INTERMEDIATE BOND FUND OF AMERICA
ANNUAL REPORT
for the Year Ended August 31, 1995
[The American Funds Group(R)]
THE OBJECTIVE OF INTERMEDIATE BOND FUND OF AMERICA(R) is to earn current
income, consistent with preservation of capital, within certain guidelines for
quality and maturity. The fund invests primarily in a portfolio of securities
with effective maturities of between three and 10 years that are rated in the
two highest categories by Moody's (Aaa, Aa) or Standard & Poor's (AAA, AA), or
in equivalent unrated securities.
These investments include:
- - U.S. government and federal agency securities
- - High-quality corporate obligations
- - GNMA certificates and other mortgage-related and asset-backed securities
In pursuing its objective, the fund seeks to provide more income than
short-term obligations such as Treasury bills, and greater stability than
longer term bonds. While short-term investments typically offer greater
stability of principal and long-term bonds generally offer higher yields,
Intermediate Bond Fund of America seeks to take an attractive middle course
between the two.
ABOUT OUR COVER:
The fixed-income trading room of the fund's investment adviser, Capital
Research and Management Company.
FELLOW SHAREHOLDERS:
What a difference a year makes.
A year ago the bond market was languishing from the effects of the Federal
Reserve's actions to raise interest rates amid expectations that strong
economic growth would lead to higher inflation.
Things began to look up last November. Fixed-income investors were buoyed by
hopes that the newly elected Congress would intensify the fight to reduce the
federal budget deficit. Interest rates turned down and bond prices, which move
inversely to interest rates, rose. A slowdown in consumer spending and a
weakening economy tempered concerns about inflation and continued to fuel a
bond market rally through the spring and into the summer. Although interest
rates rose temporarily in July and August, bond prices on balance ended the
year a bit higher than where they began.
Over the 12 months ended August 31, Intermediate Bond Fund of America paid
dividends totaling 92 1/2 cents a share. This represented an income return
of...
- - 6.9% if you took your dividends in cash, or
- - 7.1% if, like most shareholders, you compounded your earnings by reinvesting
your dividends in additional fund shares.
Meanwhile, the fund's net asset value began the fiscal year on September 1,
1994 at $13.38 and ended it August 31 at $13.52. This increase in share price,
combined with the income return of 7.1%, produced a total return of +8.3% for
those who reinvested their dividends. The fund's latest results bring its
total return since its inception in February 1988 to +72.6%, or an average
annual compound return of +7.5%. This is more than twice the 31.8% increase in
the Consumer Price Index during this same period.
The fund entered fiscal 1995 with a relatively short average effective maturity
and shortened it somewhat further amid conflicting signals about the strength
of business activity and the extent of inflationary pressures. This was
designed to protect capital in the event that interest rates moved higher. This
conservative posture, along with Intermediate Bond Fund of America's high
credit standards, caused the fund to trail the unmanaged Salomon Brothers Broad
Investment-Grade Medium Term Index. This index, which has a somewhat longer
effective maturity than the fund and also contains higher yielding, lower rated
bonds, gained 10.0% on a reinvested basis over the course of the year.
During fiscal 1995, we made a number of adjustments in the fund's portfolio.
The portion held in corporate bonds was somewhat reduced as the yield advantage
they traditionally enjoy over U.S. Treasury securities narrowed. In effect, we
were able to upgrade Intermediate Bond Fund of America's already high-quality
portfolio with little sacrifice in yield by increasing the share of the
portfolio represented by government bonds. Treasuries and other federal agency
obligations currently make up more than two-thirds of the fund's net assets.
Last July, the Federal Reserve lowered its target for the federal funds rate, a
key short-term interest rate, by a quarter of one percent. The nation's central
bank appeared at that time to take the view that inflationary pressures had
subsided and that some easing was warranted to avoid a recession. This was a
change in direction for the Fed, which for more than a year had focused on
raising rates and warding off inflation. The Fed, as of this writing, has left
short-term interest rates unchanged since July.
We believe the near-term outlook for interest rates - and for business
generally - is rather uncertain at the moment. Although there have been signs
of softening in some parts of the economy, other sectors are showing renewed
vigor. It is not yet clear whether the overall pace of growth in the months
ahead will be strong enough to intensify inflation and move interest rates up,
or weak enough to allow further reductions in rates. Over the long-term,
however, we continue to feel that the outlook for inflation, the bond markets
and the fund is encouraging.
We look forward to reporting to you again in six months.
Cordially,
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
October 12, 1995
HOW A $10,000 INVESTMENT HAS GROWN
The fund results in the chart on this page reflect payment of the maximum sales
charge of 4.75%. Thus, the net amount invested was $9,525 versus $10,000 in the
Salomon Brothers Broad Investment-Grade Medium Term Index, which is unmanaged
and does not reflect sales charges, commissions or expenses. That index also
represents a larger universe of fixed-income securities than that in which
Intermediate Bond Fund of America invests. The fund invests only in securities
rated "AA" or higher, while the Salomon index includes lower rated
investment-grade securities - those rated "A" or "Baa/BBB." Securities in these
rating categories typically offer higher yields than the higher quality
securities in which the fund invests.
February 19, 1988 through August 31, 1995
$18,732
Salomon Brothers Broad Investment-Grade Medium Term Index with interest
reinvested
$16,439
Intermediate Bond Fund of America with dividends reinvested
$13,181
Consumer Price Index/+/
/+/ Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
Past results are not predictive of future results.
AVERAGE ANNUAL COMPOUND RETURNS*
<TABLE>
<CAPTION>
Periods ended
8/31/95 9/30/95
<S> <C> <C>
Lifetime (since 2/19/88) +6.82% +6.86%
Five Years +7.02% +7.03%
One Year +3.17% +4.88%
</TABLE>
*Assumes reinvestment of all distributions and payment of the maximum 4.75%
sales charge at the beginning of the stated periods.
The fund's 30-day yield as of September 30, 1995, calculated in accordance with
the Securities and Exchange Commission formula, was 5.45%. The fund's
distribution rate as of that date was 6.33%. The SEC yield reflects income
earned by the fund, while the distribution rate reflects dividends actually
paid by the fund. Fund results elsewhere in this report were computed without a
sales charge unless otherwise indicated. Sales charges are lower for accounts
of $25,000 or more.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. HISTORICALLY, THE SHORTER
THE TIME PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND
SHARES 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.
A LOOK AT YOUR FUND'S PORTFOLIO - AND THE UNIVERSE IN WHICH IT INVESTS.
Today's bond market is vast and complex, comprising tens of thousands of bonds
collectively worth trillions of dollars. The charts and tables that follow give
an overview of the bond market and that portion which meets the maturity and
quality criteria for Intermediate Bond Fund of America.
The Salomon Brothers Broad Investment-Grade (BIG) Bond Index is a
representation of the universe of taxable investment-grade bonds.
Investment-grade bonds are those rated BBB and above by Standard and Poor's and
Baa by Moody's Investors Service, two independent credit rating agencies.
(Non-investment grade bonds are considered to have "speculative"
characteristics.)
The Salomon Brothers Broad Investment-Grade Medium Term Index represents the
portion of the universe with maturities up to 10 years -the maximum maturity in
which the fund can invest. Within the medium-term segment of the bond market,
Intermediate Bond Fund of America's purchases are limited to those rated AA or
higher.
Maturity
Less than 1 year 4%
1-3 years 32%
3-7 years 37%
7-10 years 27%
Intermediate Bond Fund of America
<TABLE>
<CAPTION>
Investment- Intermediate
Grade Medium-Term Bond Fund
Bond Market/1/ Bond Market/2/ of America
<S> <C> <C> <C>
Less than - - 4%
1 year
1-3 years 23% 29% 32%
3-7 years 36% 44% 37%
7-10 21% 27% 27%
years
10+ years 20% - -
100% 100% 100%
</TABLE>
/1/Salomon Brothers Broad Investment-Grade (BIG) Bond Index
/2/Salomon Brothers Broad Investment-Grade Medium Term Index
CREDIT QUALITY
AAA 17%
AA 11%
Cash Equivalents 3%
U.S. Govt./Agency 69%
Intermediate Bond Fund of America
<TABLE>
<CAPTION>
Investment- Intermediate
Grade Medium-Term Bond Fund
Bond Market/1/ Bond Market/2/ of America
<S> <C> <C> <C>
U.S. 81% 85% 69%
Govt./Agenc
y
AAA 2% 2% 17%
AA 4% 3% 11%
A 8% 6% -
BBB 5% 4% -
Below BB - - -
Cash - - 3%
Equivalents
100% 100% 100%
</TABLE>
SECTOR
Asset-Backed 12%
Corporate Bonds 5%
Non-U.S. Govt. Bonds/Development Agencies/3/ 5%
Cash Equivalents 3%
U.S. Govt./Agency (Non-Mortgage) 48%
Mortgage-Backed 27%
Intermediate Bond Fund of America
<TABLE>
<CAPTION>
Investment- Intermediate
Grade Medium-Term Bond Fund
Bond Market/1/ Bond of America
Market/2/
<S> <C> <C> <C>
U.S.
Govt./Agency
(Non-Mortgage) 53% 50% 48%
Mortgage-Backed 28% 35% 27%
Asset-Backed 1% 1% 12%
Corporate Bonds 15% 11% 5%
Non-U.S. Govt.
Bonds/Development
Agencies/3/ 3% 3% 5%
Cash Equivalents - - 3%
100% 100% 100%
</TABLE>
/3/All non-U.S. bonds in the fund's portfolio as well as those issued by
development authorities such as the World Bank are denominated in U.S. dollars
and conform to U.S. securities market regulations.
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 REPORTED 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.
SHAREHOLDER SERVICES
TO HELP YOU ADD TO YOUR ACCOUNT
AUTOMATIC REINVESTMENT OF DISTRIBUTIONS
All dividends and capital gain distributions can be automatically reinvested in
additional shares at net asset value (without sales charge), thus providing you
with additional potential for growth through compounding.
INVESTING BY MAIL
Simply send a check for $50 or more to the fund's transfer agent. You can send
personal checks or you can put bonus, gift or dividend checks to work by
endorsing them to the fund for investment into your account.
AUTOMATIC INVESTMENT PLAN
You can make automatic investments regularly by authorizing the fund's transfer
agent to deduct a specified sum from your bank account.
CROSS-REINVESTMENT OF DISTRIBUTIONS
You can cross-reinvest dividends or dividends and capital gain distributions
from one fund into another at no charge if you have a balance of at least
$5,000 in the originating fund or meet the minimum initial investment for the
receiving fund.
TO HELP YOU ADD TO YOUR INVESTMENT AT A REDUCED SALES CHARGE
QUANTITY DISCOUNTS
There are discounts on large investments, whether they are in one fund or a
combination of funds in The American Funds Group, as explained in the
prospectus.
RIGHT OF ACCUMULATION
You can add the value of your present shares of any of the funds in The
American Funds Group (except shares of our money market funds that were
purchased directly) to the amount of any new purchase in order to qualify for a
quantity discount on your new investment.
STATEMENT OF INTENTION
You can, without obligation, sign a Statement of Intention that allows you to
combine the purchases you intend to make over a 13-month period so as to take
immediate advantage of the maximum quantity discount available.
TO HELP YOU PAY YOUR BILLS
DIVIDENDS IN CASH
You have the option of taking your dividends in cash.
AUTOMATIC WITHDRAWAL PLAN
You can arrange to have regular checks for specified amounts sent to you or to
anyone you designate in any month(s) you choose.
TO HELP YOU MEET YOUR CHANGING NEEDS
EXCHANGE PRIVILEGES
Should your goals or financial circumstances change, you can easily restructure
your investment program by transferring some or all of your holdings into other
funds in The American Funds Group. You can do this at no charge by mail or by
phone. Automatic exchanges of $50 or more may also be made between funds. Your
initial exchange must meet the receiving fund's minimum investment requirement
unless the originating fund's balance is at least $5,000 (in which case you
have a year to meet the minimum investment requirement). Please remember that
fund exchanges constitute a sale and purchase for tax purposes.
TO HELP YOU TAKE ADVANTAGE OF MONEY-SAVING TAX BENEFITS
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
You can set aside up to $2,000 a year in your personal tax-deferred IRA.
Deductibility of contributions depends on other retirement plan coverage and
adjusted gross income. All contributions, deductible or nondeductible, continue
to grow on a tax-deferred basis.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)
A SEP is a tax-deferred retirement plan which enables employers to make
tax-deductible contributions to employees' IRAs. Through SAR-SEP programs,
employees can also make pre-tax contributions to their accounts. Generally,
contribution limits on SEPs and SAR-SEPs exceed the IRA limit described above.
401(K) RETIREMENT PLAN FOR EMPLOYEES OF CORPORATIONS
A 401(k) plan is a salary-deferred program, which often allows for larger
contributions than IRAs, yet has fewer withdrawal restrictions.
403(B) RETIREMENT PLAN FOR EMPLOYEES OF PUBLIC SCHOOLS OR NONPROFIT
ORGANIZATIONS
You may qualify for this tax-deferred plan if you are employed by a public
school system or by a nonprofit organization (e.g., a hospital or foundation).
OTHER RETIREMENT PLANS FOR BUSINESSES
Two prototype plans are available that enable businesses to make tax-deductible
contributions into tax-deferred retirement accounts:
- -Basic qualified plans (Keogh-type)
Suitable for smaller businesses.
- - Full-feature qualified plans (corporate-type)
Suitable for larger businesses. Trusteeship and optional plan administration
services are available with prototype or individually designed plans.
TAX INFORMATION ON PLAN DISTRIBUTIONS
We can help you minimize taxes on lump-sum or other retirement plan
distributions.
TO HELP YOU WITH RECORDKEEPING
CONFIRMATION OF TRANSACTIONS
You receive account statements reflecting the transactions in your account.
CONSOLIDATED QUARTERLY STATEMENTS
If you have more than one account with the American Funds, you can request a
quarterly statement combining certain accounts registered to the same
individual.
TELEPHONE INFORMATION SERVICE
American FundsLine(R) is a toll-free service which gives you information about
your account as well as current prices for all American Funds. Just call
800/325-3590. (Please have your account number and fund number ready.)
IMAGECHECK(SM)
If you're a shareholder in a fund that has check-writing privileges (The Cash
Management Trust of America, The U.S. Treasury Money Fund of America or The
Tax-Exempt Money Fund of America), each month you'll receive photo images of
the front and back of each cleared check on easy-to-file 8 1/2" x 11"
statements.
YEAR-END TAX REPORT
At the end of each year, you will receive an individual report which shows the
tax status of the dividends and any capital gain distributions paid to you
during the year. In many instances, these reports can help you calculate taxes
due on shares you've sold by reporting average cost.
SAFEKEEPING OF CERTIFICATES
Your shares are credited to your account and certificates are not issued unless
specifically requested. This helps eliminate the costly, irritating problem of
lost or destroyed certificates.
FOR MORE COMPLETE INFORMATION ABOUT THESE SERVICES OR ABOUT ANY OF THE AMERICAN
FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR
SECURITIES DEALER OR FINANCIAL PLANNER, OR PHONE THE FUND'S TRANSFER AGENT,
AMERICAN FUNDS SERVICE COMPANY, AT 800/421-0180. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THESE SERVICES ARE SUBJECT TO CHANGE
OR TERMINATION.
BOARD OF TRUSTEES
H. FREDERICK CHRISTIE, Palos Verdes Estates, California
Private investor; former President and Chief Executive Officer, The Mission
Group; former President, Southern California Edison Company
DIANE C. CREEL, Long Beach, California
Chairwoman, Chief Executive Officer and President, The Earth Technology
Corporation
MARTIN FENTON, JR., San Diego, California
Chairman of the Board, Senior Resource Group, Inc.
(senior living centers management)
LEONARD R. FULLER, Los Angeles, California
President, Fuller & Company, Inc.
(financial management consulting firm)
ABNER D. GOLDSTINE, Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR., Los Angeles, California
Chairman of the Board of the fund
Senior Vice President and Director, Capital Research and Management Company
HERBERT HOOVER III, Pasadena, California
Private investor
RICHARD G. NEWMAN, Los Angeles, California
Chairman of the Board, President and Chief Executive Officer, AECOM Technology
Corporation (architectural engineering)
PETER C. VALLI, Long Beach, California
Chairman of the Board and Chief Executive Officer, BW/IP International, Inc.
(industrial manufacturing)
Leonard Weil retired from the Board effective December 31, 1994. He has been a
member of the Board of Trustees since 1987. The Trustees thank him for his many
contributions to the fund. Diane Creel and Leonard Fuller were elected Trustees
effective September 22, 1994.
OTHER OFFICERS
MARY C. CREMIN, Brea, California
Vice President and Treasurer of the fund
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
MICHAEL J. DOWNER, Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
JOHN H. SMET, Los Angeles, California
Vice President of the fund
Vice President,
Capital Research and Management Company
JULIE F. WILLIAMS, Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group, Capital Research and
Management Company
KIMBERLY S. VERDICK, Los Angeles, California
Assistant Secretary of the fund
Compliance Associate - Fund Business Management Group, Capital Research and
Management Company
ANTHONY W. HYNES, JR., Brea, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of Intermediate Bond Fund of
America but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after December 31, 1995, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA TAG/GRS/2735
Lit. No. IBFA-011-1095
[The American Funds Group (R)]
