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New Perspective Fund – ‘N-30D’ for 9/30/97

As of:  Tuesday, 12/9/97   ·   For:  9/30/97   ·   Accession #:  71516-97-24   ·   File #:  811-02333

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  As Of                Filer                Filing    For·On·As Docs:Size

12/09/97  New Perspective Fund              N-30D       9/30/97    1:81K

Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual or Semi-Annual Report Mailed to                37±   155K 

Document Table of Contents

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11st Page   -   Filing Submission

[The American Funds Group (R)] NEW PERSPECTIVE FUND [sketch: flat depiction of globe] 1997 ANNUAL REPORT for the year ended September 30 NEW PERSPECTIVE FUND (R) seeks long-term growth of capital through investments all over the world, including the United States. New Perspective is one of the 28 mutual funds in The American Funds Group,(R) managed by Capital Research and Management Company. Since 1931, Capital has invested with a long-term focus based on thorough research and attention to risk. RESULTS AT A GLANCE FISCAL 1997 for the year ended September 30, 1997 Total return* New Perspective Fund +30.0% Morgan Stanley Capital International Indexes: World Index +24.6% USA Index +40.2% LIFETIME OF THE FUND from March 13, 1973 Average annual through September 30, 1997 Total return* compound return* New Perspective Fund +3,091.4% +15.1% Morgan Stanley Capital International Indexes: World Index +1,538.2% +12.1% USA Index +1,896.1% +13.0% *With dividends and capital gain distributions reinvested [sketches of globe changing from flat to round shape] About our cover: In the 1930s, Buckminster Fuller, the educator, engineer, architect and futurist, began developing a new perception of the Earth with his creation of the Fuller Projection Dymaxion (TM) (Dynamic + Maximum + Tension) map. As the first two-dimensional world map accurate in terms of the relative sizes of land masses, it provided an unprecedented look at the whole Earth at once. New Perspective Fund's investment professionals take a similar approach, looking at companies from every angle to get a comprehensive picture before they invest. The word "Dymaxion" and the Fuller Projection Dymaxion (TM) Map design are trademarks of the Buckminster Fuller Institute, Santa Barbara, California, (c)1938, 1967 & 1992. All rights reserved. FUND RESULTS IN THIS REPORT WERE COMPUTED WITHOUT A SALES CHARGE UNLESS OTHERWISE INDICATED. THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. INVESTING OUTSIDE THE UNITED STATES IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS AND POLITICAL INSTABILITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS. FELLOW SHAREHOLDERS: Fiscal 1997 was another profitable year for New Perspective Fund, its best for total return in a decade. For the 12 months ended September 30, the value of your investment rose 30.0% if you reinvested income dividends totaling 33 cents a share and the capital gain distribution of 68 cents paid during the fiscal period. By comparison, the unmanaged Morgan Stanley Capital International (MSCI) World Index, which measures the world's major stock markets including the United States, rose 24.6%. That also was the average gain of 170 global equity funds tracked by Lipper Analytical Services. As NPF approaches its quarter-century anniversary as one of the oldest global mutual funds, fiscal 1997 results lifted the fund's total return since its inception in March 1973 to 3,091.4%. This translates into an average annual compound return of 15.1%. The MSCI World Index gained an average of 12.1% a year during that period, while the average for global funds was 14.4% a year. A STRONG ENVIRONMENT FOR INVESTING During fiscal 1997, most of the world's major markets enjoyed exceptional growth. Propelled by moderate inflation, low interest rates and sustained capital inflows from optimistic investors, most markets posted double-digit gains both in local currency and in U.S. dollars, despite the dollar's relative strength. In the United States, the fund's largest area of concentration, the market overall rose 40.2% as measured by the MSCI USA Index. The United Kingdom, NPF's next largest area of holdings, also did well, roughly matching the U.S. gain in dollar terms. (The table on page 2 shows returns for major markets.) At the other end of the spectrum, a number of Asian markets fared poorly during the fiscal year. Despite a brief uptick in the first quarter of 1997, Japan's sluggish economy led to a 15.7% decline in stock prices in dollar terms. Good stock selection, however, meant that a number of our Japanese holdings rose in price during the year, including Sony (+50.1%), Fuji Photo Film (+36.0%) and Toyota (+20.2%). The market downturn also provided an opportunity to increase our investments in Japanese equities. Japan now accounts for 5.6% of net assets, up from 3.1% a year ago. Elsewhere in the region, currency turmoil in midsummer roiled markets across Southeast Asia, sending currency values and stock prices spiraling downward. With virtually no investments in the affected countries, the crisis had little impact on the fund. (The fund does have investments in Hong Kong stocks, which tumbled several weeks after the close of the reporting period; however, at 1.6% of net assets our position in that market is relatively small.) A FOCUSED RESEARCH EFFORT As we have frequently mentioned, New Perspective Fund invests in companies, not countries. That individual focus is supported by in-depth research into every security we consider for the fund. In the feature beginning on page 6, we take you on a tour of how that research effort is conducted among companies in our largest industry concentrations. Our analytical approach leads to broad diversification. On September 30, the fund held 238 companies in 27 countries and 34 industries. The portfolio showed broad strength: Of stocks held over the entire period, 143 rose in price and 31 declined. During the past fiscal year, our 10 largest holdings made solid contributions to NPF's growth. They include two longtime holdings, Finnish cellular phone manufacturer Nokia (+111.9%) and Caterpillar (+43.1%); the Spanish telecommunications company Telefonica de Espana, a relatively new holding, rose 69.9%. [photos: globe cutouts] [Begin sidebar] WHERE NPF'S ASSETS WERE INVESTED (percent invested by country) 9/30/97 9/30/96 ASIA/PACIFIC RIM 12.0% 9.8% Japan 5.6 3.1 Australia 3.4 3.6 Hong Kong 1.6 1.6 New Zealand .8 1.5 Taiwan .5 - South Korea .1 - EUROPE 31.9% 37.9% United Kingdom 6.5 7.2 France 5.6 7.3 Sweden 4.2 5.9 Netherlands 3.6 4.2 Switzerland 3.1 3.5 Germany 2.4 4.8 Spain 2.0 2.0 Italy 1.8 .7 Finland 1.6 1.3 Norway .6 .4 Denmark .4 .4 Luxembourg .1 .1 Belgium - .1 NORTH AMERICA 41.1% 35.2% United States 33.8 28.3 Canada 5.8 5.4 Mexico 1.5 1.5 OTHER 3.6% 2.9% CASH & EQUIVALENTS 11.4% 14.2% 100.0% 100.0% [End sidebar] The smallest increases among our 10 largest holdings were recorded by Astra, the Swedish pharmaceutical company (+15.6%), and the U.S. memory-chip maker Micron Technology (+13.7%). Astra suffered from investor concern over a patent expiration on its major ulcer drug, Losec, but we continue to believe that the strength of the balance sheet and flow of new products bode well for the company. Micron's lackluster return was caused by a slowdown in personal computer demand earlier in the year, not unusual in such a cyclical business. In a period in which investor concentration on a relatively small number of very large U.S. companies was driving the U.S. stock market higher, NPF maintained a significantly broader base. At the close of the fiscal year, the fund held nearly 34% in U.S. stocks, up from 28% last year; Europe accounted for 32% of net assets; Asia and the Pacific Rim for 12%, and other countries for about 11%. The balance was held in cash and equivalents as a buying reserve. LOW TURNOVER AS WELL AS LOW EXPENSES An important part of New Perspective Fund's investment strategy is a long-term perspective. The fund's portfolio turnover rate (the rate at which holdings are bought and sold), averaging 21% of net assets over the last five years, is among the lowest of all global equity funds, according to Lipper. Turnover rates take on added significance for investors because of recent changes in U.S. tax law. The new provisions grant a reduction in long-term capital gains tax (to 20% from 28% for assets held longer than 18 months). We are also pleased to report that NPF's 0.79% annual expense ratio - already well under half the 1.92% average in its fund universe as measured by CDA/Wiesenberger - continued to trend downward (see table on page 34). NPF'S 401(K) ACCOUNTS GROW TO $1 BILLION New Perspective Fund has continued to grow. Assets at year-end stood at nearly $17 billion, up 45% from a year earlier. While some of that growth reflects appreciation in the portfolio, we also welcomed many new shareholder accounts, including a significant number of 401(k) retirement accounts. NPF now has nearly 30,000 such accounts, totaling just over $1 billion. NPF's method of portfolio management, the multiple portfolio counselor system, is helping it accommodate growth. Because the fund's assets are divided among a number of portfolio counselors, managers can be added as assets increase. The fund currently has five primary portfolio counselors, with an aggregate of 151 years of experience among them, and a research portfolio managed by 41 analysts. World markets have been remarkably robust in recent years. A number of factors have contributed. Inflation worldwide has been relatively benign, which has kept interest rates low. Technology has been helping businesses grow without putting pressure on wages. European governments have been taking disciplined fiscal measures to prepare for the introduction of the Euro in January 1999. Globalization has made many companies more competitive as they find new markets in which to do business. At the same time, the rapid rise in many international markets, along with the continued strength in the U.S., suggest caution as we move forward. Stock prices have become more volatile and less tolerant of profit disappointments and other shocks. Indeed, world markets dipped sharply shortly after the close of the fund's reporting period. This is why we have always maintained a long-term perspective on our investments and encourage shareholders to do the same. Cordially, [/s/ Walter P. Stern] Walter P. Stern Chairman of the Board [/s/ Gina H. Despres] Gina H. Despres President November 17, 1997 [Begin sidebar] NEW PERSPECTIVE VERSUS THE MAJOR WORLD MARKET INDEXES (with dividends reinvested) [Enlarge/Download Table] World's Major Stock Latest Fiscal Year Lifetime of the Fund Markets/1/ (10/1/96-9/30/97) (3/13/73-9/30/97) (listed in order of size Local Adjusted to Local Adjusted to of market capitalization currency U.S.$/2/ currency U.S.$/2/ as of 9/30/97) United States MSCI USA Index 40.2% 1,896.1% Japan -8.6% -15.7 461.4% 1,128.9 United Kingdom 35.5 40.0 3,994.0 2,632.8 Germany 52.1 31.4 1,115.5 1,861.5 France 42.3 23.8 2,255.0 1,574.0 Canada 35.7 33.6 1,184.3 816.8 Switzerland 52.8 31.9 1,106.0 2,518.2 Netherlands 66.1 42.8 3,864.7 5,350.8 Hong Kong 20.9 20.9 2,082.1 1,350.6 Australia 22.3 12.0 2,085.3 993.5 Italy 52.9 34.9 2,082.7 601.4 Sweden 64.0 43.3 9,256.6 5,277.6 Spain 83.9 58.3 1,801.8 630.8 Belgium 35.9 17.1 2,254.8 2,383.8 Singapore -5.1 -12.7 353.6 515.5 MSCI World Index/3/ 24.6 1,538.2 NEW PERSPECTIVE FUND 30.0% 3,091.4% /1/ United States market represented by the U.S. component of MSCI World Index; all other markets computed by Capital International Perspective S.A. and included in MSCI World Index. All indexes are unmanaged. /2/ Figures adjusted to reflect foreign exchange fluctuations relative to the U.S. dollar. /3/ Includes the major stock markets throughout the world, weighted by size and adjusted to reflect foreign exchange fluctuation relative to the U.S. dollar. U.S. companies currently represent approximately 47% of the total index. All figures include the reinvestment of dividends. Returns for international indexes are with gross dividends reinvested (i.e., without local withholding taxes removed). NEW PERSPECTIVE'S 10 LARGEST STOCK HOLDINGS AT FISCAL YEAR-END [Download Table] PERCENT OF FOR 12 MONTHS COMPANY NPF'S NET ASSETS COUNTRY ENDED 9/30/97 Astra 2.23% Sweden +15.6% Novartis 2.10 Switzerland +57.2* Time Warner 2.05 U.S. +40.3 Philip Morris 1.83 U.S. +38.9 Pfizer 1.73 U.S. +51.8 Telefonica de Espana 1.51 Spain +69.9 Caterpillar 1.46 U.S. +43.1 Mannesmann 1.43 Germany +27.5 Micron Technology 1.40 U.S. +13.7 Nokia 1.33 Finland +111.9 *Company formed by merger in December 1996. Figure contains certain hypothetical data. HERE'S HOW A $10,000 INVESTMENT IN THE FUND GREW between March 13, 1973 - when the fund was introduced - and September 30, 1997, the end of the fund's latest fiscal year. Unlike figures presented earlier in the report, the fund's results in this chart reflect payment of the maximum sales charge of 5.75%, so the net amount invested was $9,425 versus $10,000 in the indexes shown. The indexes are unmanaged and do not have sales charges, commissions or expenses. As you can see, the investment in New Perspective would have grown to $300,835 versus $163,819 in the Morgan Stanley Capital International (MSCI) World Index, which reflects results in 22 major markets, and $199,607 in the MSCI USA Index. New Perspective's year-by-year results appear in the table under the chart. The table shows that NPF recorded positive results in 21 of these 25 periods, and the boxed figure at the bottom right of the table shows that over the entire 241/2 years the investment grew at an average compound rate of 14.9% a year. You can use this table to estimate how much the value of your own holdings has grown. Let's say, for example, that you have been reinvesting all your dividends and capital gain distributions and want to know how your investment has done since September 30, 1987. At that time, according to the table, the value of the investment illustrated here was $94,727. Since then, it has more than tripled to $300,835. Thus, in that same period, the value of your investment - regardless of size - also has more than tripled. NPF'S RETURN VERSUS OTHER GLOBAL EQUITY FUNDS (with distributions reinvested for periods ended 9/30/97) New Perspective Fund has done significantly better than most other similar mutual funds. Over its lifetime, the fund ranked second among the five global equity funds in existence over this 24 1/2-year span, according to Lipper Analytical Services. Here is how the fund ranks over other time periods: * 10 years: 4th out of 18 global equity funds * 5 years: 9th out of 44 global equity funds * 1 year: 41st out of 170 global equity funds Lipper rankings are based on total return and do not reflect the effect of sales charges. [begin chart] HOW A $10,000 INVESTMENT HAS GROWN $300,835/1,2/ New Perspective Fund with dividends reinvested $199,607 MSCI USA Index with dividends reinvested $163,819 MSCI World Index with dividends reinvested $10,000/1/ original investment [Download Table] New Perspective Year Fund MSCI USA MSCI World ended TOTAL VALUE Index with Index with September Dividends Value at Total dividends dividends 30 Reinvested year-end/1/ Return reinvested reinvested 1973# - $9,938 (0.6)% 9,644 9,496 1974 $325 7,402 (25.5) 5,796 5,886 1975 401 10,769 45.5 7,954 7,647 1976 337 12,720 18.1 10,379 9,328 1977 280 13,050 2.6 9,925 9,685 1978 318 17,342 32.9 10,953 11,895 1979 444 20,100 15.9 12,042 13,362 1980 501 24,866 23.7 14,200 15,945 1981 931 25,315 1.8 13,948 14,919 1982 1,667 27,151 7.3 15,458 15,314 1983 1,830 39,093 44.0 22,064 21,629 1984 1,205 39,494 1.0 23,019 22,861 1985 1,196 45,578 15.4 26,527 28,617 1986 1,178 63,273 38.8 34,776 45,581 1987 1,393 94,727 49.7 49,353 65,809 1988 1,820 81,233 (14.2) 42,818 61,905 1989 2,605 103,968 28.0 56,868 77,872 1990 2,617 98,896 (4.9) 52,008 61,430 1991 2,979 122,493 23.9 68,580 76,958 1992 2,524 132,337 8.0 76,198 76,629 1993 2,172 156,604 18.3 86,165 92,637 1994 2,231 176,345 12.6 89,637 100,116 1995 2,813 209,200 18.6 117,232 115,102 1996 4,129 231,461 10.6 142,355 131,445 1997 4,365 300,835 30.0 199,607 163,819 Average annual compound return for 24-1/2 years 14.9% /1/ # For the period March 13, 1973 (commencement of operations) through September 30, 1973. /1/These figures, unlike those shown elsewhere in this report, reflect payment of the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net amount invested was $9,425. As outlined in the prospectus, the sales charge is reduced for larger investments. The maximum intitial sales charge was 8.5% prior to July 1, 1988. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. No adjustment has been made for income or capital gain taxes. /2/Includes reinvested dividends of $40,261 and reinvested capital gain distributions of $80,243. Past results are not predictive of future results. AVERAGE ANNUAL COMPOUND RETURNS* (for periods ended September 30, 1997) 10 Years +11.59% 5 Years +16.46% 1 Year +22.52% *Assumes reinvestment of all distributions and payment of 5.75% sales charge at the beginning of the stated periods. [end chart] CAPITALIZING ON CHANGE A NEW PERSPECTIVE ON THE GLOBAL ECONOMY New Perspective Fund was created nearly 25 years ago with an unusual mandate: to seek out investment opportunities presented by changes in international trade and in economic and political relationships. The strategy was a prescient one. The last few decades have seen borders open, free trade and free enterprise flourish, economies expand and the concept of investing globally gain wide acceptance to a degree we could not have anticipated back in 1973. Several trends have converged to ease the way. A wave of economic freedom and a reduction in government control have allowed private investment to finance growth. Trade pacts and worldwide deregulation have helped erase borders. Bolstering these forces is a quickening of innovation, particularly in technology, that is creating entire industries that did not exist when New Perspective Fund began. Many companies have been alert to the potential rewards of globalization and benefited tremendously from it. With economic prosperity raising living standards for more people around the world than at any time in history, businesses that serve world markets have both fueled this growth and been among its biggest beneficiaries. New Perspective's investment professionals also use a global approach when they look for investments for the fund. The fund's investment adviser, Capital Research and Management Company, has had an international presence for more than 35 years. What began as a single office in Geneva has grown today into one of the industry's most comprehensive global research networks, supported by more than 100 analysts and portfolio counselors. Of course, other investment firms have offices around the world. What makes New Perspective unique is an integrated research process that allows investment professionals to develop a broad base of knowledge and expertise. It's a process that demands constant dialogue and a continuous exchange of information and ideas. We believe those insights help us make better long-term investment decisions on your behalf. On the next few pages, we'll examine three industries that have adapted particularly well to globalization and explain how our analysts have gone about identifying them and their potential value as long-term investments. The telecommunications, information technology and pharmaceuticals industries are well-represented in New Perspective Fund. (Companies shown in BOLDFACE on first reference are current holdings in the fund. Of course, the fund's portfolio is actively managed and holdings may change.) These businesses are offering new services, developing new products and tapping into new markets. [photo: telephone conversation via computer monitor] [Begin photo caption] TELECOMMUNICATIONS [End photo caption] [photo: pharmaceutical lab technician] [Begin photo caption] PHARMACEUTICALS [End photo caption] [photo: microchip] [Begin photo caption] INFORMATION TECHNOLOGY [End photo caption] [photo: conical shape of globe] [Begin sidebar] With a new customer added about every 20 seconds, wireless service is one of the fastest growing areas in telecommunications and another way telephone companies add value. New Perspective's research analysts can add value, too, by uncovering attractive investment opportunities at just the right time. When AIRTOUCH COMMUNICATIONS entered into a joint venture with the German conglomerate MANNESMANN, Brad Vogt, a research analyst based in Washington, D.C., was intrigued. "I had been covering AirTouch for some time," he says, "and it was clear that this was a good opportunity for the company to make use of its expertise in overseas markets." [photo: telephone conversation via computer monitor] Because Brad focuses mostly on U.S. companies, however, he felt he needed a broader perspective before he could be certain about whether the investment made sense. After carefully studying the details of the partnership, he talked to David Riley, who covers European telecommunications companies, and Ursula Van Almsick, a London-based analyst who covers Mannesmann, to see what they thought. They compared notes and, based on their input on European companies and industry trends, Brad felt confident that AirTouch stock was undervalued and recommended it for New Perspective Fund. Since then, the venture, called Mannesmann Mobilfunk, has attracted more than 2 million subscribers and has helped make AirTouch and Mannesmann two very good investments for the fund. [End sidebar] TELECOMMUNICATIONS NEW SERVICES FOR GLOBAL COMPANIES With the technology to reach every corner of the world in the blink of an eye, perhaps no industry is more emblematic of the potential of globalization than telecommunications services. Although the telephone has been helping people stay in touch for more than a century, its potential has only begun to be realized. Not long ago, AT&T'S decades-long monopoly on U.S. services and equipment seemed unassailable, and the majority of overseas phone companies were bureaucratic, state-run operations. Without competition, phone service around the world tended to be slow, expensive or simply nonexistent. Today, the telecommunications landscape could not be more different. Ma Bell's dominance in the U.S. crumbled in 1984. The Telecommunications Act of 1996 brought added competition to the market by allowing regional phone companies to broaden the range of services they could provide to customers. The U.S. government has been auctioning off billions of dollars in licenses for parts of the frequency spectrum for wireless services. In Europe, barriers to competition that had protected the continent's telecommunications groups for more than a century will be demolished as early as January 1, 1998. Developing markets that had virtually no phone service two decades ago are now hastily building infrastructures that will accommodate wireless technology and Internet access. Innovation and industrywide deregulation have allowed competition to take its course, forcing companies to become more efficient and customer-oriented. These changes have made telecommunications companies attractive investments as well. New Perspective Fund had no telecommunications holdings until 1983. Today, thanks in no small part to the potential offered by global growth and worldwide deregulation, telecommunications is our second largest industry concentration, with 16 companies based in 12 countries. David Riley, an NPF research analyst based in Geneva, is impressed by how effectively some telecommunications companies are taking advantage of the new open environment. "To borrow a biblical term, globalization begets globalization," he says. "As businesses have expanded their borders of operations, they have demanded increasingly sophisticated, reliable services. Phone companies have responded by becoming more global themselves." David cites as examples a number of global partnerships formed by regional and long distance service providers. A joint venture called Concert, involving BRITISH TELECOM and MCI, has recently linked up with TELEFONICA DE ESPANA to facilitate access to Spain and Latin America. Likewise, DEUTSCHE TELEKOM has joined France Telecom and SPRINT in a venture called Global One, while AT&T has partnered with the Netherlands' KPN, Swiss PTT and Telia of Sweden to enhance services for its multinational customers. These companies are offering their clients faster, cheaper connections, new data services and simplified billing. Research is critical in a complex industry such as this one. The fund's analysts make it their business to get to know every telecommunications company very well, whether we invest in it or not. Their research typically crosses geographic borders, which can help an analyst determine what companies are worth on a relative basis. David, for example, follows European companies and has recently added Latin America to his area of coverage. Keeping Mexican or Brazilian valuations in mind when evaluating British or Italian businesses has helped him make better investment recommendations. Although David spends a lot of time studying companies on his own, his work isn't done until he's talked with other Capital associates with relevant areas of expertise (see story above). Working in "cluster groups" helps analysts leverage their many hours of research and close the circle of information. That knowledge makes a difference with the companies we invest in, too. As David says, "When Capital's analysts call on them, companies will take the time to talk to us. In fact, because we've done our homework so thoroughly, management will frequently call us with information they feel is important for their shareholders." [photo: cables] [sketch of globe cutouts] [photo: Telefonica de Espana, Spain] [Begin photo caption] Telefonica de Espana, Spain [End photo caption] [photo: Telefonos de Mexico] [Begin photo caption] Telefonos de Mexico [End photo caption] INFORMATION TECHNOLOGY NEW MARKETS FOR GLOBAL INNOVATION If telecommunications has ridden the wave of the global explosion, then information technology has been its catalyst, the element that has made it all possible. Technological innovation has helped create new industries, change the way every business is run and transform developing economies into pacesetters. The market for information technology is expanding rapidly. Companies are spending large sums to upgrade their computer systems, while more people than ever are buying personal computers for home use. The fastest growth is occurring outside the U.S., particularly in the Asia/Pacific region, where improving economic conditions helped propel PC sales 30% higher last year. China, South Korea and India have presented significant opportunities for global companies that can meet the demands of their international customers. Today, U.S.-based technology companies, which dominate the industry, derive up to half of their revenues from markets outside the United States, by some estimates. Many global technology firms operate manufacturing facilities in the countries they service. Trade pacts have helped globalize the industry as well; several countries have recently agreed to end all tariffs on information technology products by the year 2000. The industry is complex and interdependent. Where manufacturers like IBM once made all the parts they needed to assemble a complete computer, companies now typically produce only one or a few components. Scott Bonham, a research analyst based in San Francisco, notes that "outsourcing, which has become popular across many industries, has completely changed the dynamics of the information technology sector. That applies across the board. Whether it's giant mainframes, tiny silicon wafers or ancillary consulting services, people want to benefit from technology, not manage it." He points out that today computer makers rely on other firms to supply the "guts" of the machine - companies such as INTEL and ADVANCED MICRO DEVICES for microprocessors, which coordinate the flows of information within the computer; MICRON TECHNOLOGY for powerful memory chips that store huge amounts of data; SEAGATE for disk drives; and CISCO SYSTEMS and ASCEND for high-speed data networking systems that allow computers to communicate with each other. Of course, information technology has other applications. Chips and circuits are used to make and operate automobiles, machinery, movies and countless electronic devices. What's more, much of the best innovation comes not from the technology industry but from forward-looking businesses hoping to increase their market share. They include firms such as NOKIA and ERICSSON, which pioneered cellular phone technology. Technology companies fit together like pieces of a global jigsaw puzzle. That makes understanding them - and investing in them - a complicated enterprise. Integrated research helps the fund's analysts develop a comprehensive understanding of this highly specialized industry. New Perspective Fund's technology cluster comprises six analysts. Working as a team, they travel together, share information at weekly teleconferences and write frequent reports on the companies they cover. "The constant interplay of perspectives is essential to the research process," stresses Scott. "Without it, it's like using an encyclopedia with $A' through $M' missing." [photo: Nokia, Finland] [Begin photo caption] Nokia, Finland [End photo caption] [photo: Advanced Micro Devices, U.S. K6 microprocessor] [Begin photo caption] Advanced Micro Devices, U.S. K6 microprocessor [End photo caption] [photo: close-up of microchip] [photo: electronic component] [Begin sidebar] Fundamental research can be a time-consuming, laborious process, but we think it's worth the effort: After all, keeping a long-term focus is one of New Perspective Fund's guiding principles. Sung Lee, a technology analyst based in Tokyo, was inspired by an article he read about the impending deregulation of Japan's financial industry. Realizing that these companies would have to make tremendous investments in information technology to stay competitive, he compiled a list of several technology companies that might benefit. Sung crunched some numbers and came up with Fujitsu, the world's second-largest computer manufacturer, as a likely candidate. At that point, however, Sung's work had just begun. He began to hit the streets, meeting with every division head at Fujitsu, visiting the company's U.S. subsidiaries and calling on dozens of customers and competitors. All the while, he consulted with the fund's technology cluster at the group's weekly teleconference to gain additional insights and put his information in a broader context. Finally, after several weeks of painstaking research, Sung was convinced that Fujitsu would be a good long-term holding for the fund and made his recommendation. "Spending time on research can sometimes cost you short-term gains," he concedes, "but I think it helps you reap the real benefits down the line." [End sidebar] NEW PRODUCTS FOR GLOBAL HEALTH PHARMACEUTICALS [sketch of globe cutouts] [photo: phamaceutical lab technician] Unlike telephones and computers, which are relatively recent innovations, the use of plants or minerals for medicinal purposes goes back to ancient times. In many ways, however, the drug industry is just as "new" as the other two industries, reinvented by the remarkable advances the global economy has wrought. Many factors have contributed to the growth of the pharmaceutical industry. Baby boomers will increasingly require drugs for ailments of age such as cancer, Alzheimer's, cardiovascular disease and depression. Health care providers, under pressure to trim budgets, have turned to cost-effective drugs to prevent disease and hasten their cure. Breakthrough treatments like com-bination therapy for HIV/AIDS are gaining wider acceptance. Regulatory agencies have made enormous strides in shortening approval times, which allows new drugs to be brought to market faster. But perhaps the greatest stimulus is the most obvious one. "Everyone wants to live," states Jonathan Knowles, a pharmaceutical analyst based in London. "Drugs help you stay alive." "The largest drug concerns," says Jonathan, "NOVARTIS, MERCK and JOHNSON & JOHNSON, to name just a few, are truly multinational. Technically, they may be based in one country, but in reality they serve a world market." He mentions GLAXO WELLCOME, which recently performed clinical trials on its new hepatitis drug in China, where incidence of the disease is quite high. Another example is PFIZER, which partnered with a Croatian firm to develop one of the world's best-selling antibiotics. In addition to opening doors to potential profits, globalization also helps companies leverage the resources they need to bring new medicines to market, which can run to $500 million and perhaps a decade of research and development for a single product. That investment is imperative. In the highly competitive world of pharmaceuticals, companies that do not continuously develop innovative products simply cannot thrive. Research, the lifeblood of the pharmaceutical industry, is also the cornerstone of New Perspective Fund's investment strategy. Like the fund's other health care analysts, Jonathan pays close attention to drug "pipelines" to monitor their progress. "Because so many things can change along the way," he says, "you have to make constant assessments of how a product is moving through the system." Not long ago, he was following the development of an environmentally safe fungicide that ZENECA was planning to launch. "We started tracking it a while back. On successive visits, we could see that their R&D people were getting more and more excited about the possibilities. This chemical has recently been launched and is doing extremely well." Analysts who follow pharmaceutical companies are part of a health care cluster that includes a bond specialist who provides yet another perspective to the group. In all, the cluster has seven analysts covering biotechnology, hospitals, managed care facilities and medical supplies, in addition to pharmaceuticals. Such collaboration is particularly helpful in an industry that crosses so many borders. The analysts also benefit from the vast experience of New Perspective Fund's investment adviser. "Capital's pedigree is remarkable in the investment world," notes Jonathan. "Our organization has been visiting many of these pharmaceutical companies for 15 or 20 years." That history, combined with the continuous, intensive research of the fund's investment professionals, provides a depth of knowledge that is virtually unmatched in the industry. [photo: Novartis, Switzerland] [Begin photo caption] Novartis, Switzerland [End photo caption] [photos: Astra Research Center] [Begin photo caption] Astra, Sweden Astra Research Center, Boston, Massachusetts (above and right) [End photo caption] [Begin sidebar] Drug companies frequently find success by looking for unorthodox solutions to difficult problems. When it comes to researching pharmaceutical firms, New Perspective Fund's analysts often have to be creative as well. Sankyo was developing a novel treatment for type 2 diabetes in Japan, where the condition is prevalent. Lacking sufficient distribution channels for overseas markets, the company had licensed the drug jointly to Glaxo Wellcome and Warner-Lambert. Unfortunately, information about the drug was extremely hard to come by. Richard Beleson, an analyst based in San Francisco, had a long relationship with Warner-Lambert. During his visits to the company, he paid close attention to the drug's pipeline on the U.S. side. He was encouraged by what he saw. "It was apparent from clinical trials that were being performed here that this was going to be an extremely important product for all three companies involved," he says. Richard shared his insights with Jonathan Knowles, who follows European pharmaceuticals, and other Capital analysts. The drug is off to a great start. Launched earlier this year, it has already generated more than $250 million in sales worldwide. [End sidebar] [Enlarge/Download Table] New Perspective Fund Investment Portfolio, September 30, 1997 Largest Industry Holdings 10.26% Health & Personal Care 7.63% Telecommunications 6.71% Banking 5.58% Electronic Components 5.30% Broadcasting & Publishing 52.93% Other Industries 11.59% Bonds, Cash and Equivalents Shares or Market Percent Principal Value of Net Equity-Type Securities Amount (Millions) Assets ----------------------------------------- ------------ ------------ ------------ Health & Personal Care - 10.26% AB Astra, Class A (Sweden) 11,826,833 $218.798 AB Astra, Class A (American Depositary Receipts) 413,333 7.595 AB Astra, Class B 8,590,533 152.115 2.23 Novartis AG (Switzerland) 231,231 355.470 2.10 Pfizer Inc (USA) 4,870,000 292.505 1.73 Teva Pharmaceutical Industries Ltd. (American Depositary Receipts) (Israel) 2,400,000 133.800 .79 SmithKline Beecham PLC (American Depositary Receipts) (United Kingdom) 2,200,000 107.525 .63 Merck & Co., Inc. (USA) 880,000 87.945 .52 Glaxo Wellcome PLC (United Kingdom) 563,264 12.678 Glaxo Wellcome PLC (American Depositary Receipts) 854,000 38.377 .30 Zeneca Group PLC (United Kingdom) 1,000,000 32.627 Zeneca Group PLC (American Depositary Receipts) 185,000 18.095 .30 Shiseido Co., Ltd. (Japan) 2,924,000 47.075 .28 Johnson & Johnson (USA) 800,000 46.100 .27 Genentech, Inc., callable putable common stock (USA) (1) 600,000 34.875 .21 Sankyo Co., Ltd. (Japan) 1,000,000 34.689 .20 Alza Corp. (USA) (1) 1,000,000 29.000 .17 Abbott Laboratories (USA) 400,000 25.575 .15 Pharmacia & Upjohn, Inc. (USA) 500,000 18.250 .11 Gillette Co. (USA) 203,400 17.556 .10 Guidant Corp. (USA) 300,000 16.800 .10 Medtronic, Inc. (USA) 255,000 11.985 .07 Telecommunications - 7.63% Telefonica de Espana, SA (Spain) 7,906,000 249.523 Telefonica de Espana, SA (American Depositary Receipts) 76,000 7.153 1.51 Telecom Italia SPA, ordinary shares (formerly STET-Societa Finanziaria Telefonica p.a.) (Italy) 20,190,000 135.280 Telecom Italia SPA, nonconvertible savings shares 16,500,000 64.457 1.18 Telefonos de Mexico, SA de CV, Class L (American Depositary Receipts) (Mexico) 3,134,530 162.212 .96 AirTouch Communications (USA) (1) 3,500,000 124.031 .73 Telecom Corp. of New Zealand Ltd. (New Zealand) 13,678,100 69.386 Telecom Corp. of New Zealand Ltd. (2) 5,135,400 26.051 .56 Vodafone Group PLC (American Depositary Receipts) (United Kingdom) 1,428,500 76.782 .45 Tele Danmark AS, Class B (Denmark) 672,000 35.463 Tele Danmark AS, Class B (American Depositary Receipts) 1,233,700 32.924 .40 MCI Communications Corp. (USA) 2,325,000 68.297 .40 AT&T Corp. (USA) 1,535,000 68.020 .40 Koninklijke PTT Nederland NV (Netherlands) 1,629,500 64.208 .38 Sprint Corp. (USA) 883,400 44.170 .26 Hong Kong Telecommunications Ltd. (Hong Kong) 8,260,529 18.684 Hong Kong Telecommunications Ltd. (American Depositary Receipts) 440,759 9.862 .17 British Telecommunications PLC (United Kingdom) 3,000,000 19.828 .12 Telecomunicacoes Brasileiras SA, preferred nominative (American Depositary Receipts) (Brazil) 76,439 9.841 .06 Deutsche Telekom AG (Germany) 265,900 5.160 .03 DDI Corp. (Japan) 500 2.515 .02 Banking - 6.71% Royal Bank of Canada (Canada) 3,717,000 182.689 1.08 Bank of Nova Scotia (Canada) 3,129,500 149.962 .88 Westpac Banking Corp. (Australia) 17,567,630 110.731 Westpac Banking Corp., warrants, expire 2000 (1) 3,000,000 15.867 .75 BankAmerica Corp. (USA) 1,250,000 91.641 .54 Citicorp (USA) 600,000 80.362 .47 Banco de Santander, SA (Spain) 1,800,000 59.233 Banco de Santander, SA (American Depositary Receipts) 540,000 17.617 .45 Australia and New Zealand Banking Group Ltd. (Australia) 7,371,411 60.242 .36 Cie. Financiere de Paribas, Class A (France) 750,000 55.781 .33 Banque Nationale de Paris (France) 1,021,549 51.613 .30 Chase Manhattan Corp. (USA) 375,000 44.250 .26 Fuji Bank, Ltd. (Japan) 3,710,000 40.948 .24 Sumitomo Bank, Ltd. (Japan) 2,300,000 34.739 .21 ABN AMRO Holding NV (Netherlands) 1,672,960 33.972 .20 Sakura Bank, Ltd. (Japan) 6,675,000 31.962 .19 The Toronto-Dominion Bank (Canada) 750,000 25.489 .15 Bank of Tokyo-Mitsubishi, Ltd. (Japan) 1,250,000 23.859 .14 Istituto Mobiliare Italiano SpA (Italy) 1,500,000 16.064 .09 HSBC Holdings PLC (United Kingdom) 320,000 11.365 .07 Electronic Components - 5.58% Micron Technology, Inc. (USA) (1) 6,855,000 237.783 1.40 Advanced Micro Devices, Inc. (USA) (1) 6,050,000 197.003 1.16 Intel Corp. (USA) 1,400,000 129.237 .76 Bay Networks, Inc. (USA) (1) 3,000,000 115.875 .68 Analog Devices, Inc. (USA) (1) 1,710,000 57.285 .34 Arrow Electronics, Inc. (USA) (1) 880,000 51.040 .30 Seagate Technology (USA) (1) 1,400,000 50.575 .30 Altera Corp. (USA) (1) 950,000 48.687 .29 Murata Manufacturing Co., Ltd. (Japan) 590,000 25.559 .15 Electrocomponents PLC (United Kingdom) 3,000,000 22.273 .13 Kyocera Corp. (Japan) 176,000 11.524 .07 Broadcasting & Publishing - 5.30% Time Warner Inc. (USA) 6,406,225 347.137 2.05 Viacom Inc., Class B (USA) (1) 4,640,000 146.740 .87 News Corp. Ltd. (Australia) 3,948,625 20.246 News Corp. Ltd. (American Depositary Receipts) 3,991,600 81.578 News Corp. Ltd., preferred shares 2,021,244 8.947 News Corp. Ltd., preferred shares (American Depositary Receipts) 1,995,800 35.800 .86 CANAL + (France) 267,145 47.595 .27 Carlton Communications PLC (United Kingdom) 4,890,000 40.607 .24 Grupo Televisa, SA, ordinary participation certificates (American Depositary Receipts) (Mexico) (1) 825,000 29.545 .17 Westinghouse Electric Corp. (USA) 1,045,000 28.280 .17 Elsevier NV (Netherlands) 1,700,000 24.756 .15 Wolters Kluwer NV (Netherlands) 162,516 21.979 .13 Pearson PLC (United Kingdom) 1,700,000 21.498 .13 Dow Jones & Co., Inc. (USA) 434,900 20.331 .12 AUDIOFINA (Luxembourg) 415,300 16.707 .10 U S WEST Media Group (USA) (1) 313,300 6.990 .04 . Energy Sources - 4.76% TOTAL, Class B (France) 131,077 15.044 TOTAL, Class B (American Depositary Receipts) 3,109,814 178.231 1.14 Royal Dutch Petroleum Co. (New York Registered Shares) (Netherlands) 1,852,000 102.786 'Shell' Transport and Trading Co., PLC (United Kingdom) 3,000,000 21.958 .74 Broken Hill Proprietary Co. Ltd. (Australia) 6,502,053 75.749 .45 ENI SpA (Italy) 11,000,000 69.448 .41 Elf Aquitaine (France) 400,000 53.550 Elf Aquitaine (American Depositary Receipts) 100,000 6.669 .35 Phillips Petroleum Co. (USA) 1,100,000 56.788 .33 Anadarko Petroleum Corp. (USA) 700,000 50.269 .30 Talisman Energy Inc. (Canada) (1) 1,400,000 48.237 .28 YPF SA, Class D (American Depositary Receipts (Argentina) 1,200,000 44.250 .26 Mobil Corp. (USA) 500,000 37.000 .22 RAO Gazprom (American Depositary Receipts) (Russia) 1,341,000 33.659 .20 Enterprise Oil PLC (United Kingdom) 1,221,300 13.355 .08 . Electrical & Electronics - 4.58% Nokia Corp., Class A (Finland) 480,000 45.693 Nokia Corp., Class A (American Depositary Receipts) 1,450,000 136.028 Nokia Corp., Class K 460,000 43.615 1.33 Telefonaktiebolaget LM Ericsson, Class B (Sweden) 2,376,000 114.444 Telefonaktiebolaget LM Ericsson, Class B (American Depositary Receipts) 800,000 38.350 .90 ABB AB, Class A (Sweden) 150,000 2.131 ABB AB, Class B 6,000,000 84.836 ABB AB, Class B (American Depositary Receipts) 250,000 35.375 ABB AG, Class A (Switzerland) 11,750 17.350 .82 Northern Telecom Ltd. (Canada) 457,300 47.530 .28 Schneider SA (France) 750,000 47.477 .28 Siemens AG (Germany) 600,000 40.637 .24 Alcatel Alsthom (France) 260,000 34.675 .21 York International Corp. (USA) 680,000 30.430 .18 General Electric Co. (USA) 394,000 26.817 .16 NextLevel Systems, Inc. (USA) (1) 1,055,200 17.675 .10 Lucent Technologies Inc. (USA) 168,523 13.713 .08 . Multi-Industry - 4.17% Siebe PLC (United Kingdom) 6,570,000 132.391 .78 Hutchison Whampoa Ltd. (Hong Kong) 13,281,000 130.884 .77 Lend Lease Corp. Ltd. (Australia) 4,058,860 96.427 .57 FMC Corp. (USA) (1) 991,300 87.978 .52 Williams Holdings PLC (United Kingdom) 10,000,000 59.557 .35 LTV Corp. (USA) 4,225,000 53.605 .32 Suez Lyonnaise des Eaux (France) 390,243 43.668 .26 Canadian Pacific Ltd. (Canada) 1,000,000 29.563 .17 Lagardere Groupe SCA (France) 700,000 22.280 .13 AlliedSignal Inc. (USA) 400,000 17.000 .10 B.A.T Industries PLC (United Kingdom) 1,895,559 16.613 .10 Swire Pacific Ltd., Class A (Hong Kong) 2,150,000 16.464 .10 . Automobiles - 3.63% Honda Motor Co., Ltd. (Japan) 4,640,000 162.111 .96 Regie Nationale des Usines Renault, SA (France) 3,800,000 112.985 .67 Bayerische Motoren Werke AG (Germany) 69,500 59.336 Bayerische Motoren Werke AG, preferred shares 20,318 11.830 .42 Ford Motor Co., Class A (USA) 1,229,500 55.635 .33 Chrysler Corp. (USA) 1,500,000 55.219 .33 Toyota Motor Corp. (Japan) 1,405,000 43.141 .25 Suzuki Motor Corp. (Japan) 3,600,000 34.656 .20 Volvo AB, Class B (Sweden) 1,000,000 28.741 .17 General Motors Corp. (USA) 400,000 26.775 .16 Daimler-Benz AG, 4.125% convertible debentures 2003 (Germany) (2) DM28,000,000 24.311 .14 Beverages & Tobacco - 3.42% Philip Morris Companies Inc. (USA) 7,455,000 309.848 1.83 Asahi Breweries, Ltd. (Japan) 4,060,000 65.364 Asahi Breweries, Ltd., 1.00% convertible debentures 2003 Y924,000,000 12.844 Asahi Breweries, Ltd., .95% convertible debentures 2002 Y410,000,000 5.682 Asahi Breweries, Ltd., .90% convertible debentures 2001 Y520,000,000 7.168 .54 Seagram Co. Ltd. (Canada) 2,200,000 77.550 .46 PepsiCo, Inc. (USA) 1,000,000 40.563 .24 Cia. Cervejaria Brahma (Brazil) 47,000,000 36.108 .21 LVMH Moet Hennessy Louis Vuitton (France) 55,000 11.723 .07 Lion Nathan Ltd. (New Zealand) 3,218,800 7.875 .04 Gallaher Group PLC (American Depositary Receipts) (United Kingdom) 300,000 5.756 .03 Machinery & Engineering - 3.40% Caterpillar Inc. (USA) 4,600,000 248.113 1.46 Mannesmann AG (Germany) 507,500 242.490 1.43 Deere & Co. (USA) 725,000 38.969 .23 Kvaerner AS, Class A (Norway) 535,340 31.663 .19 Kawasaki Heavy Industries, Ltd. (Japan) 4,200,000 14.534 .09 Chemicals - 3.20% Praxair, Inc. (USA) 2,639,300 135.099 .80 Georgia Gulf Corp. (USA) (3) 1,975,000 60.484 .36 Sherwin-Williams Co. (USA) 1,962,000 57.756 .34 Methanex Corp. (Canada) 6,250,000 52.479 .31 Nan Ya Plastics Corp. (Taiwan) 19,980,000 47.921 .28 E.I. du Pont de Nemours and Co. (USA) 600,000 36.938 .22 Valspar Corp. (USA) 1,160,000 36.395 .21 AGA AB, Class A (Sweden) 1,460,000 24.020 AGA AB, Class B 550,000 8.867 .19 Bayer AG (Germany) 750,000 29.941 .18 L'Air Liquide (France) 110,097 18.163 .11 BOC Group PLC (United Kingdom) 1,000,000 17.827 .10 Engelhard Corp. (USA) 813,100 17.533 .10 Food & Household Products - 3.13% Nestle SA (Switzerland) 89,782 125.395 .74 Cadbury Schweppes PLC (United Kingdom) 10,865,090 104.604 .62 Reckitt & Colman PLC (United Kingdom) 6,056,250 93.007 .55 Unilever NV (Netherlands) 335,000 71.706 Unilever PLC (United Kingdom) 660,000 19.318 .54 Groupe Danone (France) 443,586 70.107 .41 Archer Daniels Midland Co. (USA) 1,050,000 25.134 .15 Colgate-Palmolive Co. (USA) 300,000 20.906 .12 Data Processing & Reproduction - 2.54% Fujitsu Ltd. (Japan) 7,172,000 89.873 .53 Ascend Communications, Inc. (USA) (1) 1,850,000 59.894 .35 Silicon Graphics, Inc. (USA) (1) 2,100,000 55.125 .32 Oracle Corp. (USA) (1) 1,425,000 51.923 .31 Acer Inc. (Taiwan) (1) 20,000,000 39.216 .23 Sybase, Inc. (USA) (1) 1,850,000 33.300 .20 International Business Machines Corp. (USA) 300,000 31.781 .19 Computer Associates International, Inc. (USA) 261,500 18.779 .11 Microsoft Corp. (USA) (1) 140,000 18.524 .11 Digital Equipment Corp. (USA) (1) 400,000 17.325 .10 Cisco Systems, Inc. (USA) (1) 200,000 14.613 .09 Insurance - 2.46% ING Groep NV (formerly Internationale Nederlanden Groep) (Netherlands) 4,376,336 201.550 1.19 Fairfax Financial Holdings Ltd. (Canada) 234,700 65.067 Fairfax Financial Holdings Ltd. (USA) (2) 93,000 25.783 .54 American International Group, Inc. (USA) 774,843 79.954 .47 Societe Centrale des Assurances Generales de France (Franc 735,000 29.196 .17 Assicurazioni Generali SpA (Italy) 670,000 15.098 .09 Forest Products & Paper - 2.01% Champion International Corp. (USA) 2,200,000 134.063 .79 Louisiana-Pacific Corp. (USA) 2,550,000 63.750 .38 UPM-Kymmene Corp. (Finland) 1,953,000 54.332 .32 International Paper Co. (USA) 600,000 33.038 .19 Rayonier Inc. (USA) 600,000 29.025 .17 Jefferson Smurfit Corp. (USA) (1) 1,255,700 25.114 .15 Carter Holt Harvey Ltd. (New Zealand) 1,058,500 2.298 .01 Gold Mines - 1.88% Newmont Mining Corp. (USA) 2,750,000 123.578 .73 Placer Dome Inc. (Canada) 5,500,000 105.188 .62 Barrick Gold Corp. (Canada) 2,500,000 61.875 .36 Gold Fields of South Africa Ltd. (South Africa) 1,400,000 28.195 .17 Metals: Nonferrous - 1.78% Aluminum Co. of America (USA) 950,000 77.900 .46 WMC Ltd. (Australia) 15,389,336 72.249 .43 Alumax Inc. (USA) (1) 1,500,000 61.313 .36 Alcan Aluminium Ltd. (Canada) 1,700,000 59.075 .35 Pechiney, Class A (France) 366,527 17.657 .10 Teck Corp., Class B (Canada) 700,000 14.441 .08 Leisure & Tourism - 1.35% Carnival Corp., Class A (USA) 3,400,000 157.250 .93 Walt Disney Co. (USA) 600,000 48.375 .29 Accor SA (France) 120,000 22.231 .13 Euro Disney SCA (France) (1) 171,307 .236 .00 Merchandising - 1.29% Wal-Mart Stores, Inc. (USA) 4,150,000 151.994 .90 Cifra, SA de CV, Class A (Mexico) 4,970,139 11.136 Cifra, SA de CV, Class B 4,500,000 10.650 Cifra, SA de CV, Class C 3,624,400 7.981 .17 Home Depot, Inc. (USA) 472,500 24.629 .14 Ito-Yokado Co., Ltd. (Japan) 185,000 10.041 .06 WHSmith Group PLC, Class A (United Kingdom) 500,000 2.970 .02 Energy Equipment - 1.27% Schlumberger Ltd. (Netherlands Antilles) 998,300 84.044 .50 Halliburton Co. (USA) 1,270,000 66.040 .39 Western Atlas Inc. (USA) (1) 740,000 65.120 .38 Recreation & Other Consumer Products - 1.17% Mattel, Inc. (USA) 1,900,000 62.938 .37 Fuji Photo Film Co., Ltd. (Japan) 900,000 37.195 .22 Nintendo Co., Ltd. (Japan) 350,000 32.822 .19 Eastman Kodak Co. (USA) 400,000 25.975 .15 EMI Group PLC (United Kingdom) 1,375,569 13.532 EMI Group PLC, Class B preferred shares 764,205 1.412 .09 PolyGram NV (New York Registered Shares) (Netherlands) 259,900 14.928 .09 Fortune Brands Inc. (formerly American Brands, Inc.) (USA) 300,000 10.106 .06 Appliances & Household Durables - 0.98% Sony Corp. (Japan) 927,000 87.700 .52 Philips Electronics NV (Netherlands) 582,500 49.427 Philips Electronics NV, warrants, expire 1998 (1) 250,000 16.943 .39 Samsung Electronics Co., Ltd. (South Korea) 125,727 12.180 .07 Business & Public Services - 0.98% Quintiles Transnational Corp. (USA) (1) 500,000 42.125 .25 United Utilities PLC (United Kingdom) 3,000,000 37.114 .22 Cie. Generale des Eaux (France) 203,808 24.046 Cie. Generale des Eaux, warrants, expire 2001 (1) 203,808 .110 .14 Rentokil Group PLC (United Kingdom) 4,200,000 17.455 .11 Reuters Holdings PLC (American Depositary Receipts) (United Kingdom) 240,000 17.100 .10 Waste Management, Inc. (formerly WMX Technologies, Inc.) (USA) 395,737 13.826 .08 Electronic Data Systems Corp. (USA) 300,000 10.650 .06 Thorn PLC (United Kingdom) 1,301,948 2.942 .02 Metals: Steel - 0.85% Allegheny Teledyne Inc. (USA) 2,040,000 58.395 .34 Usinor Sacilor (France) 2,800,000 56.748 .34 Cia. Vale do Rio Doce, ordinary nominative (Brazil) 38,400 .893 Cia. Vale do Rio Doce, preferred nominative 38,400 .000 Cia. Vale do Rio Doce, preferred nominative (American Depositary Receipts) 11,184,000 28.712 .17 Utilities: Electric & Gas - 0.71% National Power PLC (United Kingdom) 9,300,000 85.483 .50 Hongkong Electric Holdings Ltd. (Hong Kong) 5,213,500 19.406 .12 Enersis SA (American Depositary Receipts) (Chile) 420,000 15.566 .09 Transportation: Shipping - 0.57% Bergesen d.y. AS, Class A (Norway) 1,500,000 46.158 Bergesen d.y. AS, Class B 795,000 24.576 .42 Nippon Yusen KK (Japan) 7,658,000 25.739 .15 Miscellaneous Materials & Commodities - 0.53% Potash Corp. of Saskatchewan Inc. (Canada) 400,000 31.400 .19 Cie. de Saint-Gobain (France) 189,841 29.362 .17 De Beers/Centenary linked units (South Africa) 1,000,000 29.216 .17 Real Estate - 0.45% Cheung Kong (Holdings) Ltd. (Hong Kong) 6,720,000 75.562 .45 Transportation: Rail & Road - 0.33% CSX Corp. (USA) 950,000 55.575 .33 Building Materials & Components - 0.33% CEMEX, SA de CV, Class A (Mexico) 2,362,225 12.289 CEMEX, SA de CV CPO 4,040,000 21.225 .20 Holderbank Financiere Glaris Ltd. (Switzerland) 23,000 21.880 .13 Electronic Instruments - 0.29% Tokyo Electron Ltd. (Japan) 500,000 30.581 .18 Applied Materials, Inc. (USA) (1) 200,000 19.050 .11 Aerospace & Military Technology - 0.23% Boeing Co. (USA) 720,000 39.195 .23 Industrial Components - 0.22% Bridgestone Corp. (Japan) 1,571,000 37.808 .22 Textiles & Apparel - 0.18% NIKE, Inc., Class B (USA) 290,000 15.370 .09 Gucci Group NV (New York Registered Shares) (Netherlands) 310,000 14.531 .09 Miscellaneous - 0.24% Other equity-type securities in initial period of acquisition 39.936 .24 ------------ ------------ TOTAL EQUITY-TYPE SECURITIES (cost: $9,917.226 million) 14,990.005 88.41 ------------ ------------ Principal Amount Bonds (Millions) --------------------------------------- ------------ New Zealand Government - 0.18% New Zealand 8.00% November 2006 NZ$44.500 31.076 .18 ----------- ----------- TOTAL BONDS (cost: $29.793 million) 31.076 .18 ----------- ----------- TOTAL INVESTMENT SECURITIES (cost: $9,947.019 million) 15,021.081 88.59 ----------- ----------- Short-Term Securities ------------------------------------------ Corporate Short-Term Notes - 9.05% Svenska Handelsbanken Group 5.47%-5.50% due 11/4-12/23/97 100.000 99.107 .59 Toyota Motor Credit Corp. 5.49%-5.50% due 10/16-11/13/97 91.500 91.084 .54 Ameritech Corp. 5.46%-5.47% due 10/2-10/3/97 90.000 89.965 .53 Lucent Technologies Inc. 5.48%-5.50% due 10/8-12/17/97 90.000 89.390 .53 Daimler-Benz North America Corp. 5.49%-5.50% due 10/14- 12/19/97 89.500 89.169 .53 Halifax PLC 5.49% due 11/18-12/3/97 89.300 88.553 .52 General Electric Capital Corp. 5.50%-6.50% due 10/1- 11/12/97 89.240 88.881 .52 National Australia Funding (Delaware) Inc. 5.47%-5.48% due 10/1-12/9/97 85.000 84.790 .50 E.I. du pont de Nemours and Co. 5.47% due 10/24-12/5/97 73.595 73.184 .43 Caisse d'amortissement de la dette sociale 5.48%-5.50% due 10/20-12/2/97 70.000 69.579 .41 ANZ (Delaware) Inc. 5.49%-5.50% due 10/20-10/28/97 67.300 66.832 .40 Ford Credit Europe PLC 5.50%-5.52% due 10/7-12/11/97 63.800 63.570 .38 Canada Bills 5.46%-5.47% due 10/21-11/3/97 62.800 62.536 .37 International Lease Finance Corp. 5.47%-5.50% due 10/6- 12/1/97 62.000 61.654 .36 Toronto-Dominion Holdings USA Inc. 5.47%-5.53% due 10/22- 10/31/97 60.000 59.779 .35 A.I. Credit Corp. 5.49%-5.50% due 10/20-11/3/97 55.000 54.767 .33 IBM Credit Corp. 5.48%-5.51% due 10/16-11/14/97 53.600 53.299 .31 Commonwealth Bank of Australia 5.50% due 10/8-12/9/97 52.600 52.336 .31 Rank Xerox Capital (Europe) PLC 5.47%-5.50% due 10/10-10/17/97 50.000 49.913 .29 Abbey National North America 5.47%-5.50% due 10/17- 10/20/97 47.000 46.871 .28 American Express Credit Corp. 5.49%-5.52% due 10/29- 11/20/97 39.500 39.278 .23 British Columbia (Province of) 5.45%-5.48% due 10/21- 10/31/97 31.834 31.711 .19 Societe Generale NA Inc. 5.51%-5.52% due 12/9-12/10/97 25.600 25.322 .15 Certificates of Deposit - 1.23% Canadian Imperial Bank of Commerce 5.54%-5.57% due 10/23-11/19/97 70.000 69.999 .41 Westdeutsche Landesbank Girozentrale 5.56%-5.66% due 10/9-10/22/97 65.000 65.001 .38 Abbey National PLC 5.57% due 11/5/97 50.000 49.999 .29 Societe Generale 5.55% due 10/1/97 25.000 25.000 .15 Federal Agency Discount Notes - 0.84% Freddie Mac (formerly Federal Home Loan Mortgage Corp.) 5.40%-5.48% due 10/7-11/25/97 89.100 88.692 .52 Fannie Mae (formerly Federal National Mortgage Assn.) 5.40%-5.45% due 11/6-11/24/97 55.100 54.718 .32 ----------- ----------- Non-U.S. Currency - 0.06% New Taiwanese Dollar NT$292.202 10.231 .06 TOTAL SHORT-TERM SECURITIES (cost: $1,895.484 million) 1,895.210 11.18 Excess of cash and receivables over payables 39.793 .23 ------------ ------------ TOTAL SHORT-TERM SECURITIES AND NET CASH 1,935.003 11.41 ------------ ------------ NET ASSETS $16,956.084 100.00% =========== =========== (1) Non-income-producing securities (2) Purchased in a private placement transaction; resale to the public may require registration or sale only to qualified institutional buyers. (3) The fund owns 5.72% of the outstanding voting securities of Georgia Gulf Corp., which represent an investment in an affiliate as defined in the Investment Company Act of 1940. The descriptions of the companies shown in the portfolio, which were obtained from published reports and other sources believed to be reliable, are supplemental and are not covered by the Report of Independent Accountants. See Notes to Financial Statements [Download Table] New Perspective Fund Equity-Type Securities Appearing in the Equity-Type Securities Eliminated from the Portfolio Since March 31, 1997 Portfolio Since March 31, 1997 Accor Baker Hughes Acer Barclays Allegheny Teledyne Bombardier Altera British Airways Applied Materials Ciba Specialty Chemicals Holdings Archer Daniels Midland Cie. Generale des Etablissements Michelin Asahi Breweries Electrolux Ascend Communications Eurotunnel Assicurazioni Generali Hasbro Bank of Tokyo-Mitsubishi Hitachi Bay Networks Hoechst BOC Group Incentive Chase Manhattan Inco Cheung Kong (Holdings) Kimberly-Clark Chrysler Litton Industries Cia. Cervejaria Brahma NCR Computer Associates International Overseas Shipholding Group Deutsche Telekom Repsol Digital Equipment Republic New York Dow Jones SANYO Electric ENI VEBA Enterprise Oil Weyerhaeuser Fairfax Financial Fuji Bank Fujitsu General Electric Gucci Group Guidant HSBC International Business Machines Istituto Mobiliare Italiano Kvaerner Medtronic Microsoft Mobil Nan Ya Plastics NIKE Pharmacia & Upjohn Quintiles Transnational RAO Gazprom Rentokil Group Sakura Bank Samsung Electronics Shiseido Sumitomo Bank Swire Pacific Talisman Energy Tokyo Electron Toronto-Dominion Bank Westinghouse Electric [Download Table] New Perspective Fund Financial Statements ---------------------------------------------- ---------------- ---------------- Statement of Assets and Liabilities (dollars in at September 30, 1997 millions) ---------------------------------------------- ---------------- ---------------- Assets: Investment securities at market (cost: $9,947.019) $15,021.081 Short-term securities (cost: $1,895.484) 1,895.210 Cash .663 Receivables for- Sales of investments $38.023 Sales of fund's shares 23.147 Dividends and accrued interest 36.879 98.049 ---------------- ---------------- 17,015.003 Liabilities: Payables for- Purchases of investments 39.837 Repurchases of fund's shares 9.426 Management services 5.769 Accrued expenses 3.887 58.919 ---------------- ---------------- Net Assets at September 30, 1997- Equivalent to $21.86 per share on 775,640,437 shares of $1 par value capital stock outstanding (authorized capital stock--1,000,000,000 shares) $16,956.084 ================ Statement of Operations for the year ended September 30, 1997 (dollars in millions) ---------------------------------------------- ---------------- ---------------- Investment Income: Income: Dividends $ 232.693 Interest 101.880 $ 334.573 ---------------- Expenses: Management services fee 59.337 Distribution expenses 32.358 Transfer agent fee 12.198 Reports to shareholders 1.060 Registration statement and prospectus 1.301 Postage, stationery and supplies 1.694 Directors' and Advisory Board fees .243 Auditing and legal fees .078 Custodian fee 4.117 Taxes other than federal income tax .170 Other expenses .091 112.647 ---------------- ---------------- Net investment income 221.926 ---------------- Realized Gain and Increase in Unrealized Appreciation on Investments: Net realized gain 922.766 Net increase in unrealized appreciation on investments: Beginning of year 2,505.461 End of year 5,073.194 2,567.733 ---------------- ---------------- Net realized gain and unrealized appreciation on investments 3,490.499 ---------------- Net Increase in Net Assets Resulting from Operations $3,712.425 ================ ---------------------------------------------- ---------------- ---------------- Statement of Changes in Net Assets (dollars in millions) Year ended September 30, 1997 1996 ---------------------------------------------- ---------------- ---------------- Operations: Net investment income $ 221.926 $ 204.748 Net realized gain on investments 922.766 439.315 Net increase in unrealized appreciation on investments 2,567.733 389.111 ---------------- ---------------- Net increase in net assets resulting from operations 3,712.425 1,033.174 ---------------- ---------------- Dividends and Distributions Paid to Shareholders: Dividends from net investment income (224.557) (181.254) Distributions from net realized gain on investments (462.037) (326.785) ---------------- ---------------- Total dividends and distributions (686.594) (508.039) ---------------- ---------------- Capital Share Transactions: Proceeds from shares sold: 160,556,117 and 168,317,771 shares, respectively 3,126.904 2,872.559 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments: 36,204,990 and 29,221,609 shares, respectively 650.157 477.859 Cost of shares repurchased: 78,902,097 and 58,868,182 shares, respectively (1,534.468) (1,004.893) ---------------- ---------------- Increase in net assets resulting from capital share transactions 2,242.593 2,345.525 ---------------- ---------------- Total Increase in Net Assets 5,268.424 2,870.660 Net Assets: Beginning of year 11,687.660 8,817.000 ---------------- ---------------- End of year (including undistributed net investment income: $115.664 and $119.565, respectively) $16,956.084 $11,687.660 ================ ================ See Notes to Financial Statements Notes to Financial Statements 1. New Perspective Fund, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks long-term growth of capital through investments all over the world, including the United States. The following paragraphs summarize the significant accounting policies consistently followed by the fund in the preparation of its financial statements: Equity-type securities traded on a national securities exchange (or reported on the Nasdaq national market) and securities traded in the over-the-counter market are stated at the last reported sales price on the day of valuation; other securities, and securities for which no sale was reported on that date, are stated at the last quoted bid price. Long-term and short-term securities with original or remaining maturities in excess of 60 days are valued at the mean of their quoted bid and asked prices. Short-term securities with 60 days or less to maturity are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available are valued at fair value by the Board of Directors or a committee thereof. As is customary in the mutual fund industry, securities transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses from securities transactions are reported on an identified cost basis. Dividend and interest income is reported on the accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Dividends and distributions paid to shareholders are recorded on the ex-dividend date. Investment securities, cash balances and other assets and liabilities denominated in non-U.S. currencies are recorded in the financial statements after translation into U.S. dollars utilizing rates of exchange on the last business day of the year. Purchases and sales of investment securities, income and expenses are calculated using the prevailing exchange rate as accrued. The effects of changes in foreign currency exchange rates on investment securities are included with the net realized and unrealized gain or loss on investment securities. 2. It is the fund's policy to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net taxable income, including any net realized gain on investments, to its shareholders. Therefore, no federal income tax provision is required. As of September 30, 1997, net unrealized appreciation on investments for federal income tax purposes aggregated $5,074,776,000, of which $5,318,292,000 related to appreciated securities and $243,516,000 related to depreciated securities. During the year ended September 30, 1997, the fund realized, on a tax basis, a net capital gain of $922,872,000 on securities transactions. Net losses related to non-U.S. currency and other transactions of $106,000 were treated as an adjustment to ordinary income for federal income tax purposes. The capital gain distribution paid in December 1996 includes $4,708,000 of realized non-U.S. currency gains. The cost of portfolio securities for federal income tax purposes was $11,841,515,000 at September 30, 1997. 3. The fee of $59,337,000 for management services was paid pursuant to an agreement with Capital Research and Management Company (CRMC), with which certain officers and Directors of the fund are affiliated. The Investment Advisory and Service Agreement provides for monthly fees, accrued daily, based on an annual rate of 0.60% of the first $500 million of average net assets; 0.50% of such assets in excess of $500 million but not exceeding $1 billion; 0.46% of such assets in excess of $1 billion but not exceeding $1.5 billion; 0.43% of such assets in excess of $1.5 billion but not exceeding $2.5 billion; 0.41% of such assets in excess of $2.5 billion but not exceeding $4 billion; 0.40% of such assets in excess of $4 billion but not exceeding $6.5 billion; 0.395% of such assets in excess of $6.5 billion but not exceeding $10.5 billion; 0.39% of such assets in excess of $10.5 billion but not exceeding $17 billion; and 0.385% of such assets in excess of $17 billion. Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its average net assets annually for any activities primarily intended to result in sales of fund shares, provided the categories of expenses for which reimbursement is made are approved by the fund's Board of Directors. Fund expenses under the Plan include payments to dealers to compensate them for their selling and servicing efforts. During the year ended September 30, 1997, distribution expenses under the Plan were $32,358,000. As of September 30, 1997, accrued and unpaid distribution expenses were $2,763,000. American Funds Service Company (AFS), the transfer agent for the fund, was paid a fee of $12,198,000. American Funds Distributors, Inc. (AFD), the principal underwriter of the fund's shares, received $12,090,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's shares. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying statement of operations. Directors and Advisory Board members who are unaffiliated with CRMC may elect to defer part or all of the fees earned for services as members of the Boards. Amounts deferred are not funded and are general unsecured liabilities of the fund. As of September 30, 1997, aggregate amounts deferred and earnings thereon were $436,000. CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 4. As of September 30, 1997, accumulated undistributed net realized gain on investments was $848,291,000 and additional paid-in capital was $10,143,295,000. The fund reclassified $1,270,000 and $1,157,000 from undistributed net investment income and undistributed net realized gains, respectively, to additional paid-in-capital for the year ended September 30, 1997. The fund made purchases and sales of investment securities, excluding short-term securities, of $4,697,161,000 and $3,199,572,000, respectively, during the year ended September 30, 1997. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. The custodian fee of $4,117,000 includes $61,000 that was paid by these credits rather than in cash. Dividend and interest income is recorded net of non-U.S. taxes paid. For the year ended September 30, 1997, such non-U.S. taxes were $21,248,000. Net realized currency losses on dividends, interest, withholding taxes reclaimable and sales of non-U.S. bonds and notes were $4,038,000 for the year ended September 30, 1997. [Enlarge/Download Table] Year ended September 30 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- Net Asset Value, Beginning of Year $17.77 $16.98 $15.40 $14.21 $12.25 ----------- ----------- ----------- ----------- ----------- Income from Investment Operations: Net investment income .29 .32 .31 .22 .17 Net realized gain and increase in unrealized appreciation on investment 4.81 1.40 2.35 1.54 2.04 ----------- ----------- ----------- ----------- ----------- Total income from investment operations 5.10 1.72 2.66 1.76 2.21 ----------- ----------- ----------- ----------- ----------- Less Distributions: Dividends from net investment income (.323) (.321) (.237) (.173) (.178) Dividends from net realized non-U.S. currency gains(1) (.007) (.009) (.003) (.027) (.022) Distributions from net realized gains (.680) (.600) (.840) (.370) (.050) ----------- ----------- ----------- ----------- ----------- Total distributions (1.01) (.93) (1.08) (.57) (.25) ----------- ----------- ----------- ----------- ----------- Net Asset Value, End of Year $21.86 $17.77 $16.98 $15.40 $14.21 ========= ========= ========= ========= ========= Total Return(2) 29.97% 10.64% 18.63% 12.61% 18.34% Ratios/Supplemental Data: Net assets, end of year (in millions) $16,956 $11,688 $8,817 $6,279 $4,417 Ratio of expenses to average net assets .79% .82% .83% .84% .87% Ratio of net income to average net assets 1.56% 2.00% 2.12% 1.48% 1.40% Average commissions paid(3) .50c 4.30c .72c 1.05c 1.74c Portfolio turnover rate 25.68% 18.12% 22.40% 25.33% 15.02% (1) Realized non-U.S. currency gains are treated as ordinary income for federal income tax purposes. (2)Calculated without deducting a sales charge. The maximum sales charge is 5.75% of the fund's offering price. (3) Brokerage commissions paid on portfolio transactions increase the cost of securities purchased or reduce the proceeds of securities sold, and are not separately reflected in the fund's statement of operations. Shares traded on a principal basis (without commissions), such as most over-the-counter and fixed-income transactions, are excluded. Generally, non-U.S. commissions are lower than U.S. commissions when expressed as cents per share but higher when expressed as a percentage of transactions because of the lower per-share prices of many non-U.S. securities. To the Board of Directors and Shareholders of New Perspective Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the per-share data and ratios present fairly, in all material respects, the financial position of New Perspective Fund, Inc. (the "Fund") at September 30, 1997, the results of its operations, the changes in its net assets and the per-share data and ratios for the years indicated in conformity with generally accepted accounting principles. These financial statements and per-share data and ratios (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 1997 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. /s/Price Waterhouse LLP Los Angeles, California October 31, 1997 Tax Information (unaudited) We are required to advise you within 60 days of the fund's fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the fund were earned from the following sources: [Enlarge/Download Table] Dividends and Distributions per Share To Shareholders Payment Date From Net From Net From Net of Record Investment Realized Short- Realized Long- Income term Gains term Gains December 13, 1996 December 16, 1996 $.23 $.056 $.624 May 30, 1997 June 2, 1997 .10 - - The fund makes an election under the Internal Revenue Code Section 853 to pass through non-U.S. taxes paid by the fund to its shareholders. The amount of non-U.S. taxes for the fiscal year ended September 30, 1997 is $0.03744 on a per-share basis. Shareholders are entitled to a foreign tax credit or an itemized deduction, at their option. Generally, it is more advantageous to claim a credit rather than to take a deduction. Corporate shareholders may exclude up to 70% of qualifying dividends received during the year. For purposes of computing this exclusion, 17% of the dividends paid by the fund from net investment income represents qualifying dividends. Dividends and distributions received by retirement plans such as IRAs, Keogh-type plans and 403(b) plans need not be reported as taxable income. However, many plan retirement trusts may need this information for their annual information reporting. SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WILL BE MAILED IN JANUARY 1998 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR 1997 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS. NEW PERSPECTIVE FUND BOARD OF DIRECTORS ELISABETH ALLISON, Cambridge, Massachusetts Administrative Director, ANZI, Ltd.; Publishing Consultant, Harvard Medical School MICHAEL R. BONSIGNORE, Minneapolis, Minnesota Chairman and Chief Executive Officer, Honeywell Inc. GINA H. DESPRES, Washington, D.C. President of the fund Senior Vice President, Capital Research and Management Company DAVID I. FISHER, Los Angeles, California Chairman of the Board, The Capital Group Companies, Inc. ROBERT A. FOX, Livingston, California President and Chief Executive Officer, Foster Farms Inc. ALAN GREENWAY, La Jolla, California Private investor; President, Greenway Associates, Inc. (management consulting services) KOICHI ITOH, Tokyo, Japan President and Chief Executive Officer, IMPAC (management consulting services); former managing partner, VENCA Management (venture capital) WILLIAM H. KLING, St. Paul, Minnesota President, Minnesota Public Radio; President, Greenspring Co.; former President, American Public Radio (now Public Radio International) JON B. LOVELACE, Los Angeles, California Vice Chairman of the Board of the fund Vice Chairman of the Board, Capital Research and Management Company JOHN G. MCDONALD, Stanford, California The IBJ Professor of Finance, Graduate School of Business, Stanford University WILLIAM I. MILLER, Columbus, Indiana Chairman of the Board, Irwin Financial Corporation KIRK P. PENDLETON, Southampton, Pennsylvania Chairman of the Board and Chief Executive Officer, Cairnwood, Inc. (venture capital investment) DONALD E. PETERSEN, Birmingham, Michigan Retired; former Chairman of the Board and Chief Executive Officer, Ford Motor Company JAMES W. RATZLAFF, San Francisco, California Senior Partner, The Capital Group Partners L.P. WALTER P. STERN, New York, New York Chairman of the Board of the fund Chairman of the Board, Capital Group International, Inc. OTHER OFFICERS WILLIAM R. GRIMSLEY, San Francisco, California Senior Vice President of the fund Senior Vice President and Director, Capital Research and Management Company GREGG E. IRELAND, Washington, D.C. Senior Vice President of the fund Senior Vice President, Capital Research and Management Company THIERRY VANDEVENTER, Geneva, Switzerland Senior Vice President of the fund Director, Capital Research and Management Company DARCY B. KOPCHO, Los Angeles, California Vice President of the fund Vice President and Director, Capital Research Company CATHERINE M. WARD, Los Angeles, California Vice President of the fund Senior Vice President and Director, Capital Research and Management Company VINCENT P. CORTI, Los Angeles, California Secretary of the fund Vice President - Fund Business Management Group, Capital Research and Management Company R. MARCIA GOULD, Brea, California Treasurer of the fund Vice President - Fund Business Management Group, Capital Research and Management Company MEMBERS OF THE ADVISORY BOARD YOICHI FUNABASHI, Ph.D., Tokyo, Japan Chief Diplomatic Correspondent and columnist for the Asahi Shimbun JEAN GANDOIS, Paris, France President, Conseil National du Patronat Fran<UNDEF>ais; Chairman of the Board of Cockerill-Sambre; former Chairman and Chief Executive Officer, Pechiney, and former Chairman, Pechiney International CLAUDIO X. GONZALEZ LAPORTE, Mexico, DF, Mexico Chairman of the Board and Chief Executive Officer, Kimberly-Clark de M<UNDEF>xico, SA de CV SIR PETER HOLMES, London, England Director and former Chairman of the Board and Managing Director, The Royal Dutch/Shell Group of Companies JAE-HYUN HYUN, New York, New York Chairman, Tong Yang Group BARON GUALTHERUS KRAIJENHOFF, Nijmegen, Netherlands Chairman of the Supervisory Council, Akzo NV PIERRE LESCURE, Paris, France* Chairman and Chief Executive Officer, Canal+ ALLEN E. PUCKETT, Pacific Palisades, California Chairman Emeritus, Hughes Aircraft Company ROZANNE L. RIDGWAY, Washington, D.C. Chair, Baltic American Enterprises Fund, former Co-Chair, Atlantic Council of the United States ORVILLE H. SCHELL, Berkeley, California Dean, Graduate School of Journalism, University of California at Berkeley *Effective October 1, 1997 The following members retired from the Advisory Board effective September 30, 1997: JUNICHI HATTORI had been on the Advisory Board since 1988. PETER C. HOBBINS had been on the Advisory Board since 1987. The Honourable JOHN L. NICHOL and BRIAN NICHOLSON had been on the Advisory Board since 1984. HAROLD M. WILLIAMS had been on the Advisory Board since 1981. STEVEN N. KEARSLEY retired as Treasurer of the fund effective May 20, 1997. He had been an officer since 1973. The Directors thank these six individuals for their many contributions to the fund. OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND MANAGEMENT COMPANY 333 South Hope Street Los Angeles, California 90071-1443 135 South State College Boulevard Brea, California 92821-5804 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 2205 Brea, California 92822-2205 P.O. Box 659522 San Antonio, Texas 78265-9522 P.O. Box 6007 Indianapolis, Indiana 46206-6007 P.O. Box 2280 Norfolk, Virginia 23501-2280 CUSTODIAN OF ASSETS The Chase Manhattan Bank One Chase Manhattan Plaza New York, New York 10081-0001 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 400 South Hope Street Los Angeles, California 90071-2889 COUNSEL O'Melveny & Myers LLP 400 South Hope Street Los Angeles, California 90071-2899 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, California 90071-1462 For information about your account or any of the fund's services, please contact your financial adviser. You may also call American Funds Service Company, toll-free, at 800/421-0180 or visit on the World Wide Web. THIS REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF NEW PERSPECTIVE FUND, BUT IT MAY ALSO BE USED AS SALES LITERATURE WHEN PRECEDED OR ACCOMPANIED BY THE CURRENT PROSPECTUS, WHICH GIVES DETAILS ABOUT CHARGES, EXPENSES, INVESTMENT OBJECTIVES AND OPERATING POLICIES OF THE FUND. IF USED AS SALES MATERIAL AFTER DECEMBER 31, 1997, THIS REPORT MUST BE ACCOMPANIED BY AN AMERICAN FUNDS GROUP STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED CALENDAR QUARTER. Printed on recycled paper Litho in USA AGD/GRS/3215 Lit. No. NPF-011-1197 [The American Funds Group (R)]

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