UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-03734
EuroPacific Growth Fund
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code: (213) 486-9200
Date of fiscal year end: March 31
Date of reporting period: March 31, 2006
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Richard M. Phillips
Kirkpatrick & Lockhart Nicholson Graham LLP
Four Embarcadero Center, 10th Floor
San Francisco, CA 94111
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[Logo - American Funds®]
The right choice for the long term®
EuroPacific Growth Fund
Dealing with a changing Europe
[cover photo: Bridges over the Vltava River in Prague, Czech Republic]
Annual report for the year ended March 31, 2006
EuroPacific Growth Fund® seeks long-term capital appreciation by investing primarily in the securities of companies based in Europe and the Pacific Basin. About half of the world’s investment opportunities can be found beyond the borders of our country. As a shareholder in the fund, you have access to what we believe are the best of those opportunities.
This fund is one of the 29 American Funds. The organization ranks among the nation’s three largest mutual fund families. For nearly 75 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.
Contents | |
Letter to shareholders, with results at a glance | 1 |
The value of a long-term perspective | 4 |
Feature article: Continental shift | 6 |
Tapping global potential | 12 |
Summary investment portfolio | 13 |
Financial statements | 18 |
Trustees and officers | 35 |
The American Funds family | back cover |
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For the most current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.
Please see page 4 for Class A share returns with relevant sales charges deducted. Results for other share classes can be found on page 34. Please see the inside back cover for important information about other share classes.
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 26 for details.
Investing outside the United States is subject to additional risks, such as currency fluctuations and political instability, which are detailed in the fund’s prospectus.
On the cover: Bridges over the Vltava River in Prague, Czech Republic, including the Charles Bridge (second bridge from bottom), the city’s oldest. Built in 1357, it is the main pedestrian route connecting two important districts of the city.
[close up photo of bridges over the Vltava River in Prague, Czech Republic]
Fellow shareholders:
International stocks surged during the past 12 months, aided by rising corporate earnings and synchronized economic growth around the world. Virtually every market did better than the U.S., both in dollar and local currency terms.
EuroPacific Growth Fund did well in this environment, outpacing its primary market benchmarks, as well as the average return of its peers. For the 12 months ended March 31, 2006, the fund gained 30.3%, including reinvestment of the capital gain distribution of $1.32 a share and the dividend of 72 cents a share; both were paid in December.
That was ahead of the 28.1% total return of the unmanaged MSCI ACWI (All-Country World Index) Index,SM ex-USA, which measures 48 developed- and developing-country indexes. The Lipper International Funds Average, meanwhile, returned 26.3%. By way of comparison, U.S. stocks, as measured by the unmanaged Standard & Poor’s 500 Composite Index, rose 11.7%. (The market indexes have no expenses.)
As the table below shows, EuroPacific sustained its advantage over longer periods as well. We would note, however, that the fund’s 12-month gain, while more than welcome, is much higher than its annualized returns over periods of five years and longer. These timeframes are more reasonable measures of the fund’s success, and we would therefore urge shareholders not to extrapolate future returns from the past year’s extraordinary gains.
International markets soar
Underpinning the surge in international stocks were signs of a steady economic recovery around the world. Industrial production increased, unemployment fell and inflation remained well-contained. Companies that had restructured during difficult times began to realize the fruits of their efforts; the resulting leaner operations helped boost profit margins as demand increased. At the same time, rising interest rates in the United States and disruptions caused by Hurricane Katrina encouraged investors to look elsewhere for growth.
The dollar strengthened versus most major currencies during the year, nipping at returns for U.S. investors. Even in dollar terms, however, most markets posted double-digit gains. In Europe, a number of countries found themselves on firmer economic footing, with exports up and unemployment inching lower. Confidence was particularly high in Germany, which saw stock prices increase 28.7%.* Optimism also boosted stocks in the Netherlands (+25.1%), France (+23.0%) and Spain (+21.2%). Markets were more subdued in the United Kingdom (+14.7%) and Italy (+11.5%), both of which are struggling economically.
[Begin Sidebar]
Results at a glance
(for periods ended March 31, 2006, with all distributions reinvested)
Total return | Average annual total returns | ||||||||||||
1 year | 5 years | 10 years | Lifetime1 | ||||||||||
EuroPacific Growth Fund | +30.3 | % | +11.4 | % | +11.2 | % | +14.0 | % | |||||
MSCI ACWI (All-Country World Index) Index,SM ex-USA2,3 | +28.1 | +11.8 | +7.4 | — | |||||||||
Lipper International Funds Average4 | +26.3 | +9.3 | +7.9 | +11.5 | |||||||||
MSCI EAFE® (Europe, Australasia, Far East) Index2 | +24.9 | +10.0 | +6.8 | +11.5 |
1 Since April 16, 1984.
2 Indexes are unmanaged.
3 The index did not exist prior to December 31, 1987.
4 Source: Lipper. Lipper averages do not include the effects of sales charges.
[End Sidebar]
Investors were particularly enthusiastic about prospects for Japan (+37.4%), where economic recovery finally seems to have taken root. The banking system has improved and prices of goods and real estate rose modestly, signaling an end to the country’s long run of deflation. Elsewhere in the region, Indian and South Korean stocks rose a remarkable 70.9% and 48.7%, respectively.
Finally, in the Americas, stock markets rewarded U.S. investors not only with absolute price gains but currency appreciation as well. The Mexican peso and the Canadian dollar each rose slightly against the U.S. dollar, contributing to overall stock increases of 63.5% and 34.8%, respectively. An influx of foreign investment pushed up the value of the Brazilian real by 23%, with stocks soaring 82.0% over the year.
A well-positioned portfolio
Good company selection contributed to EuroPacific’s above-average returns. Of the 237 stocks held over the full year, 197 rose in price. Many of the fund’s larger holdings outpaced both their industry categories and the markets in which they are traded. These included businesses as diverse as América Móvil (+99.2%), the Mexican wireless service provider; oil producer Petrobras (+96.7%) of Brazil; Kookmin Bank (+93.3%) of Korea; Swiss pharmaceutical firm Roche (+38.9%); Spanish fashion distributor Inditex (+29.1%); and Taiwan Semiconductor Manufacturing (+27.1%). Together, these six holdings account for over 9% of net assets.
Financial institutions continue to be EuroPacific’s largest sector concentration, at 22.8% of net assets. We began adding to stocks of Japanese banks more than a year ago; these were particularly strong, as lending rates improved. Noteworthy gainers included Mizuho Financial Group (+72.9%) and Shinhan Financial Group (+67.1%), while ORIX Corp., a consumer finance firm, appreciated more than 140% in price. Among other industries, stocks of energy companies rose alongside oil prices, and cyclical stocks — building materials, metals and automobiles — benefited from the positive global economic outlook.
Several sectors turned in mixed or muted results. Purveyors of food and personal products, such as Nestlé (+8.5%), Diageo (+11.9%) and L’Oreal (+10.1%), trailed broader markets, while prices for pharmaceutical stocks tended to rely on the fortunes of individual companies. Thus, Novo Nordisk (+11.7%) and Sanofi-Aventis (+12.8%) did not do nearly as well as Roche and AstraZeneca (+27.6%).
*Country and industry returns are based on MSCI indexes, expressed in U.S. dollars and assume reinvestment of dividends.
[Begin Sidebar]
Where the fund’s assets are invested
(percent invested by country)
EuroPacific Growth Fund invests primarily in the stocks of companies based in Europe and the Pacific Basin.1
EuroPacific | MSCI EAFE | |||||||||
Growth Fund | Index2 | |||||||||
(3/31/06) | (3/31/05) | (3/31/06) | ||||||||
Europe | ||||||||||
Euro zone3 | 22.9 | % | 26.2 | % | 32.9 | % | ||||
United Kingdom | 8.1 | 11.7 | 23.4 | |||||||
Switzerland | 6.1 | 4.2 | 6.7 | |||||||
Russia | 1.5 | .1 | — | |||||||
Denmark | 1.2 | 1.4 | .7 | |||||||
Norway | 1.2 | 2.3 | .8 | |||||||
Hungary | .7 | .7 | — | |||||||
Other Europe | .4 | 1.0 | 2.4 | |||||||
42.1 | 47.6 | 66.9 | ||||||||
Pacific Basin | ||||||||||
Japan | 17.7 | 16.4 | 25.4 | |||||||
South Korea | 8.0 | 5.5 | — | |||||||
Taiwan | 4.8 | 3.1 | — | |||||||
Mexico | 2.7 | 2.5 | — | |||||||
Canada | 2.7 | 3.3 | — | |||||||
Hong Kong | 2.0 | 1.3 | 1.6 | |||||||
Australia | 1.4 | 2.3 | 5.1 | |||||||
Indonesia | .7 | .2 | — | |||||||
China | .6 | .7 | — | |||||||
Singapore | .6 | .4 | .8 | |||||||
Other Pacific Basin | 1.1 | 1.7 | .2 | |||||||
42.3 | 37.4 | 33.1 | ||||||||
Other | ||||||||||
Brazil | 3.4 | 4.4 | — | |||||||
India | 2.1 | 2.0 | — | |||||||
South Africa | 1.2 | .5 | — | |||||||
6.7 | 6.9 | — | ||||||||
Short-term securities & | ||||||||||
other assets less | ||||||||||
liabilities | 8.9 | 8.1 | — | |||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
1 A country is considered part of the Pacific Basin if any of its borders touches the Pacific Ocean.
2 The MSCI EAFE index, which measures 21 major markets outside North America, is weighted by market capitalization.
3 Countries using the euro as a common currency are: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.
[End Sidebar]
A few areas finished the year in the red. Most European telecommunications holdings fared poorly, as pricing pressures and large expansion projects weighed on earnings. France Télécom (-24.9%), Vodafone (-21.0%) and Telefónica (-6.3%) all declined, although both Telekom Austria (+20.4%) and KPN of the Netherlands (+26.0%) managed to buck the downward trend. Media and food retailers also declined.
Actively managing the portfolio
During the year, market movements and new cash inflows led to some shifts in the portfolio. Our concentrations in technology companies and banks have been enhanced, both with new investments and additions to existing holdings. We substantially reduced our exposure to European telecommunications providers; at the same time, we increased our position in América Móvil. We also trimmed several large energy holdings that had risen substantially during the year, allowing us to sell into strength.
Diversifying risk
Even as we seek growth opportunities for the fund, we are ever mindful of risk. International investing can be challenging — accounting standards and political and economic conditions often vary widely by country or region. EuroPacific’s broad diversification, which is supported by intensive company research, allows us to capitalize on those differences while also helping us to mitigate risk. The fund’s geographic breakdown, shown in the tables at left, is the result of our research-driven, long-term investment approach.
Occasionally, a development will have a major influence on the global investment environment. That has been the case with the introduction of the euro, which has been adopted by 12 countries so far. The common currency has changed the way European businesses operate. It has also leveled the currency risk, and to some degree, the economic risks among these countries. The effect has been significant enough that we’ve combined the euro zone countries in our geographic tables. We believe this provides a more accurate portrait of our global view, both in terms of risk and opportunities. (We invite you to read about how Europe’s economic union has affected companies, in the article that begins on page 6.)
[photo from rooftop level of the National Theatre in Prague - spires from a nearby building in the foreground]
Searching the globe for value
Looking forward, economic growth appears to be gaining traction around the world. Japan’s financial ship may be righting itself at last — businesses are expanding as exports have surged, although the country still faces demographic and political challenges. Europe is expanding as well, albeit at a modest pace. Consumer spending, which has been weak across the Continent, could improve as corporate profits make their way to workers. The greatest growth, of course, is coming from developing countries in Asia and South America. These countries are not only supplying new markets for developed-country businesses but are also nurturing their own world-class companies.
With its flexibility to invest anywhere outside the United States, EuroPacific is in a good position to capture this potential. We are choosing carefully, however. The surge in international stocks has flattened valuations among markets somewhat, making individual stock selection paramount. Fortunately, there are many good companies to be found, and our global research network helps us uncover value.
Finally, we are pleased to note that EuroPacific’s shareholder family has grown to 2.4 million accounts — an increase of 25% over the past 12 months. We welcome those of you who have recently joined us, and look forward to serving all of our shareholders in the years to come.
Cordially,
/s/ Gina H. Despres
Gina H. Despres
Vice Chairman of the Board
/s/ Mark Denning
Mark Denning
President
May 9, 2006
For current information about the fund, visit americanfunds.com.
The value of a long-term perspective
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com. Fund figures reflect deduction of the maximum sales charge of 5.75% on a $10,000 investment.1 Thus the net amount invested was $9,425.2
How a $10,000 investment has grown
While notable for their volatility in recent years, financial markets have tended to reward investors over the long term. Active management — bolstered by experience and careful research — can add even more value. As the chart shows, over its lifetime, EuroPacific Growth Fund has done demonstrably better than its relevant benchmark.
Average annual total returns based on a $1,000 investment* (for periods ended March 31, 2006)
1 year | 5 years | 10 years | ||||||||
Class A shares | +22.77 | % | +10.10 | % | +10.54 | % |
*Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge.
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 26 for details.
[begin mountain chart]
EuroPacific Growth Fund, with dividends reinvested (4) | MSCI EAFE® Index, with dividends reinvested (5) | Consumer Price Index (inflation) (5,6) | |||||||
Initial Investment | 04/16/84 | $9,425 | $10,000 | $10,000 | |||||
1985 | Low | 07/23/84 | 8,696 | Low | 7/23/1984 | 8,155 | Low | 04/30/84 | $10,000 |
Hi | 03/28/85 | 9,955 | Hi | 03/31/85 | 10,348 | Hi | 03/31/85 | 10,320 | |
Close | 03/31/85 | 9,941 | Close | 03/31/85 | 10,348 | Close | 03/31/85 | 10,320 | |
1986 | Low | 04/08/85 | 9,775 | Low | 4/9/1985 | 10,115 | Low | 04/30/85 | 10,369 |
Hi | 03/21/86 | 15,364 | Hi | 03/31/86 | 19,228 | Hi | 01/31/86 | 10,630 | |
Close | 03/31/86 | 15,357 | Close | 03/31/86 | 19,228 | Close | 03/31/86 | 10,553 | |
1987 | Low | 07/22/86 | 15,634 | Low | 4/7/1986 | 18,448 | Low | 04/30/86 | 10,533 |
Hi | 03/27/87 | 19,887 | Hi | 3/27/1987 | 31,405 | Hi | 03/31/87 | 10,873 | |
Close | 03/31/87 | 19,813 | Close | 03/31/87 | 31,010 | Close | 03/31/87 | 10,873 | |
1988 | Hi | 10/08/87 | 24,499 | Low | 5/15/1987 | 36,006 | Low | 04/30/87 | 10,931 |
Low | 12/11/87 | 17,992 | Hi | 11/11/1987 | 28,389 | Hi | 03/31/88 | 11,300 | |
Close | 03/31/88 | 21,422 | Close | 03/31/88 | 36,219 | Close | 03/31/88 | 11,300 | |
1989 | Low | 09/01/88 | 21,189 | Low | 9/1/1988 | 32,906 | Low | 04/30/88 | 11,358 |
Hi | 02/09/89 | 24,835 | Hi | 2/15/1989 | 42,276 | Hi | 03/31/89 | 11,862 | |
Close | 03/31/89 | 24,569 | Close | 03/31/89 | 40,521 | Close | 03/31/89 | 11,862 | |
1990 | Low | 06/13/89 | 24,282 | Hi | 1/4/1990 | 45,031 | Low | 04/30/89 | 11,940 |
Hi | 12/06/89 | 28,391 | Low | 3/22/1990 | 35,487 | Hi | 03/31/90 | 12,483 | |
Close | 03/31/90 | 28,742 | Close | 03/31/90 | 35,924 | Close | 03/31/90 | 12,483 | |
1991 | Hi | 07/18/90 | 33,103 | Hi | 7/18/1990 | 41,149 | Low | 04/30/90 | 12,502 |
Low | 01/16/91 | 27,795 | Low | 9/28/1990 | 31,065 | Hi | 03/31/91 | 13,094 | |
Close | 03/31/91 | 31,359 | Close | 03/31/91 | 36,954 | Close | 03/31/91 | 13,094 | |
1992 | Low | 08/19/91 | 30,061 | Hi | 4/5/1991 | 39,005 | Low | 04/30/91 | 13,113 |
Hi | 02/28/92 | 36,033 | Low | 8/19/1991 | 33,192 | Hi | 03/31/92 | 13,511 | |
Close | 03/31/92 | 35,033 | Close | 03/31/92 | 34,104 | Close | 03/31/92 | 13,511 | |
1993 | Hi | 06/02/92 | 37,465 | Low | 4/9/1992 | 31,837 | Low | 04/30/92 | 13,531 |
Low | 11/17/92 | 33,764 | Hi | 03/31/93 | 38,199 | Hi | 03/31/93 | 13,928 | |
Close | 03/31/93 | 37,728 | Close | 03/31/93 | 38,199 | Close | 03/31/93 | 13,928 | |
1994 | Low | 04/02/93 | 37,813 | Low | 4/1/1993 | 38,858 | Low | 04/30/93 | 13,967 |
Hi | 02/02/94 | 50,611 | Hi | 2/1/1994 | 49,726 | Hi | 03/31/94 | 14,277 | |
Close | 03/31/94 | 47,638 | Close | 03/31/94 | 46,923 | Close | 03/31/94 | 14,277 | |
1995 | Hi | 09/02/94 | 51,011 | Hi | 9/2/1994 | 51,327 | Low | 04/30/94 | 14,297 |
Low | 01/31/95 | 46,642 | Low | 1/23/1995 | 45,815 | Hi | 03/31/95 | 14,685 | |
Close | 03/31/95 | 47,974 | Close | 03/31/95 | 49,912 | Close | 03/31/95 | 14,685 | |
1996 | Low | 04/03/95 | 47,928 | Low | 4/3/1995 | 48,779 | Low | 04/30/95 | 14,733 |
Hi | 03/25/96 | 57,612 | Hi | 03/31/96 | 56,237 | Hi | 03/31/96 | 15,102 | |
Close | 03/31/96 | 57,494 | Close | 03/31/96 | 56,237 | Close | 03/31/96 | 15,102 | |
1997 | Low | 07/24/96 | 57,229 | Low | 7/24/1996 | 54,497 | Low | 04/30/96 | 15,160 |
Hi | 03/11/97 | 67,625 | Hi | 11/22/1996 | 59,311 | Hi | 03/31/97 | 15,519 | |
Close | 03/31/97 | 66,627 | Close | 03/31/97 | 57,223 | Close | 03/31/97 | 15,519 | |
1998 | Hi | 10/03/97 | 77,523 | Low | 4/14/1997 | 54,799 | Low | 05/31/97 | 15,529 |
Low | 01/12/98 | 67,131 | Hi | 3/26/1998 | 68,910 | Hi | 03/31/98 | 15,732 | |
Close | 03/31/98 | 80,601 | Close | 3/31/1998 | 68,053 | Close | 03/31/98 | 15,732 | |
1999 | Hi | 04/15/98 | 83,900 | Low | 10/5/1998 | 55,377 | Low | 04/30/98 | 15,761 |
Low | 10/05/98 | 65,404 | Hi | 1/6/1999 | 74,483 | Hi | 03/31/99 | 16,004 | |
Close | 03/31/99 | 87,198 | Close | 3/31/1999 | 72,385 | Close | 03/31/99 | 16,004 | |
2000 | Low | 04/01/99 | 87,833 | Low | 5/27/1999 | 71,259 | Low | 06/30/99 | 16,120 |
Hi | 03/29/00 | 137,516 | Hi | 1/3/2000 | 91,555 | Hi | 03/31/00 | 16,605 | |
Close | 03/31/00 | 134,560 | Close | 3/31/2000 | 90,772 | Close | 03/31/00 | 16,605 | |
2001 | Hi | 04/10/00 | 134,710 | Hi | 4/10/2000 | 90,057 | Low | 04/30/00 | 16,615 |
Low | 03/22/01 | 94,189 | Low | 3/22/2001 | 64,090 | Hi | 03/31/01 | 17,090 | |
Close | 03/31/01 | 96,853 | Close | 3/31/2001 | 67,471 | Close | 03/31/01 | 17,090 | |
2002 | Hi | 05/21/01 | 104,778 | Hi | 5/1/2001 | 73,098 | Low | 12/31/01 | 17,139 |
Low | 09/21/01 | 79,958 | Low | 9/21/2001 | 52,949 | Hi | 03/31/02 | 17,342 | |
Close | 03/31/02 | 94,302 | Close | 3/31/2002 | 61,921.4 | Close | 03/31/02 | 17,342 | |
2003 | Hi | 05/17/02 | 96,306 | Hi | 5/17/2002 | 64,118 | Low | 04/30/02 | 17,439 |
Low | 03/12/03 | 69,809 | Low | 3/12/2003 | 45,088 | Hi | 03/31/03 | 17,866 | |
Close | 03/31/03 | 72,463 | Close | 3/31/2003 | 47,710 | Close | 03/31/03 | 17,866 | |
2004 | Low | 04/01/03 | 73,091 | Low | 4/1/2003 | 48,153 | Low | 05/31/03 | 17,798 |
High | 03/01/04 | 114,695 | High | 2/17/2004 | 76,639 | Hi | 03/31/04 | 18,177 | |
Close | 03/31/04 | 113,848 | Close | 3/31/2004 | 75,453 | Close | 03/31/04 | 18,177 | |
2005 | Low | 05/17/04 | 103,225 | Low | 5/17/2004 | 69,649 | Low | 04/30/04 | 18,235 |
High | 03/04/05 | 132,976 | High | 3/8/2005 | 90,551 | Hi | 03/31/05 | 18,749 | |
Close | 03/31/05 | 127,604 | Close | 3/31/2005 | 87,143 | Close | 03/31/05 | 18,749 | |
2006 | Low | 04/28/05 | 123,628 | Low | 5/17/2005 | 84,069 | Low | ||
High | 03/30/06 | 166,244 | High | 3/30/2006 | 109,681 | Hi | |||
Close | 03/31/06 | 166,207 | Close | 3/31/2006 | 108,874 | Close |
[end mountain chart]
Year ended March 31 | 19853 | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | |||||||||||||||
TOTAL VALUE | ||||||||||||||||||||||
Dividends reinvested | $ | 69 | 35 | 118 | 491 | 316 | 527 | 656 | ||||||||||||||
Value at year-end | $ | 9,941 | 15,357 | 19,813 | 21,422 | 24,569 | 28,742 | 31,359 | ||||||||||||||
Total return | (0.6 | )% | 54.5 | 29.0 | 8.1 | 14.7 | 17.0 | 9.1 | ||||||||||||||
Year ended March 31 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | |||||||||||||||
TOTAL VALUE | ||||||||||||||||||||||
Dividends reinvested | $ | 611 | 538 | 515 | 715 | 1,131 | 1,062 | 1,155 | ||||||||||||||
Value at year-end | $ | 35,033 | 37,728 | 47,638 | 47,974 | 57,494 | 66,627 | 80,601 | ||||||||||||||
Total return | 11.7 | 7.7 | 26.3 | 0.7 | 19.8 | 15.9 | 21.0 | |||||||||||||||
Year ended March 31 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||
TOTAL VALUE | ||||||||||||||||||||||
Dividends reinvested | $ | 991 | 841 | 637 | 2,209 | 836 | 1,083 | 1,796 | ||||||||||||||
Value at year-end | $ | 87,198 | 134,560 | 96,853 | 94,302 | 72,463 | 113,848 | 127,604 | ||||||||||||||
Total return | 8.2 | 54.3 | (28.0 | ) | (2.6 | ) | (23.2 | ) | 57.1 | 12.1 | ||||||||||||
Year ended March 31 | 2006 | |||||||||||||||||||||
TOTAL VALUE | ||||||||||||||||||||||
Dividends reinvested | $ | 2,575 | ||||||||||||||||||||
Value at year-end | $ | 166,207 | ||||||||||||||||||||
Total return | 30.3 |
Average annual total return for fund’s lifetime: 13.7%4
The results shown are before taxes on fund distributions and sale of fund shares.
1 As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares.
2 The maximum initial sales charge was 8.5% prior to July 1, 1988.
3 For the period April 16, 1984 (commencement of operations) through March 31, 1985.
4 Includes reinvested dividends of $18,906 and reinvested capital gain distributions of $39,639.
5 The indexes are unmanaged and do not reflect sales charges, commissions or expenses.
6 Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.
[photo of a cobblestone street with retail stores in Europe]
Continental shift: How businesses are dealing with a changing Europe
With the Maastricht Treaty, which went into effect in 1993, Europe took a momentous step toward transforming itself into a single economic power. Touching on issues as wide-ranging as trade, terrorism, foreign investment and immigration, its goal was to intertwine the fortunes of countries that for decades, even centuries, had maintained strong national interests.
[photo of various bridges over a body of water in a European city]
[photo of various country flags flying from flagpoles]
[photo of people walking in a terminal]
Although the process has a way to go, the European Union (EU) has made significant progress. Goods, labor and capital now move relatively freely through a borderless continent. This financial integration was accelerated, in 2000, with the adoption of the single currency, the euro.
Today, the EU is a massive presence. It consists of 25 member countries with a combined population of 450 million, and produces one quarter of the world’s goods and services. Thus far, 12 countries have adopted the euro.
As its name implies, EuroPacific Growth Fund has always invested a substantial portion of its assets in Europe. Currently, these holdings account for about 40% of the fund’s net assets and represent some 95 companies across a range of industries. All of these businesses have had to negotiate the changes wrought by the ongoing union of Europe. At the same time, globalization has had a powerful impact on how they position themselves for the future. Many have risen to the challenge to emerge as world leaders in their industries.
On the following pages, we’ll discuss the state of the European Union, how businesses are dealing with change and what EuroPacific’s investment professionals consider when they choose investments for the fund.
The move to consolidate
“One litmus test of the success of the Maastricht Treaty is that no one really thinks about it anymore,” says Mark Denning, EuroPacific’s president and a portfolio counselor. “Free trade within Europe is simply a given today.”
[Begin Sidebar]
“Forging a powerful global presence has always been a principal aim of the common market.”
Gina Despres
Vice Chairman
[End Sidebar]
Indeed, restrictions on intra-Europe movement of goods and services have been eased considerably over the past decade: Trade tariffs have been abolished and many regulatory and bureaucratic barriers have been lowered. National industries that were once fiercely guarded, such as water, gas and telecommunications, have been liberalized, and judicial cooperation has given the European Commission the muscle to enforce cross-border business transactions.
That openness has generally been a boon for European companies. “Ten years ago, a Dutch business that wanted to expand into France essentially had to build a mini-company there, with its own warehouse and management,” says portfolio counselor Tim Dunn. “Dealing with the red tape was not only time-consuming, it made those companies less efficient, hence less profitable. Today the situation is more analogous to the U.S., where companies can expand based on distribution flows rather than national borders. This has allowed them to improve efficiencies and take advantage of economies of scale — which has in turn made them more attractive investments.”
As Europe has integrated, so too have many companies. Lower interest rates have spurred a wave of mergers and acquisitions across the Continent: The value of these deals reached a record $1 trillion in 2005. Tellingly, the companies that have been most affected — telecoms, utilities and banks — had, in many cases, once been closely held national monopolies.
While many of the barriers have been chiseled away, however, Europe’s economic walls have not completely tumbled yet. Individual countries still control a number of areas affecting business, such as tax rates and labor laws. The latter has been an especially contentious issue, particularly in countries such as Germany, France and Italy, which have historically granted workers generous pay packages and benefits. Higher wages and rigid hiring practices put pressure on profit margins. Paradoxically, because companies are slow to add employees, these protections also contribute to the high unemployment rates in those countries.
Some of these difficulties are starting to ease in Germany, where working hours have lengthened and wages have fallen slightly. These measures have begun to bear fruit. Job vacancies are increasing and profit gains are being passed along to employees in the form of bonuses.
[photo of a shipping container being loaded onto a flatbed truck - other shipping containers in the background]
[photo of a refinery near a body of water - a ship nearby]
[photo of a refinery near a body of water - a ship nearby]
[Begin Sidebar]
“Because Europe’s domestic markets aren’t growing as quickly, companies have to look elsewhere for growth. That has often made them more nimble than their U.S. counterparts.”
Rob Lovelace
Portfolio counselor
[End Sidebar]
Complicating matters is a tough economic environment, notably a sluggish consumer sector and the aftermath of a recession from 2000 to 2002. Ironically, these difficulties served as the catalyst for corporate growth. “The recession really forced managements’ feet to the fire,” explains Mark. “Companies have had to take drastic steps just to stay afloat. Many of them restructured or reduced costs by moving a portion of their operations to cheaper markets.”
As a result, even though Europe’s economies are only gradually recovering, European companies have managed to burst through the darkness. Corporate profits have climbed sharply in recent years, and stock prices have climbed along with them. (Please see the chart below.) Individual stock selection has been key in this market — an investment environment to which EuroPacific’s research-intensive, company-by-company approach is particularly well suited.
[Begin Sidebar]
European strength in stocks
In the 13 years since the Maastricht Treaty first began opening borders throughout Europe, stocks have done very well, in many cases outstripping the U.S. or broader international markets.
[begin bar chart]
International | Europe | U.S. | ||||||||
1993 | 12.01% | 5.32% | 14.71% | |||||||
1994 | 22.84 | 19.98 | 1.70 | |||||||
1995 | 6.37 | 10.68 | 16.13 | |||||||
1996 | 12.67 | 19.29 | 33.18 | |||||||
1997 | 1.75 | 22.92 | 20.62 | |||||||
1998 | 18.93 | 42.44 | 48.72 | |||||||
1999 | 6.37 | 4.89 | 21.05 | |||||||
2000 | 25.40 | 18.82 | 17.74 | |||||||
2001 | -25.67 | -22.50 | -23.94 | |||||||
2002 | -8.22 | -4.95 | -0.19 | |||||||
2003 | -22.95 | -25.54 | -25.23 | |||||||
2004 | 58.15 | 54.60 | 34.99 | |||||||
2005 | 15.49 | 20.88 | 6.96 | |||||||
2006 | 24.94 | 21.22 | 12.39 |
Returns, as of March 31 of each year, are measured in U.S. dollars and include reinvestment of dividends. Source for international stocks: MSCI EAFE index; source for U.S. and European stocks: MSCI U.S. and Europe indexes, respectively.
[End Sidebar]
[photo of a train platform - a train coming into the station]
A global impact
The greatest incentive for change, however, may lie beyond EU borders. “Forging a powerful global presence has always been a principal aim of the common market,” says Gina Despres, EuroPacific’s vice chairman. “The belief has been that removing internal barriers will encourage businesses to grow and become more innovative, which should make them more globally competitive.” In fact, taken as a bloc, the EU countries are now the world’s largest exporters of goods and services — more than $1.3 trillion worth — about one-fifth of which are destined for the United States.
Most of EuroPacific’s European holdings do a significant portion of their business abroad. Some are truly global: Pharmaceutical firms such as Roche, Novo-Nordisk and Sanofi-Aventis research and license their products in every corner of the world; that they are based in Switzerland, Denmark and France, respectively, is essentially immaterial. Other companies in the portfolio once served a largely domestic market, but have been aggressively expanding into different regions.
[Begin Sidebar]
One portfolio, a world of experience
When a fund invests around the world, as EuroPacific does, it benefits from investment professionals who thoroughly know those regions. American Funds’ unique management structure sets the stage for that strength.
“There’s a real value to being close to where the action is taking place,” says the fund’s vice chairman, Gina Despres. “EuroPacific portfolio counselors and analysts work and live in real time in the areas where they are investing. This is very different from a single manager running a fund out of a single office.”
Each one of EuroPacific’s eight portfolio counselors manages a portion of the fund’s assets as if it were an entire fund, keeping within overall objectives. Another portion of the fund is managed by the research analysts, who invest in their areas of expertise. The ability to pursue ideas and act independently, without having to reach consensus or get approval from other portfolio counselors, differentiates the multiple portfolio counselor system from a team-based approach.
“This is not ‘management by committee,’” says portfolio counselor Rob Lovelace. “We all have different strengths and biases — and the system allows us each to act on our high-conviction ideas, which might not be what the group as a whole would choose. It’s good for the fund and good for the shareholders.”
At the same time, the system is structured so that counselors share information and work as a whole. They do not compete against each other; rather, they are evaluated on the fund’s overall success, not just the success of their own particular portion of the portfolio.
“It’s an old cliché of ‘making one plus one equal three,’ but we do get more value out of this system,” said EuroPacific president and portfolio counselor Mark Denning. “It allows for individual flair and convictions, but it also encourages people to work together. Shareholders have really benefited from that duality.”
Size is another aspect where multiple managers can add value. When a fund’s assets grow, portfolio counselors can be added, keeping portions manageable. EuroPacific is a large fund, with more than $80 billion in assets. “For one person, managing a portfolio of that size could be a real challenge,” notes Rob, “but being in charge of a smaller pool of that money allows each of us to continue to invest nimbly.”
Years with American Funds | Years of investment | |
Portfolio counselors | and affiliates | experience |
Steve Bepler | 34 | 40 |
Mark Denning | 24 | 24 |
Robert Lovelace | 21 | 21 |
Timothy Dunn | 16 | 20 |
Carl Kawaja | 15 | 18 |
Alwyn Heong | 14 | 18 |
Nick Grace | 12 | 16 |
Sung Lee | 12 | 12 |
Years of experience as of June 2006.
[End Sidebar]
Developing a global outlook is nothing new for European businesses, explains portfolio counselor Rob Lovelace. “Because Europe’s domestic markets aren’t growing as quickly, companies have to look elsewhere for growth. That has often made them more nimble than their U.S. counterparts, which have been able to fall back on a huge domestic clientele. Nokia, for instance, which derives only a tiny portion of its revenues from its Finnish home market, produced the first mobile phone with Chinese characters.” These globally oriented companies offer investors another incentive: less risky access to fast-growing developing markets. Siemens, the giant German conglomerate, has been meeting China’s needs for high-tech industrial infrastructure. Telefónica, the Spanish service provider, has not only been a beneficiary of Spain’s fiscal health, but also does significant business in Latin America. “As investors, that gives us a double benefit,” Rob says.
Globalization works two ways, of course. Even as European companies have profited, they have also had to protect themselves from incursions from abroad, notably from Asia. Countries dominated by low-cost manufacturing, such as Italy and Portugal, have been badly undercut by cheaper production in China. Compounding their difficulties is their inability to devalue their currency to make goods more competitive. The euro’s exchange rate is fixed by the European Central Bank.
[photo of a worker in a factory]
[photo of a street market inside a warehouse]
[photo of a city street from above at dusk]
New entrants into the Union
In May 2004, the European Union admitted 10 new member states. (Bulgaria, Croatia, Macedonia, Romania and Turkey are being considered for 2007.) These latest, mostly Eastern European, entrants receive billions of euros to develop transportation and other infrastructure, and are rapidly modernizing. They have also provided fertile hunting ground for larger European countries — both as sources of cheaper labor and as markets for new business.
German companies have embraced these new relationships with particular enthusiasm. Roughly half of them have plants in Eastern Europe. Among EuroPacific’s holdings, Allianz, the insurance giant, has pushed aggressively into Eastern Europe, where it now has a major presence. Continental AG, a leading supplier of automotive components, relocated a number of its German tire factories to Romania and other developing countries; the moves have reduced the cost base and widened profit margins.
Banks present another sector that has looked to Eastern Europe for growth. The region, which entered the EU “under-banked” and with very low housing growth, offers enormous potential for suppliers of capital. Unicredito, based in Italy, is now a primary lender in central and eastern Europe. Having recently acquired Hypovereinsbank of Germany, Unicredito plans to move the back offices of both banks to Bulgaria, thus enhancing both its cost savings and its customer base.
[photo: view looking between two glass-paneled buildings to street level from above]
[Begin Sidebar]
EuroPacific’s largest European holdings
Company | Percent of net assets | |||
Roche Holdings | 2.6 | % | ||
Novo-Nordisk | 1.1 | |||
AstraZeneca | 1.1 | |||
Unified Energy Systems of Russia | 1.0 | |||
Nestlé | 1.0 | |||
ING Groep | 1.0 | |||
Allianz | .9 | |||
Sanofi-Aventis | .8 | |||
Siemens | .8 |
[End Sidebar]
In order to succeed in these new markets, businesses must pay close attention to local culture. “Companies may view themselves as pan-European,” says Mark, “but they also acknowledge different tastes of individual countries.” That’s literally true for food manufacturers and retailers, which carefully research local preferences in order to win consumers. Thus, Nescafé in France tastes slightly different from Nescafé in Hungary, and the nearly 200 Tesco supermarkets that dot Eastern Europe cater specifically to local buying patterns.
Creating shareholder value
Corporations have become sensitive to another type of market as well — the stock market. With European equities reaching a market capitalization of $12.5 trillion, corporate managements are increasingly focused on creating value for their shareholders.
This is a fairly recent development. When portfolio counselor Steve Bepler made his first research call on a European company, in the early 1970s, he encountered managements that were often entrenched and not terribly forward thinking. “Many businesses were partly owned by the national governments in those days,” he recalls, “which gave them little incentive to look at costs or operate strategically. That was very different from what was happening at the time in Japan, which was quickly becoming an export powerhouse.” Reliable information was difficult to come by — accounting standards varied by country, disclosure requirements were minimal and few reports were translated into English. In addition, foreign investors were often restricted to nonvoting shares. “The investment culture simply wasn’t there in Europe,” Steve says. “In many cases, I was the first analyst that management had ever seen — not just the first American analyst, but any analyst, period.”
Today, of course, international travel is commonplace and information widely available. Corporate managements pay close attention to balance sheets to maximize return on capital. Companies pay, and increase, dividends, and share buybacks are becoming more common. Accounting standards are now uniform and on a par with the U.S. in their demand for transparency. Stock culture has trickled down to European citizens as well. Where 10 years ago relatively few individuals invested in equities, today, unit trusts (the European equivalent of mutual funds) are immensely popular — with about 6.6 trillion euros ($7.8 trillion) under management.
It comes down to the companies
Given that little more than a decade has passed since borders have opened, Europe has made good progress in its effort to unite. The process is far from complete, of course, and there have been bumps in the road. Last year, both the Netherlands and France rejected the EU constitution, and more recently, protesters in France have resisted proposed modifications to its labor laws. “The nation-state has proved to be a pretty robust institution,” says Gina. “While commercial mobility is progressing fairly well, it could take decades, even a generation, for Europe to unify politically. In the meantime, a great deal of healthy debate is taking place.”
EuroPacific’s investment professionals are staying abreast of these developments, but they view them through a narrow lens. As we have emphasized many times, EuroPacific invests in companies, not countries or regions. Decisions are made from the bottom up, and are based on the potential merits of individual businesses, regardless of where they are located.
As Tim Dunn explains, this distinction is crucial. “When I’m deciding how to invest, I don’t say, ‘Germany looks attractive, so what should I buy there?’ Rather, economic or political events may lead me to decide that this is a good time to look at certain German companies that I’ve been following for many years. The macro picture is more of a backdrop than a starting point. At the same time, I know that well-managed companies will have the resources to weather and even profit from change.”
Tapping global potential | ||||
1981 | -1% | U.S. stock market | -4% | All major stock markets outside North America |
1982 | -1% | All major stock markets outside North America | 22% | U.S. stock market |
1983 | 25% | U.S. stock market | 22% | All major stock markets outside North America |
1984 | 8% | U.S. stock market | 6% | All major stock markets outside North America |
1985 | 57% | U.S. stock market | 33% | All major stock markets outside North America |
1986 | 70% | U.S. stock market | 18% | All major stock markets outside North America |
1987 | 25% | U.S. stock market | 4% | All major stock markets outside North America |
1988 | 29% | U.S. stock market | 16% | All major stock markets outside North America |
1989 | 11% | All major stock markets outside North America | 31% | U.S. stock market |
1990 | -23% | All major stock markets outside North America | -2% | U.S. stock market |
1991 | 12% | All major stock markets outside North America | 31% | U.S. stock market |
1992 | -12% | All major stock markets outside North America | 7% | U.S. stock market |
1993 | 33% | U.S. stock market | 10% | All major stock markets outside North America |
1994 | 8% | U.S. stock market | 2% | All major stock markets outside North America |
1995 | 12% | All major stock markets outside North America | 38% | U.S. stock market |
1996 | 6% | All major stock markets outside North America | 24% | U.S. stock market |
1997 | 2% | All major stock markets outside North America | 34% | U.S. stock market |
1998 | 20% | All major stock markets outside North America | 31% | U.S. stock market |
1999 | 27% | U.S. stock market | 22% | All major stock markets outside North America |
2000 | -14% | All major stock markets outside North America | -13% | U.S. stock market |
2001 | -21% | All major stock markets outside North America | -12% | U.S. stock market |
2002 | -16% | U.S. stock market | -23% | All major stock markets outside North America |
2003 | 39% | U.S. stock market | 29% | All major stock markets outside North America |
2004 | 21% | U.S. stock market | 11% | All major stock markets outside North America |
2005 | 14% | U.S. stock market | 6% | All major stock markets outside North America |
The table above compares total returns for the unmanaged MSCI EAFE® (Europe, Australasia, Far East) and U.S. indexes over the past 25 calendar years. Figures in red represent U.S. stocks; those in black show stocks in major markets outside North America.
A world of opportunity
With about half of the world’s investment opportunities located beyond our shores, an international focus gives U.S. investors access to growth potential that would otherwise be out of reach. As the chart shows, international stocks have outpaced their U.S. counterparts in 14 of the past 25 calendar years.
Tempered volatility
Diversifying among many markets can also help investors mitigate fluctuations in the value of their investments. Over the past 25 calendar years, the least volatile equity portfolio would have been composed of approximately 65% U.S. stocks and 35% non-U.S. stocks (rebalanced monthly), and been nearly as rewarding as one invested entirely in U.S. stocks. (Volatility is measured by annualized standard deviation, based on monthly returns, a measure of how returns have varied from the mean over time.)
Active management
Negotiating the unfamiliar terrain of international markets can be challenging. That is why so many people choose to invest overseas through professionally managed mutual funds. EuroPacific Growth Fund draws on the global research expertise of its investment adviser, Capital Research and Management Company, to find attractive companies based chiefly in Europe and the Pacific Basin.
Summary investment portfolio
March 31, 2006
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.
[begin pie chart]
Industry sector diversification | Percent of net assets | |||
Financials | 22.77 | % | ||
Consumer discretionary | 12.58 | |||
Information technology | 11.39 | |||
Health care | 7.96 | |||
Telecommunication services | 7.61 | |||
Other industries | 28.76 | |||
Convertible securities & warrants | 0.06 | |||
Short-term securities & other assets less liabilities | 8.87 |
[end pie chart]
Shares | Market | Percent | ||||||||
value | of net | |||||||||
Common stocks - 91.07% | (000 | ) | assets | |||||||
Financials - 22.77% | ||||||||||
Kookmin Bank | 16,803,310 | $ | 1,451,006 | 1.79 | ||||||
ING Groep NV | 19,733,017 | 779,740 | .96 | |||||||
Allianz AG | 4,311,335 | 720,006 | .89 | |||||||
Mitsubishi UFJ Financial Group, Inc. | 43,978 | 672,446 | .83 | |||||||
Sun Hung Kai Properties Ltd. | 62,729,000 | 637,040 | .78 | |||||||
BNP Paribas | 5,959,356 | 553,669 | ||||||||
BNP Paribas (1) | 540,725 | 48,533 | .74 | |||||||
UBS AG | 5,403,398 | 593,334 | .73 | |||||||
Shinhan Financial Group Co., Ltd. | 12,200,900 | 546,253 | .67 | |||||||
Banco Santander Central Hispano, SA | 35,864,805 | 523,834 | .65 | |||||||
UniCredito Italiano SpA (Italy) | 61,795,000 | 447,313 | ||||||||
UniCredito Italiano SpA (Germany) | 10,000,000 | 71,878 | .64 | |||||||
Banco Itaú Holding Financeira SA, preferred nominative | 15,056,000 | 445,485 | .55 | |||||||
Banco Bradesco SA, preferred nominative | 11,967,800 | 428,860 | .53 | |||||||
Other securities | 10,571,288 | 13.01 | ||||||||
18,490,685 | 22.77 | |||||||||
Consumer discretionary - 12.58% | ||||||||||
Industria de Diseno Textil, SA | 17,719,915 | 684,084 | .84 | |||||||
Toyota Motor Corp. | 11,122,600 | 607,529 | .75 | |||||||
Mediaset SpA | 49,429,411 | 582,358 | .72 | |||||||
Vivendi Universal | 16,942,448 | 581,989 | .72 | |||||||
Continental AG | 4,977,500 | 548,119 | .68 | |||||||
LG Electronics Inc. | 5,805,850 | 470,874 | .58 | |||||||
Honda Motor Co., Ltd. | 7,042,150 | 436,096 | .54 | |||||||
Swatch Group Ltd, non-registered shares | 1,650,246 | 277,002 | .53 | |||||||
Swatch Group Ltd | 4,367,061 | 152,032 | ||||||||
Other securities | 5,871,849 | 7.22 | ||||||||
10,211,932 | 12.58 | |||||||||
Information technology - 11.39% | ||||||||||
Samsung Electronics Co., Ltd. | 1,526,475 | 989,789 | ||||||||
Samsung Electronics Co., Ltd., nonvoting preferred | 48,800 | 24,988 | 1.25 | |||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 443,816,406 | 879,088 | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) | 10,800,200 | 108,650 | 1.22 | |||||||
Hon Hai Precision Industry Co., Ltd. | 133,057,418 | 825,143 | 1.02 | |||||||
Hynix Semiconductor Inc. (1) | 18,507,940 | 550,514 | .68 | |||||||
Rohm Co., Ltd. | 4,623,700 | 489,000 | .60 | |||||||
Toshiba Corp. | 78,028,000 | 453,374 | .56 | |||||||
Murata Manufacturing Co., Ltd. | 6,377,500 | 431,776 | .53 | |||||||
Other securities | 4,493,383 | 5.53 | ||||||||
9,245,705 | 11.39 | |||||||||
Health care - 7.96% | ||||||||||
Roche Holding AG | 14,394,700 | 2,142,482 | 2.64 | |||||||
Novo Nordisk A/S | 14,772,550 | 919,533 | 1.13 | |||||||
AstraZeneca PLC (Sweden) | 11,286,617 | 569,181 | ||||||||
AstraZeneca PLC (United Kingdom) | 5,725,000 | 288,551 | 1.06 | |||||||
Sanofi-Aventis | 7,160,800 | 681,349 | .84 | |||||||
Other securities | 1,865,812 | 2.29 | ||||||||
6,466,908 | 7.96 | |||||||||
Telecommunication services - 7.61% | ||||||||||
América Móvil SA de CV, Series L (ADR) | 33,648,000 | 1,152,780 | ||||||||
América Móvil SA de CV, Series L | 21,540,000 | 36,748 | 1.47 | |||||||
Koninklijke KPN NV | 54,855,000 | 618,355 | .76 | |||||||
Vodafone Group PLC | 285,094,779 | 597,071 | .74 | |||||||
Telekom Austria AG | 19,619,056 | 462,526 | .57 | |||||||
Other securities | 3,307,810 | 4.07 | ||||||||
6,175,290 | 7.61 | |||||||||
Energy - 6.83% | ||||||||||
Petróleo Brasileiro SA - Petrobras, ordinary nominative (ADR) | 9,263,000 | 802,824 | ||||||||
Petróleo Brasileiro SA - Petrobras, preferred nominative (ADR) | 1,068,850 | 85,348 | 1.09 | |||||||
Norsk Hydro ASA | 3,375,000 | 467,834 | ||||||||
Norsk Hydro ASA (ADR) | 250,000 | 34,585 | .62 | |||||||
MOL Magyar Olaj- és Gázipari Rt. | 4,846,200 | 497,649 | .61 | |||||||
Canadian Natural Resources, Ltd. | 8,180,000 | 454,873 | .56 | |||||||
Royal Dutch Shell PLC | 9,583,091 | 311,789 | ||||||||
Royal Dutch Shell PLC (ADR) | 1,874,848 | 122,146 | .53 | |||||||
Other securities | 2,769,750 | 3.42 | ||||||||
5,546,798 | 6.83 | |||||||||
Consumer staples - 6.03% | ||||||||||
Nestlé SA | 2,802,250 | 831,586 | 1.02 | |||||||
Seven & I Holdings Co., Ltd. | 16,087,000 | 636,811 | .78 | |||||||
Koninklijke Ahold NV (1) | 70,836,332 | 557,236 | .69 | |||||||
Other securities | 2,868,245 | 3.54 | ||||||||
4,893,878 | 6.03 | |||||||||
Materials - 5.17% | ||||||||||
Nitto Denko Corp. | 6,179,900 | 524,441 | .65 | |||||||
Bayer AG | 12,655,000 | 507,111 | .62 | |||||||
Other securities | 3,169,796 | 3.90 | ||||||||
4,201,348 | 5.17 | |||||||||
Industrials - 4.77% | ||||||||||
Siemens AG | 6,854,000 | 640,028 | .79 | |||||||
Asahi Glass Co., Ltd. | 38,439,000 | 574,365 | .71 | |||||||
Other securities | 2,658,609 | 3.27 | ||||||||
3,873,002 | 4.77 | |||||||||
Utilities - 2.93% | ||||||||||
RAO Unified Energy System of Russia (GDR) | 12,315,100 | 841,121 | 1.04 | |||||||
E.ON AG | 3,948,000 | 434,560 | .54 | |||||||
Other securities | 1,103,425 | 1.35 | ||||||||
2,379,106 | 2.93 | |||||||||
Miscellaneous - 3.03% | ||||||||||
Other common stocks in initial period of acquisition | 2,457,274 | 3.03 | ||||||||
Total common stocks (cost: $51,199,754,000) | 73,941,926 | 91.07 | ||||||||
Shares | Market | Percent | ||||||||
amount | value | of net | ||||||||
Warrants - 0.04% | (000 | ) | assets | |||||||
Financials - 0.04% | ||||||||||
ING Groep NV, warrants, expire 2008 (1) | 1,730,000 | $ | 33,342 | .04 | ||||||
Total warrants (cost: $46,430,000) | 33,342 | .04 | ||||||||
Market | Percent | |||||||||
value | of net | |||||||||
Convertible securities - 0.02% | (000 | ) | assets | |||||||
Financials - 0.02% | $ | 16,800 | .02 | |||||||
Total convertible securities (cost: $20,366,000) | 16,800 | .02 | ||||||||
Principal | Market | Percent | ||||||||
amount | value | of net | ||||||||
Short-term securities - 8.63% | (000 | ) | (000 | ) | assets | |||||
Federal Home Loan Bank 4.373%-4.65% due 4/17-6/7/2006 | $ | 490,900 | $ | 487,415 | .60 | |||||
ING (U.S.) Funding LLC 4.54%-4.69% due 4/11-5/25/2006 | 169,600 | 168,980 | .21 | |||||||
Nestlé Capital Corp. 4.51%-4.52% due 4/4-4/12/2006 (2) | 82,400 | 82,309 | ||||||||
Alcon Capital Corp. 4.50% due 4/7/2006 (2) | 50,000 | 49,956 | .16 | |||||||
Other securities | 6,217,180 | 7.66 | ||||||||
Total short-term securities (cost: $7,005,349,000) | 7,005,840 | 8.63 | ||||||||
Total investment securities (cost: $58,271,899,000) | 80,997,908 | 99.76 | ||||||||
Other assets less liabilities | 198,222 | .24 | ||||||||
Net assets | $ | 81,196,130 | 100.00 | % | ||||||
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. | ||||||||||
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. | ||||||||||
The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item. | ||||||||||
(1) Security did not produce income during the last 12 months. | ||||||||||
(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $2,977,871,000, which represented 3.67% of the net assets of the fund. | ||||||||||
ADR = American Depositary Receipts | ||||||||||
GDR = Global Depositary Receipts | ||||||||||
See Notes to Financial Statements |
Financial statements | |||||||
Statement of assets and liabilities | |||||||
at March 31, 2006 | (dollars and shares in thousands, except per-share amounts) | ||||||
Assets: | |||||||
Investment securities at market (cost: $58,271,899) | $ | 80,997,908 | |||||
Cash denominated in non-U.S. currencies | |||||||
(cost: $38,245) | 38,181 | ||||||
Cash | 20,405 | ||||||
Receivables for: | |||||||
Sales of investments | $ | 311,254 | |||||
Sales of fund's shares | 459,557 | ||||||
Dividends and interest | 199,246 | 970,057 | |||||
82,026,551 | |||||||
Liabilities: | |||||||
Payables for: | |||||||
Purchases of investments | 522,603 | ||||||
Repurchases of fund's shares | 229,194 | ||||||
Investment advisory services | 25,984 | ||||||
Services provided by affiliates | 23,017 | ||||||
Deferred trustees' compensation | 2,460 | ||||||
Other fees and expenses | 27,163 | 830,421 | |||||
Net assets at March 31, 2006 | $ | 81,196,130 | |||||
Net assets consist of: | |||||||
Capital paid in on shares of beneficial interest | $ | 55,619,863 | |||||
Distributions in excess of net investment income | (202,944 | ) | |||||
Undistributed net realized gain | 3,079,039 | ||||||
Net unrealized appreciation | 22,700,172 | ||||||
Net assets at March 31, 2006 | $ | 81,196,130 |
Shares of beneficial interest issued and outstanding - unlimited shares authorized (1,842,105 total shares outstanding) | ||||||||||
Net assets | Shares outstanding | Net asset value per share(* | ) | |||||||
Class A | $ | 50,209,018 | 1,135,892 | $ | 44.20 | |||||
Class B | 1,393,719 | 31,884 | 43.71 | |||||||
Class C | 2,696,874 | 62,217 | 43.35 | |||||||
Class F | 6,685,530 | 151,765 | 44.05 | |||||||
Class 529-A | 386,618 | 8,788 | 44.00 | |||||||
Class 529-B | 64,398 | 1,483 | 43.42 | |||||||
Class 529-C | 164,097 | 3,782 | 43.38 | |||||||
Class 529-E | 23,919 | 547 | 43.75 | |||||||
Class 529-F | 23,233 | 528 | 43.98 | |||||||
Class R-1 | 65,702 | 1,518 | 43.29 | |||||||
Class R-2 | 735,283 | 16,958 | 43.36 | |||||||
Class R-3 | 4,336,420 | 99,376 | 43.64 | |||||||
Class R-4 | 5,352,243 | 122,512 | 43.69 | |||||||
Class R-5 | 9,059,076 | 204,855 | 44.22 | |||||||
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $46.90 and $46.68, respectively. | ||||||||||
See Notes to Financial Statements |
Statement of operations | |||||||
for the year ended March 31, 2006 | (dollars in thousands | ) | |||||
Investment income: | |||||||
Income: | |||||||
Dividends (net of non-U.S. taxes of $141,426) | $ | 1,285,694 | |||||
Interest (net of non-U.S. taxes of $5) | 207,777 | $ | 1,493,471 | ||||
Fees and expenses:(*) | |||||||
Investment advisory services | 279,176 | ||||||
Distribution services | 179,141 | ||||||
Transfer agent services | 33,116 | ||||||
Administrative services | 30,330 | ||||||
Reports to shareholders | 1,290 | ||||||
Registration statement and prospectus | 3,054 | ||||||
Postage, stationery and supplies | 3,281 | ||||||
Trustees' compensation | 792 | ||||||
Auditing and legal | 222 | ||||||
Custodian | 18,716 | ||||||
State and local taxes | 843 | ||||||
Other | 384 | ||||||
Total fees and expenses before reimbursements/waivers | 550,345 | ||||||
Less reimbursement/waiver of fees and expenses: | |||||||
Investment advisory services | 27,918 | ||||||
Administrative services | 630 | ||||||
Total fees and expenses after reimbursements/waivers | 521,797 | ||||||
Net investment income | 971,674 | ||||||
Net realized gain and unrealized | |||||||
appreciation on investments | |||||||
and non-U.S. currency: | |||||||
Net realized gain (loss) on: | |||||||
Investments | 4,899,166 | ||||||
Non-U.S. currency transactions | (29,647 | ) | 4,869,519 | ||||
Net unrealized appreciation (depreciation) on: | |||||||
Investments | 11,586,333 | ||||||
Non-U.S. currency translations | (2,435 | ) | 11,583,898 | ||||
Net realized gain and | |||||||
unrealized appreciation | |||||||
on investments and non-U.S. currency | 16,453,417 | ||||||
Net increase in net assets resulting | |||||||
from operations | $ | 17,425,091 | |||||
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements. | |||||||
Statements of changes in net assets | (dollars in thousands) | ||||||
Year ended March 31 | |||||||
2006 | 2005 | ||||||
Operations: | |||||||
Net investment income | $ | 971,674 | $ | 578,352 | |||
Net realized gain on investments and | |||||||
non-U.S. currency transactions | 4,869,519 | 2,670,830 | |||||
Net unrealized appreciation | |||||||
on investments and non-U.S. currency translations | 11,583,898 | 2,265,511 | |||||
Net increase in net assets | |||||||
resulting from operations | 17,425,091 | 5,514,693 | |||||
Dividends and distributions paid to | |||||||
shareholders: | |||||||
Dividends from net investment income and non-U.S. currency gains | (1,165,183 | ) | (716,189 | ) | |||
Distributions from net realized gain | |||||||
on investments | (2,179,508 | ) | - | ||||
Total dividends and distributions paid | |||||||
to shareholders | (3,344,691 | ) | (716,189 | ) | |||
Capital share transactions | 12,951,237 | 7,477,962 | |||||
Total increase in net assets | 27,031,637 | 12,276,466 | |||||
Net assets: | |||||||
Beginning of year | 54,164,493 | 41,888,027 | |||||
End of year (including | |||||||
distributions in excess of | |||||||
net investment income: $(202,944) and $(45,469), | |||||||
respectively) | $ | 81,196,130 | $ | 54,164,493 | |||
See Notes to Financial Statements |
Notes to financial statements
1. | Organization and significant accounting policies |
Organization - 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 primarily in the securities of companies based in Europe and the Pacific Basin.
The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:
Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature |
Class A and 529-A | Up to 5.75% | None (except 1% for certain redemptions within one year of purchase without an initial sales charge) | None |
Class B and 529-B | None | Declines from 5% to 0% for redemptions within six years of purchase | Class B and 529-B convert to Class A and 529-A, respectively, after eight years |
Class C | None | 1% for redemptions within one year of purchase | Class C converts to Class F after 10 years |
Class 529-C | None | 1% for redemptions within one year of purchase | None |
Class 529-E | None | None | None |
Class F and 529-F | None | None | None |
Class R-1, R-2, R-3, R-4 and R-5 | None | None | None |
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.
Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:
Security valuation - Equity securities are valued at the official closing price of, or the last reported sale price on, the 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. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of representative quoted bid and asked prices. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's board of trustees. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities are fair valued.
Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Class allocations - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders - Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.
Forward currency contracts - The fund may enter into forward currency contracts, which represent agreements to exchange non-U.S. currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in non-U.S. exchange rates arising from investments denominated in non-U.S. currencies. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates. Due to these risks, the fund could incur losses up to the entire contract amount, which may exceed the net unrealized value shown on the accompanying financial statements. On a daily basis, the fund values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The fund records realized gains or losses at the time the forward contract is closed or offset by another contract with the same broker for the same settlement date and currency.
2. | Non-U.S. investments |
Investment risk - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.
Taxation - Dividend and interest income is recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities. For the year ended March 31, 2006, non-U.S. taxes paid on realized gains were $24,719,000. As of March 31, 2006, non-U.S. taxes provided on unrealized gains were $24,556,000.
3. Federal income taxation and distributions
The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made.
Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; unrealized appreciation of certain investments in non-U.S. securities; deferred expenses; and non-U.S. taxes on capital gains. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. As of March 31, 2006, the cost of investment securities for federal income tax purposes was $58,964,431,000.
During the year ended March 31, 2006, the fund reclassified $36,141,000 from undistributed net realized gains to undistributed net investment income; and reclassified $107,000 from undistributed net investment income and $238,786,000 from undistributed net realized gains to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.
As of March 31, 2006, the components of distributable earnings on a tax basis were as follows (dollars in thousands):
Undistributed net investment income and non-U.S. currency gains | $497,121 | |||
Loss deferrals related to non-U.S. currency that were realized during the period November 1, 2005, through March 31, 2006 | (10,673 | ) | ||
Undistributed short-term capital gains | 1,161,715 | |||
Undistributed long-term capital gains | 1,922,922 | |||
Gross unrealized appreciation on investment securities | 22,812,119 | |||
Gross unrealized depreciation on investment securities | (778,642 | ) | ||
Net unrealized appreciation on investment securities | 22,033,477 |
Undistributed net investment income and non-U.S. currency gains above include non-U.S. currency losses of $3,693,000 that were realized during the period November 1, 2004, through March 31, 2005. During the year ended March 31, 2006, the fund realized, on a tax basis, a net capital gain of $4,834,998,000.
The tax character of distributions paid to shareholders was as follows (dollars in thousands):
Year ended March 31, 2006 | Year ended March 31, 2005 | ||||||||||||||||||
Ordinary income | Long-term capital gains | Total distributions paid | Ordinary income | Long-term capital gains | Total distributions paid | ||||||||||||||
Share class | |||||||||||||||||||
Class A | $ | 759,044 | $ | 1,397,736 | $ | 2,156,780 | $ | 522,903 | $ | - | $ | 522,903 | |||||||
Class B | 13,272 | 38,144 | 51,416 | 7,662 | - | 7,662 | |||||||||||||
Class C | 24,151 | 69,543 | 93,694 | 12,061 | - | 12,061 | |||||||||||||
Class F | 93,903 | 173,956 | 267,859 | 49,621 | - | 49,621 | |||||||||||||
Class 529-A | 5,281 | 9,692 | 14,973 | 2,348 | - | 2,348 | |||||||||||||
Class 529-B | 546 | 1,718 | 2,264 | 270 | - | 270 | |||||||||||||
Class 529-C | 1,435 | 4,253 | 5,688 | 603 | - | 603 | |||||||||||||
Class 529-E | 274 | 589 | 863 | 119 | - | 119 | |||||||||||||
Class 529-F | 327 | 577 | 904 | 132 | - | 132 | |||||||||||||
Class R-1 | 599 | 1,547 | 2,146 | 240 | - | 240 | |||||||||||||
Class R-2 | 6,864 | 18,799 | 25,663 | 2,902 | - | 2,902 | |||||||||||||
Class R-3 | 50,412 | 106,965 | 157,377 | 23,867 | - | 23,867 | |||||||||||||
Class R-4 | 70,568 | 130,147 | 200,715 | 31,595 | - | 31,595 | |||||||||||||
Class R-5 | 138,507 | 225,842 | 364,349 | 61,866 | - | 61,866 | |||||||||||||
Total | $ | 1,165,183 | $ | 2,179,508 | $ | 3,344,691 | $ | 716,189 | $ | - | $ | 716,189 |
4. Fees and transactions with related parties
Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund’s shares.
Investment advisory services -The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.690% on the first $500 million of daily net assets and decreasing to 0.405% on such assets in excess of $71 billion. CRMC is currently waiving 10% of investment advisory services fees. During the year ended March 31, 2006, total investment advisory services fees waived by CRMC were $27,918,000. As a result, the fee shown on the accompanying financial statements of $279,176,000, which was equivalent to an annualized rate of 0.435%, was reduced to $251,258,000, or 0.391% of average daily net assets.
Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:
Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of trustees approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of trustees has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.
For Class A and 529-A, the board of trustees has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of March 31, 2006, unreimbursed expenses subject to reimbursement totaled $13,749,000 for Class A. There were no unreimbursed expenses subject to reimbursement for Class 529-A.
Share class | Currently approved limits | Plan limits |
Class A | 0.25% | 0.25% |
Class 529-A | 0.25 | 0.50 |
Class B and 529-B | 1.00 | 1.00 |
Class C, 529-C and R-1 | 1.00 | 1.00 |
Class R-2 | 0.75 | 1.00 |
Class 529-E and R-3 | 0.50 | 0.75 |
Class F, 529-F and R-4 | 0.25 | 0.50 |
Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described on the following page.
Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended March 31, 2006, the total administrative services fees paid by CRMC were $1,000 and $629,000 for Class R-1 and R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.
Expenses under the agreements described above for the year ended March 31, 2006, were as follows (dollars in thousands):
Share class | Distribution services | Transfer agent services | Administrative services | ||
CRMC administrative services | Transfer agent services | Commonwealth of Virginia administrative services | |||
Class A | $104,956 | $32,322 | Not applicable | Not applicable | Not applicable |
Class B | 11,134 | 794 | Not applicable | Not applicable | Not applicable |
Class C | 19,614 | Included in administrative services | $2,830 | $352 | Not applicable |
Class F | 12,411 | 5,310 | 557 | Not applicable | |
Class 529-A | 461 | 238 | 29 | $272 | |
Class 529-B | 488 | 43 | 22 | 49 | |
Class 529-C | 1,177 | 104 | 44 | 118 | |
Class 529-E | 82 | 15 | 2 | 16 | |
Class 529-F | 3 | 14 | 2 | 16 | |
Class R-1 | 398 | 57 | 21 | Not applicable | |
Class R-2 | 3,881 | 771 | 2,011 | Not applicable | |
Class R-3 | 15,515 | 4,530 | 934 | Not applicable | |
Class R-4 | 9,021 | 5,526 | 115 | Not applicable | |
Class R-5 | Not applicable | 6,281 | 51 | Not applicable | |
Total | $179,141 | $33,116 | $25,719 | $4,140 | $471 |
Deferred trustees’ compensation - Since the adoption of the deferred compensation plan in 1993, trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $792,000, shown on the accompanying financial statements, includes $363,000 in current fees (either paid in cash or deferred) and a net increase of $429,000 in the value of the deferred amounts.
Affiliated officers and trustees - Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or trustees received any compensation directly from the fund.
5. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
Share class | Sales(*) | Reinvestments of dividends and distributions | Repurchases(*) | Net increase | |||||||||||||||||||||
Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||
Year ended March 31, 2006 | |||||||||||||||||||||||||
Class A | $ | 8,534,230 | 212,260 | $ | 2,043,046 | 49,977 | $ | (7,057,998 | ) | (179,258 | ) | $ | 3,519,278 | 82,979 | |||||||||||
Class B | 251,424 | 6,302 | 49,103 | 1,213 | (103,791 | ) | (2,660 | ) | 196,736 | 4,855 | |||||||||||||||
Class C | 862,304 | 21,782 | 90,002 | 2,240 | (231,111 | ) | (5,932 | ) | 721,195 | 18,090 | |||||||||||||||
Class F | 2,239,413 | 56,190 | 234,046 | 5,745 | (792,274 | ) | (19,984 | ) | 1,681,185 | 41,951 | |||||||||||||||
Class 529-A | 124,997 | 3,132 | 14,973 | 368 | (10,656 | ) | (266 | ) | 129,314 | 3,234 | |||||||||||||||
Class 529-B | 13,939 | 354 | 2,264 | 56 | (1,558 | ) | (40 | ) | 14,645 | 370 | |||||||||||||||
Class 529-C | 51,016 | 1,300 | 5,688 | 141 | (6,419 | ) | (163 | ) | 50,285 | 1,278 | |||||||||||||||
Class 529-E | 8,384 | 211 | 863 | 21 | (708 | ) | (17 | ) | 8,539 | 215 | |||||||||||||||
Class 529-F | 7,844 | 195 | 904 | 22 | (847 | ) | (21 | ) | 7,901 | 196 | |||||||||||||||
Class R-1 | 39,340 | 988 | 2,142 | 53 | (13,441 | ) | (350 | ) | 28,041 | 691 | |||||||||||||||
Class R-2 | 336,231 | 8,570 | 25,635 | 638 | (115,279 | ) | (2,947 | ) | 246,587 | 6,261 | |||||||||||||||
Class R-3 | 2,149,181 | 54,390 | 157,301 | 3,895 | (965,574 | ) | (24,801 | ) | 1,340,908 | 33,484 | |||||||||||||||
Class R-4 | 2,523,838 | 63,546 | 200,459 | 4,961 | (856,006 | ) | (21,686 | ) | 1,868,291 | 46,821 | |||||||||||||||
Class R-5 | 3,672,179 | 91,973 | 354,930 | 8,684 | (888,777 | ) | (22,271 | ) | 3,138,332 | 78,386 | |||||||||||||||
Total net increase | |||||||||||||||||||||||||
(decrease) | $ | 20,814,320 | 521,193 | $ | 3,181,356 | 78,014 | $ | (11,044,439 | ) | (280,396 | ) | $ | 12,951,237 | 318,811 | |||||||||||
Year ended March 31, 2005 | |||||||||||||||||||||||||
Class A | $ | 6,368,083 | 191,318 | $ | 487,060 | 14,175 | $ | (5,554,993 | ) | (168,189 | ) | $ | 1,300,150 | 37,304 | |||||||||||
Class B | 193,292 | 5,893 | 7,274 | 213 | (69,186 | ) | (2,113 | ) | 131,380 | 3,993 | |||||||||||||||
Class C | 582,150 | 17,757 | 11,548 | 341 | (115,140 | ) | (3,500 | ) | 478,558 | 14,598 | |||||||||||||||
Class F | 1,528,316 | 46,074 | 43,192 | 1,261 | (451,133 | ) | (13,620 | ) | 1,120,375 | 33,715 | |||||||||||||||
Class 529-A | 80,293 | 2,409 | 2,348 | 69 | (5,367 | ) | (161 | ) | 77,274 | 2,317 | |||||||||||||||
Class 529-B | 11,969 | 367 | 270 | 8 | (719 | ) | (22 | ) | 11,520 | 353 | |||||||||||||||
Class 529-C | 33,743 | 1,025 | 603 | 18 | (3,273 | ) | (99 | ) | 31,073 | 944 | |||||||||||||||
Class 529-E | 4,422 | 133 | 119 | 3 | (335 | ) | (10 | ) | 4,206 | 126 | |||||||||||||||
Class 529-F | 5,238 | 159 | 132 | 4 | (862 | ) | (27 | ) | 4,508 | 136 | |||||||||||||||
Class R-1 | 22,982 | 695 | 240 | 7 | (3,933 | ) | (122 | ) | 19,289 | 580 | |||||||||||||||
Class R-2 | 229,096 | 6,970 | 2,900 | 86 | (59,582 | ) | (1,829 | ) | 172,414 | 5,227 | |||||||||||||||
Class R-3 | 1,409,987 | 42,745 | 23,844 | 701 | (347,312 | ) | (10,487 | ) | 1,086,519 | 32,959 | |||||||||||||||
Class R-4 | 1,692,744 | 51,340 | 31,296 | 921 | (367,006 | ) | (11,172 | ) | 1,357,034 | 41,089 | |||||||||||||||
Class R-5 | 2,246,312 | 66,636 | 60,479 | 1,760 | (623,129 | ) | (18,573 | ) | 1,683,662 | 49,823 | |||||||||||||||
Total net increase | |||||||||||||||||||||||||
(decrease) | $ | 14,408,627 | 433,521 | $ | 671,305 | 19,567 | $ | (7,601,970 | ) | (229,924 | ) | $ | 7,477,962 | 223,164 | |||||||||||
(*) Includes exchanges between share classes of the fund. |
6. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities, of $28,613,334,000 and $21,015,456,000, respectively, during the year ended March 31, 2006.
Financial highlights(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from investment operations(2) | Dividends and distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | Net investment income | Net gains (losses) on securities (both realized and unrealized | ) | Total from investment operations | Dividends (from net investment income | ) | Distributions (from capital gains | ) | Total dividends and distributions | Net asset value, end of period | Total return(3 | ) | Net assets, end of period (in millions | ) | Ratio of expenses to average net assets before reimbursements/ waivers | Ratio of expenses to average net assets after reimbursements/ waivers | (4 | ) | Ratio of net income to average net assets | ||||||||||||||||||||||||||||||||||||
Class A: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | $ | 35.63 | $ | .62 | $ | 9.99 | $ | 10.61 | $ | (.72 | ) | $ | (1.32 | ) | $ | (2.04 | ) | $ | 44.20 | 30.25 | % | $ | 50,209 | .81 | % | .76 | % | 1.58 | % | ||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.26 | .43 | 3.45 | 3.88 | (.51 | ) | - | (.51 | ) | 35.63 | 12.08 | 37,515 | .83 | .82 | 1.31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.78 | .29 | 11.50 | 11.79 | (.31 | ) | - | (.31 | ) | 32.26 | 57.11 | 32,759 | .87 | .87 | 1.08 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.23 | .25 | (6.46 | ) | (6.21 | ) | (.24 | ) | - | (.24 | ) | 20.78 | (23.16 | ) | 20,143 | .90 | .90 | 1.06 | |||||||||||||||||||||||||||||||||||||
Year ended 3/31/2002 | 28.72 | .33 | (1.16 | ) | (.83 | ) | (.66 | ) | - | (.66 | ) | 27.23 | (2.63 | ) | 27,765 | .88 | .88 | 1.21 | |||||||||||||||||||||||||||||||||||||
Class B: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.29 | .32 | 9.88 | 10.20 | (.46 | ) | (1.32 | ) | (1.78 | ) | 43.71 | 29.32 | 1,394 | 1.55 | 1.51 | .82 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.00 | .18 | 3.41 | 3.59 | (.30 | ) | - | (.30 | ) | 35.29 | 11.24 | 954 | 1.58 | 1.56 | .55 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.65 | .08 | 11.41 | 11.49 | (.14 | ) | - | (.14 | ) | 32.00 | 55.95 | 737 | 1.62 | 1.62 | .31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.09 | .07 | (6.43 | ) | (6.36 | ) | (.08 | ) | - | (.08 | ) | 20.65 | (23.79 | ) | 387 | 1.68 | 1.68 | .28 | |||||||||||||||||||||||||||||||||||||
Year ended 3/31/2002 | 28.56 | .11 | (1.14 | ) | (1.03 | ) | (.44 | ) | - | (.44 | ) | 27.09 | (3.34 | ) | 422 | 1.65 | 1.65 | .41 | |||||||||||||||||||||||||||||||||||||
Class C: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.04 | .27 | 9.82 | 10.09 | (.46 | ) | (1.32 | ) | (1.78 | ) | 43.35 | 29.21 | 2,697 | 1.64 | 1.60 | .71 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.81 | .14 | 3.40 | 3.54 | (.31 | ) | - | (.31 | ) | 35.04 | 11.16 | 1,546 | 1.67 | 1.65 | .44 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.58 | .06 | 11.37 | 11.43 | (.20 | ) | - | (.20 | ) | 31.81 | 55.76 | 939 | 1.70 | 1.70 | .19 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.07 | .05 | (6.42 | ) | (6.37 | ) | (.12 | ) | - | (.12 | ) | 20.58 | (23.80 | ) | 275 | 1.74 | 1.74 | .19 | |||||||||||||||||||||||||||||||||||||
Year ended 3/31/2002 | 28.56 | .06 | (1.14 | ) | (1.08 | ) | (.41 | ) | - | (.41 | ) | 27.07 | (3.53 | ) | 178 | 1.77 | 1.77 | .22 | |||||||||||||||||||||||||||||||||||||
Class F: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.52 | .59 | 9.97 | 10.56 | (.71 | ) | (1.32 | ) | (2.03 | ) | 44.05 | 30.22 | 6,686 | .84 | .80 | 1.50 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.18 | .40 | 3.45 | 3.85 | (.51 | ) | - | (.51 | ) | 35.52 | 12.01 | 3,901 | .90 | .89 | 1.20 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.75 | .27 | 11.48 | 11.75 | (.32 | ) | - | (.32 | ) | 32.18 | 57.02 | 2,449 | .92 | .92 | .97 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.23 | .24 | (6.46 | ) | (6.22 | ) | (.26 | ) | - | (.26 | ) | 20.75 | (23.21 | ) | 861 | .94 | .94 | 1.00 | |||||||||||||||||||||||||||||||||||||
Year ended 3/31/2002 | 28.72 | .26 | (1.11 | ) | (.85 | ) | (.64 | ) | - | (.64 | ) | 27.23 | (2.71 | ) | 580 | .95 | .95 | .98 | |||||||||||||||||||||||||||||||||||||
Class 529-A: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.49 | .58 | 9.97 | 10.55 | (.72 | ) | (1.32 | ) | (2.04 | ) | 44.00 | 30.21 | 387 | .85 | .80 | 1.47 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.15 | .39 | 3.46 | 3.85 | (.51 | ) | - | (.51 | ) | 35.49 | 12.04 | 197 | .91 | .89 | 1.18 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.74 | .27 | 11.47 | 11.74 | (.33 | ) | - | (.33 | ) | 32.15 | 57.00 | 104 | .91 | .91 | .98 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.23 | .23 | (6.45 | ) | (6.22 | ) | (.27 | ) | - | (.27 | ) | 20.74 | (23.22 | ) | 33 | .94 | .94 | .98 | |||||||||||||||||||||||||||||||||||||
Period from 2/15/2002 to 3/31/2002 | 26.02 | .11 | 1.10 | 1.21 | - | - | - | 27.23 | 4.88 | 4 | .13 | .13 | .42 | ||||||||||||||||||||||||||||||||||||||||||
Class 529-B: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.09 | .25 | 9.82 | 10.07 | (.42 | ) | (1.32 | ) | (1.74 | ) | 43.42 | 29.10 | 64 | 1.71 | 1.67 | .64 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.86 | .10 | 3.40 | 3.50 | (.27 | ) | - | (.27 | ) | 35.09 | 11.01 | 39 | 1.80 | 1.79 | .30 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.61 | .02 | 11.38 | 11.40 | (.15 | ) | - | (.15 | ) | 31.86 | 55.61 | 24 | 1.83 | 1.83 | .06 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.21 | .02 | (6.43 | ) | (6.41 | ) | (.19 | ) | - | (.19 | ) | 20.61 | (23.91 | ) | 8 | 1.86 | 1.86 | .07 | |||||||||||||||||||||||||||||||||||||
Period from 2/19/2002 to 3/31/2002 | 25.54 | .08 | 1.59 | 1.67 | - | - | - | 27.21 | 6.77 | 1 | .20 | .20 | .29 | ||||||||||||||||||||||||||||||||||||||||||
Class 529-C: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.08 | .24 | 9.83 | 10.07 | (.45 | ) | (1.32 | ) | (1.77 | ) | 43.38 | 29.11 | 164 | 1.70 | 1.66 | .63 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.86 | .10 | 3.40 | 3.50 | (.28 | ) | - | (.28 | ) | 35.08 | 11.02 | 88 | 1.79 | 1.78 | .31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.61 | .02 | 11.39 | 11.41 | (.16 | ) | - | (.16 | ) | 31.86 | 55.66 | 50 | 1.82 | 1.82 | .07 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.20 | .02 | (6.42 | ) | (6.40 | ) | (.19 | ) | - | (.19 | ) | 20.61 | (23.88 | ) | 15 | 1.84 | 1.84 | .08 | |||||||||||||||||||||||||||||||||||||
Period from 2/15/2002 to 3/31/2002 | 26.02 | .09 | 1.09 | 1.18 | - | - | - | 27.20 | 4.77 | 1 | .22 | .22 | .35 | ||||||||||||||||||||||||||||||||||||||||||
Class 529-E: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.33 | .45 | 9.91 | 10.36 | (.62 | ) | (1.32 | ) | (1.94 | ) | 43.75 | 29.77 | 24 | 1.18 | 1.13 | 1.13 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.04 | .28 | 3.43 | 3.71 | (.42 | ) | - | (.42 | ) | 35.33 | 11.63 | 12 | 1.26 | 1.24 | .84 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.69 | .17 | 11.44 | 11.61 | (.26 | ) | - | (.26 | ) | 32.04 | 56.45 | 7 | 1.28 | 1.28 | .61 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2003 | 27.23 | .15 | (6.44 | ) | (6.29 | ) | (.25 | ) | - | (.25 | ) | 20.69 | (23.48 | ) | 2 | 1.30 | 1.30 | .66 | |||||||||||||||||||||||||||||||||||||
Period from 3/7/2002 to 3/31/2002 | 27.39 | .06 | (.22 | ) | (.16 | ) | - | - | - | 27.23 | (.36 | ) | - | (5 | ) | .09 | .09 | .23 | |||||||||||||||||||||||||||||||||||||
Class 529-F: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.45 | .64 | 9.96 | 10.60 | (.75 | ) | (1.32 | ) | (2.07 | ) | 43.98 | 30.39 | 23 | .70 | .66 | 1.63 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.13 | .36 | 3.44 | 3.80 | (.48 | ) | - | (.48 | ) | 35.45 | 11.89 | 12 | 1.01 | .99 | 1.09 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.74 | .24 | 11.48 | 11.72 | (.33 | ) | - | (.33 | ) | 32.13 | 56.79 | 6 | 1.02 | 1.02 | .82 | ||||||||||||||||||||||||||||||||||||||||
Period from 9/16/2002 to 3/31/2003 | 22.67 | .16 | (1.83 | ) | (1.67 | ) | (.26 | ) | - | (.26 | ) | 20.74 | (7.57 | ) | 1 | 1.05 | (6 | ) | 1.05 | (6 | ) | 1.31 | (6 | ) | |||||||||||||||||||||||||||||||
Class R-1: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | $ | 35.04 | $ | .26 | $ | 9.82 | $ | 10.08 | $ | (.51 | ) | $ | (1.32 | ) | $ | (1.83 | ) | $ | 43.29 | 29.16 | % | $ | 66 | 1.65 | % | 1.61 | % | .66 | % | ||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.89 | .11 | 3.43 | 3.54 | (.39 | ) | - | (.39 | ) | 35.04 | 11.18 | 29 | 1.72 | 1.68 | .34 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.67 | .04 | 11.41 | 11.45 | (.23 | ) | - | (.23 | ) | 31.89 | 55.72 | 8 | 1.82 | 1.71 | .15 | ||||||||||||||||||||||||||||||||||||||||
Period from 6/17/2002 to 3/31/2003 | 26.26 | .06 | (5.41 | ) | (5.35 | ) | (.24 | ) | - | (.24 | ) | 20.67 | (20.56 | ) | 1 | 2.84 | (6 | ) | 1.73 | (6 | ) | .32 | (6 | ) | |||||||||||||||||||||||||||||||
Class R-2: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.07 | .26 | 9.83 | 10.09 | (.48 | ) | (1.32 | ) | (1.80 | ) | 43.36 | 29.20 | 735 | 1.76 | 1.60 | .68 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.86 | .14 | 3.41 | 3.55 | (.34 | ) | - | (.34 | ) | 35.07 | 11.17 | 375 | 1.90 | 1.64 | .42 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.64 | .05 | 11.40 | 11.45 | (.23 | ) | - | (.23 | ) | 31.86 | 55.78 | 174 | 2.08 | 1.67 | .17 | ||||||||||||||||||||||||||||||||||||||||
Period from 5/31/2002 to 3/31/2003 | 27.34 | .10 | (6.55 | ) | (6.45 | ) | (.25 | ) | - | (.25 | ) | 20.64 | (23.80 | ) | 29 | 2.33 | (6 | ) | 1.70 | (6 | ) | .53 | (6 | ) | |||||||||||||||||||||||||||||||
Class R-3: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.23 | .46 | 9.89 | 10.35 | (.62 | ) | (1.32 | ) | (1.94 | ) | 43.64 | 29.85 | 4,336 | 1.15 | 1.11 | 1.18 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.96 | .30 | 3.42 | 3.72 | (.45 | ) | - | (.45 | ) | 35.23 | 11.68 | 2,321 | 1.18 | 1.16 | .89 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.68 | .15 | 11.45 | 11.60 | (.32 | ) | - | (.32 | ) | 31.96 | 56.46 | 1,052 | 1.29 | 1.29 | .51 | ||||||||||||||||||||||||||||||||||||||||
Period from 5/21/2002 to 3/31/2003 | 27.64 | .17 | (6.86 | ) | (6.69 | ) | (.27 | ) | - | (.27 | ) | 20.68 | (24.40 | ) | 63 | 1.35 | (6 | ) | 1.31 | (6 | ) | .87 | (6 | ) | |||||||||||||||||||||||||||||||
Class R-4: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.25 | .57 | 9.91 | 10.48 | (.72 | ) | (1.32 | ) | (2.04 | ) | 43.69 | 30.20 | 5,352 | .87 | .83 | 1.45 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 31.95 | .39 | 3.44 | 3.83 | (.53 | ) | - | (.53 | ) | 35.25 | 12.04 | 2,668 | .90 | .88 | 1.17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.63 | .27 | 11.41 | 11.68 | (.36 | ) | - | (.36 | ) | 31.95 | 57.00 | 1,106 | .92 | .92 | .92 | ||||||||||||||||||||||||||||||||||||||||
Period from 6/7/2002 to 3/31/2003 | 26.69 | .22 | (6.00 | ) | (5.78 | ) | (.28 | ) | - | (.28 | ) | 20.63 | (21.87 | ) | 76 | .96 | (6 | ) | .96 | (6 | ) | 1.27 | (6 | ) | |||||||||||||||||||||||||||||||
Class R-5: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2006 | 35.64 | .69 | 10.02 | 10.71 | (.81 | ) | (1.32 | ) | (2.13 | ) | 44.22 | 30.56 | 9,059 | .58 | .53 | 1.74 | |||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2005 | 32.26 | .50 | 3.47 | 3.97 | (.59 | ) | - | (.59 | ) | 35.64 | 12.38 | 4,507 | .59 | .58 | 1.51 | ||||||||||||||||||||||||||||||||||||||||
Year ended 3/31/2004 | 20.78 | .35 | 11.51 | 11.86 | (.38 | ) | - | (.38 | ) | 32.26 | 57.49 | 2,473 | .61 | .61 | 1.27 | ||||||||||||||||||||||||||||||||||||||||
Period from 5/15/2002 to 3/31/2003 | 27.55 | .26 | (6.74 | ) | (6.48 | ) | (.29 | ) | - | (.29 | ) | 20.78 | (23.71 | ) | 782 | .63 | (6 | ) | .63 | (6 | ) | 1.31 | (6 | ) |
Year ended March 31 | ||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||
Portfolio turnover rate for all classes of shares | 35 | % | 30 | % | 25 | % | 29 | % | 27 | % |
(1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year. |
(2) Based on average shares outstanding. |
(3) Total returns exclude all sales charges, including contingent deferred sales charges. |
(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. |
During some of the periods shown, CRMC reduced fees for investment advisory services for all |
share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), |
CRMC agreed to pay a portion of the fees related to transfer agent services. |
(5) Amount less than $1 million. |
(6) Annualized. |
See Notes to Financial Statements |
Report of independent registered public accounting firm
To the Shareholders and Board of Trustees of EuroPacific Growth Fund:
We have audited the accompanying statement of assets and liabilities of EuroPacific Growth Fund (the “Fund”), including the summary investment portfolio, as of March 31, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the period ended March 31, 2002, were audited by other auditors whose report, dated April 30, 2002, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2006, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of EuroPacific Growth Fund as of March 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, California
May 11, 2006
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 certain distributions received by shareholders during such fiscal year. The information below is provided for the fund’s fiscal year ended March 31, 2006.
During the fiscal year ended, the fund paid a long-term capital gain distribution of $2,179,508,000.
The amount of foreign taxes passed through to shareholders for the fiscal year was $162,423,000. Foreign source income earned by the fund for the fiscal year was $1,593,921,000.
Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates $1,450,550,000 of the dividends received as qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates $2,425,000 of dividends received as qualified dividend income.
For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $8,422,000 as interest derived on direct U.S. government obligations.
Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed in January 2007, to determine the calendar year amounts to be included on their 2006 tax returns. Shareholders should consult their tax advisers.
Expense example
unaudited
As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2005, through March 31, 2006).
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning account value 10/1/2005 | Ending account value 3/31/2006 | Expenses paid during period* | Annualized expense ratio | ||||||||||
Class A -- actual return | $ | 1,000.00 | $ | 1,151.28 | $ | 4.02 | .75 | % | |||||
Class A -- assumed 5% return | 1,000.00 | 1,021.19 | 3.78 | .75 | |||||||||
Class B -- actual return | 1,000.00 | 1,147.21 | 8.03 | 1.50 | |||||||||
Class B -- assumed 5% return | 1,000.00 | 1,017.45 | 7.54 | 1.50 | |||||||||
Class C -- actual return | 1,000.00 | 1,146.78 | 8.51 | 1.59 | |||||||||
Class C -- assumed 5% return | 1,000.00 | 1,017.00 | 8.00 | 1.59 | |||||||||
Class F -- actual return | 1,000.00 | 1,151.47 | 4.18 | .78 | |||||||||
Class F -- assumed 5% return | 1,000.00 | 1,021.04 | 3.93 | .78 | |||||||||
Class 529-A -- actual return | 1,000.00 | 1,151.57 | 4.24 | .79 | |||||||||
Class 529-A -- assumed 5% return | 1,000.00 | 1,020.99 | 3.98 | .79 | |||||||||
Class 529-B -- actual return | 1,000.00 | 1,146.59 | 8.83 | 1.65 | |||||||||
Class 529-B -- assumed 5% return | 1,000.00 | 1,016.70 | 8.30 | 1.65 | |||||||||
Class 529-C -- actual return | 1,000.00 | 1,146.27 | 8.72 | 1.63 | |||||||||
Class 529-C -- assumed 5% return | 1,000.00 | 1,016.80 | 8.20 | 1.63 | |||||||||
Class 529-E -- actual return | 1,000.00 | 1,149.36 | 5.95 | 1.11 | |||||||||
Class 529-E -- assumed 5% return | 1,000.00 | 1,019.40 | 5.59 | 1.11 | |||||||||
Class 529-F -- actual return | 1,000.00 | 1,152.10 | 3.27 | .61 | |||||||||
Class 529-F -- assumed 5% return | 1,000.00 | 1,021.89 | 3.07 | .61 | |||||||||
Class R-1 -- actual return | 1,000.00 | 1,146.67 | 8.62 | 1.61 | |||||||||
Class R-1 -- assumed 5% return | 1,000.00 | 1,016.90 | 8.10 | 1.61 | |||||||||
Class R-2 -- actual return | 1,000.00 | 1,146.79 | 8.51 | 1.59 | |||||||||
Class R-2 -- assumed 5% return | 1,000.00 | 1,017.00 | 8.00 | 1.59 | |||||||||
Class R-3 -- actual return | 1,000.00 | 1,149.65 | 5.95 | 1.11 | |||||||||
Class R-3 -- assumed 5% return | 1,000.00 | 1,019.40 | 5.59 | 1.11 | |||||||||
Class R-4 -- actual return | 1,000.00 | 1,151.23 | 4.45 | .83 | |||||||||
Class R-4 -- assumed 5% return | 1,000.00 | 1,020.79 | 4.18 | .83 | |||||||||
Class R-5 -- actual return | 1,000.00 | 1,152.90 | 2.84 | .53 | |||||||||
Class R-5 -- assumed 5% return | 1,000.00 | 1,022.29 | 2.67 | .53 | |||||||||
* Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (182), and divided by 365 (to reflect the one-half year period). |
Approval of Investment Advisory and Service Agreement
The fund’s board has approved the fund’s amended Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through December 31, 2006. The agreement had recently been amended to add additional advisory fee breakpoints if and when the fund’s net assets exceed $55 billion and $71 billion. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The information, material factors and conclusions that formed the basis for the committee’s recommendation and the board’s subsequent approval are described below.
1. Information reviewed
Materials reviewed — During the course of each year, board members review a wide variety of materials relating to the services provided by CRMC, including reports on the fund’s investment results; portfolio composition; portfolio trading practices; shareholder services; and other information relating to the nature, extent and quality of services provided by CRMC to the fund. In addition, the committee requests and reviews supplementary information that includes extensive materials regarding the fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding CRMC, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the fund.
Review process — The committee received assistance and advice regarding legal and industry standards from independent counsel to the board. The committee discussed the approval of the agreement with CRMC representatives and in a private session with counsel at which no representatives of CRMC were present. In deciding to recommend the approval of the agreement, the committee did not identify any single issue or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the board and the committee.
2. Nature, extent and quality of services
CRMC, its personnel and its resources — The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ability of its organizational structure to address the recent growth in assets under management. The board and the committee also considered that CRMC made available to its investment professionals a variety of resources and systems relating to investment management, compliance, trading, investment results and portfolio accounting. They considered CRMC’s commitment to investing in information technology supporting investment management and compliance. They further considered CRMC’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems. The board and the committee also considered the benefits to fund shareholders from investing in a fund that is part of a large family of funds offering a variety of investment objectives.
Other services — The board and the committee considered CRMC’s policies, procedures and systems designed to comply with applicable laws and regulations and its commitment to compliance; its efforts to keep board members informed; and its attention to matters that may involve potential conflicts of interest with the fund. The board and the committee also considered the nature, extent, quality and cost of administrative, distribution and shareholder services provided by CRMC to the fund under the agreement and other agreements, including the information technology, legal and fund accounting and treasury functions.
3. Investment results
The board and the committee considered the fund’s investment results in light of its primary objective of providing long-term growth of capital. They also considered information regarding the selection of indexes and funds comparable to the fund. The board and the committee reviewed the fund’s absolute investment results, as well as the fund’s relative investment results measured against: (i) the Lipper International Funds Index (the Lipper category that includes the fund), (ii) the MSCI EAFE Index and (iii) a comparison group of the other funds in the Lipper International Funds Index as of July 31, 2005. The board and the committee noted that for the 10-year period ended July 31, 2005, the fund’s investment results exceeded those of both indexes and the average and median results of the comparison group. The board and the committee also considered the volatility of the fund’s results, as well as the investment risks assumed by the fund relative to comparable market indexes and funds.
4. Advisory fees and total expenses
The board and the committee reviewed the advisory fees and total expenses of the fund (each as a percentage of average net assets) and compared such amounts with the median fee and expense levels of other funds in the Lipper International Funds Index, as well as a comparison group of the other funds in the Lipper International Funds Index. The board and the committee observed that the fund’s advisory fees and total expenses (each as a percentage of average net assets) were among the lowest of all 29 funds in that comparison group (with the second lowest ratio of total operating expenses to average net assets, not including 12b-1 expenses). The board and the committee also noted the new additional advisory fee breakpoints if and when the fund’s net assets exceed $55 billion and $71 billion, as well as the 5% advisory fee waiver that CRMC put into effect September 1, 2004, which was increased to 10% on April 1, 2005.
The board and the committee also reviewed information and materials regarding the advisory fees paid by institutional clients of an affiliate of CRMC with similar investment mandates. They noted that, although the fees paid by those clients generally were lower than those paid by the American Funds, these differences reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, as well as the resulting level of profits to CRMC, comparing those to the reported results of several large, publicly held investment management companies. The committee also received information during the past year regarding the structure and manner in which CRMC’s investment professionals were compensated and CRMC’s view of the relationship of such compensation to the attraction and retention of quality personnel. The board and the committee considered CRMC’s willingness to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements. They further considered that breakpoint discounts in the fund’s advisory fee structure reduce the level of fees charged by CRMC to the fund as fund assets increase. They also considered the impact of the current 10% advisory fee waiver.
6. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers.
7. Conclusions
Based on their review, including their consideration of each of the factors referred to above, the board and the committee concluded that the agreement is fair and reasonable to the fund and its shareholders and that the fund’s shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund. The board and the committee concluded that the nature, extent and quality of services provided by CRMC, including its investment record, the fund’s cost structure and low level of fees, benefit and are in the best interests of the fund and, along with the consideration of other factors, support approval of the agreement.
Other share class results
unaudited
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com.
Average annual total returns for periods ended March 31, 2006: | ||||||||||
1 year | 5 years | Life of class | ||||||||
Class B shares— first sold 3/15/00 | ||||||||||
Reflecting applicable contingent deferred sales charge | ||||||||||
(CDSC), maximum of 5%, payable only if shares | ||||||||||
are sold within six years of purchase | +24.32 | % | +10.30 | % | +3.38 | % | ||||
Not reflecting CDSC | +29.32 | % | +10.57 | % | +3.38 | % | ||||
Class C shares— first sold 3/15/01 | ||||||||||
Reflecting CDSC, maximum of 1%, payable only if | ||||||||||
shares are sold within one year of purchase | +28.21 | % | +10.46 | % | +10.13 | % | ||||
Not reflecting CDSC | +29.21 | % | +10.46 | % | +10.13 | % | ||||
Class F shares*— first sold 3/15/01 | ||||||||||
Not reflecting annual asset-based fee charged | ||||||||||
by sponsoring firm | +30.22 | % | +11.34 | % | +11.01 | % | ||||
Class 529-A shares†— first sold 2/15/02 | ||||||||||
Reflecting 5.75% maximum sales charge | +22.71 | % | — | +14.36 | % | |||||
Not reflecting maximum sales charge | +30.21 | % | — | +16.02 | % | |||||
Class 529-B shares†— first sold 2/19/02 | ||||||||||
Reflecting applicable CDSC, maximum of 5%, payable | ||||||||||
only if shares are sold within six years of purchase | +24.10 | % | — | +15.25 | % | |||||
Not reflecting CDSC | +29.10 | % | — | +15.56 | % | |||||
Class 529-C shares†— first sold 2/15/02 | ||||||||||
Reflecting CDSC, maximum of 1%, payable only if | ||||||||||
shares are sold within one year of purchase | +28.11 | % | — | +15.01 | % | |||||
Not reflecting CDSC | +29.11 | % | — | +15.01 | % | |||||
Class 529-E shares*†— first sold 3/7/02 | +29.77 | % | — | +14.40 | % | |||||
Class 529-F shares*†— first sold 9/16/02 | ||||||||||
Not reflecting annual asset-based fee charged | ||||||||||
by sponsoring firm | +30.39 | % | — | +23.58 | % |
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 26 for details.
*These shares are sold without any initial or contingent deferred sales charge.
†Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.
Board of trustees
“Non-interested” trustees | |||||
Year first | |||||
elected | |||||
a trustee | |||||
Name and age | of the fund1 | Principal occupation(s) during past five years | |||
Elisabeth Allison, 59 | 1991 | Partner, ANZI, Ltd. (transactional work specializing in joint ventures and strategic alliances); Business negotiator, Harvard Medical School | |||
Vanessa C.L. Chang, 53 | 2004 | Director, El & El Investments (real estate); former President and CEO, ResolveItNow.com (insurance-related Internet company); former Senior Vice President, Secured Capital Corporation (real estate investment bank); former Partner, KPMG LLP (independent registered public accounting firm) | |||
Robert A. Fox, 69 | 1984 | Managing General Partner, Fox Investments LP; corporate director; retired President and CEO, Foster Farms (poultry producer) | |||
Jae H. Hyun, 57 | 2004 | Chairman of the Board, Tong Yang Major Corp. (holding company of Tong Yang Group companies) | |||
Koichi Itoh, 65 | 1994 | Executive Chairman of the Board, Itoh Building Co., Ltd. (building management); former President, Autosplice KK (electronics) | |||
William H. Kling, 64 | 1987 | President, American Public Media Group | |||
John G. McDonald, 69 | 1984 | Professor of Finance, Graduate School of Business, Stanford University | |||
William I. Miller, 50 | 1992 | Chairman of the Board and CEO, Irwin Financial | |||
Chairman of the Board (Independent and Non-Executive) | Corporation | ||||
Alessandro Ovi, 62 | 2002 | Publisher and Editor, Technology Review; President, TechRev.srl; former Special Adviser to the President of the European Commission; former CEO, Tecnitel (subsidiary of a telecommunications company) | |||
Kirk P. Pendleton, 66 | 1996 | Chairman of the Board and CEO, Cairnwood, Inc. (venture capital investment) | |||
Rozanne L. Ridgway, 70 | 2004 | Director of companies; Chair (non-executive), Baltic-American Enterprise Fund; former co-chair, Atlantic Council of the United States | |||
“Non-interested” trustees | |||||
Number of | |||||
portfolios | |||||
in fund | |||||
complex2 | |||||
overseen by | |||||
Name and age | trustee | Other directorships3 held by trustee | |||
Elisabeth Allison, 59 | 3 | Color Kinetics, Inc. | |||
Vanessa C.L. Chang, 53 | 3 | None | |||
Robert A. Fox, 69 | 7 | Chemtura Corporation | |||
Jae H. Hyun, 57 | 3 | Tong Yang Investment Bank; Tong Yang Magic Inc.; Tong Yang Major Corp.; Tong Yang Systems Corp. | |||
Koichi Itoh, 65 | 5 | None | |||
William H. Kling, 64 | 8 | Irwin Financial Corporation | |||
John G. McDonald, 69 | 8 | iStar Financial, Inc.; Plum Creek Timber Co.; Scholastic Corporation; Varian, Inc. | |||
William I. Miller, 50 | 3 | Cummins, Inc. | |||
Chairman of the Board (Independent and Non-Executive) | |||||
Alessandro Ovi, 62 | 3 | Assicurazioni Generali; Guala Closures SpA; Korn & Ferry Europe (Advisory Board); ST Microelectronics; Telecom Italia Media | |||
Kirk P. Pendleton, 66 | 6 | None | |||
Rozanne L. Ridgway, 70 | 3 | Boeing; 3M Corporation; Emerson Electric; Manpower, Inc.; Sara Lee Corporation |
“Interested” trustees4 | |||||
Year first elected a | |||||
trustee or | Principal occupation(s) during past five years and | ||||
Name, age and | officer of | positions held with affiliated entities or the principal | |||
position with fund | the fund1 | underwriter of the series | |||
Gina H. Despres, 64 | 1999 | Senior Vice President, Capital Research and | |||
Vice Chairman of the Board | Management Company; Senior Vice President, Capital Strategy Research, Inc.5 | ||||
Mark E. Denning, 48 | 1994 | Director, Capital Research and Management | |||
President | Company; Senior Vice President, Capital Research Company5 | ||||
“Interested” trustees4 | |||||
Number of | |||||
portfolios | |||||
in fund | |||||
complex2 | |||||
Name, age and | overseen by | ||||
position with fund | trustee | Other directorships3 held by trustee | |||
Gina H. Despres, 64 | 4 | None | |||
Vice Chairman of the Board | |||||
Mark E. Denning, 48 | |||||
President | 1 | None |
Other officers6 | |||||
Year first | |||||
elected | Principal occupation(s) during past five years | ||||
Name, age and | an officer | and positions held with affiliated entities or | |||
position with fund | of the fund1 | the principal underwriter of the fund | |||
Stephen E. Bepler, 63 | 1984 | Senior Vice President, Capital Research Company5 | |||
Executive Vice President | |||||
Robert W. Lovelace, 43 | 1996 | Senior Vice President, Capital Research and | |||
Senior Vice President | Management Company; Chairman of the Board, Capital Research Company;5 Director, The Capital Group Companies, Inc.5 | ||||
Michael J. Downer, 51 | 2004 | Vice President and Secretary, Capital Research and | |||
Vice President | Management Company; Secretary and Director, American Funds Distributors, Inc.;5 Director, Capital Bank and Trust Company5 | ||||
Nicholas J. Grace, 40 | 2004 | Senior Vice President, Capital Research Company5 | |||
Vice President | |||||
Alwyn Heong, 46 | 1998 | Senior Vice President and Director, Capital | |||
Vice President | Research Company5 | ||||
Carl M. Kawaja, 41 | 2003 | Senior Vice President, Capital Research Company;5 | |||
Vice President | Director, Capital International, Inc.;5 Director, Capital International Asset Management5 | ||||
Sung Lee, 39 | 2003 | Executive Vice President and Director, Capital | |||
Vice President | Research Company5 | ||||
Vincent P. Corti, 49 | 1984 | Vice President — Fund Business Management | |||
Secretary | Group, Capital Research and Management Company | ||||
R. Marcia Gould, 51 | 1993 | Vice President — Fund Business Management | |||
Treasurer | Group, Capital Research and Management Company | ||||
Jennifer M. Buchheim, 32 | 2005 | Vice President — Fund Business Management | |||
Assistant Treasurer | Group, Capital Research and Management Company |
The statement of additional information includes additional information about fund trustees and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all trustees and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Fund Secretary.
1 Trustees and officers of the fund serve until their resignation, removal or retirement.
2 Capital Research and Management Company manages the American Funds, consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which serves as the underlying investment vehicle for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain nonprofit organizations.
3 This includes all directorships (other than those in the American Funds) that are held by each trustee as a director of a public company or a registered investment company.
4 “Interested persons” within the meaning of the 1940 Act, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter).
5 Company affiliated with Capital Research and Management Company.
6 All of the officers listed, except Nicholas J. Grace and Sung Lee, are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as investment adviser.
Offices of the fund and of the investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Counsel
Kirkpatrick & Lockhart Nicholson Graham LLP
Four Embarcadero Center
San Francisco, CA 94111-4121
Independent registered public accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
There are several ways to invest in EuroPacific Growth Fund. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.75 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (“CDSC”) of up to 5% that declines over time. Class C shares were subject to annual expenses 0.84 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annual expenses (by 0.04 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class.
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.
A complete March 31, 2006, portfolio of EuroPacific Growth Fund’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
EuroPacific Growth Fund files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.
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, 2006, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
[Logo - American Funds®]
The right choice for the long term®
What makes American Funds different?
For nearly 75 years, we have sought to provide consistently superior long-term investment results for American Funds shareholders. The range of opportunities offered by our family of just 29 carefully conceived, broadly diversified funds has attracted over 35 million shareholder accounts.
Our unique combination of strengths includes these five factors:
• A long-term, value-oriented approach
We buy stocks and bonds of well-managed companies at reasonable prices and hold them for the long term.
• An extensive global research effort
American Funds investment professionals search the world to gain a comprehensive understanding of companies and markets.
• The multiple portfolio counselor system
Our unique method of portfolio management, developed more than 45 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.
• Experienced investment professionals
American Funds portfolio counselors have an average of 23 years of investment experience, providing a wealth of knowledge and experience that few organizations have.
• A commitment to low operating expenses
The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.
29 mutual funds, consistent philosophy, consistent results
• Growth funds
Emphasis on long-term growth through stocks
AMCAP Fund®
> EuroPacific Growth Fund®
The Growth Fund of America®
The New Economy Fund®
New Perspective Fund®
New World FundSM
SMALLCAP World Fund®
• Growth-and-income funds
Emphasis on long-term growth and dividends through stocks
American Mutual Fund®
Capital World Growth and Income FundSM
Fundamental InvestorsSM
The Investment Company of America®
Washington Mutual Investors FundSM
• Equity-income funds
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder®
The Income Fund of America®
• Balanced fund
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund®
• Bond funds
Emphasis on current income through bonds
American High-Income TrustSM
The Bond Fund of AmericaSM
Capital World Bond Fund®
Intermediate Bond Fund of America®
U.S. Government Securities FundSM
• Tax-exempt bond funds
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund®
Limited Term Tax-Exempt Bond Fund of AmericaSM
The Tax-Exempt Bond Fund of America®
State-specific tax-exempt funds
The Tax-Exempt Fund of California®
The Tax-Exempt Fund of Maryland®
The Tax-Exempt Fund of Virginia®
• Money market funds
The Cash Management Trust of America®
The Tax-Exempt Money Fund of AmericaSM
The U.S. Treasury Money Fund of AmericaSM
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGEAR-916-0506P
Litho in USA BG/AL/8055-S4702
Printed on recycled paper
ITEM 2 - Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.
ITEM 3 - Audit Committee Financial Expert
The Registrant’s Board has determined that Vanessa C.L. Chang, a member of the Registrant’s Audit Committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the Audit Committee and of the Board, nor will it reduce the responsibility of the other Audit Committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the Board had designated them as such. Most importantly, the Board believes each member of the Audit Committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 - Principal Accountant Fees and Services
Registrant: | ||||
a) Audit Fees: | ||||
2005 | $81,000 | |||
2006 | $89,000 | |||
b) Audit-Related Fees: | ||||
2005 | $6,000 | |||
2006 | $17,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2005 | $9,000 | |||
2006 | $15,000 | |||
The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns including returns relating to the Registrant’s investments in non-U.S. jurisdictions. | ||||
d) All Other Fees: | ||||
2005 | none | |||
2006 | none | |||
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | ||||
a) Not Applicable | ||||
b) Audit-Related Fees: | ||||
2005 | $327,000 | |||
2006 | $359,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2005 | None | |||
2006 | None | |||
d) All Other Fees: | ||||
2005 | None | |||
2006 | $36,000 | |||
The other fees consist of consulting services related to the Registrant’s compliance program. |
The Registrant’s Audit Committee will pre-approve all audit and permissible non-audit services that the Committee considers compatible with maintaining the auditors’ independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The Committee will not delegate its responsibility to pre-approve these services to the investment adviser. The Committee may delegate to one or more Committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full Committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.
Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $1,250,000 for fiscal year 2005 and $858,000 for fiscal year 2006. The non-audit services represented by these amounts were brought to the attention of the Committee and considered to be compatible with maintaining the auditors’ independence.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 - Schedule of Investments
[Logo - American Funds®]
EuroPacific Growth Fund®
Investment portfolio
March 31, 2006
Common stocks — 91.07% | Shares | Market value (000) | |||||
FINANCIALS — 22.77% | |||||||
Kookmin Bank | 16,803,310 | $ | 1,451,006 | ||||
ING Groep NV | 19,733,017 | 779,740 | |||||
Allianz AG | 4,311,335 | 720,006 | |||||
Mitsubishi UFJ Financial Group, Inc. | 43,978 | 672,446 | |||||
Sun Hung Kai Properties Ltd. | 62,729,000 | 637,040 | |||||
BNP Paribas | 5,959,356 | 553,669 | |||||
BNP Paribas1 | 540,725 | 48,533 | |||||
UBS AG | 5,403,398 | 593,334 | |||||
Shinhan Financial Group Co., Ltd. | 12,200,900 | 546,253 | |||||
Banco Santander Central Hispano, SA | 35,864,805 | 523,834 | |||||
UniCredito Italiano SpA (Italy) | 61,795,000 | 447,313 | |||||
UniCredito Italiano SpA (Germany) | 10,000,000 | 71,878 | |||||
Banco Itaú Holding Financeira SA, preferred nominative | 15,056,000 | 445,485 | |||||
Banco Bradesco SA, preferred nominative | 11,967,800 | 428,860 | |||||
ABN AMRO Holding NV | 13,263,019 | 397,723 | |||||
HSBC Holdings PLC (United Kingdom) | 13,747,439 | 230,568 | |||||
HSBC Holdings PLC (Hong Kong) | 8,998,436 | 150,643 | |||||
Mitsui Sumitomo Insurance Co., Ltd. | 27,031,000 | 367,623 | |||||
ORIX Corp. | 1,057,000 | 329,078 | |||||
ORIX Corp. (ADR) | 189,600 | 29,445 | |||||
Macquarie Bank Ltd. | 7,444,164 | 344,553 | |||||
Mitsui Trust Holdings, Inc. | 21,427,000 | 313,251 | |||||
Sompo Japan Insurance Inc. | 21,399,000 | 310,296 | |||||
Unibanco-União de Bancos Brasileiros SA, units (GDR) | 4,166,500 | 307,946 | |||||
DnB NOR ASA | 22,555,000 | 303,871 | |||||
Hongkong Land Holdings Ltd. | 80,980,300 | 301,247 | |||||
Mizuho Financial Group, Inc. | 36,060 | 294,986 | |||||
AXA | 8,204,200 | 287,987 | |||||
Erste Bank der oesterreichischen Sparkassen AG | 3,091,800 | 179,921 | |||||
Erste Bank der oesterreichischen Sparkassen AG1 | 1,738,686 | 102,549 | |||||
Société Générale | 1,798,000 | 270,458 | |||||
Swire Pacific Ltd. | 27,195,500 | 266,193 | |||||
Credit Suisse Group | 4,665,000 | 261,671 | |||||
Royal Bank of Scotland Group PLC | 7,911,244 | 257,533 | |||||
Housing Development Finance Corp. Ltd. | 8,542,500 | 256,736 | |||||
QBE Insurance Group Ltd. | 14,700,760 | 230,175 | |||||
DEPFA BANK PLC | 12,890,000 | 229,672 | |||||
NIPPONKOA Insurance Co., Ltd. | 24,280,000 | 221,515 | |||||
Millea Holdings, Inc. | 11,063 | 218,967 | |||||
Hypo Real Estate Holding AG | 3,188,540 | 218,633 | |||||
Hana Financial Holdings | 4,497,778 | 212,945 | |||||
HBOS PLC | 12,505,955 | 208,877 | |||||
Sumitomo Mitsui Financial Group, Inc. | 17,590 | 194,249 | |||||
Crédit Agricole SA | 4,870,000 | 189,543 | |||||
Bank of Nova Scotia | 4,600,000 | 184,536 | |||||
Sampo OYJ | 8,154,100 | 171,678 | |||||
Sberbank (Savings Bank of the Russian Federation) (GDR) | 1,107,500 | 163,910 | |||||
Samsung Fire & Marine Insurance Co., Ltd. | 1,200,950 | 158,833 | |||||
FirstRand Ltd. | 48,000,000 | 156,225 | |||||
PartnerRe Holdings Ltd. | 2,437,850 | 151,366 | |||||
Lloyds TSB Group PLC | 14,562,900 | 139,333 | |||||
Takefuji Corp. | 2,118,000 | 133,320 | |||||
Mitsubishi Estate Co., Ltd. | 5,550,000 | 131,537 | |||||
Banco Bilbao Vizcaya Argentaria, SA | 6,206,200 | 129,538 | |||||
AIFUL Corp. | 1,901,200 | 125,810 | |||||
DBS Group Holdings Ltd. | 12,450,000 | 125,555 | |||||
Zurich Financial Services1 | 532,000 | 124,933 | |||||
ICICI Bank Ltd. | 6,982,300 | 92,467 | |||||
ICICI Bank Ltd. (ADR) | 1,111,300 | 30,761 | |||||
PT Bank Mandiri (Persero) Tbk2 | 606,602,500 | 113,252 | |||||
Westfield Group | 9,236,563 | 113,026 | |||||
Promise Co., Ltd. | 1,844,700 | 111,572 | |||||
ForeningsSparbanken AB | 3,938,500 | 111,216 | |||||
Cathay Financial Holding Co., Ltd. | 61,550,000 | 110,141 | |||||
Westpac Banking Corp. | 5,119,760 | 87,269 | |||||
Woori Finance Holdings Co., Ltd. (Korea) | 4,000,000 | 79,457 | |||||
State Bank of India | 3,200,000 | 69,676 | |||||
China Construction Bank Corp.1 | 115,773,300 | 54,086 | |||||
Fairfax Financial Holdings Ltd. | 500,000 | 53,209 | |||||
Chinatrust Financial Holding Co., Ltd. | 70,063,513 | 49,826 | |||||
Brookfield Asset Management Inc. | 750,500 | 41,335 | |||||
Malayan Banking Bhd. | 13,150,300 | 39,285 | |||||
Wharf (Holdings) Ltd. | 7,800,000 | 28,649 | |||||
Security Capital European Realty1,2,3 | 39,607 | 633 | |||||
18,490,685 | |||||||
CONSUMER DISCRETIONARY — 12.58% | |||||||
Industria de Diseno Textil, SA | 17,719,915 | 684,084 | |||||
Toyota Motor Corp. | 11,122,600 | 607,529 | |||||
Mediaset SpA | 49,429,411 | 582,358 | |||||
Vivendi Universal | 16,942,448 | 581,989 | |||||
Continental AG | 4,977,500 | 548,119 | |||||
LG Electronics Inc. | 5,805,850 | 470,874 | |||||
Honda Motor Co., Ltd. | 7,042,150 | 436,096 | |||||
Swatch Group Ltd, non-registered shares | 1,650,246 | 277,002 | |||||
Swatch Group Ltd | 4,367,061 | 152,032 | |||||
Hyundai Motor Co. | 4,906,120 | 412,546 | |||||
Kingfisher PLC | 93,422,191 | 388,871 | |||||
SEGA SAMMY HOLDINGS INC. | 9,170,000 | 372,346 | |||||
Sony Corp. | 7,070,000 | 327,315 | |||||
Bridgestone Corp. | 13,747,000 | 286,688 | |||||
News Corp. Inc., Class A | 15,109,826 | 250,974 | |||||
News Corp. Inc., Class B | 1,848,614 | 32,462 | |||||
Porsche AG, nonvoting preferred | 280,000 | 268,117 | |||||
British Sky Broadcasting Group PLC | 27,222,638 | 255,490 | |||||
Compagnie Générale des Etablissements Michelin | 3,798,000 | 238,694 | |||||
Suzuki Motor Corp. | 9,396,867 | 215,924 | |||||
DSG International PLC | 65,779,418 | 210,929 | |||||
NOK Corp. | 6,845,000 | 184,324 | |||||
Esprit Holdings Ltd. | 23,100,000 | 179,813 | |||||
Carnival PLC | 3,450,000 | 169,690 | |||||
Fuji Heavy Industries Ltd. | 25,777,000 | 151,526 | |||||
Nikon Corp. | 8,259,000 | 148,033 | |||||
Cie. Financière Richemont AG, units | 3,058,816 | 146,596 | |||||
Rakuten, Inc. | 154,400 | 140,340 | |||||
Renault SA | 1,198,700 | 127,496 | |||||
Koninklijke Philips Electronics NV | 3,750,000 | 126,771 | |||||
Grupo Televisa, SA, ordinary participation certificates (ADR) | 5,929,600 | 117,999 | |||||
Volkswagen AG, nonvoting preferred | 1,333,000 | 73,176 | |||||
Volkswagen AG | 423,965 | 32,020 | |||||
HYUNDAI MOBIS | 1,177,800 | 104,252 | |||||
Yamada Denki Co., Ltd. | 849,000 | 97,867 | |||||
JCDecaux SA1 | 3,528,700 | 95,509 | |||||
Reed Elsevier NV | 6,648,100 | 95,328 | |||||
Pearson PLC | 6,324,272 | 87,713 | |||||
Sekisui House, Ltd. | 4,780,000 | 71,302 | |||||
Reed Elsevier PLC | 7,300,000 | 70,034 | |||||
Daito Trust Construction Co., Ltd. | 1,315,000 | 68,587 | |||||
Premiere AG1 | 3,618,000 | 64,246 | |||||
Li & Fung Ltd. | 24,388,000 | 55,003 | |||||
Daiwa House Industry Co., Ltd. | 2,960,300 | 51,300 | |||||
Marks and Spencer Group PLC | 4,500,000 | 43,524 | |||||
Agfa-Gevaert NV | 1,900,000 | 36,203 | |||||
Funai Electric Co., Ltd. | 285,000 | 28,180 | |||||
Publishing & Broadcasting Ltd. | 2,270,000 | 28,102 | |||||
NEXT PLC | 385,000 | 11,041 | |||||
Kesa Electricals PLC | 709,926 | 3,850 | |||||
Antena 3 Televisión, SA | 64,652 | 1,668 | |||||
TI Automotive Ltd.1,2 | 3,197,300 | — | |||||
10,211,932 | |||||||
INFORMATION TECHNOLOGY — 11.39% | |||||||
Samsung Electronics Co., Ltd. | 1,526,475 | 989,789 | |||||
Samsung Electronics Co., Ltd., nonvoting preferred | 48,800 | 24,988 | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 443,816,406 | 879,088 | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) | 10,800,200 | 108,650 | |||||
Hon Hai Precision Industry Co., Ltd. | 133,057,418 | 825,143 | |||||
Hynix Semiconductor Inc.1 | 18,507,940 | 550,514 | |||||
Rohm Co., Ltd. | 4,623,700 | 489,000 | |||||
Toshiba Corp. | 78,028,000 | 453,374 | |||||
Murata Manufacturing Co., Ltd. | 6,377,500 | 431,776 | |||||
Hoya Corp. | 8,920,000 | 359,922 | |||||
Nippon Electric Glass Co., Ltd. | 13,969,000 | 347,682 | |||||
Tokyo Electron Ltd. | 4,545,700 | 313,550 | |||||
High Tech Computer Corp. | 11,400,000 | 312,329 | |||||
AU Optronics Corp. | 195,305,000 | 294,054 | |||||
LG.Philips LCD Co., Ltd.1 | 6,343,360 | 285,960 | |||||
Chi Mei Optoelectronics Corp. | 187,659,598 | 264,884 | |||||
Hirose Electric Co., Ltd. | 1,830,000 | 257,276 | |||||
Nintendo Co., Ltd. | 1,600,200 | 239,242 | |||||
Acer Inc. | 102,306,000 | 188,439 | |||||
Canon, Inc. | 2,652,600 | 175,533 | |||||
Mediatek Incorporation | 14,673,324 | 169,994 | |||||
SAP AG | 760,000 | 164,903 | |||||
Powerchip Semiconductor Corp. | 278,750,000 | 163,404 | |||||
Quanta Computer Inc. | 70,346,000 | 115,681 | |||||
TDK Corp. | 1,525,000 | 114,906 | |||||
Yahoo Japan Corp. | 181,200 | 110,518 | |||||
Advanced Semiconductor Engineering, Inc. | 116,643,491 | 110,482 | |||||
Compal Electronics, Inc. | 102,759,000 | 105,099 | |||||
Wipro Ltd. | 8,000,000 | 100,665 | |||||
Infosys Technologies Ltd. | 1,480,000 | 99,201 | |||||
SOFTBANK CORP. | 2,224,600 | 65,196 | |||||
ASML Holding NV1 | 2,500,000 | 51,060 | |||||
ASML Holding NV (New York registered)1 | 213,000 | 4,339 | |||||
Konica Minolta Holdings, Inc. | 2,928,000 | 37,359 | |||||
Ricoh Co., Ltd. | 1,125,000 | 21,980 | |||||
livedoor Co., Ltd.1 | 21,906,152 | 19,725 | |||||
9,245,705 | |||||||
HEALTH CARE — 7.96% | |||||||
Roche Holding AG | 14,394,700 | 2,142,482 | |||||
Novo Nordisk A/S | 14,772,550 | 919,533 | |||||
AstraZeneca PLC (Sweden) | 11,286,617 | 569,181 | |||||
AstraZeneca PLC (United Kingdom) | 5,725,000 | 288,551 | |||||
Sanofi-Aventis | 7,160,800 | 681,349 | |||||
UCB NV | 7,296,059 | 359,048 | |||||
Smith & Nephew PLC | 38,987,200 | 346,252 | |||||
Chugai Pharmaceutical Co., Ltd. | 16,132,400 | 292,581 | |||||
Novartis AG | 4,613,960 | 256,508 | |||||
Merck KGaA | 2,560,400 | 243,405 | |||||
Shionogi & Co., Ltd. | 7,420,000 | 121,713 | |||||
Essilor | 1,250,000 | 111,513 | |||||
Gedeon Richter Ltd. | 453,400 | 91,472 | |||||
Elan Corp., PLC (ADR)1 | 3,000,000 | 43,320 | |||||
6,466,908 | |||||||
TELECOMMUNICATION SERVICES — 7.61% | |||||||
América Móvil SA de CV, Series L (ADR) | 33,648,000 | 1,152,780 | |||||
América Móvil SA de CV, Series L | 21,540,000 | 36,748 | |||||
Koninklijke KPN NV | 54,855,000 | 618,355 | |||||
Vodafone Group PLC | 285,094,779 | 597,071 | |||||
Telekom Austria AG | 19,619,056 | 462,526 | |||||
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk2 | 518,454,200 | 395,575 | |||||
Tele Norte Leste Participações SA, ordinary nominative | 762,130 | 16,892 | |||||
Tele Norte Leste Participações SA, preferred nominative | 16,764,775 | 279,568 | |||||
Tele Norte Leste Participações SA, preferred nominative (ADR) | 130,000 | 2,168 | |||||
Teléfonos de México, SA de CV (ADR) | 12,683,600 | 285,127 | |||||
Teléfonos de México, SA de CV | 8,400,000 | 9,490 | |||||
Telefónica, SA | 15,941,093 | 250,223 | |||||
Portugal Telecom, SGPS, SA | 15,795,000 | 191,643 | |||||
China Mobile (Hong Kong) Ltd. | 32,000,000 | 168,054 | |||||
Singapore Telecommunications Ltd. | 90,508,500 | 148,393 | |||||
France Télécom, SA | 6,573,000 | 147,870 | |||||
China Unicom Ltd. | 176,248,000 | 143,099 | |||||
KT Corp. | 2,335,060 | 93,850 | |||||
KT Corp. (ADR) | 2,172,880 | 46,282 | |||||
Telenor ASA | 12,500,000 | 134,534 | |||||
Mobile Telesystems OJSC (ADR) | 3,554,000 | 117,637 | |||||
Bharti Tele-Ventures Ltd.1 | 12,507,000 | 116,058 | |||||
BT Group PLC | 30,000,000 | 115,751 | |||||
Philippine Long Distance Telephone Co. | 2,976,260 | 112,229 | |||||
KDDI Corp. | 20,000 | 106,864 | |||||
Advanced Info Service PCL | 42,980,000 | 101,240 | |||||
SK Telecom Co., Ltd. (ADR) | 4,255,575 | 100,389 | |||||
BCE Inc. | 3,145,196 | 75,807 | |||||
China Netcom Group Corp. (Hong Kong) Ltd. (ADR) | 1,592,800 | 56,401 | |||||
Telecomunicações de Sao Paulo SA, preferred nominative | 2,061,761 | 51,091 | |||||
Telecom Italia SpA, nonvoting | 15,605,000 | 41,575 | |||||
6,175,290 | |||||||
ENERGY — 6.83% | |||||||
Petróleo Brasileiro SA - Petrobras, ordinary nominative (ADR) | 9,263,000 | 802,824 | |||||
Petróleo Brasileiro SA - Petrobras, preferred nominative (ADR) | 1,068,850 | 85,348 | |||||
Royal Dutch Shell PLC, Class B | 9,583,091 | 311,789 | |||||
Royal Dutch Shell PLC, Class B (ADR) | 1,874,848 | 122,146 | |||||
Royal Dutch Shell PLC, Class A | 7,325,000 | 229,246 | |||||
Royal Dutch Shell PLC, Class A (ADR) | 1,000,000 | 62,260 | |||||
Norsk Hydro ASA | 3,375,000 | 467,834 | |||||
Norsk Hydro ASA (ADR) | 250,000 | 34,585 | |||||
MOL Magyar Olaj- és Gázipari Rt. | 4,846,200 | 497,649 | |||||
Canadian Natural Resources, Ltd. | 8,180,000 | 454,873 | |||||
Petro-Canada | 8,600,000 | 408,078 | |||||
Oil & Natural Gas Corp. Ltd. | 13,814,400 | 407,273 | |||||
Reliance Industries Ltd. | 20,420,718 | 365,144 | |||||
SK Corp. | 5,003,780 | 335,783 | |||||
Nexen Inc. | 4,308,231 | 237,357 | |||||
TOTAL SA | 701,100 | 185,002 | |||||
Cameco Corp. | 4,000,000 | 143,947 | |||||
Husky Energy Inc. | 1,900,000 | 115,016 | |||||
ENI SpA | 3,500,000 | 99,610 | |||||
OAO NOVATEK (GDR)3 | 1,197,600 | 46,108 | |||||
OAO NOVATEK (GDR) | 925,000 | 35,613 | |||||
Repsol YPF, SA | 2,172,800 | 61,733 | |||||
PetroChina Co. Ltd. | 36,000,000 | 37,580 | |||||
5,546,798 | |||||||
CONSUMER STAPLES — 6.03% | |||||||
Nestlé SA | 2,802,250 | 831,586 | |||||
Seven & I Holdings Co., Ltd. | 16,087,000 | 636,811 | |||||
Koninklijke Ahold NV1 | 70,836,332 | 557,236 | |||||
Groupe Danone | 2,578,000 | 315,917 | |||||
Diageo PLC | 19,706,500 | 310,475 | |||||
METRO AG | 4,975,000 | 255,138 | |||||
Tesco PLC | 43,889,561 | 251,724 | |||||
L’Oréal SA | 2,400,000 | 211,487 | |||||
Shinsegae Co., Ltd. | 450,155 | 205,248 | |||||
Unilever PLC | 19,106,185 | 195,587 | |||||
Unilever NV | 2,722,800 | 189,107 | |||||
Wal-Mart de México, SA de CV | 64,835,718 | 171,126 | |||||
Coca-Cola HBC SA | 4,669,583 | 145,122 | |||||
Woolworths Ltd. | 8,410,292 | 113,327 | |||||
Pernod Ricard Co. | 540,000 | 103,482 | |||||
Fomento Económico Mexicano, SA de CV (ADR) | 935,600 | 85,757 | |||||
Gallaher Group PLC | 5,550,866 | 81,038 | |||||
Foster’s Group Ltd. | 19,950,000 | 75,807 | |||||
Uni-Charm Corp. | 1,538,900 | 75,559 | |||||
Coca-Cola FEMSA, SA de CV | 13,500,000 | 45,171 | |||||
Koninklijke Numico NV1 | 840,000 | 37,173 | |||||
4,893,878 | |||||||
MATERIALS — 5.17% | |||||||
Nitto Denko Corp. | 6,179,900 | 524,441 | |||||
Bayer AG | 12,655,000 | 507,111 | |||||
Cemex, SA de CV, ordinary participation certificates, units (ADR) | 5,378,256 | 351,093 | |||||
POSCO | 1,315,000 | 339,036 | |||||
Harmony Gold Mining Co. Ltd.1 | 18,181,600 | 295,876 | |||||
Cía. Vale do Rio Doce, preferred nominative | 3,700,000 | 159,957 | |||||
Cía. Vale do Rio Doce, ordinary nominative (ADR) | 2,000,000 | 97,060 | |||||
AngloGold Ashanti Ltd. | 4,275,000 | 228,186 | |||||
Barrick Gold Corp. | 4,080,000 | 111,139 | |||||
Barrick Gold Corp. (Canada) | 3,537,838 | 96,305 | |||||
Kuraray Co., Ltd. | 16,637,500 | 195,602 | |||||
Siam Cement PCL | 26,121,400 | 172,148 | |||||
Lonmin PLC | 3,450,000 | 159,676 | |||||
Gold Fields Ltd. | 6,107,500 | 133,570 | |||||
BHP Billiton PLC | 6,000,000 | 109,650 | |||||
Ivanhoe Mines Ltd.1 | 10,160,000 | 96,629 | |||||
UPM-Kymmene Corp. | 4,000,000 | 94,544 | |||||
BASF AG | 1,170,500 | 91,794 | |||||
JSR Corp. | 3,000,000 | 89,195 | |||||
Stora Enso Oyj | 5,394,843 | 83,046 | |||||
Holcim Ltd. | 1,028,571 | 81,870 | |||||
Kaneka Corp. | 4,100,000 | 49,143 | |||||
L’Air Liquide | 224,000 | 46,645 | |||||
Clariant Ltd.1 | 2,295,000 | 35,549 | |||||
Yara International ASA | 1,580,000 | 25,146 | |||||
Rio Tinto PLC | 375,000 | 19,044 | |||||
LANXESS AG1 | 210,000 | 7,893 | |||||
4,201,348 | |||||||
INDUSTRIALS — 4.77% | |||||||
Siemens AG | 6,854,000 | 640,028 | |||||
Asahi Glass Co., Ltd. | 38,439,000 | 574,365 | |||||
Mitsubishi Corp. | 15,700,000 | 357,424 | |||||
FANUC LTD | 3,050,000 | 293,548 | |||||
Nippon Express Co., Ltd. | 47,489,900 | 269,481 | |||||
Fraport AG | 3,316,649 | 252,463 | |||||
Sandvik AB | 3,792,000 | 224,646 | |||||
Mitsui & Co., Ltd. | 12,449,000 | 179,988 | |||||
Marubeni Corp. | 30,000,000 | 156,983 | |||||
Singapore Airlines Ltd. | 17,788,000 | 154,075 | |||||
Bombardier Inc.1 | 39,396,400 | 114,770 | |||||
Capita Group PLC | 14,197,623 | 113,384 | |||||
Metso Oyj | 2,500,000 | 96,513 | |||||
Ryanair Holdings PLC (ADR)1 | 1,700,463 | 93,015 | |||||
Macquarie Infrastructure Group | 31,044,081 | 84,640 | |||||
Bharat Heavy Electricals Ltd. | 1,500,000 | 75,605 | |||||
JS Group Corp. | 2,390,000 | 51,365 | |||||
MISC Berhad | 18,871,600 | 48,690 | |||||
Wesfarmers Ltd. | 1,180,000 | 29,453 | |||||
Qantas Airways Ltd. | 9,309,391 | 23,583 | |||||
Contax Participações SA | 16,764,775 | 20,927 | |||||
Contax Participações SA, ordinary nominative1 | 762,130 | 1,268 | |||||
Contax Participações SA, preferred nominative (ADR) | 130,000 | 162 | |||||
Vedior NV | 848,285 | 16,626 | |||||
3,873,002 | |||||||
UTILITIES — 2.93% | |||||||
RAO Unified Energy System of Russia (GDR) | 12,315,100 | 841,121 | |||||
E.ON AG | 3,948,000 | 434,560 | |||||
Veolia Environnement | 5,335,400 | 296,384 | |||||
National Grid PLC | 20,936,428 | 208,318 | |||||
Gas Natural SDG, SA | 6,510,000 | 188,511 | |||||
Hong Kong and China Gas Co. Ltd. | 50,000,000 | 120,821 | |||||
RWE AG | 1,230,000 | 107,075 | |||||
Scottish Power PLC | 10,070,000 | 101,860 | |||||
Korea Electric Power Corp. | 1,915,960 | 80,456 | |||||
2,379,106 | |||||||
MISCELLANEOUS — 3.03% | |||||||
Other common stocks in initial period of acquisition | 2,457,274 | ||||||
Total common stocks (cost: $51,199,754,000) | 73,941,926 | ||||||
Warrants — 0.04% | |||||||
FINANCIALS — 0.04% | |||||||
ING Groep NV, warrants, expire 20081 | 1,730,000 | 33,342 | |||||
Total warrants (cost: $46,430,000) | 33,342 | ||||||
Convertible securities — 0.02% | Principal amount (000 | ) | |||||
FINANCIALS — 0.02% | |||||||
Fairfax Financial Holdings Ltd. 5.00% convertible debentures 20233 | $ | 20,000 | 16,800 | ||||
Total convertible securities (cost: $20,366,000) | 16,800 | ||||||
Principal amount | Market value | ||||||
Short-term securities — 8.63% | (000 | ) | (000 | ) | |||
Federal Home Loan Bank 4.373%-4.65% due 4/17-6/7/2006 | $ | 490,900 | $ | 487,415 | |||
Spintab AB (Swedmortgage) 4.43%-4.76% due 4/4-6/1/2006 | 296,200 | 295,223 | |||||
Total Capital SA 4.40%-4.755% due 4/6-6/7/20063 | 294,000 | 292,622 | |||||
Stadshypotek Delaware Inc. 4.52%-4.64% due 4/24-5/8/20063 | 142,900 | 142,436 | |||||
Svenska Handelsbanken Inc. 4.425%-4.75% due 4/5-6/5/2006 | 130,200 | 129,748 | |||||
Freddie Mac 4.52%-4.60% due 5/1-5/30/2006 | 227,700 | 226,269 | |||||
Westpac Banking Corp. 4.695% due 5/24/20063 | 100,000 | 99,314 | |||||
Westpac Trust Securities NZ Ltd. 4.62%-4.88% due 5/8-6/30/20063 | 125,000 | 123,866 | |||||
Amsterdam Funding Corp. 4.58%-4.76% due 4/7-5/16/20063 | 220,000 | 219,036 | |||||
Royal Bank of Canada 4.705% due 5/15/2006 | 50,000 | 49,994 | |||||
Old Line Funding, LLC 4.56%-4.68% due 4/10-5/12/20063 | 146,580 | 146,147 | |||||
Thunder Bay Funding, LLC 4.56% due 4/4/20063 | 20,000 | 19,990 | |||||
Dexia Delaware LLC 4.525%-4.645% due 4/7-5/10/2006 | 215,000 | 214,266 | |||||
Allied Irish Banks N.A. Inc. 4.57%-4.865% due 4/28-6/30/20063 | 200,000 | 198,902 | |||||
Fannie Mae 4.57%-4.76% due 5/24-6/28/2006 | 199,600 | 197,637 | |||||
Danske Corp. 4.575%-4.81% due 4/18-5/30/20063 | 194,200 | 193,267 | |||||
HSBC USA Inc. 4.44%-4.86% due 4/6-6/27/2006 | 190,000 | 189,243 | |||||
Depfa Bank PLC 4.57%-4.895% due 4/4-6/26/2006 | 134,000 | 133,990 | |||||
Depfa Bank PLC 4.525% due 4/5/20063 | 50,000 | 49,976 | |||||
Toyota Motor Credit Corp. 4.50%-4.68% due 4/6-5/11/2006 | 157,300 | 156,800 | |||||
Toyota Credit de Puerto Rico Corp. 4.63% due 5/3/2006 | 20,000 | 19,920 | |||||
Barton Capital LLC 4.50%-4.81% due 4/3-6/5/20063 | 175,000 | 174,485 | |||||
U.S. Treasury Bills 4.33%-4.385% due 4/27-5/4/2006 | 170,540 | 169,913 | |||||
ING (U.S.) Funding LLC 4.54%-4.69% due 4/11-5/25/2006 | 169,600 | 168,980 | |||||
Sheffield Receivables Corp. 4.58%-4.76% due 4/3-5/1/20063 | 116,500 | 116,166 | |||||
Barclays U.S. Funding Corp. 4.675% due 5/22/2006 | 50,000 | 49,662 | |||||
BASF AG 4.51%-4.63% due 4/19-5/8/20063 | 165,300 | 164,669 | |||||
American Honda Finance Corp. 4.50%-4.54% due 4/11-4/25/2006 | 162,000 | 161,639 | |||||
Nestlé Capital Corp. 4.51%-4.52% due 4/4-4/12/20063 | 82,400 | 82,309 | |||||
Alcon Capital Corp. 4.50% 4/7/20063 | 50,000 | 49,956 | |||||
Citigroup Funding Inc. 4.52%-4.81% due 4/4-6/14/2006 | 126,200 | 125,442 | |||||
Toronto-Dominion Holdings USA Inc. 4.545%-4.55% due 4/21-4/24/20063 | 125,000 | 124,671 | |||||
BMW U.S. Capital Corp. 4.51%-4.71% due 4/12-5/22/20063 | 125,000 | 124,603 | |||||
Bank of Ireland 4.555%-4.68% due 4/18-5/23/20063 | 124,000 | 123,554 | |||||
HBOS Treasury Services PLC 4.62%-4.75% due 5/10-6/9/2006 | 116,500 | 115,675 | |||||
IXIS Commercial Paper Corp. 4.58%-4.67% due 4/20-5/12/20063 | 110,000 | 109,605 | |||||
GlaxoSmithKline Finance PLC 4.53%-4.60% due 4/19-5/11/2006 | 110,000 | 109,588 | |||||
Private Export Funding Corp. 4.53%-4.59% due 5/9-5/15/20063 | 110,000 | 109,421 | |||||
DaimlerChrysler Revolving Auto Conduit LLC II 4.58%-4.81% due 4/4-5/30/2006 | 104,304 | 103,622 | |||||
UBS Finance (Delaware) LLC 4.58%-4.72% due 4/21-5/18/2006 | 103,600 | 103,223 | |||||
Canadian Imperial Bank of Commerce 4.53% due 4/18/2006 | 50,000 | 49,997 | |||||
Canadian Imperial Holdings Inc. 4.53% due 4/10/2006 | 50,000 | 49,943 | |||||
KfW International Finance Inc. 4.53% due 4/26/20063 | 95,000 | 94,705 | |||||
ANZ National (International) Ltd. 4.67%-4.69% due 5/10-5/23/20063 | 88,500 | 87,952 | |||||
Shell International Finance BV 4.50%-4.51% due 4/3-4/11/2006 | 84,300 | 84,237 | |||||
Swedish Export Credit Corp. 4.675%-4.81% due 4/21-6/27/2006 | 76,600 | 76,117 | |||||
Calyon North America Inc. 4.50% due 4/3/2006 | 75,000 | 74,981 | |||||
International Bank for Reconstruction and Development 4.42% due 4/7/2006 | 75,000 | 74,943 | |||||
BNP Paribas Finance Inc. 4.654% due 5/12/2006 | 75,000 | 74,612 | |||||
CBA (Delaware) Finance Inc. 4.63%-4.64% due 4/27-4/28/2006 | 74,200 | 73,938 | |||||
Rabobank USA Financial Corp. 4.53% due 4/17/2006 | 50,000 | 49,898 | |||||
Caisse d’Amortissement de la Dette Sociale 4.50% due 4/10/2006 | 49,800 | 49,743 | |||||
Bank of America Corp. 4.685% due 5/24/2006 | 50,000 | 49,655 | |||||
Scotiabank Inc. 4.88% due 6/30/20063 | 50,000 | 49,400 | |||||
Tennessee Valley Authority 4.445% due 4/13/2006 | 36,504 | 36,445 | |||||
Canada Government 4.71% due 5/26/2006 | 30,000 | 29,786 | |||||
Royal Bank of Scotland PLC 4.535% due 4/20/2006 | 27,200 | 27,137 | |||||
Statoil ASA 4.56% due 4/6/2006 | 25,000 | 24,981 | |||||
Bank of Montreal 4.51% due 4/13/2006 | 25,000 | 24,963 | |||||
Siemens Capital Co. LLC 4.57% due 5/5/2006 | 25,000 | 24,894 | |||||
National Australia Funding (Delaware) Inc. 4.68% due 4/10/20063 | 17,300 | 17,278 | |||||
British Columbia Hydro and Power Authority 4.57% due 4/10/2006 | 7,000 | 6,991 | |||||
Total short-term securities (cost: $7,005,349,000) | 7,005,840 | ||||||
Total investment securities (cost: $58,271,899,000) | 80,997,908 | ||||||
Other assets less liabilities | 198,222 | ||||||
Net assets | $ | 81,196,130 |
“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
1Security did not produce income during the last 12 months.
2Valued under fair value procedures adopted by authority of the board of trustees.
3Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration.
The total value of all such restricted securities was $2,977,871,000, which represented 3.67% of the net assets of the fund.
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
See Notes to Financial Statements
MFGEFP-916-0506-S4549
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO
To the Shareholders and
Board of Trustees of
EuroPacific Growth Fund:
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of EuroPacific Growth Fund (the “Fund”) as of March 31, 2006, and for the year then ended and have issued our report thereon dated May 11, 2006, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Fund’s investment portfolio (the “Schedule”) as of March 31, 2006 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Fund’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
May 11, 2006
Costa Mesa, California
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a Nominating Committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the Board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Trustees. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board. Such suggestions must be sent in writing to the Nominating Committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the Nominating Committee.
ITEM 11 - Controls and Procedures
(a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
(b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 - Exhibits
(a)(1) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
(a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EUROPACIFIC GROWTH FUND | |
By /s/ Mark E. Denning | |
Mark E. Denning, President and PEO | |
Date: June 8, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ Mark E. Denning |
Mark E. Denning, President and PEO |
Date: June 8, 2006 |
By /s/ R. Marcia Gould |
R. Marcia Gould, Treasurer and PFO |
Date: June 8, 2006 |