[THE AMERICAN FUNDS GROUP(R)]
INTERMEDIATE BOND FUND OF AMERICA
[photo: trading room]
[photo: clocks showing international time]
Semi-Annual Report for the Six Months Ended February 28, 1998
THE OBJECTIVE OF INTERMEDIATE BOND FUND OF AMERICA(R) is to earn current
income, consistent with preservation of capital, within certain guidelines for
quality and maturity. The fund invests primarily in a portfolio of bonds with
effective maturities between three and 10 years that are rated in the two
highest categories by Moody's (Aaa, Aa) or Standard & Poor's (AAA, AA), or in
equivalent unrated securities.
These investments include:
* U.S. government and federal agency securities
* Pass-through securities, such as mortgage- and asset-backed
securities
* High-quality corporate obligations
In pursuing its objective, the fund takes a middle course, seeking a higher
yield than money market funds (which typically offer stable principal value)
with less volatility than longer term bonds (which typically provide higher
income).
Intermediate Bond Fund of America is one of the 28 mutual funds in The American
Funds Group,(r) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
<TABLE>
<CAPTION>
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AVERAGE ANNUAL COMPOUND RETURNS* For the Periods Ended
2/28/98 3/31/98
Ten years +6.76% +6.82%
Five years +4.51% +4.44%
One year +2.43% +3.15%
</TABLE>
*Assumes reinvestment of all distributions and payment of the maximum 4.75%
sales charge at the beginning of the stated periods. Sales charges are lower
for accounts of $25,000 or more.
Fund results in this report were computed without a sales charge unless
otherwise indicated. The fund's 30-day yield as of March 31, 1998, calculated
in accordance with the Securities and Exchange Commission formula, was 5.17%.
The fund's distribution rate as of that date was 5.93%. The SEC yield reflects
income the fund expects to earn based on its current portfolio of securities,
while the distribution rate is based solely on the fund's past dividends.
Accordingly, the fund's SEC yield and distribution rate may differ.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY BY
INVESTING IN THE FUND. THE SHORTER THE TIME PERIOD OF YOUR INVESTMENT, THE
GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR INSURED OR GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL
INSTITUTION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY,
ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
During the past six months, Intermediate Bond Fund of America benefited from a
favorable bond market environment. Shareholders received monthly dividends
totaling 44 cents per share, which represented a six-month income return of
3.32% with dividends reinvested (6.64% annualized) or 3.28% with dividends paid
in cash (6.56% annualized).
In addition, the fund's net asset value increased 0.7% from $13.42 to $13.51.
This increase, combined with monthly dividends, helped the fund to generate a
six-month total return of 4.0%. During the same time frame, the unmanaged
Salomon Brothers Broad Investment-Grade Medium Term Index had a total return of
4.7%. Unlike the fund, the index includes lower rated investment-grade
securities and has a longer effective maturity.
SIGNIFICANT MARKET AND FUND PORTFOLIO CHANGES
After several years in the shadow of a record-breaking U.S. stock market, the
bond market began gaining speed and investor popularity in late 1997. Favorable
economic conditions - such as continued low inflation - created an attractive
backdrop for bonds. The crisis in Southeast Asia encouraged more investors to
seek a safe haven in U.S. bonds.
We continue to find particular value in mortgage-backed securities and
increased the fund's holdings to 45% of net assets. To reduce the exposure to
prepayments - the risk that borrowers may pay off mortgages early and return
the principal payment to investors - we invest in a variety of mortgage-backed
securities that have proven to be less susceptible to refinancing. A prime
example is the fund's investment in commercial mortgage-backed securities,
which include office, industrial, multi-family residence and retail mortgages.
We also buy mortgage-backed securities of "seasoned" 30-year mortgages. These
mortgages have been around long enough that the homeowners are less likely to
refinance than those with newer mortgages.
Additionally, we increased the fund's holdings in adjustable-rate mortgages
during the past six months. All of the fund's adjustable-rate mortgages are
"seasoned" to protect the fund from increases in refinancing, such as those
seen recently among relatively new adjustable-rate mortgages.
MARKET OUTLOOK
Fixed-income investors have many reasons to be positive about the current bond
market. Inflation and interest rates remain low - even in this unprecedented
eighth year of economic expansion - and the demand for quality U.S. bonds
remains high.
How long these conditions will last, however, is difficult to predict.
Indications are that pricing pressures may increase as corporate America tries
to offset rising expenses. Already, wages have risen slightly due to increased
business activity and a shrinking labor pool. On the other hand, the economic
slowdown in Asia and the weakness in many Asian currencies should lower import
prices and increase competition for domestic producers. Regardless of the
current environment, we continue to encourage shareholders to base their
investment decisions on their long-term goals instead of on short-term economic
and market trends.
We will continue to watch the economic horizon on your behalf and look forward
to reporting to you in more detail in six months.
Cordially,
/s/Paul G. Haaga, Jr. /s/Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
April 15, 1998
<TABLE>
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Intermediate Bond Fund of America
Investment Portfolio February 28, 1998
<begin pie chart>
Federal Agency Obligations--Non-Mortgage 4.13%
Corporate Bonds 7.65%
Governments (Excluding U.S. Government) 2.64%
Cash & Equivalents 2.61%
Privately Originated Mortgage Obligations 14.09%
Asset-Backed Obligations 18.56%
Federal Agency Mortgage Obligations 31.33%
U.S. Treasury Securities 18.99%
<end pie chart>
Unaudited
Bonds & Notes Principal Market Percent
Amount Value of Net
Industrial & Service - 1.55% (000) (000) Assets
BP America Inc. 10.00% 2018(1998)(1) $2,600 $2,751 0.20%
PacifiCorp Australia, LLC 6.15% 2008 (2) 10,000 9,890 .73
Taiwan Semiconductor Manufacturing Co. Ltd. 0% convertible
debentures 2002(2) 7,140 8,407 .62
-----------------------
21,048 1.55
-----------------------
Transportation - 0.74%
Airplanes Pass Through Trust, pass-through certificates,Series 1,
Class A-3, 6.095% 2015 (2001)(1),(3),(4) 10,000 10,001 .74
-----------------------
Utilities - 1.21%
Big Rivers Electric Corp. 9.50% 2017 (1998)(1) 10,000 10,496 .77
Texas Utilities Co., Series A, 6.20% 2002 (2) 6,000 6,006 .44
-----------------------
16,502 1.21
-----------------------
Financial Services - 4.15%
ABN AMRO Bank NV 7.55% 2006 2,000 2,150 .16
Barclays North American Capital Corp. 9.75% 2021 (2001)(1) 7,230 8,154 .60
Beverly Finance Corp. 8.36% 2004(2) 10,000 10,845 .80
Corporate Property Investors:
9.00% 2002(2) 9,500 10,286
7.75% 2004(2) 2,000 2,101 .91
Deutsche Bank Financial Inc. 6.70% 2006 2,000 2,044 .15
Dresdner Bank AG 6.625% 2005 2,000 2,022 .15
General Electric Capital Corp. 8.375% 2001 1,500 1,598 .12
Town & Country Funding Corp. 5.85% 2000 (1998)(1) 15,000 14,966 1.10
Union Bank of Switzerland 7.25% 2006 2,000 2,109 .16
-----------------------
56,275 4.15
-----------------------
Collateralized Mortgage Obligations
(Privately Originated)(4) - 14.09%
Bombardier Capital Mortgage Securitization,
Series 1998-A, Class A4, 6.65% 2028 3,000 2,977 .22
Chase Commercial Mortgage Securities Corp.:
Series 1997-1, Class A1, 7.27% 2004 4,793 4,967
Series 1996-1, Class A1, 7.60% 2005 1,916 2,031 .51
Chase Manhattan Bank, NA, Series 1993-I,
Class 2A-5, 7.25% 2024 7,500 7,530 .55
CS First Boston Mortgage Securities Corp., Series 1995-AEW1,
Class B, 7.182% 2027(3) 7,200 7,200 .53
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A-1A, 7.40% 2006 (2) 6,695 6,996
Series 1995-CF2, Class A-1B, 6.85% 2027 (2) 5,000 5,133
Series 1996-CF1, Class A-1A, 7.28% 2028 2,647 2,736 1.10
GMAC Commercial Mortgage Securities Inc.,
Series 1996-C1, Class A2A, 6.79% 2028 16,668 17,111 1.26
J.P. Morgan Commercial Mortgage Finance Corp., pass-through
certificates:
Series 1995-C1, Class A-2, 7.403% 2010(3) 18,155 18,968
Series 1997-C4, Class A-1, 6.939% 2028 1,744 1,770 1.53
Merrill Lynch Mortgage Investors Inc.:
Series 1992B, Class A-3, 8.30% 2012 6,448 6,498
Series 1995-C2, Class A-1, 6.666% 2021(3) 5,911 6,014
Series 1995-C3, Class A-2, 6.847% 2025(3) 5,180 5,293
Series 1997-C1, Class A-1, 6.95% 2029 13,525 13,897 2.34
Morgan Stanley Capital I Inc.:
Series 1995-GA1, Class A1, 7.00% 2002(2) 4,788 4,835
Series 1998-WF1, Class A1, 6.12% 2007 28,000 28,144
Series 1997-HF1, Class B, 7.33% 2007 (2) 9,000 9,454
Series 1997-WF1, Class A1, 6.83% 2029 (2) 9,330 9,563
Series 1997-HF1, Class A2, 7.27% 2029 (2) 8,000 8,439 4.45
Paine Webber CMO, Series O, Class 5, 9.50% 2019 4,656 5,108 .38
Prudential Home Mortgage Securities Co., Inc.:
Series 1992-37, Class A-6, 7.00% 2022 1,402 1,397
Series 1992-33, Class A-12, 7.50% 2022 27 27 .10
Structured Asset Securities Corp., Series 1996-CFL,
Class A1-C, 5.944% 2028 3,547 3,530 .26
Westam Mortgage, Class 4-H, 8.95% 2018 11,000 11,643 .86
-----------------------
191,261 14.09
-----------------------
Asset-Backed Obligations(4) - 18.56%
Asset Backed Securities Investment Trust,
Series 1997-D, 6.79% 2003(2) 20,000 20,020 1.47
Asset Securitization Corp.:
Series 1997-D5, Class A-PS1, Interest Only, 1.005% 2041 120,190 13,032
Series 1997-D5, Class A-1A, 6.50% 2041 2,890 2,921 1.17
Bear Asset Trust Securities, Series 1997-1,
Class A, 6.686% 2006(2) 10,000 10,023 .74
Blackrock Capital Finance LP, Series 1996-C2,
Class A, 7.598% 2026(2) 250 250 .02
California Infrastructure PG&E-1:
Series 1997-1, Class A6, 6.32% 2005 12,250 12,361
Series 1997-1, Class A7, 6.42% 2008 22,700 23,041 2.61
Case Equipment Loan Trust 1995-A, 7.30% 2002 1,956 1,968 .15
Chase Manhattan Credit Card Master Trust,
Series 1996-4, Class A, 6.73% 2003 6,000 6,064 .45
Chemical Financial Acceptance Corp., Series 1989-A, Class A,
9.25% 1998 6,117 6,127 .45
Equicredit Funding Trust, Series 1996-A,
'Class A2, 6.95% 2012 5,500 5,553 .41
First Plus Home Loan Owner Trust:
Series 1997-1, Class A-1, 6.05% 2004 428 428
Series 1997-1, Class A-2, 6.28% 2006 1,450 1,450
Series 1996-4, Class A-3, 6.28% 2009 5,000 5,001
Series 1997-1, Class A-3, 6.45% 2009 3,900 3,908
Series 1996-3, Class A-6, 7.60% 2014 13,000 13,464
Series 1997-1, Class A-6, 6.95% 2015 9,000 9,140
Series 1997-3, Class M-1, 7.32% 2023 4,000 4,024 2.76
GCC Home Equity Trust, asset-backed certificates,
Series 1990-1, Class A, 10.00% 2005 1,694 1,709 .13
Green Tree Financial Corp., pass-through certificates:
Series 1993-3, Class A5, 5.75% 2018 9,420 9,349
Series 1995-1, Class A3, 7.95% 2025 793 794
Series 1995-9, Class A4, 6.45% 2027 4,250 4,277
Series 1996-8, Class A4, 7.00% 2027 5,000 5,069
Series 1996-10, Class A4, 6.42% 2028 3,500 3,524
Series 1996-10, Class A5, 6.83% 2028 14,000 14,249
Series 1997-6, Class A5, 6.68% 2029 5,000 5,078
Series 1997-6, Class A6, 6.90% 2029 3,000 3,062 3.34
Green Tree Home Improvement Loan Trust:
Series 1996-C, Class HIA1, 6.45% 2021 58 58
Series 1997-D, Class HIA1, 6.14% 2023 3,517 3,522
Series 1997-A, Class HIA1, 6.30% 2023 890 890
Series 1997-D, Class HIA3, 6.77% 2023 5,000 5,039
Series 1997-C, Class HIA2, 6.46% 2028 1,750 1,756 .83
IMC Home Equity Loan Trust, Series 1996-4,
Class A1, 6.59% 2011 347 346 .02
Iroquois Trust, Series 1997-2, Class A, 6.752% 2007 (2) 5,000 5,026 .37
The Money Store Home Equity Trust:
Series 1996-B, Class A14, 7.35% 2012 5,000 5,105
Series 1996-C, Class A3, 7.07% 2016 6,705 6,747 .87
Standard Credit Card Master Trust I, credit card
participation certificates:
Series 1991-3, Class A, 8.875% 1999 (1998)(1) 9,050 9,138
Series 1991-6, Class A, 7.875% 2000 (1998)(1) 21,250 21,496 2.26
Structured Assets Notes Transactions, LTD,
Series 1996-A, Class A1, 7.156% 2003(2) 6,814 6,857 .51
-----------------------
251,866 18.56
-----------------------
Governments (Excluding U.S. Government) &
Government Authorities - 2.64%
British Columbia Hydro & Power Authority 12.50% 2013 (1998)( 2,000 2,140 .16
Canadian Government 6.125% 2002 7,000 7,084 .52
Finland (Republic of) Debentures 9.625% 2028 (1998)(1) 10,639 11,119 .82
Ontario (Province of):
7.75% 2002 8,000 8,512
11.50% 2013 (1998)(1) 3,000 3,139 .86
Victoria (Territory of) Public Authorities Finance Agency
8.45% 2001 3,500 3,785 .28
-----------------------
35,779 2.64
-----------------------
Federal Agency Mortgage Pass-Through Obligations(4) - 26.29%
Fannie Mae (formerly Federal National Mortage Assn.):
6.00% 2013 6,750 6,657
6.19% 2033 (3) 14,680 14,731
6.50% 2013-2028 14,750 14,719
7.00% 2008-2028 25,923 26,293
7.50% 2009-2023 19,172 19,773
8.00% 2002-2005 1,463 1,494
8.277% 2002(3) 8,199 8,536
8.50% 2008-2027 12,225 12,883
9.00% 2001-2022 11,818 12,681
9.50% 2009-2022 8,905 9,532
10.00% 2017-2025 19,148 20,949
10.50% 2004-2020 1,446 1,599
11.00% 2000-2020 2,608 2,915
12.25% 2013 16 17 11.26
Freddie Mac (formerly Federal Home Loan Mortgage Corp.):
6.00% 2013 2,250 2,220
6.50% 2013 7,000 7,026
7.00% 2008 3,287 3,356
8.00% 2003-2017 5,201 5,443
8.50% 2008-2021 7,098 7,438
8.75% 2008-2009 963 1,008
9.50% 2010-2013 1,819 1,921
10.00% 2004-2019 17,031 18,530
11.00% 2018 48 54
12.00% 2013 188 214
12.50% 2013-2015 1,398 1,645
12.75% 2019 46 54 3.60
Government National Mortgage Assn.:
6.50% 2028 995 986
7.00% 2007-2024(3) 64,973 66,571
7.375% 2016-2024(3) 20,377 20,912
8.00% 2023 1,031 1,084
8.50% 2007-2023 17,798 19,083
9.00% 2008-2025 13,174 14,212
9.50% 2009-2021 19,848 21,626
9.75% 1999 23 23
10.00% 2019 8,226 9,206
10.25% 2012 257 281
10.50% 2019 124 140
11.00% 2010-2019 308 357
11.50% 2010-2013 130 152
12.50% 2010-2014 406 484 11.43
-----------------------
356,805 26.29
-----------------------
Federal Agency Collateralized Mortgage Obligations(4) - 5.04%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 13,092 13,562
Series 91-146, Class Z, 8.00% 2006 3,726 3,865
Trust D2, 11.00% 2009 3,247 3,698
Series 97-41, Class B, 7.25% 2014 7,967 8,037
Series 88-16, Class B, 9.50% 2018 572 619
Series 90-93, Class G, 5.50% 2020 3,167 3,058
Series 91-78, Class PK, 8.50% 2020 8,785 9,071
Series 90-21, Class Z, 9.00% 2020 19,225 20,492 4.60
Freddie Mac:
Series 1539, Class PL, 6.50% 2008 2,000 2,026
Series 83-B, Class 3, 12.50% 2013 111 140
Series 76, Class F, 9.125% 2020 1,715 1,754
Series 1567, Class A, 6.09% 2023(3) 2,172 2,060 .44
-----------------------
68,382 5.04
-----------------------
Federal Agency Obligations--Non-Mortgage - 4.13%
Federal Home Loan Bank Notes:
6.16% 2004 15,000 14,784
6.27% 2004 3,000 2,971 1.31
Freddie Mac Notes:
5.78% 2003 2,000 1,960
6.30% 2003 6,000 5,943
6.39% 2003 2,000 1,988
6.50% 2003 2,000 1,992
6.61% 2003 16,650 16,608
6.19% 2004 10,000 9,850 2.82
-----------------------
56,096 4.13
-----------------------
U.S. Treasury Obligations - 18.99%
9.125% May 1999 9,000 9,368 .69
6.75% June 1999 5,500 5,584 .41
7.125% February 2000 4,250 4,374 .32
8.00% May 2001 8,000 8,555 .63
13.375% August 2001 16,750 20,843 1.53
10.75% February 2003 5,000 6,096 .45
10.75% May 2003 21,750 26,715 1.97
11.125% August 2003 12,500 15,676 1.16
7.25% May 2004 60,706 65,771 4.85
7.25% August 2004 12,750 13,844 1.02
11.625% November 2004 29,500 39,138 2.88
6.50% May 2005 11,750 12,310 .91
3.375% January 2007 (5) 5,091 4,969 .37
6.250% February 2007 17,500 18,164 1.34
10.375% November 2009 5,000 6,261 .46
-----------------------
257,668 18.99
-----------------------
TOTAL BONDS & NOTES (cost: $1,306,098,000) 1,321,683 97.39
-----------------------
Short-Term Securities
Commercial Paper - 7.47%
American Express Credit Corp.:
5.50% due 3/12/98 15,000 14,973
5.49% due 3/17/98 10,000 9,974 1.84
Bell Atlantic Financial Services, Inc.:
5.52% due 3/3/98 10,000 9,995
5.47% due 3/17/98 10,000 9,974 1.47
General Electric Capital Corp. 5.68% due 3/2/98 36,500 36,489 2.69
Lucent Technologies Inc.:
5.47% due 3/6/98 10,000 9,991
5.48% due 4/27/98 10,000 9,912 1.47
-----------------------
TOTAL SHORT-TERM SECURITIES (cost: $101,308,000) 101,308 7.47
-----------------------
TOTAL INVESTMENT SECURITIES (cost: $1,407,406,000) 1,422,991 104.86
Excess of payables over cash and receivables 65,881 4.86
-----------------------
Net Assets $1,357,110 100.00%
========= ======
(1) 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.
(2) Purchased in a private placement transaction;
resale may be limited to qualified institutional buyers;
resale to the public may require registration.
(3) Coupon rate may change periodically.
(4) Pass-through security backed by a pool of mortgages or
other loans on which principal payments are periodically made.
Therefore, the effective maturity is shorter
than the stated maturity.
(5) Index-linked bond whose principal amount moves with a
government retail price index.
See Notes to Financial Statements
</TABLE>
<TABLE>
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Intermediate Bond Fund of America
Financial Statements Unaudited
- ---------------------------------------- ------------ -----------
Statement of Assets and Liabilities
at February 28, 1998 (dollars in thousands)
- ---------------------------------------- ------------ -----------
Assets:
Investment securities at market
(cost: $1,407,406) $1,422,991
Receivables for -
Sales of investments $ 160
Sales of fund's shares 2,699
Accrued interest 13,307 16,166
------------ -----------
1,439,157
Liabilities: -----------
Payables for -
Purchases of investments 74,621
Repurchases of fund's shares 4,546
Dividends payable 1,658
Management services 421
Accrued expenses 801 82,047
------------ -----------
Net Assets at February 28, 1998 -
Equivalent to $13.51 per share on 100,456,509 shares
of beneficial interest issued and outstanding;
unlimited shares authorized $1,357,110
=========
Statement of Operations Unaudited
for the six months ended February 28, 1998 (dollars in thousands)
------------ -----------
Investment Income:
Income:
Interest $ 46,518
Expenses:
Management services fee 2,627
Distribution expenses 1,913
Transfer agent fee 429
Reports to shareholders 83
Registration statement and prospectus 50
Postage, stationery and supplies 94
Trustees' fees 10
Auditing and legal fees 42
Custodian fee 16
Taxes other than federal income tax 20
Other expenses 45 5,329
------------ -----------
Net investment income 41,189
-----------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,263
Net unrealized appreciation on investments:
Beginning of period 6,084
End of period 15,585
------------
Net unrealized appreciation on investments 9,501
-----------
Net realized gain and unrealized appreciation
on investments 10,764
------------
Net Increase in Net Assets Resulting
from Operations $51,953
=========
See Notes to Financial Statements
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- --------------------------
Six months endeYear ended
February 28, August 31,
1998* 1997
Operations: -------------------------
Net investment income $ 41,189 $ 88,644
Net realized gain (loss) on investments 1,263 (9,914)
Net unrealized appreciation on investments 9,501 25,828
--------------------------
Net increase in net assets
resulting from operations 51,953 104,558
--------------------------
Dividends Paid From Net Investment Income (42,823) (87,766)
--------------------------
Capital Share Transactions:
Proceeds from shares sold: 20,476,253 and 45,770,888
shares, respectively 276,556 612,621
Proceeds from shares issued in
reinvestment of net investment income
dividends:
2,442,336 and 4,954,744 shares, respectively 32,938 66,280
Cost of shares repurchased:
22,191,041 and 58,792,101
shares, respectively (299,549) (786,616)
--------------------------
Net increase (decrease) in net assets resulting from
capital share transactions 9,945 (107,715)
--------------------------
Total Increase (Decrease) in Net Assets 19,075 (90,923)
Net Assets:
Beginning of period 1,338,035 1,428,958
--------------------------
End of period (including undistributed
net investment income of $2,603 and
$4,237, respectively) $1,357,110 $1,338,035
============= =============
*Unaudited
See Notes to Financial Statements
</TABLE>
INTERMEDIATE BOND FUND OF AMERICA
Notes to Financial Statements Unaudited
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 February 28, 1998, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $15,585,000, of which
$22,187,000 related to appreciated securities and $6,602,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the six months ended February 28, 1998.
The fund had available at August 31, 1997 a net capital loss carryforward of
$85,565,000 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 portfolio
securities for book and federal income tax purposes was $1,407,406,000 at
February 28, 1998.
3. The fee of $2,627,000 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.
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. As of February 28, 1998, accrued and
unpaid distribution expenses were $669,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $429,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $601,000 (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 February 28,
1998, aggregate amounts deferred and earnings thereon were $73,000.
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 February 28, 1998, accumulated net realized loss on investments was
$91,464,000 and paid-in capital was $1,430,386,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $321,755,000 and $322,264,000, respectively, during
the six months ended February 28, 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 $16,000 was paid by these credits rather than in cash.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS
- -------------------------------- ---------------------------------------------------
Six Months
Ended Year ended August 31
February 2-----------------------------------------
1998 (1) 1997 1996 1995 1994 1993
---------------------------------------------------
Net Asset Value, Beginning
of Period $13.42 $13.26 $13.52 $13.38 $14.64 $ 14.28
---------------------------------------------------
Income from Investment
Operations:
Net investment income .42 .86 .88 .93 .95 1.00
Net realized and unrealized
gain (loss) on investments .11 .15 (.27) .13 (1.20) .37
Total from investment ---------------------------------------------------
operations .53 1.01 .61 1.06 (.25) 1.37
---------------------------------------------------
Less Distributions:
Dividends from net investment
income (.44) (.85) (.87) (.92) (.94) (1.01)
Distributions from net realized
gains -- -- -- -- (.07) --
---------------------------------------------------
Total distributions (.44) (.85) (.87) (.92) (1.01) (1.01)
---------------------------------------------------
Net Asset Value, End of Period $ 13.51 $ 13.42 $13.26 $13.52 $13.38 $ 14.64
===================================================
Total Return (2) 4.00%(3) 7.83% 4.63% 8.33%(1.80%) 9.95%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $1,357 $1,338 $1,429 $1,501 $1,626 $1,686
Ratio of expenses to average
net assets .40%(3) .82% .80% .78% .83% .82%
Ratio of net income to
average net assets 3.09%(3) 6.40% 6.53% 6.96% 6.79% 7.00%
Portfolio turnover rate 29.33%(3) 41.55% 48.25 % 71.91% 52.94% 42.59%
(1) Unaudited
(2) Excludes maximum sales charge of
4.75%.
(3) Based on operations for the period
shown and, accordingly, not
representative of a full year's
operations.
</TABLE>
[The American Funds Group(r)]
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH
AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
This report is for the information of shareholders of Intermediate Bond Fund of
America, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after June 30, 1998, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Printed on recycled paper
Litho in USA SG/GRS/3750
Lit. No. IBFA-013-0498
