AMCAP FUND, INC.
Part B
Statement of Additional Information
May 1, 1998 (as amended August 17, 1998)
This document is not a prospectus but should be read in conjunction with the
current Prospectus of AMCAP Fund, Inc. (the "fund") dated May 1, 1998. The
Prospectus may be obtained from your investment dealer or financial planner or
by writing to the fund at the following address:
AMCAP Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
<TABLE>
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Item Page No.
<S> <C>
Description of Certain Securities 1
Description of Bond Ratings 2
Investment Restrictions 3
Fund Directors and Officers 6
Director Compensation 6
Management 10
Dividends, Distributions and Federal Taxes 13
Purchase of Shares 15
Redeeming Shares 21
Shareholder Account Services and Privileges 22
Execution of Portfolio Transactions 24
General Information. 25
Investment Results 26
Financial Statements Attached
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES
The descriptions below are intended to supplement the material in the
Prospectus under "Investment Policies and Risks."
Subsequent to its purchase by the fund, an issue of straight debt securities
may cease to be rated or its rating may be reduced below the minimum rating
required for its purchase. Neither event requires the elimination of such
obligation from the fund's portfolio, but Capital Research and Management
Company (the "Investment Adviser") will consider such an event in its
determination of whether the fund should continue to hold such obligation in
its portfolio. The fund has no current intention (at least during the next 12
months) to invest more than 5% of its assets in convertible securities rated
below A by Moody's Investors Service Inc. or Standard & Poor's Corporation. If
as a result of a downgrade or otherwise, the fund holds more than 5% of its net
assets in securities rated Ba or BB or below (also known as "high-yield,
high-risk securities"), the fund will dispose of the excess as expeditiously as
possible.
CASH EQUIVALENTS - The fund may maintain assets in cash or cash equivalents.
Cash equivalents include (1) commercial paper (short-term notes up to 9 months
in maturity issued by corporations or governmental bodies), (2) commercial bank
obligations such as certificates of deposit (interest-bearing time deposits)
and bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), (3) savings association
obligations (certificates of deposit issued by mutual savings banks or savings
and loan associations), (4) securities of the U.S. Government, its agencies or
instrumentalities that at time of purchase mature, or may be redeemed, in one
year or less, and (5) corporate bonds and notes that at time of purchase
mature, or that may be redeemed, in one year or less.
OTHER SECURITIES - The fund may also invest in securities that have equity and
debt characteristics such as non-convertible preferred stocks and convertible
securities. These securities may at times resemble equity more than debt and
vice versa. Non-convertible preferred stocks are similar to debt in that they
have a stated dividend rate akin to the coupon of a bond or note even though
they are often classified as equity securities. The prices and yields of
non-convertible preferred stocks generally move with changes in interest rates
and the issuer's credit quality, similar to the factors affecting debt
securities.
F
Bonds, preferred stocks, and other securities may sometimes be converted into
common stock or other securities at a stated exchange ratio. These securities
prior to conversion pay a fixed rate of interest or a dividend. Because
convertible securities have both debt and equity characteristics, their value
varies in response to may factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the issuer's credit
quality.
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities from "Aaa" to "C." Moody's applies the numerical modifiers 1,
2, and 3 in each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. The top three rating categories are
described as follows:
"Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
Standard & Poor's Corporation rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
The top three rating categories are described as follows:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
INVESTMENT RESTRICTIONS
The fund has adopted certain investment restrictions which may not be changed
without a majority vote of its outstanding shares. Such majority is defined by
the Investment Company Act of 1940 (the "1940 Act") as the vote of the lesser
of (i) 67% or more of the outstanding voting securities present at a meeting,
if the holders of more than 50% of the outstanding voting securities are
present in person or by proxy, or (ii) more than 50% of the outstanding voting
securities. Investment limitations expressed in the following restrictions are
considered at the time securities are purchased and are based on the fund's net
assets unless otherwise indicated. These restrictions provide that:
1. The fund may not invest in:
(a) real estate (although it has not been the practice of the fund to make
such investments, the fund may invest in the securities of real estate
investment trusts);
(b) commodities or commodity contracts;
(c) companies for the purpose of exercising control or management;
(d) the securities of companies which, with their predecessors, have a record
of less than three years' continuing operation, if such purchase at the time
thereof would cause more than 5% of the value of the fund's total assets to be
invested in the securities of such companies;
(e) securities which would subject the fund to unlimited liability (such as
assessable shares or partnership interests);
(f) any securities of another issuer if immediately after and as a result of
such purchase (1) the market value of the securities of such other issuer shall
exceed 5% of the market value of the total assets of the fund or (2) the fund
shall own more than 10% of any class of securities or of the outstanding voting
securities of such issuer; or
(g) any securities if immediately after and as a result of such purchase more
than 25% of the market value of the total assets of the fund are invested in
securities of companies in any one industry.
2. The fund may not engage in short sales or margin purchases.
3. The fund may not lend money or securities. The making of deposits with
banks and the purchase of a portion of the issue of bonds, debentures, or other
debt securities which are publicly distributed or of a type generally purchased
by institutional investors, are not regarded as loans.
4. The fund may not invest more than 10% of the value of its total assets in
securities that are illiquid, nor may it engage in the business of underwriting
securities of other issuers.
5. The fund may not borrow in excess of 10% of its total assets taken at cost
or pledge its assets taken at market value to an extent greater than 15% of
total assets taken at cost. Asset coverage of at least 300% taken at market
value must be maintained. No borrowing may be undertaken except as a temporary
measure for extraordinary or emergency purposes. (The fund may borrow only
from banks. The fund, however, has never borrowed and does not currently
anticipate borrowing.)
The following policies are non-fundamental policies which may be changed by
action of the Board of Directors, without shareholder approval.
Investment restriction #1 does not apply to deposits in banks or to the
purchase of securities issued or fully guaranteed by the U.S. Government (or
its agencies or instrumentalities). For purposes of investment restriction
#1(g), the fund will not invest 25% or more (rather than "more than 25%") of
its total assets in the securities of issuers in the same industry.
Notwithstanding investment restriction #5, the fund has no current intention
(at least during the next 12 months) to leverage its assets.
In addition to the foregoing policies, it is also the policy of the fund not to
invest in securities of open-end investment companies except in connection with
a merger, consolidation or acquisition of assets, but the fund may invest in
securities of closed-end investment companies within the limitations imposed by
the 1940 Act. (Notwithstanding this restriction, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.) In general, this means (i) that the fund will not own more than
3% of the outstanding voting stock of a closed-end investment company, (ii)
that the fund will not invest more than an aggregate of 5% of its total assets
in securities issued by closed-end investment companies, and (iii) that the
fund, together with all other investment companies served by the Investment
Adviser, will not own more than 10% of the outstanding voting stock of a
closed-end investment company. Any such purchases will be made only in the
open market or as a part of a merger, consolidation, or acquisition of assets,
and will not involve commissions or profits to a sponsor or dealer other than
customary brokerage commissions.
FUND OFFICERS AND DIRECTORS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS AND WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AGE REGISTRANT DURING (INCLUDING (INCLUDING OF FUND
PAST 5 YEARS VOLUNTARILY VOLUNTARILY BOARDS ON
(POSITIONS DEFERRED DEFERRED WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) DIRECTOR
ORGANIZATIONS FROM FUND DURING FROM ALL FUNDS SERVES/2/
LISTED MAY FISCAL YEAR MANAGED BY
HAVE CHANGED ENDED 2/28/98 CAPITAL RESEARCH
DURING THIS AND
PERIOD) MANAGEMENT
COMPANY/2/ FOR
THE YEAR ENDED
2/28/98
<S> <C> <C> <C> <C> <C>
H. Director Private none/5/ $163,600 19
Frederick investor;
Christie former
655 Deep President and
Valley Chief
Drive Executive
Suite 125 Officer, The
Rolling Mission Group
Hills, CA (non-utility
90274 holding
Age: 64 company,
subsidiary of
Southern
California
Edison
Company)
Mary Anne Director Founder and none/5/ $26,400 2
Dolan President,
M.A.D., M.A.D., Inc.
Inc. (a
1033 Gayley communications
Avenue company)
Suite 205
Los
Angeles, CA
90024
Age: 50
Martin Director Chairman, $13,525/3/ $128,234 16
Fenton, Jr. Senior
Senior Resource Group
Resource (management of
Group senior living
4350 centers)
Executive
Drive
Suite 101
San Diego,
CA
92121-2116
Age: 62
Herbert Director Private $12,742 $70,134 14
Hoover III Investor
1520 Circle
Drive
San Marino,
CA 91108
Age: 70
+Claudia P. President Senior Vice none/4/ none/4/ 1
Huntington and President,
333 South Director Capital
Hope Street Research and
Los Management
Angeles, CA Company
90071
Age: 45
Mary Myers Director Founder and none/5/ $86,300 5
Kauppila President,
Energy Energy
Investment Investment,
Inc. Inc.
One
Winthrop
Square
Boston, MA
02110
Age: 43
Kirk P. Director Chairman/CEO, $13,000/3/ $91,584 5
Pendleton Cairnwood,
Cairnwood, Inc. (venture
Inc. capital
75 James investment)
Way
Southampton, PA 18966
Age: 58
+James W. Director Senior none/4/ none/4/ 8
Ratzlaff Partner, The
One Market Capital Group
Plaza, Steuart Partners, L.P.
Tower, Ste.
1800
San
Francisco,
CA 94105
Age: 61
Olin C. Director President of none/5/ $78,000 3
Robinson the Salzburg
Salzburg Seminar;
Seminar President
The Marble Emeritus,
Works Middlebury
P.O. Box College
886
2 Maple
Street,
Ste.102
Middlebury,
VT 05753
Age: 61
+R. Michael Chairman Chairman of none/4/ none/4/ 2
Shanahan of the Board and
333 South the Board Principal
Hope Street and Executive
Los Principal Officer,
Angeles, CA Executive Capital
90071 Officer Research and
Age:59 Management
Company;
Director, The
Capital Group
Companies,
Inc.;
Director,
Capital Group
Research, Inc.
</TABLE>
+ Directors who are considered "interested persons" as defined in the 1940 Act,
on the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: American Balanced Fund, Inc., American High-Income
Municipal Bond Fund, Inc., American High-Income Trust, American Mutual Fund,
Inc., The Bond Fund of America, Inc., The Cash Management Trust of America,
Capital Income Builder, Inc., Capital World Growth and Income Fund, Inc.,
Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental Investors,
Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc.,
Intermediate Bond Fund of America, The Investment Company of America, Limited
Term Tax-Exempt Bond Fund of America, The New Economy Fund, New Perspective
Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America,
Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The
Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S.
Treasury Money Fund of America, U.S. Government Securities Fund and Washington
Mutual Investors Fund, Inc. Capital Research and Management Company also
manages American Variable Insurance Series and Anchor Pathway Fund which serve
as the underlying investment vehicle for certain variable insurance contracts;
and Bond Portfolio for Endowments, Inc. and Endowments, Inc. whose shares may
be owned only by tax-exempt organizations.
/3/ Since the deferred compensation plan's adoption, the total amount of
deferred compensation accrued by the fund (plus earnings thereon) for the
fiscal year ended February 28, 1998 for participating Directors is as follows:
Martin Fenton, Jr. ($39,240), Kirk P. Pendleton ($77,391). Amounts deferred
and accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Director.
/4/ Claudia P. Huntington, James W. Ratzlaff and R. Michael Shanahan are
affiliated with the Investment Adviser and, accordingly, receive no
compensation from the fund.
/5/ H. Frederick Christie, Mary Anne Dolan, Mary Myers Kauppila and Olin C.
Robinson were elected Directors on March 9, 1998 and, therefore, received no
compensation from the fund during the fiscal year ended February 28, 1998.
OFFICERS
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NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING
WITH REGISTRANT PAST 5 YEARS
Timothy D. Armour 37 Senior Vice Director, Capital Research and
333 South Hope Street President Management Company; Chairman of
Los Angeles, CA 90071 the Board and Chief Executive
Officer, Capital Research
Company
Paul G. Haaga, Jr. 49 Senior Vice Director and Executive Vice
333 South Hope Street President President, Capital Research and
Los Angeles, CA 90071 Management Company
James B. Lovelace 41 Senior Vice Senior Vice President, Capital
333 South Hope Street President Research and Management Company
Los Angeles, CA 90071
Vincent P. Corti 41 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
Mary C. Hall 40 Treasurer Senior Vice President - Fund
135 South State College Business Management Group,
Blvd. Capital Research and Management
Brea, CA 92821 Company
Robert P. Simmer 37 Assistant Treasurer Vice President - Fund Business
5300 Robin Hood Road Management Group, Capital
Norfolk, VA 23513 Research and Management Company
Sheryl F. Johnson 29 Assistant Treasurer Assistant Vice President - Fund
5300 Robin Hood Road Business Management Group,
Norfolk, VA 23513 Capital Research and Management
Company
</TABLE>
All of the officers listed are officers or employees of the Investment Adviser
or affiliated companies. No compensation is paid by the fund to any officer or
Director who is a director or officer of the Investment Adviser. Each
unaffiliated Director is paid a fee of $9,000 per annum, plus $800 for each
Board of Directors meeting attended, plus $400 for each meeting attended as a
member of a committee of the Board of Directors. No pension or retirement
benefits are accrued as part of fund expenses. The Directors may elect, on a
voluntary basis, to defer all or a portion of their fees through a deferred
compensation plan in effect for the fund. As of April 1, 1998, the officers
and directors of the fund and their families as a group owned beneficially or
of record less than 1% of the outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's research professionals travel several million miles a
year, making more than 5,000 research visits in more than 50 countries around
the world. The Investment Adviser believes that it is able to attract and
retain quality personnel. The Investment Adviser is a wholly owned subsidiary
of The Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations, as well as schools, colleges, foundations
and other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser, unless
sooner terminated, will continue until March 31, 1999 and may be renewed from
year to year thereafter, provided that any such renewal has been specifically
approved at least annually by (i) the Board of Directors, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities, and
(ii) the vote of a majority of directors who are not parties to the Agreement
or interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement provides that the Investment Adviser has no liability to the fund for
its acts or omissions in the performance of its obligations to the fund not
involving willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The Agreement also provides that
either party has the right to terminate it, without penalty, upon 60 days'
written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
qualified persons to perform executive, administrative, clerical and
bookkeeping functions of the fund; provides suitable office space and
utilities; and furnishes necessary small office equipment and general purpose
accounting forms, supplies, and postage used at the offices of the fund
relating to the services furnished by the Investment Adviser.
The fund pays all expenses not specifically assumed by the Investment Adviser,
including, but not limited to, custodian, registrar, stock transfer and
dividend disbursing fees and expenses; expenses pursuant to the fund's Plan of
Distribution (see below); costs of designing, printing and mailing reports,
prospectuses, proxy statements and notices to shareholders; taxes; expenses of
the issuance, sale, redemption, or repurchase of shares of the fund (including
stock certificates, registration and qualification fees and expenses); legal
and auditing fees and expenses; compensation, fees, and expenses paid to
directors not affiliated with the Investment Adviser; association dues; and
costs of stationery and forms prepared exclusively for the fund.
The Investment Adviser receives a management fee at the annual rates of 0.485%
on the first $1 billion of the fund's net assets, 0.385% on net assets in
excess of $1 billion but not exceeding $2 billion, 0.355% on net assets in
excess of $2 billion but not exceeding $3 billion, 0.335% on net assets in
excess of $3 billion but not exceeding $5 billion, 0.32% on net assets in
excess of $5 billion but not exceeding $8 billion, and 0.31% on net assets in
excess of $8 billion.
The Investment Adviser has agreed to pay to the fund annually, immediately
after the fiscal year end the amount by which the total expenses of the fund
for any particular fiscal year, except taxes and interest, exceed an amount
equal to 1% of the average of the total net assets of the fund for the year.
During the fiscal years ended February 28, 1998, February 28, 1997, and
February 29, 1996, the Investment Adviser's fees amounted to $16,324,000,
$14,491,000, and $13,418,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the "Plan"), pursuant to rule 12b-1 under the 1940 Act . The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares during the fiscal year ended
February 28, 1998 amounted to $671,000 after allowance of $3,213,000 to
dealers. During the fiscal years ended February 28, 1997, and February 29,
1996, the Principal Underwriter retained $638,000 and $747,000, after an
allowance of $3,121,000 and $3,798,000 respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors and separately by a
majority of the directors who are not "interested persons" of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the fund. The
officers and directors who are "interested persons" of the fund may be
considered to have a direct or indirect financial interest in the operation of
the Plan due to present or past affiliations with the Investment Adviser and
related companies. Potential benefits of the Plan to the fund include improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of directors who
are not "interested persons" of the fund are committed to the discretion of the
directors who are not "interested persons" during the existence of the Plan.
Plan expenditures are reviewed quarterly and the Plan must be renewed annually
by the Board of Directors.
Under the Plan the fund may expend up to 0.25% of its average net assets
annually to finance any activity primarily intended to result in the sale of
fund shares, provided the fund's Board of Directors has approved the category
of expenses for which payment is being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code (the "Code") including a "401(k)"
plan with 100 or more eligible employees). During the fiscal year ended
February 28, 1998 the fund paid $8,842,000 under the Plan. As of February 28,
1998 accrued and unpaid distribution expenses were $2,363,000.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries of affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Code. Under Subchapter M, if the fund distributes within specified times at
least 90% of its investment company taxable income (net investment income and
the excess of net short-term capital gains over net long-term capital losses) ,
it will be taxed only on the portion of its investment company taxable income
that it retains.
To qualify as a regulated investment company, the fund must (a) derive at least
90% of its gross income from dividends, interest, certain payments with respect
to securities loans, and gains from the sale or other disposition of stock,
securities, currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. Government
securities and other securities which must be limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
generally means the sum of 98% of (i) taxable net investment income for the
calendar year, (ii) capital gains (both long-term and short-term) for the
one-year period ending on October 31 (as though the one-year period ending on
October 31 were the regulated investment company's taxable year): and (iii) the
sum of any untaxed, undistributed taxable net investment income and net capital
gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts distributed by the
fund during the calendar year and (ii) any amount on which the fund pays
income tax during the periods described above. The fund intends to distribute
net investment income and net capital gains so as to minimize or avoid the
excise tax liability. Distributions of investment company taxable income,
including short-term capital gains, generally are taxable to the shareholders
as ordinary income, regardless of whether such distributions are paid in cash
or invested in additional shares of the fund's stock.
The fund also intends to continue distributing to shareholders all of the
excess of net long-term capital gain over net short-term capital loss on sales
of securities. A capital gain distribution, whether paid in cash or
re-invested in shares, is taxable to shareholders as long-term capital gains,
regardless of the length a shareholder has held his shares or whether such gain
was realized by the fund before the shareholder acquired such shares and was
reflected in the price paid for the shares. If the net asset value of shares of
the fund should, by reason of a distribution of realized capital gains, be
reduced below a shareholder's cost, such distribution should, by reason of a
distribution of realized capital gains, be reduced below a shareholder's cost,
such distribution would be a taxable dividend to the shareholder, even though
the distribution is economically a return of capital. In particular, investors
should consider the tax implications of purchasing shares just prior to a
dividend or capital gain distribution record date.
Dividends and capital gain distributions generally are taxable to shareholders
at the time they are paid. However, such dividends and distributions declared
in October, November and December and made payable to shareholders of record in
such a month are treated as paid and are thereby taxable as of December 31,
provided that the fund pays the dividend and/or capital gain distributions no
later than the end of January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares will not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual rate applicable to net
capital gains on assets held more than eighteen months is 20% and on assets
held more than one year and not more than eighteen months is 28%; and the
maximum corporate tax rate applicable to ordinary income and net capital gain
is 35% (however, to eliminate the benefit of lower marginal corporate income
tax rates, corporations which have income in excess of $100,000 for a taxable
year will be required to pay an additional income tax liability of up to
$11,750 and corporations which have taxable income in excess of $15,000,000 for
a taxable year will be required to pay an additional amount of tax of up to
$100,000). Naturally, the amount of tax payable by a taxpayer will be affected
by a combination of tax law rules covering deductions, credits, deferrals,
exemptions, sources of income and other matters. Under the Code, an individual
is generally entitled to establish and contribute to an Individual Retirement
Account ("IRA") each year (prior to the tax return filing deadline for that
year) whereby earnings on investments are tax-deferred. In addition, in some
cases, the IRA contribution itself may be deductible.
The foregoing is a summary discussion of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and distributions may also be subject to state or local
taxes. Investors should consult their own tax advisers for additional details
as to their particular tax status.
PURCHASE OF SHARES
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METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer Mail directly to your investment
your who is registered in the state dealer's address printed on your account
investment where the purchase is made and statement.
dealer who has a sales agreement with
American Funds Distributors.
By mail Make your check payable to the Fill out the account additions form at
fund and mail to the address the bottom of a recent account
indicated on the account statement, make your check payable to
application. Please indicate the fund, write your account number on
an investment dealer on the your check, and mail the check and form
account application. in the envelope provided with your
account statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then section on the account application or
follow the procedures for American FundsLink Authorization Form.
additional investments. Once you establish the privilege, you,
your financial advisor or any person
with your account information can call
American FundsLine(R) and make
investments by telephone (subject to
conditions noted in "Telephone and
Computer Purchases, Redemptions and
Exchanges" below).
By computer Please contact your investment Complete the American FundsLink
dealer to open account, then Authorization Form. Once you establish
follow the procedures for the privilege, you, your financial
additional investments. advisor or any person with your account
information may access American
FundsLine OnLine(sm) on the Internet and
make investments by computer (subject to
conditions noted in "Telephone and
Computer Purchases, Redemptions and Exchanges" below).
By wire Call 800/421-0180 to obtain Your bank should wire your additional
your account number(s), if investments in the same manner as
necessary. Please indicate an described under "Initial Investment."
investment dealer on the
account. Instruct your bank
to wire funds to:
Wells Fargo Bank
155 Fifth Street, Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine(R) (see description
below):
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FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
Stock and Stock/Bond Funds
AMCAP Fund(R) 02
$1,000
American Balanced Fund(R) 11
500
American Mutual Fund(R) 03
250
Capital Income Builder(R) 12
1,000
Capital World Growth and Income Fund(sm) 33
1,000
EuroPacific Growth Fund(R) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(R) 05
1,000
The Income Fund of America(R) 06
1,000
The Investment Company of America(R) 04
250
The New Economy Fund(R) 14
1,000
New Perspective Fund(R) 07
250
SMALLCAP World Fund(R) 35
1,000
Washington Mutual Investors Fund(sm) 01
250
Bond Funds
American High-Income Municipal Bond Fund(R) 40
1,000
American High-Income Trust(sm) 21
1,000
The Bond Fund of America(sm) 08
1,000
Capital World Bond Fund(R) 31
1,000
Intermediate Bond Fund of America(sm) 23
1,000
Limited Term Tax-Exempt Bond Fund of America(sm) 43
1,000
The Tax-Exempt Bond Fund of America(R) 19
1,000
The Tax-Exempt Fund of California(R)* 20
1,000
The Tax-Exempt Fund of Maryland(R)* 24
1,000
The Tax-Exempt Fund of Virginia(R)* 25
1,000
U.S. Government Securities Fund(sm) 22
1,000
Money Market Funds
The Cash Management Trust of America(R) 09
2,500
The Tax-Exempt Money Fund of America(sm) 39
2,500
The U.S. Treasury Money Fund of America(sm) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for IRAs. Minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
The minimum is $50 for additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
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Amount of Purchase SALES CHARGE AS DEALER
at the Offering Price PERCENTAGE OF THE: CONCESSION
AS
PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
Stock and Stock/Bond Funds
Less than $50,000 6.10%
5.75% 5.00%
$50,000 but less than $100,000 4.71
4.50 3.75
Bond Funds
Less than $25,000 4.99
4.75 4.00
$25,000 but less than $50,000 4.71
4.50 3.75
$50,000 but less than $100,000 4.17
4.00 3.25
Stock, Stock/Bond, and Bond Funds
$100,000 but less than $250,000 3.63
3.50 2.75
$250,000 but less than $500,000 2.56
2.50 2.00
$500,000 but less than $1,000,000 2.04
2.00 1.60
$1,000,000 or more none (see
none below)
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Code including a "401(k)" plan with 100
or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $50 million or more: 1.00% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), currently provides additional compensation to dealers. Currently
these payments are limited to the top 100 dealers who have sold shares of the
fund or other funds in The American Funds Group. These payments will be based
on a pro rata share of a qualifying dealer's sales. American Funds Distributors
will, on an annual basis, determine the advisability of continuing these
payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified under
Section 401(a) of the Code including a "401(k)" plan with 100 or more eligible
employees or any other purchaser investing at least $1 million in shares of the
fund (or in combination with shares of other funds in The American Funds Group
other than the money market funds) may purchase shares at net asset value;
however, a contingent deferred sales charge of 1% is imposed on certain
redemptions made within twelve months of the purchase. Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge. (See "Redeeming Shares--Contingent Deferred Sales Charge.")
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans, foundations, and endowments with assets of $50
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the
"Statement") terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize the Statement in order
to qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by American
Funds Service Company (the "Transfer Agent"). All dividends and capital gain
distributions on shares held in escrow will be credited to the shareholder's
account in shares (or paid in cash, if requested). If the intended investment
is not completed within the specified 13-month period, the purchaser will remit
to the Principal Underwriter the difference between the sales charge actually
paid and the sales charge which would have been paid if the total of such
purchases had been made at a single time. If the difference is not paid within
45 days after written request by the Principal Underwriter or the securities
dealer, the appropriate number of shares held in escrow will be redeemed to
pay such difference. If the proceeds from this redemption are inadequate, the
purchaser will be liable to the Principal Underwriter for the balance still
outstanding. The Statement may be revised upward at any time during the
13-month period, and such a revision will be treated as a new Statement, except
that the 13-month period during which the purchase must be made will remain
unchanged and there will be no retroactive reduction of the sales charges paid
on prior purchases. Existing holdings eligible for rights of accumulation (see
the prospectus and account application) may be credited toward satisfying the
Statement. During the Statement period reinvested dividends and capital gain
distributions, investments in money market funds, and investments made under a
right of reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan, by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, (2) made for two or
more employee benefit plans of a single employer or of affiliated employers as
defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or the Transfer
Agent; this offering price is effective for orders received prior to the time
of determination of the net asset value and, in the case of orders placed with
dealers, accepted by the Principal Underwriter prior to its close of business.
In case of orders sent directly to the fund or the Transfer Agent, an
investment dealer MUST be indicated. The dealer is responsible for promptly
transmitting purchase orders to the Principal Underwriter. Orders received by
the investment dealer, the Transfer Agent, or the fund after the time of the
determination of the net asset value and orders received by a dealer prior to
such time but not forwarded promptly to the Principal Underwriter will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at 4:00 p.m., New York Time each
day the New York Stock Exchange is open. For example, if the Exchange closes
at 1:00 p.m. on one day and at 4:00 p.m. on the next, the fund's share price
would be determined as of 4:00 p.m. New York Time on both days. The New York
Stock Exchange is currently closed on weekends and on the following holidays:
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The
net asset value per share is determined as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 3% of the
outstanding shares of the fund without the consent of a majority of the Board
of Directors.
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Funds Send a letter of instruction specifying the name of the
Service Company (at the appropriate fund, the number of shares or dollar amount to be sold,
address indicated under "Principal your name and account number. You should also enclose
Underwriter and Transfer any share certificates you wish to redeem. For
Agent" in the Prospectus) redemptions over $50,000 and for certain redemptions of
$50,000 or less (see below), your signature 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. You should
verify with the institution that it is an eligible
guarantor prior to signing. Additional documentation
may be required for redemption of shares held in
corporate, partnership or fiduciary accounts.
Notarization by a Notary Public is not an acceptable
signature guarantee.
By contacting your investment If you redeem shares through your investment dealer,
dealer you may be charged for this service. SHARES HELD FOR
YOU IN YOUR INVESTMENT DEALER'S STREET NAME MUST BE
REDEEMED THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is
check sent to you by using registered in the name of an individual(s), a UGMA/UTMA
American FundsLine(R) or American custodian, or a non-retirement plan trust. These
FundsLine OnLine(sm) by redemptions may not exceed $50,000 per shareholder per
telephoning, faxing, or day, and the check must be made payable to the
telegraphing American Funds Service shareholder(s) of record and be sent to the address of
Company (subject to the conditions record provided the address has been used with the
noted in this section and in account for at least 10 days. See "Principal
"Telephone and Computer Purchases, Underwriter and Transfer Agent" in the Prospectus and
and Exchanges" in the prospectus) "Exchange Privilege" below for the appropriate
telephone or fax number.
In the case of the money Upon request (use the account application for the money
market funds, you may have market funds) you may establish telephone redemption
redemptions wired to your privileges (which will enable you to have a redemption
bank by telephoning American sent to your bank account) and/or check writing
Funds Service Company ($1,000 privileges. If you request check writing privileges,
or more) or by writing a you will be provided with checks that you may use
check ($250 or more) to draw against your account. These checks may
be made payable to anyone you designate and must
be signed by the authorized number of registered
shareholders exactly as indicated on your checking
account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Code including a "401(k)" plan with 100
or more eligible employees. The charge is 1% of the lesser of the value of the
shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the total cost of such shares. Shares held for the longest
period are assumed to be redeemed first for purposes of calculating this
charge. The charge is waived for exchanges (except if shares acquired by
exchange were then redeemed within 12 months of the initial purchase); for
distributions from qualified retirement plans and other employee benefit plans;
for redemptions resulting from participant-directed switches among investment
options within a participant-directed employer-sponsored retirement plan; for
distributions from 403(b) plans or IRAs due to death, disability or attainment
of age 591/2; for tax-free returns of excess contributions to IRAs; for
redemptions through certain automatic withdrawals not exceeding 10% of the
amount that would otherwise be subject to the charge; and for redemptions in
connection with loans made by qualified retirement plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables you to make
regular monthly or quarterly investments in shares through automatic charges to
your bank accounts. With shareholder authorization and bank approval, the
Transfer Agent will automatically charge the bank account for the amount
specified ($50 minimum), which will be automatically invested in shares at the
offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If your bank account cannot be charged due
to insufficient funds, a stop-payment order or closing of your account, the
plan may be terminated and the related investment reversed. You may change the
amount of the investment or discontinue the plan at any time by writing the
Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund will have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(R) and American FundsLine OnLine(sm) (see "American FundsLine(R) and
American FundsLine OnLine(sm)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
Prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, computer, fax or telegraph. Exchange redemptions and purchases are
processed simultaneously at the share prices next determined after the exchange
order is received. (See "Purchase of Shares--Price of Shares.") THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into your
account from which there are automatic withdrawals. Withdrawals of amounts
exceeding reinvested dividends and distributions and increases in share value
would reduce the aggregate value of your account. The Transfer Agent arranges
for the redemption by the fund of sufficient shares, deposited by you with the
Transfer Agent, to provide the withdrawal payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) - You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder per day), or exchange
shares around the clock with American FundsLine(R) and American FundsLine
OnLine(sm). To use this service, call 800/325-3590 from a TouchTone(tm)
telephone or access the American Funds Web site on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(R)
and American FundsLine OnLine(sm) are subject to the conditions noted above and
in "Shareholder Account Services and Privileges --Telephone and Computer
Purchases, Redemptions and Exchanges" below. You will need your fund number
(see the list of funds in The American Funds Group under "Purchase of
Shares--Investment Minimums and Fund Numbers"), personal identification number
(the last four digits of your Social Security number or other tax
identification number associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone, computer (including American FundsLine(R) and American FundsLine
OnLine(sm)), fax or telegraph redemption and/or exchange options, you agree to
hold the fund, American Funds Service Company, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liabilities (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company does not employ reasonable procedures to confirm
that the instructions received from any person with appropriate account
information are genuine, the fund may be liable for losses due to unauthorized
or fraudulent instructions. In the event that shareholders are unable to reach
the fund by telephone because of technical difficulties, market conditions, or
a natural disaster, redemption and exchange requests may be made in writing
only.
REDEMPTION OF SHARES - The fund's Articles of Incorporation permit the fund to
direct the Transfer Agent to redeem your shares if the value of the shares in
your account is less than the minimum initial investment amount applicable to
that account as set forth in the fund's current registration statement under
the 1940 Act, and subject to such further terms and conditions as the Board of
Directors of the fund may from time to time adopt.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through its
correspondent clearing agent) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not consider that it has
an obligation to obtain the lowest available commission rate to the exclusion
of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund does not intend to pay a mark-up
in exchange for research in connection with principal transactions.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal years ended February 28, 1998,
February 28, 1997, and February 29, 1996 , amounted to $1,744,000, $1,648,000,
and $1,963,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gains distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $2,127,000 for the fiscal year ended February 28, 1998.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, has served as the fund's independent auditors
since its inception, providing audit services, preparation of tax returns and
review of certain documents to be filed with the Securities and Exchange
Commission. The financial statements included in this Statement of Additional
Information have been so included in reliance on the independent auditors'
report given on the authority of said firm as experts in accounting and
auditing. The selection of the fund's independent accountant is reviewed and
determined annually by the Board of Directors.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on the last day of
February. Shareholders are provided at least semi-annually with reports
showing the investment portfolio, financial statements and other information.
The fund's financial statements are audited annually by the fund's independent
accountants, Deloitte & Touche LLP. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
shareholder reports. To receive additional copies of a report shareholders
should contact the Transfer Agent.
YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
PERSONAL INVESTING POLICY - The Investment Adviser and its affiliated companies
have adopted a personal investing policy consistent with Investment Company
Institute guidelines. This policy includes: a ban on acquisitions of
securities pursuant to an initial public offering; restrictions on acquisitions
of private placement securities; pre-clearance and reporting requirements;
review of duplicate confirmation statements; annual recertification of
compliance with codes of ethics; blackout periods on personal investing for
certain investment personnel; ban on short-term trading profits for investment
personnel; limitations on service as a director of publicly traded companies;
and disclosure of personal securities transactions.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors, as
though the fund were a common-law trust. Accordingly, the directors of the
fund will promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
The financial statements including the investment portfolio and the report of
Independent Auditors contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Net asset value and redemption price per share
<S> <C>
(Net assets divided by shares outstanding) $16.93
Maximum offering price per share $17.96
(100/94.25 of net asset value per share, which
takes into account the fund's current maximum
sales charge)
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is 0.40% based on a 30-day (or one month) period ended
February 28, 1998, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's one year total return and average annual total returns for the five-
and ten-year periods ended February 28, 1998 were 29.10%, 16.51% and 14.86%,
respectively. The average total return ("T") is computed by equating the value
at the end of the period ("ERV") with a hypothetical initial investment of
$1,000 ("P") over a period of years ("n") according to the following formula as
required by the Securities and Exchange Commission: P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in accordance
with the formulas stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. The
fund will calculate total return for one-, five- and ten-year periods. In
addition, the fund may provide lifetime average total return figures.
The fund may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
Total return for the unmanaged indices will be calculated assuming reinvestment
of dividends and interest, but will not reflect any deductions for advisory
fees, brokerage costs or administrative expenses. The fund may also, from time
to time, combine its results with those of other funds in The American Funds
Group for purposes of illustrating investment strategies involving multiple
funds.
The fund may refer to results and surveys compiled by organizations such as CDA
Investment Technologies, Ibbottson Associates, Lipper Analytical Services,
Morningstar, Inc. and Wiesenberger Investment Companies Services.
Additionally, the fund may, from time to time, refer to results published in
various periodicals, including Barrons, Forbes, Fortune, Institutional
Investor, Kiplinger's Personal Finance Magazine, Money, U.S. News and World
Report and The Wall Street Journal.
The fund may from time to time illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
The fund may also, from time to time, refer to statistics compiled by the U.S.
Department of Commerce.
The investment results set forth below were calculated as described in the
fund's prospectus. The fund's results will vary from time to time depending
upon market conditions, the composition of the fund's portfolio and operating
expenses of the fund, so that any investment results reported by the fund
should not be considered representative of what an investment in the fund may
earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objective and policies.
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management Company
manages nine growth and income funds that are at least 10 years old. In the
10-year periods since January 1, 1968 (133 in all), those funds have had better
total returns than their comparable Lipper indexes in 124 of the 133 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
IF YOU ARE CONSIDERING AMCAP FOR AN INDIVIDUAL RETIREMENT ACCOUNT . . .
<TABLE>
<CAPTION>
Here's how much you would have if you had invested $2,000
on March 1 of each year in AMCAP over the past 5, 10, 15
and 20 years:
<S> <C> <C> <C>
5 Years 10 Years 15 years 20 Years
(3/1/93 - 2/28/98) (3/1/88 - 2/28/98) (3/1/83 - 2/28/98) (3/1/78 - 2/28/98)
$17,349 $49,050 $108,394 $272,289
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had invested Periods ...and taken all
$10,000 in AMCAP 3/1 - 2/28 or 29 distributions in shares,
this many years ago... your investment would
| have been worth this
Number of Years much at Feb. 28, 1998
|
Value
<S> <C> <C>
1 1996-1998 $12,910
2 1995-1998 14,424
3 1994-1998 18,649
4 1993-1998 19,288
5 1992-1998 21,473
6 1991-1998 22,737
7 1990-1998 27,374
8 1989-1998 31,981
9 1988-1998 36,444
10 1987-1998 39,969
11 1986-1998 38,691
12 1985-1998 50,457
13 1984-1998 62,041
14 1983-1998 72,037
15 1982-1998 72,888
16 1981-1998 104,975
17 1980-1998 110,427
18 1979-1998 133,524
19 1978-1998 196,821
20 1977-1998 269,402
21 1976-1998 315,772
22 1975-1998 322,278
23 1974-1998 452,036
24 1973-1998 405,215
25 1972-1998 320,390
26 1971-1998 300,376
27 1970-1998 354,027
28 1969-1998 378,358
29 1968-1998 366,754
30 1967-1998 444,844
</TABLE>
AMCAP VS. VARIOUS UNMANAGED INDICES
<TABLE>
TOTAL RETURN CAPITAL APPRECIATION
Period AMCAP DJIA/1/ S&P 500/2/ Average AMCAP NYSE/4/ ASE/5/ NASDAQ
3/1 - 2/28 or 29 Savings OTC/6/
Institution/3/
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1988 - 1998 + 300% + 458% + 422% + 55% + 246% + 262% + 145 + 383%
1987 - 1997 + 182 + 324 + 276 + 57 + 140 + 156 + 85 + 208
1986 - 1996 + 230 + 346 + 286 + 62 + 177 + 162 + 118 + 206
1985 - 1995 + 214 + 343 + 274 + 69 + 161 + 152 + 99 + 179
1984 - 1994 + 252 + 382 + 322 + 81 + 186 + 187 + 124 + 214
1983 - 1993 + 220 + 348 + 331 + 92 + 156 + 186 + 118 + 156
1982 - 1992 + 335 + 505 + 440 + 105 + 242 + 249 + 213 + 253
1981 - 1991 + 280 + 364 + 322 + 116 + 184 + 167 + 104 + 129
1980 - 1990 + 294 + 387 + 347 + 121 + 194 + 182 + 133 + 169
1979 - 1989 + 409 + 356 + 369 + 122 + 282 + 201 + 301 + 226
1978 - 1988 + 535 + 366 + 389 + 124 + 381 + 211 + 370 + 262
1977 - 1987 + 669 + 304 + 360 + 125 + 487 + 199 + 484 + 349
1976 - 1986 + 502 + 201 + 270 + 123 + 361 + 145 + 398 + 298
1975 - 1985 + 587 + 198 + 261 + 119 + 422 + 144 + 489 + 289
1974 - 1984 + 430 + 130 + 165 + 113 + 304 + 75 + 332 + 168
1973 - 1983 + 315 + 98 + 113 + 106 + 219 + 42 + 235 + 118
1972 - 1982 + 170 + 47 + 66 + 95 + 111 + 10 + 99 + 43
1971 - 1981 + 202 + 79 + 108 + 85 + 147 + 41 + 204 + 95
1970 - 1980 + 167 + 76 + 92 + 79 + 120 + 30 + 158 N/A
1969 - 1979 + 76 + 38 + 45 + 75 + 45 - 2 + 8 N/A
1968 - 1978 + 56 + 33 + 41 + 72 + 30 - 3 N/A N/A
1967*- 1977 + 42 + 54 + 50 + 67 + 20 + 5 N/A N/A
</TABLE>
* From May 1, 1967, the date the fund commenced operation. N/A - Data for these
periods not available.
1. The Dow Jones Average of 30 Industrial stocks is comprised of stocks of 30
industrial companies such as General Motors and General Electric.
2. The Standard and Poor's 500 Stock Index is comprised of industrial,
transportation, public utilities and financial stocks and represents a large
portion of the value of issues traded on the New York Stock Exchange. Selected
issues traded on the American Stock Exchange are also included.
3. Based on figures supplied by the U.S. League of Savings Institutions and the
Federal Reserve Board which reflect all kinds of savings deposits, including
longer-term certificates. Savings deposits offer a guaranteed return of
principal and fixed rate of interest, but no opportunity for capital growth.
Maximum allowable rates were imposed by law during a portion of the period.
4. The New York Stock Exchange Composite Index is a capitalization weighted
index of all common stocks listed on the Exchange.
5. The American Stock Exchange Index is a capitalization weighted index of all
common stocks listed on the Exchange.
6. The National Association of Securities Dealers Automated Quotation Composite
Index of Over-the-Counter Stocks represents all domestic over-the-counter
stocks except those traded on exchanges and those having only one market maker,
covers some 3,500 stocks and is market value weighted.
Illustration of a $10,000 investment in AMCAP with
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the lifetime of the Fund May 1, 1967 through February 28, 1998)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Fiscal Annual Dividends Total From From From Total
Year End Dividends (cumulative) Investment Initial Capital Dividends Value
Feb. 28 or Cost Investment Gains Reinvested
29 Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1968* -- -- $10,000 $10,056 -- -- $10,056
1969 $ 75 $ 75 10,075 12,128 -- $84 12,212
1970 190 265 10,265 11,149 $ 430 256 11,835
1971 200 465 10,465 11,695 451 497 12,643
1972 244 709 10,709 13,540 522 840 14,902
1973 228 937 10,937 12,109 913 956 13,978
1974 196 1,133 11,133 8,493 1,697 847 11,037
1975 294 1,427 11,427 7,401 1,479 1,023 9,903
1976 328 1,755 11,755 10,075 2,014 1,794 13,883
1977 208 1,963 11,963 10,132 2,025 2,016 14,173
1978 263 2,226 12,226 11,657 2,330 2,625 16,612
1979 335 2,561 12,561 15,650 3,128 3,960 22,738
1980 438 2,999 12,999 22,674 4,531 6,336 33,541
1981 724 3,723 13,723 25,066 7,476 8,006 40,548
1982 2,594 6,317 16,317 22,185 10,812 9,646 42,643
1983 1,231 7,548 17,548 30,546 15,837 15,073 61,456
1984 1,591 9,139 19,139 30,094 15,602 16,432 62,128
1985 1,944 11,083 21,083 33,371 18,301 20,493 72,165
1986 1,548 12,631 22,631 38,983 23,855 25,900 88,738
1987 1,629 14,260 24,260 44,143 40,258 31,263 115,664
1988 3,017 17,277 27,277 39,058 42,406 30,573 112,037
1989 3,167 20,444 30,444 40,038 48,069 34,720 122,827
1990 3,160 23,604 33,604 40,942 60,465 38,620 140,027
1991 3,293 26,897 36,897 43,578 74,977 44,937 163,492
1992 2,156 29,053 39,053 49,831 93,202 53,823 196,856
1993 2,252 31,305 41,305 50,923 100,277 57,357 208,557
1994 1,918 33,223 43,223 48,889 126,209 57,039 232,137
1995 2,399 35,622 45,622 46,252 137,347 56,448 240,047
1996 3,363 38,985 48,985 54,237 186,287 69,821 310,345
1997 2,643 41,628 51,628 54,991 218,307 73,485 346,783
1998 2,465 44,093 54,093 63,766 323,194 88,043 475,003
</TABLE>
The dollar amount of capital gain distributions during the period was $226,391
* From May 1, 1967, the date the fund commenced operations.
<TABLE>
AMCAP Fund Investment Portfolio Percent
February 28, 1998 of Net
Assets
- --------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Largest Industry Holdings
Broadcasting & Publishing 12.06%
Business & Public Services 10.39
Health & Personal Care 9.40
Financial Services 8.83
Data Processing & Reproduction 7.94
Other Industries 41.02
Cash & Equivalents 10.36
- --------------------------------------------------------- ------- ------- -------
Largest Individual Equity Holdings
Time Warner 4.44%
Walt Disney 3.32
Fannie Mae 3.08
Medtronic 2.78
Philip Morris 2.58
Norwest 2.34
Comcast 2.27
SLM Holding 2.07
Viacom 1.93
Cendant 1.82
- --------------------------------------------------------- ------- ------- -------
Number Market Percent
of Value of Net
Equity Securities (common stocks) Shares (000) Assets
- --------------------------------------------------------- ------- ------- -------
Broadcasting & Publishing - 12.06%
Time Warner Inc. 3216000 $217,080 4.44%
Comcast Corp., Class A special stock 2925000 102375
Comcast Corp., Class A 260000 9051 2.27
Viacom Inc., Class B(1) 1962200 94185 1.93
Tele-Communications, Inc., Series A,
Liberty Media Group(1) 3131250 85914 1.76
Harte-Hanks Communications, Inc. 1070000 46478 .95
Tele-Communications, Inc., Series A,
TCI Group(1) 1195935 34757 .71
Business & Public Services - 10.39%
Cendant Corp. (formerly CUC International Inc.)(1) 2370000 88875 1.82
Avery Dennison Corp. 1200000 60600 1.24
Concord EFS, Inc.(1) 1764600 54923 1.12
Electronic Data Systems Corp. 1162800 50945 1.04
United HealthCare Corp. 790000 47943 .98
American Management Systems, Inc.(1) 1450000 37881 .77
Interpublic Group of Companies, Inc. 600000 32700 .67
First Data Corp. 800000 27200 .56
IKON Office Solutions, Inc. 800000 26150 .53
Manpower Inc. 470200 19837 .40
America Online, Inc.(1) 160000 19380 .40
Ceridian Corp.(1) 300000 13969 .29
Columbia/HCA Healthcare Corp. 500000 13563 .28
TeleTech Holdings, Inc.(1) 800000 7650 .16
National TechTeam, Inc.(1) 628000 6476 .13
Health & Personal Care - 9.40%
Medtronic, Inc. 2560000 136,000 2.78
Gillette Co. 685200 73916 1.51
Pfizer Inc 800000 70800 1.45
Guidant Corp. 550000 40116 .82
Avon Products, Inc. 480000 33810 .69
Boston Scientific Corp.(1) 467400 27927 .57
Merck & Co., Inc. 200000 25512 .52
Warner-Lambert Co. 150000 21937 .45
Schering-Plough Corp. 200000 15213 .31
Thermedics Inc.(1) 900000 14738 .30
Financial Services - 8.83%
Fannie Mae 2360000 150598 3.08
SLM Holding Corp. 2450000 101216 2.07
Capital One Financial Corp. 1245000 83648 1.71
Freddie Mac 1374400 64940 1.33
First Empire State Corp. 37000 17464 .36
Associates First Capital Corp., Class A 175000 14000 .28
Data Processing & Reproduction - 7.94%
Oracle Corp.(1) 3337500 82186 1.68
Lexmark International Group, Inc., Class A(1) 1400000 59850 1.22
Solectron Corp.(1) 860400 41622 .85
Intuit Inc.(1) 829700 38581 .79
Silicon Graphics, Inc.(1) 1850000 27866 .57
PeopleSoft, Inc. (1) 600000 26812 .55
3Com Corp.(1) 700000 25025 .51
International Business Machines Corp. 200000 20888 .43
Cisco Systems, Inc.(1) 300000 19,762 .41
Sequent Computer Systems, Inc.(1) 560000 11865 .24
Ascend Communications, Inc.(1) 275000 10295 .21
Netscape Communications Corp.(1) 493500 9562 .20
Computer Associates International, Inc. 200000 9425 .19
Sun Microsystems, Inc.(1) 94800 4515 .09
Merchandising - 6.09%
Viking Office Products, Inc.(1) 2800000 61600 1.26
Cardinal Health, Inc., Class A 628693 51474 1.05
Consolidated Stores Corp.(1) 1245312 51213 1.05
AutoZone, Inc.(1) 1500000 45375 .93
Wal-Mart Stores, Inc. 650000 30103 .61
Albertson's, Inc. 500000 23406 .48
Intimate Brands, Inc., Class A 700000 18988 .39
Circuit City Stores, Inc. 400000 15450 .32
Leisure & Tourism - 5.39%
Walt Disney Co. 1450000 162309 3.32
Brinker International, Inc.(1) 3250000 67844 1.39
McDonald's Corp. 330000 18067 .37
Marriott International, Inc. 200000 15150 .31
Banking - 5.33%
Norwest Corp. 2800000 114625 2.34
Golden West Financial Corp. 700000 62475 1.28
Marshall & Ilsley Corp. 590100 34595 .71
Northern Trust Corp. 450000 34228 .70
SunTrust Banks, Inc. 200000 14750 .30
Electronic Components - 4.97%
Intel Corp. 650000 58297 1.19
Bay Networks, Inc.(1) 1200000 40650 .83
Texas Instruments Inc. 700000 40512 .83
Analog Devices, Inc.(1) 825000 26606 .54
ADC Telecommunications, Inc.(1) 1020000 26329 .54
Adaptec, Inc.(1) 806300 21317 .44
Littelfuse, Inc.(1) 590000 16667 .34
Sanmina Corp.(1) 100000 7969 .16
Seagate Technology(1) 200000 4863 .10
Beverages & Tobacco - 3.79%
Philip Morris Companies Inc. 2905000 126186 2.58
PepsiCo, Inc. 1200000 43875 .90
Robert Mondavi Corp., Class A(1) 366700 15218 .31
Telecommunications - 2.26%
AirTouch Communications(1) 1250000 56172 1.15
LCI International, Inc.(1) 1200000 39600 .81
Tele-Communications, Inc., Series A,
TCI Ventures Group(1) 945876 14602 .30
Recreation & Other Consumer Products - 1.73%
Harley-Davidson, Inc. 1125000 32625 .67
Electronic Arts(1) 668900 29515 .60
Broderbund Software, Inc.(1) 900000 22275 .46
Insurance - 1.42%
American International Group, Inc. 506250 60845 1.24
Aetna Inc. 100000 8737 .18
Chemicals - 1.38%
Airgas, Inc.(1) 1500000 26906 .55
Cambrex Corp. 530000 26235 .54
Praxair, Inc. 300000 14344 .29
Industrial Components - 0.84%
Tower Automotive, Inc.(1) 600000 27262 .56
Lear Corp.(1) 265000 14012 .28
Machinery & Engineering - 0.84%
Thermo Electron Corp.(1) 1000000 41000 .84
Transportation: Rail - 0.68%
Wisconsin Central Transportation Corp.(1) 1225000 33228 .68
Aerospace & Military Technology - 0.45%
General Motors Corp., Class H 300000 12431 .25
Raytheon Co., Class A 168720 9786 .20
Transportation: Airlines - 0.31%
Southwest Airlines Co. 525375 15072 .31
Textiles & Apparel - 0.29%
Tommy Hilfiger Corp.(1) 268900 14403 .29
Appliances & Household Durables - 0.17%
Corning Inc. 200000 8125 .17
Energy Equipment - 0.16%
Camco International, Inc. 132400 7745 .16
Miscellaneous - 4.92%
Other equity securities in initial period of
acquisition 240575 4.92
------- -------
TOTAL EQUITY SECURITIES (cost: $2,437,661,000) 4383657 89.64
------- -------
Principal
Amount
SHORT-TERM SECURITIES (000)
- --------------------------------------------------------- ------- ------- -------
Corporate Short-Term Notes - 8.41%
E.I. du Pont de Nemours and Co. 5.41%-5.45% due 3/18-4/6/ $65,200 $64,924 1.33%
AT&T Corp. 5.42%-5.70% due 3/2-3/18/98 62900 62806 1.28
H.J. Heinz Co. 5.44%-5.46% due 3/25-4/1/98 56,300 56050 1.15
Procter & Gamble Co. 5.45%-5.50% due 3/3-3/27/98 40800 40716 .83
General Electric Capital Corp. 5.45%-5.52% due 3/10-3/20/ 40500 40412 .83
Xerox Corp. 5.43%-5.46% due 3/19-4/17/98 40000 39804 .81
A.I. Credit Corp. 5.44%-5.60% due 3/4-3/17/98 37,400 37,349 .76
Ford Motor Credit Co. 5.46%-5.47% due 3/12-4/21/98 37300 37135 .76
Emerson Electric Co. 5.44% due 3/25-4/2/98 32250 32117 .66
Federal Agency Discount Notes - 2.23%
Fannie Mae 5.35%-5.38% due 4/9-5/26/98 50700 50122 1.03
Freddie Mac 5.37%-5.58% due 3/6-4/24/98 34900 34837 .71
Federal Home Loan Banks 5.34%-5.35% due 5/6-5/8/98 24400 24141 .49
------- -------
TOTAL SHORT-TERM SECURITIES (cost:
$520,449,000) 520413 10.64
------- -------
TOTAL INVESTMENT SECURITIES (cost:
$2,958,110,000) 4904070 100.28
Excess of payables over cash and receivables 13536 .28
------- -------
NET ASSETS $4,890,534 100.00%
======= =======
(1) Non-income-producing securities.
See Notes to Financial Statements
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 Independent Auditors' Report.
Equity securities appearing in the portfolio
since August 31, 1997
- ---------------------------------------------------------
Adaptec
Aetna
Boston Scientific
Columbia/HCA Healthcare
Consolidated Stores
Corning
First Empire State
Tommy Hilfiger
Littelfuse
Marshall & Ilsley
McDonald's
National TechTeam
Praxair
Raytheon
Sanmina
Schering-Plough
Tele-Communications, TCI Ventures
TeleTech Holdings
Tower Automotive
Warner-Lambert
Equity securities eliminated from the portfolio
since August 31, 1997
- ---------------------------------------------------------
BDM International
Danaher
Jacobs Engineering Group
PacifiCare Health Systems
RPM
Sybase
Telephone and Data Systems
Waste Management
</TABLE>
<TABLE>
AMCAP FUND Financial Statements
- ------------------------------------------- ---------------- ----------------
Statement of Assets and Liabilities
at February 28, 1998 (dollars in thousands)
- ------------------------------------------- ---------------- ----------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $2,958,110) $4,904,070
Cash 98
Receivables for--
Sales of investments $7,794
Sales of fund's shares 7,649
Dividends and accrued interest 2,443 17,886
------------------ -----------------
4,922,054
Liabilities:
Payables for--
Purchases of investments 24,228
Repurchases of fund's shares 3,134
Management services 1,389
Accrued expenses 2,769 31,520
------------------ -----------------
Net Assets at February 28, 1998--
Equivalent to $16.93 per share on
288,917,232 shares of $1 par value
capital stock outstanding (authorized
capital stock--300,000,000 shares) $4,890,534
=================
Statement of Operations for the year
ended February 28, 1998
------------------ -----------------
Investment Income:
Income:
Dividends $ 25,036
Interest 29,697 $ 54,733
------------------
Expenses:
Management services fee 16,324
Distribution expenses 8,842
Transfer agent fee 2,127
Reports to shareholders 166
Registration statement and prospectus 108
Postage, stationery and supplies 558
Directors' fees 110
Auditing and legal fees 48
Custodian fee 68
Taxes other than federal income tax 56
Other expenses 108 28,515
------------------ -----------------
Net investment income 26,218
-----------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 509,966
Net increase in unrealized
appreciation on investments:
Beginning of year 1,136,951
End of year 1,945,960
------------------
Net unrealized appreciation
on investments 809,009
-----------------
Net realized gain and unrealized
appreciation on investments 1,318,975
-----------------
Net Increase in Net Assets Resulting
From Operations $1,345,193
=================
See Notes to Financial Statements
Statement of Changes in Net
Assets
- ------------------------------------------- ------------------ -----------------
Year ended February 28
1998 1997
Operations: ------------------ -----------------
Net investment income $ 26,218 $ 29,859
Net realized gain on investments 509,966 476,706
Net unrealized appreciation (depreciation)
on investments 809,009 (93,742)
------------------ -----------------
Net increase in net assets
resulting from operations 1,345,193 412,823
------------------ -----------------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (26,109) (30,602)
Distributions from net realized
gain on investments (646,989) (334,007)
------------------ -----------------
Total dividends and distributions (673,098) (364,609)
------------------ -----------------
Capital Share Transactions:
Proceeds from shares sold:
23,535,997 and 31,306,396
shares, respectively 366,597 439,313
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
42,604,643 and 23,920,709 shares,
respectively 630,147 342,841
Cost of shares repurchased:
37,958,301 and 50,858,558
shares, respectively (585,123) (716,380)
------------------ -----------------
Net increase in net assets
resulting from capital share transaction 411,621 65,774
------------------ -----------------
Total Increase in Net Assets 1,083,716 113,988
Net Assets:
Beginning of year 3,806,818 3,692,830
------------------ -----------------
End of year (including undistributed
net investment income of $5,138 and
$5,029, respectively) $4,890,534 $3,806,818
================== =================
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. AMCAP 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 by investing in growing, profitable
companies. The following paragraphs summarize the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:
Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the investment adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Securities with original maturities of one year
or less having 60 days or less to maturity are amortized to maturity based on
their cost if acquired within 60 days of maturity or, if already held on the
60th day, based on the value determined on the 61st day. Securities and assets
for which representative market quotations are not readily available are valued
at fair value as determined in good faith by a committee appointed by the Board
of Directors.
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
on securities purchased are amortized. Dividends and distributions paid to
shareholders are recorded on the ex-dividend date.
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 February 28, 1998, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $1,945,960,000, of which
$2,009,957,000 related to appreciated securities and $63,997,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the year ended February 28, 1998. The cost
of portfolio securities for book and federal income tax purposes was
$2,958,110,000 at February 28, 1998.
3. The fee of $16,324,000 for management services was incurred pursuant to an
agreement with Capital Research and Management Company(CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.485% of the first $1 billion of average net assets;
0.385% of such assets in excess of $1 billion but not exceeding $2 billion;
0.355% of such assets in excess of $2 billion but not exceeding $3 billion;
0.335% of such assets in excess of $3 billion but not exceeding $5 billion;
0.32% of such assets in excess of $5 billion but not exceeding $8 billion; and
0.31% of such assets in excess of $8 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 February 28, 1998,
distribution expenses under the Plan were $8,842,000. As of February 28, 1998,
accrued and unpaid distribution expenses were $2,363,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $2,127,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $671,000 (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 who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of February 28,
1998, aggregate amounts deferred and earnings thereon were $423,000.
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 February 28, 1998, accumulated undistributed net realized gain on
investments was $127,380,000 and additional paid-in capital was $2,523,139,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,156,972,000 and $1,283,887,000, respectively,
during the year ended February 28, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $68,000 includes $19,000 that was paid by these credits
rather than in cash.
<TABLE>
AMCAP FUND
Per-Share Data and Ratios
- -------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Year ended February 28
------- ------- ------- ------- -------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
Net Asset Value, Beginning
of Year $14.60 $14.40 $12.28 $12.98 $13.52
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .10 .12 .16 .14 .12
Net realized and unrealized
gain on investments 4.80 1.51 3.32 .24 1.28
------- ------- ------- ------- -------
Total income from investment
operations 4.90 1.63 3.48 0.38 1.40
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.10) (.12) (.17) (.13) (.12)
Distributions from net realized
gains (2.47) (1.31) (1.19) (.95) (1.82)
------- ------- ------- ------- -------
Total distributions (2.57) (1.43) (1.36) (1.08) (1.94)
------- ------- ------- ------- -------
Net Asset Value, End of Year $16.93 $14.60 $14.40 $12.28 $12.98
======= ======= ======= ======= =======
Total Return /1/ 36.97% 11.74% 29.29% 3.41% 11.31%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $4,891 $3,807 $3,693 $2,970 $3,063
Ratio of expenses to average `
net assets .68% .69% .71% .71% .72%
Ratio of net income to
average net assets .62% .81% 1.16% 1.16% .89%
Average commissions paid
per share /2/ 4.66 c 5.05 c 5.95 c 5.95 c 6.54 c
Portfolio turnover rate 31.42% 24.14% 35.16% 17.92% 22.18%
/1/Excludes maximum sales charge
of 5.75%.
/2/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.
</TABLE>
Independent Auditors' Report
To the Board of Directors and Shareholders of AMCAP Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of AMCAP
Fund, Inc.(the "fund"), including the investment portfolio as of February 28,
1998, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and per-share data and ratios for each of the five years in the period
then ended. These financial statements and per-share data and ratios are the
responsibility of the fund's management. Our responsibility is to express an
opinion on these financial statements and per-share data and ratios based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures include confirmation of securities owned as of
February 28, 1998, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of AMCAP Fund, Inc. as of February 28, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the per-share data and ratios for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 20, 1998
Results of Meeting of Shareholders Held March 9, 1998
Shares Outstanding on January 6, 1998 289,392,503
Shares Voting on March 9, 1998 174,432,735 (60.3%)
Election of Directors
<TABLE>
<CAPTION>
Percent of Percent of
Votes Shares Votes Shares
Director For Voting For Withheld Withheld
<S> <C> <C> <C> <C>
H. Frederick Christie 168,051,821 96% 6,380,914 4%
Mary Anne Dolan 168,002,905 96 6,429,830 4
Martin Fenton, Jr. 168,050,189 96 6,382,546 4
Herbert Hoover III 167,802,474 96 6,630,261 4
Claudia P. Huntington 168,046,827 96 6,385,908 4
Mary Myers Kauppila 168,051,903 96 6,380,832 4
Kirk P. Pendleton 168,051,343 96 6,381,392 4
James W. Ratzlaff 168,065,144 96 6,367,591 4
Olin C. Robison 168,048,813 96 6,383,922 4
R. Michael Shanahan 168,055,602 96 6,377,133 4
</TABLE>
Ratification of Auditors
<TABLE>
<CAPTION>
Percent of Percent of Percent of
Votes Shares Votes Shares Shares
For Voting For Against Voting Against Abstentions Abstaining
<S> <C> <C> <C> <C> <C> <C>
Deloitte & 167,378,141 96.0% 1,324,008 0.7% 5,730,586 3.3%
Touche llp
</TABLE>
AMCAP's board of directors welcomes H. Frederick Christie, Mary Anne Dolan,
Claudia P. Huntington, Mary Myers Kauppila and Olin C. Robison as new directors
of the fund. They were elected at the March shareholders meeting.
We also wish to thank Guilford C. Babcock, Charles H. Black, Gail L. Neale,
Henry E. Riggs and Walter P. Stern for their past service to the fund. They did
not stand for reelection as directors of AMCAP, but they will continue to serve
as directors for other American Funds as per the realignment of board clusters
described in the proxy material.
Charles Wolf, Jr., a director since 1991, has recently retired and did not
stand for reelection. We thank him for his many contributions to the fund.
1998 Tax Information (Unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
Dividends and
Distributions per Share
<S> <C> <C> <C> <C>
From From Net From Net
Net Realized Realized
Investment Short-Term Long-Term
To Shareholders of Record Payment Date Income Gains Gains*
May 23, 1997 May 27, 1997 0.05 0.24 0.79
November 28, 1997 December 1, 1997 0.05 ---- 1.44
* Includes $1.212 long-term
capital gains taxed at a
maximum rate of 28%.
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 31% of the
dividends paid by the fund from net investment income represent 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.
SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WERE MAILED IN JANUARY
1998 TO DETERMINE THE AMOUNTS TO BE INCLUDED ON THEIR 1997 TAX RETURNS.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
