SEC. File Nos. 2-83848
811-3735
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 19
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 16
THE NEW ECONOMY FUND
(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
Chad L. Norton
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
MICHAEL J. FAIRCLOUGH, ESQ.
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
The Registrant has filed a declaration pursuant to rule 24f-2
registering an indefinite number of shares under the Securities Act of 1933.
On January 23, 1996, it filed its 24f-2 notice for fiscal 1995.
Approximate date of proposed public offering:
It is proposed that this filing become effective on February 1, 1996,
pursuant to paragraph (b) of rule 485.
THE NEW ECONOMY FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number of Captions in Prospectus (Part "A")
Part "A" of Form N-1A
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Financial Highlights, Investment Results
4. General Description of Registrant Investment Objective and Policies; Certain Securities and
Investment Techniques; Fund Organization and
Management
5. Management of the Fund Financial Highlights; Fund Organization and Management;
Summary of Expenses, Certain Securities and Investment
Techniques
6. Capital Stock and Other Securities Investment Objective and Policies; Certain Securities and
Investment Techniques; Fund Organization and Management;
Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchasing Shares; Shareholder Services; Fund Organization
and Management
8. Redemption or Repurchase Redeeming Shares
9. Legal Proceedings N/A
</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 Cover
11. Table of Contents Table of Contents
12. General Information and History Fund Organization and Management (Part "A")
13. Investment Objectives and Policies Certain Securities and Investment Techniques (Part "A");
Investment Policies; Investment Restrictions
14. Management of the Registrant Fund Trustees and Officers; Management
15. Control Persons and Principal Holders Fund Trustees and Officers
of Securities
16. Investment Advisory and Other Services Management; Fund Organization and Management (Part "A");
General Information
17. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
18. Capital Stock and Other Securities N/A
19. Purchase, Redemption and Pricing of Purchase of Shares; Purchasing Shares (Part "A"); Shareholder
Securities Being Offered Account Services and Privileges; Redemption of Shares
20. Tax Status Dividends, Distributions and Federal Taxes
21. Underwriter Management -- Principal Underwriter
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Item in Part "C"
24. Financial Statements and Exhibits
25. Persons Controlled by or under
Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of
Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
<PAGE>
Prospectus
THE NEW ECONOMY FUND(R)
AN OPPORTUNITY FOR LONG-TERM
GROWTH OF CAPITAL
February 1, 1996
[LOGO OF THE NEW ECONOMY FUND(R)]
THE NEW ECONOMY FUND
333 South Hope Street
Los Angeles, California 90071
The fund's investment objective is long-term growth of capital. Current income
is a secondary consideration. In seeking to achieve its objective, the fund
invests principally in the equity securities of companies that derive their
revenue primarily from operations in the services and information area of the
global economy or that appear to have future prospects tied importantly to
that area of the economy.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information for the fund, dated
February 1, 1996, which contains the fund's financial statements, without
charge by writing to the Secretary of the fund at the above address or
telephoning 800/421-0180. These requests will be honored within three business
days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
14-010-0296
<PAGE>
TABLE OF CONTENTS
Summary of Expenses..................................... 3
Financial Highlights.................................... 4
Investment Objective and Policies....................... 4
Certain Securities and Investment Techniques............ 6
Investment Results...................................... 7
Dividends, Distributions and Taxes...................... 8
Fund Organization and Management........................ 9
The American Funds
Shareholder Guide...................................... 12-20
Purchasing Shares...................................... 12
Reducing Your Sales Charge............................. 15
Shareholder Services................................... 16
Redeeming Shares....................................... 18
Retirement Plans....................................... 20
IMPORTANT PHONE NUMBERS
Shareholder Services:...800/421-0180 ext. 1
Dealer Services:........800/421-9900 ext.11
American FundsLine(R):..800/325-3590
(24-hour information)
<PAGE>
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SUMMARY OF EXPENSES
Average annual expenses
paid over a 10-year
period would be
approximately $16 per
year, assuming a $1,000
investment and a 5%
annual return with the
maximum sales charge.
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge on purchases
(as a percentage of offering price)................................... 5.75%/1/
The fund has no sales charge on reinvested dividends, deferred sales
charge,/2/ redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees........................................................ 0.45%
12b-1 expenses......................................................... 0.20%/3/
Other expenses (including audit, legal, shareholder
services, transfer agent and custodian expenses)...................... 0.23%
Total fund operating expenses.......................................... 0.88%
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
cumulative expenses on a $1,000
investment, assuming
a 5% annual return./4/ $66 $84 $103 $160
</TABLE>
/1/ Sales charges are reduced for certain large purchases. (See "The American
Funds Shareholder Guide: Purchasing Shares--Sales Charges.")
/2/ Any employer-sponsored 403(b) plan or defined contribution plan qualified
under Section 401(a) of the Internal Revenue Code including a "401(k)" plan
with 200 or more eligible employees or any other purchaser investing at
least $1 million in shares of the fund (or in combination with shares of
other funds in The American Funds Group other than the money market funds)
may purchase shares at net asset value; however, a contingent deferred sales
charge of 1% applies on certain redemptions made within 12 months following
such purchases. (See "The American Funds Shareholder Guide: Redeeming
Shares--Contingent Deferred Sales Charge.")
/3/ These expenses may not exceed 0.25% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/4/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
3
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FINANCIAL The following information has been audited by Deloitte
HIGHLIGHTS & Touche LLP, independent accountants, whose
unqualified report covering each of the most recent
(For a share five years is included in the statement of additional
outstanding information. This information should be read in
throughout the conjunction with the financial statements and
fiscal year) accompanying notes which are also included in the
statement of additional information.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30/1/
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $14.65 $16.47 $13.17 $10.98 $ 9.80 $13.22 $10.48 $ 9.29 $10.60 $ 9.37
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income. .20 .17 .11 .08 .15 .27 .25 .22 .22 .19
Net realized and
unrealized gain (loss)
on investments....... 2.99 (.59) 3.75 2.45 1.76 (1.79) 3.33 1.70 (.73) 1.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income from
investment operations 3.19 (.42) 3.86 2.53 1.91 (1.52) 3.58 1.92 (.51) 1.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income.... (.18) (.12) (.07) (.14) (.26) (.29) (.24) (.19) (.24) (.10)
Distributions from net
realized gains....... (.68) (1.28) (.49) (.20) (.47) (1.61) (.60) (.54) (.56) (.57)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.. (.86) (1.40) (.56) (.34) (.73) (1.90) (.84) (.73) (.80) (.67)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $16.98 $14.65 $16.47 $13.17 $10.98 $ 9.80 $13.22 $10.48 $ 9.29 $10.60
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return/2/......... 23.22% (2.94)% 30.60% 23.58% 20.68% (13.39)% 36.87% 22.32% (5.37)% 21.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(in millions)......... $3,523 $2,592 $1,912 $1,115 $908 $783 $888 $678 $696 $776
Ratios of expenses to
average net assets.... .88% .85% .85% .89% .92% .92% .83% .81% .73% .68%
Ratio of net income to
average net assets.... 1.33% 1.25% .76% .67% 1.33% 2.50% 2.13% 1.97% 1.91% 2.06%
Portfolio turnover
rate.................. 27.03% 25.51% 26.97% 19.03% 18.52% 17.21% 23.31% 8.06% 15.40% 25.60%
</TABLE>
--------
/1/ Adjusted to reflect the /1//0//0/% share dividend effective May 26,
1994.
/2/ This was calculated without deducting a sales charge. The maximum sales
charge is 5.75% of the fund's offering price.
INVESTMENT The fund's investment objective is long-term growth of
OBJECTIVE capital. Current income is a secondary consideration.
AND POLICIES In seeking to meet its investment objective, the fund
invests in securities of companies that derive their
The fund aims to revenues primarily from operations in the services and
provide you with information area of the global economy or that appear
long-term growth to have future prospects tied importantly to that area
of capital. of the economy. These could include, for example,
companies involved in the areas of telecommunications,
computer systems and software, broadcasting and
publishing, health care, advertising, leisure, tourism,
financial services, distribution and transportation.
This investment policy is based on the belief that
growth in services and information industries will
continue to outpace overall economic growth, and will
be more resistant to economic downturn.
The fund may invest up to 25% of its assets in
companies outside of the services and information area.
This percentage is measured at the time of a particular
investment.
4
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The fund normally invests in equity securities,
including common and preferred stocks or other
securities convertible into stocks.
When prevailing market, economic, political or currency
conditions warrant, assets may also be invested in debt
securities generally rated in the top three quality
categories by Standard & Poor's Corporation or Moody's
Investors Service, Inc. or determined to be of
equivalent quality by the fund's investment adviser,
Capital Research and Management Company; however, up to
10% of the fund's assets may be invested in lower rated
debt securities. These securities may be rated,
measured at the time of purchase, as high as Baa by
Moody's or BBB by S&P and as low as Ca by Moody's or CC
by S&P. Bonds rated Ca or CC are described by the
rating agencies as "speculative in a high degree, often
in default or [having] other marked shortcomings."
Securities rated Ba and BB or below or unrated
securities that are determined to be of equivalent
quality are commonly known as "junk" or "high-yield,
high-risk" bonds. As of the date of this prospectus,
none of the fund's assets were invested in "high-yield,
high-risk" bonds. (See the statement of additional
information for a complete description of the bond
ratings.) The market values of fixed-income securities
tend to vary inversely with the level of interest
rates--when interest rates rise, their values generally
will decline; when interest rates decline, their values
generally will rise. The fund may also hold cash or
cash equivalents and government securities. These
investments are not limited to services and information
companies. (See the statement of additional information
for a description of cash equivalents.)
The fund may also invest up to 40% of its assets in
securities of issuers outside the U.S. and/or
denominated in currencies other than the U.S. dollar
subject to the limitations discussed above. The fund's
investments in non-U.S. fixed-income securities will
consist principally of securities issued or guaranteed
as to principal and interest by governments or their
agencies or instrumentalities or by multinational
agencies.
The fund's investment restrictions (which are described
in the statement of additional information) and
objective cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES AND THE SPECIAL RISKS ASSOCIATED WITH
INVESTMENT OUTSIDE THE U.S. DESCRIBED HEREIN.
5
<PAGE>
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CERTAIN SECURITIES INVESTING AROUND THE WORLD The fund's assets are
AND INVESTMENT invested globally which, in the opinion of Capital
TECHNIQUES Research and Management Company, enhances the fund's
ability to meet its objective--long-term growth of
capital.
Global investing Of course, investing globally involves special risks,
involves special particularly in certain developing countries, caused
risks and by, among other things, fluctuating currency values;
opportunities. different accounting, auditing, and financial reporting
Capital Research regulations and practices in some countries; changing
and Management local and regional economic, political, and social
Company monitors conditions; differing securities market structures; and
these risks and various administrative difficulties such as delays in
opportunities by clearing and settling portfolio transactions or in
closely following receiving payment of dividends.
companies,
industries, However, in the opinion of Capital Research and
governments, and Management Company, global investing also can reduce
securities and certain portfolio risks due to greater diversification
currency exchange opportunities.
markets worldwide.
Additional costs could be incurred in connection with
the fund's investment activities outside the U.S.
Brokerage commissions are generally higher outside the
U.S., and the fund will bear certain expenses in
connection with its currency transactions. Furthermore,
increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
CURRENCY TRANSACTIONS In connection with its non-U.S.
investments, the fund has the ability to hold
currencies other than the U.S. dollar and to enter into
forward currency contracts to facilitate settlements
and to protect against certain changes in exchange
rates. However, there is no assurance that such
strategies will be successful. Moreover, due to the
expenses involved, the fund will not generally attempt
to protect against all potential changes in exchange
rates.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objectives and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the fund
are listed on the next page.
6
<PAGE>
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<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
YEARS OF EXPERIENCE AS INVESTMENT PROFESSIONAL
PORTFOLIO COUNSELOR (AND (APPROXIMATE)
PORTFOLIO COUNSELORS RESEARCH PROFESSIONAL, WITH CAPITAL
FOR PRIMARY TITLE(S) IF APPLICABLE) FOR RESEARCH AND
THE NEW ECONOMY FUND THE NEW ECONOMY FUND MANAGEMENT
(APPROXIMATE) COMPANY OR
ITS
AFFILIATES TOTAL YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William R. Grimsley President, Trustee and Since the fund began operations 26 years 33 years
Principal Executive Officer
of the fund; Senior Vice
President and Director,
Capital Research and Man-
agement Company
- -----------------------------------------------------------------------------------------------------------------
Timothy D. Armour Vice President of the fund; Five years (plus five years as 13 years 13 years
Executive Vice President, a research professional prior
Capital Research Company* to becoming a portfolio
counselor for the fund)
- -----------------------------------------------------------------------------------------------------------------
James B. Lovelace Vice President of the fund; Five years (plus two years as 14 years 14 years
Vice President, Capital Re- a research professional prior
search and Management to becoming a portfolio
Company counselor for the fund)
- -----------------------------------------------------------------------------------------------------------------
Gordon Crawford Senior Vice President and Two years (plus five years as 25 years 25 years
Director, Capital Research a research professional prior
Company* to becoming a portfolio
counselor for the fund)
- -----------------------------------------------------------------------------------------------------------------
Mark E. Denning Senior Vice President, Three years 14 years 14 years
Capital Research Company*
- -----------------------------------------------------------------------------------------------------------------
William C. Newton Senior Partner, The Capital Since the fund began operations 37 years 43 years
Group Partners L.P.*
</TABLE>
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THE FUND BEGAN OPERATIONS ON DECEMBER 1, 1983.
* COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a to-
averaged a total tal return, yield and/or distribution rate basis for
return of 14.46% a various periods, with or without sales charges. Results
year (assuming the calculated without a sales charge will be higher. Total
maximum sales returns assume the reinvestment of all dividends and
charge was paid) capital gain distributions. The fund's distribution
over its lifetime rate is calculated by dividing the dividends paid by
the fund over the last 12 months by the sum of the
(December 1, 1983 month-end price and the capital gains paid over the
through last 12 months. The yield reflects income earned by the
December 31, fund, while the distribution rate reflects dividends
1995). paid by the fund.
The fund's total return over the past 12 months, and
average annual returns over the past five- and ten-year
periods, as of December 31, 1995, were 17.21%, 16.31% and
13.27%, respectively. These results were calculated in
accordance with Securities and Exchange Commission rules
which require that the maximum sales charge be deducted.
Of course, past results are not an indication of future
results. Further information
7
<PAGE>
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regarding the fund's investment results is contained in
the fund's annual report which may be obtained without
charge by writing to the Secretary of the fund at the
address indicated on the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS in June and December. Capital gains, if any, are
AND TAXES usually distributed in December. When a dividend or
capital gain is distributed, the net asset value per
Income share is reduced by the amount of the payment.
distributions are
usually made in FEDERAL TAXES The fund intends to operate as a
June and December. "regulated investment company" under the Internal
Revenue Code. In any fiscal year in which the fund so
qualifies and distributes to shareholders all of its
net investment income and net capital gains, the fund
itself is relieved of federal income tax.
All dividends and capital gains are taxable whether
they are reinvested or received in cash--unless you are
exempt from taxation or entitled to tax deferral. Early
each year, you will be notified as to the amount and
federal tax status of all dividends and capital gains
paid during the prior year. Such dividends and capital
gains may also be subject to state or local taxes.
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS
NOTIFIED THE FUND THAT THE TAXPAYER IDENTIFICATION
NUMBER LISTED ON YOUR ACCOUNT IS INCORRECT ACCORDING TO
ITS RECORDS OR THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, FEDERAL LAW GENERALLY REQUIRES THE FUND TO
WITHHOLD 31% FROM ANY DIVIDENDS AND/OR REDEMPTIONS
(INCLUDING EXCHANGE REDEMPTIONS). Amounts withheld are
applied to your federal tax liability; a refund may be
obtained from the Service if withholding results in
overpayment of taxes. Federal law also requires the
fund to withhold 30% or the applicable tax treaty rate
from dividends paid to certain nonresident alien, non-
U.S. partnership and non-U.S. corporation shareholder
accounts.
The fund may be required to pay withholding and other
taxes imposed by various countries in connection with
investments outside the U.S. generally at rates from
10% to 40%, which would reduce the fund's investment
income.
This is a brief summary of some of the tax laws that
affect your investment in the fund. Please see the
statement of additional information and your tax
adviser for further information.
8
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FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND organized as a Massachusetts business trust in 1983.
MANAGEMENT The fund's board supervises fund operations and
performs duties required by applicable state and
The fund is a federal law. Members of the board who are not employed
member of The by Capital Research and Management Company or its
American Funds affiliates are paid for services rendered to the fund
Group, which is as described in the statement of additional
managed by one of information. They may elect to defer all or a portion
the largest and of these fees through a deferred compensation plan in
most experienced effect for the fund. Shareholders have one vote per
investment share owned and, at the request of the holders of at
advisers. least 10% of the shares, the fund will hold a meeting
at which any member of the board could be removed by a
majority vote. There will not usually be a shareholder
meeting in any year except, for example, when the
election of the board is required to be acted upon by
shareholders under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92621. (See "The American Funds
Shareholder Guide: Purchasing Shares--Investment
Minimums and Fund Numbers" for a listing of funds in
The American Funds Group.) Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
lower of the annual rates of 0.60% on the first $300
million of the fund's net assets, 0.48% on net assets
in excess of $300 million but not exceeding $750
million, 0.45% on net assets in excess of $750 million
but not exceeding $1.25 billion, and 0.42% on net
assets in excess of $1.25 billion; or 0.58% on the
first $500 million of the fund's net assets, 0.48% on
net assets in excess of $500 million but not exceeding
$1 billion, 0.44% on net assets in excess of $1 billion
but not exceeding $1.5 billion, 0.41% on net assets in
excess of $1.5 billion but not exceeding $2.5 billion,
0.39% on net assets in excess of $2.5 billion but not
exceeding $4 billion, 0.38% on net assets in excess of
$4 billion but not exceeding $6.5 billion, and 0.375%
on net assets in excess of $6.5 billion. The latter fee
schedule provides for lower fees when net assets exceed
$3 billion.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
9
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Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. In the over-the-counter
market, purchases and sales are transacted directly
with principal market-makers except in those
circumstances where it appears better prices and
executions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 1H-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.25% of its average net assets
annually (all of which may be for service fees). See
"The American Funds Shareholder Guide: Purchasing
Shares--Sales Charges" below.
10
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TRANSFER AGENT American Funds Service Company, a wholly
owned subsidiary of Capital Research and Management
Company, is the transfer agent and performs shareholder
service functions. It was paid a fee of $4,047,000 for
the fiscal year ended November 30, 1995. Telephone
conversations with American Funds Service Company may
be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
SERVICE ADDRESS AREAS SERVED
AREA
-------------------------------------------------------------
WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92622-2205 MT, NV, OR, UT, WA and
Fax: 714/671-7080 outside the U.S.
-------------------------------------------------------------
CENTRAL- P.O. Box 659522 AR, CO, IA, KS, LA,
WEST San Antonio, TX 78265-9522 MN, MO, ND, NE, NM,
Fax: 210/530-4050 OK, SD, TX, and WY
-------------------------------------------------------------
CENTRAL- P.O. Box 6007 AL, IL, IN, KY, MI,
EAST Indianapolis, IN 46206-6007 MS, OH, TNand WI
Fax: 317/735-6620
-------------------------------------------------------------
EAST P.O. Box 2280 CT, DE, FL, GA, MA,
Norfolk, VA 23501-2280 MD, ME, NC, NH, NJ,
Fax: 804/670-4773 NY, PA, RI, SC, VA,
VT, WV and Washington,
D.C.
-------------------------------------------------------------
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 FOR SERVICE.
-------------------------------------------------------------
[MAP OF THE UNITED STATES OF AMERICA]
-------------------------------------------------------------
West (light grey); Central-West (white); Central-East
(dark grey); East (red)
11
<PAGE>
LOGO
---------------------------------------------------------
PURCHASING SHARES METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
---------------------------------------------------------
Your investment By See "Investment $50 minimum (except
dealer can help contacting Minimums and Fund where a lower
you establish your your Numbers" for minimum is noted
account--and help investment initial under "Investment
you add to it dealer investment Minimums and Fund
whenever you like. minimums. Numbers").
Visit any Mail directly to
investment dealer your investment
who is registered dealer's address
in the state printed on your
where the account statement.
purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
---------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check
account payable to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the
account envelope provided
application. with your account
statement.
---------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account investments in the
number(s), if same manner as
necessary. Please described under
indicate an "Initial Investment."
investment dealer
on the account.
Instruct your
bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco,
CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
---------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
SHARE PRICE Shares are purchased at the offering price
next determined after the order is received by the fund
or American Funds Service Company. In the case of orders
sent directly to the fund or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of trading (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange is open. The
current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share. The net asset value
per share of the money market funds normally will remain
constant at $1.00 based on the funds' current practice
of valuing their shares using the penny-rounding method
in accordance with rules of the Securities and Exchange
Commission.
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost or
destroyed certificates.
12
<PAGE>
- -------------------------------------------------------------------------------
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT AVAIL-
ABLE FOR THE MONEY MARKET FUNDS.
INVESTMENT MINIMUMS AND FUND NUMBERS Here are the
minimum initial investments required by the funds in
The American Funds Group along with fund numbers for
use with our automated phone line, American
FundsLine(R) (see description below):
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R)............................ $1,000 02
American Balanced Fund(R)................ 500 11
American Mutual Fund(R).................. 250 03
Capital Income Builder(R)................ 1,000 12
Capital World Growth and Income Fund(SM). 1,000 33
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(SM).................. 1,000 35
Washington Mutual Investors Fund(SM)..... 250 01
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
BOND FUNDS
Amerian High-Income Municipal
Bond Fund(SM)........................... $1,000 40
American High-Income Trust(R)............ 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(R)..... 1,000 23
Limited Term Tax-Exempt Bond Fund
of America(SM).......................... 1,000 43
The Tax-Exempt Bond Fund of America(SM).. 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 America(R).. 2,500 09
The Tax-Exempt Money Fund of America(SM). 2,500 39
The U.S. Treasury Money Fund of
America(SM)............................. 2,500 49
</TABLE>
--------
*Available only in certain states.
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). Mini-
mums are reduced to $50 for purchases through "Auto-
matic 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 in-
vestments (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.)
13
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
--------------------- ---------- -------- -------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000..................... 6.10% 5.75% 5.00%
$50,000 but less than
$100,000............................. 4.71 4.50 3.75
BOND FUNDS
Less than $25,000..................... 4.99 4.75 4.00
$25,000 but less than
$50,000.............................. 4.71 4.50 3.75
$50,000 but less than
$100,000............................. 4.17 4.00 3.25
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than $250,000....... 3.63 3.50 2.75
$250,000 but less than $500,000....... 2.56 2.50 2.00
$500,000 but less than $1,000,000..... 2.04 2.00 1.60
$1,000,000 or more.................... none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1
million or more, for purchases by any employer-
sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue
Code including a "401(k)" plan with 200 or more
eligible employees (paid pursuant to the fund's plan of
distribution), and for purchases made at net asset
value by certain retirement plans of organizations with
collective retirement plan assets of $100 million or
more as set forth in the statement of additional
information (paid by American Funds Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will, during
calendar year 1996, provide additional compensation to
dealers. Currently these payments are limited to the
top one hundred dealers who have sold shares of the
fund or other funds in The American Funds Group. These
payments will be based on a pro rata share of a
qualifying dealer's sales. American Funds Distributors
will, on an annual basis, determine the advisability of
continuing these payments.
Any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees or any other purchaser
investing at least $1 million in shares of the fund (or
in combination with shares of other funds in The
American Funds Group other than the money market funds)
may purchase shares at net asset value; however, a
contingent deferred sales charge of 1% is imposed on
certain redemptions made within one year of the
purchase. (See "Redeeming Shares--Contingent Deferred
Sales Charge.")
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to
14
<PAGE>
- -------------------------------------------------------------------------------
compensate them for providing certain services. (See
"Fund Organization and Management--Plan of
Distribution.") These services include processing
purchase and redemption transactions, establishing
shareholder accounts and providing certain information
and assistance with respect to the fund.
NET ASSET VALUE PURCHASES The stock, stock/bond and
bond funds may sell shares at net asset value to: (1)
current or retired directors, trustees, officers and
advisory board members of the funds managed by Capital
Research and Management Company, employees of
Washington Management Corporation, employees and
partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members of the
above persons, and trusts or plans primarily for such
persons; (2) current registered representatives,
retired registered representatives with respect to
accounts established while active, or full-time
employees (and their spouses, parents, and children) of
dealers who have sales agreements with American Funds
Distributors (or who clear transactions through such
dealers) and plans for such persons or the dealers; (3)
companies exchanging securities with the fund through a
merger, acquisition or exchange offer; (4) trustees or
other fiduciaries purchasing shares for certain
retirement plans of organizations with retirement plan
assets of $100 million or more; (5) insurance company
separate accounts; (6) accounts managed by subsidiaries
of The Capital Group Companies, Inc.; and (7) The
Capital Group Companies, Inc., its affiliated companies
and Washington Management Corporation. Shares are
offered at net asset value to these persons and
organizations due to anticipated economies in sales
effort and expense.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE include those by you, your spouse and your children
under the age of 21, if all parties are purchasing
You and your shares for their own account(s), which may include
immediate family purchases through employee benefit plan(s) such as an
may combine IRA, individual-type 403(b) plan or single-participant
investments to Keogh-type plan or by a business solely controlled by
reduce your costs. these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) for a diversified common
trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating
fund shares. Purchases made for nominee or street name
accounts (securities held in the name of an investment
dealer or another nominee such as a bank trust
department instead of the customer) may not be
aggregated with those made for
15
<PAGE>
- -------------------------------------------------------------------------------
other accounts and may not be aggregated with other
nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your invest-
ment may also be reduced by taking into account the
current value of your existing holdings in The American
Funds Group. Direct purchases of the money market funds
are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application and
the statement of additional information under "Purchase
of Shares--Statement of Intention.")
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 ABOVE.
SHAREHOLDER AUTOMATIC INVESTMENT PLAN You may make regular monthly
SERVICES or quarterly investments through automatic charges to
your bank account. Once a plan is established, your ac-
The fund offers count will normally be charged by the 10th day of the
you a valuable month during which an investment is made (or by the
array of services 15th day of the month in the case of any retirement
designed to plan for which Capital Guardian Trust Company--another
increase the affiliate of The Capital Group Companies, Inc.--acts as
convenience and trustee or custodian).
flexibility of
your investment-- AUTOMATIC REINVESTMENT Dividends and capital gain dis-
services you can tributions are reinvested in additional shares at no
use to alter your sales charge unless you indicate otherwise on the
investment program account application. You also may elect to have divi-
as your needs and dends and/or capital gain distributions paid in cash by
circumstances informing the fund, American Funds Service Company or
change. your investment dealer.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of ad-
ditional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
16
<PAGE>
- -------------------------------------------------------------------------------
EXCHANGE PRIVILEGE You may exchange shares into other
funds in The American Funds Group. Exchange purchases
are subject to the minimum investment requirements of
the fund purchased and no sales charge generally
applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on
the fund being purchased, unless the money market fund
shares were acquired by an exchange from a fund having
a sales charge, or by reinvestment or cross-
reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American FundsLine(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for
which Capital Guardian Trust Company serves as trustee
may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simul-
taneously at the share prices next determined after the
exchange order is received. (See "Purchasing Shares--
Share Price.") 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 pre-
ceding 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 re-
ceiving 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 You may make automatic
withdrawals of $50 or more as follows: five or more
times per year if you have an account of $10,000 or
more, or four or fewer times per year if you have an
account of $5,000 or more. Withdrawals are made on or
about the 15th day of each month you designate, and
checks will be sent within seven days. (See "Other
Important Things to Remember.") Additional investments
in a withdrawal account must not be less than one
year's scheduled withdrawals or $1,200, whichever is
greater. However, additional investments in a
withdrawal account may be inadvisable due to sales
charges and tax liabilities.
These services are available only in states where the
fund to be purchased may be legally offered and may be
terminated or modified at any time upon 60 days'
written notice.
ACCOUNT STATEMENTS Your account is opened in accordance
with your registration instructions. Transactions in
the account, such as additional investments and
dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service
Company. Purchases through automatic investment plans
will be confirmed at least quarterly.
17
<PAGE>
- -------------------------------------------------------------------------------
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, redeem shares (up to $10,000 per fund, per
account each day), or exchange shares around the clock
with American FundsLine(R). To use this service, call
800/325-3590 from a TouchTone(TM) telephone.
Redemptions and exchanges through American FundsLine(R)
are subject to the conditions noted above and in
"Redeeming Shares--Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of
funds in The American Funds Group under "Purchasing
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.
REDEEMING By writing to Send a letter of instruction
SHARES American specifying the name of the fund, the
Funds Service number of shares or dollar amount to
You may take money Company (at be sold, your name and account
out of your the number. You should also enclose any
account whenever appropriate share certificates you wish to
you please. address redeem. For redemptions over $50,000
indicated and for certain redemptions of
under "Fund $50,000 or less (see below), your
Organization signature must be guaranteed by a
and bank, savings association, credit
Management-- union, or member firm of a domestic
Transfer stock exchange or the National
Agent") Association of Securities Dealers,
Inc., that is an eligible guarantor
institution. You should verify with
the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required for redemption of shares
held in corporate, partnership or
fiduciary accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
By contacting If you redeem shares through your
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
--------------------------------------------------------
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the
conditions
noted in this
section and
in "Telephone
Redemptions
and
Exchanges"
below)
--------------------------------------------------------
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
--------------------------------------------------------
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY
REDEMPTION OF $50,000 OR LESS PROVIDED THE REDEMPTION
CHECK IS MADE PAYABLE TO THE REGISTERED SHAREHOLDER(S)
AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE
ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST 10
DAYS.
18
<PAGE>
- -------------------------------------------------------------------------------
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN fUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine(R)), fax or
telegraph redemption and/or exchange options, you agree
to hold the fund, American Funds Service Company, any
of its affiliates or mutual funds managed by such
affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including
attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these
options. However, you may elect to opt out of these
options by writing American Funds Service Company (you
may 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.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions made
within twelve months of purchase on investments of $1
million or more and on any investment made with no
initial sales charge by any employer-sponsored 403(b)
plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee benefit
plans; for redemptions resulting from participant-
directed switches among investment options within a
participant-directed employer-sponsored retirement
plan; for distributions from 403(b) plans or IRAs due
to death, disability or attainment of age 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.
REINSTATEMENT PRIVILEGE 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
19
<PAGE>
- -------------------------------------------------------------------------------
account) in any fund in The American Funds Group. Send
a written request and a check to American Funds Service
Company within 90 days after the date of the redemption
or distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same
fund within 30 days. If you redeem your shares within
90 days after purchase and the sales charge on the
purchase of other shares is waived under the
reinstatement privilege, the sales charge you
previously paid for the shares may not be taken into
account when you calculate your gain or loss on that
redemption.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
You may invest in the funds through various retirement
RETIREMENT plans including the following plans for which Capital
PLANS Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh- and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact
American Funds Distributors or your investment dealer.
To determine which retirement plan is appropriate for
you, please consult your tax adviser. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS INVESTMENTS FOR RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
20
<PAGE>
Prospectus
for Eligible Retirement Plans
THE NEW
ECONOMY FUND(R)
(ART)
An opportunity for long-term
growth of capital
FEBRUARY 1, 1996 [LOGO OF THE AMERICAN FUNDS GROUP(R)]
THE NEW ECONOMY FUND
333 South Hope Street
Los Angeles, California 90071
The fund's investment objective is long-term growth of capital. Current income
is a secondary consideration. In seeking to achieve its objective, the fund
invests principally in the equity securities of companies that derive their
revenue primarily from operations in the services and information area of the
global economy or that appear to have future prospects tied importantly to
that area of the economy.
This prospectus relates only to shares of the fund offered without a sales
charge to eligible retirement plans. For a prospectus regarding shares of the
fund to be acquired otherwise, contact the Secretary of the fund at the
address indicated above.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information for the fund, dated
February 1, 1996, which contains the fund's financial statements, without
charge, by writing to the Secretary of the fund at the above address or
telephoning 800/421-0180. These requests will be honored within three business
days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
RP 14-010-0296
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY OF
EXPENSES
Average annual
expenses paid over
a 10-year period
would be approximately
$11 per year, assuming
a $1,000 investment
and a 5% annual return
with no sales charge.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses..................... 2
Financial Highlights.................... 3
Investment Objective and Policies....... 3
Certain Securities and Investment
Techniques............................. 5
Investment Results...................... 6
Dividends, Distributions and Taxes...... 7
Fund Organization and Management........ 7
Purchasing Shares....................... 9
Shareholder Services.................... 11
Redeeming Shares........................ 11
</TABLE>
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the fund with no sales
charge./1/ The fund also has no sales charge on reinvested dividends, deferred
sales charge, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees........................................................ 0.45%
12b-1 expenses......................................................... 0.20%/2/
Other expenses (including audit, legal, shareholder services,
transfer agent and custodian expenses)................................ 0.23%
Total fund operating expenses.......................................... 0.88%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative
expenses on a $1,000 investment, assuming
a 5% annual return./3/ $9 $28 $49 $108
</TABLE>
/1/ Retirement plans of organizations with $100 million or more in collective
retirement plan assets may purchase shares of the fund with no sales charge.
In addition, any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or any other plan that
invests at least $1 million in shares of the fund (or in combination with
shares of other funds in The American Funds Group other than the money
market funds) may purchase shares at net asset value; however, a contingent
deferred sales charge of 1% applies on certain redemptions made within 12
months following such purchases. (See "Redeeming Shares--Contingent Deferred
Sales Charge.")
/2/ These expenses may not exceed 0.25% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/3/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information has been audited by Deloitte &
HIGHLIGHTS Touche LLP, independent accountants, whose unqualified
report covering each of the most recent five years is
(For a share included in the statement of additional information.
outstanding This information should be read in conjunction with the
throughout the financial statements and accompanying notes which are
fiscal year) also included in the statement of additional
information.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30/1/
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $14.65 $16.47 $13.17 $10.98 $ 9.80 $13.22 $10.48 $ 9.29 $10.60 $ 9.37
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. .20 .17 .11 .08 .15 .27 .25 .22 .22 .19
Net realized and
unrealized gain (loss)
on investments........ 2.99 (.59) 3.75 2.45 1.76 (1.79) 3.33 1.70 (.73) 1.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income from
investment
operations........... 3.19 (.42) 3.86 2.53 1.91 (1.52) 3.58 1.92 (.51) 1.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income..... (.18) (.12) (.07) (.14) (.26) (.29) (.24) (.19) (.24) (.10)
Distributions from net
realized gains........ (.68) (1.28) (.49) (.20) (.47) (1.61) (.60) (.54) (.56) (.57)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions... (.86) (1.40) (.56) (.34) (.73) (1.90) (.84) (.73) (.80) (.67)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $16.98 $14.65 $16.47 $13.17 $10.98 $ 9.80 $13.22 $10.48 $ 9.29 $10.60
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return/2/........ 23.22% (2.94)% 30.60% 23.58% 20.68% (13.39)% 36.87% 22.32% (5.37)% 21.35%
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of year
(in millions)......... $3,523 $2,592 $1,912 $1,115 $908 $783 $888 $678 $696 $776
Ratios of expenses to
average net assets.... .88% .85% .85% .89% .92% .92% .83% .81% .73% .68%
Ratio of net income to
average net assets.... 1.33% 1.25% .76% .67% 1.33% 2.50% 2.13% 1.97% 1.91% 2.06%
Portfolio turnover
rate.................. 27.03% 25.51% 26.97% 19.03% 18.52% 17.21% 23.31% 8.06% 15.40% 25.60%
</TABLE>
--------
/1/ Adjusted to reflect the 100% share dividend effective May 26,
1994.
/2/ Calculated with no sales charge.
INVESTMENT The fund's investment objective is long-term growth of
OBJECTIVE capital. Current income is a secondary consideration. In
AND POLICIES seeking to meet its investment objective, the fund
invests in securities of companies that derive their
The fund seeks to revenues primarily from operations in the services and
provide you with information area of the global economy or that appear to
long-term growth have future prospects tied importantly to that area of
of capital. the economy. These could include, for example, companies
involved in the areas of telecommunications, computer
systems and software, broadcasting and publishing,
health care, advertising, leisure, tourism, financial
services, distribution and transportation. This
investment policy is based on the belief that growth in
services and information industries will continue to
outpace overall economic growth, and will be more
resistant to economic downturn.
The fund may invest up to 25% of its assets in companies
outside of the services and information area. This
percentage is measured at the time of a particular
investment.
The fund normally invests in equity securities,
including common and preferred stocks or other
securities convertible into stocks.
3
<PAGE>
- -------------------------------------------------------------------------------
When prevailing market, economic, political or currency
conditions warrant, assets may also be invested in debt
securities generally rated in the top three quality
categories by Standard & Poor's Corporation or Moody's
Investors Service, Inc. or determined to be of
equivalent quality by the fund's investment adviser,
Capital Research and Management Company; however, up to
10% of the fund's assets may be invested in lower rated
debt securities. These securities may be rated,
measured at the time of purchase, as high as Baa by
Moody's or BBB by S&P and as low as Ca by Moody's or CC
by S&P. Bonds rated Ca or CC are described by the
rating agencies as "speculative in a high degree, often
in default or [having] other marked shortcomings."
Securities rated Ba and BB or below or unrated
securities that are determined to be of equivalent
quality are commonly known as "junk" or "high-yield,
high-risk" bonds. As of the date of this prospectus,
none of the fund's assets were invested in "high-yield,
high-risk" bonds. (See the statement of additional
information for a complete description of the bond
ratings.) The market values of fixed-income securities
tend to vary inversely with the level of interest
rates--when interest rates rise, their values generally
will decline; when interest rates decline, their values
generally will rise. The fund may also hold cash or
cash equivalents and government securities. These
investments are not limited to services and information
companies. (See the statement of additional information
for a description of cash equivalents.)
The fund may also invest up to 40% of its assets in
securities of issuers outside the U.S. and/or
denominated in currencies other than the U.S. dollar
subject to the limitations discussed above. The fund's
investments in non-U.S. fixed-income securities will
consist principally of securities issued or guaranteed
as to principal and interest by governments or their
agencies or instrumentalities or by multinational
agencies.
The fund's investment restrictions (which are described
in the statement of additional information) and
objectives cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES AND THE SPECIAL RISKS ASSOCIATED WITH
INVESTING OUTSIDE THE U.S. DESCRIBED HEREIN.
4
<PAGE>
- -------------------------------------------------------------------------------
CERTAIN SECURITIES INVESTING AROUND THE WORLD The fund's assets are
AND INVESTMENT invested globally which, in the opinion of Capital
TECHNIQUES Research and Management Company, enhances the fund's
ability to meet its primary objective--long-term growth
Global investing of capital.
involves special
risks and Of course, investing globally involves special risks,
opportunities. particularly in certain developing countries, caused
Capital Research by, among other things: fluctuating currency values;
and Management different accounting, auditing, and financial reporting
Company monitors regulations and practices in some countries; changing
these risks and local and regional economic, political, and social
opportunities by conditions; differing securities market structures; and
closely following various administrative difficulties such as delays in
companies, clearing and settling portfolio transactions or in
industries, receiving payment of dividends.
governments, and
securities and However, in the opinion of Capital Research and
currency exchange Management Company, global investing also can reduce
markets worldwide. certain portfolio risks due to greater diversification
opportunities.
Additional costs could be incurred in connection with
the fund's investment activities outside the U.S.
Brokerage commissions are generally higher outside the
U.S., and the fund will bear certain expenses in
connection with its currency transactions. Furthermore,
increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
CURRENCY TRANSACTIONS In connection with its non-U.S.
investments, the fund has the ability to hold
currencies other than the U.S. dollar and to enter into
forward currency contracts to facilitate settlements
and to protect against certain changes in exchange
rates. However, there is no assurance that such
strategies will be successful. Moreover, due to the
expenses involved, the fund will not generally attempt
to protect against all potential changes in exchange
rates.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objectives and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the fund
are listed on the next page.
5
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE
YEARS OF EXPERIENCE AS AS INVESTMENT PROFESSIONAL
PORTFOLIO COUNSELORS PORTFOLIO COUNSELOR (APPROXIMATE)
FOR (AND RESEARCH WITH CAPITAL
THE NEW ECONOMY PRIMARY TITLE(S) PROFESSIONAL, RESEARCH AND
FUND IF APPLICABLE) FOR MANAGEMENT
THE NEW ECONOMY COMPANY OR ITS TOTAL
FUND (APPROXIMATE) AFFILIATES YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William R. Grimsley President, Trustee and Since the fund began 26 years 33 years
Principal Executive operations.
Officer of the fund;
Senior Vice President
and Director, Capital
Research and Management
Company
- -------------------------------------------------------------------------------------------------------------------
Timothy D. Armour Vice President of the Five years (plus 13 years 13 years
fund. Executive Vice five years as a
President, Capital research professional
Research Company* prior to becoming a
portfolio counselor
for the fund)
- -------------------------------------------------------------------------------------------------------------------
James B. Lovelace, Jr. Vice President of the Five years (plus 14 years 14 years
fund; Vice President, two years as a
Capital Research and research professional
Management Company prior to becoming a
portfolio counselor
for the fund)
- -------------------------------------------------------------------------------------------------------------------
Gordon Crawford Senior Vice President Two years (plus 25 years 25 years
and Director, Capital five years as a
Research Company* research professional
prior to becoming a
portfolio counselor
for the fund)
- -------------------------------------------------------------------------------------------------------------------
Mark E. Denning Senior Vice President, Three years 14 years 14 years
Capital Research
Company*
- -------------------------------------------------------------------------------------------------------------------
William C. Newton Senior Partner, The Since the fund 37 years 43 years
Capital Group began operations.
Partners L.P.*
- -------------------------------------------------------------------------------------------------------------------
The fund began operations on December 1, 1983.
* Company affiliated with Capital Research and Management Company.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a
averaged a total total return, yield and/or distribution rate basis for
return (at no various periods, with or without sales charges. Results
sales charge) of calculated without a sales charge will be higher. Total
15.02% a year over returns assume the reinvestment of all dividends and
its lifetime capital gain distributions. The fund's distribution
rate is calculated by dividing the dividends paid by
(December 1, 1983 the fund over the last 12 months by the sum of the
through December month-end price and the capital gains paid over the
31, 1995). last 12 months. The yield reflects income earned by the
fund, while the distribution rate reflects dividends
paid by the fund.
The fund's total return over the past 12 months, and
average annual returns over the past five- and ten-year
periods, as of December 31, 1995, were 24.37%, 17.69%
and 13.95%, respectively. These results were calculated
with no sales charge in accordance with Securities and
Exchange Commission requirements. Of course, past
results are not an indication of future results.
Further information regarding the fund's investment
results is contained in the fund's annual report which
may be obtained without charge by writing to the
Secretary of the fund at the address indicated on the
cover of this prospectus.
6
<PAGE>
- -------------------------------------------------------------------------------
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS in June and December. Capital gains, if any, are
AND TAXES usually distributed in December. When a dividend or
capital gain is distributed, the net asset value per
Income share is reduced by the amount of the payment.
distributions are
usually made in The terms of your plan will govern how your plan may
June, and receive distributions from the fund. Generally,
December. periodic distributions from the fund to your plan are
reinvested in additional fund shares, although your
plan may permit fund distributions from net investment
income to be received by you in cash while reinvesting
capital gain distributions in additional shares or all
fund distributions to be received in cash. Unless you
select another option, all distributions will be
reinvested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. For any fiscal year in which the fund so
qualifies and distributes to shareholders all of its
net investment income and net capital gains, the fund
itself is relieved of federal income tax. The tax
treatment of redemptions from a retirement plan may
differ from redemptions from an ordinary shareholder
account.
The fund may be required to pay withholding and other
taxes imposed by various countries in connection with
its investments outside the U.S. generally at rates
from 10% to 40%, which would reduce the fund's
investment income.
Please see the statement of additional information and
your tax adviser for further information.
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND organized as a Massachusetts business trust in 1983.
MANAGEMENT The fund's board supervises fund operations and
performs duties required by applicable state and
The fund is a federal law. Members of the board who are not employed
member of The by Capital Research and Management Company or its
American Funds affiliates are paid for services rendered to the fund
Group, which is as described in the statement of additional
managed by one of information. They may elect to defer all or a portion
the largest and of these fees through a deferred compensation plan in
most experienced effect for the fund. Shareholders have one vote per
investment share owned and, at the request of the holders of at
advisers. least 10% of the shares, the fund will hold a meeting
at which any member of the board could be removed by a
majority vote. There will not usually be a shareholder
meeting in any year except, for example, when the
election of the board is required to be acted upon by
shareholders under the Investment Company Act of 1940.
7
<PAGE>
- -------------------------------------------------------------------------------
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los Ange-
les, CA 90071, and at 135 South State College Boule-
vard, Brea, CA 92621. Capital Research and Management
Company manages the investment portfolio and business
affairs of the fund and receives a fee at the lower of
the annual rates of 0.60% on the first $300 million of
the fund's net assets, 0.48% on net assets in excess of
$300 million but not exceeding $750 million, 0.45% on
net assets in excess of $750 million but not exceeding
$1.25 billion, and 0.42% on net assets in excess of
$1.25 billion; or 0.58% on the first $500 million of
the fund's net assets, 0.48% on net assets in excess of
$500 million but not exceeding $1 billion, 0.44% on net
assets in excess of $1 billion but not exceeding $1.5
billion, 0.41% on net assets in excess of $1.5 billion
but not exceeding $2.5 billion, 0.39% on net assets in
excess of $2.5 billion but not exceeding $4 billion,
0.38% on net assets in excess of $4 billion but not ex-
ceeding $6.5 billion, and 0.375% on net assets in ex-
cess of $6.5 billion. The latter fee schedule provides
for lower fees when net assets exceed $3 billion.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. In the over-the-counter
market, purchases and sales are transacted directly
with principal market-makers except in those
circumstances where it appears better prices and
executions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
8
<PAGE>
- -------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.25% of its average net assets
annually (all of which may be for service fees.)
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, 135 South State College Boulevard,
Brea, CA 92621, 8000 IH-10 West, San Antonio, TX 78230,
5300 Robin Hood Road, Norfolk, VA 23513 and 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240.
It was paid a fee of $4,047,000 for the fiscal year
ended November 30, 1995. Telephone conversations with
American Funds Service Company may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
PURCHASING SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PURCHASE SHARES OF THE FUND THROUGH YOUR PLAN OR
LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT WITH YOUR EMPLOYER. Shares are sold to eligible
retirement plans at the net asset value per share next
determined after receipt of an order by the fund or
American Funds Service Company. Orders must be received
before the close of regular trading on the New York
Stock Exchange in order to receive that day's net asset
value. Plans of organizations with collective
retirement plan assets of $100 million or more may
purchase shares at net asset value. In addition, any
employer-sponsored 403(b) plan or defined contribution
plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at
least $1 million in shares of the fund (or in
combination with shares of other funds in The American
Funds Group other than the money market funds) may
purchase shares at net asset
9
<PAGE>
- -------------------------------------------------------------------------------
value; however, a contingent deferred sales charge of
1% is imposed on certain redemptions made within twelve
months of such purchase. (See "Redeeming Shares--
Contingent Deferred Sales Charge.") Plans may also
qualify to purchase shares at net asset value by
completing a statement of intention to purchase $1
million in fund shares subject to a commission over a
maximum of 13 consecutive months. Certain redemptions
of such shares may also be subject to a contingent
deferred sales charge as described above. (See the
statement of additional information.)
The minimum initial investment is $250, except that the
money market funds have a minimum of $1,000 for
individual retirement accounts (IRAs). Minimums are
reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds)
or to $25 for purchases by retirement plans through
payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds
Group.
American Funds Distributors, at its expense (from a
designated percentage of its income), will, during
calendar year 1996, provide additional promotional
incentives to dealers. Currently these incentives are
limited to the top one hundred dealers who have sold
shares of the fund or other funds in The American Funds
Group. Such incentive 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 promotional
incentives.
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund
Organization and Management--Plan of Distribution.")
These services include processing purchase and
redemption transactions, establishing shareholder
accounts and providing certain information and
assistance with respect to the fund.
Shares of the fund are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value next determined after the
order is received by the fund or American Funds Service
Company. In the case of orders sent directly to the
fund or American Funds Service Company, an investment
dealer must be indicated. Dealers are responsible for
promptly transmitting orders. (See the statement of ad-
ditional information under "Purchase of Shares--Price
of Shares.")
The fund's net asset value per share is determined as
of the close of trading (currently 4:00 p.m., New York
time) on each day the New York
10
<PAGE>
- -------------------------------------------------------------------------------
Stock Exchange is open. The current value of the fund's
total assets, less all liabilities, is divided by the
total number of shares outstanding and the result,
rounded to the nearer cent, is the net asset value per
share.
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on your plan, you may be able to exchange shares
automatically or cross-reinvest dividends in shares of
other funds. Contact your plan administrator/trustee
regarding how to use these services. Also, see the
fund's statement of additional information for a
description of these and other services that may be
available through your plan. These services are
available only in states where the fund to be purchased
may be legally offered and may be terminated or
modified at any time upon 60 days' written notice.
REDEEMING Subject to any restrictions imposed by your plan, you
SHARES can sell your shares through the plan any day the New
York Stock Exchange is open. For more information about
how to sell shares of the fund through your retirement
plan, including any charges that may be imposed by the
plan, please consult with your employer.
By contacting Your plan administrator/trustee must
your plan send a letter of instruction
administrator/ specifying the name of the fund, the
trustee number of shares or dollar amount to
be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners or their legal
representatives must be guaranteed
by a bank, savings association,
credit union, or member firm of a
domestic stock exchange or the
National Association of Securities
Dealers, Inc., that is an eligible
guarantor institution. Your plan
administrator/trustee should verify
with the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required to redeem shares from certain
accounts. Notarization by a Notary
Public is not an acceptable signature
guarantee.
--------------------------------------------------------
By Shares may also be redeemed through
contacting an investment dealer; however, you or
an your plan may be charged for this
investment service. SHARES HELD FOR YOU IN AN
dealer INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND ALL
REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions made
within twelve months of purchase on investments of $1
million or more and on any investment
11
<PAGE>
- -------------------------------------------------------------------------------
made with no initial sales charge by any employer-
sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue
Code including a "401(k)" plan with 200 or more
eligible employees. The charge is 1% of the lesser of
the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or
the total cost of such shares. Shares held for the
longest period are assumed to be redeemed first for
purposes of calculating this charge. The charge is
waived for exchanges (except if shares acquired by
exchange were then redeemed within 12 months of the
initial purchase); for distributions from qualified
retirement plans and other employee benefit plans; for
redemptions resulting from participant-directed
switches among investment options within a participant-
directed employer-sponsored retirement plan; and for
redemptions in connection with loans made by qualified
retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because the fund's
net asset value fluctuates, reflecting the market value
of the portfolio, the amount you receive for shares
redeemed may be more or less than the amount paid for
them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE FUND
TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF
THE FUND AT THE ADDRESS INDICATED ON THE FRONT.
12
THE NEW ECONOMY FUND (R)
February 1, 1996
THE NEW ECONOMY FUND(R)
PROFILE
333 South Hope Street February 1, 1996
Los Angeles, CA 90071
1. Goal
The fund seeks to make your money grow over time by investing in service and
information companies around the world.
2. Investment Strategies
The fund normally invests principally in stocks of companies involved in the
services and information area. The fund may also invest up to 25% of its
assets in other companies, and up to 40% of its assets in companies based
outside the U.S. The fund may also hold other types of securities, such as
bonds, when appropriate.
3. Risks
Stock prices rise and fall. Investing outside the U.S. involves a number of
risks caused by, among other things, currency fluctuations and differing
securities market structures and accounting standards.
YOU CAN LOSE MONEY BY INVESTING IN THE FUND; YOUR INVESTMENT IS NOT GUARANTEED.
THE LIKELIHOOD OF LOSS IS GREATER IF YOU INTEND TO INVEST FOR A SHORTER PERIOD
OF TIME.
4. Appropriateness
If you are not a long-term investor seeking capital growth through investments
in services and information industries through global diversification, this
fund may not be appropriate for you. Please consult your investment dealer.
5. Fees and Expenses
Shareholder transaction expenses are charges you pay when you buy or sell
shares of a fund. Annual fund operating expenses are paid out of the fund's
assets. The fund's expenses are factored into its share price and
distributions and are not charged directly to shareholder accounts.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge
on purchases
(as a percentage of offering price) 5.75%
</TABLE>
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. The fund has no
sales charge on reinvested dividends, and no deferred sales charge or
redemption or exchange fees. A contingent deferred sales charge of 1% applies
on certain redemptions within 12 months following purchases without a sales
charge.
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C>
Management fees 0.45%
12b-1 expenses 0.20%
Other expenses 0.23%
Total fund operating expenses 0.88%
</TABLE>
Example
You would pay the following cumulative expenses on a $1,000 investment,
assuming a 5% annual return. This example should not be considered a
representation of past or future expenses.
<TABLE>
<CAPTION>
<S> <C>
One year $66
Three years 84
Five years 103
Ten years 160
</TABLE>
6. Past Results
Here are the fund's annual total returns for each of the past 10 calendar
years:
[CHART]
<TABLE>
<CAPTION>
<S> <C>
1986 13.30%
1987 5.17%
1988 15.74%
1989 31.79%
1990 -10.10%
1991 29.17%
1992 16.82%
1993 30.95%
1994 -8.11%
1995 24.37%
</TABLE>
[END CHART]
Sales charges have not been deducted from results shown above.
The fund's average annual total return* is +14.46% over its lifetime (December
1, 1983 through December 31, 1995). PAST RESULTS ARE NOT A GUARANTEE OF FUTURE
RESULTS.
<TABLE>
<CAPTION>
<S> <C>
Average Annual
Total Returns*
On
e year + 17.21%
Five years + 16.31%
Ten years + 13.27%
</TABLE>
* These results were calculated for periods ended December 31, 1995 in
accordance with Securities and Exchange Commission rules which require that the
maximum sales charge be deducted.
7. Investment Adviser
Capital Research and Management Company, one of the world's largest and most
experienced investment advisers, manages the fund, which is a member of The
American Funds Group. Capital Research and Management Company manages this
diversified mutual fund using the multiple portfolio counselor system. Under
this system, the fund's assets are divided into several portions. Each portion
is independently managed by a portfolio counselor or a group of research
professionals, subject to oversight by the investment adviser's investment
committee.
8. Purchases
The fund's shares are sold through investment dealers. Your investment dealer
can help you with your account, or you may call American Funds Service Company
at 800/421-0180 with questions about your account. Generally, the minimum
initial investment is $250.
9. Redemptions
You may redeem shares at no cost at any time through your investment dealer or
by calling American FundsLineR at 800/325-3590. (You will need the fund's
number - 14 - if you use this service.) Transactions will be processed as of
the next close of the New York Stock Exchange.
10. Distributions
Dividends and capital gain distributions are automatically reinvested unless
you notify American Funds Service Company that you would like to invest them in
another of the American Funds or receive payment in cash. Income distributions
are usually made in June and December. Capital gains, if any, are usually
distributed in December.
11. Other Services
You may exchange your shares for any of the other American Funds or obtain
information about your investment any time by calling American FundsLineR. If
you purchase shares at net asset value through a retirement plan, some or all
of the services or features described may not be available. Contact your
employer for details.
THIS PROFILE CONTAINS KEY INFORMATION ABOUT THE FUND. MORE DETAILS APPEAR IN
THE FUND'S ACCOMPANYING PROSPECTUS.
This profile has been printed on recycled
paper that meets the guidelines of the United
States Environmental Protection Agency.
THE NEW ECONOMY FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
This document is not a prospectus but should be read in conjunction
with the current prospectus dated February 1, 1996 of The New Economy Fund
(the fund or NEF). The prospectus may be obtained from your investment dealer
or financial planner or by writing to the fund at the following address:
THE NEW ECONOMY FUND
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
The fund has two forms of prospectuses. Each reference to the
prospectus in the Statement of Additional Information includes both of the
fund's prospectuses. Shareholders who purchase shares at net asset value
through eligible retirement plans should note that not all of the services or
features described below may be available to them, and they should contact
their employer for details.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
NO.
<S> <C>
INVESTMENT POLICIES 1
DESCRIPTION OF CERTAIN SECURITIES 2
CERTAIN RISK FACTORS RELATING TO BELOW INVESTMENT GRADE BONDS 3
INVESTMENT RESTRICTIONS 4
FUND TRUSTEES AND OFFICERS 6
MANAGEMENT 10
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 12
PURCHASE OF SHARES 15
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 17
REDEMPTION OF SHARES 18
EXECUTION OF PORTFOLIO TRANSACTIONS 18
GENERAL INFORMATION 19
INVESTMENT RESULTS 20
APPENDIX - DESCRIPTION OF BOND RATINGS 25
FINANCIAL STATEMENTS ATTACHED
</TABLE>
INVESTMENT POLICIES
The fund may invest up to 10% of its assets in debt securities which are
rated below the top three quality categories by Standard & Poor's Corporation
(S&P) or Moody's Investors Service, Inc. (Moody's) or securities that are
determined equivalent by the fund's investment adviser, Capital Research and
Management Company (the Investment Adviser). (See "Appendix - Description of
Bond Ratings" below for a more complete description of bond ratings.)
DESCRIPTION OF CERTAIN SECURITIES
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. In these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the Treasury.
However, they generally involve federal sponsorship in one way or another; some
are backed by specific types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the issuer; others
are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, Federal Land Banks, Farmers Home Administration, Central Bank
Cooperatives, and Federal Intermediate Credit Banks.
CASH EQUIVALENTS - These securities include (1) commercial paper (short-term
notes up to 9 months in maturity issued by corporations or governmental
bodies), (2) commercial bank obligations (certificates of deposit
(interest-bearing time deposits), bankers' acceptances (time drafts on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity) and documented discount notes (corporate promissory discount notes
accompanied by a commercial bank guarantee to pay at maturity)), (3) savings
association obligations (certificates of deposit issued by savings banks or
savings and loan associations), (4) securities of the U.S. Government, its
agencies or instrumentalities that mature, or may be redeemed, in one year or
less, and (5) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less).
REPURCHASE AGREEMENTS - Although the fund currently does not anticipate
doing so during the next 12 months, it is authorized to enter into repurchase
agreements. A repurchase agreement permits the fund to buy a security and
obtain 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
the Investment Adviser. See "Management" below. 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, realization upon the collateral by the
fund may be delayed or limited.
CURRENCY TRANSACTIONS -- The fund has the ability to hold a portion of its
assets in U.S. dollars and other currencies and to enter into certain currency
contracts (on either a spot or forward basis) in connection with investing in
non-U.S. dollar denominated securities including foreign exchange and forward
currency contracts. A foreign exchange contract is used to facilitate
settlement of trades. For example, the fund might purchase a currency or enter
into a foreign exchange contract to preserve the U.S. dollar price of
securities it has contracted to purchase. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. For example, the fund
might enter into a forward currency contract to protect against an anticipated
decline in value of a foreign currency against the U.S. dollar when it holds
securities denominated in that foreign currency. To avoid having an amount
greater than its net assets subject to market risk in connection with currency
contract transactions, the fund will segregate cash, cash equivalents, or high
quality debt instruments to the extent required by the Securities and Exchange
Commission.
At the maturity of a forward contract, the fund may either accept or
make delivery of the currency specified in the contract or, prior to maturity,
enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to the original
contract. The fund will only enter into such a forward contract if it is
expected that the fund will be able to readily close out such contract. There
can, however, be no assurance that it will be able in any particular case to do
so, in which case the fund may suffer a loss.
Certain provisions of the Internal Revenue Code may limit the extent
to which the fund may enter into forward contracts. Such transactions may also
affect, for U.S. federal income tax purposes, the character and timing of
income, gain or loss recognized by the fund.
CERTAIN RISK FACTORS RELATING TO BELOW INVESTMENT GRADE BONDS
Certain risk factors relating to investing in below investment grade
securities, bonds rated Ba and BB or below or unrated but determined to be of
equivalent quality (high-yield, high-risk bonds) are discussed below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk bonds
are very sensitive to adverse economic changes 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 defaulted on its 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 of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other 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. Conversely, a high-yield, high-risk bond's value will decrease in a
rising interest rate market, as it will with all bonds.
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.
INVESTMENT RESTRICTIONS
The fund has adopted certain investment restrictions, which cannot be
changed without approval by a majority of its outstanding shares. Such
majority is defined within the Investment Company Act of 1940 (the "1940 Act")
as the vote of the lesser of (i) 67% or more of the outstanding shares present
at a meeting, if the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding shares.
These restrictions provide that the fund may not:
1. Invest in securities of another issuer (other than the U.S. or its agencies
or instrumentalities), if immediately after and as a result of such investment
more than 5% of the value of the total assets of the fund would be invested in
the securities of such other issuer, or more than 10% of the outstanding voting
securities of such issuer would be owned by the fund;
2. Invest in companies for the purpose of exercising control or management;
3. Purchase the securities of companies in a particular industry (other than
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities) if thereafter 25% or more of the value of its total assets
would consist of securities issued by companies in that industry;
4. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commissions, is involved, and only if immediately thereafter no more than 10%
of the value of the fund's total assets would be invested in such securities;
5. 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
or issued by companies, including real estate investment trusts, which invest
in real estate or interests therein;
6. Buy or sell commodities or commodity contracts in the ordinary course of
its business provided, however, that entering into a forward currency contract
shall not be prohibited by this restriction;
7. Invest more than 10% of the value of its total assets in securities which
are not readily marketable or engage in the business of underwriting of
securities of other issuers, except to the extent that the disposal of an
investment position may technically constitute the fund an underwriter as that
term is defined under the Securities Act of 1933;
8. Lend any of its assets; provided, however that investment in government
obligations, short-term commercial paper, certificates of deposit and banker's
acceptances and publicly traded bonds, debentures, or other debt securities or
entering into repurchase agreements, shall not be prohibited by this
restriction;
9. 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;
10. Purchase securities on margin;
11. Enter into any repurchase agreement if, as a result, more than 10% of the
fund's total assets would be subject to repurchase agreements maturing in more
than seven days (see above);
12. Borrow amounts in excess of 5% of the value of its total assets or issue
senior securities; in any event, the fund may borrow only as a temporary
measure for extraordinary or emergency purposes and not for investment in
securities;
13. Mortgage, pledge or hypothecate its assets to any extent;
14. Purchase or retain the securities of any issuer, if those individual
officers and trustees of the fund, its investment adviser or distributor, 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;
15. Invest more than 5% of the value of its total assets in securities of
companies having, together with their predecessors, a record of less than three
years of continuous operation;
16. Invest in puts, calls, straddles or spreads, or combinations thereof; nor
17. Purchase partnership interests in oil, gas, or mineral exploration,
drilling or mining ventures.
Further investment policies of the fund, which may be changed by
action of the Board of Trustees, without shareholder approval, include the
following: the fund will not invest more than 40% of its assets in securities
of issuers outside the U.S. and/or denominated in currencies other than the
U.S. dollar; nor will the fund invest more than 5% of the value of the fund's
net assets in warrants, valued at the lower of cost or market, with no more
than 2% being unlisted on the New York or American Stock Exchanges (warrants
acquired by the fund in units or attached to securities may be deemed to be
without value for purposes of this restriction).
All percentages relating to the policies and restrictions of the fund are
measured at the time the investment is made.
For purposes of investment restriction number 3, the fund will not invest
25% or more of total assets in the securities of issuers in the same industry.
For purposes of investment restriction number 4, the fund may invest in
securities of other managed investment companies if deemed advisable by its
officers in connection with the administration of a deferred compensation plan
adopted by Trustees, and to the extent such investments are allowed by an
exemptive order granted by the Securities and Exchange Commission.
For purposes of investment restriction number 6, forward currency
contracts are not considered commodities or commodities contracts.
FUND TRUSTEES AND OFFICERS
TRUSTEES AND TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATION(S) DURING PAST AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
TOTAL NUMBER
WITH 5 YEARS (POSITIONS WITHIN THE (INCLUDING VOLUNTARILY ALL FUNDS MANAGED BY OF FUND
BOARDS
REGISTRANT ORGANIZATIONS LISTED MAY HAVE DEFERRED COMPENSATION/1/) CAPITAL RESEARCH AND ON WHICH
CHANGED DURING THIS PERIOD) FROM THE FUND MANAGEMENT COMPANY/2/ TRUSTEE SERVES
DURING FISCAL YEAR ENDED FOR THE YEAR ENDED
11/30/95 11/30/95
<S> <C> <C> <C> <C> <C>
Richard G. Capen, Jr. Trustee Corporate Director and author; former $12,300 $25,300 2
Box 2494 United States Ambassador to Spain;
Rancho Santa Fe, CA 92067 former Vice Chairman of the Board;
Age: 61 Knight Ridder, Inc.; former Chairman
and Publisher, The Miami Herald.
+H. Frederick Christie Trustee Private Investor; former President and $12,358/3/ $140,200/3/ 18
P.O. Box 144 Chief Executive Officer, The Mission
Palos Verdes Estates, CA Group (non-utility holding company,
90274 subsidiary of Southern California
Age: 62 Edison Company); former President,
Southern California Edison Company
Alan E. Clements Trustee Private investor; former Executive $11,600 $23,900 2
16 Great Peter Street Director - Finance, Imperial Chemical
London SW1P3JF Industries PLC
England
Age: 67
++Robert B. Egelston Chairman Senior Partner, Capital Group None/4/ None/4/ 5
333 South Hope Street of the Partners, Limited Partnership
Los Angeles, CA 90071 Board
Age: 65
Alan Greenway Trustee Private Investor; $12,550 $65,400 4
7413 Fairway Road President, Greenway Associates, Inc.
La Jolla, CA 92037 (management consulting services)
Age: 68
++William R. Grimsley President Senior Vice President and Director, None/4/ None/4/ 3
Four Embarcadero Center, and Capital Research and Management
Suite 1800 Trustee Company
San Francisco, CA 94111
Age: 57
++Graham Holloway Director Former Chairman of the Board, None/4/ None/4/ 2
17309 Club Hill Drive American Funds Distributors, Inc.
Dallas, TX 75248
Age: 65
Leonade D. Jones Trustee Treasurer, The Washington Post $7,667/3/ $58,517/3/ 5
1150-15th Street, N.W. Company
Washington, DC 20071
Age: 48
William H. Kling Trustee President, Minnesota Public Radio; $11,950/3/ $70,100/3/ 4
45 East Seventh Street President, Greenspring Co.; former
St. Paul, MN 55101 President, American Public Radio
Age: 53 (now Public Radio International)
Norman R. Weldon Trustee President and Director, Corvita $12,200 $32,600 2
8210 N.W. 27th Street Corporation; Chairman of the
Miami, FL 33122 Board, Novoste Corporation; Director,
Age: 61 Enable Medical
Patricia K. Woolf Trustee Private investor; Lecturer, Department $11,900 $63,950 5
506 Quaker Road of Molecular Biology, Princeton
Princeton, NJ 08540 University
Age: 61
</TABLE>
+ May be deemed an "interested person" within the meaning of the Investment
Company Act of 1940 (the 1940 Act) due to membership on the board of directors
of the parent company of a registered broker-dealer.
++ Trustees who are "interested persons" within the meaning of the 1940 Act on
the basis of their affiliation with the Investment Adviser.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more of
the 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, 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 vehicles for certain
variable insurance contracts; amd Bond Portfolio for Endowments, Inc. and
Endowments, Inc whose shares may be owned only by tax-exempt organizations.
/3/ Since the plan's adoption, the total amounts of deferred compensation
accrued by the fund (plus earnings thereon) for participating Trustees are as
follows: H. Frederick Christie ($8,371); William H. Kling ($23,651); and
Leonade D. Jones ($8,673). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the Trustee.
/4/ Robert B. Egelston, William R. Grimsley and Graham Holloway are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
(with their principal occupations during the past five years)#
ROBERT B. EGELSTON, Chairman of the Board (see above).
WILLIAM R. GRIMSLEY, President (see above).
** STEVEN N. KEARSLEY, Vice President and Treasurer.
Vice President and Treasurer, Capital Research and Management Company.
* TIMOTHY D. ARMOUR, Vice President. Executive Vice President,
Capital Research Company.
* VINCENT P. CORTI, Vice President.
Vice President - Fund Business Management Group, Capital Research and
Management Company.
JAMES B. LOVELACE, Vice President. 11100 Santa Monica Boulevard, Santa
Monica, CA 90025. Vice President, Capital Research and Management
Company.
* CHAD L. NORTON, Secretary.
Vice President - Fund Business Management Group, Capital Research and
Management Company.
** MARY C. HALL, Assistant Treasurer.
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company.
ROBERT P. SIMMER, Assistant Treasurer. 5300 Robin Hood Raod, Norfolk, VA
23513. Vice President - Fund Business Management Group,
Capital Research and Management Company.
__________________________________
# Positions within the organizations listed may have change during this period.
* Address is 333 South Hope Street, Los Angeles, CA 90071
** Address is 135 South State College Boulevard, Brea, CA 92621
All of the Trustees and officers also are officers and/or
directors/trustees of one or more of the other funds for which Capital Research
and Management company serves as Investment Adviser. No compensation is paid
by the fund to any officer or Trustee who is a director, officer or employee of
the Investment Adviser or affiliated companies. The fund pays each
unaffiliated Trustee a fee of $7,000 per annum, plus $700 for each Board of
Trustees meeting attended, plus $300 for each meeting attended as a member of a
committee of the Board of Trustees. The Trustees 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
Trustees who are not affiliated with the Investment Adviser. As of January 1,
1996 the officers and Trustees of the fund and their families as a group owned
beneficially or of record less than 1% of the outstanding shares of the
fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have a number of years of investment experience. The Investment
Adviser's professionals travel several million miles a year, making more than
5,000 research visits in more than 50 countries around the world. The
Investment Adviser believes that it is able to attract and retain quality
personnel.
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 $100 billion of
stocks, bonds and money market instruments and serves over five million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and
Service Agreement (the Agreement) between the fund and the Investment Adviser
will continue in effect until November 30, 1996, 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 Trustees, 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 Trustees who are not parties to
the Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Agreement provides that the Investment Adviser has no liability
to the fund for its acts or omissions in the performance of its obligations to
the fund not involving willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations under the Agreement. The Agreement also
provides that either party has the right to terminate it, without penalty, upon
60 days' written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
As compensation for its services, the Investment Adviser receives a
monthly fee which is accrued daily, calculated at the lower of the annual rates
of 0.60% on the first $300 million of the fund's net assets, 0.48% on assets
over $300 million to $750 million, 0.45% on assets over $750 million to $1.25
billion, and 0.42% on assets over $1.25 billion; or 0.58% on the first $500
million of the fund's net assets, 0.48% on assets from $500 million to $1
billion, 0.44% on assets from $1 billion to $1.5 billion, 0.41% on assets from
$1.5 billion to $2.5 billion, 0.39% on assets from $2.5 billion to $4 billion,
0.38% on assets from $4 billion to $6.5 billion, and 0.375% on assets over $6.5
billion. The latter fee schedule provides for lower fees when net assets
exceed $3 billion.
The Investment Adviser, in addition to providing investment advisory
services, furnishes the services and pays the compensation and travel expenses
of persons to perform the executive, clerical and bookkeeping functions of the
fund and provides suitable office space, small office equipment and utilities,
and general purpose accounting forms, supplies, and postage used at the office
of the fund relating to the services furnished by the Investment Adviser.
Subject to the expense agreement described below, the fund will pay all
expenses not expressly assumed by the Investment Adviser, including, but not
limited to, registration and filing fees with federal and state agencies; blue
sky expenses; expenses of shareholders' meetings; the expense of reports to
existing shareholders; expenses of printing proxies and prospectuses; legal
and auditing fees; dividend disbursement expenses; the expense of the issuance,
transfer, and redemption of its shares; expenses pursuant to the fund's Plan of
Distribution (described below); custodian fees; printing and preparation of
registration statements; taxes; compensation, compensation and expenses paid to
Trustees unaffiliated with the Investment Adviser; association dues; and costs
of stationery, forms and certificates prepared exclusively for the fund.
The Agreement provides for an advisory fee reduction by any amount
necessary to assure that the fund's annual ordinary net operating expenses do
not exceed applicable expense limitations in any state in which the fund's
shares are being offered for sale. Only one state (California) continues to
impose expense limitations on funds registered for sale therein. The
California provision currently limits annual expenses to the sum of 2 1/2% of
the first $30 million of average net assets, 2% of the next $70 million and 1
1/2% of the remaining average net assets. Rule 12b-1 distribution plan
expenses are excluded from this limit. Other expenses which are not subject to
this limitation are interest, taxes, and extraordinary items such as
litigation. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and not as expenses.
During the fiscal years ended November 30, 1995, 1994 and 1993, the
Investment Adviser's total fees amounted to $13,517,000, $10,711,000 and
$7,097,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The fund has
adopted a Plan of Distribution (the Plan), pursuant to rule 12b-1 under the
1940 Act (see "Fund Organization and Management -- Principal Underwriter" in
the prospectus). 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 November 30, 1995 amounted to $2,620,000 after
allowance of $13,820,000 to dealers. During the fiscal years ended November
30, 1994 and 1993 the Principal Underwriter retained $4,309,000 and $2,223,000
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
Trustees, and separately by a majority of the Trustees 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 Trustees who are "interested persons"
of the fund may be considered to have a direct or indirect financial interest
in the operation of the Plan due to present or past affiliations with the
Investment Adviser and related companies. Potential benefits of the Plan to
the fund include improved shareholder services, savings to the fund in transfer
agency costs, savings to the fund in advisory fees and other expenses, benefits
to the investment process from growth or stability of assets and maintenance of
a financially healthy management organization. The selection and nomination of
Trustees who are not "interested persons" of the fund is committed to the
discretion of the Trustees who are not "interested persons" during the
existence of the Plan. The Plan is reviewed quarterly and must be renewed
annually by the Board of Trustees.
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 Trustees has approved
the category of expenses for which payment is being made. These include
service fees for qualified dealers and wholesaler compensation on sales of
shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a 401 (k) plan with 200
or more eligible employees). Only expenses incurred during the preceding 12
months and accrued while the Plan is in effect may be paid by the fund. During
the year ended November 30, 1995, the fund paid or accrued $6,124,000 for
compensation to dealers under the Plan.
The Glass-Stegall Act and other applicable laws, among other things,
generally prohibit commercial banks from engaging in the business of
underwriting, selling or distributing securities, but permit banks to make
shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries of affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or
other services then being provided by such bank. It is not expected that
shareholders would suffer adverse financial consequences as a result of any of
these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax
status of a "regulated investment company" under the provisions of Subchapter M
of the Internal Revenue Code of 1986, (the Code). Under Subchapter M, if the
fund distributes within specified times at least 90% of the sum of its
investment company taxable income, it will be taxed only on that portion of
such investment company taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities held for less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities, securities of other regulated
investment companies, and other securities, but such other securities must be
limited, in respect of any one issuer, to an amount not greater than 5% of the
fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies), or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess
of a regulated investment company's "required distribution" for the calendar
year ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
for the year. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
The amount of any realized gain or loss on closing out a forward currency
contract such as a forward commitment for the purchase or sale of foreign
currency will generally result in a realized capital gain or loss for tax
purposes. Under Code Section 1256, forward currency contracts held by the fund
at the end of each fiscal year will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Code Section 988 may also apply to forward currency contracts. Under Section
988, each foreign currency gain or loss is generally computed separately and
treated as ordinary income or loss. In the case of overlap between Sections
1256 and 988, special provisions determine the character and timing of any
income, gain or loss. The fund will attempt to monitor Section 988
transactions to avoid an adverse tax impact.
Distributions of investment company taxable income, including
short-term capital gains, generally are taxable to the shareholder as ordinary
income, regardless of whether such distributions are paid in cash or reinvested
in additional shares of the fund. The fund also intends to continue
distributing to shareholders all of the excess of net long-term capital gain
over net short-term capital loss on sales of securities. A capital gain
distribution, whether paid in cash or reinvested in shares, is taxable to
shareholders as long-term capital gains, regardless of the length of time a
shareholder has held the shares or whether such gain was realized by the fund
before the shareholder acquired such shares and was reflected in the price paid
for the shares.
Except for transactions the fund has identified as hedging transactions,
the fund is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on forward currency
contracts as of the end of the year as well as those actually realized during
the year.
Sales of forward currency contracts which are intended to hedge against a
change in the value of securities or currencies held by the fund may affect the
holding period of such securities or currencies and, consequently, the nature
of the gain or loss on such securities or currencies upon disposition.
It is anticipated that any net gain realized from the closing out of
forward currency contracts will be considered gain from the sale of securities
or currencies and therefore be qualifying income for purposes of the 90% of
gross income from qualified sources requirement, as discussed above. In order
to avoid realizing excessive gains on securities or currencies held less than
three months, the fund may be required to defer the closing out of a forward
currency contract beyond the time when it would otherwise be advantageous to do
so. It is anticipated that unrealized gains on forward currency contracts,
which have been open for less than three months as of the end of the fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test, as discussed above.
The fund will distribute to shareholders annually any net long-term
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the fund's fiscal year) on forward
currency contract transactions. Such distributions will be combined with
distributions of capital gains realized on the fund's other investments.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that the fund pays the dividend during
January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund
within 90 days of having acquired such shares, and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
for shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Under the Code, distributions of net investment income by the fund to
a shareholder who, as to the U.S., is a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, non-U.S. corporation, or
non-U.S. partnership (a non-U.S. shareholder) will be subject to U.S.
withholding tax (at a rate of 30% or lower treaty rate). Withholding will not
apply if a dividend paid by the fund to a non-U.S. shareholder is "effectively
connected" with a U.S. trade or business, in which case the reporting and
withholding requirements applicable to U.S. citizens, U.S. residents, or
domestic corporations will apply. However, if the distribution is effectively
connected with the conduct of the non-U.S. shareholder's trade or business
within the U.S., the distribution would be included in the net income of the
shareholder and subject to U.S. income tax at the applicable marginal rate.
Distributions of net long-term capital gains are not subject to tax
withholding, but if the non-U.S. shareholder was an individual who was
physically present in the U.S. during the tax year for more than 182 days and
such shareholder is nonetheless treated as a nonresident alien, the
distributions would be subject to a 30% tax.
The fund may be required to pay withholding and other taxes imposed by
foreign countries generally at rates from 10% to 40% which would reduce the
fund's investment income. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. If more than 50% in value of
the fund's total assets at the close of its taxable year consists of securities
of foreign issuers, the fund will be eligible to file elections with the
Internal Revenue Service pursuant to which shareholders of the fund will be
required to include their respective pro rata portions of such withholding
taxes in their federal income tax returns as gross income, treat such amounts
as foreign taxes paid by them, and deduct such amounts in computing their
taxable incomes or, alternatively, use them as foreign tax credits against
their federal income taxes. In any year the fund makes such an election,
shareholders will be notified as to the amount of foreign withholding and other
taxes paid by the fund.
As of the date of this statement of additional information, the
maximum federal individual stated tax rate applicable to ordinary income is
39.6% (effective tax rates may be higher for some individuals due to phase out
of exemptions and elimination of deductions); the maximum individual tax rate
applicable to net capital gain is 28%; and the maximum corporate tax applicable
to ordinary income and net capital gain is 35%. However, to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 for a taxable year will be required to pay
an additional income tax liability up to $11,700 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay and additional amount of tax 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, an individual is entitled to establish and
contribute to an IRA each year (prior to the tax return filing deadline for
that year) whereby earnings on investments are tax-deferred. In addition, in
some cases, the IRA contribution itself may be deductible.
The foregoing is limited to a summary federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Shareholders should consult their own tax advisers for
additional details as to their particular tax status.
PURCHASE OF SHARES
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company (the Transfer Agent); this offering price is effective for
orders received prior to the time of determination of the net asset value and,
in the case of orders placed with dealers, accepted by the Principal
Underwriter prior to its close of business. The dealer is responsible for
promptly transmitting purchase orders to the Principal Underwriter. Orders
received by the investment dealer, the Transfer Agent, or the fund after the
time of the determination of the net asset value will be entered at the next
calculated offering price. Prices which appear in the newspaper are not always
indicative of prices at which you will be purchasing and redeeming shares of
the fund, since such prices generally reflect the previous day's closing price,
whereas purchases and redemptions are made at the next calculated price.
The price paid for shares, the offering price, is based on the net
asset value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open as set forth below. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day. The net asset value per share is determined as follows:
1. Stocks, and convertible bonds and debentures, traded on the New York
Stock Exchange are valued at the last sale price on such exchange on the day of
valuation, or if there is no sale on the day of valuation, at the last-reported
bid price. Nonconvertible bonds and debentures, and other long-term debt
securities normally are valued at prices obtained for the day of valuation from
a bond pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, an
over-the-counter or exchange quotation may be used. Securities traded
primarily on securities exchanges outside the U.S. are valued at the last sale
price on such exchanges on the day of valuation, or if there is no sale on the
day of valuation, at the last-reported bid price. U.S. Treasury bills,
certificates of deposit issued by banks, corporate short-term notes and other
short-term investments with original or remaining maturities in excess of 60
days are valued at the mean of representative quoted bid and asked prices for
such securities or, if such prices are not available, for securities of
comparable maturity, quality and type. Short-term securities with 60 days or
less to maturity are amortized to maturity based on their cost to the fund if
acquired within 60 days of maturity or, if already held by the fund on the 60th
day, based on the value determined on the 61st day. Other securities are
valued on the basis of last sale or bid prices in what is, in the opinion of
the Investment Adviser, the broadest and most representative market, which may
be either a securities exchange or the over-the-counter market. Where
quotations are not readily available, securities are valued at fair value as
determined in good faith by the Board of Trustees. The fair value of all other
assets is added to the value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the
liabilities, including accruals of taxes and other expense items; and
3. The net assets so obtained are then divided by the total number of shares
outstanding (excluding treasury shares), 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 the
fund. The fund will not knowingly sell 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 Trustees.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the Statement)
terms. The Statement is not a binding obligation to purchase the indicated
amount. When a shareholder signs a Statement in order to qualify for a reduced
sales charge, shares equal to 5% of the dollar amount specified in the
Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and capital gain distributions on shares held in escrow will be
credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total 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 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. The Statement may be
revised upward at any time during the 13-month period, and such a revision will
be treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement
plans by payroll deduction, the sales charge for the investments made during
the 13-month period will be handled as follows: The regular monthly payroll
deduction will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the statement of intention, 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 accepatance of these terms with their first
purchase.
DEALER COMMISSIONS - The following commissions will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
401(k) plan with 200 or more eligible employees, and for purchases made at net
asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value. See "The
American Funds Shareholder Guide" in the fund's prospectus for more
information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum) which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of accounts for retirement plans where
Capital Guardian Trust Company serves as trustee or custodian). Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement showing the current transaction. Participation in the
plan will begin within 30 days after receipt of the account application. If
the Shareholders 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. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American funds Group (the receiving fund) subject to the following conditions:
(i) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, automatically to redeem the account and send the
proceeds to the shareholder. These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
REDEMPTION OF SHARES
The fund's Declaration of Trust permits the fund to direct the
Transfer Agent to redeem the shares of any shareholder if the shares owned by
such shareholder through redemptions, market decline or otherwise, have a value
of less than $1,000 (determined, for this purpose only as the greater of the
shareholder's cost or the current net asset value of the shares, including any
shares acquired through the reinvestment of income dividends and capital gain
distributions). Prior written notice of at least 60 days will be given to a
shareholder before the involuntary redemption provision is made effective with
respect to the shareholder's account. The shareholder 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
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal years ended November 30, 1995,
1994 and 1993 amounted to $6,058,000, $3,496,000 and $2,644,000
respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02101, as Custodian. Non-U.S. securities may be held by the Custodian
pursuant to sub-custodial arrangements in non-U.S. banks or foreign branches of
U.S. banks.
INDEPENDENT PUBLIC ACCOUNTANTS - Deloitte & Touche LLP, 1000 Wilshire
Boulevard, 15th Floor, Los Angeles, CA 90017, have 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 from the Annual Report have been so
included in reliance on the report of Deloitte & Touche LLP given on the
authority of said firm as experts in auditing and accounting.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on November 30.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The
financial statements are audited annually by the fund's independent public
accountants, Deloitte & Touche LLP, whose selection is determined annually by
the Board of Trustees.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts where the fund was organized and California where the
fund's principal office is located, shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the fund. However, the risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder
liability for acts, omissions, obligations or affairs of the fund and provides
that notice of the disclaimer may be given in each agreement, obligation, or
instrument which is entered into or executed by the fund or Trustees. The
Declaration of Trust provides for indemnification out of fund property of any
shareholder held personally liable for the obligations of the fund and also
provides for the fund to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or liability.
Under the Declaration of Trust, the Trustees, officers, employees or
agents of the fund are not liable for actions or failure to act; however, they
are not protected from liability by reason of their willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
SHAREHOLDER VOTING RIGHTS - At any meeting of shareholders, duly called and at
which a quorum is present, the shareholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
trustee or trustees from office and may elect a successor or successors to fill
any resulting vacancies for the unexpired terms of removed trustees. The fund
has made an undertaking, at the request of the staff of the Securities and
Exchange Commission, to apply the provisions of section 16(c) of the 1940 Act
with respect to the removal of trustees, as though the fund were a common-law
trust. Accordingly, the trustees of the fund shall promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when requested in writing to do so by the record holders of not less
than 10% of the outstanding shares.
The financial statements including the investment portfolio and the report
of Independent Auditors contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- NOVEMBER 30, 1995
<S> <C>
Net asset value and redemption price per share $16.98
(Net assets divided by shares outstanding)
Maximum offering price per share (100/94.25 of per $18.02
share net asset value, which takes into account
the fund's current maximum sales load)
</TABLE>
INVESTMENT RESULTS
The fund's yield is 1.08% based on a 30-day (or one month) period
ended November 30, 1995, computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's total return for the past 12 months and average annual
total returns over the past five- and ten-year periods as of November 30, 1995
were 16.16%, 17.03% and 13.84%, respectively. The average total return ("T")
is computed by equating the value at the end of the period ("ERV") with a
hypothetical initial investment of $1,000 ("P") over a period of years ("n")
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the public
offering price (which includes the sales charge) as of the first day of the
period in order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are reinvested at net asset value on
the reinvestment date determined by the Board of Trustees. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending and the initial
investment value divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the periods. Total return may be calculated for one-year, five-years,
ten-years and for other periods. The average annual total return over periods
greater than one year may also be computed by utilizing ending values as
determined above.
The following assumptions will be reflected in computations made in
accordance with the formulas stated above: (1) deduction of the maximum sales
load of 5.75% from the $1,000 initial investment; (2) reinvestment of dividends
and distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated.
The fund may also, at times, calculate total return based on net asset
value per share (rather than the offering price), in which case the figure
would not reflect the effect of any sales charges which would have been paid if
shares were purchased during the period reflected in the computation.
Consequently, total return calculated in this manner will be higher. These
total returns may be calculated over periods in addition to those described
above. Total return for the unmanaged indices will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
advisory fees, brokerage costs or administrative expenses.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by dividing the dividends
paid by the fund over the last 12 months by the sum of the month-end net asset
value or maximum offering price and the capital gains paid over the last 12
months. The distribution rate may differ from the yield.
The fund may include information on its investment results and/or
comparisons of its investment results to various unmanaged indices (such as The
Dow Jones Average of 30 Industrial Stocks and The Standard and Poor's 500 Stock
Composite Index) or results of other mutual funds or investment or savings
vehicles in advertisements or in reports furnished to present or prospective
shareholders.
The fund may refer to results compiled by organizations such as CDA
Investment Technologies, Ibbottson Associates, Lipper Analytical Services,
Morningstar, Inc., Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the fund may, from time to time, refer
to results published in various periodicals, including BARRON'S, FORBES,
FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY,
U.S. NEWS AND WORLD REPORT and THE WALL STREET JOURNAL.
The fund may from time to time illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
The fund may from time to time compare its investment results with the
Consumer Price Index, which is a measure of the average change in prices over
time in a fixed market basket of good and services (E.G. food, clothing, fuels,
transportation, and other goods and services that people buy for day-to-day
living).
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management
Company manages nine common stock funds that are at least 10 years old. In the
rolling 10-year periods since January 1, 1966 (121 in all), those funds have
had better total returns than the Standard and Poor's 500 Composite Stock Index
in 94 of the 121 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The investment results set forth below were calculated as described in the
fund's prospectus. The fund's results will vary from time to time depending
upon market conditions, the composition of the fund's portfolio and operating
expenses of the fund, so that any investment results reported by the fund
should not be considered representative of what an investment in the fund may
earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objective and policies.
NEF VS. VARIOUS UNMANAGED INDICES
Here is how a $10,000 investment in NEF would have grown (with all
distributions reinvested) in its lifetime compared with investments in DJIA 30
and S&P 500:
<TABLE>
<CAPTION>
Period NEF S&P 500/1/ DJIA/2/ NYSE/3/
<S> <C> <C> <C> <C>
12/1/83 - +410% +446% +513% +236%
11/30/95
</TABLE>
/1/ The Standard and Poor's 500 Stock Index is comprised of industrial,
transportation, public utilities and financial stocks, and represents a large
portion of the value of issues traded on the New York Stock Exchange. Selected
issues traded on the American Stock Exchange are also included.
/2/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30
industrial companies such as General Motors and General Electric.
/3/ Index is a capitalization weighted index of all The New York Stock
Exchange Composite common stocks listed on the exchange.
IF YOU ARE CONSIDERING NEF FOR AN INDIVIDUAL RETIREMENT ACCOUNT...
<TABLE>
<CAPTION>
Here's how much you would have if you had invested $2,000
a year in NEF:
<S> <C> <C> <C>
2 Years 5 Years 7 Years 10 Years
(12/1/93- (12/1/90 - (12/1/88- (12/1/85-
11/30/95) 11/30/95) 11/30/95) 11/30/95)
$4,578 $15,431 $24,440 $44,148
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had invested Periods ...and taken all
$10,000 in NEF 12/1-11/30 distributions in shares,
this many years and... your investment would
Number have been worth this
of Years much at November 30,
1995:
Value
<S> <C> <C>
1 1994 - 1995 $ 11,616
2 1993 - 1995 11,271
3 1992 - 1995 14,720
4 1991 - 1995 18,192
5 1990 - 1995 21,951
6 1989 - 1995 19,018
7 1988 - 1995 26,026
8 1987 - 1995 31,844
9 1986 - 1995 30,132
10 1985 - 1995 36,563
11 1984 - 1995 50,670
12 1983 - 1995 50,984
</TABLE>
Illustration of a $10,000 investment in NEF with
dividends reinvested and capital gain distributions taken in shares
(For the lifetime of the fund, December 1, 1983 through November 30, 1995)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Fiscal Annual Total Investment From From Dividends Total
Year End Dividends Dividends Cost Initial Capital Gains Reinvested Value
11/30 (cumulative) Investment Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1984 $ -- $ -- $ 10,000 $ 9,485 $ -- $ -- $ 9,485
1985 199 199 10,199 12,864 -- 280 13,144
1986 140 339 10,339 14,560 913 477 15,950
1987 367 706 10,706 12,761 1,586 746 15,093
1988 315 1,021 11,021 14,396 2,858 1,208 18,462
1989 421 1,442 11,442 18,159 5,042 2,068 25,269
1990 566 2,008 12,008 13,462 6,417 2,007 21,886
1991 589 2,597 12,597 15,076 8,427 2,910 26,413
1992 328 2,925 12,925 18,091 10,676 3,874 32,641
1993 189 3,114 13,114 22,617 14,934 5,080 42,631
1994 307 3,421 13,421 20,124 16,436 4,816 41,376
1995 517 3,938 13,938 23,324 21,446 6,214 50,984
</TABLE>
The dollar amount of capital gain distributions during the period was
$14,750
APPENDIX
DESCRIPTION OF BOND RATINGS
CORPORATE DEBT SECURITIES
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities from "Aaa" to "C".
"AA -- 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 issues."
"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 Aa 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 or have other marked
shortcomings."
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
STANDARD & POOR'S CORPORATION rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
"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 no interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
THE NEW ECONOMY FUND
Investment Portfolio, November 30, 1995
LARGEST HOLDINGS BY INDUSTRY
Broadcasting & Publishing 14.98%
Telecommunications 8.94%
Banking 8.36%
Insurance 8.24%
Merchandising 7.48%
All Other Industries 36.63%
Cash & Equivalents 15.37%
<TABLE>
<CAPTION>
MARKET PERCENT
Stocks SHARES VALUE OF NET
(Common and Preferred ) (000) ASSETS
- ---------------------------------------- ----------- --------- --------
<S> <C> <C> <C>
BROADCASTING & PUBLISHING - 14.98%
Tele-Communications, Inc., Series A, TCI Group/1/ 5,877,067 $108,726 3.09%
(Formerly Tele-Communications, Inc.)
Time Warner Inc. 1,488,000 59,520 1.70
Tele-Communications, Inc., Series A, Liberty Media
Group (Formerly Liberty Media Corp.)/1/ 1,545,866 43,284 1.23
Comcast Corp., Class A, special stock 2,050,000 40,487 1.15
Viacom Inc., Class B/1/ 750,000 36,187 1.03
Gaylord Entertainment Co., Class A 1,344,000 33,936 .96
News Corp. Ltd. (Australia) 2,066,943 10,842
News Corp. Ltd. (American Depositary
Receipts) 470,000 9,870
News Corp. Ltd., preferred shares 1,042,295 4,987
News Corp. Ltd., preferred shares
(American Depositary Receipts) 235,000 4,436 .86
Capital Cities/ABC, Inc. 240,000 29,670 .84
International Family Entertainment, Inc.,
Class B/1/ 1,250,000 23,281 .66
Tele-Communications International, Series A/1/ 735,000 17,273 .49
Grupo Televisa, SA (American Depositary
Receipts) (Mexico) 738,300 15,966 .45
Arnoldo Mondadori Editore SpA (Italy) 1,950,000 15,227 .43
Turner Broadcasting System, Inc., Class B 469,627 13,150 .37
Chris-Craft Industries, Inc./1/ 300,000 12,338 .35
LIN Television Corp./1/ 420,000 12,075 .34
CANAL+ (France) 59,646 10,851 .31
News International PLC (United Kingdom) 1,300,000 6,109 .17
Western Publishing Group, Inc./1/ 500,000 4,500 .13
New York Times Co., Class A 150,000 4,425 .13
TeleWest Communications PLC (American
Depositary Receipts) (United Kingdom)/1/ 172,000 4,386 .12
Westcott Communications, Inc./1/ 300,000 4,275 .12
Dow Jones & Co., Inc. 50,000 1,919 .05
TELECOMMUNICATIONS - 8.94%
AirTouch Communications/1/ 1,625,000 47,328 1.34
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) (Mexico) 1,341,960 44,285 1.26
Telecom Corp. of New Zealand Ltd. (New Zealand)/2/ 8,810,480 36,850 1.05
Tele Danmark AS, Class B (American Depositary
Receipts) (Denmark) 704,700 19,644
Tele Danmark AS, Class B 200,000 10,877 .87
Vodafone Group PLC (American Depositary
Receipts) (United Kingdom) 575,000 20,772 .59
Octel Communications Corp./1/ 600,000 19,725 .56
MCI Communications Corp. 720,000 19,260 .55
Telecomunicacoes Brasileiras SA, preferred
nominative (American Depositary Receipts)
(Brazil) 373,291 17,918 .51
AT&T Corp. 200,000 13,200 .37
Telefonica de Espana, SA (American
Depositary Receipts) (Spain) 170,000 7,055
Telefonica de Espana, SA 400,000 5,509 .36
ALLTEL Corp. 420,000 12,390 .35
Technology Resources Industries Bhd.
(Malaysia) 4,320,000 12,090 .34
STET-Societa Finanziaria Telefonica p.a.
(Italy) 4,300,000 11,713
STET-Societa Finanziaria Telefonica p.a.,
preferred shares 150,000 294 .34
BCE Mobile Communications Inc. (Canada)/1/ 325,000 10,403 .29
Nortel Inversora SA, preferred shares,
Series B (American Depositary Receipts)
(Argentina)/2/ 284,000 3,976 .11
Pakistan Telecommunication Corp. (Global
Depositary Receipts) (Pakistan)/1/ /2/ 21,800 1,657 .05
BANKING - 8.36%
Svenska Handelsbanken Group, Class A (Sweden) 2,410,000 48,675 1.38
Banc One Corp. 800,000 30,500 .87
Old Kent Financial Corp. 630,000 25,515 .72
First Interstate Bancorp 175,000 23,450 .67
Mercantile Bancorporation Inc. 510,000 23,396 .66
Norwest Corp. 630,000 20,790 .59
Golden West Financial Corp. 350,000 17,894 .51
Washington Mutual Savings Bank 567,500 16,032 .46
Charter One Financial, Inc. 450,000 14,400 .41
Australia and New Zealand Banking Group Ltd.
(Australia) 3,218,711 14,349 .41
Banco de Santander, SA (Spain) 270,000 12,577 .36
Stadshypotek AB, Class A (Sweden) 500,000 10,060 .29
West One Bancorp 180,000 8,955 .25
Mercantile Bankshares Corp. 250,000 7,094 .20
Grupo Financiero Banamex Accival, SA de CV,
Series L (Mexico) 2,885,500 4,111
Grupo Financiero Banamex Accival, SA de CV,
Series B 1,745,000 2,686 .19
Hibernia Corp., Class A 500,000 5,250 .15
Keystone Financial, Inc. 150,000 4,669 .13
Banco Popular Espanol, SA (Spain) 24,000 4,025 .11
INSURANCE - 8.24%
Internationale Nederlanden Groep NV
(Netherlands) 649,075 42,444
Internationale Nederlanden Groep NV, warrants,
expire 2001/1/ 8,800,000 29,695 2.05
EXEL Ltd. (Bermuda) 740,000 46,157 1.31
PartnerRe Holdings Ltd. (Bermuda) 1,320,000 34,980 .99
CKAG Colonia Konzern AG (Germany) 27,900 20,421
CKAG Colonia Konzern AG, preferred shares 5,330 3,147 .67
PMI Group, Inc. 405,100 19,242 .55
AMBAC Inc. 350,000 15,444 .44
TIG Holdings, Inc. 525,000 14,175 .40
American International Group, Inc. 150,000 13,462 .38
Cincinnati Financial Corp. 200,000 12,400 .35
Dowa Fire and Marine Insurance Co., Ltd.
(Japan) 2,200,000 11,108 .31
Irish Life PLC (Ireland) 2,507,465 9,680 .27
Selective Insurance Group, Inc. 210,000 7,980 .23
Nippon Fire and Marine Insurance Co., Ltd.
(Japan) 1,230,000 7,006 .20
Trenwick Group Inc. 60,000 3,075 .09
MERCHANDISING - 7.48%
Viking Office Products, Inc./1/ 1,110,000 51,060 1.45
Giordano Holdings Ltd. (Hong Kong) 33,436,000 30,047 .85
Consolidated Stores Corp./1/ 1,200,000 29,700 .84
H & M Hennes & Mauritz AB, Class B (Sweden) 320,000 19,877 .56
Barnes & Noble, Inc./1/ 479,600 17,625 .50
Wal-Mart Stores, Inc. 575,000 13,800 .39
Walgreen Co. 400,000 11,650 .33
Giant Food Inc., Class A 350,000 11,287 .32
Michaels Stores, Inc./1/ 600,000 9,900 .28
Arbor Drugs, Inc. 500,000 9,875 .28
Home Depot, Inc. 206,000 9,141 .26
Toys 'R' Us, Inc./1/ 300,000 6,975 .20
Home Shopping Network, Inc./1/ 700,000 6,562 .19
Tesco PLC (United Kingdom) 1,430,156 6,316 .18
Delhaize 'Le Lion' SA (Belgium) 150,000 6,260 .18
Duty Free International, Inc. 450,000 6,075 .17
Gap, Inc. 80,000 3,620 .10
Circuit City Stores, Inc. 120,000 3,480 .10
Ito-Yokado Co., Ltd. (Japan) 60,000 3,306 .09
Williams-Sonoma, Inc./1/ 150,000 3,000 .09
Cifra, SA de CV, Class C (Mexico) 2,340,000 2,474 .07
Shoe Carnival, Inc./1/ 412,000 1,596 .05
MISCELLANEOUS FINANCIAL SERVICES - 6.35%
Federal National Mortgage Assn. 800,000 87,600 2.49
Federal Home Loan Mortgage Corp. 560,000 43,120 1.22
Student Loan Marketing Assn. 380,000 26,648 .76
Capital One Financial Corp. 875,000 22,094 .63
ADVANTA Corp., Class B 300,000 11,625
ADVANTA Corp., Class A 250,000 10,375 .62
ORIX Corp. (Japan) 320,000 13,176 .38
H&R Block, Inc. 200,000 8,900 .25
ENTERTAINMENT & LEISURE - 5.43%
Walt Disney Co. 675,000 40,584 1.15
Carnival Cruise Lines, Inc., Class A 1,520,000 39,520 1.12
Mirage Resorts, Inc./1/ 1,000,000 33,875 .96
Harrah's Entertainment, Inc./1/ 1,290,000 32,089 .91
Circus Circus Enterprises, Inc./1/ 1,100,000 30,525 .87
Station Casinos, Inc./1/ 725,000 10,875 .31
Nintendo Co., Ltd. (Japan) 50,000 3,922 .11
HEALTH & PERSONAL CARE SERVICES - 4.70%
United HealthCare Corp. 1,060,000 66,647 1.89
Humana Inc./1/ 1,100,000 30,800 .88
Columbia/HCA Healthcare Corp. 425,000 21,941 .62
Health Systems International, Inc., Class A/1/ 550,000 17,875 .51
PacifiCare Health Systems, Inc., Class A/1/ 100,000 8,500
PacifiCare Health Systems, Inc., Class B/1/ 50,000 4,337 .36
FHP International Corp./1/ 305,400 8,857 .25
Value Health, Inc./1/ 130,000 3,266 .09
Vivra Inc./1/ 90,000 2,047 .06
Coram Healthcare Corp./1/ 230,000 1,265 .04
COMPUTER SERVICES & SOFTWARE - 2.96%
Sybase, Inc./1/ 850,600 29,877 .85
Tech Data Corp./1/ 900,000 15,187 .43
Electronic Arts/1/ 355,200 12,121 .35
CUC International Inc./1/ 300,000 11,400 .32
General Motors Corp., Class E 200,000 10,100 .29
Policy Management Systems Corp./1/ 220,000 9,845 .28
Oracle Corp.(Formerly Oracle Systems Corp.)/1/ 100,000 4,537 .13
Fractal Design Corp./1/ 250,000 3,563 .10
MacNeal-Schwendler Corp. 200,000 3,125 .09
Avid Technology, Inc./1/ 70,000 2,774 .08
FTP Software, Inc. /1/ 50,000 1,519 .04
RESTAURANTS - 2.17%
Brinker International, Inc./1/ 2,320,000 35,670 1.01
McDonald's Corp. 470,000 20,974 .60
Foodmaker, Inc./1/ 1,900,000 9,975 .28
Sizzler International, Inc. 1,100,000 4,262 .12
Au Bon Pain Co., Inc./1/ 400,000 3,650 .11
Outback Steakhouse, Inc./1/ 50,000 1,825 .05
COMPUTER SYSTEMS - 1.48%
Silicon Graphics, Inc./1/ 900,000 32,850 .93
Digital Equipment Corp./1/ 200,000 11,775 .34
International Business Machines Corp. 77,000 7,440 .21
ELECTRONIC DATA PRODUCTS - 1.40%
General Instrument Corp./1/ 1,247,300 31,962 .91
America Online, Inc./1/ 423,800 17,323 .49
MISCELLANEOUS PUBLIC SERVICES - 1.29%
WMX Technologies, Inc. 695,000 20,503 .58
Waste Management International PLC (American
Depositary Receipts) (United Kingdom)/1/ 1,465,000 15,199 .43
ADT Ltd. (Bermuda)/1/ 500,000 7,000 .20
Eurotunnel SA (France)/1/ 1,899,400 2,778 .08
ENERGY SERVICES - 1.28%
Sonat Offshore Drilling Inc. 400,000 13,800 .39
Helmerich & Payne, Inc. 500,000 13,625 .39
Schlumberger Ltd. (Netherlands Antilles) 200,000 12,700 .36
Landmark Graphics Corp./1/ 250,000 5,000 .14
HOTELS & MOTELS - 1.05%
Marriott International, Inc. 755,000 28,124 .80
Promus Hotel Corp./1/ 400,000 8,850 .25
DIVERSIFIED SERVICES - 0.71%
First Pacific Co. Ltd. (Hong Kong) 10,724,106 11,648 .33
Brambles Industries Ltd. (Australia) 1,000,000 10,922 .31
Benpres Holdings Corp. (Global Depositary
Receipts) (Philippines)/1/ /2/ 509,190 2,485 .07
ADVERTISING - 0.66%
Interpublic Group of Companies, Inc. 320,000 12,280 .35
Omnicom Group Inc. 100,000 6,675 .19
Havas SA (France) 59,204 4,343 .12
DELIVERY SERVICES - 0.55%
Federal Express Corp./1/ 260,000 19,435 .55
REAL ESTATE - 0.53%
Host Marriott Corp./1/ 1,450,000 18,669 .53
AIRLINES - 0.49%
Southwest Airlines Co. 500,000 12,500 .36
AMR Corp./1/ 60,000 4,597 .13
ELECTRIC UTILITIES - 0.40%
National Power PLC (United Kingdom) 1,450,000 10,255 .29
CESP - Companhia Energetica de Sao Paulo,
preferred nominative (Brazil) 133,590,000 3,610
CESP - Companhia Energetica de Sao Paulo,
ordinary nominative 4,995,000 118
CESP - Companhia Energetica de Sao Paulo,
preferred nominative (American Depositary
Receipts)/1/ 2,000 16 .11
ENGINEERING & CONSTRUCTION - 0.38%
Jacobs Engineering Group Inc./1/ 555,000 13,389 .38
INFORMATION & PRINTING SERVICES - 0.37%
Primark Corp./1/ 466,500 12,887 .37
MISCELLANEOUS BUSINESS SERVICES - 0.23%
Robert Half International Inc. 200,000 8,025 .23
RAIL & ROAD SERVICES - 0.13%
Norfolk Southern Corp. 50,000 3,937 .11
Canadian National Railway System - 1st Installment
(Canada)/1/ 50,000 750 .02
ENVIRONMENTAL SERVICES - 0.03%
Ecolab Inc. 40,000 1,150 .03
MISCELLANEOUS
Other stocks in initial period of acquisition 142,420 4.04
--------- -------
TOTAL STOCKS
(cost: $2,165,415,000) 2,981,043 84.63
Principal --------- -------
Amount
Short-Term Securities (000)
- ---------------------------------------- ----------- --------- -------
CORPORATE SHORT-TERM NOTES- 15.29%
Ford Motor Credit Co. 5.70% due
1/9-1/24/96 45,900 $45,569 1.29
Central and South West Corp. 5.68%-5.72%
due 12/12/95-1/23/96 38,650 38,447 1.09
General Electric Capital Corp. 5.70%
due 12/6-12/11/95 38,200 38,157 1.08
Wal-Mart Stores, Inc. 5.68% due
12/19-12/21/95 36,200 36,085 1.02
Coca-Cola Co. 5.67%-5.70% due 12/12-
12/14/95 33,600 33,529 .94
John Deere Capital Corp. 5.72% due
1/16/96 30,000 29,775 .85
A. I. Credit Corp. 5.67%-5.68% due
1/8-1/26/96 25,000 24,824 .71
Motorola Credit Corp. 5.69% due 12/8/95 24,800 24,769 .70
H.J. Heinz Co. 5.70%-5.72% due 12/5
-12/18/95 24,600 24,556 .70
American General Finance Corp. 5.70%
due 12/5/95 21,400 21,383 .61
Beneficial Corp. 5.67%-5.70% due 12/18/95
-1/11/96 21,100 20,981 .60
AT & T Co. 5.64%-5.69% due 12/19-12/21/95 20,200 20,135 .57
J.C. Penney Funding Corp. 5.71% due
12/11/95 20,000 19,965 .57
Procter & Gamble Co. 5.67% due 1/29/96 20,000 19,810 .56
SAFECO Credit Co. Inc. 5.67% due 1/26/96 15,520 15,380 .44
National Rural Utilities Cooperative
Finance Corp. 5.68% due 1/12/96 15,000 14,898 .42
Xerox Corp. 5.68% due 1/12/96 15,000 14,898 .42
Associates Corp. of North America 5.89%
due 12/1/95 13,350 13,348 .38
Eli Lilly and Co. 5.67% due 12/15/95 12,900 12,870 .37
U S WEST Communications, Inc. 5.70% due
12/13/95 12,000 11,975 .34
Kimberly-Clark Corp. 5.67% due 12/28/95 11,000 10,951 .31
American Express Credit Co. 5.70% due
1/11/96 10,000 9,934 .28
Avco Financial Services Inc. 5.65% due
1/30/96 10,000 9,903 .28
Harvard University 5.70% due 12/13/95 8,650 8,632 .25
PACCAR Financial Corp. 5.71% due
12/5/95 6,800 6,795 .19
CIT Group Holdings Inc. 5.72% due
12/4/95 6,000 5,996 .17
Toys R Us, Inc.5.68% due 12/8/95 5,200 5,193 .15
FEDERAL AGENCY DISCOUNT NOTES- 0.61%
Federal Home Loan Bank 5.67% due 12/18/95 21,300 21,240 .61
--------- -------
TOTAL SHORT-TERM SECURITIES
(cost: $560,014,000) 559,998 15.90
--------- -------
TOTAL INVESTMENT SECURITIES
(cost: $2,725,429,000) 3,541,041 100.53
Excess of payables over cash and receivables 18,465 .53
--------- -------
NET ASSETS $3,522,576 100.00%
========= =======
</TABLE>
/1/ NON-INCOME-PRODUCING SECURITIES.
/2/ PURCHASED IN A PRIVATE PLACEMENT TRANSACTION; RESALE TO THE PUBLIC MAY
REQUIRE REGISTRATION OR MAY EXTEND ONLY TO QUALIFIED INSTITUTIONAL BUYERS.
SEE NOTES TO FINANCIAL STATEMENTS
STOCKS APPEARING IN THE PORTFOLIO
SINCE MAY 31, 1995
- -------------------------------------------
Arbor Drugs
Banco de Santander
Barnes & Noble
H&R Block
Brambles Industries
Brinker International
Canadian National Railway System
Chris-Craft Industries
Fractal Design
FTP Software
Gap
General Instrument
Giordano Holdings
Harrah's Entertainment
Health Systems International
Michaels Stores
National Power
ORIX
Primark
Robert Half International
Sonat Offshore Drilling
Sybase
Tele-Communications International
Walgreen
Wal-Mart Stores
STOCKS ELIMINATED FROM THE PORTFOLIO
SINCE MAY 31, 1995
- -------------------------------------------
Apple Computer
BankAmerica
Bay Networks
Canadian Imperial Bank of Commerce
China Light & Power
Enhance Financial Services Group
Intel
Le Groupe Videotron Ltee
LIN Broadcasting
Lotus Development
Munchener Ruckversicherungs-Gesellschaft
Perusahaan Perseroan (Persero) PT Indonesian
Satellite
Rogers Communications
Symantec
Thai Military Bank
TJX Companies
THE NEW ECONOMY FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND (DOLLARS IN
LIABILITIES AT NOVEMBER 30, 1995 THOUSANDS)
------------- -------------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $2,725,429) $3,541,041
Cash 12
Receivables for-
Sales of investments $ 730
Sales of fund's shares 18,988
Dividends 4,101 23,819
------------- -------------
3,564,872
LIABILITIES:
Payables for-
Purchases of investments 16,425
Repurchases of fund's shares 23,032
Management services 1,247
Accrued expenses 1,592 42,296
NET ASSETS AT NOVEMBER 30, 1995- ------------- -------------
Equivalent to $16.98 per share on
207,474,477 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $3,522,576
=============
STATEMENT OF OPERATIONS (DOLLARS IN
FOR THE YEAR ENDED NOVEMBER 30, 1995 THOUSANDS)
- ---------------------------------------- ------------- -------------
INVESTMENT INCOME:
Income:
Dividends $ 32,308
Interest 34,095 $ 66,403
-------------
Expenses:
Management services fee 13,517
Distribution expenses 6,124
Transfer agent fee 4,047
Reports to shareholders 291
Registration statement and prospectus 479
Postage, stationery and supplies 1,046
Trustees' fees 103
Auditing and legal fees 45
Custodian fee 708
Taxes other than federal income tax 46
Other expenses 92 26,498
------------- -------------
Net investment income 39,905
-------------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 146,663
Net increase in unrealized
appreciation on investments:
Beginning of year 355,041
End of year 815,599
Net unrealized appreciation -------------
on investments 460,558
Net realized gain and unrealized -------------
appreciation on investments 607,221
NET INCREASE IN NET ASSETS -------------
RESULTING FROM OPERATIONS $647,126
=============
(DOLLARS IN
STATEMENT OF CHANGES IN NET ASSETS THOUSANDS)
- ---------------------------------------- ------------- -------------
Year Ended November 30
1995 1994
Operations : ------------- -------------
Net investment income $ 39,905 $ 28,986
Net realized gain on investments 146,663 120,824
Net unrealized appreciation
(depreciation) on investments 460,558 (225,519)
------------- -------------
Net increase (decrease) in net assets
resulting from operations 647,126 (75,709)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (33,138) (15,140)
Distributions from net realized
gain on investments (120,976) (151,346)
------------- -------------
Total dividends and distributions (154,114) (166,486)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
50,144,726 and 59,645,687
shares, respectively 747,511 1,301,162
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
10,606,653 and 5,227,221 shares,
respectively 145,052 154,809
Cost of shares repurchased:
30,229,239 and 24,316,506
shares, respectively (454,846) (534,094)
------------- -------------
Net increase in net assets resulting
from capital share transactions 437,717 921,877
------------- -------------
TOTAL INCREASE IN NET ASSETS 930,729 679,682
NET ASSETS:
Beginning of year 2,591,847 1,912,165
End of year (including undistributed ------------- -------------
net investment income: $27,814 and
$21,210, respectively) $3,522,576 $2,591,847
============= =============
</TABLE>
See Notes to Financial Statements
1. The New Economy Fund (the "fund") is registered under the Investment Company
Act of 1940 as an open-end, diversified management investment company. The
following paragraphs summarize the significant accounting policies consistently
followed by the fund in the preparation of its financial statements:
Stocks traded on a national securities exchange (or reported on the NASDAQ
national market) and securities traded in the over-the-counter market are
stated at the last reported sales price on the day of valuation; other
securities, and securities for which no sale was reported on that date, are
stated at the last quoted bid price. Short-term securities with original or
remaining maturities in excess of 60 days are valued at the mean of their
quoted bid and asked prices. Short-term securities with 60 days or less to
maturity are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Valuation Committee of the Board
of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis. Discounts
on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in non-U.S.
currencies are recorded in the financial statements after translation into U.S.
dollars utilizing rates of exchange on the last business day of the year.
Purchases and sales of investment securities, income, and expenses are
calculated using the prevailing exchange rate as accrued. The fund does not
identify the portion of each amount shown in the fund's statement of operations
under the caption "Realized Gain and Unrealized Appreciation on Investments"
that arises from changes in non-U.S. currency exchange rates.
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 $708,000 includes $13,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of November 30, 1995 net unrealized appreciation on investments for book
and federal income tax purposes aggregated $815,612,000, of which $921,003,000
related to appreciated securities and $105,391,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended November 30, 1995. The cost of
portfolio securities for book and federal income tax purposes was
$2,725,429,000 at November 30, 1995.
3. The fee of $13,517,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily,
calculated at the lower of the annual rates of 0.60% of the first $300 million
of average net assets; 0.48% of such assets in excess of $300 million but not
exceeding $750 million; 0.45% of such assets in excess of $750 million but not
exceeding $1.25 billion; and 0.42% of such assets in excess of $1.25 billion;
OR 0.58% of the first $500 million of the fund's net assets; 0.48% of such
assets in excess of $500 million but not exceeding $1 billion; 0.44% of such
assets in excess of $1 billion but not exceeding $1.5 billion; 0.41% of such
assets in excess of $1.5 billion but not exceeding $2.5 billion; 0.39% of such
assets in excess of $2.5 billion but not exceeding $4 billion; 0.38% of such
assets in excess of $4 billion but not exceeding $6.5 billion; and 0.375% of
such assets in excess of $6.5 billion. The latter fee schedule provides for
lower fees when net assets exceed $3 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended November 30, 1995,
distribution expenses under the Plan were $6,124,000. As of November 30, 1995,
accrued and unpaid distribution expenses were $1,436,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $4,047,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $2,620,000 (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.
Trustees of the fund 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
November 30, 1995, aggregate amounts deferred were $35,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly
owned subsidiaries of CRMC. Certain Trustees and officers of the fund are or
may be considered to be affiliated with CRMC, AFS, and AFD. No such persons
received any remuneration directly from the fund.
4. As of November 30, 1995, accumulated undistributed net realized gain on
investments was $143,655,000 and paid-in capital was $2,535,508,000. The fund
reclassified permanent book and tax differences relating to shareholder
distributions of $163,000 from undistributed net investment income to
undistributed net realized gains for the year ended November 30, 1995.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,044,986,000 and $661,189,000, respectively, during
the year ended November 30, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended November 30, 1995, such non-U.S. taxes were $1,679,000. Net realized
currency losses on dividends, interest, withholding taxes reclaimable, and
sales of non-U.S. bonds and notes were $54,000 for the year ended November 30,
1995.
PER-SHARE DATA AND RATIOS/1/
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
------- -------- ------- ------ ------
1995 1994 1993 1992 1991
------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $14.65 $16.47 $13.17 $10.98 $9.80
------- -------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .20 .17 .11 .08 .15
Net realized and unrealized
gain (loss) on investments 2.99 (.59) 3.75 2.45 1.76
Total income from ------- -------- ------- ------ ------
investment operations 3.19 (.42) 3.86 2.53 1.91
------- -------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.18) (.12) (.07) (.14) (.26)
Distributions from net realized
gains (.68) (1.28) (.49) (.20) (.47)
------- -------- ------- ------ ------
Total distributions (.86) (1.40) (.56) (.34) (.73)
------- -------- ------- ------ ------
Net Asset Value, End of Year $16.98 $14.65 $16.47 $13.17 $10.98
======= ======== ======= ====== ======
Total Return/2/ 23.22% (2.94)% 30.60% 23.58% 20.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in millions) $3,523 $2,592 $1,912 $1,115 $908
Ratio of expenses to average
net assets .88% .85% .85% .89% .92%
Ratio of net income to
average net assets 1.33% 1.25% .76% .67% 1.33%
Portfolio turnover rate 27.03% 25.51% 26.97% 19.03% 18.52%
</TABLE>
/1/ Adjusted to reflect the 100% share dividend effective May 26, 1994.
/2/ Calculated without deducting a sales charge. The maximum sales charge is
5.75% of the fund's offering price.
Independent Auditors' Report
To the Board of Trustees and Shareholders of The New Economy Fund:
We have audited the accompanying statement of assets and liabilities of
The New Economy Fund, including the schedule of portfolio investments, as of
November 30, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the per-share data and ratios for each of the five years
in the period then ended. These financial statements and per-share data and
ratios are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and the per-share data and
ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the per-share
data and ratios are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures include confirmation of securities owned
at November 30, 1995 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other procedures. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of The New Economy Fund at November 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the per-share data and ratios for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
December 22, 1995
1995 TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 23% of the
dividends paid by the fund from net investment income represents qualifying
dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WILL BE
MAILED IN JANUARY 1996 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON
THEIR 1995 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Per-Share Data and Ratios
Independent Auditors Report
(B) EXHIBITS:
1. On file (see SEC file nos. 811-3735 and 2-83848)
2. On file (see SEC file nos. 811-3735 and 2-83848)
3. None.
4. On file (see SEC file nos. 811-3735 and 2-83848)
5. On file (see SEC file nos. 811-3735 and 2-83848)
6. On file (see SEC file nos. 811-3735 and 2-83848)
7. None.
8. On file (see SEC file nos. 811-3735 and 2-83848)
9. Form of Shareholder Services Agreement between Registrant and American
Funds Service Company, as amended January 1, 1995.
10. Not applicable to this filing.
11. Consent of Independent Accountants.
12. None.
13. None.
14. On file (see SEC file nos. 811-3735 and 2-83848)
15. On file (see SEC file nos. 811-3735 and 2-83848)
16. Updates to previously filed schedule for computation of each performance
quotation provided in the Registration Statement in response to Item 22 (see
SEC nos. 811-3735 and 2-83848).
17. Financial data schedule (EDGAR)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of December 31, 1995.
Number of
Title of Class Record-Holders
Beneficial Interest 333,243
(no par value)
ITEM 27. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund
Errors and Omissions Policy written by American International Surplus Lines
Insurance Company, Chubb Custom Insurance Company and ICI Mutual Insurance
Company, which insures its officers and Trustees against certain liabilities.
However, in no such event will Registrant maintain insurance to indemnify any
such person for any act for which Registrant itself is not permitted to
indemnify the individual.
Article VI of the Trust's By-Laws states:
(a) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a 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 action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgement, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person reasonably believed to be opposed to the best interests of the the
Trust, and, with repsect to any criminal action or proceeding, had reasonable
cause to believe that such person's conduct was unlawful.
(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances ofthe case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity for the determination as to the standard of
conduct as provided in subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion; and any
determinations so made shall be conclusive..
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested trustees or independent legal counsel.
(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled and
shall continue as to a person who has ceased to be Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such person.
(h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed
to protect any Trustee or officer of the Trust against any liability to the
Trust or to its shareholders to which such person would otherwise be subject by
reason of willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.
(i) The Trust shall have power to purchase and maintain insurance on behalf
of any person against any liability asserted against or incurred by such
person, whether or not the Trust would have the power to indemnify such person
against such liability under the provisions of this Article.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer of controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 29. PRINCIPAL UNDERWRITERS.
(A) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., 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, EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., The Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
New Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund
of America, Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money
fund of America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
# David L. Abzug Assistant Vice President None
John A. Agar Regional Vice President None
1501 N. University Drive
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Brynwood Drive
Madison, WI 53711
& Richard L. Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Vice President None
8000 Town Line Avenue So.
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Regional Vice President None
1190 Rockmart Circle
Kennesaw, GA 30144
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
Ian B. Bodell Vice President None
3100 West End Avenue, Suite 870
Nashville, TN 37215
Mick L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Senior Vice President, Director None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MD 20895
Victor C. Cassato Vice President None
999 Green Oaks Drive
Littleton, CO 80121
Christopher J. Cassin Regional Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1425 Vallejo, #203
San Francisco, CA 94109
* Larry P. Clemmensen Treasurer, Director None
* Kevin G. Clifford Senior Vice President None
Ruth M. Collier Vice President None
145 W. 67th Street #12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Blvd.
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
3521 Rittenhouse Street N.W.
Washington, D.C. 20015
* Carl D. Cutting Vice President None
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
3622 East 87th Street
Tulsa, OK 74137
Kirk D. Dodge Vice President None
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
+ Lloyd G. Edwards Vice President None
* Paul H. Fieberg Senior Vice President None
John R. Fodor Regional Vice President None
15 Latisquana Road
Southborough, MA 01772
* Mark P. Freeman, Jr. President, Director None
Clyde E. Gardner Vice President None
Rt. 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
* Paul G. Haaga, Jr. Director None
David E. Harper Vice President None
R.D. 1, Box 210, Rte. 519
Frenchtown, NJ 08825
Ronald R. Hulsey Regional Vice President None
6744 Avalon
Dallas, TX 75214
* Robert L. Johansen Vice President, Controller None
Victor J. Kriss, Jr. Senior Vice President None
P.O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
12585-E
East Tennessee Circle
Aurora, CO 80012
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Senior Vice President None
* E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
6008 E. Anderson Drive
Scottsdale, AZ 85255
& John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Rd.
St. Louis, MO 63131
* R. William Melinat Vice President, Institutional None
Investment Services Division
David R. Murray Regional Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
* Barbara G. Nicolich Assistant Vice President, None
Institutional Investment
Services Division
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Regional Vice President None
32 Ridge Avenue
Newton Centre, MA 02161
# Candance D. Pilgram Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, SE
Mercer Island, WA 98040
* John O. Post, Jr. Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
* George L. Romine, Jr. Vice President, Institutional None
Investment Services Division
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
Douglas F. Rowe Regional Vice President None
30309 Oak Tree Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* R. Michael Shanahan Chairman None
David W. Short Senior Vice President None
1000 RIDC Plaza, Ste. 212
Pittsburgh, PA 15238
* Victor S. Sidhu Vice President, None
Institutional Investment Services
Division
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Assistant Vice President, None
Institutional Investment
Services Division
* Mary E. Smith Assistant Vice President, None
Institutional Investment
Services Division
Rodney G. Smith Regional Vice President None
2350 Lakeside Blvd., #850
Richardson, TX 75082
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
4 West 4th Avenue, Suite 406
San Mateo, CA 94402
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
& James P. Toomey Assistant Vice President None
+ Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
@ Andrew J. Ward Vice President None
* David M. Ward Assistant Vice President, None
Institutional Investment Services
Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34238
# J. Kelly Webb Senior Vice President None
Gregory J. Weimer Regional Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
N. Dexter Williams Vice President None
Four Embarcadero Center
San Francisco, CA 94111
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
* Marshall D. Wingo Senior Vice President None
* Robert L. Winston Senior Vice President, None
Director
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet Young Regional Vice President None
1616 Vermont
Houston, TX 77006
</TABLE>
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
# Business Address, 135 South State College Blvd., Brea, CA 92621
& Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
+ Business Address, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240
(C) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, are maintained and 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 92621.
Records covering shareholder accounts are maintained and kept by the
Transfer Agent, American Funds Service Company, 135 South State College Blvd.,
Brea, CA 92621, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230, 5300 Robin
Hood Road, Norfolk, VA 23513 and 8332 Woodfield Crossing Blvd., Indianapolis,
IN 46240.
Records covering portfolio transactions are also maintained and kept by
the Custodian, State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts, 02101.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
As reflected in the prospectus, the fund undertakes to provide each person
to whom a prospectus is delivered with a copy of the fund's latest annual
report to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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
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
25th day of January, 1996.
The New Economy Fund
By: /s/ William R. Grimsley
William R. Grimsley, President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this amendment
to Registration Statement has been signed below on January 25, 1996, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/ William R. Grimsley President
William R. Grimsley
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ Steven N. Kearsley Vice President and Treasurer
Steven N. Kearsley
(3) Trustees:
Richard G. Capen, Jr.* Trustee
H. Frederick Christie* Trustee
Alan W. Clements* Trustee
Robert B. Egelston* Chairman of the Board
Alan Greenway* Trustee
William R. Grimsley* President and Trustee
Leonade D. Jones* Trustee
William H. Kling* Trustee
Norman R. Weldon* Trustee
Patricia K. Woolf* Trustee
</TABLE>
*By /s/ Chad L. Norton
Chad L. Norton
(Attorney-in-Fact)
Counsel reports that the amendment does not contain disclosures that would
make the amendment ineligible for effectiveness under the provisions of rule
485(b).
/s/ Michele Y. Yang
Michele Y. Yang, Esq.
C-14
SHAREHOLDER SERVICES AGREEMENT
1. The parties to this Agreement, which is effective as of January 1, 1995,
are The New Economy Fund (hereinafter called "the Fund") and American Funds
Service Company, a California corporation (hereinafter called "AFS"). AFS is a
wholly owned subsidiary of Capital Research and Management Company (hereinafter
called "CRMC"). This Agreement will continue in effect until amended or
terminated in accordance with its terms.
2. The Fund hereby employs AFS, and AFS hereby accepts such employment by the
Fund, as its transfer agent. In such capacity AFS will provide the services of
stock transfer agent, dividend disbursing agent, redemption agent, and such
additional related services as the Fund may from time to time require, all of
which services are sometimes referred to herein as "shareholder services."
3. AFS has entered into substantially identical agreements with other
investment companies for which CRMC serves as investment adviser. (For the
purposes of this Agreement, such investment companies, including the Fund, are
called "participating investment companies.")
4. AFS has entered into an agreement with DST Systems, Inc. (hereinafter
called "DST"), to provide AFS with electronic data processing services
sufficient for the performance of the shareholder services referred to in
paragraph 2.
5. The Fund, together with the other participating companies, will maintain a
Review and Advisory Committee, which Committee will review and may make
recommendations to the boards of the participating investment companies
regarding all fees and charges provided for in this Agreement, as well as
review the level and quality of the shareholder services rendered to the
participating investment companies and their shareholders. Each participating
investment company may select one director or trustee who is not affiliated
with CRMC, or any of its affiliated companies, or with Washington Management
Corporation or any of its affiliated companies, to serve on the Review and
Advisory Committee.
6. AFS will provide to the participating investment companies the shareholder
services referred to herein in return for the following fees:
ANNUAL ACCOUNT MAINTENANCE FEE (PAID MONTHLY):
$.67 per month for each open account on AFS books or in Level 2 or 4
Networking ($8.04 per year)
$.09 per month for each open account maintained in Street Name or Level 1 or
3 Networking ($1.08 per year)
No annual fee will be charged for a participant account underlying a 401(k)
or other defined contribution plan where the plan maintains a single account
on AFS books and responds to all participant inquiries
TRANSACTION FEES:
$2.00 per non-automated transaction
$0.50 per automated transaction
For this purpose, "transactions" shall include all types of transactions
included in an "activity index" as reported to the Review and Advisory
Committee at least annually. AFS will bill the Fund monthly, on or shortly
after the first of each calendar month, and the Fund will pay to AFS within
five business days of such billing.
Any revision of the schedule of charges set forth herein shall require the
affirmative vote of a majority of the members of the board of
directors/trustees of the Fund.
7. All fund-specific charges from third parties -- including DST charges,
payments described in the next sentence, postage, NSCC transaction charges and
similar out-of-pocket expenses -- will be passed through directly to the Fund
or other participating investment companies, as applicable. AFS, subject to
approval of its board of directors, is authorized in its discretion to
negotiate payments to third parties for account maintenance and/or transaction
processing services provided such payments do not exceed the anticipated
savings to the Fund, either in fees payable to AFS hereunder or in other direct
Fund expenses, that AFS reasonably anticipates would be realized by the Fund
from using the services of such third party rather than maintaining the
accounts directly on AFS' books and/or processing non-automated transactions.
8. It is understood that AFS may have income in excess of its expenses and may
accumulate capital and surplus. AFS is not, however, permitted to distribute
any net income or accumulated surplus to its parent, CRMC, in the form of a
dividend without the affirmative vote of a majority of the members of the
boards of directors/trustees of the Fund and all participating investment
companies.
9. This Agreement may be amended at any time by mutual agreement of the
parties, with agreement of the Fund to be evidenced by affirmative vote of a
majority of the members of the board of directors/trustees of the Fund.
10. This Agreement may be terminated on 180 days' written notice by either
party. In the event of a termination of this Agreement, AFS and the Fund will
each extend full cooperation in effecting a conversion to whatever successor
shareholder service provider(s) the Fund may select, it being understood that
all records relating to the Fund and its shareholders are property of the Fund.
11. In the event of a termination of this Agreement by the Fund, the Fund will
pay to AFS as a termination fee the Fund's proportionate share of any costs of
conversion of the Fund's shareholder service from AFS to a successor. In the
event of termination of this Agreement and all corresponding agreements with
all the participating investment companies, all assets of AFS will be sold or
otherwise converted to cash, with a view to the liquidation of AFS when it
ceases to provide shareholder services for the participating investment
companies. To the extent any such assets are sold by AFS to CRMC and/or any of
its affiliates, such sales shall be at fair market value at the time of sale as
agreed upon by AFS, the purchasing company or companies, and the Review and
Advisory Committee. After all assets of AFS have been converted to cash and
all liabilities of AFS have been paid or discharged, an amount equal to any
capital or paid-in surplus of AFS that shall have been contributed by CRMC or
its affiliates shall be set aside in cash for distribution to CRMC upon
liquidation of AFS. Any other capital or surplus and any assets of AFS
remaining after the foregoing provisions for liabilities and return of capital
or paid-in surplus to CRMC shall be distributed to the participating investment
companies in such proportions as may be determined by the Review and Advisory
Committee.
12. In the event of disagreement between the Fund and AFS, or between the Fund
and other participating investment companies as to any matter arising under
this Agreement, which the parties to the disagreement are unable to resolve,
the question shall be referred to the Review and Advisory Committee for
resolution. If the Review and Advisory Committee is unable to resolve the
question to the satisfaction of both parties, either party may elect to submit
the question to arbitration; one arbitrator to be named by each party to the
disagreement and a third arbitrator to be selected by the two arbitrators named
by the original parties. The decision of a majority of the arbitrators shall
be final and binding on all parties to the arbitration. The expenses of such
arbitration shall be paid by the party electing to submit the question to
arbitration.
13. The obligations of the Fund under this Agreement are not binding upon any
of the directors, trustees, officers, employees, agents or shareholders of the
Fund individually, but bind only the Fund itself. AFS agrees to look solely to
the assets of the Fund for the satisfaction of any liability of the Fund in
respect to this Agreement and will not seek recourse against such directors,
trustees, officers, employees, agents or shareholders, or any of them or their
personal assets for such satisfaction.
AMERICAN FUNDS SERVICE COMPANY THE NEW ECONOMY FUND
By /s/ Don R. Conlan By /s/ Robert B. Egelston
Don R. Conlan, Chairman Robert B. Egelston, Chairman
By /s/ Kenneth R. Gorvetzian By /s/ Chad L. Norton
Kenneth R. Gorvetzian, Secretary Chad L. Norton, Secretary
CONSENT OF INDEPENDENT AUDITORS
The New Economy Fund:
We consent to (a) the use in this Post-Effective Amendment No. 19 to
Registration Statement no. 2-83848 on Form N-1A of our report dated December
22, 1995, appearing in the Financial Statements that are included in part B,
the Statement of Additional Information of such Registration Statement, (b) the
reference to us under the heading "General Information" in such Statement of
Additional Information, and (c) the reference to us under the heading
"Financial Highlights" in the Prospectus, which is part of such Registration
Statement.
Deloitte & Touche LLP
Los Angeles, California
January 26, 1996
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT
(1) ENDING REDEMPTION VALUE AND TOTAL RETURN
Value of an initial investment at the end of a period and total return for the
period are computed as set forth below.
(A) INITIAL INVESTMENT DIVIDED BY
PUBLIC OFFERING PRICE FOR ONE SHARE AT BEGINNING
OF PERIOD EQUALS
NUMBER OF SHARES INITIALLY PURCHASED
(B) NUMBER OF SHARES INITIALLY PURCHASED PLUS
NUMBER OF SHARES ACQUIRED AT NET ASSET VALUE
THROUGH REINVESTMENT OF DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS DURING PERIOD EQUALS
NUMBER OF SHARES PURCHASED DURING PERIOD
(C) NUMBER OF SHARES PURCHASED DURING PERIOD MULTIPLIED BY
NET ASSET VALUE OF ONE SHARE AS OF THE LAST DAY
OF THE PERIOD EQUALS
VALUE OF INVESTMENT AT END OF PERIOD
(D) VALUE OF INVESTMENT AT END OF PERIOD DIVIDED BY
INITIAL INVESTMENT
MINUS ONE AND THEN MULTIPLIED BY 100 EQUALS
TOTAL RETURN FOR THE PERIOD EXPRESSED AS A
PERCENTAGE
Exhibit 16
(2) AVERAGE ANNUAL TOTAL RETURN
Average annual total return quotations for the one-year, five-year and ten-year
periods ended on the date of the most recent balance sheet are computed
according to the formula set forth below.
P(1+T)/n/ = ERV
WHERE: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment as of the
end of one-year and lifetime periods (computed in accordance with the formula
shown in (1), above)
THUS:
AVG. ANNUAL TOTAL RETURN AT PUBLIC OFFERING PRICE:
1 Year Total Return 1,000(1+T)/1/ = $1,161.62
T = +16.16%
Five Year Avg. Annual Total Return 1,000(1+T)/5/ = $2,195.11
T = +17.03%
Ten-Year Avg. Annual Total Return 1,000(1+T)/10/ = $3,656.41
T = +13.84%
Hypothetical illustrations based on $1,000 and $10,000 initial investments used
to obtain ending values over various time periods are attached. Illustrations
of $2,000 per year investments in an Individual Retirement Account are also
included.
(3) YIELD
Yield is computed as set forth below.
(A) Dividends and interest earned during the period MINUS
Expenses accrued for the period EQUALS
Net investment income
(B) Net income investment DIVIDED BY
Average daily number of shares
outstanding during the period that
were entitled to receive dividends EQUALS
Net investment income per share earned
during the period
(C) Net investment income per share earned
during the period DIVIDED BY
Maximum offering price per share on
last day of the period EQUALS
Current month's yield
(D) Current months yield PLUS ONE RAISED
TO THE SIXTH POWER EQUALS
Semiannual compounded yield
(E) Semiannual compounded yield MINUS ONE
MULTIPLIED BY TWO EQUALS
Annualized rate
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
1/01/95 1000.00 14.58 5.75 % 68.587 13.740 942
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/95 1000 13 13 1013 47 1110 49 1159 13 1172.05 72.438
TOTAL $ 47
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
1/01/91 1000.00 20.05 5.75 % 49.875 18.900 943
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/91 1000 15 15 1015 20 1181 21 1202 15 1217.58 51.418
12/31/92 1000 8 23 1023 51 1320 77 1397 25 1422.44 53.758
12/31/93 1000 12 35 1035 138 1585 234 1819 43 1862.64 58.629
12/31/94 1000 20 55 1055 80 1371 283 1654 57 1711.63 124.573
12/31/95 1000 24 79 1079 86 1614 422 2036 92 2128.74 131.566
TOTAL $ 375
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
1/01/86 1000.00 20.73 5.75 % 48.239 19.540 943
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 1000 19 19 1019 112 936 113 1049 18 1067.96 55.021
12/31/87 1000 21 40 1040 60 909 175 1084 39 1123.13 59.614
12/31/88 1000 28 68 1068 72 969 260 1229 70 1299.90 64.736
12/31/89 1000 37 105 1105 147 1138 454 1592 121 1713.05 72.587
12/31/90 1000 39 144 1144 142 912 494 1406 134 1540.12 81.488
12/31/91 1000 24 168 1168 32 1142 653 1795 194 1989.33 84.009
12/31/92 1000 14 182 1182 83 1276 816 2092 232 2324.01 87.831
12/31/93 1000 19 201 1201 225 1533 1212 2745 298 3043.18 95.788
12/31/94 1000 33 234 1234 131 1326 1180 2506 290 2796.49 203.529
12/31/95 1000 39 273 1273 141 1561 1534 3095 382 3477.97 214.955
TOTAL $ 1145
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/83 1000.00 14.56 5.75 % 68.681 13.725 943
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 1000 0 0 1000 0 948 0 948 0 947.80 68.681
12/31/84 1000 20 20 1020 0 968 0 968 21 989.47 70.175
12/31/85 1000 14 34 1034 0 1342 0 1342 43 1385.87 70.925
12/31/86 1000 29 63 1063 164 1333 166 1499 71 1570.21 80.897
12/31/87 1000 31 94 1094 88 1294 257 1551 100 1651.33 87.650
12/31/88 1000 42 136 1136 107 1379 383 1762 149 1911.19 95.179
12/31/89 1000 56 192 1192 216 1621 667 2288 230 2518.69 106.724
12/31/90 1000 58 250 1250 209 1298 726 2024 240 2264.41 119.810
12/31/91 1000 35 285 1285 47 1626 960 2586 338 2924.84 123.515
12/31/92 1000 20 305 1305 121 1817 1200 3017 399 3416.91 129.135
12/31/93 1000 28 333 1333 331 2182 1782 3964 510 4474.33 140.835
12/31/94 1000 48 381 1381 192 1887 1735 3622 489 4111.63 299.245
12/31/95 1000 57 438 1438 207 2223 2256 4479 634 5113.58 316.043
TOTAL $ 1682
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
1/01/95 1000.00 13.74 0.00 % 72.780 13.740 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/95 1000 14 14 1014 50 1178 52 1230 13 1243.68 76.865
TOTAL $ 50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
1/01/91 1000.00 18.90 0.00 % 52.910 18.900 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/91 1000 15 15 1015 21 1253 22 1275 16 1291.67 54.547
12/31/92 1000 8 23 1023 54 1400 81 1481 27 1508.99 57.029
12/31/93 1000 13 36 1036 146 1681 248 1929 46 1975.97 62.196
12/31/94 1000 21 57 1057 85 1454 300 1754 61 1815.78 132.153
12/31/95 1000 26 83 1083 91 1712 448 2160 98 2258.24 139.570
TOTAL $ 397
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
1/01/86 1000.00 19.54 0.00 % 51.177 19.540 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 1000 21 21 1021 119 993 120 1113 20 1133.00 58.372
12/31/87 1000 22 43 1043 63 964 185 1149 42 1191.54 63.245
12/31/88 1000 30 73 1073 77 1028 276 1304 75 1379.01 68.676
12/31/89 1000 40 113 1113 156 1208 481 1689 128 1817.37 77.007
12/31/90 1000 42 155 1155 150 967 524 1491 142 1633.89 86.449
12/31/91 1000 26 181 1181 34 1212 693 1905 205 2110.41 89.122
12/31/92 1000 14 195 1195 88 1354 866 2220 245 2465.46 93.177
12/31/93 1000 21 216 1216 239 1626 1286 2912 316 3228.44 101.619
12/31/94 1000 34 250 1250 139 1406 1252 2658 308 2966.71 215.918
12/31/95 1000 41 291 1291 149 1656 1628 3284 405 3689.67 228.039
TOTAL $ 1214
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/83 1000.00 13.73 0.00 % 72.860 13.725 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 1000 0 0 1000 0 1005 0 1005 0 1005.47 72.860
12/31/84 1000 21 21 1021 0 1027 0 1027 22 1049.67 74.445
12/31/85 1000 15 36 1036 0 1424 0 1424 46 1470.19 75.240
12/31/86 1000 30 66 1066 174 1414 176 1590 75 1665.73 85.818
12/31/87 1000 33 99 1099 93 1373 273 1646 105 1751.78 92.982
12/31/88 1000 44 143 1143 113 1463 406 1869 158 2027.44 100.968
12/31/89 1000 59 202 1202 229 1719 708 2427 244 2671.87 113.215
12/31/90 1000 61 263 1263 221 1377 770 2147 255 2402.11 127.096
12/31/91 1000 37 300 1300 50 1725 1018 2743 359 3102.72 131.027
12/31/92 1000 21 321 1321 129 1928 1273 3201 423 3624.70 136.988
12/31/93 1000 31 352 1352 352 2315 1891 4206 540 4746.41 149.399
12/31/94 1000 51 403 1403 204 2002 1841 3843 518 4361.63 317.440
12/31/95 1000 61 464 1464 220 2358 2393 4751 673 5424.51 335.260
TOTAL $ 1785
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/94 1000.00 15.54 5.75 % 64.350 14.650 943
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 1000 8 8 1008 44 884 44 928 8 936.79 68.180
11/30/95 1000 3 11 1011 0 1093 55 1148 13 1161.62 68.411
TOTAL $ 44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/90 1000.00 20.80 5.75 % 48.077 19.600 942
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 1000 20 20 1020 46 909 46 955 19 974.94 51.584
12/31/91 1000 15 35 1035 20 1138 79 1217 42 1259.30 53.180
12/31/92 1000 8 43 1043 52 1272 144 1416 55 1471.15 55.599
12/31/93 1000 12 55 1055 143 1527 319 1846 80 1926.41 60.636
12/31/94 1000 21 76 1076 83 1321 360 1681 89 1770.25 128.839
11/30/95 1000 6 82 1082 0 1633 445 2078 117 2195.11 129.276
TOTAL $ 344
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/85 1000.00 19.87 5.75 % 50.327 18.730 943
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/85 1000 10 10 1010 0 983 0 983 10 993.90 50.865
12/31/86 1000 21 31 1031 118 977 119 1096 30 1126.09 58.016
12/31/87 1000 22 53 1053 63 948 184 1132 52 1184.26 62.859
12/31/88 1000 29 82 1082 76 1011 275 1286 84 1370.64 68.259
12/31/89 1000 40 122 1122 155 1188 478 1666 140 1806.30 76.538
12/31/90 1000 42 164 1164 150 951 520 1471 152 1623.94 85.923
12/31/91 1000 25 189 1189 34 1192 688 1880 217 2097.60 88.581
12/31/92 1000 14 203 1203 87 1332 861 2193 257 2450.49 92.611
12/31/93 1000 20 223 1223 238 1599 1278 2877 331 3208.83 101.002
12/31/94 1000 34 257 1257 138 1383 1245 2628 320 2948.71 214.608
11/30/95 1000 11 268 1268 0 1709 1538 3247 409 3656.41 215.336
TOTAL $ 1059
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/83 10000.00 14.56 5.75 % 686.813 13.725 9427
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 10000 0 0 10000 0 9478 0 9478 0 9478.02 686.813
12/31/84 10000 199 199 10199 0 9684 0 9684 210 9894.75 701.755
12/31/85 10000 140 339 10339 0 13420 0 13420 438 13858.78 709.252
12/31/86 10000 286 625 10625 1644 13331 1657 14988 714 15702.01 808.965
12/31/87 10000 308 933 10933 877 12940 2569 15509 1004 16513.20 876.497
12/31/88 10000 414 1347 11347 1066 13791 3829 17620 1491 19111.84 951.785
12/31/89 10000 554 1901 11901 2160 16209 6671 22880 2306 25186.65 1067.231
12/31/90 10000 576 2477 12477 2085 12981 7256 20237 2406 22643.90 1198.090
12/31/91 10000 349 2826 12826 469 16264 9598 25862 3386 29248.14 1235.141
12/31/92 10000 198 3024 13024 1214 18173 12000 30173 3995 34168.94 1291.343
12/31/93 10000 284 3308 13308 3314 21820 17822 39642 5100 44742.93 1408.339
12/31/94 10000 480 3788 13788 1921 18874 17354 36228 4887 41115.80 2992.416
11/30/95 10000 150 3938 13938 0 23324 21446 44770 6213 50983.59 3002.567
TOTAL $ 14750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STANDARD & POOR'S 500 COMPOSITE INDEX
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/83 10000.00 166.49 0.00 % 60.064 166.490 10000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 10000 108 108 10108 0 9906 0 9906 107 10013.56 60.714
12/31/84 10000 466 574 10574 0 10045 0 10045 597 10642.65 63.637
12/31/85 10000 511 1085 11085 0 12690 0 12690 1322 14012.51 66.322
12/31/86 10000 556 1641 11641 0 14546 0 14546 2067 16613.83 68.604
12/31/87 10000 611 2252 12252 0 14841 0 14841 2651 17492.03 70.795
12/31/88 10000 697 2949 12949 0 16681 0 16681 3708 20389.92 73.419
12/31/89 10000 822 3771 13771 0 21226 0 21226 5611 26837.20 75.940
12/31/90 10000 931 4702 14702 0 19834 0 19834 6163 25997.56 78.728
12/31/91 10000 972 5674 15674 0 25052 0 25052 8845 33897.32 81.271
12/31/92 10000 1018 6692 16692 0 26170 0 26170 10300 36470.23 83.703
12/31/93 10000 1064 7756 17756 0 28017 0 28017 12117 40134.76 86.043
12/31/94 10000 1145 8901 18901 0 27585 0 27585 13069 40654.12 88.519
11/30/95 10000 913 9814 19814 0 36361 0 36361 18273 54634.04 90.249
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DOW JONES INDUSTRIAL AVERAGE
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/83 10000.00 1275.10 0.00 % 7.843 1275.100 10000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 10000 116 116 10116 0 9871 0 9871 115 9986.05 7.934
12/31/84 10000 491 607 10607 0 9502 0 9502 620 10122.67 8.355
12/31/85 10000 527 1134 11134 0 12130 0 12130 1395 13525.63 8.745
12/31/86 10000 596 1730 11730 0 14869 0 14869 2321 17190.58 9.067
12/31/87 10000 652 2382 12382 0 15205 0 15205 2944 18149.39 9.361
12/31/88 10000 756 3138 13138 0 17007 0 17007 4086 21093.68 9.727
12/31/89 10000 1017 4155 14155 0 21592 0 21592 6289 27881.66 10.127
12/31/90 10000 1066 5221 15221 0 20654 0 20654 7067 27721.91 10.526
12/31/91 10000 1014 6235 16235 0 24852 0 24852 9590 34442.01 10.869
12/31/92 10000 1107 7342 17342 0 25889 0 25889 11096 36985.64 11.204
12/31/93 10000 1129 8471 18471 0 29441 0 29441 13809 43250.87 11.521
12/31/94 10000 1254 9725 19725 0 30072 0 30072 15362 45434.28 11.849
11/30/95 10000 1030 10755 20755 0 39797 0 39797 21533 61330.29 12.086
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/93 2000.00 34.94 5.75 % 57.241 32.930 1885
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/94 2000 14 14 2014 147 1677 139 1816 13 1829.52 124.882
11/30/95 4000 46 60 4060 172 4129 377 4506 71 4577.55 269.585
TOTAL $ 319
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/90 2000.00 20.80 5.75 % 96.154 19.600 1885
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/91 2000 50 50 2050 91 2111 107 2218 56 2274.42 103.618
11/30/92 4000 52 102 4102 74 4795 217 5012 128 5140.15 195.146
11/30/93 6000 35 137 6137 191 8351 521 8872 203 9075.48 275.599
11/30/94 8000 79 216 8216 852 9107 1273 10380 257 10637.99 726.143
11/30/95 10000 156 372 10372 581 12741 2201 14942 489 15431.29 908.792
TOTAL $ 1789
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/88 2000.00 22.24 5.75 % 89.928 20.960 1885
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/89 2000 43 43 2043 109 2378 147 2525 54 2579.86 97.574
11/30/90 4000 100 143 4143 563 3160 582 3742 125 3867.32 197.312
11/30/91 6000 154 297 6297 279 5650 978 6628 313 6941.64 316.248
11/30/92 8000 109 406 8406 157 9041 1362 10403 504 10907.89 414.119
11/30/93 10000 68 474 10474 406 13660 2233 15893 715 16608.44 504.356
11/30/94 12000 133 607 12607 1438 13831 3353 17184 765 17949.36 1225.212
11/30/95 14000 248 855 14855 921 18216 5035 23251 1189 24440.26 1439.356
TOTAL $ 3873
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/85 2000.00 19.87 5.75 % 100.654 18.730 1885
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/86 2000 20 20 2020 115 2134 131 2265 22 2287.67 107.909
11/30/87 4000 96 116 4116 220 3522 320 3842 106 3948.73 212.526
11/30/88 6000 122 238 6238 339 6100 774 6874 262 7136.48 340.481
11/30/89 8000 206 444 8444 521 10073 1679 11752 595 12347.56 467.003
11/30/90 10000 318 762 10762 1794 8865 2754 11619 708 12327.36 628.947
11/30/91 12000 383 1145 13145 689 12038 3889 15927 1224 17151.53 781.391
11/30/92 14000 236 1381 15381 338 16708 5074 21782 1743 23525.31 893.140
11/30/93 16000 141 1522 17522 875 23244 7487 30731 2356 33087.31 1004.777
11/30/94 18000 251 1773 19773 2719 22359 9244 31603 2340 33943.39 2316.955
11/30/95 20000 448 2221 22221 1663 28100 12790 40890 3257 44147.98 2599.999
TOTAL $ 9273
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/83 10000.00 14.56 5.75 % 686.813 13.725 9427
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/84 10000 0 0 10000 0 9485 0 9485 0 9484.89 686.813
11/30/85 10000 199 199 10199 0 12864 0 12864 279 13143.87 701.755
11/30/86 10000 140 339 10339 801 14560 913 15473 476 15949.63 752.341
11/30/87 10000 367 706 10706 843 12761 1586 14347 745 15092.63 812.305
11/30/88 10000 315 1021 11021 877 14396 2858 17254 1207 18461.92 880.817
11/30/89 10000 421 1442 11442 1066 18159 5042 23201 2067 25268.84 955.705
11/30/90 10000 566 2008 12008 3184 13462 6417 19879 2006 21885.97 1116.631
11/30/91 10000 589 2597 12597 1061 15076 8427 23503 2909 26412.81 1203.317
11/30/92 10000 328 2925 12925 469 18091 10676 28767 3873 32640.98 1239.217
11/30/93 10000 189 3114 13114 1214 22617 14934 37551 5079 42630.52 1294.580
11/30/94 10000 307 3421 13421 3314 20124 16436 36560 4816 41376.39 2824.327
11/30/95 10000 517 3938 13938 1921 23324 21446 44770 6213 50983.59 3002.567
TOTAL $ 14750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/84 10000.00 14.65 5.75 % 682.594 13.810 9427
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/85 10000 198 198 10198 0 12785 0 12785 278 13063.13 697.444
11/30/86 10000 139 337 10337 797 14471 908 15379 472 15851.64 747.719
11/30/87 10000 364 701 10701 837 12683 1576 14259 740 14999.91 807.315
11/30/88 10000 313 1014 11014 872 14307 2840 17147 1201 18348.49 875.405
11/30/89 10000 419 1433 11433 1059 18048 5011 23059 2054 25113.58 949.833
11/30/90 10000 562 1995 11995 3165 13379 6378 19757 1994 21751.49 1109.770
11/30/91 10000 585 2580 12580 1054 14983 8375 23358 2892 26250.49 1195.922
11/30/92 10000 325 2905 12905 466 17980 10610 28590 3850 32440.42 1231.603
11/30/93 10000 189 3094 13094 1207 22478 14842 37320 5048 42368.63 1286.627
11/30/94 10000 305 3399 13399 3294 20000 16335 36335 4787 41122.18 2806.975
11/30/95 10000 514 3913 13913 1909 23181 21315 44496 6174 50670.36 2984.120
TOTAL $ 14660
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/85 10000.00 19.87 5.75 % 503.271 18.730 9426
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/86 10000 101 101 10101 575 10669 655 11324 114 11438.46 539.550
11/30/87 10000 263 364 10364 604 9351 1138 10489 334 10823.87 582.555
11/30/88 10000 226 590 10590 629 10549 2049 12598 642 13240.20 631.689
11/30/89 10000 302 892 10892 764 13306 3616 16922 1199 18121.84 685.395
11/30/90 10000 406 1298 11298 2284 9864 4602 14466 1229 15695.78 800.805
11/30/91 10000 422 1720 11720 761 11047 6043 17090 1852 18942.24 862.972
11/30/92 10000 235 1955 11955 337 13256 7656 20912 2496 23408.86 888.719
11/30/93 10000 136 2091 12091 871 16573 10710 27283 3289 30572.97 928.423
11/30/94 10000 220 2311 12311 2377 14746 11787 26533 3140 29673.53 2025.497
11/30/95 10000 370 2681 12681 1377 17091 15380 32471 4092 36563.46 2153.325
TOTAL $ 10579
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/86 10000.00 22.49 5.75 % 444.642 21.200 9426
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/87 10000 217 217 10217 498 8261 464 8725 194 8919.90 480.081
11/30/88 10000 186 403 10403 518 9320 1155 10475 436 10911.19 520.572
11/30/89 10000 249 652 10652 630 11756 2306 14062 872 14934.16 564.832
11/30/90 10000 334 986 10986 1882 8715 3294 12009 925 12934.84 659.941
11/30/91 10000 348 1334 11334 627 9760 4421 14181 1429 15610.23 711.172
11/30/92 10000 193 1527 11527 277 11712 5639 17351 1940 19291.15 732.390
11/30/93 10000 112 1639 11639 718 14642 7987 22629 2566 25195.07 765.110
11/30/94 10000 182 1821 11821 1959 13028 8968 21996 2457 24453.85 1669.205
11/30/95 10000 305 2126 12126 1135 15100 11810 26910 3221 30131.81 1774.547
TOTAL $ 8244
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/87 10000.00 19.71 5.75 % 507.357 18.580 9427
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/88 10000 197 197 10197 548 10634 667 11301 230 11531.12 550.149
11/30/89 10000 263 460 10460 666 13415 1739 15154 628 15782.67 596.924
11/30/90 10000 354 814 10814 1989 9944 2963 12907 762 13669.77 697.437
11/30/91 10000 368 1182 11182 663 11136 4093 15229 1268 16497.18 751.580
11/30/92 10000 205 1387 11387 293 13364 5264 18628 1759 20387.27 774.004
11/30/93 10000 118 1505 11505 759 16707 7572 24279 2347 26626.64 808.583
11/30/94 10000 191 1696 11696 2070 14866 8704 23570 2273 25843.32 1764.049
11/30/95 10000 322 2018 12018 1200 17230 11584 28814 3029 31843.88 1875.376
TOTAL $ 8188
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/88 10000.00 22.24 5.75 % 449.640 20.960 9424
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/89 10000 215 215 10215 544 11888 734 12622 277 12899.26 487.869
11/30/90 10000 288 503 10503 1626 8813 1912 10725 447 11172.37 570.019
11/30/91 10000 300 803 10803 542 9870 2774 12644 839 13483.23 614.270
11/30/92 10000 167 970 10970 240 11844 3616 15460 1202 16662.60 632.597
11/30/93 10000 97 1067 11067 620 14807 5331 20138 1624 21762.09 660.859
11/30/94 10000 157 1224 11224 1692 13174 6351 19525 1596 21121.84 1441.764
11/30/95 10000 263 1487 11487 980 15270 8584 23854 2172 26026.13 1532.752
TOTAL $ 6244
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/89 10000.00 28.05 5.75 % 356.506 26.440 9426
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/90 10000 211 211 10211 1188 6988 1000 7988 176 8164.09 416.535
11/30/91 10000 220 431 10431 396 7825 1582 9407 445 9852.72 448.871
11/30/92 10000 122 553 10553 175 9390 2109 11499 677 12176.03 462.264
11/30/93 10000 71 624 10624 453 11740 3228 14968 934 15902.42 482.916
11/30/94 10000 114 738 10738 1236 10446 4047 14493 941 15434.58 1053.555
11/30/95 10000 193 931 10931 716 12107 5584 17691 1327 19018.33 1120.043
TOTAL $ 4164
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/90 10000.00 20.80 5.75 % 480.769 19.600 9423
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/91 10000 254 254 10254 457 10553 534 11087 285 11372.10 518.091
11/30/92 10000 141 395 10395 202 12663 883 13546 507 14053.68 533.549
11/30/93 10000 82 477 10477 523 15832 1788 17620 734 18354.72 557.386
11/30/94 10000 133 610 10610 1427 14087 2946 17033 781 17814.74 1216.023
11/30/95 10000 222 832 10832 827 16327 4446 20773 1178 21951.15 1292.765
TOTAL $ 3436
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/91 10000.00 23.29 5.75 % 429.369 21.950 9425
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/92 10000 117 117 10117 167 11310 201 11511 136 11647.02 442.180
11/30/93 10000 67 184 10184 433 14139 818 14957 254 15211.52 461.935
11/30/94 10000 109 293 10293 1183 12581 1851 14432 332 14764.02 1007.783
11/30/95 10000 184 477 10477 685 14581 3000 17581 611 18192.08 1071.383
TOTAL $ 2468
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/92 10000.00 27.95 5.75 % 357.782 26.340 9424
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/93 10000 55 55 10055 351 11782 458 12240 68 12308.15 373.767
11/30/94 10000 89 144 10144 957 10483 1317 11800 146 11946.05 815.430
11/30/95 10000 149 293 10293 554 12150 2218 14368 351 14719.81 866.891
TOTAL $ 1862
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/93 10000.00 34.94 5.75 % 286.205 32.930 9425
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/94 10000 68 68 10068 733 8386 696 9082 65 9147.45 624.399
11/30/95 10000 114 182 10182 425 9720 1337 11057 214 11271.39 663.804
TOTAL $ 1158
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/94 10000.00 15.54 5.75 % 643.501 14.650 9427
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/95 10000 118 118 10118 438 10927 546 11473 143 11616.22 684.112
TOTAL $ 438
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE NEW ECONOMY FUND
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
12/01/95 10000.00 18.02 5.75 % 554.939 16.980 9423
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/95 10000 0 0 10000 0 9423 0 9423 0 9422.86 554.939
TOTAL $ 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 2,725,429
<INVESTMENTS-AT-VALUE> 3,541,041
<RECEIVABLES> 23,819
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,564,872
<PAYABLE-FOR-SECURITIES> 16,425
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,871
<TOTAL-LIABILITIES> 42,296
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,535,508
<SHARES-COMMON-STOCK> 207,474,477
<SHARES-COMMON-PRIOR> 176,952,337
<ACCUMULATED-NII-CURRENT> 27,814
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 143,655
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 815,599
<NET-ASSETS> 3,522,576
<DIVIDEND-INCOME> 32,308
<INTEREST-INCOME> 34,095
<OTHER-INCOME> 0
<EXPENSES-NET> 26,498
<NET-INVESTMENT-INCOME> 39,905
<REALIZED-GAINS-CURRENT> 146,663
<APPREC-INCREASE-CURRENT> 460,558
<NET-CHANGE-FROM-OPS> 647,126
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33,138
<DISTRIBUTIONS-OF-GAINS> 120,976
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,144,726
<NUMBER-OF-SHARES-REDEEMED> 30,229,239
<SHARES-REINVESTED> 10,606,653
<NET-CHANGE-IN-ASSETS> 930,729
<ACCUMULATED-NII-PRIOR> 21,210
<ACCUMULATED-GAINS-PRIOR> 117,805
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,517
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26,498
<AVERAGE-NET-ASSETS> 3,004,658
<PER-SHARE-NAV-BEGIN> 14.65
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> 2.99
<PER-SHARE-DIVIDEND> .18
<PER-SHARE-DISTRIBUTIONS> .68
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.98
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
