[The American Funds Group(r)]
EUROPACIFIC GROWTH FUND
[cover: blueprint of globe on color-blocked background]
1998 Annual Report
for the year ended March 31, 1998
SCRATCHING THE SURFACE
How We Find Investments for the Fund
EUROPACIFIC GROWTH FUND(r)
Seeks long-term capital appreciation by investing in the securities of
companies based outside the United States. About half of the world's investment
opportunities can be found beyond the borders of our country. As a shareholder
of the fund, you have access to what we believe are the best of those
opportunities.
EuroPacific is one of the 28 mutual funds in The American Funds Group,(r)
managed by Capital Research and Management Company. Since 1931, Capital has
invested with a long-term focus based on thorough research and attention to
risk.
A LOOK AT THE FUND'S RESULTS*
(total return through 3/31/98, with all distributions reinvested)
<TABLE>
<CAPTION>
Cumulative Average annual
return compound return
<S> <C> <C>
Latest year +21.0% -
Five years +113.6 +16.4%
Ten years +276.2 +14.2
Lifetime (since 4/16/84) +755.6 +16.6
</TABLE>
*Returns are shown at net asset value.
EUROPACIFIC GROWTH FUND RANKED NUMBER ONE OVER LIFETIME
Over its lifetime, EuroPacific has done better than all other mutual funds with
similar objectives. It ranked first among the 13 international funds in
existence from mid-April 1984, when operations began, to March 31, 1998,
according to Lipper Analytical Services. For the one-, five- and 10-year
periods ended March 31, EuroPacific also did well. Over 10 years, it ranked 4th
out of 35 comparable funds; over five years, 20th out of 122. For the 12 months
ended March 31, the fund ranked 184th out of 459 funds. Lipper rankings are
based on total return and do not reflect the effects of sales charges.
Fund results in this report were computed without a sales charge unless
otherwise indicated. The year-by-year record of an investment made in the fund
at the 5.75% maximum sales charge is shown on page 5. (Sales charges are lower
for accounts of $50,000 or more.) Returns in this report assume reinvestment of
all distributions.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. INVESTING OUTSIDE THE
UNITED STATES IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS,
POLITICAL INSTABILITY, DIFFERING SECURITIES REGULATIONS AND PERIODS OF
ILLIQUIDITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS.
INTERNATIONAL INVESTING: THE 25-YEAR RECORD
U.S. Stock Market [U.S. flag]
All Major Stock Markets Outside North America [schematic globe]
The percentages on the top lines represent the U.S. stock market; the lower
lines are for all major stock markets outside North America.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1973 1974 1975 1976 1977
- -16% -28% +36% +23% -8%
- -14% -22% +37% +4% +19%
globe globe globe flag globe
1978 1979 1980 1981 1982
+6% +14% +30% -4% +22%
+34% +6% +24% -1% -1%
globe flag flag globe flag
1983 1984 1985 1986 1987
+22% +6% +33% +18% +4%
+25% +8% +57% +70% +25%
globe globe globe globe globe
1988 1989 1990 1991 1992
+16% +31% -2% +31% +7%
+29% +11% -23% +12% -12%
globe flag flag flag flag
1993 1994 1995 1996 1997
+10% +2% +38% +24% +34%
+33% +8% +12% +6% +2%
globe globe flag flag flag
</TABLE>
Note: These figures, based on U.S. dollars, are for calendar years and include
reinvestment of dividends.
This chart, which has appeared in most reports for EuroPacific Growth Fund,
shows that stock markets outside North America have done better than the U.S.
market in 14 of the past 25 calendar years.
Over the entire period, the Morgan Stanley Capital International EAFE(r)
(Europe, Australasia, Far East) Index, which measures all major stock markets
outside North America, gained 1,568% (an average of 11.9% a year), while the
U.S. index rose 1,859% (an annual average of 12.6%). Both indexes are unmanaged
and include reinvestment of dividends.
While the U.S. stock market has been exceptionally strong in recent years, we
are convinced that investing outside the United States makes sense over the
long term. We also know that negotiating the unfamiliar terrain of
international markets can be especially challenging. That is why so many people
choose to invest overseas through actively managed mutual funds such as
EuroPacific Growth Fund. Over the years, EuroPacific's investment professionals
have helped shareholders participate in opportunities for growth, avoid
potential pitfalls and achieve consistently attractive long-term returns.
FELLOW SHAREHOLDERS
Fiscal 1998 marked the third consecutive year of double-digit returns for
EuroPacific Growth Fund. For the 12 months ended March 31, the value of your
investment rose 21.0% if, like most shareholders, you reinvested income
dividends totaling 45 cents a share and capital gain distributions totaling
$1.93 a share that were paid during the period.
The fund's gain outpaced both the unmanaged Morgan Stanley Capital
International (MSCI) EAFE (Europe, Australasia, Far East) Index, which measures
all major stock markets outside North America - up 18.9% - and the average
return for the 459 international funds tracked by Lipper Analytical Services,
which rose 19.5% for the year.
These latest results bring the fund's total return since operations began in
April 1984 to 755.6%, or an average compound return of 16.6% a year. By
comparison, the EAFE index had a return of 580.5%, while the average
international fund provided 525.0%. EuroPacific's return once again placed it
first among all 13 U.S.-based international funds in existence throughout its
14-year lifetime.
DIVERGENCE IN WORLD MARKETS
Global markets diverged sharply in fiscal 1998. Stock prices surged in Europe
and North America, while Asia stumbled. Regardless of the region, markets were
quite volatile throughout the year.
In Europe, the rise in stock prices was fueled by a combination of factors,
including positive news on corporate earnings, a wave of merger and
restructuring activity and a strong U.S. dollar, which made European
manufacturers more competitive. Recent changes in regulations, allowing
companies to buy back shares and offer stock options to employees, also made
equities more attractive to investors. Meanwhile, governments eager to fulfill
the criteria for the European Monetary Union helped keep both inflation and
interest rates low.
Although the Asian "flu" precipitated steep declines in October, European
markets recovered strongly; as a group, they posted their second-highest annual
return ever (based on the fund's fiscal year). In the U.K., where EuroPacific
has the largest concentration of companies, stocks rose 43% in U.S. dollars
during the year. Italy, Spain and Switzerland gained 83%, 76% and 52%,
respectively, outpacing even the U.S. market's 49% return. (Market returns are
based on MSCI country indexes.)
DIFFICULTIES IN ASIA
Asian markets, on the other hand, marched to a very different drummer. The
continent's emerging nations were battered by a currency free fall that began
in Thailand and swept through Malaysia, Indonesia, South Korea and the
Philippines. The turmoil sparked a market rout from which the region has not
yet recovered. In some cases, stock prices lost upward of 50% in U.S. dollar
terms, with Indonesia posting a dramatic 77% decline. Although we have had
large holdings in Southeast Asia in the past, the fund has not had a
significant presence there for some time.
Japan, meanwhile, continued to grapple with severe difficulties at home.
Chronic economic problems, a weakened yen and a banking crisis pushed stock
prices 12% lower in dollar terms, on top of a 26% loss the year before. Despite
declines in broad market levels, our research has turned up a number of
world-class companies in Japan, many of which have been trading at lower
valuations than their European or American counterparts. As a result, while not
all of our Japanese stocks were able to buck the decline, a number of our
investments did much better than the market as a whole. These included the
fund's three largest Japanese stocks: Rohm (+24.2%), a maker of integrated
circuits, electronics giant Sony (+21.3%), and video game maker Nintendo
(+20.2%). The decline also provided an opportunity to add to our holdings in
Japan. At nearly 13% of net assets, Japanese companies form the fund's
second-largest country concentration.
A COMPANY-BY-COMPANY APPROACH
Our Japanese holdings are a good example of how we invest the fund's assets.
Rather than choose securities by region or country, our primary focus has
always been on individual companies. Geographic concentrations merely express
the sum of individual decisions made about companies located in a particular
area. (For a discussion of how we find investments for the fund, we invite you
to read the article beginning on page 6.)
EuroPacific's largest holdings reflect our strongest convictions about
companies we believe offer exceptional value and potential for growth over the
long term. All of our 10 largest positions, representing more than 17% of net
assets, posted double-digit price increases for the year. A number of these
companies have been in the fund's portfolio for many years. Mannesmann, our
largest holding, was also among the biggest gainers for fiscal 1998, rising
91.3% thanks to the success of the company's mobile telecommunications business
in Germany. Other long-term holdings, such as Nestle (+63.0%), Telefonos de
Mexico (+46.5%) and BMW (+36.2%), made substantial contributions to the fund's
results as well. We have been investing in all four companies since at least
1990.
[Begin table]
WHERE THE FUND'S ASSETS
ARE INVESTED
(percent invested by country)
<TABLE>
<CAPTION>
EAFE
EuroPacific Growth Fund Index*
3/31/98 3/31/97 3/31/98
<S> <C> <C> <C>
Europe
United Kingdom 14.8% 11.8% 21.8%
France 6.2 6.0 8.6
Sweden 5.4 6.3 3.1
Germany 4.9 5.7 10.0
Netherlands 4.7 5.4 5.6
Switzerland 4.3 3.9 7.9
Italy 2.8 2.8 4.8
Spain 2.7 2.8 3.2
Norway 2.0 1.6 .6
Finland 1.7 1.3 .9
Denmark .7 .5 1.1
Other Europe .8 1.0 3.1
51.0 49.1 70.7
Pacific Basin
Japan 12.6 10.2 22.3
Australia 5.6 5.8 2.6
Canada 5.1 4.7 -
Hong Kong 3.8 3.4 2.4
Mexico 2.6 2.8 -
Philippines 1.1 .9 -
South Korea .7 1.1 -
New Zealand .5 1.5 .3
Other Pacific Basin 1.1 2.0 1.7
33.1 32.4 29.3
Brazil 1.9 1.7 -
Argentina 1.3 1.1 -
South Africa .7 .8 -
India .6 .8 -
Other Countries 2.0 1.7 -
6.5 6.1 -
Cash and Equivalents 9.4 12.4 -
Total 100.0% 100.0% 100.0%
</TABLE>
*Weighted by market capitalization
[End table]
DIVERSE INDUSTRIES
Among industries, the fund has a fairly heavy concentration in banks and other
financial services stocks. Many of these firms have been consolidating in an
effort to cut costs and become more competitive. European and Canadian banks
are merging at a rapid rate as restrictions on cross-selling ease and as
borders open. For example, ForeningsSparbanken (+76.7%), a new addition to the
fund, was recently formed by the merger of two Swedish banks. ING (+44.0%), a
long-time holding, is based in the Netherlands but offers insurance,
investment and banking services on a global basis. Other banks, such as Bank of
Scotland (+124.6%) and Bank of Nova Scotia (+47.4%), also showed strong price
appreciation.
Another sector participating in the trend toward consolidation is
telecommunications, the fund's largest industry concentration. Worldwide
deregulation is encouraging alliances among service providers as they expand
their borders of operations. Telefonica de Espana (+78.2%) and Telecom Italia
(+76.0%), for example, have been courted by large long distance carriers on the
strength of their valuable footholds in Latin America and other regions. Both
companies are benefiting from their fast-growing and highly profitable mobile
operations.
Our emphasis on individual companies leads to broad diversification. On March
31, the fund held securities representing 275 companies based in more than 35
countries. Over half of net assets was invested in European companies.
Countries bordering the Pacific accounted for about one-third of net assets,
while roughly 6% was invested in equities from other countries. The balance,
about 9%, was held in cash and equivalents.
GROWING OPPORTUNITIES
EuroPacific is the nation's largest international fund, with net assets of
about $21 billion. Capital appreciation accounts for a portion of that growth,
but we are also pleased to welcome many new shareholders. Shareholder accounts
now number more than one million and include many 401(k) and other corporate
retirement plans.
An important benefit of growth is that economies of scale make your fund
cheaper to own. As the table on page 33 shows, EuroPacific's 0.86% annual
expense ratio has continued to trend downward. It is also less than half the
2.01% average expense ratio for foreign equity funds, according to
CDA/Wiesenberger.
Looking forward, the environment for global equities remains encouraging.
Markets are very liquid, and inflation worldwide has been relatively benign,
keeping interest rates low. Deregulation continues to create new investment
opportunities, encouraging businesses to expand.
By many measures, however, stock valuations are high by historic standards, and
equity markets have become more sensitive to unexpected events. Asia's
financial difficulties have injected an additional degree of uncertainty into
the investment outlook. Japan's repeated attempts to stimulate its flagging
economy have met with little apparent success thus far. Although China has
recently announced sweeping economic reforms, implementing them will be a
challenge. Southeast Asia's recovery is predicated on currency stability, which
is not at all assured. On a global level, it remains to be seen how non-Asian
companies with significant business in the region will fare as consumer demand
there contracts.
This past year has been an object lesson in the unpredictability of financial
markets. Few investors could have foretold either the sudden collapse of
Southeast Asia's stock markets or Europe's heady growth. While we welcome the
latter and have some concerns about the former, we continue to set our sights
on the long-term prospects of good companies around the world. As you work
toward achieving your financial goals, we would urge you to maintain that same
long-term view.
We look forward to reporting to you again in six months.
Cordially,
[/s/ Walter P. Stern]
Walter P. Stern
Chairman of the Board
[/s/ Thierry Vandeventer]
Thierry Vandeventer
President
May 12, 1998
HOW A $10,000 INVESTMENT HAS GROWN
Here's how a $10,000 investment in the fund grew between April 16, 1984 - when
the fund began - and March 31, 1998. The chart shows the high, low and closing
values for each year. As you can see, that $10,000 investment would have
increased in value to $80,656 with all distributions reinvested. That long-term
growth has occurred despite events which may have negatively affected world
markets over the short term.
The fund's year-by-year results appear in the table under the chart. Those
results have been positive in each of 13 full fiscal years since operations
began. The boxed figure at the far right shows that over EuroPacific's lifetime
an investment in the fund, made at the maximum sales charge, grew at an average
compound rate of 16.1% a year.
The black line tracks the Morgan Stanley Capital International EAFE (Europe,
Australasia, Far East) Index. The Japanese market is the largest single
component in the index, which helps explain why the fund lagged the index early
in its life and has outpaced it more recently.
[begin mountain chart]
$80,656/1,2/
EuroPacific
Growth Fund
with dividends
reinvested
$68,054/3/
MSCI EAFE
Index
$15,732/4/
Consumer Price
Index (inflation)
$10,000/1/
original
investment
[chart]
<TABLE>
<CAPTION>
EuroPacific
Growth Fund
with
dividends Consumer
Year ended reinvested MSCI EAFE Price Index
March 31 /1/,/2/ Index /3/ (inflation) /4/
<S> <C> <C> <C> <C>
4/16/84 $9,425 $10,000 $10,000
1985 9,948 10,348 10,320 IRAN/IRAQ WAR ESCALATES
1986 15,368 19,228 10,553 GORBACHEV CALLS FOR SWEEPING CHANGES
1987 19,827 31,010 10,873 BOMBING OF LIBYA
1988 21,437 36,220 11,300 GLOBAL STOCK MARKET COLLAPSE
1989 24,586 40,522 11,862 EASTER EUROPE UPRISING
1990 28,762 35,925 12,483 TIANANMEN SQUARE MASSACRE
1991 31,381 36,954 13,094 PERSIAN GULF WAR
1992 35,057 34,104 13,511 USSR DISINTEGRATES
1993 37,754 38,200 13,928 EUROPEAN CURRENCY CRISIS
1994 47,670 46,923 14,277 RWANDAN VIOLENCE ESCALATES
1995 48,007 49,913 14,685 MEXICAN PESO DEVALUED
1996 57,533 56,238 15,102 ISRAELI PRIME MINISTER ASSASSINATED
1997 66,672 57,224 15,519 JAPANESE BANKING CRISIS
1998 80,656 68,054 15,732 ASIAN "FLU"
</TABLE>
- ---
<TABLE>
<CAPTION>
Year Ended March 31 1985# 1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL VALUE
Dividends Reinvested $69 35 118 491 316 527 656
Value at Year-End /1/ $9,948 15,368 19,827 21,437 24,586 28,762 31,381
Total Return (0.5)% 54.5 29.0 8.1 14.7 17.0 9.1
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31 1992 1993 1994 1995 1996 1997
TOTAL VALUE
<S> <C> <C> <C> <C> <C> <C>
Dividends Reinvested 611 538 515 716 1,132 1,063
Value at Year-End /1/ 35,057 37,754 47,670 48,007 57,533 66,672
Total Return 11.7 7.7 26.3 0.7 19.8 15.9
Year Ended March 31 1998
TOTAL VALUE
Dividends Reinvested 1,156
Value at Year-End /1/ 80,656
Total Return 21.0
</TABLE>
Average annual compound return
for fund's lifetime:
16.1%/1/
[end mountain chart]
/#/For the period April 16, 1984 (commencement of operations) through March 31,
1985.
/1/These figures, unlike those shown earlier in this report, reflect payment of
the maximum sales charge of 5.75% on the original investment. Thus, the net
amount invested was $9,425. As outlined in the prospectus, the sales charge is
reduced for larger investments. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares. The
maximum initial sales charge was 8.5% prior to July 1, 1988. Results shown do
not take into account income or capital gain taxes.
/2/Includes reinvested dividends of $7,943 and reinvested capital gain
distributions of $16,100.
/3/With dividends reinvested.
/4/Begins April 30, 1984. Computed from data supplied by the U.S. Department of
Labor, Bureau of Labor Statistics.
The indexes are unmanaged and do not reflect sales charges, commissions or
expenses.
Past results are not predictive of future results.
AVERAGE ANNUAL COMPOUND RETURNS
(for periods ended March 31, 1998)
Ten Years 13.50%
Five Years 15.03%
One Year 14.01%
Assumes reinvestment of all distributions and payment of the 5.75%
maximum sales charge at the beginning of the stated periods.
SCRATCHING THE SURFACE
When Asian stock markets collapsed this past fall, investors were caught
off-guard. Few saw it coming. Financial markets can always change course
unexpectedly, as history shows, but well-managed businesses tend to stand their
shareholders in good stead over the long run. That's why EuroPacific takes a
strict bottom-up approach, investing on a company-by-company - rather than a
country-by-country - basis. We also hold securities for the long term, because
while it's impossible to tell where stock prices are headed, it is somewhat
easier to anticipate the course of a solid business.
Of course, finding the right businesses isn't easy. Your fund's portfolio
counselors and research analysts spend hundreds of hours meeting with company
managements, visiting production plants and studying balance sheets. They
confer with suppliers, customers, competitors - and each other. We think the
effort is worth it: Collectively, these carefully selected companies have
provided long-term shareholders with above-average returns and relatively low
volatility.
On the following pages, we'll highlight some of the components of our research
effort and show how tracking companies through good times and bad helps
EuroPacific's investment professionals keep current events in perspective when
markets are rocky.
A LOOK AT HOW WE FIND INVESTMENTS FOR THE FUND
[Begin sidebar]
Ultimately, our investment strategy is relatively straightforward: Buy good
companies at reasonable prices and hold them for the long term.
[End sidebar]
FUNDAMENTAL RESEARCH IS KEY
As you can see by the list of holdings that begins on page 12, EuroPacific's
portfolio is extremely diverse. The fund is invested in 275 companies. They
range from giant multinational firms to small regional concerns. Most are
headquartered in major industrial countries, although quite a few are based in
the world's developing nations. Some of the names - Nestle, Toyota or Michelin
- - are probably familiar to you; others are less well known. More than three
dozen countries are represented.
What the portfolio listing can't show you is how these investments were
selected. As we have mentioned many times over the years, we invest in
individual companies, not countries. The geographic concentrations shown in the
table on page 3 are not the result of a decision to emphasize particular
countries. Rather, they are the result of many decisions about specific
businesses whose stocks we find attractive - a very different approach.
Ultimately, our investment strategy is relatively straightforward: Buy good
companies at reasonable prices and hold them for the long term. That sounds
simple, but it's a strategy that requires a deep understanding of individual
businesses, broad industry knowledge and a true global perspective. That reach
is particularly important for international investing, where a number of
factors - local business practices, changes in currency values, a lack of
public information or language barriers - can present unexpected challenges
beyond the scope of most individual investors.
A GLOBAL PERSPECTIVE
These are challenges that EuroPacific's investment professionals meet on a
regular basis as they look for appropriate investments for the fund. They are
supported in their efforts by one of the industry's most comprehensive global
research networks, operated by the fund's investment adviser, Capital Research
and Management Company.
Capital has been investing internationally for more than 40 years, and opened
its first overseas office in Geneva in 1962. Today, more than 100 analysts and
portfolio counselors are based in nine research offices on three continents.
These men and women hail from 32 countries and speak 41 languages, bringing a
remarkable diversity to their task.
Experience has taught us that trying to anticipate where markets are headed is
next to impossible. Focusing solely on broad trends can lead to poor investment
decisions, such as selecting the wrong stock in the right industry, investing
when prices are too high or missing out on good companies in currently
unpopular regions.
Rob Lovelace, based in Los Angeles, is one of the fund's six primary portfolio
counselors. He cites Japan as an example of the latter. "In a broad brush
sense, everyone knows that the Japanese market has been $bad' lately, but when
you look beneath the surface there have been individual stocks - Rohm, Sony and
Fujitsu come to mind - that have been quite the opposite. Not only have these
securities done well on a relative basis, they have also been good investments
in absolute terms."
For EuroPacific's investment professionals, going against the market's
conventional wisdom often requires nerves of steel. It also demands a strong
degree of conviction that, in the long run, their decisions are the right ones
for shareholders. That conviction develops from the fundamental research we do
on every security we consider for the fund.
AN INTEGRATED EFFORT
All of our buy and sell decisions are based on our own information-gathering.
That means thousands of hours and millions of miles of travel each year by
analysts who do global research for the fund. They get to know every company in
their area of coverage by talking with corporate executives and observing
company operations. They confer with competitors, suppliers and customers. They
meet with economists, government officials, consultants and industry
specialists. They sift through company reports and financial statements.
Their work isn't done, however, until they've consulted with other Capital
associates. What makes our research process unique is the continuous exchange
of ideas that allows investment professionals to develop a broad base of
knowledge. Portfolio counselors and analysts share information at weekly
conference calls and make joint visits to companies so that people with
different responsibilities can contribute their own points of view. Analysts
with relevant areas of expertise work in "cluster groups" to leverage their
many hours of research.
That constant interplay of perspectives is essential to the research process.
It helps analysts determine relative valuations - how British telephone
companies stack up against their Brazilian counterparts, for example - and
provides a depth of knowledge about companies that's virtually unmatched in the
industry. Many analysts also bring their expertise directly to bear by managing
a portion of the fund's assets.
[Begin sidebar]
Going against the market's conventional wisdom demands nerves of steel - and
the conviction that our investment decisions are the right ones for
shareholders. [End sidebar]
[begin sidebar]
RESEARCHING A CONGLOMERATE
TWO HEADS ARE BETTER THAN ONE
[illustration: translucent piggy bank with money floating out]
As businesses merge and globalize, recognizing their true worth becomes
increasingly complicated. Multiple perspectives can help. ING, a financial
services company based in the Netherlands, is the joint research responsibility
of two London-based analysts - one following insurance companies and another
covering banks. In the early 1990s, when ING was formed by a series of mergers,
the stock was relatively undervalued. Our analysts, on the other hand, were
intrigued by the synergies the combined businesses would create for global
expansion. "Investors were discouraged," Ulrich Volk, the insurance analyst,
recalls. "Poor business practices had left the company somewhat bloated. Many
people were also skeptical about a single company offering a complete range of
financial services, which was a relatively new idea at the time." Our analysts
carefully studied the components of the merger and felt that with new
management coming aboard, the mistakes of the past would be corrected, putting
the firm on the right track. This research is a never-ending process. As ING
has continued to acquire companies and increase its business outside the
Netherlands, Ulrich has regularly compared notes with Isabelle de Wismes, the
banking analyst. ING has been in the portfolio since 1993 and is one of the
fund's largest holdings. It is also one of many financial companies that has
changed the way it does business. "Today, European banks and insurance
providers are merging at a very rapid rate," notes Isabelle. "As analysts, we
already had considerable experience leveraging knowledge from one industry to
another because of the way we do research."
SEEING THE TREES IN THE FOREST
A LOOK AT EUROPACIFIC'S AUTO HOLDINGS
[photo: translucent car]
Focusing on individual companies rather than broad market trends has helped us
uncover attractive investments in industries that were out of favor among other
investors. For example, automobile stocks have been well-represented in
EuroPacific since the fund began, even though an economic slowdown sent the
sector into a seven-year slump nearly a decade ago. In the face of market
pessimism, Darcy Kopcho, the fund's Los Angeles-based auto analyst, kept her
sights on the prospects of individual car manufacturers. Darcy met regularly
with auto executives, plant managers and parts suppliers; she carefully
inspected assembly lines and test-drove new car models. What she discovered was
that the auto industry was not monolithic. "As I got to know individual
companies," she says, "what became immediately apparent was that each firm had
a unique combination of strengths and weaknesses, regardless of what the sector
was doing." She recommended BMW, for example, on the strength of its
management, and was impressed by Suzuki's cost-cutting abilities. What's more,
the decline in equity prices provided good buying opportunities. Darcy notes,
"For long periods of time, if you had viewed auto stocks as a uniform whole,
they did not seem to be compelling investments. But by choosing the right
companies over those long periods, we've been able to find value for our
shareholders, contrary to the general wisdom of the market."
THE USES OF ADVERSITY
INVESTING IN TROUBLED MARKETS
Turmoil often creates rewarding opportunities for those who can spot them. We
first invested in Bangkok Bank in 1991 - shortly after a military coup had
overthrown the government. Mark Denning, now a portfolio counselor, was an
analyst following Thai banks at the time. "Thailand has had more changes in
government than I've had hot dinners," he jokes. "When the military took over,
investors on the whole were pretty disheartened." Convinced that the country's
economic structures were still sound, Mark ignored market sentiment and focused
on company fundamentals. He believed that the bank, Thailand's largest, had
tremendous earnings potential. Furthermore, because of the market dip, the
stock valuations were extremely attractive. On his recommendation, the fund's
portfolio counselors built a large position in Bangkok Bank, which remained in
the portfolio for about five years. We sold most of the stock at a large
premium - in other words, just when other investors were buying. We'd become
concerned that Thai banks were making injudicious loans to real estate
developers - a primary cause of the recent financial crisis in Southeast Asia.
"If you concentrate on the microeconomics of a company, and they look
favorable," Mark says, "adverse conditions may be a good buying opportunity.
Conversely, careful research can also tell you when it's time to leave the
party, and sell at the right time."
[photo: translucent dragon]
[photo: translucent structure]
[end sidebar]
"We don't just have islands of research, operating in isolation," emphasizes
Mark Denning, a portfolio counselor who works out of our London office. "Our
research is truly integrated, enabling us to make decisions that others
couldn't even consider."
PUTTING THE PIECES TOGETHER
Mark remembers when he first started looking at News Corp., which is based in
Australia. In 1990, Rupert Murdoch's media empire was badly overleveraged. The
company was bleeding debt and a number of its businesses were losing money.
"The share price was dropping like mad," Mark recalls, "because Australian
investors just didn't realize how valuable News Corp.'s U.S. assets were.
Because I was covering the company's Asian businesses, while another Capital
analyst covered its U.S. interests, we had the advantage of a global
perspective." After sharing what they had learned, both analysts felt confident
that the company would recover from its financial troubles, and that with
Murdoch's global vision, the stock was almost certain to rise. News Corp. has
been a large holding in EuroPacific for many years now and has indeed proved to
be a rewarding selection.
[Begin sidebar]
"When circumstances are confused, you have to be in a position to act
rationally, based on the knowledge you've gained and the research you've done
ahead of time." [End sidebar]
EXPECTING THE UNEXPECTED
Declines in markets or individual stocks can be troubling for investors who
must watch the value of their assets go down. They can also present
opportunities for those who have done their homework.
Steve Bepler, who is based in New York, is one of the fund's original portfolio
counselors. Over the years, he has seen his share of market turmoil. "Our motto
for dealing with the market's unpredictability," he explains, "is: $Be
prepared.' You have to be in a position to act rationally when circumstances
are confused, based on the knowledge you've gained and the careful research
that you've done ahead of time. Otherwise, you may be caught unawares."
Portfolio counselor Janet McKinley, also based in New York, agrees. She is
convinced that consistent, fundamental research has given the fund an important
competitive edge. "We would be lying if we claimed to be able to predict market
meltdowns, but because we follow companies over the long term, in good times
and bad, we have the advantage of knowing the true extent of the problems they
face as opposed to the market's panicky first judgment."
That long-term view is a cornerstone of our investment approach. EuroPacific's
investment professionals make the effort to get to know companies because most
stocks stay in the portfolio for quite a while - about four years, on average
(based on turnover rates for the past five years). That's significantly longer
than the average international stock fund, which turns over investments every
year and a half, according to Lipper Analytical Services.
A longer time horizon has helped the fund achieve attractive returns and is
also another way to put market declines in perspective. "My most successful
holdings have been in my portfolio for five years or longer, and have usually
had somewhat painful beginnings," notes Thierry Vandeventer, the Geneva-based
president of EuroPacific and one of its portfolio counselors. "I'm not
interested in guessing what a stock's price is going to be six months from now.
What I want to know is, where will this company be in five years' time? What is
its earnings potential over the long term?"
Ultimately, it is that focus - on the long-term prospects of solid companies we
know very, very well - that makes EuroPacific so special. While no strategy is
perfect, over the years we believe our approach has helped reward shareholders
handsomely.
<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:
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>
BOARD OF TRUSTEES
ELISABETH ALLISON
Cambridge, Massachusetts
Administrative Director, ANZI, Ltd.
(financial publishing and consulting);
publishing consultant, Harvard Medical School
MICHAEL R. BONSIGNORE
Minneapolis, Minnesota
Chairman and Chief Executive Officer, Honeywell Inc.
DAVID I. FISHER
Los Angeles, California
Chairman of the Board, The Capital Group Companies, Inc.;
Chairman of the Board, Capital Guardian Trust Company
ROBERT A. FOX
Livingston, California
President and Chief Executive Officer, Foster Farms Inc.
ALAN GREENWAY
La Jolla, California
Private investor; President, Greenway Associates, Inc.
(management consulting services)
WILLIAM R. GRIMSLEY
San Francisco, California
Senior Vice President and Director,
Capital Research and Management Company;
Director, The Capital Group Companies, Inc.
KOICHI ITOH
Tokyo, Japan
Group Vice President - Asia/Pacific, Autosplice, Inc.;
former President and Chief Executive Officer, IMPAC
(management consulting services); former Managing Partner, VENCA Management
(venture capital)
WILLIAM H. KLING
St. Paul, Minnesota
President, Minnesota Public Radio;
President, Greenspring Co.;
former President, American Public Radio
(now Public Radio International)
JOHN G. MCDONALD
Stanford, California
The IBJ Professor of Finance,
Graduate School of Business, Stanford University
WILLIAM I. MILLER
Columbus, Indiana
Chairman of the Board, Irwin Financial Corporation
KIRK P. PENDLETON
Southampton, Pennsylvania
Chairman of the Board and Chief Executive Officer,
Cairnwood, Inc. (venture capital investment)
DONALD E. PETERSEN
Birmingham, Michigan
Retired; former Chairman of the Board and
Chief Executive Officer, Ford Motor Company
WALTER P. STERN
New York, New York
Chairman of the Board of the fund
Chairman of the Board, Capital Group International, Inc.
THIERRY VANDEVENTER
Geneva, Switzerland
President of the fund
Director, Capital Research and Management Company
OTHER OFFICERS
STEPHEN E. BEPLER
New York, New York
Executive Vice President of the fund
Senior Vice President, Capital Research Company
MARK E. DENNING
London, England
Executive Vice President of the fund
Director, Capital Research and Management Company;
Senior Vice President and Director, Capital Research Company
ROBERT W. LOVELACE
Los Angeles, California
Senior Vice President of the fund
Executive Vice President and Director, Capital Research Company; Vice
President, Capital Research and Management Company
JANET A. MCKINLEY
New York, New York
Senior Vice President of the fund
Director, Capital Research and Management Company;
Senior Vice President, Capital Research Company
ALWYN HEONG
New York, New York
Vice President of the fund
Vice President, Capital Research Company
HIROMI ISHIKAWA
Tokyo, Japan
Vice President of the fund
Vice President, Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
R. MARCIA GOULD
Brea, California
Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
CORPORATE INFORMATION
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers llp
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
This report is for the information of shareholders of EuroPacific Growth Fund,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
June 30, 1998, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
EUROPACIFIC GROWTH FUND
SHAREHOLDER SERVICES
ARE YOU AWARE OF YOUR RIGHTS?
Did you know you may be eligible for a sales charge discount when you buy
shares of most American Funds? The discounts begin when your investments total
$25,000 for bond funds or $50,000 for stock and stock/bond funds - and the good
news is you don't have to invest the whole amount at one time.
Through your right of accumulation, when you purchase additional shares you can
add the purchase amount to the value of shares you already own - in any of our
eligible funds* - in order to qualify for a sales charge discount on the new
investment. Sales charges are reduced on a sliding scale as the value of your
investments increases.
You'll find a detailed breakdown of all discounts in your fund's prospectus,
which you can obtain from your financial adviser or by calling a Shareholder
Services Representative.
OTHER WAYS TO REDUCE SALES CHARGES
You can establish a statement of intention that allows you to invest at a
reduced sales charge immediately, based on purchases you intend to make over a
13-month period.* (If, over the 13 months, you don't invest the intended
amount, you will pay the sales charge applicable to the amount invested.) Or
you can aggregate accounts by adding your purchase amount to the total value of
accounts you, your spouse and your children under the age of 21 have with The
American Funds Group. Call a Shareholder Services Representative for details
and restrictions.
Whether you accumulate, aggregate or establish a statement of intention, it all
adds up - to more purchasing power for you.
INVESTING WITH STYLE
Our many free services are designed to help you meet your needs quickly,
effortlessly and efficiently.
AMERICAN FUNDSLINE(R) AND FUNDSLINE ONLINE(SM) - Handle transactions using your
computer or phone 24 hours a day. Obtain current prices and investment returns,
exchange shares between funds, redeem shares, check your share balances,
confirm your most recent transaction, order checks and duplicate statements
and, from our Web site, print a prospectus. All on your timetable.
AMERICAN FUNDSLINK(SM) - Link your American Funds accounts with your bank
account. You can have fund dividends or automatic fund withdrawals deposited
directly into your bank account. Or you can invest money directly from your
bank account into your fund account on either a systematic or on-demand basis.
OTHER AUTOMATIC TRANSACTIONS - You can reinvest dividends into the same fund or
another fund, make withdrawals, and exchange shares between funds - quarterly,
monthly or during the months you specify.
DIVIDEND AND CAPITAL GAIN OPTIONS - Use your dividend and capital gain
distributions to meet your changing needs. You may:
- - Automatically reinvest distributions back into the fund at no sales charge.
- - Cross-reinvest dividends into another fund at no sales charge. (Certain
restrictions apply.)
- - Have dividends mailed or sent electronically to you or to someone else.
EXCHANGE PRIVILEGES - When you and your investment adviser feel it's time to
adjust your portfolio to meet your changing investment goals, you can easily
exchange shares from one American Fund to another -without paying a sales
charge.* If you are opening an account in a different fund, you must meet that
fund's minimum investment requirement. An exchange generally constitutes a sale
and purchase for tax purposes. Please read the prospectus before you exchange
shares.
OTHER SERVICES - Stay on top of your investments with account statements that
keep you abreast of the activity in your account, consolidated quarterly
statements that reduce paperwork and year-end tax reports that show the
dividends and capital gain distributions paid to you during the year.
* Investments in our money market funds - The Cash Management Trust of America,
The Tax-Exempt Money Fund of America and The U.S. Treasury Money Fund of
America - which are purchased without a sales charge, generally do not apply
when determining your sales charges unless the shares were originally purchased
in another American Fund that required a sales charge, then later exchanged
into our money market funds.
QUESTIONS?
For more information about these services or any of the American Funds, please
read a current prospectus, which you may obtain from your financial adviser. To
contact American Funds:
- - Shareholder Services Representative, toll-free, 8 a.m. to 8 p.m. ET -
800/421-0180
- - American FundsLine, toll-free 24-hour voice response unit - 800/325-3590
- - FundsLine OnLine, Web site - www.americanfunds.com
- - By mail - Write to the service center nearest you. If you live outside the
U.S., please write to the Western Service Center.
Your financial adviser will be happy to explain these services to you in
greater detail. Or, to talk to a Shareholder Services Representative at
American Funds, call toll-free (8 a.m. to 8 p.m. ET) from anywhere in the U.S.
800/421-0180. Visit us at www.americanfunds.com on the World Wide Web.
[map of United States]
WESTERN
SERVICE CENTER
American Funds
Service Company
P.O. Box 2205
Brea, California
92822-2205
WEST CENTRAL
SERVICE CENTER
American Funds
Service Company
P.O. Box 659522
San Antonio, Texas
78265-9522
EAST CENTRAL
SERVICE CENTER
American Funds
Service Company
P.O. Box 6007
Indianapolis, Indiana
92822-2205
EASTERN
SERVICE CENTER
American Funds
Service Company
P.O. Box 2280
Norfolk, Virgina
23501-2280
Printed on recycled paper
Litho in USA BDA/AL/3606
Lit. No. EUPAC-011-0598
[The American Funds Group(r)]
