SEC. File Nos. 33-19514
811-5446
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 12
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 13
INTERMEDIATE BOND FUND OF AMERICA
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
JULIE F. WILLIAMS
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Cary I. Klafter, Esq.
MORRISON & FOERSTER
345 California Street
San Francisco, California 94104
(Counsel for the Registrant)
The Registrant has filed a declaration pursuant to rule 24f-2
registering an indefinite number of shares under the Securities Act of 1933.
On October 16, 1995, it filed its 24f-2 notice for fiscal 1995.
Approximate date of proposed public offering:
It is proposed that this filing become effective on October 25, 1995,
pursuant to paragraph (b) of rule 485.
INTERMEDIATE BOND FUND OF AMERICA
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number of Captions in Prospectus (Part "A")
Part "A" of Form N-1A
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objective and Policies
5. Management of the Fund Summary of Expenses: Fund Organization and
Management
6. Capital Stock and Other Securities Investment Objective and Policies; Certain
Securities and Investment Techniques;
Fund Organization and Management;
Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchasing Shares
8. Redemption or Repurchase Redeeming Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
Item Number of Captions in Statement of
Part "B" of Form N-1A Additional Information (Part "B")
<S> <C> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History General Information; Investment Restrictions
13. Investment Objectives and Policies Description of Securities and Investment Techniques;
Investment Restrictions
14. Management of the Registrant Fund Officers and Trustees; Management
15. Control Persons and Principal Holders Fund Officers and Trustees
of Securities
16. Investment Advisory and Other Services Management
17. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
18. Capital Stock and Other Securities None
19. Purchase, Redemption and Pricing of Purchase of Shares; Shareholder
Securities Being Offered Account Services and Privileges
20. Tax Status Dividends, Distributions and Federal Taxes
21. Underwriter Management -- Principal Underwriter
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Item in Part "C"
<S> <C>
24. Financial Statements and Exhibits
25. Persons Controlled by or under
Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of
Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
<PAGE>
Prospectus
INTERMEDIATE BOND FUND OF AMERICA (R)
AN OPPORTUNITY FOR CURRENT INCOME
AND PRESERVATION OF CAPITAL PRIMARILY
THROUGH BONDS WITH EFFECTIVE
MATURITIES BETWEEN 3 AND 10 YEARS
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
October 25, 1995
INTERMEDIATE BOND FUND OF AMERICA
333 South Hope Street
Los Angeles, California 90071
The fund's investment objective is to provide investors with current income
consistent with its stated maturity and quality standards and preservation of
capital. It seeks to achieve this objective primarily through investing in
bonds with effective maturities of between 3 and 10 years.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information dated October 25, 1995,
which contains the fund's financial statements, without charge, by writing to
the Secretary of the fund at the above address or telephoning 800/421-0180.
These requests will be honored within three business days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
23-010-1095
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SUMMARY OF EXPENSES
Average annual expenses
paid over a 10-year
period would be
approximately $14 per
year, assuming a $1,000
investment and a 5%
annual return.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses............................. 2
Financial Highlights............................ 3
Investment Objective and Policies............... 3
Certain Securities and Investment Techniques.... 4
Investment Results.............................. 7
Dividends, Distributions and Taxes.............. 8
Fund Organization and Management................ 9
The American Funds Shareholder Guide............ 12-20
Purchasing Shares.............................. 12
Reducing Your Sales Charge..................... 15
Shareholder Services........................... 16
Redeeming Shares............................... 18
Retirement Plans............................... 20
</TABLE>
IMPORTANT PHONE NUMBERS
Shareholder Services: 800/421-0180 ext. 1
Dealer Services: 800/421-9900 ext. 11
American FundsLine(R): 800/325-3590
(24-hour information)
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price)................................... 4.75%/1/
</TABLE>
The fund has no sales charge on reinvested dividends, deferred sales charge,/2/
redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees....................................................... 0.41%
12b-1 expenses........................................................ 0.27%/3/
Other expenses (including audit, legal, shareholder services, transfer
agent and custodian expenses)........................................ 0.10%
Total fund operating expenses......................................... 0.78%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative ex-
penses on a $1,000 investment, assuming a 5%
annual return./4/ $55 $71 $89 $140
</TABLE>
/1/ Sales charges are reduced for certain large purchases. (See "The American
Funds Shareholder Guide: Purchasing Shares--Sales Charges.")
/2/ Any defined contribution plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more eligible employees
or any other purchaser investing at least $1 million in shares of the fund
(or in combination with shares of other funds in The American Funds Group
other than the money market funds) may purchase shares at net asset value;
however, a contingent deferred sales charge of 1% applies on certain
redemptions within 12 months following such purchases. (See "The American
Funds Shareholder Guide: Redeeming Shares--Contingent Deferred Sales
Charge.")
/3/ These expenses may not exceed 0.30% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/4/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
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FINANCIAL The following information has been audited by Deloitte
HIGHLIGHTS & Touche LLP, independent accountants, whose
(For a share unqualified report covering each of the most recent
outstanding five years is included in the statement of additional
throughout the information. This information should be read in
fiscal year) conjunction with the financial statements and
accompanying notes which are included in the statement
of additional information.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
----------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988/1/
------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $13.38 $14.64 $14.28 $13.69 $13.37 $13.78 $13.81 $14.29
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. .93 .95 1.00 1.09 1.21 1.20 1.25 .61
Net realized and
unrealized gain
(loss) on invest-
ments................. .13 (1.20) .37 .59 .30 (.35) (.07) (.48)
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations........... 1.06 (.25) 1.37 1.68 1.51 .85 1.18 .13
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net in-
vestment income....... (.92) (.94) (1.01) (1.09) (1.19) (1.26) (1.21) (.61)
Distributions from
capital gains......... -- (.07) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions... (.92) (1.01) (1.01) (1.09) (1.19) (1.26) (1.21) (.61)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $13.52 $13.38 $14.64 $14.28 $13.69 $13.37 $13.78 $13.81
====== ====== ====== ====== ====== ====== ====== ======
Total Return/2/......... 8.33% (1.80)% 9.95% 12.79% 11.73% 6.43% 8.99% .93%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, End of Year
(in millions)......... $1,501 $1,626 $1,686 $1,215 $ 407 $ 162 $ 100 $ 67
Ratio of Expenses to
Average Net Assets.... .78% .83% .82% .90% 1.00% 1.00% .88% .41%/3/
Ratio of Net Income to
Average Net Assets.... 6.96% 6.79% 7.00% 7.66% 8.67% 8.75% 9.12% 4.79%/3/
Portfolio Turnover
Rate.................. 71.91% 52.94% 42.59% 45.01% 83.00% 86.10% 76.10% 22.40%/3/
</TABLE>
--------
/1/ Period from 2/9/88-8/31/88.
/2/ This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price.
/3/ These ratios are based on operations for the period shown and,
accordingly, are not representative of a full year's operations.
INVESTMENT The fund's investment objective is to seek current
OBJECTIVE income consistent with its stated maturity and quality
AND POLICIES standards and preservation of capital. The fund will
attempt to achieve this objective primarily through
The fund's goal is investing in bonds with effective maturities of 3 to 10
to provide you years and will not purchase any bonds with an effective
with current maturity greater than 10 years. See "Maturity" below.
income and The fund will purchase only high-quality bonds (those
preservation of that are rated with the two highest categories by
capital. either Moody's Investors Service, Inc. (Aaa, Aa) or
Standard & Poor's Corporation (AAA, AA) or if not rated
by either of these rating agencies, determined to be of
comparable quality by Capital Research and Management
Company, the fund's investment adviser). See the
Appendix to the statement of additional information for
a further description of these ratings.
3
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The fund's investments may include U.S. Government bonds
or notes, Government National Mortgage Association
certificates and other mortgage-related securities of
governmental or private issuers, other asset-backed
securities (as described below), and other marketable
debt securities issued by corporations or other
entities. The fund may purchase obligations of non-U.S.
corporations or governmental entities, provided they are
dollar denominated and highly liquid and meet the
maturity and quality standards set forth above. The fund
also may maintain assets in cash or cash equivalents.
(See the statement of additional information for a
description of cash equivalents.) Except when the fund
is in a temporary defensive investment position, at
least 65% of the fund's total assets will be invested in
bonds.
The fund's investment restrictions (which are described
in the statement of additional information) and
objective cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
CERTAIN RISKS The market value of fixed-income securities is
SECURITIES AND generally affected by changes in the level of interest
INVESTMENT rates. An increase in interest rates will tend to reduce
TECHNIQUES their market value, and a decline in interest rates will
tend to increase their value. The magnitude of these
Investing in bonds changes generally will be greater the longer the
involves certain remaining maturity of the security. While the fund's
risks. maturity limitations are intended to reduce the extent
to which the value of its shares will fluctuate, such
fluctuations cannot be eliminated and the fund's share
price typically will decline when interest rates rise.
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 (such as
securities issued by the Government National Mortgage
Association, commonly known as "GNMA certificates"
(described below), and Federal Housing Administration
debentures).
Certain securities issued by U.S. Government
instrumentalities and certain federal agencies are
neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal
sponsorship in one way or another: some are backed by
specific types of collateral; some are supported by the
issuer's right to borrow from the Treasury; some are
supported by the discretionary authority of the Treasury
to purchase certain obligations of the issuer; and
others are supported only by the credit of the issuing
government agency or instrumentality.
4
<PAGE>
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MORTGAGE-RELATED SECURITIES The fund may invest in GNMA
certificates which are securities representing part
ownership of a pool of mortgage loans on which timely
payment of interest and principal is guaranteed by the
U.S. Government. GNMA certificates differ from typical
bonds because principal is repaid monthly over the term
of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will
have stated maturities of up to 30 years, the actual
average life or effective maturity of the GNMA
certificates typically will be substantially less
because the mortgages will be subject to normal
principal amortization and may be prepaid prior to
maturity.
The fund also may invest in securities representing in-
terests in pools of conventional mortgage loans issued
by the Federal National Mortgage Association (FNMA) or
by the Federal Home Loan Mortgage Corporation (FHLMC).
The fund also may invest in collateralized mortgage
obligations (CMOs) and mortgage-backed bonds which may
be issued by various governmental entities or private
institutions. A CMO is made up of a series of bonds of
varying maturities that together are fully
collateralized directly or indirectly by a pool of
mortgages on which the payments of principal and
interest are dedicated to payment of principal and
interest on the bonds. Mortgage-backed bonds are
general obligations fully collateralized directly or
indirectly by a pool of mortgages, but on which
payments are not passed through directly.
OTHER ASSET-BACKED SECURITIES If consistent with its
investment objective and policies, the fund may invest
in other asset-backed securities (unrelated to mortgage
loans) such as securities whose assets consist of a
pool of motor vehicle retail installment sales
contracts or a pool of credit card loan receivables.
See the statement of additional information for a more
complete description of these securities.
REPURCHASE AGREEMENTS The fund may enter into
repurchase agreements, under which it buys a security
and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and
price. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the
repurchase price including accrued interest, as
monitored daily by Capital Research and Management
Company. If the seller under the repurchase agreement
defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has
declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller,
liquidation of the collateral by the fund may be
delayed or limited.
5
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WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS, RE-
VERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS The
fund may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment
agreements (transactions whereby the payment obligation
and interest rate are fixed at the time of the transac-
tion but the settlement is delayed). The fund as pur-
chaser assumes the risk of any decline in value of the
security beginning on the date of the agreement or pur-
chase. As the fund's aggregate commitments under these
transactions increase the opportunity for leverage sim-
ilarly may increase. The fund also may enter into re-
verse repurchase agreements, which are the sale of a
security by the fund and its agreement to repurchase
the security at a specified time and price at a later
date, and "roll" transactions, which are the sale of
GNMA certificates or other securities together with a
commitment (for which the fund typically receives a
fee) to purchase similar, but not identical, securities
at a later date.
MATURITY The fund will not purchase any bonds with
effective maturities of greater than 10 years and,
except when the fund is in a temporary defensive
position, its dollar-weighted average effective
portfolio maturity will range between 3 and 10 years.
Within these limits, the maturity composition of the
fund's portfolio will be adjusted in response to market
conditions and expectations.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objective and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the fund
are listed on the next page.
6
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
YEARS OF EXPERIENCE AS (APPROXIMATE)
ORTFOLIO COUNSELORSP PORTFOLIO COUNSELOR FOR
FOR PRIMARY TITLE(S) INTERMEDIATE BOND WITH CAPITAL
INTERMEDIATE BOND FUND OF AMERICA RESEARCH AND
FUND OF AMERICA (APPROXIMATE) MANAGEMENT
COMPANY OR TOTAL
ITS AFFILIATES YEARS
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abner D. Goldstine President and Trustee of Since the fund began 28 years 43 years
the fund. Senior Vice operations
President and Director,
Capital Research and
Management Company
- -----------------------------------------------------------------------------------------------
John H. Smet Vice President of the 4 years 12 years 13 years
fund. Vice
President, Capital Re-
search and
Management Company
- -----------------------------------------------------------------------------------------------
Mark H. Dalzell Vice President-- 2 years 7 years 18 years
Investment Management
Group, Capital Research
and Management Company
- -----------------------------------------------------------------------------------------------
John W. Ressner Portfolio Counselor-- 4 years 7 years 7 years
Fixed Income, Capital Re-
search and Management
Company
- -----------------------------------------------------------------------------------------------
Richard T. Schotte Senior Vice President, 2 years 18 years 28 years
Capital
Research and Management
Company
- -----------------------------------------------------------------------------------------------
The fund began operations on February 19, 1988.
- -----------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various indices or other mutual funds in re-
ports to shareholders, sales literature and advertise-
The fund has ments. The results may be calculated on a total return,
averaged a total yield and/or distribution rate basis for various peri-
return of 6.86% a ods, with or without sales charges. Results calculated
year (assuming the without a sales charge will be higher. Total returns
maximum sales assume the reinvestment of all dividends and capital
charge was paid) gain distributions.
over its lifetime
(February 19, 1988 The fund's yield and the average annual total returns
through September are calculated in accordance with Securities and
30, 1995). Exchange Commission requirements which provide that the
maximum sales charge be reflected. The fund's
distribution rate is calculated by annualizing the
current month's dividend and dividing by the average
price for the month. For the 30-day period ended
September 30, 1995, the fund's SEC yield was 5.45% and
the distribution rate was 6.33% at maximum offering
price. The SEC yield reflects income earned by the
fund, while the distribution rate reflects dividends
paid by the fund. Among the elements used to calculate
the SEC yield are the dividend and interest income
earned and expenses paid by the fund, whereas the
income paid to shareholders is used to calculate the
distribution rate. The fund's total return over the
past 12 months and average annual total returns over
the past five-year and lifetime periods, as of
September 30, 1995, were 4.88%, 7.03% and 6.86%,
respectively. Of course, past results are not a
guarantee of future results. Further information
regarding the fund's investment results is contained in
the fund's annual report which may be obtained without
charge by writing to the Secretary of the fund at the
address indicated on the cover of this prospectus.
7
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DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS The fund declares dividends
DISTRIBUTIONS from its net investment income daily and distributes
AND TAXES the accrued dividends to shareholders each month.
Dividends begin accruing one day after payment for
Income shares is received by the fund or American Funds
distributions are Service Company. All capital gains, if any, are
made each month. distributed annually, usually in December. When a
capital gain is declared, the net asset value per share
is reduced by the amount of the payment.
FEDERAL TAXES The fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. For any fiscal year in which the fund so
qualifies and distributes to shareholders all of its
net investment income and net capital gains, the fund
itself is relieved of federal income tax.
All dividends and capital gains are taxable whether
they are reinvested or received in cash -- unless you
are exempt from taxation or entitled to tax deferral.
Early each year, you will be notified as to the amount
and federal tax status of all dividends and capital
gains paid during the prior year. Such dividends and
capital gains may also be subject to state or local
taxes.
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS
NOTIFIED THE FUND THAT THE TAXPAYER IDENTIFICATION
NUMBER LISTED ON YOUR ACCOUNT IS INCORRECT ACCORDING TO
THEIR RECORDS OR THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, FEDERAL LAW GENERALLY REQUIRES THE FUND TO
WITHHOLD 31% FROM ANY DIVIDENDS AND/OR REDEMPTIONS
(INCLUDING EXCHANGE REDEMPTIONS). Amounts withheld are
applied to your federal tax liability; a refund may be
obtained from the Service if withholding results in
overpayment of taxes. Federal law also requires the
fund to withhold 30% or the applicable tax treaty rate
from dividends paid to certain nonresident alien, non-
U.S. partnership and non-U.S. corporation shareholder
accounts.
This is a brief summary of some of the tax laws that
affect your investment in the fund. Please see the
statement of additional information and your tax
adviser for further information.
8
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FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND organized as a Massachusetts business trust in 1987.
MANAGEMENT The fund's board supervises fund operations and
performs duties required by applicable state and
The fund is a federal law. Members of the board who are not employed
member of The by Capital Research and Management Company or its
American Funds affiliates are paid certain fees for services rendered
Group, which is to the fund as described in the statement of additional
managed by one of information. They may elect to defer all or a portion
the largest and of these fees through a deferred compensation plan in
most experienced effect for the fund. Shareholders have one vote per
investment share owned and, at the request of the holders of at
advisers. least 10% of the shares, the fund will hold a meeting
at which any member of the board could be removed by
majority vote. There will not usually be a shareholder
meeting in any year except, for example, when the
election of the board is required to be acted upon by
shareholders under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92621. (See "The American Funds
Shareholder Guide: Purchasing Shares--Investment
Minimums and Fund Numbers" for a listing of funds in
The American Funds Group.) Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rate of 0.30% of the first $60 million of the
fund's net assets, plus 0.21% on net assets in excess
of $60 million but not exceeding $1 billion, plus 0.18%
on net assets in excess of $1 billion but not exceeding
$3 billion, plus 0.16% on net assets in excess of $3
billion, plus 3% of the first $40 million of annual
gross income, plus 2.5% of annual gross investment
income in excess of $40 million but not exceeding $100
million, plus 2% of annual gross investment income in
excess of $100 million. Assuming net assets of $1.5
billion and gross investment income levels of 5%, 6%,
7%, 8% and 9% management fees would be .33%, .35%,
.38%, .40%, and .42%, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
9
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Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. Fixed-income securities are
generally traded on a "net" basis with a dealer acting
as principal for its own account without a stated
commission, although the price of the security usually
includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed
price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's
concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no
commissions or discounts are paid.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors is located
at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92621, 8000 IH-
10 West, San Antonio, TX 78230, 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240, and 5300 Robin Hood
Road, Norfolk, VA 23513. Telephone conversations with
American Funds Distributors may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primary intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.30% of its average net assets
annually (0.25% of which may be for service fees). See
"Purchasing Shares--Sales Charges" below.
10
<PAGE>
================================================================================
TRANSFER AGENT American Funds Service Company, a wholly
owned subsidiary of Capital Research and Management
Company, is the transfer agent and performs shareholder
service functions. It was paid a fee of $1,058,000 for
the fiscal year ended August 31, 1995. Telephone
conversations with American Funds Service Company may
be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
SERVICE ADDRESS AREAS SERVED
AREA
------------------------------------------------------------
WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92622-2205 MT, NV, OR, UT, WA
Fax: 714/671-7080 and outside the U.S.
------------------------------------------------------------
CENTRAL- P.O. Box 659522 AR, CO, IA, KS, LA,
WEST San Antonio, TX 78265-9522 MN, MO, ND, NE, NM,
Fax: 210/530-4050 OK, SD, TX, and WY
------------------------------------------------------------
CENTRAL- P.O. Box 6007 AL, IL, IN, KY, MI,
EAST Indianapolis, IN 46206-6007 MS, OH, TNand WI
Fax: 317/735-6620
------------------------------------------------------------
EAST P.O. Box 2280 CT, DE, FL, GA, MA,
Norfolk, VA 23501-2280 MD, ME, NC, NH, NJ,
Fax: 804/670-4773 NY, PA, RI, SC, VA,
VT, WV and
Washington, D.C.
------------------------------------------------------------
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 FOR SERVICE.
------------------------------------------------------------
[MAP OF THE UNITED STATES OF AMERICA]
------------------------------------------------------------
West (light grey); Central-West (white); Central-East
(dark grey), East (green)
11
<PAGE>
THE AMERICAN FUNDS SHAREHOLDER GUIDE
---------------------------------------------------------
PURCHASING SHARES METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
---------------------------------------------------------
See "Investment $50 minimum (except
Your investment Minimums and Fund where a lower
dealer can help Numbers" for minimum is noted
you establish your initial under "Investment
account--and help investment Minimums and Fund
you add to it minimums. Numbers").
whenever you like. ---------------------------------------------------------
By Visit any Mail directly to
contacting investment dealer your investment
your who is registered dealer's address
investment in the state printed on your
dealer where the account statement.
purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
---------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check
account payable to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the
account envelope provided
application. with your account
statement.
---------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account investments in the
number(s), if same manner as
necessary. Please described under
indicate an "Initial Investment."
investment dealer
on the account.
Instruct your
bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco,
CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
---------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
---------------------------------------------------------
SHARE PRICE Shares are purchased at the next offering
price after the order is received by the fund or
American Funds Service Company. In the case of orders
sent directly to the fund or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of trading (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange is open. The
current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share. The net asset value
per share of the money market funds normally will remain
constant at $1.00 based on the funds' current practice
of valuing their shares using the penny-rounding method
in accordance with rules of the Securities and Exchange
Commission.
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost or
destroyed certificates.
12
<PAGE>
================================================================================
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT AVAIL-
ABLE FOR THE MONEY MARKET FUNDS.
INVESTMENT MINIMUMS AND FUND NUMBERS Here are the
minimum initial investments required by the funds in
The American Funds Group along with fund numbers for
use with our automated phone line, American
FundsLine(R) (see description below):
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
- ---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS AMCAP Fund(R)......... $1,000 02
American Balanced Fund(R)........................ 500 11
American Mutual Fund(R).......................... 250 03
Capital Income Builder(R)........................ 1,000 12
Capital World Growth and Income Fund(SM)......... 1,000 33
EuroPacific Growth Fund(R)....................... 250 16
Fundamental Investors(SM)........................ 250 10
The Growth Fund of America(R).................... 1,000 05
The Income Fund of America(R).................... 1,000 06
The Investment Company of America(R)............. 250 04
The New Economy Fund(R).......................... 1,000 14
New Perspective Fund(R).......................... 250 07
SMALLCAP World Fund(SM).......................... 1,000 35
Washington Mutual Investors Fund(SM)............. 250 01
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
- ---- ---------- ------
<S> <C> <C>
BOND FUNDS
American High-Income Municipal Bond Fund(SM)....... $1,000 40
American High-Income Trust(R)...................... 1,000 21
The Bond Fund of America(SM)....................... 1,000 08
Capital World Bond Fund(R)......................... 1,000 31
Intermediate Bond Fund of America(R)............... 1,000 23
Limited Term Tax-Exempt Bond Fund of America(SM)... 1,000 43
The Tax-Exempt Bond Fund of America(SM)............ 1,000 19
The Tax-Exempt Fund of California(R)*.............. 1,000 20
The Tax-Exempt Fund of Maryland(R)*................ 1,000 24
The Tax-Exempt Fund of Virginia(R)*................ 1,000 25
U.S. Government Securities Fund(SM)................ 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(R)............ 2,500 09
The Tax-Exempt Money Fund of America(SM)........... 2,500 39
The U.S. Treasury Money Fund of America(SM)........ 2,500 49
</TABLE>
--------
*Available only in certain states.
For retirement plan investments, the minimum is $250,
except that the money market funds have a minimum of
$1,000 for individual retirement accounts (IRAs). Mini-
mums are reduced to $50 for purchases through "Auto-
matic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans
through payroll deductions and may be reduced or waived
for shareholders of other funds in The American Funds
Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT
PLAN INVESTMENTS. The minimum is $50 for additional in-
vestments (except as noted above).
SALES CHARGES The sales charges you pay when purchasing
the stock, stock/bond, and bond funds of The American
Funds Group are set forth below. The money market funds
of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for
a listing of the funds.)
13
<PAGE>
================================================================================
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
--------------------- ---------- -------- -------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000................. 6.10% 5.75% 5.00%
$50,000 but less than $100,000.... 4.71 4.50 3.75
BOND FUNDS
Less than $25,000................. 4.99 4.75 4.00
$25,000 but less than $50,000..... 4.71 4.50 3.75
$50,000 but less than $100,000.... 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000... 3.63 3.50 2.75
$250,000 but less than $500,000... 2.56 2.50 2.00
$500,000 but less than $1,000,000. 2.04 2.00 1.60
$1,000,000 or more................ none none (see below)
---------------------------------------------------------------------
</TABLE>
Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 mil-
lion or more, for purchases by any employer-sponsored
403(b) plan or defined contribution plan qualified un-
der Section 401(a) of the Internal Revenue Code includ-
ing a "401(k)" plan with 200 or more eligible employees
(paid pursuant to the fund's plan of distribution), and
for purchases made at net asset value by certain re-
tirement plans of organizations with collective retire-
ment plan assets of $100 million or more as set forth
in the statement of additional information (paid by
American Funds Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will, during cal-
endar year 1996, provide additional promotional incen-
tives to dealers. Currently these incentives are lim-
ited to the top one hundred dealers who have sold
shares of the fund or other funds in The American Funds
Group. These incentive payments will be based on a pro
rata share of a qualifying dealer's sales. American
Funds Distributors will, on an annual basis, determine
the advisability of continuing these promotional incen-
tives.
Any employer-sponsored 403(b) plan or defined contribu-
tion plan qualified under Section 401(a) of the Inter-
nal Revenue Code including a "401(k)" plan with 200 or
more eligible employees or any other purchaser invest-
ing at least $1 million in shares of the fund (or in
combination with shares of other funds in The American
Funds Group other than the money market funds) may pur-
chase shares at net asset value; however, a contingent
deferred sales charge of 1% is imposed on certain re-
demptions within one year of the purchase. (See "Re-
deeming Shares--Contingent Deferred Sales Charge.")
Qualified dealers currently are paid a continuing serv-
ice fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to
14
<PAGE>
================================================================================
compensate them for providing certain services. (See
"Fund Organization and Management--Plan of Distribu-
tion.") These services include processing purchase and
redemption transactions, establishing shareholder ac-
counts and providing certain information and assistance
with respect to the fund.
NET ASSET VALUE PURCHASES The stock, stock/bond and
bond funds may sell shares at net asset value to: (1)
current or retired directors, trustees, officers and
advisory board members of the funds managed by Capital
Research and Management Company, employees of Washing-
ton 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 regis-
tered representatives with respect to accounts estab-
lished 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 dealer; (3) companies exchang-
ing securities with the fund through a merger, acquisi-
tion or exchange offer; (4) trustees or other fiducia-
ries purchasing shares for certain retirement plans of
organizations with retirement plan assets of $100 mil-
lion or more; (5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital
Group Companies, Inc.; and (7) The Capital Group Compa-
nies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset
value to these persons and organizations due to
anticipated economies in sales effort and expense.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE include those by you, your spouse and your children
under the age of 21, if all parties are purchasing
You and your shares for their own account(s), which may include
immediate family purchases through employee benefit plan(s) such as an
may combine IRA, individual-type 403(b) plan or single-participant
investments to Keogh-type plan or by a business solely controlled by
reduce your costs. these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) for a diversified common
trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating
fund shares. Purchases made for nominee or street name
accounts (securities held in the name of an investment
dealer or another nominee such as a bank trust
department instead of the customer) may not be
aggregated with those made for other accounts and may
not be aggregated with other nominee or street name
accounts unless otherwise qualified as described above.
15
<PAGE>
================================================================================
CONCURRENT PURCHASES To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your invest-
ment may also be reduced by taking into account the
current value of your existing holdings in The American
Funds Group. Direct purchases of the money market funds
are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application and
the statement of additional information under "Purchase
of Shares--Statement of Intention.")
YOU MUST LET YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY KNOW IF YOU QUALIFY FOR A REDUCTION IN
YOUR SALES CHARGE USING ONE OR ANY COMBINATION OF THE
METHODS DESCRIBED ABOVE.
SHAREHOLDER AUTOMATIC INVESTMENT PLAN You may make regular monthly
SERVICES or quarterly investments through automatic charges to
your bank account. Once a plan is established, your ac-
The fund offers count will normally be charged by the 10th day of the
you a valuable month during which an investment is made (or by the
array of services 15th day of the month in the case of any retirement
designed to plan for which Capital Guardian Trust Company--another
increase the affiliate of The Capital Group Companies, Inc.--acts as
convenience and trustee or custodian).
flexibility of
your investment-- AUTOMATIC REINVESTMENT Dividends and capital gain dis-
services you can tributions are reinvested in additional shares at no
use to alter your sales charge unless you indicate otherwise on the
investment program account application. You also may elect to have divi-
as your needs and dends and/or capital gain distributions paid in cash by
circumstances informing the fund, American Funds Service Company or
change. your investment dealer.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of ad-
ditional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
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
16
<PAGE>
================================================================================
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 dis-
tributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American FundsLine(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for
which Capital Guardian Trust Company serves as trustee
may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simul-
taneously at the share prices next determined after the
exchange order is received. (See "Purchasing Shares--
Share Price.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES You may automatically exchange
shares (in amounts of $50 or more) among any of the
funds in The American Funds Group on any day (or pre-
ceding business day if the day falls on a non-business
day) of each month you designate. You must either meet
the minimum initial investment requirement for the re-
ceiving fund OR the originating fund's balance must be
at least $5,000 and the receiving fund's minimum must
be met within one year.
AUTOMATIC WITHDRAWALS You may make automatic
withdrawals of $50 or more as follows: five or more
times per year if you have an account of $10,000 or
more, or four or fewer times per year if you have an
account of $5,000 or more. Withdrawals are made on or
about the 15th day of each month you designate, and
checks will be sent within seven days. (See "Other
Important Things to Remember.") Additional investments
in a withdrawal account must not be less than one
year's scheduled withdrawals or $1,200, whichever is
greater. However, additional investments in a
withdrawal account may be inadvisable due to sales
charges and tax liabilities.
THESE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE
FUND TO BE PURCHASED MAY BE LEGALLY OFFERED AND MAY BE
TERMINATED OR MODIFIED AT ANY TIME UPON 60 DAYS'
WRITTEN NOTICE.
ACCOUNT STATEMENTS Your account is opened in accordance
with your registration instructions. Transactions in
the account, such as additional investments and
dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service
Company.
17
<PAGE>
================================================================================
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, redeem shares (up to $10,000 per fund, per
account each day), or exchange shares around the clock
with American FundsLine(R). To use this service, call
800/325-3590 from a TouchTone(TM) telephone.
Redemptions and exchanges through American FundsLine(R)
are subject to the conditions noted above and in
"Redeeming Shares--Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of
funds in The American Funds Group under "Purchasing
Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of
your Social Security number or other tax identification
number associated with your account) and account
number.
---------------------------------------------------------
REDEEMING By writing to Send a letter of instruction
SHARES American specifying the name of the fund, the
Funds Service number of shares or dollar amount to
You may take money Company (at be sold, your name and account
out of your the number. You should also enclose any
account whenever appropriate share certificates you wish to
you please. address redeem. For redemptions over $50,000
indicated and for certain redemptions of
under "Fund $50,000 or less (see below), your
Organization signature must be guaranteed by a
and bank, savings association, credit
Management-- union, or member firm of a domestic
Transfer stock exchange or the National
Agent") Association of Securities Dealers,
Inc., that is an eligible guarantor
institution. You should verify with
the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required for redemption of shares
held in corporate, partnership or
fiduciary accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
---------------------------------------------------------
By contacting If you redeem shares through your
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
---------------------------------------------------------
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the
conditions
noted in this
section and
in "Telephone
Redemptions
and
Exchanges"
below)
---------------------------------------------------------
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
---------------------------------------------------------
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY
REDEMPTION OF $50,000 OR LESS PROVIDED THE REDEMPTION
CHECK IS MADE PAYABLE TO THE REGISTERED SHAREHOLDER(S)
AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE
ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST 10
DAYS.
18
<PAGE>
================================================================================
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine(R)), fax or
telegraph redemption and/or exchange options, you agree
to hold the fund, American Funds Service Company, any
of its affiliates or mutual funds managed by such
affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including
attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these
options. However, you may elect to opt out of these
options by writing American Funds Service Company (you
may reinstate them at any time also by writing American
Funds Service Company). If American Funds Service
Company does not employ reasonable procedures to
confirm that the instructions received from any person
with appropriate account information are genuine, the
fund may be liable for losses due to unauthorized or
fraudulent instructions. In the event that shareholders
are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made
in writing only.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive
of reinvested dividends and capital gain distributions)
or the total cost of such shares. Shares held for the
longest period are assumed to be redeemed first for
purposes of calculating this charge. The charge is
waived for exchanges (except if shares acquired by
exchange were then redeemed within 12 months of the
initial purchase); for distributions from qualified
retirement plans and other employee benefit plans; for
redemptions resulting from participant- directed
switches among investment options within a participant-
directed employer-sponsored retirement plan; for
distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 59 1/2; for tax-free
returns of excess contributions to IRAs; for
redemptions through certain automatic withdrawals not
exceeding 10% of the amount that would otherwise be
subject to the charge; and for redemptions in
connection with loans made by qualified retirement
plans.
REINSTATEMENT PRIVILEGE You may reinvest proceeds from
a redemption or a dividend or capital gain distribution
without sales charge (any contingent deferred sales
charge paid will be credited to your
19
<PAGE>
================================================================================
account) in any fund in The American Funds Group. Send
a written request and a check to American Funds Service
Company within 90 days after the date of the redemption
or distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same
fund within 30 days. If you redeem your shares within
90 days after purchase and the sales charge on the
purchase of other shares is waived under the
reinstatement privilege, the sales charge you
previously paid for the shares may not be taken into
account when you calculate your gain or loss on that
redemption.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
RETIREMENT You may invest in the funds through various retirement
PLANS plans including the following plans for which Capital
Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh- and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact
American Funds Distributors or your investment dealer.
To determine which retirement plan is appropriate for
you, please consult your tax adviser. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS INVESTMENTS FOR RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
20
<PAGE>
Prospectus
for Eligible Retirement Plans
AN OPPORTUNITY FOR CURRENT
INCOME AND PRESERVATION OF CAPITAL PRIMARILY
THROUGH BONDS WITH EFFECTIVE MATURITIES
BETWEEN 3 AND 10 YEARS
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
October 25, 1995
INTERMEDIATE BOND FUND OF AMERICA
333 South Hope Street
Los Angeles, California 90071
The fund's investment objective is to provide investors with current income
consistent with its stated maturity and quality standards and preservation of
capital. It seeks to achieve this objective primarily through investing in
bonds with effective maturities of between 3 and 10 years.
This prospectus relates only to shares of the fund offered without a sales
charge to eligible retirement plans. For a prospectus regarding shares of the
fund to be acquired otherwise, contact the Secretary of the fund at the
address indicated above.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information dated October 25, 1995,
which contains the fund's financial statements, without charge, by writing to
the Secretary of the fund at the above address or telephoning 800/421-0180.
These requests will be honored within three business days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
RP 23-010-1095
<PAGE>
================================================================================
SUMMARY OF EXPENSES
Average annual
expenses paid over a
10-year period would
be approximately $10
per year, assuming a
$1,000 investment and
a 5% annual return.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses............................... 2
Financial Highlights.............................. 3
Investment Objective and Policies................. 3
Certain Securities and Investment Techniques...... 4
Investment Results................................ 7
Dividends, Distributions and Taxes................ 7
Fund Organization and Management.................. 8
Purchasing Shares................................. 10
Shareholder Services.............................. 11
Redeeming Shares.................................. 11
</TABLE>
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the fund with no sales
charge./1/ The fund has no sales charge on reinvested dividends, deferred
sales charges, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees....................................................... 0.41%
12b-1 expenses........................................................ 0.27%/2/
Other expenses (including audit, legal, shareholder services, transfer
agent and custodian expenses)........................................ 0.10%
Total fund operating expenses......................................... 0.78%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative ex-
penses on a $1,000 investment, assuming a 5%
annual return./3/ $8 $25 $43 $97
</TABLE>
/1/ Retirement plans of organizations with $100 million or more in collective
retirement plan assets may purchase shares of the fund with no sales charge.
In addition, any defined contribution plan qualified under Section 401(a) of
the Internal Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at least $1 million in
shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares
at net asset value; however, a contingent deferred sales charge of 1%
applies on certain redemptions within 12 months following such purchases.
(See "Redeeming Shares--Contingent Deferred Sales Charge.")
/2/ These expenses may not exceed 0.30% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/3/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE>
================================================================================
FINANCIAL The following information has been audited by Deloitte
HIGHLIGHTS & Touche LLP, independent accountants, whose
(For a share unqualified report covering each of the most recent
outstanding five years is included in the statement of additional
throughout the information. This information should be read in
fiscal year) conjunction with the financial statements and
accompanying notes which are included in the statement
of additional information.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
----------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988/1/
------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $13.38 $14.64 $14.28 $13.69 $13.37 $13.78 $13.81 $14.29
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. .93 .95 1.00 1.09 1.21 1.20 1.25 .61
Net realized and
unrealized gain
(loss) on invest-
ments................. .13 (1.20) .37 .59 .30 (.35) (.07) (.48)
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations........... 1.06 (.25) 1.37 1.68 1.51 .85 1.18 .13
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net in-
vestment income....... (.92) (.94) (1.01) (1.09) (1.19) (1.26) (1.21) (.61)
Distributions from
capital gains......... -- (.07) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions... (.92) (1.01) (1.01) (1.09) (1.19) (1.26) (1.21) (.61)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $13.52 $13.38 $14.64 $14.28 $13.69 $13.37 $13.78 $13.81
====== ====== ====== ====== ====== ====== ====== ======
Total Return/2/......... 8.33% (1.80)% 9.95% 12.79% 11.73% 6.43% 8.99% .93%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of Year
(in millions)......... $1,501 $1,626 $1,686 $1,215 $ 407 $ 162 $ 100 $ 67
Ratio of Expenses to
Average Net Assets.... .78% .83% .82% .90% 1.00% 1.00% .88% .41%/3/
Ratio of Net Income to
Average Net Assets.... 6.96% 6.79% 7.00% 7.66% 8.67% 8.75% 9.12% 4.79%/3/
Portfolio Turnover
Rate.................. 71.91% 52.94% 42.59% 45.01% 83.00% 86.10% 76.10% 22.40%/3/
</TABLE>
--------
/1/ Period from 2/9/88-8/31/88.
/2/ Calculated with no sales charge.
/3/ These ratios are based on operations for the period shown and,
accordingly, are not representative of a full year's operations.
INVESTMENT The fund's investment objective is to seek current
OBJECTIVE income consistent with its stated maturity and quality
AND POLICIES standards and preservation of capital. The fund will
attempt to achieve this objective primarily through
The fund's goal is investing in bonds with effective maturities of 3 to 10
to provide you years and will not purchase any bonds with an effective
with high current maturity greater than 10 years. See "Maturity" below.
income and The fund will purchase only high-quality bonds (those
preservation of that are rated with the two highest categories by
capital. either Moody's Investors Service, Inc. (Aaa, Aa) or
Standard & Poor's Corporation (AAA, AA) or if not rated
by either of these rating agencies, determined to be of
comparable quality by Capital Research and Management
Company, the fund's investment adviser). See the
Appendix to the statement of additional information for
a further description of these ratings.
The fund's investments may include U.S. Government
bonds or notes, Government National Mortgage
Association certificates and other mortgage-related
securities of governmental or private issuers, other
asset-backed securities (as described below), and other
marketable debt securities issued by corporations or
other entities. The fund may purchase obligations of
non-U.S. corporations or governmental entities,
provided they are dollar denominated and highly liquid
and meet the
3
<PAGE>
================================================================================
maturity and quality standards set forth above. The
fund also may maintain assets in cash or cash
equivalents. (See the statement of additional
information for a description of cash equivalents.)
Except when the fund is in a temporary defensive
investment position, at least 65% of the fund's total
assets will be invested in bonds.
The fund's investment restrictions (which are described
in the statement of additional information) and
objective cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
CERTAIN RISKS The market value of fixed-income securities is
SECURITIES AND generally affected by changes in the level of interest
INVESTMENT rates. An increase in interest rates will tend to
TECHNIQUES reduce their market value, and a decline in interest
rates will tend to increase their value. The magnitude
Investing in bonds of these changes generally will be greater the longer
involves certain the remaining maturity of the security. While the
risks. fund's maturity limitations are intended to reduce the
extent to which the value of its shares will fluctuate,
such fluctuations cannot be eliminated and the fund's
share price typically will decline when interest rates
rise.
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 (such as
securities issued by the Government National Mortgage
Association, commonly known as "GNMA certificates"
(described below), and Federal Housing Administration
debentures).
Certain securities issued by U.S. Government
instrumentalities and certain federal agencies are
neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal
sponsorship in one way or another: some are backed by
specific types of collateral; some are supported by the
issuer's right to borrow from the Treasury; some are
supported by the discretionary authority of the
Treasury to purchase certain obligations of the issuer;
and others are supported only by the credit of the
issuing government agency or instrumentality.
MORTGAGE-RELATED SECURITIES The fund may invest in GNMA
certificates which are securities representing part
ownership of a pool of mortgage loans on which timely
payment of interest and principal is guaranteed by the
U.S. Government. GNMA certificates differ from typical
bonds because principal is repaid monthly over the term
of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will
have stated maturities of up to 30 years, the actual
average life or effective maturity of the GNMA
certificates typically will be substantially less
because the mortgages will be subject to normal
principal amortization and may be prepaid prior to
maturity.
4
<PAGE>
================================================================================
The fund also may invest in securities representing in-
terests in pools of conventional mortgage loans issued
by the Federal National Mortgage Association (FNMA) or
by the Federal Home Loan Mortgage Corporation (FHLMC).
The fund also may invest in collateralized mortgage
obligations (CMOs) and mortgage-backed bonds which may
be issued by various governmental entities or private
institutions. A CMO is made up of a series of bonds of
varying maturities that together are fully
collateralized directly or indirectly by a pool of
mortgages on which the payments of principal and
interest are dedicated to payment of principal and
interest on the bonds. Mortgage-backed bonds are
general obligations fully collateralized directly or
indirectly by a pool of mortgages, but on which
payments are not passed through directly.
OTHER ASSET-BACKED SECURITIES If consistent with its
investment objective and policies, the fund may invest
in other asset-backed securities (unrelated to mortgage
loans) such as securities whose assets consist of a
pool of motor vehicle retail installment sales
contracts or a pool of credit card loan receivables.
See the statement of additional information for a more
complete description of these securities.
REPURCHASE AGREEMENTS The fund may enter into
repurchase agreements, under which it buys a security
and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and
price. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the
repurchase price including accrued interest, as
monitored daily by Capital Research and Management
Company. If the seller under the repurchase agreement
defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has
declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller,
liquidation of the collateral by the fund may be
delayed or limited.
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS, RE-
VERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS The
fund may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment
agreements (transactions whereby the payment obligation
and interest rate are fixed at the time of the transac-
tion but the settlement is delayed). The fund as pur-
chaser assumes the risk of any decline in value of the
security beginning on the date of the agreement or pur-
chase. As the fund's aggregate commitments under these
transactions increase the opportunity for leverage sim-
ilarly may increase. The fund also may enter into re-
verse repurchase agreements, which are the sale of a
security by the fund and its agreement to repurchase
the security at a specified time and price at a later
date, and "roll" transactions, which are the sale of
GNMA certificates or other
5
<PAGE>
================================================================================
securities together with a commitment (for which the
fund typically receives a fee) to purchase similar, but
not identical, securities at a later date.
MATURITY The fund will not purchase any bonds with
effective maturities of greater than 10 years and,
except when the fund is in a temporary defensive
position, its dollar-weighted average effective
portfolio maturity will range between 3 and 10 years.
Within these limits, the maturity composition of the
fund's portfolio will be adjusted in response to market
conditions and expectations.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objective and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the fund
are listed below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
ORTFOLIO COUNSELORSP YEARS OF EXPERIENCE AS
FOR PRIMARY TITLE(S) PORTFOLIO COUNSELOR WITH CAPITAL
INTERMEDIATE BOND FOR RESEARCH AND
FUND OF AMERICA INTERMEDIATE BOND FUND MANAGEMENT
OF AMERICA COMPANY OR TOTAL
(APPROXIMATE) ITS AFFILIATES YEARS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abner D. Goldstine President and Trustee of Since the fund began 28 years 43 years
the fund. operations
Senior Vice President and
Director, Capital Re-
search and Management
Company
- ------------------------------------------------------------------------------------------------
John H. Smet Vice President of the 4 years 12 years 13 years
fund. Vice
President, Capital Re-
search and
Management Company
- ------------------------------------------------------------------------------------------------
Mark H. Dalzell Vice President-Investment 2 years 7 years 18 years
Management Group, Capital
Research and Management
Company
- ------------------------------------------------------------------------------------------------
John W. Ressner Portfolio Counselor-Fixed 4 years 7 years 7 years
Income, Capital Research
and Management Company
- ------------------------------------------------------------------------------------------------
Richard T. Schotte Senior Vice President, 2 years 18 years 28 years
Capital
Research and Management
Company
- ------------------------------------------------------------------------------------------------
The fund began operations on February 19, 1988.
- ------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
================================================================================
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various indices or other mutual funds in re-
ports to shareholders, sales literature and advertise-
The fund has ments. The results may be calculated on a total return,
averaged a total yield and/or distribution rate basis for various peri-
return (at no ods, with or without sales charges. Results calculated
sales charge) of without a sales charge will be higher. Total returns
7.54% a year over assume the reinvestment of all dividends and capital
its lifetime gain distributions.
(February 19, 1988 The fund's yield for the average annual total returns
through September are calculated with no sales charge. The fund's
30, 1995). distribution rate is calculated by annualizing the
current month's dividend and dividing by the average
price for the month. For the 30-day period ended
September 30, 1995, the fund's SEC yield was 5.73% and
the distribution rate was 6.64% with no sales charge.
The SEC yield reflects income earned by the fund, while
the distribution rate reflects dividends paid by the
fund. Among the elements used to calculate the SEC
yield are the dividend and the interest income earned
and expenses paid by the fund, whereas the income paid
to shareholders is used to calculate the distribution
rate. The fund's total return over the past 12 months
and average annual total returns over the past five-
year and lifetime periods, as of September 30, 1995,
were 10.13%, 8.08% and 7.54%, respectively. Of course,
past results are not a guarantee of future results.
Further information regarding the fund's investment
results is contained in the fund's annual report which
may be obtained without charge by writing to the
Secretary of the fund at the address indicated on the
cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS The fund declares dividends
DISTRIBUTIONS from its net investment income daily and distributes
AND TAXES the accrued dividends to shareholders each month.
Dividends begin accruing one day after payment for
Income shares is received by the fund or American Funds
distributions are Service Company. All capital gains, if any, are
made each month. distributed annually, usually in December. When a
capital gain is declared, the net asset value per share
is reduced by the amount of the payment.
The terms of your plan will govern how your plan may
receive distributions from the fund. Generally,
periodic distributions from the fund to your plan are
reinvested in additional fund shares, although your
plan may permit fund distributions from net investment
income to be received by you in cash while reinvesting
capital gain distributions in additional shares or all
fund distributions to be received in cash. Unless you
select another option, all distributions will be
reinvested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. In any fiscal year in which the fund so
qualifies and distributes to shareholders all of its
net investment income and net capital gains, the fund
itself is relieved of federal income tax. The tax
treatment of redemptions from a retirement plan may
differ from redemptions from an ordinary shareholder
account.
Please see the statement of additional information and
your tax adviser for further information.
7
<PAGE>
================================================================================
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND organized as a Massachusetts business trust in 1987.
MANAGEMENT The fund's board supervises fund operations and
performs duties required by applicable state and
The fund is a federal law. Members of the board who are not employed
member of The by Capital Research and Management Company or its
American Funds affiliates are paid certain fees for services rendered
Group, which is to the fund as described in the statement of additional
managed by one of information. They may elect to defer all or a portion
the largest and of these fees through a deferred compensation plan in
most experienced effect for the fund. Shareholders have one vote per
investment share owned and, at the request of the holders of at
advisers. least 10% of the shares, the fund will hold a meeting
at which any member of the board could be removed by
majority vote. There will not usually be a shareholder
meeting in any year except, for example, when the
election of the board is required to be acted upon by
shareholders under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92621. Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rate of 0.30% of the first $60 million of the
fund's net assets, plus 0.21% on net assets in excess
of $60 million but not exceeding $1 billion, plus 0.18%
on net assets in excess of $1 billion but not exceeding
$3 billion, plus 0.16% on net assets in excess of $3
billion, plus 3% of the first $40 million of annual
gross income, plus 2.5% of annual gross investment
income in excess of $40 million but not exceeding $100
million, plus 2% of annual gross investment income in
excess of $100 million. Assuming net assets of $1.5
billion and gross investment income levels of 5%, 6%,
7%, 8% and 9% management fees would be .33%, .35%,
.38%, .40%, and .42%, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group, Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
8
<PAGE>
================================================================================
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. Fixed-income securities are
generally traded on a "net" basis with a dealer acting
as principal for its own account without a stated
commission, although the price of the security usually
includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed
price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's
concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no
commissions or discounts are paid.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors is located
at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92621, 8000 IH-
10 West, San Antonio, TX 78230, 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240, and 5300 Robin Hood
Road, Norfolk, VA 23513. Telephone conversations with
American Funds Distributors may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primary intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.30% of its average net assets
annually (0.25% of which may be for service fees).
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, 135 South State College Boulevard,
Brea, CA 92621, 8000 IH-10 West, San Antonio, TX 78230,
8332 Woodfield Crossing Boulevard, Indianapolis, IN
46240, and 5300 Robin Hood Road, Norfolk, VA 23513. It
was paid a fee of $1,058,000 for the fiscal year ended
August 31, 1995. Telephone conversations with American
Funds Service Company may be recorded or monitored for
verification, recordkeeping and quality assurance
purposes.
9
<PAGE>
================================================================================
PURCHASING ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
SHARES RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PURCHASE SHARES OF THE FUND THROUGH YOUR PLAN OR
LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT WITH YOUR EMPLOYER. Shares are sold to eligible
retirement plans at the net asset value per share next
determined after receipt of an order by the fund or
American Funds Service Company. Orders must be received
before the close of regular trading on the New York
Stock Exchange in order to receive that day's net asset
value. Plans of organizations with collective
retirement plan assets of $100 million or more may
purchase shares at net asset value. In addition, any
employer-sponsored 403(b) plan or defined contribution
plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at
least $1 million in shares of the fund (or in
combination with shares of other funds in The American
Funds Group other than the money market funds) may
purchase shares at net asset value; however, a
contingent deferred sales charge of 1% is imposed on
certain redemptions within one year of such purchase.
(See "Redeeming Shares--Contingent Deferred Sales
Charge.") Plans may also qualify to purchase shares at
net asset value by completing a statement of intention
to purchase $1 million in fund shares subject to a
commission over a maximum of 13 consecutive months.
Certain redemptions of such shares may also be subject
to a contingent deferred sales charge as described
above. (See the statement of additional information.)
The minimum initial investment is $250, except that the
money market funds have a minimum of $1,000 for
individual retirement accounts (IRAs). Minimums are
reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds)
or to $25 for purchases by retirement plans through
payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds
Group.
American Funds Distributors, at its expense (from a
designated percentage of its income), will, during
calendar year 1996, provide additional promotional
incentives to dealers. Currently, these incentives are
limited to the top hundred dealers who have sold shares
of the fund or other funds in The American Funds Group.
Such incentive payments will be based on a pro rata
share of a qualifying dealer's sales. American Funds
Distributors will, on an annual basis, determine the
advisability of continuing these promotional
incentives.
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
annually in order to promote selling efforts and to
compensate them for providing certain services. (See
"Fund Organization and Management--Plan of
Distribution.") These services include processing
purchase and redemption transactions, establishing
shareholder accounts and providing certain information
and assistance with respect to the fund.
10
<PAGE>
================================================================================
Shares of the fund are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value after the order is
received by the fund or American Funds Service Company.
In the case of orders sent directly to the fund or
American Funds Service Company, an investment dealer
must be indicated. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The fund's net asset value per share is determined as
of the close of trading (currently 4:00 p.m., New York
time) on each day the New York Stock Exchange is open.
The current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share.
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on your plan, you may be able to exchange shares
automatically or cross-reinvest dividends in shares of
other funds. Contact your plan administrator/trustee
regarding how to use these services. Also, see the
fund's statement of additional information for a
description of these and other services that may be
available through your plan. These services are
available only in states where the fund to be purchased
may be legally offered and may be terminated or
modified at any time upon 60 days' written notice.
REDEEMING Subject to any restrictions imposed by your plan, you
SHARES can sell your shares through the plan any day the New
York Stock Exchange is open. For more information about
how to sell shares of the fund through your retirement
plan, including any charges that may be imposed by the
plan, please consult with your employer.
---------------------------------------------------------
By Your plan administrator/trustee must
contacting send a letter of instruction
your plan specifying the name of the fund, the
administrator/ number of shares or dollar amount to
trustee be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners (i.e., trustees or
their legal representatives) must be
guaranteed by a bank, savings
association, credit union, or member
firm of a domestic stock exchange or
the National Association of
Securities Dealers, Inc., that is an
eligible guarantor institution. Your
plan administrator/trustee should
verify with the institution that it
is an eligible guarantor prior to
signing. Additional documentation may
be required to redeem shares from
certain accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
---------------------------------------------------------
By Shares may also be redeemed through
contacting an investment dealer; however, you or
an your plan may be charged for this
investment service. SHARES HELD FOR YOU IN AN
dealer INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
---------------------------------------------------------
11
<PAGE>
================================================================================
The price you receive for the shares you redeem is the
net asset value next determined after your order and all
required documentation are received by the fund or
American Funds Service Company. (See "Purchasing
Shares--Share Price.")
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive
of reinvested dividends and capital gain distributions)
or the total cost of such shares. Shares held for the
longest period are assumed to be redeemed first for
purposes of calculating this charge. The charge is
waived for exchanges (except if shares acquired by
exchange were then redeemed within 12 months of the
initial purchase); for distributions from qualified
retirement plans and other employee benefit plans; for
redemptions resulting from participant-directed
switches among investment options within a participant-
directed employer-sponsored retirement plan; and for
redemptions in connection with loans made by qualified
retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because the fund's
net asset value fluctuates, reflecting the market value
of the portfolio, the amount you receive for shares
redeemed may be more or less than the amount paid for
them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
---------------------------------------------------------
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE FUND
TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF
THE FUND AT THE ADDRESS INDICATED ON THE FRONT.
---------------------------------------------------------
12
INTERMEDIATE BOND FUND OF AMERICA
Part B
Statement of Additional Information
OCTOBER 25, 1995
THIS DOCUMENT IS NOT A PROSPECTUS BUT SHOULD BE READ IN CONJUNCTION
WITH THE CURRENT PROSPECTUS DATED OCTOBER 25, 1995 OF INTERMEDIATE BOND FUND OF
AMERICA (THE "FUND"). THE PROSPECTUS MAY BE OBTAINED FROM YOUR INVESTMENT
DEALER OR FINANCIAL PLANNER OR BY WRITING TO THE FUND AT THE FOLLOWING ADDRESS:
INTERMEDIATE BOND FUND OF AMERICA
ATTENTION: SECRETARY
333 SOUTH HOPE STREET
LOS ANGELES, CA 90071
(213) 486-9200
THE FUND HAS TWO FORMS OF PROSPECTUSES. EACH REFERENCE TO THE
PROSPECTUS IN THIS STATEMENT OF ADDITIONAL INFORMATION INCLUDES BOTH OF THE
FUND'S PROSPECTUSES. SHAREHOLDERS WHO PURCHASE SHARES AT NET ASSET VALUE
THROUGH ELIGIBLE RETIREMENT PLANS SHOULD NOTE THAT NOT ALL OF THE SERVICES OR
FEATURES DESCRIBED BELOW MAY BE AVAILABLE TO THEM, AND THEY SHOULD CONTACT
THEIR EMPLOYER FOR DETAILS.
Table of Contents
.
<TABLE>
<CAPTION>
ITEM PAGE NO
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES 1
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES 2
INVESTMENT RESTRICTIONS 6
FUND OFFICERS AND TRUSTEES 8
MANAGEMENT 11
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 13
PURCHASE OF SHARES 15
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 17
EXECUTION OF PORTFOLIO TRANSACTIONS 18
GENERAL INFORMATION 18
INVESTMENT RESULTS 20
APPENDIX 23
FINANCIAL STATEMENTS ATTACHED
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
The fund's investment objective is to seek current income consistent with
its stated maturity and quality standards and preservation of capital.
Consistent with this objective, over the long term, the fund seeks to provide
shareholders an opportunity to earn more income than generally available in
money market instruments, accounts or funds, with more stability than some
other types of bond funds.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES - Certificates issued by
the Government National Mortgage Association ("GNMA") are mortgage-backed
securities representing part ownership of a pool of mortgage loans, which are
issued by lenders such as mortgage bankers, commercial banks and savings and
loan associations, and are either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. A pool of these mortgages is
assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government.
Principal is paid back monthly by the borrower over the term of the loan.
Reinvestment of prepayments may occur at higher or lower rates than the
original yield on the certificates. Due to the prepayment feature and the need
to reinvest prepayments of principal at current market rates, GNMA certificates
can be less effective than typical bonds of similar maturities at "locking in"
yields during periods of declining interest rates. GNMA certificates typically
appreciate or decline in market value during periods of declining or rising
interest rates, respectively. Due to the regular repayment of principal and
the prepayment feature, the effective maturities of mortgage pass-through
securities are shorter than stated maturities, will vary based on market
conditions and cannot be predicted in advance. The effective maturities of
newly-issued GNMA certificates backed by relatively new loans at or near the
prevailing interest rates are generally assumed to range between approximately
9 and 12 years.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS - FNMA, a privately-owned
corporate instrumentality of the U.S. Government, issues pass-through
securities representing interests in a pool of conventional mortgage loans.
FNMA guarantees the timely payment of principal and interest but this guarantee
is not backed by the full faith and credit of the U.S. Government.
FHLMC, a corporate instrumentality of the U.S. Government, issues
participation certificates which represent an interest in a pool of
conventional mortgage loans. FHLMC guarantees the timely payment of interest
and the ultimate collection of principal, and maintains reserves to protect
holders against losses due to default, but the certificates are not backed by
the full faith and credit of the U.S. Government.
As is the case with GNMA certificates, the actual maturity of and realized
yield on particular FNMA and FHLMC pass-through securities will vary based on
the prepayment experience of the underlying pool of mortgages.
OTHER MORTGAGE-RELATED SECURITIES - The fund may invest in mortgage-related
securities issued by financial institutions such as commercial banks, savings
and loan associations, mortgage bankers and securities broker-dealers (or
separate trusts or affiliates of such institutions established to issue these
securities). These securities include mortgage pass-through certificates,
collateralized mortgage obligations (including real estate mortgage investment
conduits as authorized under the Internal Revenue Code of 1986) (CMOs) or
mortgage-backed bonds. Each class of bonds in a CMO series may have a
different effective maturity, bear a different coupon, and have a different
priority in receiving payments. All principal payments, both regular principal
payments as well as any prepayment of principal, are passed through to the
holders of the various CMO classes dependent on the characteristics of each
class. In some cases, all payments are passed through first to the holders of
the class with the shortest stated maturity until it is completely retired.
Thereafter, principal payments are passed through to the next class of bonds in
the series, until all the classes have been paid off. In other cases, payments
are passed through to holders of whichever class first has the shortest
effective maturity at the time payments are made. As a result, an acceleration
in the rate of prepayments that may be associated with declining interest rates
shortens the expected life of each class. The impact of an acceleration in
prepayments affects the expected life of each class differently depending on
the unique characteristics of that class. In the case of some CMO series, each
class may receive a differing proportion of the monthly interest and principal
repayments on the underlying collateral. In these series the classes would be
more affected by an acceleration (or slowing) in the rate of prepayments than
CMOs which share principal and interest proportionally.
Mortgage-backed bonds are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMOs). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change the effective maturity of a
CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).
OTHER ASSET-BACKED SECURITIES - The fund may invest in bonds or notes backed by
loan paper or accounts receivable originated by banks, credit card companies,
or other providers of credit. These securities are often "enhanced" by a bank
letter of credit or by insurance coverage provided by an institution other than
the issuer; such an enhancement typically covers only a portion of the par
value until exhausted. Generally, the originator of the loan or accounts
receivable paper sells it to a specially created trust, which repackages it as
securities with a term of five years or less. Examples of these types of
securities include "certificates for automobile receivables" and bonds backed
by credit card loan receivables. The loans underlying these securities are
subject to prepayments which can decrease maturities and returns. The values
of these securities are ultimately dependent upon payment of the underlying
loans by individuals, and the holders generally have no recourse against the
originator of the loans. Holders of these securities may experience losses or
delays in payment if the original payments of principal and interest are not
made to the trust with respect to the underlying loans. The values of these
securities also may fluctuate due to changes in the market perception of the
creditworthiness of the servicing agent for the loan pool, the originator of
the loan, or the financial institution providing the credit enhancement.
WHEN-ISSUED SECURITIES, AND FIRM COMMITMENT AGREEMENTS AND "ROLL"
TRANSACTIONS - The fund may purchase securities on a delayed delivery or
"when-issued" basis and enter into firm commitment agreements (transactions
whereby the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). The fund as purchaser assumes the
risk of any decline in the value of the security beginning on the date of the
agreement or purchase. As the fund's aggregate commitments under these
transactions increase, the opportunity for leverage similarly may increase.
The fund will not use these transactions for the purpose of leveraging
and will maintain in a segregated account (with the value adjusted daily based
on market valuations) cash or high-grade debt securities in an amount
sufficient to meet its payment obligations in these transactions. Although
these transactions will not be entered into for leveraging purposes, to the
extent the fund's aggregate commitments under these transactions exceed its
holdings of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the fund temporarily will be in a
leveraged position (because it will have an amount greater than its net assets
subject to market risk). Should market values of the fund's portfolio
securities decline while the fund is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. The fund will not borrow money to settle these transactions and,
therefore, will liquidate other portfolio securities in advance of settlement
if necessary to generate additional cash to meet its obligations
thereunder.
The fund also may enter into "roll" transactions, which consist of the
sale of securities together with a commitment (for which the fund typically
receives a fee) to purchase similar, but not identical, securities at a later
date. The fund intends to treat roll transactions as two separate
transactions: one involving the purchase of a security and a separate
transaction involving the sale of a security. Since the fund does not intend
to enter into roll transactions for financing purposes, it may treat these
transactions as not falling within the definition of "borrowing" set forth in
Section 2(a)(23) of the Investment Company Act of 1940.
REVERSE REPURCHASE AGREEMENTS - The fund may enter into reverse repurchase
agreements. This type of agreement involves the sale of a security by the
fund and its commitment to repurchase the security at a specified time and
price. The fund will maintain in a segregated account with its custodian
liquid assets such as cash, U.S. Government securities or other appropriate
high-grade debt obligations in an amount sufficient to cover its obligations
under reverse repurchase agreements with broker-dealers (but no collateral is
required on reverse repurchase agreements with banks). Under the Investment
Company Act of 1940, as amended (the "1940 Act"), reverse repurchase agreements
may be considered borrowings by the fund; accordingly, the fund will limit its
investments in reverse repurchase agreements, together with any other
borrowings, to no more than one-third of its total assets. The use of reverse
repurchase agreements by the fund creates leverage which increases the fund's
investment risk. As the fund's aggregate commitments under these reverse
repurchase agreements increases, the opportunity for leverage similarly
increases. If the income and gains on securities purchased with the proceeds
of reverse repurchase agreements exceed the costs of the agreements, the fund's
earnings or net asset value will increase faster than otherwise would be the
case; conversely if the income and gains fail to exceed the costs, earnings or
net asset value would decline faster than otherwise would be the case.
CASH AND CASH EQUIVALENTS - Subject to the requirement that it maintain at
least 65% of its assets in bonds under normal market conditions, the fund may
maintain assets in cash or cash equivalents, including commercial bank
obligations (certificates of deposit, which are interest-bearing time deposits;
bankers' acceptances, which are time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity; and demand or time
deposits), and commercial paper (short-term notes issued by corporations or
governmental bodies).
PORTFOLIO TRADING - The fund intends to engage in portfolio trading when it is
believed that the sale of a security owned by the fund and the purchase of
another security of better value can enhance principal and/or increase income.
A security may be sold to avoid any prospective decline in market value in
light of what is evaluated as an expected rise in prevailing yields, or a
security may be purchased in anticipation of a market rise (a decline in
prevailing yields). A security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two
securities, or in connection with a "roll" transaction as described in the
Prospectus under "Certain Securities and Investment Techniques" and above.
LOANS OF PORTFOLIO SECURITIES - Although the fund has no current intention of
doing so during the next 12 months, the fund is authorized to make loans of its
portfolio securities to selected securities dealers or to other institutional
investors whose financial condition is monitored by Capital Research and
Management Company (the "Investment Adviser"). The borrower must maintain with
the fund's custodian collateral consisting of cash, cash equivalents or U.S.
Government securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Investment Adviser will monitor the
adequacy of the collateral on a daily basis. The fund may at any time call a
loan of its portfolio securities and obtain the return of the loaned
securities. The fund will receive any interest paid on the loaned securities
and a fee or a portion of the interest earned on the collateral. The fund will
limit its loans of portfolio securities to an aggregate of one-third of the
value of its total assets, measured at the time any such loan is made.
VARIABLE RATE OBLIGATIONS - The fund may invest in securities with interest
rates that are not fixed but fluctuate based upon changes in market rates or
designated indexes. Variable rate obligations have interest rates that are
adjusted at designated intervals, and interest rates on floating rate
obligations are adjusted whenever there are exchanges in the indexes or market
rates on which their interest rates are based. In some cases the fund has the
ability to demand payment from the dealer or issuer at par plus accrued
interest on short notice (seven days or less). The effective maturity of a
floating or variable rate obligation is deemed to be the longer of (i) the
notice period required before the fund is entitled to receive payment of the
obligation upon demand or (ii) the period remaining until the obligation's next
interest rate adjustment. If not sold or redeemed by the fund through the
demand feature, these obligations would mature on a specified date which may
range up to 30 years or more from the date of issuance.
ADJUSTMENT OF MATURITIES -- The Investment Adviser seeks to anticipate
movements in interest rates and adjusts the maturity distribution of the
portfolio accordingly subject to maintaining, under normal market conditions,
an average dollar-weighted effective portfolio maturity of 3 to 10 years.
Longer term securities ordinarily yield more than shorter term securities but
are subject to greater and more rapid price fluctuation. Keeping in mind the
fund's objective the Investment Adviser will increase the Fund's exposure to
this price volatility only when it appears likely to increase current income
without undue risk to capital.
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions, and may result in the realization of
net capital gains, which are taxable when distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. The fund does not
anticipate its portfolio turnover to exceed 100% annually. The fund's
portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. See " Financial Highlights" in the
Prospectus for the fund's portfolio turnover for each of the last eight
years.
INVESTMENT RESTRICTIONS
The fund has adopted certain investment restrictions which may not be
changed as to the fund without a majority vote of the fund's outstanding
shares. Such majority is defined by the 1940 Act as the vote of the lesser of
(i) 67% or more of the outstanding voting securities of the fund present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or by proxy, or (ii) more than 50% of the outstanding
voting securities. These restrictions provide that the fund may not:
1. Purchase any security (other than securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities ("U.S. Government
securities")) if, immediately after and as a result of such investment, more
than 5% of the value of the fund's total assets would be invested in securities
of the issuer;
2. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. Government securities;
3. Invest in companies for the purpose of exercising control or
management;
4. Knowingly purchase securities of other managed investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
5. Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the fund may purchase or sell readily
marketable debt securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein, including
real estate investment trusts;
6. Acquire securities subject to contractual restrictions preventing their
ready disposition or enter into repurchase agreements or purchase time deposits
maturing in more than seven days if, immediately after and as a result, the
value of illiquid securities held by the fund would exceed, in the aggregate,
10% of the value of the fund's total assets;
7. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
8. Make loans, except that this does not prevent the fund from purchasing
marketable debt securities and entering into repurchase agreements or making
loans of portfolio securities;
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, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
11. Borrow money, except from banks for temporary or emergency purposes,
not in excess of 5% of the value of the fund's total assets, except that the
fund may enter into reverse repurchase agreements, provided that the fund will
limit its aggregate borrowings to no more than one-third of its total assets;
12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the sale of securities pursuant to a reverse
repurchase agreement;
13. 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;
14. Invest in interests in oil, gas, or other mineral exploration or
development programs;
15. Invest more than 5% of its total assets in warrants which are
unattached to securities;
16. Write, purchase or sell puts, calls or combinations thereof;
17. Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years of
continuous operation.
A further investment policy of the fund, which may be changed by action of
the Board of Trustees without shareholder approval, is that the fund will not
invest in securities of an issuer if the investment would cause the fund to own
more than 10% of the outstanding voting securities of any one issuer. With
respect to Investment Restriction #15, investments in warrants, valued at the
lower of cost or market, will not exceed 5% of the value of the fund's net
assets, 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.)
Notwithstanding Investment Restriction #4, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
the Trustees pursuant to an exemptive order granted by the Securities and
Exchange Commission.
FUND OFFICERS AND TRUSTEES
Trustees and Trustee Compensation
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S) DURING AGGREGATE TOTAL COMPENSATION TOTAL NUMBER
REGISTRANT PAST 5 YEARS (POSITIONS WITHIN THE COMPENSATION FROM ALL FUNDS OF FUND
ORGANIZATIONS LISTED MAY HAVE (INCLUDING MANAGED BY CAPITAL BOARDS ON
CHANGED DURING THIS PERIOD) VOLUNTARILY DEFERRED RESEARCH AND WHICH
COMPENSATION/1/) FROM MANAGEMENT TRUSTEE
THE COMPANY DURING FISCAL COMPANY/2/ SERVES/2/
YEAR ENDED AUGUST 31, 1995
<S> <C> <C> <C> <C> <C>
++ H. Frederick Trustee Private Investor. The Mission Group $3,559/3/
Christie (non-utility holding company, subsidiary of $136,600 18
P.O. Box 144 Southern California Edison Company),
Palos Verdes former President and Chief
Estates, CA 90274 Executive Officer
Age: 62
Diane C. Trustee Chairwoman, CEO and President, $2,931
Creel The Earth Technology Corporation $30,675 12
100 W.
Broadway
Suite 5000
Long Beach,
CA 90802
Age: 46
Martin Trustee Chairman, Senior Resource Group $3,972/3/
Fenton, Jr. (management of senior living centers) $102,700 16
4350
Executive Drive
Suite 101
San Diego,
CA 92121-2116
Age: 60
Leonard R. Trustee President, Fuller & Company, Inc. $2,786
Fuller (financial management consulting firm) $31,575 12
4337 Marina
City Drive
Suite 841
ETN
Marina del
Rey, CA 90292
Age: 48
+* Abner D. President, PEO Capital Research and Management none
Goldstine and Trustee Company, Senior Vice President /4/ none/4/ 12
Age: 65 and Director
+** Paul G. Chairman of Capital Research and Management none
Haaga, Jr. the Board Company, Senior Vice President /4/ none/4/ 14
Age: 46 and Director
Herbert Trustee Private Investor $3,377
Hoover III $60,050 14
200 S. Los
Robles Avenue
Suite 520
Pasadena,
CA 91101-2431
Age: 67
Richard G. Trustee Chairman, President and CEO, $3,991/3/
Newman AECOM Technology Corporation $39,050 12
3250 (architectural engineering)
Wilshire Boulevard
Los Angeles,
CA 90010-1599
Age: 60
Peter C. Valli Trustee Chairman and CEO, BW/IP $3,900/3/
200 International Inc. (industrial $37,050 12
Oceangate Boulevard manufacturing)
Suite 900
Long Beach,
CA 90802
Age: 68
</TABLE>
+ Trustees who are considered "interested persons as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of trustees of the parent company of a registered broker-dealer.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071//
/1/ Amounts may be deferred by eligible Trustees under a non-qualified deferred
compensation plan adopted by the fund in 1994. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustee.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicle for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Trustees is as
follows: H. Frederick Christie ($2,095), Martin Fenton, Jr. ($5,802), Richard
G. Newman ($7,780), and Peter C. Valli ($7,282). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Director.
/4/ Paul G. Haaga, Jr. and Abner D. Goldstine are affiliated with the
Investment Adviser and, accordingly, receive no compensation from the fund.
OFFICERS
(with their principal occupations during the past five years)#
** MARY C. CREMIN, VICE PRESIDENT AND TREASURER. Capital Research and
Management Company, Senior Vice President - Fund Business
Management Group
* MICHAEL J. DOWNER, VICE PRESIDENT, Capital Research and Management Company,
Senior Vice President - Fund Business Management Group
*** JOHN H. SMET, VICE PRESIDENT. Capital Research and Management Company, Vice
President
* JULIE F. WILLIAMS, SECRETARY. Capital Research and Management Company,
Vice President - Fund Business Management Group
* KIMBERLY S. VERDICK, ASSISTANT SECRETARY. Capital Research and Management
Company, Compliance Associate - Fund Business Management Group.
** ANTHONY W. HYNES, JR., ASSISTANT TREASURER. Capital Research and Management
Company, Vice President - Fund Business Management Group.
# Positions within the organizations listed may have changed during this
period.
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92621.
*** Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
No compensation is paid by the fund to any officer or Trustee who is a
director or officer of the Investment Adviser. The fund pays annual fees of
$2,500 to Trustees who are not affiliated with the Investment Adviser, plus
$200 for each Board of Trustees meeting attended, plus $200 for each meeting
attended as a member of a committee of the Board of Trustees. The Trustees may
elect, on a voluntary basis, to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund. The fund also reimburses
certain expenses of the Trustees who are not affiliated with the Investment
Adviser. As of October 1, 1995, the officers and Trustees and their families
as a group, owned beneficially or of record fewer than 1% of the outstanding
shares of the fund.
MANAGEMENT
Investment Adviser - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have years of investment experience. The Investment Adviser's research
professionals travel several million miles a year, making more than 5,000
research visits in more than 50 countries around the world. The Investment
Adviser believes that it is able to attract and retain quality personnel.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of
stocks, bonds and money market instruments and serves over five million
investors of all types throughout the world. These investors include privately
owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser will
continue in effect until October 24, 1996, unless sooner terminated, and may be
renewed from year to year thereafter provided that any such renewal has been
specifically approved at least annually by (i) the Board of Trustees or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such part, 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 of 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).
After Board approval of the new fees, the Investment Adviser voluntarily
agreed to waive its fees by any amount necessary to assure that the fund's
expenses would not exceed 1.00% of the average daily net assets and waive its
fees by any additional amount necessary to assure that such expenses did not
exceed applicable expense limitations in any state in which the fund's shares
were 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 would be
excluded from this limit. Expenses which are not subject to these limitations
include interest, taxes, brokerage commissions, transaction costs, and
extraordinary items such as litigation, as well as, for purposes of the state
expense limitations, any amounts excludable under the applicable regulation.
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 August 31, 1995, 1994, and 1993, the
Investment Adviser's total fees amounted to $6,106,000, $6,742,000, and
$5,991,000, respectively.
The fund pays all expenses not specifically 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, insurance premiums, 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, custodian
fees, printing and preparation of registration statements, taxes and
compensation and expenses of Trustees who are not affiliated with the
Investment Adviser.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The fund has
adopted a Plan of Distribution (the "Plan"), pursuant to rule 12b-1 under the
1940 Act (see "Principal Underwriter" in the Prospectus). The Principal
Underwriter receives amounts payable pursuant to the Plan (see below) and
commissions consisting of that portion of the sales charge remaining after the
discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the fiscal year ended
August 31, 1995 amounted to $1,581,362 after allowance of $6,650,561 to
dealers. During the fiscal year ended August 31, 1994 and 1993, the Principal
Underwriter retained $3,558,588 and $4,999,000, respectively.
As required by rule 12b-1, the Plan (together with the Principal
Underwriting Agreement) has been approved by the full 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 due
to present affiliations with the Investment Adviser and related companies may
be considered to have a direct or indirect financial interest in the operation
of the Plan. Potential benefits of the Plan to the fund 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 0.30% of its average net
assets annually to finance any activity which is primarily intended to result
in the sale of fund shares, provided the fund's Board of Trustees has approved
the category of expenses for which payment is made. These include service fees
for qualified dealers and dealer commissions and wholesaler compensation on
sales of shares exceeding $1 million (including purchases by any defined
contribution plan qualified under Section 401(a) of the Internal Revenue Code
including a "401(k) plan with 200 or more eligible employees). During the
fund's fiscal year ended August 31, 1995, such expenses were $4,112,000 under
the Plan as compensation to dealers. As of August 31, 1995 accrued and unpaid
distribution expenses were $704,000.
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities, but permit banks
to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries 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 with adverse financial consequences as a result of
any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax
status of a "regulated investment company" under the provisions of Subchapter M
of the Internal Revenue Code of 1986 (the "Code"). Under Subchapter M, if the
fund distributes within specified times at least 90% of its investment company
taxable income (net investment income and the excess of net short-term capital
gains over net long-term capital losses), it will be taxed only on that portion
of the investment company taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies or other income
derived with respect to its business of investing in such stock, securities, or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of stock or securities held less than three months; and (c)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the fund's assets is represented by cash, cash
items, U.S. Government securities, securities of other regulated investment
companies and other securities which must be limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess
of a regulated investment company's "required distribution" for the calendar
year ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually
distributed by the fund from its current year's ordinary income and capital
gain net income and (ii) any amount on which the Fund pays income tax 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 fund also intends to distribute to shareholders all of the excess of
net long-term capital gain over net short-term capital loss on sales of
securities. If the net asset value of shares of the fund should, by reason of
a distribution of realized capital gains, be reduced below a shareholder's
cost, such distribution would to that extent be a return of capital to that
shareholder even though taxable to the shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes. In particular, investors should consider the tax
implications of purchasing shares just prior to a dividend or distribution
record date. Those investors purchasing shares just prior to such a date will
then receive a partial return of capital upon the dividend or distribution,
which will nevertheless be taxable to them as an ordinary or capital gains
dividend.
Dividends and distributions generally are taxable to shareholders at the
time they are paid. However, dividends and distributions declared payable 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 the end of January of
the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund
within 90 days of having acquired such shares, and if, as a result of having
acquired those shares, the shareholder subsequently pays a reduced sales charge
for shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, non-U.S. corporation, or non-U.S.
partnership (a "non-U.S. shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate). Withholding will not apply if a
dividend paid by the fund to a non-U.S. shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents, or domestic
corporations will apply. However, if the distribution is effectively connected
with the conduct of the non-U.S. shareholder's trade or business within the
U.S., the distribution would be included in the net income of the shareholder
and subject to U.S. income tax at the applicable marginal rate. Distributions
of capital gains not effectively connected with a U.S. trade or business are
not subject to the 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
countries outside the U.S. which would reduce the fund's investment income,
generally at rates from 10% to 40%. Tax conventions between certain countries
and the U.S. may reduce or eliminate such taxes. If more than 50% in value of
the fund's total assets at the close of its taxable year consist of securities
of non-U.S. corporations, 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. The fund does not currently expect to meet the
eligibility requirement for filing this election as its investments in
securities of non-U.S. issuers are extremely limited.
As of the date of this statement of additional information, the
maximum stated individual tax rate applicable to ordinary income is 39.6%
(effective tax rates may be higher for some individuals due to phase out of
exemptions and elimination of deductions); the maximum individual tax rate
applicable to net capital gain is 28%; and the maximum corporate tax applicable
to ordinary income and net capital gains is 35%. However, to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
taxable income in excess of $100,000 in a taxable year will be required to pay
an additional amount of tax of up to $11,750, and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of income tax 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 an
IRA each year (prior to the tax return filing deadline for that year) whereby
earnings on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a discussion of federal taxation and should
not be viewed as a comprehensive discussion of all provisions of the Code
relevant to investors. Dividends and distributions may also be subject to
state or local taxes. Investors should consult their own tax advisers for
additional details as to their particular tax status.
PURCHASE OF SHARES
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. The dealer is responsible for promptly transmitting purchase
orders to the Principal Underwriter. Orders received by the investment dealer,
the Transfer Agent, or the fund after the time of the determination of the net
asset value will be entered at the next calculated offering price. Prices
which appear in the newspaper are not always indicative of prices at which you
will be purchasing and redeeming shares of the fund, since such prices
generally reflect the previous day's closing price whereas purchases and
redemptions are made at the next calculated closing price.
The price you pay for fund shares, the public 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, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day. The net asset value per share of the fund is determined as
follows:
1. Long-term debt securities and U.S. Treasury notes are valued at prices
obtained from a bond pricing service provided by a major dealer in bonds, 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 of representative quoted bid and asked prices. Short-term securities with
60 days or less to maturity are amortized to maturity based on their cost to
the fund if acquired within 60 days of maturity or, if already held by the fund
on the 60th day, based on the value determined on the 61st day. Securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees or a committee thereof. The
fair value of any other assets is added to the value of securities to arrive at
total assets; and
2. The fund's liabilities, including proper accruals of expense items, are
deducted from total assets; and
3. The net assets so obtained are then divided by the total number of
shares outstanding and the result, rounded to the nearer cent, is the net asset
value per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other person or entity, where, after
the sale, such person or entity would own beneficially directly, indirectly, or
through a unit investment trust more than 4.5% of the outstanding shares of the
fund without the consent of a majority of the Board of Trustees.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $25,000 or more made within a
13-month period pursuant to the terms of a written statement of intention (the
"Statement") in the form provided by the Principal Underwriter and signed by
the purchaser. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder signs a Statement in order to qualify for
a reduced sales charge, shares equal to 5% of the dollar amount specified in
the Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and capital gain distributions on these 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 must remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total purchases had been made at a single time. If
the difference is not paid within 20 days after written request by the
Principal Underwriter or the investment dealer, the appropriate number of
escrowed shares will be redeemed to pay such difference. If the proceeds from
this redemption are inadequate, the purchaser will be liable to the Principal
Underwriter for the balance still outstanding. The Statement may be revised
upward at any time during the 13-month period, and such a revision will be
treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases.
In the case of purchase orders by the trustees of certain retirement plans
by payroll reduction, the sales charge for the investments made during the
13-month period will be handled as follows: The investment made the first
month of the 13-month period will be multiplied by 13 and then multiplied by
1.5. On the first investment and all other investments made pursuant to the
statement of intention, a sales charge will be assessed according to the sales
charge breakpoint thus determined. There will be no retroactive adjustments in
sales charges on investments previously made during the 13-month period.
DEALER COMMISSIONS - The following commissions will be paid, as described in
the prospectus, to dealers who initiate and are responsible for purchases of $1
million or more, for purchases by any defined contribution plan qualified under
section 401(a) of the Internal Revenue Code including a "401(k)" plan with 200
or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $100 million or more: 1% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value. See "The American Funds Shareholder
Guide" in the fund's prospectus for more information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of accounts for retirement plans for which
Capital Guardian Trust Company serves as trustee or custodian.) Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement showing the current transaction. Participation in the
plan will begin within 30 days after receipt of the account application. If
the 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 the Transfer Agent.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the Fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the Fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal years ended August 31, 1995, 1994,
and 1993, amounted to $124,750, $224,500, and $321,000, respectively.
The fund held certain debt securities of its regular brokers or
dealers or its parents, E.G., securities of Associates Corp. of North America
in the amount of $11,698,000 at August 31, 1995.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New
York, NY 10081, as Custodian.
INDEPENDENT ACCOUNT - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, has 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 have been so included in reliance on the report of the independent
auditors given on the authority of said firm as experts in accounting and
auditing.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on August 31.
Shareholders are provided at least semiannually with reports showing the
investment portfolio, financial statements and other information audited
annually by the fund's independent auditors, Deloitte & Touche LLP, whose
selection is determined annually by the Trustees.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
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:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE -- AUGUST 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $13.52
Offering price per share (100/95.25 of per share
net asset value, which takes into account the
Fund's current maximum sales charge) $14.19
</TABLE>
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 or obligations 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 or officers 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. The fund will
provide indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.
SHAREHOLDER VOTING RIGHTS - All shares of the fund have equal voting rights and
may be voted in the elections of Trustees and on other matters submitted to the
vote of shareholders. As permitted by Massachusetts law, there will normally
be no meetings of shareholders for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees holding office have
been elected by shareholders. At that time, the Trustees then in office will
call a shareholders' meeting for the election of Trustees. The Trustees must
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Trustee when requested to do so by the record holders of 10% of
the outstanding shares. At such a meeting, a Trustee may be removed after the
holders of record of not less than two-thirds of the outstanding shares have
declared that the Trustee be removed either by declaration in writing or by
votes cast in person or by proxy. Except as set forth above, the Trustees
shall continue to hold office and may appoint successor Trustees. The shares
do not have cumulative voting rights, which means that the holders of a
majority of the shares voting for the election of Trustees can elect all the
Trustees. No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the fund except
that amendments may be made upon the sole approval of the Trustees to conform
the Declaration of Trust to the requirements of applicable Federal laws or
regulations or the requirements of the regulated investment company provisions
of the Code; however, the Trustees shall not be held liable for failing to do
so. If not terminated by the vote or written consent of a majority of the
outstanding shares, the fund will continue indefinitely.
INVESTMENT RESULTS
The fund's yield is 5.60% based on the 30-day (or one month) period ended
August 31, 1995, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by annualizing the current
month's dividend and dividing by average net asset value or maximum offering
price for the month. The distribution rate may differ from the yield.
In addition, investments in premium bonds may affect a fund's
distribution rate. A premium bond is bond which is purchased for more than its
face value. Because of this, the bond usually pays a higher than market rate
interest, but the value of the bond (which affects the net asset value of the
fund) will be lower than its purchase price as it nears maturity. The SEC
yield takes into account the long-term effects of premium bonds (I.E., for a
premium bond, the income must be regularly reduced (amortized) by an amount
that provides for the future decrease in value of the bond) whereas the
distribution rate may not.
Income from "roll" transactions (the sale of GNMA certificates or other
securities together with a commitment, for which the fund receives a fee, to
purchase similar securities at a future date) is recorded for accounting
purposes as interest income ratably over the term of each roll and is included
in net investment income for purposes of determining the fund's yield.
As of August 31, 1995, the fund's total return over the past 12 months and
average annual total returns over the past five-year and lifetime periods were
3.17%, 7.02% and 6.82%. The average annual total return ("T") will be computed
by equating the value at the end of the period ("ERV") with a hypothetical
initial investment of $1,000 ("P") over a period of years ("n") according to
the following formula as required by the Securities and Exchange Commission:
P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in
accordance with the formula stated above: (1) deduction of the maximum sales
load of 4.75% from the $1,000 initial investment; (2) reinvestment of dividends
and distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. The
Fund will calculate total return for one-, five- and ten-year periods after
such periods have elapsed. In addition, the Fund will provide lifetime average
total return figures.
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In all of the
10-year periods during which those funds were managed by Capital Research and
Management Company since 1964 (115 in all), those funds have had better total
returns that the Standard and Poor's 500 Composite Stock Index in 94 of the 115
periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The fund may also refer to results compiled by organizations such as
Lipper Analytical Services, Morningstar, Inc. and Wiesenberger Investment
Companies Services. Additionally, the fund may, from time to time, refer to
results published in various newspapers or periodicals, including Barrons,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
The Benefits of Systematic Investing
<TABLE>
<CAPTION>
Here's how much you would have if you
invested $2,000 a year in the fund:
<S> <C> <C>
2 years 4 years Lifetime
(9/1/93-8/31/95) (9/1/91-8/31/95) (2/19/88-8/31/95)
$4,090 $8,832 $20,662
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had invested Periods ... and taken all
$10,000 in the fund 9/1-8/31 distributions in shares,
this many years ago... your investment would
Number of Years have been worth this
much at August 31, 1995
Value**
<S> <C> <C>
1 1994 - 1995 $10,317
2 1993 - 1995 10,133
3 1992 - 1995 11,143
4 1991 - 1995 12,569
5 1990 - 1995 14,037
6 1989 - 1995 14,941
7 1988 - 1995 16,286
Lifetime 1988* - 1995 16,439
</TABLE>
* From inception, 2/19/88 through 8/31/95.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.
* * * * * * * *
ILLUSTRATION OF A $10,000 INVESTMENT IN THE FUND WITH DIVIDENDS REINVESTED
(For the lifetime of the Fund February 19, 1988 - August 31, 1995)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES**
Fiscal Annual Dividends Total From From From Total
Year End Dividends (cumulative) Investment Initial Capital Gains Dividends Value
August 31 Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1988* $ 411 $ 411 $10,411 $9,207 --- $ 406 $ 9,613
1989 885 1,296 11,296 9,187 --- 1,291 10,478
1990 1,000 2,296 12,296 8,913 --- 2,239 11,152
1991 1,029 3,325 13,325 9,127 --- 3,333 12,460
1992 1,033 4,358 14,358 9,520 --- 4,534 14,054
1993 1,022 5,380 15,380 9,760 --- 5,692 15,452
1994 1,020 6,400 16,400 8,920 70 6,184 15,174
1995 1,084 7,484 17,484 9,013 71 7,355 16,439
</TABLE>
The dollar amount of capital gain distributions during the period was $75.
* From inception on February 19, 1988.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. rates "investment grade" long-term debt
obligations issued by various entities from "Aaa" to "Baa." The two top
ratings are as follows:
"Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
Standard & Poor's Corporation rates the investment grade long-term debt
obligations of various entities in categories ranging from "AAA" to "BBB"
according to quality. The two top ratings are as follows:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc. employs the designations "Prime-1," "Prime-2"
and "Prime-3" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated Prime-1 have a superior capacity for repayment
of short-term promissory obligations. Prime-1 repayment capacity will normally
be evidenced by the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protections; broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and well-established access to a
range of financial markets and assured sources of alternate liquidity. Issues
rated Prime-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Standard & Poor's Corporation's ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D" for
the lowest. A -- Issues assigned its highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 --
This designation indicates that the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation. A-2 -- Capacity for timely payments on issues with this
designation is strong. However, the relative degree of safety is not as high
as for issues designated "A-1."
_____
SUBSEQUENT TO ITS PURCHASE BY THE FUND, THE RATING OF AN ISSUE OF SECURITIES
MAY BE REDUCED BELOW THE CURRENT MINIMUM RATING REQUIRED FOR ITS PURCHASE, OR
IN THE CASE OF AN UNRATED ISSUE OF SECURITIES, ITS CREDIT QUALITY MAY BECOME
EQUIVALENT TO AN ISSUE OF SECURITIES RATED BELOW THAT REQUIRED FOR PURCHASE.
NEITHER EVENT REQUIRES THE ELIMINATION OF SUCH AN OBLIGATION FROM THE FUND'S
PORTFOLIO, BUT CAPITAL RESEARCH AND MANAGEMENT COMPANY WILL CONSIDER SUCH AN
EVENT IN DETERMINING WHETHER THE FUND SHOULD CONTINUE TO HOLD SUCH AN
OBLIGATION IN ITS PORTFOLIO.
Intermediate Bond Fund of America
Investment Portfolio August 31, 1995
<TABLE>
<CAPTION>
Principal Market Percent
Amount Value of Net
Bonds & Notes (000) (000) Assets
<S> <C> <C> <C>
INDUSTRIAL & SERVICE- .59%
BP America Inc. 10.00% 2018 (1998) /1/ $2,600 $2,919 .19%
Donnelley (R.R) & Sons Co. 9.125% 2000 2,000 2,210 .15
Schering-Plough Corp. 0% 1996 4,000 3,712 .25
-------- -----
8,841 .59
-------- -----
UTILITIES- .67%
Nippon Telegraph and Telephone Corp. 9.50% 1998 6,000 6,501 .43
Northern Telecom Ltd. 8.75% 2001 3,250 3,552 .24
-------- -----
10,053 .67
-------- -----
FINANCIAL- 4.30%
ABN AMRO Bank NV, Chicago Branch 7.25% 2005 10,000 10,162 .68
Bank of Nova Scotia 6.5625% /2/ /3/ 1,000 784 .05
Beverly Finance Corp. 8.36% 2004 10,000 10,500 .70
Corporate Property Investors 9.00% 2002 9,500 10,485 .70
Credit Suisse 8.50% 2004 5,000 5,519 .37
General Electric Capital Corp. 8.375% 2001 1,500 1,626 .11
National Australia Bank Ltd. 9.70% 1998 3,000 3,265 .22
National Westminster Bancorp Inc. 12.125% 2002 (1997) /1/ 1,000 1,113 .07
NatWest Capital Corporation 9.375% 2003 2,000 2,305 .15
S & S Finance International, Inc. 10.125% Euronotes 1996 12,180 12,743 .85
Societe Generale, New York Branch 9.875% 2003 5,100 6,013 .40
-------- -----
64,515 4.30
-------- -----
COLLATERALIZED MORTGAGE OBLIGATIONS
(PRIVATELY ORIGINATED) /4/- 5.70%
Chase Manhattan Bank, NA, Series 1993-I, Class 2A-5, 7.25% 7,500 7,294 .49
2024
Merrill Lynch Mortgage Investors Inc., Series 1992B:
Class A-2, 8.05% 2012 7,500 7,624 .51
Class A-3, 8.30% 2012 10,000 10,384 .69
Nomura Asset Securities Corp., Series 1994-MD1:
Class A-1A 7.376% 2018 /2/ 3,760 3,819 .25
Class A-1B 7.526% 2018 /2/ 26,040 26,756 1.78
Prudential Home Mortgage Securities Co., Inc.:
Series 1992-33, Class A-12, 7.50% 2022 2,000 2,007 .13
Series 1992-37, Class A-6, 7.00% 2022 11,710 11,688 .78
Resolution Trust Corp.:
Series 1992-6, Class A-2B, 8.40% 2024 3,989 3,984 .27
Series 1992-7, Class A-2D, 8.35% 2029 7,453 7,434 .50
Travelers Mortgage Services, Inc., Series 1989-9, Class
Z-2,
8.80% 2019 4,649 4,649 .30
-------- -----
85,639 5.70
-------- -----
BONDS & NOTES
ASSET-BACKED OBLIGATIONS /4/- 12.07%
Capstead Securities Corp. III, Series 1991-5, Class G, 12,860 13,150 .88
9.50%
2021
Case Equipment Loan Trust 1995-A 7.30% 2002 14,052 14,280 .95
Chemical Financial Acceptance Corp., 1989-A, 9.25% 1998 13,444 13,914 .93
Discover Card Trust, Series 1991-D, Class A, 8.00% 2000 10,000 10,378 .69
Ford Motor Credit Co. 1994 - A 6.35% 1999 1,663 1,667 .11
GCC Home Equity Trust, asset-backed certificates,
1990-1, 10.00% 2005 5,160 5,289 .35
Green Tree Financial Corp., pass-through certificates:
Series 1993-3, Class A5, 5.75% 2018 10,000 9,553 .64
Series 1995-1, Class A2, 7.80% 2025 12,000 12,266 .82
Series 1995-1, Class A3, 7.95% 2025 4,000 4,152 .28
MBNA Credit Card Trust, asset-backed certificates
1991-1, 7.75% 1998 10,000 10,153 .68
Sears Credit Account Trust:
1991-D, 7.75% 1998 10,000 10,156 .68
1991-C, 8.65% 1998 10,000 10,209 .68
Standard Credit Card Master Trust I, credit card
participation certificates:
Series 1991-3, Class A, 8.875% 1999 9,050 9,599 .64
Series 1991-6, Class A, 7.875% 2000 40,000 41,725 2.78
Town & Country Funding Corp. 5.85% 2000 15,000 14,513 .96
-------- -----
181,004 12.07
-------- -----
GOVERNMENTS (EXCLUDING U.S. GOVERNMENT) &
GOVERNMENT AUTHORITIES- 3.95%
British Columbia Hydro & Power Authority 2,000 2,395 .16
12.50% 2013 (1998)/1/ Ontario (Province of):
7.75% 2002 10,000 10,574 .70
7.375% 2003 10,000 10,359 .69
17.00% 2011 (1996) /1/ 3,100 3,660 .24
15.25% 2012 (1997) /1/ 5,550 6,741 .45
15.75% 2012 (1997) /1/ 105 125 .01
11.50% 2013 (1997) /1/ 3,000 3,439 .23
11.75% 2013 (1998) /1/ 4,500 5,231 .35
County of Orange, California Taxable Pension Obligation
Bonds, Series 1994A, 6.810% 1996 5,000 4,450 .30
Republic of Italy 6.00% 2003 5,000 4,712 .31
Victorian (Territory of) Public Authorities Finance Agency
8.45% 2001 7,000 7,595 .51
-------- -----
59,281 3.95
-------- -----
DEVELOPMENT AUTHORITIES- 0.89%
African Development Bank 9.30% 2000 3,750 4,172 .28
International Bank for Reconstruction and Development
14.90% 1997 8,000 9,140 .61
-------- -----
13,312 .89
-------- -----
FEDERAL AGENCY MORTGAGE PASS-THROUGH OBLIGATIONS /4/- 19.47%
Federal Home Loan Mortgage Corp.:
8.00% 2003-2010 2,986 3,054 .20
8.50% 2008-2021 3,323 3,430 .23
8.75% 2008-2009 1,601 1,655 .11
9.00% 2017 1,735 1,830 .12
9.50% 2013 839 887 .06
10.00% 2004 581 628 .04
11.00% 2018 91 99 .01
12.00% 2013 331 367 .02
12.50% 2013 165 183 .01
12.75% 2019 84 94 .01
Federal National Mortgage Assn.:
7.00% 2023 2,570 2,526 .17
7.50% 2009-2024 30,643 31,013 2.07
8.00% 2002-2005 3,441 3,535 .24
8.50% 2008-2023 15,541 16,101 1.07
9.00% 2001-2022 9,813 10,236 .68
9.50% 2010-2020 2,082 2,190 .15
10.00% 2019-2021 4,709 5,127 .34
10.50% 2004-2020 3,726 4,091 .27
11.00% 2000-2010 767 836 .06
12.25% 2013 81 87 .01
Government National Mortgage Assn.:
5.50% 2023-2024 /2/ 85,521 84,642 5.63
6.00% 2023-2024 /2/ 12,997 13,018 .86
6.125% 2022 /2/ 1,975 2,000 .12
7.00% 2007-2023 /2/ 11,954 12,070 .79
8.00% 2023 1,576 1,615 .11
8.50% 2007-2025 39,190 40,745 2.71
9.00% 2008-2025 18,225 19,111 1.27
9.50% 2016-2025 27,011 29,071 1.94
9.75% 1999 238 247 .02
10.25% 2012 397 416 .03
10.50% 2019 191 211 .01
11.00% 2010-2019 565 630 .04
11.50% 2010-2013 398 449 .03
12.50% 2010-2014 567 641 .04
-------- -----
292,835 19.47
-------- -----
FEDERAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS /4/-
/1.55%/
Federal Home Loan Mortgage Corp., Class B-3, 12.50% 2013 203 221 .01
Federal National Mortgage Assn.:
Series 91-50, Class H, 7.75% 2006 9,000 9,250 .62
Series 91-146, Class Z, 8.00% 2006 3,394 3,489 .23
Series 88-16, Class B, 9.50% 2018 1,011 1,068 .07
Series 90-93, Class G, 5.50% 2020 3,850 3,531 .24
Trust D2, 11.00% 2009 5,333 5,653 .38
-------- -----
23,212 1.55
-------- -----
FEDERAL AGENCY OBLIGATIONS-NON-MORTGAGE- 8.39%
Federal Home Loan Bank Notes:
6.38% 2003 4,000 3,891 .26
6.16% 2004 10,000 9,573 .64
6.27% 2004 3,000 2,886 .19
Federal Home Loan Mortgage Notes:
6.30% 2003 9,300 9,014 .60
6.39% 2003 2,000 1,987 .13
6.50% 2003 2,000 1,953 .13
6.61% 2003 16,650 16,502 1.10
6.19% 2004 9,000 8,608 .57
Federal National Mortgage Assn. Medium-Term Note:
6.30% 1997 15,470 15,441 1.03
6.14% 2004 3,000 2,831 .19
6.40% 2004 1,500 1,446 .10
8.40% 2004 10,000 10,670 .71
FNSM Callable Principal STRIPS:
1991-B4, 0%/7.94% 2001 /5/ 20,000 18,547 1.24
1991-B8, 0%/7.89% 2002 /5/ 25,000 22,567 1.50
-------- -----
125,916 8.39
-------- -----
U.S. TREASURY OBLIGATIONS- 39.62%
9.375% April 1996 6,500 6,642 .44
6.875% October 1996 15,000 15,185 1.01
6.750% February 1997 74,000 75,006 5.00
8.500% April 1997 15,000 15,609 1.04
8.125% February 1998 59,000 61,922 4.12
7.875% April 1998 1,500 1,570 .10
9.00% May 1998 5,000 5,377 .36
9.25% August 1998 22,250 24,197 1.61
5.125% November 1998 52,000 50,684 3.38
9.125% May 1999 29,250 32,198 2.14
6.750% June 1999 62,000 63,453 4.23
7.750% November 1999 2,500 2,654 .18
8.00% May 2001 8,000 8,712 .58
7.875% August 2001 10,000 10,842 .72
13.375% August 2001 15,000 20,351 1.36
7.500% November 2001 20,000 21,347 1.42
15.75% November 2001 15,000 22,305 1.49
11.125% August 2003 12,000 15,570 1.04
7.250% May 2004 43,000 45,600 3.04
7.250% August 2004 10,000 10,611 .71
11.625% November 2004 48,250 65,726 4.38
10.375% November 2009 15,000 19,010 1.27
-------- -----
594,571 39.62
-------- -----
Total Bonds & Notes (cost: $1,450,793,000) 1,459,17 97.20
9
-------- -----
SHORT-TERM SECURITIES
COMMERCIAL PAPER- 1.38%
Associates Corp. of North America 5.82% due 9/1/95 11,700 11,698 .78
Pacific Bell Telephone 5.85% due 9/1/95 9,000 8,999 .60
-------- -----
20,697 1.38
-------- -----
Total Short-Term Securities (cost: $20,697,000) 20,697 1.38
-------- -----
Total Investment Securities (cost: $1,471,490,000) 1,479,87 98.58
6
Excess of cash and receivables over payables 21,307 1.42
-------- -----
Net assets 1,501,18 100.00%
3
======== =====
</TABLE>
/1/ Some investments are valued in the market on the basis of their effective
maturity - that is, the dates at which the securities are expected to be called
or refunded by the issuers or the dates at which the investor can put the
securities to the issuers for redemption. These effective maturity dates are
shown in parentheses.
/2/ Coupon rate may change periodically.
/3/ Issue does not have fixed maturity.
/4/ Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the effective
maturity of these securities is shorter than the stated maturity.
/5/ Represents a zero-coupon bond which will convert to a coupon-bearing
security at a later date.
See Notes to Financial Statements
INTERMEDIATE BOND FUND OF AMERICA
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
at August 31, 1995 (dollars in thousands)
- ---------------------------------------- ----------- ------------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $1,471,490) $1,479,876
Cash 2,964
Receivables for-
Sales of investments $ 16,769
Sales of fund's shares 3,778
Accrued interest 18,946 39,493
----------- ------------
1,522,333
LIABILITIES:
Payables for-
Purchases of investments 17,421
Repurchases of fund's shares 1,661
Dividends payable 547
Management services 505
Accrued expenses 1,016 21,150
----------- ------------
NET ASSETS AT AUGUST 31, 1995
Equivalent to $13.52 per share on
111,032,212 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $1,501,183
=============
STATEMENT OF OPERATIONS
for the year ended August 31, 1995 (dollars in thousands)
----------- ------------
INVESTMENT INCOME:
Income:
Interest $ 116,409
Expenses:
Management services fee 6,106
Distribution expenses 4,112
Transfer agent fee 1,058
Reports to shareholders 81
Registration statement and prospectus 82
Postage, stationery and supplies 148
Trustees' fees 15
Auditing and legal fees 32
Custodian fee 65
Taxes other than federal income tax 21 11,720
----------- ------------
Net investment income 104,689
------------
REALIZED LOSS AND UNREALIZED (DEPRECIATION)
APPRECIATION ON INVESTMENTS:
Net realized loss (47,764)
Net unrealized (depreciation) appreciation
on investments:
Beginning of year (50,873)
End of year 8,386
-----------
Net change in unrealized depreciation on
investments 59,259
------------
Net realized loss and change in unrealized
(depreciation) appreciation on investments 11,495
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $116,184
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- ------------ -------------
Year ended August 31,
1995 1994
OPERATIONS: ------------ -------------
Net investment income $ 104,689 $ 116,210
Net realized loss on investments (47,764) (28,357)
Net change in unrealized appreciation
(depreciation) on investments 59,259 (122,435)
------------ -------------
Net increase (decrease) in net assets
resulting from operations 116,184 (34,582)
------------ -------------
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net investment income (103,958) (114,479)
Distribution from net realized gain
on investments 0 (8,496)
------------ -------------
Total dividends and distributions (103,958) (122,975)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
38,884,119 and 64,292,703
shares, respectively 515,751 904,219
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
5,917,803 and 6,747,528 shares,
respectively 78,348 94,032
Cost of shares repurchased:
55,272,862 and 64,692,200
shares, respectively (730,831) (901,393)
------------ -------------
Net (decrease) increase in net assets resulting
from capital share transactions (136,732) 96,858
------------ -------------
TOTAL DECREASE IN NET ASSETS (124,506) (60,699)
NET ASSETS:
Beginning of year 1,625,689 1,686,388
------------ -------------
End of year (including undistributed
net investment income of $2,493 and
$1,762, respectively) $1,501,183 $1,625,689
============ =============
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. Intermediate Bond Fund of America (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company. The following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, 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 of their representative quoted bid
and asked prices or, if such prices are not available, at the mean of such
prices for securities of comparable maturity, quality and type. Short-term
securities with original or remaining maturities in excess of 60 days are
valued at the mean of their quoted bid and asked prices. Short-term securities
with 60 days or less to maturity are valued at amortized cost, which
approximates market value. The maturities of variable or floating rate
instruments are deemed to be the time remaining until the next interest rate
adjustment date. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by the Valuation
Committee of the Board of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Discounts on
securities purchased are amortized over the life of the respective securities.
The fund does not amortize premiums on securities purchased. Dividends are
declared on a daily basis after the determination of the fund's net asset value
and are paid to shareholders on a monthly basis.
Pursuant to the custodian agreement, the fund receives credit against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $65,000 includes $8,000 that was paid with these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of August 31, 1995, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $8,386,000, of which $24,846,000
related to appreciated securities and $16,460,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended August 31, 1995. During the year
ended August 31, 1995, the fund realized, on a tax basis, a net capital loss of
$47,764,000 on securities transactions. The fund has available at August 31,
1995 a net capital loss carryforward totaling $39,144,000 which may be used to
offset capital gains realized during subsequent years through 2002 and thereby
relieve the fund and its shareholders of any federal income tax liability with
respect to the capital gains that are so offset. It is the intention of the
fund not to make distributions from capital gains while there is a capital loss
carryforward. The cost of portfolio securities for book and federal income tax
purposes was $1,471,490,000 at August 31, 1995.
3. The fee of $6,106,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.30% of the first $60 million of average net assets;
0.21% of such assets in excess of $60 million but not exceeding $1 billion;
0.18% of such assets in excess of $1 billion but not exceeding $3 billion; and
0.16% of such assets in excess of $3 billion; plus 3.00% on the first
$3,333,333 of the fund's monthly gross investment income; 2.50% of such income
in excess of $3,333,333 but not exceeding $8,333,333; and 2.00% of such income
in excess of $8,333,333.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended August 31, 1995,
distribution expenses under the Plan were $4,112,000. As of August 31, 1995,
accrued and unpaid distribution expenses were $704,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,058,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $1,581,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Trustees who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of August 31,
1995, aggregate amounts deferred were $20,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Trustees and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of August 31, 1995, accumulated undistributed net realized loss on
investments was $79,827,000 and paid-in capital was $1,570,131,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,034,220,000 and $1,099,534,000, respectively,
during the year ended August 31, 1995.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year Ended August 31
-------- -------- -------- ------ --------
1995 1994 1993 1992 1991
-------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year...................... $13.38 $14.64 $14.28 $13.69 $13.37
-------- -------- -------- ------ --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... .93 .95 1.00 1.09 1.21
Net realized and unrealized
gain (loss) on investments. .13 (1.20) .37 .59 .30
Total from investment -------- -------- -------- ------ --------
operations................ 1.06 (.25) 1.37 1.68 1.51
-------- -------- -------- ------ --------
LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (.92) (.94) (1.01) (1.09) (1.19)
Distributions from capital (.07)
gains
-------- -------- -------- ------ --------
Total distributions........ (.92) (1.01) (1.01) (1.09) (1.19)
-------- -------- -------- ------ --------
Net Asset Value, End of Year.. $13.52 $13.38 $14.64 $14.28 $13.69
======== ======== ======== ====== ========
Total Return /1/................. 8.33% (1.80%) 9.95% 12.79% 11.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)................... $1,501 $1,626 $1,686 $1,215 $407
Ratio of expenses to average
net assets.................. .78% .83% .82% .90% 1.00%
Ratio of net income to
average net assets.......... 6.96% 6.79% 7.00% 7.66% 8.67%
Portfolio turnover rate...... 71.91 % 52.94 % 42.59 % 45.01 % 83.00 %
</TABLE>
/1/ This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price.
Independent Auditors' Report
To the Board of Trustees and Shareholders
of Intermediate Bond Fund of America:
We have audited the accompanying statement of assets and liabilities of
Intermediate Bond Fund of America, including the schedule of portfolio
investment as of August 31, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the per-share data and ratios for each of
the five years in the period then ended. These financial statements and the
per-share data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these statements and the per-share
data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at August 31, 1995, by correspondence with the custodian and brokers;
where replies were not received from brokers we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of Intermediate Bond Fund of America at August 31, 1995, and the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the per-share
data and ratios for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
September 22, 1995
Tax Information (Unaudited)
Certain states may exempt from income taxation a portion of the dividends paid
from net investment income if derived from direct U.S. Treasury obligations.
For purposes of computing this exclusion, 45% of the dividends paid by the fund
from net investment income was derived from interest on direct U.S. Treasury
obligations.
Dividends received by retirement plans such as IRAs, Keogh-type plans, and
403(b) plans need not be reported as taxable income. However, many retirement
trusts may need this information for their annual information reporting.
Since the amounts above are report for the fiscal year and not a calendar year,
shareholders should refer to their Form 1099-DIV or other tax information which
will be mailed in January 1996 to determine the CALENDAR YEAR amounts to be
included on their respective 1995 tax returns. Shareholders should consult
their tax advisers.
INTERMEDIATE BOND FUND OF AMERCA
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
Investment Portfolio Notes to Financial Statements
Statement of Assets and Liabilities Selected Per-Share Data and Ratios
Statement of Operations Independent Auditors Report
Statement of Changes in Net Assets
(B) EXHIBITS:
1. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
2. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
3. None.
4. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
5. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
6. On file (see SEC file No. 33-19514, Post-Effective Amendment No. 9 filed
10/20/93.
7. None.
8. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
9. Form of Shareholder Service Agreement between Registrant and American
Funds Service Company, as amended 1/1/95.
10. Not applicable to this filing.
11. Consent of independent auditors.
12. None.
13. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
14. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
15. On file (see SEC file No. 33-19514, Pre-Effective Amendment No. 1 filed
1/14/88.
16. Updates to previously filed schedule for computation of each performance
quotation provided in the Registration Statement in response to Item 22 (see
SEC file Nos. 811-5446 and 33-19514).
17. Financial data schedule (EDGAR)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
As of August 31, 1995
<S> <C>
Number of
Title of Class Record Holders
Shares of beneficial 71,853
interest (no par value)
</TABLE>
ITEM 27. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund
Errors and Omissions Policy written by American International Surplus Lines
Insurance Company, Chubb Custom Insurance Company and Insurance Company which
insures its officers and Trustees 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 judgment, 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 Trust, and, with respect 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
ITEM 27. INDEMNIFICATION (CONT.)
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 of the
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
attorney's 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 in the
circumstances because such person has met the applicable 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, or (ii) if such a quorum of
disinterested Trustees so directs, by independent legal counsel in a written
opinion; and any determination so made shall be conclusive.
(e) Expenses incurred in defending a civil or criminal action, writ 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 a Trustee or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(h) Nothing in the Declaration 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.
ITEM 27. INDEMNIFICATION (CONT.)
(i) The Trust shall have the 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. Nevertheless,
insurance will not be purchased or maintained by the Trust if the purchase or
maintenance of such insurance would result in the indemnification of any person
in contravention of any rule or regulation of the Securities and Exchange
Commission.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange ommission
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 inthe 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
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., Intermediate Bond Fund of America, The Investment Company of
America, Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund,
New Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund
of America, Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money
Fund of America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
# David L. Abzug Assistant Vice President None
John A. Agar Regional Vice President None
1501 N. University, Suite 225
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
& Richard Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Vice President None
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Regional Vice President None
1190 Rockmart Circle
Kennesaw, GA 30144
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
Ian B. Bodell Regional Vice President None
3100 West End Avenue, Suite 870
Nashville, TN 37215
Michael L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Director, Sr. Vice President None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MO 20895
Victor C. Cassato Vice President None
999 Green Oaks Drive
Littleton, CO 80121
Christopher J. Cassin Regional Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1425 Vallejo, #203
Ssn Francisco, CA 94109
* Larry P. Clemmensen Director, Treasurer None
* Kevin G. Clifford Senior Vice President None
Ruth M. Collier Vice President None
145 West 67th St., Ste 12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
3521 Rittenhouse Street NW
Washington, DC 20005
* Carl D. Cutting Vice President None
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
3622 E. 87th Street
Tulsa, OK 74137
Kirk D. Dodge Regional Vice President None
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary Vice President
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
& Lloyd G. Edwards Vice President None
@ Richard A. Eychner Vice President None
* Paul H. Fieberg Senior Vice President None
John Fodor Regional Vice President None
5 Marlborough Street
Suite 51
Boston, MA 02116
* Mark P. Freeman, Jr. Director, President None
Clyde E. Gardner Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
* Paul G. Haaga, Jr. Director Chairman of the Board
David E. Harper Vice President None
R. D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Regional Vice President None
6744 Avalon
Dallas, TX 75214
* Robert L. Johansen Vice President, Controller None
* V. John Kriss Senior Vice President None
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
12585-E East Tennessee Circle
Aurora, CO 80012
* Heather A. Maier Assistant Vice President - None
Institutional Investment Services
Division
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 South Race Street
Littleton, CO 90121
* John C. Massar Vice President None
* E. Lee McClennahan Vice President None
Laurie B. McCurdy Regional Vice President None
6008 E. Anderson Drive
Scottsdale, AZ 85255
& John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
* R. William Melinat Vice President - Institutional None
Investment Services Division
David R. Murray Regional Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
* Barbara G. Nicholich Assistant Vice President - None
Institutional Investment Services
Division
William E. Noe Revional Vice President None
12535 Barkley
Overland Park, KS 66209
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Regional Vice President None
32 Ridge Avenue
Newton Centre, MA 02159
# Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
* John O. Post Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
* George L. Romine, Jr. Vice President - Institutional None
Investment Services Division
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07962
* Julie D. Roth Vice President None
Douglas F. Rowe Regional Vice President None
104 River Road
Georgetown, TX 78628
* Christopher Rowey Regional Vice President None
Dean B. Rydquist Vice President None
1080 Bay Point Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, No. 4
Marina del Rey, CA 90292
Joseph D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* R. Michael Shanahan Chairman of the Board None
David W. Short Vice President None
1000 RIDC Plaza, Suite 212
Pittsburgh, PA 15238
* Victor S. Sidhu Vice President - Institutional None
Investment Services Division
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Vice President - Institutional None
Investment Services Division
* Mary E. Smith Assistant Vice President - None
Institutional Investment Services
Division
Rodney G. Smith Regional Vice President None
2350 Lakeside Blvd., #850
Richardson, TX 75082
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
#4 West Fourth Avenue, Suite 406
San Mateo, CA 94402
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
& James P. Toomey Assistant Vice President None
% Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
@ Andrew J. Ward Vice President None
* David M. Ward Assistant Vice President - None
Institutional Investment Services
Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34242
# J. Kelly Webb Sr. Vice President None
Gregory J. Weimer Regional Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
** N. Dexter Williams Vice President None
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
@ Marshall D. Wingo Sr. Vice President None
# Robert L. Winston Director, Senior Vice President None
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
</TABLE>
__________
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
** Business Address, Four Embarcadero, Suite 1800, San Francisco 94111
# Business Address, 135 South State College Boulevard, Brea, CA 92621
& Business Address, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
% Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
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, as amended, are maintained and kept in the
offices of the Fund and its investment adviser, Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071. Certain accounting
records are maintained and kept in the offices of the Fund's accounting
department, 135 South State College Blvd., Brea, CA 92621.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92621, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230 and 5300 Robin Hood
Road, Norfolk, VA 23514.
Records covering portfolio transactions are also maintained and kept by
the custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York,
NY 10081.
ITEM 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 certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
23rd day of October, 1995.
INTERMEDIATE BOND FUND OF AMERICA
By /s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed below on October 23, 1995, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/ Abner D. Goldstine President and Trustee
(Abner D. Goldstine)
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ Mary C. Cremin Vice President and Treasurer
(Mary C. Cremin)
(3) Trustees:
H. Frederick Christie* Trustee
Diane C. Creel*/1/ Trustee
Martin Fenton, Jr.* Trustee
Leonard R. Fuller*/1/ Trustee
/s/ Abner D. Goldstine President and Trustee
(Abner D. Goldstine)
/s/ Paul G. Haaga, Jr. Chairman of the Board
(Paul G. Haaga, Jr.)
Herbert Hoover III* Trustee
Richard G. Newman* Trustee
Peter C. Valli* Trustee
/1/ Powers of Attorney attached hereto.
</TABLE>
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact
Counsel represents that this amendment does not contain disclosures that would
make the amendment ineligible for effectiveness under the provisions of Rule
485(b).
/s/ Michael J. Downer (Michael J. Downer) C-14
POWER OF ATTORNEY
I, Diane C. Creel, the undersigned Trustee of Intermediate Bond Fund of
America, a Massachusetts business trust, revoking all prior powers of attorney
given as a Trustee of Intermediate Bond Fund of America do hereby constitute
and appoint Mary C. Cremin, Michael J. Downer, Paul G. Haaga, Jr., Kimberly S.
Verdick and Julie F. Williams, or any of them, to act as attorneys-in-fact for
and in my name, place and stead (1) to sign my name as Trustee of said Trust to
any and all Registration Statements of Intermediate Bond Fund of America, File
No. 33-19514, under the Securities Act of 1933 as amended and/or the Investment
Company Act of 1940, as amended, and any and all amendments thereto, said
Registration Statements and amendments to be filed with the Securities and
Exchange Commission, and to any and all reports, applications or renewal of
applications required by any State in the United States of America in which
this Trust is registered to sell shares, and (2) to deliver any and all such
Registration Statements and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended and/or the Investment Company Act of 1940, as amended,
granting to said attorneys-in-fact, and each of them, full power and authority
to do and perform every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as the
undersigned might or could do if personally present, hereby ratifying and
approving the acts of said attorneys-in-fact.
EXECUTED at Los Angeles, California, this 12th day of December, 1994.
/s/ Diane C. Creel
Diane C. Creel, Trustee
POWER OF ATTORNEY
I, Leonard R. Fuller, the undersigned Trustee of Intermediate Bond Fund of
America, a Massachusetts business trust, revoking all prior powers of attorney
given as a Trustee of Intermediate Bond Fund of America do hereby constitute
and appoint Mary C. Cremin, Michael J. Downer, Paul G. Haaga, Jr., Kimberly S.
Verdick and Julie F. Williams, or any of them, to act as attorneys-in-fact for
and in my name, place and stead (1) to sign my name as Trustee of said Trust to
any and all Registration Statements of Intermediate Bond Fund of America, File
No. 33-19514, under the Securities Act of 1933 as amended and/or the Investment
Company Act of 1940, as amended, and any and all amendments thereto, said
Registration Statements and amendments to be filed with the Securities and
Exchange Commission, and to any and all reports, applications or renewal of
applications required by any State in the United States of America in which
this Trust is registered to sell shares, and (2) to deliver any and all such
Registration Statements and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended and/or the Investment Company Act of 1940, as amended,
granting to said attorneys-in-fact, and each of them, full power and authority
to do and perform every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes as the
undersigned might or could do if personally present, hereby ratifying and
approving the acts of said attorneys-in-fact.
EXECUTED at Los Angeles, California, this 12th day of December, 1994.
/s/ Leonard R. Fuller
Leonard R. Fuller, Trustee
SHAREHOLDER SERVICES AGREEMENT
1. The parties to this Agreement, which is effective as of January 1,
1995, are INTERMEDIATE BOND FUND OF AMERICA, a Massachusetts business trust
(hereinafter called "the Fund"), and American Funds Service Company, a
California corporation (hereinafter called "AFS"). AFS is a wholly owned
subsidiary of Capital Research and Management Company (hereinafter called
"CRMC"). This Agreement will continue in effect until amended or terminated in
accordance with its terms.
2. The Fund hereby employs AFS, and AFS hereby accepts such employment by
the Fund, as its transfer agent. In such capacity AFS will provide the
services of stock transfer agent, dividend disbursing agent, redemption agent,
and such additional related services as the Fund may from time to time require,
all of which services are sometimes referred to herein as "shareholder
services."
3. AFS has entered into substantially identical agreements with other
investment companies for which CRMC serves as investment adviser. (For the
purposes of this Agreement, such investment companies, including the Fund, are
called "participating investment companies.")
4. AFS has entered into an agreement with DST Systems, Inc. (hereinafter
called "DST"), to provide AFS with electronic data processing services
sufficient for the performance of the shareholder services referred to in
paragraph 2.
5. The Fund, together with the other participating companies, will
maintain a Review and Advisory Committee, which Committee will review and may
make recommendations to the boards of the participating investment companies
regarding all fees and charges provided for in this Agreement, as well as
review the level and quality of the shareholder services rendered to the
participating investment companies and their shareholders. Each participating
investment company may select one director or trustee who is not affiliated
with CRMC, or any of its affiliated companies, or with Washington Management
Corporation or any of its affiliated companies, to serve on the Review and
Advisory Committee.
6. AFS will provide to the participating investment companies the
shareholder services referred to herein in return for the following fees:
ANNUAL ACCOUNT MAINTENANCE FEE (PAID MONTHLY):
$.67 per month for each open account on AFS books or in Level 2 or 4
Networking ($8.04 per year)
$.09 per month for each open account maintained in Street Name or Level 1
or 3 Networking ($1.08 per year)
EXHIBIT 9
No annual fee will be charged for a participant account underlying a
401(k) or other defined contribution plan where the plan maintains
a single account on AFS books and responds to all participant inquiries
TRANSACTION FEES:
$2.00 per non-automated transaction
$0.50 per automated transaction
For this purpose, "transactions" shall include all types of transactions
included in an "activity index" as reported to the Review and Advisory
Committee at least annually. AFS will bill the Fund monthly, on or shortly
after the first of each calendar month, and the Fund will pay to AFS within
five business days of such billing.
Any revision of the schedule of charges set forth herein shall require the
affirmative vote of a majority of the members of the board of
directors/trustees of the Fund.
7. All fund-specific charges from third parties -- including DST charges,
payments described in the next sentence, postage, NSCC transaction charges and
similar out-of-pocket expenses -- will be passed through directly to the Fund
or other participating investment companies, as applicable. AFS, subject to
approval of its board of directors, is authorized in its discretion to
negotiate payments to third parties for account maintenance and/or transaction
processing services provided such payments do not exceed the anticipated
savings to the Fund, either in fees payable to AFS hereunder or in other direct
Fund expenses, that AFS reasonably anticipates would be realized by the Fund
from using the services of such third party rather than maintaining the
accounts directly on AFS' books and/or processing non-automated transactions.
8. It is understood that AFS may have income in excess of its expenses and
may accumulate capital and surplus. AFS is not, however, permitted to
distribute any net income or accumulated surplus to its parent, CRMC, in the
form of a dividend without the affirmative vote of a majority of the members of
the boards of directors/trustees of the Fund and all participating investment
companies.
9. This Agreement may be amended at any time by mutual agreement of the
parties, with agreement of the Fund to be evidenced by affirmative vote of a
majority of the members of the board of directors/trustees of the Fund.
10. This Agreement may be terminated on 180 days' written notice by either
party. In the event of a termination of this Agreement, AFS and the Fund will
each extend full cooperation in effecting a conversion to whatever successor
shareholder service provider(s) the Fund may select, it being understood that
all records relating to the Fund and its shareholders are property of the Fund.
11. In the event of a termination of this Agreement by the Fund, the Fund
will pay to AFS as a termination fee the Fund's proportionate share of any
costs of conversion of the Fund's shareholder service from AFS to a successor.
In the event of termination of this Agreement and all corresponding agreements
with all the participating investment companies, all assets of AFS will be sold
or otherwise converted to cash, with a view to the liquidation of AFS when it
ceases to provide shareholder services for the participating investment
companies. To the extent any such assets are sold by AFS to CRMC and/or any of
its affiliates, such sales shall be at fair market value at the time of sale as
agreed upon by AFS, the purchasing company or companies, and the Review and
Advisory Committee. After all assets of AFS have been converted to cash and
all liabilities of AFS have been paid or discharged, an amount equal to any
capital or paid-in surplus of AFS that shall have been contributed by CRMC or
its affiliates shall be set aside in cash for distribution to CRMC upon
liquidation of AFS. Any other capital or surplus and any assets of AFS
remaining after the foregoing provisions for liabilities and return of capital
or paid-in surplus to CRMC shall be distributed to the participating investment
companies in such proportions as may be determined by the Review and Advisory
Committee.
12. In the event of disagreement between the Fund and AFS, or between the
Fund and other participating investment companies as to any matter arising
under this Agreement, which the parties to the disagreement are unable to
resolve, the question shall be referred to the Review and Advisory Committee
for resolution. If the Review and Advisory Committee is unable to resolve the
question to the satisfaction of both parties, either party may elect to submit
the question to arbitration; one arbitrator to be named by each party to the
disagreement and a third arbitrator to be selected by the two arbitrators named
by the original parties. The decision of a majority of the arbitrators shall
be final and binding on all parties to the arbitration. The expenses of such
arbitration shall be paid by the party electing to submit the question to
arbitration.
13. The obligations of the Fund under this Agreement are not binding upon
any of the directors, trustees, officers, employees, agents or shareholders of
the Fund individually, but bind only the Fund itself. AFS agrees to look
solely to the assets of the Fund for the satisfaction of any liability of the
Fund in respect to this Agreement and will not seek recourse against such
directors, trustees, officers, employees, agents or shareholders, or any of
them or their personal assets for such satisfaction.
AMERICAN FUNDS SERVICE COMPANY INTERMEDIATE BOND FUND OF AMERICA
By /s/ Don R. Conlan By /s/ Paul G. Haaga, Jr.
Don R. Conlan, Chairman Paul G. Haaga, Jr., Chairman
By /s/ Kenneth R. GorvetzianBy /s/ Julie F. Williams
Kenneth R. Gorvetzian, Secretary Julie F. Williams, Secretary
INDEPENDENT AUDITORS' CONSENT
We consent to (a) the use in this Post-Effective Amendment No. 12 to
Registration Statement No. 33-19514 of Intermediate Bond Fund of America
on Form N-1A of our report dated September 22, 1995 appearing in the Financial
Statements, which are included in Part B, the Statement of Additional
Information of such Registration Statement, (b) the reference to us under the
heading "General Information" in such Statement of Additional Information, and
(c) the reference to us under the heading "Financial Highlights" in the
Prospectus, which is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Los Angeles, California
October 20, 1995
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT
(1) ENDING REDEMPTION VALUE AND TOTAL RETURN
Value of an initial investment at the end of a period and total return for the
period are computed as set forth below.
(A) Initial investment DIVIDED BY
Public offering price for one share at
beginning of period EQUALS
Number of shares initially purchased
(B) Number of shares initially purchased PLUS
Number of shares acquired at net asset
value through reinvestment of dividends
and capital gain distributions during period EQUALS
Number of shares purchased during period
(C) Number of shares purchased during period MULTIPLIED BY
Net asset value of one share as of the last day
of the period EQUALS
Value of investment at end of period
(D) Value of investment at end of period DIVIDED BY
Initial investment
minus one and then multiplied by 100 EQUALS
Total return for the period expressed as a
percentage
EXHIBIT 16
(2) AVERAGE ANNUAL TOTAL RETURN
Average annual total return quotations for the 1- 5-year and lifetime periods
ended August 31, 1995 are computed according to the formula set forth below.
P(1+T)/n/ = ERV
WHERE: P= a hypothetical initial investment of $1,000
T= average annual total return
n= number of years
ERV= ending redeemable value of a hypothetical $1,000 investment as of the end
of 1 year and lifetime periods (computed in accordance with the formula shown
in (1), above)
THUS:
AVG. ANNUAL TOTAL RETURN AT PUBLIC OFFERING PRICE:
1 Year Total Return 1,000(1+T)/1/ = 1,031.68
T = +3.17%
5 Year Total Return 1,000(1+T)/5/ = 1,403.69
T = +7.02%
Lifetime 1,000(1+T)/7.53/ = 1,643.78
T = +6.82%
Hypothetical illustrations which are based on $1,000 and $10,000 initial
investments used to obtain ending values over various time periods are
attached.
(3) YIELD
Yield is computed as set forth below.
(A) Dividends and interest earned during the period MINUS
Expenses accrued for the period EQUALS
Net investment income
(B) Net income investment DIVIDED BY
Average daily number of shares
outstanding during the period that
were entitled to receive dividends EQUALS
Net investment income per share earned
during the period
(C) Net investment income per share earned
during the period DIVIDED BY
Maximum offering price per share on
last day of the period EQUALS
Current month's yield
(D) Current months yield PLUS ONE RAISED TO
THE SIXTH POWER
EQUALS
Semiannual compounded yield
(E) Semiannual compounded yield minus one multiplied
by two equals
Annualized rate
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/01/94 1000.00 13.19 0.00 % 75.815 13.190 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/95 1000 72 72 1072 0 1027 0 1027 74 1101.25 81.273
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/01/90 1000.00 13.36 0.00 % 74.850 13.360 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/91 1000 92 92 1092 0 1037 0 1037 94 1131.10 81.609
9/30/92 1000 92 184 1184 0 1077 0 1077 191 1268.90 88.179
9/30/93 1000 91 275 1275 0 1094 0 1094 287 1381.49 94.493
9/30/94 1000 91 366 1366 7 987 6 993 346 1339.48 101.553
9/30/95 1000 97 463 1463 0 1014 6 1020 455 1475.08 108.862
TOTAL $ 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
2/19/88 1000.00 14.29 0.00 % 69.994 14.287 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/88 1000 50 50 1050 0 973 0 973 50 1023.21 73.612
9/30/89 1000 94 144 1144 0 962 0 962 144 1106.02 80.438
9/30/90 1000 106 250 1250 0 935 0 935 244 1179.09 88.255
9/30/91 1000 108 358 1358 0 970 0 970 363 1333.65 96.223
9/30/92 1000 108 466 1466 0 1007 0 1007 489 1496.10 103.968
9/30/93 1000 107 573 1573 0 1023 0 1023 605 1628.89 111.415
9/30/94 1000 107 680 1680 8 923 7 930 649 1579.33 119.737
9/30/95 1000 114 794 1794 0 948 7 955 784 1739.22 128.356
TOTAL $ 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/01/94 1000.00 13.85 4.75 % 72.202 13.190 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/95 1000 69 69 1069 0 978 0 978 70 1048.76 77.399
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/01/90 1000.00 14.03 4.75 % 71.276 13.360 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/91 1000 87 87 1087 0 988 0 988 89 1077.09 77.712
9/30/92 1000 88 175 1175 0 1026 0 1026 182 1208.27 83.966
9/30/93 1000 86 261 1261 0 1042 0 1042 273 1315.48 89.978
9/30/94 1000 87 348 1348 6 940 6 946 329 1275.45 96.698
9/30/95 1000 92 440 1440 0 966 6 972 432 1404.58 103.659
TOTAL $ 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
2/19/88 1000.00 15.00 4.75 % 66.667 14.287 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/88 1000 48 48 1048 0 927 0 927 47 974.57 70.113
9/30/89 1000 89 137 1137 0 917 0 917 136 1053.44 76.614
9/30/90 1000 101 238 1238 0 891 0 891 232 1123.07 84.062
9/30/91 1000 103 341 1341 0 924 0 924 346 1270.30 91.652
9/30/92 1000 103 444 1444 0 959 0 959 466 1425.01 99.028
9/30/93 1000 102 546 1546 0 975 0 975 576 1551.47 106.120
9/30/94 1000 102 648 1648 8 879 7 886 618 1504.28 114.047
9/30/95 1000 109 757 1757 0 903 7 910 746 1656.58 122.257
TOTAL $ 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/94 1000.00 14.05 4.75 % 71.174 13.380 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/95 1000 68 68 1068 0 962 0 962 69 1031.68 76.308
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/90 1000.00 14.04 4.75 % 71.225 13.370 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/91 1000 88 88 1088 0 975 0 975 88 1063.97 77.719
8/31/92 1000 88 176 1176 0 1017 0 1017 183 1200.09 84.040
8/31/93 1000 87 263 1263 0 1043 0 1043 276 1319.47 90.128
8/31/94 1000 87 350 1350 6 953 6 959 336 1295.72 96.840
8/31/95 1000 93 443 1443 0 963 6 969 434 1403.69 103.823
TOTAL $ 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
2/19/88 1000.00 15.00 4.75 % 66.667 14.287 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/88 1000 41 41 1041 0 921 0 921 40 961.33 69.611
8/31/89 1000 88 129 1129 0 919 0 919 128 1047.75 76.034
8/31/90 1000 100 229 1229 0 891 0 891 224 1115.14 83.406
8/31/91 1000 103 332 1332 0 913 0 913 332 1245.95 91.012
8/31/92 1000 103 435 1435 0 952 0 952 453 1405.35 98.414
8/31/93 1000 102 537 1537 0 976 0 976 569 1545.18 105.545
8/31/94 1000 102 639 1639 8 892 7 899 618 1517.33 113.403
8/31/95 1000 108 747 1747 0 901 7 908 735 1643.78 121.581
TOTAL $ 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/93 2000.00 15.37 4.75 % 130.124 14.640 1905
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/94 2000 126 126 2126 9 1741 9 1750 120 1870.71 139.814
8/31/95 4000 270 396 4396 0 3684 9 3693 396 4089.89 302.507
TOTAL $ 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/91 2000.00 14.37 4.75 % 139.179 13.690 1905
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/92 2000 158 158 2158 0 1987 0 1987 162 2149.17 150.502
8/31/93 4000 295 453 4453 0 3991 0 3991 466 4457.79 304.494
8/31/94 6000 420 873 6873 31 5388 29 5417 831 6248.26 466.985
8/31/95 8000 582 1455 9455 0 7369 29 7398 1434 8832.25 653.273
TOTAL $ 31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
2/19/88 2000.00 15.00 4.75 % 133.333 14.287 1905
ANNUAL INVESTMENTS OF $ 2000.00 -- SAME DAY AS INITIAL INVESTMENT
DIVIDENDS AND CAPITAL GAINS REINVESTED
RIGHT OF ACCUMULATION DISCOUNT REFLECTED WHERE APPLICABLE IN THIS ILLUSTRATION
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/88 2000 82 82 2082 0 1841 0 1841 81 1922.66 139.222
8/31/89 4000 279 361 4361 0 3755 0 3755 361 4116.13 298.703
8/31/90 6000 498 859 6859 0 5523 0 5523 842 6365.39 476.095
8/31/91 8000 685 1544 9544 0 7563 0 7563 1555 9118.11 666.042
8/31/92 10000 845 2389 12389 0 9854 0 9854 2486 12340.75 864.198
8/31/93 12000 975 3364 15364 0 12043 0 12043 3544 15587.46 1064.717
8/31/94 14000 1103 4467 18467 76 12815 71 12886 4301 17187.55 1284.570
8/31/95 16000 1305 5772 21772 0 14912 72 14984 5677 20661.63 1528.227
TOTAL $ 76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
2/19/88 10000.00 15.00 4.75 % 666.667 14.287 9525
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/88 10000 411 411 10411 0 9207 0 9207 406 9613.35 696.115
8/31/89 10000 885 1296 11296 0 9187 0 9187 1290 10477.82 760.364
8/31/90 10000 1000 2296 12296 0 8913 0 8913 2238 11151.77 834.089
8/31/91 10000 1029 3325 13325 0 9127 0 9127 3332 12459.89 910.145
8/31/92 10000 1033 4358 14358 0 9520 0 9520 4534 14054.08 984.179
8/31/93 10000 1022 5380 15380 0 9760 0 9760 5692 15452.40 1055.492
8/31/94 10000 1020 6400 16400 75 8920 70 8990 6184 15174.14 1134.091
8/31/95 10000 1084 7484 17484 0 9013 71 9084 7354 16438.58 1215.871
TOTAL $ 75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/88 10000.00 14.50 4.75 % 689.655 13.810 9524
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/89 10000 876 876 10876 0 9503 0 9503 877 10380.57 753.307
8/31/90 10000 990 1866 11866 0 9221 0 9221 1827 11048.25 826.346
8/31/91 10000 1020 2886 12886 0 9441 0 9441 2903 12344.26 901.699
8/31/92 10000 1024 3910 13910 0 9848 0 9848 4075 13923.64 975.045
8/31/93 10000 1012 4922 14922 0 10097 0 10097 5211 15308.97 1045.695
8/31/94 10000 1011 5933 15933 74 9228 70 9298 5735 15033.31 1123.566
8/31/95 10000 1073 7006 17006 0 9324 70 9394 6892 16286.03 1204.588
TOTAL $ 74
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/89 10000.00 14.47 4.75 % 691.085 13.780 9523
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/90 10000 909 909 10909 0 9240 0 9240 895 10135.72 758.094
8/31/91 10000 935 1844 11844 0 9461 0 9461 1863 11324.67 827.222
8/31/92 10000 939 2783 12783 0 9869 0 9869 2904 12773.56 894.507
8/31/93 10000 929 3712 13712 0 10117 0 10117 3927 14044.49 959.323
8/31/94 10000 928 4640 14640 68 9247 64 9311 4480 13791.61 1030.763
8/31/95 10000 985 5625 15625 0 9343 64 9407 5533 14940.86 1105.093
TOTAL $ 68
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/90 10000.00 14.04 4.75 % 712.251 13.370 9523
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/91 10000 879 879 10879 0 9751 0 9751 888 10639.84 777.198
8/31/92 10000 882 1761 11761 0 10171 0 10171 1830 12001.17 840.418
8/31/93 10000 872 2633 12633 0 10427 0 10427 2768 13195.21 901.312
8/31/94 10000 871 3504 13504 64 9530 60 9590 3367 12957.61 968.431
8/31/95 10000 925 4429 14429 0 9630 61 9691 4346 14037.33 1038.264
TOTAL $ 64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/91 10000.00 14.37 4.75 % 695.894 13.690 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/92 10000 790 790 10790 0 9937 0 9937 808 10745.69 752.499
8/31/93 10000 781 1571 11571 0 10188 0 10188 1626 11814.86 807.026
8/31/94 10000 780 2351 12351 57 9311 54 9365 2237 11602.08 867.121
8/31/95 10000 828 3179 13179 0 9408 54 9462 3106 12568.85 929.649
TOTAL $ 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/92 10000.00 14.99 4.75 % 667.111 14.280 9526
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/93 10000 693 693 10693 0 9767 0 9767 707 10474.19 715.450
8/31/94 10000 692 1385 11385 51 8926 48 8974 1311 10285.58 768.728
8/31/95 10000 734 2119 12119 0 9019 48 9067 2075 11142.64 824.160
TOTAL $ 51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/93 10000.00 15.37 4.75 % 650.618 14.640 9525
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/94 10000 629 629 10629 46 8705 43 8748 605 9353.54 699.069
8/31/95 10000 668 1297 11297 0 8796 44 8840 1292 10132.96 749.479
TOTAL $ 46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/94 10000.00 14.05 4.75 % 711.744 13.380 9523
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/95 10000 680 680 10680 0 9623 0 9623 693 10316.67 763.067
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/01/95 10000.00 14.19 4.75 % 704.722 13.520 9528
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/95 10000 0 0 10000 0 9528 0 9528 0 9527.84 704.722
TOTAL $ 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 1,471,490
<INVESTMENTS-AT-VALUE> 1,479,876
<RECEIVABLES> 39,493
<ASSETS-OTHER> 2,964
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,522,333
<PAYABLE-FOR-SECURITIES> 17,421
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,729
<TOTAL-LIABILITIES> 21,150
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,570,131
<SHARES-COMMON-STOCK> 111,032,212
<SHARES-COMMON-PRIOR> 121,503,152
<ACCUMULATED-NII-CURRENT> 2,493
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (79,827)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,259
<NET-ASSETS> 1,501,183
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 116,409
<OTHER-INCOME> 0
<EXPENSES-NET> 11,720
<NET-INVESTMENT-INCOME> 104,689
<REALIZED-GAINS-CURRENT> (47,764)
<APPREC-INCREASE-CURRENT> 59,259
<NET-CHANGE-FROM-OPS> 116,184
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 103,598
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,884,119
<NUMBER-OF-SHARES-REDEEMED> 55,272,862
<SHARES-REINVESTED> 5,917,803
<NET-CHANGE-IN-ASSETS> (124,506)
<ACCUMULATED-NII-PRIOR> 1,762
<ACCUMULATED-GAINS-PRIOR> (32,063)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,720
<AVERAGE-NET-ASSETS> 1,504,166
<PER-SHARE-NAV-BEGIN> 13.38
<PER-SHARE-NII> .93
<PER-SHARE-GAIN-APPREC> .13
<PER-SHARE-DIVIDEND> .92
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.52
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
