[The American Funds Group(R)]
The New Economy Fund
Semi-Annual Report
for the six months ended May 31, 2000
[cover illustration: binary numbers encircling the glob]
THE NEW ECONOMY FUND
The New Economy Fund(R) seeks to help you participate in the many investment
opportunities created as society continues to shift from producing industrial
goods to providing a wide array of information and services. The fund has the
flexibility to invest all over the world in industries ranging from
broadcasting and publishing to banking and insurance, cellular telephones to
merchandising, and health care to computer software and the Internet.
The New Economy Fund(R) is one of 29 American Funds, the nation's third-largest
mutual fund family. For nearly seven decades, Capital Research and Management
Company, the American Funds adviser, has invested with a long-term focus based
on thorough research and attention to risk.
Results at a Glance
for periods ended May 31, 2000 (with all distributions reinvested)
Six Months (total return) +7.03%
12 Months (total return) +29.61
Lifetime (average annual compound
return since December 1, 1983) +17.45
Fund results in this report were computed for Class A shares at net asset value
(without a sales charge) unless otherwise indicated. Here are the total returns
and the average annual compound returns on a $1,000 investment with all
distributions reinvested for periods ended June 30, 2000 (the most recent
calendar quarter), assuming payment of the 5.75% maximum sales charge at the
beginning of the stated periods:
<TABLE>
<CAPTION>
Total Average Annual
Return Compound Return
<S> <C> <C>
10 Years +419.27% +17.91%
Five Years +183.10 +23.14
One Year +17.53 -
</TABLE>
Sales charges are lower for accounts of $25,000 or more.
Results for Class B shares are not shown because of the brief time between
their introduction on March 15 and the end of the fund's fiscal period.
Please see back cover for important information about Class A and Class B
shares.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. Of course, investments
outside the United States involve special risks such as currency fluctuations,
political instability, differing securities regulations and periods of
illiquidity. Global diversification can help reduce these risks.
FELLOW SHAREHOLDERS:
During the six months ended May 31, 2000, The New Economy Fund produced a solid
return despite enormous volatility in financial markets worldwide.
The fund posted a 7.0% gain for the six months if, like most shareholders, you
reinvested the dividend of 14 cents a share and capital gain distribution of
$3.18 a share paid in December 1999. This result outpaced two of the three
benchmarks that represent the fund's potential investment universe while
falling slightly short of the third. The Lipper Growth Funds Index, which
measures 30 of the largest growth-oriented U.S. mutual funds, recorded a total
return of 6.2%. The Morgan Stanley Capital International EAFE(R) (Europe,
Australasia, Far East) Index, which measures all major markets outside the
United States, rose 0.7%. The third index - the Russell 2500 Index, a measure
of small- and medium-capitalization U.S. stocks - rose 9.9%. (All indexes are
unmanaged.)
[Begin Sidebar]
During the six months ended May 31, 2000, The New Economy Fund produced a solid
return despite enormous volatility in financial markets worldwide.
[End Sidebar]
Another widely reported index - Standard & Poor's 500 Composite Index, which
tracks 500 large companies listed on U.S. exchanges - returned 2.8% for the
period.
Looking back over the past 12 months, it's worth noting that The New Economy
Fund had a strong gain of 29.6%. Since your fund's inception on December 1,
1983, it has posted a lifetime total return of 1,319.9%, or an average of 17.4%
a year over those 17 years.
KEEPING OUR SEAT BELTS FASTENED
Stock markets globally were more volatile during the last six months than at
any other time in recent history. While U.S. equities continued to charge
forward during the first months of the reporting period, by late March they
proved vulnerable to rising interest rates and increasing fears of inflation.
Technology stocks, many of which had reached stratospheric valuations, began a
sharp decline in mid-March.
By no means did your fund avoid the market's peaks and valleys. In the span of
six months, its net asset value ranged from a high of $33.17 on March 24 to a
low of $27.25 on May 26, a swing of nearly 18%. Some individual holdings
fluctuated even more wildly. For example, PMC-Sierra - a semiconductor
manufacturer among your fund's larger holdings - saw its share price appreciate
from $52 at the beginning of the reporting period to $245 on March 10, only to
fall back to $153 by May 31.
[Begin Sidebar]
WHERE THE FUND'S
ASSETS ARE INVESTED
Geographical distribution of
net assets as of May 31, 2000
<TABLE>
<CAPTION>
Percent
of Net
Assets
<S> <C>
UNITED STATES 53.2%
NON-U.S.
EUROPE
UNITED KINGDOM 2.5
Sweden 2.0
Germany 1.6
Italy 1.2
Netherlands .6
Switzerland .6
Finland .5
Other 1.3
ASIA/PACIFIC
Japan 10.2
South Korea 2.1
Taiwan 1.8
Australia .9
Hong Kong .6
China .5
Other .8
LATIN AMERICA & CANADA
Mexico 1.5
Brazil .8
Canada .7
Supranational 2.5
TOTAL NON-U.S. 32.7
CASH & EQUIVALENTS 14.1
TOTAL 100.0%
</TABLE>
[End Sidebar]
This is not to say that we think periods of volatility - as unsettling as they
are - aren't beneficial for the prudent investor. Though we can't predict
whether or how far global stock markets will continue to fall, we certainly can
argue that a correction should bring the market back into balance and provide
your fund with an opportunity to buy the stocks of attractive companies at
lower prices.
FAMILIAR FORCES DRIVE GROWTH
Despite the ups and downs of the global technology sector, some tech stocks
nonetheless produced many of your fund's best returns. Of the 20 holdings that
appreciated the most during the period, approximately half were technology
companies. We have tried to invest in companies with values that make sense
relative to their growth rates - companies that have potential to generate
profits over the long term. Many of these companies are benefiting from the
increase in demand for bandwidth brought on by the boom in the Internet, mobile
communications and other technological advancements. Examples of these
companies are Oracle (+112.0%), Applied Materials (+71.4%) and Texas
Instruments (+50.4%).
Two other sectors helped returns over the six months: Media and
telecommunications companies, which in concert with technology companies are
driving the information revolution. AUDIOFINA, the largest free-TV broadcasting
group in Europe, gained 111.6% while Germany's ProSieben Media was up 104.5%.
Ericsson, the Swedish wireless equipment provider, rose 69.2% as China Telecom
gained 39.2%.
WHERE WE FELL SHORT
During the course of our reporting period, the Japanese market dropped more
than 6%. At the same time, the dollar remained strong against the yen,
increasing the overall negative effect.
After posting huge gains in 1999, some pullback was likely and, indeed, that's
what has happened. Technology stocks, in particular, have languished, including
a number of the holdings in your fund. Fujitsu, the country's largest computer
manufacturer, was down 20.6%. Wireless services provider NTT DoCoMo fell 26.8%.
During the period, we trimmed some of our exposure to Japanese companies. Six
months ago, 14.5% of our assets were invested in Japan; at the end of the
current reporting period that number was 10.2%. Overall, however, our holdings
in non-U.S. companies remain large - 32.7% of the fund's assets are invested
outside the United States.
LOOKING FORWARD
Throughout the past decade of unprecedented stock market gains, short periods
of volatility have promptly yielded to continued periods of advancement. This
time, it's possible the market's unsteadiness may take time to smooth out.
There is reason to believe the Federal Reserve may make further adjustments to
interest rates in an effort to manage the pace of our growing economy and the
threat of inflation.
Whatever happens, we will continue our commitment to the principled investing
that has held your fund in good stead over its lifetime. This includes careful
research, a focus on value and a long-term perspective - something we encourage
you to maintain. Historically, shareholders who have ridden out bumps in the
road have been rewarded over the long term.
We look forward to reporting to you again in six months.
Cordially,
/S/ Gordon Crawford /s/ Timothy D. Armour
Gordon Crawford Timothy D. Armour
Chairman of the Board President
July 17, 2000
<TABLE>
New Economy Fund
May 31, 2000
Percent
of
Net
<S> <C>
Industry Diversification Assets
Broadcasting & Publishing 15.22%
Electronic Data Products 15.20%
Telecommunications 10.76%
Computer Services & Software 6.01%
Miscellaneous Business Services 5.84%
Other Industries 32.83%
Cash & Equivalents 14.14%
</TABLE>
<TABLE>
New Economy Fund
May 31,2000
Percent
of
Net
Assets
<S> <C>
Largest Equity-Type Holdings
Viacom 3.72%
Sakura Bank 2.11
Vodafone AirTouch 1.90
Time Warner 1.85
American International Group 1.82
Nippon Television Network 1.57
Taiwan Semiconductor Manufacturing 1.41
Telefonaktiebolaget LM Ericsson 1.39
AT&T Liberty Media Group 1.31
Texas Instruments 1.27
</TABLE>
<TABLE>
The New Economy Fund
Investment Portfolio, May 31, 2000
Unaudited Principal Market Percent
Amount (000) Value of Net
Equity Securitites (common and preferred stocks and or Shares (000) Assets
convertible debentures)
<S> <C> <C> <C>
BROADCASTING & PUBLISHING - 15.22%
Viacom Inc., Class B, nonvoting (1) 7,114,500 441,099 3.72
Time Warner Inc. 2,775,000 219,052 1.85
Nippon Television Network Corp. (Japan) 138,170 94,720 1.57
Nippon Television Network Corp. (1,2) 138,170 91,772
AT&T Corp. Liberty Media Group, Class A (1) 3,510,000 155,537 1.31
Clear Channel Communications, Inc. (1) 1,600,200 119,815 1.01
News Corp. Ltd., preferred (ADR) (Australia) 825,000 32,330 .91
News Corp. Ltd., preferred 2,902,483 27,902
News Corp. Ltd. 2,169,362 24,546
News Corp. Ltd. (ADR) 500,000 22,781
Mediaset SpA (Italy) (3) 5,760,000 88,980 .75
UnitedGlobalCom, Inc., Class A (1) 1,600,000 76,800 .65
KirchMedia GmbH & Co. KGaA, nonvoting (Germany) (1,3,4) 1,775,000 72,772 .61
USA Networks, Inc. (1) 3,300,000 62,494 .53
Fox Entertainment Group, Inc., Class A (1) 2,000,000 52,250 .44
Infinity Broadcasting Corp., Class A (1) 1,568,200 49,594 .42
AUDIOFINA (Luxembourg) 263,000 30,004 .25
Chris-Craft Industries, Inc. (1) 477,405 29,062 .24
Tokyo Broadcasting System, Inc. (Japan) (1) 675,000 25,046 .21
Nippon Broadcasting System, Inc. (Japan) 372,000 22,465 .19
ProSieben Media AG, nonvoting preferred (Germany) 205,000 19,514 .16
Grupo Televisa, SA (ADR) (Mexico) (1) 345,000 19,212 .16
EMAP PLC (United Kingdom) 840,000 14,509 .12
United Pan-Europe Communications NV (Netherlands) (1) 300,000 7,790 .07
Sinclair Broadcast Group, Inc., Class A (1) 800,000 6,600 .05
ELECTRONIC DATA PRODUCTS - 15.20%
Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) (1) 32,700,288 166,849 1.41
Telefonaktiebolaget LM Ericsson, Class B (ADR) (Sweden) 6,320,000 129,560 1.39
Telefonaktiebolaget LM Ericsson, Class B 1,760,000 35,848
Texas Instruments Inc. 2,090,000 151,003 1.27
Rohm Co., Ltd. (Japan) 407,000 126,857 1.07
Microchip Technology Inc. (1) 1,875,000 106,436 .90
PMC-Sierra, Inc. (1) 635,000 97,314 .82
Samsung Electronics Co., Ltd. (South Korea) 345,000 94,119 .79
Samsung Electro-Mechanics Co. (South Korea) 1,380,000 86,785 .73
3Com Corp. (1) 2,000,000 83,625 .70
Cisco Systems, Inc. (1) 1,200,000 68,325 .58
Applied Materials, Inc. (1) 800,000 66,800 .56
Dallas Semiconductor Corp. 1,400,000 56,000 .47
Adaptec, Inc. (1) 2,710,000 53,353 .45
Research In Motion Ltd. (Canada) (1) 1,600,000 51,516 .43
KLA-Tencor Corp. (1) 850,000 42,128 .35
Motorola, Inc. 430,000 40,312 .34
ADVANTEST CORP. (Japan) 150,000 31,586 .27
Lucent Technologies Inc. 540,000 30,982 .26
Nokia Corp., Class A (ADR) (Finland) 560,000 29,120 .24
Micrel, Inc. (1) 420,000 26,775 .23
Hyundai Electronics Industries Co., Ltd. (South Korea) (1) 1,660,000 25,878 .22
Universal Scientific Industrial Co., Ltd. (Taiwan) (1) 11,200,000 25,843 .21
Nikon Corp. (Japan) 700,000 19,286 .16
Alcatel (ADR) (France) 324,000 17,678 .15
Infineon Technologies AG (Germany) (1) 229,300 15,031 .13
ArrowPoint Communications, Inc. (1) 119,200 14,304 .12
SCI Systems, Inc. (1) 306,800 13,806 .12
MIPS Technologies, Inc., Class A (1) 534,500 13,429 .11
Locus Co., Ltd. (South Korea) (1) 178,546 13,063 .11
Allgon AB, Class B (Sweden) 500,000 10,463 .09
Compal Electronics, Inc. (Taiwan) 4,290,000 10,247 .09
Maxim Integrated Products, Inc. (1) 150,000 9,516 .08
SIPEX Corp. (1) 375,000 8,209 .07
Electronics for Imaging, Inc. (1) 200,000 7,363 .06
Hon Hai Precision Industry Co. Ltd. (Taiwan) (1) 780,000 7,148 .06
Elcor Corp. 350,000 6,672 .06
Nanovation Technologies, Inc., convertible 267,000 4,005 .03
preferred, Class A (1,3,4)
Avanex Corp. (1) 45,600 3,101 .03
Storage Technology Corp. (1) 275,000 3,077 .03
Metalink Ltd. (Israel) (1) 25,900 647 .01
TELECOMMUNICATION - 10.76%
Vodafone AirTouch PLC (formerly Vodafone Group PLC) 32,430,530 148,172 1.90
(United Kingdom)
Vodafone AirTouch PLC (ADR) 1,687,500 77,309
Telefonos de Mexico, SA de CV, Class L (ADR) (Mexico) 2,303,920 112,172 .95
NTT DoCoMo, Inc. (formerly NTT Mobile Communications 4,178 107,744 .91
Network, Inc.) (Japan)
Telesp Celular Participacoes SA, preferred nominative (Brazil) 4,394,650,000 66,462 .64
Telesp Celular Participacoes SA, ordinary nominative 547,087,257 8,918
Intermedia Communications Inc. (1) 2,390,000 59,750 .50
Western Wireless Corp., Class A (1) 1,238,200 59,201 .50
China Telecom (Hong Kong) Ltd. (China) (1) 7,416,000 55,438 .47
Nippon Telegraph and Telephone Corp. (Japan) 4,629 54,964 .46
Telecom Italia SpA (Italy) 2,400,000 33,215 .46
Telecom Italia SpA, nonvoting savings shares 3,359,500 21,029
Nuevo Grupo Iusacell, SA de CV, Class V (ADR) (Mexico) (1) 3,278,147 43,435 .37
PSINet Inc. (1) 1,632,000 42,534 .36
Equinix, Inc., convertible preferred, Class C (1,3,4) 2,000,000 30,160 .25
SAVVIS Communications Corp. (1) 2,200,000 29,975 .25
TriTel, Inc., Class A (1) 1,190,500 27,307 .23
Swisscom AG (Switzerland) 75,695 26,685 .22
Qwest Communications International Inc. (1) 600,000 25,387 .21
Triton PCS Holdings, Inc., Class A (1) 615,000 25,061 .21
CenturyTel, Inc. 906,700 24,481 .21
Sprint Corp. 400,000 24,200 .20
TeleCorp PCS Inc., Class A (1) 780,000 23,693 .20
NorthPoint Communications, Inc. (1) 1,480,000 23,125 .19
Tele Celular Sul Participacoes SA, preferred 565,300 19,150 .16
nominative (ADR) (Brazil)
U S WEST, Inc. 260,000 18,720 .16
Tele Danmark AS (Denmark) 220,000 15,579 .15
Tele Danmark AS, Class B (ADR) 80,000 2,815
Korea Telecom Corp. (ADR) (South Korea) 408,800 15,126 .13
FirstCom Corp. (1) 1,000,000 13,938 .12
MCI WorldCom, Inc. (1) 300,000 11,288 .09
Flashcom, Inc., convertible preferred, Series B (1,3,4) 1,522,070 10,274 .09
Novatel Wireless, Inc., convertible preferred, Class C (1,3,4) 599,520 5,000 .04
Novatel Wireless, Inc., warrants, expire 2004, Class C (1,3,4) 119,904 0
eircom PLC (Ireland) 1,250,000 3,624 .03
Equant NV (Netherlands) (1) 77,200 3,392 .03
AAPT Ltd. (Australia) (1) 666,009 2,248 .02
Stet Hellas Telecommunications SA (ADR) (Greece) (1) 97,500 2,047 .02
Telecom Argentina STET-France Telecom SA, 75,000 1,847 .02
Class B (ADR) (Argentina)
Tele Sudeste Celular Participacoes SA, 305,659,000 1,306 .01
ordinary nominative (Brazil)
COMPUTER SERVICES & SOFTWARE - 6.01%
Oracle Corp. (1) 1,600,000 115,000 .97
Computer Associates International, Inc. 1,750,000 90,125 .76
Microsoft Corp. (1) 1,222,500 76,483 .64
Cendant Corp. (1) 5,199,622 68,895 .58
Juniper Networks, Inc. (1) 291,900 51,137 .43
Intuit Inc. (1) 1,147,600 41,600 .35
Paychex, Inc. 1,125,000 39,375 .33
HNC Software Inc. (1) 800,000 32,800 .28
Stonesoft Oyj (Finland) (1) 1,955,000 31,078 .26
Ubizen (Belgium) (1) 195,000 28,446 .24
Power Integrations, Inc. (1) 1,200,000 27,900 .24
Autodesk, Inc. 650,000 24,172 .20
Freei Networks, Inc., convertible preferred, Series C (1,3,4) 1,018,171 20,000 .17
Baltimore Technologies PLC (United Kingdom) (1) 2,690,000 18,335 .15
Computer Sciences Corp. (1) 180,000 17,269 .15
Cymer, Inc. (1) 304,100 9,598 .08
National Computer Systems, Inc. 169,200 7,688 .07
MMC AS (Norway) (1,3,4) 2,500,000 7,316 .06
Hewlett-Packard Co. 50,000 6,006 .05
VIA NET.WORKS, Inc. (1) 22,800 325 .00
MISCELLANEOUS BUSINESS SERVICES - 5.84%
Concord EFS, Inc. (1) 4,030,000 97,727 .82
Black Box Corp. (1) 675,000 52,988 .45
Sabre Holdings Corp., Class A (1) 1,800,000 51,750 .44
Trimble Navigation Ltd. (1) 1,090,000 48,164 .41
Snyder Communications, Inc. (1) 1,950,000 44,119 .38
Snyder Communications, Inc.- Circle.com (1) 262,500 935
Robert Half International Inc. (1) 700,000 41,562 .35
Adecco SA (Switzerland) 48,000 38,010 .32
Service Corp. International 9,000,000 28,125 .24
Datacraft Asia Ltd (Singapore) 4,003,051 27,821 .23
Marubeni Corp. (Japan) 10,354,000 27,470 .23
Midas, Inc. (5) 800,000 20,750 .17
iXL Enterprises, Inc. (1) 1,000,000 19,000 .16
Focal Communications Corp. (1) 700,000 18,856 .16
Expeditors International of Washington, Inc. 450,000 18,253 .15
Metamor Worldwide, Inc. (1) 745,600 16,962 .14
ISS-International Service System A/S (Denmark)(1) 217,500 15,811 .13
Ceridian Corp. (1) 552,000 13,317 .11
Pitney Bowes Inc. 300,000 13,050 .11
Efficient Networks, Inc. (1) 267,100 12,954 .11
Digex, Inc., Class A (1) 240,000 10,140 .09
Cintas Corp. 225,000 9,900 .08
Rakuten, Inc. (Japan)(1) 128 9,262 .08
Profit Recovery Group International, Inc. (1) 450,000 8,156 .07
InterNAP Network Services Corp. (1) 248,200 7,105 .06
MSC Industrial Direct Co., Inc., Class A (1) 303,200 6,993 .06
Versata, Inc. (1) 275,000 6,497 .05
ProBusiness Services, Inc. (1) 200,000 5,325 .04
Alloy Online, Inc. (1) 375,000 4,453 .04
Park-Ohio Holdings Corp. (1) 496,000 4,216 .04
Internet Capital Group, Inc. (1) 155,000 4,175 .04
Niku Corp. (1) 254,500 4,140 .03
China.com Corp., Class A (Hong Kong) (1) 102,800 2,448 .02
Bright Horizons Family Solutions, Inc. (1) 118,800 2,012 .02
EarthWatch Inc. 8.50% convertible preferred, Series C (1,3,4,6) 224,590 386 .01
INSURANCE - 5.52%
American International Group, Inc. 1,921,875 216,331 1.82
Marsh & McLennan Companies, Inc. 1,200,000 132,075 1.11
XL Capital Ltd., Class A (Bermuda - Incorporated 1,770,000 105,315 .88
in Cayman Islands)
ING Groep NV (Netherlands) 862,407 51,701 .54
ING Groep NV, warrants, expire 2001 (1) 660,000 11,430
HCC Insurance Holdings, Inc. 2,300,000 39,244 .33
Fairfax Financial Holdings Ltd. (Canada) (1) 281,000 29,470 .25
21st Century Insurance Group (formerly 20th Century Industries) 1,180,500 26,192 .22
PartnerRe Holdings Ltd. (Singapore - Incorporated in Bermuda) 553,900 20,564 .17
Mercury General Corp. 550,000 14,025 .12
Progressive Corp. 100,000 9,387 .08
MERCHANDISING - 4.84%
Dollar General Corp. 6,250,000 109,375 .92
Kohl's Corp. (1) 1,900,000 98,325 .83
Albertson's, Inc. 2,250,000 82,406 .69
Walgreen Co. 1,790,000 50,791 .43
Ito-Yokado Co., Ltd. (Japan) 794,000 47,066 .40
Michaels Stores, Inc. (1) 1,094,700 46,867 .39
Consolidated Stores Corp. (1) 3,018,750 39,244 .33
Lowe's Companies, Inc. 620,000 28,869 .24
Too, Inc. (1) 970,000 24,856 .21
EM.TV & Merchandising AG (Germany) (1) 258,300 17,390 .15
EM.TV & Merchandising AG 4.00% convertible debentures 2005 $846 737
AutoZone, Inc. (1) 500,000 14,000 .12
Kingfisher PLC (United Kingdom) 1,257,733 11,644 .10
Chip Shot Golf Corp., Series C, convertible preferred (1,3,4) 1,215,000 2,977 .03
BANKING - 4.21%
Sakura Bank, Ltd. (Japan) 32,130,000 237,547 2.11
Sakura Finance (Bermuda) Trust 0.75% convertible preference 864,000,000 12,703
units (Incorporated in Bermuda)
Wells Fargo & Co. 2,900,000 131,225 1.10
Bank of America Corp. 700,000 38,894 .33
STB Cayman Capital, Ltd. 0.50% convertible debentures 2007 (Japan) $2,240,000 32,208 .27
Bangkok Bank PCL (Thailand) (1) 19,400,000 22,901 .19
Hang Seng Bank Ltd. (Hong Kong) 1,400,000 11,858 .10
Bank of the Philippine Islands (Philippines) 5,462,100 10,462 .09
Equitable Banking Corp. (Philippines) 1,606,090 2,001 .02
MISCELLANEOUS FINANCIAL SERVICES - 3.42%
Fannie Mae 2,321,500 139,580 1.18
Freddie Mac 1,375,000 61,187 .51
ORIX Corp. (Japan) 388,800 57,527 .48
SLM Holding Corp. 1,200,000 40,425 .34
Capital One Financial Corp. 675,000 31,894 .27
Mycal Card Inc. (Japan) 620,000 22,603 .19
Citigroup Inc. 338,600 21,057 .18
Consumer Financial Network, Inc., Series C, 3,500,000 14,000 .12
convertible preferred (1,3,4)
American Capital Strategies, Ltd. 450,000 9,366 .08
AIFUL Corp. (Japan) 90,000 7,906 .07
ENTERTAINMENT & LEISURE - 2.83%
Carnival Corp. 4,200,000 113,925 .96
MGM Grand, Inc. (1,3,4) 2,788,500 81,564 .75
MGM Grand, Inc. 211,500 6,874
Pixar (1) 1,000,000 34,250 .29
Nintendo Co., Ltd. (Japan) 200,000 29,684 .25
VTech Holdings Ltd. (Hong Kong) 7,097,463 23,637 .20
Star Cruises PLC (United Kingdom) (1) 3,115,000 20,403 .17
Kinowelt Medien AG (Germany) (1) 170,000 8,743 .07
StudioCanal (France) (1) 550,000 6,814 .06
Harrah's Entertainment, Inc. (1) 325,000 6,419 .05
Vail Resorts, Inc. (1) 200,000 3,200 .03
COMPUTER SYSTEMS - 2.51%
Dell Computer Corp. (1) 1,750,000 75,469 .64
NEC Corp. (Japan) 2,826,000 71,567 .60
Fujitsu Ltd. (Japan) 2,500,000 70,733 .60
Compaq Computer Corp. 1,450,000 38,062 .32
International Business Machines Corp. 188,000 20,175 .17
Gateway, Inc. (1) 162,200 8,029 .07
Silicon Graphics, Inc. (1) 1,120,300 7,422 .06
Lexmark International Group, Inc., Class A (1) 100,000 6,975 .05
ENVIRONMENTAL SERVICES - 0.86%
Allied Waste Industries, Inc. (1) 5,827,200 59,365 .50
Waste Management, Inc. 2,100,000 42,787 .36
MISCELLANEOUS PUBLIC SERVICES - 0.84%
Williams Companies, Inc. 1,420,600 59,044 .50
Suez Lyonnaise des Eaux (France) 149,500 24,982 .21
Hays PLC (United Kingdom) 2,800,000 15,729 .13
HEALTH & HOSPITAL SERVICES - 0.83%
Cardinal Health, Inc. 690,650 44,806 .38
First Health Group Corp. (1) 720,000 25,200 .21
HCA-The Healthcare Co. 680,000 18,360 .15
Universal Health Services, Inc., Class B (1) 200,000 10,625 .09
DELIVERY SERVICES - 0.62%
United Parcel Service, Inc., Class B 1,221,500 73,137 .62
SAFETY & SECURITY SERVICES - 0.51%
Securitas AB, Class B (Sweden) 2,612,000 61,073 .51
RESTAURANTS - 0.36%
Brinker International, Inc. (1) 1,500,000 42,469 .36
ELECTRIC UTILITIES - 0.30%
Manila Electric Co., Class A (GDR) (Philippines) (4) 1,860,000 13,715 .20
Manila Electric Co., Class B 6,755,916 10,082
Scottish and Southern Energy PLC (United Kingdom) 900,000 7,031 .06
National Power PLC (United Kingdom) 940,000 5,175 .04
ENERGY SERVICES - 0.29%
Schlumberger Ltd. (Netherlands Antilles) 470,000 34,574 .29
ADVERTISING - 0.27%
Interpublic Group of Companies, Inc. 600,000 25,763 .22
Ventiv Health, Inc. (1) 650,000 5,728 .05
HEALTH & PERSONAL CARE SERVICES - 0.23%
Quintiles Transnational Corp. (1) 917,800 13,538 .12
Trigon Healthcare, Inc. (1) 264,600 13,230 .11
DIVERSIFIED SERVICES - 0.22%
First Pacific Co. Ltd. (Hong Kong) 46,275,461 16,332 .13
Benpres Holdings Corp. (GDR) (Philippines)(1) 5,900,000 10,325 .09
AIRLINES - 0.17%
Deutsche Lufthansa AG (Germany) 800,000 19,674 .17
RAIL & ROAD SERVICES - 0.08%
C.H. Robinson Worldwide, Inc. 205,900 9,253 .08
FOOD SERVICES - 0.07%
Mikuni Coca-Cola Bottling Co., Ltd. (Japan) 550,000 7,760 .07
MISCELLANEOUS - 3.85%
Other equity securities in initial period of acquisition 456,658 3.85
TOTAL EQUITY SECURITIES (cost: $7,110,137,000) 10,189,841 85.86
Principal
Amount
Short Term Securities (000)
-------------------------------------------- --------
CORPORATE SHORT-TERM NOTES - 11.72%
Coca-Cola Co. 6.05%-6.55% due 6/19-7/27/2000 $70,000 69,474 .59
E.W. Scripps Co. 5.95%-6.56% due 6/2-7/19/2000 (3) 60,000 59,882 .50
General Motors Acceptance Corp. 6.07%-6.54% due 6/9-7/11/2000 60,000 59,753 .50
USAA Capital Corp. 6.04%-6.45% due 6/14-7/14/2000 59,000 58,766 .50
Corporate Asset Funding Co. Inc. 6.06%-6.55% due 6/6-7/21/2000 (3) 58,000 57,645 .49
E.I. du Pont de Nemours and Co. 6.07%-6.46% due 6/28-7/19/2000 55,000 54,626 .46
Equilon Enterprises, LLC 6.02%-6.065% due 6/6-6/8/2000 50,000 49,941 .42
SBC Communications Inc. 5.90%-6.13% due 6/2-7/7/2000 (3) 50,000 49,910 .42
Pfizer Inc 6.25%-6.46% due 6/2-6/29/2000 (3) 50,000 49,861 .42
International Lease Finance Corp. 6.04%-6.53% due 6/7-7/13/2000 50,000 49,851 .42
H.J. Heinz Co. 6.04%-6.52% due 6/8-7/10/2000 50,000 49,804 .42
Procter & Gamble Co. 6.02%-6.55% due 6/8-7/26/2000 50,000 49,788 .42
Ford Motor Credit Co. 6.34%-6.52% due 6/26-7/20/2000 50,000 49,680 .42
Alcoa Inc. 6.08%-6.55% due 6/21-7/21/2000 50,000 49,673 .42
Wal-Mart Stores, Inc. 6.48%-6.51% due 6/23-7/12/2000 (3) 50,000 49,658 .42
Associates First Capital Corp. 6.08%-6.54% due 7/5-7/17/2000 50,000 49,639 .42
Motorola, Inc. 6.06%-6.54% due 6/20-7/28/2000 50,000 49,616 .42
Bell Atlantic Financial Services, Inc. 6.55%-6.59% 50,000 49,488 .42
due 7/25-7/27/2000
Anheuser-Busch Companies, Inc. 6.13%-6.53% due 7/18-8/1/2000 45,000 44,554 .38
Eastman Kodak Co. 6.47%-6.63% due 6/21-8/17/2000 41,000 40,463 .34
General Electric Capital Services, Inc. 6.50%-6.56% 40,000 39,668 .34
due 7/11-7/24/2000
Fortune Brands Inc. 6.10%-6.55% due 7/7-8/1/2000 (3) 40,000 39,643 .33
Minnesota Mining and Manufacturing Co. 6.50%-6.60% 40,000 39,610 .33
due 7/5-8/22/2000
Gannett Co., Inc. 6.52% due 7/25/2000 40,000 39,601 .33
Kimberly-Clark Corp. 6.03%-6.40% due 6/8-6/13/2000 (3) 35,000 34,942 .29
General Mills, Inc. 6.05%-6.40% due 6/5-6/16/2000 35,000 34,922 .29
Archer Daniels Midland Co. 5.93%-6.52% due 6/13-7/14/2000 30,000 29,905 .25
General Electric Capital Corp. 6.10%-6.78% due 6/1-6/15/2000 25,985 25,921 .22
Lucent Technologies Inc. 6.00% due 6/1/2000 25,000 24,996 .21
Estee Lauder Companies Inc. 6.06%-6.45% due 6/2-6/19/2000 (3) 20,000 19,956 .17
Bestfoods 6.08%-6.35% due 6/13-6/16/2000 (3) 20,000 19,950 .16
FEDERAL AGENCY DISCOUNT NOTES - 2.16%
Fannie Mae 5.79%-6.54% due 6/8-8/31/2000 108,000 107,484 .90
Freddie Mac 5.79%-6.515% due 6/13-8/24/2000 100,000 99,334 .84
Federal Home Loan Bank Discount Corp. 5.92%-6.52% 50,000 49,609 .42
due 6/7-8/30/2000
NON-U.S. CURRENCY - 0.03%
New Taiwanese Dollar NT$104,496 3,396 .03
TOTAL SHORT-TERM SECURITIES (cost: $1,650,804,000) 1,651,009 13.91
TOTAL INVESTMENT SECURITIES (cost: $8,760,941,000) 11,840,850 99.77
Excess of cash and receivables over payables 26,909 .23
NET ASSETS $11,867,759 100.00
(1) Non-income-producing security.
(2) When-issued security.
(3) Purchased in a private placement transaction;
resale to the public may require registration or sale
only to qualified institutional buyers.
(4) Valued under procedures established by the Board of Trustees.
(5) The fund owns 5.09% of the outstanding voting securities of
Midas, Inc., and thus is
considered an affiliate as defined in the Investment Company
Act of 1940.
(6) Payment in kind; the issuer has the option of paying
additional securities in lieu of cash.
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
See Notes to Financial Statements
</TABLE>
Equity securities appearing in the portfolio since November 30, 1999
AAPT
AIFUL
Albertson's
Alcatel
Allgon
Alloy Online
ArrowPoint Communications
Avanex
Baltimore Technologies
Bank of America
CenturyTel
Compal Electronics
Computer Sciences
Consumer Financial Network
Datacraft Asia
Dell Computer
Efficient Networks
eircom
Elcor
Equinix
Expeditors International of Washington
FirstCom
Flashcom
Freei Networks
Hang Seng Bank
Hon Hai Precision Industry
Hyundai Electronics Industries
Infineon Technologies
InterNAP Network Services
Internet Capital Group
iXL Enterprises
Locus
Lucent Technologies
Marsh & McLennan Companies
Marubeni
Metalink
MGM Grand
Midas
MMC
Motorola
National Computer Systems
Niku
Nippon Broadcasting System
Nokia
NorthPoint Communications
Novatel Wireless
Pitney Bowes
ProBusiness Services
Progressive
PSINet
Rakuten
Research In Motion
SAVVIS Communications
Services Corp. International
Snyder Communications - Circle.com
Stonesoft
StudioCanal
Tele Sudeste Celular Participacoes
TeleCorp PCS
Telesp Celular Participacoes
Tokyo Broadcasting System
TriTel
Triton PCS Holdings
U S West
Ubizen
United Pan-Europe Communications
Universal Scientific Industrial
Ventiv Health
Versata
VIA NET.WORKS
Equity securities eliminated in the portfolio since November 30, 1999
Allianz
Altera
Bombay
Brambles Industries
CBS
Charter One Financial
Coles Myer
Flextech
Foster Wheeler
Galileo International
Hertz
HI/FN
Hikari Tsushin
IKON Office Solutions
Insight Communications
Intel
Lason
MediaOne Group
New World China Land
Nextel Communicatons
Nu Skin Enterprises
PeopleSoft
PETsMART
Primark
Rentokil Initial
Siebel Systems
Spanish Broadcasting System
Thomson
Unidanmark
Vantive
Westpac Banking
Ziff-Davis
<TABLE>
New Economy Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES UNAUDITED
at May 31, 2000 (dollars in thousands)
<S> <C> <C>
Assets:
Investment securities at market:
(cost: $8,760,941) $11,840,850
0
---------------
$0
Cash 956
Receivables for--
Sales of investments $41,488
Sales of fund's shares 18,085
Forward currency contracts-net
Dividends and interest 10,407 69,980
Other
11,911,786
Liabilities:
Payables for--
Purchases of investments 14,530
Repurchases of fund's shares 17,797
Forward currency contracts-net 0
Dividends on fund's shares 0
Management services 3,989
Chase Manhattan Bank 0
Other expenses 7,711 44,027
Net Assets at May 31, 2000 $11,867,759
Shares of beneficial interest issued
and outstanding-
Unlimited shares authorized
Class A shares
Net assets $11,828,095
Shares outstanding 414,235,012
Net asset value per share $28.55
Class B shares
Net assets $39,664
Shares outstanding 1,391,270
Net asset value per share $28.51
UNAUDITED
STATEMENT OF OPERATIONS
for the six months ended May 31, 2000 (dollars in thousands)
Investment Income:
Income:
Dividends $ 24,235
Interest 43,438 $ 67,673
Expenses:
Management services fee 23,137
Distribution expenses- Class A 14,539
Distribution expenses- Class B 47
Transfer agent fee- Class A 6,329
Transfer agent fee- Class B 5
Reports to shareholders 221
Registration statement and prospectus 978
Postage, stationery and supplies 933
Trustees' fees 65
Auditing and legal fees 61
Custodian fee 845
Taxes other than federal income tax 121
Other expenses 70 47,351
Net investment income 20,322
Realized Gain and Unrealized
Depreciation on Investments:
Net realized gain 950,617
Net change in unrealized
appreciation on investments:
Beginning of period 3,484,857
End of period 3,079,888
Open forward currency contracts 0
Net unrealized depreciation on investments (404,969)
Net realized gain and
unrealized depreciation
on investments 545,648
Net Increase in Net Assets Resulting
from Operations $565,970
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Six Months Year Ended
Ended May 31, November 30,
2000* 1999
Operations:
Net investment income $ 20,322 $ 31,510
Net realized gain on investments 950,617 1,065,572
Net unrealized (depreciation) appreciation
on investments (404,969) 1,554,163
Net increase in net assets
resulting from operations 565,970 2,651,245
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income:
Class A (44,919) (37,556)
Class B - -
Distributions from net realized gain
on investments:
Class A (1,020,301) (648,071)
Class B - -
Total dividends and distributions (1,065,220) (685,627)
Capital Share Transactions:
Proceeds from shares sold 2,588,736 1,758,922
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain 1,021,526 657,311
on investments
Cost of shares repurchased (764,953) (898,829)
Net increase in net assets resulting from 2,845,309 1,517,404
capital share transactions
Total Increase in Net Assets 2,346,059 3,483,022
Net Assets:
Beginning of period 9,521,700 6,038,678
End of period [including distributions in
excess of net investment income and
undistributed net investment income:
$(8,545) and $16,052, respectively] $11,867,759 $9,521,700
*Unaudited
See Notes to Financial Statements
</TABLE>
NEW ECONOMY FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The New Economy Fund (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital.
The fund offers Class A and Class B shares. Class A shares are sold with an
initial sales charge of up to 5.75%. Class B shares are sold without an
initial sales charge but subject to a contingent deferred sales charge paid
upon redemption. This charge declines from 5% to zero over a period of six
years. Class B shares have higher distribution expenses and transfer agent fees
than Class A shares. Class B shares are automatically converted to Class A
shares eight years after the date of purchase. Holders of both classes of
shares have equal pro rata rights to assets and identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution and transfer agent expenses, and each class shall have exclusive
rights to vote on matters affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles that require
management to make estimates and assuptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:
SECURITY VALUATION - 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. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates market
value. Forward currency contracts are valued at the mean of their
representative quoted bid and asked prices. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith by a committee appointed by the Board of
Trustees.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period. Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -Security transactions are
accounted for as of the trade date. Realized gains and losses from securities
transactions are determined based on specific identified cost. Dividend income
is recognized on the ex-dividend date, and interest income is recognized on an
accrual basis. Market discounts, premiums, and original issue discounts on
securities purchased are amortized daily over the expected life of the
security.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency
contracts, which represent agreements to exchange currencies of different
countries at specified future dates at specified rates. The fund enters into
these contracts to manage its exposure to fluctuations in foreign exchange
rates arising from investments denominated in non-U.S. currencies.
ALLOCATIONS - Income, expenses other than class-specific expenses and realized
and unrealized gains and losses are allocated daily between the classes based
on their relative net asset values. Distribution expenses, transfer agent fees
and any other class-specific expenses, are accrued daily and charged to the
applicable share class.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluation of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid.
For the six months ended May 31, 2000, such non-U.S. taxes were $1,444,000.
CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest
and other receivables and payables, on a book basis, were $54,000 for the six
months ended May 31, 2000.
3. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year. As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of May 31, 2000, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $3,079,909,000; $3,725,651,000 related
to appreciated securities and $645,742,000 related to depreciated securities.
During the six months ended May 31, 2000, the fund realized, on a tax basis, a
net capital gain of $951,008,000 on securities transactions.
The cost of portfolio securities for book and federal income tax purposes was
$8,761,000 at May 31, 2000.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $23,137,000 for management services was
incurred pursuant to an agreement with Capital Research and Management Company
(CRMC), with which certain officers and Trustees of the fund are affiliated.
The Investment Advisory and Service Agreement provides for monthly fees,
accrued daily, based on the following rates and average net asset levels:
<TABLE>
<CAPTION>
Average Net Asset Level
<S> <C> <C>
Rate In Excess of Up to
0.58% $0 $500 million
0.48% $500 million $1.0 billion
0.44% $1.0 billion $1.5 billion
0.41% $1.5 billion $2.5 billion
0.39% $2.5 billion $4.0 billion
0.38% $4.0 billion $6.5 billion
0.375% $6.5 billion
</TABLE>
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution for Class A shares,
the fund may expend up to 0.25% of Class A average daily net assets annually
for any activities primarily intended to result in sales of fund shares,
provided the categories of expenses for which reimbursement is made are
approved by the fund's Board of Trustees. Fund expenses under the Plan
include payments to dealers to compensate them for their selling and servicing
efforts. Pursuant to a Plan of Distribution for Class B shares, the fund may
expend up to 1.00% of Class B average daily net assets annually to compensate
dealers for their selling and servicing efforts. During the six months ended
May 31, 2000, distribution expenses under the Plans of Distribution for Class A
and Class B shares were $14,539,000 and $47,000, respectively. As of May 31,
2000, accrued and unpaid distribution expenses for Class A and Class B shares
were $5,702,000 and $28,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $5,245,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's Class A shares. Such
sales charges are not an expense of the fund and, hence, are not reflected in
the accompanying statement of operations.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $6,334,000.
DEFERRED TRUSTEES' FEES - Trustees who are unaffiliated with CRMC may elect to
defer part or all of the fees earned for services as members of the Board.
Amounts deferred are not funded and are general unsecured liabilities of the
fund. As of May 31, 2000, aggregate deferred amounts and earnings thereon since
the deferred compensation plan's adoption (1993), net of any payments to
Trustees, were $274,000.
AFFILIATED TRUSTEES AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Certain Trustees and officers of the fund are or may be considered to be
affiliated with CRMC, AFS and AFD. No such persons received any remuneration
directly from the fund.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $3,693,398,000 and $2,393,738,000, respectively,
during the six months ended May 31, 2000.
As of May 31, 2000, net assets consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Capital paid in on shares of beneficial interest $7,851,306
Distributions in excess of net investment income (8,545)
Accumulated net realized gain 945,110
Net unrealized appreciation 3,079,888
Net Assets $11,867,759
</TABLE>
Capital share transations in the fund were as follows:
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $845,000 includes $46,000 that was paid by these credits
rather than in cash.
<TABLE>
Year ended
Six months November 30,
May 31,2000 1999
Amount (000) Shares Amount (000) Shares
<S> <C> <C> <C> <C>
Class A Shares:
Sold $2,546,791 84,007,064 $1,758,922 69,401,406
Reinvestment of dividends 1,021,526 37,212,691 657,311 29,589,151
and distributions
Repurchased (764,736) (25,439,140) (898,829) (35,924,475)
Net increase in Class A 2,803,581 95,780,615 1,517,404 63,066,082
Class B Shares*:
Sold 41,945 1,398,771 - -
Reinvestment of dividends - - - -
and distributions
Repurchased (217) (7,501) - -
Net increase in Class B 41,728 1,391,270 - -
Total net increase in fund $2,845,309 97,171,885 $1,517,404 63,066,082
*Class B shares not offered
before March 15, 2000.
</TABLE>
<TABLE>
PER-SHARE DATA AND RATIOS(1)
Net gains
Net asset on securities
value, Net (both realized
Period beginning investment and
ended of period income unrealized)
<S> <C> <C> <C> <C>
Class A :
2000 $29.90 $.05(2) 1.92(2)
1999 23.65 .10 8.83
1998 20.92 .13 4.44
1997 18.50 .12 3.57
1996 16.98 .14 2.26
1995 14.65 .20 2.99
Class B :
2000 31.27 (.01)(2) (2.75)(2)
Total Dividends
from (from net Distributions
Period investment investment (from capital
ended operations income) gains)
Class A :
2000 $1.97 $(.14) $(3.18)
1999 8.93 (.14) (2.54)
1998 4.57 (.12) (1.72)
1997 3.69 (.14) (1.13)
1996 2.40 (.19) (0.69)
1995 3.19 (.18) (0.68)
Class B :
2000 (2.76) - -
Net assets,
Period Total Total end of period
ended Distributions return (in millions)
Class A :
2000 $(3.32) 7.03% $11,828
1999 (2.68) 41.71 9,522
1998 (1.84) 23.73 6,039
1997 (1.27) 21.64 4,804
1996 (0.88) 15.00 4,223
1995 (0.86) 23.22 3,523
Class B :
2000 - (8.83) 40
Ratio of
expenses Portfolio
Period to average turnover
ended net assets rate
Class A :
2000 .80%(3) 23.51%(4)
1999 .78 47.93
1998 .79 38.55
1997 .81 31.62
1996 .84 29.54
1995 .88 27.03
Class B :
2000 1.55 (3) 23.51%(4)
(1)The periods 1995 through 1999 represent
fiscal years ended November 30. The periods
ended 2000 (unaudited) represent,
for Class A shares, the six-month period
ended May 31, 2000, and, for Class B shares,
the 77-day period ended May 31, 2000.
Class B shares were not offered before
March 15, 2000. Total returns for such periods
are based on activity during the period and
thus are not representative of a full year.
Total returns exclude all sales charges,
including contingent deferred sales charges.
(2) Based on avergae shares outstanding.
(3) Annualized.
(4) Represents portfolio turnover rate
(equivalent for all share classes) for
the six months ended May 31, 2000.
</TABLE>
[The American Funds Group(R)]
Offices of the fund and
of the investment adviser,
Capital Research and
Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
Transfer agent for
shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
Custodian of assets
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02105-1713
Counsel
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
There are two ways to invest in The New Economy Fund. Class A shares are
subject to a 5.75% maximum up-front sales charge that declines for accounts of
$25,000 or more. Class B shares, which are not available for certain
employer-sponsored retirement plans, have no up-front charge. They are,
however, subject to additional expenses of approximately 0.75% a year over the
first eight years of ownership. If redeemed within six years, they may also be
subject to a contingent deferred sales charge (5% maximum) that declines over
time.
For information about your account or any of the fund's services, or for a
prospectus for any of the American Funds, please contact your financial
adviser. You may also call American Funds Service Company, toll-free, at
800/421-0180 or visit www.americanfunds.com on the World Wide Web.
This report is for the information of shareholders of The New Economy Fund, but
it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
September 30, 2000, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Printed on recycled paper
Litho in USA BDC/AL/4630
Lit. No. NEF-013-0700
