NEW PERSPECTIVE FUND, INC.
Part B
Statement of Additional Information
DECEMBER 1, 1998
as amended August 1, 1999
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, 1998. 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 2
Investment Restrictions 4
Fund Organization 6
Fund Directors and Officers 7
Advisory Board Members 12
Management 16
Dividends, Distributions and Federal Taxes 18
Purchase of Shares 22
Selling Shares 28
Shareholder Account Services and Privileges 30
Execution of Portfolio Transactions 32
General Information 33
Investment Results and Related Statistics 34
Description of Bond Ratings 39
Financial Statements Attached
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
THE FUND MAY EXPERIENCE DIFFICULTY LIQUIDATING CERTAIN PORTFOLIO SECURITIES
DURING SIGNIFICANT MARKET DECLINES OR PERIODS OF HEAVY REDEMPTIONS.
THE DESCRIPTIONS BELOW ARE INTENDED TO SUPPLEMENT THE MATERIAL IN THE
PROSPECTUS UNDER "INVESTMENT OBJECTIVES, STRATEGIES AND RISKS."
EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. The prices of equity securities fluctuate based on changes in the
financial condition of their issuers and on market and economic conditions. The
fund's results will be related to the overall market for these securities. The
growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss.
DEBT SECURITIES -- Bonds and other debt securities are used by issuers to
borrow money. Issuers pay investors interest and generally must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon bonds,
do not pay current interest, but are purchased at a discount from their face
values. The prices of debt securities fluctuate depending on such factors as
interest rates, credit quality and maturity. In general their prices decline
when interest rates rise and vice versa.
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.
OTHER SECURITIES -- The fund may also invest in securities that have equity
and debt characteristics such as non-convertible preferred stocks and
convertible securities. These securities may at times resemble equity more than
debt and vice versa. Non-convertible preferred stocks are similar to debt in
that they have a stated dividend rate akin to the coupon of a bond or note even
though they are often classified as equity securities. The prices and yields of
non- convertible preferred stocks generally move with changes in interest rates
and the issuer's credit quality, similar to the factors affecting debt
securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
common stock or other securities at a stated exchange ratio. These securities
prior to conversion pay a fixed rate of interest or a dividend. Because
convertible securities have both debt and equity characteristics, their value
varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the issuer's credit
quality.
INVESTING IN VARIOUS COUNTRIES -- The fund has the ability to invest outside
the U.S. Investing outside the U.S. involves special risks, particularly in
certain developing countries, caused by, among other things, fluctuating
currency values; different accounting, auditing, and financial reporting
regulations and practices in some countries; changing local and regional
economic, political, and social conditions; expropriation or confiscatory
taxation; greater market volatility; differing securities market structures;
and various administrative difficulties such as delays in clearing and settling
portfolio transactions or in receiving payment of dividends. However, in the
opinion of Capital Research and Management Company, investing outside the U.S.
also can reduce certain portfolio risks due to greater diversification
opportunities.
The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund generally invests in securities of issuers in
developing countries to a limited extent.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
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 can purchase and sell currencies to
facilitate securities transactions and enter into forward currency contracts to
hedge against changes in currency exchange rates. While entering into forward
currency transactions could minimize the risk of loss due to a decline in the
value of the hedged currency, it could also limit any potential gain which
might result from an increase in the value of the currency. The fund will not
generally attempt to protect against all potential changes in exchange rates.
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.
RESTRICTED SECURITIES AND LIQUIDITY -- The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded outside the
U.S. will be considered illiquid unless they have been specifically determined
to be liquid under procedures which may be adopted by the fund's board of
directors, taking into account factors such as the frequency and volume of
trading, the commitment of dealers to make markets and the availability of
qualified investors, all of which can change from time to time. The fund may
incur certain additional costs in disposing of illiquid securities.
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 ORGANIZATION
The fund is an open-end, diversified management investment company. It was
organized as a Maryland corporation on September 5, 1972.
All fund operations are supervised by the fund's board of directors. The board
meets periodically and performs duties required by applicable state and federal
laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in "Directors and Director Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund.
FUND DIRECTORS AND OFFICERS
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL TOTAL NUMBER OF
AND AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION FUND BOARDS ON
REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING WHICH DIRECTOR
YEARS VOLUNTARILY VOLUNTARILY SERVES/2/
DEFERRED DEFERRED
COMPENSATION/1/) COMPENSATION/1/)
FROM THE FUND FROM ALL FUNDS
DURING FISCAL MANAGED BY
YEAR ENDED CAPITAL RESEARCH
9/30/98 AND MANAGEMENT
COMPANY OR ITS
AFFILIATES/2/
FOR THE YEAR
ENDED 9/30/98
<S> <C> <C> <C> <C> <C>
Elisabeth Director Administrative $20,200 $41,900 2
Allison Director, ANZI,
ANZI, Ltd. Ltd.
1770 (financial
Massachusetts publishing and
Ave. consulting);
Cambridge, MA Publishing
02410 Consultant,
Age: 52 Harvard Medical
School; former
Senior Vice
President,
Planning and
Development,
McGraw Hill,
Inc.
Michael R. Director Chairman of the $18,400/3/ $38,300 2
Bonsignore Board and Chief
Honeywell Executive
Plaza Officer,
P.O. Box 524 Honeywell, Inc.
Minneapolis,
MN 55440
Age: 57
+Gina H. Director Senior Vice None/4/ None/4/ 1
Despres President,
3000 K Street, Capital
N.W. Research and
Washington, DC Management
20007 Company
Age: 57z
Robert A. Fox Director President and $19,400/3/ $107,800 6
P.O Box 457 Chief Executive
Livingston, CA Officer, Foster
95334 Farms
Age: 61
Alan Greenway Director President, $20,200 $75,150 4
7413 Fairway Greenway
Road Associates,
La Jolla, CA Inc.
92037 (management
Age: 71 consulting
services)
Koichi Itoh Director Group Vice $21,500/3/ $43,200 2
7-14-11-104 President -
Minami Asia/Pacific,
Aoyama Autosplice,
Minato-ku, Inc.; former
Tokyo, Japan President and
Age: 58 Chief Executive
Officer, IMPAC
(management
consulting
services);
former Managing
Partner, VENCA
Management
(venture
capital)
William H. Director President, $19,400/3/ $77,850 5
Kling Minnesota
45 East Public Radio;
Seventh Street President,
St. Paul, MN Greenspring
55101 Co.; former
Age: 56 President, American Public
Radio
(now Public
Radio
International)
+Jon B. Vice Vice Chairman None/4/ None/4/ 4
Lovelace Chairman of of the Board,
333 South Hope the Board Capital
Street Research and
Los Angeles, Management
CA 90071 Company
Age: 71
John G. Director The IBJ $20,300/3/ $173,200 8
McDonald Professor of
Graduate Finance,
School of Graduate School
Business of Business,
Stanford Stanford
University University
Stanford, CA
94305
Age: 61
++William I. Director Chairman of the $21,500/3/ $43,200 2
Miller Board,
500 Washington Irwin Financial
Street Corporation
Box 929
Columbus, IN
47202
Age: 42
Kirk P. Director President, $19,800/3/ $100,900 5
Pendleton Cairnwood, Inc.
Cairnwood, (venture
Inc. capital
75 James Way investment)
Southhampton,
PA 18966
Age: 59
Donald E. Director Former Chairman $20,700/3/ $73,500 4
Petersen of the Board
255 East and
Brown, Suite Chief Executive
460 Officer, Ford
Birmingham, MI Motor
48009 Company
Age: 72
+James W. Director Senior Partner, None/4/ None/4/ 8
Ratzlaff The Capital
One Market Group Partners,
Plaza L.P.
Steuart Tower,
Suite 1800
San Francisco,
CA 94105
Age: 62
+Walter P. Chairman of Chairman, None/4/ None/4/ 8
Stern the Board Capital Group
630 Fifth International,
Avenue Inc.; Vice
New York, NY Chairman,
10111 Capital
Age: 70 Research
International;
Chairman,
Capital
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.
++ Director who may be deemed an "interested person" 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 29 funds: AMCAP Fund, Inc., 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., New World 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 Endowments, Inc. whose shareholders
are limited to (i) any entity exempt from taxation under Section 501(c)(3) of
the Internal Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii)
any trust, the present or future beneficiary of which is a 501(c)(3)
organization, and (iii) any other entity formed for the primary purpose of
benefiting a 501(c)(3) organization. An affiliate of Capital Research and
Management Company, Capital International, Inc., manages Emerging Markets
Growth Fund, Inc.
3 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, 1998 for participating Directors is as follows:
Michael R. Bonsignore ($25,900), Robert A. Fox ($204,400), Koichi Itoh
($43,100), William H. Kling ($87,300), John G. McDonald ($99,800), William I.
Miller ($44,100), Kirk P. Pendleton ($37,700) and Donald E. Petersen ($14,600).
Amounts deferred and accumulated earnings thereon are not funded and are
general unsecured liabilities of the fund until paid to the Directors.
4 Gina H. Despres, 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) PRINCIPAL OCCUPATION(S)
HELD WITH DURING PAST 5 YEARS
REGISTRANT
Walter P. Stern
(see above)
Jon B. Lovelace
(see above)
Gina H. Despres
(see above)
William R. Grimsley 60 Senior Senior Vice President and
P.O. Box 7650 Vice Director, Capital Research
San Francisco, CA President and Management Company
94120
Gregg E. Ireland 48 Senior Senior Vice President,
3000 K Street, N.W. Vice Capital Research and
Washington, DC President Management Company
20007
Thierry Vandeventer 63 Senior Director, Capital Research
3 Place des Bergues Vice and Management Company
1201 Geneva, President
Switzerland
Jonathan O. Knowles 37 Vice Vice President,
25 Bedford Street President Capital Research Company
London, England
WC2E 9HN
Darcy B. Kopcho 45 Vice Executive Vice President
333 South Hope President and Director,
Street Capital Research Company
Los Angeles, CA
90071
Cathy M. Ward 51 Vice Senior Vice President and
333 South Hope President Director,
Street Capital Research and
Los Angeles, CA Management Company
90071
Vincent P. Corti 42 Secretary Vice President - Fund
333 South Hope Business Mangement Group,
Street Capital Research and
Los Angeles, CA Management Company
90071
R. Marcia Gould 44 Treasurer Vice President - Fund
135 South State Business Mangement Group,
College Blvd. Capital Research and
Brea, CA 92821 Management Company
Dayna G. Yamabe 31 Assistant Assistant Vice President -
135 South State Treasurer Fund Business Management
College Blvd. Group, Capital Research
Brea, CA 92821 and Management Company
<S> <C> <C> <C>
</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, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS AND WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AGE REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS
DEFERRED DEFERRED ON WHICH
COMPENSATION/1/) COMPENSATION/1/) ADVISORY
FROM THE FUND FROM ALL FUNDS BOARD
DURING FISCAL MANAGED BY MEMBER
YEAR ENDED CAPITAL RESEARCH SERVES/2/
9/30/98 AND MANAGEMENT
COMPANY OR ITS
AFFILIATES/2/
FOR THE YEAR
ENDED 9/30/98
<S> <C> <C> <C> <C> <C>
David I. Advisory Chairman, The None/4/ None/4/ 2
Fisher Board Capital Group
333 South Member Companies,
Hope Street (former Inc. (an
Los Angeles, Director) affiliate of
CA 90071 the
Age: 59 Investment
Adviser)
Yoichi Advisory Washington, $10,000 $10,000 1
Funabashi Board DC Bureau
Asahi Member Chief and
Shimbun Diplomatic
6-3-9 Kita-Terao Correspondent
Yokahama and Columnist
City, Japan of the Asahi
Age: 53 Shimbun
Jean Gandois Advisory President, $10,000 $10,000 1
Conseil Board Conseil
National du Member National du
Patronat Patronat
Francais Francais;
31 Ave. former
Pierre Chairman of
Premier de the Board,
Serbie Cockerill-Sambre;
75784 Paris, former
France Chairman and
Age: 68 Chief
Executive
Officer,
Pechiney
Claudio X. Advisory Chairman of $10,000 $10,000 1
Gonzalez Board the Board and
Laporte Member Chief
Kimberly Executive
Clark de Officer,
Mexico, SA Kimberly
103-3 Clark de
Colonia Mexico, SA
Polanco
Morales
Mexico, DF,
Mexico
Age: 64
Sir Peter Advisory Director and $10,000 $10,000 1
Holmes Board former
Shell Centre Member Chairman of
London, the Board and
England Managing
Age: 66 Director, The
Royal
Dutch/Shell
Group of
Companies
Jae H. Hyun Advisory Chairman, $10,000 $10,000 1
Tong Yang Board Tong Yang
Group Member Group
185, 2-Ka,
Eulchi-ro,
Chung-ku
Seoul, Korea
100-192
Age: 49
Baron Advisory Chairman of $10,000 $10,000 1
Gualtherus Board the
Kraijenhoff Member Supervisory
Stoeplaan 9, Council, AKZO
Flat 58 N.V.
The
Netherlands
Age: 76
Pierre Advisory Chairman and $10,000 $10,000 1
Lescure Board Chief
CANAL + Member Executive
85-89 quai Officer,
Andre CANAL +
Citroen
F-75015
Paris
France
Age: 52
Shijuro Advisory Non-executive $0/3/ $0/3/ 1
Ogata Board Director,
Tokyo, Japan Member Fuji Xerox
Age: Co. Ltd. And
Horiba Ltd.
Alessandro Advisory Chief $0/3/ $0/3/ 1
Ovi Board Executive
Tecnitel Member Officer,
Via Abruzzi, Tecnitel
3
Rome, Italy
Age: 54
Allen E. Advisory Chairman $10,000 $10,000 1
Puckett Board Emeritus,
935 Corsica Member Hughes
Drive Aircraft
Pacific Company
Palisades,
CA 90272
Age: 79
Rozanne L. Advisory Chair, Baltic $10,000 $10,000 1
Ridgway Board American
Baltic-American Member Enterprises
Enterprise Fund; former
Fund Co-Chair,
1625 K Atlantic
Street, N.W. Council of
Washington, the United
DC 20006 States
Age: 63
Orville H. Advisory Dean, $10,000 $10,000 1
Schell Board Graduate
Graduate Member School of
School of Journalism,
Journalism University of
121 North California,
Gate Hall Berkeley
University
of
California
Berkeley, CA
94720
Age: 58
Bruce B. Advisory Chairman and $7,500 $7,500 1
Teele Board Chief
Australian Member Executive
Foundation Officer, J.B.
Investment Were & Son;
Co. Ltd. Chairman,
101 Collins Australian
Street Foundation
Melbourne, Investment
Victoria Co. Ltd.
3000
Australia
Age: 61
</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, Inc., 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 Endowments, Inc. whose shareholders are
limited to (i) any entity exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii) any
trust, the present or future beneficiary of which is a 501(c)(3) organization,
and (iii) any other entity formed for the primary purpose of benefiting a
501(c)(3) organization. An affiliate of Capital Research and Management
Company, Capital International, Inc., manages Emerging Markets Growth Fund,
Inc.
3 Shijuro Ogata and Alessandro Ovi were appointed to the Advisory Board
effective October 1, 1998 and, therefore, received no compensation from the
fund in fiscal year 1998.
4 David I. Fisher is affiliated with the Investment Adviser and, accordingly,
receives no compensation from the fund.
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 $16,000 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 $500 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. The fund pays fees of $5,000 per
annum to Advisory Board members who are not affiliated with the Investment
Adviser, plus $5,000 for each meeting attended in conjunction with meetings
with the Board of Directors. As of November 1, 1998 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 December
31, 1999, 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, 1998, 1997 and 1996,
the Investment Adviser received advisory fees of $72,691,000, $59,337,000 and
$43,463,000, 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, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 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, 1998 amounted to $11,088,000 after allowance of $55,870,000 to
dealers. During the fiscal years ended September 30, 1997 and 1996 the
Principal Underwriter received $12,090,000 and $12,923,000, after allowance of
$62,293,000 and $67,852,000, 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, 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, or a community foundation).
Commissions 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 any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the fiscal year ended September 30, 1998, the fund paid or accrued $40,459,000
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, as amended, (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; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the fund's total 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 total assets and to not more than 10% of the
outstanding voting securities of such issuer), and (ii) not more than 25% of
the value of its total 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%, or the fund's income subject to
tax in such countries, 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, foreign
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 one year is 20%; 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. The maximum amount that an individual may contribute to all
IRA's (deductible, nondeductible and Roth IRA's) per year is the lesser of
$2,000 or the individual's compensation for the year. 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
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers" for initial "Investment Minimums and Fund
investment minimums. Numbers").
By Visit any investment Mail directly to your
contacting dealer who is investment dealer's address
your registered in the state printed on your account
investment where the purchase is statement.
dealer made and who has a
sales agreement with
American Funds
Distributors.
By mail Make your check payable Fill out the account additions
to the fund and mail to form at the bottom of a recent
the address indicated account statement, make your
on the account check payable to the fund,
application. Please write your account number on
indicate an investment your check, and mail the check
dealer on the account and form in the envelope
application. provided with your account
statement.
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with
your account information can
call American FundsLine(r) and
make investments by telephone
(subject to conditions noted
in "Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By computer Please contact your Complete the American
investment dealer to FundsLink Authorization Form.
open account, then Once you establish the
follow the procedures privilege, you, your financial
for additional advisor or any person with
investments. your account information may
access American FundsLine
OnLine(r) 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 Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds Service
Company a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS -- Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(r) (see
description below):
<TABLE>
<CAPTION>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
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 1,000 33
Fund(sm)
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
New World Fund(sm) 1,000+ 36
SMALLCAP World Fund(r) 1,000 35
Washington Mutual Investors Fund(sm) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(r)
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 1,000 23
America(sm)
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(sm)
The Tax-Exempt Bond Fund of 1,000 19
America(r)
The Tax-Exempt Fund of 1,000 20
California(r)*
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 2,500 09
America(r)
The Tax-Exempt Money Fund of 2,500 39
America(sm)
The U.S. Treasury Money Fund of 2,500 49
America(sm)
___________
*Available only in certain states.
+Effective September 15, 1999.
</TABLE>
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).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND
FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investment of $1 million or more
and investments made by employer-sponsored defined contribution-type plans with
100 or more eligible employees are sold with no initial sales charge. A
contingent deferred sales charge may be imposed on certain redemptions by these
accounts made within one year of purchases. Investments by retirement plans,
foundations or endowments with $50 million or more in assets, and
employer-sponsored defined contribution-type plans with 100 or more eligible
employees made with no sales charge and are not subject to a contingent
deferred sales charge.
In addition, 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 of organizations with retirement plan 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.
DEALER COMMISSIONS -- 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 $4 million, 0.50% on amounts over $4 million to $10 million, and 0.25% on
amounts over $10 million.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 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.
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.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. 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 by the close of the period,
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 account
application) and any individual investments in American Legacy products
(American Legacy, American Legacy II and American Legacy III variable
annuities, American Legacy Life, American Legacy Variable Life, and American
Legacy Estate Builder) 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.
When the trustees of certain retirement plans purchase shares 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),
any rollovers or transfers reasonably anticipated to be invested in non-money
market American Funds during the 13-month period, and any individual
investments in American Legacy products 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.
CONCURRENT PURCHASES -- You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. When
determining your sales charge, you may also take into account the value of your
individual holdings, as of the end of the week prior to your investment in
various American Legacy products (American Legacy, American Legacy II and
American Legacy III variable annuities, American Legacy Life, American Legacy
Variable Life, and American Legacy Estate Builder). Direct purchases of the
money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next determined
after the purchase order is received and accepted 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 do not always indicate the 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. For example, if the Exchange closes at 1:00 p.m. on one day and at 4:00
p.m. on the next, the fund's share price would be determined as of 4:00 p.m.
New York time on both days. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King Jr.
Day, 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 non-U.S. 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
Board of Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
- -- Over $50,000;
- -- Made payable to someone other than the registered shareholder(s); or
- -- Sent to an address other than the address of record, or an address of record
which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R)
- - Redemptions by telephone or fax (including American FundsLine(r) and American
FundsLine OnLine(r)) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application).
- -- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds
made within twelve months of purchase on investments of $1 million or more
(other than redemptions by employer-sponsored retirement plans). 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 403(b) plans or IRAs due to
death, disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; and, for redemptions through certain automatic
withdrawals not exceeding 10% of the amount that would otherwise be subject to
the charge.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments into the American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is
made, depending on the bank's capabilities. American Funds Service Company
will then invest your money into the fund you specified on or around the date
you specified. If your bank account cannot be debited due to insufficient
funds, a stop-payment or the closing of the account, the plan may be terminated
and the related investment reversed. You may may change the amount of the
investment or discontinue the plan at any time by writing to American Funds
Service Company.
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 -- You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:
(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the
fund receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distribution must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
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(r) (see "American FundsLine(r) and
American FundsLine OnLine(r)" 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 (a) meet the minimum initial investment
requirement for the receiving fund or (b) 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 will be reflected on regular confirmation statements from American
Funds Service Company. Dividend and capital gain reinvestments and purchases
through automatic investment plans and certain retirement plans will be
confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(R) -- 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(r). To use this service, call 800/325-3590 from a
TouchTone(tm) telepone or access the American Funds Web site on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(r)
and American FundsLine OnLine(r) 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 PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine(r)) or computer (including American
FundsLine OnLine(r)), fax or telegraph purchase, 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.
SHARE CERTIFICATES -- Shares are credited to your account and certficates are
not issued unless you request them by writing to American Funds Service
Company.
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.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not have an obligation
to obtain the lowest available commission rate to the exclusion of price,
service and qualitative considerations.
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, 1998, 1997 and 1996 amounted to $14,763,000, $11,461,000 and
$8,933,000, 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 $14,537,000 for the fiscal year ended September 30, 1998.
INDEPENDENT ACCOUNTANTS -- PricewaterhouseCoopers 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 PricewaterhouseCoopers 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,
PricewaterhouseCoopers LLP, whose selection is determined annually by the Board
of Directors. In an effort to reduce the volume of mail shareholders receive
from the fund when a household owns more than one account, the Transfer Agent
has taken steps to eliminate duplicate mailings of shareholder reports. To
receive additional copies of a report shareholders should contact the Transfer
Agent.
YEAR 2000 -- The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
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.
SHAREHOLDER VOTING RIGHTS -- The fund does not hold annual meetings of
shareholders. However, significant matters which require shareholder approval,
such as certain elections of board members or a change in a fundamental
investment policy, will be presented to shareholders at a meeting called for
such purpose. Shareholders have one vote per share owned. At any meeting of
shareholders, duly called and at which a quorum is present, shareholders
holding a majority of the votes entitled to be cast, 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
agreed, 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 will 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 at least 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:
DETERMINATION OF NET ASSET VALUE,
REDEMPTION PRICE ANDMAXIMUM OFFERING PRICE PER SHARE -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $20.50
Maximum offering price per share
(100/94.25 of net asset value per share which takes
into account the fund's current maximum $21.75
sales charge)
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is 1.40% based on a 30-day (or one month) period ended
September 30, 1998, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's one-year total return and average annual total returns for the five-
and ten-year periods ended on September 30, 1998 was -4.58%, 12.88% and 13.45%,
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.
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.
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 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, in advertisements or in reports furnished to present or
prospective shareholders, information on its investment results and/or
comparisons of its investment results to various unmanaged indices (such as The
Dow Jones Average of 30 Industrial Stocks and The Standard and Poor's 500
Composite Stock Index) or results of other mutual funds or investment or
savings vehicles. The fund may also, from time to time, combine its results
with those of other funds in The American Funds Group for purposes of
illustrating investment strategies involving multiple funds.
The fund may refer to results and surveys compiled by organizations such as CDA
Investment Technologies, Ibbottson Associates, Lipper Analytical Services,
Morningstar, Inc., 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).
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/5/
<S> <C> <C> <C> <C> <C> <C> <C>
1973# - 1998 +2,945% +2,209% +2,238% +1,547% +2,117% +1,422% +723%
1988 - 1998 +253 +394 +390 +166 +418 +190 +228
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
(10/1/93 - 9/30/98) (10/1/88 - 9/30/98)
$14,052 $41,464
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM . . .
<TABLE>
<CAPTION>
If you had invested ... and taken all
$10,000 in NPF distributions in shares,
this many years ago... your investment would
have been worth this
much at September 30, 1998
Periods
Number of Years 10/1 - 9/30 Value
<S> <C> <C>
1 1997 - 1998 $9,542
2 1996 - 1998 12,403
3 1995 - 1998 13,717
4 1994 - 1998 16,276
5 1993 - 1998 18,324
6 1992 - 1998 21,684
7 1991 - 1998 23,428
8 1990 - 1998 29,022
9 1989 - 1998 27,606
10 1988 - 1998 35,318
11 1987 - 1998 30,295
12 1986 - 1998 45,344
13 1985 - 1998 62,955
14 1984 - 1998 72,701
15 1983 - 1998 73,427
16 1982 - 1998 105,771
17 1981 - 1998 113,352
18 1980 - 1998 115,475
19 1979 - 1998 142,782
20 1978 - 1998 165,549
21 1977 - 1998 219,919
22 1976 - 1998 225,700
23 1975 - 1998 266,600
24 1974 - 1998 387,636
25 1973 - 1998 288,857
Lifetime 1973# - 1998 304,530
</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, 1998)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Fiscal Annual Dividends Total From From Dividends Total
Year End Dividends (cumulative) Investment Initial Capital Reinvested Value
Sept. 30 Cost Investment Gains
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
1998 4,388 44,649 54,649 47,857 171,886 84,787 304,530
</TABLE>
The dollar amount of capital gain distributions during the period was $96,895.
________________________________________
# From March 13, 1973, the date fund commenced operations.
EXPERIENCE OF THE INVESTMENT ADVISER -- Capital Research and Management
Company manages nine growth and growth-income funds that are at least 10 years
old. In the rolling 10-year periods since January 1, 1968 (133 in all) those
funds have had better total returns than their comparable Lipper indexes in 124
of 133 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
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>
New Perspective Fund
Investment Portfolio, September 30, 1998
<S> <C> <C> <C>
Percent
Largest Industry Holdings Largest Individual of Net
12.25% Telecommunications Holdings Assets
10.92% Health & Personal Care Pfizer 2.91%
7.11% Broadcasting & Publishing Time Warner 2.62
6.00% Electrical & Electronics Philip Morris 2.43
4.15% Electronic Components Astra 2.10
43.87% Other Industries Viacom 2.01
Nokia 2.01
15.70% Cash and Equivalents Mannesmann 2.00
Novartis 1.81
Telefonica 1.45
Micron Technology 1.29
Shares or Market Percent
Principal Value of Net
Equity Securities Amount (Millions) Assets
- ----------------------------------------- ------------ ----------------------
Telecommunications - 12.25%
Mannesmann AG (Germany) 3,875,000 $355.015 2.00
Telefonica, SA (formerly Telefonica de Espana, SA)
(Spain) 6,823,800 249.100
Telefonica, SA (ADR) 76,000 8.203 1.45
AirTouch Communications (USA) (1) 3,575,000 203.775 1.15
Deutsche Telekom AG (Germany) 6,424,300 199.653 1.13
Telefonos de Mexico, SA de CV, Class L (ADR) (Mexi 3,434,530 151.978 .86
AT&T Corp. (USA) 2,535,000 148.139 .84
WorldCom, Inc. (formerly MCI Communications Corp.)
(USA) 2,892,068 141.350 .80
Vodafone Group PLC (ADR) (United Kingdom) 977,000 110.157 .62
Tele Danmark AS (Denmark) 671,150 66.703
Tele Danmark AS, Class B (ADR) 699,300 33.654 .57
Telecom Italia SpA, ordinary shares (Italy) 4,187,500 28.647
Telecom Italia SpA, nonconvertible savings shares 12,500,000 58.349 .49
France Telecom, SA (France) 1,190,700 70.435 .40
DDI Corp. (Japan) 29,045 64.672 .37
Nippon Telegraph and Telephone Corp. (Japan) 8,850 64.497 .36
Sprint Corp. (USA) 883,400 63.605 .36
Telecom Corp. of New Zealand Ltd. (New Zealand) 10,671,100 40.800
Telecom Corp. of New Zealand Ltd. (2) 4,917,700 18.803 .34
Koninklijke PTT Nederland NV (Netherlands) 1,649,371 50.949 .29
British Telecommunications PLC (United Kingdom) 3,000,000 39.886 .22
Health & Personal Care - 10.92%
Pfizer Inc (USA) 4,870,000 515.916 2.91
Astra AB, Class A (Sweden) 13,026,833 222.616
Astra AB, Class A (ADR) 413,333 7.104
Astra AB, Class B 8,590,533 141.326 2.10
Novartis AG (Switzerland) 199,231 320.288 1.81
SmithKline Beecham PLC (ADR) (United Kingdom) 2,200,000 120.450 .68
Merck & Co., Inc. (USA) 810,500 105.010 .59
Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 2,635,000 99.801 .56
Zeneca Group PLC (United Kingdom) 1,700,000 60.041
Zeneca Group PLC (ADR) 555,000 19.425 .45
Glaxo Wellcome PLC (United Kingdom) 563,264 16.355
Glaxo Wellcome PLC (ADR) 1,044,000 59.639 .43
Alza Corp. (USA) (1) 1,000,000 43.375 .25
Genentech, Inc., callable putable common stock (US 600,000 43.125 .24
Bristol-Myers Squibb Co. (USA) 400,000 41.550 .24
Pharmacia & Upjohn, Inc. (USA) 650,000 32.622 .18
Guidant Corp. (USA) 400,000 29.700 .18
Medtronic, Inc. (USA) 500,000 28.938 .16
Shiseido Co., Ltd. (Japan) 1,689,000 14.907 .08
Avon Products, Inc. (USA) 400,000 11.225 .06
Broadcasting & Publishing - 7.11%
Time Warner Inc. (USA) 5,306,225 464.626 2.62
Viacom Inc., Class A (USA) (1) 500,000 28.750
Viacom Inc., Class B (1) 5,640,000 327.120 2.01
News Corp. Ltd. (Australia) 3,958,997 25.534
News Corp. Ltd. (ADR) 3,991,600 102.285
News Corp. Ltd., preferred shares 2,037,002 11.351
News Corp. Ltd., preferred shares (ADR) 1,995,800 44.656 1.04
CANAL+ (France) 350,623 85.153 .48
Wolters Kluwer NV (Netherlands) 162,516 31.199 .18
Pearson PLC (United Kingdom) 1,700,000 31.190 .18
CBS Corp. (USA) 1,045,000 25.341 .14
Elsevier NV (Netherlands) 1,700,000 25.264 .14
Dow Jones & Co., Inc. (USA) 500,000 23.250 .13
AUDIOFINA (Luxembourg) 415,300 17.485 .10
Grupo Televisa, SA, ordinary participation
certificates (ADR) (Mexico) (1) 825,000 15.933 .09
Electrical & Electronics - 6.00%
Nokia Corp., Class A (Finland) 1,440,000 114.441
Nokia Corp., Class A (ADR) 2,440,000 191.388
Nokia Corp., Class K 623,800 49.514 2.01
Telefonaktiebolaget LM Ericsson, Class B (Sweden) 9,672,000 182.553
Telefonaktiebolaget LM Ericsson, Class B (ADR) 2,200,000 40.425 1.26
Siemens AG (Germany) 3,280,000 181.284 1.02
Northern Telecom Ltd. (Canada) 3,553,420 113.709 .64
Matsushita Communication Industrial Co., Ltd. (Jap 1,550,000 55.629 .31
General Electric Co. (USA) 480,000 38.190 .22
Schneider SA (France) 600,000 31.263 .18
General Instrument Corp. (USA) (1) 1,055,200 22.819 .13
York International Corp. (USA) 680,000 22.695 .13
Alcatel, SA (formerly Alcatel Alsthom) (France) 200,000 17.773 .10
Electronic Components - 4.15%
Micron Technology, Inc. (USA) (1) 7,500,000 228.281 1.29
Intel Corp. (USA) 1,800,000 154.350 .87
Advanced Micro Devices, Inc. (USA) (1) 7,050,000 130.866 .74
Murata Manufacturing Co., Ltd. (Japan) 1,746,000 58.955 .33
Altera Corp. (USA) (1) 1,250,000 43.906 .25
Seagate Technology (USA) (1) 1,400,000 35.088 .20
Analog Devices, Inc. (USA) (1) 1,710,000 27.467 .15
Hirose Electric Co., Ltd. (Japan) 400,000 20.538 .12
Rohm Co., Ltd. (Japan) 200,000 19.043 .11
Texas Instruments Inc. (USA) 300,000 15.825 .09
Banking - 3.98%
Bank of Nova Scotia (Canada) 7,359,000 120.600 .68
Westpac Banking Corp. (Australia) 17,794,543 97.954
Westpac Banking Corp., warrants, expire 2000 (1) 3,000,000 14.956 .64
Royal Bank of Canada (Canada) 2,717,000 110.247 .62
BankAmerica Corp. (USA) 1,200,000 72.150 .41
Citicorp (USA) 610,000 56.692 .32
Banque Nationale de Paris (France) 867,048 46.416 .26
Australia and New Zealand Banking Group Ltd.
(Australia) 6,212,511 33.208 .19
Paribas, Class A (formerly Cie. Financiere de
Paribas) (France) 500,000 26.945 .15
Istituto Mobiliare Italiano SpA (Italy) 1,980,000 26.640 .15
ABN AMRO Holding NV (Netherlands) 1,357,860 23.134 .13
Banco de Santander, SA (Spain) 416,000 6.435
Banco de Santander, SA (ADR) 1,101,600 16.662 .13
First Union Corp. (USA) 426,000 21.806 .12
Sakura Bank, Ltd. (Japan) 12,700,000 18.604 .11
Fuji Bank, Ltd. (Japan) 5,910,000 11.904 .07
Beverages & Tobacco - 3.78%
Philip Morris Companies Inc. (USA) 9,355,000 430.915 2.43
Seagram Co. Ltd. (Canada) 2,800,000 80.325 .45
Asahi Breweries, Ltd. (Japan) 2,777,000 32.951
Asahi Breweries, Ltd., 1.00% convertible
debentures 2003 Y924,000,000 10.016
Asahi Breweries, Ltd., 0.95% convertible
debentures 2002 Y410,000,000 4.264
Asahi Breweries, Ltd., 0.90% convertible
debentures 2001 Y520,000,000 5.332 .30
Gallaher Group PLC (United Kingdom) 2,905,100 21.211
Gallaher Group PLC (ADR) 300,000 8.813 .17
PepsiCo, Inc. (USA) 1,000,000 29.438 .17
Southcorp Ltd. (Australia) 9,000,000 25.059 .14
Cia. Cervejaria Brahma, preferred nominative (Braz 50,172,000 19.681
Cia. Cervejaria Brahma, preferred nominative (ADR) 100,000 0.781 .11
LVMH Moet Hennessy Louis Vuitton (France) 9,700 1.324 .01
Energy Sources - 3.38%
TOTAL, Class B (France) 131,077 16.513
TOTAL, Class B (ADR) 3,109,814 195.335 1.20
Royal Dutch Petroleum Co. (New York Registered
Shares) (Netherlands) 1,952,000 92.964
'Shell' Transport and Trading Co., PLC (United
Kingdom) 3,000,000 18.147 .63
Elf Aquitaine (France) 400,000 49.322
Elf Aquitaine (ADR) 250,000 15.547 .37
Mobil Corp. (USA) 700,000 53.156 .30
Phillips Petroleum Co. (USA) 700,000 31.588 .18
YPF SA, Class D (ADR) (Argentina) 1,200,000 31.200 .17
Talisman Energy Inc. (Canada) (1) 1,400,000 30.010 .17
Unocal Corp. (USA) 800,000 29.000 .16
ENI SpA (Italy) 4,000,000 24.549 .14
RAO Gazprom (ADR) (Russia) 1,341,000 8.683 .05
Broken Hill Proprietary Co. Ltd. (Australia) 371,938 2.663 .01
Data Processing & Reproduction - 2.93%
Oracle Corp. (USA) (1) 2,911,100 84.786 .48
Ascend Communications, Inc. (USA) (1) 1,850,000 84.175 .48
Microsoft Corp. (USA) (1) 760,000 83.648 .47
Fujitsu Ltd. (Japan) 9,223,000 79.712 .45
Cisco Systems, Inc. (USA) (1) 750,000 46.359 .26
International Business Machines Corp. (USA) 300,000 38.400 .22
Compaq Computer Corp. (USA) 1,200,000 37.950 .21
Gateway 2000, Inc. (USA) (1) 500,000 26.063 .15
Silicon Graphics, Inc. (USA) (1) 2,100,000 19.688 .11
Computer Associates International, Inc. (USA) 500,000 18.500 .10
Business & Public Services - 2.79%
Cendant Corp. (USA) (1) 11,400,000 132.525 .75
Reuters Group PLC (United Kingdom) 10,985,400 92.147
Reuters Group PLC (ADR) 300,000 14.925 .61
Suez Lyonnaise des Eaux (France) 447,000 76.095 .43
TNT Post Groep NV (Netherlands) 1,629,500 41.514 .23
Vivendi SA (formerly Cie. Generale des Eaux) (Fran 203,808 40.587
Vivendi SA, warrants, expire 2001 (1) 203,808 0.313 .23
Interpublic Group of Companies, Inc. (USA) 500,000 26.969 .15
Electronic Data Systems Corp. (USA) 800,000 26.550 .15
Rentokil Initial PLC (United Kingdom) 4,200,000 25.701 .15
United Utilities PLC (United Kingdom) 567,286 9.161 .05
Brambles Industries Ltd. (Australia) 350,000 7.558 .04
Insurance - 2.57%
ING Groep NV (Netherlands) 2,486,908 112.063 .63
Fairfax Financial Holdings Ltd. (Canada) 289,700 83.748
Fairfax Financial Holdings Ltd. (USA) (2) 93,000 26.885 .63
American International Group, Inc. (USA) 1,153,437 88.815 .50
Assicurazioni Generali SpA (Italy) 1,508,000 49.267 .28
Allianz AG (Germany) 153,000 47.457 .27
Yasuda Fire and Marine Insurance Co., Ltd. (Japan) 7,299,000 26.730 .15
Guardian Royal Exchange PLC (United Kingdom) 4,142,857 17.973 .10
QBE Insurance Group Ltd. (Australia) 624,097 2.275 .01
Multi-Industry - 2.49%
Siebe PLC (United Kingdom) 27,880,000 89.946 .51
Hutchison Whampoa Ltd. (Hong Kong) 13,216,000 69.589 .39
Williams PLC (United Kingdom) 11,076,923 64.796 .37
Lend Lease Corp. Ltd. (Australia) 2,444,277 52.163 .30
FMC Corp. (USA) (1) 559,800 28.865 .16
TI Group PLC (United Kingdom) 4,472,900 27.038 .15
Canadian Pacific Ltd. (Canada) 1,200,000 24.825 .14
LTV Corp. (USA) 3,975,000 24.347 .14
Lagardere Groupe SCA (France) 850,000 24.253 .14
Investor AB, Class B (Sweden) 520,000 20.160 .11
AlliedSignal Inc. (USA) 400,000 14.150 .08
Chemicals - 2.44%
Praxair, Inc. (USA) 3,207,850 104.857 .59
BOC Group PLC (United Kingdom) 7,751,600 96.084 .55
Valspar Corp. (USA) 1,555,000 46.553 .26
Sherwin-Williams Co. (USA) 1,962,000 42.428 .24
Methanex Corp. (Canada) (1) 7,250,000 41.585 .24
Bayer AG (Germany) 950,000 35.895 .20
Georgia Gulf Corp. (USA) (3) 1,975,000 30.859 .17
L'Air Liquide (France) 125,235 19.845 .11
AGA AB, Class A (Sweden) 800,000 10.406
AGA AB, Class B 300,000 3.711 .08
Automobiles - 2.41%
Renault V.I. SA (France) 3,000,000 119.914 .68
Bayerische Motoren Werke AG (Germany) 80,350 51.410
Bayerische Motoren Werke AG, preferred shares 26,412 9.866 .35
Suzuki Motor Corp. (Japan) 5,538,000 55.733 .31
Chrysler Corp. (USA) 1,000,000 47.875 .27
Honda Motor Co., Ltd. (Japan) 1,000,000 30.396 .17
Nissan Motor Co., Ltd. (Japan) 9,300,000 25.884 .15
Volvo AB, Class B (Sweden) 1,000,000 24.486 .14
Ford Motor Co. (USA) 500,000 23.469 .13
General Motors Corp. (USA) 400,000 21.875 .12
Daimler-Benz AG, 4.125% convertible debentures
2003 (Germany) (2) DM17,000,000 15.829 .09
Food & Household Products - 1.99%
Nestle SA (Switzerland) 60,000 119.713 .68
Groupe Danone (France) 393,552 103.444 .58
Reckitt & Colman PLC (United Kingdom) 5,503,125 81.342 .46
Unilever NV (Netherlands) 300,000 18.884 .11
Archer Daniels Midland Co. (USA) 1,102,500 18.467 .10
Colgate-Palmolive Co. (USA) 150,000 10.275 .06
Gold Mines - 1.91%
Newmont Mining Corp. (USA) 4,000,000 97.000 .55
Placer Dome Inc. (Canada) 7,000,000 96.688 .55
Barrick Gold Corp. (Canada) 3,400,000 68.000 .38
Homestake Mining Co. (USA) 4,500,000 54.563 .31
Gold Fields of South Africa Ltd. (South Africa) 1,741,500 22.302 .12
Leisure & Tourism - 1.44%
Carnival Corp. (USA) 6,600,000 209.963 1.19
Walt Disney Co. (USA) 1,800,000 45.563 .25
Appliances & Household Durables - 1.36%
Sony Corp. (Japan) 1,845,000 128.243 .72
Koninklijke Philips Electronics NV (Netherlands) 1,723,200 92.832 .52
Samsung Electronics Co., Ltd. (South Korea) 634,412 17.362
Samsung Electronics Co., Ltd. (GDR) 193,028 2.707 .12
Forest Products & Paper - 1.31%
Champion International Corp. (USA) 2,200,000 68.888 .39
Louisiana-Pacific Corp. (USA) 2,550,000 51.956 .30
UPM-Kymmene Corp. (Finland) 1,953,000 44.757 .25
International Paper Co. (USA) 600,000 27.975 .16
Rayonier Inc. (USA) 600,000 23.400 .13
Jefferson Smurfit Corp. (USA) (1) 1,255,700 14.441 .08
Merchandising - 1.14%
Wal-Mart Stores, Inc. (USA) 1,850,000 101.056 .57
Home Depot, Inc. (USA) 1,270,000 50.165 .28
Marks & Spencer PLC (United Kingdom) 4,200,000 32.035 .18
Cifra, SA de CV, Class C (Mexico) 3,624,400 4.438
Cifra, SA de CV, Class V (1) 10,995,004 13.959 .11
Utilities: Electric & Gas - 1.00%
Williams Companies, Inc. (USA) 3,198,025 91.943 .52
National Power PLC (United Kingdom) 9,300,000 84.642 .48
Recreation & Other Consumer Products - 0.96%
Nintendo Co., Ltd. (Japan) 650,000 61.129 .35
Hasbro, Inc. (USA) 1,800,000 53.100 .30
Eastman Kodak Co. (USA) 400,000 30.925 .17
EMI Group PLC (United Kingdom) 3,975,569 24.487 .14
Aerospace & Military Technology - 0.71%
Bombardier Inc., Class B (Canada) 5,820,000 64.094 .36
Boeing Co. (USA) 1,800,000 61.763 .35
Textiles & Apparel - 0.61%
NIKE, Inc., Class B (USA) 2,928,000 107.787 .61
Metals: Nonferrous - 0.54%
Aluminum Co. of America (formerly Alumax Inc.) (US 631,313 44.823 .25
WMC Ltd. (Australia) 12,389,336 37.288 .21
Pechiney, Class A (France) 383,309 13.256 .08
Machinery & Engineering - 0.51%
Caterpillar Inc. (USA) 1,350,000 60.159 .34
Deere & Co. (USA) 500,000 15.125 .08
Kvaerner AS, Class A (Norway) 659,240 8.380 .05
UNOVA Inc. (USA) (1) 440,000 7.233 .04
Metals: Steel - 0.48%
Allegheny Teledyne Inc. (USA) 2,040,000 36.338 .20
Usinor Sacilor (France) 2,800,000 31.128 .18
Cia. Vale do Rio Doce, ordinary nominative (Brazil 38,400 0.411
Cia. Vale do Rio Doce, preferred nominative (4) 38,400 0.000
Cia. Vale do Rio Doce, preferred nominative (ADR) 1,184,000 16.872 .10
Energy Equipment - 0.47%
Schlumberger Ltd. (Netherlands Antilles) 598,300 30.102 .17
Baker Hughes Inc. (USA) 1,388,300 29.068 .16
Halliburton Co. (USA) 874,900 24.989 .14
Transportation: Shipping - 0.35%
Bergesen d.y. AS, Class A (Norway) 1,500,000 21.300
Bergesen d.y. AS, Class B 795,000 10.536 .18
Nippon Yusen KK (Japan) 10,525,000 30.913 .17
Transportation: Rail & Road - 0.33%
Union Pacific Corp. (USA) 1,375,000 58.609 .33
Miscellaneous Materials & Commodities - 0.31%
Cie. de Saint-Gobain (France) 320,000 42.427 .24
De Beers Consolidated Mines Ltd. (South Africa) 1,000,000 13.129 .07
Real Estate - 0.30%
Cheung Kong (Holdings) Ltd. (Hong Kong) 11,320,000 52.447 .30
Electronic Instruments - 0.25%
ADVANTEST CORP. (Japan) 1,027,500 43.650 .25
Industrial Components - 0.15%
Bridgestone Corp. (Japan) 1,118,000 22.519 .13
Rockwell International Corp. (USA) 91,000 3.287 .02
Building Materials & Components - 0.10%
Cemex, SA de CV, Class A (Mexico) 2,362,225 5.195
Cemex, SA de CV, ordinary participation certificat 5,777,066 12.705 .10
Financial Services - 0.09%
Associates First Capital Corp., Class A (USA) 259,883 16.957 .09
Miscellaneous - 0.79%
Other equity securities in initial period of
acquisition 139.842 .79
----------------------
TOTAL INVESTMENT SECURITIES
(cost: $11,341.853 million) 14,926.669 84.30
----------------------
Short-Term Securities
- ------------------------------------------
Corporate Short-Term Notes - 11.03%
General Electric Capital Corp. 5.18%-5.54% due $108.600 108.028 .61
10/13-12/7/98
Toyota Motor Credit Corp. 5.47%-5.50% due 10/1- 107.297 106.855 .60
11/20/98
Coca-Cola Co. 5.31%-5.43% due 11/10-12/8/98 107.100 106.242 .60
Ford Motor Credit Co. 5.18%-5.52% due 10/5-11/30/ 103.300 102.784 .58
Abbey National North America 5.41%-5.48% due 100.000 99.139 .56
11/23-12/9/98
Daimler-Benz North America Corp. 5.20%-5.52% due 99.100 98.745 .56
10/8-12/21/98
Deutsche Bank Financial Inc. 5.48%-5.52% due 10/ 95.300 95.007 .54
10/23/98
Canada Bills 5.32%-5.47% due 10/19-12/3/98 91.200 90.634 .51
Halifax PLC 5.48%-5.49% due 10/7-10/19/98 89.640 89.484 .51
British Gas Capital Inc. 5.10%-5.51% due 10/15/98 88.000 86.986 .49
3/11/99
Commerzbank U.S. Finance Inc. 5.50%-5.52% due 86.750 86.451 .49
10/16-10/26/98
Svenska Handelsbanken Group 5.49%-5.50% due 10/21 83.300 82.813 .47
11/20/98
Motorola, Inc. 5.43%-5.49% due 10/22-11/19/98 82.200 81.774 .46
General Motors Acceptance Corp. 5.50% due 10/1- 75.000 74.828 .42
10/22/98
E.I. du Pont de Nemours and Co. 5.46% due 11/4- 74.468 74.061 .42
11/6/98
International Lease Finance Corp. 5.45%-5.50% due 64.600 64.281 .36
10/27-11/13/98
American Express Credit Corp. 5.20%-5.50% due 59.300 59.025 .33
10/23-11/6/98
Repsol International Finance B.V. 4.97%-5.48% due 58.000 57.349 .32
10/2/98-3/30/99
Rank Xerox Capital (Europe) PLC 5.43%-5.49% due 53.597 53.439 .30
10/14-11/12/98
Dresdner U.S. Finance Inc. 5.50% due 10/7/98 50.000 49.946 .28
Shell Oil Co. 5.49% due 10/16/98 50.000 49.878 .28
Commonwealth Bank of Australia 5.42% due 12/14/98 50.000 49.459 .28
BP America Inc. 5.42% due 12/4/98 40.000 39.626 .23
UBS Finance (DE) Inc. 5.48%-5.50% due 10/9- 37.500 37.427 .21
10/21/98
Electricite de France 5.49% due 10/13/98 35.500 35.429 .20
ABN AMRO North America Finance Inc. 5.48%-5.50% 35.400 35.156 .20
due 10/13-12/1/98
Bank of Montreal 5.47% due 10/6/98 20.000 19.982 .12
Hershey Foods Corp. 5.48% due 10/20/98 17.100 17.048 .10
Federal Agency Discount Notes - 2.83%
Freddie Mac 5.00%-5.45% due 10/1/98-2/16/99 301.740 298.936 1.69
Fannie Mae 4.915%-5.42% due 10/5/98-3/26/99 203.900 202.111 1.14
Certificates of Deposit - 1.89%
Canadian Imperial Bank of Commerce 5.46% due 90.000 89.999 .51
11/17-11/23/98
Westdeutsche Landesbank Girozentrale 5.55%-5.56% 85.000 85.000 .48
due 10/8-10/9/98
Bayerische Vereinsbank AG 5.57%-5.59% due 10/5- 80.000 80.000 .45
10/6/98
Societe Generale 5.52%-5.57% due 10/27-10/30/98 80.000 80.000 .45
Non-U.S. Currency - 0.04%
New Taiwanese Dollar NT$260.183 7.608 .04
TOTAL SHORT-TERM SECURITIES (cost: $2,796.784 mill 2,795.530 15.79
Excess of payables over cash and receivables 15.229 .09
----------------------
TOTAL SHORT-TERM SECURITIES AND NET CASH 2,780.301 15.70
----------------------
NET ASSETS $17,706.97 100.00%
=====================
(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 6.38% of the outstanding voting
securities of Georgia Gulf Corp., and thus is
considered an affiliate as defined in the Investment
Company Act of 1940.
(4) Valued under procedures established by the Board of
Directors.
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
The descriptions of the companies shown in the port-
folio 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
New Perspective Fund
Equity-Type Securities Appearing in the
Portfolio Since March 31, 1998
Baker Hughes
Bombardier
Brambles Industries
Cendant
Compaq Computer
First Union
Gateway 2000
Homestake Mining
Interpublic Group of Companies
Marks & Spencer
Matsushita Communication Industrial
Nippon Telegraph & Telephone
Nissan Motor
QBE Insurance Group
Southcorp
TI Group
Unocal
Yasuda Fire & Marine Insurance
Equity-Type Securities Eliminated from the
Portfolio Since March 31, 1998
Accor
Alcan Aluminium
Amgen
Anadarko Petroleum
Applied Materials
Asustek Computer
B.A.T Industries
Cadbury Schweppes
Carlton Communications
Carrefour
Chase Manhattan
Du Pont
Engelhard
Enterprise Oil
Fuji Photo Film
Gillette
Hong Kong Telecommunications
Hongkong Electric Holdings
Istituto Nazionale delle Assicurazioni
Johnson & Johnson
Kawasaki Heavy Industries
Kyocera
Phelps Dodge
PolyGram
Raytheon
Security Capital Group
Swire Pacific
Taiwan Semiconductor Manufacturing
Teck
Telecomunicacoes Brasileiras
Tokyo Electron
Toronto-Dominion Bank
Toyota Motor
</TABLE>
<TABLE>
New Perspective Fund
Financial Statements
- ----------------------------------------- ---------------- ----------------
<S> <C> <C>
Statement of Assets and Liabilities (dollars in
at September 30, 1998 millions)
- ----------------------------------------- ---------------- ----------------
Assets:
Investment securities at market
(cost: $11,341.853) $14,926.669
Short-term securities
(cost: $2,796.784) 2,795.530
Cash .230
Receivables for-
Sales of investments $61.596
Sales of fund's shares 17.617
Forward currency contracts 1.937
Dividends and accrued interest 39.487 120.637
---------------- ----------------
17,843.066
Liabilities:
Payables for-
Purchases of investments 107.639
Repurchases of fund's shares 17.956
Management services 6.010
Accrued expenses 4.491 136.096
---------------- ----------------
Net Assets at September 30, 1998-
Equivalent to $20.50 per share on
863,908,688 shares of $1 par value
capital stock outstanding (authorized
capital stock--1,000,000,000 shares) $17,706.970
================
Statement of Operations
for the year ended September 30, 1998
(dollars in
millions)
- ----------------------------------------- ---------------- ----------------
Investment Income:
Income:
Dividends $ 235.336
Interest 127.111 $ 362.447
----------------
Expenses:
Management services fee 72.691
Distribution expenses 40.459
Transfer agent fee 14.537
Reports to shareholders .512
Registration statement and prospectus 1.223
Postage, stationery and supplies 2.980
Directors' and Advisory Board fees .294
Auditing and legal fees .097
Custodian fee 3.732
Taxes other than federal income tax .222
Other expenses .266 137.013
---------------- ----------------
Net investment income 225.434
----------------
Realized Gain and Change in Unrealized
Appreciation on Investments:
Net realized gain 1,406.817
Net change in unrealized appreciation on
investments (1,488.575)
Net increase in unrealized appreciation
on forward currency contracts 1.937 (1,486.638)
---------------- ----------------
Net realized gain and change in unrealized
appreciation on investments (79.821)
----------------
Net Increase in Net Assets Resulting
from Operations $ 145.613
================
- ----------------------------------------- ---------------- ----------------
Statement of Changes in Net Assets (dollars in millions)
Year ended September 30
1998 1997
- ----------------------------------------- ---------------- ----------------
Operations:
Net investment income $ 225.434 $ 221.926
Net realized gain on investments 1,406.817 922.766
Net change in unrealized appreciation
on investments (1,486.638) 2,567.733
---------------- ----------------
Net increase in net assets
resulting from operations 145.613 3,712.425
---------------- ----------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (250.381) (224.557)
Distributions from net realized gain on
investments (944.065) (462.037)
---------------- ----------------
Total dividends and distributions (1,194.446) (686.594)
---------------- ----------------
Capital Share Transactions:
Proceeds from shares sold: 141,823,983
and 160,556,117 shares, respectively 3,063.856 3,126.904
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 58,921,097 and 36,204,990 shares,
respectively 1,133.982 650.157
Cost of shares repurchased: 112,476,829
and 78,902,097 shares, respectively (2,398.119) (1,534.468)
---------------- ----------------
Net increase in net assets resulting from
capital share transactions 1,799.719 2,242.593
---------------- ----------------
Total Increase in Net Assets 750.886 5,268.424
Net Assets:
Beginning of year 16,956.084 11,687.660
---------------- ----------------
End of year (including undistributed
net investment income: $85.257
and $115.664, respectively) $17,706.970 $16,956.084
================ ================
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Forward currency contracts are valued at the
mean of their representative quoted bid and asked prices. Securities and assets
for which representative market quotations are not readily available are valued
at fair value as determined in good faith by a committee appointed by the Board
of Directors.
NON-U.S. CURRENCY TRANSLATION - Assets or liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period. Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - As is customary in the
mutual fund industry, securities transactions are accounted for on the date the
securities are purchased or sold. In the event the fund purchases securities on
a delayed delivery or "when-issued" basis, it will segregate with its custodian
liquid assets in an amount sufficient to meet its payment obligations in these
transactions. Realized gains and losses from securities transactions are
reported on an identified cost basis. Dividend and interest income is reported
on the accrual basis. Discounts and premiums on securities purchased are
amortized.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency
contracts, which represent agreements to exchange currencies of different
countries at specified future dates at specified rates. The fund enters into
these contracts to reduce its exposure to fluctuations in foreign exchange
rates arising from investments denominated in non-U.S. currencies. The fund's
use of forward currency contracts involves market risk in excess of the amount
recognized in the statement of assets and liabilities. The contracts are
recorded in the statement of assets and liabilities at their net unrealized
value. The fund records realized gains or losses at the time the forward
contract is closed or offset by a matching contract. The face or contract
amount in U.S. dollars reflects the total exposure the fund has in that
particular contract. Risks may arise upon entering these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from possible movements in non-U.S. exchange rates and securities values
underlying these instruments.
2. FEDERAL INCOME TAXATION
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, 1998, net unrealized appreciation on investments, excluding
forward currency contracts, for federal income tax purposes aggregated
$3,584,550,000, of which $4,918,386,000 related to appreciated securities and
$1,333,836,000 related to depreciated securities. During the year ended
September 30, 1998, the fund realized, on a tax basis, a net capital gain of
$1,412,023,000 on securities transactions.
Net losses related to non-U.S. currency and other transactions of $5,206,000
were treated as an adjustment to ordinary income for federal income tax
purposes. The cost of portfolio securities, excluding forward currency
contracts, for federal income tax purposes was $14,137,649,000 at September 30,
1998.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $72,691,000 for management services was
incurred 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.
DISTRIBUTION EXPENSES - 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, 1998,
distribution expenses under the Plan were $40,459,000. As of September 30,
1998, accrued and unpaid distribution expenses were $3,058,000.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $14,537,000. American Funds Distributors, Inc.
(AFD), the principal underwriter of the fund's shares, received $11,088,228
(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' FEES - 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 Board. Amounts deferred are not funded and are general unsecured
liabilities of the fund. As of September 30, 1998, aggregate amounts deferred
and earnings thereon were $590,000.
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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $4,607,426,000 and $4,621,129,000, respectively,
during the year ended September 30, 1998.
As of September 30, 1998, accumulated undistributed net realized gain on
investments was $1,316,503,000 and additional paid-in capital was
$11,854,745,000. The fund reclassified $5,460,000 to undistributed net
investment income from undistributed net realized gains for the year ended
September 30, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $3,732,000 includes $95,000 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, 1998, such non-U.S. taxes were $20,774,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes, on a book basis, were $10,527,000 for
the year ended September 30, 1998.
At September 30, 1998, the fund had outstanding forward currency contracts to
sell non-U.S. currencies as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Non-U.S. Currency Contract Amounts U.S. Valuation at 9/30/98
Sale Contracts
Non-U.S. U.S. Amount Unrealized Appreciation
Japanese Yen expiring Y6,890,225,000 $54,758,000 $52,821,000 $1,937,000
9/21/99
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS Year endedSeptember 30
1998 1997 1996 1995 1994 1993
-------------------------------------------------------------
Net Asset Value, Beginning of Year $21.86 $17.77 $16.98 $15.40 $14.21 $12.25
-------------------------------------------------------------
Income from Investment Operations:
Net investment income .27 .29 .32 .31 .22 .17
Net realized gain and change in
unrealized appreciation on investmen (.11) 4.81 1.40 2.35 1.54 2.04
-------------------------------------------------------------
Total income from
investment operations .16 5.10 1.72 2.66 1.76 2.21
-------------------------------------------------------------
Less Distributions:
Dividends from net
investment income (.31) (.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 (1.21) (.680) (.600) (.840) (.370) (.050)
-------------------------------------------------------------
Total distributions (1.52) (1.01) (.93) (1.08) (.57) (.25)
-------------------------------------------------------------
Net Asset Value, End of Year $20.50 $21.86 $17.77 $16.98 $15.40 $14.21
============================================================
Total Return(2) 1.23% 29.97% 10.64% 18.63% 12.61% 18.34%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $17,707 $16,956 $11,688 $8,817 $6,279 $4,417
Ratio of expenses to average
net assets .77% .79% .82% .83% .84% .87%
Ratio of net income to
average net assets 1.27% 1.56% 2.00% 2.12% 1.48% 1.40%
Portfolio turnover rate 29.71 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) Excludes maximum sales charge of 5.75%.
</TABLE>
Report of Independent Accountants
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, 1998, the results of its operations, the changes in
its net assets and the per-share data and ratios for the years indicated in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 1998 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Los Angeles, California
October 30, 1998
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net Realized From Net Realized
of Record Investment Short-term Gains Long-term Gains
Income
<S> <C> <C> <C> <C>
December 12, 1997 December 15, 1997 $.19 $.155 $1.055*
June 5, 1998 June 8, 1998 .12 - -
</TABLE>
*Includes $0.4104 long-term capital gains taxed at a maximum rate of 28%.
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
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, 1998 is $0.025 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, 28% 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 retirement plan trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 1999 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1998 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
