[THE AMERICAN FUNDS GROUP(R)]
INTERMEDIATE BOND FUND OF AMERICA
SEMI-ANNUAL REPORT
[photo: close-up of various stock market computer screens]
For the six months ended February 28, 1999
THE OBJECTIVE OF INTERMEDIATE BOND FUND OF AMERICA(R) is to earn current
income, consistent with preservation of capital, by investing primarily in
fixed-income securities with an average effective maturity of no more than five
years and with quality ratings of A or better (as rated by Standard & Poor's or
Moody's Investors Service) or 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 a 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) THE NATION'S THIRD-LARGEST MUTUAL FUND FAMILY. FOR MORE THAN
SIX DECADES, CAPITAL RESEARCH AND MANAGEMENT COMPANY, THE AMERICAN FUNDS
ADVISER, HAS INVESTED WITH A LONG-TERM FOCUS BASED ON THOROUGH RESEARCH AND
ATTENTION TO RISK.
AVERAGE ANNUAL COMPOUND RETURNS*
<TABLE>
<CAPTION>
<S> <C> <C>
Periods Ended
2/28/99 3/31/99
Ten Years +6.86% +6.91%
Five Years +4.60 +5.18
One Year -0.05 +0.46
</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.
Unlike the results above, fund results in this report were computed without a
sales charge. The fund's 30-day yield as of March 31, 1999, calculated in
accordance with the Securities and Exchange Commission formula, was 5.15%. The
fund's distribution rate as of that date was 5.13%. 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.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY.
FELLOW SHAREHOLDERS:
Spurred by economic crises in Asia and Russia, investors around the world
sought refuge in U.S. Treasury securities last fall. This "light to
quality"drove up prices of U.S. Treasury securities, causing their yields to
tumble in early October to the lowest level in more than 25 years. All other
fixed-income securities - especially lower quality securities - lagged far
behind.
In September, the Federal Reserve Board made the first of three cuts in the
federal funds rate to help protect the U.S. economy from instability in foreign
markets. (The federal funds rate is the interest rate banks charge each other
on overnight loans.) The second cut, in October, relieved some strain in U.S.
financial markets. The third, in November, helped further boost investor
confidence, causing bond investors to begin moving out of U.S. Treasury
securities to take advantage of values in other areas of the market.
FUND RESULTS
Despite the cuts in short-term rates, yields on short- and long-term bonds
increased from their October lows and, in many cases, were higher on February
28 than on September 1. As a result, Intermediate Bond Fund of America's net
asset value declined slightly during the semi-annual period from $13.56 a share
to $13.34, or 1.6%. Still, the fund generated solid income of 3.0% (6.0%
annualized), producing a 1.3% total return for shareholders who reinvested
their dividends. For the six-month period, the average return of the 106
Short-Intermediate Investment Grade Debt Funds monitored by Lipper, Inc. was
1.7%, while the unmanaged Salomon Smith Barney Broad Investment-Grade Medium
Term Index had a total return of 2.1%.
For the six months ended February 28, the fund paid monthly dividends totaling
40 cents a share. Due to a general decline in interest rates over the past
several years, the fund's monthly dividend was reduced from 6.5 to 6 cents a
share effective with the March payment, after the end of the fund's semi-annual
reporting period.
FUND HIGHLIGHTS
Last fall, the fund's investment guidelines were expanded to allow fixed-income
securities rated A by Standard & Poor's or Moody's. Previously, the fund could
invest only in securities in the two highest credit categories, AAA and AA.
This change substantially increased your portfolio counselors' investment
choices, giving them more opportunities to use research to identify value.
Currently, 6% of the fund's total assets are invested in A-rated fixed-income
securities. We have not yet added more A-rated securities because we have been
finding better values in higher quality asset-backed and commercial
mortgage-backed securities.
MARKET OUTLOOK
The U.S. economic expansion shows no sign of abating. Consumer spending is
robust, mirroring increases in income and net worth from stock market gains.
Meanwhile, inflation and interest rates remain low with little to indicate a
significant rise in the near future. We continue to be cautious, however -
especially in light of market events during the past six months - and will
carefully monitor developments that may affect your fund.
As we have seen, investors are highly sensitive to global events and can react
quickly. These volatile times show the value of dedicating a portion of your
portfolio to investments with relatively low volatility, such as Intermediate
Bond Fund of America.
We look forward to reporting to you again in six months.
Cordially,
/s/Paul G. Haaga, Jr. /s/John H. Smet
Paul G. Haaga, Jr. John H. Smet
Chairman of the Board President
April 15, 1999
[Begin sidebar]
At the latest meeting of the board of trustees, John H. Smet was elected
president of Intermediate Bond Fund of America. John has been a portfolio
counselor for the fund for the past seven years. Abner D. Goldstine, the fund's
president since its inception in 1988, was elected vice chairman and will
remain a trustee.
[End sidebar]
<TABLE>
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Intermediate Bond Fund of America
Investment Portfolio February 28, 1999
Unaudited
How your money is invested
Quality
U.S. Government/Agency 46%
AAA 35%
AA 8%
A 6%
Cash & Equivalents 5%
Sector
Federal Agency Mortgage-Backed 28%
Other Mortgage-Backed 24%
U.S. Govt./Agency (Non-Mortgage) 19%
Asset-Backed 12%
Corportate Bonds 11%
Governments (excluding U.S. Govt.) and Development Authorities 1%
Cash & Equivalents 5%
Bonds & Notes Principal Market Percent
Amount Value of Net
Industrial & Service - 3.70% (000) (000) Assets
Carnival Corp. 7.70% 2004 $ $ .14%
Cox Radio, Inc. 6.375% 2005 3,500 3,482 .22
McKesson Corp. 6.30% 2005 2,000 1,977 .13
McKesson Finance of Canada 6.55% 2002 (1) 3,200 3,204 .20
Oil Enterprises Ltd. 6.239% 2008 (1) 10,050 9,887 .63
Pacificorp Australia LLC 6.15% 2008 (1) 10,000 9,833 .63
Pemex Finance Ltd. 5.72% 2003 (1) 5,000 4,861 .31
Philip Morris Companies Inc. 8.25% 2003 1,500 1,616 .10
R.P. Scherer International Corp. 6.75% 2004 4,325 4,427 .28
Sears Roebuck Acceptance Corp. 6.90% 2003 3,000 3,087 .20
Sony Corp. 6.125% 2003 8,500 8,540 .54
Sotheby's Holdings, Inc. 6.875% 2009 1,000 964 .06
Wal-Mart Stores, Inc. 5.65% 2000 4,000 4,013 .26
------- -------
58,016 3.70
------- -------
Transportation - 2.66%
Continental Airlines:
Series 1998-3, Class C-1, 7.08% 2004 7,000 6,921
Series 1998-2, Class A, 6.41% 2007 19,000 18,839
Series 1996-2, Class A, 7.75% 2016 (2014) (2,3) 1,257 1,321 1.72
Jet Equipment Trust, Series 1995-B, Class A,
7.63% 2015 (2012) (1,2,3) 9,085 9,355 .60
USAir, Inc., Class A, 6.76% 2009 (2008) (2,3) 5,573 5,297 .34
------- -------
41,733 2.66
------- -------
Utilities - .70%
National Rural Utilities Cooperative Finance Corp. 5.50% 2005 5,000 4,871 .31
Texas Utilities Company, Series A, 6.20% 2002 6,000 6,063 .39
------- -------
10,934 .70
------- -------
Financial Services - 4.08%
ABN AMRO Bank N.V. 7.55% 2006 4,000 4,221 .27
Bank of Hawaii 6.875% 2009 3,000 2,940 .19
BankAmerica Corp. 5.875% 2009 3,175 3,058 .19
Barclays North American Capital Corp. 9.75% 2021 7,230 7,974 .51
Beverly Finance Corp. 8.36% 2004 (1) 10,000 10,617 .68
Ford Motor Credit Company 5.75% 2004 3,000 2,964 .19
General Electric Capital Corp. 8.375% 2001 1,500 1,578 .10
General Motors Acceptance Corp. 6.75% 2002 3,000 3,064 .19
Ikon Capital Inc. 6.33% 2000 2,500 2,530 .16
Lend Lease (US) Finance Inc. 6.75% 2005 5,000 5,108 .33
Margaretten Financial 6.75% 2000 7,450 7,544 .48
NationsBank Corp. 6.125% 2004 3,000 3,002 .19
Toyota Credit Canada 6.625% 2002 3,000 3,058 .19
Toyota Motor Credit Corp.:
6.125% 2000 2,495 2,504
6.00% 2003 4,000 3,976 .41
------- -------
64,138 4.08
------- -------
Commercial Mortgage-Backed Securities (3) - 17.08%
Asset Securitization Corp.,
Series 1997-D5, Class A-PS1, interest only, 1.574% 2043 (4) 172,920 16,185 1.03
Bear Stearns Commercial Mortgage Securities, Inc.:
Series 1998-C1, Class A-1, 6.34% 2007 5,707 5,716
Series 1999-C1, Class X, interest only, .583% 2031 (4) 93,500 6,835 .80
Chase Commercial Mortgage Securities Corp.:
Series 1996-1, Class A1, 7.60% 2005 1,927 2,011
Series 1997-1, Class A1, 7.27% 2029 3,372 3,464
Series 1998-1, Class A1, 6.34% 2030 6,658 6,690
Series 1998-2, Class A2, 6.39% 2030 5,000 4,986 1.09
Commercial Mortgage Acceptance Corp.:
Series 1998-C1, Class A-1, 6.23% 2007 2,419 2,414
Series 1998-C2, Class A-1, 5.80% 2030 4,392 4,366 .43
CS First Boston Mortgage Securities Corp.:
Series 1995-AEW1, Class B, 7.182% 2027 (4) 12,294 12,327
Series 1998-C1, Class A-1A, 6.26% 2040 5,621 5,621 1.15
Deutsche Mortgage & Asset Receiving Corp.,
Series 1998-C1, Class A-1, 6.22% 2031 13,325 13,242 .84
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A1A, 7.40% 2006 (1) 6,257 6,343
Series 1995-CF2, Class A1B, 6.85% 2027 (1) 5,000 5,061
Series 1996-CF1, Class A1A, 7.28% 2028 2,420 2,475
Series 1998-CF2, Class A1B, 6.24% 2031 7,250 7,159
Series 1998-CF2, Class A3, 6.65% 2031 (4) 5,250 5,225
Series 1998-CF2, Class A4, 6.90% 2031 (4) 3,250 3,237 1.89
GMAC Commercial Mortgage Securities, Inc.,
Series 1996-C1, Class A2A, 6.79% 2028 14,974 15,196 .97
GS Mortgage Securities Corp. II,
Series 1999-GFSL II, Class D, 5.963% 2027 (1,4,5) 10,000 10,009 .64
J.P. Morgan Commercial Mortgage Finance Corp.:
Series 1995-C1, Class A-2, 7.443% 2010 (4) 18,155 18,396
Series 1997-C4, Class A-1, 6.939% 2028 1,469 1,472 1.28
LB Commercial Mortgage Trust, Series 1998-C1, 6.33% 2004 1,262 1,265 .08
Merrill Lynch Mortgage Investors Inc.:
Series 1995-C2, Class A-1, 6.517% 2021 (4) 3,721 3,749
Series 1995-C3, Class A-2, 6.821% 2025 (4) 5,180 5,243
Series 1997-C1, Class A-1, 6.95% 2029 (4) 12,942 13,294 1.43
Morgan Stanley Capital I Inc.:
Series 1995-GA1, Class A-1, 7.00% 2002 (1) 2,569 2,589
Series 1998-WF1, Class A-1, 6.25% 2007 (4) 34,525 34,556
Series 1998-HF2, Class A-1, 6.01% 2030 4,921 4,875
Series 1998-HF2, Class A-2, 6.48% 2030 6,000 6,027
Series 1998-WF2, Class A-1, 6.34% 2030 (4) 6,721 6,756 3.49
Mortgage Capital Funding Inc.,
Series 1998-MC1, Class A-1, 6.417% 2030 12,418 12,518 .80
Nomura Asset Securities Corp.,
Series 1998-D6, Class A-A1, 6.28% 2030 (4) 9,391 9,372 .60
SMA Finance Co., Inc.,
Series 1998-C1, Class A-1, 6.27% 2005 (1) 8,680 8,662 .55
Structured Asset Securities Corp.,
Series 1996-CFL, Class A1-C, 5.944% 2028 (4) 1,032 1,029 .01
------- -------
268,365 17.08
------- -------
Collateralized Mortgage Obligations
(Privately Originated)(3) - 6.51%
Asset Backed Securities Investment Trust,
Series 1997-D, Class A, 6.79% 2003 (1) 2,198 2,199 .14
Chase Manhattan Bank, NA,
Series 1993-I, Class 2A5, 7.25% 2024 3,187 3,194 .20
First Nationwide, Series 1999-2, Class 1PA1, 6.50% 2029 7,200 7,088 .44
Morgan Stanley Capital I Inc., Series 1998-1, Class A-5, 6.75% 2013 13,006 12,928 .82
Norwest Asset Securities Corp.,
Series 1998-8, Class A-1, 6.50% 2013 5,253 5,193 .32
Paine Webber CMO, Series O, Class 5, 9.50% 2019 3,169 3,369 .21
Residential Accredit Loans, Inc.,
Series 1997-QS12, Class A4, 6.819% 2027 (4) 3,000 2,988 .19
Residential Funding Mortgage Securities I, Inc.,
Series 1998-S17, Class M-1, 6.75% 2028 1,992 1,947 .12
Structured Asset Securities Corp.:
Series 1998-RF2, Class A, 8.568% 2022 (1,4) 17,185 18,173
Series 1998-RF1, Class A, 8.689% 2027 (1,4) 19,422 20,624
Series 1999-BC1, Class M2, 6.239% 2029 (4) 7,500 7,499 3.00
Structured Assets Notes Transactions, Ltd.,
Series 1996-A, Class A1, 7.156% 2003 (1) 5,874 5,845 .36
Westam Mortgage, Class 4-H, 8.95% 2018 11,000 11,244 .71
------- -------
102,291 6.51
------- -------
Asset-Backed Obligations(3) - 11.89%
Case Equipment Loan Trust, Series 1995-A, 7.30% 2002 483 483 .03
Chase Manhattan Credit Card Master Trust,
Series 1997-5, Class A, 6.194% 2005 8,750 8,840 .56
ComEd Transitional Funding Trust, Transitional Funding
Trust Notes:
Series 1998, Class A-4, 5.39% 2005 2,000 1,966
Series 1998, Class A-5, 5.44% 2007 14,000 13,663 .99
EquiCredit Funding Asset Backed Certificates, Series 1996-A,
Class A2, 6.95% 2012 3,432 3,450 .22
First Chicago Master Trust II,
Series 1995-M, Class A, 5.176% 2003 (4) 4,000 4,009 .25
First Consumer Master Trust:
Series 1999-A, Class A, 5.80% 2005 (1) 8,000 7,803
Series 1999-A, Class B, 6.28% 2005 (1) 9,000 8,778 1.06
FIRSTPLUS Home Loan Owner Trust:
Series 1997-1, Class A-3, 6.45% 2009 3,795 3,796
Series 1997-4, Class A-5, 6.62% 2015 6,200 6,163
Series 1997-3, Class M-1, 7.32% 2023 4,000 3,859 .88
GCC Home Equity Trust, Series 1990-1, Class A, 10.00% 2005 981 981 .06
Green Tree Financial Corp., pass-through certificates:
Series 1998-2, Class A5, 6.24% 2016 3,500 3,501
Series 1993-3, Class A5, 5.75% 2018 8,035 8,027
Series 1995-9, Class A4, 6.45% 2027 4,250 4,269
Series 1996-8, Class A4, 7.00% 2027 5,000 5,048
Series 1996-10, Class A4, 6.42% 2028 3,500 3,514
Series 1996-10, Class A5, 6.83% 2028 14,000 14,179
Series 1997-6, Class A5, 6.68% 2029 5,000 5,052
Series 1997-6, Class A6, 6.90% 2029 3,000 3,047 2.97
Green Tree Home Improvement Loan Trust:
Series 1997-D, Class HIA3, 6.77% 2023 5,000 5,069
Series 1997-C, Class HIA2, 6.46% 2028 978 981 .39
Merrill Lynch Mortgage Investors, Inc.,
Series 1992-B, Class A3, 8.30% 2012 1,002 1,002 .06
The Money Store Home Equity Trust:
Series 1996-B, Class A14, 7.35% 2012 5,000 5,049
Series 1994-D, Class A5, 8.925% 2022 9,621 10,023 .96
Nebhelp Trust, Student Loan Interest Margin Securities,
Series 1998-1, Class A, 6.68% 2016 (1) 19,331 19,311 1.23
Puerto Rico Public Financing Corp.,
Series 1, Class A, 6.15% 2008 19,000 18,814 1.20
Sears Credit Account Master Trust II,
Series 1998-2, Class A, 5.25% 2008 3,000 2,909 .19
Student Loan Funding LLC,
Series 1998-B, Class B3, 6.25% 2019 (1) 13,500 13,129 .84
------- -------
186,715 11.89
------- -------
Governments (Excluding U.S. Government) &
Government Authorities - .98%
Canadian Government 6.125% 2002 2,000 2,031 .13
KfW International Finance Inc. 7.625% 2004 2,500 2,672 .17
Ontario (Province of):
7.75% 2002 4,000 4,234
7.375% 2003 2,500 2,636 .44
Victoria (Territory of) Public Authorities Finance Agency
8.45% 2001 3,500 3,708 .24
------- -------
15,281 .98
------- -------
Development Authorities - .54%
Asian Development Bank 5.75% 2003 2,500 2,486 .16
Corporation Andina de Fomento 7.75% 2004 6,000 5,996 .38
------- -------
8,482 .54
------- -------
Federal Agency Mortgage Pass-Through Obligations(3) - 24.20%
Fannie Mae:
6.00% 2013 13,915 13,776
6.132% 2033 (4) 11,143 11,175
6.50% 2013-2029 15,215 15,206
7.00% 2008-2028 12,748 12,951
7.50% 2009-2028 15,327 15,771
8.00% 2002-2028 2,512 2,586
8.315% 2002 (4) 8,654 8,827
8.50% 2008-2027 7,832 8,256
9.00% 2001-2022 8,455 8,981
9.50% 2009-2022 5,758 6,136
10.00% 2017-2025 12,786 13,782
10.50% 2004-2020 866 941
11.00% 2000-2020 2,181 2,407
12.00% 2015-2019 11,042 12,611
12.25% 2012-2013 1,635 1,859
12.50% 2015-2016 3,309 3,825
13.00% 2015-2028 2,867 3,351
15.00% 2028 1,066 1,291 9.15
Freddie Mac:
6.00% 2013-2029 16,294 16,087
6.50% 2012-2013 32,061 32,281
7.00% 2008 2,439 2,484
8.00% 2003-2026 20,706 21,402
8.50% 2008-2027 7,456 7,827
8.75% 2008-2009 699 726
9.00% 2028 1,682 1,782
9.50% 2010-2013 1,020 1,072
10.00% 2005-2019 11,355 12,255
11.00% 2018 47 52
12.00% 2016 129 147
12.50% 2015-2019 857 1,000
12.75% 2019 34 40 6.19
Government National Mortgage Assn.:
6.00% 2013 4,605 4,584
6.50% 2013-2028 21,851 21,886
6.625% 2022 (4) 15,713 16,018
6.875% 2016-2024 (4) 4,784 4,899
7.00% 2007-2028 7,133 7,259
7.50% 2022-2028 17,444 17,944
8.00% 2023-2025 20,983 21,867
8.50% 2007-2023 12,003 12,746
9.00% 2008-2025 8,161 8,737
9.50% 2009-2021 13,339 14,344
10.00% 2019 5,656 6,158
10.25% 2012 214 230
10.50% 2019 63 70
11.00% 2010-2019 248 279
11.50% 2010-2013 108 123 8.73
Fannie Mae/Government National Mortgage Assn.:
12.50% 2029 1,500 1,717 .11
Federal Housing Authority/Veterans Administration:
12.50% 2029 318 367 .02
------- -------
380,115 24.20
------- -------
Federal Agency Collateralized Mortgage Obligations(3) - 3.74%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 8,528 8,763
Series 91-146, Class Z, 8.00% 2006 2,448 2,511
Trust D2, 11.00% 2009 2,484 2,711
Series 88-16, Class B, 9.50% 2018 375 401
Series 90-93, Class G, 5.50% 2020 2,014 1,948
Series 91-78, Class PK, 8.50% 2020 2,698 2,723
Series 90-21, Class Z, 9.00% 2020 12,019 12,556 2.01
Freddie Mac:
Series 1539, Class PL, 6.50% 2008 2,000 2,012
Series 83-B, Class 3, 12.50% 2013 85 94
Series 98-A, Class A, 6.69% 2020 (1) 22,000 21,481
Series 1567, Class A, 5.338% 2023 (4) 1,760 1,697
Series 2030, Class F, 5.436% 2028 (4) 1,928 1,934 1.73
------- -------
58,831 3.74
------- -------
Federal Agency Obligations--Non-Mortgage - 1.45%
Freddie Mac Notes:
5.125% 2003 5,750 5,621
5.75% 2003 5,000 5,021 .68
Federal Home Loan Bank Bonds:
5.625% 2001 12,000 12,045 .77
------- -------
22,687 1.45
------- -------
U.S. Treasury Obligations - 17.57%
6.375% January 2000 22,500 22,760 1.45
8.00% May 2001 1,000 1,057 .07
13.375% August 2001 16,750 19,854 1.26
10.75% February 2003 5,000 5,950 .38
10.75% May 2003 10,500 12,600 .80
11.125% August 2003 12,500 15,312 .97
7.25% May 2004 58,456 63,470 4.04
7.25% August 2004 14,750 16,045 1.02
7.875% November 2004 4,245 4,755 .30
11.625% November 2004 42,000 54,620 3.48
7.50% February 2005 4,250 4,700 .30
3.465% January 2007 (6) 10,500 10,479 .67
7.25% July 2007 33,750 35,490 2.26
6.125% August 2007 355 371 .02
3.65% January 2008 (6) 2,500 2,487 .16
10.375% November 2009 5,000 6,165 .39
------- -------
276,115 17.57
------- -------
TOTAL BONDS & NOTES (cost: $1,499,665,000) 1,493,703 95.10
------- -------
Short-Term Securities
Commercial Paper - 5.11%
Ameritech Capital Funding Corp. 4.77% due 3/29/99 (1) 19,000 18,927 1.21
Chevron USA Inc. 4.80% due 3/2/99 10,000 9,997 .64
Ford Motor Credit Co. 4.82% due 3/10/99 8,100 8,089 .51
General Electric Capital Corp. 4.87% due 3/1/99 43,200 43,194 2.75
------- -------
TOTAL SHORT-TERM SECURITIES (cost: $80,207,000) 80,207 5.11
------- -------
TOTAL INVESTMENT SECURITIES (cost: $1,579,872,000) 1,573,910 100.21
Excess of payables over cash and receivables 3,373 .21
------- -------
Net Assets $1,570,537 100.00%
====== ======
(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) When-issued security.
(6) Index-linked bond whose principal amount moves with a
government retail price index.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
Intermediate Bond Fund of America
Financial Statements
- ---------------------------------------- --------- ---------
Statement of Assets and Liabilities
at February 28, 1999 (dollars in thousands)
- ---------------------------------------- --------- ---------
Assets:
Investment securities at market
(cost: $1,579,872) $1,573,910
Cash 416
Receivables for-
Sales of investments $ 13,615
Sales of fund's shares 5,728
Accrued interest 12,690 32,033
--------- ---------
1,606,359
Liabilities:
Payables for-
Purchases of investments 26,150
Repurchases of fund's shares 6,944
Dividends payable 1,550
Management services 388
Accrued expenses 790 35,822
--------- ---------
Net Assets at February 28, 1999 -
Equivalent to $13.34 per share on 117,773,086 shares
of beneficial interest issued and outstanding;
unlimited shares authorized $1,570,537
=========
Statement of Operations
for the six months ended February 28, 1999 (dollars in thousands)
--------- ---------
Investment Income:
Income:
Interest $ 48,941
Expenses:
Management services fee $ 2,885
Distribution expenses 2,306
Transfer agent fee 463
Reports to shareholders 92
Registration statement and prospectus 113
Postage, stationery and supplies 82
Trustees' fees 15
Auditing and legal fees 44
Custodian fee 14
Taxes other than federal income tax 17
Other expenses 25
---------
Total expenses before reimbursement 6,056
Reimbursement of expenses 471 5,585
Net investment income --------- ---------
43,356
Realized Gain and Unrealized Appreciation ---------
(Depreciation) on Investments:
Net realized gain 2,272
Net unrealized appreciation (depreciation) on investments:
Beginning of period 20,879
End of period (5,962)
---------
Net change in unrealized appreciation
(depreciation) on investments (26,841)
---------
Net realized gain and change in unrealized appreciation
(depreciation) on investments (24,569)
---------
Net Increase in Net Assets Resulting
from Operations $18,787
---------
Statement of Changes in Net Assets (dollars in thousands)
- ---------------------------------------- --------- ---------
Six months ended For year ended
February 28 August 31
1999* 1998
Operations: --------- ---------
Net investment income $ 43,356 $ 82,968
Net realized gain on investments 2,272 2,961
Net unrealized appreciation (depreciation) on investments (26,841) 14,795
--------- ---------
Net increase in net assets
resulting from operations 18,787 100,724
--------- ---------
Dividends Paid From Net Investment Income (45,232) (86,313)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
34,330,805 and 49,876,745 shares, respectively 465,017 672,768
Proceeds from shares issued in
reinvestment of net investment income
dividends: 2,703,550 and 4,954,203 shares,
respectively 36,539 66,762
Cost of shares repurchased: 26,859,558 and
46,961,620 shares, respectively (363,357) (633,193)
--------- ---------
Net increase in net assets resulting
from capital share transactions 138,199 106,337
--------- ---------
Total Increase in Net Assets 111,754 120,748
Net Assets:
Beginning of period 1,458,783 1,338,035
--------- ---------
End of period (including undistributed
net investment income (loss) of ($1,349) and
$527, respectively) $1,570,537 $1,458,783
========= =========
*Unaudited
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - 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.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - 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 AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily after the determination of the fund's net investment income and
are paid to shareholders monthly.
2. FEDERAL INCOME TAXATION
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, 1999, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $5,962,000, of which $10,302,000
related to appreciated securities and $16,264,000 related to depreciated
securities. The fund had available at August 31, 1998 a net capital loss
carryforward totaling $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 portfolio securities for book and federal income tax purposes was
$1,579,872,000 at February 28, 1999.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $2,885,000 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 six months ended
February 28, 1999, CRMC reduced the management fees by $471,000 to reimburse
the fund for certain distribution expenses.
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 six months ended February 28,
1999, distribution expenses under the Plan were limited to $2,306,000. Had no
limitation been in effect, the fund would have paid $2,525,000 in distribution
expenses under the Plan. As of February 28, 1999, accrued and unpaid
distribution expenses were $738,000. American Funds Distributors, Inc. (AFD),
the principal underwriter of the fund's shares, received $915,000 (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.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $463,000.
DEFERRED TRUSTEES' FEES - 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, 1999, aggregate amounts deferred and earnings thereon
were $64,000.
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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $660,130,000 and $510,414,000, respectively, during
the six months ended February 28, 1999.
As of February 28, 1999, accumulated net realized loss on investments was
$87,129,000 and additional paid-in capital was $1,664,977,000.
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 $14,000 was paid by these credits rather than in cash.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Six months Year Ended August 31
Per-Share Data and Ratios ended
February 28,
1999 (1) 1998 1997 1996 1995 1994
Net Asset Value, Beginning of Period $13.56 $13.42 $13.26 $13.52 $13.38 $14.64
---- ---- ---- ---- ---- ----
Income From Investment Operations:
Net investment income .41 .83 .86 .88 .93 .95
Net gains or losses on securities (both
realized and unrealized) (.23) .17 .15 (.27) .13 (1.20)
---- ---- ---- ---- ---- ----
Total from investment operations .18 1.00 1.01 .61 1.06 (.25)
---- ---- ---- ---- ---- ----
Less Distributions:
Dividends (from net investment income) (.40) (.86) (.85) (.87) (.92) (.94)
Distributions (from capital gains) .00 .00 .00 .00 .00 (.07)
---- ---- ---- ---- ---- ----
Total distributions (.40) (.86) (.85) (.87) (.92) (1.01)
---- ---- ---- ---- ---- ----
Net Asset Value, End of Period $13.34 $13.56 $13.42 $13.26 $13.52 $13.38
==== ==== ==== ==== ==== ====
Total Return (2) 1.32% (3) 7.68% 7.83% 4.63% 8.33%(1.80%)
Ratios/Supplemental Data:
Net assets, end of period (in millions) $1,571 $1,459 $1,338 $1,429 $1,501 $1,626
Ratio of expenses to average net assets .36% (3),(4) .76% (4) .82% .80% .78% .83%
Ratio of net income to average net assets 2.80% (3) 6.09% 6.40% 6.53% 6.96% 6.79%
Portfolio turnover rate 34.61% (3) 79.19% 41.55% 48.25% 71.91% 52.94%
(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.
(4) Had CRMC not waived
management services fees, the fund's
expense ratio would have been
.39% for the six months ended
February 28, 1999 and .79% for the
fiscal year ended August 31, 1998.
</TABLE>
[THE AMERICAN FUNDS GROUP(R)]
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.
PREPARING FOR THE YEAR 2000. The fund's key service providers - Capital
Research and Management Company, the investment adviser, and American Funds
Service Company, the transfer agent - have updated all significant computer
systems to process date-related information properly following the turn of the
century. Testing of these and other systems with business partners, vendors and
other service providers will continue through much of 1999. We will continue to
keep you up to date in our regular publications. If you'd like more detailed
information, call Shareholder Services at 800/421-0180, ext. 21, or visit our
Web site at www.americanfunds.com.
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 92821-5823
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
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, 1999, 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/AL/3968
Lit. No. IBFA-013-0499
