NEW PERSPECTIVE FUND, INC.
Part B
Statement of Additional Information
DECEMBER 1, 1997
(as amended August 17, 1998)
This document is not a prospectus but should be read in conjunction with the
current prospectus of New Perspective Fund, Inc. (the fund or NPF) dated
December 1, 1997. The prospectus may be obtained from your investment dealer
or financial planner or by writing to the fund at the following address:
New Perspective Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page No.
<S> <C>
Description of Certain Securities and Investment Techniques 1
Investment Restrictions 3
Fund Directors and Officers 5
Advisory Board Members 10
Management 13
Dividends, Distributions and Federal Taxes 15
Purchase of Shares 19
Redeeming Shares 24
Shareholder Account Services and Privileges 26
Execution of Portfolio Transactions 28
General Information 28
Investment Results 29
Appendix - Description of Bond Ratings 34
Financial Statements Attached
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
THE DESCRIPTIONS BELOW ARE INTENDED TO SUPPLEMENT THE MATERIAL IN THE
PROSPECTUS UNDER "INVESTMENT POLICIES AND RISKS."
CASH AND CASH EQUIVALENTS -- These securities include (1) commercial paper
(short-term notes up to 9 months in maturity issued by corporations or
governmental bodies), (2) commercial bank obligations (E.G., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), (3) savings association
and saving bank obligations (E.G., certificates of deposit issued by savings
banks or savings associations), (4) securities of the U.S. Government, its
agencies or instrumentalities that mature, or may be redeemed, in one year or
less, and (5) corporate bonds and notes that mature, or that may be redeemed,
in one year or less.
CURRENCY TRANSACTIONS -- The fund has the ability to enter into forward
currency contracts to protect against changes in currency exchange rates. A
forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. Forward currency contracts entered into by the fund will involve the
purchase or sale of a currency against the U.S. dollar. The fund will
segregate liquid assets, which will be marked to market daily, to meet its
forward contract commitments to the extent required by the Securities and
Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
INVESTMENTS IN LOWER RATED BONDS -- Although the fund has no current intention
of investing in such securities (at least for the next 12 months), it may
invest up to 10% of it's assets in lower rated straight debt securities
(securities rated Baa or below by Moody's Investors Service, Inc. or BBB or
below by Standard & Poor's Corporation), including up to 5% in securities rated
Ba and BB or below (commonly referred to as "junk bonds" or "high-yield,
high-risk bonds") or in unrated securities that are determined to be of
equivalent quality. High-yield, high-risk bonds carry a higher degree of
investment risk and are considered speculative. This quality restriction does
not apply to securities convertible into common stocks.
High-yield, high-risk bonds are very sensitive to adverse economic changes and
corporate developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial stress
that would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to obtain
additional financing. If the issuer of a bond defaulted on its obligations to
pay interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high-yield, high-risk bonds.
High-yield, high-risk bonds, like other bonds, may contain redemption or call
provisions. If an issuer exercised these provisions in a declining interest
rate market, the fund would have to replace the security with a lower yielding
security, resulting in a decreased return for investors. Conversely, a
high-yield, high-risk bond's value is likely to decrease in a rising interest
rate market, as is generally true with all bonds.
There may be little trading in the secondary market for particular bonds, which
may affect adversely the fund's ability to value accurately or dispose of such
bonds. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of high-yield,
high-risk bonds, especially in a thin market.
INVESTMENT RESTRICTIONS
The fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares. Such majority is defined by the Investment Company Act of
1940 (the 1940 Act) as the vote of the lesser of (i) 67% or more of the
outstanding voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities are present in person or by proxy or
(ii) more than 50% of the outstanding voting securities. Investment
limitations expressed in the following restrictions are considered at the time
securities are purchased and are based on the fund's net assets unless
otherwise indicated. These restrictions provide that the fund may not:
1. Invest in securities of another issuer (other than the U.S. government or
its agencies or instrumentalities), if immediately after and as a result of
such investment more than 5% of the value of the total assets of the fund would
be invested in the securities of such other issuer, or more than 10% of the
outstanding voting securities of such issuer would be owned by the fund;
2. Invest in companies for the purpose of exercising control or management;
3. Invest more than 25% of the value of its total assets in the securities of
companies primarily engaged in any one industry;
4. Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commissions, is involved, and only if immediately thereafter no more than 10%
of the value of the fund's total assets would be invested in such securities;
5. Buy or sell real estate in the ordinary course of its business; however, the
fund may invest in securities secured by real estate or interests therein or
issued by companies, including real estate investment trusts, which invest in
real estate or interests therein;
6. Buy or sell commodities or commodity contracts in the ordinary course of its
business; provided, however, that this restriction shall not prohibit the fund
from purchasing, selling or holding foreign currencies or entering into forward
foreign currency contracts;
7. Make any investment under circumstances requiring direct payment by the fund
of the Federal Interest Equalization Tax if, immediately thereafter and as a
result of such investment, the total of the Federal Interest Equalization Tax
directly paid or owing by the fund during the fiscal year in which such
investment is made would amount to more than 1-1/2% of the fund's average
month-end net assets during such fiscal year to the date of such investment;
8. Acquire securities subject to restrictions on disposition imposed by the
Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of all such restricted securities held by the fund would
exceed 2% of the value of its total assets; in any event, the fund will not
invest more than 5% of the value of its total assets in securities which are
not readily marketable;
9. Engage in the business of underwriting of securities of other issuers,
except to the extent that the disposal of an investment position may
technically constitute the fund an underwriter as that term is defined under
the Securities Act of 1933;
10. Lend any of its assets; provided, however, that investment in government
obligations, short-term commercial paper, certificates of deposit and banker's
acceptances and publicly traded bonds, debentures, or other debt securities
shall not be deemed to be the making of a loan;
11. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;
12. Purchase securities on margin;
13. Borrow amounts in excess of 5% of the value of its total assets; in any
event, the fund may borrow only as a temporary measure for extraordinary or
emergency purposes and not for investment in securities; nor
14. Mortgage, pledge or hypothecate its assets to any extent.
For purposes of Investment Restriction #3, the fund will not invest 25% or more
of the value of its total assets in the securities of companies primarily
engaged in any one industry.
Notwithstanding Investment Restriction #4, the fund may invest in securities of
other investment companies if deemed advisable by its officers in connection
with the administration of a deferred compensation plan adopted by Directors
pursuant to an exemptive order granted by the Securities and Exchange
Commission.
For purposes of Investment Restriction #11, although the fund may sell
securities short, to the extent that the fund contemporaneously owns or has the
right to acquire at no additional cost securities identical to those sold
short, the fund does not anticipate doing so during the next twelve months.
Additional investment restrictions adopted by the fund and which may be changed
by the Board of Directors, provide that the fund may not;
1. Purchase or retain the securities of any issuer, if those individual
officers and directors of the fund, its investment adviser or principal
underwriter, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
2. Invest more than 5% of the value of its total assets in securities of
companies having, together with their predecessors, a record of less than three
years of continuous operation;
3. Invest in puts, calls, straddles or spreads, or combinations thereof; or
4. Purchase partnership interests in oil, gas, or mineral exploration, drilling
or mining ventures.
FUND DIRECTORS AND OFFICERS
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL OCCUPATION(S) DURING PAST AGGREGATE COMPENSATION TOTAL COMPENSATION TOTAL
AND AGE WITH 5 YEARS (POSITIONS WITHIN THE (INCLUDING VOLUNTARILY (INCLUDING VOLUNTARILY NUMBER OF
REGISTRANT ORGANIZATIONS LISTED MAY HAVE DEFERRED DEFERRED FUND
CHANGED DURING THIS PERIOD) COMPENSATION/1/) COMPENSATION/1/) FROM BOARDS ON
FROM THE FUND DURING ALL FUNDS MANAGED BY WHICH
FISCAL YEAR ENDED CAPITAL RESEARCH AND DIRECTOR
9/30/97 MANAGEMENT SERVES/3/
COMPANY/2/ FOR THE YEAR
ENDED 9/30/97
<S> <C> <C> <C> <C> <C>
Elisabeth Allison Director Administrative Director, ANZI, Ltd. $ 18,100 $ 37,200 2
ANZI, Ltd. (financial publishing and consulting);
1770 Massachusetts Ave. Publishing Consultant, Harvard
Cambridge, MA 02410 Medical School; former Senior Vice
Age: 51 President, Planning and Development,
McGraw Hill, Inc.
Michael R. Bonsignore Director Chairman of the Board and Chief $ 9,500/4/ $ 18,750 2
Honeywell Plaza Executive Officer, Honeywell, Inc.
P.O. Box 524
Minneapolis, MN 55440
Age: 56
+Gina H. Despres Director Senior Vice President, Capital None/5/ None/5/ 1
3000 K Street, N.W. Research and Management Company
Washington, DC 20007
Age: 56
+David I. Fisher Director Chairman of the Board, None/5/ None/5/ 3
333 South Hope Street The Capital Group Companies, Inc.
Los Angeles, CA 90071
Age: 58
Robert A. Fox Director President and Chief Executive Officer, $ 16,700/4/ $ 83,800 5
P.O Box 457 Foster Farms; former President,
Livingston, CA 95334 Revlon International; former Chairman
Age: 60 and Chief Executive Officer, Clarke
Hooper America (advertising)
Alan Greenway Director President, Greenway Associates, Inc. $ 17,600 $ 69,200 4
7413 Fairway Road (management consulting services)
La Jolla, CA 92037
Age: 70
Koichi Itoh Director President and Chief Executive Officer, $ 18,300/4/ $ 36,400 2
7-14-11-104 Minami IMPAC (management consulting
Aoyama services); former Managing Partner,
Minato-ku, Tokyo, Japan VENCA Management (venture capital)
Age: 57
++William H. Kling Director President, Minnesota Public Radio; $ 16,550/4/ $ 71,500 5
45 East Seventh Street President, Greenspring Co.; former
St. Paul, MN 55101 President, American Public Radio
Age: 55 (now Public Radio International)
+Jon B. Lovelace Vice Vice Chairman of the Board, Capital None/5/ None/5/ 4
333 South Hope Street Chairman of Research and Management Company
Los Angeles, CA 90071 the Board
Age: 70
John G. McDonald Director The IBJ Professor of Finance, $ 17,500/4/ $ 142,900 7
Graduate School of Business Graduate School of Business,
Stanford University Stanford University
Stanford, CA 94305
Age: 60
++William I. Miller Director Chairman of the Board, $ 19,300/4/ $ 38,400 2
500 Washington Street Irwin Financial Corporation
Box 929
Columbus, IN 47202
Age: 41
Kirk P. Pendleton Director President, Cairnwood, Inc. $ 15,300/4/ $ 88,800 5
Cairnwood, Inc. (venture capital investment)
75 James Way
Southhampton, PA 18966
Age: 58
Donald E. Petersen Director Former Chairman of the Board and $ 16,800/4/ $ 66,800 4
255 East Brown, Suite 460 Chief Executive Officer, Ford Motor
Birmingham, MI 48009 Company
Age: 71
+James W. Ratzlaff Director Senior Partner, The Capital Group None/5/ None/5/ 8
One Market Plaza Partners, L.P.
Steuart Tower, Suite 1800
San Francisco, CA 94105
Age: 61
+Walter P. Stern Chairman of Chairman, Capital Group International, None/5/ None/5/ 8
630 Fifth Avenue the Board Inc.; Vice Chairman, Capital Research
New York, NY 10111 International; Chairman, Capital
Age: 69 International, Inc.; Director, Temple-
Inland Inc. (forest products)
</TABLE>
+ Directors who are considered "interested persons" of the fund as defined in
the 1940 Act on the basis of their affiliation with the fund's Investment
Adviser, Capital Research and Management Company.
++ Directors who may be deemed "interested persons" of the fund as defined in
the 1940 Act due to membership on the board of directors of the parent company
of a registered broker-dealer.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more of
the funds in The American Funds Group as designated by the director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America.
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicles for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Includes funds managed by Capital Research and Management Company and
affiliates.
/4/ Since the deferred compensation plan's adoption, the total amount of
deferred compensation accrued by the fund (plus earnings thereon) as of the
fiscal year ended September 30, 1997 for participating Directors is as follows:
Michael R. Bonsignore ($8,043), Robert A. Fox ($193,175), Koichi Itoh
($21,833), William H. Kling ($83,016), John G. McDonald ($73,293), William I.
Miller ($22,864), Kirk P. Pendleton ($18,258) and Donald E. Petersen ($15,238).
Amounts deferred and accumulated earnings thereon are not funded and are
general unsecured liabilities of the fund until paid to the Directors.
/5/ Gina H. Despres, David I. Fisher, Jon B. Lovelace, James W. Ratzlaff and
Walter P. Stern are affiliated with the Investment Adviser and, accordingly,
receive no compensation from the fund.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING
WITH REGISTRANT PAST 5 YEARS
<S> <C> <C> <C>
Walter P. Stern
(see above)
Jon B. Lovelace
(see above)
Gina H. Despres
(see above)
William R. Grimsley 59 Senior Senior Vice President and Director,
P.O. Box 7650 Vice President Capital Research and Management
San Francisco, CA 94120 Company
Gregg E. Ireland 47 Senior Senior Vice President,
3000 K Street, N.W. Vice President Capital Research and Management
Washington, DC 20007 Company
Thierry Vandeventer 62 Senior Director, Capital Research and
3 Place des Bergues Vice President Management Company
1201 Geneva, Switzerland
Darcy B. Kopcho 44 Vice President Vice President and Director,
333 South Hope Street Capital Research Company
Los Angeles, CA 90071
Cathy M. Ward 50 Vice President Senior Vice President and Director,
333 South Hope Street Capital Research and Management
Los Angeles, CA 90071 Company
Vincent P. Corti 41 Secretary Vice President - Fund Business
333 South Hope Street Mangement Group, Capital Research
Los Angeles, CA 90071 and Management Company
R. Marcia Gould 43 Treasurer Vice President - Fund Business
135 South State College Blvd. Mangement Group, Capital Research
Brea, CA 92821 and Management Company
</TABLE>
ADVISORY BOARD MEMBERS
Advisory Board Member Compensation
The Board of Directors has established an Advisory Board whose members are, in
the judgment of the Directors, highly knowledgeable about world political and
economic matters. In addition to holding meetings with the Board of Directors,
members of the Advisory Board, while not participating in specific investment
decisions, will consult from time to time with the Investment Adviser,
primarily with respect to world trade and business conditions abroad. The
members of the Advisory Board are:
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL OCCUPATION(S) DURING PAST AGGREGATE TOTAL COMPENSATION TOTAL
AND AGE WITH 5 YEARS (POSITIONS WITHIN THE COMPENSATION (INCLUDING VOLUNTARILY NUMBER OF
REGISTRANT ORGANIZATIONS LISTED MAY HAVE (INCLUDING VOLUNTARILY DEFERRED COMPENSATION/1/) BOARDS ON
CHANGED DURING THIS PERIOD) DEFERRED FROM ALL FUNDS MANAGED WHICH
COMPENSATION/1/) BY CAPITAL RESEARCH AND ADVISORY
FROM THE FUND DURING MANAGEMENT COMPANY/2/ BOARD
FISCAL YEAR ENDED FOR THE YEAR ENDED MEMBER
9/30/97 9/30/97 SERVES/3/
<S> <C> <C> <C> <C> <C>
Yoichi Funabashi Advisory Washington, DC Bureau Chief and $7,000 $7,000 1
Asahi Shimbun Board Diplomatic Correspondent and
6-3-9 Kita-Terao Member Columnist of the Asahi Shimbun
Yokahama City, Japan
Age: 53
Jean Gandois Advisory President, Conseil National du $3,000 $3,000 1
Conseil National du Patronat Francais Board Patronat Francais; former Chairman of
31 Ave. Pierre Premier de Serbie Member the Board, Cockerill-Sambre; former
75784 Paris, France Chairman and Chief Executive Officer,
Age: 67 Pechiney
Claudio X. Gonzalez Laporte Advisory Chairman of the Board and Chief $3,000 $3,000 1
Kimberly Clark de Mexico, SA Board Executive Officer, Kimberly Clark de
103-3 Colonia Polanco Morales Member Mexico, SA
Mexico, DF, Mexico
Age: 63
Sir Peter Holmes Advisory Director and former Chairman of the $7,000 $7,000 1
Shell Centre Board Board and Managing Director, The
London, England Member Royal Dutch/Shell Group of
Age: 65 Companies
Jae-Hyun Hyun Advisory Chairman, Tong Yang Group $6,250 $6,250 1
Tong Yang Group Board
14F, TYIF Building Member
Seoul, Korea
Age: 48
Baron Gualtherus Kraijenhoff Advisory Chairman of the Supervisory Council, $7,000 $7,000 1
Stoeplaan 9, Flat 58 Board AKZO N.V.
The Netherlands Member
Age: 75
Pierre Lescure Advisory Chairman and Chief Executive Officer, $0/4/ $0/4/ 1
CANAL + Board CANAL +
85-89 quai Andre Citroen Member
F-75015 Paris
France
Age: 51
Allen E. Puckett Advisory Chairman Emeritus, Hughes Aircraft $7,000 $7,000 1
935 Corsica Drive Board Company
Pacific Palisades, CA 90272 Member
Age: 78
Rozanne L. Ridgway Advisory Co-Chair, Atlantic Council of the $7,000 $7,000 1
Baltic-American Enterprise Fund Board United States; Chair, Baltic American
1625 K Street, N.W. Member Enterprises Fund
Washington, DC 20006
Age: 62
Orville H. Schell Advisory Dean, Graduate School of Journalism, $7,000 $7,000 1
Graduate School of Journalism Board University of California, Berkeley
121 North Gate Hall Member
University of California
Berkeley, CA 94720
Age: 57
</TABLE>
/1/ Amounts may be deferred by eligible advisory board members under a
non-qualified deferred compensation plan adopted by the fund in 1993. Deferred
amounts accumulate at an earnings rate determined by the total return of one or
more of the funds in The American Funds Group as designated by the Advisory
Board member.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America.
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicles for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Includes funds managed by Capital Research and Management Company and
affiliates.
/4/ Pierre Lescure was appointed to the Advisory Board effective October 1,
1997 and, therefore, received no compensation from the fund in fiscal year
1997.
All of the officers listed are officers or employees of the Investment Adviser
or affiliated companies. No compensation is paid by the fund to any director
or officer who is a director, officer or employee of the Investment Adviser or
affiliated companies. The fund pays fees of $12,000 per annum to directors who
are not affiliated with the Investment Adviser, plus $1,000 for each Board of
Directors meeting attended ($2,500 for each meeting attended in conjunction
with meetings with the Advisory Board), plus $400 for each meeting attended as
a member of a committee of the Board of Directors. No pension or retirement
benefits are accrued as part of fund expenses. The Directors may elect, on a
voluntary basis, to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund. Effective October 1, 1997, each
Advisory Board member is paid a fee of $5,000 per annum, plus $5,000 for each
meeting attended in conjunction with meetings with the Board of Directors. As
of November 1, 1997 the officers, directors and Advisory Board members and
their families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER -- The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for managing more than $175 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the Agreement) between the fund and the Investment Adviser
is dated April 1, 1997. The Agreement will continue in effect until March 31,
1998, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by (i) the Board of Directors of the fund, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the fund, and (ii) the vote of a majority of Directors who are not parties to
the Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person, at a meeting called for the purpose of voting on such
approval. The Agreement provides that the Investment Adviser has no liability
to the fund for its acts or omissions in the performance of its obligations to
the fund not involving willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations under the Agreement. The Agreement also
provides that either party has the right to terminate it, without penalty, upon
60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, provides suitable office space and utilities, necessary office
equipment and general purpose forms and supplies used at the office of the
fund, and will pay the travel expenses of directors and members of the Advisory
Board incurred in connection with attendance at meetings of those Boards. The
fund will pay all expenses not expressly assumed by the Investment Adviser,
including, but not limited to, fees and expenses of the transfer agent,
dividend disbursing agent, legal counsel and independent public accountants and
custodian, including charges of such custodian for the preparation and
maintenance of the books of account and records of the fund, cost of designing,
printing and mailing reports, prospectuses, proxy statements and notices to
shareholders; fees and expenses of registration, qualification and issuance of
fund shares; expenses pursuant to the fund's Plan of Distribution (described
below); association dues; interest; taxes; and compensation of Advisory Board
members and of Directors who are not affiliated persons of the Investment
Adviser.
The Investment Adviser has agreed that in the event the expenses of the fund
(with the exclusion of interest, taxes, brokerage costs, distribution expenses
pursuant to a plan under Rule 12b-1 and extraordinary expenses such as
litigation and acquisitions) for any fiscal year ending on a date on which the
Agreement is in effect, exceed the expense limitations, if any, applicable to
the fund pursuant to state securities laws or any regulations thereunder, it
will reduce its fee by the extent of such excess and, if required pursuant to
any such laws or regulations, will reimburse the fund in the amount of such
excess.
As compensation for its services, the Investment Adviser receives a monthly fee
which is accrued daily, calculated at the annual rate of 0.60% on the first
$500 million of the fund's net assets, 0.50% on net assets between $500 million
and $1 billion, 0.46% on net assets between $1 billion and $1.5 billion, 0.43%
on net assets between $1.5 billion and $2.5 billion, 0.41% on net assets
between $2.5 billion and $4 billion, 0.40% on net assets between $4 billion and
$6.5 billion, 0.395% on net assets between $6.5 billion and $10.5 billion,
0.39% on net assets between $10.5 billion and $17 billion, and 0.385% in excess
of $17 billion. For the fiscal years ended September 30, 1997, 1996 and 1995,
the Investment Adviser received advisory fees of $59,337,000, $43,463,000 and
$32,015,000, respectively.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares for the fiscal year ended
September 30, 1997 amounted to $12,090,000 after allowance of $62,293,000 to
dealers. During the fiscal years ended September 30, 1996 and 1995 the
Principal Underwriter received $12,923,000 and $8,330,000, after allowance of
$67,852,000 and $44,248,000, respectively.
As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has been approved by the full Board of
Directors, and separately by a majority of the Directors who are not interested
persons of the fund and who have no direct or indirect financial interest in
the operation of the Plan or the Principal Underwriting Agreement, and the Plan
has been approved by the vote of a majority of the outstanding voting
securities of the fund. The Officers and Directors who are interested persons
of the fund may be considered to have a direct or indirect financial interest
in the operation of the Plan due to present or past affiliations with the
Investment Adviser and related companies. Potential benefits of the Plan to
the fund include improved shareholder services, savings to the fund in transfer
agency costs, savings to the fund in advisory fees and other expenses, benefits
to the investment process from growth or stability of assets and maintenance of
a financially healthy management organization. The selection and nomination of
Directors who are not interested persons of the fund are committed to the
discretion of the Directors who are not interested persons during the existence
of the Plan. The Plan is reviewed quarterly and must be renewed annually by
the Board of Directors.
Under the Plan, the fund may expend up to 0.25% of its net assets annually to
finance any activity primarily intended to result in the sale of fund shares,
provided the fund's Board of Directors has approved the category of expenses
for which payment is being made. These include service fees for qualified
dealers and dealer commissions and wholesaler compensation on sales of shares
exceeding $1 million (including purchases by any employer-sponsored 403(b) plan
or purchases by any defined contribution plan qualified under Section 401(a) of
the Internal Revenue Code including a "401(k)" plan with 100 or more eligible
employees). During the fiscal year ended September 30, 1997, the fund paid or
accrued $32,358,000 for compensation to dealers under the Plan.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries of affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements, and has elected the tax status
of a "regulated investment company," under the provisions of Subchapter M of
the Internal Revenue Code of 1986 (the Code). Under Subchapter M, if the fund
distributes within specified times at least 90% of the sum of its investment
company taxable income (net investment income and the excess of net short-term
capital gains over net long-term capital losses) and its tax-exempt interest,
if any, it will be taxed only on that portion of such investment company
taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
gains or sale or other disposition of stock or securities held less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities (but such other
securities must be limited, in respect of any one issuer, to an amount not
greater than 5% of the fund's assets and 10% of the outstanding voting
securities of such issuer), and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
for the year. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
The amount of any realized gain or loss on closing out a futures contract such
as a forward commitment for the purchase or sale of foreign currency will
generally result in a realized capital gain or loss for tax purposes. Futures
contracts held by the fund at the end of each fiscal year will be required to
be "marked to market" for federal income tax purposes, that is, deemed to have
been sold at market value. Sixty percent (60%) of any net gain or loss
recognized on these deemed sales and sixty percent (60%) of any net realized
gain or loss from any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss.
Currency transactions that are not subject to Section 1256 of the Code may be
subject to Section 988 of the Code, in which case the 60%/40%
long-term/short-term capital gain or loss rule of Section 1256 would not apply.
Rather, each Section 988 foreign currency gain or loss would generally be
computed separately and treated as ordinary income or loss. The fund will
attempt to monitor Section 988 transactions to avoid an adverse tax impact.
The fund also intends to continue distributing to shareholders all of the
excess of net long-term capital gain over net short-term capital loss on sales
of securities. If the net asset value of shares of the fund should, by reason
of a distribution of realized capital gains, be reduced below a shareholder's
cost, such distribution would to that extent be a return of capital to that
shareholder even though taxable to the shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that the fund pays the dividend no later
than the end of January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
The fund may be required to pay withholding and other taxes imposed by foreign
countries generally at rates from 10% to 40% which would reduce the fund's
investment income. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. If more than 50% in value of the fund's total
assets at the close of its taxable year consists of securities of foreign
issuers, the fund will be eligible to file elections with the Internal Revenue
Service pursuant to which shareholders of the fund will be required to include
their respective pro rata portions of such withholding taxes in their federal
income tax returns as gross income, treat such amounts as foreign taxes paid by
them, and deduct such amounts in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their federal income
taxes. In any year the fund makes such an election, shareholders will be
notified as to the amount of foreign withholding and other taxes paid by the
fund.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, non-U.S. corporation, or non-U.S.
partnership (a non-U.S. shareholder) will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate). Withholding will not apply if a
dividend paid by the fund to a non-U.S. shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents, or domestic
corporations will apply. However, if the distribution is effectively connected
with the conduct of the non-U.S. shareholder's trade or business within the
U.S., the distribution would be included in the net income of the shareholder
and subject to U.S. income tax at the applicable marginal rate. Distributions
of net long-term capital gains are not subject to tax withholding, but in the
case of a non-U.S. shareholder who is a nonresident alien individual, such
distributions ordinarily will be subject to U.S. income tax at a rate of 30% if
the individual is physically present in the U.S. for more than 182 days during
the taxable year.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on assets held more than eighteen months is 20%, and on assets
held more than one year and not more than eighteen months is 28%; and the
maximum corporate tax applicable to ordinary income and net capital gains is
35%. However, to eliminate the benefit of lower marginal corporate income tax
rates, corporations which have taxable income in excess of $100,000 for a
taxable year will be required to pay an additional amount of tax liability of
up to $11,750 and corporations which have taxable income in excess of
$15,000,000 for a taxable year will be required to pay an additional amount of
tax of up to $100,000. Naturally, the amount of tax payable by a shareholder
with respect to either distributions from the fund or disposition of fund
shares will be affected by a combination of tax law rules covering, e.g.,
deductions, credits, deferrals, exemptions, sources of income and other
matters. Under the Code, an individual is entitled to establish an IRA each
year (prior to the tax return filing deadline for that year) whereby earnings
on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Investors should consult their own tax advisers with
specific reference to their own tax situations.
PURCHASE OF SHARES
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METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and Fund $50 minimum (except where a lower minimum is
Numbers" for initial investment noted under "Investment Minimums and Fund
minimums. Numbers").
By contacting Visit any investment dealer who is Mail directly to your investment dealer's address
your investment registered in the state where the printed on your account statement.
dealer purchase is made and who has a sales
agreement with American Funds
Distributors.
By mail Make your check payable to the fund Fill out the account additions form at the bottom of a
and mail to the address indicated on recent account statement, make your check
the account application. Please payable to the fund, write your account number on
indicate an investment dealer on the your check, and mail the check and form in the
account application. envelope provided with your account statement.
By telephone Please contact your investment dealer Complete the "Investments by Phone" section on
to open account, then follow the the account application or American FundsLink
procedures for additional investments. Authorization Form. Once you establish the
privilege, you, your financial advisor or any person
with your account information can call American
FundsLine(R) and make investments by telephone
(subject to conditions noted in "Telephone
Purchases, Redemptions and Exchanges" below).
By computer Please contact your investment dealer Complete the American FundsLink Authorization
to open account, then follow the Form. Once you establish the privilege, you, your
procedures for additional investments. financial advisor or any person with your account
information may access American FundsLine
OnLine(SM) on the Internet and make investments by
computer (subject to conditions noted in "Telephone
and Computer Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to obtain your Your bank should wire your additional investments
account number(s), if necessary. in the same manner as described under "Initial
Please indicate an investment dealer Investment."
on the account. Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service Company a/c
#4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
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INVESTMENT MINIMUMS AND FUND NUMBERS -- Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(R) (see
description below):
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FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R) $1,000 02
American Balanced Fund(R) 500 11
American Mutual Fund(R) 250 03
Capital Income Builder(R) 1,000 12
Capital World Growth and Income Fund(SM) 1,000 33
EuroPacific Growth Fund(R) 250 16
Fundamental Investors(SM) 250 10
The Growth Fund of America(R) 1,000 05
The Income Fund of America(R) 1,000 06
The Investment Company of America(R) 250 04
The New Economy Fund(R) 1,000 14
New Perspective Fund(R) 250 07
SMALLCAP World Fund(R) 1,000 35
Washington Mutual Investors Fund(SM) 250 01
BOND FUNDS
American High-Income Municipal Bond Fund(R) 1,000 40
American High-Income Trust(SM) 1,000 21
The Bond Fund of America(SM) 1,000 08
Capital World Bond Fund(R) 1,000 31
Intermediate Bond Fund of America(SM) 1,000 23
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(SM)
The Tax-Exempt Bond Fund of America(R) 1,000 19
The Tax-Exempt Fund of California(R)* 1,000 20
The Tax-Exempt Fund of Maryland(R)* 1,000 24
The Tax-Exempt Fund of Virginia(R)* 1,000 25
U.S. Government Securities Fund(SM) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(R) 2,500 09
The Tax-Exempt Money Fund of America(SM) 2,500 39
The U.S. Treasury Money Fund of America(SM) 2,500 49
___________
*Available only in certain states.
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For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
DEALER COMMISSIONS -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
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AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than $100,000 4.71 4.50 3.75
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than $50,000 4.71 4.50 3.75
$50,000 but less than $100,000 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND
FUNDS
$100,000 but less than $250,000 3.63 3.50 2.75
$250,000 but less than $500,000 2.56 2.50 2.00
$500,000 but less than $1,000,000 2.04 2.00 1.60
$1,000,000 or more none none (see below)
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Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1998, provide additional compensation
to dealers. Currently these payments are limited to the top 100 dealers who
have sold shares of the fund or other funds in The American Funds Group. These
payments will be based on a pro rata share of a qualifying dealer's sales.
American Funds Distributors will, on an annual basis, determine the
advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a "401(k)" plan with 100
or more eligible employees or any other purchaser investing at least $1 million
in shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares at
net asset value; however, a contingent deferred sales charge of 1% is imposed
on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.") Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES -- The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans, foundations, and endowments with assets of $50
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION -- The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the
"Statement"). The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize a Statement in order to
qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by the
Transfer Agent. All dividends and any capital gain distributions on shares
held in escrow will be credited to the shareholder's account in shares (or paid
in cash, if requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the sales
charge which would have been paid if the total of such purchases had been made
at a single time. If the difference is not paid within 45 days after written
request by the Principal Underwriter or the securities dealer, the appropriate
number of shares held in escrow will be redeemed to pay such difference. If
the proceeds from this redemption are inadequate, the purchaser will be liable
to the Principal Underwriter for the balance still outstanding. The Statement
may be revised upward at any time during the 13-month period, and such a
revision will be treated as a new Statement, except that the 13-month period
during which the purchase must be made will remain unchanged and there will be
no retroactive reduction of the sales charges paid on prior purchases.
Existing holdings eligible for rights of accumulation (see the prospectus and
account application) may be credited toward satisfying the Statement. During
the Statement period, reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
PRICE OF SHARES -- Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In the case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York time) each day the New York Stock Exchange is
open as set forth below. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day. All portfolio securities of funds managed by
Capital Research and Management Company (other than money market funds) are
valued, and the net asset value per share is determined, as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 3% of the
outstanding shares of the fund without the consent of a majority of the fund's
Directors.
REDEEMING SHARES
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By writing to American Funds Service Send a letter of instruction specifying the name of the fund, the
Company (at the appropriate address number of shares or dollar amount to be sold, your name and
indicated under "Principal Underwriter account number. You should also enclose any share certificates
and Transfer Agent" in the prospectus) you wish to redeem. For redemptions over $50,000 and for
certain redemptions of $50,000 or less (see below), your
signature must be guaranteed by a member firm of a domestic
stock exchange or the National Association of Securities Dealers,
Inc., bank, savings association or credit union that is an eligible
guarantor institution. You should verify with the institution that it is
an eligible guarantor prior to signing. Additional documentation
may be required for redemption of shares held in corporate,
partnership or fiduciary accounts. Notarization by a Notary Public
is not an acceptable signature guarantee.
By contacting your investment dealer If you redeem shares through your investment dealer, you may be
charged for this service. SHARES HELD FOR YOU IN YOUR
INVESTMENT DEALER'S STREET NAME MUST BE REDEEMED THROUGH
THE DEALER.
You may have a redemption check sent You may use this option, provided the account is registered in the
to you by using American FundsLine(R) name of an individual(s), a UGMA/UTMA custodian, or a non-retirement
or American FundsLine OnLine(SM) or by plan trust. These redemptions may not exceed $50,000 per shareholder
telephoning, faxing, or telegraphing each day and the check must be made payable to the shareholder(s) of
American Funds Service Company record and be sent to the address of record provided the address has
(subject to the conditions noted in this been used with the account for at least 10 days. See "Principal
section and in "Telephone and Computer Underwriter and Transfer Agent" in the prospectus and "Exchange
Purchases, Sales and Exchanges" in the "Privilege" below for the appropriate telephone or fax number.
prospectus)
In the case of the money market funds, Upon request (use the account application for the money market
you may have redemptions wired to your funds) you may establish telephone redemption privileges (which
bank by telephoning American Funds will enable you to have a redemption sent to your bank account)
Service Company ($1,000 or more) or by and/or check writing privileges. If you request check writing
writing a check ($250 or more) privileges, you will be provided with checks that you may use to
draw against your account. These checks may be made payable
to anyone you designate and must be signed by the authorized
number of registered shareholders exactly as indicated on your
checking account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 15 DAYS.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 59 1/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit the fund
to direct the Transfer Agent to redeem the shares of any shareholder if (a) the
shares owned by such shareholder have a value (determined, for the purpose of
this sentence only, as the greater of the shareholder's cost or the then net
asset value of the shares, including the reinvestment of income dividends and
capital gain distributions, if any) of less than $150, or (b) such shareholder
owns less than ten (10) shares of capital stock of the fund. Prior notice of
at least 60 days will be given to a shareholder before the involuntary
redemption provision is made effective with respect to the shareholder's
account. The shareholder will have not less than 30 days from the date of such
notice within which to bring the account up to the minimum determined as set
forth above.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables
shareholders to make regular monthly or quarterly investments in shares through
automatic charges to their bank accounts. With shareholder authorization and
bank approval, the Transfer Agent will automatically charge the bank account
for the amount specified ($50 minimum), which will be automatically invested in
shares at the offering price on or about the dates you select. Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement at least quarterly. Participation in the plan will
begin within 30 days after receipt of the account application. If the
shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or the closing of the account, the plan may be terminated
and the related investment reversed. The shareholder may change the amount of
the investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the receiving fund) subject to the following conditions:
(i) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, to automatically redeem the account and send the
proceeds to the shareholder. These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(R) or American FundsLine OnLine(SM) (see "American FundsLine(R) and
American FundsLine OnLine(SM)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, computer, fax or telegraph. Exchange redemptions and purchases are
processed simultaneously at the share prices next determined after the exchange
order is received. (See "Purchase of Shares--Price of Shares.") THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES -- You may automatically exchange shares (in amounts of
$50 or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS -- Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) -- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(R) or American
FundsLine OnLine(SM). To use this service, call 800/325-3590 from a
TouchTone/TM/ telepone or access the American Funds Wed site on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(R)
and American FundsLine OnLine(SM) are subject to the conditions noted above
and in "Shareholder Account Services and Privileges -- Telephone and Computer
Purchases, Redemptions and Exchanges" below. You will need your fund number
(see the list of funds in The American Funds Group under "Purchase of Shares --
Investment Minimums and Fund Numbers"), personal identification number (the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.
TELEPHONE AND COMPUTER REDEMPTIONS AND EXCHANGES -- By using the telephone or
computer (including American FundsLine(R) or American FundsLine OnLine(SM)),
fax or telegraph redemption and/or exchange options, you agree to hold the
fund, American Funds Service Company, any of its affiliates or mutual funds
managed by such affiliates, and each of their respective directors, trustees,
officers, employees and agents harmless from any losses, expenses, costs or
liability (including attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all shareholders are
automatically eligible to use these options. However, you may elect to opt out
of these options by writing American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company does not employ reasonable procedures to confirm
that the instructions received from any person with appropriate account
information are genuine, the fund may be liable for losses due to unauthorized
or fraudulent instructions. In the event that shareholders are unable to reach
the fund by telephone because of technical difficulties, market conditions, or
a natural disaster, redemption and exchange requests may be made in writing
only.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker is in a position to obtain the
best price and execution, the order is placed with that broker. This may or
may not be a broker who has provided investment research, statistical, or other
related services to the Investment Adviser or has sold shares of the fund or
other funds served by the Investment Adviser. The fund does not consider that
it has an obligation to obtain the lowest available commission rate to the
exclusion of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner.
Brokerage commissions paid on portfolio transactions for the fiscal years ended
September 30, 1997, 1996 and 1995 amounted to $11,461,000, $8,933,000 and
$6,300,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, NY 10081, as Custodian. Non-U.S. securities may be held by the
Custodian pursuant to subcustodial arrangements in non-U.S. banks or foreign
branches of U.S. banks.
TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $12,198,000 for the fiscal year ended September 30, 1997.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the fund's independent accountants since the
fund's inception, providing audit services, preparation of tax returns and
review of certain documents to be filed with the Securities and Exchange
Commission. The financial statements included in this Statement of Additional
Information from the Annual Report have been so included in reliance on the
report of Price Waterhouse LLP given on the authority of said firm as experts
in auditing and accounting.
REPORTS TO SHAREHOLDERS -- The fund's fiscal year ends on September 30.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent accountants,
Price Waterhouse LLP, whose selection is determined annually by the Board of
Directors.
PERSONAL INVESTING POLICY -- Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
REMOVAL OF DIRECTORS BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors as
though the fund were a common-law trust. Accordingly, the Directors of the
fund shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
The financial statements including the investment portfolio and the report of
Independent Accountants contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE,
REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- SEPTEMBER 30, 1997
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $21.86
Maximum offering price per share
(100/94.25 of net asset value per share which takes
into account the fund's current maximum sales charge) $23.19
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is 1.14% based on a 30-day (or one month) period ended
September 30, 1997, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's one-year total return and average annual total returns for the five-
and ten-year periods ended on September 30, 1997 was 22.52%, 16.46% and 11.59%,
respectively. The average annual total return (T) is computed by using the
value at the end of the period (ERV) of a hypothetical initial investment of
$1,000 (P) over a period of years (n) according to the following formula as
required by the Securities and Exchange Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent dividends
and capital gain distributions are then reinvested at net asset value on the
reinvestment date determined by the Board of Directors. The sum of the initial
shares purchased and shares acquired through reinvestment is multiplied by the
net asset value per share as of the end of the period in order to determine
ending value. The difference between the ending value and the initial
investment divided by the initial investment converted to a percentage equals
total return. The resulting percentage indicates the positive or negative
investment results that an investor would have experienced from reinvested
dividends and capital gain distributions and changes in share price during the
period. Total return may be calculated for one year, five years, ten years and
for other periods of years. The average annual total return over periods
greater than one year may also be computed by utilizing ending values as
determined above.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated.
The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices or results of other
mutual funds or investment or savings vehicles in advertisements or in reports
furnished to present to prospective shareholders. The fund may also, from time
to time, combine its results with those of other funds in The American Funds
Group for purposes of illustrating investment strategies involving multiple
funds.
The fund may refer to results compiled by organizations such as CDA Investment
Technologies, Ibbottson Associates, Lipper Analytical Services, Morningstar,
Inc. and Wiesenberger Investment Companies Services and by the U.S. Department
of Commerce. Additionally, the fund may, from time to time, refer to results
published in various newspapers or periodicals, including BARRONS, FORBES,
FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY,
U.S. NEWS AND WORLD REPORT and THE WALL STREET JOURNAL.
The fund may, from time to time, illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
The fund may from time to time compare its investment results with the Consumer
Price Index, which is a measure of the average change in prices over time in a
fixed market basket of goods and services (e.g. food, clothing, fuels,
transportation, and other goods and services that people buy for day-to-day
living).
EXPERIENCE OF THE INVESTMENT ADVISER -- Capital Research and Management
Company manages nine common stock funds that are at least 10 years old. In
the rolling 10-year periods since January 1, 1967 (127 in all) those funds
have had better total returns than the Standard and Poor's 500 Composite Stock
Index in 91 of the 127 periods.
Note that past results are not an indication of future investment results and
that the fund has different investment policies from other funds managed by
Capital Research and Management Company. Reference to the other common stock
funds is made solely for the purpose of informing investors about the
experience and history of Capital Research and Management Company.
The investment results set forth below were calculated as described in the
fund's Prospectus.
NPF VS. VARIOUS UNMANAGED INDEXES
<TABLE>
<CAPTION>
Periods Total MSCI Indices Capital
Return Appreciation
10/1 - 9/30 NPF DJIA/1/ S&P 500/2/ World/3/ U.S./4/ NPF NYSE/6/
<S> <C> <C> <C> <C> <C> <C> <C>
1973# - 1997 +2,908% +2,187% +2,035% +1,538% +1,896% +1,426% +711%
1987 - 1997 +199 +316 +295 +149 +304 +144 +176
1986 - 1996 +245 +358 +303 +188 +309 +180 +175
1985 - 1995 +332 +404 +341 +302 +342 +250 +198
1984 - 1994 +321 +355 +289 +338 +289 +236 +167
1983 - 1993 +278 +321 +293 +328 +291 +196 +165
1982 - 1992 +360 +443 +402 +400 +393 +244 +232
1981 - 1991 +356 +446 +397 +416 +392 +246 +218
1980 - 1990 +275 +314 +269 +285 +266 +166 +132
1979 - 1989 +387 +395 +392 +483 +372 +245 +212
1978 - 1988 +342 +302 +317 +420 +291 +214 +166
1977 - 1987 +584 +415 +432 +580 +397 +386 +241
1976 - 1986 +369 +205 +256 +389 +235 +232 +137
1975 - 1985 +299 +187 +253 +274 +233 +181 +136
1974 - 1984 +403 +241 +326 +288 +297 +248 +186
1973# - 1983 +271 +124 +149 +128 +129 +156 + 64
</TABLE>
/1/ The Dow Jones Average of 30 Industrial stocks is comprised of 30
industrial companies such as General Motors and General Electric.
/2/ The Standard and Poor's 500 Composite Stock Index is comprised of
industrial, transportation, public utilities and financial stocks and
represents a large portion of the value of issues traded on the New York Stock
Exchange. Selected issues traded on the American Stock Exchange are also
included.
/3/ The Morgan Stanley Capital International World Index is an arithmetical
average, weighted by market value, of the performance of more than 1,400
securities listed on the stock exchanges of Europe, Australia, the Far East,
Canada, New Zealand and the U.S.
/4/ The Morgan Stanley Capital International USA Index is an arithmetical
average, weighted by market value, of the performance of more than 300
securities listed on stock exchanges in the U.S.
/5/ The New York Stock Exchange Composite Index is a capitalization weighted
index of all common stocks listed on the exchange.
# From March 13, 1973, the date the fund commenced operations.
IF YOU ARE CONSIDERING NPF FOR RETIREMENT . . .
Here's how much you would have if you had invested $2,000 on
October 1 of each year in NPF over the past 5 and 10 years:
<TABLE>
<CAPTION>
<S> <C>
5 Years 10 Years
(10/1/92 - 9/30/97) (10/1/87 - 9/30/97)
$16,281 $45,061
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM . . .
<TABLE>
<CAPTION>
If you had invested Periods ...and taken all
$10,000 in NPF 10/1 - 9/30 distributions in shares,
this many years ago... your investment would
Number of Years have been worth this
much at September 30, 1997
Value
<S> <C> <C>
1 1996 - 1997 $12,253
2 1995 - 1997 13,550
3 1994 - 1997 16,078
4 1993 - 1997 18,102
5 1992 - 1997 21,421
6 1991 - 1997 23,144
7 1990 - 1997 28,670
8 1989 - 1997 27,271
9 1988 - 1997 34,889
10 1987 - 1997 29,927
11 1986 - 1997 44,794
12 1985 - 1997 62,191
13 1984 - 1997 71,819
14 1983 - 1997 72,536
15 1982 - 1997 104,487
16 1981 - 1997 111,977
17 1980 - 1997 114,074
18 1979 - 1997 141,049
19 1978 - 1997 163,540
20 1977 - 1997 217,251
21 1976 - 1997 222,962
22 1975 - 1997 263,365
23 1974 - 1997 382,933
24 1973 - 1997 285,353
Lifetime 1973# - 1997 300,835
</TABLE>
# From March 13, 1973, the date the fund commenced operations.
Illustration of a $10,000 investment in NPF with
dividends reinvested and capital gain distributions taken in shares
(For the period March 13, 1973 through September 30, 1997)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Fiscal Annual Dividends Total From From Dividends Total
Year End Dividends (cumulative) Investment Initial Capital Gains Reinvested Value
Sept. 30 Cost Investment Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1973# ---- ---- $10,000 $9,938 ---- ---- $9,938
1974 325 325 10,325 7,163 ---- 239 7,402
1975 401 726 10,726 9,952 ---- 817 10,769
1976 337 1,063 11,063 11,422 ---- 1,298 12,720
1977 280 1,343 11,343 11,236 244 1,570 13,050
1978 318 1,661 11,661 13,908 1,079 2,355 17,342
1979 444 2,105 12,105 15,165 1,868 3,067 20,100
1980 501 2,606 12,606 18,230 2,315 4,321 24,866
1981 931 3,537 13,537 17,905 2,274 5,136 25,315
1982 1,667 5,204 15,204 16,225 4,557 6,369 27,151
1983 1,830 7,034 17,034 21,080 7,382 10,631 39,093
1984 1,205 8,239 18,239 19,259 9,323 10,912 39,494
1985 1,196 9,435 19,435 19,796 13,202 12,580 45,578
1986 1,178 10,613 20,613 24,699 21,436 17,138 63,273
1987 1,393 12,006 22,006 32,052 38,599 24,076 94,727
1988 1,820 13,826 23,826 23,928 37,429 19,876 81,233
1989 2,605 16,431 26,431 27,920 49,773 26,275 103,968
1990 2,617 19,048 29,048 23,718 50,481 24,697 98,896
1991 2,979 22,027 32,027 27,477 63,176 31,840 122,493
1992 2,524 24,551 34,551 28,597 67,989 35,751 132,337
1993 2,172 26,723 36,723 33,173 79,499 43,932 156,604
1994 2,231 28,954 38,954 35,951 90,455 49,939 176,345
1995 2,813 31,767 41,767 39,639 111,254 58,307 209,200
1996 4,129 35,896 45,896 41,484 124,538 65,439 231,461
1997 4,365 40,261 50,261 51,032 164,111 85,692 300,835
</TABLE>
The dollar amount of capital gain distributions during the period was $80,243
________________________________________
# From March 13, 1973, the date fund commenced operations.
APPENDIX
DESCRIPTION OF BOND RATINGS
Corporate Debt Securities
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C" according to quality.
"Aaa -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as 'gilt edge.' Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
"Aa -- High quality by all standards. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"Baa -- Medium grade obligations. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and , in fact, have
speculative characteristics as well."
"Ba -- Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B -- Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small."
"Caa -- Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"Ca -- Speculative in a high degree; often in default or have other marked
shortcomings."
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
STANDARD & POOR'S CORPORATION rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
"AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"A - Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
"BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for debt in
higher rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"C-1 -- Reserved for income bonds on which no interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
<TABLE>
<S> <C> <C> <C>
New Perspective Fund
Investment Portfolio, September 30, 1997
Largest Industry Holdings
10.26% Health & Personal Care
7.63% Telecommunications
6.71% Banking
5.58% Electronic Components
5.30% Broadcasting & Publishing
52.93% Other Industries
11.59% Bonds, Cash and Equivalents
Shares or Market Percent
Principal Value of Net
Equity-Type Securities Amount (Millions) Assets
- ----------------------------------------- ------------ ------------ ------------
Health & Personal Care - 10.26%
AB Astra, Class A (Sweden) 11,826,833 $218.798
AB Astra, Class A (American Depositary Receipts) 413,333 7.595
AB Astra, Class B 8,590,533 152.115 2.23
Novartis AG (Switzerland) 231,231 355.470 2.10
Pfizer Inc (USA) 4,870,000 292.505 1.73
Teva Pharmaceutical Industries Ltd. (American Depositary
Receipts) (Israel) 2,400,000 133.800 .79
SmithKline Beecham PLC (American Depositary Receipts)
(United Kingdom) 2,200,000 107.525 .63
Merck & Co., Inc. (USA) 880,000 87.945 .52
Glaxo Wellcome PLC (United Kingdom) 563,264 12.678
Glaxo Wellcome PLC (American Depositary Receipts) 854,000 38.377 .30
Zeneca Group PLC (United Kingdom) 1,000,000 32.627
Zeneca Group PLC (American Depositary Receipts) 185,000 18.095 .30
Shiseido Co., Ltd. (Japan) 2,924,000 47.075 .28
Johnson & Johnson (USA) 800,000 46.100 .27
Genentech, Inc., callable putable common stock (USA) (1) 600,000 34.875 .21
Sankyo Co., Ltd. (Japan) 1,000,000 34.689 .20
Alza Corp. (USA) (1) 1,000,000 29.000 .17
Abbott Laboratories (USA) 400,000 25.575 .15
Pharmacia & Upjohn, Inc. (USA) 500,000 18.250 .11
Gillette Co. (USA) 203,400 17.556 .10
Guidant Corp. (USA) 300,000 16.800 .10
Medtronic, Inc. (USA) 255,000 11.985 .07
Telecommunications - 7.63%
Telefonica de Espana, SA (Spain) 7,906,000 249.523
Telefonica de Espana, SA (American Depositary Receipts) 76,000 7.153 1.51
Telecom Italia SPA, ordinary shares (formerly STET-Societa
Finanziaria Telefonica p.a.) (Italy) 20,190,000 135.280
Telecom Italia SPA, nonconvertible
savings shares 16,500,000 64.457 1.18
Telefonos de Mexico, SA de CV, Class L (American
Depositary Receipts) (Mexico) 3,134,530 162.212 .96
AirTouch Communications (USA) (1) 3,500,000 124.031 .73
Telecom Corp. of New Zealand Ltd. (New Zealand) 13,678,100 69.386
Telecom Corp. of New Zealand Ltd. (2) 5,135,400 26.051 .56
Vodafone Group PLC (American Depositary Receipts) (United
Kingdom) 1,428,500 76.782 .45
Tele Danmark AS, Class B (Denmark) 672,000 35.463
Tele Danmark AS, Class B (American Depositary Receipts) 1,233,700 32.924 .40
MCI Communications Corp. (USA) 2,325,000 68.297 .40
AT&T Corp. (USA) 1,535,000 68.020 .40
Koninklijke PTT Nederland NV (Netherlands) 1,629,500 64.208 .38
Sprint Corp. (USA) 883,400 44.170 .26
Hong Kong Telecommunications Ltd. (Hong Kong) 8,260,529 18.684
Hong Kong Telecommunications Ltd. (American Depositary
Receipts) 440,759 9.862 .17
British Telecommunications PLC (United Kingdom) 3,000,000 19.828 .12
Telecomunicacoes Brasileiras SA, preferred
nominative (American Depositary Receipts) (Brazil) 76,439 9.841 .06
Deutsche Telekom AG (Germany) 265,900 5.160 .03
DDI Corp. (Japan) 500 2.515 .02
Banking - 6.71%
Royal Bank of Canada (Canada) 3,717,000 182.689 1.08
Bank of Nova Scotia (Canada) 3,129,500 149.962 .88
Westpac Banking Corp. (Australia) 17,567,630 110.731
Westpac Banking Corp., warrants, expire 2000 (1) 3,000,000 15.867 .75
BankAmerica Corp. (USA) 1,250,000 91.641 .54
Citicorp (USA) 600,000 80.362 .47
Banco de Santander, SA (Spain) 1,800,000 59.233
Banco de Santander, SA (American Depositary Receipts) 540,000 17.617 .45
Australia and New Zealand Banking Group Ltd. (Australia) 7,371,411 60.242 .36
Cie. Financiere de Paribas, Class A (France) 750,000 55.781 .33
Banque Nationale de Paris (France) 1,021,549 51.613 .30
Chase Manhattan Corp. (USA) 375,000 44.250 .26
Fuji Bank, Ltd. (Japan) 3,710,000 40.948 .24
Sumitomo Bank, Ltd. (Japan) 2,300,000 34.739 .21
ABN AMRO Holding NV (Netherlands) 1,672,960 33.972 .20
Sakura Bank, Ltd. (Japan) 6,675,000 31.962 .19
The Toronto-Dominion Bank (Canada) 750,000 25.489 .15
Bank of Tokyo-Mitsubishi, Ltd. (Japan) 1,250,000 23.859 .14
Istituto Mobiliare Italiano SpA (Italy) 1,500,000 16.064 .09
HSBC Holdings PLC (United Kingdom) 320,000 11.365 .07
Electronic Components - 5.58%
Micron Technology, Inc. (USA) (1) 6,855,000 237.783 1.40
Advanced Micro Devices, Inc. (USA) (1) 6,050,000 197.003 1.16
Intel Corp. (USA) 1,400,000 129.237 .76
Bay Networks, Inc. (USA) (1) 3,000,000 115.875 .68
Analog Devices, Inc. (USA) (1) 1,710,000 57.285 .34
Arrow Electronics, Inc. (USA) (1) 880,000 51.040 .30
Seagate Technology (USA) (1) 1,400,000 50.575 .30
Altera Corp. (USA) (1) 950,000 48.687 .29
Murata Manufacturing Co., Ltd. (Japan) 590,000 25.559 .15
Electrocomponents PLC (United Kingdom) 3,000,000 22.273 .13
Kyocera Corp. (Japan) 176,000 11.524 .07
Broadcasting & Publishing - 5.30%
Time Warner Inc. (USA) 6,406,225 347.137 2.05
Viacom Inc., Class B (USA) (1) 4,640,000 146.740 .87
News Corp. Ltd. (Australia) 3,948,625 20.246
News Corp. Ltd. (American Depositary Receipts) 3,991,600 81.578
News Corp. Ltd., preferred shares 2,021,244 8.947
News Corp. Ltd., preferred shares (American Depositary
Receipts) 1,995,800 35.800 .86
CANAL + (France) 267,145 47.595 .27
Carlton Communications PLC (United Kingdom) 4,890,000 40.607 .24
Grupo Televisa, SA, ordinary participation certificates
(American Depositary Receipts) (Mexico) (1) 825,000 29.545 .17
Westinghouse Electric Corp. (USA) 1,045,000 28.280 .17
Elsevier NV (Netherlands) 1,700,000 24.756 .15
Wolters Kluwer NV (Netherlands) 162,516 21.979 .13
Pearson PLC (United Kingdom) 1,700,000 21.498 .13
Dow Jones & Co., Inc. (USA) 434,900 20.331 .12
AUDIOFINA (Luxembourg) 415,300 16.707 .10
U S WEST Media Group (USA) (1) 313,300 6.990 .04
.
Energy Sources - 4.76%
TOTAL, Class B (France) 131,077 15.044
TOTAL, Class B (American Depositary Receipts) 3,109,814 178.231 1.14
Royal Dutch Petroleum Co. (New York Registered
Shares) (Netherlands) 1,852,000 102.786
'Shell' Transport and Trading Co., PLC (United Kingdom) 3,000,000 21.958 .74
Broken Hill Proprietary Co. Ltd. (Australia) 6,502,053 75.749 .45
ENI SpA (Italy) 11,000,000 69.448 .41
Elf Aquitaine (France) 400,000 53.550
Elf Aquitaine (American Depositary
Receipts) 100,000 6.669 .35
Phillips Petroleum Co. (USA) 1,100,000 56.788 .33
Anadarko Petroleum Corp. (USA) 700,000 50.269 .30
Talisman Energy Inc. (Canada) (1) 1,400,000 48.237 .28
YPF SA, Class D (American Depositary Receipts (Argentina 1,200,000 44.250 .26
Mobil Corp. (USA) 500,000 37.000 .22
RAO Gazprom (American Depositary Receipts) (Russia) 1,341,000 33.659 .20
Enterprise Oil PLC (United Kingdom) 1,221,300 13.355 .08
.
Electrical & Electronics - 4.58%
Nokia Corp., Class A (Finland) 480,000 45.693
Nokia Corp., Class A (American Depositary Receipts) 1,450,000 136.028
Nokia Corp., Class K 460,000 43.615 1.33
Telefonaktiebolaget LM Ericsson, Class B (Sweden) 2,376,000 114.444
Telefonaktiebolaget LM Ericsson, Class B (American
Depositary Receipts) 800,000 38.350 .90
ABB AB, Class A (Sweden) 150,000 2.131
ABB AB, Class B 6,000,000 84.836
ABB AB, Class B (American Depositary Receipts) 250,000 35.375
ABB AG, Class A (Switzerland) 11,750 17.350 .82
Northern Telecom Ltd. (Canada) 457,300 47.530 .28
Schneider SA (France) 750,000 47.477 .28
Siemens AG (Germany) 600,000 40.637 .24
Alcatel Alsthom (France) 260,000 34.675 .21
York International Corp. (USA) 680,000 30.430 .18
General Electric Co. (USA) 394,000 26.817 .16
NextLevel Systems, Inc. (USA) (1) 1,055,200 17.675 .10
Lucent Technologies Inc. (USA) 168,523 13.713 .08
.
Multi-Industry - 4.17%
Siebe PLC (United Kingdom) 6,570,000 132.391 .78
Hutchison Whampoa Ltd. (Hong Kong) 13,281,000 130.884 .77
Lend Lease Corp. Ltd. (Australia) 4,058,860 96.427 .57
FMC Corp. (USA) (1) 991,300 87.978 .52
Williams Holdings PLC (United Kingdom) 10,000,000 59.557 .35
LTV Corp. (USA) 4,225,000 53.605 .32
Suez Lyonnaise des Eaux (France) 390,243 43.668 .26
Canadian Pacific Ltd. (Canada) 1,000,000 29.563 .17
Lagardere Groupe SCA (France) 700,000 22.280 .13
AlliedSignal Inc. (USA) 400,000 17.000 .10
B.A.T Industries PLC (United Kingdom) 1,895,559 16.613 .10
Swire Pacific Ltd., Class A (Hong Kong) 2,150,000 16.464 .10
.
Automobiles - 3.63%
Honda Motor Co., Ltd. (Japan) 4,640,000 162.111 .96
Regie Nationale des Usines Renault, SA (France) 3,800,000 112.985 .67
Bayerische Motoren Werke AG (Germany) 69,500 59.336
Bayerische Motoren Werke AG, preferred shares 20,318 11.830 .42
Ford Motor Co., Class A (USA) 1,229,500 55.635 .33
Chrysler Corp. (USA) 1,500,000 55.219 .33
Toyota Motor Corp. (Japan) 1,405,000 43.141 .25
Suzuki Motor Corp. (Japan) 3,600,000 34.656 .20
Volvo AB, Class B (Sweden) 1,000,000 28.741 .17
General Motors Corp. (USA) 400,000 26.775 .16
Daimler-Benz AG, 4.125% convertible debentures 2003
(Germany) (2) DM28,000,000 24.311 .14
Beverages & Tobacco - 3.42%
Philip Morris Companies Inc. (USA) 7,455,000 309.848 1.83
Asahi Breweries, Ltd. (Japan) 4,060,000 65.364
Asahi Breweries, Ltd., 1.00% convertible debentures 2003Y924,000,000 12.844
Asahi Breweries, Ltd., .95% convertible debentures 2002 Y410,000,000 5.682
Asahi Breweries, Ltd., .90% convertible debentures 2001 Y520,000,000 7.168 .54
Seagram Co. Ltd. (Canada) 2,200,000 77.550 .46
PepsiCo, Inc. (USA) 1,000,000 40.563 .24
Cia. Cervejaria Brahma (Brazil) 47,000,000 36.108 .21
LVMH Moet Hennessy Louis Vuitton (France) 55,000 11.723 .07
Lion Nathan Ltd. (New Zealand) 3,218,800 7.875 .04
Gallaher Group PLC (American Depositary Receipts)
(United Kingdom) 300,000 5.756 .03
Machinery & Engineering - 3.40%
Caterpillar Inc. (USA) 4,600,000 248.113 1.46
Mannesmann AG (Germany) 507,500 242.490 1.43
Deere & Co. (USA) 725,000 38.969 .23
Kvaerner AS, Class A (Norway) 535,340 31.663 .19
Kawasaki Heavy Industries, Ltd. (Japan) 4,200,000 14.534 .09
Chemicals - 3.20%
Praxair, Inc. (USA) 2,639,300 135.099 .80
Georgia Gulf Corp. (USA) (3) 1,975,000 60.484 .36
Sherwin-Williams Co. (USA) 1,962,000 57.756 .34
Methanex Corp. (Canada) 6,250,000 52.479 .31
Nan Ya Plastics Corp. (Taiwan) 19,980,000 47.921 .28
E.I. du Pont de Nemours and Co. (USA) 600,000 36.938 .22
Valspar Corp. (USA) 1,160,000 36.395 .21
AGA AB, Class A (Sweden) 1,460,000 24.020
AGA AB, Class B 550,000 8.867 .19
Bayer AG (Germany) 750,000 29.941 .18
L'Air Liquide (France) 110,097 18.163 .11
BOC Group PLC (United Kingdom) 1,000,000 17.827 .10
Engelhard Corp. (USA) 813,100 17.533 .10
Food & Household Products - 3.13%
Nestle SA (Switzerland) 89,782 125.395 .74
Cadbury Schweppes PLC (United Kingdom) 10,865,090 104.604 .62
Reckitt & Colman PLC (United Kingdom) 6,056,250 93.007 .55
Unilever NV (Netherlands) 335,000 71.706
Unilever PLC (United Kingdom) 660,000 19.318 .54
Groupe Danone (France) 443,586 70.107 .41
Archer Daniels Midland Co. (USA) 1,050,000 25.134 .15
Colgate-Palmolive Co. (USA) 300,000 20.906 .12
Data Processing & Reproduction - 2.54%
Fujitsu Ltd. (Japan) 7,172,000 89.873 .53
Ascend Communications, Inc. (USA) (1) 1,850,000 59.894 .35
Silicon Graphics, Inc. (USA) (1) 2,100,000 55.125 .32
Oracle Corp. (USA) (1) 1,425,000 51.923 .31
Acer Inc. (Taiwan) (1) 20,000,000 39.216 .23
Sybase, Inc. (USA) (1) 1,850,000 33.300 .20
International Business Machines Corp. (USA) 300,000 31.781 .19
Computer Associates International, Inc. (USA) 261,500 18.779 .11
Microsoft Corp. (USA) (1) 140,000 18.524 .11
Digital Equipment Corp. (USA) (1) 400,000 17.325 .10
Cisco Systems, Inc. (USA) (1) 200,000 14.613 .09
Insurance - 2.46%
ING Groep NV (formerly Internationale Nederlanden Groep)
(Netherlands) 4,376,336 201.550 1.19
Fairfax Financial Holdings Ltd. (Canada) 234,700 65.067
Fairfax Financial Holdings Ltd. (USA) (2) 93,000 25.783 .54
American International Group, Inc. (USA) 774,843 79.954 .47
Societe Centrale des Assurances Generales de France (Fra 735,000 29.196 .17
Assicurazioni Generali SpA (Italy) 670,000 15.098 .09
Forest Products & Paper - 2.01%
Champion International Corp. (USA) 2,200,000 134.063 .79
Louisiana-Pacific Corp. (USA) 2,550,000 63.750 .38
UPM-Kymmene Corp. (Finland) 1,953,000 54.332 .32
International Paper Co. (USA) 600,000 33.038 .19
Rayonier Inc. (USA) 600,000 29.025 .17
Jefferson Smurfit Corp. (USA) (1) 1,255,700 25.114 .15
Carter Holt Harvey Ltd. (New Zealand) 1,058,500 2.298 .01
Gold Mines - 1.88%
Newmont Mining Corp. (USA) 2,750,000 123.578 .73
Placer Dome Inc. (Canada) 5,500,000 105.188 .62
Barrick Gold Corp. (Canada) 2,500,000 61.875 .36
Gold Fields of South Africa Ltd. (South Africa) 1,400,000 28.195 .17
Metals: Nonferrous - 1.78%
Aluminum Co. of America (USA) 950,000 77.900 .46
WMC Ltd. (Australia) 15,389,336 72.249 .43
Alumax Inc. (USA) (1) 1,500,000 61.313 .36
Alcan Aluminium Ltd. (Canada) 1,700,000 59.075 .35
Pechiney, Class A (France) 366,527 17.657 .10
Teck Corp., Class B (Canada) 700,000 14.441 .08
Leisure & Tourism - 1.35%
Carnival Corp., Class A (USA) 3,400,000 157.250 .93
Walt Disney Co. (USA) 600,000 48.375 .29
Accor SA (France) 120,000 22.231 .13
Euro Disney SCA (France) (1) 171,307 .236 .00
Merchandising - 1.29%
Wal-Mart Stores, Inc. (USA) 4,150,000 151.994 .90
Cifra, SA de CV, Class A (Mexico) 4,970,139 11.136
Cifra, SA de CV, Class B 4,500,000 10.650
Cifra, SA de CV, Class C 3,624,400 7.981 .17
Home Depot, Inc. (USA) 472,500 24.629 .14
Ito-Yokado Co., Ltd. (Japan) 185,000 10.041 .06
WHSmith Group PLC, Class A (United Kingdom) 500,000 2.970 .02
Energy Equipment - 1.27%
Schlumberger Ltd. (Netherlands Antilles) 998,300 84.044 .50
Halliburton Co. (USA) 1,270,000 66.040 .39
Western Atlas Inc. (USA) (1) 740,000 65.120 .38
Recreation & Other Consumer Products - 1.17%
Mattel, Inc. (USA) 1,900,000 62.938 .37
Fuji Photo Film Co., Ltd. (Japan) 900,000 37.195 .22
Nintendo Co., Ltd. (Japan) 350,000 32.822 .19
Eastman Kodak Co. (USA) 400,000 25.975 .15
EMI Group PLC (United Kingdom) 1,375,569 13.532
EMI Group PLC, Class B preferred shares 764,205 1.412 .09
PolyGram NV (New York Registered Shares) (Netherlands) 259,900 14.928 .09
Fortune Brands Inc. (formerly American Brands, Inc.)
(USA) 300,000 10.106 .06
Appliances & Household Durables - 0.98%
Sony Corp. (Japan) 927,000 87.700 .52
Philips Electronics NV (Netherlands) 582,500 49.427
Philips Electronics NV, warrants, expire 1998 (1) 250,000 16.943 .39
Samsung Electronics Co., Ltd. (South Korea) 125,727 12.180 .07
Business & Public Services - 0.98%
Quintiles Transnational Corp. (USA) (1) 500,000 42.125 .25
United Utilities PLC (United Kingdom) 3,000,000 37.114 .22
Cie. Generale des Eaux (France) 203,808 24.046
Cie. Generale des Eaux, warrants, expire 2001 (1) 203,808 .110 .14
Rentokil Group PLC (United Kingdom) 4,200,000 17.455 .11
Reuters Holdings PLC (American Depositary Receipts)
(United Kingdom) 240,000 17.100 .10
Waste Management, Inc. (formerly WMX Technologies, Inc.)
(USA) 395,737 13.826 .08
Electronic Data Systems Corp. (USA) 300,000 10.650 .06
Thorn PLC (United Kingdom) 1,301,948 2.942 .02
Metals: Steel - 0.85%
Allegheny Teledyne Inc. (USA) 2,040,000 58.395 .34
Usinor Sacilor (France) 2,800,000 56.748 .34
Cia. Vale do Rio Doce, ordinary nominative (Brazil) 38,400 .893
Cia. Vale do Rio Doce, preferred nominative 38,400 .000
Cia. Vale do Rio Doce, preferred nominative (American
Depositary Receipts) 11,184,000 28.712 .17
Utilities: Electric & Gas - 0.71%
National Power PLC (United Kingdom) 9,300,000 85.483 .50
Hongkong Electric Holdings Ltd. (Hong Kong) 5,213,500 19.406 .12
Enersis SA (American Depositary Receipts) (Chile) 420,000 15.566 .09
Transportation: Shipping - 0.57%
Bergesen d.y. AS, Class A (Norway) 1,500,000 46.158
Bergesen d.y. AS, Class B 795,000 24.576 .42
Nippon Yusen KK (Japan) 7,658,000 25.739 .15
Miscellaneous Materials & Commodities - 0.53%
Potash Corp. of Saskatchewan Inc. (Canada) 400,000 31.400 .19
Cie. de Saint-Gobain (France) 189,841 29.362 .17
De Beers/Centenary linked units (South Africa) 1,000,000 29.216 .17
Real Estate - 0.45%
Cheung Kong (Holdings) Ltd. (Hong Kong) 6,720,000 75.562 .45
Transportation: Rail & Road - 0.33%
CSX Corp. (USA) 950,000 55.575 .33
Building Materials & Components - 0.33%
CEMEX, SA de CV, Class A (Mexico) 2,362,225 12.289
CEMEX, SA de CV CPO 4,040,000 21.225 .20
Holderbank Financiere Glaris Ltd. (Switzerland) 23,000 21.880 .13
Electronic Instruments - 0.29%
Tokyo Electron Ltd. (Japan) 500,000 30.581 .18
Applied Materials, Inc. (USA) (1) 200,000 19.050 .11
Aerospace & Military Technology - 0.23%
Boeing Co. (USA) 720,000 39.195 .23
Industrial Components - 0.22%
Bridgestone Corp. (Japan) 1,571,000 37.808 .22
Textiles & Apparel - 0.18%
NIKE, Inc., Class B (USA) 290,000 15.370 .09
Gucci Group NV (New York Registered Shares) (Netherlands 310,000 14.531 .09
Miscellaneous - 0.24%
Other equity-type securities in initial period of
acquisition 39.936 .24
------------ ------------
TOTAL EQUITY-TYPE SECURITIES
(cost: $9,917.226 million) 14,990.005 88.41
------------ ------------
Principal
Amount
Bonds (Millions)
- --------------------------------------- ------------
New Zealand Government - 0.18%
New Zealand 8.00% November 2006 NZ$44.500 31.076 .18
----------- -----------
TOTAL BONDS (cost: $29.793 million) 31.076 .18
----------- -----------
TOTAL INVESTMENT SECURITIES (cost: $9,947.019 million) 15,021.081 88.59
----------- -----------
Short-Term Securities
- ------------------------------------------
Corporate Short-Term Notes - 9.05%
Svenska Handelsbanken Group 5.47%-5.50% due 11/4-12/23/9 100.000 99.107 .59
Toyota Motor Credit Corp. 5.49%-5.50% due 10/16-11/13/97 91.500 91.084 .54
Ameritech Corp. 5.46%-5.47% due 10/2-10/3/97 90.000 89.965 .53
Lucent Technologies Inc. 5.48%-5.50% due 10/8-12/17/97 90.000 89.390 .53
Daimler-Benz North America Corp. 5.49%-5.50% due 10/14-
12/19/97 89.500 89.169 .53
Halifax PLC 5.49% due 11/18-12/3/97 89.300 88.553 .52
General Electric Capital Corp. 5.50%-6.50% due 10/1-
11/12/97 89.240 88.881 .52
National Australia Funding (Delaware) Inc. 5.47%-5.48%
due 10/1-12/9/97 85.000 84.790 .50
E.I. du pont de Nemours and Co. 5.47% due 10/24-12/5/97 73.595 73.184 .43
Caisse d'amortissement de la dette sociale 5.48%-5.50%
due 10/20-12/2/97 70.000 69.579 .41
ANZ (Delaware) Inc. 5.49%-5.50% due 10/20-10/28/97 67.300 66.832 .40
Ford Credit Europe PLC 5.50%-5.52% due 10/7-12/11/97 63.800 63.570 .38
Canada Bills 5.46%-5.47% due 10/21-11/3/97 62.800 62.536 .37
International Lease Finance Corp. 5.47%-5.50% due 10/6-
12/1/97 62.000 61.654 .36
Toronto-Dominion Holdings USA Inc. 5.47%-5.53% due 10/22-
10/31/97 60.000 59.779 .35
A.I. Credit Corp. 5.49%-5.50% due 10/20-11/3/97 55.000 54.767 .33
IBM Credit Corp. 5.48%-5.51% due 10/16-11/14/97 53.600 53.299 .31
Commonwealth Bank of Australia 5.50% due 10/8-12/9/97 52.600 52.336 .31
Rank Xerox Capital (Europe) PLC 5.47%-5.50%
due 10/10-10/17/97 50.000 49.913 .29
Abbey National North America 5.47%-5.50% due 10/17-
10/20/97 47.000 46.871 .28
American Express Credit Corp. 5.49%-5.52% due 10/29-
11/20/97 39.500 39.278 .23
British Columbia (Province of) 5.45%-5.48% due 10/21-
10/31/97 31.834 31.711 .19
Societe Generale NA Inc. 5.51%-5.52% due 12/9-12/10/97 25.600 25.322 .15
Certificates of Deposit - 1.23%
Canadian Imperial Bank of Commerce 5.54%-5.57%
due 10/23-11/19/97 70.000 69.999 .41
Westdeutsche Landesbank Girozentrale 5.56%-5.66%
due 10/9-10/22/97 65.000 65.001 .38
Abbey National PLC 5.57% due 11/5/97 50.000 49.999 .29
Societe Generale 5.55% due 10/1/97 25.000 25.000 .15
Federal Agency Discount Notes - 0.84%
Freddie Mac (formerly Federal Home Loan Mortgage Corp.)
5.40%-5.48% due 10/7-11/25/97 89.100 88.692 .52
Fannie Mae (formerly Federal National Mortgage Assn.)
5.40%-5.45% due 11/6-11/24/97 55.100 54.718 .32
----------- -----------
Non-U.S. Currency - 0.06%
New Taiwanese Dollar NT$292.202 10.231 .06
TOTAL SHORT-TERM SECURITIES (cost: $1,895.484 million) 1,895.210 11.18
Excess of cash and receivables over payables 39.793 .23
------------ ------------
TOTAL SHORT-TERM SECURITIES AND NET CASH 1,935.003 11.41
------------ ------------
NET ASSETS $16,956.084 100.00%
=========== ===========
(1) Non-income-producing securities
(2) Purchased in a private placement
transaction; resale to the public may
require registration or sale only
to qualified institutional buyers.
(3) The fund owns 5.72% of the outstanding voting
securities of Georgia Gulf Corp., which represent an
investment in an affiliate as defined in the Investment
Company Act of 1940.
The descriptions of the companies shown in the portfolio,
which were obtained from published reports and other
sources believed to be reliable, are supplemental and
are not covered by the Report of Independent Accountants.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
New Perspective Fund
Financial Statements
- ---------------------------------------------- ---------------- ----------------
Statement of Assets and Liabilities (dollars in
at September 30, 1997 millions)
- ---------------------------------------------- ---------------- ----------------
Assets:
Investment securities at market
(cost: $9,947.019) $15,021.081
Short-term securities
(cost: $1,895.484) 1,895.210
Cash .663
Receivables for-
Sales of investments $38.023
Sales of fund's shares 23.147
Dividends and accrued interest 36.879 98.049
---------------- ----------------
17,015.003
Liabilities:
Payables for-
Purchases of investments 39.837
Repurchases of fund's shares 9.426
Management services 5.769
Accrued expenses 3.887 58.919
---------------- ----------------
Net Assets at September 30, 1997-
Equivalent to $21.86 per share on
775,640,437 shares of $1 par value
capital stock outstanding (authorized
capital stock--1,000,000,000 shares) $16,956.084
================
Statement of Operations
for the year ended September 30, 1997 (dollars in
millions)
- ---------------------------------------------- ---------------- ----------------
Investment Income:
Income:
Dividends $ 232.693
Interest 101.880 $ 334.573
----------------
Expenses:
Management services fee 59.337
Distribution expenses 32.358
Transfer agent fee 12.198
Reports to shareholders 1.060
Registration statement and prospectus 1.301
Postage, stationery and supplies 1.694
Directors' and Advisory Board fees .243
Auditing and legal fees .078
Custodian fee 4.117
Taxes other than federal
income tax .170
Other expenses .091 112.647
---------------- ----------------
Net investment income 221.926
----------------
Realized Gain and Increase in Unrealized
Appreciation on Investments:
Net realized gain 922.766
Net increase in unrealized appreciation on
investments:
Beginning of year 2,505.461
End of year 5,073.194 2,567.733
---------------- ----------------
Net realized gain and unrealized appreciation
on investments 3,490.499
----------------
Net Increase in Net Assets Resulting
from Operations $3,712.425
================
- ---------------------------------------------- ---------------- ----------------
Statement of Changes in Net Assets (dollars in
millions)
Year ended
September 30,
1997 1996
- ---------------------------------------------- ---------------- ----------------
Operations:
Net investment income $ 221.926 $ 204.748
Net realized gain on investments 922.766 439.315
Net increase in unrealized appreciation
on investments 2,567.733 389.111
---------------- ----------------
Net increase in net assets
resulting from operations 3,712.425 1,033.174
---------------- ----------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (224.557) (181.254)
Distributions from net realized gain on
investments (462.037) (326.785)
---------------- ----------------
Total dividends and distributions (686.594) (508.039)
---------------- ----------------
Capital Share Transactions:
Proceeds from shares sold: 160,556,117
and 168,317,771 shares, respectively 3,126.904 2,872.559
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 36,204,990 and 29,221,609 shares,
respectively 650.157 477.859
Cost of shares repurchased: 78,902,097
and 58,868,182 shares, respectively (1,534.468) (1,004.893)
---------------- ----------------
Increase in net assets resulting from
capital share transactions 2,242.593 2,345.525
---------------- ----------------
Total Increase in Net Assets 5,268.424 2,870.660
Net Assets:
Beginning of year 11,687.660 8,817.000
---------------- ----------------
End of year (including undistributed
net investment income: $115.664
and $119.565, respectively) $16,956.084 $11,687.660
================ ================
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. New Perspective Fund, Inc. (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The fund seeks long-term growth of capital through investments all over the
world, including the United States. The following paragraphs summarize the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Equity-type securities traded on a national securities exchange (or reported
on the Nasdaq national market) and securities traded in the over-the-counter
market are stated at the last reported sales price on the day of valuation;
other securities, and securities for which no sale was reported on that date,
are stated at the last quoted bid price. Long-term and short-term securities
with original or remaining maturities in excess of 60 days are valued at the
mean of their quoted bid and asked prices. Short-term securities with 60 days
or less to maturity are valued at amortized cost, which approximates market
value. Securities for which market quotations are not readily available are
valued at fair value by the Board of Directors or a committee thereof.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions paid to shareholders are
recorded on the ex-dividend date.
Investment securities, cash balances and other assets and liabilities
denominated in non-U.S. currencies are recorded in the financial statements
after translation into U.S. dollars utilizing rates of exchange on the last
business day of the year. Purchases and sales of investment securities, income
and expenses are calculated using the prevailing exchange rate as accrued. The
effects of changes in foreign currency exchange rates on investment securities
are included with the net realized and unrealized gain or loss on investment
securities.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of September 30, 1997, net unrealized appreciation on investments for
federal income tax purposes aggregated $5,074,776,000, of which $5,318,292,000
related to appreciated securities and $243,516,000 related to depreciated
securities. During the year ended September 30, 1997, the fund realized, on a
tax basis, a net capital gain of $922,872,000 on securities transactions. Net
losses related to non-U.S. currency and other transactions of $106,000 were
treated as an adjustment to ordinary income for federal income tax purposes.
The capital gain distribution paid in December 1996 includes $4,708,000 of
realized non-U.S. currency gains. The cost of portfolio securities for federal
income tax purposes was $11,841,515,000 at September 30, 1997.
3. The fee of $59,337,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.60% of the first $500 million of average net assets;
0.50% of such assets in excess of $500 million but not exceeding $1 billion;
0.46% of such assets in excess of $1 billion but not exceeding $1.5 billion;
0.43% of such assets in excess of $1.5 billion but not exceeding $2.5 billion;
0.41% of such assets in excess of $2.5 billion but not exceeding $4 billion;
0.40% of such assets in excess of $4 billion but not exceeding $6.5 billion;
0.395% of such assets in excess of $6.5 billion but not exceeding $10.5
billion; 0.39% of such assets in excess of $10.5 billion but not exceeding $17
billion; and 0.385% of such assets in excess of $17 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended September 30, 1997,
distribution expenses under the Plan were $32,358,000. As of September 30,
1997, accrued and unpaid distribution expenses were $2,763,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $12,198,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $12,090,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors and Advisory Board members who are unaffiliated with CRMC may elect
to defer part or all of the fees earned for services as members of the Boards.
Amounts deferred are not funded and are general unsecured liabilities of the
fund. As of September 30, 1997, aggregate amounts deferred and earnings thereon
were $436,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of September 30, 1997, accumulated undistributed net realized gain on
investments was $848,291,000 and additional paid-in capital was
$10,143,295,000. The fund reclassified $1,270,000 and $1,157,000 from
undistributed net investment income and undistributed net realized gains,
respectively, to additional paid-in-capital for the year ended September 30,
1997.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $4,697,161,000 and $3,199,572,000, respectively,
during the year ended September 30, 1997.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $4,117,000 includes $61,000 that was paid by these credits
rather than in cash.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended September 30, 1997, such non-U.S. taxes were $21,248,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable
and sales of non-U.S. bonds and notes were $4,038,000 for the year ended
September 30, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended
September 30
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
Net Asset Value, Beginning of Year $17.77 $16.98 $15.40 $14.21 $12.25
----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income .29 .32 .31 .22 .17
Net realized gain and increase in
unrealized appreciation on investment 4.81 1.40 2.35 1.54 2.04
----------- ----------- ----------- ----------- -----------
Total income from
investment operations 5.10 1.72 2.66 1.76 2.21
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from net
investment income (.323) (.321) (.237) (.173) (.178)
Dividends from net realized
non-U.S. currency gains(1) (.007) (.009) (.003) (.027) (.022)
Distributions from net
realized gains (.680) (.600) (.840) (.370) (.050)
----------- ----------- ----------- ----------- -----------
Total distributions (1.01) (.93) (1.08) (.57) (.25)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year $21.86 $17.77 $16.98 $15.40 $14.21
========= ========= ========= ========= =========
Total Return(2) 29.97% 10.64% 18.63% 12.61% 18.34%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $16,956 $11,688 $8,817 $6,279 $4,417
Ratio of expenses to average
net assets .79% .82% .83% .84% .87%
Ratio of net income to
average net assets 1.56% 2.00% 2.12% 1.48% 1.40%
Average commissions paid(3) .50c 4.30c .72c 1.05c 1.74c
Portfolio turnover rate 25.68% 18.12% 22.40% 25.33% 15.02%
(1) Realized non-U.S. currency gains
are treated as ordinary income for
federal income tax purposes.
(2)Calculated without deducting a sales
charge. The maximum sales charge is
5.75% of the fund's offering price.
(3) Brokerage commissions paid on
portfolio transactions increase
the cost of securities purchased or
reduce the proceeds of securities
sold, and are not separately reflected
in the fund's statement of operations.
Shares traded on a principal basis
(without commissions), such as most
over-the-counter and fixed-income
transactions, are excluded. Generally,
non-U.S. commissions are lower than
U.S. commissions when expressed as
cents per share but higher when
expressed as a percentage of
transactions because of the lower
per-share prices of many non-U.S.
securities.
</TABLE>
To the Board of Directors and Shareholders of New Perspective Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of New Perspective Fund, Inc. (the
"Fund") at September 30, 1997, the results of its operations, the changes in
its net assets and the per-share data and ratios for the years indicated in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 1997 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse LLP
Los Angeles, California
October 31, 1997
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net From Net
of Record Investment Realized Short- Realized Long-
Income term Gains term Gains
<S> <C> <C> <C> <C>
December 13, 1996 December 16, 1996 $.23 $.056 $.624
May 30, 1997 June 2, 1997 .10 - -
</TABLE>
The fund makes an election under the Internal Revenue Code Section 853 to pass
through non-U.S. taxes paid by the fund to its shareholders. The amount of
non-U.S. taxes for the fiscal year ended September 30, 1997 is $0.03744 on a
per-share basis. Shareholders are entitled to a foreign tax credit or an
itemized deduction, at their option. Generally, it is more advantageous to
claim a credit rather than to take a deduction.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 17% of the dividends
paid by the fund from net investment income represents qualifying dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WILL BE
MAILED IN JANUARY 1998 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON
THEIR 1997 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
