MARKED
SEC. File Nos. 2-49291
811-2421
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 25
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 25
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
JULIE F. WILLIAMS, Secretary
The Tax-Exempt Bond Fund of America, Inc.
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Robert E. Carlson, Esq.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. Flower Street, 23rd Floor
Los Angeles, CA 90071-2371
(Counsel for the Registrant)
Approximate date of proposed public offering:
It is proposed that this filing become effective on November 1, 1998, pursuant
to paragraph (b) of rule 485.
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN PROSPECTUS (PART "A")
PART "A" OF FORM N-1A
<S> <C> <C>
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks and Performance
3. Risk/Return Summary: Fee Table Risk/Return Summary
4. Investment Objectives, Principal Investment Objective, Strategies and Risks
Strategies, and Related Risks
5. Management's Discussion of Fund N/A
Performance
6. Management, Organization, and Capital Management and Organization
Structure
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Shareholder Information
9. Financial Highlights Information Financial Highlights
</TABLE>
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
<S> <C> <C>
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History Fund Organization
12. Description of the Fund and its Fund Organization; Investment Restrictions;
Investments and Risks Description of Certain Securities and
Investment Techniques
13. Management of the Fund Management; Fund Officers and Directors
14. Control Persons and Principal Holders of N/A
Securities
15. Investment Advisory and Other Services Management; General Information; Fund
Officers and Directors
16. Brokerage Allocation and Other Management; Execution of Portfolio
Practices Transactions
17. Capital Stock and Other Securities None
18. Purchase, Redemption and Pricing of Purchase of Shares; Selling Shares;
Shares Shareholder Account Services and Privileges;
General Information
19. Taxation of Fund Dividends and Distributions
20. Underwriters Management
21. Calculation of Performance Data Investment Results and Related Statistics
22. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART "C"
<S> <C>
23. Exhibits
24. Persons Controlled by or under
Common Control with Registrant
25. Indemnification
26. Business and Other Connections of
Investment Adviser
27. Principal Underwriters
28. Location of Accounts and Records
29. Management Services
30. Undertakings
Signature Page
</TABLE>
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
THE TAX-EXEMPT BOND
FUND OF AMERICA-REGISTERED TRADEMARK-
PROSPECTUS
NOVEMBER 1, 1998
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
333 South Hope Street
Los Angeles, California 90071
TICKER SYMBOL: AFTEX NEWSPAPER ABBREV.: TxEx FUND NO.: 19
- -------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary 3
........................................................................
Fees and Expenses of the Fund 6
........................................................................
Investment Objective, Strategies and Risks 7
........................................................................
Important Recent Developments 10
........................................................................
Management and Organization 10
........................................................................
Shareholder Information 12
........................................................................
Purchase and Exchange of Shares 13
........................................................................
Distribution Arrangements 16
........................................................................
Financial Highlights 18
........................................................................
Appendix 19
</TABLE>
- -------------------------------------------------------------------
19-010-1198/MC
<PAGE>
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
The fund seeks to provide you with a high level of current income that is exempt
from federal income tax while preserving your investment by investing in
municipal bonds, including lower quality bonds. The fund emphasizes undervalued
but fundamentally sound investments in municipal obligations supporting roads,
schools, hospitals, airports and other public needs. Municipalities include
counties, cities, towns, and various regional or special districts.
The fund is designed for investors seeking income exempt from federal tax, and
capital preservation over the long term. An investment in the fund is subject to
risks, including the possibility that its share value and total return may
decline in response to certain events, such as changes in the market or general
economy. The value of debt securities may be affected by changing interest rates
and credit ratings. In addition, lower quality bonds will be subject to greater
credit risk and price fluctuation than higher quality bonds. Accordingly, 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 bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 3
<PAGE>
INVESTMENT RESULTS
The following information illustrates how the fund's results may vary:
Here are the fund's results calculated without a sales charge on a CALENDAR
YEAR basis. (If a sales charge were included, results would be lower.)
<TABLE>
<CAPTION>
88 9.28%
<S> <C>
89 9.49%
90 6.17%
91 11.17%
92 9.04%
93 11.72%
94 -4.82%
95 17.28%
96 4.57%
97 8.98%
</TABLE>
THE FUND'S YEAR-TO-DATE RETURN FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
WAS 5.58%.
The fund's highest/lowest QUARTERLY results during this time period were:
X HIGHEST 6.87% (quarter ended March 31, 1995)
X LOWEST -4.93% (quarter ended March 31, 1994)
4 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
For periods ended December 31, 1997:
<TABLE>
<CAPTION>
THE FUND WITH
MAXIMUM
AVERAGE ANNUAL SALES CHARGE LEHMAN
TOTAL RETURN: DEDUCTED(1) INDEX(2)
<S> <C> <C>
- ----------------------------------------------------------------------
One Year 3.83% 9.19%
.....................................................................
Five Years 6.24% 7.36%
.....................................................................
Ten Years 7.62% 8.58%
.....................................................................
Lifetime(3) 8.39% n/a
</TABLE>
Yield(1): 4.03%
(For current yield information, please call American
FundsLine-Registered Trademark- at 1-800-325-3590)
(1) THESE FUND RESULTS WERE CALCULATED ACCORDING TO A FORMULA WHICH REQUIRES
THAT THE MAXIMUM SALES CHARGE BE DEDUCTED. RESULTS WOULD BE HIGHER IF THEY
WERE CALCULATED AT NET ASSET VALUE.
(2) THE LEHMAN BROTHERS MUNICIPAL BOND INDEX REPRESENTS THE LONG-TERM INVESTMENT
GRADE MUNICIPAL BOND MARKET. THIS INDEX IS UNMANAGED AND DOES NOT REFLECT
SALES CHARGES, COMMISSIONS OR EXPENSES.
(3) THE FUND BEGAN INVESTMENT OPERATIONS ON OCTOBER 3, 1979.
These results are meant to illustrate the potential fluctuations in the fund's
results over shorter periods of time. Past results are not an indication of
future results.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 5
<PAGE>
- -------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
- -------------------------------------------------
Maximum sales charge imposed on
purchases
(AS A PERCENTAGE OF OFFERING PRICE) 4.75%(1)
................................................
Maximum sales charge imposed on
reinvested dividends 0%
................................................
Maximum deferred sales charge 0%(2)
................................................
Redemption or exchange fees 0%
</TABLE>
(1) SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES.
(2) A CONTINGENT DEFERRED SALES CHARGE OF 1% APPLIES ON CERTAIN REDEMPTIONS MADE
WITHIN 12 MONTHS FOLLOWING ANY PURCHASES YOU MADE WITHOUT A SALES CHARGE.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE FUND ASSETS)
<TABLE>
<S> <C>
- ---------------------------------------------
Management Fees 0.35%
............................................
Service (12b-1) Fees 0.25%*
............................................
Other Expenses 0.06%
............................................
Total Annual Fund Operating Expenses 0.66%
</TABLE>
* 12b-1 EXPENSES MAY NOT EXCEED 0.25% OF THE FUND'S AVERAGE NET ASSETS ANNUALLY.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<S> <C>
- -------------------------------------------------
One year $ 539
................................................
Three years $ 676
................................................
Five years $ 825
................................................
Ten years $1,258
</TABLE>
6 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is to provide you with a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. It seeks to achieve this objective by investing primarily in municipal
bonds, including lower quality bonds. Municipal bonds are debt obligations
generally issued to obtain funds for various public purposes, including the
construction of public facilities.
The fund will invest at least 65% of its assets in debt securities rated A or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation. The
fund may also invest up to 35% of its assets in debt securities rated Baa or BBB
or below (however, no more than 20% of its assets may be invested in debt
securities rated Ba and BB or below). The value of debt securities held by the
fund may be affected by changing interest rates, effective maturities and credit
ratings. For example, the value of bonds in the fund's portfolio generally will
decline when interest rates rise and vice versa. The value of lower quality
bonds may be subject to greater credit risk and price fluctuations than higher
quality bonds. The fund's investment adviser attempts to reduce these risks
through diversification of the portfolio and by doing a credit analysis of each
issuer as well as by monitoring economic and legislative developments. The fund
may also invest in cash, cash equivalents, or taxable debt securities. The
extent of the fund's cash position will be dependent on market conditions, fund
purchases and redemptions, and other factors. For example, under certain
circumstances, in response to abnormal market conditions, the fund may be
invested substantially in cash or cash equivalents. This will detract from the
achievement of the fund's objective over the short term, and it may protect the
fund during a market downturn.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities which represent good long-term
investment opportunities.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 7
<PAGE>
ADDITIONAL INVESTMENT RESULTS
The following additional investment results are for periods ended
December 31, 1997:
<TABLE>
<CAPTION>
AVERAGE ANNUAL THE FUND WITH NO LIPPER
TOTAL RETURN SALES CHARGE(1) AVERAGE(2)
<S> <C> <C>
- ----------------------------------------------------------------------
One Year 8.98% 9.13%
.....................................................................
Five Years 7.28% 6.86%
.....................................................................
Ten Years 8.15% 8.29%
.....................................................................
Lifetime(3) 8.68% 8.68%
</TABLE>
(1) THESE FUND RESULTS WERE CALCULATED ACCORDING TO A FORMULA THAT IS REQUIRED
FOR ALL STOCK AND BOND FUNDS.
(2) THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE REPRESENTS FUNDS THAT INVEST
AT LEAST 65% OF ASSETS IN MUNICIPAL DEBT ISSUES IN THE TOP FOUR RATING
CATEGORIES. THIS AVERAGE IS UNMANAGED AND DOES NOT REFLECT SALES CHARGES,
COMMISSIONS OR EXPENSES.
(3) THE FUND BEGAN INVESTMENT OPERATIONS ON OCTOBER 3, 1979.
8 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
THE FOLLOWING CHART ILLUSTRATES THE QUALITY RATINGS OF THE VARIOUS BONDS
HELD IN THE PORTFOLIO AS OF THE END OF THE FUND'S FISCAL YEAR, AUGUST 31,
1998. SEE THE APPENDIX FOR A DESCRIPTION OF QUALITY RATINGS.
[begin pie chart]
<TABLE>
<S> <C>
AAA 36.73%
AA 18.52%
A 17.85%
BBB 15.91%
BB 2.73%
B 3.06%
Cash and Short-term
Securities 5.20%
</TABLE>
[end pie chart]
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
GEOGRAPHIC BREAKDOWN NET ASSETS NET ASSETS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
Alabama 0.23% Mississippi 0.23%
......................................... .........................................
Alaska 0.75% Nevada 0.22%
......................................... .........................................
Arizona 0.12% New Jersey 1.83%
......................................... .........................................
California 9.73% New Mexico 0.13%
......................................... .........................................
Colorado 4.58% New York 12.04%
......................................... .........................................
Connecticut 1.43% North Carolina 1.63%
......................................... .........................................
Delaware 0.06% Ohio 0.11%
......................................... .........................................
District of Columbia 1.08% Oklahoma 0.63%
......................................... .........................................
Florida 2.11% Oregon 0.20%
......................................... .........................................
Georgia 1.31% Pennsylvania 7.07%
......................................... .........................................
Hawaii 0.41% Rhode Island 1.31%
......................................... .........................................
Illinois 7.73% South Carolina 0.61%
......................................... .........................................
Indiana 5.76% South Dakota 0.89%
......................................... .........................................
Iowa 1.11% Tennessee 1.93%
......................................... .........................................
Kentucky 0.41% Texas 4.05%
......................................... .........................................
Louisiana 4.86% Utah 0.91%
......................................... .........................................
Maine 0.16% Vermont 0.02%
......................................... .........................................
Maryland 1.58% Virginia 1.53%
......................................... .........................................
Massachusetts 1.99% Washington 4.17%
......................................... .........................................
Michigan 8.07% Wisconsin 1.35%
......................................... .........................................
Minnesota 0.40% Wyoming 0.06%
......................................... .........................................
</TABLE>
BECAUSE THE FUND IS ACTIVELY MANAGED, ITS HOLDINGS WILL CHANGE FROM TIME TO
TIME.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 9
<PAGE>
- --------------------------------------------------------------------------
IMPORTANT RECENT DEVELOPMENTS
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service providers --
including the investment adviser and its affiliates -- are taking steps to
address the issue. In addition, the Year 2000 problem may adversely affect the
issuers in which the fund invests. For example, issuers may incur substantial
costs to address the problem. They may also suffer losses caused by corporate
and governmental data processing errors. The fund and its investment adviser
will continue to monitor developments relating to this issue.
- -------------------------------------------------------------------
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as 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 total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is indicated earlier under
"Fees and Expenses of the Fund."
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.
10 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
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 a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee). In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for The Tax-Exempt Bond Fund of America are listed below.
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF
EXPERIENCE AS AN
INVESTMENT PROFESSIONAL
(INCLUDING THE LAST FIVE
YEARS)
WITH CAPITAL
YEARS OF EXPERIENCE RESEARCH AND
PORTFOLIO COUNSELORS AS PORTFOLIO COUNSELOR MANAGEMENT
FOR THE TAX-EXEMPT FOR THE TAX-EXEMPT BOND FUND COMPANY OR
BOND FUND OF AMERICA PRIMARY TITLE(S) OF AMERICA (APPROXIMATE) AFFILIATES TOTAL YEARS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NEIL L. LANGBERG Senior Vice President of the 19 years (since the fund began 20 years 20 years
fund. Vice President -- operations)
Investment Management Group,
Capital Research and
Management Company
- -------------------------------------------------------------------------------------------------------------------------
MARK R. MACDONALD Vice President of the fund. 4 years 4 years 13 years
Vice President -- Investment
Management Group, Capital
Research and Management
Company
- -------------------------------------------------------------------------------------------------------------------------
REBECCA L. FORD Vice President -- Investment 13 years 16 years 16 years
Management Group, Capital
Research and Management
Company
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE FUND BEGAN OPERATIONS ON OCTOBER 3, 1979.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 11
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your needs
and circumstances change. These services 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. For your convenience, American Funds Service Company has
four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
[MAP]
<TABLE>
<S> <C> <C> <C>
WESTERN SERVICE WESTERN CENTRAL EASTERN CENTRAL EASTERN SERVICE
CENTER SERVICE CENTER SERVICE CENTER CENTER
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Norfolk, Virginia
92822-2205 78265-9522 Indiana 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 46206-6007 Fax: 757/670-4773
Fax: 317/735-6620
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER ARE DESCRIBED 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.
TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. Additionally,
accounts held by investment dealers may not offer certain services. If you have
any questions, please contact your dealer.
12 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group
generally without a sales charge. Exchanges of shares from the money market
funds initially purchased without a sales charge generally will be subject to
the appropriate sales charge. Exchanges have the same tax consequences as
ordinary sales and purchases. See "Transactions by Telephone..." for information
regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE IS
CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A PERIOD
OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT
ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY INVESTOR
WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES ACTUAL OR
POTENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
<TABLE>
<S> <C>
- -------------------------------------------------
To establish an account $ 1,000
To add to an account $ 50
</TABLE>
SHARE PRICE
The fund determines its share price, also called net asset value, as of 4:00
p.m. New York time, which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value, market
prices are used when available. If a market price for a particular security is
not available, the fund will determine the appropriate price for the security.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and accepts
your request. The offering price is the net asset value plus a sales charge, if
applicable.
SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced for
larger purchases as indicated below.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 13
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
.................................
NET DEALER CONCESSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
.................................
NET DEALER CONCESSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Less than $25,000 4.75% 4.99% 4.00%
.......................................................................................................
$25,000 but less than $50,000 4.50% 4.71% 3.75%
.......................................................................................................
$50,000 but less than $100,000 4.00% 4.17% 3.25%
.......................................................................................................
$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 CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF
PURCHASE. A dealer concession of up to 1% may be paid by the fund under its Plan
of Distribution and/or by American Funds Distributors on investments made with
no initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. 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 in the statement of additional information
or "Welcome to the Family."
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 fund's board of directors. Up to
14 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
0.25% of average net assets is paid annually to qualified dealers for providing
certain services pursuant to the fund's Plan of Distribution. The 12b-1 fee paid
by the fund, as a percentage of average net assets, for the previous fiscal year
is indicated earlier under "Fees and Expenses of the Fund." Since these fees are
paid out of the fund's assets on an ongoing basis, over time they will increase
the cost of an investment and may cost you more than paying higher initial sales
charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to or sponsor
informational meetings for dealers as described in the statement of additional
information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
- SHARES HELD FOR YOU IN YOUR DEALER'S NAME MUST BE SOLD THROUGH THE DEALER.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s).
- A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 15
<PAGE>
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE-REGISTERED TRADEMARK- OR AMERICAN FUNDSLINE ONLINE-REGISTERED
TRADEMARK-:
- Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day
- Checks must be made payable to the registered shareholder(s)
- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE, OR AMERICAN FUNDSLINE ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all of
these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, costs or liabilities (including attorney fees) which may be
incurred in connection with the exercise of these privileges, 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.
- -------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends from its net investment income daily and distributes
the accrued dividends to you each month. Capital gains, if any, are usually
distributed in November or December.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash.
16 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
TAX CONSEQUENCES
Interest on municipal bonds is generally not included in gross income for
federal income tax purposes. The fund is permitted to pass through to its
shareholders federally tax-exempt income subject to certain requirements.
However, the fund may invest in obligations which pay interest that is subject
to state and local taxes when distributed by the fund. Dividends derived from
taxable interest income, distributions of capital gains and dividends on gains
from the disposition of certain market discount bonds will not be exempt from
federal, state or local income tax.
Dividends and capital gains are generally taxable whether they are reinvested or
received in cash -- unless you are exempt from taxation or entitled to tax
deferral. Capital gains may be taxed at different rates depending on the length
of time the fund holds its assets.
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% of the applicable tax treaty rate from
dividends paid to certain non-resident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family," and
your tax adviser for further information.
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 17
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the past five years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the fund's financial statements, are included in the statement of
additional information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
......................................
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
--------------------------------------
Net Asset Value,
Beginning of Year $12.27 $11.86 $11.94 $11.65 $12.43
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .62 .64 .64 .68 .67
..............................................................................
Net realized and unrealized
gain (loss) on investments .37 .45 .01 .29 (.69)
..............................................................................
Total income from investment operations .99 1.09 .65 .97 (.02)
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.62) (.64) (.64) (.68) (.68)
..............................................................................
Distributions from net realized gains (.04) (.04) (.09) -- (.08)
..............................................................................
Total distributions (.66) (.68) (.73) (.68) (.76)
..............................................................................
Net Asset Value,
End of Year $12.60 $12.27 $11.86 $11.94 $11.65
..............................................................................
Total Return(1) 8.26% 9.39% 5.51% 8.70% (.14)%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) $1,795 $1,593 $1,476 $1,424 $1,385
..............................................................................
Ratio of expenses to
average net assets .66% .68% .68% .66% .69%
..............................................................................
Ratio of net income to
average net assets 4.98% 5.27% 5.35% 5.87% 5.53%
..............................................................................
Portfolio turnover rate 23.19% 14.39% 26.89% 49.28% 22.40%
</TABLE>
(1) EXCLUDES MAXIMUM SALES CHARGE OF 4.75%.
18 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
APPENDIX
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C," according to quality
as described below.
"Aaa -- Best quality. These securities 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 shares."
"Aa -- High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A -- 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."
"Baa -- 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."
"Ba -- Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B -- Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small."
"Caa -- Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"Ca -- Speculative in a high degree; often in default of having other marked
shortcomings."
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 19
<PAGE>
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
Standard & Poor's rates the long-term debt securities issued by various entities
in categories ranging from "AAA" to "D," according to quality as described
below.
"AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree."
"A -- Have 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 rated categories."
"BBB -- Regarded as having adequate 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 repay principal than for debt in higher
rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions."
"C1 -- Reserved for income bonds on which interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
20 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
NOTES
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 21
<PAGE>
- -------------------------------------------------------------------
NOTES
22 THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS
<PAGE>
- -------------------------------------------------------------------
NOTES
THE TAX-EXEMPT BOND FUND OF AMERICA / PROSPECTUS 23
<PAGE>
<TABLE>
<S> <C> <C>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
American Funds Call your employer American Funds
Service Company or plan Distributors
800/421-0180 administrator 800/421-9900 ext.11
FOR 24-HOUR INFORMATION
</TABLE>
<TABLE>
<S> <C>
American American Funds
FundsLine-Registered Internet Web site
Trademark- http://www.americanfunds.com
800/325-3590
</TABLE>
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
------------------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. If there are any
inconsistencies or ambiguities, the English text will prevail.
------------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including financial
statements, investment results, portfolio holdings, a statement from
portfolio management discussing market conditions and the fund's investment
strategies, and the independent accountants' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the fund, including the
fund's financial statements.
A current SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The SAI and
other related materials about the fund are available for review or to be
copied at the SEC's Public Reference Room (1-800-SEC-0330) or on the SEC's
Internet Web site athttp:// www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
<TABLE>
<S> <C> <C>
Call American Funds or Write to the Secretary of the
Service Company fund
800/421-0180 ext.1 333 South Hope Street
Los Angeles, California 90071
</TABLE>
Investment Company File No. 811-2421 [LOGO] Printed on recycled paper
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1998
This document is not a prospectus but should be read in conjunction with the
current prospectus dated November 1, 1998 of The Tax-Exempt Bond Fund of
America, Inc. (the "fund"). The prospectus may be obtained from your
investment dealer or financial planner or by writing to the fund at the
following address:
The Tax-Exempt Bond Fund of America, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Item Page No.
Certain Investment Limitations and Guidelines 2
Description of Certain Securities and Investment 2
Techniques
Investment Restrictions 6
Fund Organization 8
Fund Officers and Directors 9
Management 12
Dividends and Distributions 15
Additional Information Concerning Taxes 15
Purchase of Shares 19
Selling Shares 25
Shareholder Account Services and Privileges 26
Execution of Portfolio Transactions 29
General Information 29
Investment Results and Related Statistics 31
Description of Ratings for Debt Securities 34
Financial Statements attached
</TABLE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
- - The fund will invest at least 80% of its assets in tax-exempt securities.
- - The fund will not invest in securities subject to alternative minimum taxes.
- - The fund will invest at least 65% of its assets in debt securities rated A or
better or unrated but determined to be of equivalent quality.
- - The fund may invest up to 35% of its assets in debt securities rated BBB/Baa
or below or unrated but determined to be of equivalent quality (with no more
than 20% of its assets in debt securities rated BB/Ba or below or unrated but
determined to be of equivalent quality).
- - The fund will invest substantially in securities with maturities in excess of
three years.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
THE DESCRIPTIONS BELOW ARE INTENDED TO SUPPLEMENT THE MATERIAL IN THE
PROSPECTUS UNDER the "Risk/Return Summary" and "Investment Objectives,
Strategies and Risks."
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 up to 20% of its assets in debt securities rated Ba and BB
or below by Moody's or S&P or in unrated securities that are determined to be
of equivalent quality by Capital Research and Management Company, the fund's
investment adviser. These securities are commonly known as "high-yield,
high-risk" or "junk" bonds. The fund may invest in bonds rated as low as Ca
by Moody's or CC by S&P which are described by the rating agencies as
"speculative in a high degree; often in default or [having] other marked
shortcomings."
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- High-yield, high-risk
bonds can be sensitive to adverse economic changes and political and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress that
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaults on its obligations to pay interest
or principal or enters into bankruptcy proceedings, the fund may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices and yields of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS -- High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining
interest rate market, the fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. A
high-yield, high-risk bond's value will decrease in a rising interest rate
market, as will the value of the fund's assets.
LIQUIDITY AND VALUATION -- There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
Subsequent to its purchase by the fund, an issue of municipal bonds or notes
may cease to be rated or its rating may be reduced below the minimum rating
required for its purchase. Neither event requires the elimination of such
obligation from the fund's portfolio, but Capital Research and Management
Company (the "Investment Adviser") will consider such an event in its
determination of whether the fund should continue to hold such obligation in
its portfolio. If, however, as a result of downgrades or otherwise, the fund
holds more than 20% of its net assets in high-yield, high-risk bonds, the fund
will dispose of the excess as expeditiously as possible.
MUNICIPAL BONDS -- Municipal bonds are debt obligations generally issued to
obtain funds for various public purposes, including the construction of public
facilities. Opinions relating to the validity of municipal bonds and to the
exclusion from gross income for federal income tax purposes and, where
applicable, the exemption from state and local income tax are rendered by bond
counsel to the issuing authorities at the time of issuance.
The two principal classifications of municipal bonds are general obligation
and limited obligation, or revenue, bonds. General obligation bonds are
secured by the issuer's pledge of its full faith and credit including, if
available, its taxing power for the payment of principal and interest. Issuers
of general obligation bonds include states, counties, cities, towns and various
regional or special districts. The proceeds of these obligations are used to
fund a wide range of public facilities such as the construction or improvement
of schools, highways and roads, water and sewer systems and facilities for a
variety of other public purposes. Lease revenue bonds or certificates of
participation in leases are payable from annual lease rental payments from a
state or locality. Annual rental payments are payable to the extent such
rental payments are appropriated annually.
Typically, the only security for a limited obligation or revenue bond is the
net revenue derived from a particular facility or class of facilities financed
thereby or, in some cases, from the proceeds of a special tax or other special
revenues. Revenue bonds have been issued to fund a wide variety of
revenue-producing public capital projects including: electric, gas, water and
sewer systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; hospitals; and convention, recreational and housing
facilities. Although the security behind these bonds varies widely, many
provide additional security in the form of a debt service reserve fund which
may also be used to make principal and interest payments on the issuer's
obligations. In addition, some revenue obligations (as well as general
obligations) are insured by a bond insurance company or backed by a letter of
credit issued by a banking institution.
Revenue bonds also include, for example, pollution control, health care and
housing bonds, which, although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but are secured
by the revenues of the authority derived from payments by the private entity
which owns or operates the facility financed with the proceeds of the bonds.
Obligations of housing finance authorities have a wide range of security
features including reserve funds and insured or subsidized mortgages, as well
as the net revenues from housing or other public projects. Most of these bonds
do not generally constitute the pledge of the credit of the issuer of such
bonds. The credit quality of such revenue bonds is usually directly related to
the credit standing of the user of the facility being financed or of an
institution which provides a guarantee, letter of credit, or other credit
enhancement for the bond issue.
MUNICIPAL LEASE OBLIGATIONS -- The fund may invest in municipal lease revenue
obligations, some of which may be considered illiquid. The fund may purchase,
without limitation, municipal lease revenue obligations that are determined to
be liquid by Capital Research and Management Company. In determining whether
these securities are liquid, Capital Research and Management Company will
consider among other things, the credit quality and support, including
strengths and weaknesses of the issuers and lessees, the terms of the lease,
the frequency and volume of trading and the number of dealers trading the
securities.
TEMPORARY INVESTMENTS -- The fund may invest in short-term municipal
obligations of up to one year in maturity during periods of temporary defensive
strategy or when such investments are considered advisable for liquidity.
Generally, the income from all such securities is exempt from federal income
tax. See "Additional Information Concerning Taxes" below. Further, a portion
of the fund's assets, which will normally be less than 20% of assets, may be
held in cash or invested in high quality taxable short-term securities of up to
one year in maturity. Such temporary investments may include: (1) obligations
of the U.S. Treasury; (2) obligations of agencies and instrumentalities of the
U.S. Government; (3) money market instruments, such as certificates of deposit
issued by domestic banks, corporate commercial paper, and bankers' acceptances;
and (4) repurchase agreements (which are described below).
MUNICIPAL INFLATION-INDEXED BONDS -- The fund may invest in inflation-indexed
bonds issued by municipalities. Interest payments are made to bondholders
semi-annually and are made up of two components: a fixed "real coupon" or
spread, and a variable coupon linked to an inflation index. Accordingly,
payments will increase or decrease each period as a result of changes in the
inflation index. In the period of deflation payments may decrease to zero, but
in any event will not be less than zero.
ZERO COUPON BONDS -- Municipalities may issue zero coupon securities which are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified date when the securities begin paying
current interest. They are issued and traded at a discount from their face
amount or par value, which discount varies depending on the time remaining
until cash payments begin, prevailing interest rates, liquidity of the
security, and the perceived credit quality of the issuer.
PRE-REFUNDED BONDS -- From time to time, a municipality may refund a bond that
it has already issued prior to the original bond's call date by issuing a
second bond, the proceeds of which are used to purchase securities. The
securities are placed in an escrow account pursuant to an agreement between the
municipality and an independent escrow agent. The principal and interest
payments on the securities are then used to pay off the original bondholders.
For the purposes of diversification, pre-refunded bonds will be treated as
governmental issues.
FORWARD COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When the fund purchases 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 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 increases. 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 may 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.
VARIABLE AND FLOATING RATE OBLIGATIONS -- The fund may invest in variable and
floating rate obligations which have interest rates that are adjusted at
designated intervals or whenever interest rates change. The rate adjustment
feature tends to limit the extent to which the market value of the obligation
will fluctuate.
PRIVATE PLACEMENTS -- Generally, municipal securities acquired in private
placements are subject to contractual restrictions on resale. Accordingly, all
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.
REPURCHASE AGREEMENTS -- Although the fund has no current intention to do so
during the next 12 months, it may enter on a temporary basis into repurchase
agreements, under which it buys a security and obtains a simultaneous
commitment from the seller to repurchase the security at a specified time and
price. Repurchase agreements permit the fund to maintain liquidity and earn
income over periods of time as short as overnight. The seller must maintain
with the fund's custodian collateral equal to at least 100% of the repurchase
price including accrued interest, as monitored daily by Capital Research and
Management Company. The fund will only enter into repurchase agreements
involving securities in which it could otherwise invest and with selected banks
and securities dealers whose financial condition is monitored by the Investment
Adviser. If the seller under the repurchase agreement defaults, the fund may
incur a loss if the value of the collateral securing the repurchase agreement
has declined and may incur disposition costs in connection with liquidating the
collateral. If bankruptcy proceedings are commenced with respect to the
seller, liquidation of the collateral by the fund may be delayed or limited.
PORTFOLIO MANAGEMENT -- In seeking to achieve the fund's objective, the
Investment Adviser causes the fund to purchase securities which it believes
represent the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the economy, movements in
the general level and term structure of interest rates, political developments,
and variations in the supply of funds available for investment in the
tax-exempt market relative to the demand for the funds placed upon it. These
latter factors change continuously and should be met with a dynamic, responsive
approach to the investment process. Some of the more important portfolio
management techniques that are utilized by the Investment Adviser are set forth
below.
ADJUSTMENT OF MATURITIES -- The Investment Adviser seeks to anticipate
movements in interest rates and adjusts the maturity distribution of the
portfolio accordingly. Longer term securities ordinarily yield more than
shorter term securities but are subject to greater and more rapid price
fluctuation. Keeping in mind the fund's objective of producing a high level of
current income, the Investment Adviser will increase the fund's exposure to
this price volatility only when it appears likely to increase current income
without undue risk to capital.
ISSUE CLASSIFICATION -- Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which
they were issued, often tend to trade at different yields. These yield
differentials tend to fluctuate in response to political and economic
developments, as well as temporary imbalances in normal supply/demand
relationships. The Investment Adviser monitors these fluctuations closely, and
will attempt to adjust portfolio concentrations in various issue
classifications according to the value disparities brought about by these yield
relationship fluctuations.
QUALITY -- Securities issued for similar purposes and with the same general
maturity characteristics, but which vary according to the creditworthiness of
their respective issuers, tend to trade at different yields. These yield
differentials also tend to fluctuate in response to political, economic and
supply/demand factors. The Investment Adviser will attempt to take advantage
of these fluctuations by adjusting the concentration of portfolio securities in
any given quality category according to the value disparities produced by these
yield relationship fluctuations.
The Investment Adviser believes that, in general, the market for municipal
bonds is less liquid than that for taxable fixed-income securities.
Accordingly, the ability of the fund to make purchases and sales of securities
in the foregoing manner may, at any particular time and with respect to any
particular securities, be limited (or non-existent).
PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions, and may result in the realization of
net capital gains, which are taxable when distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. The fund does not
anticipate its portfolio turnover will exceed 100% annually. The fund's
portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. See "Financial Highlights" in the
prospectus for the fund's portfolio turnover for each of the last 5 years.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES -- The fund has adopted certain investment restrictions
which may not be changed without a majority vote of its outstanding shares.
Such majority is defined by the Investment Company Act of 1940 (the "1940 Act")
as the vote of the lesser of (i) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy, or (ii) more
than 50% of the outstanding voting securities. None of the following
investment restrictions involving a maximum percentage of assets will be
considered violated unless the excess occurs immediately after, and is caused
by, an acquisition [or encumbrance of securities or assets of, or borrowings]
by the fund. These restrictions provide that the fund may not:
1. Purchase any security (other than securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities), if immediately after and
as a result of such investment more than 5% of the value of the fund's total
assets would be invested in securities of the issuer. For the purpose of this
restriction, the fund will regard each state, each political subdivision,
agency or instrumentality of such state, each multi-state agency of which such
state is a member, and each public authority which issues industrial
development bonds on behalf of a private entity as a separate issuer;
2. Enter into any repurchase agreement if, as a result, more than 10% of the
value of the fund's total assets would be subject to repurchase agreements
maturing in more than seven days;
3. Buy or sell real estate in the ordinary course of its business; however,
the fund may invest in securities secured by real estate or interests therein;
4. Acquire securities subject to restrictions on disposition, except for
repurchase obligations;
5. Make loans to others, except for the purchase of debt securities or
entering into repurchase agreements;
6. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;
7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales;
8. Borrow money, except from banks for temporary or emergency purposes, not in
excess of 5% of the value of the fund's total assets, excluding the amount
borrowed. This borrowing provision is intended to facilitate the orderly sale
of portfolio securities to accommodate unusually heavy redemption requests, if
they should occur; it is not intended for investment purposes;
9. Mortgage, pledge, or hypothecate its assets, except in an amount up to 10%
of the value of its total assets, but only to secure borrowings for temporary
or emergency purposes;
10. Underwrite any issue of securities, except to the extent that the purchase
of municipal bonds directly from the issuer in accordance with the fund's
investment objective, policies and restrictions, and later resale may be deemed
to be an underwriting;
11. Invest in companies for the purpose of exercising control or management;
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition, or reorganization;
13. Buy or sell commodities or commodity contracts or oil, gas or other
mineral exploration or development programs;
14. Write, purchase or sell puts, calls, straddles, spreads or any
combination thereof;
15. Purchase or retain the securities of any issuer, if, to the knowledge of
the fund, those individual officers and directors of the fund, its Investment
Adviser, or principal underwriter, each owning beneficially more than 1/2 of 1%
of the securities of such issuer, together own more than 5% of the securities
of such issuer;
For the purpose of the fund's investment restrictions, the identification of
the "issuer" of municipal bonds that are not general obligation bonds is made
by the Investment Adviser on the basis of the characteristics of the bonds as
described, the most significant of which is the ultimate source of funds for
the payment of principal and interest on such bonds.
For purposes of Investment Restriction #4, the term "securities subject to
restrictions on disposition" includes only securities that are not readily
marketable due to contractual restrictions. Accordingly, the Fund can purchase
securities issued in private placements (including so-called 144A securities)
provided they are readily marketable.
Notwithstanding Investment Restriction #12, 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 the
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.
For purposes of Investment Restriction #13, the term "oil, gas or other
mineral exploration or development programs" includes oil, gas or other mineral
exploration or development leases.
NON-FUNDAMENTAL POLICIES -- The fund has adopted the following non-fundamental
investment policies: The fund may not:
(a) invest 25% or more of its assets in municipal bonds the issuers of which
are located in the same state, unless such securities are guaranteed by the
U.S. Government, or more than 25% of its total assets in securities the
interest on which is paid from revenues of similar type projects (such as
hospitals and health facilities; turnpikes and toll roads; ports and airports;
or colleges and universities). The fund may on occasion invest more than an
aggregate of 25% of its total assets in industrial development bonds. There
could be economic, business or political developments which might affect all
municipal bonds of a similar category or type or issued by issuers within any
particular geographical area or jurisdiction;
(b) invest more than 5% of the value of its total assets in securities of any
issuer with a record of less than three years continuous operation, including
predecessors, except those issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, or municipal bonds rated at least "A" by either
Moody's Investors Service, Inc. or Standard & Poor's Corporation; and
(c) invest more than 15% of its total assets in securities which are not
readily marketable.
FUND ORGANIZATION
The fund is an open-end, diversified management investment company. It was
organized as a Maryland corporation on July 20, 1979.
All fund operations are supervised by the fund's board of directors. The
board meets periodically and performs duties required by applicable state and
federal laws. Members of the board who are not employed by Capital Research
and Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in "Directors and Director Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund.
FUND OFFICERS AND DIRECTORS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS WITH OCCUPATION(S) DURING COMPENSATION COMPENSATION NUMBER
AND AGE REGISTRANT PAST 5 YEARS (INCLUDING (INCLUDING OF FUND
(POSITIONS WITHIN VOLUNTARILY VOLUNTARILY BOARDS ON
THE ORGANIZATIONS DEFERRED DEFERRED WHICH
LISTED MAY HAVE COMPENSATION COMPENSATION DIRECTOR
CHANGED DURING THIS /1/) FROM THE /1/) FROM ALL SERVES
PERIOD) FUND DURING FUNDS MANAGED /2/
FISCAL YEAR BY CAPITAL
ENDED AUGUST RESEARCH AND
31, 1998 MANAGEMENT
COMPANY OR ITS
AFFILIATES /2/
FOR THE YEAR
ENDED AUGUST
31, 1998
<S> <C> <C> <C> <C> <C>
H. Frederick Christie Director Private Investor. $4,211/3/ $171,100 19
Age: 65 Former President and
P.O. Box 144 Chief Executive
Palos Verdes Estates, Officer, The Mission
CA 90274 Group (non-utility
holding Company,
subsidiary of
Southern California
Edison Company)
+ Don R. Conlan Director President (Retired), none/4/ none/4/ 12
Age: 62 The Capital Group
1630 Milan Avenue Companies, Inc.
South Pasadena, CA
91030
Diane C. Creel Director CEO and President, $3,900/3/ $44,650 12
Age: 49 The Earth Technology
100 W. Broadway Corporation
Suite 5000 (international
Long Beach, CA 90802 consulting
engineering)
Martin Fenton, Jr. Director Chairman, Senior $4,625/3/ $121,084 15
Age: 63 Resource Group
4660 La Jolla Village (management of
Drive senior living
Suite 725 centers)
San Diego, CA 92121-
2116
Leonard R. Fuller Director President, Fuller $4,266/3/ $51,850 12
Age: 52 Consulting
4337 Marina City Drive (financial
Suite 841 ETN management
Marina del Rey, CA consulting
90292 firm)
+* Abner D. Goldstine President, Senior Vice none/4/ none/4/ 12
Age: 68 PEO and President and
Director Director, Capital
Research and
Management Company
+** Paul G. Haaga, Jr. Chairman Executive Vice none/4/ none/4/ 14
Age: 49 of President and
the Board Director, Capital
Research and
Management Company
Herbert Hoover III Director Private Investor $4,043 $65,084 13
Age: 70
1520 Circle Drive
San Marino, CA 91108
Richard G. Newman Director Chairman, President $4,654/3/ $102,650 13
Age: 63 and CEO, AECOM
3250 Wilshire Technology
Boulevard Corporation
Los Angeles, CA 90010- (architectural
1599 engineering)
</TABLE>
+ Directors who are considered "interested persons" of the fund as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the Fund in 1994. 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 Endowments, whose shareholders are limited
to (i) any entity exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii) any trust,
the present or future beneficiary of which is a 501(c)(3) organization, and
(iii) any other entity formed for the primary purpose of benefiting a 501(c)(3)
organization. An affiliate of Capital Research and Management Company, Capital
International, Inc., manages Emerging Markets Growth Fund, Inc.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors is as
follows: H. Frederick Christie ($8,475), Diane C. Creel ($1,104), Martin
Fenton, Jr. ($10,732), Leonard R. Fuller ($5,591) and Richard G. Newman
($24,683).
/4/ Don R. Conlan, Paul G. Haaga, Jr. and Abner D. Goldstine are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
Fund.
OFFICERS
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
AGE POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS HELD WITH DURING PAST 5 YEARS
REGISTRANT
<S> <C> <C> <C>
Neil L. Langberg 45 Senior Vice Vice President -
11100 Santa Monica President Investment Management
Blvd. Group, Capital Research
Los Angeles, CA and Management Company
90025
Michael J. Downer 43 Vice Senior Vice President -
333 South Hope President Fund Business Management
Street Group, Capital Research
Los Angeles, CA and Management Company
90071
Mark R. Macdonald 39 Vice Vice President -
11100 Santa Monica President Investment Management
Blvd. Group, Capital Research
Los Angeles, CA and Management Company
90025
Julie F. Williams 50 Secretary Vice President - Fund
333 South Hope Business Management
Street Group, Capital Research
Los Angeles, CA and Management Company
90071
Anthony W. Hynes, 35 Treasurer Vice President - Fund
Jr. Business Management
135 South State Group, Capital Research
College Blvd. and Management Company
Brea, CA 92821
Kimberly S. 33 Assistant Assistant Vice President
Verdick Secretary - Fund Business
333 South Hope Management Group, Capital
Street Research and Management
Los Angeles, CA Company
90071
Todd L. Miller 39 Assistant Assistant Vice President
135 South State Treasurer - Fund Business
College Blvd. Management Group, Capital
Brea, CA 92821 Research and Management
Company
</TABLE>
# Positions within the organizations listed may have changed during this period
No compensation is paid by the fund to any officer or Director who is a
Director or officer of the Investment Adviser. The fund pays annual fees of
$2,500 to Directors who are not affiliated with the Investment Adviser, plus
$200 for each Board of Directors meeting attended, plus $200 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 these 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 October 1, 1998 the officers and Directors and their
families as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER -- The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have years of investment experience. The
Investment Adviser is located at 333 South Hope Street, Los Angeles, Ca 90071,
and at 135 South State College Boulevard, Brea, CA 92821. The Investment
Adviser's research professionals travel several million miles a year, making
more than 5,000 research visits in more than 50 countries around the world.
The Investment Adviser believes that it is able to attract and retain quality
personnel. The Investment Adviser is a wholly owned subsidiary of the Capital
Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations, as well as schools, colleges, foundations
and other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the "Agreement") between the fund and the Investment Adviser
will continue in effect until May 31, 1999, unless sooner terminated, and may
be renewed from year to year thereafter, provided that any such renewal has
been specifically approved at least annually by (i) the Board of Directors, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the fund, and (ii) the vote of a majority of Directors who
are not parties to the Agreement or interested persons (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement provides that the Investment Adviser
has no liability to the fund for its acts or omissions in the performance of
its obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate, without
penalty, upon 60 days' written notice to the other party and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
The Investment Adviser receives a fee at the annual rate of 0.30% on the first
$60 million of the fund's net assets, plus 0.21% on net assets from $60 million
to $1 billion, plus 0.18% on net assets from $1 billion to $3 billion, plus
0.16% on net assets over $3 billion, plus 3% of the first $3,333,333 of the
fund's monthly gross investment income, plus 2.50% of such income over
$3,333,333 but not exceeding $8,333,333 and 2.25% of such income in excess of
$8,333,333. Assuming net assets of $1.5 billion and gross investment income
levels of 3%, 4%, 5%, 6% and 7%, management fees would be 0.29%, 0.32%, 0.34%,
0.37% and 0.39%, respectively.
For the purpose of such computations under the Agreement, the fund's gross
investment income does not reflect any net realized gains or losses on the sale
of portfolio securities but does include original-issue discount as defined for
federal income tax purposes.
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
qualified persons to perform the executive and related administrative, clerical
and bookkeeping functions of the fund, and provides suitable office space,
necessary small office equipment and utilities, as well as general purpose
accounting forms, supplies, and postage to be used at the offices of the fund.
The fund pays all expenses not assumed by the Investment Adviser, including,
but not limited to, custodian, stock transfer and dividend disbursing fees and
expenses; costs of designing, printing and mailing reports, prospectuses, proxy
statements, and notices to its shareholders; taxes; expenses of issuance and
redemption of shares (including stock certificates, registration and
qualification fees and expenses); legal and auditing expenses; compensation,
fees, and expenses paid to Directors unaffiliated with the Investment Adviser;
association dues; costs of stationery and forms prepared exclusively for the
fund; and costs of assembling and storing shareholder account data.
The Agreement provides that the Investment Adviser will reimburse the fund for
any expenses incurred by the fund in any fiscal year, exclusive of interest,
taxes and brokerage costs and extraordinary expenses such as litigation and
acquisitions, to the extent such expenses exceed the lesser of 25% of gross
income for the preceding year or the sum of (a) 1.5% of the average daily net
assets of the preceding year up to and including $30 million and (b) 1% of any
excess of average daily net assets of the preceding year over $30 million. The
investment advisory fee is included as an expense of the fund and is subject to
the expense limitation described in the preceding sentence.
During the fiscal years ended August 31, 1998, 1997, and 1996, the Investment
Adviser's total fees amounted to $5,969,000, $5,567,000, and $5,451,000,
respectively.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the "Plan") pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares during the fiscal year ended
August 31, 1998 amounted to $827,000 after allowance of $3,336,000 to dealers.
During the fiscal years ended August 31, 1997 and 1996, the Principal
Underwriter retained $632,000 and $760,000, respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by a majority of the entire 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 due
to present or past affiliations with the Investment Adviser and related
companies may be considered to have a direct or indirect financial interest in
the operation of the Plan. Potential benefits of the Plan to the fund are
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 is committed to the
discretion of the Directors who are not "interested persons" during the
existence of the Plan. Plan expenditures are 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 average 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, any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code, including a "401(k)" plan with
200 or more eligible employees or a community foundation).
Commissions on sales of shares exceeding $1 million (including purchases by
any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the fund's fiscal year ended August 31, 1998, the fund paid or accrued
$4,211,000 under the Plan as compensation to dealers. As of August 31, 1998
accrued and unpaid distribution expenses were $834,000.
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised 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 or 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 AND DISTRIBUTIONS
The fund declares dividends from its net investment income daily and
distributes the accrued dividends to shareholders each month. The percentage
of the distribution that is tax-exempt may vary from distribution to
distribution. For the purpose of calculating dividends, daily net investment
income of the fund consists of: (a) all interest income accrued on the fund's
investments including any original issue discount or market premium ratably
amortized to the date of maturity or determined in such other manner as may be
deemed appropriate; minus (b) all liabilities accrued, including interest,
taxes and other expense items, amounts determined and declared as dividends or
distributions and reserves for contingent or undetermined liabilities, all
determined in accordance with generally accepted accounting principles.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional federal, state and local
tax considerations generally affecting the fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of the
fund or its shareholders, and the discussion here and in the fund's prospectus
is not intended as a substitute for careful tax planning. Investors are urged
to consult their tax advisers with specific reference to their own tax
situations.
The fund is not intended to constitute a balanced investment program and is
not designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the fund would
generally not be suitable for tax-exempt institutions or tax-deferred
retirement plans (E.G., plans qualified under Section 401 of the Internal
Revenue Code, Keogh-type plans and individual retirement accounts). Such
retirement plans would not gain any benefit from the tax-exempt nature of the
fund's dividends because such dividends would be ultimately taxable to
beneficiaries when distributed to them. In addition, the fund may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who regularly uses a part of such facilities in his trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
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 taxable and tax-exempt
net investment income, it will be taxed only on that portion, if any, which it
retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities which must be
limited, in respect of any one issuer to an amount not greater than 5% of the
fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies) or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
The percentage of total dividends paid by the fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for the fund to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the aggregate
value of the fund's assets must consist of certain tax-exempt obligations. Not
later than 60 days after the close of its taxable year, the fund will notify
each shareholder in writing of the portion of the dividends paid by the fund to
the shareholder with respect to such taxable year which constitutes
exempt-interest dividends. The aggregate amount of dividends so designated
cannot, however, exceed the excess of the amount of interest excludable from
gross income from tax under Section 103 of the Code received by the fund during
the taxable year over any amounts disallowed as deductions under Sections 265
and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry fund
shares is not deductible for federal income tax purposes if the fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share is held for six months or less, any loss on the sale or exchange
of such share will be disallowed to the extent of the amount of such
exempt-interest dividend.
While the fund does not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually. The
fund will have no tax liability with respect to such gains, and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held fund shares. Such distributions
will be designated as a capital gains distribution in a written notice mailed
by the fund to shareholders not later than 60 days after the close of the
fund's taxable year. If a shareholder receives a designated capital gain
distribution (treated by the shareholder as a long-term capital gain) with
respect to any fund share and such fund share is held for six months or less,
then (unless otherwise disallowed) any loss on the sale or exchange of that
fund share will be treated as long-term capital loss to the extent of the
designated capital gain distribution. The fund also may make a distribution of
net realized long-term capital gains near the end of the calendar year to
comply with certain requirements of the Code. Gain recognized on the
disposition of a debt obligation (including tax-exempt obligations purchased
after April 30, 1993) purchased by the fund at a market discount (generally, at
a price less than its principal amount) will be treated as ordinary income to
the extent of the portion of the market discount which accrued during the
period of time the fund held the debt obligation.
Similarly, while the fund does not expect to earn any significant investment
company taxable income, in the event that any taxable income is earned by the
fund it will be distributed. In general, the fund's investment company taxable
income will be its taxable income subject to certain adjustments and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. The fund would be taxed on any
undistributed investment company taxable income. Since any such income will be
distributed, it will be taxable to shareholders as ordinary income (whether
distributed in cash or additional shares).
The Code imposes limitations on the use and investment of the proceeds of
state and local governmental bonds and upon other funds of the issuers of such
bonds. These limitations must be satisfied on a continuing basis to maintain
the exclusion from gross income of interest on such bonds. These provisions of
the Code generally apply to bonds issued after August 15, 1986. Bond counsel
qualify their opinions as to the federal tax status of new issues of bonds by
making such opinions contingent on the issuer's future compliance with these
limitations. Any failure on the part of an issuer to comply could cause the
interest on its bonds to become taxable to investors retroactive to the date
the bonds were issued.
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 gain (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 during
the periods described above. The fund intends to distribute net investment
income and net capital gains so as to minimize or avoid the excise tax
liability.
If for any taxable year the fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
would be subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits, and
might be eligible for the dividends-received deduction for corporations. Under
normal circumstances, no part of the distributions to shareholders by the fund
is expected to qualify for the dividends-received deduction allowed to
corporate shareholders.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares will not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purposes 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 funds. Also, any loss realized on a redemption or exchange of
shares of the fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
As of the date of this statement of additional information, the maximum
individual 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 generally
applicable to net capital gains on assets held more than one year is 20%, 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 income 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 income tax
of up to $100,000. Naturally, the amount of tax payable by a taxpayer will be
affected by a combination of tax law rules covering, E.G., deductions, credits,
deferrals, exemptions, sources of income and other matters.
Under the Code, distributions of net investment income by the fund to 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 a lower treaty rate, if
applicable). Withholding will not apply if a dividend paid by the fund 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.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
BY CONTACTING Visit any investment dealer who Mail directly to your investment
YOUR is registered in the state where dealer's address printed on your
INVESTMENT the purchase is made and who has account statement.
DEALER a sales agreement with American
Funds Distributors.
BY MAIL Make your check payable to the Fill out the account additions form at
fund and mail to the address the bottom of a recent account
indicated on the account statement, make your check payable to
application. Please indicate an the fund, write your account number on
investment dealer on the account your check, and mail the check and
application. 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 or
follow the procedures for American FundsLink Authorization Form.
additional investments. Once you establish the privilege, you,
your financial advisor or any person
with your account information can call
American FundsLine(R) and make
investments by telephone (subject to
conditions noted in "Telephone and
Computer Purchases, Redemptions and
Exchanges" below).
BY COMPUTER Please contact your investment Complete the American FundsLink
dealer to open account, then Authorization Form. Once you
follow the procedures for establish the privilege, you, your
additional investments. financial advisor or any person with
your account information may access
American FundsLine OnLine(SM) on the
Internet and make investments by
computer (subject to conditions noted
in "Telephone and Computer Purchases,
Redemptions and Exchanges" below).
BY WIRE Call 800/421-0180 to obtain your Your bank should wire your additional
account number(s), if necessary. investments in the same manner as
Please indicate an investment described under "Initial 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 FUND 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>
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<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R) $1,000 02
American Balanced Fund(R) 500 11
American Mutual Fund(R) 250 03
Capital Income Builder(R) 1,000 12
Capital World Growth and Income 1,000 33
Fund(SM)
EuroPacific Growth Fund(R) 250 16
Fundamental Investors(SM) 250 10
The Growth Fund of America(R) 1,000 05
The Income Fund of America(R) 1,000 06
The Investment Company of America(R) 250 04
The New Economy Fund(R) 1,000 14
New Perspective Fund(R) 250 07
SMALLCAP World Fund(R) 1,000 35
Washington Mutual Investors Fund(SM) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(R)
American High-Income Trust(SM) 1,000 21
The Bond Fund of America(SM) 1,000 08
Capital World Bond Fund(R) 1,000 31
Intermediate Bond Fund of America(SM) 1,000 23
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(SM)
The Tax-Exempt Bond Fund of America(R) 1,000 19
The Tax-Exempt Fund of California(R)* 1,000 20
The Tax-Exempt Fund of Maryland(R)* 1,000 24
The Tax-Exempt Fund of Virginia(R)* 1,000 25
U.S. Government Securities Fund(SM) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of 2,500 09
America(R)
The Tax-Exempt Money Fund of 2,500 39
America(SM)
The U.S. Treasury Money Fund of 2,500 49
America(SM)
___________
*Available only in certain states.
</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).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND
FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investments of $1 million or more and
investments made by employer-sponsored defined contribution-type plans with 100
or more eligible employees are sold with no initial sales charge. A contingent
deferred sales charge may be imposed on certain redemptions by these accounts
made within one year of purchase. Investments by retirement plans, foundations
or endowments with $50 million or more in assets may be made with no sales
charge and are not subject to a contingent deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;
(4) directors 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.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $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.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis,
determine the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the prospectus apply to purchases of $50,000 or more made
within a 13-month period subject to the following statement of intention (the
Statement) terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to use 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 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 pay 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.
When the directors of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: The regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments)
and any rollovers or transfers reasonably anticipated to be invested in
non-money market American Funds during the 13-month period is 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 director(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 1940 Act, again excluding employee benefit plans described
above, or (3) for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
CONCURRENT PURCHASES -- You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. Direct
purchases of the money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next determined
after the purchase order is received and accepted by the fund or 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 the 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 the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper do not always indicate the 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 net asset value per share of money market funds
normally will remain constant at $1.00 based on the fund's current practice of
valuing their shares using the penny-rounding method in accordance with rules
of the Securities and Exchange Commission.
The price you pay for shares, the public offering price, is based on the net
asset value per share which is calculated once daily at the normal close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. For example, if the Exchange closes at 1:00 p.m. on one day
and at 4:00 p.m. on the next, the fund's share price would be determined as of
4:00 p.m. New York time on both days. The New York Stock Exchange is currently
closed on weekends and on the following holidays: New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company are valued, and the net asset value per share is determined, as
follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Forward currency contracts are valued at the
mean of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
own beneficially directly, indirectly, or through a unit investment trust more
than 4.5% of the outstanding shares of the fund without the consent of a
majority of the Board of Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
- -- Over $50,000;
- -- Made payable to someone other than the registered shareholder(s); or
- -- Sent to an address that has not been used with the account for at least 10
days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that are eligible guarantor institutions.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R)
- - Redemptions by telephone or fax (including American FundsLine(R) and American
FundsLine OnLine(R)) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application).
- -- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions 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 100 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer- sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 59 1/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables you to make
regular monthly or quarterly investments in shares through automatic charges to
your bank account. 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 you will receive a confirmation statement at least
quarterly. Participation in the plan will begin within 30 days after receipt
of the account application. If your bank account cannot be charged due to
insufficient funds, a stop-payment order or closing of the account, the plan
may be terminated and the related investment reversed. You may change the
amount of the investment or discontinue the plan at any time by writing to the
Transfer Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- You may 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 your account(s) in the paying fund(s) must equal or exceed $5,000
(this condition is waived if the value of the account in the receiving fund
equals or exceeds that fund's minimum initial investment requirement), (ii) as
long as the value of the account in the receiving fund is below that fund's
minimum initial investment requirement, dividends and capital gain
distributions paid by the receiving fund must be automatically reinvested in
the receiving fund, and (iii) if this privilege is discontinued with respect to
a particular receiving fund, the value of the account in that fund must equal
or exceed the fund's minimum initial investment requirement or the fund will
have the right, if you fail 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 you. 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) or American FundsLine Online(R) (see "American FundsLine(R) and
American FundsLine Online(R)" below), or by telephoning 800/421-0180 toll-free,
faxing (see "Transfer Agent" below for the appropriate fax numbers) or
telegraphing American Funds Service Company. (See "Telephone and Computer
Purchases, Redemptions and Exchanges" below.) Shares held in corporate-type
retirement plans for which Capital Guardian Trust Company serves as trustee may
not be exchanged by telephone, 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 your account. The Transfer Agent
arranges for the redemption by the fund of sufficient shares, deposited by you
with the Transfer Agent, to provide the withdrawal payment specified.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments , will be reflected on regular confirmation statements from
American Funds Service Company. Dividend and capital gain reinvestments and
purchases through automatic investment plans and certain retirement plans will
be confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(R) -- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(R) and American
FundsLine Online(R). To use this service, call 800/325-3590 from a
TouchTone(TM) telephone or access the American Funds Website on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(R)
and American FundsLine Online(R) are subject to the conditions noted above and
in "Redeeming Shares--Telephone and Computer Purchases, Redemptions and
Exchanges" below. You will need your fund number (see the list of funds in The
American Funds Group under "Purchase of Shares--Investment Minimums and Fund
Numbers"), personal identification number (the last four digits of your Social
Security number or other tax identification number associated with your
account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine(R) and American FundsLine Online(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 reinstate
them at any time also by writing American Funds Service Company). If American
Funds Service Company does not employ reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine, the fund may be liable for losses due to unauthorized or fraudulent
instructions. In the event that shareholders are unable to reach the fund by
telephone because of technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made in writing only.
SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by writing to American Funds Service
Company.
REDEMPTION OF SHARES - The fund's Articles of Incorporation permit the fund to
direct the Transfer Agent to redeem your shares if, through redemptions or
otherwise, they have a value of less than $1000 (determined, for this purpose
only, as the greater of your cost or the current net asset value of the shares,
including any shares acquired through reinvestment of income dividends and
capital gain distributions), or are fewer than ten shares. We will give you
prior notice of at least 60 days before the involuntary redemption provision is
made effective with respect to your account. You will have not less than 30
days from the date of such notice within which to bring the account up to the
minimum determined as set forth above.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities t
transactions. The Investment Adviser strives to obtain the best available
prices in its portfolio transactions taking into account the costs and
promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through its
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not have an obligation
to obtain the lowest available commission rate to the exclusion of price,
service and qualitative considerations.
Portfolio transactions for the fund may be executed as part of concurrent
authorizations to purchase or sell the same security for other funds served by
the Investment Adviser, or for trusts or other accounts served by affiliated
companies of the Investment Adviser. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the fund, they
are effected only when the Investment Adviser believes that to do so is in the
interest of the fund. When such concurrent authorizations occur, the objective
is to allocate the executions in an equitable manner.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal year ended August 31, 1998
amounted to $1,435,000. .
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. It was paid a fee of $443,000 for the fiscal
year ended August 31, 1998.
INDEPENDENT ACCOUNTANTS -- PricewaterhouseCoopers LLP, 400 South Hope Street,
Los Angeles, CA 90071, has served as the fund's independent accountants since
its inception, providing audit services, preparation of tax returns and review
of certain documents to be filed with the Securities and Exchange Commission.
The financial statements included in this Statement of Additional Information
have been so included in reliance on the report of the independent accountants
given on the authority of said firm as experts in auditing and accounting.
SHAREHOLDER VOTING RIGHTS -- At any meeting of shareholders, duly called for
such purpose, 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 directors of the fund will promptly call a meeting of
shareholders for the purpose of voting upon the removal of any director when
requested in writing to do so by the record holders of at least 10% of the
outstanding shares.
REPORTS TO SHAREHOLDERS -- The fund's fiscal year ends on August 31. It
provides shareholders at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited annually by the fund's independent
accountants, PricewaterhouseCoopers LLP, whose selection is determined annually
by the Board of Directors. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
shareholder reports. To receive additional copies of a report shareholders
should contact the Transfer Agent.
YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
PERSONAL INVESTING POLICY -- The Investment Adviser and its affiliated
companies have adopted a personal investing policy consistent with Investment
Company Institute guidelines. This policy includes: a ban on acquisitions of
securities pursuant to an initial public offering; restrictions on acquisitions
of private placement securities; pre-clearance and reporting requirements;
review of duplicate confirmation statements; annual recertification of
compliance with codes of ethics; 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. You may obtain a summary of the personal investing policy by
contacting the Secretary of the fund.
The financial statements including the investment portfolio and the report of
independent accountants 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 -- AUGUST 31, 1998
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $12.60
Maximum offering price per share (100/95.25 of
per share net asset value, which takes into account
the fund's current maximum sales charge) $13.23
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield was 3.89% based on a 30-day (or one month) period ended
August 31, 1998, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund may also calculate a tax equivalent yield based on a 30-day (or one
month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of
the yield (as computed by the formula stated above) which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield that is not tax-exempt. The fund's tax equivalent yield based on
the maximum individual effective federal tax rate of 39.6% for the 30-day (or
one month) period ended August 31, 1998 was 6.44%.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by annualizing the current
month's dividend and dividing by the average price for the month. The taxable
equivalent distribution rate will reflect the most current federal and state
tax rates available. The current distribution rate may differ from the current
yield.
The fund's total return over the past 12 months and average annual total
returns over the past five-year and ten-year periods ending on August 31, 1998
were 3.14%, 5.26% and 7.59%, respectively. The average annual total return
("T") is computed by equating the value at the end of the period ("ERV") with a
hypothetical initial investment of $1,000 ("P") over a period of years ("n")
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV. The fund's total return at net asset value over
the past 12 months and average annual total return over the past five- and
ten-year periods at August 31, 1998 were 8.26%, 6.29% and 8.11%, respectively.
In calculating average annual total return, the fund assumes: (1) deduction
of the maximum sales load of 4.75% 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.
During its lifetime, the fund had a total return of 354.3% compared with
410.9% for The Bond Buyer Index. /1/ In the period from January 1, 1980, when
the Lehman Brothers Municipal Bond Index /2/ began, to August 31, 1998, the
fund had a total return of 353.6% and the index showed a 376.5% return. Note
that past results are not an indication of future investment results.
/1/ The Bond Buyer Index is unmanaged, reflects no expenses or management fees
and consists of 20 General Obligations bonds maturity in 20 years and rated A
to AA by Standard & Poor's Corporation.
/2/ The Lehman Brothers Municipal Bond Index is unmanaged, reflects no expenses
or management fees and consists of a large universe of municipal bonds issued
as state general obligations or revenue bonds with a minimum rating of BBB by
Standard & Poor's Corporation
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices 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 also combine
its results with those of other funds in The American Funds Group for purposes
of illustrating investment strategies involving multiple funds.
The fund may also refer to results and surveys compiled by organizations such
as CDA Investment Technologies, Ibbotson Associates, Lipper Analytical Services
("Lipper"), Morningstar, Inc., Wiesenberger Investment Companies Services and
the U.S. Department of Commerce. Additionally, the fund may 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.
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
...and taken all distributions
If you had invested in shares, your investment
$10,000 in the fund would have been worth this
this many years ago... much at August 31, 1998
| |
<S> <C> <C>
Periods
Number of Years 9/1-8/31 Value
1 1997 - 1988 $10,313
2 1996 - 1998 11,281
3 1995 - 1998 11,898
4 1994 - 1998 12,939
5 1993 - 1998 12,919
6 1992 - 1998 14,521
7 1991 - 1998 16,098
8 1990 - 1998 17,972
9 1989 - 1998 18,843
10 1988 - 1998 20,780
11 1987 - 1998 22,167
12 1986 - 1998 22,143
13 1985 - 1998 27,817
14 1984 - 1998 32,372
15 1983 - 1998 34,770
16 1982 - 1998 40,446
17 1981 - 1998 50,831
18 1980 - 1998 46,297
19 1979*- 1998 45,428
</TABLE>
ILLUSTRATION OF A $10,000 INVESTMENT IN THE FUND
WITH DIVIDENDS REINVESTED
(FOR THE LIFETIME OF THE FUND OCTOBER 3, 1979 THROUGH AUGUST 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
COST OF SHARES VALUE OF SHARES**
Fiscal Annual Dividends Total From From From Total
Year End Dividends (cumulative) Investment Initial Capital Gains Dividends Value
Aug. 31 Cost Investment Reinvested Reinvested
1980* $ 553 $ 553 $ 10,553 $ 8,819 $ 0 $ 529 $ 9,348
1981 779 1,332 11,332 7,362 0 1,146 8,508
1982 932 2,264 12,264 8,362 0 2,334 10,696
1983 978 3,242 13,242 8,971 0 3,473 12,444
1984 1,026 4,268 14,268 8,895 0 4,466 13,361
1985 1,182 5,450 15,450 9,543 0 6,012 15,555
1986 1,297 6,747 16,747 10,962 53 8,297 19,312
1987 1,335 8,082 18,082 10,267 192 9,057 19,516
1988 1,390 9,472 19,472 10,162 307 10,358 20,827
1989 1,499 10,971 20,971 10,467 317 12,176 22,960
1990 1,573 12,544 22,544 10,267 311 13,493 24,071
1991 1,621 14,165 24,165 10,762 326 15,800 26,888
1992 1,723 15,888 25,888 11,219 339 18,234 29,792
1993 1,773 17,661 27,661 11,838 577 21,077 33,492
1994 1,874 19,535 29,535 11,095 773 21,576 33,444
1995 2,011 21,546 31,546 11,371 792 24,192 36,355
1996 2,017 23,563 33,563 11,295 1,042 26,024 38,360
1997 2,131 25,693 35,693 11,686 1,193 29,082 41,961
1998 2,180 27,873 37,873 12,000 1,358 32,070 45,428
</TABLE>
Includes reinvested dividends of $27,873 and reinvested capital gain
distributions of $1,277
* From inception on October 3, 1979
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.
DESCRIPTION OF RATINGS FOR DEBT SECURITIES
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Corporation represent their opinions as to the quality of the municipal bonds
which they undertake to rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, municipal
bonds with the same maturity, coupon and rating may have different yields,
while municipal bonds of the same maturity and coupon with different ratings
may have the same yield.
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities from "Aaa" to "C." Moody's applies the numerical modifiers 1,
2, and 3 in each generic rating classification from AA through B in its
corporate bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. Ratings are described as follows:
BONDS --
"Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. 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."
"Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
"Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
"Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or having other marked
shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
NOTES --
"The MIG 1 designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
The MIG 2 designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
COMMERCIAL PAPER --
"Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained."
Standard & Poor's Corporation rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Ratings are described as follows:
BONDS -- "Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized."
NOTES -- "The SP-1 rating denotes a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
The SP-2 rating denotes a satisfactory capacity to pay principal and
interest."
COMMERCIAL PAPER --
The A-1 designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation."
<TABLE>
THE TAX-EXEMPT BOND FUND OF AMERICA
Investment Portfolio, August 31, 1998
<S> <C> <C>
Principal Market
Tax-Exempt Securities Maturing in More than Amount Value
One Year - 94.80% (000) (000)
Alabama - 0.23%
Daughters of Charity, National Health System, 5.25% 2015 $4,000 $4,083
Alaska - 0.75%
Housing Finance Corp., Collateralized Bonds (Veterans Mortgage 3,850 4,126
Program), Series 1992A-1, 6.75% 2032
Municipality of Anchorage:
1995 G.O. Refunding General Purpose Bonds, Series B, FGIC 2,895 3,316
Insured, 6.00% 2012
Municipal Light & Power, Senior Lien Refunding Electric Rev. 5,000 6,037
Bonds, MBIA Insured, Series 1996, 6.50% 2014
Arizona - 0.12%
State Transportation Board, Subordinated Highway Rev. Bonds, 1,850 2,051
Series 1992B, 6.50% 2008 (Preref. 2002)
California - 9.74%
G.O.Bonds:
6.75% 2006 1,000 1,168
5.25% 2016 7,320 7,552
Educational Fac. Auth., Rev. Bonds, Stanford University, 3,000 3,097
Series N, 5.35% 2027
Health Fac. Fin. Auth. Hospital Rev. Bonds (Downey 4,990 5,190
Community Hospital), Series 1993, 5.75% 2015
Housing Fin. Agcy., Single Family Mortgage Rev. Bonds,
1998 Series C-4, Class I:
5.10% 2007 2,000 2,047
5.20% 2009 4,465 4,585
Public Works Board, Lease Rev. Bonds, California Community 1,315 1,537
Colleges, 1994 Series B (Various Community College
Projects), 7.00% 2007
Statewide Communities Dev. Auth.:
Apartment Dev. Rev. Ref. Bonds (Irvine Apartment 6,000 6,103
Communities, L.P.), Series 1998A-3, MBIA Insured, 5.10% 2010
Children's Hospital of Los Angeles, MBIA Insured, 6.00% 2008 1,715 1,952
Citrus Valley Health Partners, Inc., Cert. of Part., 1,360 1,450
MBIA Insured, 5.25% 2009
Rev. Ref. Bonds (Sherman Oaks Project), Series 1998A,
AMBAC Insured:
5.00% 2007 2,000 2,117
5.00% 2008 2,000 2,116
St. Joseph Health System Obligated Group, Cert. of Part.:
5.50% 2014 2,000 2,068
5.50% 2023 2,700 2,779
Alameda Public Fin. Auth., 1997 Rev. Bonds (Marina
Village Assessment Dist. Bond Refinancing),:
6.05% 2008 1,000 1,025
6.375% 2014 1,000 1,030
Anaheim Public Fin. Auth., Lease Rev. Bonds, (Anaheim 1,000 1,168
Public Improvement Project), Senior Lease Rev. Bonds
1997 Series A, FSA Insured, 6.00% 2024
Association of Bay Area Governments, Fin. Auth.for
Nonprofit Corps., Ref. Rev. Cert. of Part., Series 1998:
(Episcopal Homes Foundation), 5.00% 2008 1,350 1,403
(American Baptist Homes Foundation), 6.10% 2017 3,000 3,177
Central Valley Fin. Auth., Cogeneration Project
Rev. Bonds (Carson Ice-Gen Project), Series 1993:
5.80% 2004 3,300 3,567
6.00% 2009 3,750 4,022
6.10% 2013 1,000 1,115
Del Mar Race Track Auth., Rev. Ref. Bonds, Series 1996, 6.00% 2001 2,060 2,126
City of Irvine, Assessment Dist. No. 95-12 Limited 1,000 1,003
Obligation Improvement Bonds, Fixed Rate Bonds,
Group Three, 5.50% 2021
Long Beach Aquarium of the Pacific, Rev. Bonds
(Aquarium of the Pacific Project), 1995 Series A:
6.10% 2010 4,000 4,300
6.125% 2015 5,500 5,834
6.125% 2023 14,000 14,810
City of Los Angeles:
State Building Auth., Lease Rev. Ref. Bonds, Dept. of
General Services Lease, 1993 Series A:
5.375% 2006 3,000 3,236
5.50% 2007 5,545 6,053
Community Redevelopment Agcy., Central Business 2,000 2,054
Dist. Redevelopment Project, Tax Allocation
Refunding Bonds, Series I, 5.00% 2001
Regional Airports Improvement Corp., Fac. Lease Ref. 2,000 2,188
Rev. Bonds, Issue of 1992, United Air Lines, Inc.
(L.A. International Airport), 6.875% 2012
County of Los Angeles:
Capital Asset Leasing Corp., Cert. of Part.
(Marina del Rey), Series A:
6.25% 2003 5,500 5,817
6.50% 2008 4,750 5,175
Metropolitan Transportation Auth., Proposition C 1,300 1,322
Sales Tax Rev. Bonds, Second Series 1993B,
AMBAC Insured, 5.25% 2023
Transportation Commission, Sales Tax Rev. Bonds, Series 2,000 2,096
1989, 7.00% 2019
Metropolitan Water Dist. of Southern California, 3,000 3,201
Waterworks G. O. Refunding Bonds, 1993 Series A1, 5.50% 2010
Northern California Public Power Agcy., Geothermal 3,000 3,242
Project #3, Special Rev. Bonds, 1993 Refunding Series A,
5.60% 2006
County of Orange:
Aliso Viejo Special Tax Bonds of Community Fac. Dist.
No. 88-1, Series A of 1992:
7.15% 2006 (Preref. 2002) 2,000 2,286
7.35% 2018 (Preref. 2002) 10,000 11,501
Limited Obligation Improvement Bonds, Irvine Coast
Assessment District No. 88-1, 1998 Series A:
5.15% 2008 1,000 1,004
5.30% 2010 1,100 1,104
Pleasanton Joint Powers Fin. Auth., Reassessment Rev. 470 492
Bonds, 1993 Series A, 5.70% 2001
Riverside County Transportation Commission, Sales Tax Rev. 3,600 3,936
Bonds (Limited Tax Bonds),
1991 Series A, 6.5% 2009 (Preref.2001)
Sacramento City Fin. Auth., 1991 Rev. Bonds, 6.80% 2020 5,000 5,563
(Preref. 2001)
Sacramento Cogeneration Auth., Cogeneration Project Rev. Bonds:
Procter & Gamble Project, 1995 Series:
7.00% 2005 1,500 1,734
6.20% 2006 1,000 1,118
6.375% 2010 1,000 1,130
1995 Series:
6.00% 2002 1,000 1,070
6.00% 2003 2,200 2,380
County of Sacramento, Laguna Creek Ranch/Elliott Ranch 500 527
Community Fac. Dist. No. 1, Improvement Area No. 2
Special Tax Ref. Bonds, 6.30% 2021
County of San Diego Reassessment Dist. No. 97-1 1,000 1,033
(4-S Ranch), Limited Obligation Improvement Bonds, 6.25% 2012
Redevelopment Agcy. of the City and County of San Francisco, 4,000 4,075
Refunding Lease Rev. Bonds, Series 1991
(George R. Moscone Convention Center), 5.50% 2018
San Francisco Bay Area Rapid Transit Dist., Sales 3,250 3,497
Tax Rev. Ref. Bonds, Series 1990, AMBAC Insured, 6.75% 2009
San Marcos Public Fac. Auth., Ref. Rev. Bonds, Series 1,000 1,006
1998, 5.80% 2027
South Orange County, Public Fin. Auth., Special Tax Rev.
Bonds, 1994 Series B (Junior Lien Bonds):
6.65% 2003 1,000 1,020
6.75% 2004 1,000 1,020
Stanislaus Waste-To-Energy Finance Agcy., Solid Waste Facility 2,500 2,642
Ref. Rev. Cert. (Ogden Martin Systems of
Stanislaus, Inc. Project), Series 1990, 7.625% 2010
City of Stockton, Mello-Roos Rev. Bonds, Series 1997A, 500 515
Community Fac. Dist No. 90-2B (Brookside Estates), 5.40% 2004
City of West Sacramento, Limited Obligation Refunding
Improvement Bonds, Reassessment District of 1998:
5.30% 2009 750 748
5.30% 2010 500 497
The Regents of the University of California, Various 2,000 2,066
University of California Projects, 1993 Series A, 5.50% 2021
Colorado - 4.58%
Housing and Fin. Auth.:
Multi-Family Housing Insured Mortgage Rev. Bonds:
1997 Series C-3, 5.65% 2015 2,300 2,389
1982 Series A, 9.00% 2025 1,780 1,806
Single-Family Housing Program Senior and Subordinate Bonds:
1996 Series C-2, 7.10% 2015 3,000 3,381
1997 Series:
A-3, 7.00% 2016 1,750 1,970
C-3, 6.75% 2017 1,000 1,120
B-3, 6.80% 2028 1,000 1,129
1998 Series:
A-3, 6.50% 2016 1,000 1,112
B-3, 6.55% 2025 5,750 6,352
Student Obligation Bond Auth., Student Loan Rev. Bonds, 1,065 1,123
1994 Series L, 6.00% 2001
Arapahoe County, Capital Improvement Trust Fund
Highway Rev. Bonds (E-470 Project):
6.90% 2015 (Preref. 2005) 5,750 6,872
6.95% 2020 (Preref. 2005) 20,500 24,564
City and County of Denver, Airport System Rev. Bonds,
Series 1992A:
7.25% 2025 14,210 16,307
7.25% 2025 (Preref. 2002) 5,590 6,406
Eaglebend Dowd Affordable Housing Corp., Multifamily
Housing Project Rev. Bonds:
Series 1997 A, 6.45% 2021 1,175 1,231
Series 1998 A:
6.35% 2014 1,065 1,078
6.63% 2039 2,000 2,023
The Regents of the University of Colorado, Refunding 3,000 3,329
Cert. of Part. (Telecommmunications and Cogeneration Projects),
Series 1996, AMBAC Insured, 6.00% 2005
Connecticut - 1.43%
Health and Educational Fac. Auth., Rev. Bonds, 2,800 2,980
University of Hartford Issue, Series D, 6.75% 2012
Housing Finance Auth., Housing Mortgage Finance Program 1,000 1,072
Bonds, Subseries B-1, 6.25% 2011
Mashantucket (Western) Pequot Tribe, Special Rev. Bonds,
1996 Series A(1):
6.25% 2002 1,000 1,087
6.25% 2002 (Escrowed to Maturity) 1,000 1,079
6.25% 2003 2,025 2,211
6.375% 2004 1,985 2,227
6.375% 2004 (Escrowed to Maturity) 5,390 5,979
6.50% 2005 1,510 1,704
6.50% 2005 (Escrowed to Maturity) 1,490 1,703
6.40% 2011 2,530 2,809
6.40% 2011 (Preref. 2007) 2,470 2,884
Delaware - 0.06%
Economic Dev. Auth., First Mortgage Rev. Bonds (Peninsula 1,000 1,081
United Methodist Homes, Inc. Issue), Series 1997A,
6.00% 2009
District of Columbia - 1.08%
G.O. Bonds:
Series 1992 B, MBIA Insured, 6.30% 2010 2,900 3,189
Series 1993 A, AMBAC Insured:
5.875% 2005 2,780 3,045
5.875% 2005 (Escrowed to Maturity) 220 243
Series 1993 B-1, AMBAC Insured, 5.50% 2009 3,000 3,237
Hospital Rev. Ref. Bonds:
Medatlantic Healthcare Group, Inc. Issue,
Hospital Rev. Ref. Bonds:
Series 1992B, 6.50% 2002 2,000 2,163
Series 1993 A, MBIA Insured, 5.25% 2012 2,000 2,086
Series 1997 A, MBIA Insured:
5.10% 2008 1,000 1,052
5.20% 2009 1,000 1,057
Washington Hospital Center Issue, Series 1992A, 7.00% 2005 2,000 2,179
Redevelopment Land Agcy., Sports Arena Special 1,115 1,149
Tax Rev. Bonds, Series 1996, 5.625% 2010
Florida - 2.11%
Arbor Green Community Dev. Dist. (City of Tampa, Hillsborough
County), Special Assessment Rev. Bonds, Series 1996:
Series 1998, 5.75% 2006 1,000 1,008
Series 1996, 7.60% 2018 1,000 1,090
Broward County, Resource Recovery Rev. Bonds, Series 1984:
North Project, 7.95% 2008 5,430 5,824
South Project, 7.95% 2008 10,495 11,257
The Crossings at Fleming Island Community Dev. Dist. 1,085 1,205
(Clay County), Special Assessment Bonds, Series 1995,
8.25% 2016
Heritage Harbor Community Dev. Dist. Rev. Bonds, Series 1,250 1,271
B, 6.00% 2003
Meadow Pointe II, Community Dev. Dist. (Pasco County),
Capital Improvement Rev. Bonds:
Series 1998A, 5.25% 2003 2,000 1,983
Series 1998B, 5.5% 2005 1,670 1,656
Mid-Bay Bridge Auth., Rev. Ref. Bonds:
Series 1991B, 8.50% 2022 (Subject to Crossover Refunding) 4,000 4,622
Series 1993D, 6.10% 2022 500 541
Northern Palm Beach County Improvement Dist., Water
Control and Improvement Bonds, Unit of Dev. No. 9A,
Series 1996A:
6.80% 2006 1,015 1,099
7.30% 2027 1,500 1,657
River Ridge Community Dev. Dist. (Lee County), Capital 2,000 1,993
Improvement Rev. Bonds, Series 1998, 5.75% 2008
Tampa Health Systems Rev. Bonds, MBIA Insured, Series A-3:
5.50% 2006 1,000 1,088
5.00% 2009 1,550 1,629
Georgia - 1.31%
Municipal Electric Auth.:
General Power Rev. Bonds:
1992B Series, 6.50% 2012 1,215 1,411
CTFS-1992B Series. 6.375% 2016 1,000 1,155
Mel Power, Project One Subordinated Bonds, AMBAC Insured,
Series B:
6.00% 2007 1,995 2,237
5.625% 2009 1,000 1,092
City of Atlanta:
Airport Fac. Rev. Ref. Bonds, Series 1994A, AMBAC Insured, 1,000 1,175
6.50% 2009
Special Purpose Fac. Rev. Ref. Bonds (Delta Air Lines, 4,500 4,753
Inc. Project), Series 1989A, 7.50% 2019
Fulco Hospital Auth., Rev. Anticipation Certificates:
St. Josephs' Hospital of Atlanta, Inc., Series 1994, 4.80% 2001 2,305 2,376
Georgia Baptist Health Care System Project:
Series 1992 A:
6.40% 2007 1,000 1,109
6.25% 2013 2,100 2,318
6.375% 2022 1,595 1,768
Series 1992 B, 6.375% 2022 610 676
Dev. Auth. of Fulton County, Special Fac. Rev. Bonds 3,115 3,430
(Delta Air Lines, Inc. Project), Series 1992, 6.95% 2012
Hawaii - 0.41%
G.O. Bonds of 1998, Series CR, MBIA Insured, 5.00% 2008 5,000 5,262
City and County of Honolulu, G.O. Bonds, Refunding and 2,000 2,072
Improvement Series, 1993B, 5.00% 2013
Illinois - 7.74%
Build Illinois Bonds (Sales Tax Rev. Bonds), Series O, 6.00% 2002 1,000 1,074
Civic Center Bonds (Special State Obligation Bonds), 6,500 7,632
Series 1991, AMBAC Insured, 6.25% 2020
Educational Fac. Auth. Rev. Bonds, Wesleyan University, 1,490 1,557
Series 1993, 5.625% 2018
Health Fac. Auth.:
Refunding Bonds:
Advocate Health Care Network, Series 1997A:
5.50% 2008 2,110 2,270
5.80% 2016 10,000 10,769
Edward Hospital Project, Series 1993 A, 5.75% 2009 1,100 1,162
Rev. Bonds:
Series 1992 (Edward Hospital Association Project), 7.00% 2022 1,000 1,117
Series 1993 OSF Healthcare System, 5.75% 2007 6,760 7,263
Series 1994A (Northwestern Memorial Hospital), 6.00% 2024 2,000 2,158
Series 1998, Centegra Health System:
5.50% 2008 1,640 1,752
5.50% 2010 2,440 2,579
5.20% 2012 2,200 2,234
5.25% 2013 2,430 2,470
5.25% 2018 2,500 2,508
Rev. Ref. Bonds:
(Edward Hospital Project), Series 1993A, 6.00% 2019 1,435 1,506
(Fairview Obligated Group Project), 1995 Series A:
6.25% 2001 1,105 1,150
6.50% 2006 770 836
7.40% 2023 1,500 1,680
Rev. and Rev. Ref. Bonds:
Evangelical Hospitals Corp., Series C, 6.25% 2022 4,000 4,647
(Escrowed to Maturity)
Lutheran General Health, Series C, 6.00% 2018 2,705 3,024
Housing Dev. Auth., Multi-Family Housing Bonds, 1992 1,490 1,630
Series A, 7.00% 2010
Metropolitan Pier and Exposition Auth., McCormick Place 3,910 4,414
Expansion Project Bonds, Series 1992A, 6.50% 2027
(Preref. 2003)
City of Berwyn, Rev. Bonds, Series 1995 (MacNeal Memorial 3,000 3,387
Hospital Association Project), AMBAC Insured, 6.00% 2009
City of Chicago:
County of Cook, G.O. Capital Improvement Bonds, Series
1996, FGIC Insured:
6.00% 2006 3,920 4,398
6.50% 2011 4,000 4,794
Chicago O'Hare International Airport:
Special Facility Rev. Bonds (United Air Lines, Inc. Project), 1,160 1,223
Series 1984C, 8.20% 2018
Special Facility Rev. Ref. Bonds, Series 1994 (American 2,750 3,300
Airlines, Inc. Project), 8.20% 2024
Metropolitan Water Reclamation Dist. of Greater Chicago,
Series B:
Capital Improvement Bonds, 5.25% 2004 5,000 5,327
Refunding Bonds, 5.30% 2005 5,325 5,720
Sales Tax Rev. Bonds, Series 1997, FGIC Insured, 5.375% 2027 5,000 5,176
School Reform Board of Trustees of the Board of Education 4,000 4,880
of the City of Chicago, Unlimited Tax G.O. Bonds
(Dedicated Tax Rev.), Series 1997, 6.75% 2012
Skyway Toll Bridge Ref. Rev. Bonds, Series 1994:
6.50% 2010 (Preref. 2004) 13,250 15,044
6.75% 2014 (Preref. 2004) 6,500 7,457
Water Rev. Bonds, Refunding Series 1993, FGIC Insured, 6.50% 2011 4,345 5,196
Regional Transportation Auth, Cook, Du Page, Kane, Lake,
McHenry and Will Counties, G.O. Bonds:
Series 1994D, FGIC Insured, 7.20% 2019 4,500 6,176
Series 1990A, AMBAC Insured, 7.20% 2020 1,000 1,308
Indiana - 5.76%
Educational Fac. Auth., Educational Fac. Rev. Bonds 1,000 1,050
(University of Evansville Project), Series 1996, 5.25% 2005
Health Fac. Fin. Auth. Hospital Rev. Bonds:
Charity Obligation Group, Series 1997D, 5.00% 2026 25,350 26,311
Clarian Health Partners, Inc., Series 1996A, 5.50% 2016 16,250 16,939
Holy Cross Health System Corp. Series 1998, MBIA Insured:
5.375% 2009 5,340 5,738
5.375% 2010 7,095 7,576
Housing Finance Auth., Single Family Mortgage Ref. Rev. 1,275 1,356
Bonds, 1992 Series A, 6.75% 2010
State Dev. Fin. Auth.:
Pollution Control Rev. Bonds (Inland Steel Co. Project 2,500 2,730
No. 12), 6.85% 2012
Rev. Ref. Bonds, Exempt Fac.-Inland Steel, 5.75% 2011 4,000 4,085
State Office Building Commission, Correctional Fac. Program 8,490 9,926
Rev. Bonds, Series 1995B, AMBAC Insured, 6.25% 2012
Transportation Finance Auth., Airport Fac. Lease Rev.
Bonds, Series A:
6.50% 2007 1,160 1,276
6.50% 2007 (Preref. 2002) 3,755 4,201
6.75% 2011 (Preref. 2002) 2,400 2,708
City of East Chicago, Pollution Control Rev. Ref.
Bonds, Inland Steel Co.:
Project No. 11, Series 1994, 7.125% 2007 3,000 3,357
Project No. 10, Series 1993, 6.80% 2013 2,210 2,367
Hospital Auth. of the City of Fort Wayne, Rev. Bonds
(Parkview Memorial Hospital Inc. Project), Series 1992:
6.375% 2013 6,000 6,503
6.40% 2022 2,000 2,164
Hospital Auth. of St. Joseph County (Indiana)
Health System Bonds, (Memorial Health System), Series 1998A:
5.50% 2006 2,055 2,223
5.50% 2007 1,650 1,793
5.50% 2008 1,010 1,100
Iowa - 1.11%
Catholic Health Initiatives, Polk County, Rev. Bonds, 1,520 1,650
Series 1997A, 5.50% 2007
Finance Auth.:
Healthcare Rev. Bonds, Series 1997 (Genesis Medical Center), 2,920 3,052
MBIA Insured, 5.00% 2006
Hospital Fac. Rev. Bonds, Series 1998 A (Iowa Health System), 6,395 6,815
MBIA Insured, 5.25% 2007
Single Family Mortgage Bonds, 1997 Series F, 5.55% 2016 2,000 2,081
Polk County Rev. Bond Catholic Health Initiatives, Series A:
5.125% 2011 3,020 3,119
5.125% 2012 3,170 3,243
Kentucky - 0.41%
Econ. Dev. Finance Auth., Hospital System Refunding
and Improvement Rev. Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project):
5.60% 2008 630 668
5.60% 2009 1,305 1,381
5.70% 2010 490 520
5.75% 2011 2,190 2,321
Kenton County Airport Board, Special Fac. Rev. Bonds
(Delta Air Lines, Inc. Project):
Series 1985, 7.80% 2015 1,000 1,061
1992 Series B, 7.25% 2022 1,350 1,482
Louisiana - 4.86%
Health Education Auth., (Lambeth House Project):
Rev. Bonds, Series 1996, 9.00% 2026 9,000 12,057
Rev. Ref. Bonds, Series 1998A:
5.50% 2010 5,505 5,351
6.15% 2018 2,000 2,010
6.20% 2028 5,500 5,527
Public Fac. Auth., Hospital Rev. Ref. Bonds (Franciscan
Missionaries of Our Lady Health System Project),
Series 1998A, FSA Insured:
5.50% 2008 6,935 7,530
5.50% 2011 5,000 5,432
5.75% 2014 3,495 3,883
5.75% 2015 3,825 4,239
Lake Charles Harbor and Terminal Dist., Port Fac. Rev. 23,000 26,445
Ref. Bonds (Trunkline LNG Co. Project), Series 1992, 7.75% 2022
City of New Orleans, Refunding Certificates of Indebtedness, 9,500 9,942
Series 1998B, FSA Insured, 5.10% 2010
Offshore Terminal Auth., Deepwater Port Ref. Rev. Bonds
(LOOP INC. Project):
First Stage, Series E:
7.45% 2004 1,000 1,077
7.60% 2010 415 448
7.60% 2010 (Preref. 2000) 585 639
Parish of St. Charles, Adjustable/Fixed-Rate Pollution 2,490 2,628
Control Rev. Bonds (Louisiana Power & Light Co. Project),
Series 1984, 8.25% 2014
Maine - 0.16%
Housing Auth., Mortgage Purchase Bonds, 1994 Series C-1, 2,735 2,851
5.90% 2015
Maryland - 1.58%
Community Dev. Administration, Dept. of Housing and
Community Dev., Single Family Program Bonds:
1997 First Series, 5.25% 2005 5,815 6,064
1990 First Series, 7.60% 2017 5,920 6,166
Health and Higher Educational Fac. Auth.:
Rev. Bonds, Howard County General Hospital Issue, Series 1993:
5.50% 2013 2,300 2,428
5.50% 2021 1,225 1,283
Project and Ref. Rev. Bonds, Peninsula Regional Medical 1,000 1,025
Center Issue, Series 1993, 5.25% 2012
First Mortgage Rev. Bonds, PUMH of Maryland, Inc. Issue
(Heron Point of Chestertown):
Series 1998A:
5.60% 2013 1,000 1,016
5.75% 2019 2,400 2,406
Series 1998B, 5.75% 2026 4,000 3,961
Calvert County, Maryland Econ. Dev. Rev. Bonds (Ashbury- 2,500 3,150
Solomons Island Facility), Series 1995, 8.625% 2024
Prince George's County, Hospital Rev. Bonds, Dimensions 750 853
Health Corp. Issue, Series 1992, 7.25% 2017 (Preref. 2002)
Massachusetts - 1.99%
Massachussetts Bay Transportation Auth., General 5,000 5,955
Transportation System Bonds, 1994 Series A Refunding Bonds,
7.00% 2007
Health and Educational Fac. Auth. Rev. Bonds:
Brigham and Women's Hospital Issue, Series D, 6.75% 2024 7,000 7,684
Caregroup Issue, MBIA Insured, Series A, 5.50% 2007 2,675 2,908
Housing Finance Agcy., Single Family Housing Rev. Bonds, 1,050 1,101
Series 39, 6.50% 2014
Water Resources Auth.:
General Rev. Bonds, 1990 Series A, 7.50% 2009 (Preref. 2000) 9,500 10,241
General Rev. Ref. Bonds, 1993 Series B, 5.25% 2009 2,500 2,610
Boston City Hospital (FHA Insured Mortgage), 7.625% 2021 980 1,069
The New England Education Loan Marketing Corp.:
Student Loan Rev. Ref. Bonds, 1992 Senior Issue A, 6.50% 2002 1,000 1,086
Student Loan Refunding Bonds, 1993 Series G, 5.20% 2002 3,000 3,116
Michigan - 8.08%
Hospital Finance Auth., Hospital Rev. Ref. Bonds:
Daughters of Charity, National Health System, 5.50% 2005 1,750 1,843
The Detroit Medical Center Obligated Group, Series 1993A, 1,000 1,103
6.375% 2009
Genesys Health System Obligated Group, Series 1995A:
7.10% 2002 1,770 1,958
7.10% 2002 (Escrowed to Maturity) 285 318
7.20% 2003 1,000 1,149
8.00% 2005 8,880 10,993
8.10% 2013 5,000 6,295
8.125% 2021 4,500 5,673
7.50% 2027 4,520 5,458
Genesys Regional Medical Center Obligated Group, Series 1998A, 5,340 5,513
5.30% 2011
Hackley Hospital Obligated Group, Series 1998A:
4.85% 2006 1,105 1,126
5.00% 2008 1,215 1,243
5.30% 2013 2,325 2,363
McLaren Obligated Group, Series 1993A, 5.375% 2013 2,985 3,057
Mercy Health Services, Series 1997T, 6.25% 2011 3,255 3,681
Pontiac Osteopathic, Series 1994 A:
6.00% 2014 3,500 3,629
6.00% 2024 3,775 3,914
Sinai Hospital of Greater Detroit, Series 1995:
6.625% 2016 5,750 6,426
6.70% 2026 1,680 1,880
Housing Dev. Auth., Rental Housing Rev. Bonds:
1992 Series A:
AMBAC Insured, 6.40% 2005 2,350 2,538
6.60% 2012 17,200 18,625
1994 Series A, 6.20% 2003 1,600 1,710
Job Dev. Auth, Pollution Control Rev. Bonds (Chrysler Corp. 7,000 7,144
Project), Series 1984, 5.70% 1999
City of Detroit:
G.O. Refunding Bonds (Unlimited Tax), Series 1995-B, 6.75% 2003 2,000 2,210
G.O. Rev. Bonds (Unlimited Tax), Series 1995-B:
6.25% 2001 6,585 6,940
7.00% 2004 2,500 2,828
6.25% 2005 2,625 2,908
6.25% 2008 1,730 1,908
6.25% 2009 1,195 1,312
6.25% 2010 1,250 1,366
Downtown Dev. Auth., Tax Increment Bonds (Dev. Area No.1
Projects), Series 1996C:
6.20% 2017 9,310 10,213
6.25% 2025 4,265 4,637
Econ. Dev. Corp. of Dickinson County, Solid Waste Disposal 2,000 2,122
Ref. Rev. Bonds (Champion International Corp. Project),
Series 1989, 6.55% 2007
City of Royal Oak Hospital Financing Auth., Hospital Rev. 3,000 3,028
Ref. Bonds (William Beaumont Hospital), Series 1993 G,
5.25% 2019
Charter County of Wayne, Special Airport Fac. Rev. Ref. Bonds 6,960 7,774
(Northwest Airlines, Inc., Fac.), Series 1995, 6.75% 2015
Minnesota - 0.40%
Housing Finance Agcy.:
Housing Dev. Bonds, 1991 Series A, 6.85% 2007 2,535 2,714
Single Family Mortgage Bonds, 1994 Series E, Remarketing 2,205 2,291
3/12/96, 5.60% 2013
Regents of the University of Minnesota, G.O. Bonds, Series 2,000 2,177
1996A, 5.50% 2006
Mississippi - 0.23%
Claiborne County Adjustable/Fixed-Rate Pollution Control 4,000 4,169
Rev. Bonds (Middle South Energy, Inc. Project),
Series C, 9.875% 2014
Nevada - 0.22%
G.O. (Limited Tax) Bonds, Series A-2, 6.00% 2011 2,135 2,440
City of Henderson, Local Improvement Dist. No. T-10 (Seven 1,485 1,543
Hills) Limited Obligation Improvement Bonds, 7.50% 2015
New Jersey - 1.83%
Econ. Dev. Auth.:
Econ. Dev. Bonds, Kapkowski Road Landfill Reclamation 6,905 6,922
Improvement District Project (City of Elizabeth),
Series 1998A, 6.375 2031
First Mortgage Rev. Fixed-Rate Bonds:
Fellowship Village Project:
Series 1998A, 4.95% 2005 1,230 1,256
Series 1995A, 9.25% 2025 700 9,080
Winchester Gardens at Ward Homestead Project, Series 1996A:
8.50% 2016 4,000 4,519
8.625% 2025 3,500 3,981
Health Care Facility Fin. Auth., Rev. Bond Community Medical 1,500 1,633
Center/Kimball, FSA Insured, 5.50% 2007
Housing and Mortgage Finance Agcy., Section 8 Bonds,
1991 Series A:
6.80% 2005 2,570 2,753
6.85% 2006 2,500 2,682
New Mexico - 0.13%
Mortgage Finance Auth., Single Family Mortgage Purchase 2,235 2,388
Refunding Senior Bonds, 1992 Series A-1, 6.85% 2010
New York - 12.05%
Dormitory Auth.:
City University System Consolidated Third General Resolution 2,000 2,157
Rev. Bonds, 1998 Series 2, AMBAC Insured, 5.50% 2008
Center for Nursing/Rehabilitation, Inc. Rev. Bonds, 5.45% 2017 2,100 2,166
Court Fac., Lease Rev. Bonds, Series 1993A, 5.50% 2010 4,000 4,185
Edgar Health Care Center (Nursing Home) Rev. Bonds, FHA 1,375 1,377
Insured, 4.90% 2013
The New York and Presbysterian Hospital FHA-Insured
Mortgage Hospital Rev. Bonds, Series 1998, AMBAC Insured:
5.50% 2006 5,500 5,935
5.50% 2008 10,000 10,914
Secured Hospital Rev. Ref. Bonds:
Wyckoff Heights Medical Center, Series H, 5.125% 2008 2,315 2,422
Brookdale Hospital, Series J, 5.125% 2009 4,300 4,482
State University Educational Fac. Rev. Ref. Bonds:
Series 1990A, 7.50% 2013 3,500 4,512
Series 1990B:
7.50% 2011 1,720 2,131
7.00% 2016 1,000 1,065
Series 1994B, 5.70% 2004 1,485 1,602
Staten Island University Hospital, Insured Rev. Bonds, 7,000 7,610
Series 1998, AMBAC Insured, 5.50% 2009
Environmental Fac. Corp., State Water Pollution Control
Revolving Fund Rev. Bonds (New York City
Municipal Water Finance Auth. Project):
Series 1990 A, 7.50% 2012 500 541
Series 1991 E, 6.875% 2010 1,270 1,398
Series 1991 E, 6.875% 2011 230 252
Housing Finance Agcy.:
Health Fac. Rev. Bonds (New York City), 1996 Series A 6,000 6,588
Refunding, 6.375% 2003
Service Contract Obligation Rev. Ref. Bonds:
1996 Series A, 5.80% 2008 1,000 1,099
Series 1997C, 5.20% 2010 1,750 1,830
Local Government Assistance Corp.:
Series 1991 A, 7.00% 2016 (Preref. 2001) 7,000 7,690
Series 1991 B, 7.50% 2020 (Preref. 2001) 6,925 7,689
Series 1991 C, 0% 2005 5,000 3,801
Series 1991 D:
7.00% 2011 (Preref. 2002) 2,000 2,248
7.00% 2018 (Preref. 2002) 8,650 9,721
6.75% 2021 (Preref. 2002) 1,350 1,506
Series 1992 C, 5.50% 2022 1,000 1,019
State Medical Care Fac. Finance Agcy.:
Mental Health Services Fac. Improvement, Rev. Bonds:
1997 Series B, 5.30% 2004 2,220 2,349
Series D, 5.25% 2023 1,000 1,008
Series 1998B:
6.00% 2005 1,000 1,099
5.375% 2007 1,275 1,363
6.00% 2007 1,750 1,957
6.00% 2007 2,500 2,796
5.375% 2008 1,345 1,441
5.60% 2008 1,300 1,420
5.375% 2009 1,270 1,359
5.70% 2009 2,795 3,063
5.00% 2010 1,530 1,581
5.00% 2010 1,495 1,544
Series 1998C:
5.375% 2008 1,250 1,343
5.00% 2009 1,850 1,925
5.00% 2010 1,760 1,818
St. Luke's-Roosevelt Hospital Center, FHA-Insured 12,575 13,217
Mortgage Rev. Bonds, 1993 SeriesA, 5.60% 2013
Metropolitan Transit Auth., Transit Fac. Service Contract 4,000 4,188
Bonds, Series O and P, 5.375% 2002
Urban Dev. Corp., Correctional Capital Fac. Rev. Bonds:
Series 1993 A, Refunding Series, 5.30% 2005 2,800 2,950
Series 7, 5.25% 2009 1,375 1,448
Series 2, 6.50% 2021 (Preref. 2001) 3,700 3,929
Battery Park City Auth., Rev. Ref. Bonds, Series 1993 A:
5.00% 2013 5,000 5,022
4.75% 2019 12,000 11,497
Castle Rest Residential Health Care Facility, FHA Insured 1,700 1,789
Mortgage Rev. Bonds, Series 1997A, 5.60% 2017
Town of Hempstead Industrial Dev. Agcy., Resource 6,000 6,256
Recovery Rev. Bonds (American REF-FUEL Co. of
Hempstead Project), Series 1997, MBIA Insured, 5.00% 2009
City of New York, G.O. Bonds:
Fiscal 1991 Series B, 8.25% 2006 1,500 1,876
Fiscal 1992 Series C, 6.50% 2004 (Preref. 2002) 470 521
Fiscal 1992 Series H:
6.875% 2002 1,670 1,833
6.875% 2002 230 251
Fiscal 1993 Series A, 6.25% 2003 1,000 1,090
Fiscal 1995 Series F:
6.375% 2006 2,860 3,205
6.375% 2006 (Preref. 2005) 140 159
6.60% 2010 1,115 1,263
6.60% 2010 (Preref. 2005) 885 1,019
6.625% 2025 (Preref. 2005) 1,500 1,730
Fiscal 1996 Series E, 6.50% 2006 3,000 3,406
Fiscal 1996 Series I, 6.50% 2006 10,000 11,366
Municipal Water Finance Auth., Water and Sewer System Rev.
Bonds:
Fiscal 1991 Series C, 7.75% 2020 (Preref. 2001) 5,000 5,596
Fiscal 1994 Series B:
4.875% 2002 3,000 3,099
5.50% 2019 2,000 2,054
Transit Auth., Transit Fac. Rev. Bonds (Livingston Plaza 4,000 4,278
Project), Series 1990, FSA Insured, 7.50% 2020 (Preref. 2000)
Triborough Bridge and Tunnel Auth., General Purpose and 1,000 1,143
Rev. Bonds, Series Y, 6.00% 2012
North Carolina - 1.63%
Eastern Municipal Power Agcy., Power System Rev. Bonds:
Refunding Series 1993B:
7.25% 2007 5,425 6,388
7.00% 2008 10,720 12,556
6.00% 2026 1,700 1,856
Series 1993 B, 6.00% 2006 3,120 3,395
Series 1993 D, 5.875% 2013 1,250 1,299
Series 1993 C, 5.00% 2021 2,300 2,183
Medical Care Commission, Health Care Rev. Ref. Bonds 1,540 1,627
(Novant Health Project), Series 1998A, MBIA Insured, 5.10% 2010
Ohio - 0.11%
County of Franklin, Hospital Fac. Rev. Ref. and Improvement 1,750 1,906
Bonds (Doctors Hospital Project), 5.60% 2006
Oklahoma - 0.63%
Health System Rev. Bonds, Baptist Medicine Center of 2,500 2,830
Oklahoma, Series 1995 C, AMBAC Insured, 6.375% 2009
State Industrial Auth., Health System Rev. Ref. Bonds,
(Obligated Group consisting of INTEGRIS Baptist Medical Center,
Inc., INTEGRIS South Oklahoma City Hospital
Corp. and INTEGRIS Rural Health, Inc.), AMBAC Insured, 2,500 2,825
Series 1995D, 6.00% 2009
Industries Auth., Health Fac. Rev. Ref. Bonds (Sisters of 2,505 2,525
Mercy Health System, St. Louis, Inc.), Series 1993A, 5.00% 2013
Tulsa Industrial Auth., Hospital Rev. and Ref. Bonds, St. John 3,000 3,101
Medical Center Project, Series 1996, 5.375% 2017
Oregon - 0.20%
Hospital Fac. Auth. of the City of Medford, Rev. Bonds 3,425 3,642
(Asante Health System), Series 1998-A, MBIA Insured, 5.25% 2010
Pennsylvania - 7.07%
Convention Center Auth., Refunding Rev. Bonds, 1994 10,000 10,746
Series A, 6.25% 2004
Higher Educational Fac. Auth., Rev. Bonds (Thomas Jefferson
University), 1992 Series A:
6.625% 2009 875 976
6.625% 2009 375 416
Housing Finance Auth., Single Family Mortgage Rev. Bonds, 1,000 1,074
Series 1992-33, 6.85% 2009
Housing Finance Agcy., Rev. Bonds, Rental Housing Refunding Bonds:
Issue 1993, 5.80% 2018 4,000 4,204
Issue 1992, 6.50% 2023 7,850 8,411
Industrial Dev. Auth., Economic Dev. Rev. Bonds, Series 1,750 2,076
1994, AMBAC Insured, 7.00% 2007
Allegheny County, Hospital Dev. Auth. Rev. Bonds, Catholic
Health Systems:
Series 1998A, 5.50% 2008 2,445 2,667
Series A, AMBAC Insured:
5.00% 2010 2,705 2,811
5.25% 2011 2,840 3,004
Blair County Hospital Auth., Hospital Rev. Bonds (Altoona 3,415 3,628
Hospital Project), Series A of 1998,
AMBAC Insured, 5.25% 2009
Delaware County, Auth. Rev. Bonds, Catholic Health Systems,
Series A, AMBAC Insured:
5.00% 2010 2,465 2,562
5.25% 2011 4,115 4,353
Hospital and Higher Education Fac. Auth. of Philadelphia:
Hospital Rev. Bonds (The Children's Hospital of
Philadelphia Project):
Series A of 1992:
6.50% 2009 4,500 4,959
6.50% 2021 3,000 3,306
Series A of 1993, 5.375% 2014 1,505 1,537
Frankford Hospital, Series A:
6.00% 2014 3,705 3,881
6.00% 2023 4,000 4,163
Jefferson Health Systems, Series 1997 A:
5.50% 2006 1,500 1,620
5.50% 2007 1,400 1,516
5.50% 2008 1,000 1,085
5.00% 2009 1,000 1,039
5.00% 2010 1,000 1,032
The Philadelphia Protestant Home, Series A, 6.50% 2027 1,100 1,156
Temple University Hospital, Series of 1997, 5.70% 2009 1,000 1,071
Hospital Auth. of Philadelphia, Hospital Rev. Bonds
(Temple University Hospital):
Series of 1993 A, 6.50% 2008 15,500 17,360
Series of 1983, 6.625% 2023 15,385 16,633
Philadelphia Auth. for Industrial Dev., Rev. Bonds (Cathedral 2,815 2,923
Village Project), Series of 1998, 5.50% 2010
City of Pottsville Hospital Auth., Hospital Rev. Bonds 8,500 10,042
(The Pottsville Hospital and Warne Clinic), Series of 1994,
7.25% 2024
Scranton-Lackawanna Health and Welfare Auth., Hospital Rev.
Bonds (Moses Taylor Hospital Project), Series 1997:
6.05% 2010 1,000 1,088
6.15% 2012 2,245 2,384
6.20% 2017 3,000 3,171
Rhode Island - 1.32%
Convention Center Auth., Refunding Rev. Bonds, MBIA Insured, 1,590 1,674
1993 Series B, 5.00% 2008
Depositors Econ. Protection Corp., Special Obligation Bonds:
1993 Series A, MBIA Insured 5.75% 2012 4,850 5,421
1992 Series A, FSA Insured, 6.625% 2019 (Preref. 2002) 1,000 1,118
1993 Series A (Escrowed to Maturity)
5.75% 2021 1,210 1,341
5.75% 2021 2,715 3,009
6.375% 2022 7,000 8,383
Housing and Mortgage Finance Corp., Homeownership 2,500 2,657
Opportunity Bonds, Series 3-A, 7.80% 2010
South Carolina - 0.61%
Florence County Hospital Rev. Bonds, McLeod Regional Medical
Center Project, MBIA Insured, Series A:
5.25% 2009 2,645 2,831
5.25% 2010 2,785 2,972
Lexington County Health Services Dist. Inc., Hospital Rev.
Ref. and Improvement Bonds, FSA Insured, Series 1997:
5.50% 2007 2,000 2,168
5.00% 2009 1,000 1,041
5.125% 2021 2,000 1,992
South Dakota - 0.89%
Health and Educational Fac. Auth., Rev. Ref. Bonds, Series
1999 (Rapid City Regional Hospital Issue), MBIA Insured:
5.00% 2007 4,095 4,306
5.00% 2009 4,010 4,185
5.00% 2010 4,175 4,322
Housing Dev. Auth., Homeownership Mortgage Bonds, 1995 3,000 3,149
Series A, 5.80% 2014
Tennessee - 1.93%
Memphis-Shelby County Airport Auth., Special Fac. Rev. 23,850 26,148
Bonds, Refunding Series 1992 (Federal Express Corp.),
6.75% 2012
Health and Educational Fac. Board of the Metropolitan 6,600 8,433
Government of Nashville and Davidson County
(Blakeford Project), 9.25% 2024
Texas - 4.06%
National Research Laboratory Commission, G.O. Bonds, Series 14,450 15,493
1990 (Superconducting Super Collider Project),
7.125% 2020 (Preref. 2000)
Bell County Health Fac. Dev. Corp.:
Hospital Rev. Ref. and Improvement Bonds (Cook Children's
Medical Center Project), Series 1998, FSA Insured:
5.25% 2008 1,965 2,099
5.25% 2009 2,070 2,205
5.25% 2010 2,180 2,312
Retirement Facility Rev. Bonds (Buckner Retirement Services,
Inc. Obligated Group Project), Series 1998:
5.25% 2009 1,620 1,678
5.00% 2010 705 708
5.25% 2028 3,400 3,337
Dallas/Forth Worth Internatinoal Airport Facility
Improvement Corp.:
American Airlines, Inc., Rev. Bonds, Series 1995, 6.00% 2014 9,790 10,402
Delta Air Lines, Inc., Rev. Ref. Bonds, Series 1993, 6.25% 2013 2,400 2,571
Harris County Health Fac. Dev. Corp., SCH Health Care System
Rev. Bonds (Sisters of Charity of the
Incarnate Word, Houston):
Series 1991A, 7.10% 2021 8,000 8,851
Series 1994B, 6.25% 2027 1,500 1,806
Hidalgo County Health Services Corp., Hospital Rev. Bonds,
(Mission Hospital, Inc. Project), Series 1996:
7.000% 2008 1,000 1,125
6.750% 2016 1,740 1,923
North Texas Health Fac. Dev. Corp., United Regional Health 2,330 2,437
Care Systems Inc., MBIA Insured, 5.00% 2009
Northeast Medical Clinic, Hospital Auth., County of Humble, 1,000 1,165
Rev. Bonds, FSA Insured, 6.25% 2012
Northside Independent School Dist. (Bexar, Medina and 3,500 3,711
Bandera Counties), Unlimited Tax School Building Bonds,
Series 1991, 6.375% 2008 (Preref. 2001)
Tarrant County Health Fac. Dev. Corp., Health Resources 4,000 4,333
Systems Rev. Bonds, Series 1997A, 5.50% 2007
Tomball Hospital Auth., Rev. Ref. Bonds, Series 1993, 6,250 6,580
6.125% 2023
Utah - 0.82%
Housing Finance Agcy., Single Family Mortgage Bonds, 1995 920 950
Issue E (Federally Insured or Guaranteed Mortgage Loans),
5.50% 2024
Salt Lake City, Hospital Rev. Bonds, Series 1992
(IHC Hospitals, Inc.):
5.50% 2021 8,100 8,259
6.25% 2023 5,000 5,437
Vermont - 0.02%
Housing Finance Agcy., Single Family Housing Bonds, 290 298
Series 4, 5.75% 2012
Virginia - 1.53%
Housing Dev. Auth., Commonwealth Mortgage Bonds, Series D:
Subseries D-3, Remarketing 5/30/96:
6.00% 2012 1,430 1,528
6.00% 2012 1,470 1,571
6.05% 2013 1,510 1,614
6.05% 2013 1,555 1,662
Subseries D-4, Remarketing 7/16/96:
6.00% 2009 1,180 1,262
6.00% 2009 1,220 1,304
6.05% 2010 1,255 1,346
6.05% 2010 1,290 1,384
Big Stone Gap Redevelopment and Housing Auth. Correctional 2,000 2,101
Facility Lease,Wallens Ridge Dev. Project, 5.25% 2010
Fairfax County Industrial Dev. Auth., Hospital Rev. Ref. Bonds
(INOVA Health Systems Hospital Project), Series 1993 A:
5.00% 2011 1,300 1,345
5.00% 2023 1,200 1,221
Industrial Dev. Auth. of Fairfax County, Hospital Rev. Ref. 1,850 1,928
Bonds (Inova Health System Hospitals Project),
Series 1993A, 4.80% 2005
Industrial Dev. Auth., of Hanover County, Hospital Rev. Bonds 1,000 1,185
(Memorial Regional Medical Center Project at Hanover
Medical Park),
Series 1995, MBIA Insured, 6.50% 2009
Industrial Dev. Auth. of the City of Norfolk, Hospital Rev. 2,500 2,827
Bonds (Sentara Hospitals-Norfolk Project),
Series 1991, 6.50% 2013
Pocahontas Parkway Association, Route 895 Connector Toll Road 5,000 5,134
Rev. Bonds, Senior Current Interest Bonds,
Series 1998A, 5.25% 2008
Washington - 4.17%
G.O., Series B, 5.50% 2010 2,000 2,193
Health Care Fac. Auth., Rev. Bonds, Refunding Series 1997A
(Virgina Mason Medical Center),
MBIA Insured, 6.00% 2007 1,500 1,681
Public Power Supply System:
Nuclear Project No. 1 Ref. Rev. Bonds:
Series 1997B, 5.13% 2014 9,000 9,134
Series 1989A, 6.00% 2017 2,000 2,042
Nuclear Project No. 2 Ref. Rev. Bonds:
Series 1990A, 7.375% 2012 (Preref. 2000) 8,000 8,670
Series 1993B, FSA Insured, 5.65% 2008 3,030 3,326
Series 1994A:
6.00% 2007 19,900 22,170
5.25% 2008 5,000 5,250
Series 1998A, 5.75% 2008 2,000 2,199
Nuclear Project No. 3 Ref. Rev. Bonds, Series 1989B:
FGIC Insured, 7.00% 2000 4,500 4,778
5.375% 2015 3,000 3,058
7.25% 2015 (Preref. 2000) 3,500 3,729
7.125% 2016 5,250 6,595
Wisconsin - 1.35%
Health and Educational Fac. Auth. Rev. Bonds:
Children's Hospital Project, Series 1993, FGIC Insured, 2,000 2,168
5.50% 2006
Series 1998 (Children's Hospital of Wisconsin, Inc.), 1,130 1,225
AMBAC Insured, 5.625% 2015
Medical College of Wisconsin, Series 1993, 5.95% 2015 3,000 3,210
Health and Educational Fac. Auth. Rev. Ref. Bonds 2,505 2,607
(Wausau Hospital, Inc.), Series A, AMBAC Insured, 5.00% 2009
Housing and Econ. Dev. Auth., Housing Rev. Bonds, 6.40% 2003 3,480 3,711
Pollution Control and Industrial Dev. Rev. Bonds (General 3,000 3,251
Motors Corp. Projects), City of Janesville, Series 1984,
5.55% 2009
Public Power Incorporated System, Power Supply System Rev. 500 542
Bonds, Series 1990 A, AMBAC Insured,
7.40% 2020 (Preref. 2000)
City of Superior, Limited Obligation Ref. Rev. Bonds (Midwest 6,000 7,561
Energy Resources Co. Project),
Series E-1991 (Collateralized), FGIC Insured, 6.90% 2021
Wyoming - 0.06%
Community Dev. Auth., Single Family Mortgage Bonds, 1989 75 75
Series A, 7.90% 2017
Student Loan Corp., Student Loan Rev. Ref. Bonds, Series 950 980
1991, 6.25% 1999
-----
1,700,310
-----
Tax-Exempt Securities Maturing in
One Year or Less - 4.07%
State of Arizona, Industrial Dev. Auth., County of Apache, 1,200 1,200
Industrial Dev. Rev. Bonds, 1983 C (Tuscon Electric Power Co.
Springerville Project), 3.30% 2018(2)
City of Chicago, Chicago-O'Hare International Airport, 1,300 1,300
Special Facility Rev. Bonds (American Airlines, Inc. Project),
Series 1983A, 3.35% 2017(2)
State of Colorado, General Fund Tax and Rev. Anticipation 6,000 6,025
Notes, Series 1998A, 4.00% 6/25/99
State of Texas, City of Houston, Tax and Rev. Anticipation 10,000 10,065
Notes, Series 1998, 4.25% 6/30/99
State of Iowa, School Cash Anticipation Program, Iowa School 2,000 2,015
Corporations Warrant Certificates, 1998-99 Series A,
FSA Insured, 4.50% 6/25/99
State of Kentucky, Asset/Liability Commission, General Fund 13,500 13,611
Tax and Rev. Anticipation Notes,
1998 Series A, 4.50% 6/25/99
State of New York, Long Island Power Auth., Electric System 3,000 3,000
Subordinated Rev. Bonds, 3.55% 2033(2)
Los Angeles County Metropolitan Transportation Auth., 15,325 15,475
Proposition C Sales Tax Rev. Ref. Bonds,
Second Senior Bonds, Series 1998-A, AMBAC Insured, 4.50% 1999
Louisiana Offshore Terminal Auth., Deepwater Port Ref. 3,150 3,150
Rev. Bonds (LOOP INC. Project), First Stage Series B,
5.40% 9/1/1998
Maricopa County, Arizona Pollution Control Corp., Pollution
control Rev. Ref. Bonds(2):
1984 Series E (El Paso Electric Co. Palo Verde Project), 2,100 2,100
3.25% 2014
1994 Series C, (Arizona Public Service Co. Palo Verde Project), 1,700 1,700
3.20% 2029
North Carolina Medical Care Commission, Varioable Rate 1,500 1,500
Demand Health Care Facility Rev. Bonds
(The Givens Estates, Inc. Project), Series 1997, 3.70% 2026(2)
Power County, Idaho, Pollution Control Revenue Bonds 2,100 2,100
(FMR Corp. Project), 3.70% 2010(3)
State of Texas, Tax and Rev. Anticipation Notes, Series 4,000 4,044
1998, 4.50% 8/31/99
State of Alaska, City of Valdez, Marine Terminal Rev. Ref. 1,250 1,250
Bonds (Exxon Pipeline Co. Project), 1993 Series A,
3.20% 2033(2)
State of Wisconsin, Tax and Rev. Anticipation Notes, 7,000 7,054
4.50% 6/15/1999
-------
75,589
-------
TOTAL TAX-EXEMPT SECURITIES (cost: $1,641,652,000) 1,775,899
Excess of cash and receivables over payables 17,754
-------
NET ASSETS $1,793,653
=========
(1)Purchased in a private-placement transaction; resale may
to limited to qualified institutional buyers;
resale to the public may require registration.
(2)Coupon rate changes periodically.
See Notes to Financial Statements
KEY TO ABBREVIATIONS
Agcy. = Agency
Auth. = Authority
Cert. of Part. = Certificates of Participation
Dept. = Department
Dev. = Development
Dist. = District
Econ. = Economic
Fac. = Facilities
Fin. = Financing
G.O. = General Obligation
Preref. = Prerefunded
Rev. = Revenue
Rev. Ref. = Revenue Refunding
</TABLE>
<TABLE>
The Tax-Exempt Bond Fund of America
Financial Statements
<S> <C> <C>
Statement of Assets and Liabilities
at August 31, 1998 (dollars in thousands)
Assets:
Tax-exempt securities (cost: $1,641,652) $1,777,608
Cash 0
Receivables for--
Sales of investments $ 3,705
Sales of fund's shares 5,868
Accrued interest 23,830 33,403
---------- -----------
1,811,011
Liabilities:
Payables for--
Chase Manhattan Bank 745
Purchases of investments 7,672
Repurchases of fund's shares 2,804
Dividends payable 3,010
Management services 520
Accrued expenses 898 15,649
---------- -----------
Net Assets at August 31, 1998--
Equivalent to $12.60 per share on
142,463,476 shares of $1 par value
capital stock outstanding (authorized
capital stock--200,000,000 shares) $1,795,362
===========
Statement of Operations
For the year ended August 31, 1998
(dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $95,178
Expenses:
Management services fee $5,969
Distribution expenses 4,211
Transfer agent fee 443
Reports to shareholders 69
Registration statement and prospectus 114
Postage, stationery and supplies 157
Directors' fees 25
Auditing and legal fees 42
Custodian fee 13
Taxes other than federal income tax 21
Other expenses 17
----------- 11,081
-----------
Net investment income 84,097
-----------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 25,646
Net unrealized appreciation on investments:
Beginning of year 112,269
End of year 135,956
----------
Net increase in unrealized appreciation
on investments 23,687
-----------
Net realized gain and increase in
unrealized appreciation on investments 49,333
-----------
Net Increase in Net Assets Resulting
from Operations $133,430
===========
Statement of Changes in Net Assets
(dollars in thousands)
Year ended August 31
1998 1997
----------- -----------
Operations:
Net investment income $ $
Net realized gain on investments 25,646 3,847
Net increase in unrealized appreciation
on investments 23,687 52,749
----------- -----------
Net increase in net assets
resulting from operations 133,430 137,119
----------- -----------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (84,100) (80,789)
Distributions from net realized gain on
investments (5,006) (4,359)
----------- -----------
Total dividends and distributions (89,106) (85,148)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
27,437,243 and 20,390,763
shares, respectively 341,812 246,583
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
4,320,816 and 4,336,074 shares,
respectively 53,787 52,363
Cost of shares repurchased:
19,085,481 and 19,372,679
shares, respectively (237,660) (233,780)
----------- -----------
Net increase in net assets
resulting from capital share
transactions 157,939 65,166
----------- -----------
Total Increase in Net Assets 202,263 117,137
Net Assets:
Beginning of year 1,593,099 1,475,962
----------- -----------
End of year $1,795,362 $1,593,099
=========== ===========
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. The Tax-Exempt Bond Fund of America, Inc.(the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks a high level of federally tax-free current
income, consistent with the preservation of capital, through a diversified
portfolio of municipal bonds. The following paragraphs summarize the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Tax-exempt securities are valued at prices obtained from a pricing service,
when such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean quoted bid and asked prices or at prices for securities of comparable
maturity, quality and type. Securities with original maturities of one year or
less having 60 days or less to maturity are amortized to maturity based on
their cost if acquired within 60 days of maturity or, if already held on the
60th day, based on the value determined on the 61st day. Securities and assets
for which representative market quotations are not readily available are valued
at fair value as determined in good faith by a committee appointed by the Board
of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Interest
income is reported on the accrual basis. Premiums and original issue discounts
on securities purchased are amortized. Amortization of market discounts on
securities is recognized upon disposition, subject to applicable tax
requirements. Dividends to shareholders are declared daily after the
determination of the fund's net investment income and are paid to shareholders
monthly.
2. It is the fund's policy to continue to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of August 31, 1998, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $135,956,000, of which $136,361,000
related to appreciated securities and $405,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended August 31, 1998. The cost of
portfolio securities for book and federal income tax purposes was
$1,641,652,000 at August 31, 1998.
3. The fee of $5,969,000 for management services was incurred pursuant to
an agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.30% of the first $60 million of average net assets;
0.21% of such assets in excess of $60 million but not exceeding $1 billion;
0.18% of such assets in excess of $1 billion but not exceeding $3 billion; and
0.16% of such assets in excess of $3 billion; plus 3.00% on the first
$3,333,333 of the fund's monthly gross investment income, plus 2.50% of such
income in excess of $3,333,333 but not exceeding $8,333,333 million and 2.25%
of such income in excess of $8,333,333.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended August 31, 1998,
distribution expenses under the Plan were limited to $4,211,000, representing
0.25% of average net assets. Had no limitation been in effect, the fund would
have paid $4,631,000 in expenses under the Plan. As of August 31, 1998, accrued
and unpaid distribution expenses were $834,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $443,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $827,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of August 31,
1998, aggregate amounts deferred and earnings thereon were $51,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors officers of the fund are
or may be considered to be affiliated with CRMC, AFS and AFD. No such persons
received any remuneration directly from the fund.
4. As of August 31, 1998, accumulated undistributed net realized gain on
investments was $24,216,000 and additional paid-in capital was $1,492,714,000.
The fund made purchases and sales of investment securities $515,494,000 and
$377,819,000, respectively, during the year ended August 31, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $13,000 was paid by these credits rather than in cash.
<TABLE>
PER-SHARE DATA AND RATIOS
Year Ended August 31
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Net Asset Value, Beginning
of Year $12.27 $11.86 $11.94 $11.65 $12.43
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .62 .64 .64 .68 .67
Net realized and
unrealized gain
(loss) on investments .37 .45 .01 .29 (.69)
------- ------- ------- ------- -------
Total income from
investment operations .99 1.09 .65 .97 (.02)
------- ------- ------- ------- -------
Less Distributions:
Dividends from net
investment income (.62) (.64) (.64) (.68) (.68)
Distributions from net
realized gains (.04) (.04) (.09) - (.08)
------- ------- ------- ------- -------
Total distributions (.66) (.68) (.73) (.68) (.76)
------- ------- ------- ------- -------
Net Asset Value, End of Year $12.60 $12.27 $11.86 $11.94 $11.65
======= ======= ======= ======= =======
Total Return* 8.2 9.39% 5.51% 8.70% (.14)%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $1,795 $1,593 $1,476 $1,424 $1,385
Ratio of expenses to average
net assets .66% .68% .68% .66% .69%
Ratio of net income to
average net assets 4.98% 5.27% 5.35% 5.87% 5.53%
Portfolio turnover rate 23.19% 14.39% 26.89% 49.28% 22.40%
*Excludes maximum sales charge of 4.75%.
</TABLE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
The Tax-Exempt Bond Fund of America, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the per-share data and ratios present fairly,
in all material respects, the financial position of The Tax-Exempt Bond Fund of
America, Inc. (the "Fund") at August 31, 1998, the results of its operations,
the changes in its net assets and the per-share data and ratios for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and per-share data and ratios (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCooper LLP
Los Angeles, California
September 30, 1998
Tax Information (unaudited)
During the fiscal year ended August 31, 1998 the fund paid 62.1 cents per share
of exempt-interest distributions within the meaning of Section 852(b)(5)(A) of
the Internal Revenue Code and 3.1 cents per share of long -term capital gain
distributions, of which 1.8 cents per share were 28% gains.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the calendar
year-end information you receive from the fund's transfer agent.
PART C
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(b) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(c) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(d) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(e) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(f) None
(g) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(h) None.
(i) Not applicable to this filing.
(j) Consent of independent accountants
(k) None.
(l) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(m) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97).
(n) EX-27 Financial data schedule (EDGAR).
(o) None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. 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 trustees [directors] against certain liabilities.
However, in no event will Registrant maintain insurance to indemnify any such
person for any act for which Registrant itself if not permitted to indemnify
the individual.
Subsection (b) of Section 2-418 of the General Corporation Law of Maryland
empowers a corporation to indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against reasonable expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding unless it is established that:
(i) the act or omission of the person was material to the matter giving rise to
the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the person actually received an improper personal
benefit of money, property or services; or (iii) with respect to any criminal
action or proceeding, the person had reasonable cause to believe his act or
omission was unlawful.
Indemnification under subsection (b) of Section 2-418 may not be made by a
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification is permissible in the circumstances because
the party to be indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such quorum cannot be obtained, then by a
majority vote of a committee of the Board consisting solely of two or more
directors not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full Board in which
the designated directors who are parties may participate; (ii) by special legal
counsel selected by the Board of Directors of a committee of the Board by vote
as set forth in subparagraph (i), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be established, by a
majority vote of the full Board in which any director who is a party may
participate; or (iii) by the stockholders (except that shares held by any party
to the specific proceeding may not be voted). A court of appropriate
jurisdiction may also order indemnification if the court determines that a
person seeking indemnification is entitled to reimbursement under subsection
(b).
Section 2-418 further provides that indemnification provided for by Section
2-418 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that the scope of indemnification extends to
directors, officers, employees or agents of a constituent corporation absorbed
in a consolidation, or merger and persons serving in that capacity at the
request of the constituent corporation for another; and empowers the
corporation to purchase and maintain insurance on behalf of a director,
officer, employee or agent of the corporation against any liability asserted
against or incurred by such person in any such capacity or arising out of such
person's status as such whether or not the corporation would have the power to
indemnify such person against such liabilities under Section 2-418.
Article VI of the Articles of Incorporation of the Fund provides that
"Nothing in these Articles of Incorporation or in the By-Laws shall be deemed
to protect any director or officer of the Corporation against any liability to
the Corporation or to its security holders to which he would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. PRINCIPAL UNDERWRITERS.
(A) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced 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, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, 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.
ITEM 27. PRINCIPAL UNDERWRITERS. (cont)
<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
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar 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
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Boulder, CO 80301
B Carl R. Bauer Assistant Vice President None
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 Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Michael L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
C. Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
H J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Littleton, CO 80121
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue, Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and None
Co-Chief Executive Officer
Ruth M. Collier Senior Vice President None
145 West 67th St., #12K
New York, NY 10023
S David Coolbaugh Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
Daniel 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 Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary Vice President
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director 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 Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director Chairman of the Board
B Mariellen Hamann Assistant Vice President None
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 None
Michael J. Johnston Director None
630 Fifth Avenue, 36th Floor
New York, NY 10111
B Damien M. Jordan Vice President None
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - None
Institutional
Investment Services
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice None
President
L E. Lee McClennahan Senior Vice President None
L James R. McCrary Assistant Vice President None
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 - None
Institutional
Investment Services
David R. Murray Vice President None
60 Brian Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P. O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
L John O. Post, Jr. Vice President None
S Richard P. Prior Assistant Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
P.O. Box 472245
Charlotte, NC 28247
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
30008 Oakland Hills Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Director, Chairman of the None
1000 RIDC Plaza, Suite 212 Board and Co-Chief
Pittsburgh, PA 15238 Executive Officer
William P. Simon, Jr. Senior Vice President None
912 Castlehill Lane
Devon, PA 19333
L John C. Smith Assistant Vice President - None
Institutional Investment
Services
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
L Kris J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue, Suite 228
San Mateo, CA 94401
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
3919 Whooping Crane Circle
Virginia Beach, VA 23455
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
L David M. Ward Vice President - None
Institutional
Investment Services
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, None
Treasurer
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
N. Dexter Williams Senior Vice President None
P.O. Box 2200
Danville, CA 94526
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice None
President
L Robert L. Winston Director, Senior Vice None
President
Laurie B. Wood Regional Vice President None
3500 W. Camino de Urania
Tucson, AZ 85741
William R. Yost 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
320 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
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
ITEM 28. 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, as amended, are maintained and kept in the
offices of the Fund and its investment adviser, Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071. Certain accounting
records are maintained and kept in the offices of the Fund's accounting
department, 135 South State College Blvd., Brea, CA 92821.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92621, 3500 Wiseman Boulevard, San Antonio, TX 78251, 5300 Robin Hood Road,
Norfolk, VA 23514 and 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
n/a
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
27th day of October, 1998.
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
By/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr., Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on October 27, 1998, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C> <C>
(1) Principal Executive Officer:
/s/ Abner D. Goldstine President and Director
(Abner D. Goldstine)
(2) Principal Financial Officer and Principal Accounting
Officer:
/s/ Anthony W. Hynes, Jr. Treasurer
(Anthony W. Hynes, Jr.)
(3) Directors:
H. Frederick Christie* Director
Don R. Conlan* Director
Diane C. Creel* Director
Martin Fenton, Jr.* Director
Leonard R. Fuller* Director
/s/ Abner D. Goldstine President and Director
(Abner D. Goldstine)
/s/ Paul G. Haaga, Jr. Chairman and Director
(Paul G. Haaga, Jr.
Herbert Hoover III* Director
Richard G. Newman* Director
</TABLE>
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact
Counsel represents that this amendment does not contain disclosures that would
make the amendment ineligible for effectiveness under the provisions of rule
485(b).
/s/ Michael J. Downer
(Michael J. Downer)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 25 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
September 30, 1998, relating to the financial statements and per-share data and
ratios of The Tax-Exempt Bond Fund of America, Inc., which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Independent Accountants" and "Reports to Shareholders" in such Statement of
Additional Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
October 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-1-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 1,641,652
<INVESTMENTS-AT-VALUE> 1,777,608
<RECEIVABLES> 33,403
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,811,011
<PAYABLE-FOR-SECURITIES> 7,672
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,977
<TOTAL-LIABILITIES> 15,649
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,492,714
<SHARES-COMMON-STOCK> 142,463,476
<SHARES-COMMON-PRIOR> 129,790,898
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24,216
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 135,956
<NET-ASSETS> 1,795,362
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 95,178
<OTHER-INCOME> 0
<EXPENSES-NET> 11,081
<NET-INVESTMENT-INCOME> 84,097
<REALIZED-GAINS-CURRENT> 25,646
<APPREC-INCREASE-CURRENT> 23,687
<NET-CHANGE-FROM-OPS> 133,430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 84,100
<DISTRIBUTIONS-OF-GAINS> 5,006
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,437,243
<NUMBER-OF-SHARES-REDEEMED> 19,085,481
<SHARES-REINVESTED> 4,320,816
<NET-CHANGE-IN-ASSETS> 202,263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,576
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,969
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,081
<AVERAGE-NET-ASSETS> 1,689,377
<PER-SHARE-NAV-BEGIN> 12.27
<PER-SHARE-NII> .62
<PER-SHARE-GAIN-APPREC> .37
<PER-SHARE-DIVIDEND> .62
<PER-SHARE-DISTRIBUTIONS> .04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.6
<EXPENSE-RATIO> .007
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
