THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC OFFERING
AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH
TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.
/s/ Patrick F. Quan
Patrick F. Quan
Secretary
<PAGE>
Prospectus
for Eligible Retirement Plans
AMERICAN BALANCED FUND(R)
AN OPPORTUNITY FOR CONSERVATION OF
CAPITAL, CURRENT INCOME, AND LONG-TERM
GROWTH OF CAPITAL AND INCOME
March 1, 1996
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
AMERICAN BALANCED FUND, INC.
Four Embarcadero Center
Suite 1800
San Francisco, CA 94111
The investment objectives of the fund are: (1) conservation of capital, (2)
current income, and (3) long-term growth of capital and income. The fund
strives to accomplish these objectives by investing in a broadly diversified
portfolio of securities including stocks and bonds. The fund approaches the
management of its investments as if they constituted the complete investment
program of the prudent investor.
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND OFFERED WITHOUT A SALES
CHARGE TO ELIGIBLE RETIREMENT PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE
FUND TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF THE FUND AT THE
ADDRESS INDICATED ABOVE.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information for the fund dated
March 1, 1996, which contains the fund's financial statements, without charge
by writing to the Secretary of the fund at the above address or telephoning
800/421-0180. These requests will be honored within three business days of
receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
RP 11-010-0396
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY OF EXPENSES
Average annual expenses
paid over a 10-year
period would be
approximately $8 per
year, assuming a $1,000
investment and a 5%
annual return with no
sales charge.
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the fund with no sales
charge./1/ The fund also has no sales charge on reinvested dividends, deferred
sales charge, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees....................................................... 0.32%
12b-1 expenses........................................................ 0.24%/2/
Other expenses (including audit, legal, shareholder services,
transfer agent and custodian expenses)............................... 0.11%
Total fund operating expenses......................................... 0.67%
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative
expenses on a $1,000 investment,
assuming a 5% annual return./3/ $7 $21 $37 $83
</TABLE>
/1/ Retirement plans of organizations with $100 million or more in collective
retirement plan assets may purchase shares of the fund with no sales charge.
In addition, any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or any other plan that
invests at least $1 million in shares of the fund (or in combination with
shares of other funds in The American Funds Group other than the money
market funds) may purchase shares at net asset value; however, a contingent
deferred sales charge of 1% applies on certain redemptions made within 12
months following such purchases. (See "Redeeming Shares--Contingent Deferred
Sales Charge.")
/2/ These expenses may not exceed 0.25% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/3/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
TABLE OF CONTENTS
Summary of Expenses.................. 2
Financial Highlights................. 3
Investment Objectives and Policies... 3
Certain Securities and
Investment Techniques............... 4
Investment Results................... 6
Dividends, Distributions and Taxes... 7
Fund Organization and Management..... 7
Purchasing Shares.................... 9
Shareholder Services................. 10
Redeeming Shares..................... 11
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information for the five years ended
HIGHLIGHTS December 31, 1995 has been audited by Deloitte & Touche
(For a share LLP, independent accountants, whose unqualified report
outstanding covering each of the most recent five years is included
throughout the in the statement of additional information, and for the
fiscal year) five years ended December 31, 1990 by KPMG Peat
Marwick, independent accountants. This information
should be read in conjunction with the financial state-
ments and accompanying notes which are included in the
statement of additional information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $12.00 $12.57 $12.28 $12.05 $10.32 $11.41 $10.46 $10.13 $10.83 $11.65
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .57 .57 .59 .61 .62 .63 .66 .59 .59 .67
Net realized and
unrealized gain (loss)
on investments........ 2.61 (.53) .76 .49 1.86 (.82) 1.54 .68 (.14) 1.17
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income from in-
vestment operations. 3.18 .04 1.35 1.10 2.48 (.19) 2.20 1.27 .45 1.84
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Distributions from net
investment income..... (.56) (.56) (.60) (.60) (.62) (.63) (.67) (.62) (.67) (.64)
Distributions from net
realized gains........ (.47) (.05) (.46) (.27) (.13) (.27) (.58) (.32) (.48) (2.02)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.. (1.03) (.61) (1.06) (.87) (.75) (.90) (1.25) (.94) (1.15) (2.66)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $14.15 $12.00 $12.57 $12.28 $12.05 $10.32 $11.41 $10.46 $10.13 $10.83
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return/1/......... 27.13% .34% 11.27% 9.48% 24.69% (1.57)% 21.53% 12.87% 4.02% 16.87%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, end of
year (in millions).... $3,048 $2,082 $1,710 $1,067 $ 642 $ 370 $ 275 $ 218 $ 193 $ 167
Ratio of expenses to
average net assets.... .67% .68% .71% .74% .82% .84% .78% .76% .68% .67%
Ratio of net income to
average net assets.... 4.38% 4.76% 4.74% 5.19% 5.56% 5.95% 5.80% 5.54% 5.17% 5.71%
Portfolio turnover
rate.................. 39.03% 32.05% 27.81% 17.00% 24.65% 25.51% 37.31% 41.90% 42.00% 59.17%
</TABLE>
--------
/1/Calculated with no sales charge.
INVESTMENT The fund's investment objectives are: (1) conservation
OBJECTIVES of capital, (2) current income, and (3) long-term
AND POLICIES growth of capital and income. The fund approaches the
management of its investments as if they constituted
The fund aims to the complete investment program of the prudent investor.
provide you with
conservation of The fund invests in a broadly diversified portfolio of
capital, current securities, including common stocks, preferred stocks,
income and long- corporate bonds and U.S. Government securities. Assets
term growth of may also be held in cash or cash equivalents. (See the
both capital and statement of additional information for a description
income. of cash equivalents.) Additionally, the fund will
invest no more than 10% of its assets in securities of
issuers which are not included in the Standard & Poor's
500 Composite Index (a broad measure of the U.S. stock
market) and which are domiciled outside the U.S. The
fund's fixed-income investments will be investment
grade. For long-term debt obligations such as bonds,
this includes securities that are rated Baa or better
by Moody's Investors Service, Inc. or BBB or better by
Standard & Poor's Corporation, or that are unrated but
determined to be of equivalent quality by the fund's
investment adviser, Capital Research and Management
Company. Securities rated Baa or BBB may have
speculative characteristics and changes in economic
conditions may lead to a weaker capacity to make
principal and interest payments than is the case with
higher rated securities. The fund will maintain at
least 25% of the value of its total assets in fixed-
income securities.
3
<PAGE>
- -------------------------------------------------------------------------------
The fund's portfolio turnover rate will depend primar-
ily on market conditions. Short-term trading profits
are not the fund's objective and changes in its invest-
ments are generally accomplished gradually, though
short-term transactions may occasionally be made.
The fund's investment restrictions (which are described
in the statement of additional information) and objec-
tives cannot be changed without shareholder approval.
All other investment practices may be changed by the
fund's board.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVES CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
CERTAIN RISKS OF INVESTING IN STOCKS AND BONDS Because the fund
SECURITIES AND invests in common stocks or securities convertible into
INVESTMENT common stocks, the fund is subject to stock market
TECHNIQUES risks. For example, the fund is subject to the possi-
bility that stock prices in general will decline over
Investing in short or even extended periods.
stocks and bonds
involves certain The fund also invests in fixed-income securities, in-
risks. cluding bonds, which have market values which tend to
vary inversely with the level of interest rates--when
interest rates rise, their values will tend to decline
and vice versa. Although under normal market conditions
longer term securities yield more than shorter term
securities of similar quality, they are subject to
greater price fluctuations. These fluctuations in the
value of the fund's investments will be reflected in
its net asset value per share.
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 instrumen-
talities 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 sup-
ported only by the credit of the issuing government
agency or instrumentality.
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS AND
"ROLL" TRANSACTIONS The fund may purchase securities on
a delayed delivery or "when-issued" basis and enter
into firm commitment agreements (transactions whereby
the payment obligation and interest rate are fixed at
the time of the transaction but the settlement is
delayed). The fund as purchaser assumes the risk of any
decline in value of the security beginning on the date
of the agreement or purchase. As the fund's aggregate
commitments under these transactions increase, the
opportunity for leverage similarly increases.
4
<PAGE>
- -------------------------------------------------------------------------------
The fund also may enter into "roll" transactions, which
consist of the sale of securities together with a com-
mitment (for which the fund typically receives a fee)
to purchase similar, but not identical, securities at a
later date.
PRIVATE PLACEMENTS Private placements may be either
purchased from another institutional investor that
originally acquired the securities in a private place-
ment or directly from the issuers of the securities.
Generally, securities acquired in private placements
are subject to contractual restrictions on resale and
may not be resold except pursuant to a registration
statement under the Securities Act of 1933 or in reli-
ance upon an exemption from the registration require-
ments under that Act, for example, private placements
sold pursuant to Rule 144A. Accordingly, any such obli-
gation will be deemed illiquid unless it has been spe-
cifically determined to be liquid under procedures
adopted by the fund's board of directors.
In determining whether these securities are liquid,
factors such as the frequency and volume of trading and
the commitment of dealers to make markets will be con-
sidered. Additionally, the liquidity of any particular
security will depend on such factors as the availabil-
ity of "qualified" institutional investors and the ex-
tent of investor interest in the security, which can
change from time to time.
INVESTING IN VARIOUS COUNTRIES The fund will invest no
more than 10% of its assets in securities of issuers
which are not included in the Standard & Poor's 500
Composite Index (a broad measure of the U.S. stock mar-
ket) and which are domiciled outside the U.S. Non-U.S.
companies may not be subject to uniform accounting, au-
diting and financial reporting standards and practices
or regulatory requirements comparable to those applica-
ble to U.S. companies. There may also be less public
information available about non-U.S. companies. Addi-
tionally, specific local political and economic factors
must be evaluated in making these investments including
trade balances and imbalances, and related economic
policies; expropriation or confiscatory taxation; limi-
tations on the removal of funds or other assets; polit-
ical or social instability; the diverse structure and
liquidity of the various securities markets; and na-
tionalization policies of governments around the world.
However, investing outside the U.S. can also reduce
certain risks due to greater diversification opportuni-
ties. The fund currently intends to limit these invest-
ments to those that are U.S. dollar denominated.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objectives and policies
5
<PAGE>
- --------------------------------------------------------------------------------
and by Capital Research and Management Company's
investment committee). In addition, Capital Research
and Management Company's research professionals make
investment decisions with respect to a portion of the
fund's portfolio. The primary individual portfolio
counselors for the fund are listed below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
YEARS OF EXPERIENCE AS
PORTFOLIO COUNSELOR WITH CAPITAL
PORTFOLIO COUNSELORS (AND RESEARCH PROFESSIONAL, RESEARCH AND
FOR IF APPLICABLE) FOR MANAGEMENT
AMERICAN BALANCED AMERICAN BALANCED FUND, INC. COMPANY OR TOTAL
FUND, INC. PRIMARY TITLE(S) (APPROXIMATE) ITS AFFILIATES YEARS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abner D. Goldstine Senior Vice President 21 years 29 years 44 years
of the fund. Senior
Vice President and
Director, Capital
Research and
Management Company
- -------------------------------------------------------------------------------------------------------------
J. Dale Harvey Vice President, Capital Less than 1 year 5 years 7 years
Research Company/1/
- -------------------------------------------------------------------------------------------------------------
Robert G. O'Donnell President of the fund. 10 years (in addition to 14 years 21 years 24 years
Senior Vice President as a research professional prior
and Director, Capital to becoming a portfolio
Research and Manage- counselor for the fund)*
ment Company
- -------------------------------------------------------------------------------------------------------------
Victor M. Parachini Senior Vice President, Less than 1 year** 21 years 34 years
Capital Research and
Management Company
- -------------------------------------------------------------------------------------------------------------
CAPITAL RESEARCH AND MANAGEMENT COMPANY HAS BEEN THE FUND'S INVESTMENT ADVISER SINCE JULY 26, 1975.
/1/ COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
* PRIOR TO JULY 26, 1975, MR. O'DONNELL WAS A RESEARCH PROFESSIONAL WITH AMERICAN EXPRESS INVESTMENT MANAGEMENT
COMPANY, THE FUND'S PREVIOUS INVESTMENT ADVISER.
** PRIOR TO JULY 26, 1975, MR. PARACHINI WAS A PORTFOLIO COUNSELOR WITH AMERICAN EXPRESS INVESTMENT
MANAGEMENT COMPANY, THE FUND'S PREVIOUS INVESTMENT ADVISER.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a
averaged a total yield, total return and/or distribution rate basis for
return (at no various periods, with or without sales charges. Results
sales charge) of calculated without a sales charge will be higher. Total
+13.08% a year returns assume the reinvestment of all dividends and
under Capital capital gain distributions.
Research and
Management The fund's yield and the average annual total returns
Company's are calculated with no sales charge in accordance with
management Securities and Exchange Commission requirements. The
(July 26, 1975 fund's distribution rate is calculated by dividing the
through December dividends paid by the fund over the last 12 months by
31, 1995). the sum of the month-end price and the capital gains
paid over the last 12 months. For the 30-day period
ended December 31, 1995, the fund's SEC yield was 3.82%
and the distribution rate was 3.83% with no sales
charge. The SEC yield reflects income earned by the
fund, while the distribution rate reflects dividends
paid by the fund. The fund's total return over the past
12 months and average annual total returns over the
past five- and ten-year periods, as of December 31,
1995, were +27.13%, +14.14% and +12.27%, respectively.
Of course, past results are not an indication of
6
<PAGE>
- -------------------------------------------------------------------------------
future results. Further information regarding the
fund's investment results is contained in the fund's
annual report which may be obtained without charge by
writing to the Secretary of the fund at the address in-
dicated on the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS in February, May, August and December. Capital gains,
AND TAXES if any, are usually distributed in December. When a
dividend or capital gain is distributed, the net asset
Income value per share is reduced by the amount of the pay-
distributions are ment.
usually made in
February, May, The terms of your plan will govern how your plan may
August and receive distributions from the fund. Generally, peri-
December. odic distributions from the fund to your plan are rein-
vested in additional fund shares, although your plan
may permit fund distributions from net investment in-
come to be received by you in cash while reinvesting
capital gain distributions in additional shares or all
fund distributions to be received in cash. Unless you
select another option, all distributions will be rein-
vested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a "regu-
lated investment company" under the Internal Revenue
Code. In any fiscal year in which the fund so qualifies
and distributes to shareholders all of its net invest-
ment income and net capital gains, the fund itself is
relieved of federal income tax. The tax treatment of
redemptions from a retirement plan may differ from re-
demptions from an ordinary shareholder account.
PLEASE SEE THE STATEMENT OF ADDITIONAL INFORMATION AND
YOUR TAX ADVISER FOR FURTHER INFORMATION.
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was or-
AND ganized as a Delaware corporation in 1932 and reorga-
MANAGEMENT nized as a Maryland corporation in 1990. The fund's
board supervises fund operations and performs duties
The fund is a required by applicable state and federal law. Members
member of The of the board who are not employed by Capital Research
American Funds and Management Company or its affiliates are paid cer-
Group, which is tain fees for services rendered to the fund as de-
managed by one of scribed in the statement of additional information.
the largest and They may elect to defer all or a portion of these fees
most experienced through a deferred compensation plan in effect for the
investment fund. Shareholders have one vote per share owned and,
advisers. at the request of the holders of at least 10% of the
shares, the fund will hold a meeting at which any mem-
ber of the board could be removed by a majority vote.
There will not usually be a shareholder meeting in any
year except, for example, when the election of the
board is required to be acted upon by shareholders
under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds,
7
<PAGE>
- -------------------------------------------------------------------------------
including those in The American Funds Group. Capital
Research and Management Company is located at 333 South
Hope Street, Los Angeles, CA 90071, and at 135 South
State College Boulevard, Brea, CA 92621. Capital Re-
search and Management Company manages the investment
portfolio and business affairs of the fund and receives
a fee at the annual rate of 0.42% on the first $500
million of the fund's average net assets, 0.324% of
such assets over $500 million to $1 billion, 0.30% of
such assets over $1 billion to $1.5 billion, 0.282% of
such assets over $1.5 billion to $2.5 billion, 0.27% of
such assets over $2.5 billion to $4 billion, and 0.264%
of such assets over $4 billion.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.,
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. In the over-the-counter mar-
ket, purchases and sales are transacted directly with
principal market-makers except in those circumstances
where it appears better prices and executions are
available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 800 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
8
<PAGE>
- -------------------------------------------------------------------------------
PLAN OF DISTRIBUTION The fund has a plan of distribu-
tion or "12b-1 Plan" under which it may finance activi-
ties primarily intended to sell shares, provided the
categories of expenses are approved in advance by the
board and the expenses paid under the plan were in-
curred within the last 12 months and accrued while the
plan was in effect. Expenditures by the fund under the
plan may not exceed 0.25% of its average net assets an-
nually (all of which may be for service fees).
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los Ange-
les, CA 90071, 135 South State College Boulevard, Brea,
CA 92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240
and 5300 Robin Hood Road, Norfolk, VA 23513. It was
paid a fee of $1,928,000 for the fiscal year ended De-
cember 31, 1995. Telephone conversations with American
Funds Service Company may be recorded or monitored for
verification, recordkeeping and quality assurance pur-
poses.
PURCHASING SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PURCHASE SHARES OF THE FUND THROUGH YOUR PLAN OR
LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT WITH YOUR EMPLOYER. Shares are sold to eligible
retirement plans at the net asset value per share next
determined after receipt of an order by the fund or
American Funds Service Company. Orders must be received
before the close of regular trading on the New York
Stock Exchange in order to receive that day's net asset
value. Plans of organizations with collective
retirement plan assets of $100 million or more may
purchase shares at net asset value. In addition, any
employer-sponsored 403(b) plan or defined contribution
plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at
least $1 million in shares of the fund (or in
combination with shares of other funds in The American
Funds Group other than the money market funds) may
purchase shares at net asset value; however, a
contingent deferred sales charge of 1% is imposed on
certain redemptions made within 12 months of such
purchase. (See "Redeeming Shares--Contingent Deferred
Sales Charge.") Plans may also qualify to purchase
shares at net asset value by completing a statement of
intention to purchase $1 million in fund shares subject
to a commission over a maximum of 13 consecutive
months. Certain redemptions of such shares may also be
subject to a contingent deferred sales charge as
described above. (See the statement of additional
information.)
The minimum initial investment is $250, except that the
money market funds have a minimum of $1,000 for
individual retirement accounts
9
<PAGE>
- -------------------------------------------------------------------------------
(IRAs). Minimums are reduced to $50 for purchases
through "Automatic Investment Plans" (except for the
money market funds) or to $25 for purchases by
retirement plans through payroll deductions and may be
reduced or waived for shareholders of other funds in
The American Funds Group.
American Funds Distributors, at its expense (from a
designated percentage of its income), will, during
calendar year 1996, provide additional compensation to
dealers. Currently these payments are limited to the
top one hundred dealers who have sold shares of the
fund or other funds in The American Funds Group. These
payments will be based on a pro rata share of a
qualifying dealer's sales. American Funds Distributors
will, on an annual basis, determine the advisability of
continuing these payments.
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund
Organization and Management--Plan of Distribution.")
These services include processing purchase and
redemption transactions, establishing shareholder
accounts and providing certain information and
assistance with respect to the fund.
Shares of the fund are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value next determined after the
order is received by the fund or American Funds Service
Company. In the case of orders sent directly to the
fund or American Funds Service Company, an investment
dealer must be indicated. Dealers are responsible for
promptly transmitting orders. (See the statement of
additional information under "Purchase of Shares--Price
of Shares.")
The fund's net asset value per share is determined as
of the close of trading (currently 4:00 p.m., New York
time) on each day the New York Stock Exchange is open.
The current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share.
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on your plan, you may be able to exchange shares
automatically or cross-reinvest dividends in shares of
other funds. Contact your plan administrator/trustee
regarding how to use these services. Also, see the
fund's statement of additional information for a
10
<PAGE>
- -------------------------------------------------------------------------------
description of these and other services that may be
available through your plan. These services are
available only in states where the fund to be purchased
may be legally offered and may be terminated or
modified at any time upon 60 days' written notice.
REDEEMING SHARES Subject to any restrictions imposed by your plan, you
can sell your shares through the plan any day the New
York Stock Exchange is open. For more information about
how to sell shares of the fund through your retirement
plan, including any charges that may be imposed by the
plan, please consult with your employer.
--------------------------------------------------------
By Your plan administrator/trustee must
contacting send a letter of instruction
your plan specifying the name of the fund, the
administrator/ number of shares or dollar amount to
trustee be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners (i.e., trustees or
their legal representatives) must be
guaranteed by a bank, savings
association, credit union, or member
firm of a domestic stock exchange or
the National Association of
Securities Dealers, Inc., that is an
eligible guarantor institution. Your
plan administrator/trustee should
verify with the institution that it
is an eligible guarantor prior to
signing. Additional documentation may
be required to redeem shares from
certain accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
---------------------------------------------------------
By contacting Shares may also be redeemed through
an investment an investment dealer; however, you or
dealer your plan may be charged for this
service. SHARES HELD FOR YOU IN AN
INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND ALL
REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions made
within twelve months of purchase on investments of $1
million or more and on any investment made with no
initial sales charge by any employer-sponsored 403(b)
plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including
"401(k)" plans with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee benefit
plans; for redemptions resulting from participant-
directed
11
<PAGE>
- -------------------------------------------------------------------------------
switches among investment options within a participant-
directed employer-sponsored retirement plan; and for
redemptions in connection with loans made by qualified
retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because the fund's
net asset value fluctuates, reflecting the market value
of the portfolio, the amount you receive for shares
redeemed may be more or less than the amount paid for
them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
This prospectus has been printed on
[RECYCLE LOGO] recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE FUND TO
BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF THE
FUND AT THE ADDRESS INDICATED ON THE FRONT.
12
<PAGE>
