THE TAX-EXEMPT FUND OF CALIFORNIA
333 South Hope Street, Los Angeles, California 90071
September 13, 1999
Dear Shareholder:
We are writing to inform you of the upcoming meeting of the shareholders of The
Tax-Exempt Fund of California (the "Fund") to be held at the offices of The
Capital Group Companies, 11100 Santa Monica Boulevard, 15/th/ Floor, Los
Angeles, California, on Friday, October 29, 1999 at 10:00 a.m., local time (the
AMeeting@). At this meeting, you are being asked to vote on important
proposals affecting the Fund. THE BOARD OF TRUSTEES OF THE FUND BELIEVES THAT
THESE PROPOSALS ARE IN THE BEST INTERESTS OF THE FUND AND ITS SHAREHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT YOU APPROVE ALL PROPOSALS PRESENTED FOR YOUR
CONSIDERATION.
At the Meeting, you will be asked to vote on:
1. The election of a Board of 10 Trustees (Proposal 1).
2. A proposal to eliminate or revise certain of the Fund's investment
restrictions (Proposal 2).
3. The ratification of the selection, by the Board of Directors, of Deloitte &
Touche llp as independent accountants for the Fund for the fiscal year 2000
(Proposal 5).
4. Any other business that may come before the Meeting, although we are not
currently aware of any other items to be considered.
Some key points about Proposal 2 are described below. The proposal is
described in more detail in the full text of the proxy statement which you
should read before you vote.
ABOUT PROPOSAL 2:
Because the Fund was formed many years ago, it is subject to a number of
investment restrictions that do not reflect current conditions, practices or
legal requirements. In some cases restrictions, although described as
"fundamental" because they require shareholder approval to modify, were
originally adopted in response to state regulation that no longer applies to
the Fund. In other cases, we believe the language of the restrictions should
be modified to reflect current standards. We are also requesting that certain
restrictions be re-classified as non-fundamental, requiring only Board approval
to change. You may vote for any or all of the changes that are the subject of
Proposal 4 by so indicating on your proxy card. THIS PROPOSAL WILL NOT AFFECT
THE FUND'S INVESTMENT OBJECTIVE, WHICH REMAINS UNCHANGED. MOREOVER, THE BOARD
DOES NOT ANTICIPATE THAT THE CHANGES, INDIVIDUALLY OR IN THE AGGREGATE, WILL
INCREASE TO A MATERIAL DEGREE THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH AN
INVESTMENT IN THE FUND.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THIS
PROPOSAL.
* * *
We are sure that you, like most people, lead a busy life and are tempted to put
this proxy aside for another day. Please don't. When shareholders do not
return their proxies, additional expenses are incurred to pay for follow-up
mailings and telephone calls. PLEASE TAKE A FEW MINUTES TO REVIEW THIS PROXY
STATEMENT AND SIGN AND RETURN THE ENCLOSED PROXY CARD TODAY. Please be sure to
sign and return each proxy card regardless of how many you receive.
If you have any questions regarding the issues to be voted on or need
assistance in completing your proxy card, please contact [
]. Thank you for investing with us and for your continuing support.
PAUL G. HAAGA, JR.
Chairman of the Board
ABNER D. GOLDSTINE
President
PROXY CARD THE TAX-EXEMPT FUND OF CALIFORNIA PROXY CARD
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE FUND
FOR THE MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 29, 1999
The undersigned hereby appoints Michael J. Downer, Paul G. Haaga, Jr., Anthony
W. Hynes, Jr., and Julie F. Williams, and each of them, his/her true and lawful
agents and proxies with full power of substitution to represent the undersigned
at the Meeting of Shareholders to be held at the Office of The Capital Group
Companies, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, California,
on Friday, October 29, 1999 at 10:00 a.m., on all matters coming before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER YOU DIRECTED. IF
NO DIRECTION IS GIVEN, WITH RESPECT TO ANY PARTICULAR ITEM, THIS PROXY WILL BE
VOTED FOR THE NOMINEES IN ITEM 1 AND FOR ITEMS 2 AND 3.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. JOINT OWNERS
SHOULD EACH SIGN INDIVIDUALLY. CORPORATE PROXIES SHOULD BE SIGNED IN FULL
CORPORATE NAME BY AN AUTHORIZED OFFICER. FIDUCIARIES SHOULD GIVE FULL TITLES.
Signature
Signature of joint owner, if any
Date
THE TAX-EXEMPT FUND OF CALIFORNIA PROXY
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: []
<TABLE>
<CAPTION>
1. Election of Trustees: FOR ALL WITHHOLD FOR ALL
ALL EXCEPT
<S> <C> <C> <C> <C> <C>
01 Richard G. Capen 06 Leonard R. Fuller [] [] []
02 H. Frederick Christie 07 Abner D. Goldstine
03 Don R. Conlan 08 Paul G. Haaga, Jr.
04 Diane C. Creel 09 Richard G. Newman
05 Martin Fenton 10 Frank M. Sanchez
</TABLE>
To withhold your vote for any individual nominee, mark the "For All Except"
box and write the nominee's number on the line provided below.
_____________________________________________________________________
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
2. Approval of the proposed changes to the Fund's [] [] []
investment restrictions.
[] To vote against the proposed changes to one or more of [] [] []
the specific fundamental investment restrictions, but
to approve the others, place an "X" in the box at the
left AND indicate the letter(s) (as set forth in the
proxy statement) of the investment
restrictions you do NOT want to change on this line
(for example, A, B, or C):
3. Ratification of selection of Deloitte & Tourhc LLP as [] [] []
independent accountant:
</TABLE>
In their discretion, upon other matters as may properly come before the
meeting.
IMPORTANT
SHAREHOLDERS CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF
SENDING FOLLOW-UP LETTERS BY PROMPTLY RETURNING THE ENCLOSED PROXY.
THE AMERICAN FUNDS TAX-EXEMPT SERIES II
THE TAX-EXEMPT FUND OF CALIFORNIA
----------------
NOTICE OF MEETING OF SHAREHOLDERS
OCTOBER 29, 1999
----------------
To the Shareholders of
The Tax-Exempt Fund of California
A Meeting of Shareholders of The Tax-Exempt Fund of California (the "Fund")
will be held at the offices of The Capital Group Companies, 11100 Santa Monica
Boulevard, 15th floor, Los Angeles, California, on Friday, October 29, 1999 at
10:00 a.m., local time, to consider and vote on the following matters described
under the corresponding numbers in the accompanying Proxy Statement:
(1) election of a Board of 10 Trustees;
(2) approval of the elimination or revision of certain of the Fund's
fundamental investment policies;
(3) ratification of the selection, by the Board of Trustees of Deloitte &
Touche LLP as independent accountant for the Fund for the fiscal year 2000;
(4) such other matters as may properly come before the meeting.
The Board of Trustees has fixed the close of business on August 26, 1999 as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting.
THE PROPOSED BUSINESS CANNOT BE CONDUCTED AT THE MEETING UNLESS THE HOLDERS OF
A MAJORITY OF THE SHARES OF THE FUND OUTSTANDING ON THE RECORD DATE ARE PRESENT
IN PERSON OR BY PROXY. THEREFORE, PLEASE MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF TRUSTEES. THE PROXY IS
REVOCABLE, AND YOUR SIGNING WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE
EVENT THAT YOU ATTEND THE MEETING.
By Order of the Board of Trustees,
Julie F. Williams
Secretary
September 13, 1999
IMPORTANT
SHAREHOLDERS CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF SENDING
FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN ORDER THAT THE
NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING. THE ENCLOSED ENVELOPE
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.THE TAX-EXEMPT FUND OF
CALIFORNIA
333 SOUTH HOPE STREET, LOS ANGELES, CALIFORNIA
----------------
PROXY STATEMENT
MEETING OF SHAREHOLDERS
OCTOBER 29, 1999
- ----------------
The enclosed Proxy is solicited by the Board of Trustees of the Fund in
connection with the Meeting of Shareholders to be held on Friday, October 29,
1999. Every Proxy returned in time to be voted at the meeting will be voted
and, if a specification is made with respect to any proposal, the Proxy will be
voted accordingly. If no specification is made, the Proxy will be voted in
favor of the proposal. Anyone having submitted a Proxy may revoke it prior to
its exercise, either by filing with the Fund a written notice of revocation, by
delivering a duly executed Proxy bearing a later date, or by attending the
meeting and voting in person. This Proxy was first mailed to shareholders on or
about September 13, 1999.
At the close of business on August 26, 1999, the record date fixed by the
Board of Trustees for the determination of shareholders entitled to notice of
and to vote at the meeting, there were outstanding
shares of beneficial interest, the only authorized
class of securities of the Fund (the "Shares"). Each Share is entitled to one
vote. There is no provision for cumulative voting. No person owned of record or
was known by the Fund to own beneficially 5% or more of the outstanding shares
of the Fund.
With respect to the election of Trustees (Item 1), the 10 nominees receiving
the highest number of votes shall be deemed to be elected. The vote required to
approve Items 2 and 3 is the affirmative vote of the lesser of (a) 67% or more
of all Shares present and entitled to vote at the meeting, provided the holders
of more than 50% of all outstanding Shares are present or represented by proxy,
or (b) more than 50% of all outstanding Shares on the record date.
In the event that sufficient votes are not received by the meeting date, a
person named as proxy may propose one or more adjournments of the meeting for a
period or periods of not more than 120 days in the aggregate to permit further
solicitation of Proxies. The persons named as proxies may vote all Proxies in
favor of such adjournment. Signed but unmarked Proxies will be voted for the
below nominated directors and in favor of all proposals. Shareholders who
return Proxies marked as abstaining from voting on one or more proposals are
treated as being present at the meeting for purposes of obtaining the quorum
necessary to hold the meeting, but are not counted as part of the vote
necessary to approve the proposal(s). Where brokers holding Fund shares for
their customers in Street Name have not received instructions and are not
authorized to vote without instruction, those shares also will be treated as
abstentions.
1. ELECTION OF TRUSTEES.
Ten Trustees are to be elected at the meeting, each to hold office until their
resignation or removal and until a successor is elected and qualified. Because
it is not anticipated that meetings of shareholders will be held each year, the
Trustees' terms will be indefinite in length. All of the nominees for Trustee
except Richard G. Capen, Jr., Don R. Conlan, and Frank M. Sanchez were elected
by the shareholders at the meeting held on February 29, 1996. Don R. Conlan
was elected by the Trustees on December 16, 1996; and Richard G. Capen, Jr. and
Frank M. Sanchez were elected by the Trustees effective January 1, 1999.
Herbert Hoover III, a Trustee since 1986, having reached retirement age, is not
standing for re-election.
Each of the nominees has agreed to serve as Trustee if elected. If, due to
presently unforeseen circumstances, any nominee should not be available for
election, the persons named as proxies will vote the signed but unmarked
Proxies and those marked for the nominated directors for such other nominee as
the present directors may recommend. The table below sets forth certain
information regarding the nominees.
<TABLE>
<CAPTION>
NAME OF NOMINEE CURRENT YEAR FIRST MEMBERSHIPS ON SHARES OF THE FUND
(POSITION WITH PRINCIPAL ELECTED A BOARD BENEFICIALLY
FUND) OCCUPATION AND TRUSTEE OF OF OTHER OWNED, DIRECTLY OR
AND AGE PRINCIPAL THE FUND REGISTERED INDIRECTLY, AT
EMPLOYMENT INVESTMENT AUGUST 26, 1999
DURING PAST FIVE COMPANIES AND
YEARS # PUBLICLY HELD
COMPANIES
<S> <C> <C> <C> <C>
Richard G. Corporate 1999 The American Funds
Capen, Jr. Director and Group:
/2 3/ author; former (Director/
(Trustee) United States Trustee of
63 Ambassador to 4 other funds)
Spain; former
Vice Chairman of
the Board,
Knight Ridder,
Inc.; former
Chairman and
Publisher, The
Miami Herald
H. Frederick Private 1986 The American Funds
Christie investor. Group:
/2 3/ Former President (Director/
(Trustee) and Chief Trustee of
66 Executive 16 other funds)
Officer, the Mission Group The American Variable
(non-utility Insurance Series
holding company,
subsidiary of
Southern
California
Edison Company)
Don R. Conlan * President 1996 The American Funds
(Trustee) (retired), The Group:
63 Capital Group (Director/
Companies, Inc. Trustee of
11 other funds)
Diane C. Creel CEO and 1994 The American Funds
/1 2 3/ President, The Group:
(Trustee) Earth Technology (Director/
50 Corporation Trustee of
(international 11 other funds)
consulting
engineering)
Martin Fenton Chairman, Senior Resource Group, 1989 The American Funds Group:
/1 2 3/ LLC (management (Director/
(Trustee) of senior living Trustee of
64 centers) 13 other funds)
The American Variable
Insurance Series
Leonard R. President, 1994 The American Funds
Fuller Fuller Group:
/ 2 3/ Consulting (Director/
(Trustee) (financial Trustee
52 management of 11 other funds)
consulting firm) The American
Variable Insurance
Series
Abner D. Capital Research 1986 The American Funds
Goldstine* and Management Group:
(President and Company, Senior (Director/
Trustee) Vice President Trustee of
69 and Director 11 other funds)
Paul G. Haaga, Capital Research 1986 The American Funds
Jr. * (Chairman and Management Group:
of the Board) 50 Company, Executive Vice (Director/
President and Trustee of 13 other funds)
Director
Richard G. Chairman, 1991 The American Funds
Newman President and Group:
/1 2 3/ CEO AECOM (Director/
(Trustee) Technology Trustee of
64 Corporation 12 other funds)
(architectural
engineering)
Frank M. Principal, The 1999 The American Funds
Sanchez Sanchez Family Group:
/1 2 3/ Corporation dba (Director/
(Trustee) McDonald's Trustee of
55 Restaurants 2 other funds)
(McDonald's
licensee)
</TABLE>
The American Funds Group consists of 29 funds: AMCAP Fund, Inc., American
Balanced Fund, Inc., American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.
The Cash Management Trust of America, Capital Income Builder, Inc., Capital
World Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., Intermediate Bond Fund of America, The Investment
Company of America, Limited Term Tax-Exempt Bond Fund of America, The New
Economy Fund, New Perspective Fund, Inc., New World 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.,
managed by Capital Research and Management Company. 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. An affiliate of Capital Research and Management Company, Capital
International, Inc., manages Emerging Markets Growth Fund, Inc..
* Is considered an interested person of the Fund within the meaning of the
Investment Company Act of 1940 (the 1940 Act), on the basis of his affiliation
with Capital Research and Management Company (the Investment Adviser).
# Corporate positions, in some instances, may have changed during this period.
/1/ The Fund has an Audit Committee composed of the above-designated Trustees.
The function of the Committee includes such specific matters as recommending
the independent accountant to the Board of Trustees, reviewing the audit plan
and results of the audits and considering other matters deemed appropriate for
consideration by the Board of Trustees and/or the Committee.
/2/ The Fund has a Nominating Committee which is composed of the
above-designated Trustees. The Committee's functions include selecting and
recommending to the Board of Trustees nominees for election as Trustees of the
Fund. While the Committee normally is able to identify from its own resources
an ample number of qualified candidates, it will consider shareholder
suggestions of persons to be considered as nominees to fill future vacancies on
the board. Such suggestions must be sent in writing to the Nominating
Committee of the Fund, c/o the Fund's Secretary, and must be accompanied by
complete biographical and occupational data on the prospective nominee, along
with a written consent of the prospective nominee to consideration of his or
her name by the Committee.
/3/ The Fund has a Contracts Committee which is composed of all Trustees who
are not considered to be "interested persons" of the Fund within the meaning of
the 1940 Act. The Contracts Committee's function is to request, review and
consider the information deemed necessary to evaluate the terms of the
investment advisory and principal underwriting agreements and the Plan of
Distribution under rule 12b-1 that the Fund proposed to enter into, renew or
continue prior to voting thereon, and to make its recommendations to the full
Board of Trustees on these matters.
Each Trustee is paid a fee of $900 per annum plus $200 for each Board of
Trustees meeting attended and $200 for each meeting attended as a member of a
committee of the Board of Trustees.
There were four Board of Trustees, two Audit Committee, two Nominating
Committee, and one Contracts Committee meeting during the year ended August 31,
1998. All incumbent Trustees attended at least 75% of all Board meetings and
meetings of the committees of which they were members.
The Fund pays no salaries or other compensation to its Trustees other than
Trustees fees, which are paid to those Trustees who are unaffiliated with the
Investment Adviser as described below.
TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
Trustee Aggregate Total Compensation Total Number of
Compensation (including Fund Boards on
(including Voluntarily Deferred which Trustee
Voluntarily Compensation) Serves/2/
Deferred from all Funds Managed by
Compensation/1/) Capital Research and
from the Fund during Management Company during
Fiscal Year ended the Fiscal Year ended
8/31/98 8/31/98
<S> <C> <C> <C>
Richard G. Capen, none/3/ $ 30,250 5
Jr. $2,611/4/ 171,100 19
H. Frederick none/5/ none/5/ 12
Christie 2,300/4/ 44,650 12
Don R. Conlan 3,025/4/ 121,084 15
Diane C. Creel 2,666/4/ 51,850 13
Martin Fenton none/5/ none/5/ 12
Leonard R. Fuller none/5/ none/5/ 14
Abner D. Goldstine 3,054/4/ 102,650 13
Paul G. Haaga, Jr. none/3/ none/3/ 3
Richard G. Newman
Frank M. Sanchez
</TABLE>
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 funds in The
American Funds Group as designated by the director.
2 Includes funds managed by Capital Research and Management Company and
affiliates.
3 Richard G. Capen, Jr. and Frank M. Sanchez became Trustees of the Fund in
1999 and as such had not received any remuneration from the Fund as of its
8/31/98 fiscal year end..
4 Since the plan's adoption, the total amount of deferred compensation accrued
by the Fund (plus earnings thereon) for participating Trustees is as follows:
H. Frederick Christie ($4,366), Diane C. Creel ($397), Martin Fenton ($8,952),
Leonard R. Fuller ($2,012) and Richard G. Newman ($17,719).
5 Don R. Conlan, Abner D. Goldstine and Paul G. Haaga, Jr. are affiliated with
the Fund's Investment Adviser and, accordingly, receive no remuneration from
the Fund.
Other Executive Officers
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name 44 Principal Occupation (1) Officer
(Position with Fund) 33 Capital Research and Management Company, Continuously
and Age 46 Secretary Since (2)
Michael J. Downer 51 Capital Research Company, Director and 1994
(Vice President) 36 Vice President 1999
David A. Hoag Capital Research and Management Company, 1986
(Vice President) Vice President - Investment Management 1986
Neil L. Langberg Group
(Vice President) Capital Research and Management Company, 1993
Julie F. Williams Vice President, Fund Business Management
(Secretary) Group
Anthony W. Hynes, Jr. Capital Research and Management Company,
(Treasurer) Vice President, Fund Business Management
Group
</TABLE>
(1) The occupations shown reflect the principal employment of each
individual during the past five years. Corporate positions, in some
instances, may have changed during this period.
(2) Officers are elected to hold office until their respective successors are
elected, or until they resign or are removed.
NO OFFICER, DIRECTOR OR EMPLOYEE OF THE INVESTMENT ADVISER RECEIVES ANY
REMUNERATION FROM THE FUND. ALL TRUSTEES AND OFFICERS AS A GROUP OWNED
BENEFICIALLY FEWER THAN 1% OF THE SHARES OUTSTANDING ON AUGUST 26, 1999.
2. APPROVAL OF THE ELIMINATION OR REVISION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
INTRODUCTION AND SUMMARY
The Fund is subject to investment restrictions which establish percentage and
other limits that govern the Fund's investment activities. Under the
Investment Company Act of 1940 (the "1940 Act"), investment restrictions
relating to certain activities are required to be "fundamental," which means
that any changes require shareholder approval. Investment companies, including
the Fund, are permitted to designate additional restrictions as fundamental.
They may also adopt "non-fundamental" investment restrictions, which may be
changed by the Fund's Board of Trustees without shareholder approval.
Some of the Fund's existing fundamental investment restrictions reflect
regulatory, business or industry conditions, practices or requirements that
have changed or no longer exist. With the passage of time, the development of
new practices, and changes in regulatory standards, management believes certain
fundamental restrictions ought to be revised, eliminated or re-classified as
non-fundamental.
The Board of Trustees, together with the Fund's senior officers, have analyzed
the current fundamental investment restrictions, and have concluded that five
restrictions should be amended. Three restrictions would be eliminated and two
restrictions would be revised and re-classified as non-fundamental.
The proposed investment restrictions have been drafted to maintain important
investor protections while providing flexibility to respond to future legal,
regulatory and market changes. By reducing the number of policies that can be
changed only by shareholder vote, the Board of Trustees and the Fund will have
greater flexibility to modify Fund policies, as appropriate, in response to
changing markets and in light of new investment opportunities and instruments.
The Fund will then be able to avoid the costs and delays associated with a
shareholder meeting when making changes to the non-fundamental investment
policies that the Board may consider desirable.
IMPORTANTLY, THE PROPOSED AMENDMENTS DO NOT AFFECT THE INVESTMENT OBJECTIVE OF
YOUR FUND, WHICH REMAINS UNCHANGED. MOREOVER, THE BOARD DOES NOT ANTICIPATE
THAT THE CHANGES, INDIVIDUALLY OR IN THE AGGREGATE, WILL CHANGE TO A MATERIAL
DEGREE THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH AN INVESTMENT IN THE FUND.
The text of each proposed change to the Fund's fundamental restrictions is set
forth below. Shareholders may vote for any or all of the changes that are the
subject of Proposal 2. For ease of reading and due to limited space on the
proxy card, we have organized the proposed changes as part of a single proposal
but shareholders are asked to review each change. A shareholder wishing to
vote against a particular change need only list the letter corresponding to the
change on the proxy card. If the proposed changes are approved by the Fund's
shareholders, the Fund's prospectus and statement of additional information
will be revised, as appropriate, to reflect those changes.
RESTRICTIONS PROPOSED TO BE ELIMINATED
None of the following investment restrictions are required under the 1940 Act.
Many were originally adopted in response to state law restrictions or
interpretations which no longer apply to the Fund. Therefore, in order to
increase the ability of Fund management to manage the Funds' assets effectively
and efficiently in response to market and regulatory change, it is proposed
that these investment restrictions, which are currently listed as fundamental,
be eliminated. Further explanations pertaining to specific restrictions are
set forth below.
2A. AFFILIATED OWNERSHIP
The purposes intended to be served by this restriction are covered by the
Fund's Code of Ethics and by separate provisions of the 1940 Act.
CURRENT TEXT
[The Fund may not$] purchase or retain the securities of any issuer if, to the
knowledge of the fund, those individual officers and Trustees of the Trust, its
investment adviser or principal underwriter, each owning beneficially more than
1/2 of 1% of the shares of such issuer, together own more than 5% of the
securities of such issuer.
2B. UNSEASONED ISSUERS
Retaining unseasoned issuer restrictions could, among other things, preclude
the Fund from making otherwise attractive investments in newly-formed companies
issuing asset-backed securities.
CURRENT TEXT
[The Fund may not$] invest more than 5% of the value of the fund's total assets
in securities of any issuer with a record of less than three years continuous
operation, including predecessors, except those issued or guaranteed by the
U.S. Government or its agencies and instrumentalities, or municipal bonds rated
at least "A" by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation.
2C. PLEDGING ASSETS
In certain circumstances this restriction could interfere with the Fund's
ability to borrow temporarily for extraordinary or emergency purposes. The
Fund's current borrowing limit of 5% of total assets would remain unchanged.
CURRENT TEXT
[The Fund may not$] mortgage, pledge or hypothecate its assets, except in an
amount up to 10% of the value of its total assets, but only to secure
borrowings for temporary or emergency purposes.
RESTRICTIONS PROPOSED TO BE REVISED AND RECLASSIFIED AS NON-FUNDAMENTAL
2D. RESTRICTED/ILLIQUID SECURITIES
The Fund has a fundamental policy prohibiting the acquisition of "restricted
securities" (I.E., securities with legal or contractual limitations on
transfer) and a separate policy covering "illiquid" securities. Neither of
these restrictions are required to be fundamental under the 1940 Act.
Historically, there has been a concern that restricted securities, which
typically cannot be resold to the public, may be difficult for a mutual fund to
sell at approximately the value at which the fund is carrying the investment.
Restricted securities may or may not be illiquid, however. Some restricted
securities are actively traded among institutional investors and thus highly
liquid in the marketplace. Investor protection would be afforded by the
proposed, non-fundamental investment restriction covering illiquid securities.
The proposed restriction is consistent with current regulatory standards
applicable to all non-money market mutual funds.
CURRENT TEXT
[The Fund may not$] enter into any repurchase agreement maturing in more than
seven days (unless subject to a demand feature of seven days or less) if any
such investment, together with any illiquid securities held by the fund,
exceeds 10% of the value of its total assets.
[The Fund may not$] acquire securities subject to legal or contractual
restrictions on disposition.
PROPOSED TEXT
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities.
2E. INVESTMENTS IN OTHER INVESTMENT COMPANIES
This restriction deals with certain anti-pyramiding concerns addressed by the
1940 Act. Revising this restriction in the manner proposed would allow the Fund
to invest to a limited degree in entities falling within the technical
definition of investment company. On occasion, certain issuers in various
lines of business, primarily financial, fall within this definition but
otherwise represent attractive investment opportunities, consistent with the
Fund's investment objective. Current industry practice is to rely on the 1940
Act for investor protection./1/
CURRENT TEXT
[The Fund may not$] purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition, or reorganization.
PROPOSED TEXT
[The Fund may not$] invest in securities of other investment companies, except
as permitted by the Investment Company Act of 1940, as amended.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THESE
PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS.
3. RATIFICATION OF THE SELECTION BY THE BOARD OF TRUSTEES OF DELOITTE & TOUCHE
LLP AS INDEPENDENT PUBLIC ACCOUNTANT
Pursuant to the 1940 Act, a majority of the entire Board of Trustees (including
a majority of the directors who are not "interested persons"of the Fund as that
term is defined in the 1940 Act) have selected the firm of Deloitte & Touche
LLP as independent accountant for the Fund for the fiscal year 2000. In
addition to the normal audit services, Deloitte & Touche LLP provides services
in connection with the preparation and review of federal and state tax returns
for the Fund. Deloitte & Touche LLP has served as the Fund's independent
accountant since inception and has advised the Fund that it has no material
direct or indirect financial interest in the Fund or its affiliates. The
Fund's Audit Committee recommended that Deloitte & Touche LLP be selected as
the Fund's independent accountant for the current fiscal year. The employment
of the accountant is conditioned upon the right of the Fund to terminate such
employment forthwith without any penalty. No representative of the firm of
Deloitte & Touche LLP is expected to attend the Meeting of Shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF
ITS SELECTION OF DELOITTE & TOUCHE LLP.
/1/SECTION 12(D)(1)(A) OF THE 1940 ACT MAKES IT UNLAWFUL FOR A FUND TO ACQUIRE
MORE THAN (I) 3% OF THE OUTSTANDING VOTING STOCK OF ANOTHER INVESTMENT COMPANY
(OPEN- OR CLOSED-END), (II) SECURITIES OF ANOTHER INVESTMENT COMPANY VALUED AT
MORE THAN 5% OF THE FUND'S TOTAL ASSETS, OR (III) SECURITIES OF ALL OTHER
INVESTMENT COMPANIES VALUED AT MORE THAN 10% OF THE FUND'S TOTAL ASSETS.
SECTION 12(D)(1)(C) OF THE ACT MAKES IT UNLAWFUL FOR A FUND TO ACQUIRE THE
SECURITIES OF A REGISTERED CLOSED-END INVESTMENT COMPANY IF, IMMEDIATELY AFTER
THE ACQUISITION, THE FUND AND OTHER FUNDS MANAGED BY THE SAME INVESTMENT
ADVISER OWN MORE THAN 10% OF THE TOTAL OUTSTANDING VOTING STOCK OF THE
CLOSED-END INVESTMENT COMPANY.
SHAREHOLDER PROPOSALS
Any shareholder proposals for inclusion in proxy solicitation material for a
shareholders meeting should be submitted to the Secretary of the Fund, at the
Fund's principal executive offices, 333 South Hope Street, Los Angeles, CA
90071. Any such proposals must comply with the requirements of rule 14a-8 under
the Securities Exchange Act of 1934.
Under the laws of Massachusetts, where the Fund is organized, the Fund is not
required to hold regular meetings of shareholders. Under the 1940 Act, a vote
of shareholders is required from time to time for particular matters but not
necessarily on an annual basis. As a result, it is not anticipated that the
Fund will hold shareholders meetings on a regular basis, and any shareholder
proposal received may not be considered until such a meeting is held.
GENERAL INFORMATION
Capital Research and Management Company is the investment adviser to the Fund
and is located at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821. American Funds Distributors, Inc. is
the principal underwriter of the Fund's shares and is located at the Los
Angeles and Brea addresses above and also at 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513.
The solicitation of the enclosed Proxy is made by and on behalf of the Board of
Trustees of the Fund.. The cost of soliciting proxies, consisting of printing,
handling and mailing of the Proxies and related materials, will be paid by the
Fund. In addition to solicitation by mail, certain officers and directors of
the Fund, who will receive no extra compensation for their services, may
solicit by telephone, telegram or personally. ALL SHAREHOLDERS ARE URGED TO
MARK, DATE, SIGN, AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES
The management is not aware of any matters that will be presented for action at
the meeting other than the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the proxies in the accompanying form
will confer upon the person or persons entitled to vote the shares represented
by such Proxy a discretionary authority to vote the shares in respect to any
such other matters in accordance with their best judgment in the interest of
the Fund.
A COPY OF THE FUND'S MOST RECENT ANNUAL REPORT MAY BE OBTAINED, WITHOUT CHARGE,
BY WRITING TO THE SECRETARY OF THE FUND AT 333 SOUTH HOPE STREET, LOS ANGELES,
LOS ANGELES, CA 90071 OR BY TELEPHONING 800/421-0180. THESE REQUESTS WILL BE
HONORED WITHIN THREE BUSINESS DAYS OF RECEIPT.
By Order of the Board of Trustees
JULIE F. WILLIAMS
Secretary
September 13, 1999
