<PAGE>
AMCAP FUND, INC.
Part B
Statement of Additional Information
MAY 1, 1999
as amended August 1, 1999
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, 1999. 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
Item Page No.
Certain Investment Limitations and Guidelines 2
Description of Certain Securities 2
Fundamental Policies and Investment Restrictions 5
Fund Organization 6
Fund Directors and Officers 7
Management 11
Dividends, Distributions and Federal Taxes 13
Purchase of Shares 17
Selling Shares 23
Shareholder Account Services and Privileges 25
Execution of Portfolio Transactions 27
General Information. 28
Investment Results and Related Statistics 29
Financial Statements Attached
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
GENERAL GUIDELINES
- - The fund will invest primarily in common stocks of companies domiciled in
the U.S. In determining whether a company is domiciled in the U.S., the fund's
investment adviser takes into account such factors as where the company is
legally organized and/or maintains principal corporate offices and/or conducts
its principal operations. The fund will generally only invest in U.S.
securities that are traded in U.S. markets and that are substantially subject
to the laws of the U.S.
- - The fund may also invest in securities convertible into common stocks,
straight (nonconvertible) debt securities, cash or cash equivalents, U.S.
Government securities or nonconvertible preferred stocks.
DEBT SECURITIES
- - The fund may invest in straight debt securities rated A or better by
Standard & Poor's Corporation or Moody's Investors Service, Inc. (or unrated
but considered to be of equivalent quality).
DESCRIPTION OF CERTAIN SECURITIES
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.
The descriptions below are intended to supplement the material in the
Prospectus under "Investment Objective, Strategies and Risks."
EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. The prices of equity securities fluctuate based on changes in the
financial condition of their issuers and on market and economic conditions. The
fund's results will be related to the overall market for these securities. The
growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss.
DEBT SECURITIES -- Bonds and other debt securities are used by issuers to
borrow money. Issuers pay investors interest and generally must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon bonds,
do not pay current interest, but are purchased at a discount from their face
value. The prices of debt securities fluctuate depending on such factors as
interest rates, credit quality and maturity. In general their prices decline
when interest rates rise and vice versa.
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.
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."
U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. Certain securities issued by U.S.
Government instrumentalities and certain federal agencies are neither direct
obligations of, nor guaranteed by, the Treasury. However, they generally
involve federal sponsorship in one way or another: some are backed by specific
types of collateral; some are supported by the issuer's right to borrow from
the Treasury; some are supported by the discretionary authority of the Treasury
to purchase certain obligations of the issuer; and others are supported only by
the credit of the issuing government agency or instrumentality.
INVESTING IN SMALLER CAPITALIZATION STOCKS -- The fund may invest from time to
time in the stocks of smaller companies (typically companies with market
capitalizations of less than $1.2 billion at the time of purchase). The
Investment Adviser believes that the issuers of smaller capitalization stocks
often provide attractive investment opportunities. However, investing in
smaller capitalization stocks can involve greater risk than is customarily
associated with investing in stocks of larger, more established companies. For
example, smaller companies often have limited product lines, markets, or
financial resources, may be dependent for management on one or a few key
persons, and can be more susceptible to losses. Also, their securities may be
thinly traded (and therefore have to be sold at a discount from current prices
or sold in small lots over an extended period of time), may be followed by
fewer investment research analysts, and may be subject to wider price swings
thus creating a greater chance of loss than securities or larger capitalization
companies.
CASH EQUIVALENTS -- The fund invests in various high-quality money market
instruments that mature, or may be redeemed or resold, generally in 13 months
or less (25 months in the case of U.S. government securities). These include:
(1) commercial paper (notes issued by corporations or governmental bodies); (2)
certificates of deposit and bankers' acceptances (time drafts on a commercial
bank where the bank accepts an irrevocable obligation to pay at maturity); (3)
savings association and bank obligations; (4) securities of the U.S.
Government, its agencies or instrumentalities; and (5) corporate bonds and
notes.
OTHER SECURITIES -- The fund may also invest in securities that have equity
and debt characteristics such as non-convertible preferred stocks and
convertible securities. These securities may at times resemble equity more
than debt and vice versa. Non-convertible preferred stocks are similar to debt
in that they have a stated dividend rate akin to the coupon of a bond or note
even though they are often classified as equity securities. The prices and
yields of non-convertible preferred stocks generally move with changes in
interest rates and the issuer's credit quality, similar to the factors
affecting debt securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
common stock or other securities at a stated exchange ratio. These securities
prior to conversion pay a fixed rate of interest or a dividend. Because
convertible securities have both debt and equity characteristics, their value
varies in response to 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.
FUNDAMENTAL POLICIES AND 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 ORGANIZATION
The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation in 1966 and reorganized as a Maryland corporation on
May 10, 1990.
All fund operations are supervised by the fund's Board of Directors. The Board
meets periodically and performs duties required by applicable state and federal
laws. Members of the board who are not employed by the Investment Adviser or
its affiliates are paid certain fees for services rendered to the fund as
described in "Fund Directors and Officers - Directors and Director
Compensation" below. They may elect to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund.FUND DIRECTORS AND
OFFICERS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, 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
DEFERRED DEFERRED ON WHICH
COMPENSATION/1/) COMPENSATION/1/) DIRECTOR
FROM THE FUND FROM ALL FUNDS SERVES
DURING FISCAL MANAGED BY /2/
YEAR ENDED CAPITAL RESEARCH
2/28/99 AND
MANAGEMENT
COMPANY OR ITS
AFFILIATES/2/
FOR THE YEAR
ENDED
2/28/99
<S> <C> <C> <C> <C> <C>
H. Frederick Director Private $14,100/3/ $193,800 19
Christie investor;
P.O. Box 144 former
Palos Verdes President and
Estates, CA Chief
90274 Executive
Age: 65 Officer, The
Mission Group
(non-utility
holding
company,
subsidiary of
Southern
California
Edison
Company)
Mary Anne Director Founder and $15,000 $37,000 2
Dolan President,
1033 Gayley M.A.D., Inc.
Avenue (a
Los Angeles, communications company)
CA 90024
Age: 51
Martin Director Chairman, $15,400/3/ $125,350 15
Fenton Senior
4660 La Resource
Jolla Group, Inc.
Village (management
Drive of senior
Suite 725 living
San Diego, centers)
CA 92121
Age: 63
Herbert Director Private $15,800 $69,550 13
Hoover III Investor
1520 Circle
Drive
San Marino,
CA 91108
Age: 71
+Claudia P. President Senior Vice none/4/ none/4/ 1
Huntington and President,
333 South Director Capital
Hope Street Research and
Los Angeles, Management
CA 90071 Company
Age: 47
Mary Myers Director Private $14,100/3/ $104,700 5
Kauppila Investor;
Energy former Owner
Investment and
Inc. President,
One Winthrop Energy
Square Investment,
Boston, MA Inc.
02110
Age: 44
Kirk P. Director Chairman/CEO, $15,000/3/ $110,400 5
Pendleton Cairnwood,
75 James Way Inc. (venture
Southampton, capital
PA 18966 investment)
Age: 59
+James W. Director Senior none/4/ none/4/ 7
Ratzlaff Partner, The
P.O. Box Capital Group
7650 Partners,
San L.P.
Francisco,
CA 94120
Age: 62
Olin C. Director President of $14,100/3/ $94,800 3
Robison the Salzburg
The Marble Seminar;
Works Professor and
P.O. Box 886 former
Middlebury, President
VT 05753 Emeritus,
Age: 62 Middlebury
College
+R. Michael Chairman of Chairman of none/4/ none/4/ 2
Shanahan the Board the Board and
333 South and Principal
Hope Street Principal Executive
Los Angeles, Executive Officer,
CA 90071 Officer Capital
Age: 60 Research and
Management
Company
</TABLE>
+ Directors who are considered "interested persons" of the fund as defined in
the 1940 Act, on the basis of their affiliation with the fund's Investment
Adviser, Capital Research and Management Company.
/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: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Fund of California, The
Tax-Exempt Fund of Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt
Money Fund of America, The U. S. Treasury Money Fund of America, U.S.
Government Securities Fund and Washington Mutual Investors Fund, Inc. Capital
Research and Management Company also manages American Variable Insurance Series
and Anchor Pathway Fund which serve as the underlying investment vehicle for
certain variable insurance contracts; and Endowments, Inc. whose shareholders
are limited to (i) any entity exempt from taxation under Section 501(c)(3) of
the Internal Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii)
any trust, the present or future beneficiary of which is a 501(c)(3)
organization; and (iii) any other entity formed for the primary purpose of
benefiting a 501(c)(3) organization. An affiliate of Capital Research and
Management Company, Capital International, Inc., manages Emerging Markets
Growth Fund, Inc.
/3/ Since the deferred compensation plan's adoption, the total amount of
deferred compensation accrued by the fund (plus earnings thereon) for the
fiscal year ended February 28, 1999 for participating Directors is as follows:
H. Frederick Christie ($17,017), Martin Fenton ($55,658), Mary Myers Kauppila
($16,476), Kirk P. Pendleton ($99,009) and Olin C. Robison ($17,108). 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.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) PRINCIPAL
WITH OCCUPATION(S)
REGISTRANT DURING PAST 5 YEARS
R. Michael Shanahan
(see above)
Claudia P.
Huntington
(see above)
Timothy D. Armour 38 Senior Vice Director, Capital
333 South Hope President Research and
Street Management Company;
Los Angeles, CA Chairman of the Board,
90071 Capital Research
Company
Paul G. Haaga, Jr. 50 Senior Vice Director and Executive
333 South Hope President Vice President,
Street Capital Research and
Los Angeles, CA Management Company
90071
Joanna F. Jonsson 35 Vice Vice President and
P.O. Box 7650 President Director,
San Francisco, CA Capital Research
94120 Company
Vincent P. Corti 42 Secretary Vice President - Fund
333 South Hope Business Management
Street Group, Capital
Los Angeles, CA Research and
90071 Management Company
Sheryl F. Johnson 30 Treasurer Vice President - Fund
5300 Robin Hood Business Management
Road Group, Capital
Norfolk, VA 23513 Research and
Management Company
Robert P. Simmer 38 Assistant Vice President - Fund
5300 Robin Hood Treasurer Business Management
Road Group, Capital
Norfolk, VA 23513 Research and
Management Company
<S> <C> <C> <C>
</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 Director or
officer who is a director or officer or employee of the Investment Adviser or
affiliated companies. Each unaffiliated Director is paid a fee of $10,000 per
annum, plus $1,000 for each Board of Directors meeting attended, plus $500 for
each meeting attended as a member of a committee of the Board of Directors. No
pension or retirement benefits are accrued as part of fund expenses. The
Directors may elect, on a voluntary basis, to defer all or a portion of their
fees through a deferred compensation plan in effect for the fund. As of
February 28, 1999, 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 professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the "Agreement") between the fund and the Investment Adviser
is dated July 1, 1993. The Agreement will continue in effect until March 31,
2000, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by (i) the Board of Directors of the fund, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the fund, and (ii) the vote of a majority of directors who are not parties to
the Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Agreement provides that the Investment Adviser has no liability
to the fund for its acts or omissions in the performance of its obligations to
the fund not involving willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations under the Agreement. The Agreement also
provides that either party has the right to terminate it, without penalty, upon
60 days' written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
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.
As compensation for its services, 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, 1999, 1998 and 1997, the Investment
Adviser's fees amounted to $19,703,000, $16,324,000 and $14,491,000,
respectively.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the "Plan"), pursuant to rule 12b-1 under the 1940 Act . The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares for the fiscal year ended
February 28, 1999 amounted to $1,596,000 after allowance of $7,571,000 to
dealers. During the fiscal years ended February 28, 1998 and 1997, the
Principal Underwriter retained $671,000 and $638,000, after an allowance of
$3,213,000 and $3,121,000, respectively.
As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has been approved by the full Board of
Directors and separately by a majority of the directors who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plan or the Principal Underwriting Agreement, and the Plan
has been approved by the vote of a majority of the outstanding voting
securities of the fund. The officers and directors who are "interested
persons" of the fund may be considered to have a direct or indirect financial
interest in the operation of the Plan due to present or past affiliations with
the Investment Adviser and related companies. Potential benefits of the Plan
to the fund include improved shareholder services, savings to the fund in
transfer agency costs, savings to the fund in advisory fees and other expenses,
benefits to the investment process from growth or stability of assets and
maintenance of a financially healthy management organization. The selection
and nomination of directors who are not "interested persons" of the fund are
committed to the discretion of the directors who are not "interested persons"
during the existence of the Plan. 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, any defined contribution plan qualified under Section 401(a) of
the Internal Revenue Code including a "401(k)" plan with 100 or more eligible
employees or a community foundation).
Commissions on sales of shares exceeding $1 million (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the fiscal year ended February 28, 1999 the fund paid or accrued $11,159,000
under the Plan.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries of affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income which includes any
excess of net realized short-term gains over net realized long-term capital
losses. The fund may follow the practice of distributing the entire excess of
net realized long-term capital gains over net realized short-term capital
losses. However, the fund may retain all or part of such gain for
reinvestment, after paying the related federal taxes for which shareholders may
then be able to claim a credit against their federal tax liability. If the
fund does not distribute the amount of capital gain and/or net investment
income required to be distributed by an excise tax provision of the Code, the
fund may be subject to that excise tax. In certain circumstances, the fund may
determine that it is in the interest of shareholders to distribute less than
the required amount. In this case, the fund will pay any income or excise
taxes due.
The fund intends to distribute twice a year its investment company taxable
income, including any net short-term capital gains in excess of net long-term
capital losses, and any net capital gains realized during each fiscal year.
Additional distributions may be made, if necessary.
Dividends will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other
American Funds, as provided in the prospectus.
TAXES -- The fund intends to elect to be treated as a regulated investment
company under Subchapter M of the Code. A regulated investment company
qualifying under Subchapter M of the Code is required to distribute to its
shareholders at least 90% of its investment company taxable income (including
the excess of net short-term capital gain over net long-term capital losses)
and generally is not subject to federal income tax to the extent that it
distributes annually its investment company taxable income and net realized
capital gains in the manner required under the Code. The fund intends to
distribute annually all of its investment company taxable income and net
realized capital gains and therefore does not expect to pay federal income tax,
although in certain circumstances the fund may determine that it is in the
interest of shareholders to distribute less than that amount.
The fund will be subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires the
fund to distribute to shareholders for a calendar year an amount equal to at
least 98% of the fund's ordinary income for that calendar year, at least 98% of
the excess of its capital gains over capital losses realized during the
one-year period ending October 31 during such year, and all ordinary income and
capital gains for prior years that were not previously distributed.
Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking
into account any capital loss carry-forward of the fund.
If any net long-term capital gains in excess of net short-term capital losses
are retained by a fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to
increase the adjusted tax basis on fund shares by the difference between a pro
rata share of the retained gains and their related tax credit.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such
six-month period.
Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable as described above, whether
received in shares or in cash. Shareholders electing to receive distributions
in the form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share on
the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another
American Fund, may result in tax consequences (gain or loss) to the shareholder
and must also be reported on the shareholder's federal income tax return.
Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of
the fund's gross income, a portion of the income distributions of the fund will
be eligible for the deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify.
The dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days.
Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to
the shareholder as ordinary income or capital gain as described above, even
though, from an investment standpoint, it may constitute a partial return of
investment capital. For this reason, investors should consider the tax
implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
a partial return of investment capital upon the distribution, which will
nevertheless be taxable to them.
A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest
payments from these securities. This original issue discount (imputed income)
will comprise a part of the investment company taxable income of the fund which
must be distributed to shareholders in order to maintain the qualification of
the fund as a regulated investment company and to avoid federal income tax at
the level of the fund. Shareholders will be subject to income tax on such
original issue discount, whether or not they elect to receive their
distributions in cash.
The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated
investment company may be subject to withholding of federal income tax at the
rate of 31% in the case of non-exempt U.S. shareholders who fail to furnish the
investment company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year fund shareholders will
receive a statement of the federal income tax status of all distributions.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, I.E., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on dividend income received
by him or her.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers" for initial "Investment Minimums and Fund
investment minimums. Numbers").
By Visit any investment Mail directly to your
contacting dealer who is investment dealer's address
your registered in the state printed on your account
investment where the purchase is statement.
dealer made and who has a
sales agreement with
American Funds
Distributors.
By mail Make your check payable Fill out the account additions
to the fund and mail to form at the bottom of a recent
the address indicated account statement, make your
on the account check payable to the fund,
application. Please write your account number on
indicate an investment your check, and mail the check
dealer on the account and form in the envelope
application. provided with your account
statement.
By Please contact your Complete the "Investments by
telephone investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(r) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
By Please contact your Complete the American FundsLink
computer investment dealer to Authorization Form. Once you
open account, then establish the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(r) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional
number(s), if investments in the same manner
necessary. Please as described under "Initial
indicate an 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):
<TABLE>
<CAPTION>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) $1,000 02
American Balanced Fund(r) 500 11
American Mutual Fund(r) 250 03
Capital Income Builder(r) 1,000 12
Capital World Growth and Income 1,000 33
Fund(sm)
EuroPacific Growth Fund(r) 250 16
Fundamental Investors(sm) 250 10
The Growth Fund of America(r) 1,000 05
The Income Fund of America(r) 1,000 06
The Investment Company of America(r) 250 04
The New Economy Fund(r) 1,000 14
New Perspective Fund(r) 250 07
New World Fund 1,000+ 36
SMALLCAP World Fund(r) 1,000 35
Washington Mutual Investors Fund(sm) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(r)
American High-Income Trust(sm) 1,000 21
The Bond Fund of America(sm) 1,000 08
Capital World Bond Fund(r) 1,000 31
Intermediate Bond Fund of 1,000 23
America(sm)
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(sm)
The Tax-Exempt Bond Fund of 1,000 19
America(r)
The Tax-Exempt Fund of 1,000 20
California(r)*
The Tax-Exempt Fund of Maryland(r)* 1,000 24
The Tax-Exempt Fund of Virginia(r)* 1,000 25
U.S. Government Securities Fund(sm) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of 2,500 09
America(r)
The Tax-Exempt Money Fund of 2,500 39
America(sm)
The U.S. Treasury Money Fund of 2,500 49
America(sm)
___________
*Available only in certain states.
+Effective September 15, 1999.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for IRAs. Minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
The minimum is $50 for additional investments (except as noted above).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND BOND
FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investment of $1 million or more and
investments made by employer-sponsored defined contribution-type plans with 100
or more eligible employees are sold with no initial sales charge. A contingent
deferred sales charge may be imposed on certain redemptions by these accounts
made within one year of purchases. Investments by retirement plans,
foundations or endowments with $50 million or more in assets, and
employer-sponsored defined contribution-type plans with 100 or more eligible
employees made with no sales charge are not subject to a contingent deferred
sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 1.00% on amounts of $1 million
to $4 million, 0.50% on amounts over $4 million to $10 million, and 0.25% on
amounts over $10 million.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. American Funds Distributors will, on an annual
basis, determine the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company (the "Transfer Agent") know if you qualify for a
reduction in your sales charge using one or any combination of the methods
described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the Prospectus apply to purchases of $50,000 or more made
within a 13-month period subject to the following statement of intention (the
"Statement"). The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize a Statement in order to
qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by the
Transfer Agent. All dividends and any capital gain distributions on shares
held in escrow will be credited to the shareholder's account in shares (or paid
in cash, if requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the sales
charge which would have been paid if the total of such purchases had been made
at a single time. If the difference is not paid by the close of the period,
the appropriate number of shares held in escrow will be redeemed to pay such
difference. If the proceeds from this redemption are inadequate, the purchaser
will be liable to the Principal Underwriter for the balance still outstanding.
The Statement may be revised upward at any time during the 13-month period, and
such a revision will be treated as a new Statement, except that the 13-month
period during which the purchase must be made will remain unchanged and there
will be no retroactive reduction of the sales charges paid on prior purchases.
Existing holdings eligible for rights of accumulation (see the account
application) and any individual investments in American Legacy products
(American Legacy, American Legacy II and American Legacy III variable
annuities, American Legacy Life, American Legacy Variable Life, and American
Legacy Estate Builder) may be credited toward satisfying the Statement. During
the Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: The regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments),
any rollovers or transfers reasonably anticipated to be invested in non-money
market American Funds during the 13-month period, and any individual
investments in American Legacy products are added to the figure determined
above. The sum is the Statement amount and applicable breakpoint level. On
the first investment and all other investments made pursuant to the Statement,
a sales charge will be assessed according to the sales charge breakpoint thus
determined. There will be no retroactive adjustments in sales charges on
investments previously made during the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan, by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
CONCURRENT PURCHASES -- You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. When
determining your sales charge, you may also take into account the value of your
individual holdings, as of the end of the week prior to your investment, in
various American Legacy products (American Legacy, American Legacy II and
American Legacy III variable annuitites, American Legacy Life, American Legacy
Variable Life, and American Legacy Estate Builder). Direct purchases of the
money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next determined
after the purchase order is received and accepted by the fund or 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 the 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 will be entered at the next calculated
offering price. Prices which appear in the newspaper are not always indicative
of prices at which you will be purchasing and redeeming shares of the fund,
since such prices generally reflect the previous day's closing price whereas
purchases and redemptions are made at the next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open. For example, if the Exchange closes at 1:00 p.m. on one day and at 4:00
p.m. on the next, the fund's share price would be determined as of 4:00 p.m.
New York time on both days. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King,
Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of 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.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- -Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- -Requests must be signed by the registered shareholder(s)
- -A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- -Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- -You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R)
- -Redemptions by telephone or fax (including American FundsLine(r) and American
FundsLine OnLine(r)) are limited to $50,000 per shareholder each day.
- -Checks must be made payable to the registered shareholder(s).
- -Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- -You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- -You may establish check writing privileges (use the money market funds
application)
-- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds
made within twelve months of purchase on investments of $1 million or more
(other than redemptions by employer-sponsored retirement plans). The charge is
1% of the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be redeemed first for
purposes of calculating this charge. The charge is waived for exchanges
(except if shares acquired by exchange were then redeemed within 12 months of
the initial purchase); for distributions from 403(b) plans or IRAs due to
death, disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge.
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.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments into the American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is
made, depending on the bank's capabilities. American Funds Service Company
(the "Transfer Agent") will then invest your money into the fund you specified
on or around the date you specified. If your bank account cannot be debited
due to insufficient funds, a stop-payment or closing of the 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 to the
Transfer Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:
(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the
fund receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distribution must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) and American FundsLine OnLine(r) (See "American FundsLine(r) and
American FundsLine OnLine(r)" below), or by telephoning 800/421-0180 toll-free,
faxing (see "Principal Underwriter and Transfer Agent" in the prospectus for
the appropriate fax numbers) or telegraphing American Funds Service Company.
(See "Telephone and Computer Purchases, Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for which Capital Guardian Trust
Company serves as trustee may not be exchanged by telephone, computer, fax or
telegraph. Exchange redemptions and purchases are processed simultaneously at
the share prices next determined after the exchange order is received. (See
"Purchase of Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES -- You may automatically exchange shares in amounts of $50
or more among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day of each month you
designate. You must either (a) meet the minimum initial investment requirement
for the receiving fund OR (b) the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS -- Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the company of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments will be reflected on regular confirmation statements from American
Funds Service Company. Dividend and capital gain reinvestments and purchases
through automatic investment plans and certain retirement plans will be
confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(R)-- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(r) and American
FundsLine OnLine(r). To use these services, 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(r) are subject to the conditions
noted above and in "Shareholder Account Services and Privileges - Telephone and
Computer Purchases, Redemptions and Exchanges" below. You will need your fund
number (see the list of funds in The American Funds Group under "Purchase of
Shares--Investment Minimums and Fund Numbers"), personal identification number
(the last four digits of your Social Security number or other tax
identification number associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine(r)) or computer (including American
FundsLine OnLine(r)), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, American Funds Service Company, any of its
affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including attorney fees) which may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these options. However, you may
elect to opt out of these options by writing American Funds Service Company
(you may also reinstate them at any time by writing American Funds Service
Company). If American Funds Service Company does not employ reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine, the fund may be liable for losses
due to unauthorized or fraudulent instructions. In the event that shareholders
are unable to reach the fund by telephone because of technical difficulties,
market conditions, or a natural disaster, redemption and exchange requests may
be made in writing only.
SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.
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 quality of executions. When, in the opinion of the Investment Adviser,
two or more brokers (either directly or through their correspondent clearing
agents) are in a position to obtain the best price and execution, preference
may be given to brokers who have sold shares of the fund or who have provided
investment research, statistical, or other related services to 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 will not pay a mark-up for
research in principal transactions.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal years ended February 28, 1999,
1998 and 1997, amounted to $3,054,000, $1,744,000 and $1,648,000, 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 $2,686,000 for the fiscal year ended February 28, 1999.
INDEPENDENT AUDITORS -- Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, has served as the fund's independent auditors
since the fund's inception, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this Statement of
Additional Information 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 -- Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; 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.
OTHER INFORMATION -- 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, 1999
<TABLE>
<CAPTION>
Net asset value and redemption price per share
<S> <C>
(Net assets divided by shares outstanding) $17.84
Maximum offering price per share $18.93
(100/94.25 of net asset value per share,
which takes into account the fund's current
maximum sales charge)
</TABLE>
SHAREHOLDER VOTING RIGHTS -- Shareholders have one vote per share owned. At
any meeting of shareholders, duly called and at which a quorum is present, the
shareholders holding a majority of the votes entitled to be cast, may remove
any director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed directors.
The fund has agreed, at the request of the staff of the Securities and Exchange
Commission, to apply the provisions of section 16(c) of the 1940 Act with
respect to the removal of directors, as though the fund were a common-law
trust. Accordingly, the directors of the fund will promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
director when requested in writing to do so by the record holders of not less
than 10% of the outstanding shares.
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is 0.66% based on a 30-day (or one month) period ended
February 28, 1999, 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, 1999 were 14.13%, 18.49% and 16.00%,
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 growth-income funds that are at least 10 years old. In
the rolling 10-year periods since January 1, 1969 (138 in all), those funds
have had better total returns than their comparable Lipper indexes in 128 of
the 138 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
(3/1/94 - (3/1/89 - (3/1/84 - (3/1/79 -
2/28/99) 2/28/99) 2/28/99) 2/28/99)
$18,088 $51,990 $115,836 $266,279
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had invested Periods ...and taken all
$10,000 in AMCAP 3/1 - 2/28 or 29 distributions in
this many years ago... shares, your
| investment would
Number of Years have been worth
this much at
Feb. 28, 1999
|
Value ($)
<S> <C> <C>
1 1998-1999 11,413
2 1997-1999 15,631
3 1996-1999 17,436
4 1995-1999 22,578
5 1994-1999 23,352
6 1993-1999 25,998
7 1992-1999 27,528
8 1991-1999 33,142
9 1990-1999 38,719
10 1989-1999 44,123
11 1988-1999 48,391
12 1987-1999 46,843
13 1986-1999 61,089
14 1985-1999 75,113
15 1984-1999 87,216
16 1983-1999 88,245
17 1982-1999 127,094
18 1981-1999 133,694
19 1980-1999 161,658
20 1979-1999 238,293
21 1978-1999 326,167
22 1977-1999 382,307
23 1976-1999 390,183
24 1975-1999 547,282
25 1974-1999 490,596
26 1973-1999 387,897
27 1972-1999 363,667
28 1971-1999 428,623
29 1970-1999 458,080
30 1969-1999 444,031
</TABLE>
<TABLE>
<CAPTION>
AMCAP VS. VARIOUS UNMANAGED INDICES
TOTAL RETURN CAPITAL APPRECIATION
Period AMCAP DJIA/1/ S&P 500 Average AMCAP NYSE/4/ ASE/5/ NASDAQ
3/1 - 2/28 or 29 /2/ Savings OTC/6/
Institution
/3/
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 - 1999 +341% +445% +459% + 60% + 290% + 261% + 117% + 472%
1988 - 1998 +300 +458 +422 + 63 + 246 + 262 + 145 + 383
1987 - 1997 +182 +324 +276 + 65 + 140 + 156 + 85 + 2 8
1986 - 1996 +230 +346 +286 + 70 + 177 + 162 + 118 + 206
1985 - 1995 +214 +343 +274 + 76 + 161 + 152 + 99 + 179
1984 - 1994 +252 +382 +322 + 87 + 186 + 187 + 124 + 214
1983 - 1993 +220 +348 +331 + 98 + 156 + 186 + 118 + 156
1982 - 1992 +335 +505 +440 + 111 + 242 + 249 + 213 + 253
1981 - 1991 +280 +364 +322 + 121 + 184 + 167 + 104 + 129
1980 - 1990 +294 +387 +347 + 124 + 194 + 182 + 133 + 169
1979 - 1989 +409 +356 +369 + 124 + 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, 1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
COST OF SHARES VALUE OF SHARES
Fiscal Annual Dividends Total From From From Total
Year End Dividends (cumulative) Investment Initial Capital Gains Dividends Value
Feb. 28 or 29 Cost Investment Reinvested Reinvested
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
1999 3,727 47,820 57,820 67,194 411,122 96,773 575,089
</TABLE>
The dollar amount of capital gain distributions during the period was $292,101
* From May 1, 1967, the date the fund commenced operations.
<TABLE>
Amcap Fund Percent
Investment Portfolio, February 28, 1999 of Net
Assets
Largest Industry Holdings
<S> <C> <C> <C>
Broadcasting & Publishing 14.08%
Data Processing & Reproduction 10.71%
Health & Personal Care 9.66%
Business & Public Services 8.05%
Financial Services 5.35%
Other Industries 35.39%
Cash & Equivalents 16.76%
Largest Individual Equity Holdings
Comcast 3.79%
Time Warner 3.69%
Medtronic 3.04%
Philip Morris 2.70%
Viacom 2.62%
Fannie Mae 2.42%
Oracle 2.23%
Tele-Communications, Liberty Media Group 1.94%
AirTouch Communications 1.92%
SLM Holding 1.77%
Number of Market Percent
Shares Value Of Net
Equity Securitites (common stocks) (000) Assets
- -------------------------------------------- -------- -------- --------
BROADCASTING & PUBLISHING - 14.08%
Comcast Corp., Class A, special stock 2,925,000 $207,492 3.79%
Comcast Corp., Class A 260,000 17,647
Time Warner Inc. 3,400,000 219,300 3.69
Viacom Inc., Class B (1) 1,762,200 155,734 2.62
Tele-Communications, Inc., Series A, Liberty Media Group (1) 2,137,500 115,158 1.94
Harte-Hanks Communications, Inc. 2,140,000 55,372 .93
Tele-Communications, Inc., Series A, TCI Ventures Group (1) 945,876 26,189 .44
Infinity Broadcasting Corp., Class A (1) 712,200 16,915 .29
Tele-Communications, Inc., Series A, TCI Group (1) 212,421 13,343 .23
Clear Channel Communications, Inc. (1) 150,000 9,000 .15
DATA PROCESSING & REPRODUCTION - 10.71%
Oracle Corp. (1) 2,367,500 132,284 2.23
Microsoft Corp. (1) 450,000 67,556 1.14
Lexmark International Group, Inc., Class A (1) 650,000 67,072 1.13
Computer Associates International, Inc. 1,538,300 64,609 1.09
Intuit Inc. (1) 500,000 49,469 .83
Cisco Systems, Inc. (1) 450,000 44,016 .74
PeopleSoft, Inc. (1) 1,800,000 33,975 .57
Silicon Graphics, Inc. (1) 1,850,000 29,484 .50
HNC Software Inc. (1) 1,030,000 27,681 .47
Gateway 2000, Inc. (1) 375,000 27,258 .46
International Business Machines Corp. 150,000 25,500 .43
3Com Corp. (1) 700,000 22,006 .37
Cadence Designs Systems, Inc. (1) 600,000 14,437 .24
Compaq Computer Corp. 300,000 10,575 .18
Synopsys, Inc. (1) 200,000 9,250 .15
Ascend Communications, Inc. (1) 70,000 5,386 .09
Sequent Computer Systems, Inc. (1) 560,000 5,337 .09
HEALTH & PERSONAL CARE - 9.66%
Medtronic, Inc. 2,560,000 180,800 3.04
Pfizer Inc 700,000 92,356 1.56
Guidant Corp. 1,500,000 85,500 1.44
Gillette Co. 1,000,000 53,625 .90
Avon Products, Inc. 1,160,000 48,285 .81
Alza Corp. (1) 700,000 36,706 .62
Merck & Co., Inc. 400,000 32,700 .55
Bergen Brunswig Corp., Class A 500,000 12,219 .21
Schering-Plough Corp. 200,000 11,187 .19
Cardinal Health, Inc. 144,589 10,438 .18
Watson Pharmaceuticals, Inc. (1) 200,000 9,663 .16
BUSINESS & PUBLIC SERVICES - 8.05%
Concord EFS, Inc. (1) 2,246,900 71,760 1.21
Cendant Corp. (1) 3,975,000 65,836 1.11
Young & Rubicam Inc. (1) 1,493,500 56,380 .95
Interpublic Group of Companies, Inc. 600,000 44,887 .75
Avery Dennison Corp. 700,000 37,581 .63
First Data Corp. 800,000 30,600 .51
FIRST HEALTH Group Corp. (1) 1,400,000 22,400 .38
MSC Industrial Direct Co., Inc., Class A (1) 1,225,700 21,909 .37
ServiceMaster Co. 1,157,500 21,631 .36
Cambridge Technology Partners (Massachusetts), Inc. (1) 849,600 21,346 .36
Metamor Worldwide, Inc. (1) 850,000 16,044 .27
IKON Office Solutions, Inc. 1,000,000 14,125 .24
Paychex, Inc. 330,000 13,984 .24
Universal Health Services, Inc., Class B (1) 250,000 10,156 .17
ROMAC International, Inc. (1) 770,517 9,246 .16
Columbia/HCA Healthcare Corp. 500,000 8,937 .15
Galileo International, Inc. 114,000 5,757 .10
TeleTech Holdings, Inc. (1) 747,900 5,235 .09
ELECTRONIC COMPONENTS - 5.95%
Intel Corp. 600,000 71,962 1.21
Solectron Corp. (1) 1,600,000 71,500 1.20
ADC Telecommunications, Inc. (1) 1,420,000 57,510 .97
Texas Instruments Inc. 600,000 53,513 .90
SCI Systems, Inc. (1) 800,000 24,750 .41
Molex Inc. 800,000 21,400 .36
Analog Devices, Inc. (1) 825,000 20,677 .35
Sanmina Corp. (1) 237,500 12,409 .21
Littlefuse, Inc. (1) 590,000 10,067 .17
Adaptec, Inc. (1) 500,000 199,969 .17
FINANCIAL SERVICES - 5.35%
Fannie Mae 2,051,000 143,570 2.42
SLM Holding Corp. 2,450,000 105,044 1.77
Freddie Mac 700,000 41,213 .69
Capital One Financial Corp. 140,000 17,868 .30
Providian Financial Corp. 100,000 10,213 .17
MERCHANDISING - 4.51%
Consolidated Stores Corp. (1) 2,645,312 66,629 1.12
Kohl's Corp. (1) 950,000 65,550 1.10
AutoZone, Inc. (1) 1,800,000 63,000 1.06
Albertson's, Inc. 750,000 42,750 .72
Circuit City Stores, Inc. 560,000 30,380 .51
BEVERAGES & TOBACCO - 4.17%
Philip Morris Companies Inc. 4,100,000 160,413 2.70
PepsiCo, Inc. 1,600,000 60,200 1.01
Beringer Wine Estates Holdings, Inc., Class B (1) 365,000 14,714 .25
Robert Mondavi Corp., Class A (1) 366,700 12,605 .21
BANKING - 3.45%
Wells Fargo & Co. (formerly Norwest Corp.) 2,700,000 1,999,225 1.67
M&T Bank Corp. 85,923 40,878 .69
Northern Trust Corp. 450,000 40,219 .68
Marshall & Ilsley Corp. 346,400 19,398 .33
Imperial Bancorp (1) 270,000 4,928 .08
INSURANCE - 2.07%
American International Group, Inc. 587,500 66,938 1.13
MGIC Investment Corp. 650,000 22,141 .37
Mercury General Corp. 500,000 17,438 .29
Orion Capital Corp. 500,000 16,531 .28
TELECOMMUNICATIONS - 1.92%
AirTouch Communications (1) 1,250,000 113,828 1.92
CHEMICALS - 1.70%
Cambrex Corp. 1,130,000 27,049 .45
RPM, Inc. 1,700,000 23,481 .40
Ionics, Inc. (1) 621,000 17,310 .29
Sigma-Aldrich Corp. 600,000 15,825 .27
Praxair, Inc. 350,000 12,228 .20
Airgas, Inc. (1) 600,000 5,400 .09
LEISURE & TOURISM - 1.59%
Brinker International, Inc. (1) 2,950,000 85,366 1.44
Walt Disney Co. 250,000 8,797 .15
MACHINERY & ENGINEERING - 1.12%
Millipore Corp. 1,024,200 28,550 .48
IDEX Corp. 1,010,000 23,988 .41
Thermo Electron Corp. (1) 1,000,000 13,813 .23
ELECTRONIC INSTRUMENTS - 0.84%
Applied Materials, Inc. (1) 900,000 50,063 .84
TEXTILES & APPAREL - 0.80%
NIKE, Inc., Class B 640,000 34,320 .58
Liz Claiborne Inc. 385,000 12,970 .22
INDUSTRIAL COMPONENTS - 0.66%
Tower Automotive, Inc. (1) 1,400,000 26,075 .44
Lear Corp. (1) 365,000 12,889 .22
ENERGY EQUIPMENT - 0.51%
Schlumberger Ltd. (Netherlands Antilles) 624,232 30,314 .51
RECREATION & OTHER CONSUMER PRODUCTS - 0.46%
Harley-Davidson, Inc. 275,000 15,898 .27
Mattel, Inc. 431,900 11,391 .19
FOOD & HOUSEHOLD PRODUCTS - 0.29%
Colgate-Palmolive Co. 200,000 16,975 .29
WHOLESALE & INTERNATIONAL TRADE - 0.24%
Tech Data Corp. (1) 850,000 14,450 .24
TRANSPORTATION: RAIL & ROAD - 0.16%
Wisconsin Central Transportation Corp. (1) 675,000 9,281 .16
AEROSPACE & MILITARY TECHNOLOGY - 0.10%
Raytheon Co., Class A 112,480 5,947 .10
Miscellaneous - 4.85%
Other equity securities in initial
period of acquistion 288,314 4.85
TOTAL EQUITY SECURITIES (COST:$ 2,861,252) 4,943,462 83.24
Principal
Amount
Short-Term Securities (000)
Corporate Short-Term Notes - 15.01%
Coca-Cola Co. 4.77%-4.79% due 3/12-4/12/1999 75,500,000 75,214 1.27
CIT Group Holdings, Inc. 4.80%-4.81% due 3/1-4/20/1999 71,900,000 71,584 1.21
Eastman Kodak Co.4.79%-4.81% due 3/9-5/11/1999 70,000,000 69,667 1.17
E.I. du Pont de Nemours and Co. 4.77%-4.80% due 3/16-5/13/1999 64,800,000 64,554 1.09
Ciesco LP 4.80% due 3/19-4/6/1999 60,500,000 60,311 1.02
International Lease Finance Corp. 4.75%-4.79% due 3/30-5/7/1999 59,200,000 58,786 .99
Lucent Technologies Inc. 4.77%-4.81% due 3/23-4/14/1999 58,836,000 58,581 .99
Ford Motor Credit Co. 4.83% due 4/12-4/19/1999 57,800,000 57,446 .97
American Express Credit Corp. 4.79%-4.83% due 3/22-5/12/1999 56,700,000 56,348 .95
Associates First Capital Corp. 4.84%-4.85% due 3/4-3/17/1999 53,900,000 53,820 .91
Commercial Credit Co. 4.82%-4.85% due 3/2-4/13/1999 46,800,000 46,621 .78
BellSouth Telecommunications, Inc. 4.76%-4.80% due 3/3-4/5/1999 45,500,000 45,379 .76
A.I. Credit Corp. 4.76%-4.78% due 3/25-4/7/1999 43,400,000 43,213 .73
National Rural Utilities Cooperative Finance Corp. 4.78%-4.83% due 3/22- 43,300,000 43,120 .70
Motorola, Inc. 4.75% due 4/1/1999 37,000,000 36,844 .62
H.J. Heinz Co. 4.78% due 4/15/1999 37,000,000 36,774 .62
General Electric Capital Corp. 4.87% due 3/1/1999 13,400,000 13,398 .23
Federal Agency Discount Notes - 4.01%
Fannie Mae 4.70%-5.10% due 3/18-5/10/1999 105,800,000 105,120 1.78
Freddie Mac 4.73%-5.00% due 3/5-3/26/1999 7,199,900,00 79,787 1.34
Federal Home Loan Banks 4.76%-4.98% due 3/3-5/26/1999 53,300,000 52,877 .89
TOTAL SHORT-TERM SECURITIES (COST: $1,129,497) 1,129,444 19.02
TOTAL INVESTMENT SECURITIES (COST: $3,900,749) 6,072,906
Excess of payables over cash and receivables 133,988 2.26
----------------------
NET ASSETS 5,938,918 100.00
========= =========
(1) Non-income-producing securities.
See Notes to Financial Statements
</TABLE>
<TABLE>
AMCAP FUND Financial Statements
- ------------------------------------------- --------- ---------
Statement of Assets and Liabilities
at February 28, 1999 (dollars in thousands, except per-share data)
- ------------------------------------------- --------- ---------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $3,990,749) $6,072,906
Cash 4,097
Receivables for--
Sales of investments $9,203
Sales of fund's shares 9,271
Dividends 2,290 20,764
--------- ---------
6,097,767
Liabilities:
Payables for--
Purchases of investments 150,721
Repurchases of fund's shares 3,030
Management services 1,694
Other expenses 3,404 158,849
--------- ---------
Net Assets at February 28, 1999--
Equivalent to $17.84 per share on
332,834,083 shares of $1 par value
capital stock outstanding (authorized
capital stock--500,000,000 shares) $5,938,918
========
Statement of Operations for the year
ended February 28, 1999 (dollars in thousands)
--------- ---------
Investment Income:
Income:
Dividends $ 26,494
Interest 45,416 $ 71,910
---------
Expenses:
Management services fee 19,703
Distribution expenses 11,159
Transfer agent fee 2,686
Reports to shareholders 172
Registration statement and prospectus 261
Postage, stationery and supplies 563
Directors' fees 110
Auditing and legal fees 52
Custodian fee 93
Taxes other than federal income tax 66
Other expenses 157 35,022
--------- ---------
Net investment income 36,888
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 849,757
Net increase in unrealized
appreciation on investments:
Beginning of year 1,945,960
End of year 2,082,157
---------
Net unrealized appreciation
on investments 136,197
---------
Net realized gain and unrealized
appreciation on investments 985,954
---------
Net Increase in Net Assets Resulting
From Operations $1,022,842
=========
Statement of Changes in Net
Assets (dollars in thousands)
- --------------------------------------------- --------- ---------
Year ended February 28
1999 1998
Operations: --------- ---------
Net investment income $ 36,888 $ 26,218
Net realized gain on investments 849,757 509,966
Net unrealized appreciation
on investments 136,197 809,009
--------- ---------
Net increase in net assets
resulting from operations 1,022,842 1,345,193
--------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (38,213) (26,109)
Distributions from net realized
gain on investments (673,768) (646,989)
--------- ---------
Total dividends and distributions (711,981) (673,098)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
46,252,114 and 23,535,997
shares, respectively 807,601 366,597
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
39,917,389 and 42,604,643 shares,
respectively 663,119 630,147
Cost of shares repurchased:
42,252,652 and 37,958,301
shares, respectively (733,197) (585,123)
--------- ---------
Net increase in net assets
resulting from capital share transactions 737,523 411,621
--------- ---------
Total Increase in Net Assets 1,048,384 1,083,716
Net Assets:
Beginning of year 4,890,534 3,806,818
--------- ---------
End of year (including undistributed
net investment income of $3,813 and
$5,138, respectively) $5,938,918 $4,890,534
========= =========
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Organization - 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.
Significant Accounting Policies - The following is a summary of the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Security Valuation - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. 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.
Security Transactions and Related Investment Income - As is
customary in the mutual fund industry, securities transactions are accounted
for on the date the securities are purchased or sold. Realized gains and losses
from securities transactions are reported on an identified cost basis. Dividend
and interest income is reported on the accrual basis. Discounts and premiums on
securities purchased are amortized.
Dividends and Distributions to Shareholders - Dividends and distributions
paid to shareholders are recorded on the ex-dividend date.
2. Federal Income Taxation
It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of February 28, 1999, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $2,082,157,000, of which
$2,298,943,000 related to appreciated securities and $216,786,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the year ended February 28, 1999. The cost
of portfolio securities for book and federal income tax purposes was
$3,990,749,000 at February 28, 1999.
3. Fees and Transactions with Related Parties
Investment Advisory Fee - The fee of $19,703,000 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.
Distribution Expenses - Pursuant to a Plan of Distribution, the fund may
expend up to 0.25% of its average net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved by the fund's Board of
Directors. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
February 28, 1999, distribution expenses under the Plan were $11,159,000. As of
February 28, 1999, accrued and unpaid distribution expenses were $2,834,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $1,596,000 (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.
Transfer Agent Fee - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $2,686,000.
Deferred Director's Fees - 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, 1999, aggregate amounts deferred and earnings thereon
were $536,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. Investment Transactions and Other Disclosures
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,615,721,000 and $2,041,889,000, respectively,
during the year ended February 28, 1999.
As of February 28, 1999, accumulated undistributed net realized gain on
investments was $273,729,000 and additional paid-in capital was $3,246,385,000.
The fund reclassified $29,640,000 from undistributed net realized gains to
paid-in capital, for the year ended February 28, 1999.
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 $93,000 includes $18,000 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 or 29
------ ------ ------ ------ ------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Net Asset Value, Beginning
of Year $16.93 $14.60 $14.40 $12.28 $12.98
------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income .12 .10 .12 .16 .14
Net gains on securities (both
realized and unrealized) 3.21 4.80 1.51 3.32 .24
------ ------ ------ ------ ------
Total from investment operations 3.33 4.90 1.63 3.48 .38
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income) (.13) (.10) (.12) (.17) (.13)
Distributions (from capital gains) (2.29) (2.47) (1.31) (1.19) (.95)
------ ------ ------ ------ ------
Total distributions (2.42) (2.57) (1.43) (1.36) (1.08)
------ ------ ------ ------ ------
Net Asset Value, End of Year $17.84 $16.93 $14.60 $14.40 $12.28
====== ====== ====== ====== ======
Total Return /1/ 21.07% 36.97% 11.74% 29.29% 3.41%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $5,939 $4,891 $3,807 $3,693 $2,970
Ratio of expenses to average `
net assets .67% .68% .69% .71% .71%
Ratio of net income to
average net assets .70% .62% .81% 1.16% 1.16%
Portfolio turnover rate 36.46% 31.42% 24.14% 35.16% 17.92%
/1/Excludes maximum sales charge
of 5.75%.
</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,
1999, 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 the 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, 1999, 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, 1999, 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 19, 1999
1999 Tax Information (Unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net From Net
of Record Investment Realized Realized
Income Short-Term Long-Term
Gains Gains
<S> <C> <C> <C> <C>
June 19, 1998 June 22, 1998 $0.03 $0.113 $0.337
December 10, 1998 December 11, 1998 $0.10 - $1.840
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 70% 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.
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION, WHICH WAS MAILED IN JANUARY 1999, TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1998 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
