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. 22
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 19
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 LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
Approximate date of proposed public offering:
It is proposed that this filing become effective on February 1, 1999, pursuant
to paragraph(a)(1) of rule 485.
The New Economy Fund
Prospectus
FEBRUARY 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE NEW ECONOMY FUND
333 South Hope Street
Los Angeles, CA 90071
TICKER SYMBOL: ANEFX NEWSPAPER ABBREV.: NEco FUND NO.: 14
TABLE OF CONTENTS
Risk/Return Summary 3
Fees and Expenses of the Fund 6
Investment Objectives, Strategies and Risks 7
Important Recent Developments 9
Management and Organization 10
Shareholder Information 12
Purchase and Exchange of Shares 14
Distribution Arrangements 17
Financial Highlights 18
RISK/RETURN SUMMARY
The fund seeks to make your investment grow over time by investing primarily in
stocks of companies in the services and information area of the global economy.
The fund is suited to investors seeking greater capital appreciation through
investments in stocks of issuers based around the world. Investors in the fund
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations. An investment in the fund is subject to risks, including
the possibility that its share price and total return may decline in response
to certain events, such as changes in the market or general economy. The
prices of equity securities held by the fund may be affected by events
involving the issuers of those securities.
Investing outside the U.S. can also involve additional risks, such as currency
fluctuations or political, social and economic instability.
You may lose money by investing in the fund. The likelihood of loss is greater
if you invest for a shorter period of time. Your investment in the fund is not
a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, entity or person.
INVESTMENT RESULTS
The following information illustrates how the fund's results may vary:
Here are the fund's results calculated without a sales charge on a CALENDAR
YEAR basis. (If a sales charge were included, results would be lower.)
[begin bar chart]
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
[end bar chart]
The fund's highest/lowest quarterly results during this time period were:
- - HIGHEST xx.xx% (quarter ended xx, 19xx)
- - LOWEST xx.xx% (quarter ended xx, 19xx)
For periods ended December 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AVERAGE ANNUAL THE FUND WITH MAXIMUM GROWTH FUNDS S&P 500 3
TOTAL RETURN SALES CHARGE DEDUCTED 1 INDEX 2
One Year xx.xx% xx.xx% xx.xx%
Five Years xx.xx% xx.xx% xx.xx%
Ten Years xx.xx% xx.xx% xx.xx%
Lifetime 4 xx.xx% xx.xx% xx.xx%
</TABLE>
1 THESE FUND RESULTS WERE CALCULATED ACCORDING TO A STANDARD FORMULA THAT WHICH
REQUIRES THAT THE MAXIMUM SALES CHARGE OF 5.75% BE DEDUCTED. RESULTS WOULD BE
HIGHER IF THEY WERE CALCULATED AT NET ASSET VALUE.
2 THE LIPPERGROWTH FUNDS INDEX TRACKS THE 30 LARGEST GROWTH FUNDS
(REPRESENTING ABOUT 56% OF ALL GROWTH FUND ASSETS). THIS INDEX IS UNMANAGED
AND DOES NOT REFLECT SALES CHARGES, COMMISSIONS OR EXPENSES.
3 THE STANDARD & POOR'S 500 INDEX REPRESENTS STOCKS. THIS INDEX IS UNMANAGED
AND DOES NOT REFLECT SALES CHARGES, COMMISSIONS OR EXPENSES.
4 THE FUND BEGAN OPERATIONS ON DECEMBER 1, 1983.
These results illustrate the potential fluctuations on the fund's results over
shorter periods of time. Past results are not an indication of future results.
FEES AND EXPENSES OF THE FUND
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge imposed on purchases 5.75% 1
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum sales charge imposed on reinvested dividends 0%
Maximum deferred sales charge 0% 2
Redemption or exchange fees 0%
</TABLE>
1 SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURHASES.
2 A CONTINGENT DEFERRED SALES CHARGE OF 1% APPLIES ON CERTAIN REDEMPTIONS MADE
WITHIN 12 MONTHS FOLLOWING ANY PURCHASES YOU MADE WITHOUT A SALES CHARGE.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE FUND ASSETS)
<TABLE>
<CAPTION>
<S> <C>
Management Fees x.xx%
Service (12b-1) Fees x.xx%*
Other Expenses x.xx%
</TABLE>
Total Annual Fund Operating Expenses x.xx%
*12B-1 EXPENSES MAY NOT EXCEED 0.25% OF THE FUND'S AVERAGE NET ASSETS ANNUALLY.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
One Year $xx
Three Years $xx
Five Years $xx
Ten Years $xx
$xx
</TABLE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund seeks to provide you with long-term growth of capital. It invests
primarily in stocks of companies in the services and information area of the
global economy, although a portion of its assets may be outside these areas.
Providing you with current income is a secondary consideration.
The prices of equity securities held by the fund may decline in response to
certain events including those directly involving the issuers of these
securities, adverse conditions affecting the general economy, or overall market
declines. The growth-oriented, equity-type securities generally purchased by
the fund may involve large price swings and potential for loss, particularly in
the case of smaller capitalization stocks. Furthermore, the value of non-U.S.
securities can decline in response to currency fluctuations, political, social
and economic instability, differing securities regulations, and administrative
difficulties such as delays in clearing and settling portfolio transactions.
The fund may also invest in cash and cash equivalents, for example, in response
to abnormal market conditions. The extent of the fund's cash position will
depend on market conditions, fund purchases and redemptions, and other factors.
This may detract from the achievement of the fund's objectives over the
short-term or it may protect the fund during a market downturn.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities that represent good long-term
investment opportunities.
THE FOLLOWING CHART ILLUSTRATES THE ASSET MIX OF THE FUND'S INVESTMENT
PORTFOLIO AS OF THE END OF THE FUND'S FISCAL YEAR, NOVEMBER 30, 1998.
Largest Industry Holdings [pie chart]
Ten Largest Individual Holdings [table]
Percent Invested by Country [table]
BECAUSE THE FUND IS ACTIVELY MANAGED, ITS HOLDINGS WILL CHANGE FROM TIME TO
TIME.
IMPORTANT RECENT DEVELOPMENTS
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service
providers--including the investment adviser and its affiliates--are taking
steps to address the issue. In addition, the Year 2000 problem may adversely
affect the issuers in which the fund invests. For example, issuers may incur
substantial costs to address the problem. They may also suffer losses caused
by corporate and governmental data processing errors. The fund and its
investment adviser will continue to monitor developments relating to this
issue.
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071.
Capital Research and Management Company manages the investment portfolio and
business affairs of the fund. The total management fee paid by the fund, as a
percentage of average net assets, for the previous fiscal year is discussed
earlier under "Fees and Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested (within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee). In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for The New Economy Fund are listed on the following page.
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE AS AN
INVESTMENT PROFESSIONAL (INCLUDING
THE LAST 5 YEARS)
PORTFOLIO PRIMARY YEARS OF WITH CAPITAL TOTAL YEARS
COUNSELORS FOR TITLE(S) EXPERIENCE AS RESEARCH AND
THE NEW ECONOMY PORTFOLIO MANAGEMENT COMPANY
FUND COUNSELOR FOR OR AFFILIATES
THE NEW ECONOMY
FUND
(APPROXIMATE)
<S> <C> <C> <C> <C>
William R. Chairman of 15 years (since 29 years 36 years
Grimsley the Board the fund began
of the fund; operations)
Senior Vice
President
and
Director,
Capital
Research and
Management
Company
Timothy D. President, 8 years (plus 5 16 years 16 years
Armour Principal years as a
Executive research
Officer professional
and Trustee prior to becoming
of the fund; a portfolio
Chairman of counselor for the
the Board fund)
and Chief
Executive
Officer,
Capital
Research
Company*
Claudia Senior Vice 4 years (plus 11 21 years 23 years
Huntington President of years as a
the fund; research
Senior Vice professional
President, prior to becoming
Capital a portfolio
Research and counselor for the
Management fund)
Company
James B. Senior Vice 8 years (plus 2 17 years 17 years
Lovelace President of years as a
the fund; research
Senior Vice professional
President, prior to becoming
Capital a portfolio
Research and counselor for the
Management fund)
Company
Gordon Crawford Senior Vice 5 years (plus 5 28 years 28 years
President years as a
and research
Director, professional
Capital prior to becoming
Research and a portfolio
Management counselor for the
Company fund)
William C. Senior 15 years (since 40 years 46 years
Newton Partner, The the fund began
Capital operations)
Group
Partners
L.P.*
</TABLE>
* Company affiliated with Capital Research and Management Company.
SHAREHOLDER INFORMATION
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days' written notice. For your convenience, American Funds Service
Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
(Insert Service Center Map)
WESTERN SERVICE CENTER
American Funds Service Company
P.O. Box 2205
Brea, California
92822-2205
Fax: 714/671-7080
WESTERN CENTRAL SERVICE CENTER
American Funds Service Company
P.O. Box 659522
San Antonio, Texas
78265-9522
Fax: 210/474-4050
EASTERN CENTRAL SERVICE CENTER
American Funds Service Company
P.O. Box 6007
Indianapolis, Indiana
46206-6007
Fax: 317/735-6620
EASTERN SERVICE CENTER
American Funds Service Company
P.O. Box 2280
Norfolk, Virginia
23501-2280
Fax: 757/670-4773
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER ARE DESCRIBED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
You may invest in the fund through various retirement plans. However, some
retirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan
administrator/trustee or dealer.
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group
generally without a sales charge. Exchange of shares from the money market
funds initially purchased without a sales charge generally will be subject to
the appropriate sales charge. Exchanges have the same tax consequences as
ordinary sales and purchases. See "Transactions by Telephone..." for
information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
To establish an account $ 1,000
For a retirement plan account $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
SHARE PRICE
The fund calculates its share price, also called net asset value, as of 4:00
p.m. New York time which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value,
market prices are used when available. If a market price for a particular
security is not available, the fund will determine the appropriate price for
the security.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and
accepts your request. The offering price is the net asset value plus a sales
charge, if applicable.
SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced
for larger purchases as indicated below.
Sales Charge as a Percentage of
<TABLE>
<CAPTION>
INVESTMENT OFFERING NET DEALER
PRICE AMOUNT CONCESSION
INVESTED AS % OF
OFFERING
PRICE
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
$500,000 but less $1 million 2.00% 2.04% 1.60%
$1 million or more and see below see below see below
certain other investments
described below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY ACCOUNTS THAT INVEST WITH NO INITIAL SALES
CHARGE (OTHER THAN EMPLOYER-SPONSORED PLANS), MADE WITHIN ONE YEAR OF PURCHASE.
A dealer concession of up to 1% may be paid by the fund under its Plan of
Distribution and/or by American funds Distributors on investments made with no
initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. You must let your investment dealer or American Funds Service Company
know if you qualify for a reduction in your sales charge using one or any
combination of the methods described in the statement of additional information
and "Welcome to the Family."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. Up to 0.25%
of average net assets is paid annually to qualified dealers for providing
certain services pursuant to the fund's Plan of Distribution. The 12b-1 fee
paid by the fund, as a percentage of average net assets, fund for the previous
fiscal year is indicated earlier under "Fees and Expenses of the Fund." Since
these fees are paid out of the fund's assets on an ongoing basis, over time
they will increase the cost of an investment and may cost you more than paying
higher initial sales charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for dealers as described in the statement of additional
information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
- - Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
--- Over $50,000;
--- Made payable to someone other than the registered shareholder(s); or
--- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R) :
- - Redemptions by telephone or fax (including American FundsLine(r) and
American FundsLine OnLine(r)) are limited to $50,000 per shareholder each day
- - Checks must be made payable to the registered shareholder
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE(R), OR AMERICAN FUNDSLINE
ONLINE(R)
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American Funds Service Company employs reasonable procedures to confirm that
the instructions received from any person with appropriate account information
are genuine. If reasonable procedures are not employed, the fund may be liable
for losses due to unauthorized or fradulent instructions.
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund intends to pay dividends to you, usually in June and December.
Capital gains, if any, are usually distributed in December.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash.
TAX CONSEQUENCES
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.
Capital gains may be taxed at different rates depending on the length of time
the fund holds its assets.
The tax treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
You must provide the fund with a certified correct taxpayer identification
number (generally your Social Security Number) and certify that you are not
subject to backup withholding. If you fail to do so, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions. Federal
law also requires the fund to withhold 30% or the applicable tax treaty rate
from dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family,"
and your tax adviser for further information.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial
results for a single fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by Deloitte & Touche LLP, whose report, along with the fund's
financial statements, are included in the statement of additional information,
which is available upon request.
<TABLE>
<CAPTION>
Year ended November 30
-------- --------- --------- -------- --------
1998 1997 1996 1995 1994
-------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year 18.5 16.98 14.65 16.47
-------- --------- --------- -------- --------
Income from Investment
Operations:
Net investment income .12 .14 .20 .17
Net realized gain and change in
unrealized appreciation on investments 3.57 2.26 2.99 (.59)
-------- --------- --------- -------- --------
Total From Investment Operations 3.69 2.40 3.19 (.42)
-------- --------- --------- -------- --------
Less Distributions:
Dividends from net investment
income (.14) (.19) (.18) (.12)
Distributions from capital
gains (1.13) (.69) (.68) (1.28)
-------- --------- --------- -------- --------
Total distributions (1.27) (.88) (.86) (1.40)
-------- --------- --------- -------- --------
Net Asset Value, End of Year 20.92 18.5 16.98 14.65
======== ========= ========= ======== ========
Total Return (2) 21.64% 15.00% 23.22% (2.94)%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $4,804 $4,223 $3,523 $2,592
Ratio of expenses to average
net assets .81% .84% .88% .85%
Ratio of net income to
average net assets .66% .85% 1.33% 1.25%
Portfolio turnover rate 31.62% 29.54% 27.03% 25.51%
</TABLE>
<TABLE>
<CAPTION>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
<S> <C> <C>
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 ext.1 800/421-9900 ext.11
</TABLE>
FOR 24-HOUR INFORMATION
American American Funds
FundsLine(r) Internet Web site
800/325-3590 http://www.americanfunds.com
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. In the event of any
inconsistencies or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including financial statements,
investments results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent auditors' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the fund, including the
fund's financial statements.
A current SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The SAI and
other related materials about the fund are available for review or to be copied
at the SEC's Public Reference Room (1-800-SEC-0330) or on the SEC's Internet
Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary of the fund
Service Company 333 South Hope Street
800/421-0180 ext. 1 Los Angeles, CA 90071
Investment Company File No. 811-3735
THE NEW ECONOMY FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1999
This document is not a prospectus but should be read in conjunction with the
current prospectus of The New Economy Fund (the fund or NEF) dated February 1,
1999. 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
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>
CERTAIN INVESTMENT LIMITATIONS 1
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES2
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS 5
FUND ORGANIZATION 7
FUND TRUSTEES AND OFFICERS 8
MANAGEMENT 11
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 14
PURCHASE OF SHARES 18
SELLING SHARES 24
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 26
EXECUTION OF PORTFOLIO TRANSACTIONS 28
GENERAL INFORMATION 28
INVESTMENT RESULTS AND RELATED STATISTICS 31
DESCRIPTION OF BOND RATINGS 36
FINANCIAL STATEMENTS ATTACHED
</TABLE>
CERTAIN INVESTMENT LIMITATIONS
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
INVESTMENT OBJECTIVE
- - Generally, the fund will invest primarily in securities of companies that
derive their revenues primarily from operations in the services and information
area of the global 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.
- - The fund may invest up to 25% of its assets in companies outside the services
and information area.
DEBT SECURITIES
- - The fund may invest up to 10% of its assets in debt securities rated Baa/BBB
or below by Moody's Investors Services, Inc. (Moody's) or Standard & Poor's
Corporation (S&P) or in unrated securities that are determined to be of
equivalent quality.
NON-U.S. SECURITIES
- - The fund may invest up to 40% of its assets in securities of issuers
domiciled outside the U.S. and/or in securities denominated in currencies other
than the U.S. dollar.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES - The fund will invest in equity securities. Equity
securities represent an ownership position in a company. The prices of equity
securities fluctuate based on changes in the financial condition of their
issuers and on market and economic conditions. The fund's results will be
related to the overall market for these securities. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss.
INVESTING IN SMALLER CAPITALIZATION STOCKS - The fund may invest from time to
time in the stocks of smaller companies (typically companies with market
capitalizations of less than $1.2 billion at the time of purchase). Capital
Research and Management Company (the Investment Adviser) believes that the
issuers of smaller capitalization stocks often provide attractive investment
opportunities. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with investing in stocks of larger,
more established companies. For example, smaller companies often have limited
product lines, markets, or financial resources, may be dependent for management
on one or a few key persons, and can be more susceptible to losses. Also,
their securities may be thinly traded (and therefore have to be sold at a
discount from current prices or sold in small lots over an extended period of
time), may be followed by fewer investment research analysts, and may be
subject to wider price swings thus creating a greater chance of loss than
securities or larger capitalization companies.
DEBT SECURITIES - The fund will invest in debt securities. Bonds and other
debt securities are used by issuers to borrow money. Issuers pay investors
interest and generally must repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest but are
purchased at a discount from their face values. The prices of debt securities
fluctuate depending on such factors as interest rates, credit quality and
maturity. In general their prices decline when interest rates rise and vice
versa.
LOWER RATED DEBT SECURITIES -- The fund may invest up to 10% of its total
assets in debt securities rated Baa or BBB or below or in unrated securities
that are determined to be of equivalent quality. Securities rated Ba and BB or
below or unrated securities determined to be of equivalent quality are commonly
known as "high-yield, high-risk" or "junk" bonds and may have characteristics
similar to the equity securities eligible for purchase by the fund. The fund's
high-yield, high-risk securities may be rated as low as Ca by Moody's or Cc by
S&P, which are described by the ratings agencies as "speculative in a high
degree; often in default or [having] other marked shortcomings" or
"predominantly speculative with repsect to capacity to pay interest and reapy
principal in accordiance with terms of the obligation."
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
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 or issuers whose revenue is very
sensitive to economic conditions 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 obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices 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.
The fund's Investment Adviser attempts to reduce these risks through
diversification of the portfolio, by credit analysis of each issuer as well as
by monitoring broad economic trends and corporate developments, but there can
be no assurance that it will be successful in doing so. The fund's investment
policy with respect to investing in high-yield, high risk securities is a
"non-fundamental" policy and thus may be changed by the board of directors at
any time.
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.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
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 U.S. Treasury; some are supported by the
discretionary authority of the U.S. 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 AND CASH EQUIVALENTS -- These securities include (1) commercial paper
(short-term notes issued by corporations or governmental bodies), (2)
commercial bank obligations (E.G. certificates of deposit (interest-bearing
time deposits), and bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)), (3)
savings association and bank obligations (E.G. certificates of deposit issued
by savings banks or savings associations), (4) securities of the U.S.
Government, its agencies or instrumentalities that mature, or may be redeemed,
in one year or less, and (5) corporate bonds and notes that mature, or that may
be redeemed, in one year or less.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements, under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods
of time as short as overnight. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the repurchase price, including
accrued interest, as monitored daily by 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 can purchase and sell currencies to
facilitate securities transactions and enter into forward currency contracts
to protect against changes in currency exchange rates. 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.
Forward currency contracts entered into by the fund will involve the purchase
or sale of a currency against the U.S. dollar. While entering into forward
currency transactions could minimize the risk of loss due to a decline in the
value of the hedged currency, it could also limit any potential gain which
might result from an increase in the value of the currency. The fund will not
generally attempt to protect against all potential changes in exchange rates.
The fund will segregate liquid assets which will be marked to market daily to
meet its forward contract commitments to the extent required by the Securities
and Exchange Commission.
Certain provisions of the Internal Revenue Code (the 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.
INVESTING IN VARIOUS COUNTRIES -- The fund has the ability to invest outside
the U.S. Investing outside the U.S. involves special risks, particularly in
certain developing countries, caused by, among other things: fluctuating
currency values; different accounting, auditing, and financial reporting
regulations and practices in some countries; changing local and regional
economic, political, and social conditions; expropriation or confiscatory
taxation; greater market volatility; differing securities market structures;
and various administrative difficulties such as delays in clearing and settling
portfolio transactions or in receiving payment of dividends. However, in the
opinion of Capital Research and Management Company, investing outside the U.S.
also can reduce certain portfolio risks due to greater diversification
opportunities.
The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
RESTRICTED SECURITIES AND LIQUIDITY -- The fund may purchase securities
subject to restrictions on resale. All such securities not actively traded
outside the U.S. will be considered illiquid unless they have been
specifically determined to be liquid under procedures which have been adopted
by the fund's board of trustees, taking into account factors such as the
frequency and volume of trading, the commitment of dealers to make markets and
the availability of qualified investors, all of which can change from time to
time. The fund may incur certain additional costs in disposing of illiquid
securities.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
The fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares. Such majority is defined by law as the vote of the lesser
of (1) 67% or more of the outstanding voting securities present at a meeting,
if the holders of more than 50% of the outstanding voting securities are
present in person or by proxy, or (2) more than 50% of the outstanding voting
securities . Investment limitations expressed in the following restrictions as
a percentage of assets are considered at the time securities are purchased.
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 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 ORGANIZATION
The fund, an open-end, diversified management investment company. It was
organized as a Massachusetts business trust on December 1, 1983.
All fund operations are supervised by the fund's board of trustees which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in the statement of additional information. They may elect to
defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.
FUND TRUSTEES AND OFFICERS
TRUSTEES AND TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
AND AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS
DEFERRED DEFERRED ON
COMPENSATION/1/) COMPENSATION/1/) WHICH
FROM THE FUND FROM ALL FUNDS TRUSTEE
DURING FISCAL MANAGED BY SERVES
YEAR ENDED CAPITAL RESEARCH /3/
11/30/98 AND
MANAGEMENT
COMPANY OR ITS
AFFILIATES/2/
FOR THE YEAR
ENDED 11/30/98
<S> <C> <C> <C> <C> <C>
+Timothy D. Armour President Chairman and none/4/ none/4/ 1
333 South and Chief
Hope Street Trustee Executive
Los Angeles, Officer,
CA 90071 Capital
Research
Age: 38 Company;
Director,
Capital
Research and
Management
Company
Richard G. Capen, Jr. Trustee Corporate $XX,XXX $XX,XXX 2
Box 2494 Director and
Rancho Santa author,
Fe, CA former United
92067 States
Age: 64 Ambassador to
Spain; former
Vice Chairman
of the Board;
Knight
Ridder, Inc.,
former
Chairman and
Publisher, The Miami Herald
H. Frederick Christie Trustee Private $XX,XXX/3/ $XXX,XXX/4/ 18
P.O. Box 144 Investor;
Palos Verdes former
Estates, CA President and
90274 Chief
Age: 65 Executive
Officer, The
Mission Group
(non-utility
holding
company,
subsidiary of
Southern
California
Edison Company); former President, Southern California Edison Company
Alan E. Trustee Private $XX,XXX $XX,XXX 2
Clements investor;
16 Great former
Peter Street Executive
London Director -
SW1P3JF Finance,
England Imperial
Age: 70 Chemical
Industries
PLC
Alan Greenway Trustee President, $XX,XXX $XX,XXX 4
7413 Fairway Greenway
Road Associates,
La Jolla, CA Inc.
92037 (management
Age: 71 consulting
services)
+William R. Chairman Senior Vice None/5/ None/5/ 3
Grimsley of the President and
P.O. Box 7650 Board Director,
San Capital
Francisco, CA Research and
94120 Management
Age: 60 Company
++Graham Trustee Former None/5/ None/5/ 2
Holloway Chairman of
17309 Club the Board,
Hill Drive American
Dallas, TX Funds
75248 Distributors,
Age: 68 Inc.
Leonade D. Trustee Former $XX,XXX/4/ $XX,XXX/4/ 5
Jones Treasurer,
1536 Los The
Montes Drive Washington
Burlingame, Post Company
CA 94010
Age: 50
William H. Trustee President, $XX,XXX/3/ $XX,XXX/4/ 4
Kling Minnesota
2619 Lake of Public Radio;
the Isles President,
Parkway East Greenspring
St. Paul, MN Co.; former
55408 President,
Age: 56 American
Public Radio
(now Public
Radio
International)
Norman R. Trustee Managing $XX,XXX $XX,XXX 2
Weldon Director,
7026 Timbers Partisan
Drive Management
Evergreen, CO Group, Inc;
80439 Chairman of
Age: 64 the Board,
Novoste
Corporation;
Director,
Enable
Medical;
former
President and
Director, Corvita
Corporation
Patricia K. Woolf Trustee Private $XX,XXX $XX,XXX 5
506 Quaker investor;
Road Lecturer,
Princeton, NJ Department
08540 of Molecular
Age: 64 Biology,
Princeton
University;
Corporate
Director
</TABLE>
+ "Interested Persons" of the fund within the meaning of the Investment
Company Act of 1940 (the 1940 Act) on the basis of their affiliation with the
fund's Investment Adviser or the parent company of theInvestment Adviser, The
Capital Group Companies, Inc.
/1/ Amounts may be deferred by eligible Trustees 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 Trustee.
/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; and Endowments whose shareholders are limited
to (i) any entity exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (501(c)(3) organization); (ii) any trust, the
present or future beneficiary of which is a 501(c)(3) organization; and (iii)
any other entity formed for the primary purpose of benefiting a 501(c)(3)
organization.
/3/ Includes funds managed by Capital Research and Management Company.
/4/ 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 ($XX,XXX); Leonade D. Jones ($XX,XXX); and
William H. Kling ($XX,XXX). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the Trustee.
/5/ Timothy D. Armour, William R. Grimsley and Graham Holloway are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION(S)
HELD WITH DURING PAST 5 YEARS
REGISTRANT
<S> <C> <C> <C>
William R. Grimsley 59
(see above)
Timothy D. Armour 37
(see above)
Claudia P. 45 Senior Vice Senior Vice President,
Huntington President Capital Research and
333 South Hope Management Company
Street Los Angeles,
CA 90071
Vincent P. Corti 41 Vice President Vice President -- Fund
333 South Hope Business Management Group, Capital Research
Street Los Angeles, and Management Company.
CA 90071
Ulrich A. Volk Vice President Vice President, Capital
25 Bedford Street Research Company
London, England
WC2E 9HN
Chad L. Norton 37 Secretary Vice President -- Fund
333 South Hope Business Management
Street Los Angeles, Group, Capital Research
CA 90071 and Management Company
Robert P. Simmer 36 Treasurer Vice President -- Fund
5300 Robin Hood Business Management
Road Norfolk, VA Group, Capital Research
2351 and Management Company
</TABLE>
All of the officers listed also are officers or employees of the Investment
Adviser or affiliated companies. 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 fees of $9,000 per annum to
Trustees who are not affiliated with the Investment Adviser, plus $1,000 for
each Board of Trustees meeting attended, plus $500 for each meeting attended as
a member of a committee of the Board of Trustees. No pension or retirement
benefits are accrued as part of fund expenses. 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, 1999 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 (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types. These investors include privately owned businesses and large
corporations as well as schools, colleges, foundations and other non-profit and
tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the Agreement) between the fund and the Investment Adviser
will continue in effect until November 30, 1999, and may be renewed from year
to year thereafter, provided that any such renewal has been specifically
approved at least annually by (1) 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 (2) 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).
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.
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 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, 1998, 1997 and 1996, the
Investment Adviser's total fees amounted to $XX,XXX,XXX, $18,971,000, and
$17,016,000, respectively.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the Principal
Underwriter) is the Principal Underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240 and 5300 Robin
Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of Distribution (the
Plan), pursuant to rule 12b-1 under the 1940 Act. The Principal Underwriter
receives amounts payable pursuant to the Plan (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,
1998 amounted to $X,XXX,XXX after allowance of $8,007,000 to dealers. During
the fiscal years ended November 30, 1997 and 1996 the Principal Underwriter
retained $1,605,000 and $2,388,000 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 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, purchases
by any defined contribution plan qualified under Section 401(a) of the Code
including a 401 (k) plan with 100 or more eligible employees) or a community
foundation.
Commissions on sales of shares exceeding $1 million (including purchases by
any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the fiscal year ended November 30 , 1998, the fund paid or accrued $XX,XXX,XXX
under the Plan as compensation to dealers.
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
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; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the fund's total assets
is represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities, but such other
securities must be limited, in respect of any one issuer, to an amount not
greater than 5% of the fund's total assets and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total 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 (1) 98% of ordinary income for the calendar year, (2) 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 (3) 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 (a) amounts actually distributed by the fund from its current
year's ordinary income and capital gain net income and (b) 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.
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.
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 no later
than January of the following year.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.
Corporate shareholders of the fund may be eligible for the dividends-received
deduction on the dividends (excluding the net capital gain distributions) paid
by the fund to the extent the fund's income is derived from dividends (which
if received directly would qualify for such deduction) received from domestic
corporations. In order to qualify for the dividends-received deduction, a
corporate shareholder must hold the fund shares paying the dividends upon which
the deduction is based for at least 46 days.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are 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, foreign
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% on the fund's income
subject to tax in such countries, which would reduce the fund's investment
income. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. While the fund expects to invest less than 50%
of its assets outside the U.S. under current market conditions, 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 gains on assets held more than one year is 20%, 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
$11,750 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 Individual Retirement
Account (IRA) each year (prior to the tax return filing deadline for that year)
whereby earnings on investments are tax-deferred. The maximum amount that an
individual may contribute to all IRAs (deductible, nondeductible and Roth IRAs)
per year is the lesser of $2,000 or theindividual's compensation for the year.
In addition, in some cases, the IRA contribution itself may be deductible.
The foregoing is limited to a summary discussion of federal taxation and should
not be viewed as a comprehensive discussion of all provisions of the Code
relevant to investors. Dividends and capital gain distributions may also be
subject to state or local taxes. Shareholders should consult their own tax
advisers for additional details as to their particular tax status.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers" for initial "Investment Minimums and Fund
investment minimums. Numbers").
By Visit any investment Mail directly to your
contacting dealer who is investment dealer's address
your registered in the printed on your account
investment state where the statement.
dealer 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 fund additions form at the bottom
and mail to the of a recent account
address indicated on statement, make your check
the account payable to the fund, write
application. Please your account number on your
indicate an investment check, and mail the check and
dealer on the account form in the envelope provided
application. with your account statement.
By Please contact your Complete the "Investments by
telephone investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your
financial advisor or any
person with your account
information can call American
FundsLine(r) and make
investments by telephone
(subject to conditions noted
in "Shareholder Account
Services and Privileges -
Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By computer Please contact your Complete the American
investment dealer to FundsLink Authorization Form.
open account, then Once you establish the
follow the procedures privilege, you, your financial
for additional adviser or any person with
investments. your account information may
access American FundsLine
OnLine(r) on the Internet and
make investments by computer
(subject to conditions noted
in "Shareholder Account
Services and Privileges -
Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described
necessary. Please under "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street, 6th
Floor
San Francisco, CA
94106
(ABA #121000248)
For credit to the
account of:
American Funds Service
Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS -- Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(r) (see
description below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) $1,000 02
American Balanced Fund(r) 500 11
American Mutual Fund(r) 250 03
Capital Income Builder(r) 1,000 12
Capital World Growth and Income 1,000 33
Fund(sm)
EuroPacific Growth Fund(r) 250 16
Fundamental Investors(sm) 250 10
The Growth Fund of America(r) 1,000 05
The Income Fund of America(r) 1,000 06
The Investment Company of America(r) 250 04
The New Economy Fund(r) 1,000 14
New Perspective Fund(r) 250 07
SMALLCAP World Fund(r) 1,000 35
Washington Mutual Investors Fund(sm) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(r)
American High-Income Trust(sm) 1,000 21
The Bond Fund of America(sm) 1,000 08
Capital World Bond Fund(r) 1,000 31
Intermediate Bond Fund of 1,000 23
America(sm)
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(sm)
The Tax-Exempt Bond Fund of 1,000 19
America(r)
The Tax-Exempt Fund of 1,000 20
California(r)*
The Tax-Exempt Fund of Maryland(r)* 1,000 24
The Tax-Exempt Fund of Virginia(r)* 1,000 25
U.S. Government Securities Fund(sm) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of 2,500 09
America(r)
The Tax-Exempt Money Fund of 2,500 39
America(sm)
The U.S. Treasury Money Fund of America(sm) 2,500 49
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for IRAs. Minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
The minimum is $50 for additional investments (except as noted above).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND BOND
FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or more
and investments made by employer-sponsored defined contribution-type plans with
100 or more eligible employees are sold with no initial sales charge. A
contingent deferred sales charge may be imposed on certain redemptions by these
accounts made within one year of purchase. Investments by retirement plans,
foundations or endowments with $50 million or more in assets, and
employer-sponsored defined contribution-type plans with 100 or more eligible
employees may be made with no sales charge and are not subject to a contingent
deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net
asset value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Code including a "401(k)" plan with
100 or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $50 million or more: 1.00% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its
expense (from a designated percentage of its income), currently provides
additional compensation to dealers. Currently these payments are limited to the
top 100 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. The American Funds Distributors will, on an annual basis,
determine the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the Prospectus apply to purchases of $50,000 or more made
within a 13-month period subject to the following statement of intention (the
Statement) terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize a Statement in order to
qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by the
American Funds Service Company (the Transfer Agent). All dividends and any
capital gain distributions on shares held in escrow will be credited to the
shareholder's account in shares (or paid in cash, if requested). If the
intended investment is not completed within the specified 13-month period, the
purchaser will remit to the Principal Underwriter the difference between the
sales charge actually paid and the sales charge which would have been paid if
the total of such purchases had been made at a single time. If the difference
is not paid within 45 days after written request by the Principal Underwriter
or the securities dealer, the appropriate number of shares held in escrow will
be redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for the
balance still outstanding. The Statement may be revised upward at any time
during the 13-month period, and such a revision will be treated as a new
Statement, except that the 13-month period during which the purchase must be
made will remain unchanged and there will be no retroactive reduction of the
sales charges paid on prior purchases. Existing holdings eligible for rights
of accumulation (see the account application) may be credited toward
satisfying the Statement. During the Statement period reinvested dividends and
capital gain distributions, investments in money market funds, and investments
made under a right of reinstatement will not be credited toward satisfying the
Statement.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: The regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments)
and any rollovers or transfers reasonably anticipated to be invested in
non-money market American Funds during the 13-month period are added to the
figure determined above. The sum is the Statement amount and applicable
breakpoint level. On the first investment and all other investments made
pursuant to the Statement, a sales charge will be assessed according to the
sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if (I) all parties are purchasing shares for
their own account(s), which may include purchases through employee benefit
plan(s) such as an IRA, individual-type 403(b) plan or single-participant
Keogh-type plan or by a business solely controlled by these individuals (for
example, the individuals own the entire business) or by a trust (or other
fiduciary arrangement) solely for the benefit of these individuals or (ii)
these individuals are making gifts to other individuals or charities.
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 1940 Act, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
CONCURRENT PURCHASES - You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION - You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. Direct
purchases of the money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the American Funds Distributors prior to its
close of business. In the case of orders sent directly to the fund or
American Funds Service Company, an investment dealer MUST be indicated. The
dealer is responsible for promptly transmitting purchase orders to American
Funds Distributors. 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. The prices which appear
in the newspaper are not always indicative of prices at which you will be
purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price whereas purchases and redemptions are
made at the next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open as set forth below. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day. The net asset value per share is determined as
follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 4.5% of the
outstanding shares of the fund without the consent of a majority of the Board
of Trustees.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s)
- A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R)
- Redemptions by telephone or fax (including American FundsLine(r) and
American FundsLine OnLine(r)) are limited to $50,000 per shareholder each day.
- Checks must be made payable to the registered shareholder(s).
- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- You may establish check writing privileges (use the money market funds
application)
-- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
The fund may, with 60 days' written notice, close your account if due to a
sale of shares the account has a value of less than the minimum required
initial investment.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service
Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds
made within twelve months of purchase on investments of $1 million or more
(other than redemptions by employer-sponsored retirement plans).. The charge is
1% of the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be redeemed first for
purposes of calculating this charge. The charge is waived for exchanges
(except if shares acquired by exchange were then redeemed within 12 months of
the initial purchase); for distributions from qualified retirement plans and
other employee benefit plans; for distributions from 403(b) plans or IRAs due
to death, disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; and for redemptions through certain automatic
withdrawals not exceeding 10% of the amount that would otherwise be subject to
the charge.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or closing of the
account, the plan may be terminated and the related investment reversed. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Transfer Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:
a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distribution must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine(r)
or American FundsLine Online(r) (see "American FundsLine(r) and American
FundsLine Online(r)" below), or by telephoning 800/421-0180 toll-free, faxing
(see "Principal Underwriter and Transfer Agent" in the prospectus for the
appropriate fax numbers) or telegraphing the Transfer Agent. (See "Telephone
and Computer Purchases, Redemptions and Exchanges" below.) Shares held in
corporate-type retirement plans for which Capital Guardian Trust Company serves
as trustee may not be exchanged by telephone, computer, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES --You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS -- Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from the Transfer Agent. Dividend and capital gain
reinvestments and purchases through automatic investment plans and certain
retirement plans will be confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(R) -- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(r) and American
FundsLine Online(r). To use this service, call 800/325-3590 from a
TouchTone(tm) telephone or access the American Funds Web site on the Internet
at www.americanfunds.com. Redemptions and exchanges through American
FundsLine(r) and American FundsLine Online(r) are subject to the conditions
noted above and in "Shareholder Account Services and Privileges --Telephone and
Computer Purchases, Redemptions and Exchanges" below. You will need your fund
number (see the list of funds in The American Funds Group under "Purchase of
Shares--Investment Minimums and Fund Numbers"), personal identification number
(the last four digits of your Social Security number or other tax
identification number associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone or computer (including American FundsLine(r) or American FundsLine
Online(r)), fax or telegraph purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, 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 the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, the fund may be liable
for losses due to unauthorized or fraudulent instructions. In the event that
shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions, or a natural disaster, redemption and exchange
requests may be made in writing only.
SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by writing to American Funds Service
Company.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not consider that it has
an obligation to obtain the lowest available commission rate to the exclusion
of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
Brokerage commissions paid on portfolio transactions for the fiscal years
ended November 30, 1998, 1997 and 1996 amounted to $X,XXX,XXX, $3,337,000 and
$2,495,000 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.
TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $4,253,000 for the fiscal year ended November 30, 1997.
INDEPENDENT AUDITORS -- Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, have served as the fund's independent auditors
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 auditors,
Deloitte & Touche LLP, whose selection is determined annually by the Board of
Trustees. In an effort to reduce the volume of mail shareholders receive from
the fund when a household owns more than one account, the Transfer Agent has
taken steps to eliminate duplicate mailings of shareholder reports. To receive
additional copies of a report, shareholders should contact the Transfer Agent.
YEAR 2000 - The fund and its shareholders depend on the proper functioning
of computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
PERSONAL INVESTING POLICY -- The Investment Adviser and its affiliated
companies have adopted a personal investing policy consistent with Investment
Company Institute guidelines. This policy includes: a ban on acquisitions of
securities pursuant to an initial public offering; restrictions on acquisitions
of private placement securities; pre-clearance and reporting requirements;
review of duplicate confirmation statements; annual recertification of
compliance with codes of ethics; blackout periods on personal investing for
certain investment personnel; a 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 -- The fund does not hold annual meetings of
shareholders. However, significant matters that require shareholder approval,
such as certain elections of board members or a change in a fundamental
investment policy, will be presented to shareholders at a meeting called for
such purpose. At any meeting of shareholders, duly called and at which a
quorum is present, the shareholders holding a majority of the votes entitled to
be cast thereon, may remove any trustee or trustees from office any 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, 1998
<S> <C>
Net asset value and redemption price per share $XX.XX
(Net assets divided by shares outstanding)
Maximum offering price per share (100/94.25 of $XX.XX
per share net asset value, which takes into
account the fund's current maximum sales load)
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is 0.XX% based on a 30-day (or one month) period ended
November 30, 1998, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's one-year total return and average annual total returns over the
past five- and ten-year periods as of November 30, 1998 were XX.XX%, XX.XX% and
XX.XX%, 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 also, from time to time, combine its results with
those of other funds in The American Fudns Group for purposes of illustrating
investment strategies involving multiple funds.
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, compare its investment results with the
Consumer Price Index, which is a measure of the average change in prices over
time in a fixed market basket of goods and services (e.g. food, clothing,
shelter, and fuels, transportation fares, charges for doctors' and dentists'
services, prescription medicines, and other goods and services that people buy
for day-to-day living).
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 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
<TABLE>
<CAPTION>
Period NEF S&P 500/1/ DJIA/2/ NYSE/3/
<S> <C> <C> <C> <C>
12/1/83 - 11/30/98 +XXX% +XXX% +XXX% +XXX%
</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
(12/1/96- (12/1/93 - (12/1/91- (12/1/88-
11/30/98) 11/30/98) 11/30/98) 11/30/98)
$X,XXX $XX,XXX $XX,XXX $XX,XXX
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM:
<TABLE>
<CAPTION>
If you had invested Periods ...and taken all
$10,000 in NEF 12/1-11/30 distributions in
this many years... shares, your investment
Number would have been worth
of Years this much at November
30, 1998:
Value ($)
<S> <C> <C>
1 1997 - 1998 XX,XXX
2 1996 - 1998 XX,XXX
3 1995 - 1998 XX,XXX
4 1994 - 1998 XX,XXX
5 1993 - 1998 XX,XXX
6 1992 - 1998 XX,XXX
7 1991 - 1998 XX,XXX
8 1990 - 1998 XX,XXX
9 1989 - 1998 XX,XXX
10 1988 - 1998 XX,XXX
11 1987 - 1998 XX,XXX
12 1986 - 1998 XX,XXX
13 1985 - 1998 XX,XXX
14 1984 - 1998 XX,XXX
15 1983 - 1998 XX,XXX
</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, 1998)
<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
1996 578 4,516 14,516 25,412 25,793 7,426 58,631
1997 455 4,971 14,971 28,736 33,632 8,949 71,317
1998 XXX X,XXX XX,XXX XX,XXX XX,XXX X,XXX XX,XXX
</TABLE>
The dollar amount of capital gain distributions during the period was $XX,XXX
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."~
PART C
OTHER INFORMATION
THE NEW ECONOMY FUND
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(b) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(c) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(d) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(e) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(f) None.
(g) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(h) None.
(i) Not applicable to this filing.
(j) Consent of Independent Auditors - to be filed by amendment.
(k) None.
(l) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(m) Previously filed (see Post-Effective Amendment No. 21 filed January 30,
1998).
(n) EX-27 Financial data schedule (EDGAR).
(o) None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Registrant is a joint-insured under investment advisor/mutual fund errors and
omissions policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities. However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.
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 (the Act) 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> <C> <C>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
1501 N. University, Suite 227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Boulder, CO 80301
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Senior Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Michael L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
C. Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
H J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Littleton, CO 80120
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue, Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and
Co-Chief Executive Officer None
Ruth M. Collier Senior Vice President None
145 West 67th St., #12K
New York, NY 10023
S David Coolbaugh Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director None
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director None
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
R.D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
L Robert L. Johansen Vice President None
Michael J. Johnston Director None
630 Fifth Avenue, 36th Floor
New York, NY 10111
B Damien M. Jordan Vice President None
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
Mark Lien Regional Vice President None
5570 Beechwood Terrace
West Des Moines, IA 50266
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - Institutional None
Investment Services
LW Robert W. Lovelace Director Vice President
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice President None
L E. Lee McClennahan Senior Vice President None
L Jamie R. McCrary Assistant Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - Institutional None
Investment Services
David R. Murray Vice President None
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P.O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Senior Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
L John O. Post Vice President None
S Richard P. Prior Assistant Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
11404 Foxhaven Drive
Charlotte, NC 28277
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
30008 Oakland Hills Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Director, Chairman of the Board None
1000 RIDC Plaza, Suite 212 and co-Chief Executive Officer
Pittsburgh, PA 15238
William P. Simon, Jr. Senior Vice President None
912 Castlehill Lane
Devon, PA 91333
L John C. Smith Assistant Vice President -
Institutional Investment Services None
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
Tony Soave Regional Vice President None
8831 Morning Mist Drive
Clarkston, MI 48348
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue Suite 228
San Mateo, CA 94401
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
3919 Whooping Crane Circle
Virginia Beach, VA 23455
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, Treasurer None
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
George Wenzel Regional Vice President None
3406 Shakespear Drive
Troy, MI 48084
N. Dexter Williams Senior Vice President None
P.O. Box 2200
Danville, CA 94526
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice President \None
L Robert L. Winston Director, Senior Vice President None
William R. Yost Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
320 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
ITEM 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 and 5300 Robin Hood Road, Norfolk,
VA 23513.
Records covering shareholder accounts are maintained and kept by the fund's
transfer agent, American Funds Service Company, 135 South State College Blvd.,
Brea, CA 92621, 8000 IH-10, Suite 1400, San Antonio, TX 78230, 8332 Woodfield
Crossing Blvd., Indianapolis, IN 46240 and 5300 Robin Hood Road, Norfolk, VA
23513.
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.
(c) As reflected in the prospectus, the fund undertakes to provide each
person to whom a prospectus is delivered with a copy of the fund's latest
annual report to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, and State of California, on the 29th day of September,
1998.
The New Economy Fund
By: /s/ Timothy D. Armour
Timothy D. Armour, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed below on September 29, 1998, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
(1) Principal Executive Officer:
/s/ Timothy D. Armour President
Timothy D. Armour
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ Robert P. Simmer Treasurer
Robert P. Simmer
(3) Trustees:
Timothy D. Armour President and Trustee
Richard G. Capen, Jr.* Trustee
H. Frederick Christie* Trustee
Alan W. Clements* Trustee
Alan Greenway* Trustee
William R. Grimsley* Chairman and Trustee
E. Graham Holloway* 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)
