N-CSR 1 emgfncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR Certified Shareholder Report of Registered Management Investment Companies Investment Company Act File Number: 811-04692 Emerging Markets Growth Fund, Inc. (Exact Name of Registrant as specified in charter) 11100 Santa Monica Boulevard, 15th Floor Los Angeles, California 90025 (Address of principal executive offices) Registrant's telephone number, including area code: (310) 996-6000 Date of fiscal year end: June 30, 2005 Date of reporting period: December 31, 2004 Vincent P. Corti Capital International, Inc. 11100 Santa Monica Boulevard, 15th Floor Los Angeles, California 90025 (name and address of agent for service) Copies to: Rob Helm, Esq. Dechert LLP 1775 I Street, N.W. Washington, DC 20006-2401 (Counsel for the Registrant) ITEM 1 - Reports to Stockholders [logo - Capital International(SM] [cover: global map] Emerging Markets Growth Fund(SM) Seeking long-term growth of capital by investing in companies operating in developing countries around the world Semi-annual report for the six months ended December 31, 2004 DEAR SHAREHOLDERS: Emerging markets equities posted solid gains in the six-month period, supported by robust economic growth in many economies and solid corporate earnings. Stocks rebounded from a slide in the second quarter of 2004. For the six-month period ending December 31, 2004, the Emerging Markets Growth Fund rose 24.3% with dividends reinvested. The MSCI Emerging Markets Index gained 26.8% with net dividends reinvested. Stock gains were broad-based, with only the technology and health care sectors trailing the broad market. Shares of financial, consumer discretionary and industrial companies did well across several markets. Banks, which typically are closely linked to their local economies, saw shares rise. From a regional perspective, Latin American stocks performed the best in the six-month period, paced by rising oil and materials prices and stellar results in the large markets of Brazil and Mexico. Asian markets were held back by weak Chinese stocks. Markets in South Korea and Taiwan rose, but mixed results within the technology sector weighed on them. MARKETS REVIEW Inflation-targeting regimes gained credibility across markets, including in countries like Brazil and Turkey that have had a history of runaway inflation. This contributed significantly to restraining long-term borrowing rates and strengthening currencies. Currency appreciation accounted for about 35% of the market's total return. Many governments shielded consumers from the full brunt of high oil prices. Thanks to supportive macroeconomic policies, exports and industrial production regained some momentum. The annualized GDP growth rate for emerging markets was 6.5% in 2004, compared to 3.2% for developed markets, according to figures compiled by J.P. Morgan Chase. Against this backdrop, corporate profit growth was generally strong, supporting stock market gains. In the aggregate, profits for the companies in the MSCI EM Index grew 26% in their most recent fiscal year over the prior year. [Begin Sidebar] EMGF total returns vs. MSCI Emerging Markets Index for periods ended 12/31/04 (with distributions reinvested) Emerging MSCI Markets Emerging Growth Fund Markets (EMGF) Annualized Index* Annualized 6 months +24.3% --% +26.8% --% 12 months +20.7 -- +25.6 -- 3 years +64.8 +18.1 +83.6 +22.4 5 years + 9.8 + 1.9 +24.0 + 4.4 10 years +73.9 + 5.7 +36.9 + 3.2 Lifetime +1,789.0 +17.1 --+ --+ (since 5/30/86)
*Returns shown for the MSCI Emerging Markets Index reflect gross dividends through December 31, 2000, and net dividends thereafter. The index is unmanaged and does not reflect sales charges, commissions or expenses. + The MSCI Emerging Markets Index did not start until December 31, 1987. [End Sidebar] [Begin Sidebar] FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. FOR THE MOST RECENT MONTH-END RESULTS, PLEASE CALL 800/421-0180, EXT. 96245. INVESTING OUTSIDE THE UNITED STATES, ESPECIALLY IN DEVELOPING MARKETS, IS SUBJECT TO ADDITIONAL RISKS. THESE INCLUDE CURRENCY FLUCTUATIONS, POLITICAL INSTABILITY, MARKET VOLATILITY AND INVESTMENT RESTRICTIONS, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS. [End Sidebar] In Brazil, stocks rose 54%. GDP grew 6% in the third quarter over the same period the prior year. The cyclical recovery and job expansion helped lift the popularity of President Luiz Inacio Lula da Silva, who was able to push through some reforms on pensions for public sector employees. The central bank remained hawkish on inflation and began a new monetary tightening cycle in September. Mexican equities rose 29%. The country's Congress made some progress toward social security reform and the economy grew, supported by exports. Argentina's negotiations with private creditors on its defaulted debt made some headway, although the country's offer to pay 30 cents on the dollar has yet to receive wide acceptance. Asian economies were generally strong, but stock gains were mixed across the region. Chinese equities rose 14% but trailed other major markets as the government took steps to curtail credit growth in an attempt to prevent the economy from entering an inflationary spiral. After raising capital reserve requirements earlier in the year, China announced the first interest rate hike in nine years. Investors questioned corporate profitability and the government's ability to steer the economy, and repercussions were felt in materials and other industries worldwide. Indian equities staged an impressive rebound from a mid-year slide. Stocks rose 45% as the Congress Party-led coalition government set in place pro-market policies after taking power in May. These included privatization, the continuation of structural reforms begun by the previous regime and a conservative monetary policy. Sustained economic growth and solid corporate earnings reports also contributed to the stock rally. Information technology stocks were strong, benefiting from robust revenue and profit growth. [Begin Sidebar] 10 largest equity holdings Percent of gain/loss Percent of for the six months net assets as ended 12/31/04* of 12/31/04 (in U.S. dollars) Samsung Electronics 6.1% 5.7% America Movil 3.2 44.0 Sasol 2.0 39.1 Infosys Technologies 1.9 61.0 Kookmin Bank 1.8 25.7 Itausa 1.8 49.1 Hon Hai Precision 1.7 43.2 Taiwan Semiconductor 1.7 10.4 Unibanco 1.6 60.5 Telekomunikasi Indonesia 1.6 32.2 Total 23.4%
*The percent change reflects the increase or decrease in the market price per share of respective equity securities held in the portfolio for the entire period. The actual gain or loss on the total position in the fund may differ from the percentage shown. [End Sidebar] In South Korea, two interest rate cuts injected some life into a lackluster economy. Industrial production and exports rose in November, although household spending remained cautious. Bank shares climbed from depressed levels as their low valuations and steady progress in slimming down bad loan portfolios attracted investors. Telecommunications stocks were strong, while technology shares lagged. Samsung Electronics and LG Electronics reported solid earnings, but investors worried about sustainability of demand. A joint venture between LG and Philips Electronics made a US$1 billion IPO. [Begin Sidebar] WHERE THE FUND'S ASSETS ARE INVESTED MSCI EM Market value Percent of net assets Index(1) of holdings 12/31/04 12/31/03 6/30/04 12/31/04 6/30/04 12/31/04 (in thousands) Asia-Pacific China 3.2% 3.4% 3.5% 8.5% 7.7% $ 565,918 Hong Kong 1.0 1.1 1.5 -- -- 234,577 India 13.7 10.6 10.2 4.9 5.7 1,638,321 Indonesia 3.0 3.0 2.6 1.7 1.9 421,636 Malaysia 3.2 5.4 5.4 4.5 3.9 874,356 Philippines .6 .4 .3 .5 .5 55,827 Singapore -- .1 .1 -- -- 14,597 South Korea 18.5 18.0 17.6 18.7 17.7 2,823,170 Taiwan 10.3 10.0 10.5 11.9 14.0 1,684,996 Thailand 1.3 .7 .6 2.7 2.5 102,594 Vietnam .1 .1 .1 -- -- 9,939 54.9 52.8 52.4 53.4 53.9 8,425,931 Latin America Argentina .6 .6 .6 .5 .5 90,729 Brazil 11.0 9.8 11.8 8.0 9.6 1,901,605 Chile 1.0 1.4 1.2 1.9 1.9 187,527 Colombia .3 .3 .3 .1 .2 50,901 Ecuador -- -- -- -- -- 2,010 Mexico 9.3 9.8 8.7 6.3 6.4 1,397,302 Peru .5 .3 .1 .5 .5 23,756 Venezuela .3 .4 .4 .2 .2 69,075 23.0 22.6 23.1 17.5 19.3 3,722,905 Eastern Europe Bulgaria -- -- -- -- -- 1,262 Croatia .3 .3 .2 -- -- 26,891 Czech Republic .4 .7 .9 .7 .8 145,711 Hungary 1.1 1.6 .9 1.3 1.6 144,511 Kazakhstan -- -- -- -- -- 3,553 Poland .8 .7 .4 1.4 2.0 70,656 Russia 6.0 6.4 3.2 4.5 3.5 509,944 Ukraine -- -- -- -- -- 636 8.6 9.7 5.6 7.9 7.9 903,164 Other markets Canada(2) .7 .6 .8 -- -- 132,980 Dominican Republic -- -- -- -- -- 5,353 Egypt .2 .4 .3 .3 .4 52,215 Israel .5 .8 1.8 4.6 3.7 289,832 Morocco -- -- .1 .2 .3 8,827 South Africa 4.8 8.0 7.7 14.2 12.4 1,240,549 Sweden(2) -- -- .1 -- -- 21,906 Turkey 2.0 1.7 2.5 1.5 1.8 394,684 United Kingdom(2) 2.3 .4 .1 -- -- 8,357 United States of America(2) .1 .1 .1 -- -- 10,849 10.6 12.0 13.5 20.8 18.6 2,165,552 Multinational .4 .5 .4 60,559 Other(3) .8 .7 1.4 230,594 Cash & equivalents less liabilities 1.7 1.7 3.6 571,317 Total net assets 100.0% 100.0% 100.0% $16,080,022
(1) MSCI Emerging Markets Index also includes Jordan (0.2% at 6/30/04 and 12/31/04) and Pakistan (0.2% at 6/30/04 and 0.1% at 12/31/04). A dash indicates that the market is not included in the index. Source: MSCI Red Book. (2) Includes investments in companies incorporated in the region that have significant operations outside the region. (3) Includes stocks in initial period of acquisition. [End Sidebar] Taiwan's market was hurt by its heavy weighting in technology shares, although other areas did well on the back of a strengthening domestic economy. Opposition parties won a majority in legislative elections. MSCI announced that it would increase Taiwan's weighting in the MSCI EM Index to the full weighting of its free float by May 2005. [Begin Sidebar] PERCENT CHANGE IN KEY MARKETS(1) Six months ended 12/31/04 Expressed Expressed in U.S. in local dollars currency Asia-Pacific China 14.2% 13.8% India 45.2 37.3 Indonesia 49.3 47.4 Malaysia 11.3 11.3 Pakistan 12.1 14.6 Philippines 15.6 15.5 South Korea 20.8 8.2 Taiwan 12.2 5.7 Thailand 14.4 8.7 Latin America Argentina 37.2 37.8 Brazil 54.5 32.5 Chile 32.6 15.8 Colombia 70.6 49.0 Mexico 29.3 25.0 Peru 13.3 8.8 Venezuela 16.5 15.5 Eastern Europe Czech Republic 59.4 36.0 Hungary 48.3 30.0 Poland 44.6 17.1 Russia 2.3 --(2) Other markets Egypt 83.6 80.1 Israel 0.6 -2.5 Jordan 50.0 50.0 Morocco 11.5 1.8 South Africa 40.9 27.8 Turkey 54.3 40.2 Emerging Markets Growth Fund 24.3
(1) Including reinvestment of net dividends. All indexes are compiled by Morgan Stanley Capital International and are unmanaged. (2) Index is quoted in U.S. dollars only. [End Sidebar] Indonesian stocks rose 49%, partly buoyed by investor enthusiasm over the election of opposition leader Susilo Yudhoyono as the country's new president. Malaysia and Thailand lagged the broader markets. The powerful tsunami that hit many countries in Southeast Asia in late December left death and destruction in its wake. However, the financial damage was contained by the fact that industrial areas are generally located away from the coast. The small stock markets of Eastern Europe -- Hungary, Poland and the Czech Republic -- made spectacular gains, with investors focusing on their higher economic growth rates compared to old Europe, and entry into the European Union in May 2004. Investor sentiment in Russia was shaken by government actions against YUKOS Oil that culminated in the December auction of Yukos' main oil producing unit, Yuganskneftegaz, at a price that was widely viewed as far below the unit's intrinsic market value. The government also assessed Yukos with back taxes and penalties in excess of US$25 billion. Tax claims exceeded the company's total revenue for some of the delinquent years. Investors and western governments saw the Kremlin's sale of Yuganskneftegaz as a renationalization of key energy assets. South African stocks rose sharply, with domestically oriented companies rising on the back of the improving domestic economy. Mining stocks were weak; their profit margins were hurt by the strong rand, which appreciated 10% against the U.S. dollar in the period and 19% for the whole of 2004. Harmony Gold Mining made an unsolicited takeover bid for rival Gold Fields, a move that, if successful, would create the world's largest gold producer. In Turkey, stocks rose as optimism grew over Turkey's future entry into the European Union. On the economic front, inflation dropped below 10%, and expectations rose that the central bank might be able to steadily reduce interest rates by a substantial margin in 2005. PORTFOLIO REVIEW The fund made strong gains in the six-month period but nevertheless lagged the results of the benchmark. The fund benefited from investments in India, Mexico and Turkey, while results were hurt by holdings in Russia, particularly our investment in YUKOS Oil, and by not having enough exposure to South Africa. Our large investments in banks and telecommunications services contributed to returns. Our decision to hold large positions in the Indian technology services area paid off, as these stocks rose 55%. However, shares of technology hardware companies did not keep pace. The underexposure to materials was also detrimental. Given the strong performance of emerging markets over the last couple of years, we have maintained the fund's large investments in sectors with more stable earnings, including consumer staples and telecommunications. We acted on the belief that, in addition to protection from a potential downturn, companies with stable earnings growth are currently selling at historically attractive valuations. For instance, we increased our investment in Bharti Tele-Ventures in India. We have also held on to our large exposure to technology companies, as we see the share prices as attractive compared to their growth prospects. Many technology companies in Asia, such as Samsung Electronics and Taiwan Semiconductor Manufacturing, are leaders in their industries. We remain underinvested in cyclical areas such as materials, as commodity prices have been quite high. Also, China has accounted for a large part of incremental demand, driving prices higher, and any slowdown in that economy would negatively impact commodity prices. These decisions produced mixed results for the recent six-month period. The underexposure to materials hurt the fund's performance relative to the benchmark, as materials stocks rose more than 30%. We did not invest in many commodity and steel stocks, which saw share prices rise. We have been underinvested in South Africa, where stocks of companies oriented to the domestic economy rose substantially. Shares of South African mining companies fared less well, as their profits were hurt by the appreciation of the rand. We have been less optimistic about prospects for the South African economy, which has grown at a less than 4% growth rate compared to the average 6.5% for emerging markets in the aggregate. The other factor that hurt results was our investment in YUKOS Oil, which was the single-largest detractor to returns. Yukos was among the largest Russian oil companies, with reserves that matched some of the major Western oil companies. We had avoided Yukos for many years due to concerns about its management's focus on short-term gains. However, we started investing in the company in 2003 after a change in management. We believed that although the Russian government was pressing charges to collect taxes owed for prior years, it would pursue its case through the courts. Instead, authorities seized the main oil-producing unit of Yukos and sold it very cheaply to a state-controlled company, essentially re-nationalizing part of the company. We had believed that the Putin administration, which had been following a more liberal economic agenda, would not take private assets in a way that hurt minority shareholder rights. The shares of Yukos fell precipitously in the period in response to the government's actions, significantly reducing the value of our investment. Among the positive contributors, the large exposure and stock selection in telecommunications paid off handsomely. America Movil and Telekomunikasi Indonesia were among the fund's top contributors. These companies have strong balance sheets. We believe they also have good growth prospects as mobile phone use in their markets of operation is in the early stages and is fast-expanding. Within technology, shares of technology service companies in India surged, and Infosys Technologies was the fund's top contributor for the period. However, shares of hardware companies in South Korea and Taiwan had mixed results. Our stock selection in the sector was strong, and many of our investments performed well, including Hon Hai Precision, LG.Philips and ASUSTeK Computer. Nevertheless, Samsung Electronics and Taiwan Semiconductor Manufacturing lagged the broader markets, even though they both posted strong earnings. Financials is another area in which we have recently built up a large exposure. The fund has invested heavily in banks in India, Brazil, South Korea, Taiwan, Turkey and Hungary. Most of our financial holdings had good results. Consumer staples as a sector performed well, but some of our holdings had less than stellar performance. The fund's investments in Brazilian beer producer AmBev, Wal-Mart de Mexico and HM Sampoerna in Indonesia did well, but Wumart Stores in China and a few other holdings did not. On a country basis, the fund benefited from its large exposure to India, where stocks rebounded from the mid-year slide in the wake of the elections, rising 45%. The large exposure to Mexico, where stocks benefited from an up-tick in the economy, was also supportive. The underexposure to China helped. Stocks there trailed the emerging markets composite by a wide margin as government attempts to cool the economy tempered investor enthusiasm. OUTLOOK The positive backdrop of brisk U.S. economic growth, easy liquidity, moderate inflation and high energy and commodity prices that have seen emerging markets equities make substantial gains for two consecutive years is unlikely to last. We expect that over the short term global economic growth will be sustained but more modest than before, that U.S. monetary policy will be less accommodative and the dollar could well weaken further. In the past, these conditions have led to a decline in emerging markets equities, partly because many developing countries have been heavily dependent on exports to the United States, and on loans borrowed in international markets at interest rates linked to the United States. Since the Asian currency crisis of 1997-98, many of the macroeconomic imbalances that often led to crises in the past have been addressed. Hence, emerging markets are less vulnerable to the economic cycles of the United States and other major economies. Many Asian countries have huge foreign exchange reserves and floating currency regimes. Their borrowing needs are limited and are met domestically due to the high savings rate of many Asian societies. The progress in Latin America is more recent but nevertheless appears to be sustainable, and has led to lower bond yields and more stable currencies. The growth of a middle class has given domestic economies a lot of dynamism, lessening their dependence on exports. Overall, these economies are growing at a much faster rate than their developed peers. Not surprisingly, then, corporate earnings have been quite strong in the aggregate in many markets as companies benefit from sustained demand growth. South Korea was one of the few economies to suffer from a decline in consumer demand following a consumer credit bubble. Over the long term, emerging markets should be able to continue to advance, and with fewer shock events. The volatility of returns is also likely be lower. However, in the short term, a spike in inflation or substantially higher interest rates could well lead to a tightening of global liquidity and increased risk-aversion, hurting the emerging markets. A potential slowdown in China is another risk. With this in mind, the fund continues to emphasize investments in high-quality companies with strong cash flow, healthy balance sheets, rising dividends, steady earnings and good growth prospects. We find many of these companies in the consumer staples area, which remains our largest exposure relative to the index, and also among telecommunications companies. We look forward to reporting to you in another six months. Sincerely, /s/ Robert Ronus Robert Ronus Chairman of the Board /s/ Shaw B. Wagener Shaw B. Wagener President December 31, 2004 THE INVESTMENT LANDSCAPE The geographic concentrations of assets found in Emerging Markets Growth Fund's (EMGF) portfolio rarely reflect a predetermined decision to concentrate our investment in a particular country or region. More often, these concentrations result from buy-and-sell decisions made stock by stock, based on intensive, proprietary research. While the emphasis of that research is on companies, EMGF's portfolio managers and analysts also keep a close eye on political and macroeconomic considerations that can affect our holdings. Here is our view of the investment landscape in the fund's five largest areas of concentration for the six-month period ended December 31, 2004. The five account for 59% of net assets. (Percentage changes for markets and stock prices are in U.S. dollars and are for the six-month period ended December 31, 2004, unless otherwise noted.) SOUTH KOREA (17.6% of net assets) South Korean stocks rose 21%. The central bank cut interest rates twice, bringing the key rate down to 3.25% in an attempt to stimulate a lackluster domestic economy that is still recovering from the aftereffects of a consumer credit bubble. The monetary easing appeared to have some impact. Industrial production and exports rose in November, although household spending remained cautious. South Korean President Roh Moo-hyun's position appeared stronger in recent months after being reinstated by a Constitutional Court following his impeachment. His party won seats in legislative elections and obtained a majority. Bank shares climbed from depressed levels as their low valuations and steady progress in slimming down bad loan portfolios attracted investors. Among the fund's holdings, Shinhan Financial shares advanced 55%, while Kookmin Bank gained 26%. Several Western banks showed interest in Korean banks. Technology shares lagged the Korean market. Samsung Electronics and LG Electronics reported solid earnings, but investors questioned whether end demand for semiconductors and other technology products could be sustained over the next few years. Investors also worried about margin erosion in the flat-panel TV business as several new factories were expected to come on stream in South Korea and other parts of Asia. Nevertheless, a joint venture between LG and Philips Electronics of the Netherlands made a US$1 billion IPO. Utilities and materials shares had very strong results. Overall, at the price-to-earnings (P/E) ratio of 8.2 as of December 31, 2004, the South Korean market remained one of the cheapest in the emerging markets. BRAZIL (11.8% of net assets) A combination of positive macroeconomic policies and sustained earnings growth at many companies lifted Brazilian stocks 54% in the period, making it the second-best performing market in the region behind Colombia. The period saw an overall reduction in Brazilian country risk, with the average yield on Brazilian bonds declining from under 12% at the end of June to less than 9% at the end of December. The real appreciated 17% against the U.S. dollar. Investors have been impressed with the government's ability to reduce vulnerability to external financial shocks, due in large part to the government focusing on paying down foreign currency debt and making debt dynamics much less vulnerable to swings in the foreign exchange rate. Exports have also been rising, and the strong demand in commodities was only one component of the growth in trade. Brazil's central bank has gained credibility as being vigilant against inflation. After keeping rates steady for most of the year, the central bank began another monetary tightening cycle in September due to concerns over incipient inflation, partly from higher oil prices. Brazil's growth rate, estimated at 5.1% in 2004, was slower than many other emerging markets, but many companies such as banks and commodity exporters have managed to grow earnings in the double digits. As of the end of the year, the market's overall valuation, at a P/E ratio of about 11 even after the recent rally, makes it cheaper compared to the overall emerging markets. The economic expansion and gradual job growth have lifted the popularity of President Luiz Inacio Lula da Silva. In the recent period, shares of banks and materials companies had among the best results. Shares of Unibanco, a large fund holding, rose 61%, while shares of iron ore exporter Cia Vale do Rio Doce, another large fund investment, climbed 86%. In corporate news, Unibanco announced it would sell its stake in Credicard, Brazil's largest credit card issuer, to Banco Itau and Citigroup, the remaining partners in the joint venture. The sale will help Unibanco shore up its capital base. TAIWAN (10.5% of net assets) The heavy weighting of technology shares in the MSCI Taiwan Index held back performance to some extent, although it still rose 12%. Shares of industrial and materials companies, including manufacturers of plastics and metals, had strong results as the domestic economy continued to grow. Within technology, stocks had mixed results. Shares of some companies such as VIA Technologies and Taiwan Semiconductor Manufacturing did not fare as well, but other companies that have moved production to China made strong gains. These included ASUSTeK Computer and Hon Hai Precision. Domestically oriented firms benefited from a recovering economy. GDP growth in 2004 was 5.9%, buoyed by strong private investment. The banking system, which was weighed down by bad loans three or four years ago, is looking a lot healthier. The ratio of non-performing loans in the banking system fell to 3.5% at the end of the year from 8.3% in 2001. The political atmosphere remains turbulent. President Chen Shui-bian toned down his rhetoric about formal independence from China, from which the island separated in 1949. Opposition parties won seats in legislative elections, underscoring the increasing unpopularity of the president's strident approach to the issue of the Taiwan-China relationship. An agreement on charter flights for the Lunar New Year holiday was, however, one positive sign of more pragmatic and calmer relations between China and Taiwan. On a valuation basis, as of December 31, 2004, Taiwanese equities were cheap at a P/E ratio of 12.4, near a nine-year low. Meanwhile, MSCI announced it would increase Taiwan's weighting in the MSCI EM Index in two stages to be completed by May 2005, which drew some investor interest into the market. INDIA (10.2% of net assets) Indian markets enjoyed a strong six-month run, rising 45% in a rebound from the mid-year slide in the wake of parliamentary elections. The Congress Party coalition government led by Prime Minister Manmohan Singh, a former finance minister and central bank governor, set out a broad policy agenda that took a measured pace toward privatization. It persisted with many of the pro-market economic policies of the previous Bharatiya Janata party regime, such as electricity sector reform, which assured investors. The Indian economy maintained cyclical momentum, growing at 6.6% in the second quarter (July to September) of its fiscal year. Inflation dipped to below 6.5% after having risen above 7% earlier in the year, and foreign exchange reserves were at a record high of $131 billion. The government sold a 10% stake in the National Thermal Power Corp., showing its willingness to continue to reduce investments slowly in public sector enterprises. It also put out tender offers for the modernization of the country's major airports. Technology, utility and financial stocks had among the best results for the six-month period. Shares of technology companies were supported by revenue and earnings growth of close to 50%. Utilities benefited from ongoing government attempts at privatization and rationalization of the industry. Shares of Bharat Heavy Electricals rose 61% in the period on investor optimism about prospects for growth in the power generation area. Meanwhile, shares of financial companies rose on what appeared to be a consensus view that bank earnings would continue to be powered by expansion in consumer loans as well as increased corporate borrowing on the one side and improved asset quality on the other. Shares of ICICI Bank rose 61%, and those of HDFC Bank rose 57%. MEXICO (8.7% of net assets) The MSCI Mexico Index gained 29% during the six-month period. The Bolsa, the domestic stock exchange, touched an all-time high in December. The Mexican economy continued to improve in the second half of 2004, helped in part by sustained growth in the United States and strong oil prices. Foreign currency reserves are at a record high and the government has taken advantage of the upswing in oil revenue to reduce foreign debt. Banco de Mexico, the country's central bank, maintained a hawkish stance that reflected its concerns about above-target inflation. It increased its "corto" monetary policy tool nine times in 2004, which pushed interest rates on 28-day government paper from under 5% in 2003 to 9% at the end of 2004. Inflation peaked in November at 5.4% and appears to be improving. The government made some progress on social security reform. But by and large, the country remained in political gridlock and the bounce in the economy eased pressure for government action. The latest squabble between the opposition PRI (Partido Revolucionario Institucional) and the PAN (Partido Accion Nacional) of President Vicente Fox was over the federal budget. A number of expenditure items in the budget were in limbo pending a decision by the Supreme Court on whether the president has budget veto authority. No major political initiatives were expected until after the presidential elections scheduled for July 2006. Industrial stocks gained 41%, while telecommunications services shares rose 31%. America Movil, Mexico's main wireless telecommunications operator and one of the fund's largest holdings, rose 44%. The company's growth continued to outstrip investor expectations. Grupo Televisa, another large fund holding, gained 32%. The stock rose on strong earnings and investors anticipating an improving advertising cycle in 2005. Wal-Mart de Mexico shares advanced 16%. The company continued to benefit from rising domestic consumption, and earnings growth remained strong. Improvements in distribution should help maintain competitiveness and operating margins. Weak same-store sales growth, however, kept the stock from keeping pace with the market. ABOUT THE FUND AND ITS ADVISER Emerging Markets Growth Fund was organized in 1986 by the International Finance Corporation, an affiliate of the World Bank, as a vehicle for investing in the securities of companies based in developing countries. The premise behind the formation of the fund was that rapid growth in these countries could create very attractive investment opportunities. It also was felt that the availability of equity capital would stimulate the development of capital markets and encourage countries to liberalize their investment regulations. An affiliate of Capital International, Inc., the fund's current investment adviser, was selected by the IFC from a number of global investment firms to manage EMGF. Capital International is one of The Capital Group Companies. These companies form one of the world's most experienced investment advisory organizations, with roots dating back to 1931. These companies have been involved in international investing since the 1950s. Capital International employs a value-oriented, research-driven approach. Capital International and its institutional management affiliates maintain a global investment intelligence network that continues to grow and currently employs more than 137 investment professionals based on three continents. They include analysts and portfolio managers, born in over 27 countries, who speak a variety of languages. These professionals travel millions of miles each year, keeping a close watch on industry trends and government actions and scrutinizing thousands of companies. As EMGF has grown, its adviser has devoted increased resources to the task of evaluating and managing investments in developing countries. Currently, the organization has 35 analysts covering these countries, compared with four in 1986; 20 of these analysts also manage a portion of the fund. Most of its assets are managed by seven portfolio managers, compared with two in 1986. Capital International's research effort focuses heavily on regions as well as on individual countries. It is an intensive effort that combines company and industry analysis with a political and macroeconomic overview, and we believe it has given the Capital Group organization's family of companies -- and the funds they manage, including Emerging Markets Growth Fund -- a competitive edge. INVESTMENT PORTFOLIO December 31, 2004 (unaudited) Equity securities SECTOR DIVERSIFICATION Common stocks Preferred stocks Convertible bonds Financials 18.84% 2.56% - % Information technology 18.07 - - Telecommunication services 12.67 2.55 - Consumer staples 8.90 1.86 - Materials 7.18 1.06 .03 Consumer discretionary 5.54 .09 - Energy 4.83 .43 - Industrials 3.95 .34 - Utilities 2.99 .41 - Health care 2.40 - - Other .82 - - 86.19% 9.30% .03% Short-term securities Excess of cash and receivables over payables (including foreign currency contracts) Net Assets
SECTOR DIVERSIFICATION Bonds Percent of net assets Financials .04% 21.44% Information technology - 18.07 Telecommunication services .19 15.41 Consumer staples .02 10.78 Materials - 8.27 Consumer discretionary .02 5.65 Energy .02 5.28 Industrials - 4.29 Utilities .03 3.43 Health care - 2.40 Other .61 1.43 .93% 96.45% Short-term securities 3.08 Excess of cash and receivables over payables (including foreign currency contracts) .47 Net Assets 100.00%
EQUITY SECURITIES Value (common and preferred stocks) Shares (000) Argentina - 0.33% BI SA (acquired 10/21/93, cost: $4,567,000) (1) (2) 4,952,159 $1,973 Grupo Financiero Galicia SA, Class B (2) 5 - Hidroneuquen SA (acquired 11/11/93, cost: $29,239,000) (1) (2) (3) 28,022,311 875 IRSA Inversiones y Representaciones SA (GDR) (2) 405,900 4,566 Nortel Inversora SA, Class B, preferred (ADR) (2) 3,477,900 24,380 Telecom Argentina SA, Class B (ADR) (2) 1,950,046 21,373 53,167 Brazil - 11.72% ALL - America Latina Logistica, preferred nominative (2) 1,196,000 35,587 ALL - America Latina Logistica, preferred nominative (GDR) (2) 218,900 12,915 Banco Bradesco SA, preferred nominative 999,000 24,168 Banco Bradesco SA, preferred nominative, rights, expire January 27, 2005 (2) 36,849 334 Banco Itau Holding Financeira SA, preferred nominative 422,602 63,510 Banco Itau Holding Financeira SA, preferred nominative (ADR) 230,100 17,297 Bradespar SA, preferred nominative (2) 599,250 19,749 Celular CRT SA, ordinary nominative 2,255,641 344 Celular CRT SA, Class A, preferred nominative 101,573,000 20,468 Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative 268,720,000 3,897 Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative (ADR) 231,980 1,609 Centrais Eletricas Brasileiras SA - ELETROBRAS, Class B, preferred nominative 1,971,531,300 29,109 Cia. de Bebidas das Americas - AmBev, preferred nominative (ADR) 8,737,010 247,520 Cia. Energetica de Minas Gerais - CEMIG, preferred nominative 1,286,072,000 31,437 Cia. Energetica de Minas Gerais - CEMIG, preferred nominative (ADR) 200,600 4,923 Cia. Vale do Rio Doce, ordinary nominative (ADR) 1,192,690 34,600 Cia. Vale do Rio Doce, Class A, preferred nominative (ADR) 5,726,056 139,601 GOL Linhas Aereas Inteligentes SA, preferred nominative (ADR) (2) 197,000 6,280 Itausa - Investimentos Itau SA, preferred nominative 165,392,722 286,556 LIGHT-Servicos de Eletricidade SA, ordinary nominative (2) 127,393,000 3,006 Natura Cosmeticos SA, ordinary nominative 1,133,000 33,073 New GP Capital Partners, LP, Class B (acquired 1/28/94, cost: $14,762,000) (1) (2) (3) 27,000 7,650 Petroleo Brasileiro SA - Petrobras, ordinary nominative 791,310 31,742 Petroleo Brasileiro SA - Petrobras, preferred nominative 128,600 4,706 Petroleo Brasileiro SA - Petrobras, preferred nominative (ADR) 1,792,286 64,899 TIM Participacoes SA, ordinary nominative 8,376,415,124 12,210 TIM Participacoes SA, preferred nominative (ADR) 4,868,853 75,078 Tele Centro Oeste Celular Participacoes SA, ordinary nominative 14,962,504 73 Tele Centro Oeste Celular Participacoes SA, preferred nominative 5,061,882,438 16,644 Tele Centro Oeste Celular Participacoes SA, preferred nominative (ADR) 7,735,138 76,346 Telecomunicacoes Brasileiras SA, preferred nominative (ADR) 241,000 7,755 Telecomunicacoes de Sao Paulo SA, preferred nominative 32,273,000 616 Tele Leste Celular Participacoes SA, ordinary nominative (2) 3,858,906,532 770 Tele Leste Celular Participacoes SA, preferred nominative (ADR) (2) 705,223 8,568 Telemar Norte Leste SA, Class A, preferred nominative 2,935,968 74,699 Telemig Celular Participacoes SA, ordinary nominative 3,644,145,317 11,571 Telemig Celular Participacoes SA, preferred nominative (ADR) 1,015,658 28,672 Telemig Celular SA, Class G, preferred nominative 38,529 6,530 Tele Norte Celular Participacoes SA, ordinary nominative (2) (3) 9,214,930,561 2,221 Tele Norte Celular Participacoes SA, preferred nominative (ADR) (3) 453,978 4,145 Tele Norte Leste Participacoes SA, preferred nominative 741,313 12,397 Tele Norte Leste Participacoes SA, preferred nominative (ADR) 20,400 344 Telesp Celular Participacoes SA, preferred nominative (ADR) (2) 18,814,991 127,942 Unibanco-Uniao de Bancos Brasileiros SA, units 4,070,000 26,673 Unibanco-Uniao de Bancos Brasileiros SA, units (GDR) 7,389,054 234,381 Usinas Siderurgicas de Minas Gerais SA, Class A, preferred nominative 1,593,298 32,376 1,884,991 Canada - 0.83% Crew Gold Corp. (2) 1,715,300 1,687 Ivanhoe Mines Ltd. (2) (3) 17,189,000 123,904 Telesystem International Wireless Inc. (2) 660,300 7,389 132,980 Chile - 1.17% Banco Santander - Chile (ADR) 802,415 27,170 Cia. de Telecomunicaciones de Chile SA (ADR) 3,019,385 33,938 Comercial Siglo XXI SA 5,131,270 11,085 Distribucion y Servicio D&S SA 7,400,800 2,218 Embotelladora Andina SA, Class A, preferred nominative (ADR) 2,909,700 38,001 Embotelladora Andina SA, Class B, preferred nominative (ADR) 1,039,373 13,522 Enersis SA (2) 36,328,700 6,115 Enersis SA (ADR) (2) 6,519,200 55,478 187,527 China - 3.52% Anhui Conch Cement Co. Ltd. (Hong Kong) (3) 40,197,000 43,700 BYD Co. Ltd. (Hong Kong) (3) 12,432,000 32,949 China Life Insurance Co. Ltd. (Hong Kong) (2) 94,419,500 63,167 China Life Insurance Co. Ltd. (ADR) (2) 1,519,400 40,173 China Mengniu Dairy Co. (Hong Kong) (2) 21,559,000 16,919 China Merchants Holdings (International) Co. Ltd. (Hong Kong) 11,466,014 21,611 China Mobile (Hong Kong) Ltd. 4,205,800 14,258 China Netcom Group Corp. (Hong Kong) Ltd. (2) 29,877,500 40,553 China Oilfield Services Ltd. (Hong Kong) 27,123,000 8,288 China Shipping Development Co. Ltd. (Hong Kong) 7,196,000 6,388 China Telecom Corp. Ltd. (Hong Kong) 103,939,800 38,111 Huaneng Power International, Inc. (Hong Kong) 17,862,400 13,329 Lianhua Supermarket Holdings Co. Ltd. (Hong Kong) 11,912,000 14,559 NetEase.com, Inc. (ADR) (2) 469,100 24,783 PetroChina Co. Ltd. (Hong Kong) 50,490,100 26,958 PICC Property and Casualty Co. Ltd. (Hong Kong) (2) 70,689,600 24,555 Semiconductor Manufacturing International Corp. (Hong Kong) (2) 119,817,000 26,052 Semiconductor Manufacturing International Corp. (ADR) (2) 642,800 6,923 Tong Ren Tang Technologies Co. Ltd. (Hong Kong) (3) 5,529,900 12,130 Tsingtao Brewery Co. Ltd. (Hong Kong) 27,397,100 27,670 UBS AG Call Warrants on Beijing Yanjing Brewery Co. Ltd., A Shares, expire June 14, 2005 (acquired 6/15/04, cost: $28,510,000) (1) (2) 19,833,720 28,469 Weiqiao Textile Co. Ltd. (Hong Kong) 3,990,000 6,288 Wumart Stores, Inc. (Hong Kong) (2) (3) 6,735,000 10,831 Yanzhou Coal Mining Co. Ltd. (Hong Kong) 4,829,000 6,896 Zhejiang Expressway Co. Ltd. (Hong Kong) 15,048,000 10,358 565,918 Colombia - 0.23% Cia. de Cemento Argos, SA 4,010,764 37,172 Croatia - 0.17% PLIVA DD (GDR) 2,151,278 26,891 Czech Republic - 0.91% CESKY TELECOM, AS 6,319,940 104,157 Komercni Finance BV 284,500 41,554 145,711 Egypt - 0.32% Egyptian Company for Mobile Services S.A.E. 2,435,881 52,215 Hong Kong - 1.46% China.com Corp., Class A (2) 2,963,600 13,662 China Power International Development Ltd. (2) 10,310,000 3,814 Clear Media Ltd. (2) 22,774,000 21,242 Hopewell Holdings Ltd. 30,770,000 78,977 Kingway Brewery Holdings Ltd. 30,631,300 8,966 Shangri-La Asia Ltd. 25,893,246 37,144 SINA Corp. (2) 1,642,700 52,665 Texwinca Holdings Ltd. 19,148,700 18,107 234,577 Hungary - 0.90% Gedeon Richter Ltd. 5,300 664 Magyar Tavkozlesi Rt. 6,813,118 32,515 Magyar Tavkozlesi Rt. (ADR) 1,054,000 25,728 MOL Magyar Olaj- es Gazipari Rt., Class A 448,802 31,472 National Savings and Commercial Bank Ltd. 1,761,490 54,132 144,511 India - 10.17% Bharat Electronics Ltd. 1,414,966 21,498 Bharat Heavy Electricals Ltd. 3,260,445 57,837 Bharat Petroleum Corp. Ltd. 1,529,600 16,250 Bharti Tele-Ventures Ltd. (2) 39,069,420 195,528 Cummins India Ltd. (3) 10,446,937 29,603 Dr. Reddy's Laboratories Ltd. 222,333 4,451 Grasim Industries Ltd. 39 1 HDFC Bank Ltd. 4,500,452 54,171 Hindustan Lever Ltd. 16,931,594 56,164 Hindustan Petroleum Corp. Ltd. 817,723 7,596 Housing Development Finance Corp. Ltd. 12,001,044 213,496 I.T.C. Ltd. 906,531 27,486 ICICI Bank Ltd. 6,738,740 57,886 ICICI Bank Ltd. (ADR) 4,679,875 94,299 Indian Petrochemicals Corp. Ltd. 4,255,213 17,944 Infosys Technologies Ltd. 6,217,007 300,812 Larsen & Toubro Ltd. 203,434 4,633 Maruti Udyog Ltd. 3,367,800 35,984 Oil & Natural Gas Corp. Ltd. 1,353,206 25,666 Ranbaxy Laboratories Ltd. 5,872,474 169,959 Reliance Energy Ltd. 1,553,100 18,852 Reliance Energy Ltd. (acquired 3/4/04, cost: $42,028,000) (1) 2,972,200 35,176 Reliance Energy Ltd. (GDR) 624,400 22,915 Reliance Industries Ltd. 5,327,586 65,772 SET India Ltd. (acquired 5/15/00, cost: $34,131,000) (1) (2) 106,250 3,503 SET Satellite (Singapore) Pte. Ltd. (acquired 5/15/00, cost: $73,162,000) (1) (2) 2,847,112 7,475 State Bank of India 915,728 13,811 Sun Pharmaceutical Industries Ltd. 2,960,000 38,042 Wipro Ltd. 1,264,651 21,905 Zee Telefilms Ltd. 4,091,902 16,238 1,634,953 Indonesia - 2.62% PT Astra International Tbk 27,546,384 28,527 PT Bank Mandiri (Persero) Tbk 132,561,000 27,528 PT Bank Rakyat Indonesia 27,513,000 8,533 PT Hanjaya Mandala Sampoerna Tbk 127,023,300 91,122 Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. Tbk 7,000,500 4,342 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B 488,657,202 254,345 PT Ramayana Lestari Sentosa Tbk 86,587,500 7,239 421,636 Israel - 1.80% Bank Hapoalim Ltd. 4,536,600 15,318 Bank Leumi le-Israel B.M. 5,063,328 13,835 "Bezeq" The Israel Telecommunication Corp. Ltd. (2) 41,352,700 48,224 Check Point Software Technologies Ltd. (2) 1,358,100 33,450 Orbotech Ltd. (2) 1,547,325 32,757 Partner Communications Co. Ltd. (ADR) (2) 2,308,600 19,785 Teva Pharmaceutical Industries Ltd. (ADR) 4,235,200 126,463 289,832 Kazakhstan - 0.02% OJSC Kazkommertsbank (ADR) (acquired 9/10/97, cost: $1,466,000) (1) (2) 72,877 3,553 Malaysia - 5.41% AMMB Holdings Bhd. 19,069,700 16,360 Astro All Asia Networks PLC (2) 47,119,600 66,959 CIMB Bhd. 2,042,000 2,875 Commerce Asset-Holding Bhd. 33,106,200 40,947 EON Capital Bhd. 11,273,000 17,206 Genting Bhd. 9,158,000 45,790 Hong Leong Bank Bhd. 24,190,000 35,012 IJM Corp. Bhd. 16,512,714 20,597 IOI Corp. Bhd. 11,920,900 29,802 Malakoff Bhd. 9,168,900 17,373 Malayan Banking Bhd. 42,540,350 132,099 Malaysian Pacific Industries Bhd. 473,800 1,870 Maxis Communications Bhd. 52,381,800 128,887 MK Land Holdings Bhd. 25,241,000 11,757 Public Bank Bhd. 32,516,800 65,034 Resorts World Bhd. 9,180,300 24,159 Road Builder (M) Holdings Bhd. 17,988,700 11,882 S P Setia Berhad Group (3) 34,837,100 39,604 Tanjong PLC 5,558,400 20,625 Telekom Malaysia Bhd. 23,150,900 70,671 Tenaga Nasional Bhd. 10,812,700 31,015 Transmile Group Bhd. 6,041,200 14,149 UMW Holdings Bhd. 18,781,596 25,207 869,880 Mexico - 8.64% America Movil SA de CV, Series A 16,275,000 42,798 America Movil SA de CV, Series L 21,921,840 57,293 America Movil SA de CV, Series L (ADR) 8,010,600 419,355 Cemex, SA de CV, ordinary participation certificates, units 2,319,659 16,911 Cemex, SA de CV, ordinary participation certificates, units (ADR) 609,595 22,201 Coca-Cola FEMSA, SA de CV, Series L (ADR) 899,700 21,377 Consorcio International Hospital, SA de CV, convertible preferred, units (acquired 9/25/97, cost: $4,827,000) (1) (2) 23,970 - Controladora Comercial Mexicana, SA de CV, units 20,171,400 22,630 Desarrolladora Homex, SA de CV (ADR) (2) 120,850 2,858 Empresas ICA Sociedad Controladora, SA de CV (2) 63,345,100 24,447 Fomento Economico Mexicano, SA de CV (ADR) 4,056,580 213,417 Grupo IMSA, SA de CV, Series UBC, units 3,561,900 10,697 Grupo Industrial Saltillo, SA de CV 2,827,600 4,949 Grupo Modelo, SA de CV, Series C 4,692,000 12,911 Grupo Televisa, SA, ordinary participation certificates (ADR) 2,605,132 157,610 Kimberly-Clark de Mexico, SA de CV, Class A, ordinary participation certificates 31,161,300 107,675 Organizacion Soriana, SA de CV, Series B 3,554,300 12,754 Urbi Desarrollos Urbanos, SA de CV (2) 1,137,800 4,973 Wal-Mart de Mexico, SA de CV, Series V 66,854,930 229,750 Wal-Mart de Mexico, SA de CV, Series V (ADR) 157,232 5,393 1,389,999 Morocco - 0.05% Holcim (Maroc) SA 46,585 6,594 Societe des Brasseries du Maroc 12,332 2,233 8,827 Peru - 0.13% Credicorp Ltd. 1,275,162 20,160 Philippines - 0.31% ABS-CBN Holdings Corp. (Philippine Deposit Receipts) 11,603,500 3,830 Ayala Corp. 114,253,700 13,454 Ayala Land, Inc. 82,485,230 10,743 Bayan Telecommunications Holdings Corp., Class A (acquired 2/12/98, cost: $1,850,000) (1) (2) 724,790 - Bayan Telecommunications Holdings Corp., Class B (acquired 2/12/98, cost: $616,000) (1) (2) 241,431 - GLOBE TELECOM, Inc. 678,048 11,553 International Container Terminal Services, Inc. (2) 19,533,588 2,056 SM Prime Holdings, Inc. 55,082,000 7,567 49,203 Poland - 0.44% Bank Przemyslowo-Handlowy SA 39,799 6,727 Telekomunikacja Polska SA 9,742,754 63,929 70,656 Russia - 3.09% Baring Vostok Private Equity Fund (acquired 12/15/00, cost: $12,747,000) (1) (3) (4) 13,087,057 16,649 JSC MMC "Norilsk Nickel" (ADR) 2,854,670 158,434 LUKoil Holding (ADR) 1,386,259 169,817 New Century Capital Partners, LP (acquired 12/7/95, cost: $5,484,000) (1) (2) 5,247,900 2,253 OAO Gazprom (ADR) 617,904 21,936 OAO Gazprom (ADR) (acquired 10/21/96, cost: $5,646,000) (1) 363,900 12,918 OAO Moscow City Telephone Network 3,007,500 35,940 Sberbank (Savings Bank of the Russian Federation) 103,120 50,632 YUKOS Oil Co. (ADR) (2) 9,266,322 27,799 496,378 Singapore - 0.09% Noble Group Ltd. 16,432,000 14,597 South Africa - 7.71% Anglo American Platinum Corp. Ltd. 1,821,472 67,090 Anglo American Platinum Corp. Ltd. 6.38% convertible preferred May 31, 2009 212,268 4,344 Anglo American PLC 10,257,793 243,643 AVI Ltd. 2,990,800 12,240 Barloworld Ltd. 3,107,800 58,783 Gold Fields Ltd. 3,402,609 42,079 Gold Fields Ltd. (ADR) 880,700 10,991 Harmony Gold Mining Co. Ltd. 8,870,612 80,814 Harmony Gold Mining Co. Ltd. (ADR) 4,146,392 38,437 Impala Platinum Holdings Ltd. 535,005 45,599 Massmart Holdings Ltd. 1,867,900 15,053 Mvelaphanda Resources Ltd. (2) (3) 11,141,377 28,746 Nasionale Pers Beperk, Class N 1,426,200 19,033 Nedcor Ltd. 1,765,211 24,437 Sappi Ltd. 483,845 7,146 Sasol Ltd. 14,772,793 318,062 South Africa Capital Growth Fund, LP, Class A (acquired 8/25/95, cost: $893,000) (1) (2) 2,180 270 South Africa Capital Growth Fund, LP, Class D (acquired 8/25/95, cost: $5,387,000) (1) (2) 13,650 1,693 South African Private Equity Fund III, LP (acquired 9/23/98, cost: $25,247,000) (1) (3) 29,008 43,522 South African Private Equity Fund III, Ltd. (acquired 10/6/00, cost: $82,000) (1) 1,325 - SPAR Group Ltd. (2) 3,415,000 13,065 Standard Bank Group Ltd. 8,697,414 101,831 Tiger Brands Ltd. 3,415,000 58,881 Truworths International Ltd. 1,574,400 4,790 1,240,549 South Korea - 17.56% Baiksan OPC Co., Ltd. 560,100 3,138 Cheil Communications Inc. 142,870 20,773 CJ Home Shopping Co., Ltd. 52,679 3,028 Daewoo Heavy Industries & Machinery Co., Ltd. (2) 3,541,130 27,368 Hanaro Telecom, Inc. (ADR) (2) 2,021,671 5,964 Hankook Tire Co., Ltd. 3,798,420 37,430 Hynix Semiconductor Inc. (2) 2,400,180 27,014 Hyundai Development Co. 1,280,374 20,410 Hyundai Marine & Fire Insurance Co., Ltd. 1,634,250 6,126 Hyundai Motor Co. 3,458,374 185,431 Hyundai Motor Co., nonvoting preferred 500,730 13,980 INI Steel Co. 54,000 704 INI Steel Co. (GDS) 1,701,090 22,186 Kookmin Bank (2) 6,316,095 247,128 Kookmin Bank (ADR) (2) 1,135,144 44,361 Kook Soon Dang Brewery Co., Ltd. 881,800 10,904 Korea Electric Power Corp. 6,873,240 178,289 KT Corp. 1,047,000 41,977 KT Corp. (ADR) 125,400 2,735 KT&G Corp. 1,805,150 53,975 LG Cable Ltd. (3) 1,629,160 33,918 LG Electronics Inc. 216,520 13,408 LG Engineering & Construction Co., Ltd. 1,327,560 36,552 LG.Philips LCD Co., Ltd. (2) 186,900 7,042 LG.Philips LCD Co., Ltd. (ADR) (2) 5,748,100 103,408 Nong Shim Co., Ltd. 216,010 52,067 Pulmuone Co., Ltd. 227,550 11,431 Samsung Electronics Co., Ltd. 1,481,379 644,731 Samsung Electronics Co., Ltd. (GDS) 1,565,854 342,922 Samsung Fire & Marine Insurance Co., Ltd. 1,363,091 107,325 Samsung SDI Co., Ltd. 809,236 88,343 Samsung Securities Co., Ltd. 774,200 18,773 Shinhan Financial Group Co., Ltd. 10,516,430 237,740 Shinhan Financial Group Co., Ltd. (ADR) 190,950 8,717 SK Telecom Co., Ltd. 410,232 78,075 SK Telecom Co., Ltd. (ADR) 164,212 3,654 Woori Finance Holdings Co., Ltd. (2) 9,967,910 82,143 2,823,170 Sweden - 0.14% Oriflame Cosmetics SA (2) 946,750 21,906 Taiwan - 10.48% Advanced Semiconductor Engineering Inc. (2) 149,182,964 112,804 Asia Corporate Partners Fund, Class B (acquired 3/12/96, cost: $5,019,000)(1)(2) 39,360 3,738 ASUSTeK Computer Inc. 21,763,237 57,939 AU Optronics Corp. 22,289,000 32,233 AU Optronics Corp. (ADR) 502,600 7,197 Cathay Financial Holding Co., Ltd. 28,906,000 59,196 Chinatrust Financial Holding Co., Ltd. 95,756,169 114,340 Delta Electronics Inc. 26,714,787 47,134 Fubon Financial Holding Co., Ltd. 175,406,000 179,606 High Tech Computer Corp. 5,601,888 27,003 Hon Hai Precision Industry Co., Ltd. 54,859,994 254,077 Hon Hai Precision Industry Co., Ltd. (GDR) 2,487,322 23,455 Hotai Motor Co., Ltd. 4,717,000 9,660 MediaTek Incorporation 24,496,673 166,707 Mega Financial Holding Co., Ltd. 84,247,000 58,129 President Chain Store Corp. 24,514,517 39,390 Quanta Computer Inc. 32,953,899 59,180 Quanta Computer Inc. (GDR) 1,046,233 9,155 Seres Capital (Cayman) (acquired 3/12/96, cost: $12,000) (1) (3) 2 14 Seres Capital (Cayman), nonvoting (acquired 3/12/96, cost: $63,000) (1) (3) 8 73 Siliconware Precision Industries Co., Ltd. 42,055,000 34,715 SinoPac Holdings 13,975,435 8,234 Taiwan Cement Corp. 41,731,000 27,479 Taiwan Hon Chuan Enterprise Co., Ltd. 5,794,150 5,239 Taiwan Semiconductor Manufacturing Co., Ltd. 157,895,533 251,220 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 2,194,100 18,628 Test-Rite International Co., Ltd. 14,736,642 9,286 Tong Yang Industry Co., Ltd. (3) 21,933,243 33,791 Vanguard International Semiconductor Corp. (2) 21,579,350 15,025 VIA Technologies Inc. (2) 37,120,150 20,349 1,684,996 Thailand - 0.64% Advanced Info Service PCL 6,988,000 19,246 BEC World PCL 23,000,000 9,295 Electricity Generating PCL 6,108,747 11,793 Electricity Generating PCL, nonvoting depositary receipts 9,262,600 17,643 Siam Cement PCL 1,185,400 8,421 Siam Cement PCL, nonvoting depositary receipts 2,666,290 16,746 Siam City Cement PCL 3,096,924 19,450 102,594 Turkey - 2.41% Akbank Turk AS 13,493,726,000 83,771 Aktas Elektrik Ticaret AS (2) 4,273,718 - Anadolu Efes Biracilik ve Malt Sanayii AS 3,816,381,000 77,321 Koc Holding AS 1,372,336,000 8,979 Migros Turk TAS 5,744,676,000 47,837 Tansas Perakende Magazacilik Ticaret AS (2) 7,948,176,000 9,455 TUPRAS-Turkiye Petrol Rafinerileri AS 1,107,909,000 11,285 Turkcell Iletisim Hizmetleri AS 798,491,000 5,581 Turkiye Is Bankasi AS, Class C 13,545,053,000 75,027 Yapi ve Kredi Bankasi AS (2) 21,461,355,000 67,655 386,911 Ukraine - 0.00% JKX Oil & Gas PLC 283,631 636 United Kingdom - 0.05% Marakand Minerals Ltd. (2) 674,304 258 Oxus Gold PLC (2) 7,720,000 8,099 8,357 United States of America - 0.07% AsiaInfo Holdings, Inc. (2) 936,540 5,582 Sohu.com Inc. (2) 297,400 5,267 10,849 Venezuela - 0.27% Cia. Anonima Nacional Telefonos de Venezuela (CANTV), Class D (ADR) 1,936,189 43,351 Vietnam - 0.06% Vietnam Enterprise Investments Ltd., Redeemable (acquired 9/20/01, cost: $8,432,000) (1) (2) (3) 7,888,071 9,939 Multinational - 0.38% Capital International Global Emerging Markets Private Equity Fund, LP (acquired 6/30/99, cost: $32,825,000) (1) (3) (4) 56,000 31,025 New Asia East Investment Fund Ltd., Class A (acquired 5/23/96, cost: $733,000 (1) (3) 279,240 502 New Asia East Investment Fund Ltd., Class B (acquired 5/23/96, cost: $10,008,000) (1) (3) 3,810,369 6,844 New Europe East Investment Fund Ltd., Class B (acquired 6/4/93, cost: $9,038,000) (1) (3) 436 16,885 Pan Asia Special Opportunities Fund (Cayman) (acquired 10/18/00, cost: $5,914,000) (1) (2) (3) (4) 600,000 5,303 60,559 Miscellaneous - 1.43% Equity securities in initial period of acquisition 230,594 Total equity securities (cost: $9,134,056,000) 15,359,745 Units or Bonds and notes principal Value amount (000) (000) Argentina - 0.23% Multicanal SA: 9.25% February 1, 2002 (5) $2,609 $1,187 10.50% February 1, 2007 (6) 1,244 566 10.50% April 15, 2018 (6) 2,289 1,041 13.125% April 15, 2009 (6) 1,122 511 Republic of Argentina: 1.98% August 3, 2012 (7) 1,424 1,201 9.75% September 19, 2027 (6) 4,830 1,618 15.50% December 19, 2008 (6) 2,000 670 Telecom Argentina Telecom SA: 0% July 7, 2003 Agent- Bank of Tokyo-Mitsubishi Trust Company/Loan Participation Agreements (participation - Credit Suisse First Boston International) (5) (8) 12,100 11,555 0% August 18, 2003 Agent- Bayerische Landesbank Girozentrale/Loan Participation Agreements (participation - Credit Suisse First Boston International) (5) (8) JPY 440,908 4,098 0% September 25, 2003 Agent- Bank of America, N.A./Loan Participation Agreements (participation - Credit Suisse First Boston International) (5) (8) $3,965 3,787 0% October 7, 2003 Agent- Bank of America, N.A./Loan Participation Agreements (participation - Credit Suisse First Boston International) (5) (8) 3,965 3,787 Series K, 7.25% July 1, 2002 (5) EUR 3,205 4,146 Series 1, 8.375% April 8, 2004 (5) 1,145 1,481 Series 2, 9.50% July 2, 2004 (5) 1,480 1,914 37,562 Brazil - 0.10% Banco Bradesco SA 17.50% December 10, 2007 BRL 16,710 6,470 Federal Republic of Brazil: 11.00% August 17, 2040 $3,785 4,496 Capitalization Payment-in-Kind Bond, 8.00% April 15, 2014 318 325 Debt Conversion Bond, Series L, 3.125% April 15, 2012 (7) 5,559 5,323 16,614 Bulgaria - 0.01% Republic of Bulgaria 7.50% January 15, 2013 EUR 750 1,262 Colombia - 0.09% Republic of Colombia: 10.00% January 23, 2012 $5,140 5,962 10.375% January 28, 2033 1,755 2,036 10.75% January 15, 2013 3,335 4,002 11.75% February 25, 2020 1,340 1,729 13,729 Dominican Republic - 0.03% Dominican Republic: 3.50% August 30, 2024 (7) 500 406 9.04% January 23, 2013 (acquired 1/16/03, cost: $2,400,000) (1) 2,400 1,998 9.50% September 27, 2006 820 774 9.50% September 27, 2006 (acquired 9/20/01, cost: $2,307,000) (1) 2,305 2,175 5,353 Ecuador - 0.01% Republic of Ecuador 8.00% August 15, 2030 (7) 2,320 2,010 India - 0.02% Hindustan Lever Ltd. 9.00% debenture January 1, 2005 23,754 units 3,368 Malaysia - 0.03% Tenaga Nasional Bhd. 2.625% convertible debenture November 20, 2007 $3,979 4,476 Mexico - 0.05% United Mexican States Government: Series MI10, 8.00% December 19, 2013 MXN 494 3,973 Series M20, 8.00% December 7, 2023 471 3,330 7,303 Nigeria - 0.00% Central Bank of Nigeria, warrants, 0% November 15, 2020 1,000 units - Peru - 0.02% Republic of Peru: 9.125% February 21, 2012 $934 1,093 9.875% February 6, 2015 2,035 2,503 3,596 Philippines - 0.04% Republic of Philippines 10.625% March 16, 2025 6,176 6,624 Russia - 0.08% Gaz Capital SA 8.625% April 28, 2034 (acquired 4/23/04, cost: $1,100,000) (1) 1,100 1,292 Russian Federation: 5.00% March 31, 2030 (7) 1,150 1,190 5.00% March 31, 2030 (acquired 8/25/00, cost: $3,474,000) (1) (7) 7,540 7,804 8.25% March 31, 2010 555 617 8.25% March 31, 2010 (acquired 8/25/00, cost: $1,914,000) (1) 2,396 2,663 13,566 Turkey - 0.05% Republic of Turkey 20.00% October 17, 2007 TRL 9,775,000,000 7,773 Venezuela - 0.16% Petrozuata Finance, Inc., Series B, 8.22% April 1, 2017 (acquired 4/12/02, cost: $1,181,000) (1) $1,520 1,526 Republic of Venezuela: 9.25% September 15, 2027 19,495 20,616 10.75% September 19, 2013 2,985 3,582 25,724 Total bonds and notes (cost: $113,998,000) 148,960 Units or Short-term securities principal Value amount (000) (000) U.S. government short-term obligations - 2.67% U.S. Treasury Bills 1.87%-2.07% due 1/6-2/17/05 $429,500 428,872 Corporate short-term notes - 0.36% BMW U.S. Capital Corp. 2.15% due 1/3/05 2,300 $2,300 Danske Corp., Delaware 2.29% due 1/7/05 20,670 20,661 Emerson Electric Co. 2.20% due 1/5/05 25,000 24,992 IXIS Commercial Paper Corp. 2.23% due 1/4/05 10,500 10,497 58,450 Non-U.S. currency - 0.05% Taiwan New Dollar TWD 248,087 7,816 Total short-term securities (cost: $494,642,000) 495,138 Total investment securities (cost: $9,742,696,000) 16,003,843 Net unrealized depreciation on foreign currency contracts (9) (25,392) Excess of cash and receivables over payables 101,571 Net assets $16,080,022
(1) Purchased in a private placement transaction (not including purchases of securities that were publicly offered in the primary local market but were not registered under U.S. securites laws); resale to the public may require registration in the country where the primary market is located, and no right to demand registration exists. As of December 31, 2004, the total market value and cost of such securities were $257,760,000 and $375,064,000, respectively, and the market value represented 1.60% of net assets. (2) Non-income-producing securities. (3) This issuer represents investment in an affiliate as defined in the Investment Company Act of 1940. This definition includes, but is not limited to, issuers in which the fund owns more than 5% of the outstanding voting securities. New Asia East Investment Fund Ltd., New Europe East Investment Fund Ltd., and Capital International Global Emerging Markets Private Equity Fund, LP are also considered affiliates since these issuers have the same investment adviser as the fund. (4) Includes an unfunded capital commitment representing a binding commitment made by the fund which may be paid in the future. (5) Security is currently in default pending restructuring; no principal or interest payments received on the scheduled dates. (6) Security is currently in default; no interest payments received on the scheduled payment dates. (7) Coupon rate may change periodically. (8) Participation interests were acquired through the financial institution indicated parenthetically. (9) As of December 31, 2004, the net unrealized foreign currency contracts payable consists of the following: Non-U.S. U.S. Amount Unrealized depreciation (000) (000) (000) (000) --------------------------------------------------------------------------------------------------------------------- Sales Czech Koruna to Euro expiring 2/28/05 CZK1,018,161/EUR31,893 $ 43,229 $ 45,418 $ (2,189) South African Rand to U.S. Dollar expiring 1/28-8/17/05 ZAR1,646,802 265,453 288,656 (23,203) -------------- Foreign currency contracts ---net $(25,392) =============
Abbreviations Securities: ADR = American Depositary Receipts GDR = Global Depositary Receipts GDS = Global Depositary Shares Non-U.S. currency: BRL - Brazilian Real CZK - Czech Koruna EUR - Euro JPY - Japanese Yen MXN - Mexican Peso TRL - Turkish Lira TWD - Taiwan New Dollar ZAR - South African Rand See Notes to Financial Statements FINANCIAL STATEMENTS (Unaudited) Statement of assets and liabilities at December 31, 2004 (dollars in thousands, except per-share data) Assets: Investment securities at market: Unaffiliated issuers (cost: $9,299,371) $15,469,020 Affiliated issuers (cost: $443,325) $534,823 $16,003,843 ------------------------- Cash 22,467 Receivables for-- Sales of investments 37,626 Sales of fund's shares 2,029 Dividends and interest 74,737 Non-U.S. taxes 17,684 132,076 ------------------------- ------------------------ 16,158,386 ------------------------ Liabilities: Payables for-- Purchases of investments 28,993 Unfunded capital commitments 12,188 Open forward currency contracts 25,392 Investment advisory fee 8,162 Other fees and expenses 2,593 Non-U.S. taxes 1,036 ------------------------ 78,364 ------------------------ Net assets at December 31, 2004 -- Equivalent to $72.62 per share on 221,432,583 shares of $0.01 par value capital stock outstanding (authorized capital stock -- 400,000,000 shares) $16,080,022 ============== Net assets consist of: Capital paid in on shares of capital stock $10,059,815 Distributions in excess of net investment income (107,133) Accumulated net realized loss (110,325) Net unrealized appreciation 6,237,665 ------------------------ Net assets at December 31, 2004 $16,080,022 ============== See Notes to Financial Statements Statement of operations (Unaudited) for the six months ended December 31, 2004 (dollars in thousands) Investment income: Income: Dividends (net of non-U.S. withholding tax of $33,141; $205,689 also includes $12,046 from affiliates) Interest (net of non-U.S. withholding tax of $22; 10,241 $ 215,930 also includes $58 from affiliates) ------------------------- Fees and expenses: Investment advisory services 48,180 Custodian 6,012 Registration statement and prospectus 16 Auditing and legal 294 Reports to shareholders 19 Directors' compensation 228 Other 178 54,927 ---------------------------------------- Net investment income 161,003 ------------------------ Realized gain and unrealized appreciation on investments: Net realized gain before non-U.S. taxes (includes 1,731,740 $7,624 net loss from affiliates) Non-U.S. taxes (15,410) ------------------------- Net realized gain on investments 1,716,330 Net change in unrealized appreciation on investment securities and other assets and liabilities 1,448,308 Net change in unrealized depreciation on open forward currency contracts 4,600 ------------------------- Net change in unrealized appreciation 1,452,908 Non-U.S. taxes 30,661 ------------------------- Net change in unrealized appreciation on investments 1,483,569 ------------------------ Net realized gain and net change in unrealized appreciation on investments 3,199,899 ------------------------ Net increase in net assets resulting from operations $ 3,360,902 ============== Financial statements Statement of changes in net assets (dollars in thousands) (unaudited) Six months ended Year ended December 31, June 30, 2004 2004 ---------------------------------------------------- Operations: Net investment income $ 161,003 $ 299,844 Net realized gain on investments 1,716,330 2,818,559 Net change in unrealized appreciation on investments 1,483,569 1,540,016 ----------------------------- ------------- Net increase in net assets resulting from operations 3,360,902 4,658,419 ----------------------------- ------------- Dividends and distributions paid to shareholders: Dividends from net investment income (236,317) (412,626) ----------------------------- ------------- Capital share transactions: Proceeds from shares sold: 3,103,495 and 19,080,947 shares, respectively 193,367 1,152,989 Proceeds from shares issued in reinvestment of net investment income dividends: 3,152,874 and 6,472,738 shares, respectively 213,261 378,267 Cost of shares repurchased: 50,353,435 and 100,778,444 shares, respectively (3,209,439) (6,173,186) ----------------------------- ------------- Net decrease in net assets resulting from capital share transactions (2,802,811) (4,641,930) ----------------------------- ------------- Total increase (decrease) in net assets 321,774 (396,137) Net assets: Beginning of period 15,758,248 16,154,385 ----------------------------- ------------- End of period (including distributions in excess of net investment income:($107,133) and ($31,819), respectively) $16,080,022 $15,758,248 ============== ============== See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - Emerging Markets Growth Fund, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, interval investment company ("open-end interval fund"). As an open-end interval fund, the fund offers its shareholders the opportunity to purchase and redeem shares on a periodic basis. The fund's investment objective is to seek long-term capital growth by investing primarily in equity securities of issuers in developing countries. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund: SECURITY VALUATION - Equity securities are valued at the official closing price of, or the last reported sale price on, the principal exchange or market on which such securities are traded, as of the close of business or, lacking any sales, at the last available bid price. Bonds and notes are valued at prices obtained from an independent pricing service. However, where the investment adviser deems it appropriate, they will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality, and type. Short-term securities with original maturities of one year or less maturing within 60 days are valued at amortized cost, which approximates market value. Forward currency contracts are valued at the mean of their representative quoted bid and asked prices. Securities and assets for which representative market quotations are not readily available are valued at fair value as determined in good faith under policies approved by the fund's Board. If significant events occur after the close of markets outside the United States and before the fund's net asset value is next determined, appropriate adjustments to closing market prices may be made to reflect these events. Events of this type may include, but are not limited to, significant movements in the U.S. market, earthquakes and other natural disasters, or unanticipated market closures. At December 31, 2004, out of the 396 securities in the fund's portfolio, 39 securities were fair valued with an aggregate value of $242,986,000. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from securities transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums, and original issue discounts on bonds, notes, and short-term securities are amortized daily over the expected life of the security. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid to shareholders are recorded on the ex-dividend date. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect at the end of the reporting period. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities and other assets and liabilities are included with the net realized gain or loss and net change in unrealized appreciation or depreciation on investments. UNFUNDED CAPITAL COMMITMENTS - Unfunded capital commitments represent agreements which obligate the fund to meet capital calls in the future. Payment would be made when a capital call is requested. Capital calls can only be made if and when certain requirements have been fulfilled; thus, the timing of such capital calls cannot readily be determined. Unfunded capital commitments are recorded at the amount that would be paid when and if capital calls are made. FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency contracts, which represent agreements to exchange non-U.S. currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in exchange rates arising from its investments. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates and securities' values underlying these instruments. The face or contract amount in U.S. dollars reflects the total exposure the fund has in that particular contract. On a daily basis, the fund values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The fund records realized gains or losses at the time the forward contact is closed or offset by another contract with the same broker for the same settlement date and currency. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions, revaluation of currencies, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records an estimated liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities. During the six months ended December 31, 2004, tax law amendments in India resulted in the abolishment of long-term capital gain taxes on sales transacted on recognized stock exchanges. As a result, the accrued non-U.S. taxes on unrealized gains were reduced by $56,903,000 on September 30, 2004, the enactment date of the tax law amendments. As of December 31, 2004, accrued non-U.S. taxes on unrealized gains were $34,000, which were included in the payable for non-U.S. taxes. The receivable for non-U.S. taxes includes $16,689,000 related to India capital gains taxes that are currently in dispute and under appeal. Potential tax, interest, and penalty amounts relating to this issue, if any, may be assessed in the future. Based upon the advice of outside counsel, management believes that it is likely that this dispute will be resolved in favor of the fund. If this dispute is ultimately resolved unfavorably, it will not have a material adverse effect on the fund's financial position or results of operations. CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest, withholding taxes reclaimable, forward contracts, and other receivables and payables, on a book basis, were $59,229,000 for the six months ended December 31, 2004. 3. FEDERAL INCOME TAXATION The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Distributions are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses, capital losses related to sales of securities within 30 days of purchase, and unrealized appreciation or depreciation of certain investments in non-U.S. securities. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund. The tax character of the distribution paid of $236,317,000 was ordinary income. As of December 31, 2004, distributions in excess of net investment income and currency losses on a tax basis were $55,137,000. As of December 31, 2004, the fund had available a capital loss carryforward of $34,272,000, expiring 2011. The capital loss carryforward will be used to offset any capital gains realized by the fund in the current year or in subsequent years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains. As of December 31, 2004, the cost of investment securities, excluding forward currency contracts, and cash denominated in non-U.S. currencies for federal income tax reporting purposes was $9,893,892,000. Net unrealized appreciation on investments, excluding forward currency contracts, aggregated $6,109,917,000, net of accumulated deferred taxes totaling $34,000, of which $6,841,698,000 related to appreciated securities and $731,781,000 related to depreciated securities. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY SERVICES FEE - The Investment Advisory and Service Agreement with Capital International, Inc. (CII) provides for monthly management service fees, accrued weekly. CII is wholly owned by Capital Group International, Inc., which is wholly owned by The Capital Group Companies, Inc. These fees are based on an annual rate of 0.90% on the first $400 million of the fund's net assets; 0.80% of such assets in excess of $400 million but not exceeding $1 billion; 0.70% of such assets in excess of $1 billion but not exceeding $2 billion; 0.65% of such assets in excess of $2 billion but not exceeding $4 billion; 0.625% of such assets in excess of $4 billion but not exceeding $6 billion; 0.60% of such assets in excess of $6 billion but not exceeding $8 billion; 0.58% of such assets in excess of $8 billion but not exceeding $11 billion; 0.56% of such assets in excess of $11 billion but not exceeding $15 billion; 0.54% of such assets in excess of $15 billion but not exceeding $20 billion; and 0.52% of such assets in excess of $20 billion. TRANSFER AGENT FEE - The fund has an agreement with American Funds Service Company (AFS), the transfer agent for the fund. AFS is a wholly owned indirect subsidiary of The Capital Group Companies, Inc. Under this agreement, the fund compensates AFS for transfer agency services including shareholder recordkeeping, communications, and transaction processing. Transfer agent fees were $1,000 for the six months ended December 31, 2004. DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred compensation plan in 1998, Directors who are unaffiliated with CII may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or the American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors' compensation in the accompanying financial statements includes the current fees (either paid in cash or deferred) and the net increase or decrease in the value of the deferred amounts. Directors' compensation for the six months ended December 31, 2004 was $228,000, representing $194,000 in current fees (either paid in cash or deferred) and $34,000 in net increase in the value of deferred compensation amounts. As of December 31, 2004, the cumulative amount of these liabilities was $536,000. This amount is included with payables for other fees and expenses. AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund are or may be considered to be affiliated with CII. No affiliated officers and Directors received any compensation directly from the fund. 5. RESTRICTED SECURITIES The fund has invested in certain securities for which resale may be limited (for example, in the U.S., to qualified institutional buyers) or which are otherwise restricted. These securities are identified in the investment portfolio. As of December 31, 2004, the total value of restricted securities was $257,760,000, which represents 1.60% of the net assets of the fund. 6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $2,008,295,000 and $5,195,956,000, respectively, during the six months ended December 31, 2004. The fund receives a reduction in its custodian fee equal to the amount of interest calculated on certain cash balances held at the custodian bank. For the six months ended December 31, 2004, the custodian fee of $6,012,000 is reported net of a $26,000 reduction. 7. TRANSACTIONS WITH AFFILIATES If the fund owns more than 5% of the outstanding voting securities of an issuer, the fund's investment in that issuer represents an investment in an affiliate as defined in the Investment Company Act of 1940. In addition, New Asia East Investment Fund Ltd., New Europe East Investment Fund Ltd., and Capital International Global Emerging Markets Private Equity Fund, LP are considered affiliates since these issuers have the same investment adviser as the fund. A summary of the fund's transactions in the securities of affiliated issuers during the six months ended December 31, 2004 is as follows: Beginning Purchases/ Sales/ Issuer shares additions reductions Affiliated issuers: Anhui Conch Cement 39,937,000 260,000 - BYD 13,299,000 - 867,000 Cummins India 10,446,937 - - Ivanhoe Mines 17,189,000 - - LG Cable 1,629,160 - - Mvelaphanda Resources 9,142,000 1,999,377 - S P Setia Berhad 34,837,100 - - Tele Norte Celular Participacoes 9,215,384,539 - - Tong Ren Tang Technologies 5,529,900 - - Tong Yang Industry 21,298,340 634,903 - Wumart Stores 6,460,000 275,000 - Affiliated private equity funds/private placements: Baring Vostok Private Equity Fund 13,087,057 - - Capital International Global Emerging Markets Private Equity Fund 56,000 - - Hidroneuquen 28,022,311 - - New Asia East Investment Fund 4,089,609 - - New Europe East Investment Fund 436 - - New GP Capital Partners 27,000 - - Pan Asia Special Opportunities Fund 600,000 - - Seres Capital 10 - - South African Private Equity Fund III, LP 29,008 - - Vietnam Enterprise Investments 7,888,071 - - Unaffiliated issuers:(1) Advanced Semiconductor Engineering 195,145,191 10,374,773 56,337,000 Embotelladora Andina 6,429,023 - 2,479,950 Housing Development Finance 16,637,984 - 4,636,940 Hyundai Development 4,443,274 - 3,162,900 LG Engineering & Construction 2,589,070 - 1,261,510 Shanghai Forte Land 55,154,000 - 55,154,000 UMW Holdings 25,827,796 - 7,046,200 Dividend and interest Ending income Value Issuer shares (000) (000) Affiliated issuers: Anhui Conch Cement 40,197,000 $ - $43,700 BYD 12,432,000 - 32,949 Cummins India 10,446,937 454 29,603 Ivanhoe Mines 17,189,000 - 123,904 LG Cable 1,629,160 1,306 33,918 Mvelaphanda Resources 11,141,377 - 28,746 S P Setia Berhad 34,837,100 396 39,604 Tele Norte Celular Participacoes 9,215,384,539 - 6,366 Tong Ren Tang Technologies 5,529,900 - 12,130 Tong Yang Industry 21,933,243 896 33,791 Wumart Stores 6,735,000 - 10,831 Affiliated private equity funds/private placements: Baring Vostok Private Equity Fund 13,087,057 96 16,649 Capital International Global Emerging Markets Private Equity Fund 56,000 130 31,025 Hidroneuquen 28,022,311 - 875 New Asia East Investment Fund 4,089,609 3 7,346 New Europe East Investment Fund 436 - 16,885 New GP Capital Partners 27,000 - 7,650 Pan Asia Special Opportunities Fund 600,000 - 5,303 Seres Capital 10 58 87 South African Private Equity Fund III, LP 29,008 386 43,522 Vietnam Enterprise Investments 7,888,071 - 9,939 Unaffiliated issuers:(1) Advanced Semiconductor Engineering 149,182,964 - - Embotelladora Andina 3,949,073 348 - Housing Development Finance 12,001,044 4,920 - Hyundai Development 1,280,374 718 - LG Engineering & Construction 1,327,560 1,383 - Shanghai Forte Land - 85 - UMW Holdings 18,781,596 925 - $12,104 $534,823 (1) Affiliated during the period but no longer affiliated at December 31, 2004.
FINANCIAL HIGHLIGHTS Six months Year ended June 30(1) ended December 31, 2004(1),(2) 2004 2003 2002 2001 2000 Net asset value, beginning of period $59.35 $47.41 $44.80 $48.21 $68.69 $55.53 Income from investment operations: Net investment income .67 .96 .92 .35 .68 .58 Net realized and unrealized gain (loss) on investments 13.66 12.24 2.21 (3.07) (20.80) 13.56 Total income(loss) from investment operations 14.33 13.20 3.13 (2.72) (20.12) 14.14 Less distributions: Dividends from net investment income (1.06) (1.26) (.52) (.69) (.36) (.98) Net asset value, end of period $72.62 $59.35 $47.41 $44.80 $48.21 $68.69 Total return 24.27%(3) 27.89% 7.14% (5.64)% (29.31)% 25.63% Ratios/supplemental data: Net assets, end of period (in millions) $16,080 $15,758 $16,154 $16,258 $17,634 $22,639 Ratio of expenses to average net assets 0.70%(4) .70% .70% .70% .68% .71% Ratio of net income to average net assets 2.06%(4) 1.64% 2.14% 1.27% 1.25% 1.11% Portfolio turnover rate 13.28%(3) 35.36% 33.70% 26.22% 26.10% 35.86%
(1) Starting with the year ended June 30, 2004, the per-share data is based on average shares outstanding. (2) Unaudited. (3) Based on operations for the period shown and, accordingly, not representative of a full year's operations. (4) Annualized. See Notes to Financial Statements EXPENSE EXAMPLE As a shareholder of the fund, you incur ongoing costs, including investment advisory services fees and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2004 through December 31, 2004). ACTUAL EXPENSES: The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES: The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Beginning account Ending account Expenses paid Annualized value 7/1/2004 value 12/31/2004 during period(1) expense ratio Actual return $ 1,000.00 $1,242.75 $3.96 .70% Hypothetical 5% return before expenses 1,000.00 1,021.68 3.57 .70
(1) Expenses are equal to the fund's annualized expense ratio of .70%, multiplied by the average account value over the period, multiplied by the number of days in the period (184), and divided by 365 (to reflect the one-half year period). BOARD OF DIRECTORS AND DIRECTOR EMERITUS "NON-INTERESTED" DIRECTORS YEAR FIRST ELECTED A DIRECTOR NAME AND AGE OF THE FUND(1) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS Collette D. Chilton, 47 1999 President and Chief Investment Officer, Lucent Asset Management Corp. Khalil Foulathi, 53 1996 Executive Director, Abu Dhabi Investment Authority Beverly L. Hamilton, 58 1991 Retired President, ARCO Investment Management Company David F. Holstein, 49 2001 Managing Director, Global Equities, General Motors Investment Management Corporation Raymond Kanner, 51 1997 Director, Global Equity Investments, IBM Retirement Funds Helmut Mader, 62 1986 Former Director, Deutsche Bank AG William B. Robinson, 66 1986 Director, Deutsche Asset Management Australia Limited Gerrit Russelman, 59 2001 Adviser to the Managing Director, Investments, Pensioenfonds PGGM Aje K. Saigal, 48 2000 Director, Investment Policy and Strategy, Government of Singapore Investment Corporation Pte. Limited "NON-INTERESTED" DIRECTORS NUMBER OF PORTFOLIOS IN FUND COMPLEX(2) OVERSEEN BY NAME AND AGE DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR Collette D. Chilton, 47 1 None Khalil Foulathi, 53 1 None Beverly L. Hamilton, 58 1 Oppenheimer Funds David F. Holstein, 49 1 None Raymond Kanner, 51 1 None Helmut Mader, 62 1 None William B. Robinson, 66 1 None Gerrit Russelman, 59 1 None Aje K. Saigal, 48 1 None "INTERESTED" DIRECTORS(4) YEAR FIRST ELECTED A DIRECTOR OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND NAME, AGE AND OFFICER OF POSITIONS HELD WITH AFFILIATED ENTITIES OR THE PRINCIPAL POSITION WITH FUND THE FUND(1) UNDERWRITER OF THE FUND Robert Ronus, 62 2003 Senior Vice President, Capital International, Inc.; Chairman of the Board Director, Capital Group International, Inc.;(5) Vice Chairman of the Board, Capital Guardian Trust Company;(5) Senior Vice President, Capital International Limited;(5) Director, The Capital Group Companies, Inc.(6) David I. Fisher, 65 1986 Vice Chairman of the Board, Capital International, Vice Chairman of the Board Inc.; Chairman of the Board, Capital Group International, Inc.;(5) Director, Capital Group Research, Inc.;(5) Chairman of the Board, Capital Guardian Trust Company;(5) Vice Chairman of the Board, Capital International Limited;(5) Director, Capital International Research, Inc.;(5) Director, The Capital Group Companies, Inc.(6) Shaw B. Wagener, 45 1997 Chairman of the Board, Capital International, Inc.; President Senior Vice President and Director, Capital Group International, Inc.;(5) Director, Capital Guardian Trust Company;(5) Director, The Capital Group Companies, Inc.(6) Victor D. Kohn, 47 1996 President and Director, Capital International, Inc.; Executive Vice President Senior Vice President, Capital International Research, Inc.(5) "INTERESTED" DIRECTORS(4) NUMBER OF PORTFOLIOS IN FUND COMPLEX(2) NAME, AGE AND OVERSEEN BY POSITION WITH FUND DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR Robert Ronus, 62 1 None Chairman of the Board David I. Fisher, 65 1 None Vice Chairman of the Board Shaw B. Wagener, 45 1 None President Victor D. Kohn, 47 1 None Executive Vice President DIRECTOR EMERITUS Walter P. Stern Chairman Emeritus OTHER OFFICERS YEAR FIRST ELECTED AN PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND NAME, AGE AND OFFICER OF POSITIONS HELD WITH AFFILIATED ENTITIES OR THE PRINCIPAL POSITION WITH FUND THE FUND(1) UNDERWRITER OF THE FUND Hartmut Giesecke, 67 1993 Senior Vice President and Director, Capital Senior Vice President International, Inc.; Chairman of the Board, Capital International K.K.;(5) Director, Capital Group International, Inc.;(5) Senior Vice President, Capital International Research, Inc.(5) Nancy J. Kyle, 54 1996 Vice Chairman of the Board, Capital Guardian Trust Senior Vice President Company(5) Michael A. Felix, 44 1993 Senior Vice President and Director, Capital Vice President and Treasurer International, Inc.; Senior Vice President, Treasurer and Director, Capital Guardian Trust Company(5) Peter C. Kelly, 46 1996 Senior Vice President, Senior Counsel, Secretary Vice President and Director, Capital International, Inc.; Secretary, Capital Group International, Inc.;(5) Senior Vice President, Senior Counsel and Director, Capital Guardian Trust Company(5) Robert H. Neithart, 39 2000 Executive Vice President and Research Director of Vice President Emerging Markets, and Director, Capital International Research, Inc.;(5) Vice President, Capital Strategy Research5 Abbe G. Shapiro, 45 1997 Vice President, Capital International, Inc.; Vice Vice President President, Capital Guardian Trust Company(5) Lisa B. Thompson, 39 2000 Executive Vice President and Research Director of Vice President Emerging Markets, and Director, Capital International Research, Inc.(5) Vincent P. Corti, 48 1986 Vice President -- Fund Business Management Secretary Group, Capital Research and Management Company(5) Jeanne M. Nakagama, 47 2000 Vice President, Capital International, Inc.; Vice Assistant Treasurer President, Capital Guardian Trust Company(5) Lee K. Yamauchi, 42 2000 Vice President, Capital International, Inc.; Vice Assistant Treasurer President, Capital Guardian Trust Company(5)
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION ABOUT FUND DIRECTORS. THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 11100 SANTA MONICA BOULEVARD, LOS ANGELES, CA 90025, ATTENTION: FUND SECRETARY. CAPITAL INTERNATIONAL, INC. (CII) VOTES THE PROXIES OF SECURITIES HELD IN THE FUND ACCORDING TO CII'S PROXY VOTING POLICY AND PROCEDURES WHICH HAVE BEEN ADOPTED BY THE FUND'S BOARD OF DIRECTORS. A COPY OF THE FUND'S SAI, PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD FOR THE 12 MONTHS ENDED JUNE 30, 2004 IS AVAILABLE FREE OF CHARGE ON THE U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) WEBSITE AT WWW.SEC.GOV OR UPON REQUEST BY CALLING 800/421-0180, EXT. 96245. Emerging Markets Growth Fund files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website. You may also review or, for a fee, copy the forms at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800/SEC-0330. (1) Directors and officers of the fund serve until their resignation, removal or retirement. (2) Capital International, Inc. serves as investment adviser for Emerging Markets Growth Fund, Inc., an open-end "interval" fund, and does not act as investment adviser for other U.S. registered investment companies. (3) This includes all directorships (other than those in Emerging Markets Growth Fund, Inc.) that are held by each Director as a director of a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of the Securities Exchange Act of 1934 or a U.S. registered investment company. (4) "Interested persons" within the meaning of the 1940 Act, on the basis of their affiliation with the fund's investment adviser, Capital International, Inc. or affiliated entities. (5) Company affiliated with Capital International, Inc. (6) Parent company of Capital International, Inc. OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER Capital International, Inc. 11100 Santa Monica Boulevard, 15th Floor Los Angeles, CA 90025-3302 135 South State College Boulevard Brea, CA 92821-5823 CUSTODIAN OF ASSETS JPMorgan Chase Bank 270 Park Avenue New York, NY 10017-2070 COUNSEL Dechert LLP 1775 I Street, N.W. Washington, D.C. 20006-2401 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 350 South Grand Avenue Los Angeles, CA 90071-2889 This report is for the information of shareholders of Emerging Markets Growth Fund, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. Lit. No. MFGESR-915-0205P(NLS) Litho in USA TAG/WS/9099-S2229 (C) 2005 Emerging Markets Growth Fund, Inc. ITEM 2 - Code of Ethics This Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made by dialing 800/421-0180, extension 96245 or by writing to the Secretary of the Registrant, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, California 90025-3302. ITEM 3 - Audit Committee Financial Expert Not applicable for filing of Semiannual Reports to Shareholders. ITEM 4 - Principal Accountant Fees and Services Not applicable for filing of Semiannual Reports to Shareholders. ITEM 5 - Audit Committee of Listed Registrants Not applicable. ITEM 6 - Reserved ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 10 - Submission of Matters to a Vote of Security Holders There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a Committee on Directors (formerly the Nominating Committee) comprised solely of persons who are not considered "interested persons" of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The Committee periodically reviews such issues as the Board's composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Directors. While the Committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board. Such suggestions must be sent in writing to the Committee of the Registrant, c/o the Registrant's Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the Committee. ITEM 11 - Controls and Procedures (a) The Registrant's Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant's disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. (b) There were no changes in the Registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12 - Exhibits (a) The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EMERGING MARKETS GROWTH FUND, INC. By /s/ Shaw B. Wagener ---------------------------------------------------------- Shaw B. Wagener, President and PEO Date: March 10, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Shaw B. Wagener -------------------------------------------------------- Shaw B. Wagener, President and PEO Date: March 10, 2005 By /s/ Michael A. Felix ----------------------------------------------------------- Michael A. Felix, Treasurer and PFO Date: March 10, 2005