SEC File Nos.
811-66
2-10758
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 83 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 (X)
AMERICAN BALANCED FUND, INC.
(Exact name of registrant as specified in charter)
P.O. Box 7650, One Market Plaza,
Steuart Tower, Suite 1800, San Francisco, CA 94120
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (415) 421-9360
Patrick F. Quan
Secretary
American Balanced Fund, Inc.
P.0. Box 7650, One Market Plaza, Steuart Tower
San Francisco, California 94120
(Name and address of agent for service)
Copy to:
Robert E. Carlson, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
The Registrant has filed a declaration
pursuant to Rule 24f-2. On
February 22, 1996, it filed its 24f-2
Notice for fiscal 1995.
Approximate date of proposed public offering:
[X] It is proposed that this filing will
become effective on March 1, 1997
pursuant to paragraph (a) of Rule 485.
AMERICAN BALANCED FUND, INC.
Cross Reference Sheet
<TABLE>
<CAPTION>
Item Number Captions in
of Part "A" Prospectus
of Form N-1A (Part "A")
<S> <C> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expenses
3. Condensed Financial Information Financial Highlights;
Investment Results
4. General Description of Registrant Fund Organization
and Management;
Investment Policies and
Risks; Securities and
Investment Techniques
5. Management of the Fund Financial Highlights;
Fund Organization and
Management; Multiple
Portfolio Counselor
System
6. Capital Stock and Other Securities Investment Policies
and Risks; Fund
Organization and
Management; Dividends,
Distributions and Taxes
7. Purchase of Securities Being Offered Purchasing Shares;
Fund Organization and
Management; Other
Important Things to
Remember
8. Redemption or Repurchase Selling Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
Captions in Statement
Item Number of Additional
of Part "B" Information
of Form N-1A (Part "B")
<S> <C> <C> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History None
13. Investment Objectives and Policies Description of Certain
Securities; Fundamental
Policies and Investment
Restrictions
14. Management of the Fund Fund Officers and
Directors
15. Control Persons and Principal Fund Officers and
Holders of Securities Directors; Fund
Organization and
Management (Part "A")
16. Investment Advisory and Other Services Fund Officers and
Directors; Fund
Organization and
Management (Part "A");
General Information;
Management
17. Brokerage Allocation and Other Practices Execution of Portfolio
Transactions; Fund
Organization and
Management (Part "A")
18. Capital Stock and Other Securities None
19. Purchase, Redemption and Pricing Purchase of Shares;
of Securities Being Offered Redeeming Shares;
Shareholder Account
Services and Privileges;
Purchasing Shares (Part
"A"); General Information
20. Tax Status Dividends,
Distributions and Federal
Taxes
21. Underwriter Management; Fund
Organization and
Management (Part "A")
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item in
Part "C"
24. Financial Statements and Exhibits
25. Persons Controlled by or Under Common Control
with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of Investment Adviser
29. Principal Underwriter
30. Location of Accounts and Records
31. Management Services
32. Undertakings
</TABLE>
<PAGE>
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
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American Balanced Fund(R)
Prospectus
MARCH 1, 1997
<PAGE>
AMERICAN BALANCED FUND, INC.
One Market
Steuart Tower, Suite 1800
San Francisco, CA 94105
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Expenses 3
.............................................................................
Financial Highlights 4
.............................................................................
Investment Policies and Risks 5
.............................................................................
Securities and Investment Techniques 6
.............................................................................
Multiple Portfolio Counselor System 9
.............................................................................
Investment Results 10
.............................................................................
Dividends, Distributions and Taxes 11
.............................................................................
Fund Organization and Management 12
.............................................................................
Shareholder Services 15
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</TABLE>
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 presents information you should know before investing in the
fund. You should keep it on file for future reference.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE FUND IS NOT
A DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY ENTITY OR PERSON
INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
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EXPENSES
The effect of the expenses described below is reflected in the fund's share
price or return.
You may pay certain shareholder transaction expenses when you buy or sell
shares of the fund. Fund operating expenses are paid out of the fund's earned
income.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price) 5.75%
</TABLE>
................................................................................
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. There is no sales
charge on reinvested dividends, and no deferred sales charge or redemption or
exchange fees. A contingent deferred sales charge of 1% applies on certain
redemptions made within 12 months following purchases without a sales charge.
FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
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<S> <C>
Management fees 0.31%
................................................................................
12b-1 expenses 0.25%/1/
................................................................................
Other expenses 0.11%
................................................................................
Total fund operating expenses 0.67%
</TABLE>
/1/ 12b-1 expenses may not exceed 0.25% of the fund's average net assets
annually. 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, Inc.
EXAMPLES
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
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<TABLE>
<S> <C>
One year $ 64
................................................................................
Three years $ 78
................................................................................
Five years $ 93
................................................................................
Ten years $136
</TABLE>
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO PURCHASE
SHARES AT A REDUCED OR NO SALES CHARGE.
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AMERICAN BALANCED FUND / PROSPECTUS 3
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<PAGE>
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FINANCIAL HIGHLIGHTS
The following information for the six years ended December 31, 1996 has been
audited by Deloitte & Touche llp, independent auditors, and for the four years
ended December 31, 1990 by KPMG Peat Marwick, independent auditors. This table
should be read together with the financial statements which are included in the
statement of additional information and annual report.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
.......................
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $xxxxx $12.00 $12.57 $12.28 $12.05 $10.32 $11.41 $10.46 $10.13 $10.83
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income xxx .57 .57 .59 .61 .62 .63 .66 .59 .59
...............................................................................................................................
Net realized and
unrealized gain (loss)
on investments xxxx 2.61 (.53) .76 .49 1.86 (.82) 1.54 .68 (.14)
...............................................................................................................................
Total income
from investment
operations xxxx 3.18 .04 1.35 1.10 2.48 (.19) 2.20 1.27 .45
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from
net investment
income xxxxx (.56) (.56) (.60) (.60) (.62) (.63) (.67) (.62) (.67)
...............................................................................................................................
Distributions from
net realized gains xxxxx (.47) (.05) (.46) (.27) (.13) (.27) (.58) (.32) (.48)
...............................................................................................................................
Total distributions xxxxxx (1.03) (.61) (1.06) (.87) (.75) (.90) (1.25) (.94) (1.15)
...............................................................................................................................
Net asset value,
end of year xxxxxx $14.15 $12.00 $12.57 $12.28 $12.05 $10.32 $11.41 $10.46 $10.13
- -------------------------------------------------------------------------------------------------------------------------------
Total return/1/ xxxxxx 27.13% .34% 11.27% 9.48% 24.69% (1.57)% 21.53% 12.87% 4.02%
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
year (in millions) xxxxxx $3,048 $2,082 $1,710 $1,067 $642 $370 $275 $218 $193
...............................................................................................................................
Ratio of expenses
to average net assets xxxx .67% .68% .71% .74% .82% .84% .78% .76% .68%
...............................................................................................................................
Ratio of net
income to average net
assets xxxxx 4.38% 4.76% 4.74% 5.19% 5.56% 5.95% 5.80% 5.54% 5.17%
...............................................................................................................................
Average
commissions
paid per share/2/ xxxxx 6.16c 6.25c 6.82c 7.21c 7.44c 7.62c 7.75c 7.50c 7.17c
...............................................................................................................................
Portfolio turnover rate xxxxxx 39.03% 32.05% 27.81% 17.00% 24.65% 25.51% 37.31% 41.90% 42.00%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Excludes maximum sales charge of 5.75%.
/2/ Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold and are not
reflected in the fund's statement of operations. Shares traded on a
principal basis (without commissions) are excluded.
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4 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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INVESTMENT POLICIES AND RISKS
The fund strives to provide you with conservation of capital, current income
and long-term growth of both capital and income.
The fund's investment objectives are: (1) conservation of capital, (2) current
income, and (3) long-term growth of capital and income. The fund approaches the
management of its investments as if they constituted the complete investment
program of the prudent investor.
The fund invests in a broadly diversified portfolio of securities, including
common stocks, preferred stocks, corporate bonds and U.S. Government
securities. Assets may also be held in cash or cash equivalents. The fund will
maintain at least 25% of the value of its total assets in fixed-income
securities, generally rated in the top four quality categories by Standard &
Poor's Corporation or Moody's Investors Service, Inc. or unrated but determined
to be of equivalent quality by the fund's investment adviser.
The fund's portfolio turnover rate will depend primarily on market conditions.
Short-term trading profits are not the fund's objective and changes in its
investments are generally accomplished gradually, though short-term
transactions may occasionally be made. MORE INFORMATION ON THE FUND'S
INVESTMENT POLICIES IS CONTAINED IN ITS STATEMENT OF ADDITIONAL INFORMATION.
The fund's fundamental investment restrictions (described in the statement of
additional information) and objectives may not be changed without shareholder
approval. All other investment practices may be changed by the fund's board of
directors.
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.
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AMERICAN BALANCED FUND / PROSPECTUS 5
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<PAGE>
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SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES
Equity securities represent an ownership position in a company. These
securities may include common stocks and securities with equity conversion or
purchase rights. 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.
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 values. 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.
The fund may invest in debt securities rated BBB by S&P or Baa by Moody's or
unrated but determined to be of equivalent quality by Capital Research and
Management Company. These securities are considered to have speculative
characteristics.
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.
The fund may invest in notes and bonds issued by the U.S. Treasury and federal
agencies whose interest payments vary with the rate of inflation.
MORTGAGE-RELATED SECURITIES
The fund may invest in Government National Mortgage Association certificates,
which are securities representing part ownership of a pool of mortgage loans on
which timely payment of interest and principal is guaranteed by the U.S.
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6 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity.
Although the mortgage loans in the pool will have stated maturities of up to 30
years, the actual average life or effective maturity of the GNMA certificates
typically will be substantially less because the mortgages will be subject to
normal principal amortization and may be prepaid prior to maturity.
The fund also may invest in securities representing interests in pools of
conventional mortgage loans issued by the Federal National Mortgage Association
(FNMA) or by the Federal Home Loan Mortgage Corporation (FHLMC).
In addition, the fund may invest in collateralized mortgage obligations (CMOs)
and mortgage-backed bonds and interest-only or principal-only STRIPs which may
be issued by various governmental entities or private institutions. A CMO is
made up of a series of bonds of varying maturities that together are fully
collateralized directly or indirectly by a pool of mortgages on which the
payments of principal and interest are dedicated to payment of principal and
interest on the bonds. Mortgage-backed bonds are general obligations fully
collateralized directly or indirectly by a pool of mortgages, but on which
payments are not passed through directly. The fund will only purchase CMOs or
mortgage-backed bonds which are fully collateralized by securities issued by
GNMA, FNMA or FHLMC and/or mortgages insured by GNMA.
INVESTING IN VARIOUS COUNTRIES
The fund will invest no more than 10% of its assets in securities of issuers
that are domiciled outside the U.S. and not included in the Standard & Poor's
500 Composite Index (a broad measure of the U.S. stock market). Investing
outside the U.S. involves special risks, particularly in certain developing
countries, caused by, among other things, fluctuating currency values;
different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political
and social conditions; greater market volatility; differing securities market
structures; and various administrative difficulties such as delays in clearing
and settling portfolio transactions or in receiving payment of dividends.
However, in the opinion of Capital Research and Management Company, investing
outside the U.S. also can reduce certain portfolio risks due to greater
diversification opportunities.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
- --------------------------------------------------------------------------------
AMERICAN BALANCED FUND / PROSPECTUS 7
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<PAGE>
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transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions. The fund currently intends to
limit these investments to those that are U.S. dollar denominated.
FORWARD COMMITMENTS
The fund may enter into commitments to purchase or sell securities at a future
date. When the fund agrees to purchase such securities, it assumes the risk of
any decline in value of the securities beginning on the date of the agreement.
When the fund agrees to sell such securities, it does not participate in
further gains or losses with respect to the securities beginning on the date of
the agreement. If the other party to such a transaction fails to deliver or pay
for the securities, the fund could miss a favorable price or yield opportunity,
or could experience a loss.
The fund also may enter into "roll" transactions which are the sale of GNMA
certificates or other securities together with a commitment to purchase
similar, but not identical, securities at a later date. The fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations as of the time of the agreement.
U.S. PRIVATE PLACEMENTS
Private placements may be either purchased from another institutional investor
that originally acquired the securities in a private placement or directly from
the issuers of the securities. Generally, securities acquired in such 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 reliance upon an exemption from the registration requirements under
the Act (for example, private placements sold pursuant to Rule 144A).
Accordingly, all such private placements will be considered illiquid unless
they have been specifically determined to be liquid taking into account factors
such as the frequency and volume of trading and the commitment of dealers to
make markets under procedures adopted by the fund's board of directors.
Additionally, investing in private placement securities could have the effect
of increasing the level of illiquidity of the fund's portfolio to the extent
that "qualified" institutional investors become, for a period of time,
uninterested in purchasing these securities. The fund will not invest more than
15% of its total assets in illiquid securities.
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8 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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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. Counselors decide how their respective segments will be invested
(within the limits provided by the fund's objective and policies and by Capital
Research and Management Company's investment committee). In addition, Capital
Research and Management Company's research professionals make investment
decisions with respect to a portion of the fund's portfolio. 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
(AND RESEARCH PROFESSIONAL, RESEARCH AND
PORTFOLIO COUNSELORS IF APPLICABLE) FOR AMERICAN MANAGEMENT
FOR AMERICAN BALANCED FUND, INC. COMPANY OR
BALANCED FUND, INC. PRIMARY TITLE(S) (APPROXIMATE) ITS AFFILIATES TOTAL YEARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABNER D. Senior Vice President of 22 years 30 years 45 years
GOLDSTINE the fund. Senior Vice
President and Director,
Capital Research and
Management Company
- -----------------------------------------------------------------------------------------------------------------------
J. DALE Vice President, Capital 1 year 6 years 8 years
HARVEY Research Company+
- -----------------------------------------------------------------------------------------------------------------------
ROBERT G. President of the fund. 11 years (in addition to 22 years 25 years
O'DONNELL Senior Vice President 14 years as a research
and Director, Capital professional prior to
Research and becoming a portfolio
Management Company counselor for the fund)*
- -----------------------------------------------------------------------------------------------------------------------
VICTOR M. Senior Vice President, 1 year** 22 years 35 years
PARACHINI Capital Research and
Management Company
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Capital Research and Management Company has been the fund's investment
adviser since July 26, 1975.
+ 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.
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AMERICAN BALANCED FUND / PROSPECTUS 9
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<PAGE>
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INVESTMENT RESULTS
The fund may from time to time compare investment results to various indices or
other mutual funds. Fund results may be calculated on a total return, yield
and/or distribution rate basis. Results calculated without a sales charge will
be higher.
X TOTAL RETURN is the change in value of an investment in the fund over a given
period, assuming reinvestment of any dividends and capital gain
distributions.
X YIELD is computed by dividing the net investment income per share earned by
the fund over a given period of time by the maximum offering price per share
on the last day of the period, according to a formula mandated by the
Securities and Exchange Commission. A yield calculated using this formula may
be different than the income actually paid to shareholders.
X DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by dividing the dividends paid over the last
12 months by the sum of the month-end price and the capital gain
distributions paid over the last 12 months.
INVESTMENT RESULTS
(FOR PERIODS ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
THE FUND THE FUND AT
AVERAGE ANNUAL AT NET MAXIMUM LEHMAN
TOTAL RETURNS: ASSET VALUE1 SALES CHARGE/1/,/2/ INDEX/3/ S&P 500/4/
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One year 13.16% 6.68% 3.63% 22.90%
................................................................................
Five years 11.95% 10.63% 7.04% 15.18%
................................................................................
Ten years 11.91% 11.25% 8.47% 15.26%
................................................................................
Lifetime/5/ 13.08% 12.77% 9.85%/6/ 14.80%
</TABLE>
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Yield/1/,/2/: 3.64%
Distribution Rate/2/: 3.44%
/1/ These fund results were calculated according to a standard that is required
for all stock and bond funds.
/2/ The maximum sales charge has been deducted.
/3/ Lehman Brothers Aggregate Bond Index represents investment grade debt. This
index is unmanaged and does not reflect sales charges, commissions or
expenses.
/4/ The Standard & Poor's 500 Index represents stocks. This index is unmanaged
and does not reflect sales charges, commission or expenses.
/5/ For the period beginning July 26, 1975 (when Capital Research and Management
Company became the fund's investment adviser).
/6/ Lehman Brothers Aggregate Bond Index did not exist until December 31, 1975.
For the period between July 31, 1975 and December 31, 1975, Lehman Brothers
Corporate Bond Index results were used. The Lehman Brothers indexes are
based on July 31, 1975 index value.
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10 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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[GRAPH APPEARS HERE]
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Past results are not an indication of future results.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund usually pays dividends, which may fluctuate, in February, May, August
and December. Capital gains, if any, are also usually distributed in December.
When a dividend or capital gain is distributed, the net asset value per share
is reduced by the amount of the payment.
FEDERAL TAXES
In any fiscal year in which the fund qualifies as a regulated investment
company and distributes to shareholders all of its net investment income and
net capital gains, the fund itself is relieved of federal income tax.
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash -- unless you are exempt from taxation or
entitled to tax deferral. Early each year, you will be notified as to the
amount and federal tax status of all income distributions paid during the prior
year. Such distributions may also be subject to state or local taxes. The tax
treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
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AMERICAN BALANCED FUND / PROSPECTUS 11
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YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE
FUND TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal law
also requires the fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
This is a brief summary of some of the tax laws that affect your investment in
the fund. Please see the statement of additional information and your tax
adviser for further information.
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FUND ORGANIZATION AND MANAGEMENT
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation in 1932, and reorganized as a Maryland corporation in
1990. All fund operations are supervised by the fund's board of directors who
meet periodically and perform duties required by applicable state and federal
laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in the statement of additional information.
They may elect to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund. The fund does not hold annual
meetings of shareholders. However, significant corporate matters which require
shareholder approval, such as certain elections of board members or a change in
a fundamental investment policy, will be presented to shareholders at a meeting
called for such purpose. Shareholders have one vote per share owned. At the
request of the holders of at least 10% of the shares, the fund will hold a
meeting at which any member of the board could be removed by a majority vote.
THE INVESTMENT ADVISER
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the investment adviser to the fund
and other funds, including those in The American Funds Group. Capital Research
and Management Company, a wholly owned subsidiary of The Capital Group
Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA
90071. Capital Research and Management Company manages the investment portfolio
and business affairs of the fund. The management fee paid by the fund to
Capital Research and Management
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12 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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Company may not exceed 0.42% of the fund's average net assets annually and
declines at certain asset levels. The total management fee paid by the fund, as
a percentage of average net assets, for the previous fiscal year is discussed
earlier under "Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's "code of ethics."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities 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 incurred within the preceding 12 months and accrued while the Plan is
in effect. The 12b-1 fee paid by the fund, as a percentage of average net
assets, for the previous fiscal year is discussed earlier under "Expenses."
PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by Capital
Research and Management Company, which strives to obtain the best available
prices, taking into account the costs and quality of executions. Fixed-income
securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed price which includes an
amount of compensation to the dealer, generally referred to as a concession or
discount. On occasion, securities may be purchased directly from an issuer, in
which case no commissions or discounts are paid. In the over-the-counter
market, 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 who
have sold shares of the fund or have provided investment research, statistical,
and other related services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
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AMERICAN BALANCED FUND / PROSPECTUS 13
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<PAGE>
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PRINCIPAL UNDERWRITER AND TRANSFER AGENT
American Funds Distributors, Inc. and American Funds Service Company serve as
the principal underwriter and transfer agent for the fund, respectively. They
are headquartered at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821, respectively.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
[MAP OF THE UNITED STATES APPEAR HERE]
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14 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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SHAREHOLDER SERVICES
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services,
which are summarized below, are available only in states where they may be
legally offered and may be terminated or modified at any time upon 60 days'
written notice. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT
POLICIES IS CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. In
addition, an easy-to-read guide to owning a fund in The American Funds Group
titled "Welcome to the Family" is sent to new shareholders and is available by
writing or calling American Funds Service Company.
THE SERVICES DESCRIBED MAY NOT BE AVAILABLE THROUGH SOME RETIREMENT PLANS. IF
YOU ARE INVESTING THROUGH A RETIREMENT PLAN, YOU SHOULD CONTACT YOUR PLAN
ADMINISTRATOR/TRUSTEE ABOUT WHAT SERVICES ARE AVAILABLE AND WITH QUESTIONS
ABOUT YOUR ACCOUNT.
- --------------------------------------------------------------------------------
PURCHASING SHARES
HOW TO PURCHASE SHARES
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may add to your account through your
dealer or directly through American Funds Service Company by mail, wire, or
bank debit. You may also establish or add to your account by exchanging shares
from any of your other accounts in The American Funds Group. The fund and
American Funds Distributors reserve the right to reject any purchase order.
Various purchase options are available as described below subject to certain
investment minimums and limitations described in the statement of additional
information and "Welcome to the Family."
X Automatic Investment Plan
You may invest monthly or quarterly through automatic withdrawals from your
bank account.
X Automatic Reinvestment
You may reinvest your dividends and capital gain distributions into the fund
(with no sales charge). This will be done automatically unless you elect to
have the dividends and/or capital gain distributions paid to you in cash.
- --------------------------------------------------------------------------------
AMERICAN BALANCED FUND / PROSPECTUS 15
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<PAGE>
================================================================================
X Cross-Reinvestment
You may invest your dividends and capital gain distributions into any other
fund in The American Funds Group.
X Exchange Privilege
You may exchange your shares into other funds in The American Funds Group
generally with no sales charge. Exchanges of shares from the money market
funds that were initially purchased with no sales charge will generally be
subject to the appropriate sales charge. You may also elect to automatically
exchange shares among any of the funds in The American Funds Group. Exchange
requests may be made in writing, by telephone including American
FundsLine(R) (see below) or by fax. EXCHANGES HAVE THE SAME TAX CONSEQUENCES
AS ORDINARY SALES AND PURCHASES.
X Retirement Plans
You may invest in the fund through various retirement plans. For further
information contact your investment dealer or American Funds Distributors.
SHARE PRICE
The fund's share price, also called net asset value, is determined as of the
close of trading (normally 4:00 p.m., Eastern time) every day the New York
Stock Exchange is open. The fund calculates its net asset value per share,
generally using market prices, by dividing the total value of its assets after
subtracting liabilities by the number of its shares outstanding. Shares are
purchased at the offering price next determined after your investment is
received and accepted by American Funds Service Company. The offering price is
the net asset value plus a sales charge, if applicable.
SHARE CERTIFICATES
Shares are credited to your account and certificates are not issued unless you
request them by writing to American Funds Service Company.
INVESTMENT MINIMUMS
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
To establish an account $500
For a retirement plan account $250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account $ 25
</TABLE>
- --------------------------------------------------------------------------------
16 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
================================================================================
SALES CHARGES
A sales charge may apply, as described below, when purchasing shares. Sales
charges may be reduced for larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
....................... DEALER
NET CONCESSION AS
OFFERING AMOUNT % OF OFFERING
INVESTMENT PRICE INVESTED PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
................................................................................
$50,000 but less than $100,000 4.50% 4.71% 3.75%
................................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
................................................................................
$500,000 but less than $1 million 2.00% 2.04% 1.60%
................................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 200 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF PURCHASE BY THESE
ACCOUNTS. A dealer concession of up to 1% may be paid by the fund from its Plan
of Distribution on these investments. Investments by retirement plans,
foundations or endowments with $50 million or more in assets may be made with
no sales charge and are not subject to a contingent deferred sales charge. A
dealer concession of up to 1% may be paid by American Funds Distributors on
these investments. Investments by certain individuals and entities including
employees and other associated persons of dealers authorized to sell shares of
the fund and Capital Research and Management Company and its affiliated
companies are not subject to a sales charge.
- --------------------------------------------------------------------------------
AMERICAN BALANCED FUND / PROSPECTUS 17
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDITIONAL DEALER COMPENSATION
In addition to the concessions listed, up to 0.25% of average net assets is
paid annually to qualified dealers for providing certain services pursuant to
the fund's Plan of Distribution. During 1997, American Funds Distributors will
also provide additional compensation to the top one hundred dealers who have
sold shares of funds in The American Funds Group based on the pro rata share of
a qualifying dealer's sales.
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 know if you
qualify for a reduction in your sales charge using one or any combination of
the methods described below.
X Aggregation
Investments that may be aggregated include those made by you, your spouse
and your children under the age of 21, if all parties are purchasing shares
for their own account(s), including any business account solely "controlled
by," as well as any retirement plan or trust account solely for the benefit
of, these individuals. Investments made for multiple employee benefit plans
of a single employer or "affiliated" employers may be aggregated provided
they are not also aggregated with individual accounts. Finally, investments
made by a common trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating fund shares may be
aggregated.
Purchases made for nominee or street name accounts will generally not be
aggregated with those made for other accounts unless qualified as described
above.
X Concurrent Purchases
You may combine concurrent purchases of two or more funds in The American
Funds Group, except direct purchases of the money market funds. Shares of
the money market funds purchased through an exchange, reinvestment or cross-
reinvestment from a fund having a sales charge do qualify.
X Right of Accumulation
You may take into account the current value of your existing holdings in The
American Funds Group to determine your sales charge. Direct purchases of the
money market funds are excluded.
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18 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
================================================================================
X Statement of Intention
You may enter into a non-binding commitment to invest a certain amount
(which, at your request, may include purchases made during the previous 90
days) in non-money market fund shares over a 13-month period. A portion of
your account may be held in escrow to cover additional sales charges which
may be due if your total investments over the statement period are
insufficient to qualify for the applicable sales charge reduction.
- --------------------------------------------------------------------------------
SELLING SHARES
HOW TO SELL SHARES
You may sell (redeem) shares in your account by contacting your investment
dealer or American Funds Service Company. You may also use American
FundsLine(R) (see below). In addition, you may sell shares in amounts of $50 or
more automatically. If you sell shares through your investment dealer you may
be charged for this service. Shares held for you in your dealer's street name
must be sold through the dealer.
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. Sale requests may be
made in writing, by telephone, including American FundsLine(R) (see below), or
by fax. Sales by telephone or fax are limited to $10,000 in accounts registered
to individual(s) (including non-retirement trust accounts). In addition, checks
must be made payable to the registered shareholder(s) and mailed to an address
of record that has been used with the account for at least 10 days. 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. The fund may, with 60
days' written notice, close your account if due to a sale of shares the account
has a value of less than the minimum required initial investment.
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your
signature must be guaranteed by a bank, savings association, credit union, or
member firm of a domestic stock exchange or the National Association of
Securities Dealers, Inc., that is an eligible guarantor institution. A
signature guarantee is not currently required for any sale of $50,000 or less
provided the check is made
- --------------------------------------------------------------------------------
AMERICAN BALANCED FUND / PROSPECTUS 19
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
payable to the registered shareholder(s) and is mailed to the address of record
on the account, and provided the address has been used with the account for at
least 10 days. Additional documentation may be required for sales of shares
held in corporate, partnership or fiduciary accounts.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge in any fund in The American Fund Group
within 90 days after the date of the redemption or distribution. Reinvestment
will be at the next calculated net asset value after receipt and acceptance by
American Funds Service Company.
- --------------------------------------------------------------------------------
OTHER IMPORTANT THINGS TO REMEMBER
AMERICAN FUNDSLINE(R)
You may check your share balance, the price of your shares, or your most recent
account transactions, sell shares (up to $10,000 per fund, per account each
day), or exchange shares around the clock with American FundsLine(R). To use
this service, call 800/325-3590 from a TouchTone(TM) telephone.
TELEPHONE PURCHASES, SALES AND EXCHANGES
Unless you opt out of the telephone (including American FundsLine(R)) or fax
purchase, sale and/or exchange options (see below), 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 provided American Funds Service Company employs reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine. If reasonable procedures are not
employed, the fund may be liable for losses due to unauthorized or fraudulent
instructions.
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 to
American Funds Service Company.)
ACCOUNT STATEMENTS
You will receive regular confirmation statements reflecting transactions in
your account. Purchases through automatic investment plans and certain
retirement plans will be confirmed at least quarterly.
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20 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
================================================================================
NOTES
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AMERICAN BALANCED FUND / PROSPECTUS 21
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<PAGE>
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NOTES
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22 AMERICAN BALANCED FUND / PROSPECTUS
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<PAGE>
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NOTES
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AMERICAN BALANCED FUND / PROSPECTUS 23
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR SHAREHOLDER FOR DEALER FOR 24-HOUR
SERVICES SERVICES INFORMATION
<S> <C> <C>
American Funds American Funds American
Service Company Distributors FundsLine(R)
800/421-0180 ext. 1 800/421-9900 ext. 11 800/325-3590
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
- --------------------------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL STATEMENT OF ADDITIONAL
REPORT TO SHAREHOLDERS INFORMATION (SAI)
Includes financial Contains more detailed
statements, detailed information on all aspects
performance information, of the fund, including the
portfolio holdings, a fund's financial statements.
statement from portfolio
management and the
independent auditor's report.
A current SAI has been filed
CODE OF ETHICS with the Securities and
Exchange Commission and is
Includes a description of the fund's incorporated by reference
personal investing policy. (is legally part of the
prospectus).
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary
Service Company 800/421-0180 of the fund
ext. 1 P.O. Box 7650
San Francisco, CA 94120
- --------------------------------------------------------------------------------
This prospectus has been printed on recycled paper.
[LOGO]
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24 AMERICAN BALANCED FUND / PROSPECTUS
- --------------------------------------------------------------------------------
AMERICAN BALANCED FUND, INC.
Part B
Statement of Additional Information
MARCH 1, 1997
This document is not a prospectus but should be read in conjunction with the
current Prospectus of American Balanced Fund, Inc. (the fund or AMBAL) dated
March 1, 1997. The Prospectus may be obtained from your investment dealer or
financial planner or by writing to the fund at the following address:
American Balanced Fund, Inc.
Attention: Secretary
One Market, Steuart Tower
P.O. Box 7650
San Francisco, CA 94120
Telephone: (415) 421-9360
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.
DESCRIPTION OF CERTAIN SECURITIES 1
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS 3
FUND OFFICERS AND DIRECTORS 6
MANAGEMENT 10
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 12
PURCHASE OF SHARES 15
REDEEMING SHARES 21
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 22
EXECUTION OF PORTFOLIO TRANSACTIONS 24
GENERAL INFORMATION 24
INVESTMENT RESULTS 25
FINANCIAL STATEMENTS ATTACHED
DESCRIPTION OF CERTAIN SECURITIES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Policies and Risks."
BOND RATINGS - The fund may invest in debt securities which are rated in the
top four quality categories by any national rating service (or unrated but
determined to be of equivalent quality by Capital Research and Management
Company) including bonds rated at least BBB by Standard & Poor's Corporation or
Baa by Moody's Investors Service, Inc. (see below). Although the fund is not
normally required to dispose of a security in the event that its rating is
reduced below the current minimum rating required for its purchase (or it is
not rated and its quality becomes equivalent to such a security), if, as a
result of a downgrade or otherwise, the fund holds more than 5% of its net
assets in these securities (also known as "high-yield, high-risk securities"),
the fund will dispose of the excess as expeditiously as possible.
Standard & Poor's Corporation: "AAA", "AA", "A" and "BBB" are the four highest
bond rating categories, and 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 a small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions, than debt in higher categories."
"Debt rated 'BBB' is regarded as having capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and pay principal than for debt in
higher rated categories."
Moody's Investors Service, Inc.: "Aaa", "Aa", "A" and "Baa" are the four
highest bond rating categories, and are described as follows:
"Bonds 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 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 rated A are judged to be of upper medium grade obligations. These bonds
possess many favorable investment attributes. 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."
"Bonds rated Baa are judged to be of medium grade obligations. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well."
CASH AND CASH EQUIVALENTS - These securities include (1) commercial paper
(short-term notes issued by corporations or governmental bodies), (2)
commercial bank obligations (E.G., certificates of deposit (interest bearing
time deposits), and bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) , (3)
savings association and savings bank obligations (E.G., certificates of deposit
issued by savings banks or savings associations), (4) securities of the U.S.
Government, its agencies or instrumentalities that mature, at the time of
purchase, or may be redeemed, in one year or less, and (5) corporate bonds and
notes that mature, at the time of purchase, or that may be redeemed, in one
year or less.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or
sell securities at a future date. When a fund purchases such securities it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When a fund sells such securities it does not participate in
further gains or losses with respect to such securities beginning on the date
of the agreement. If the other party to such a transaction fails to deliver
or pay for the securities, the fund could miss a favorable price or yield
opportunity or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly may increase. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its
payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets , the fund
temporarily could be in a leveraged position (because it will have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets would likely occur than were
it not in such a position. The fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.
The fund also may enter into "roll" transactions, which consist of the sale
of GNMA certificates or other securities together with a commitment to purchase
similar, but not identical, securities at a future date. The fund intends to
treat roll transactions as two separate transactions: one involving the
purchase of a security and a separate transaction involving the sale of a
security. Since the fund does not intend to enter into roll transactions for
financing purposes, it may treat these transactions as not falling within the
definition of "borrowing" set forth in Section 2(a)(23) of the Investment
Company Act of 1940.
PREFERRED STOCKS - The fund may invest in preferred stocks. Preferred
stocks generally have characteristics similar to debt securities with a stated
dividend rate akin to the coupon of a bond or note. The prices and yields of
preferred stocks generally move with changes in interest rates and the issuers'
credit quality, similar to the factors affecting debt securities. In the event
of a liquidation of a corporation's assets, holders of debt securities are
entitled to payment before preferred stockholders; but preferred stockholders
are generally entitled to payment before common stockholders.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
The fund has adopted certain fundamental policies and investment restrictions
which cannot be changed without shareholder approval. (Approval requires the
affirmative vote of 67% or more of the voting securities present at a meeting
of shareholders, provided more than 50% of such securities are represented at
the meeting or the vote of more than 50% of the outstanding voting securities,
whichever is less.)
1. To invest in a diversified list of securities, including common stocks,
preferred stocks, and bonds, to the extent considered advisable by management.
2. To allocate its investments among different industries as well as among
individual companies. The amount invested in an industry will vary from time
to time in accordance with the judgment of management, but 25% or more of the
value of the fund's total assets shall not be invested in securities of issuers
in any one industry (other than securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities).
3. Not to invest in companies for the purpose of exercising control or
management.
4. Not to invest more than 5% of the value of its total assets in the
securities of any one issuer (except the U.S. Government).
5. Not to acquire more than 10% of the outstanding voting securities, or 10% of
all of the securities, of any one issuer.
6. Not to borrow more than 5% of the gross assets of the fund taken at cost or
at value, whichever is lower, and to borrow only from banks and as a temporary
measure for extraordinary or emergency purposes. The fund shall not mortgage,
pledge, hypothecate, or in any other manner transfer as security for any
indebtedness, any of its assets.
7. Not to underwrite the sale, or participate in any underwriting or selling
group in connection with the public distribution, of any security. The fund
may invest not more than 10% of its net assets in, and subsequently distribute,
as permitted by law, securities and other assets for which there is no ready
market.
8. Not to purchase securities on margin (except that it may obtain such
short-term credits as may be necessary for the clearance of purchases or sales
of securities).
9. Not to engage in the purchase or sale of real estate. Investments in real
estate investment trusts which may invest only in mortgages or other security
interests are not deemed purchases of real estate.
10. Not to purchase or sell commodities or commodity contracts.
11. Not to participate on a joint or a joint and several basis in any trading
account in securities. (The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of the
Investment Adviser to save brokerage costs or average prices among them is not
deemed to result in a securities trading account.)
12. Not to make loans of money or securities to any person or firm; provided,
however, that the acquisition for investment of bonds, debentures, notes or
other evidences of indebtedness of any corporation or government shall not be
construed to be the making of a loan.
13. Not to effect short sales of securities.
14. Not to purchase from or sell securities to the Investment Adviser or the
Principal Underwriter or their officers or directors, the fund's officers or
directors, and any companies of which they are affiliates, except in connection
with (i) an exercise of rights concerning securities owned by the fund, (ii)
the reorganization, recapitalization, consolidation or merger of a company
whose securities are owned by the fund, (iii) a transaction in fund shares, or
(iv) a permitted transaction with other investment companies advised by the
Investment Adviser.
15. Not to knowingly invest in securities of other managed investment
companies, or, in any event, invest in securities of managed registered
investment companies, except in connection with a merger, consolidation,
acquisition of assets or other reorganization approved by the fund's
shareholders.
16. Not to invest more than 75% of the value of the fund's net assets in common
stocks, such percentage including the value of that portion of convertible
securities attributable to the conversion feature.
17. Not to purchase or retain the securities issued by a corporation any of
whose officers, directors or shareholders is an officer or director of the fund
or the Investment Adviser if, after such purchase, one or more of such officers
and directors owning beneficially more than 1/2 of 1% of the securities of such
corporation together own beneficially more than 5% of such securities.
18. Not to write, purchase or sell options.
For purposes of Investment Restriction #7, restricted securities are treated as
not readily marketable by the fund, with the exception of those securities that
have been determined to be liquid pursuant to procedures adopted by the fund's
Board of Directors. Notwithstanding Investment Restriction #15, 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.
Although not fundamental policies, the fund has further agreed that it will not
invest more than 5% of the value of the fund's net assets in warrants, valued
at the lower of cost or market, with no more than 2% being unlisted on the New
York or American Stock Exchanges (warrants acquired by the fund in units or
attached to securities may be deemed to be without value); or invest in oil,
gas or other mineral leases.
FUND OFFICERS AND DIRECTORS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
AND AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS ON
(POSITIONS DEFERRED DEFERRED WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION) DIRECTOR
ORGANIZATIONS FROM THE FROM ALL SERVES/3/
LISTED MAY HAVE FUND DURING FUNDS MANAGED
CHANGED DURING FISCAL BY CAPITAL
THIS PERIOD) YEAR ENDED RESEARCH AND
12/31/96 MANAGEMENT
COMPANY/2/
FOR THE YEAR
ENDED
12/31/96
<S> <C> <C> <C> <C> <C>
Robert A. Fox Director President and 5
P.O. Box 457 Chief Executive $10,650/4/ $81,750/4/
1000 Davis Officer, Foster
Street Farms Inc.
Livingston, CA Former
95334 President,
Age: 59 Revlon
International.
Roberta L. Director Consultant; $10,350 $43,650 3
Hazard Rear Admiral,
1419 Audmar United
Drive States Navy
McLean, VA (Retired).
22101
Age: 62
Leonade D. Director Former 5
Jones Treasurer, The $10,650/4/ $74,600/4/
1536 Los Washington Post
Montes Drive Company.
Burlingame, CA
94010
Age: 49
John G. Director The IBJ 7
McDonald Professor of $14,200/4/ $153,800/4/
Graduate Finance,
School of Graduate School
Business of Business,
Stanford Stanford
University University.
Stanford, CA
94305
Age: 59
Theodore D. Director Private $9,750 3
Nierenberg investor; $41,850
15 Middle former
Patent Road President,
Armonk, NY Dansk
10504 International
Age: 73 Designs, Ltd.
***+James W. Director Senior Partner, None/5/ 8
Ratzlaff The Capital None/5/
Age: 60 Group Partners
L.P.
Henry E. Riggs Director President and 5
Kingston Hall Professor of $13,300/4/ $79,500/4/
201 Engineering,
Harvey Mudd Harvey Mudd
College College.
Claremont, CA
91711
Age: 62
+Walter P. Chairman Chairman, None/5/ 8
Stern of the Capital Group None/5/
630 Fifth Board International,
Avenue Inc.; Vice
New York, NY Chairman,
10111 Capital
Age: 68 Research
International;
Chairman,
Capital
International,
Inc.; Director,
Temple-Inland
Inc.
(forest
products).
Patricia K. Director Private $13,600 $82,050 5
Woolf investor;
506 Quaker Lecturer,
Road Department of
Princeton, NJ Molecular
08540 Biology,
Age: 62 Princeton
University.
</TABLE>
+ "Interested persons" within the meaning of the Investment Company Act of 1940
(the 1940 Act) on the basis of their affiliation with the fund's Investment
Adviser, Capital Research and Management Company or the parent of the
Investment Adviser, The Capital Group Companies, Inc.
/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., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicle for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Includes funds managed by Capital Research and Management Company and
affiliates.
/4/ Since the plan's adoption, the total amounts of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors are as
follows: Robert A. Fox ($77,517), Leonade D. Jones ($23,892), John G.
McDonald ($34,507) and Henry E. Riggs ($38,205). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Director.
/5/ James W. Ratzlaff and Walter P. Stern are affiliated with the Investment
Adviser and, accordingly, receive no compensation from the fund.
OFFICERS
(with their principal occupations for the past five years)#
WALTER P. STERN, Chairman of the Board.
Fund officers whose other positions are not described above are:
ROBERT G. O'DONNELL /3/, President. Senior Vice President and Director,
Capital Research and Management Company.
ABNER D. GOLDSTINE /4/, Senior Vice President. Senior Vice President and
Director, Capital Research and Management Company.
PAUL G. HAAGA, JR. /1/, Senior Vice President; Executive Vice President and
Director, Capital Research and Management Company; Director, American Funds
Service Company.
STEVEN N. KEARSLEY /2/, Vice President. Vice President and Treasurer, Capital
Research and Management Company; Director, American Funds Service Company.
ERIC S. RICHTER /5/, Vice President. Vice President, Investment Management
Group, Capital Research and Management Company.
PATRICK F. QUAN /3/, Secretary. Vice President, Fund Business Management
Group, Capital Research and Management Company.
MARY C. HALL /2/, Treasurer. Senior Vice President, Fund Business Management
Group, Capital Research and Management Company.
R. MARCIA GOULD /2/, Assistant Treasurer; Vice President, Fund Business
Management Group, Capital Research and Management Company.
_________________
# Positions within the organizations listed may have changed during this
period.
/1/ Address is 333 South Hope Street, Los Angeles, CA 90071.
/2/ Address is 135 South State College Boulevard, Brea, CA 92821.
/3/ P.O. Box 7650, San Francisco, CA 94120.
/4/ 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
/5/ 3000 K Street, N.W., Suite 230, Washington, D.C. 20007.
All of the directors and officers, except for Mr. Richter, are also officers
and/or directors and/or trustees of one or more of the other funds for which
Capital Research and Management Company serves as Investment Adviser. No
compensation is paid by the fund to any officer or director who is a director,
officer or employee of the Investment Adviser or affiliated companies. The
fund pays fees of $5,500 per annum to directors who are not affiliated with the
Investment Adviser, plus $700 for each Board of Directors meeting attended,
plus $300 for each meeting attended as a member of a committee of the Board of
Directors. 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. The fund also reimburses certain expenses of the directors who are not
affiliated with the Investment Adviser. As of December 31, 1996 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.
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 1135 South College Boulevard, Brea, CA 92821. The
Investment Adviser's research professionals travel several million miles a
year, making more than 5,000 research visits in more than 50 countries around
the world. The Investment Adviser believes that it is able to attract and
retain quality personnel.
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 $100 billion of
stocks, bonds and money market instruments and serves over five 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,
dated July 1, 1993, and approved by the shareholders on June 22, 1993, shall be
in effect until the close of business on November 30, 1997 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 said Act) of any such party, cast in person, at a meeting called for
the purpose of voting on such approval. Renewal of the Agreement was approved
by the unanimous vote of the Board of Directors of the fund on October 23, 1996
through November 30, 1997. 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 Advisory Agreement automatically terminates in the
event of its assignment (as defined in said Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, and provides 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, stock
transfer and dividend disbursing fees and expenses; costs of the designing,
printing and mailing of reports, prospectuses, proxy statements, and notices to
its shareholders; taxes; expenses of the issuance and redemption of shares of
the fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plan of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; and costs
of stationery and forms prepared exclusively for the fund.
Capital Research and Management Company receives a management 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.
The Agreement provides for an advisory fee reduction to the extent that the
fund's annual ordinary operating expenses exceed 1-1/2% of the first $30
million of the average net assets of the fund and 1% of the average net assets
in excess thereof. Expenses which are not subject to this limitation are
interest, taxes, and extraordinary expenses. Expenditures, including costs
incurred in connection with the purchase or sale of portfolio securities, which
are capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses.
During the years ended December 31, 1996, 1995 and 1994, the Investment
Adviser received from the fund advisory fees of $10,835,000, $8,091,000 and
$6,234,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (described
below) and commissions consisting of that portion of the sales charge remaining
after the discounts which it allows to investment dealers. Commissions
retained by the Principal Underwriter on sales of fund shares during the year
ended December 31, 1996 amounted to $2,545,000 after allowance of $12,512,000
to dealers. During the years ended December 31, 1995 and 1994, the Principal
Underwriter retained $1,918,000 and $1,508,000, after allowance of $9,904,000
and $8,038,000 to dealers, respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the 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. The
Plan is reviewed quarterly and must be renewed annually by the Board of
Directors.
Under the Plan the fund may expend up to 0.25% of its net assets annually to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Directors has approved the category of
expenses for which payment is being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a "401(k)" plan with 200
or more eligible employees). Only expenses incurred during the preceding 12
months and accrued while the Plan is in effect may be paid by the fund. During
the year ended December 31, 1996, the fund paid or accrued $8,808,000 for
compensation to dealers 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
The fund intends to meet all the requirements, and has elected the tax status
of a "regulated investment company," under the provisions of Subchapter M of
the Internal Revenue Code of 1986 (the Code). Under Subchapter M, if the fund
distributes within specified times at least 90% of its investment company
taxable income, it will be taxed only on that portion of such investment
company taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
gains or sale or other disposition of stock or securities held less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities (but such other
securities must be limited, in respect of any one issuer, to an amount not
greater than 5% of the fund's assets and 10% of the outstanding voting
securities of such issuer), and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
for the year. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
The fund also intends to continue distributing to shareholders all of the
excess of net long-term capital gain over net short-term capital loss on sales
of securities. If the net asset value of shares of the fund should, by reason
of a distribution of realized capital gains, be reduced below a shareholder's
cost, such distribution would to that extent be a return of capital to that
shareholder even though taxable to the shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that the fund pays the dividend no later
than the end of January of the following year.
Corporate shareholders of the fund may be eligible for the
dividends-received deduction on the dividends (excluding the net capital gain
distributions) paid by the fund to the extent that the fund's income is derived
from dividends (which, if received directly, would qualify for such deduction)
received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the fund shares
paying the dividends upon which the deduction is based for at least 46
days.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are re-acquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
The fund may be required to pay withholding and other taxes imposed by foreign
countries generally at rates from 10% to 40% which would reduce the fund's
investment income. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Not more than 50% of the total
assets of the fund is expected to consist of securities of foreign issuers.
Therefore, the fund will not be eligible to elect to "pass through" foreign tax
credits to shareholders and, to the extent the fund does pay foreign
withholding or other foreign taxes on investments in foreign securities,
shareholders will not be able to deduct their pro rata share of such taxes in
computing their taxable income and will not be able to take their share of such
taxes as a credit against their U.S. income taxes.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign
partnership (a foreign shareholder) will be subject to U.S. withholding tax (at
a rate of 30% or lower treaty rate). Withholding will not apply if a dividend
paid by the fund to a foreign shareholder is "effectively connected" with a
U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents, or domestic
corporations will apply. Distributions of net long-term capital gains not
effectively connected with a U.S. trade or business are not subject to tax
withholding, but in the case of a foreign shareholder who is a nonresident
alien individual, such distributions ordinarily will be subject to U.S. income
tax at a rate of 30% if the individual is physically present in the U.S. for
more than 182 days during the taxable year.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28%; and the maximum corporate tax applicable to ordinary
income and net capital gains is 35%. However, to eliminate the benefit of
lower marginal corporate income tax rates, corporations which have taxable
income in excess of $100,000 for a taxable year will be required to pay an
additional amount of tax of up to $11,750 and corporations which have taxable
income in excess of $15,000,000 for a taxable year will be required to pay an
additional amount of tax of up to $100,000. Naturally, the amount of tax
payable by a shareholder with respect to either distributions from the fund or
disposition of fund shares will be affected by a combination of tax law rules
covering, E.G., deductions, credits, deferrals, exemptions, sources of income
and other matters. Under the Code, an individual is entitled to establish an
IRA each year (prior to the tax return filing deadline for the year) whereby
earnings on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Investors are urged to consult their tax advisers with
specific reference to their own tax situations.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
By contacting your Visit any investment dealer who Mail directly to your investment
investment dealer is registered in the state dealer's address printed on your
where the purchase is made and account statement.
who has a sales agreement with
American Funds Distributors.
By mail Make your check payable to the Fill out the account additions form
fund and mail to the address at the bottom of a recent account
indicated on the account statement, make your check payable
application. Please indicate to the fund, write your account
an investment dealer on the number on your check, and mail
account application. the check and form in the envelope
provided with your account
statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then section on the account application
follow the procedures for or American FundsLink Authorization
additional investments. Form.
Once you establish the privilege,
you, your financial advisor or any
person with your account
information can call American
FundsLine(r) and make investments
by telephone (subject to conditions
noted in "Telephone Purchases,
Sales and Exchanges" in the
prospectus).
By wire Call 800/421-0180 to obtain Your bank should wire your additional investments in the same
your account number(s), if manner as described under "Initial
necessary. Please 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) 02
$1,000
American Balanced Fund(r) 11
500
American Mutual Fund(r) 03
250
Capital Income Builder(r) 12
1,000
Capital World Growth and Income Fund(sm) 33
1,000
EuroPacific Growth Fund(r) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(r) 05
1,000
The Income Fund of America(r) 06
1,000
The Investment Company of America(r) 04
250
The New Economy Fund(r) 14
1,000
New Perspective Fund(r) 07
250
SMALLCAP World Fund(r) 35
1,000
Washington Mutual Investors Fund(sm) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(r) 40
1,000
American High-Income Trust(sm) 21
1,000
The Bond Fund of America(sm) 08
1,000
Capital World Bond Fund(r) 31
1,000
Intermediate Bond Fund of America(sm) 23
1,000
Limited Term Tax-Exempt Bond Fund of America(sm) 43
1,000
The Tax-Exempt Bond Fund of America(r) 19
1,000
The Tax-Exempt Fund of California(r)* 20
1,000
The Tax-Exempt Fund of Maryland(r)* 24
1,000
The Tax-Exempt Fund of Virginia(r)* 25
1,000
U.S. Government Securities Fund(sm) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 09
2,500
The Tax-Exempt Money Fund of America(sm) 39
2,500
The U.S. Treasury Money Fund of America(sm) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
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
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10%
5.75% 5.00%
$50,000 but less than $100,000 4.71
4.50 3.75
BOND FUNDS
Less than $25,000 4.99
4.75 4.00
$25,000 but less than $50,000 4.71
4.50 3.75
$50,000 but less than $100,000 4.17
4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 3.63
3.50 2.75
$250,000 but less than $500,000 2.56
2.50 2.00
$500,000 but less than $1,000,000 2.04
2.00 1.60
$1,000,000 or more none (see below)
none
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1997, 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.
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 purchaser investing at least
$1 million in shares of the fund (or in combination with shares of other funds
in The American Funds Group other than the money market funds) may purchase
shares at net asset value; however, a contingent deferred sales charge of 1% is
imposed on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.") Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans of organizations with retirement plan assets of $100
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the Statement)
terms. The Statement is not a binding obligation to purchase the indicated
amount. When a shareholder elects to utilize the Statement in order to qualify
for a reduced sales charge, shares equal to 5% of the dollar amount specified
in the Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by 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 within 45 days after written request by
the Principal Underwriter or the securities dealer, the appropriate number of
shares held in escrow will be redeemed to pay such difference. If the proceeds
from this redemption are inadequate, the purchaser will be liable to the
Principal Underwriter for the balance still outstanding. The Statement may be
revised upward at any time during the 13-month period, and such a revision will
be treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or 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.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In case of orders sent directly to the fund or American Funds
Service Company, 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 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. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The net
asset value per share is determined as follows:
1. Stocks, and convertible bonds and debentures, traded on a national
securities exchange (or reported on the NASDAQ national market) and securities
traded in the over-the-counter market stated at the last reported sales price
on such exchange on the day of valuation; other securities, and securities for
which no sale was reported on that date, are stated at the last-quoted bid
price. Non-convertible bonds and debentures, and other long-term debt
securities normally are valued at prices obtained for the day of valuation from
a bond pricing service provided by a major dealer in bonds, 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 of their
representative quoted bid and asked prices or, if such prices are not
available, at the mean of such prices for securities of comparable maturity,
quality, and type. U.S. Treasury bills, and other short-term obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
certificates of deposit issued by banks, corporate short-term notes and other
short-term investments with original or remaining maturities in excess of 60
days are valued at the mean of representative quoted bid and asked prices for
such securities or, if such prices are not available, for securities of
comparable maturity, quality and type. Short-term securities with 60 days or
less to maturity are amortized to maturity based on their cost to the fund if
acquired within 60 days of maturity or, if already held by the fund on the 60th
day, based on the value determined on the 61st day. Other securities are
valued on the basis of last sale or bid prices in what is, in the opinion of
the Investment Adviser, the broadest and most representative market, which may
be either a securities exchange or the over-the-counter market. Where
quotations are not readily available, securities are valued at fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
The fair value of all other assets is added to the value of securities to
arrive at the total assets;
2. There are deducted from total assets, thus determined, the liabilities,
including proper accruals of taxes and other expense items; and
3. The value of the net assets so obtained is then divided by the total number
of shares outstanding, and the result, rounded to the nearer cent, is the net
asset value per share.
Redeeming Shares
<TABLE>
<CAPTION>
<S> <C>
By writing to American Funds Send a letter of instruction specifying the name of
Service Company (at the appropriate the fund, the number of shares or dollar amount to
address indicated under "Principal be sold, your name and account number. You should
Underwriter and Transfer Agent" in the also enclose any share certificates you wish to
prospectus) redeem. For redemptions over $50,000 and for
certain redemptions of $50,000 or less (see below),
your signature must be guaranteed by a bank,
savings association, credit union, or member firm
of a domestic stock exchange or the National
Association of Securities Dealers, Inc. that is an
eligible guarantor institution. You should verify
with the institution that it is an eligible
guarantor prior to signing. Additional
documentation may be required for redemption of
shares held in corporate, partnership or fiduciary
accounts. Notarization by a Notary Public is not
an acceptable signature guarantee.
By contacting your investment dealer If you redeem shares through your investment
dealer, you may be charged for this service.
SHARES HELD FOR YOU IN YOUR INVESTMENT DEALER'S
STREET NAME MUST BE REDEEMED THROUGH THE DEALER.
You may have a redemption check sent You may use this option, provided the account is
to you by using American FundsLine(r) registered in the name of an individual(s), a
or by telephoning, faxing, or UGMA/UTMA custodian, or a non-retirement plan
telegraphing American Funds Service trust. These redemptions may not exceed $10,000
Company (subject to the conditions per day, per fund account and the check must be
noted in this section and in made payable to the shareholder(s) of record and be
"Telephone Purchases, Sales and sent to the address of record provided the address
Exchanges" in the prospectus) has been used with the account for at least 10
days. See "Principal Underwriter and Transfer
Agent" in the prospectus and "Exchange Privilege"
below for the appropriate telephone or fax number.
In the case of the money market funds, Upon request (use the account application for the
you may have redemptions wired to your money market funds) you may establish telephone
bank by telephoning American Funds redemption privileges (which will enable you to
Service Company ($1,000 or more) or by have a redemption sent to your bank account)
writing a check ($250 or more) and/or check writing privileges. 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 of registered shareholders
exactly as indicated on your checking account
signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF
$50,000 OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 15 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables
shareholders to make regular monthly or quarterly investments in shares through
automatic charges to their bank accounts. With shareholder authorization and
bank approval, the Transfer Agent will automatically charge the bank account
for the amount specified ($50 minimum), which will be automatically invested in
shares at the offering price on or about the dates you select. Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement at least quarterly. Participation in the plan will
begin within 30 days after receipt of the account application. If the
shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or the closing of the account, the plan may be terminated
and the related investment reversed. The shareholder 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 - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the receiving fund) subject to the following conditions:
(i) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, automatically to redeem the account and send the
proceeds to the shareholder. These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The
American Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) (see "American FundsLine(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 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, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of
$50 or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into 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 fund 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 and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) - You may check your share balance, the price of your
shares, or your most recent account transaction, redeem shares (up to $10,000
per fund, per account each day), or exchange shares around the clock with
American FundsLine(r). To use this service, call 800/325-3590 from a TouchTonet
telephone. Redemptions and exchanges through American FundsLine(r) are subject
to the conditions noted above and in "Redeeming Shares--Telephone 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 REDEMPTIONS AND EXCHANGES - By using the telephone (including
American FundsLine(r)), fax or telegraph redemption and/or exchange options,
you agree to hold the fund, American Funds Service Company, any of its
affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or 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.
EXECUTION OF PORTFOLIO TRANSACTIONS
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 of the 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.
The fund is required to disclose information regarding investments in the
securities of broker-dealers which have certain relationships with the fund.
During the last fiscal year, American Express Credit Corp. and General Electric
Capital Corp. were among the top 10 dealers that acted as principals in
portfolio transactions. The fund held debt securities of American Express
Credit Corp. and General Electric Capital Corp. in the amounts of $37,714,000
and $52,648,000, as of the close of its most recent fiscal year.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, during the years ended December 31, 1996, 1995
and 1994 amounted to $_________, $2,653,000 and $1,050,000, 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 record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $2,582,000 for the fiscal year ended December 31, 1996.
INDEPENDENT AUDITORS - Deloitte & Touche LLP located at 1000 Wilshire
Boulevard, Los Angeles, CA 90017, serves as the fund's independent auditors
providing audit services, preparing tax returns and reviewing certain documents
of the fund to be filed with the Securities and Exchange Commission. The
financial statements included in this Statement of Additional Information from
the Annual Report have been so included in reliance on the report of Deloitte &
Touche LLP given on the authority of said firm as experts in accounting and
auditing.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors as
though the fund were a common-law trust. Accordingly, the directors of the
fund shall 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.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on December 31.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The annual
financial statements are audited by the fund's independent auditors, Deloitte &
Touche LLP, whose selection is determined annually by the Board of
Directors.
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; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; 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.
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:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE,
REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE--DECEMBER 31, 1996
<S> <C>
Net asset value and redemption price per share $14.55
(Net assets divided by shares outstanding)
Maximum offering price per share $15.44
(100/94.25 of net asset value per share which takes into
account the fund's current maximum sales charge.)
</TABLE>
The fund's yield is 3.64% based on a 30-day (or one month) period ended
December 31, 1996, 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 average annual total returns for the one, five and ten-year
periods ended on December 31, 1996 were +6.68%, +10.63% and +11.25%,
respectively. The average annual total return (T) is computed by using the
value at the end of the period (ERV) of 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.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. Total return may be calculated for one year, five years,
ten years and for other periods of years. The average annual total return over
periods greater than one year also may be computed by utilizing ending values
as determined above.
The following assumptions will be reflected in computations made in accordance
with the formula 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 may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.
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, The Standard and Poor's 500 Stock Composite
Index, the Lehman Brothers Corporate Bond Index, the Lehman Brothers Aggregate
Bond Index and the Salomon Brothers High-Grade Corporate Bond Index) or results
of other mutual funds or investment or savings vehicles in advertisements or in
reports furnished to present or prospective shareholders.
The fund may refer to results compiled by organizations such as CDA Investment
Technologies, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc. and Wiesenberger Investment Companies Services and by the U.S. Department
of Commerce. Additionally, the fund may, from time to time, refer to results
published in various newspapers or 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, from time to time, compare its investment results with the
Consumer Price Index, which is a measure of the average change in prices over
time in a fixed market basket of goods and services (E.G. food, clothing, and
fuels, transportation, and other goods and services that people buy for
day-to-day living).
The investment results for AMBAL set forth below were calculated as described
above. Data contained in Salomon's Market Performance and Lehman Brothers' The
Bond Market Report are used to calculate cumulative total return from their
base period (12/31/68 and 12/31/72, respectively) for each index. The
percentage increases shown in the table below or used in published reports of
the fund are obtained by subtracting the index results at the beginning of the
period from the index results at the end of the period and dividing the
difference by the index results at the beginning of the period.
AMBAL vs. Various Unmanaged Indices
<TABLE>
<CAPTION>
10-Year AMBAL DJIA/1/ S&P 500/2/ Lehman Lehman Salomon Average
Period Brothers Brothers High-Grade/5/ Savings
1/1 - 12/31 Corporate/3/ Aggregate/4/ Account/6/
<S> <C> <C> <C> <C> <C> <C> <C>
1987 - 1996 +190% +366% +314% +140% +125% +147% +67%
1986 - 1995 +200 +360 +299 +171 +151 +192 +69
1985 - 1994 +205 +349 +282 +175 +158 +199 +77
1984 - 1993 +232 +333 +301 +233 +207 +271 +88
1983 - 1992 +246 +367 +346 +225 +203 +248 +99
1982 - 1991 +309 +452 +404 +316 +274 +353 +112
1981 - 1990 +243 +328 +267 +261 +242 +274 +122
1980 - 1989 +298 +426 +402 +236 +223 +240 +125
1979 - 1988 +252 +340 +352 +189 +187 +180 +125
1978 - 1987 +232 +289 +313 +165 +170 +153 +125
1977 - 1986 +221 +221 +264 +167 +171 +158 +125
1976 - 1985 +246 +211 +281 +173 +171 +155 +123
1975#-1984 +275 +143 +198 +134 N/A +108 +113
</TABLE>
________________
# Since July 26, 1975, the period in which Capital Research and Management
Company has been the fund's adviser.
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
/2/ The Standard & Poor's 500 Stock Composite 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/ The Lehman Brothers Corporate Bond Index is comprised of all public, fixed
rate, non-convertible investment grade domestic corporate debt. Issues
included in this index are rated at least Baa by Moody's Investors Service, BBB
by Standard and Poor's Corporation or, in the case of bank bonds not rated by
either of the previously mentioned services, BBB by Fitch Investors Service.
/4/ The Lehman Brothers Aggregate Bond Index covers all sectors of the fixed
income market and is a combination of the Lehman Brothers Treasury Bond Index,
the Agency Bond Index, the Corporate Bond Index, the Yankee Bond Index and the
Mortgage Backed Securities Index.
/5/ The Salomon Brothers High-Grade Corporate Bond Index is comprised of a
sample of high-grade corporate bonds which have a rating of AAA or AA by
Standard and Poor's Corporation.
/6/ 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 accounts offer a guaranteed return
of principal, but no opportunity for capital growth. During a portion of the
period, the maximum rates paid on some savings deposits were fixed by law.
<TABLE>
<CAPTION>
If you are considering the fund for an
Individual Retirement Account. . .
Here's how much you would have if you had invested $2,000 on January 1
of each year in AMBAL over the past 5 and 10 years:
<S> <C>
5 years 10 years
(1/1/92-12/31/96) (1/1/87-12/31/96)
$13,907 $38,437
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had . . . and had taken
invested $10,000 all dividends and
in AMBAL this many capital gain
years ago distributions
in shares, your
investment would
have been worth
this much at
12/31/96
Number Periods Value
of Years 1/1 - 12/31
<S> <C> <C>
1 1995-1996
$10,668
2 1994-1996
13,562
3 1993-1996
13,602
4 1992-1996
15,138
5 1991-1996
16,568
6 1990-1996
20,666
7 1989-1996
20,336
8 1988-1996
24,718
9 1987-1996
27,900
10 1986-1996
29,028
11 1985-1996
33,926
12 1984-1996
43,815
13 1983-1996
47,884
14 1982-1996
55,643
15 1981-1996
71,984
16 1980-1996
75,131
17 1979-1996
85,884
18 1978-1996
92,452
19 1977-1996
98,157
20 1976-1996
98,881
21 1975-1996
124,510
22 1975#-1996
131,475
</TABLE>
__________________
# Since July 26, 1975, the period in which Capital Research and Management
Company has been the fund's adviser.
Illustration of a $10,000 investment in AMBAL with
dividends reinvested and capital gain distributions taken in shares
(for the period under CRMC management: July 26, 1975 - December 31, 1996)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Year Annual Dividends Total From Initial From From Total
Ended Dividends (cumulative) Investment Investment Capital Gains Dividends Value
Dec. 31 Cost Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1975# $305 $305 $10,305 $ 9,629 - $319 $ 9,948
1976 594 899 10,899 11,513 - 1,020 12,533
1977 656 1,555 11,555 10,990 - 1,630 12,620
1978 709 2,264 12,264 11,059 - 2,345 13,404
1979 801 3,065 13,065 11,252 - 3,175 14,427
1980 1,050 4,115 14,115 12,008 - 4,490 16,498
1981 1,303 5,418 15,418 11,609 - 5,615 17,224
1982 1,474 6,892 16,892 13,865 - 8,415 22,280
1983 1,724 8,616 18,616 15,007 - 10,862 25,869
1984 1,852 10,468 20,468 13,838 $2,484 11,969 28,291
1985 1,912 12,380 22,380 16,025 4,520 15,982 36,527
1986 2,202 14,582 24,582 14,897 10,863 16,930 42,690
1987 2,710 17,292 27,292 13,934 12,167 18,305 44,406
1988 2,780 20,072 30,072 14,388 14,035 21,700 50,123
1989 3,284 23,356 33,356 15,695 18,227 26,993 60,915
1990 3,457 26,813 36,813 14,195 17,968 27,796 59,959
1991 3,684 30,497 40,497 16,575 21,807 36,383 74,765
1992 3,816 34,313 44,313 16,891 23,986 40,976 81,853
1993 4,072 38,385 48,385 17,290 27,761 46,029 91,080
1994 4,131 42,516 52,516 16,506 26,866 48,014 91,386
1995 4,335 46,851 56,851 19,464 35,427 61,288 116,179
1996 4,684 51,535 61,535 20,014 43,703 67,758 131,475
</TABLE>
The dollar amount of capital gain distributions during the period was
$35,296.
# Since July 26, 1975, the period in which Capital Research and Management
Company has been the Fund's adviser.
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In the rolling
10-year periods since January 1, 1967 (127 in all), those funds have had better
total returns than the Standard and Poor's 500 Composite Stock Index in 91 of
the 127 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.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
Financial Statements - To Be Provided by Amendment
Financial Highlights
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Selected Per-Share Data and Ratios
Independent Auditors' Report
(b) Exhibits.
1. On file (see SEC file nos. 811-66 and 2-10758)
2. On file (see SEC file nos. 811-66 and 2-10758)
3. None
4. On file (see SEC file nos. 811-66 and 2-10758)
5. On file (see SEC file nos. 811-66 and 2-10758)
6. On file (see SEC file nos. 811-66 and 2-10758)
7. None
8. On file (see SEC file nos. 811-66 and 2-10758)
9. On file (see SEC file nos. 811-66 and 2-10758)
10. Not applicable to this filing
11. To Be Provided by Amendment
12. None
13. None
14. On file (see SEC file nos. 811-66 and 2-10758)
15. On file (see SEC file nos. 811-66 and 2-10758)
16. On file (see SEC file nos. 811-66 and 2-10758)
17. Financial Data Schedule (EDGAR)
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of January 31, 1997
<TABLE>
<CAPTION>
Title of Class Number of Record-Holders
<S> <C>
Common Stock 127,773
($1.00 Par Value)
</TABLE>
Item 27. Indemnification.
Registrant is a joint-insured under Investment Advisor/Mutual Fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities. However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.
The Articles of Incorporation state:
The Corporation shall indemnify (1) its directors and officers, whether serving
the Corporation or at its request any other entity, to the full extent required
or permitted by the General Laws of the State of Maryland now or hereafter in
force, including the advance of expenses under the procedures and to the full
extent permitted by law, and (2) its other employees and agents to such extent
as shall be authorized by the Board of Directors or the Corporation's By-Laws
and be permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may be
entitled. The Board of Directors may take such action as is necessary to carry
out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such by-laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements as
may be permitted by law. No amendment of this Charter of the Corporation shall
limit or eliminate the right to indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal. Nothing
contained herein shall be construed to authorize the Corporation to indemnify
any director or officer of the Corporation against any liability to the
Corporation or to any holders of securities of the Corporation to which he is
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the requirements of
law, including the Investment Company Act of 1940.
To the fullest extent permitted by Maryland statutory and decisional law and
the 1940 Act, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that nothing herein shall be construed to
protect any director or officer of the Corporation against any liability to
which such director or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment, modification or repeal of
this Article VIII shall adversely affect any right or protection of a director
or officer that exists at the time of such amendment, modification or repeal.
Section 2-418 (b) of The Annotated Code of Maryland states:
Permitted indemnification of director. - (1) A corporation may indemnify any
director made a party to any proceeding by reason of service in that capacity
unless it is established that:
(i) The act or omission of the director was material to the matter giving rise
to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal benefit in money,
property, or services; or
(iii) In the case of any criminal proceeding, the director had reasonable
cause to believe that the act or omission was unlawful.
(2) (i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.
Item 28. Business and Other Connections of Investment Adviser.
None.
Item 29. Principal Underwriters.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., The American Funds Income Series, The American
Funds Tax-Exempt Series I, The American Funds Tax-Exempt Series II, American
High-Income Municipal Bond Fund, American High-Income Trust, American Mutual
Fund, Inc., The Bond Fund of America, Inc., Capital Income Builder, Capital
World Bond Fund, Capital World Growth and Income Fund, Inc., The Cash
Management Trust of America, EuroPacific Growth Fund, Fundamental Investors,
Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc.,
Intermediate Bond Fund of America, The Investment Company of America, Limited
Term Tax-Exempt Bond Fund of America, The New Economy Fund, New Perspective
Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America,
Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money Fund of
America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(b) (1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
<S> <C> <C> <C>
David L. Abzug Regional Vice President None
5657 Lemona Avenue
Van Nuys, CA 91411
John A. Agar Regional Vice President None
1501 N. University
Suite 227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
S Richard Armstrong Assistant Vice President None
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Regional Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
3100 West End Avenue
Suite 870
Nashville, TN 37215
Michael L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
L Daniel C. Brown Sr. Vice President None
H J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MD 20895
Victor C. Cassato Vice President None
609 W. Littleton, Blvd.
Suite 310
Littleton, CO 80120
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue
Suite G3
Hinsdale, IL 60521
Denise M. Cassin Regional Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director, None
L Kevin G. Clifford Director, Senior Vice President None
Ruth M. Collier Vice President None
145 West 67th St. Ste. 12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
4116 Woodbine Street
Chevy Chase, MD 20815
L Carl D. Cutting Vice President None
Dan J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Vice President None
3034 Parkridge Drive
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Regional Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director, President None
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
David E. Harper Senior Vice President None
R.D., 1 Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
L Robert L. Johansen Vice President, Controller None
Michael J. Johnston Chairman of the Board None
630 Fifth Avenue, 36th Floor
New York, NY 10111-0121
V. John Kriss Senior Vice President None
P. O. Box 247
Surfside, CA 90743
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
1940 Blake St., Suite 303
Denver, CO 80202
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - Institutional
Investment Services
S Stella Lopez Vice President None
LW Robert W. Lovelace Director None
Steve A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 South Race Street
Littleton, CO 90121
L John C. Massar Director, Senior Vice President None
L E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
3500 West Camino de Urania
Tucson, AZ 85741
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - Institutional None
Investment Services Division
David R. Murray Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President None
32 Ridge Avenue
Newton Centre, MA 02159
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
L John O. Post Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President None
L James R. Rothenberg Director None
Douglas F. Rowe Regional Vice President None
30309 Oak Tree Drive
Georgetown, TX 78628
Christopher Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President None
1080 Bay Point Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, No. 4
Marina del Rey, CA 90292
Joseph D. Scarpitti Regional Vice President None
31465 St. Andrews
Westlake, OH 44145
L Daniel B. Seivert Assistant Vice President None
L R. Michael Shanahan Director None
David W. Short Director, Senior Vice President None
1000 RIDC Plaza, Suite 212
Pittsburgh, PA 15238
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
*L John C. Smith Vice President - Institutional None
Investment Services Division
L Mary E. Smith Assistant Vice President - None
Institutional Investment Services
Division
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
#4 West Fourth Avenue
Suite 406
San Mateo, CA 94402
Thomas A. Stout Regional Vice President None
12913 Kendale Lane
Bowie, MD 20715
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew Taylor Assistant Vice President None
S James P. Toomey Assistant Vice President None
I Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
L David M. Ward Assistant Vice President - None
Institutional Investment
Services Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd.
#1012
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, Treasurer None
Gregory J. Weimer Vice President None
125 Surrey Drive
Canonsburg, PA 15317
B Timothy W. Weiss Director None
SF N. Dexter Williams Vice President None
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Assistant Vice President None
H Marshall D. Wingo Director, Senior Vice President None
L Robert L. Winston Director, Senior Vice President None
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
209 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
SF Business Address, One Market Plaza, Steuart Tower, Suite 1800, San
Francisco, CA 94105
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
Item 30. Location of Accounts and Records.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, are maintained and held in the offices of its
investment adviser, Capital Research and Management Company, 333 South Hope
Street, Los Angeles, California 90071, and/or 135 South State College
Boulevard, Brea, California 92681, and/or the offices of the Registrant, One
Market Plaza, Steuart Tower, Suite 1800, San Francisco, California 94105.
Registrant's records covering shareholder accounts are maintained and kept by
the fund's transfer agent, American Funds Service Company, 135 South State
College Boulevard, Brea, California 92681, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 8000 IH-10, Suite 1400, San Antonio, Texas 78230 and
5300 Robin Hood Road, Norfolk, VA 23513.
Registrant's records covering portfolio transactions are maintained and kept by
the fund's custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, New York 10081.
Item 31. Management Services.
None.
Item 32. Undertakings.
As reflected in the prospectus, the fund undertakes to provide each person to
whom a prospectus is delivered with a copy of the fund's latest annual report
to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City and County of San Francisco, and State of California on the 19th day
of February, 1997.
AMERICAN BALANCED FUND, INC.
By /s/ Patrick F. Quan
Patrick F. Quan, Secretary
ATTEST:
/s/ Louise M. Pescetta
Louise M. Pescetta
Pursuant to the requirements of the Securities Act of 1933, this amendment to
its registration statement has been signed below on February19, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title
(1) Principal Executive Officer
/s/ Robert G. O'Donnell President
(Robert G. O'Donnell)
(2) Principal Financial Officer and Principal Accounting Officer:
/s/ Mary C. Hall Treasurer
(Mary C. Hall)
(3) Directors:
Robert A. Fox* Director
Roberta L. Hazard* Director
Leonade D. Jones* Director
John G. McDonald* Director
Theodore D. Nierenberg* Director
/s/ James W. Ratzlaff
(James W. Ratzlaff) Director
Henry E. Riggs* Director
Walter P. Stern* Chairman
Patricia K. Woolf* Director
*By /s/ Patrick F. Quan
Patrick F. Quan, Attorney-in-Fact
</TABLE>
