MARKED
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. 16
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 17
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, Secretary
INTERMEDIATE BOND FUND OF AMERICA
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
ROBERT E. CARLSON, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. Flower Street
Los Angeles, CA 90071-2371
(Counsel for the Registrant)
Approximate date of proposed public offering:
It is proposed that this filing will become effective on November 1, 1998,
pursuant to paragraph (b) of rule 485.
<PAGE>
INTERMEDIATE BOND FUND OF AMERICA
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN PROSPECTUS
PART "A" OF FORM N-1A (PART "A")
<S> <C> <C>
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks and Performance
3. Risk/Return Summary: Fee Table Risk/Return Summary
4. Investment Objectives, Principal Investment Objective,
Strategies, and Related Risks Strategies and Risks
5. Management's Discussion of Fund N/A
Performance
6. Management, Organization, and Capital Management and
Structure Organization
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Shareholder Information
9. Financial Highlights Information Financial Highlights
</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 and Table of Contents Cover Page and Table of
Contents
11. Fund History Fund Organization
12. Description of the Fund and its Fund Organization;
Investments and Risks Investment Restrictions;
Description of Certain
Securities and Investment
Techniques
13. Management of the Fund Management; Fund Officers
and Trustees
14. Control Persons and Principal Holders N/A
of Securities
15. Investment Advisory and Other Services Management; General
Information; Fund Officers
and Trustees
16. Brokerage Allocation and Other Management; Execution of
Practices Portfolio Transactions
17. Capital Stock and Other Securities None
18. Purchase, Redemption and Pricing of Purchase of Shares;
Shares Selling Shares;
Shareholder Account
Services and Privileges;
General Information
19. Taxation of Fund Dividends, Distributions
and Federal Taxes
20. Underwriters Management
21. Calculation of Performance Data Investment Results and
Related Statistics
22. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART "C"
<S> <C>
23. Exhibits
24. Persons Controlled by or under
Common Control with Registrant
25. Indemnification
26. Business and Other Connections of
Investment Adviser
27. Principal Underwriters
28. Location of Accounts and Records
29. Management Services
30. Undertakings
Signature Page
</TABLE>
<PAGE>
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
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Intermediate Bond Fund
of America(R)
Prospectus
NOVEMBER 1, 1998
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INTERMEDIATE BOND FUND OF AMERICA
333 South Hope Street
Los Angeles, California 90071
TICKER SYMBOL: AIBAX NEWSPAPER ABBREV.: IntBd FUND NO.: 23
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary 4
................................................................................
Fees and Expenses of the Fund 7
................................................................................
Investment Objective, Strategies and Risks 8
................................................................................
Important Recent Developments 11
................................................................................
Management and Organization 11
................................................................................
Shareholder Information 13
................................................................................
Purchase and Exchange of Shares 14
................................................................................
Distribution Arrangements 17
................................................................................
Financial Highlights 19
</TABLE>
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23-010-1198/RRD INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 3
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RISK/RETURN SUMMARY
The fund seeks to provide you with current income while preserving your invest-
ment, by maintaining a portfolio having an average effective maturity of no
more than five years and consisting of debt securities with quality ratings ofA
or better by either Standard & Poor's Corporation or Moody's Investors Service,
Inc.
The fund is designed for investors seeking income and more price stability than
stocks and longer-term bonds, and capital preservation over the long term. An
investment in the fund is subject to risks, including the possibility that its
share price and total return may decline in response to certain events, such as
a rise in interest rates or changes in the market or general economy. In addi-
tion, the value of debt securities may be affected by changes in credit rat-
ings. Accordingly, you may lose money by investing in the fund. The likelihood
of loss is greater if you invest for a shorter period of time.
Your investment in the fund is not a bank deposit and is not insured or guaran-
teed by the Federal Deposit Insurance Corporation or any other government agen-
cy, entity or person.
4 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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INVESTMENT RESULTS
The following information illustrates how the fund's results may vary:
[CHART OF THE FUND'S RESULTS CALCULATED WITHOUT
A SALES CHARGE ON A CALENDAR YEAR BASIS]
<TABLE>
<CAPTION>
CALENDAR YEAR FUND'S RESULTS
------------- --------------
<S> <C>
1988 3.21%
1989 10.02%
1990 7.92%
1991 14.3%
1992 6.35%
1993 9.13%
1994 -2.99%
1995 13.86%
1996 4.15%
1997 7.01%
</TABLE>
The fund's highest/lowest quarterly results during this time period were:
X HIGHEST 5.02% (quarter ended December 31, 1991)
X LOWEST -2.63% (quarter ended March 31, 1994)
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 5
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For periods ended December 31, 1997:
<TABLE>
<CAPTION>
AVERAGE THE FUND WITH
ANNUAL MAXIMUM SALOMON
TOTAL SALES CHARGE SMITH
RETURN DEDUCTED/1/ BARNEY/2/ CPI/3/
- ----------------------------------------------
<S> <C> <C> <C>
One Year 1.92% 8.42% 1.70%
..............................................
Five Years 5.05% 6.90% 2.60%
..............................................
Lifetime/4/ 6.76% 8.39% 3.40%
</TABLE>
Yield/1/: 5.52%
(For current yield information, please call American FundsLine(R) at 1-800-325-
3590)
/1/ These fund results were calculated according to a formula which requires
that the maximum sales charge be deducted. Results would be higher if they
were calculated at net asset value.
/2/ The Salomon Smith Barney Broad Investment-Grade Medium Term Index represents
a market capitalization-weighted index that includes U.S. Treasury,
Government-sponsored, mortgage, and investment-grade fixed-rate corporate
obligations with a maturity of one to ten years. This index is unmanaged and
does not reflect sales charges, commissions or expenses.
/3/ The Consumer Price Index is a measure of inflation and is computed from data
supplied by the U.S. Department of Labor, Bureau of Labor Statistics.
/4/ The fund began investment operations on February 19, 1988.
These results are meant to illustrate the potential fluctuations in the
fund's results over shorter periods of time. Past results are not an indica-
tion of future results.
6 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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FEES AND EXPENSES OF THE FUND
The following describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.75%/1/
................................................................................
Maximum sales charge imposed on reinvested dividends 0%
................................................................................
Maximum deferred sales charge 0%/2/
................................................................................
Redemption or exchange fees 0%
</TABLE>
/1/Sales charges are reduced or eliminated for larger purchases.
/2/A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following any purchases you made without a sales charge.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the fund assets)
<TABLE>
- ------------------------------------------------
<S> <C> <C>
Management
Fees 0.39%*
................................................
Service
(12b-1)
Fees 0.30%**
................................................
Other
Expenses 0.10%
................................................
Total
Annual
Fund
Operating
Expenses 0.79%
</TABLE>
................................................
* Does not reflect fee waiver. During the year, Capital Research and Management
Company reduced management fees to reimburse the fund for certain
distribution expenses. With the waiver, management fees (as a percentage of
average net assets) are 0.36% and total operating expenses are 0.76%.
** 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
One year $ 552
....................
Three years $ 715
....................
Five years $ 893
....................
Ten years $1,406
</TABLE>
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 7
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INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is to provide you with current income consis-
tent with preservation of capital. It invests primarily in fixed-income securi-
ties with quality ratings of A or better (by either Standard & Poor's Corpora-
tion or Moody's Investors Service, Inc.), including securities issued and guar-
anteed by the U.S. government and securities backed by mortgages or other as-
sets. The fund's aggregate portfolio will have an average effective maturity no
longer than five years. A bond's effective maturity is the market's trading as-
sessment of its maturity and represents an estimate of the most likely time
when an investor in that bond will receive payment of principal. For example,
as market interest rates decline, issuers may exercise call provisions which
acts to shorten the bond's effective maturities. Conversely, if interest rates
rise, effective maturities tend to lengthen. The average effective maturity is
the market-weighted average (i.e., more weight is given to larger holdings) of
all effective maturities in the portfolio.
The values of certain debt securities held by the fund may be affected by
changing interest rates, effective maturities and credit ratings. For example,
the values of bonds in the fund's portfolio generally will decline when inter-
est rates rise and vice versa. A security backed by the U.S. Treasury or the
full faith and credit of the United States is guaranteed only as to the timely
payment of interest and principal when held to maturity. The current market
prices for such securities are not guaranteed and will fluctuate. In addition,
many types of debt securities, including mortgage-related securities are sub-
ject to prepayment risk. For example, when interest rates fall, homeowners are
more likely to refinance their home mortgages and "prepay" their principal ear-
lier than expected. The fund must then reinvest the unanticipated principal in
new securities when interest rates on new mortgage investments are falling,
thus reducing the income of the fund.
Debt securities are also subject to credit risk which is the possibility that
an issuer of a debt security will fail to make timely payments of principal or
interest and the security will go into default. The fund's investment adviser
attempts to reduce these risks through diversification of the portfolio and by
doing a credit analysis of each issuer as well as by monitoring economic and
legislative developments. The fund may also invest a substantial portion of its
portfolio in cash or cash equivalents. The extent of the fund's cash position
will be dependent on market conditions, fund purchases and redemptions, and
other factors. For example, under certain circumstances, in response to abnor-
mal market conditions, the fund may be invested substantially in cash or cash
equivalents. This will detract from the achievement of the fund's objective
over the short term, and it may protect the fund during a market downturn.
8 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities which represent good investment
opportunities.
OTHER IMPORTANT INVESTMENT PRACTICES
The fund may also invest in asset-backed securities (securities backed by as-
sets such as loans, accounts receivable originated by banks, credit card compa-
nies, or other providers of credit). The loans underlying these securities are
subject to prepayments which can decrease maturities and returns. In addition,
the values of the securities are ultimately dependent upon payment of the un-
derlying loans by individuals. To lessen the effect of failures by individuals
to make payments on these loans, the securities may provide guarantees or other
types of credit support up to a certain amount. Therefore, the credit quality
of asset-backed securities depends primarily on the credit quality of the un-
derlying assets.
ADDITIONAL INVESTMENT RESULTS
The following additional investment results are for periods ended December 31,
1997:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL THE FUND WITH
TOTAL NO LIPPER
RETURN SALES CHARGE/1/ AVERAGE/2/
- ---------------------------------------
<S> <C> <C>
One Year 7.01% 6.67%
.......................................
Five Years 6.08% 5.91%
.......................................
Lifetime/3/ 7.28% 7.35%
</TABLE>
/1/These fund results were calculated according to a formula that is required
for all stock and bond funds.
/2/The Lipper Short-Intermediate Investment Grade Debt average represents funds
that invest at least 65% of their assets in investment grade debt issues
(rated in the top of four grades) with dollar-weighted average maturities of
one to five years.
/3/The fund began investment operations on February 19, 1988.
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 9
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The following chart illustrates the portfolio composition of the fund as of the
end of its fiscal year, August 31, 1998.
[CHART OF PORTFOLIO COMPOSITION OF THE FUND AS
OF THE END OF ITS FISCAL YEAR]
<TABLE>
<S> <C>
FEDERAL AGENCY MORTGAGE-BACKED 30%
.......................................................
U.S. GOV./AGENCY (NON-MORTGAGE) 23%
.......................................................
OTHER MORTGAGE-BACKED 21%
.......................................................
ASSET-BACKED 12%
.......................................................
CORPORATE BONDS 10%
.......................................................
CASH & EQUIVALENTS 4%
.......................................................
</TABLE>
<TABLE>
<S> <C>
PERCENT OF
BOND HOLDINGS BY QUALITY CATEGORY NET ASSETS
------------------------------------------------------------
U.S. Government/Agency 52.4%
............................................................
AAA 34.4%
............................................................
AA 9.2%
............................................................
Cash Equivalents 4.0%
</TABLE>
............................................................
Average effective maturity of the fund's portfolio = 4.33
years
Because the fund is actively managed, its holdings will
change from time to time.
10 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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IMPORTANT RECENT DEVELOPMENTS
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service providers --
including the investment adviser and its affiliates -- are taking steps to
address the issue. In addition, the Year 2000 problem may adversely affect the
issuers in which the fund invests. For example, issuers may incur substantial
costs to address the problem. They may also suffer losses caused by corporate
and governmental data processing errors. The fund and its investment adviser
will continue to monitor developments relating to this issue.
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MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the fund. The total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is indicated earlier under
"Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 11
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MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
fund is divided into segments which are managed by individual counselors. Coun-
selors decide how their respective segments will be invested (within the limits
provided by a fund's objective(s) and policies and by Capital Research and Man-
agement Company's investment committee). In addition, Capital Research and Man-
agement Company's research professionals may make investment decisions with re-
spect to a portion of a fund's portfolio. The primary individual portfolio
counselors for Intermediate Bond Fund of America are listed below.
<TABLE>
<CAPTION>
APPROXIMATE
YEARS OF EXPERIENCE AS
AN
INVESTMENT PROFESSIONAL
(INCLUDING
THE LAST FIVE
YEARS)
.........................
YEARS OF EXPERIENCE
AS
PORTFOLIO PORTFOLIO COUNSELOR WITH CAPITAL
COUNSELORS FOR RESEARCH AND
FOR INTERMEDIATE INTERMEDIATE BOND MANAGEMENT
BOND FUND OF FUND OF AMERICA COMPANY OR
AMERICA PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES TOTAL YEARS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOHN H. Executive Vice 7 years 15 years 16 years
SMET President
of the fund. Vice
President, Capital
Research and
Management Company
----------------------------------------------------------------------------------
THOMAS H. Vice President -- 2 years 9 years 12 years
HOGH Investment
Management Group,
Capital Research
and Management
Company
----------------------------------------------------------------------------------
JOHN W. Vice President -- 7 years 10 years 10 years
RESSNER Investment
Management Group,
Capital Research
and Management
Company
----------------------------------------------------------------------------------
The fund began operations on February 19, 1988.
</TABLE>
12 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days written notice. For your convenience, American Funds Service Com-
pany has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
[map of the United States]
<TABLE>
<S> <C> <C> <C>
WESTERN SERVICE WESTERN CENTRAL EAST CENTRAL EASTERN SERVICE
CENTER SERVICE CENTER SERVICE CENTER CENTER
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Indianapolis, Norfolk, Virginia
92822-2205 Texas Indiana 23501-2280
Fax: 714/671-7080 78265-9522 46206-6007 Fax: 757/670-4773
Fax: 210/474-4050 Fax: 317/735-6620
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS DESCRIBED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to own-
ing a fund in The American Funds Group titled "Welcome to the Family" is sent
to new shareholders and is available by writing or calling American Funds Serv-
ice Company.
You may invest in the fund through various retirement plans. However, some re-
tirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan administrator/
trustee or dealer.
13 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer autho-
rized to sell the fund's shares. You may purchase additional shares using vari-
ous options described in the statement of additional information and "Welcome
to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group gen-
erally without a sales charge. Exchanges of shares from the money market funds
initially purchased without a sales charge generally will be subject to the ap-
propriate sales charge. Exchanges have the same tax consequences as ordinary
sales and purchases. See "Transactions by Telephone..." for information regard-
ing electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER, RE-
SERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE IS
CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A PERIOD
OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT
ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY INVESTOR
WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES ACTUAL OR PO-
TENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
<TABLE>
- ---------------------------------------------------------------
<S> <C>
To establish an account $1,000
For a retirement plan account $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
</TABLE>
SHARE PRICE
The fund determines its share price, also called net asset value, as of 4:00
p.m. New York time, which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value, mar-
ket prices are used when available. If a market price for a particular security
is not available, the fund will determine the appropriate price for the securi-
ty.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and ac-
cepts your request. The offering price is the net asset value plus a sales
charge, if applicable.
14 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced for
larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
...............................
NET DEALER CONCESSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.00%
.........................................................................................
$25,000 but less than $50,000 4.50% 4.71% 3.75%
.........................................................................................
$50,000 but less than $100,000 4.00% 4.17% 3.25%
.........................................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
.........................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
.........................................................................................
$500,000 but less than $1 million 2.00% 2.04% 1.60%
.........................................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IM-
POSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF PUR-
CHASE. A dealer concession of up to 1% may be paid by the fund under its Plan
of Distribution and/or by American Funds Distributors on investments made with
no initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. You must let your investment dealer or American Funds Service Company
know if you qualify for a reduction in your sales charge using one or any com-
bination of the methods described in the statement of additional information or
"Welcome to the Family."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of ex-
penses are approved in advance by the fund's board of trustees. Up to 0.25% of
average net assets is paid annually to qualified dealers for providing certain
services
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 15
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pursuant to the fund's Plan of Distribution. The 12b-1 fee paid by the fund, as
a percentage of average net assets, for the previous fiscal year is indicated
earlier under "Fees and Expenses of the Fund." Since these fees are paid out of
the fund's assets on an ongoing basis, over time they will increase the cost of
an investment and may cost you more than paying higher initial sales charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to or sponsor
informational meetings for dealers as described in the statement of additional
information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
. Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
. Requests must be signed by the registered shareholder(s).
. A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
. Additional documentation may be required for sales of shares held in corpo-
rate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R):
. Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day
. Checks must be made payable to the registered shareholder(s)
. Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
16 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
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TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE, OR AMERICAN FUNDSLINE
ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your ac-
count(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided Amer-
ican Funds Service Company employs reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine. If reasonable procedures are not employed, the fund may be liable for
losses due to unauthorized or fraudulent instructions.
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends from its net investment income daily and distri-
butes the accrued dividends to you each month. Capital gains, if any, are usu-
ally distributed in December.
You may elect to reinvest dividends and/or capital gain distributions to pur-
chase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash.
TAX CONSEQUENCES
Dividends derived from taxable interest income, distributions of capital gains
and dividends on gains from the disposition of certain market discount bonds
will not be exempt from federal, state or local income tax.
Dividends and capital gains are generally taxable whether they are reinvested
or received in cash -- unless you are exempt from taxation or entitled to tax
deferral. Capital gains may be taxed at different rates depending on the length
of time the fund holds its assets.
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 17
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You must provide the fund with a certified correct taxpayer identification num-
ber (generally your Social Security Number) and certify that you are not sub-
ject to backup withholding. If you fail to do so, the IRS can require the fund
to withhold 31% of your taxable distributions and redemptions. Federal law also
requires the fund to withhold 30% of the applicable tax treaty rate from divi-
dends paid to certain non-resident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family,"
and your tax adviser for further information.
18 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the past five years. Certain information reflects fi-
nancial results for a single fund share. The total returns in the table repre-
sent the rate that an investor would have earned or lost on an investment in
the fund (assuming reinvestment of all dividends and distributions). This in-
formation has been audited by Deloitte & Touche LLP, whose report, along with
the fund's financial statements, are included in the statement of additional
information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
....................
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $13.42 $13.26 $13.52 $13.38 $14.64
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .83 .86 .88 .93 .95
................................................................................
Net realized and unrealized
gain (loss) on investments .17 .15 (.27) .13 (1.20)
................................................................................
Total income (loss) from
investment operations 1.00 1.01 .61 1.06 (.25)
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.86) (.85) (.87) (.92) (.94)
................................................................................
Distributions from net
realized gains -- -- -- -- (.07)
................................................................................
Total distributions (.86) (.85) (.87) (.92) (1.01)
................................................................................
Net Asset Value,
End of Year $13.56 $13.42 $13.26 $13.52 $13.38
................................................................................
Total Return/1/ 7.68% 7.83% 4.63% 8.33% (1.80)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) $1,459 $1,338 $1,429 $1,501 $1,626
................................................................................
Ratio of expenses to
average net assets .76%/2/ .82% .80% .78% .83%
................................................................................
Ratio of net income
to average net assets 6.09% 6.40% 6.53% 6.96% 6.79%
................................................................................
Portfolio turnover rate 79.19% 41.55% 48.25% 71.91% 52.94%
</TABLE>
/1/Excludes maximum sales charge of 4.75%.
/2/Had Capital Research and Management Company not waived management services
fees, the fund's expense ratio would have been 0.79% for the fiscal year
ended August 31, 1998.
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C," according to quality
as described below.
"Aaa -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are pro-
tected by a large, or by an exceptionally stable margin and principal is se-
cure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong posi-
tion of such shares."
"Aa -- High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities, fluctu-
ation of protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds possess many favorable in-
vestment attributes. Factors giving security to principal and interest are con-
sidered adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future."
Standard & Poor's rates the long-term debt securities issued by various enti-
ties in categories ranging from "AAA" to "D," according to quality as described
below.
"AAA -- Highest rating. Capacity to pay interest and repay principal is ex-
tremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree."
"A -- Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
20 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
22 INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
INTERMEDIATE BOND FUND OF AMERICA / PROSPECTUS 23
<TABLE>
<CAPTION>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
<S> <C> <C>
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext. 11
</TABLE>
FOR 24-HOUR INFORMATION
<TABLE>
<S> <C>
American American Funds
FundsLine(R) Internet Web site
800/325-3590 http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
------------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. If
there are any inconsistencies or ambiguities, the English
text will prevail.
------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including
financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing
market conditions and the fund's investment strategies, and
the independent accountants' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the
fund, including the fund's financial statements.
A current SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by
reference into this prospectus. The SAI and other related
materials about the fund are available for review or to be
copied at the SEC's Public Reference Room (1-800-SEC-0330)
or on the SEC's Internet Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing
policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary of
Service Company the fund
800/421-0180 ext. 1 333 South Hope Street
Los Angeles, California
90071
Investment Company File No. 811-5446 [LOGO OF RECYCLED PAPER] Printed on
recycled paper
<PAGE>
INTERMEDIATE BOND FUND OF AMERICA
Part B
Statement of Additional Information
NOVEMBER 1, 1998
This document is not a prospectus but should be read in conjunction with the
current prospectus dated November 1, 1998 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
Shareholders who purchase shares at net asset value through eligible
retirement plans should note that not all of the services or features described
below may be available to them, and they should contact their employer for
details.
Table of Contents
<TABLE>
<CAPTION>
Item Page No
<S> <C>
Certain Investment Limitations 2
Description of Securities and Investment Techniques 2
Investment Restrictions 7
Fund Organization 9
Fund Officers and Trustees 10
Management 13
Dividends, Distributions and Federal Taxes 16
Purchase of Shares 19
Selling Shares 25
Shareholder Account Services and Privileges 27
Execution of Portfolio Transactions 29
General Information 29
Investment Results and Related Statistics 31
Appendix 35
Financial Statements Attached
</TABLE>
CERTAIN INVESTMENT LIMITATIONS
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
DEBT SECURITIES
- - The fund will invest at least 65% of its assets in bonds.
- - All of the fund's assets will be invested in securities rated A or better or
unrated but determined to be of equivalent quality.
MATURITY
- - The fund's average effective maturity will be no longer than five years.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
Prospectus under the "Risk/Return Summary" and "Investment Objective,
Strategies and Risks."
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 -- The Federal National Mortgage
Association (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.
The Federal Home Loan Mortgage Corporation (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.
FNMA and FHLMC securities are considered by the fund to be "U.S. Government
securities" for the purpose of the fund's fundamental investment restriction
stating that the fund may not 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.
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 securities backed by
loans or accounts receivable originated by banks, credit card companies, or
other providers of credit. Generally, the originator of the loan or accounts
receivable 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 trade and automobile receivables, and credit card, home
improvement, home equity and commercial mortgage backed loans. 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.
To lessen the effect of failures by obligors on underlying assets to make
payments, asset-backed securities may contain elements of credit support
provided through guarantees, insurance policies or letters of credit issued by
a financial institution affiliated or unaffiliated with the originator of the
pool. Such credit support typically covers only a portion of the par value
until exhausted. The credit quality of most asset-backed securities depends
primarily on the credit quality of the assets underlying such securities. In
addition, the amount and quality of any credit support provided to the
securities and the degree to which the issuer is insulated from the credit risk
of the originator or any other affiliated entities are factors in determining
credit quality.
INFLATION-INDEXED BONDS -- The fund may invest in inflation-indexed bonds
issued by governments, their agencies or instrumentalities or corporations.
The principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted
principal value. For example, in a period of falling inflation, principal
value will be adjusted downward, reducing the interest payable.
Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.
OTHER SECURITIES -- While the fund may not make direct purchases of common
stocks, the fund may purchase convertible securities and debt securities that
are issued as a unit together with common stock, or other equity interests,
provided that these securities meet the fund's maturity and quality standards
at the time of purchase.
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. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods
of time as short as overnight. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the repurchase price including
accrued interest as monitored daily by 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.
FORWARD COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities
it assumes the risk of any decline in the value of the security beginning on
the date of the agreement . When the fund agrees to sell such securities, it
does not participate in further gains or losses with respect to the securities
beginning on the date of the agreement. If the other party to such
transaction fails to deliver or pay for the securities, the fund could miss a
favorable price or yield opportunity, or could experience a loss.
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 segregate liquid assets
which will be marked to market daily 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 segregated assets , the fund
temporarily could be in a leveraged position (because it may 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 are the sale of
mortgage-backed 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. 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. A reverse repurchase agreement is the sale of a security by a fund
and its agreement to repurchase the security at a specified time and price.
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.
RESTRICTED SECURITIES AND LIQUIDITY -- The fund may purchase securities subject
to restrictions on resale. All such securities whose principal trading market
is in the U.S. will be considered illiquid unless they have been specifically
determined to be liquid under procedures adopted by the fund's board of
trustees, taking into account factors such as the frequency and volume of
trading, the commitment of dealers to make markets and the availability of
qualified investors, all of which can change from time to time. The fund may
incur certain additional costs in disposing of illiquid securities.
INVESTING IN VARIOUS COUNTRIES -- The fund has the ability to invest outside
the U.S. Investing outside the U.S. involves special risks caused by, among
other things: fluctuating currency values; different accounting, auditing, and
financial reporting regulations and practices in some countries; changing local
and regional economic, political, and social conditions; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of Capital Research
and Management Company, investing outside the U.S. also can reduce certain
portfolio risks due to greater diversification opportunities.
Additional costs could be incurred in connection with the fund's activities
outside the U.S. Furthermore, increased custodian costs may be associated with
the maintenance of assets in certain jurisdictions.
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. Cash equivalents include: (1)
commercial paper (short-term notes up to 9 months in maturity issued by
corporations or governmental bodies); (2) commercial bank obligations such as
certificates of deposit (interest-bearing time deposits); bankers' acceptances,
(time drafts on a commercial bank where the bank accepts an irrevocable
obligation to pay at maturity); (3) savings association obligations
(certificates of deposit issued by mutual savings banks or savings and loan
associations); and (4) securities of the U.S. Government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less.
PORTFOLIO TRADING -- The fund intends to engage in portfolio trading when
Capital Research and Management Company (the "Investment Adviser") believes
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 "
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 lend portfolio
securities to selected securities dealers or to other institutional investors
whose financial condition is monitored by 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 effective maturity no longer than 5 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 five
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. None of the following investment restrictions involving a maximum
percentage of assets will be considered violated unless the excess occurs
immediately after, and is caused by, an acquisition [or encumbrance of
securities or assets of, or borrowings] by the fund. 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. For purposes of Investment Restriction #6, the fund will not
invest more than 15% of its net assets in illiquid securities.
FUND ORGANIZATION
The fund is an open-end, diversified management investment company. It was
organized as a Massachusetts business trust on December 7, 1987.
All fund operations are supervised by the fund's board of trustees. The board
meets periodically and performs duties required by applicable state and federal
laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in "Trustees and Trustee Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund.
FUND OFFICERS AND TRUSTEES
Trustees and Trustee Compensation
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AND AGE REGISTRANT DURING PAST 5 YEARS (INCLUDING (INCLUDING OF FUND
VOLUNTARILY VOLUNTARILY BOARDS ON
DEFERRED DEFERRED WHICH
COMPENSATION COMPENSATION TRUSTEE
/1/) FROM THE /1/) FROM ALL SERVES
FUND DURING FUNDS MANAGED /2/
FISCAL YEAR BY CAPITAL
ENDED AUGUST RESEARCH AND
31, 1998 MANAGEMENT
COMPANY OR ITS
AFFILIATES /2/
FOR THE YEAR
ENDED AUGUST
31, 1998
<S> <C> <C> <C> <C> <C>
H. Frederick Christie Private Investor. $4,211/3/ $171,100
Age: 65 Trustee Former President 19
P.O. Box 144 and Chief Executive
Palos Verdes Estates, CA Officer, The
90274 Mission Group (non-
utility holding
company, subsidiary
of Southern
California Edison
Company)
+ Don R. Conlan Trustee President none/4/ none/4/ 12
Age: 62 (retired), The
1630 Milan Avenue Capital Group
South Pasadena, CA 91030 Companies, Inc.
Diane C. Creel CEO and President, $3,900/3/ $44,650
Age: 49 Trustee The Earth 12
100 W. Broadway Technology
Suite 5000 Corporation
Long Beach, CA 90802 (international
consulting
engineering)
Martin Fenton, Jr. Trustee Chairman, Senior $4,625/3/ $121,084
Age: 63 Resource Group 15
4660 La Jolla Village (management of
Drive senior living
Suite 725 centers)
San Diego, CA 92122
Leonard R. Fuller Trustee President, Fuller $4,26 $51,850
Age: 52 Consulting 7/3/ 12
4337 Marina City Drive (financial
Suite 841 ETN management
Marina del Rey, CA 90292 consulting firm)
+* Abner D. Goldstine Senior Vice none/ none/4/
Age: 68 President, President and 4/ 12
PEO and Trustee, Capital
Trustee Research and
Management Company
+** Paul G. Haaga, Jr. Executive Vice none/ none/4/
Age: 49 Chairman of President and 4/ 14
the Board Trustee, Capital
Research and
Management Company
Herbert Hoover III Trustee Private Investor $4,043 $65,084
Age: 70 13
1520 Circle Drive
San Marino, CA 91108
Richard G. Newman Trustee Chairman, President $4,654 /3/ $102,650
Age: 63 and CEO, AECOM 13
3250 Wilshire Boulevard Technology
Los Angeles, CA 90010- Corporation
1599 (architectural
engineering)
</TABLE>
+ Trustees who are considered "interested persons of the fund 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.
* 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 Endowments, whose shareholders are limited
to (i) any entity exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii) any trust,
the present or future beneficiary of which is a 501(c)(3) organization, and
(iii) any other entity formed for the primary purpose of benefiting a 501(c)(3)
organization. An affiliate of Capital Research and Management Company, Capital
International, Inc., manages Emerging Markets Growth Fund, Inc.
/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 ($8,436), Diane C. Creel ($1,104), Martin
Fenton, Jr. ($10,874), Leonard R. Fuller ($5,591) and Richard G. Newman
($24,605). Amounts deferred and accumulated earnings thereon are not funded
and are general unsecured liabilities of the fund until paid to the Trustee.
/4/ Don R. Conlan, Abner D. Goldstine and Paul G. Haaga, Jr. are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) PRINCIPAL
HELD WITH OCCUPATION(S) DURING
THE FUND PAST 5 YEARS
<S> <C> <C> <C>
John Smet 42 Executive Vice President,
11100 Santa Monica Vice Capital Research and
Blvd. President Management Company
Los Angeles, CA 90025
Michael J. Downer 43 Vice Senior Vice President
333 South Hope Street President - Fund Business
Los Angeles, CA 90071 Management Group,
Capital Research and
Management Company
Julie F. Williams 50 Secretary Vice President - Fund
333 South Hope Street Business Management
Los Angeles, CA 90071 Group, Capital
Research and
Management Company
Anthony W. Hynes, Jr. 35 Treasurer Vice President - Fund
135 South State Business Management
College Blvd. Group, Capital
Brea, CA 92821 Research and
Management Company
Kimberly S. Verdick 33 Assistant Assistant Vice
333 South Hope Street Secretary President - Fund
Los Angeles, CA 90071 Business Management
Group, Capital
Research and
Management Company
Todd L. Miller 39 Assistant Assistant Vice
135 South State Treasurer President - Fund
College Blvd. Business Management
Brea, CA 92821 Group, Capital
Research and
Management Company
</TABLE>
# Positions within the organizations listed may have changed during this period
No compensation is paid by the fund to any officer or Trustee who is a trustee
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, 1998, 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 (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's 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. The Investment Adviser is a wholly owned subsidiary
of The Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types 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, 1999, 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).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, provides suitable office space and utilities, necessary small office
equipment and general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer
and dividend disbursing fees and expenses; costs of designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of issuance and redemption of shares (including
stock certificates, registration and qualification fees and expenses); legal
and auditing expenses; compensation, fees, and expenses paid to trustees
unaffiliated with the Investment Adviser; association dues; and costs of
stationery and forms prepared exclusively for the fund; and costs of assembling
and storing shareholder account data.
The management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income means gross income, computed
without taking account of gains or losses from sales of capital assets, but
including original issue discount as defined for federal income tax purposes.
The Internal Revenue Code in general defines original issue discount to mean
the difference between the issue price and the stated redemption price at
maturity of certain debt obligations. The holder of such indebtedness is in
general required to treat as ordinary income the proportionate part of the
original issue discount attributable to the period during which the holder held
the indebtedness. The management fee is based upon the annual rates of 0.30%
of the first $60 million of the fund's average net assets, plus 0.21% on
average net assets in excess of $60 million but not exceeding $1 billion, plus
0.18% on average net assets in excess of $1 billion but not exceeding $3
billion, plus 0.16% on average 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 $1.4 billion and gross investment income levels of 6%, 7%, 8%, 9% and
10%, management fees would be 0.37%, 0.39%, 0.42%, 0.44% and 0.46%,
respectively.
During the fiscal years ended August 31, 1998, 1997, and 1996, the Investment
Adviser's total fees amounted to $5,328,000, $5,535,000, and $5,990,000,
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 Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the "Plan"), pursuant to rule 12b-1 under the 1940 Act (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, 1998 amounted to
$1,328,000 after allowance of $5,443,000 to dealers. During the fiscal year
ended August 31, 1997 and 1996, the Principal Underwriter retained $5,507,000
and $1,785,683, 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.
Plan expenditures are 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 employer-sponsored
403(b) plan, by any defined contribution plan qualified under Section 401(a)
of the Internal Revenue Code including a "401(k) plan with 100 or more eligible
employees, or a community foundation).
Commissions on sales of shares exceeding $1 million (including purchases by
any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the fund's fiscal year ended August 31, 1998, such expenses were $4,067,000
under the Plan as compensation to dealers. As of August 31, 1998 accrued and
unpaid distribution expenses were $731,000.
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, as amended (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, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities, or currencies; and (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) at least 50% of the 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 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 be, in effect, 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 declared in October, November and December
and made payable to shareholders of record in such a month are treated as paid
and are thereby taxable as of December 31, provided that the fund pays the
dividend no later than 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 will 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 the 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 generally
applicable to net capital gain on assets held more than one year is 20%, 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
<TABLE>
<CAPTION>
<S> <C> <C>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and Fund $50 minimum (except where a lower
Numbers" for initial investment minimum is noted under "Investment
minimums. Minimums and Fund Numbers").
By contacting your Visit any investment dealer who Mail directly to your investment
investment dealer is registered in the state where dealer's address printed on your
the purchase is made and who has account statement.
a sales agreement with American
Funds Distributors.
By mail Make your check payable to the Fill out the account additions form
fund and mail to the address at the bottom of a recent account
indicated on the account statement, make your check payable
application. Please indicate an to the fund, write your account
investment dealer on the account number on your check, and mail the
application. check and form in the envelope
provided with your account
statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then section on the account application
follow the procedures for or American FundsLink Authorization
additional investments. Form. Once you establish the
privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone (subject
to conditions noted in "Telephone
and Computer Purchases, Redemptons
and Exchanges" below).
By computer Please contact your investment Complete the American FundsLink
dealer to open account, then Authorization Form. Once you
follow the procedures for establish the privilege, you,
additional investments. your financial advisor or any
person with your account
information may access American
FundsLine(R) on the Internet and
make investments by computer
(subject to conditions noted in
"Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to obtain your Your bank should wire your
account number(s), if necessary. additional investments in the same
Please indicate an investment manner as described under "Initial
dealer on the account. Instruct Investment."
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.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(R) (see
description below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R) $1,000 02
American Balanced Fund(R) 500 11
American Mutual Fund(R) 250 03
Capital Income Builder(R) 1,000 12
Capital World Growth and Income 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(R) 1,000 35
Washington Mutual Investors Fund(SM) 250 01
BOND FUNDS
American High-Income Municipal Bond Fund(R) 1,000 40
American High-Income Trust(SM) 1,000 21
The Bond Fund of America(SM) 1,000 08
Capital World Bond Fund(R) 1,000 31
Intermediate Bond Fund of America(SM) 1,000 23
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(SM)
The Tax-Exempt Bond Fund of America(R) 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
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for 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. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND
FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investments of $1 million or more and
investments made by employer-sponsored defined contribution-type plans with 100
or more eligible employees are sold with no initial sales charge. A contingent
deferred sales charge may be imposed on certain redemptions by these accounts
made within one year of purchase. Investments by retirement plans, foundations
or endowments with $50 million or more in assets may be made with no sales
charge and are not subject to a contingent deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $100 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and public
offering prices set forth in the Prospectus apply to purchases of $50,000 or
more made within a 13-month period subject to the following statement of
intention (the "Statement") terms: The Statement is not a binding obligation to
purchase the indicated amount. When a shareholder elects to use the 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 any capital gain
distributions on shares held in escrow will be credited to the shareholder's
account in shares (or paid in cash, if requested). If the intended investment
is not completed within the specified 13-month period, the purchaser will pay
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 45 days after
written request by the Principal Underwriter or the securities dealer, the
appropriate number of shares held in escrow will be redeemed to pay such
difference. If the proceeds from this redemption are inadequate, the purchaser
will be liable to the Principal Underwriter for the balance still outstanding.
The Statement may be revised upward at any time during the 13-month period, and
such a revision will be treated as a new Statement, except that the 13-month
period during which the purchase must be made will remain unchanged and there
will be no retroactive reduction of the sales charges paid on prior purchases.
Existing holdings eligible for rights of accumulation (see the prospectus and
account application) may be credited toward satisfying the Statement. During
the Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: the regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments)
and any rollovers or transfers reasonably anticipated to be invested in
non-money market American Funds during the 13-month period are added to the
figure determined above. The sum is the Statement amount and applicable
breakpoint level. On the first investment and all other investments made
pursuant to the statement 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.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
CONCURRENT PURCHASES -- You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. Direct
purchases of the money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next determined
after the purchase order is received and accepted 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. In case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to 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 do not always indicate the 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 offering price, is based on the net
asset value per share which is calculated once daily at the normal close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. For example, if the Exchange closes at 1:00 p.m. on one day
and at 4:00 p.m. on the next, the fund's share price would be determined as of
4:00 p.m. New York time on both days. The New York Stock Exchange is currently
closed on weekends and on the following holidays: New Year's Day, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company are valued, and the net asset value per share of the fund is determined
as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Forward currency contracts are valued at the
mean of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly, indirectly
or through a unit investment trust to any 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.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address that has not been used with the account for at least 10
days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that are eligible guarantor institutions.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(SM)
- - Redemptions by telephone or fax (including American FundsLine(R) and American
FundsLine OnLine(SM)) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application).
-- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
The fund may, with 60 days' written notice, close your account if due to a
sale of shares the account has a value of less than the minimum required
initial investment.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase 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 100 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 591/2; 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.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables you to make
regular monthly or quarterly investments in shares through automatic charges to
your bank accounts. With shareholder authorization and bank approval, the
Transfer Agent will automatically charge the bank account for the amount
specified ($50 minimum), which will be automatically invested in shares at the
offering price on or about the dates you select. . Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and you will receive a confirmation statement at least
quarterly. Participation in the plan will begin within 30 days after receipt
of the account application. If your 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. You may change the
amount of the investment or discontinue the plan at any time by writing the
Transfer Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- You 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 your 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 will
have the right, if you fail 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 you. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(R) or American FundsLine OnLine(SM)(see "American FundsLine(R) and
American FundsLine OnLine(SM)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
Prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, fax or telegraph. Exchange redemptions and purchases are processed
simultaneously at the share prices next determined after the exchange order is
received. (See "Purchase of Shares--Price of Shares.") THESE TRANSACTIONS HAVE
THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES -- You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS -- Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments , will be reflected on regular confirmation statements from
American Funds Service Company. Dividend and capital gain reinvestments and
purchases through automatic investment plans and certain retirement plans will
be confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) -- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(R) and American
FundsLine OnLine(SM). To use this service, call 800/325-3590 from a TouchTonet
telephone or access the American FundsWebsite on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(R)
and American FundsLine OnLine(SM) are subject to the conditions noted above and
in "Redeeming Shares--Telephone and Computer Purchases, Redemptions and
Exchanges" below. You will need your fund number (see the list of funds in The
American Funds Group under "Purchase of Shares--Investment Minimums and Fund
Numbers"), personal identification number (the last four digits of your Social
Security number or other tax identification number associated with your
account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine(R) and American FundsLine OnLine(SM)),
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 also reinstate them
at any time 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.
SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by writing to American Funds Service
Company.
REDEMPTION OF SHARES -- The fund's Declaration of Trust permits the fund to
direct the Transfer Agent to redeem your shares if, through redemptions or
otherwise, they have a value of less than the minimum initial investment amount
required of new shareholders (determined, for this purpose only, as the greater
of the shareholder's cost or the current net asset value of the shares,
including any shares acquired through reinvestment of income dividends and
capital gain distributions). We will give you prior notice of at least 60 days
before the involuntary redemption provision is made effective with respect to
your account. You will have not less than 30 days from the date of such notice
within which to bring the account up to the minimum determined as set forth
above.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available
prices in its portfolio transactions taking into account the costs and
promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not have an obligation
to obtain the lowest available commission rate to the exclusion of price,
service and qualitative considerations.
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, 1998, 1997,
and 1996, amounted to $1,197,000, $827,000, and $333,703, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, NY 10081, as Custodian.
TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $899,000 for the fiscal year ended August 31, 1998.
INDEPENDENT AUDITORS -- 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. It
provides shareholders at least semiannually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited annually by the Trust's independent
auditors, Deloitte & Touche LLP, whose selection is determined by the
Trustees. In an effort to reduce the volume of mail shareholders receive from
the fund when a household owns more than one account, the Transfer Agent has
taken steps to eliminate duplicate mailings of shareholder reports. To receive
additional copies of a report shareholders should contact the Transfer
Agent.
YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
PERSONAL INVESTING POLICY -- The Investment Adviser and its affiliated
companies have adopted a personal investing policy consistent with Investment
Company Institute guidelines. This policy includes: a ban on acquisitions of
securities pursuant to an initial public offering; restrictions on acquisitions
of private placement securities; pre-clearance and reporting requirements;
review of duplicate confirmation statements; annual recertification of
compliance with codes of ethics; ; blackout periods on personal investing for
certain investment personnel; ban on short-term trading profits for investment
personnel; limitations on service as a trustee of publicly traded companies;
and disclosure of personal securities transactions. You may obtain a summary
of the personal investing policy by contacting the Secretary of the fund.
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, 1998
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by $13.56
shares outstanding)
Offering price per share (100/95.25 of per share $14.24
net asset value, which
takes into account the
Fund's current
maximum sales charge)
</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 will
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 will 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 AND RELATED STATISTICS
The fund's yield is 5.38% based on the 30-day (or one month) period ended
August 31, 1998, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund 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 the 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.
Therefore, the distribution rates of bond funds that invest in premium bonds
(and do not amortize) usually are higher than their SEC yields.
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, 1998, the fund's total return over the past 12 months and
average annual total returns over the past five-year and lifetime periods were
2.56%, 4.24% and 7.06%. 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 fund's total return at net asset value over the past 12
months and average annual total return over the past five-year and lifetime
periods at August 31, 1998 was 7.68%, 5.26% and 7.58%, respectively.
In calculating average annual total return, the fund assumes: (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 growth and growth-income funds that are at least 10 years old. In
the rolling 10-year periods since January 1, 1968 (133 in all), those funds
have had better total returns that the Standard and Poor's 500 Composite Stock
Index in 124 of the 133 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 include information on its investment results and/or comparisons
of its investment results to various unmanaged indices or results of other
mutual funds or investment or savings vehicles in advertisements or in reports
furnished to present or prospective shareholders. The fund may also combine
its results with those of other funds in The American Funds Group for purposes
of illustrating investment strategies involving multiple funds.
The fund may also refer to results and surveys compiled by organizations such
as CDA Investment Technologies, Ibbotson Associates, Lipper Analytical Services
("Lipper"), Morningstar, Inc., Wiesenberger Investment Companies Services and
the U.S. Department of Commerce. Additionally, the fund may 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
(9/1/96-8/31/98) (9/1/94-8/31/98) (2/19/88-8/31/98)
$4,263 $9,085 $31,419
</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, 1998
Value**
<S> <C> <C>
1 1997 - 1998 $10,256
2 1996 - 1998 11,060
3 1995 - 1998 11,574
4 1994 - 1998 12,533
5 1993 - 1998 12,309
6 1992 - 1998 13,536
7 1991 - 1998 15,268
8 1990 - 1998 17,052
9 1989 - 1998 18,150
10 1988 - 1998 19,784
Lifetime 1988* - 1998 19,969
</TABLE>
* From inception, 2/19/88 through 8/31/97.
** 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, 1998)
<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
1996 1,096 8,580 18,580 8,840 70 8,289 17,199
1997 1,135 9,715 19,715 8,947 70 9,528 18,545
1998 1,224 10,939 20,939 9,040 71 10,858 19,969
</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.
<TABLE>
Intermediate Bond Fund of America
Investment Portfolio August 31, 1998
<S> <C> <C> <C>
Federal Agency Mortgage Obligations 29.99%
U.S. Treasury Securities 21.64%
Privately Originated Mortgage Obligations 21.33%
Asset-Backed Obligations 12.38%
Corporate Bonds 8.43%
Cash & Equivalents 4.02%
Governments (Excluding U.S. Government) 1.46%
Federal Agency Obligations--Non-Mortgage 0.75%
Bonds & Notes Principal Market Percent
Amount Value of Net
Industrial & Service - 1.87% (000) (000) Assets
Oil Enterprises 6.239% 2008 (1) $ 10,000 $ 10,026 .69%
PacifiCorp Australia, LLC 6.15% 2008 (1) 10,000 10,183 .70
Sony Corp. 6.125% 2003 3,000 3,024 .21
Wal-Mart Stores 5.65% 2000 4,000 4,014 .27
-----------------------
27,247 1.19
-----------------------
Transportation - 1.80%
Continental Airlines:
6.41% 2007 9,000 8,835
7.75% 2016 (2014) (2),(3) 1,282 1,434 .71
Jet Equipment Trust, Series 1995-B, Class A, 7.63% 2015 (2012) (1 9,242 10,163 .70
USAir, Inc. 6.76% 2009 (2008) (2),(3) 5,638 5,807 .39
-----------------------
26,239 1.80
-----------------------
Utilities - 0.41%
Texas Utilities Co., Series A, 6.20% 2002 6,000 6,027 .41
-----------------------
Financial Services - 4.35%
ABN AMRO Bank NV 7.55% 2006 4,000 4,275 .29
Barclays North American Capital Corp. 9.75% 2021 (2001)(2) 7,230 8,158 .56
BBV International Finance (Cayman) 6.875% 2005 7,200 7,369 .51
Beverly Finance Corp. 8.36% 2004(1) 10,000 11,080 .76
Deutsche Bank Financial 6.70% 2006 4,000 4,054 .28
Dresdner Bank New York 6.625% 2005 4,000 4,041 .28
General Electric Capital Corp. 8.375% 2001 1,500 1,591 .11
Ikon Capital Inc. 6.33% 2000 2,500 2,542 .17
Lend Lease (US) Finance Inc. 6.75% 2005 5,000 5,115 .35
Margaretten Financial 6.75% 2000 7,450 7,619 .52
NationsBank Corp. 6.125% 2004 3,000 2,982 .20
Toyota Motor Credit Corp. 6.125% 2000 2,495 2,527 .17
Union Bank of Switzerland 7.25% 2006 2,000 2,118 .15
-----------------------
63,471 4.35
-----------------------
Collateralized Mortgage Obligations
(Privately Originated)(3) - 21.33%
Asset Backed Securities Investment Trust,
Series 1997-D, 6.79% 2003 (1) 14,590 14,613 1.00
Asset Securitization Corp.,
Series 1997-D5, Class A-PS1, interest only, 1.57% 2043 (4) 173,930 18,367 1.26
Bear Asset Trust Securities, Series 1997-1,
Class A, 6.686% 2006(1) 9,802 9,824 .67
Blackrock Capital Finance LP, Series 1996-C2,
Class A, 7.632% 2026 (1),(4) 16 16 .00
Chase Commercial Mortgage Securities Corp.:
Series 1996-1, Class A1, 7.60% 2005 1,887 2,026
Series 1997-1, Class A1, 7.27% 2029 3,781 3,952
Series 1998-1, Class A1, 6.34% 2030 6,893 7,044 .89
Chase Manhattan Bank, NA, Series 1993-I,
Class 2A-5, 7.25% 2024 6,511 6,537 .45
CS First Boston Mortgage Securities Corp.,:
Series 1995-AEW1, Class B, 7.182% 2027(4) 7,200 7,200
Series 1998-C1, Class A-1A, 6.26% 2040 6,430 6,540 .94
Deutsche Mortgage & Asset Receiving Corp.,
Series 1998-C1, Class A-1, 6.22% 2031 13,705 13,888 .95
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A1A, 7.40% 2006 (1) 6,481 6,859
Series 1995-CF2, Class A1B, 6.85% 2027 (1) 5,000 5,215
Series 1996-CF1, Class A1A, 7.28% 2028 2,536 2,648 1.01
GMAC Commercial Mortgage Securities Inc.,
Series 1996-C1, Class A2A, 6.79% 2028 16,417 16,786 1.15
Iroquois Trust, Series 1997-2, Class A, 6.752% 2007 (1) 5,000 5,071 .35
J.P. Morgan Commercial Mortgage Finance Corp., pass-through
certificates:
Series 1995-C1, Class A-2, 7.463% 2010(4) 18,155 18,407
Series 1997-C4, Class A-1, 6.939% 2028 1,609 1,646 1.37
Merrill Lynch Mortgage Investors Inc.:
Series 1995-C2, Class A-1, 7.384% 2021(4) 4,910 5,019
Series 1995-C3, Class A-2, 6.822% 2025(4) 5,180 5,356
Series 1997-C1, Class A-1, 6.95% 2029 (4) 13,218 13,676 1.66
Morgan Stanley Capital I Inc.:
Series 1995-GA1, Class A-1, 7.00% 2002(1) 3,355 3,381
Series 1998-WF1, Class A-1, 6.25% 2007 (4) 35,150 35,744
Series 1998-WF2, Class A-1, 6.34% 2030 (4) 6,931 7,081 3.17
Mortgage Capital Funding Inc.,
Series 1998-MC1, Class A-1, 6.417% 2030 12,742 13,022 .89
Nomura Asset Securities Corp.,
Series 1998-D6, Class A-A1, 6.28% 2030 (4) 9,730 9,721 .67
Paine Webber CMO, Series O, Class 5, 9.50% 2019 3,889 4,258 .29
SMA Finance Co., Inc.,
Series 1998-C1, Class A-1, 6.27% 2005 (1) 4,922 4,988 .34
Structured Asset Securities Corp.:
Series 1998-RF2, Class A, 8.582% 2022 (1),(4) 18,584 20,314
Series 1998-RF1, Class A, 8.709% 2027 (1),(4) 20,104 22,062
Series 1996-CFL, Class A1-C, 5.944% 2028 (4) 2,086 2,079 3.05
Structured Assets Notes Transactions,
Series 1996-A, Class A1, 7.156% 2003(1) 6,169 6,263 .43
Westam Mortgage, Class 4-H, 8.95% 2018 11,000 11,509 .79
-----------------------
311,112 21.33
-----------------------
Asset-Backed Obligations(3) - 12.38%
Case Equipment Loan Trust, Series 1995-A, 7.30% 2002 1,070 1,076 .07
Chase Manhattan Credit Card Master Trust:
Series 1996-4, Class A, 6.73% 2003 6,000 6,045
Series 1997-5, Class A, 6.194% 2005 5,500 5,613 .79
Equicredit Funding Trust, Series 1996-A,
Class A2, 6.95% 2012 5,500 5,540 .38
FIRSTPLUS Home Loan Owner Trust:
Series 1997-1, Class A-1, 6.28% 2004 1,350 1,348
Series 1997-1, Class A-3, 6.45% 2009 3,900 3,914
Series 1997-4, Class A-5, 6.62% 2015 6,200 6,307
Series 1997-3, Class M-1, 7.32% 2023 4,000 4,219 1.08
FMAC Loan Receivables Trust, Series 1998-A, Class A, 6.69% 2020 ( 22,000 22,268 1.53
GCC Home Equity Trust, asset-backed certificates,
Series 1990-1, Class A, 10.00% 2005 1,288 1,286 .09
Green Tree Financial Corp., pass-through certificates:
Series 1998-2, Class A5, 6.24% 2016 3,500 3,539
Series 1993-3, Class A5, 5.75% 2018 9,420 9,391
Series 1995-9, Class A4, 6.45% 2027 4,250 4,269
Series 1996-8, Class A4, 7.00% 2027 5,000 5,064
Series 1996-10, Class A4, 6.42% 2028 3,500 3,531
Series 1996-10, Class A5, 6.83% 2028 14,000 14,319
Series 1997-6, Class A5, 6.68% 2029 5,000 5,105
Series 1997-6, Class A6, 6.90% 2029 3,000 3,088 3.31
Green Tree Home Improvement Loan Trust:
Series 1997-D, Class HIA1, 6.14% 2023 1,392 1,392
Series 1997-D, Class HIA3, 6.77% 2023 5,000 5,074
Series 1997-C, Class HIA2, 6.46% 2028 1,750 1,759 .56
Merrill Lynch Mortgage Investors Inc.,
Series 1992-B, Class A3, 8.30% 2012 3,510 3,525 .24
The Money Store Home Equity Trust:
Series 1996-B, Class A14, 7.35% 2012 5,000 5,067
Series 1994-D, Class A5, 8.925% 2022 9,621 10,187 1.07
Nebhelp Trust, Student Loan Interest Margin Securities,
Series 1998-1, Class A, 6.68% 2016 (1) 20,000 20,330 1.39
Norwest Asset Securities Corp., Series 1998-8, Class A1, 6.50% 20 5,998 6,005 .41
Standard Credit Card Master Trust I, credit card
participation certificates,
Series 1991-6, Class A, 7.875% 2000 21,250 21,323 1.46
-----------------------
180,584 12.38
-----------------------
Governments (Excluding U.S. Government) &
Government Authorities - 1.46%
British Columbia Hydro & Power Authority 12.50% 2013 (1998)(2) 2,000 2,080 .14
Canadian Government 6.125% 2002 7,000 7,154 .49
Ontario (Province of) 7.75% 2002 8,000 8,540 .59
Victoria (Territory of) Public Authorities Finance Agency
8.45% 2001 3,500 3,794 .24
-----------------------
21,568 1.46
-----------------------
Federal Agency Mortgage Pass-Through Obligations(3) - 26.10%
Fannie Mae:
6.00% 2013-2028 22,447 22,320
6.167% 2033(4) 13,481 13,557
6.50% 2013-2028 20,442 20,592
7.00% 2008-2028 24,735 25,204
7.50% 2009-2028 18,867 19,372
8.00% 2002-2005 1,171 1,189
8.281% 2002(4) 8,851 9,220
8.50% 2008-2027 9,985 10,444
9.00% 2001-2022 9,866 10,490
9.50% 2009-2026 7,047 7,524
10.00% 2017-2025 15,779 17,271
10.50% 2004-2020 1,172 1,293
11.00% 2000-2020 2,464 2,761
12.00% 2015-2028 6,466 7,615
12.25% 2012-2013 1,965 2,284
12.50% 2028 3,830 4,540
13.00% 2015 1,875 2,264
15.00% 2028 1,283 1,617 12.31
Freddie Mac:
6.00% 2013 5,152 5,147
6.50% 2013 1,939 1,964
7.00% 2008 2,860 2,931
8.00% 2003-2017 4,367 4,565
8.50% 2008-2021 5,827 6,093
8.75% 2008-2009 819 856
9.50% 2010-2013 1,345 1,415
10.00% 2005-2019 13,721 14,898
11.00% 2018 47 53
12.00% 2016 153 175
12.50% 2015-2019 1,105 1,297
12.75% 2019 36 42 2.70
Government National Mortgage Assn.:
5.50% 2013 2,723 2,679
6.00% 2013-2028 10,280 10,230
6.875% 2016-2024(4) 18,217 18,568
7.00% 2007-2028(4) 44,244 45,014
7.50% 2028 15,942 16,415
8.00% 2023-2026 15,067 15,630
8.50% 2007-2023 14,509 15,399
9.00% 2008-2025 10,657 11,418
9.50% 2009-2021 16,282 17,625
9.75% 1999 3 3
10.00% 2019 6,839 7,536
10.25% 2012 251 273
10.50% 2019 95 106
11.00% 2010-2019 260 296
11.50% 2010-2013 115 131
12.50% 2010-2014 351 409 11.09
-----------------------
380,725 26.10
-----------------------
Federal Agency Collateralized Mortgage Obligations(3) - 3.89%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 10,490 10,975
Series 91-146, Class Z, 8.00% 2006 3,019 3,169
Trust D2, 11.00% 2009 2,880 3,353
Series 97-41, Class B, 7.25% 2014 7,967 7,984 3.43
Series 88-16, Class B, 9.50% 2018 460 495
Series 90-93, Class G, 5.50% 2020 2,420 2,414
Series 91-78, Class PK, 8.50% 2020 5,113 5,209
Series 90-21, Class Z, 9.00% 2020 15,322 16,414
Freddie Mac:
Series 1539, Class PL, 6.50% 2008 2,000 2,070
Series 83-B, Class 3, 12.50% 2013 99 112
Series 1567, Class A, 6.088% 2023(4) 1,996 1,926
Series 2030, Class F, 6.141% 2028 (4) 2,540 2,554 .46
-----------------------
56,675 3.89
-----------------------
Federal Agency Obligations--Non-Mortgage - 0.75%
Freddie Mac Notes:
5.75% 2008 10,750 10,871 .75
-----------------------
U.S. Treasury Obligations - 21.64%
9.125% May 1999 8,250 8,473 .58
8.00% May 2001 8,000 8,598 .59
13.375% August 2001 16,750 20,542 1.41
5.875% September 2002 7,500 7,727 .53
10.75% February 2003 5,000 6,127 .42
10.75% May 2003 21,750 26,888 1.84
11.125% August 2003 12,500 15,801 1.08
7.25% May 2004 62,706 69,486 4.76
7.25% August 2004 19,750 21,975 1.51
7.875% November 2004 16,165 18,554 1.27
11.625% November 2004 40,900 54,991 3.77
7.50% February 2005 4,250 4,813 .33
6.50% May 2005 6,750 7,304 .50
5.625% February 2006 9,000 9,298 .64
3.375% January 2007 (5) 10,802 10,465 .72
6.25% February 2007 10,500 11,299 .77
6.125% August 2007 6,480 6,939 .48
10.375% November 2009 5,000 6,355 .44
-----------------------
315,635 21.64
-----------------------
TOTAL BONDS & NOTES (cost: $1,379,275,000) 1,400,154 95.98
-----------------------
Short-Term Securities
Commercial Paper - 3.05%
AIG Funding Inc. 5.50% due 9/15/98 18,100 18,059 1.24
General Electric Capital Corp. 5.85% due 9/1/98 16,500 16,497 1.13
SBC Communications Inc. 5.51% due 9/1/98 (1) 10,000 9,999 .68
-----------------------
TOTAL SHORT-TERM SECURITIES (cost: $44,555,000) 44,555 3.05
-----------------------
TOTAL INVESTMENT SECURITIES (cost: $1,423,830,000) 1,444,709 99.03
Excess of cash and receivables over payables 14,074 .97
-----------------------
Net Assets $1,458,783 100.00
=======================
(1) Purchased in a private placement transaction;
resale may be limited to qualified institutional buyers;
resale to the public may require registration.
(2) Valued in the market on the basis of
its effective maturity -- that is, the date at which the
security is expected to be called or refunded by the issuer
or the date at which the investor can put the security to
the issuer for redemption. Effective maturity date is
shown in parentheses.
(3) Pass-through securities backed by a pool of mortgages or
other loans on which principal payments are periodically made.
Therefore, the effective maturities are shorter
than the stated maturities.
(4) Coupon rate may change periodically.
(5) Index-linked bond whose principal amount moves with a
government retail price index.
See Notes to Financial Statements
</TABLE>
<TABLE>
Intermediate Bond Fund of America
Financial Statements
<S> <C> <C>
- ---------------------------------------- ----------------------
Statement of Assets and Liabilities
at August 31, 1998 (dollars inthousands)
- ---------------------------------------- ----------------------
Assets:
Investment securities at market
(cost: $1,423,830) $1,444,709
Cash 199
Receivables for-
Sales of investments $ 9,404
Sales of fund's shares 17,799
Accrued interest 13,535 40,738
----------------------
1,485,646
Liabilities:
Payables for-
Purchases of investments 19,390
Repurchases of fund's shares 4,040
Dividends payable 2,257
Management services 380
Accrued expenses 796 26,863
----------------------
Net Assets at August 31, 1998 -
Equivalent to $13.56 per share on 107,598,289 shares
of beneficial interest issued and outstanding;
unlimited shares authorized $1,458,783
=========
Statement of Operations
for the year ended August 31, 1998 (dollars inthousands)
----------------------
Investment Income:
Income:
Interest $ 93,277
Expenses:
Management services fee $ 5,328
Distribution expenses 4,067
Transfer agent fee 899
Reports to shareholders 101
Registration statement and prospectus 104
Postage, stationery and supplies 188
Trustees' fees 24
Auditing and legal fees 43
Custodian fee 6
Taxes other than federal income tax 20
------------
Total expenses before reimbursement 10,780
Reimbursement of expenses 471 10,309
Net investment income ----------------------
82,968
Realized Gain and Unrealized -----------
Appreciation on Investments:
Net realized gain 2,961
Net unrealized appreciation on investments:
Beginning of year 6,084
End of year 20,879
------------
Net unrealized appreciation on investments 14,795
-----------
Net realized gain and unrealized appreciation
on investments 17,756
-----------
Net Increase in Net Assets Resulting
from Operations $100,724
===========
Statement of Changes in Net Assets (dollars inthousands)
- ---------------------------------------- ----------------------
Year ended August 31
August 31,
1998 1997
Operations: ---------------------
Net investment income $ 82,968 $ 88,644
Net realized gain (loss) on investments 2,961 (9,914)
Net unrealized appreciation on investments 14,795 25,828
----------------------
Net increase in net assets
resulting from operations 100,724 104,558
----------------------
Dividends Paid From Net Investment Income (86,313) (87,766)
----------------------
Capital Share Transactions:
Proceeds from shares sold:
49,876,745 and 45,770,888 shares, respectivel 672,768 612,621
Proceeds from shares issued in
reinvestment of net investment income
dividends: 4,954,203 and 4,954,744 shares,
respectively 66,762 66,280
Cost of shares repurchased: 46,961,620 and
58,792,101 shares, respectively (633,193) (786,616)
----------------------
Net increase (decrease) in net assets resulting
from capital share transactions 106,337 (107,715)
----------------------
Total Increase (Decrease) in Net Assets 120,748 (90,923)
Net Assets:
Beginning of year 1,338,035 1,428,958
----------------------
End of year (including undistributed
net investment income of $527 and
$4,237, respectively) $1,458,783 $1,338,035
====================
See Notes to Financial Statements
</TABLE>
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 fund seeks current income, consistent with
preservation of capital, within certain guidelines for quality and maturity.
The following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Fixed-income securities are valued at prices obtained from a pricing service,
when such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean quoted bid and asked prices or at prices for securities of comparable
maturity, quality and type. Securities with original maturities of one year or
less having 60 days or less to maturity are amortized to maturity based on
their cost if acquired within 60 days of maturity or, if already held on the
60th day, based on the value determined on the 61st day. Securities and assets
for which representative market quotations are not readily available are valued
at fair value as determined in good faith by a committee appointed by the Board
of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed-delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Interest
income is reported on the accrual basis. Discounts and premiums on securities
purchased are amortized. Dividends to shareholders are declared daily after the
determination of the fund's net investment income and are paid to shareholders
monthly.
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, 1998, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $20,879,000, of which $25,531,000
related to appreciated securities and $4,652,000 related to depreciated
securities. During the year ended August 31, 1998, the fund realized, on a tax
basis, a net capital loss of $3,836,000 on security transactions. The fund had
available at August 31, 1998, a net capital loss carryforward of $89,401,000
which may be used to offset capital gains realized during subsequent years
through 2005 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 the portfolio securities for
book and federal income tax purposes was $1,423,830,000 at August 31, 1998.
3. The fee of $5,328,000 for management services was incurred pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on 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. During the year, CRMC reduced the management fees by
$471,000 to reimburse the fund for certain distribution expenses.
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, 1998,
distribution expenses under the Plan were limited to $4,067,000. Had no
limitation been in effect, the fund would have paid $4,681,000 in distribution
expenses under the Plan. As of August 31, 1998, accrued and unpaid
distribution expenses were $731,000.
American Funds Service Company (AFS), the transfer agent for the fund, was paid
a fee of $899,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $1,328,000 (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,
1998, aggregate amounts deferred and earnings thereon were $51,000.
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, 1998, accumulated net realized loss on investments was
$89,401,000 and paid-in capital was $1,526,778,000. The fund reclassified
$365,000 from undistributed net investment income to undistributed net realized
gains for the year ended August 31, 1998.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,270,954,000 and $1,170,477,000, respectively,
during the year ended August 31, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $6,000 was paid by these credits rather than in cash.
<TABLE>
PER-SHARE DATA AND RATIOS
- --------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended August 31
--------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------
Net Asset Value, Beginning
of Year $13.42 $13.26 $13.52 $13.38 $14.64
--------------------------------------------
Income from Investment
Operations:
Net investment income .83 .86 .88 .93 .95
Net realized and unrealized
gain (loss) on investments .17 .15 (.27) .13 (1.20)
Total from investment --------------------------------------------
operations 1.00 1.01 0.61 1.06 (0.25)
--------------------------------------------
Less Distributions:
Dividends from net investment
income (.86) (.85) (.87) (.92) (.94)
Distributions from net realized
gains (.07)
--------------------------------------------
Total distributions (.86) (.85) (.87) (.92) (1.01)
--------------------------------------------
Net Asset Value, End of Year $13.56 $13.42 $13.26 $13.52 $13.38
============================================
Total Return (1) 7.68% 7.83% 4.63% 8.33%(1.80%)
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $1,459 $1,338 $1,429 $1,501 $1,626
Ratio of expenses to average
net assets .76% (2) .82% .80% .78% .83%
Ratio of net income to
average net assets 6.12% 6.40% 6.53% 6.96% 6.79%
Portfolio turnover rate 79.19% 41.55% 48.25 % 71.91 %52.94 %
(1)Excludes maximum sales charge of 4.75%.
(2)Had CRMC not waived management services fees,
the fund's expense ratio would have been 0.79%
for the fiscal year ended August 31, 1998.
</TABLE>
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 (the "fund"), including investment portfolio,
as of August 31, 1998, 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 per-share data
and ratios are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements and 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, 1998, 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, 1998, 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.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Los Angeles, California
September xx, 1998
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, 21% 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 1999 to determine the CALENDAR YEAR amounts to
be included on their respective 1998 tax returns. Shareholders should consult
their tax advisers.
<PAGE>
PART C
INTERMEDIATE BOND FUND OF AMERICA
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(b) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(c) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(d) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(e) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(f) None.
(g) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(h) None.
(i) Not applicable to this filing.
(j) Consent of independent auditors
(k) None
(l) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(m) Previously filed (see Post-Effective Amendment No. 14 filed on 10/28/97).
(n) EX-27 Financial data schedule (EDGAR)
(o) None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund Errors
and Omissions Policies 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 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.
(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 Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer of controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. 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 Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
1501 N. University, Suite 227A
Little Rock AR 72207
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Boulder, CO 80301
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Michael L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
C. Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
H J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Littleton, CO 80121
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue, Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and Co-Chief Executive Officer None
Ruth M. Collier Senior Vice President None
145 West 67th St., #12K
New York, NY 10023
S David Coolbaugh Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary Vice President
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director None
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director Chairman of the Board
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
R.D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
L Robert L. Johansen Vice President None
Michael J. Johnston Director None
630 Fifth Avenue, 36th Floor
New York, NY 10111
B Damien M. Jordan Vice President None
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - Institutional None
Investment Services
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice President None
L E. Lee McClennahan Senior Vice President None
L James R. McCrary Assistant Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - Institutional None
Investment Services
David R. Murray Vice President None
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P.O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
L John O. Post, Jr. Vice President None
S Richard P. Prior Assistant Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
P.O. Box 472245
Charlotte, NC 28247
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
30008 Oakland Hills Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Director, None
1000 RIDC Plaza, Suite 212 Chairman of the Board and Co-Chief Executive Officer
Pittsburgh, PA 15238
William P. Simon, Jr. Senior Vice President None
912 Castlehill Lane
Devon, PA 19333
L John C. Smith Assistant Vice President - None
Institutional Investment Services
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kris J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue, Suite 228
San Mateo, CA 94401
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
3919 Whooping Crane Circle
Virginia Beach, VA 23455
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
L David M. Ward Vice President - Institutional Investment Services None
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, Treasurer None
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
N. Dexter Williams Senior Vice President None
P.O. Box 2200
Danville, CA 94526
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice President None
L Robert L. Winston Director, Senior Vice President None
Laurie B. Wood Regional Vice President None
3500 W. Camino de Urania
Tucson, AZ 85741
William R. Yost Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
320 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, Los Angeles, CA 90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
ITEM 28. 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, 3500 Wiseman Boulevard, San Antonio, TX 78251 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 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
n/a
<PAGE>
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 amended
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
28th day of October, 1998.
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 28, 1998, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C> <C>
(1) Principal Executive Officer:
/s/ Abner D. Goldstine President and Trustee
(Abner D. Goldstine)
(2) Principal Financial Officer and Principal Accounting
Officer:
/s/ Anthony W. Hynes, Jr. Treasurer
(Anthony W. Hynes, Jr.)
(3) Trustees:
H. Frederick Christie* Trustee
Don R. Conlan* Trustee
Diane C. Creel* Trustee
Martin Fenton, Jr.* Trustee
Leonard R. Fuller* Trustee
/s/ Abner D. Goldstine President and Trustee
(Abner D. Goldstine)
/s/ Paul G. Haaga, Jr. Chairman and Trustee
(Paul G. Haaga, Jr.
Herbert Hoover III* Trustee
Richard G. Newman* Trustee
</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)
CONSENT OF INDEPENDENT AUDITORS
The Intermediate Bond Fund of America, Inc.:
We consent to (a) the use in this Post-Effective Amendment No. 16 to
Registration Statement No. 33-19514 on Form N-1A of our report dated September
30, 1998 appearing in the Financial Statements, which are included in Part B,
the Statement of Additional Information of such Registration Statement, (b) the
references 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 23, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-1-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 1,423,830
<INVESTMENTS-AT-VALUE> 1,444,709
<RECEIVABLES> 40,738
<ASSETS-OTHER> 199
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,485,646
<PAYABLE-FOR-SECURITIES> 19,390
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,473
<TOTAL-LIABILITIES> 26,863
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,526,778
<SHARES-COMMON-STOCK> 107,598,289
<SHARES-COMMON-PRIOR> 99,728,961
<ACCUMULATED-NII-CURRENT> 527
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (89,401)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,879
<NET-ASSETS> 1,458,783
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 93,277
<OTHER-INCOME> 0
<EXPENSES-NET> 10,309
<NET-INVESTMENT-INCOME> 82,968
<REALIZED-GAINS-CURRENT> 2,961
<APPREC-INCREASE-CURRENT> 14,795
<NET-CHANGE-FROM-OPS> 100,724
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (86,313)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,876,745
<NUMBER-OF-SHARES-REDEEMED> 46,961,620
<SHARES-REINVESTED> 4,954,203
<NET-CHANGE-IN-ASSETS> 106,337
<ACCUMULATED-NII-PRIOR> 4,237
<ACCUMULATED-GAINS-PRIOR> (92,727)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,328
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,780
<AVERAGE-NET-ASSETS> 1,362,480
<PER-SHARE-NAV-BEGIN> 13.42
<PER-SHARE-NII> .83
<PER-SHARE-GAIN-APPREC> .17
<PER-SHARE-DIVIDEND> .86
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.56
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
