THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC OFFERING
AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH
TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.
/s/ Julie F. Williams
Julie F. Williams
Secretary
<PAGE>
March 1, 1996
THE BOND FUND OF AMERICA, INC.
333 South Hope Street
Los Angeles, CA 90071
The fund seeks to provide as high a level of current income as is consistent
with the preservation of capital by investing primarily in bonds.
This prospectus relates only to shares of the fund offered without a sales
charge to eligible retirement plans. For a prospectus regarding shares of the
fund to be acquired otherwise, contact the Secretary of the fund at the
address indicated above.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information for the fund dated
March 1, 1996, which contains the fund's financial statements, without charge,
by writing to the Secretary of the fund at the above address or telephoning
800/421-0180. These requests will be honored within three business days of
receipt.
SHARES OF THE FUND 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. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
08-010-0396 RP
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY OF
EXPENSES
Average annual expenses
paid over a 10-year
period would be
approximately $9 per
year, assuming a $1,000
investment and a 5%
annual return with
no sales charge.
This table is designed to help you understand costs of investing in the fund.
These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the fund with no sales
charge./1/ The fund also has no sales charge on reinvested dividends, deferred
sales charge, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees....................................................... 0.37%
12b-1 expenses........................................................ 0.25%/2/
Other expenses (including audit, legal, shareholder services, transfer
agent and custodian expenses)........................................ 0.12%
Total fund operating expenses......................................... 0.74%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative
expenses on a $1,000 investment, assuming
a 5% annual return./3/ $8 $24 $41 $92
</TABLE>
/1/ Retirement plans of organizations with $100 million or more in collective
retirement plan assets may purchase shares of the fund with no sales charge.
In addition, any defined contribution plan qualified under Section 401(a) of
the Internal Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at least $1 million in
shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares
at net asset value; however, a contingent deferred sales charge of 1%
applies on certain redemptions made within 12 months following such
purchases. (See "Redeeming Shares--Contingent Deferred Sales Charge.")
/2/ These expenses may not exceed 0.25% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/3/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
TABLE OF
CONTENTS
<TABLE>
<S> <C>
Summary of Expenses.......... 2
Financial Highlights......... 3
Investment Objective and
Policies.................... 3
Certain Securities and
Investment Techniques....... 5
Investment Results........... 9
Dividends, Distributions and
Taxes....................... 10
Fund Organization and
Management.................. 11
Purchasing Shares............ 13
Shareholder Services......... 14
Redeeming Shares............. 15
</TABLE>
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information has been audited by Deloitte
HIGHLIGHTS & Touche LLP, independent accountants, whose unquali-
fied report covering each of the most recent five years
(For a share is included in the statement of additional information.
outstanding This information should be read in conjunction with the
throughout the financial statements and accompanying notes which are
fiscal year) included in the statement of additional information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $12.69 $14.45 $13.99 $13.70 $12.39 $13.23 $13.24 $13.14 $14.21 $14.01
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 1.05 1.05 1.09 1.15 1.21 1.24 1.31 1.28 1.28 1.38
Net realized and
unrealized gain (loss)
on investments........ 1.18 (1.76) .84 .34 1.28 (.84) (.02) .08 (1.02) .66
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income from in-
vestment operations.. 2.23 (0.71) 1.93 1.49 2.49 .40 1.29 1.36 .26 2.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net in-
vestment income....... (1.04) (1.05) (1.08) (1.16) (1.18) (1.24) (1.30) (1.26) (1.23) (1.44)
Distributions from net
realized gains........ -- -- (.39) (.04) -- -- -- -- (.10)/1/ (.40)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions... (1.04) (1.05) ( 1.47) (1.20) (1.18) (1.24) (1.30) (1.26) (1.33) (1.84)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $13.88 $12.69 $14.45 $13.99 $13.70 $12.39 $13.23 $13.24 $13.14 $14.21
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return/2/ 18.25% (5.02)% 14.14% 11.34% 21.04% 3.27% 10.13% 10.70% 1.96% 15.17%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of year
(in millions)......... $6,290 $4,941 $5,285 $3,917 $2,859 $1,945 $1,481 $1,021 $ 825 $ 694
Ratio of expenses to
average net assets.... .74% .69% .71% .73% .77% .76% .76% .66% .59% .58%
Ratio of net income to
average net assets.... 7.87% 7.77% 7.53% 8.36% 9.28% 9.70% 9.73% 9.54% 9.45% 9.39%
Portfolio turnover
rate.................. 43.80% 57.0% 44.7% 49.7% 56.5% 59.9% 64.2% 93.0% 93.0% 107.8%
</TABLE>
--------
/1/ Represents only net short-term realized gains.
/2/ Calculated with no sales charge.
INVESTMENT The fund's investment objective is to provide as high a
OBJECTIVE level of current income as is consistent with the pres-
AND POLICIES ervation of capital. The fund invests substantially all
of its assets in marketable corporate debt securities,
The fund's goal is U.S. Government securities, mortgage-related securi-
to provide you ties, other asset-backed securities and cash or money
with high current market instruments. Normally, at least 65% of the
incomeand fund's assets will be invested in bonds. (For this pur-
conservationof pose, bonds are considered any debt securities having
capital. initial maturities in excess of one year.)
At least 60% of the value of the fund's assets, mea-
sured at the time of any purchase, must be invested in
the following categories:
. marketable corporate debt securities such as bonds
rated at the time of purchase within the three
highest investment grade ratings (A or better)
assigned by Moody's Investors Service, Inc. or
Standard & Poor's Corporation (all ratings discussed
below refer to those assigned by these two rating
agencies) or, if not rated by either of these rating
agencies, determined by the fund's investment
adviser, Capital Research and Management Company, as
being of investment quality equivalent to securities
rated A or better;
3
<PAGE>
- -------------------------------------------------------------------------------
. U.S. Government securities including (1) direct
obligations of the U.S. Treasury (such as Treasury
bills, notes and bonds), (2) obligations guaranteed
as to principal and interest by the U.S. Treasury
such as Government National Mortgage Association
certificates (described below) and Federal Housing
Administration debentures, and (3) securities issued
by U.S. Government instrumentalities and certain
federal agencies that are neither direct obligations
of, nor guaranteed by, the Treasury;
. mortgage-related securities rated A or better or
unrated securities that are determined to be of
equivalent quality of (1) governmental issuers,
including Government National Mortgage Association
certificates, which are securities representing part
ownership of a pool of mortgage loans on which timely
payment of interest and principal is guaranteed by
the U.S. Government, and securities issued and
guaranteed as to the payment of interest and
principal by the Federal National Mortgage
Association or the Federal Home Loan Mortgage
Corporation (but not backed by the U.S. Government);
(2) private issuers, including mortgage pass-through
certificates or mortgage-backed bonds; and (3) the
governmental issuers mentioned above or private
issuers, including collateralized mortgage
obligations and real estate mortgage investment
conduits which are issued in portions or tranches
with varying maturities and characteristics; some
tranches may only receive the interest paid on the
underlying mortgages (IOs) and others may only
receive the principal payments (POs); the values of
IOs and POs are extremely sensitive to interest rate
fluctuations and prepayment rates, and IOs are also
subject to the risk of early prepayment of the
underlying mortgages which will substantially reduce
or eliminate interest payments (see the statement of
additional information for more about these
securities);
. other asset-backed securities rated A or better or
unrated securities that are determined to be of
equivalent quality (unrelated to mortgage loans) such
as securities whose assets consist of a pool of motor
vehicle retail installment sales contracts and security
interests in the vehicles securing the contracts or a
pool of credit card loan receivables (see the statement
of additional information for more about these
securities);
. cash or money market instruments, including commercial
bank obligations (certificates of deposit, which are
interest-bearing time deposits; bankers acceptances,
which are time drafts on a commercial bank where the
bank accepts an irrevocable obligation to pay at
maturity; and demand or time deposits), and commercial
paper (short-term notes with maturities of up to nine
months issued by corporations or government bodies).
4
<PAGE>
- -------------------------------------------------------------------------------
The remaining 40% of the fund's assets, measured at the
time of purchase, may be invested in debt securities
rated below A or unrated securities that are determined
to be of equivalent quality, including marketable cor-
porate debt securities, mortgage-related securities and
other asset-backed securities. These securities may be
rated as low as Ca by Moody's or CC by S&P. However,
securities rated Ba and BB or below or unrated securi-
ties that are determined to be of equivalent quality
(commonly known as "junk" or "high-yield, high-risk"
bonds) will represent less than 35% of the fund's net
assets and are subject to special review before pur-
chase.
In addition, the fund may from time to time invest in
fixed-income securities of corporations outside the
U.S. or governmental entities and may purchase or sell
various currencies and enter into forward currency con-
tracts in connection with these investments. The fund
may also invest up to 1% of its assets in inverse
floating rate notes (a type of derivative instrument).
The average monthly composition of the fund's portfolio
based on the higher of the Moody's or S&P ratings for
the fiscal year ended December 31, 1995 was as
follows: bonds--Aaa/AAA-42.84%; Aa/AA-3.49%; A/A-6.26%;
Baa/BBB-10.17%; Ba/BB-7.45%; B/B-11.95%, and Caa/
CCC-1.41%. Other investments, including non-rated
investments, equity-type securities and cash or cash
equivalents amounted to 1.74%, 3.34% and 11.35%,
respectively.
The fund's investment restrictions (which are described
in the statement of additional information) and objec-
tive cannot be changed without shareholder approval.
All other investment practices may be changed by the
fund's board.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
CERTAIN SECURITIES RISKS OF INVESTING IN BONDS The market values of fixed-
AND INVESTMENT income securities generally vary inversely with the
TECHNIQUES level of interest rates--when interest rates rise,
their values will tend to decline and vice versa. The
Investing in bonds magnitude of these changes generally will be greater
involves certain the longer the remaining maturity of the security.
risks. Fluctuations in the value of the fund's investments
will be reflected in its net asset value per share;
typically declining when interest rates rise.
High-yield, high-risk bonds (bonds rated Ba and BB or
below) may be subject to greater market fluctuations
and to greater risk of loss of income and principal due
to default by the issuer than are higher-rated bonds.
Their values tend to reflect short-term corporate,
economic and
5
<PAGE>
- -------------------------------------------------------------------------------
market developments and investor perceptions of the is-
suer's credit quality to a greater extent than lower
yielding higher-rated bonds. In addition, it may be
more difficult to dispose of, or to determine the value
of, high-yield, high-risk bonds. Bonds rated Ca or CC
are described by the ratings agencies as "speculative
in a high degree; often in default or [having] other
marked shortcomings." See the statement of additional
information for a complete description of the bond rat-
ings.
Capital Research and Management Company attempts to re-
duce the risks described above through diversification
of the portfolio and by credit analysis of each issuer
as well as by monitoring broad economic trends and cor-
porate and legislative developments.
INVESTING IN VARIOUS COUNTRIES The fund may invest in
securities which may be denominated in currencies
other than the U.S. dollar. The fund may also invest in
securities of issuers located outside the United
States. Investing globally involves special risks,
particularly in certain developing countries, caused
by, among other things: trade balances and imbalances
and related economic policies; expropriation or
confiscatory taxation; limitations on the removal of
funds or other assets; political or social instability;
the diverse structure and liquidity of the various
securities markets; and nationalization policies of
governments around the world. Companies located outside
the U.S. operate under different accounting, auditing
and financial reporting standards and practices and
regulatory requirements that may be less rigorous than
U.S. companies, and frequently there may be less
information publicly available about such companies.
However, investing outside the U.S. also can reduce
certain of these risks through greater diversification
opportunities.
Transaction costs are generally higher outside the
U.S., and the fund will bear certain expenses in con-
nection with its currency transactions. Increased cus-
todian costs as well as administrative difficulties
(for example, delays in clearing and settling portfolio
transactions or in receiving payments of dividends) may
be associated with the maintenance of assets in certain
jurisdictions.
CURRENCY TRANSACTIONS The fund has the ability to pur-
chase and sell currencies to facilitate securities
transactions and to enter into forward currency con-
tracts to hedge against changes in currency exchange
rates. While entering into forward transactions could
minimize the risk of loss due to a decline in the value
of the hedged currency, it could also limit any poten-
tial gain which might result from an increase in the
value of the currency. (See "Currency Transactions" in
the statement of additional information.)
6
<PAGE>
- -------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS AND
"ROLL" TRANSACTIONS The fund may purchase securities on
a delayed delivery or "when-issued" basis and enter
into firm commitment agreements (transactions whereby
the payment obligation and interest rate are fixed at
the time of the transaction but the settlement is de-
layed). The fund as purchaser assumes the risk of any
decline in value of the security beginning on the date
of the agreement or purchase. The fund also may enter
into "roll" transactions, which are the sale of GNMA
certificates or other securities together with a com-
mitment (for which the fund typically receives a fee)
to purchase similar, but not identical, securities at a
later date. As the fund's aggregate commitments under
these transactions increase, the opportunity for lever-
age similarly may increase; however, it is not the in-
tent of the fund to engage in these transactions for
leveraging purposes. In addition, the fund may enter
into other purchase and sale transactions involving se-
curities which are not settled in the ordinary course
of business and under various terms when to do so is in
the best interest of the fund.
The fund will segregate liquid assets such as cash,
U.S. Government securities or other appropriate high-
grade debt obligations in an amount sufficient to meet
its payment obligations in these transactions. Although
these transactions will not be entered into for
leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its hold-
ings of cash and securities that do not fluctuate in
value (such as short-term money market instruments),
the fund temporarily will be in a leveraged position
(i.e., it will have an amount greater than its net as-
sets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund
is in a leveraged position, greater depreciation of its
net assets would likely occur than were it not in such
a position. The fund will not borrow money to settle
these transactions and, therefore, will liquidate other
portfolio securities in advance of settlement if neces-
sary to generate additional cash to meet its obliga-
tions thereunder.
REPURCHASE AGREEMENTS The fund may enter into repur-
chase agreements, under which it buys a security and
obtains a simultaneous commitment from the seller to
repurchase the security at a specified time and price.
The seller must maintain with the fund's custodian col-
lateral equal to at least 100% of the repurchase price
including accrued interest as monitored daily by Capi-
tal Research and Management Company. If the seller
under the repurchase agreement defaults, the fund may
incur a loss if the value of the collateral securing the
repurchase agreement has declined and may incur dispo-
sition costs in connection with liquidating the collat-
eral. If bankruptcy proceedings are commenced with
respect to the seller, liquidation of the collateral by
the fund may be delayed or limited.
7
<PAGE>
- -------------------------------------------------------------------------------
LOAN PARTICIPATIONS The fund may invest, subject to an
overall 10% limit on loans, in loan participations,
typically made by a syndicate of banks to U.S. and non-
U.S. corporate or governmental borrowers for a variety
of purposes. The underlying loans may be secured or
unsecured, and will vary in term and legal structure.
When purchasing such instruments the fund may assume
the credit risks associated with the original bank
lender as well as the credit risks associated with the
borrower. Investments in loan participations present
the possibility that the fund could be held liable as a
co-lender under emerging legal theories of lender lia-
bility. In addition, if the loan is foreclosed, the
fund could be part owner of any collateral, and could
bear the costs and liabilities of owning and disposing
of the collateral. Loan participations are generally
not rated by major rating agencies and may not be pro-
tected by the securities laws. Also, loan participa-
tions are generally considered to be illiquid.
PRIVATE PLACEMENTS Private placements may be either
purchased from another institutional investor that
originally acquired the securities in a private place-
ment or directly from the issuers of the securities.
Generally, securities acquired in private placements
are subject to contractual restrictions on resale and
may not be resold except pursuant to a registration
statement under the Securities Act of 1933 or in reli-
ance upon an exemption from the registration require-
ments under the Act, for example, private placements
sold pursuant to Rule 144A. Accordingly, any such obli-
gation will be deemed illiquid unless it has been spe-
cifically determined to be liquid under procedures
adopted by the fund's board of directors.
In determining whether these securities are liquid,
factors such as the frequency and volume of trading and
the commitment of dealers to make markets will be con-
sidered. Additionally, the liquidity of any particular
security will depend on such factors as the availabil-
ity of "qualified" institutional investors and the ex-
tent of investor interest in the security, which can
change from time to time.
MATURITY The maturity composition of the fund's portfo-
lio of fixed-income securities will be adjusted in re-
sponse to market conditions and expectations. There are
no restrictions on the maturity composition of the
portfolio, although it is anticipated that the fund
normally will be invested substantially in intermedi-
ate-term (3 to 10 years to maturity) and long-term
(over 10 years to maturity) securities.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system
8
<PAGE>
- -------------------------------------------------------------------------------
the portfolio of the fund is divided into segments
which are managed by individual counselors. Each
counselor decides how their segment will be invested
(within the limits provided by the fund's objective and
policies and by Capital Research and Management
Company's investment committee). In addition, Capital
Research and Management Company's research
professionals make investment decisions with respect to
a portion of the fund's portfolio segments. The primary
individual portfolio counselors for the fund are listed
below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE
AS INVESTMENT PROFESSIONAL
(APPROXIMATE)
YEARS OF EXPERIENCE
AS PORTFOLIO WITH CAPITAL
PORTFOLIO COUNSELOR FOR RESEARCH AND
COUNSELORS FOR THE BOND FUND MANAGEMENT
THE BOND FUND OF AMERICA COMPANY OR ITS TOTAL
OF AMERICA PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES YEARS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abner D. Goldstine President and Director of Since the fund began 29 years 44 years
the fund. Senior Vice President operations in 1974
and Director, Capital Research
and Management Company
- -----------------------------------------------------------------------------------------------------------------------------
Richard T. Schotte Senior Vice President of 18 years 18 years 29 years
the fund. Senior Vice
President, Capital
Research and Management
Company
John H. Smet Vice President of the 7 years 13 years 14 years
fund. Vice President,
Capital Research and
Management Company
- -----------------------------------------------------------------------------------------------------------------------------
Mark H. Dalzell Vice President, Investment 2 years 8 years 18 years
Management Group, Capital
Research and Management
Company
- -----------------------------------------------------------------------------------------------------------------------------
The fund began operations on May 28, 1974.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT RESULTS The fund may from time to time compare its investment
results to various unmanaged indices or other mutual
The fund has funds in reports to shareholders, sales literature and
averaged a total advertisements. The results may be calculated on a to-
return (at no tal return, yield, and/or distribution rate basis for
sales charge) of various periods, with or without sales charges. Results
10.65% a year over calculated without a sales charge will be higher. Total
its lifetime returns assume the reinvestment of all dividends and
(May 28, 1974 capital gain distributions.
through December
31, 1995). The fund's yield and the average annual total returns
are calculated with no sales charge in accordance with
Securities and Exchange Commission requirements. The
fund's distribution rate is calculated by annualizing
the current month's dividend and dividing by the
average price for the month. For the 30-day period
ended December 31, 1995, the fund's SEC yield was 6.49%
and the distribution rate was 7.18% with no sales
charge. The SEC yield reflects income earned by the
fund, while the distribution rate reflects dividends
paid by the fund. The fund's total
9
<PAGE>
- -------------------------------------------------------------------------------
return over the past 12 months and average annual total
returns over the past five-year and ten-year periods,
as of December 31, 1995, were 18.25%, 11.56% and 9.83%,
respectively. Of course, past results are not an
indication of future results. Further information
regarding the fund's investment results is contained in
the fund's annual report which may be obtained without
charge by writing to the Secretary of the fund at the
address indicated on the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS The fund declares dividends
DISTRIBUTIONS AND from its net investment income daily and distributes
TAXES the accrued dividends to shareholders each month. Divi-
dends begin accruing one day after payment for shares
Income is received by the fund or American Funds Service Com-
distributions are pany. All capital gains, if any, are distributed annu-
made each month. ally, usually in December. When a capital gain is de-
clared, the net asset value per share is reduced by the
amount of the payment.
The terms of your plan will govern how your plan may
receive distributions from the fund. Generally,
periodic distributions from the fund to your plan are
reinvested in additional fund shares, although your
plan may permit fund distributions from net investment
income to be received by you in cash while reinvesting
capital gains distributions in additional shares or all
fund distributions to be received in cash. Unless you
select another option, all distributions will be
reinvested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a "regu-
lated investment company" under the Internal Revenue
Code. For any fiscal year in which the fund so quali-
fies and distributes to shareholders all of its net in-
vestment income and net capital gains, the fund itself
is relieved of federal income tax. The tax treatment of
redemptions from a retirement plan may differ from re-
demptions from an ordinary shareholder account.
Please see the statement of additional information and
your tax adviser for further information.
10
<PAGE>
- -------------------------------------------------------------------------------
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND MANAGEMENT organized as a Maryland corporation in 1973. The fund's
board supervises fund operations and performs duties
The fund is a required by applicable state and federal law. Members
member of The of the board who are not employed by Capital Research
American Funds and Management Company or its affiliates are paid
Group, which is certain fees for services rendered to the fund as
managed by one of described in the statement of additional information.
the largest and They may elect to defer all or a portion of these fees
most experienced through a deferred compensation plan in effect for the
investment fund. Shareholders have one vote per share owned and,
advisers. at the request of the holders of at least 10% of the
shares, the fund will hold a meeting at which any
member of the board could be removed by a majority
vote. There will not usually be a shareholder meeting
in any year except, for example, when the election of
the board is required to be acted upon by shareholders
under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071 and at 135 South State College
Boulevard, Brea, CA 92621. Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rate of 0.30% on the first $60 million of the
fund's net assets, plus 0.21% on net assets in excess
of $60 million to $1 billion, plus 0.18% on assets over
$1 billion to $3 billion, plus 0.16% on assets over $3
billion, plus 3% of the first $5.4 million of annual
gross income, plus 2.25% of annual gross income over
$5.4 million. Assuming net assets of $6 billion and
gross investment income levels of 6%, 7%, 8%, 9%, 10%
and 11%, management fees would be .31%, .33%, .36%,
.38%, .40%, and .42%, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
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PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. Fixed-income securities are
generally traded on a "net" basis with a dealer acting
as principal for its own account without a stated com-
mission, although the price of the security usually in-
cludes a profit to the dealer. In underwritten offer-
ings, securities are usually purchased at a fixed price
which includes an amount of compensation to the under-
writer, generally referred to as the underwriter's con-
cession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no
commissions or discounts are paid.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and execu-
tions, preference may be given to brokers that have
sold shares of the fund or have provided investment re-
search, statistical, and other related services for the
benefit of the fund and/or other funds served by Capi-
tal Research and Management Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors is located
at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92621, 8000 IH-
10 West, San Antonio, TX 78230, 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240, and 5300 Robin Hood
Road, Norfolk, VA 23513. Telephone conversations with
American Funds Distributors may be recorded or moni-
tored for verification, recordkeeping and quality as-
surance purposes.
PLAN OF DISTRIBUTION The fund has a plan of distribu-
tion or "12b-1 Plan" under which it may finance activi-
ties primarily intended to sell shares, provided the
categories of expenses are approved in advance by the
board and the expenses paid under the plan were in-
curred within the last 12 months and accrued while the
plan is in effect. Expenditures by the fund under the
plan may not exceed 0.25% of its average net assets an-
nually (all of which may be for service fees).
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, 135 South State College Boulevard,
Brea, CA 92621, 8000 IH-10 West, San Antonio, TX 78230,
8332 Woodfield Crossing Boulevard, Indianapolis, IN
46240, and 5300 Robin Hood Road, Norfolk, VA 23513. It
was paid a fee of $4,205,000 for the fiscal year ended
December 31, 1995. Telephone conversations with
American Funds Service Company may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
12
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PURCHASING ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
SHARES RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PURCHASE SHARES OF THE FUND THROUGH YOUR PLAN OR
LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT WITH YOUR EMPLOYER. Shares are sold to eligible
retirement plans at the net asset value per share next
determined after receipt of an order by the fund or
American Funds Service Company. Orders must be received
before the close of regular trading on the New York
Stock Exchange in order to receive that day's net asset
value. Plans of organizations with collective
retirement plan assets of $100 million or more may
purchase shares at net asset value. In addition, any
employer-sponsored 403(b) plan or defined contribution
plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at
least $1 million in shares of the fund (or in
combination with shares of other funds in The American
Funds Group other than the money market funds) may
purchase shares at net asset value; however, a
contingent deferred sales charge of 1% is imposed on
certain redemptions made within twelve months of such
purchase. (See "Redeeming Shares--Contingent Deferred
Sales Charge.") Plans may also qualify to purchase
shares at net asset value by completing a statement of
intention to purchase $1 million in fund shares subject
to a commission over a maximum of 13 consecutive
months. Certain redemptions of such shares may also be
subject to a contingent deferred sales charge as
described above. (See the statement of additional
information.)
The minimum initial investment 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.
American Funds Distributors, at its expense, (from a
designated percentage of its income), will, during
calendar year 1996, provide additional promotional
incentives to dealers. Currently these incentives are
limited to the top one hundred dealers who have sold
shares of the fund or other funds in The American Funds
Group. Such incentive 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 serv-
ice 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
13
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them for providing certain services. (See "Fund Organi-
zation and Management--Plan of Distribution.") These
services include processing purchase and redemption
transactions, establishing shareholder accounts and
providing certain information and assistance with re-
spect to the fund.
Shares of the fund are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value next determined after the
order is received by the fund or American Funds Service
Company. In the case of orders sent directly to the
fund or American Funds Service Company, an investment
dealer must be indicated. Dealers are responsible for
promptly transmitting orders. (See the statement of
additional information under "Purchase of Shares--Price
of Shares.")
The fund's net asset value per share is determined as
of the close of trading (currently 4:00 p.m., New York
time) on each day the New York Stock Exchange is open.
The current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share.
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on your plan, you may be able to exchange shares
automatically or cross-reinvest dividends in shares of
other funds. Contact your plan administrator/trustee
regarding how to use these services. Also, see the
fund's statement of additional information for a
description of these and other services that may be
available through your plan. These services are
available only in states where the fund to be purchased
may be legally offered and may be terminated or
modified at any time upon 60 days' written notice.
14
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REDEEMING SHARES Subject to any restrictions imposed by your plan, you
can sell your shares through the plan to the fund any
day the New York Stock Exchange is open. For more
information about how to sell shares of the fund
through your retirement plan, including any charges
that may be imposed by the plan, please consult with
your employer.
--------------------------------------------------------
By contact- Your plan administrator/trustee must
ing your plan send a letter of instruction
administrator/ specifying the name of the fund, the
trustee number of shares or dollar amount to
be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners (i.e., trustees or
their legal representatives) must be
guaranteed by a bank, savings
association, credit union, or member
firm of a domestic stock exchange or
the National Association of
Securities Dealers, Inc., that is an
eligible guarantor institution. Your
plan administrator/trustee should
verify with the institution that it
is an eligible guarantor prior to
signing. Additional documentation may
be required to redeem shares from
certain accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
--------------------------------------------------------
By contact- Shares may also be redeemed through
ing an in- an investment dealer; however, you or
vestment your plan may be charged for this
dealer service. SHARES HELD FOR YOU IN AN
INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
--------------------------------------------------------
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND ALL
REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions made
within twelve months of purchase on investments of $1
million or more and on any investment made with no
initial sales charge by any employer-sponsored 403(b)
plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee
15
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benefit plans; for redemptions resulting from
participant-directed switches among investment options
within a participant-directed employer-sponsored
retirement plan, and for redemptions in connection with
loans made by qualified retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under "Pur-
chasing Shares--Share Price." Because the fund's net
asset value fluctuates, reflecting the market value of
the portfolio, the amount you receive for shares re-
deemed may be more or less than the amount paid for
them.
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), redemption proceeds will be paid on or before
the seventh day following receipt of a proper redemp-
tion request.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE FUND
TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF
THE FUND AT THE ADDRESS INDICATED ON THE FRONT.
16
