EUROPACIFIC GROWTH FUND
Part B
Statement of Additional Information
JUNE 1, 1998 (as amended August 17, 1998)
This document is not a prospectus but should be read in conjunction with the
current prospectus of EuroPacific Growth Fund (the fund or EUPAC) dated June 1,
1998. The prospectus may be obtained from your investment dealer or financial
planner or by writing to the fund at the following address:
EuroPacific Growth Fund
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
ITEM PAGE NO.
Description of Certain Securities and Investment Techniques 1
Investment Restrictions 5
Fund Trustees and Officers 7
Management . 13
Dividends, Distributions and Federal Taxes. 15
Purchase of Shares 19
Redeeming Shares 25
Shareholder Account Services and Privileges 26
Execution of Portfolio Transactions 28
General Information 29
Investment Results 31
Description of Bond Ratings 36
Financial Statements attached
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
THE DESCRIPTIONS BELOW ARE INTENDED TO SUPPLEMENT THE MATERIAL IN THE
PROSPECTUS UNDER "INVESTMENT POLICIES AND RISKS."
INVESTING IN VARIOUS COUNTRIES - The fund may invest in securities issued or
guaranteed by governments (including states, provinces or municipalities) of
countries other than the U.S., or by their agencies, authorities or
instrumentalities, or by supranational entities organized or supported by
several national governments. Investing outside the U.S. involves special
risks (as described in the fund's Prospectus). Securities issued by non-U.S.
governments may or may not be supported by the full faith and credit of the
governmental entities. Additionally governmental issuers of non-U.S.
securities may be unwilling to repay principal and interest when due and may
require that the conditions for payment be renegotiated. The fund has no
current intention (at least during the next 12 months) to invest more than 5%
of its assets in securities issued by non-U.S. governmental entities.
The fund's assets will be invested with geographic flexibility; accordingly,
investments may be made from time to time in issuers domiciled in, or
governments of, developing countries. The fund's investment adviser currently
does not intend to invest more than 20% of the fund's assets (taken at cost) in
securities of issuers domiciled in, or governments of, developing countries.
The risks of investing outside the U.S. may be more pronounced for investments
in developing countries, such as some of the countries of Southeast Asia, Latin
America, Eastern Europe, and the Middle East. Although there is no universally
accepted definition, a developing country may, for example, be in the initial
stages of its industrialization cycle and/or have a lower per capita gross
national product and/or have a low or middle income economy. In addition, the
possibility of political upheaval and the dependence on foreign economic
assistance may be greater in developing countries than in developed countries.
Furthermore, markets of developing countries may be more volatile and have
lower trading volume (potentially affecting the liquidity of securities).
CURRENCY TRANSACTIONS - The fund has the ability to hold a portion of its
assets in U.S. dollars and other currencies and to enter into certain currency
contracts (on either a spot or forward basis) in connection with investing in
non-U.S. dollar denominated securities including foreign currency exchange and
forward currency contracts. A foreign exchange contract is used to facilitate
settlement of trades. For example, the fund might purchase a currency or enter
into a foreign exchange contract to preserve the U.S. dollar price of
securities it has contracted to purchase. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The fund will segregate
liquid assets which will be marked to market daily to meet its forward
commitments to the extent required by the Securities and Exchange Commission.
Certain provisions of the Internal Revenue Code (the Code) may affect the
extent to which the fund may enter into forward contracts. Such transactions
may also affect, for U.S. federal income tax purposes, the character and timing
of income, gain or loss recognized by the fund.
The fund's assets may also be invested in securities through depositary
receipts which may be denominated in various currencies. For example, the fund
may purchase American Depositary Receipts which are U.S. dollar denominated
securities of non-U.S. issuers designed for use in the U.S. securities markets
and which represent and may be converted to the underlying security.
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality.
CASH EQUIVALENTS - These securities include (1) commercial paper (short-term
notes up to 9 months in maturity issued by corporations or governmental
bodies), (2) commercial bank obligations (certificates of deposit
(interest-bearing time deposits), bankers' acceptances (time drafts on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity), (3) savings association and savings bank obligations (certificates
of deposit issued by savings banks or savings associations), (4) securities of
the U.S. Government, its agencies or instrumentalities that mature, or may be
redeemed, in one year or less, and (5) corporate bonds and notes that mature,
or may be redeemed, in one year or less.
OTHER SECURITIES - The fund may also invest in securities that have both equity
and debt characteristics such as non-convertible preferred stocks and
convertible securities. Non-convertible preferred stocks are similar to debt
in that they have a stated dividend rate akin to the coupon of a bond or note
even though they are often classified as equity securities. The prices and
yields of non-convertible preferred stocks generally move with changes in
interest rates and the issuer's credit quality, similar to the factors
affecting debt securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
shares of common stock or other securities at a stated exchange ratio. These
securities prior to conversion pay a fixed rate of interest or a dividend.
Because convertible securities have both debt and equity characteristics their
value varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the credit quality of
the issuer. The fund may invest in convertible securities rated in a variety
of credit quality categories, including those rated as low as C by Moody's
Investors Service, Inc. or D by Standard & Poor's Corporation. The fund has no
current intention (at least during the next 12 months) to invest more than 5%
of its assets in convertible securities rated below A by Moody's or S&P.
WARRANTS AND RIGHTS - In addition, the fund may purchase warrants, which are
usually issued together with bonds or preferred stocks. Warrants generally
entitle the holder to buy a proportionate amount of common stock at a specified
price, usually higher than the current market price. Warrants may be issued
with an expiration date or in perpetuity. The fund may also invest in rights
to purchase common stocks. Rights are similar to warrants except that they
normally entitle the holder to purchase common stock at a lower price than the
current market price. Rights generally expire in less than four weeks.
REPURCHASE AGREEMENTS - The fund has no current intention (at least during the
next 12 months) to invest more than 5% of its assets in repurchase agreements,
under which the fund buys a security and obtains a simultaneous commitment from
the seller to repurchase the security at a specified time and price.
Repurchase agreements permit the fund to maintain liquidity and earn income
over periods of time as short as overnight. The seller must maintain with the
fund's custodian collateral equal to at least 100% of the repurchase price
including accrued interest, as monitored daily by Capital Research and
Management Company (the Investment Adviser). If the seller under the
repurchase agreement defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by the fund may be delayed or limited.
144A SECURITIES - Normally, securities acquired in U.S. private placements are
subject to contractual restrictions on resale and may not be resold except
pursuant to a registration statement under the Securities Act of 1933 or in
reliance upon an exemption from the registration requirements under the Act,
for example, private placements sold pursuant to Rule 144A. Accordingly, any
such obligation will be deemed illiquid (unless procedures for determining
liquidity are adopted by the fund's Board of Trustees), and the fund may incur
certain additional costs in disposing of such securities. Additionally,
investing in private placement securities could have the effect of increasing
the level of illiquidity of the fund's portfolio to the extent that "qualified"
institutional investors become, for a period of time, uninterested in
purchasing these securities.
The fund will not invest more than 10% of its assets in illiquid securities or
more than 5% of its assets in securities which are subject to contractual
restrictions on resale. Non-U.S. securities that can be freely traded in a
foreign securities market and for which the facts and circumstances support a
finding of liquidity are not included for the purposes of this limitation.
CERTAIN RISK FACTORS RELATING TO BELOW INVESTMENT GRADE BONDS:
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk bonds
are very sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other bonds, may
contain redemption or call provisions. If an issuer exercised these provisions
in a declining interest rate market, the fund would have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. Conversely, a high-yield, high-risk bond's value will decrease in a
rising interest rate market, as it will with all bonds.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
Subsequent to their purchase by the fund, certain bonds or notes may cease to
be rated or their ratings may be reduced below the minimum rating required for
purchase by the fund. Neither event requires the elimination of such
obligations from the fund's portfolio, but the Investment Adviser will consider
such an event in its determination of whether the fund should continue to hold
such obligations in its portfolio. If, however, as a result of a downgrade or
otherwise, the fund holds more than 5% of its assets in high-yield, high-risk
bonds, the fund will dispose of the excess as expeditiously as possible.
INVESTMENT RESTRICTIONS
The fund has adopted certain investment restrictions which may not be changed
without a majority vote of its outstanding shares. Such majority is defined by
the Investment Company Act of 1940 (the "1940 Act") as the vote of the lesser
of (i) 67% or more of the outstanding voting securities present at a meeting,
if the holders of more than 50% of the outstanding voting securities are
present in person or by proxy, or (ii) more than 50% of the outstanding voting
securities. All percentage limitations expressed in the following investment
restrictions are measured immediately after and giving effect to the relevant
transaction. The fund may not:
1. Invest in securities of another issuer (other than the U.S. government or
its agencies or instrumentalities), if immediately after and as a result of
such investment more than 5% of the value of the total assets would be invested
in the securities of such other issuer (except with respect to 25% of the value
of the total assets, the fund may exceed the 5% limitation with regards to
investments in the securities of any one foreign government);
2. Invest in companies for the purpose of exercising control or management;
3. Invest more than 25% of the value of its total assets in the securities of
companies primarily engaged in any one industry;
4. Invest more than 5% of its total assets in the securities of other
investment companies; such investments shall be limited to 3% of the voting
stock of any investment company provided, however, that investment in the open
market of a closed-end investment company where no more than customary brokers'
commissions are involved and investment in connection with a merger,
consolidation, acquisition or reorganization shall not be prohibited by this
restriction;
5. Buy or sell real estate in the ordinary course of its business; however, the
fund may invest in securities secured by real estate or interests therein or
issued by companies, including real estate investment trusts and funds, which
invest in real estate or interests therein;
6. Buy or sell commodities or commodity contracts in the ordinary course of its
business, provided, however, that entering into foreign currency contracts
shall not be prohibited by this restriction;
7. Invest more than 10% of the value of its total assets in securities which
are not readily marketable or more than 5% of the value of its total assets in
securities which are subject to legal or contractual restrictions on resale
(except repurchase agreements) or engage in the business of underwriting of
securities of other issuers, except to the extent that the disposal of an
investment position may technically constitute the fund an underwriter as that
term is defined under the Securities Act of 1933. The fund may buy and sell
securities outside the U.S. which are not registered with the Securities and
Exchange Commission or marketable in the U.S. without regard to this
restriction. The fund may not enter into any repurchase agreement if, as a
result, more than 10% of total assets would be subject to repurchase
agreements maturing in more than seven days. (See "Repurchase Agreements"
above);
8. Lend any of its assets; provided, however that entering into repurchase
agreements, investment in government obligations, publicly traded bonds,
debentures, other debt securities or in cash equivalents such as short term
commercial paper, certificates of deposit, or bankers acceptances, shall not be
prohibited by this restriction;
9. Sell securities short except to the extent that the fund contemporaneously
owns or has the right to acquire, at no additional cost, securities identical
to those sold short;
10. Purchase securities on margin;
11. Borrow amounts in excess of 5% of the value of its total assets or issue
senior securities. In any event, the fund may borrow only as a temporary
measure for extraordinary or emergency purposes and not for investment in
securities;
12. Mortgage, pledge or hypothecate its total assets to any extent;
13. Purchase or retain the securities of any issuer, if those individual
officers and trustees of the fund, its investment adviser or principal
underwriter, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
14. Invest more than 5% of the value of its total assets in securities of
companies having, together with their predecessors, a record of less than three
years of continuous operation;
15. Invest in puts, calls, straddles or spreads, or combinations thereof; or
16. Purchase partnership interests in oil, gas, or mineral exploration,
drilling or mining ventures.
In addition, it is a non-fundamental policy of the fund as to 75% of the fund's
total assets, investments in any one issuer will be limited to no more than 10%
of the voting securities of such issuer.
FUND TRUSTEES AND OFFICERS
TRUSTEES AND TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
AND AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS
(POSITIONS DEFERRED DEFERRED ON WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) TRUSTEE
ORGANIZATIONS FROM FUND DURING FROM ALL FUNDS SERVES
LISTED MAY FISCAL YEAR MANAGED BY /3/
HAVE CHANGED ENDED 3/31/98 CAPITAL RESEARCH
DURING THIS AND MANAGEMENT
PERIOD) COMPANY/2/ FOR THE
YEAR ENDED
3/31/98
<S> <C> <C> <C> <C> <C>
Elisabeth Trustee Administrative Director, $20,950 $40,650 2.00
Allison ANZI, Ltd.
ANZI, Ltd. (financial
1770 publishing
Massachusetts and
Ave. consulting);
Cambridge, MA Publishing
02140 Consultant,
Age: 51 Harvard
Medical
School;
former Senior
Vice
President,
Planning and
Development,
McGraw Hill,
Inc.
Michael R. Trustee Chairman of $17,750 $34,250 2
Bonsignore the Board and
Honeywell Chief
Plaza Executive
P.O. Box 524 Officer,
Minneapolis, Honeywell
MN 55440 Inc.
Age: 57
+David I. Trustee Chairman of None/4/ None/4/ 2.00
Fisher the Board,
333 South The Capital
Hope Street Group
Los Angeles, Companies,
CA 90072 Inc.;
Age: 58 Chairman of
the Board,
Capital
Guardian
Trust Company
Robert A. Fox Trustee President and $19,550/5/ $90,917 5.00
P.O. Box 457 Chief
Livingston, Executive
CA 95334 Officer,
Age: 61 Foster Farms,
Inc.; former
President,
Revlon
International; former
Chairman and
Chief
Executive
Officer,
Clarke Hooper
America
(advertising)
Alan Greenway Trustee President, $20,450 $72,650 4.00
7413 Fairway Greenway
Road Associates,
La Jolla, CA Inc.
92037 (management
Age: 70 consulting
services)
+William R. Trustee Senior Vice None/4/ None/4/ 3.00
Grimsley President and
One Market Director,
Plaza Capital
Steuart Research and
Tower, Suite Management
1800 Company
San
Francisco, CA
94105
Age: 60
Koichi Itoh Trustee Group Vice $19,950 $39,850 2.00
Autosplice President,
Inc. Autosplice
3-7-39 Inc., former
Minami-cho President and
Chief
Higashi-Kurume City Executive
Tokyo, Japan Officer,
203-0031 IMPAC
Age: 57 (management
consulting
services);
former
Managing
Partner,
VENCA
Management
(venture
capital)
++William H. Trustee President, $19,400/5/ $74,950 4.00
Kling Minnesota
45 East Public Radio;
Seventh President,
Street Greenspring
St. Paul, MN Co.; former
55101 President,
Age: 56 American
Public Radio
(now Public
Radio
International)
John G. Trustee The IBJ $19,150/5/ $151,200 7.00
McDonald Professor of
Graduate Finance,
School of Graduate
Business School of
Stanford Business,
University Stanford
Stanford, CA University
94305
Age: 61
++William I. Trustee Chairman of $20,950 $41,850 2.00
Miller the Board,
500 Irwin
Washington Financial
Street Corporation
Box 929
Columbus, IN
47202
Age: 42
Kirk P. Trustee Chairman/Chief Executive $19,550 $93,084 5
Pendleton Officer,
Cairnwood, Cairnwood,
Inc. Inc. (venture
75 James Way capital
Southhampton, investment)
PA 18966
Age: 58
Donald E. Trustee Former $19,650/5/ $67,450 4.00
Petersen Chairman of
222 East the Board and
Brown, Suite Chief
460 Executive
Birmingham, Officer, Ford
MI 48009 Motor
Age: 71 Company
+Walter P. Chairman Chairman, None/4/ None/4/ 8.00
Stern of Capital Group
630 Fifth the Board International, Inc.;
Avenue Chairman,
New York, NY Capital
10111 International, Inc.; Vice
Age: 69 Chairman,
Capital
Research
International, Inc.;
Director,
Temple-Inland
Inc. (forest
products)
+Thierry President Director, None/4/ None/4/ 2.00
Vandeventer and Capital
3 Place des Trustee Research and
Bergues Management
1201 Geneva, Company
Switzerland
Age: 62
</TABLE>
+ Trustees who are considered "interested persons" as defined in the
Investment Company Act of 1940, as amended, on the basis of their affiliation
with the fund's Investment Adviser, Capital Research and Management Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of directors of the parent company of a registered broker-dealer.
1 Amounts may be deferred by eligible trustees under a non-qualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more of the funds in
The American Funds Group as designated by the Trustee.
2 Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America.
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicles for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
3 Includes funds managed by Capital Research and Management Company and
affiliates.
4 David I. Fisher, William R. Grimsley, Walter P. Stern and Thierry
Vandeventer are affiliated with the Investment Adviser and, accordingly,
receive no compensation from the fund.
5 Since the deferred compensation plan's adoption, the total amount of
deferred compensation accrued by the fund (plus earnings thereon) as of the
fiscal year ended March 31, 1998 for participating Trustees is as follows:
Michael R. Bonsignore ($19,844), Robert A. Fox ($142,358), Koichi Itoh
($34,579), William H. Kling ($80,517), John G. McDonald ($79,739), William I.
Miller ($35,675), Kirk P. Pendleton ($31,835), Donald E. Petersen ($20,472).
Amounts deferred and accumulated earnings thereon are not funded and are
general unsecured liabilities of the fund until paid to the Trustee.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING
WITH REGISTRANT PAST 5 YEARS
Stephen E. Bepler 55 Executive Vice Senior Vice President, Capital
630 Fifth Avenue President Research Company
New York, NY 10111
Mark E. Denning 40 Executive Vice Senior Vice President and Director,
25 Bedford Street President Capital Research Company; Director,
London, England Capital Research and Management
Company
Robert W. Lovelace 35 Senior Vice Executive Vice President and
11100 Santa Monica Blvd. President Director, Capital Research Company;
Los Angeles, CA 90025 Vice President, Capital Research and
Management Company
Janet A. McKinley 43 Senior Vice Senior Vice President, Capital
630 Fifth Avenue President Research Company; Director, Capital
New York, NY 10111 Research and Management Company
Alwyn Heong 38 Vice President Vice President, Capital Research
630 Fifth Avenue Company
New York, NY 10111
Hiromi Ishikawa 36 Vice President Vice President, Capital Research
Yamato Seimei Building Company
14/th/ Floor
1-1-7 Uchisaiwaicho,
Chiyoda-ku
Tokyo 100, Japan
Vincent P. Corti 41 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital Research
Los Angeles, CA 90071 and Management Company
R. Marcia Gould 43 Treasurer Vice President - Fund Business
135 South State College Management Group, Capital Research
Blvd. and Management Company
Brea, CA 92821
<S> <C> <C> <C>
</TABLE>
All of the officers listed are officers or employees of the Investment Adviser
or affiliated companies. No compensation is paid by the fund to any Trustee or
officer who is a director, officer or employee of the Investment Adviser. Each
unaffiliated Trustee is paid a fee of $15,000 per annum, plus $1,000 for each
Board of Trustees meeting attended, plus $400 for each meeting attended as a
member of a committee of the Board of Trustees. The Trustees may elect, on a
voluntary basis, to defer all or a portion of their fees through a deferred
compensation plan in effect for the fund. As of May 1, 1998 the officers and
Trustees of the fund and their families as a group owned beneficially or of
record less than 1% of the outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's research professionals travel several million miles a
year, making more than 5,000 research visits in more than 50 countries around
the world. The Investment Adviser believes that it is able to attract and
retain quality personnel. The Investment Adviser is a wholly owned subsidiary
of The Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types. These investors include privately owned businesses and large
corporations, as well as schools, colleges, foundations and other non-profit
and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser, unless
sooner terminated, will continue until March 31, 1999 and may be renewed from
year to year thereafter, provided that any such renewal has been specifically
approved at least annually by (i) the Board of Trustees, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities, and
(ii) the vote of a majority of Trustees who are not parties to the Agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement provides that the Investment Adviser has no liability to the fund for
its acts or omissions in the performance of its obligations to the fund not
involving willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The Agreement also provides that
either party has the right to terminate it, without penalty, upon 60 days'
written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
qualified persons who perform executive, administrative, clerical and
bookkeeping functions of the fund; provides suitable office space and
utilities; and provides necessary small office equipment and general purpose
accounting forms, supplies, and postage used at the offices of the fund
relating to the services furnished by the Investment Adviser.
The fund pays all expenses not specifically assumed by the Investment Adviser,
including, but not limited to, custodian, stock transfer and dividend
disbursing fees and expenses; expenses pursuant to the fund's Plan of
Distribution (described below); costs of designing, printing and mailing
reports, prospectuses, proxy statements and notices to shareholders; taxes;
expenses of the issuance, sale, redemption, or repurchase of shares of the fund
(including stock certificates, registration and qualification fees and
expenses); legal and auditing fees and expenses; compensation, fees, and
expenses paid to Trustees not affiliated with the Investment Adviser;
association dues; and costs of stationery and forms prepared exclusively for
the fund.
The Investment Adviser will reimburse the fund to the extent that the fund's
annual operating expenses, exclusive of taxes, interest, brokerage costs,
distribution expenses and extraordinary expenses such as litigation and
acquisitions, exceed the expense limitations applicable to the fund imposed by
state securities laws or any regulations thereunder. Only one state
(California) continues to impose expense limitations on funds registered for
sale therein. The California provision currently limits annual expenses to the
sum of 2-1/2% of the first $30 million of average net assets, 2% of the next
$70 million and 1-1/2% of the remaining average net assets. Rule 12b-1
distribution plan expenses would be excluded from this limit. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not as expenses. The fund might be eligible to exclude
certain additional expenses, such as expenses of maintaining foreign custody of
certain portfolio securities by obtaining a waiver of such limit from
California.
As compensation for its services, the Investment Adviser receives a monthly fee
which is accrued daily, calculated at the annual rate of 0.69% on the first
$500 million of the fund's average net assets, 0.59% of such assets in excess
of $500 million but not exceeding $1.0 billion, 0.53% of such assets in excess
of $1.0 billion but not exceeding $1.5 billion, 0.50% of such assets in excess
of $1.5 billion but not exceeding $2.5 billion, 0.48% of such assets in excess
of $2.5 billion but not exceeding $4.0 billion, 0.47% of such assets in excess
of $4.0 billion but not exceeding $6.5 billion, 0.46% of such assets in excess
of $6.5 billion but not exceeding $10.5 billion, 0.45% of such assets in
excess of $10.5 billion but not exceeding $17 billion, and 0.445% of such
assets in excess of $17 billion. During the fiscal years ended March 31, 1998,
1997 and 1996, the Investment Adviser's total fees amounted to $90,507,000,
$70,142,000 and $51,034,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares during the fiscal year ended
March 31, 1998 amounted to $10,044,000 after allowance of $50,962,000 to
dealers. During the fiscal years ended March 31, 1997 and 1996 the Principal
Underwriter retained $10,806,000 and $11,178,000, respectively after an
allowance of $55,552,000 and $59,403,000 respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Trustees and separately by a
majority of the Trustees who are not "interested persons" of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the fund. The
officers and Trustees who are "interested persons" of the fund may be
considered to have a direct or indirect financial interest in the operation of
the Plan due to present or past affiliations with the Investment Adviser and
related companies. Potential benefits of the Plan to the fund include improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of Trustees who
are not "interested persons" of the fund are committed to the discretion of the
Trustees who are not "interested persons" during the existence of the Plan.
Expenditures under the Plan are reviewed quarterly, and the Plan must be
renewed annually by the Board of Trustees.
Under the Plan the fund may expend up to 0.25% of its net assets annually to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Trustees has approved the category of
expenses for which payment is made. These include service fees for qualified
dealers and dealer commissions and wholesaler compensation on sales of shares
exceeding $1 million (including purchases by any employer-sponsored 403(b) plan
or purchases by any defined contribution plan qualified under Section 401(a) of
the Code including a "401(k)" plan with 100 or more eligible employees).
During the fiscal year ended March 31, 1998, the fund paid $45,288,000 under
the Plan. As of March 31, 1998 accrued and unpaid distribution expenses were
$3,460,000.
The Glass-Stegall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein, and certain banks and
financial institutions may be required to be registered as dealers pursuant to
state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Code. Under Subchapter M, if the fund distributes within specified times at
least 90% of the sum of its investment company taxable income (net investment
income and the excess of net short-term capital gains over net long-term
capital losses) and its tax-exempt interest, if any, it will be taxed only on
that portion of its investment company taxable income that it retains.
To qualify as a regulated investment company, the fund must (a) derive at least
90% of its gross income from dividends, interest, certain payments with respect
to securities loans and gains from the sale or other disposition of stock,
securities, currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities (but such other securities must be limited, in respect of any
one issuer, to an amount not greater than 5% of the fund's assets and 10% of
the outstanding voting securities of such issuer), and (ii) not more than 25%
of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies), or in two or more issuers which the fund controls and
which are engaged in the same or similar trades or businesses or related trades
or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) capital gains (both long-term and short-term) for
the one-year period ending on October 31 (as though the one-year period ending
on October 31 were the regulated investment company's taxable year), and (iii)
the sum of any untaxed, undistributed net investment income and net capital
gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually
distributed by the fund from its current year's ordinary income and capital
gain net income and (ii) any amount on which the fund pays income tax for the
year. The fund intends to distribute net investment income and net capital
gains so as to minimize or avoid the excise tax liability.
The amount of any realized gain or loss on closing out a forward currency
contracts such as a forward commitment for the purchase or sale of foreign
currency will generally result in ordinary income or loss for tax purposes.
Under Code Section 1256, forward currency contracts held by the fund at the end
of each fiscal year will be required to be "marked to market" for federal
income tax purposes, that is, deemed to have been sold at market value. Code
Section 988 may also apply to forward currency contracts. Under Section 988,
each foreign currency gain or loss is generally computed separately and treated
as ordinary income or loss. In the case of overlap between Sections 1256 and
988, special provisions determine the character and timing of any income, gain
or loss. The fund will attempt to monitor Section 988 transactions to avoid an
adverse tax impact.
The fund intends to continue distributing to shareholders all of the excess of
net long-term capital gain over net short-term capital loss on sales of
securities. Such distributions, whether paid in cash or re-invested in shares,
will be taxable to shareholders as long-term capital gains, regardless of how
long a shareholder has held fund shares or whether such gain was realized by
the fund before the shareholder acquired such shares and was reflected in the
price paid for the shares. In particular, investors should consider the tax
implications of purchasing shares just prior to a dividend or capital gain
distribution record date.
Dividends and capital gain distributions generally are taxable to shareholders
at the time they are paid. However, such dividends and distributions declared
in October, November and December and made payable to shareholders of record in
such a month are treated as paid and are thereby taxable as of December 31,
provided that the fund pays the dividend and/or capital gain distributions no
later than the end of January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Sales of forward currency contracts which are intended to hedge against a
change in the value of securities or currencies held by the fund may affect the
holding period of such securities or currencies and, consequently, the nature
of the gain or loss on such securities or currencies upon disposition.
It is anticipated that any net gain realized from the closing out of forward
currency contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90% of gross
income from qualified sources requirement, as discussed above. In order to
avoid realizing excessive gains on securities or currencies held less than
three months, the fund may be required to defer the closing out of a forward
currency contract beyond the time when it would otherwise be advantageous to do
so.
The fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the fund's fiscal year on forward currency
contract transactions as discussed above). Such distributions will be combined
with distributions of capital gains realized on the fund's other investments.
Under the Code, the fund's taxable income for each year will be computed
without regard to any net foreign currency loss and net capital loss
attributable to transactions after October 31, and any such net foreign
currency loss and net capital loss will be treated as arising on the first day
of the following taxable year.
The fund may be required to pay withholding and other taxes imposed by foreign
countries generally at rates from 10% to 40% which would reduce the fund's
investment income. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. If more than 50% in value of the fund's total
assets at the close of its taxable year consists of securities of foreign
issuers, the fund will be eligible to file elections with the Internal Revenue
Service pursuant to which shareholders of the fund will be required to include
their respective pro rata portions of such withholding taxes in their federal
income tax returns as gross income, treat such amounts as foreign taxes paid by
them, and deduct such amounts in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their federal income
taxes. In any year the fund makes such an election, shareholders will be
notified as to the amount of foreign withholding and other taxes paid by the
fund.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on assets held more than 18 months is 20% and on assets held more
than one year and not more than 18 months is 28%; and the maximum corporate tax
applicable to ordinary income and net capital gains is 35%. However, to
eliminate the benefit of lower marginal corporate income tax rates,
corporations which have income in excess of $100,000 for a taxable year will be
required to pay an additional income tax liability of up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of tax of up to $100,000.
Naturally, the amount of tax payable by a shareholder with respect to either
distributions from the fund or disposition of fund shares will be affected by a
combination of tax law rules covering, E.G., deductions, credits, deferrals,
exemptions, sources of income and other matters. Under the Code, some
individuals are entitled to establish and contribute to an Individual
Retirement Account (IRA) each year without regard to extension (prior to the
tax return filing deadline for that year) whereby earnings on investments are
tax-deferred. In addition, in some cases, the IRA contribution itself may be
deductible.
The foregoing is limited to a summary discussion of federal taxation and should
not be viewed as a comprehensive discussion of all provisions of the Code
relevant to investors. Dividends and capital gain distributions may also be
subject to state or local taxes. Shareholders should consult their own tax
advisers for additional details as to their particular tax situations.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and Fund $50 minimum (except where a lower
Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer who is Mail directly to your investment
your investment registered in the state where the dealer's address printed on your
dealer purchase is made and who has a account statement.
sales agreement with American Funds
Distributors.
By mail Make your check payable to the fund Fill out the account additions form at
and mail to the address indicated the bottom of a recent account
on the account application. Please statement, make your check payable to
indicate an investment dealer on the fund, write your account number on
the account application. your check, and mail the check and
form in the envelope provided with
your account statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then follow section on the account application or
the procedures for additional American FundsLink Authorization Form.
investments. Once you've establish the privilege,
you, your financial advisor or any
person with your account information
can call American FundsLine(r) and make investments by telephone
(subject
to conditions noted in "Telephone and
Computer Purchases, Redemptions and
Exchanges" below).
By computer Please contact your investment Complete the American FundsLink
dealer to open account, then follow Authorization Form. Once you've
the procedures for additional established the privilege, you, your
investments. financial adviser or any person with
your account information can access
American FundsLine OnLine(sm) on the
Internet and make investments by
computer (subject to conditions noted
in "Telephone and Computer Purchases,
Redemptions and Exchanges" below).
By wire Call 800/421-0180 to obtain Your bank should wire your additional
your account number(s), if investments in the same manner as
necessary. Please indicate an described under "Initial Investment."
investment dealer on the account.
Instruct your bank to wire funds
to:
Wells Fargo Bank
155 Fifth Street, Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service
Company a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine(r) (see description
below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) 02
$1,000
American Balanced Fund(r) 11
500
American Mutual Fund(r) 03
250
Capital Income Builder(r) 12
1,000
Capital World Growth and Income Fund(sm) 33
1,000
EuroPacific Growth Fund(r) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(r) 05
1,000
The Income Fund of America(r) 06
1,000
The Investment Company of America(r) 04
250
The New Economy Fund(r) 14
1,000
New Perspective Fund(r) 07
250
SMALLCAP World Fund(r) 35
1,000
Washington Mutual Investors Fund(sm) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(r) 40
1,000
American High-Income Trust(sm) 21
1,000
The Bond Fund of America(sm) 08
1,000
Capital World Bond Fund(r) 31
1,000
Intermediate Bond Fund of America(sm) 23
1,000
Limited Term Tax-Exempt Bond Fund of America(sm) 43
1,000
The Tax-Exempt Bond Fund of America(r) 19
1,000
The Tax-Exempt Fund of California(r)* 20
1,000
The Tax-Exempt Fund of Maryland(r)* 24
1,000
The Tax-Exempt Fund of Virginia(r)* 25
1,000
U.S. Government Securities Fund(sm) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 09
2,500
The Tax-Exempt Money Fund of America(sm) 39
2,500
The U.S. Treasury Money Fund of America(sm) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for IRAs. Minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
The minimum is $50 for additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than $100,000 4.71 4.50 3.75
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than $50,000 4.71 4.50 3.75
$50,000 but less than $100,000 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 3.63 3.50 2.75
$250,000 but less than $500,000 2.56 2.50 2.00
$500,000 but less than $1,000,000 2.04 2.00 1.60
$1,000,000 or more none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Code including a "401(k)" plan with 100
or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $50 million or more: 1.00% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), currently provides additional compensation to dealers. Currently
these payments are limited to the top one hundred dealers who have sold shares
of the fund or other funds in The American Funds Group. These payments will be
based on a pro rata share of a qualifying dealer's sales. American Funds
Distributors will, on an annual basis, determine the advisability of continuing
these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified under
Section 401(a) of the Code including a "401(k)" plan with 100 or more eligible
employees or any other purchaser investing at least $1 million in shares of the
fund (or in combination with shares of other funds in The American Funds Group
other than the money market funds) may purchase shares at net asset value;
however, a contingent deferred sales charge of 1% is imposed on certain
redemptions made within 12 months of the purchase. (See "Redeeming
Shares--Contingent Deferred Sales Charge.") Investments by retirement plans,
foundations or endowments with $50 million or more in assets may be made with
no sales charge and are not subject to a contingent deferred sales charge.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans, foundations and endowments with assets of $50 million
or more; (5) insurance company separate accounts; (6) accounts managed by
subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to a statement of intention (the "Statement"). The
Statement is not a binding obligation to purchase the indicated amount. When a
shareholder elects to utilize a Statement in order to qualify for a reduced
sales charge, shares equal to 5% of the dollar amount specified in the
Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by American Funds
Service Company (the Transfer Agent). All dividends and any capital gain
distributions on shares held in escrow will be credited to the shareholder's
account in shares (or paid in cash, if requested). If the intended investment
is not completed within the specified 13-month period, the purchaser will remit
to the Principal Underwriter the difference between the sales charge actually
paid and the sales charge which would have been paid if the total of such
purchases had been made at a single time. If the difference is not paid within
45 days after written request by the Principal Underwriter or the securities
dealer, the appropriate number of shares held in escrow will be redeemed to pay
such difference. If the proceeds from this redemption are inadequate, the
purchaser will be liable to the Principal Underwriter for the balance still
outstanding. The Statement may be revised upward at any time during the
13-month period, and such a revision will be treated as a new Statement, except
that the 13-month period during which the purchase must be made will remain
unchanged and there will be no retroactive reduction of the sales charges paid
on prior purchases. Existing holdings eligible for rights of accumulation (see
the prospectus and account application) may be credited toward satisfying the
Statement. During the Statement period reinvested dividends and capital gain
distributions, investments in money market funds, and investments made under a
right of reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or the Transfer
Agent; this offering price is effective for orders received prior to the time
of determination of the net asset value and, in the case of orders placed with
dealers, accepted by the Principal Underwriter prior to its close of business.
In the case of orders sent directly to the fund or the Transfer Agent, an
investment dealer MUST be indicated. The dealer is responsible for promptly
transmitting purchase orders to the Principal Underwriter. Orders received by
the investment dealer, the Transfer Agent, or the fund after the time of the
determination of the net asset value will be entered at the next calculated
offering price. Prices which appear in the newspaper are not always indicative
of prices at which you will be purchasing and redeeming shares of the fund,
since prices generally reflect the previous day's closing price whereas
purchases and redemptions are made at the next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at 4:00 p.m., New York time each
day the New York Stock Exchange is open. For example, if the Exchange closes
at 1:00 p.m. on one day and 4:00 p.m. on the next, the fund's share price would
be determined as of 4:00 p.m. New York time on both days. The New York Stock
Exchange is currently closed on weekends and on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The
net asset value per share is determined as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
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. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially, directly or indirectly more than 4.5% of the
outstanding shares of the fund without the consent of a majority of the Board
of Trustees.
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Funds Service Send a letter of instruction specifying the name of
Company (at the appropriate address the fund, the number of shares or dollar amount to
indicated under "Fund Organization and be sold, your name and account number. You should
Management - Principal Underwriter and also enclose any share certificates you wish to
Transfer Agent" in the prospectus) redeem. For redemptions over $50,000 and for
certain redemptions of $50,000 or less (see below),
your signature must be guaranteed by a member firm
of a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank,
savings association or credit union that is an
eligible guarantor institution. You should verify
with the institution that it is an eligible
guarantor prior to signing. Additional
documentation may be required for redemption of
shares held in corporate, partnership or fiduciary
accounts. Notarization by a Notary Public is not
an acceptable signature guarantee.
By contacting your investment dealer If you redeem shares through your investment
dealer, you may be charged for this service.
SHARES HELD FOR YOU IN YOUR INVESTMENT DEALER'S
STREET NAME MUST BE REDEEMED THROUGH THE DEALER.
You may have a redemption check sent You may use this option, provided the account is
to you by using American FundsLine(r) registered in the name of an individual(s), a
or American FundsLine OnLine(sm) or by UGMA/UTMA custodian, or a non-retirement plan
telephoning, faxing, or telegraphing trust. These redemptions may not exceed $50,000
American Funds Service Company per shareholder, per day, per fund account and the
(subject to the conditions noted in check must be made payable to the shareholder(s) of
this section and in "Telephone and record and be sent to the address of record
Computer Purchases, Sales and provided the address has been used with the account
Exchanges" in the prospectus) for at least 10 days. See "Fund Organization and
Management - Principal Underwriter and Transfer
Agent" in the prospectus and "Exchange Privilege"
below for the appropriate telephone or fax number.
In the case of the money Upon request (use the account application for the
market funds, you may have redemptions money market funds) you may establish telephone
wired to your bank by telephoning redemption privileges (which will enable you to
American Funds Service Company ($1,000 have a redemption sent to your bank account) and/or
or more) or by writing a check ($250 check writing privileges. If you request check
or more) writing privileges, you will be provided with
checks that you may use to draw against your
account. These checks may be made payable to
anyone you designate and must be signed by the
authorized number of registered shareholders
exactly as indicated on your checking account
signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within 12 months of purchase on investments
of $1 million or more and on any investment made with no initial sales charge
by any employer-sponsored 403(b) plan or defined contribution plan qualified
under Section 401(a) of the Code including a "401(k)" plan with 100 or more
eligible employees. The charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. Shares held for the longest period are assumed
to be redeemed first for purposes of calculating this charge. The charge is
waived for exchanges (except if shares acquired by exchange were then redeemed
within 12 months of the initial purchase); for distributions from qualified
retirement plans and other employee benefit plans; for redemptions resulting
from participant-directed switches among investment options within a
participant-directed employer-sponsored retirement plan; for distributions from
403(b) plans or IRAs due to death, disability or attainment of age 591/2; for
tax-free returns of excess contributions to IRAs; for redemptions through
certain automatic withdrawals not exceeding 10% of the amount that would
otherwise be subject to the charge; and for redemptions in connection with
loans made by qualified retirement plans.
REDEMPTION OF SHARES - The fund's Declaration of Trust permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their
then current net asset value per share if at such time the shareholder owns of
record, shares having an aggregate net asset value of less than the minimum
initial investment amount required of new shareholders as set forth in the
fund's current registration statement under the 1940 Act, and subject to such
further terms and conditions as the Board of Trustees of the fund may from time
to time adopt.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or the closing of
the account, the plan may be terminated and the related investment reversed.
The shareholder may change the amount of the investment or discontinue the plan
at any time by writing to the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the receiving fund) subject to the following conditions:
(i) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, automatically to redeem the account and send the
proceeds to the shareholder. These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) and American FundsLine OnLine(sm) (see "American FundsLine(r) and
American FundsLine OnLine(sm)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, computer, fax or telegraph. Exchange redemptions and purchases are
processed simultaneously at the share prices next determined after the exchange
order is received. (See "Purchase of Shares--Price of Shares" above.) THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(sm) - You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(r) and American
FundsLine OnLine(sm). To use this service, call 800/325-3590 from a
TouchTone(tm) telephone or access the American Funds Web site on the Internet
at www.americanfunds.com. Redemptions and exchanges through American
FundsLine(r) and American FundsLine OnLine(sm) are subject to the conditions
noted above and in "Telephone and Computer Purchases, Redemptions and
Exchanges" below. You will need your fund number (see the list of funds in The
American Funds Group under "Purchase of Shares--Investment Minimums and Fund
Numbers" above), personal identification number (the last four digits of your
Social Security number or other tax identification number associated with your
account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine(r) and American FundsLine OnLine(sm)),
fax or telegraph redemption and/or exchange options, you agree to hold the
fund, American Funds Service Company, any of its affiliates or mutual funds
managed by such affiliates, and each of their respective directors, trustees,
officers, employees and agents harmless from any losses, expenses, costs or
liability (including attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all shareholders are automatically
eligible to use these options. However, you may elect to opt out of these
options by writing American Funds Service Company (you may also reinstate them
at any time by writing American Funds Service Company). If American Funds
Service Company does not employ reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine, the fund may be liable for losses due to unauthorized or fraudulent
instructions. In the event that shareholders are unable to reach the fund by
telephone because of technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made in writing only.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not consider that it has
an obligation to obtain the lowest available commission rate to the exclusion
of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
Brokerage commissions paid on portfolio transactions for the fiscal years ended
March 31, 1998, 1997 and 1996, amounted to $22,795,000, $18,418,000 and
$17,493,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. Non-U.S. securities may be held by the Custodian pursuant
to sub-custodial arrangements in non-U.S. banks or foreign branches of U.S.
banks.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $14,109,000 for the fiscal year ended March 31, 1998.
INDEPENDENT ACCOUNTANTS - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the fund's independent accountants since its
inception, providing audit services, preparation of tax returns and review of
certain documents to be filed with the Securities and Exchange Commission. The
financial statements, included in this Statement of Additional Information from
the Annual Report, have been so included in reliance on the report of Price
Waterhouse LLP given on the authority of said firm as experts in accounting and
auditing.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on March 31.
Shareholders are provided at least semiannually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent accountants,
Price Waterhouse LLP, whose selection is determined annually by the Trustees.
In an effort to reduce the volume of mail shareholders receive from the fund
when a household owns more than one account, the Transfer Agent has taken steps
to eliminate duplicate mailings of shareholder reports. To receive additional
copies of a report, shareholders should contact the Transfer Agent.
YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
REMOVAL OF TRUSTEES BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any Trustee or Trustees from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed Trustees. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of Trustees, as
though the fund were a common-law trust. Accordingly, the Trustees of the fund
shall promptly call a meeting of shareholders for the purpose of voting upon
the question of removal of any Trustee when requested in writing to do so by
the record holders of not less than 10% of the outstanding shares.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on
personal investing for certain investment personnel; ban on short-term trading
profits for investment personnel; limitations on service as a director of
publicly traded companies; and disclosure of personal securities transactions.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts where the fund was organized and California where the
fund's principal office is located, shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the fund. However, the risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder
liability for acts, omissions, obligations or affairs of the fund and provides
that notice of the disclaimer may be given in each agreement, obligation, or
instrument which is entered into or executed by the fund or Trustees. The
Declaration of Trust provides for indemnification out of fund property of any
shareholder held personally liable for the obligations of the fund and also
provides for the fund to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or liability.
Under the Declaration of Trust, the Trustees, officers, employees or agents of
the fund are not liable for actions or failure to act; however, they are not
protected from liability by reason of their willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of their office.
SHAREHOLDER VOTING RIGHTS - All shares of the fund have equal voting rights and
may be voted in the elections of Trustees and on other matters submitted to the
vote of shareholders. As permitted by Massachusetts law, there will normally
be no meetings of shareholders for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees holding office have
been elected by shareholders. At that time, the Trustees then in office will
call a shareholders meeting for the election of Trustees. The Trustees must
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Trustee when requested to do so by the record holders of at
least 10% of the outstanding shares. At such meeting, a Trustee may be removed
after the holders of record of not less than two-thirds of the outstanding
shares have declared that the Trustee be removed either by declaration in
writing or by votes cast in person or by proxy. Except as set forth above, the
Trustees shall continue to hold office and may appoint successor Trustees. The
shares do not have cumulative voting rights, which means that the holders of a
majority of the shares voting for the election of Trustees can elect all the
Trustees. No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the fund, except
that amendments may be made upon the sole approval of the Trustees to conform
the Declaration of Trust to the requirements of applicable Federal laws or
regulations or the requirements of the regulated investment company provisions
of the Code; however, the Trustees shall not be held liable for failing to do
so. If not terminated by the vote or written consent of a majority of the
outstanding shares, the fund will continue indefinitely.
The financial statements including the investment portfolio and the report of
Independent Accountants contained in the Annual Report are included in this
statement of additional information. The following information is not included
in the Annual Report:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- MARCH 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $29.56
Maximum offering price per share
(100/94.25 of net asset value per share, which takes
into account the fund's current maximum sales $31.36
charge)
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is 1.19% based on a 30-day (or one month) period ended March
31, 1998, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's one year total return and average annual total return for the five-
and ten-year periods ended March 31, 1998 were 14.01%, 15.03% and 13.50%,
respectively. The average total return ("T") is computed by equating the value
at the end of the period ("ERV") with a hypothetical initial investment of
$1,000 ("P") over a period of years ("n") according to the following formula as
required by the Securities and Exchange Commission: P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. In
addition, the fund will provide lifetime average total return figures.
The fund may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.
The fund may refer to results and surveys compiled by organizations such as CDA
Investment Technologies, Ibbotson Associates, Lipper Analytical Services,
Morningstar, Inc., Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the fund may, from time to time, refer
to results published in various periodicals, including BARRON'S, FORBES,
FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY,
U.S. NEWS AND WORLD REPORT and THE WALL STREET JOURNAL.
The fund may from time to time illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans. The fund may, from time to time, compare its investment
results with the Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (E.G. food,
clothing and fuels, transportation, and other goods and services that people
buy for day-to-day living).
The investment results set forth below were calculated as described in the
fund's Prospectus. The fund's results will vary from time to time depending
upon market conditions, the composition of the fund's portfolio and operating
expenses of the fund, so that any investment results reported by the fund
should not be considered representative of what an investment in the fund may
earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objective and policies.
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management Company
manages nine growth and growth-income funds that are at least 10 years old. In
the rolling 10-year periods since January 1, 1968 (133 in all) those funds have
had better total returns than their comparable Lipper indexes in 124 of 133
periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
EUPAC VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
Period MSCI
4/1 - 3/31 EUPAC S&P 500/1/ EAFE/2/
<S> <C> <C> <C>
1988 - 1998 254.7% 464.7% 87.9%
1987 - 1997 217.0% 250.1% 84.5%
1986 - 1996 252.9% 268.5% 192.5%
1985 - 1995 354.8% 283.9% 382.3%
1984* - 1998 706.6% 973.4% 586.5%
</TABLE>
/1/ The Standard and Poor's 500 Stock Index is comprised of industrial,
transportation, public utilities and financial stocks and represents a large
portion of the value of issues traded on the New York Stock Exchange. Selected
issues traded on the American Stock Exchange are also included.
/2/ The Morgan Stanley Capital International Europe, Australasia and Far East
Index (MSCI EAFE) is an arithmetical average, weighted by market value, of the
more than 1,000 securities listed on the stock exchanges of Europe, Australia,
New Zealand and the Far East.
* From inception on April 16, 1984.
IF YOU ARE CONSIDERING EUPAC FOR AN INDIVIDUAL RETIREMENT ACCOUNT . . .
Here's how much you would have if you had invested $2,000 a year in the fund:
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Lifetime
<S> <C> <C> <C>
(4/1/97 - (4/1/93 - (4/1/88 - (4/16/84 -
3/31/98) 3/31/98) 3/31/98) 3/31/98)
$2,280 $15,307 $43,052 $90,944
</TABLE>
___________________________________
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM...
<TABLE>
<CAPTION>
...and taken all distributions
If you had invested in shares, your investment
$10,000 in EUPAC would have been worth this
this many years ago... much at March 31, 1998
Periods
Number of Years 4/1 - 3/31 Value
<S> <C> <C>
1 1997-1998 $11,401
2 1996-1998 13,214
3 1995-1998 15,838
4 1994-1998 15,946
5 1993-1998 20,137
6 1992-1998 21,685
7 1991-1998 24,226
8 1990-1998 26,426
9 1989-1998 30,922
10 1988-1998 35,465
11 1987-1998 38,345
12 1986-1998 49,468
13 1985-1998 76,404
Lifetime* 1984-1998 80,656
</TABLE>
(* from inception on April 16, 1984)
___________________________________
Illustration of a $10,000 investment in EUPAC with dividends reinvested
(For the lifetime of the fund April 16, 1984 through March 31, 1998)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Fiscal Total From From From
Year End Annual Dividends Investment Initial Capital Gains Dividends Total
March 31 Dividends (cumulative) Cost Investment Reinvested Reinvested Value
<S> <C> <C> <C> <C> <C> <C> <C>
1985* $69 $69 $10,069 $9,876 $-- $72 $9,948
1986 35 104 10,104 15,206 -- 162 15,368
1987 118 222 10,222 18,489 1,006 332 19,827
1988 491 713 10,713 17,370 3,213 854 21,437
1989 316 1,029 11,029 18,379 4,969 1,238 24,586
1990 527 1,556 11,556 19,760 7,128 1,874 28,762
1991 656 2,212 12,212 20,845 7,883 2,653 31,381
1992 611 2,823 12,823 22,857 8,645 3,555 35,057
1993 538 3,361 13,361 24,238 9,167 4,349 37,754
1994 515 3,876 13,876 30,151 11,557 5,962 47,670
1995 716 4,592 14,592 28,695 12,927 6,385 48,007
1996 1,132 5,724 15,724 33,352 15,547 8,634 57,533
1997 1,063 6,787 16,787 36,676 19,366 10,630 66,672
1998 1,156 7,943 17,943 40,604 26,958 13,094 80,656
</TABLE>
The dollar amount of capital gain distributions during the period was $16,100.
(* from inception on April 16, 1984)
DESCRIPTION OF BOND RATINGS
Corporate Debt Securities
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C" according to quality.
"AAA -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as 'gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
"AA -- High quality by all standards. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"BAA -- Medium grade obligations. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and , in fact, have
speculative characteristics as well."
"BA -- Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B -- Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small."
"CAA -- Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"CA -- Speculative in a high degree; often in default or have other marked
shortcomings."
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
STANDARD & POOR'S CORPORATION rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
"AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"A - Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
"BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for debt in
higher rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"C-1 -- Reserved for income bonds on which no interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
<TABLE>
EuroPacific Growth Fund
Investment Portfolio, March 31, 1998
Largest Percent
Individual of Net
Industry Diversification Holdings Assets
Percent of Net Assets
16.38% Telecommunications Mannesmann 2.42%
9.25% Banking Novartis 2.38
6.69% Health & Personal Care Telefonica de Espana 2.01
4.52% Broadcasting & Publishing Astra 1.93
4.14% Energy Sources Bayerische Motoren Werke 1.61
49.43% Other Industries Bank of Nova Scotia 1.52
9.59% Bonds, Cash and Equivalents ING Groep 1.46
Telecom Italia Mobile 1.40
Nestle 1.38
Telefonos de Mexico 1.28
<S> <C> <C> <C>
EQUITY SECURITIES
(common and preferred stocks and convertible debentures)
Shares or Market Percent
Principal Value of Net
Amount (Millions) Assets
Telecommunications- 13.96%
Mannesmann AG (Germany) 705,950 $ 516.456 2.42%
Telefonica de Espana, SA (Spain) 9,285,000 409.041
Telefonica de Espana, SA (American Depositary Receipts) 153,000 20.234 2.01
Telecom Italia Mobile SpA (Italy) 38,980,000 210.274
Telecom Italia Mobile SpA, savings shares 23,105,000 88.592 1.40
Telefonos de Mexico, SA de CV, Class L (American Depositary Receipts)
(Mexico) 4,372,000 246.471
Telefonos de Mexico, SA de CV, Class L 9,612,500 27.206 1.28
France Telecom (France) 4,320,000 227.724 1.07
Koninklijke PTT Nederland NV (Netherlands) 3,696,900 191.439 .90
Hong Kong Telecommunications Ltd. (Hong Kong) 71,223,905 147.077 .69
Orange PLC (United Kingdom) (1) 22,570,200 143.608 .67
Tele Danmark AS, Class B (Denmark) 1,000,000 90.691
Tele Danmark AS, Class B (American Depositary Receipts) 1,050,400 47.925 .65
Telefonica de Argentina SA, Class B (American Depositary Receipts)
(Argentina) 3,438,050 130.861 .62
Telecom Italia SpA, savings shares (Italy) 16,565,100 101.153
Telecom Italia SpA 1,500,000 11.822 .53
Deutsche Telekom AG (Germany) 4,787,000 103.846 .49
Philippine Long Distance Telephone Co. (American Depositary
Receipts) (Philippines) 1,884,094 52.519
Philippine Long Distance Telephone Co. 793,120 22.154
Philippine Long Distance Telephone Co., convertible preferred shares,
Series III (Global Depositary Receipts) 400,000 20.800 .45
Telecom Corp. of New Zealand Ltd. (New Zealand) 13,889,200 66.112
Telecom Corp. of New Zealand Ltd. (2) 4,107,000 19.549
Telecom Corp. of New Zealand Ltd. (American Depositary Receipts) 63,600 2.445 .41
Telecomunicacoes Brasileiras SA, preferred nominative
(American Depositary Receipts) (Brazil) 597,436 77.555 .37
British Telecommunications PLC (United Kingdom) 7,000,000 76.085 .36
Compania de Telecomunicaciones de Chile SA (American Depositary
Receipts) (Chile) 2,417,315 66.627 .31
Nippon Telegraph and Telephone Corp. (Japan) 7,300 60.833 .29
Mahanagar Telephone Nigam Ltd. (India) 6,850,000 45.597
Mahanagar Telephone Nigam Ltd. (Global Depositary Receipts) (1),(2) 570,600 9.800 .26
Telefonica del Peru SA, Class B (American Depositary Receipts) (Per 2,408,900 51.942 .24
Telecom Argentina SA, Class B (American Depositary Receipts) (Argen 1,209,600 43.319 .20
Portugal Telecom, SA (Portugal) 795,000 41.327 .19
DDI Corp. (Japan) 12,400 30.534 .14
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. (American
Depositary Receipts) (Indonesia) 927,900 14.324
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. 8,370,000 13.528 .13
SK Telecom Co., Ltd. (South Korea) (1) 41,371 23.362 .11
Videsh Sanchar Nigam Ltd. (Global Depositary Receipts) (India) (2) 1,711,309 20.964 .10
Vodafone Group PLC (American Depositary Receipts) (United Kingdom) 105,000 10.907
Vodafone Group PLC 670,000 7.002 .09
Banking- 9.25%
Bank of Nova Scotia (Canada) 11,988,200 324.930 1.52
ForeningsSparbanken AB, Class A (Sweden) 7,485,000 246.260 1.16
Westpac Banking Corp. (Australia) 22,620,130 151.519 .71
Royal Bank of Canada (Canada) 2,502,700 148.458 .70
Australia and New Zealand Banking Group Ltd. (Australia) 19,849,799 132.700 .62
Sakura Bank, Ltd. (Japan) 32,369,000 114.944
Sakura Finance (Bermuda) Trust, convertible preference share units 1,614,000,000 10.602 .59
HSBC Holdings PLC (Hong Kong) 3,830,000 117.151 .55
ABN AMRO Holding NV (Netherlands) 4,919,500 113.458 .53
Bank of Scotland (United Kingdom) 7,385,000 87.247 .41
Fuji Bank, Ltd. (Japan) 10,018,000 60.168
Fuji JGB Investment LLC, 9.87% noncumulative preferred securities,
Series A, perpetual (2) $26,000,000 25.740 .40
Tokai Bank, Ltd. (Japan) 9,662,000 59.771 .28
Asahi Bank, Ltd. (Japan) 12,594,000 51.529 .24
Banco de Santander, SA (Spain) 1,000,000 49.784 .23
Allied Irish Banks, PLC (Ireland) 3,750,000 45.821 .22
STB Cayman Capital Ltd., 0.50% convertible debentures 2007 (Japan) Y5,925,000,000 39.700 .19
Lloyds TSB Group PLC (United Kingdom) 2,034,000 31.683 .15
Grupo Financiero Banamex Accival, SA de CV, Class B (Mexico) (1) 9,530,000 24.287
Grupo Financiero Banamex Accival, SA de CV, Class L (1) 2,207,777 5.134 .14
Unibanco-Uniao de Bancos Brasileiros SA (Global Depositary Receipts)
(Brazil) 800,000 29.000 .14
Societe Generale (France) 137,408 27.484 .13
Mitsui Trust and Banking Co., Ltd. (Japan) 8,525,000 20.032
MTI Capital (Cayman) Ltd. 0.50% convertible debentures 2007 Y1,400,000,000 6.674 .12
Toyo Trust and Banking Co., Ltd. (Japan) 2,800,000 18.246 .09
MBL International Finance, 3.00% convertible debentures 2002 (Bermu $15,000,000 15.506 .07
Bank of Montreal (Canada) 120,000 6.471 .03
Kookmin Bank (Global Depositary Receipts) (South Korea) (2) 430,226 3.162 .01
Shinhan Bank (South Korea) (1) 477,196 2.496 .01
Hanil Bank (South Korea) (1) 1,564,760 2.205 .01
Health & Personal Care- 6.69%
Novartis AG (Switzerland) 286,733 506.784 2.38
AB Astra, Class A (Sweden) 17,214,400 354.648
AB Astra, Class B 2,832,267 56.228 1.93
Zeneca Group PLC (United Kingdom) 5,693,900 245.079 1.15
Glaxo Wellcome PLC (United Kingdom) 2,185,000 58.423
Glaxo Wellcome PLC (American Depositary Receipts) 1,000,000 54.125 .53
SmithKline Beecham PLC (American Depositary Receipts) (United Kingd 1,000,000 62.562 .29
Shiseido Co., Ltd. (Japan) 3,194,000 36.688 .17
Teva Pharmaceutical Industries Ltd. (American Depositary Receipts)
(Israel) 800,000 34.200 .16
Synthelabo (France) 128,000 17.756 .08
Multi-Industry- 5.78%
Siebe PLC (United Kingdom) 11,500,000 250.571 1.17
Orkla AS, Class A (Norway) 1,974,000 201.687
Orkla AS, Class B 500,000 45.519 1.16
Hutchison Whampoa Ltd. (Hong Kong) 28,265,000 198.813 .93
Swire Pacific Ltd., Class A (Hong Kong) 21,605,000 114.324 .54
Lend Lease Corp. Ltd. (Australia) 4,341,120 101.143 .47
Jardine Strategic Holdings Ltd. (Singapore - Incorporated in Bermud 16,553,343 45.356
Jardine Strategic Holdings Ltd. (American Depositary Receipts) 300,000 1.644
Jardine Strategic Holdings Ltd., warrants, expire 1998 (1) 1,375,000 .014 .22
Imasco Ltd. (Canada) 1,150,000 46.208 .22
Suez Lyonnaise des Eaux (France) 320,000 46.197 .22
Cie. Financiere Richemont AG, units, Class A (Switzerland) 29,500 39.617 .19
Williams Holdings PLC (United Kingdom) 4,800,000 38.367 .18
TI Group PLC (United Kingdom) 3,720,900 32.604 .15
Incentive AB, Class A (Sweden) 154,300 15.220
Incentive AB, Class B 150,000 14.702 .14
Ayala Corp. (Philippines) 51,990,625 24.089 .11
Brierley Investments Ltd. (New Zealand) 16,000,000 9.189
Brierley Investments Ltd., convertible preferred shares 1,500,000 .837 .05
Groupe Bruxelles Lambert SA, warrants, expire 1998 (Belgium) (1) 126,900 6.000 .03
Broadcasting & Publishing- 4.52%
News Corp. Ltd. (American Depositary Receipts) (Australia) 3,958,200 106.624
News Corp. Ltd., preferred shares 11,201,417 63.317
News Corp. Ltd. 8,727,899 57.597
News Corp. Ltd., preferred shares (American Depositary Receipts) 1,181,600 27.177 1.19
Mediaset SpA (Italy) (2) 9,174,544 58.188
Mediaset SpA 8,093,000 51.328 .51
CANAL+ (France) 518,015 97.094 .46
Thomson Corp. (Canada) 2,660,000 83.441 .39
Grupo Televisa, SA (American Depositary Receipts) (Mexico) (1) 1,791,800 65.625 .31
Publishing & Broadcasting Ltd.(Australia) 12,225,878 63.525 .30
SOFTBANK CORP. (Japan) 1,375,900 55.367 .26
Pearson PLC (United Kingdom) 2,460,000 39.902 .19
Daily Mail and General Trust PLC, Class A (United Kingdom) 969,000 38.686 .18
Pathe (France) 157,300 32.097 .15
Carlton Communications PLC (United Kingdom) 3,866,250 30.677 .14
Television Broadcasts Ltd. (Hong Kong) 10,677,000 28.111 .13
Nippon Television Network Corp. (Japan) 57,000 16.903 .08
United News & Media PLC, 6.125% convertible debentures 2003 (United
Kingdom) L7,400,000 14.230 .07
Independent Newspapers, PLC (Ireland) 2,249,202 13.579 .06
Modern Times Group MTG AB, Class B (American Depositary Receipts)
(Sweden) (1) 211,822 9.688
Modern Times Group MTG AB, Class A (1) 302,260 2.529 .06
Singapore Press Holdings Ltd. (Singapore) 650,760 7.457 .03
FXF Trust, units (Australia) 8,595,700 1.280 .01
Energy Sources- 4.14%
TOTAL, Class B (France) 891,211 106.954
TOTAL, Class B (American Depositary Receipts) 1,033,547 62.077 .79
Royal Dutch Petroleum Co. (New York Registered Shares) (Netherlands 1,600,000 90.525
Royal Dutch Petroleum Co. 460,000 26.134
'Shell' Transport and Trading Co., PLC (New York Registered Shares)
(United Kingdom) 675,000 29.869 .69
Elf Aquitaine (France) 850,000 111.332 .52
Norsk Hydro AS (Norway) 915,000 45.305
Norsk Hydro AS (American Depositary Receipts) 500,000 25.000 .33
Imperial Oil Ltd. (Canada) 1,150,000 65.047 .31
Broken Hill Proprietary Co. Ltd. (Australia) 6,141,169 62.761 .29
YPF SA, Class D (American Depositary Receipts)(Argentina) 1,817,000 61.778 .29
ENI SpA (American Depositary Receipts) (Italy) 550,000 37.262
ENI SpA 3,500,000 23.709 .29
Repsol SA (American Depositary Receipts) (Spain) 1,150,000 58.506 .27
Sasol Ltd. (South Africa) 5,400,000 43.758 .21
Woodside Petroleum Ltd. (Australia) 4,200,000 27.800 .13
Suncor Energy Inc. (Canada) 108,900 3.973 .02
Automobiles- 3.77%
Bayerische Motoren Werke AG (Germany) 281,909 311.489
Bayerische Motoren Werke AG, preferred shares 43,636 32.418 1.61
Suzuki Motor Corp. (Japan) 12,746,000 119.613 .56
Peugeot SA (France) 650,000 111.977 .53
Honda Motor Co., Ltd. (Japan) 2,400,000 86.486 .41
Volvo AB, Class B (Sweden) 2,500,000 79.442 .37
Toyota Motor Corp. (Japan) 1,000,000 26.652 .12
Mazda Motor Corp. (Japan) (1) 6,505,000 16.702 .08
Daimler-Benz AG, 4.125% convertible debentures 2003 (Germany) DM13,522,000 12.201 .06
Edaran Otomobil Nasional Bhd. (Malaysia) 3,060,000 5.632 .03
Food & Household Products- 3.30%
Nestle SA (Switzerland) 154,725 295.260 1.38
Reckitt & Colman PLC (United Kingdom) 6,816,250 126.177 .59
Unilever PLC (United Kingdom) 10,800,000 102.038 .48
Groupe Danone (France) 378,224 91.269 .43
Cadbury Schweppes PLC (United Kingdom) 6,609,282 89.245 .42
Insurance- 3.25%
ING Groep NV (Netherlands) 5,497,179 311.813 1.46
Royal & Sun Alliance Insurance Group PLC (United Kingdom) 7,753,283 98.664 .46
Union des Assurances Federales (France) 493,960 81.112 .38
PartnerRe Holdings Ltd. (Incorporated in Bermuda) 1,621,900 79.676 .38
Corporacion Mapfre, CIR, SA (Spain) 1,241,568 46.476 .22
Guardian Royal Exchange PLC (United Kingdom) 5,390,700 38.536 .18
AXA Colonia Konzern AG (Germany) 284,880 34.633
AXA Colonia Konzern AG, preferred shares 15,530 1.695 .17
Business & Public Services- 3.25%
Rentokil Group PLC (United Kingdom) 37,500,000 221.044 1.04
United Utilities PLC (United Kingdom) 6,606,698 97.828 .46
Reuters Group PLC (United Kingdom) 6,790,766 73.130
Reuters Group PLC (American Depositary Receipts) 134,333 8.673 .38
Brambles Industries Ltd. (Australia) 3,765,000 78.375 .37
Hyder PLC (United Kingdom) 3,850,000 62.931 .29
Thames Water PLC (United Kingdom) 3,039,925 48.114 .23
Dimension Data Holdings Ltd. (South Africa) 5,231,200 33.507 .16
Havas SA (France) 336,678 27.860 .13
Securitas AB, Class B (Sweden) 777,000 26.388 .12
Quebecor Printing Inc. (Canada) 700,000 12.632 .06
Severn Trent PLC (United Kingdom) 71,750 1.259 .01
Beverages & Tobacco- 3.15%
Panamerican Beverages, Inc., Class A (Mexico) 3,322,800 133.327 .63
Foster's Brewing Group Ltd. (Australia) 45,300,000 98.648 .46
Coca-Cola Amatil Ltd. (Australia) 11,233,184 88.108 .41
Asahi Breweries, Ltd. (Japan) 4,460,000 58.931
Asahi Breweries, Ltd. 1.00% convertible debentures 2003 Y924,000,000 10.405
Asahi Breweries, Ltd. 0.90% convertible debentures 2001 Y520,000,000 5.817
Asahi Breweries, Ltd. 0.95% convertible debentures 2002 Y410,000,000 4.540 .37
South African Breweries Ltd. (South Africa) 2,575,646 76.426 .36
Seagram Co. Ltd. (Canada) 1,200,000 45.825 .22
San Miguel Corp., Class B (Philippines) 22,890,020 39.998 .19
Swedish Match AB (Sweden) 12,000,000 39.855 .19
Cia. Cervejaria Brahma, preferred nominative (Brazil) 50,000,000 38.746 .18
LVMH Moet Hennessy Louis Vuitton (France) 141,000 29.885 .14
ITC Ltd. (India) 3,232 .059 .00
Electronic Components- 3.04%
Rohm Co., Ltd. (Japan) 2,235,000 204.707 .96
Murata Manufacturing Co., Ltd. (Japan) 4,786,000 132.226 .62
Kyocera Corp. (Japan) 1,424,500 74.861 .35
Hirose Electric Co., Ltd. (Japan) 1,460,000 72.781 .34
Hoya Corp. (Japan) 2,294,000 65.444 .31
Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) 8,990,000 44.402 .21
ASM Lithography Holding NV (Netherlands) (1) 400,000 36.939 .18
Delta Electronics, Inc., 0.50% convertible debentures 2004
(Taiwan) (2) $7,250,000 9.353 .04
LG Semicon Co., Ltd. (South Korea) (1) 596,650 7.243 .03
Merchandising- 2.87%
Kingfisher PLC (United Kingdom) 6,691,700 125.215 .59
Tesco PLC (United Kingdom) 9,793,974 97.118 .45
Cifra, SA de CV, Class V (Mexico) 36,408,570 66.617
Cifra, SA de CV, Class C 8,402,600 14.802 .38
Safeway PLC (United Kingdom) 10,615,000 65.765 .31
Dixons Group PLC (United Kingdom) 7,125,400 63.150 .30
Carrefour SA (France) 98,000 57.698 .27
Coles Myer Ltd. (Australia) 5,310,838 26.540 .12
H & M Hennes & Mauritz AB, Class B (Sweden) 500,000 25.097 .12
Woolworths Ltd. (Australia) 5,586,860 20.893 .10
Koninklijke Ahold NV (Netherlands) 550,000 17.748 .08
Amway Japan Ltd. (Japan) 410,000 6.156
Amway Japan Ltd. (American Depositary Receipts) 715,000 5.765
AJL PEPS Trust 465,000 4.650 .08
Ito-Yokado Co., Ltd. (Japan) 280,000 15.177 .07
Electrical & Electronic- 2.73%
Nokia Corp., Class K (Finland) 1,116,700 120.175
Nokia Corp., Class A (American Depositary Receipts) 500,000 53.969
Nokia Corp., Class A 502,300 53.939 1.07
Telefonaktiebolaget LM Ericsson, Class B (Sweden) 2,781,000 131.949
Telefonaktiebolaget LM Ericsson, Class B (American Depositary Recei 1,600,000 76.100 .97
Premier Farnell PLC (United Kingdom) 13,567,800 87.009 .41
Northern Telecom Ltd. (Canada) 460,000 29.727 .14
ABB AB, Class B (Sweden) 900,000 12.473
ABB AB, Class A 300,000 4.289 .08
Johnson Electric Holdings Ltd. (Hong Kong - Incorporated in Bermuda 3,074,556 13.134 .06
Utilities: Electric & Gas- 1.87%
Centrais Eletricas Brasileiras SA - ELETROBRAS, preferred nominative
(American Depositary Receipts) (Brazil) 3,000,500 73.887
Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative
(American Depositary Receipts) 1,119,000 25.737 .47
Cia. Energetica de Minas Gerais - CEMIG (American Depositary Receipts)
(Brazil) 1,133,171 54.817
Cia. Energetica de Minas Gerais - CEMIG, preferred nominative 654,800,000 31.793
Cia. Energetica de Minas Gerais - CEMIG, ordinary nominative 254,168,800 9.077
Cia. Energetica de Minas Gerais - CEMIG (American Depositary Receip 21,300 1.030 .45
National Power PLC (United Kingdom) 7,135,400 73.142 .34
Scottish Power PLC (United Kingdom) 6,004,300 56.427 .27
Hongkong Electric Holdings Ltd. (Hong Kong) 9,397,000 32.260 .15
Manila Electric Co., Class B (Philippines) 6,601,111 21.672 .10
CESP - Cia. Energetica de Sao Paulo (American Depositary Receipts)
(Brazil) 455,084 6.940
CESP - Cia. Energetica de Sao Paulo (American Depositary Receipts) 297,000 4.529 .05
Unified Energy System of Russia (Global Depositary Receipts) (Russi 175,000 5.534 .03
Korea Electric Power Corp. (American Depositary Receipts) (South Ko 146,000 1.451 .01
Financial Services - 1.57%
Newcourt Credit Group Inc. (Canada) 4,613,900 230.923 1.08
Nichiei Co., Ltd. (Japan) 1,007,930 89.292 .42
ORIX Corp. (Japan) 210,000 14.284 .07
Real Estate- 1.52%
Cheung Kong (Holdings) Ltd. (Hong Kong) 23,379,000 165.954 .78
Sun Hung Kai Properties Ltd. (Hong Kong) 7,875,000 53.613 .25
Ayala Land, Inc. (Philippines) 89,515,600 43.253 .20
Security Capital Global Realty (Luxembourg) (1),(2),(3) 1,125,000 22.500 .11
Mitsui Fudosan Co., Ltd. (Japan) 2,230,000 21.262 .10
Mitsubishi Estate Co., Ltd. (Japan) 1,680,000 16.396 .08
Recreation & Other Consumer Products- 1.46%
Nintendo Co., Ltd. (Japan) 1,644,500 141.980 .67
Fuji Photo Film Co., Ltd. (Japan) 1,280,000 47.664 .22
Bajaj Auto Ltd. (India) 2,047,500 30.417
Bajaj Auto Ltd. (Global Depositary Receipts) 75,000 1.406 .15
Sony Music Entertainment (Japan) Inc. (Japan) 697,000 28.623 .13
Square Co., Ltd. (Japan) 700,500 26.821 .13
EMI Group PLC (United Kingdom) 2,865,067 23.811 .11
PolyGram NV (New York Registered Shares) (Netherlands) 250,000 11.594 .05
Appliances & Household Durables- 1.42%
Sony Corp. (Japan) 1,665,500 141.292 .66
Samsung Electronics Co., Ltd. (South Korea) (1) 2,041,450 107.678
Samsung Electronics Co., Ltd. (Global Depositary Receipts) (1), (2) 162,500 4.428 .53
Philips Electronics NV (Netherlands) 665,000 48.785 .23
Forest Products & Paper- 1.11%
Koninklijke KNP BT (Netherlands) 3,430,000 90.125 .42
UPM-Kymmene Corp. (Finland) 3,280,800 83.618 .39
Stora Kopparbergs Bergslags AB, Class B (Sweden) 1,650,000 25.340 .12
AssiDoman AB (Sweden) 828,000 22.538 .11
MAYR-MELNHOF Karton AG (Austria) 207,000 14.319 .07
Building Materials & Components- 1.07%
CEMEX, SA de CV, ordinary participation certificates (Mexico) (1) 17,420,650 77.334
CEMEX, SA de CV, Class B (1) 2,210,625 11.942
CEMEX, SA de CV, ordinary participation certificates, Class A (1) 1,793,075 8.002 .46
Holderbank Financiere Glaris Ltd. (Switzerland) 63,938 67.017 .31
Caradon PLC (United Kingdom) 20,000,000 63.209 .30
Industrial Components- 1.04%
Minebea Co., Ltd. (Japan) 6,578,000 72.101 .34
Cie. Generale des Etablissements Michelin, Class B (France) 1,009,444 60.230 .28
Bridgestone Corp. (Japan) 2,240,000 50.787 .24
Morgan Crucible Co. PLC (United Kingdom) 3,408,240 25.732 .12
NSK Ltd. (Japan) 3,470,000 13.677 .06
Metals: Nonferrous- 0.83% .00
Pechiney, Class A (France) 2,028,675 93.261 .44
WMC Ltd. (Australia) 9,753,391 33.441 .16
Cominco Ltd. (Canada) 1,024,000 17.792 .08
Teck Corp., Class B (Canada) 900,000 13.006 .06
Alcan Aluminium Ltd. (Canada) 400,000 12.500 .06
Inco Ltd. (Canada) 350,000 6.541 .03
Electronic Instruments- 0.78%
ADVANTEST CORP. (Japan) 2,069,760 134.410 .63
Tokyo Electron Ltd. (Japan) 975,000 32.866 .15
Machinery & Engineering- 0.57%
Valmet Oy (Finland) 3,400,000 54.539 .26
Kvaerner AS, Class A (Norway) 924,800 41.672 .19
Kawasaki Heavy Industries, Ltd. (Japan) 6,800,000 13.631 .06
Komori Corp. (Japan) 750,000 11.937 .06
Chemicals- 0.54%
BOC Group PLC (United Kingdom) 4,738,240 75.588 .36
L'Air Liquide (France) 229,946 38.946 .18
Transportation: Shipping- 0.44%
Bergesen d.y. AS, Class B (Norway) 1,130,000 23.831
Bergesen d.y. AS, Class A 542,800 11.518 .16
Stolt-Nielsen SA, Class B (American Depositary Receipts) (Incorporated
in Luxembourg) 845,000 16.794
Stolt-Nielsen SA 837,000 16.740 .16
Nippon Yusen KK (Japan) 7,000,000 25.173 .12
Data Processing & Reproduction- 0.41%
Fujitsu Ltd. (Japan) 8,446,000 88.138 .41
Textiles & Apparel- 0.30%
Gucci Group NV (New York Registered Shares) (Netherlands) 1,338,000 63.555 .30
Aerospace & Military Technology- 0.21%
Bombardier Inc., Class B (Canada) 1,829,000 45.190 .21
Metals: Steel- 0.18%
Kawasaki Steel Corp. (Japan) 26,113,500 38.425 .18
Leisure & Tourism- 0.17%
Granada Group PLC (United Kingdom) 1,631,313 29.298 .14
Mandarin Oriental International Ltd. (Singapore - Incorporated in
Bermuda) 9,670,312 7.736 .03
Transportation: Airlines- 0.14%
Qantas Airways Ltd. (Australia) 18,158,449 29.687 .14
Wholesale & International Trade- 0.09%
Mitsui & Co., Ltd. (Japan) 3,000,000 19.099 .09
Gold Mines- 0.04%
Ashanti Goldfields Co. Ltd. (Global Depositary Receipts) (Ghana) 879,522 8.191 .04
Miscellaneous Materials & Commodities- 0.04%
SGL Carbon AG (Germany) 72,600 8.033 .04
Transportation: Rail & Road- 0.02%
Guangshen Railway Co. Ltd., Class H (American Depositary Receipts) 286,400 3.401 .02
(People's Republic of China)
Miscellaneous- 2.47%
Other equity securities in initial period of acquisition 526.447 2.47
----------- --------
TOTAL EQUITY SECURITIES (cost: $13,815.030 million) 19,270.930 90.41
----------- --------
BONDS
Principal
Amount
(Millions)
Argentinean Government- 0.15%
Argentina 11.375% January 2017 $14.500 16.458 .08
Argentina 11.75% February 2007 ARP14.000 14.597 .07
Broadcasting & Publishing- 0.07%
Grupo Televisa, SA 0%/13.25% May 2008 (4) $20.000 15.600 .07
----------- --------
TOTAL BONDS (cost: $42.933 million) 46.655 .22
----------- --------
Principal Market Percent
Amount Value of Net
SHORT-TERM SECURITIES (Millions) (Millions) Assets
Corporate Short-Term Notes- 6.52%
Abbey National North America 5.42%-5.52% due 4/9-5/18/98 $115.000 $114.572 .54
National Australia Funding (Delaware) Inc. 5.44%-5.47% due 4/13-6/2 93.200 92.626 .44
General Electric Capital Corp. 5.48%-6.125% due 4/1-6/3/98 90.350 89.910 .42
Svenska Handelsbanken Inc. 5.35%-5.55% due 4/7-5/20/98 85.900 85.648 .40
Lloyds Bank PLC 5.41%-5.45% due 4/14-6/9/98 84.700 84.110 .39
International Lease Finance Corp. 5.36%-5.47% due 4/16-6/19/98 75.000 74.570 .35
Halifax PLC 5.44%-5.53% due 4/8-6/24/98 74.600 74.131 .35
Canada Bills 5.40%-5.48% due 4/3-4/30/98 73.000 72.850 .34
Canadian Wheat Board 5.40%-5.46% due 5/14-6/17/98 73.500 72.827 .34
Rank Xerox Capital (Europe) PLC 5.45%-5.52 due 4/21-5/19/98 68.700 68.299 .32
Toronto-Dominion Holdings (USA) Inc. 5.43%-5.50% due 5/4-5/13/98 61.600 61.238 .29
France Telecom 5.43%-5.52% due 5/15-6/1/98 60.000 59.497 .28
American Express Credit Corp. 5.51%-5.53% due 4/17-5/4/98 57.800 57.559 .27
Barclays U.S. Funding Corp. 5.415%-5.49% due 4/17-5/8/98 55.600 55.378 .26
Ford Credit Europe PLC 5.51%-5.56% due 4/8-5/22/98 55.300 55.033 .26
Commerzbank U.S. Finance Inc. 5.44% due 5/15-5/20/98 53.000 52.613 .25
ABN AMRO North America Finance Inc. 5.47%-5.54% due 4/6-6/16/98 51.442 51.108 .24
Reed Elsevier Inc. 5.41%-5.44% due 4/2-4/17/98 50.000 49.940 .23
Societe Generale North America 5.40%-5.51% due 4/15-5/19/98 43.700 43.538 .20
Minnesota Mining and Manufacturing Co. 5.39% due 4/20/98 40.000 39.880 .19
Repsol International Finance BV 5.43% due 5/1-5/5/98 35.000 34.826 .16
Federal Agency Discount Notes- 1.78%
Federal Home Loan Banks 5.34% due 4/15-4/24/98 126.654 126.303 .59
Fannie Mae 5.33%-5.35% due 4/16-6/5/98 93.775 93.257 .44
International Bank for Reconstruction and Development
5.36%-5.40% due 5/15-7/2/98 85.000 84.113 .39
Freddie Mac 5.32%-5.44% due 4/30-6/4/98 76.300 75.695 .36
Certificates of Deposit- 0.66%
Canadian Imperial Bank of Commerce 5.55%-5.56% due 5/5-5/12/98 60.000 60.000 .28
Westdeutsche Landesbank Girozentrale 5.59% due 4/14/98 50.000 50.000 .24
Societe Generale 5.53% due 4/21/98 30.000 30.000 .14
U.S. Treasury Obligations - 0.23%
5.295% April 1998 50.000 49.841 .23
Non-U.S. Currency- 0.04%
New Taiwanese Dollar NT$278.926 8.504 .04
----------- --------
TOTAL SHORT-TERM SECURITIES (cost: $1,969.621 million) 1,967.866 9.23
----------- --------
TOTAL INVESTMENT SECURITIES (cost: $15,827.584 million) 21,285.451 99.86
Excess of cash and receivables over payables 30.732 .14
----------- --------
NET ASSETS $21,316.183100.00%
=========== ========
(1) Non-income-producing securities.
(2) Purchased in a private placement transaction; resale to the
public may require registration or sale only to qualified
institutional buyers.
(3) Valued under procedures established by the Board of Trustees.
(4) Step bond; coupon rate will increase at a later date.
The descriptions of the companies shown in the portfolio, which
were obtained from published reports and other sources believed
to be reliable, are supplemental and are not covered by the
Report of Independent Accountants.
See Notes to Financial Statements
EQUITY SECURITIES APPEARING IN THE PORTFOLIO SINCE SEPTEMBER 30, 1997
Bank of Montreal
Caradon
Cie. Financiere Richemont
Compania de Telecomunicaciones de Chile
ForeningsSparbanken
France Telecom
Guardian Royal Exchange
Gucci Group
Imperial Oil
Koninklijke Ahold
Mazda Motor
Newcourt Credit Group
Nichiei
Nippon Telegraph and Telephone
NSK
Security Capital Global Realty
Societe Generale
Suez Lyonnaise des Eaux
Taiwan Semiconductor Manufacturing
TI Group
EQUITY SECURITIES ELIMINATED FROM THE PORTFOLIO SINCE SEPTEMBER 30, 1997
Acer
AGA
B A T Industries
Bangkok Bank
Barclays
Billiton
British Aerospace
C & P Homes
Calsonic
Carter Holt Harvey
Cie. de Saint-Gobain
De Beers Consolidated Mines
Elan
Elsevier
Enersis
Euro Disney
First Pacific
George Weston
GIO Australia Holdings
Hanjaya Mandala Sampoerna
Huaneng Power International
Hyundai Motor
Indofood Sukses Makmur
Industriforvaltnings AB Kinnevik
Korea First Bank
Lion Nathan
Mitsubishi
National Australia Bank
Noranda
Normandy Mining
Cos Lukoil
Olivetti
Petrofina
Redland
Reed International
Regie Nationale des Usines Renault
Rio Tinto
Sankyo
Secom
South China Morning Post
Sumitomo Electric Industries
Television Francaise /1/
Thorn
Universal Robina
Verenigd Bezit VNU
Volkswagen
WHSmith Group
Wolters Kluwer
Yasuda Fire and Marine Insurance
</TABLE>
<TABLE>
EuroPacific Growth Fund
Financial Statements
- ---------------------------------------------- --------------- --------------
Statement of Assets and Liabilities
at March 31, 1998 (dollars in millions)
- ---------------------------------------------- ---------------- -------------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $15,827.584) $21,285.451
Cash 1.705
Receivables for-
Sales of investments $67.121
Sales of fund's shares 37.813
Forward currency contracts 3.822
Dividends and accrued interest 55.556 164.312
------------------- ---------------
21,451.468
LIABILITIES:
Payables for-
Purchases of investments 100.117
Repurchases of fund's shares 20.003
Management services 8.351
Accrued expenses 6.814 135.285
------------------- ---------------
NET ASSETS AT MARCH 31, 1998-
Equivalent to $29.56 per share on
721,070,401 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $21,316.183
===============
Statement of Operations
for the year ended March 31, 1998 (dollars in millions)
- ---------------------------------------------- --------------- -------------
INVESTMENT INCOME:
Income:
Dividends $344.694
Interest 134.952 $479.646
-------------------
Expenses:
Management services fee 90.507
Distribution expenses 45.288
Transfer agent fee 14.109
Reports to shareholders .602
Registration statement and prospectus 1.628
Postage, stationery and supplies 2.653
Trustees' fees .197
Auditing and legal fees .093
Custodian fee 9.572
Taxes other than federal income tax .299
Other expenses .432 165.380
-------------------- ---------------
Net investment income 314.266
---------------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 1,082.594
Net increase in unrealized appreciation
on investments 2,216.766
Net decrease in unrealized appreciation
on forward currency contracts (4.160) 2,212.606
------------------------------------
Net realized gain and unrealized appreciation
on investments 3,295.200
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,609.466
===============
- ---------------------------------------------- ------------------- ---------------
Statement of Changes in Net Assets Year ended March 31
(dollars in millions) 1998 1997
- ---------------------------------------------- ------------------- ---------------
OPERATIONS:
Net investment income $ 314.266 $ 258.101
Net realized gain on investments 1,082.594 799.451
Net increase in unrealized appreciation
on investments 2,212.606 1,098.239
------------------- ---------------
Net increase in net assets
resulting from operations 3,609.466 2,155.791
------------------- ---------------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (294.902) (236.013)
Distributions from net realized gain on
investments (1,301.823) (503.619)
------------------- ---------------
Total dividends and distributions (1,596.725) (739.632)
------------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 177,804,677
and 195,364,825 shares, respectively 4,969.746 4,950.543
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 58,392,228 and 28,349,252 shares,
respectively 1,529.590 704.707
Cost of shares repurchased: 142,024,433
and 104,945,629 shares, respectively (3,932.937) (2,669.767)
------------------- ---------------
Net increase in net assets resulting from
capital share transactions 2,566.399 2,985.483
------------------- ---------------
TOTAL INCREASE IN NET ASSETS 4,579.140 4,401.642
NET ASSETS:
Beginning of year 16,737.043 12,335.401
----------------- ---------------
End of year (including undistributed
net investment income: $71.284
and $50.769, respectively) $21,316.183 $16,737.043
==================== ===============
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. EuroPacific Growth Fund (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The fund seeks long-term capital appreciation by investing in the securities of
companies based outside the United States. The following paragraphs summarize
the significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the investment adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type. Securities with
original maturities of one year or less having 60 days or less to maturity are
amortized to maturity based on their cost if acquired within 60 days of
maturity or, if already held on the 60th day, based on the value determined on
the 61st day. Forward currency contracts are valued at the mean of their
representative quoted bid and asked prices. Assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S. dollars at
the prevailing market rates at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing market rates on the dates of such transactions. The effects of
changes in foreign currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities. Securities and assets for which representative market quotations
are not readily available are valued at fair value as determined in good faith
by a committee appointed by the Board of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Dividend and
interest income is reported on the accrual basis. Discounts and premiums on
securities purchased are amortized. Dividends and distributions paid to
shareholders are recorded on the ex-dividend date.
The fund may enter into forward currency contracts, which represent agreements
to exchange currencies of different countries at specified future dates at
specified rates. The fund enters into these contracts to reduce its exposure to
fluctuations in foreign exchange rates arising from investments denominated in
non-U.S. currencies. The fund's use of forward currency contracts involves
market risk in excess of the amount recognized in the statement of assets and
liabilities. The contracts are recorded in the statement of assets and
liabilities at their net unrealized value. The fund records realized gains or
losses at the time the forward contract is closed or offset by a matching
contract. The face or contract amount in U.S. dollars reflects the total
exposure the fund has in that particular contract. Risks may arise upon
entering these contracts 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.
Net realized gain and net unrealized gain of the fund derived in India are
subject to certain non-U.S. taxes at a rate of 10%. The fund provides for such
non-U.S. taxes on investment income, net realized gain and net unrealized gain.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of March 31, 1998, net unrealized appreciation on investments, excluding
forward currency contracts, for book and federal income tax purposes aggregated
$5,456,184,000, net of accumulated deferred taxes totaling $1,683,000 on
unrealized appreciation of Indian securities, of which $6,398,034,000 related
to appreciated securities and $940,167,000 related to depreciated securities.
During the year ended March 31, 1998, the fund realized, on a tax basis, a net
capital gain of $1,073,508,000 on securities transactions. Net gains related to
non-U.S. currency and other transactions of $9,086,000 were treated as ordinary
income for federal income tax purposes. The capital gain distributions paid in
June and December 1997 include $11,265,000 of realized non-U.S. currency gains.
The cost of portfolio securities, excluding forward currency contracts, for
book and federal income tax purposes was $15,827,584,000 at March 31, 1998.
3. The fee of $90,507,000 for management services was incurred pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.69% of the first $500 million of average net assets;
0.59% of such assets in excess of $500 million but not exceeding $1.0 billion;
0.53% of such assets in excess of $1.0 billion but not exceeding $1.5 billion;
0.50% of such assets in excess of $1.5 billion but not exceeding $2.5 billion;
0.48% of such assets in excess of $2.5 billion but not exceeding
$4.0 billion; 0.47% of such assets in excess of $4.0 billion but not exceeding
$6.5 billion; 0.46% of such assets in excess of $6.5 billion but not exceeding
$10.5 billion; 0.45% of such assets in excess of $10.5 billion but not
exceeding $17.0 billion; and 0.445% of such assets in excess of $17.0 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended March 31 1998,
distribution expenses under the Plan were $45,288,000. As of March 31, 1998,
accrued and unpaid distribution expenses were $3,460,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $14,109,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $10,044,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Trustees who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of March 31, 1998,
aggregate amounts deferred and earnings thereon were $445,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Trustees and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of March 31, 1998, accumulated undistributed net realized gain on
investments and currency gains was $336,293,000 and paid-in capital was
$14,728,358,000. The fund reclassified $1,151,000 and $19,147,000 from
undistributed net realized gains to undistributed net investment income and
undistributed net realized currency gains, respectively, for the year ended
March 31, 1998.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $6,539,159,000 and $5,184,349,000, respectively,
during the year ended March 31, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $9,572,000 includes $129,000 that was paid by these
credits rather than in cash.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended March 31, 1998, such non-U.S. taxes were $37,631,000. Net realized
currency losses on dividends, interest, withholding taxes reclaimable, and
sales of non-U.S. bonds and notes, on a book basis, were $11,212,000 for the
year ended March 31, 1998.
At March 31, 1998, the fund had outstanding forward currency contracts to
sell non-U.S. currencies as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Non-U.S. Currency Contract Amounts U.S. Valuation at 3/31/97
Sale Contracts
Non-U.S. U.S. Amount Unrealized
Appreciation
Brazilian Real BRL72,468,000 $58,750,000 $60,281,000 $(1,531,000)
expiring 10/6/98
Japanese Yen Y6,035,175,000 51,287,000 45,934,000 5,353,000
expiring
5/14/98 to 10/22/98
110,037,000 106,215,000 3,822,000
</TABLE>
To the Board of Trustees and Shareholders of EuroPacific Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of EuroPacific Growth Fund (the
"Fund") at March 31, 1998, the results of its operations, the changes in its
net assets and the per-share data and ratios for the years indicated in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at March 31, 1998 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Los Angeles, California
April 30, 1998
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net Realized From Net
of Record Investment Short-term Gains Realized Long-term Gains
Income
<S> <C> <C> <C> <C>
May 30, 1997 June 2, 1997 $.09 $.057 $.823
December 12, 1997 December 15, 1997 .36 .225 .825*
</TABLE>
* Includes $0.7062 long-term capital gains taxed at a rate of 20%.
The fund makes an election under the Internal Revenue Code Section 853 to pass
through non-U.S. taxes paid by the fund to its shareholders. The amount of
non-U.S. taxes for the fiscal year ended March 31, 1998 is $0.0545 on a
per-share basis. Shareholders are entitled to a foreign tax credit or an
itemized deduction, at their option. Generally, it is more advantageous to
claim a credit rather than to take a deduction.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, none of the
dividends paid by the fund from net investment income represent qualifying
dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WAS MAILED IN JANUARY 1998 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1997 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
<TABLE>
Per-Share Data and Ratios
Year
ended
March
31
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $26.70 $24.28 $20.89 $21.95 $17.64
------------------------------ -------------------
Income From Investment
Operations:
Net investment income .45 .46 .46 .35 .24
Net realized gain and change in
appreciation on investments 4.79 3.28 3.63 (.19) 4.37
------------------------------ ------------------
Total income from investment
operations 5.24 3.74 4.09 .16 4.61
------------------------------ ------------------
Less Distributions:
Dividends from net investment
income (.433) (.41) (.49) (.317) (.187)
Dividends from net realized
non-U.S. currency gains (1) (.017) (.03) - (.003) (.043)
Distributions from net
realized gains (1.93) (.88) (.21) (.90) (.07)
------------------------------ ------------------
Total distributions (2.38) (1.32) (.70) (1.22) (.30)
------------------------------ ------------------
Net Asset Value, End of Year $29.56 $26.70 $24.28 $20.89 $21.95
============================== ==================
Total Return (2) 20.97% 15.88% 19.84% .71% 26.27%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $21,316 $16,737 $12,335 $8,588 $6,429
Ratio of expenses to average
net assets .86% .90% .95% .97% .99%
Ratio of net income to average
net assets 1.64% 1.77% 2.09% 1.80% 1.13%
Average commissions paid per
share (3) .41c 1.36c 1.10c .21c .08c
Portfolio turnover rate 30.51% 25.82% 21.77% 16.02% 21.37%
(1) Realized non-U.S. currency
gains are treated as ordinary
income for federal income tax
purposes.
(2)Excludes maximum sales charge
of 5.75%.
(3) Brokerage commissions paid on
portfolio transactions increase
the cost of securities purchased or
reduce the proceeds of securities
sold, and are not separately reflected
in the fund's statement of operations.
Shares traded on a principal basis
(without commissions), such as most
over-the-counter and fixed-income
transactions, are excluded. Generally,
non-U.S. commissions are lower than
U.S. commissions when expressed as
cents per share but higher when
expressed as a percentage of
transaction amount because of the lower
per-share prices of many non-U.S.
securities.
</TABLE>
