The American Funds Group(r)
INTERMEDIATE BOND FUND OF AMERICA
[photographs of the Fixed Income Trading Room]
2000 Annual Report For The Year Ended August 31
INTERMEDIATE BOND FUND OF AMERICA(r) IS ONE OF THE 29 AMERICAN FUNDS, the
nation's third-largest mutual fund family. For nearly seven 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.
INTERMEDIATE BOND FUND OF AMERICA seeks 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.
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).
THE FUND'S INVESTMENTS INCLUDE:
- U.S. government and federal agency securities
- Pass-through securities, such as mortgage- and asset-backed securities
- High-quality corporate obligations
RESULTS AT A GLANCE
[begin table]
<TABLE>
<CAPTION>
As of August 31, 2000, Average annual
with all dividends reinvested Cumulative return compound return
<S> <C> <C>
One year + 6.5% -
Five years + 31.3 + 5.6%
Ten years + 93.6 + 6.8
Lifetime (since 2/19/88) + 126.7 + 6.7
</TABLE>
[end table]
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Please see back
cover for important information about Class A and Class B shares.
Results for Class B shares are not shown because of the brief time between
their introduction on March 15 and the end of the fund's reporting period.
Here are the average annual compound returns on a $1,000 investment for periods
ended September 30, 2000 (the most recent calendar quarter), with all
distributions reinvested.
<TABLE>
<CAPTION>
<S> <C>
CLASS A SHARES AVERAGE ANNUAL
reflecting 3.75% maximum sales charge COMPOUND RETURN
One year + 2.28%
Five years + 4.82
Ten years + 6.44
</TABLE>
The fund's 30-day yield for Class A shares as of September 30, 2000, calculated
in accordance with the Securities and Exchange Commission formula, was 6.27%.
The fund's distribution rate as of that date was 5.73%. 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.
[begin sidebar]
On the cover: Your portfolio counselors are supported by more than a dozen
fixed-income traders, each of whom specializes in a particular segment of the
bond market. Altogether, these traders possess more than 138 years of market
experience. On a day-to-day basis, they provide liquidity for the various bonds
in your fund's portfolio and help your counselors identify fixed-income
opportunities within a variety of changing markets.
[begin sidebar]
FELLOW SHAREHOLDERS:
The fiscal year that ended August 31, 2000, ultimately proved more favorable to
U.S. bond investors than the preceding year. The significant correction in the
stock market earlier this year coupled with an unexpected rally in
long-maturity Treasury bonds helped to create this improved bond environment.
Nonetheless, the recent improvement has been selective. High-quality debt
benefited more than lower rated debt during the second half as investors
reduced their exposure to risk. High-quality debt (such as U.S. Treasuries,
federal agency obligations and certain asset-backed securities) constitutes
more than 75% of your fund's portfolio, which consists entirely of
investment-grade securities.
During the past fiscal year, shareholders received monthly dividends totaling
74 cents a share. This represents an income return of 5.9% for those
shareholders who reinvested their dividends. Shareholders who opted to receive
their monthly dividends in cash recorded an income return of 5.7%. For the full
fiscal year, Intermediate Bond Fund of America registered a total return (the
return assuming reinvestment of distributions plus the price changes of
portfolio assets) of 6.5% - just shy of its lifetime average of 6.7%.
The improved demand for high-quality bonds benefited other funds as well, but
not uniformly. For the past fiscal year, the average return of 124
Short-Intermediate Investment-Grade Debt Funds tracked by Lipper Inc. was 5.7%.
For the same period, the unmanaged Salomon Smith Barney Broad Investment-Grade
Medium-Term Bond Index (which has no expenses) posted a 7.0% total return.
[Begin Sidebar]
With more than 45 years of investment experience among them, your counselors
are well equipped to distinguish between brash investor reactions and
fundamental market changes.
[End Sidebar]
THE YEAR IN REVIEW
Bond market conditions in the first half of the fiscal year contrasted sharply
with those in the second half. Your fund's fiscal year began in September 1999
- only a few months after the Federal Reserve first started raising short-term
interest rates in an effort to quash inflation. Bond prices were edging lower
as inflation worries intensified, and interest rates for all fixed-income
securities were on the rise. In November, the Federal Reserve hiked rates a
third time. Nonetheless, the economy continued to expand at a rapid clip.
Investors poured money into technology stocks, riding a wave of euphoria that
pushed equity indexes to ever-higher levels. By the end of 1999, yields on
10-year Treasury bonds topped 6.4%, up from 5.8% in September. Bond prices were
suffering even as stock prices were soaring.
Early in 2000, this scenario shifted abruptly. Blue chip stocks tumbled in late
January, followed by a sharp selloff in the technology-laden NASDAQ that began
in March. During this same period, bond prices began to firm, led by a strong
rally in long-term Treasuries. The catalyst for improved bond prices was a
government decision to use part of the budget surplus to buy back Treasuries
with the longest maturities. As investors weighed the prospects of a
significantly diminished Treasury supply, prices rose steadily.
The effect of this rally was clearly evident in the Treasury yield curve, the
chart that depicts current yields on Treasury debt maturing in 3 months out to
30 years. For decades, the Treasury yield curve served as the benchmark for
evaluating all other U.S. bonds. Now, for the first time in years, long
maturities yielded less than short maturities. This anomaly produced an
inverted yield curve (see diagrams below). Under normal market conditions, the
Treasury yield curve forms a positive slope, with long maturities providing
higher yields. This was no longer the case.
The spring of 2000 was a puzzling period for many investors. Equities had lost
some of their allure following the sharp selloffs. The economy continued to
expand vigorously, breaking all previous records. The Federal Reserve raised
short-term rates a fourth and fifth time, yet long Treasury yields continued to
fall. Lower rated debt and higher risk investments fell out of favor as
investors sought security in high-quality debt. Much of the uncertainty that
riddled the markets focused on whether the Federal Reserve could successfully
engineer a "soft landing" for such an incredibly robust economy.
[Begin Sidebar]
Your fund's emphasis on thorough research to select high-quality bonds with
relatively short maturities should provide a solid platform for your long-term
financial objectives.
[End Sidebar]
On May 16, the Federal Reserve hiked rates for a sixth time in less than a
year. The bond market had anticipated this action, and bond prices weakened
during the preceding weeks. This price reversal proved short-lived, however; by
the end of May, the economy's pulse had slowed perceptibly. Once again, bond
prices improved as investors had renewed hopes for a soft landing. Throughout
the summer months, bonds continued to attract investor interest, lending the
fixed-income market a more positive tone.
THE VISION OF EXPERIENCE
The sudden changes observed in market conditions this past year are not a new
phenomenon. Over the past decade, both equity and fixed-income markets have
expanded significantly, attracting new investors and larger pools of money
while offering far more investment choices through more sophisticated trading
mechanisms. One result of this expansion is that markets now tend to react
faster to events deemed favorable or unfavorable. News travels quicker and
there are more players to respond. The release of economic data, a cautionary
comment from the Federal Reserve, the failure to meet earnings targets: These
are but a few examples of events that can alter market momentum.
[Begin Sidebar]
TREASURY YIELD CURVES
[begin line chart]
POSITIVE YIELD CURVE 8/31/1999
<TABLE>
<CAPTION>
<S> <C>
MATURITY DATES (IN YEARS) %
1 5.289
2 5.726
5 5.852
10 5.953
30 6.058
</TABLE>
[end line chart]
[begin line chart]
INVERTED YIELD CURVE 8/31/2000
<TABLE>
<CAPTION>
<S> <C>
MATURITY DATE (IN YEARS) %
1 6.23
2 6.226
5 6.051
10 5.795
30 5.732
</TABLE>
[end line chart]
Source: Bloomberg
[End Sidebar]
The three portfolio counselors who manage Intermediate Bond Fund of America
employ a proactive approach to investing, with a long-term perspective. With
more than 45 years of investment experience among them, your counselors are
well equipped to distinguish between brash investor reactions and fundamental
market changes. Before any bond is added to the portfolio, your fund's
counselors and analysts carefully evaluate its credit quality and its
suitability, assuming a variety of market conditions. Among the numerous
factors considered are the prepayment assumptions on each mortgage-backed
security, the collateral securing each asset-backed and commercial
mortgage-backed bond, and the earnings potential supporting each corporate bond
issue. In this rigorous process, your fund's counselors are supported by the
vast network of analysts and investment professionals comprising Capital
Research and Management Company, the fund's adviser as well as the adviser to
the rest of the American Funds family.
During the past year, your portfolio counselors gradually adjusted the mix of
securities to take advantage of changing market conditions. The percentage of
Treasuries in the portfolio decreased slightly, while the amount of
asset-backed obligations was increased. In addition, the amount of federal
agency mortgage-backed debt was reduced over the course of the year. As market
conditions continue to shift, your fund's managers will keep the portfolio well
diversified in an effort to enhance overall returns. Your fund's emphasis on
thorough research to select high-quality bonds with relatively short maturities
should provide a solid platform for your long-term financial objectives.
We appreciate your ongoing support, and we look forward to reporting to you
again in six months.
Cordially,
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Chairman of the Board
/s/ John H. Smet
John H. Smet
President
October 16, 2000
[Begin Sidebar]
Here are the fund's returns on a $1,000 investment in Class A shares with all
distributions reinvested for the periods noted, assuming payment of the 3.75%
maximum sales charge at the beginning of the stated periods. Sales charges are
lower for accounts of $100,000 or more.
AVERAGE ANNUAL COMPOUND RETURN
as of 8/31/2000
<TABLE>
<CAPTION>
<S> <C>
Ten years +6.42%
Five years +4.79
One year +2.46
</TABLE>
[End Sidebar]
[begin mountain chart]
RESULTS: HOW A $10,000 INVESTMENT IN THE FUND HAS GROWN
for the period February 19, 1988, to August 31, 2000, with dividends reinvested
<TABLE>
<CAPTION>
Salomon Smith Barney
Broad Investment-
Grade Medium Term
Index(1) with Intermediate Bond Consumer Price
Year interest compounded Fund of America Index(1),(2)
<S> <C> <C> <C>
2/19/88 10,000 9,625 10,000
1988 10,062 9,717 10,259
1989 11,233 10,591 10,741
1990 12,207 11,272 11,345
1991 13,872 12,594 11,776
1992 15,675 14,206 12,147
1993 17,027 15,619 12,483
1994 17,026 15,338 12,845
1995 18,732 16,616 13,181
1996 19,605 17,385 13,560
1997 21,403 18,745 13,862
1998 23,291 20,185 14,086
1999 23,785 20,495 14,405
2000 25,455 21,823 14,897
</TABLE>
Year Ended August 31
$25,455
Salomon Smith Barney Broad
Investment-Grade Medium Term Index(1)
with interest compounded
$21,823
Intermediate Bond Fund of America
with dividends reinvested
$14,897
Consumer Price Index(1),(2)
* For the period February 19, 1988, through August 31, 1988.
(1) The index is unmanaged and does not reflect sales charges, commissions
or expenses.
(2) Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
PAST RESULTS ARE NOT PREDICTIVE OF FUTURE RESULTS.
The fund results in this chart reflect payment of the maximum sales charge of
3.75% on the $10,000 initial investment. Thus, the net amount invested was
$9,625. Prior to January 10, 2000, the maximum sales charge was 4.75%. As
outlined in the prospectus, the sales charge is reduced for larger investments.
[end mountain chart]
WHAT MAKES THE AMERICAN FUNDS DIFFERENT?
AMERICAN FUNDS
[black and white photo of a portion of the United States of American flag]
As a shareholder in Intermediate Bond Fund of America, you are also a member of
The American Funds Group, the nation's third-largest mutual fund family. You
won't find us advertised, yet thousands of financial advisers recommend the
American Funds for their clients' serious money - money set aside for
education, a home, retirement and other important dreams.
What the 29 funds in our group have in common is a commitment to your best
interests and the proven approach of our investment adviser, Capital Research
and Management Company. In business since 1931, Capital's calling cards
include:
- A LONG-TERM, VALUE-ORIENTED APPROACH: Rather than follow short-term fads, we
rely on our own intensive research to find well-managed companies with
reasonably priced securities and solid, long-term potential. Despite our size,
we offer relatively few funds compared with many large fund families, allowing
us to maintain a careful focus on our objectives and enabling you to benefit
from economies of scale.
- AN UNPARALLELED GLOBAL RESEARCH EFFORT: We opened our first overseas office
in 1962, well before most mutual funds began investing internationally. Today,
the American Funds draw on one of the industry's most globally integrated
research networks. Capital Research spends substantial resources getting to
know companies and industries around the world.
- A MULTIPLE PORTFOLIO COUNSELOR SYSTEM: More than 40 years ago, we developed a
unique strategy for managing investments that blends teamwork with individual
accountability. Every American Fund is divided among a number of portfolio
counselors, each of whom manages his or her portion independently, within each
fund's objectives; in most cases, research analysts manage a portion as well.
Over time, this method has contributed to consistency of results and continuity
of management.
- EXPERIENCED INVESTMENT PROFESSIONALS: More than 75% of the portfolio
counselors who serve the American Funds were in the investment business before
the sharp stock market decline in October 1987. Long tenure and experience
through a variety of market conditions mean we aren't "practicing" with your
money.
- A COMMITMENT TO LOW OPERATING EXPENSES: You can't control market returns, but
you can control what you invest in and how much you pay to own it. American
Funds provide exceptional value for shareholders, with operating expenses that
are among the lowest in the mutual fund industry. Our portfolio turnover rates
are low as well, keeping transaction costs and tax consequences contained.
A PORTFOLIO FOR EVERY INVESTOR
Most financial advisers suggest that investors balance their portfolios by
investing across several types of investments. Which mix is right for you? That
depends on a number of things - including your risk tolerance, investment time
horizon and financial goals. The American Funds Group offers 29 funds with an
array of investment objectives to help you and your financial adviser build a
portfolio specifically tailored to your needs.
GROWTH FUNDS
Emphasis on long-term growth through stocks
AMCAP Fund(r)
EuroPacific Growth Fund(r)
The Growth Fund of America(r)
The New Economy Fund(r)
New Perspective Fund(r)
New World Fund(sm)
SMALLCAP World Fund(r)
GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
American Mutual Fund(r)
Capital World Growth and Income Fund(sm)
Fundamental Investors(sm)
The Investment Company of America(r)
Washington Mutual Investors Fund(sm)
EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(r)
The Income Fund of America(r)
BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(r)
INCOME FUNDS
Emphasis on current income through bonds
American High-Income Trust(sm)
The Bond Fund of America(sm)
Capital World Bond Fund(r)
Intermediate Bond Fund of America(r)
U.S. Government Securities Fund(sm)
TAX-EXEMPT INCOME FUNDS
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund(r)
Limited Term Tax-Exempt Bond Fund of America(sm)
The Tax-Exempt Bond Fund of America(r)
State-specific tax-exempt funds:
The Tax-Exempt Fund of California(r)
The Tax-Exempt Fund of Maryland(r)
The Tax-Exempt Fund of Virginia(r)
MONEY MARKET FUNDS
Seek stable monthly income through money market instruments
The Cash Management Trust of America(r)
The Tax-Exempt Money Fund of America(sm)
The U.S. Treasury Money Fund of America(sm)
We also offer a full line of retirement plans and variable annuities.
For more complete information about any of the funds, including charges and
expenses, please obtain a prospectus from your financial adviser, download one
from our Web site at www.americanfunds.com, or phone the funds' transfer agent,
American Funds Service Company, at 800/421-0180. Please read the prospectus
carefully before you invest or send money. For more information, ask your
financial adviser for a copy of our brochure A Portfolio for Every Investor.
Intermediate Bond Fund of America
Investment Portfolio, August 31, 2000
[begin pie chart]
<TABLE>
<S> <C>
22% Asset-Backed
17% Federal Agency Mortgage-Backed
16% Commercial Mortgage-Backed
14% Corporate Bonds
11% U.S. Treasury Bonds
5% Federal Agency Debentures
6% Collateralized Mortgage Obligations
2% Other
7% Cash & Equivalents
</TABLE>
[end pie chart]
BONDS & NOTES
<TABLE>
<S> <C> <C> <C>
Principal Market Percent
Amount Value of Net
Fixed Income Securities (000) (000) Assets
-------------------------------------------- -------- -------- --------
ASSET-BACKED OBLIGATIONS (1) - 21.86%
Arcadia Automobile Receivables Trust, 2,900 2,911 .22
Series 1999-C, Class A-3, 7.20% 2007
Atlas Air, Inc. pass-through trusts, 2,417 2,308 .18
Series 1998-1, Class A, 7.38% 2019
Banco Nacional de Mexico, SA , Series 1999-A, 5,000 5,036 .39
Class A-1, 7.50% 2006 (3)
Bay View Financial Acquisition Trust, 9,842 10,009 .77
Series 1999-C, Class M3, 8.62% 2029 (2,3)
Case Equipment Loan Trust, Series 1999-A, 1,392 1,369 .11
Class B, 5.96% 2005
Chase Manhattan Credit Card Master Trust, 8,750 8,591 .66
Series 1997-5, Class A, 6.194% 2005
Citicorp Lease pass-through trust, pass-through 2,869 2,881 .22
certificates, Series 1999-1, Class A1,
7.22% 2005 (3)
ComEd Transitional Funding Trust, Transitional
Funding Trust Notes:
Series 1998-1, Class A4, 5.39%, 2005 2,000 1,932
Series 1998-1, Class A5, 5.44% 2007 9,000 8,556 .81
Conseco Finance Home Equity Loan Trust, 10,250 10,321 .80
Series 2000-B, Class AF-6, 7.80% 2020
Continental Airlines, Inc., pass-through
certificates:
Series 1998-3, Class C1, 7.08% 2004 1,999 1,964
Series 1998-2, Class A, 6.41% 2007 17,905 17,248
Series 1996-2, Class A, 7.75% 2016 1,223 1,208
Series 1998-1, Class A, 6.648% 2019 3,367 3,111
Series 2000-1, Class B, 8.388% 2020 10,800 11,089 2.67
First Consumer Master Trust:(3)
Series 1999-A, Class A, 5.80% 2005 8,000 7,669
Series 1999-A, Class B, 6.28% 2005 9,000 8,546 1.25
FIRSTPLUS Home Loan Owner Trust, Series 3,000 2,978 .23
1997-4, Class A5, 6.62% 2015
Green Tree Financial Corp., pass-through
certificates:
Series 1998-2, Class A5, 6.24% 2016 3,500 3,421
Series 1993-3, Class A5, 5.75% 2018 1,049 1,043
Series 1996-10, Class A-4, 6.42% 2028 1,735 1,728
Series 1996-10, Class A-5, 6.83% 2028 13,992 13,743
Series 1997-6, Class A6, 6.90% 2029 3,000 2,945
Series 1997-6, Class A7, 7.14% 2029 4,250 4,141
Series 1999-2, Class A2, 5.84% 2030 4,250 4,146 2.41
Green Tree Recreational, Equipment & Consumer 8,000 7,903 .61
Trust, Series 1999-A, Class A6, 6.84% 2010
Hitachi Shinpan Co. Ltd., Series 1999-3, 6,500 6,416 .49
Class A, 9.60% 2006 (3)
Illinois Power Special Purpose Trust, 5,000 4,581 .35
Transitional Funding Trust Notes, Series 1998-1,
Class A7, 5.65% 2010
LML Auto Lease Securitization, Series 1999-A, 8,998 8,929 .69
Class A, 6.45% 2004 (3)
MBNA Master Credit Card Trust II, Series 5,750 5,737 .44
2000-D, Class B, 7.056% 2009
The Money Store Home Equity Trust, 9,621 9,696 .75
Series 1994-D, Class A5, 8.925% 2022
Nebhelp Trust, Student Loan Interest Margin 16,620 16,429 1.27
Securities, Series 1998-1, Class A,
6.68% 2016 (3)
Northwest Airlines, Inc., pass-through 3,478 3,580 .28
certificates, Series 1999-3, Class G,
7.935% 2019
NPF VI, INC., Series 1999-1, Class A, 2,000 1,953 .15
6.25% 2003 (3)
NPF XII, Inc., Series 1999-2, Class A, 18,750 18,634 1.44
7.05% 2003 (3)
PECO Energy Co., Series 1999-A, 2,500 2,444 .19
Class A-2, 5.63% 2005
Pegasus Aviation Lease Securitization, 4,000 4,128 .32
Series 2000-1, Class A2, 8.37% 2030 (3)
PP&L Transition Bond Co. LLC:
Series 1999-1, Class A5, 6.83% 2007 7,250 7,227
Series 1999-1, Class A8, 7.15% 2009 11,000 11,089 1.41
Puerto Rico Public Financing Corp., Series 1, 17,604 16,779 1.30
Class A, 6.15% 2008
Rental Car Finance Corp., Series 1999-1, 2,000 1,898 .15
Class C, 6.50% 2007 (3)
Student Loan Funding LLC, Series 1998-B, 13,500 12,911 1.00
Class B3, 6.25% 2019
Triad Auto Receivables Owner Trust, 4,000 3,938 .30
Series 1999-1, Class A2, 6.09% 2005
---------- ----------
283,166 21.86
---------- ----------
FEDERAL AGENCY MORTGAGE PASS-THROUGH
OBLIGATIONS (1) - 16.10%
Fannie Mae:
6.00% 2013 7,755 7,413
6.50% 2013 - 2014 7,357 7,164
7.00% 2008 - 2023 10,208 10,104
FNCI 7.0% 05-18-15
FNCI 7.0% 09-01-15
7.50% 2009 - 2039 30,662 30,666
FNMA POOL #524716 7.5% 04-01-15
FNCI 7.5% 05-18-15
FNCI 7.5% 09-01-15
8.00% 2002 - 2005 410 412
8.264% 2002 (2) 5,402 5,443
8.50% 2008 - 2030 2,300 2,352
9.00% 2009 - 2022 5,715 5,897
9.50% 2009 - 2022 3,263 3,407
10.00% 2017 - 2025 8,047 8,510
10.50% 2004 - 2020 545 579
11.00% 2001 - 2020 1,391 1,508
11.50% 2015 187 205
12.00% 2016 7,392 8,187
12.25% 2012 1,111 1,221
12.50% 2015-2019 2,190 2,437
13.00% 2015 - 2028 1,892 2,139
15.00% 2013 708 833 7.60
Fannie Mae/Government National Mortgage Assn.:
11.00% 2020 551 597
12.50% 2015-2019 1,552 1,728
15.00% 2013 395 461 .22
Federal Housing Administration/Veterans 210 234 .02
Affairs 12.50% 2015
Freddie Mac:
6.00% 2014 - 2029 5,338 5,033
7.00% 2008 - 2015 4,139 4,105
8.00% 2003 - 2017 7,411 7,508
8.50% 2008 - 2027 4,720 4,819
8.75% 2008 - 2009 421 428
9.00% 2028 1,172 1,208
9.50% 2010 - 2013 461 458
10.00% 2005 - 2019 7,175 7,500
11.00% 2018 874 946
12.00% 2016 83 91
12.50% 2015 - 2019 553 619
12.75% 2019 25 27 2.53
Government National Mortgage Assn.:
6.00% 2029 972 908
6.50% 2028 - 2029 14,560 13,978
GNMA I POOL #486598 6.5% 10-15-28
7.00% 2007 - 2028 9,821 9,672
7.50% 2022 - 2030 16,887 16,883
GNMA I POOL #477984 7.5% 08-15-30
8.00% 2023 - 2027 6,221 6,309
8.50% 2007 - 2023 7,971 8,198
9.00% 2008 - 2025 5,113 5,298
9.50% 2009 - 2021 8,626 9,051
10.00% 2019 3,577 3,826
10.25% 2012 170 180
10.50% 2019 43 46 5.73
---------- ----------
208,588 16.10
---------- ----------
FEDERAL AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS (1) - 1.33%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 5,243 5,271
Trust D2, 11.00% 2009 1,699 1,831
Series 83-B, Class 3, 12.50% 2013 47 51
Series 88-16, Class B, 9.50% 2018 239 249
Series 90-21, Class Z, 9.00% 2020 7,029 7,286
Series 90-93, Class G, 5.50% 2020 1,215 1,134 1.22
Freddie Mac, Series 1567, Class A, 1,393 1,356 .11
5.161% 2023 (2)
---------- ----------
17,178 1.33
---------- ----------
FEDERAL AGENCY DEBENTURES - 5.05%
Fannie Mae Notes:
5.25% 2009 9,095 8,147
6.00% 2008 30,150 28,562
6.625% 2009 16,300 15,999 4.08
Federal Home Loan Bank Bonds:
5.625% 2001 5,120 5,209
7.125% 2005 3,000 2,977 .63
Freddie Mac Note 5.125% 2008 5,000 4,454 .34
---------- ----------
65,348 5.05
---------- ----------
U.S. TREASURY OBLIGATIONS - 10.78%
6.375% August 2002 100 100
12.375% May 2004 470 566
6.00% August 2004 8,325 8,311
7.25% August 2004 5,250 5,466
11.625% November 2004 16,400 19,724
6.50% October 2006 21,000 21,512
6.25% February 2007 27,750 28,136
6.125% August 2007 355 358
10.38% November 2009 4,000 4,597
5.50% May 2009 28,550 27,756
8.875% August 2017 13,500 17,660
8.875% February 2019 2,530 3,347
5.50% August 2028 2,205 2,099 10.78
---------- ----------
139,632 10.78
---------- ----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES (1) - 16.41%
Asset Securitization Corp., Series 1997-D5, 169,406 14,386 1.11
Class APS1, interest only, 1.416% 2043 (2)
Bear Stearns Commercial Mortgage
Securities Inc.:
Series 1998-C1, Class A1, 6.34% 2030 5,085 4,944
Series 1999-C1, Class X, interest only, 91,600 5,872 .83
1.288% 2031 (2)
CDC Securitization Corp., pass-through 5,000 5,035 .39
certificates, Series 1999-FL1, Class C,
7.919% 2007 (2,3)
Chase Commercial Mortgage Securities Corp.,
pass-through certificates:
Series 1996-1, Class A1, 7.60% 2005 1,270 1,286
Series 1997-1, Class A1, 7.27% 2029 2,384 2,392
Series 1998-1, Class A1, 6.34% 2030 2,952 2,884
Series 1998-2, Class A2, 6.39% 2030 9,000 8,516
Series 1999-1, Class C, 7.625% 2031 7,000 6,969 1.70
Commercial Mortgage Acceptance Corp.:
Series 1998-C1, Class A1, 6.23% 2007 1,873 1,818
Series 1998-C2, Class A1, 5.80% 2030 3,688 3,539 .41
Commercial Mortgage, pass-through certificates, 4,000 4,007 .31
Series 2000-FL1, Class E, 7.67% 2011 (2,3)
CS First Boston Mortgage Securities Corp.,
pass-through certificates:
Series 1998-C1, Class A1A, 6.26% 2040 6,558 6,361
Series 1998-C1, Class C, 6.78% 2009 6,450 6,096 .96
Deutsche Mortgage & Asset Receiving Corp., 11,886 11,526 .89
Series 1998-C1, Class A1, 6.22% 2031
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A1A, 7.40% 2006 (3) 5,523 5,553
Series 1995-CF2, Class A1B, 6.85% 2027 (3) 10,000 9,925
Series 1998-CF2, Class A3, 6.65% 2031 5,250 4,924
Series 1998-CF2, Class A4, 6.90% 2031 3,250 3,081 1.81
GMAC Commercial Mortgage Securities, Inc., 5,000 4,756 .37
Series 1997-C2, Class C, 6.91% 2007
GS Mortgage Securities Corp. II, 10,000 10,000 .77
Series 1999-GSFL II, Class D, 7.619% 2013 (2,3)
J.P. Morgan Commercial Mortgage Finance Corp., 16,155 16,167 1.25
Series 1995-C1, Class A2, 7.435% 2010 (2)
LB Commercial Mortgage Trust, Series 1998-C1, 1,387 1,362 .10
Class A1, 6.33% 2030
Merrill Lynch Mortgage Investors, Inc.:
Series 1995-C3, Class A2, 6.829% 2025 (2) 5,180 5,142
Series 1995-C3, Class A3, 7.069% 2025 (2) 1,500 1,491
Series 1997-C1, Class A1, 6.95% 2029 (2) 2,242 2,234
Series 1998-C3, Class A1, 5.65% 2030 5,738 5,466 1.11
Morgan Stanley Capital I Inc.:
Series 1998-HF1, Class A1, 6.19% 2007 5,505 5,357
Series 1998-HF2, Class A1, 6.01% 2030 6,826 6,564
Series 1998-WF2, Class A1, 6.34% 2030 6,012 5,865
Series 1999-FNV1, Class D, 7.03% 2032 4,000 3,818 1.67
Mortgage Capital Funding, Inc., Series 11,782 11,495 .89
1998-MC1, Class A1, 6.417% 2030
Nomura Asset Securities Corp., 8,196 7,976 .62
Series 1998-D6, Class AA1, 6.28% 2030
Prudential Securities Secured Financing Corp., 2,000 1,884 .15
Commercial Mortgage pass-through certificates,
Series 1999-NRF1, Class C, 6.746% 2009
SMA Finance Co., Inc., Series 1998-C1, 8,095 7,928 .61
Class A1, 6.27% 2032 (3)
Structured Asset Securities Corp., 5,924 5,940 .46
Series 1999-C3, Class E, 7.72% 2013 (2,3)
---------- ----------
212,559 16.41
---------- ----------
CORPORATE BONDS - 15.00%
FINANCIAL SERVICES - 6.91%
ABN AMRO Bank NV 7.55% 2006 3,000 3,035 .23
Associates Corp. of North America 6.45% 2001 7,000 6,930 .54
Bank of America Corp. 7.875% 2005 4,000 4,105 .32
BANK ONE CORP., Series A, 5.625% 2004 3,300 3,123 .24
BankAmerica Corp.:
6.65% 2001 1,600 1,594
5.875% 2009 3,175 2,868 .34
DBS Bank Ltd. 7.875% 2009 (3) 3,000 3,022 .23
Ford Motor Credit Co.:
5.75% 2004 9,000 8,559
6.70% 2004 7,375 7,201
5.80% 2009 1,750 1,539 1.34
General Electric Capital Corp. 8.375% 2001 1,500 1,510 .12
General Motors Acceptance Corp.:
6.75% 2002 3,000 2,974
6.85% 2004 12,000 11,807 1.14
IKON Capital Inc. 6.33% 2000 2,500 2,497 .19
Lend Lease (US) Finance Inc. 6.75% 2005 5,000 4,808 .37
Merita Bank Ltd. 7.50% (undated) (2,3) 2,000 1,909 .15
Midland Bank PLC, 8.625% 2004 4,000 4,191 .32
NationsBank Corp. 6.125% 2004 3,000 2,896 .23
Regional Diversified Funding Ltd. 9.25% 2030 (3) 750 740 .06
ReliaStar Financial Corp. 8.00% 2006 6,750 6,891 .53
Toyota Credit Canada 6.625% 2002 3,000 2,980 .23
Toyota Motor Credit Corp. 6.125% 2000 2,495 2,492 .19
Wells Fargo Bank National 1,750 1,756 .14
Association 7.80% 2010 (2)
---------- ----------
89,427 6.91
---------- ----------
INDUSTRIAL & SERVICES - 4.64%
Carnival Corp. 7.70% 2004 2,000 1,982 .15
Cox Radio, Inc. 6.375% 2005 3,500 3,344 .26
McKesson Finance of Canada 6.55% 2002 (3) 3,200 3,039 .23
Oil Enterprises Ltd. 6.239% 2008 (3) 8,744 8,327 .64
Pacificorp Australia LLC 6.15% 2008 (3) 10,000 9,349 .72
Pemex Finance Ltd.:
5.72% 2003 4,063 3,947
6.125% 2003 3,033 2,969
7.80% 2013 (3) 2,000 2,074 .70
R.P. Scherer International Corp. 6.75% 2004 4,325 4,231 .33
Scotia Pacific Co. LLC, Series B:
Class A1, 6.55% 2028 1,701 1,603
Class A2, 7.11% 2028 5,000 3,764 .41
Sony Corp. 6.125% 2003 5,000 4,915 .38
Sotheby's Holdings, Inc. 6.875% 2009 (4) 1,000 778 .06
Vodafone AirTouch PLC, 7.625% 2005 (3) 9,710 9,817 .76
---------- ----------
60,139 4.64
---------- ----------
TRANSPORTATION - 1.70%
AIR 2 US, Series A, 8.027% 2020 (3) 9,815 9,950 .77
Jet Equipment Trust, Series 1995-B, 8,709 8,572 .66
Class A, 7.63% 2015 (3,4)
PSA Corp. Ltd. 7.125% 2005 (3) 3,500 3,506 .27
---------- ----------
22,028 1.70
---------- ----------
UTILITIES - 1.14%
Israel Electric Corp. Ltd. 7.25% 2006 (3) 6,000 5,879 .45
National Rural Utilities Cooperative Finance 3,205 3,056 .24
Corp., 5.30% 2003
Texas Utilities Co., Series A, 6.20% 2002 6,000 5,877 .45
---------- ----------
14,812 1.14
---------- ----------
COLLATERALIZED MORTGAGE OBLIGATIONS
(PRIVATELY ORIGINATED) (1) - 5.45%
Chase Manhattan Bank, NA, Series 1993-I, 1,229 1,221 .09
Class 2A5, 7.25% 2024
First Nationwide, Series 1999-2, 6,557 6,193 .48
Class 1PA1, 6.50% 2029
Franchise Mortgage Acceptance Company Loan 8,000 7,477 .58
Receivables Trust, Series 1998-A,
Class A3, 6.69% 2020 (3)
Paine Webber CMO, Series O, Class 5, 9.50% 2019 1,915 2,003 .15
Residential Funding Mortgage Securities I, Inc., 1,959 1,836 .14
Series 1998-S17, Class M1, 6.75% 2028
Security National Mortgage Loan Trust:(3)
Series 1999-1, Class B, 9.858% 2030 6,979 6,870
Series 2000-1, Class A2, 8.75% 2024 5,200 5,152 .93
Structured Asset Notes Transaction, Ltd., 4,928 4,812 .37
Series 1996-A, Class A1, 7.156% 2003 (3)
Structured Asset Securities Corp.: (2)
Series 1998-RF2, Class A, 8.542% 2027 (3) 12,726 12,997
Series 1998-RF1, Class A, 8.667% 2027 (3) 14,203 14,553
Series 1999-BC1, Class M2, 7.92% 2029 7,500 7,522 2.71
---------- ----------
70,636 5.45
---------- ----------
OTHER - 2.00%
GOVERNMENT (EXCLUDING U.S.) & GOVERNMENT
AUTHORITIES - 1.35%
Canadian Government 6.125% 2002 2,000 1,977 .15
KfW International Finance Inc.:
7.625% 2004 2,500 2,569
7.125% 2005 3,500 3,542 .47
Ontario (Province of) 7.375% 2003 2,500 2,524 .20
Victoria (Territory of) Public Authorities 3,500 3,551 .27
Finance Agency 8.45% 2001
Corporacion Andina de Fomento 8.875% 2005 3,200 3,327 .26
---------- ----------
17,490 1.35
---------- ----------
TAXABLE MUNICIPAL BONDS - 0.79%
California Maritime Infrastructure Authority, 10,604 10,238 .79
Taxable Lease Revenue Bonds (San Diego Unified
Port District-South Bay Plant Acquisition),
Series 1999, 6.63% 2009 (3)
---------- ----------
10,238 .79
---------- ----------
---------- ----------
Total Bonds & Notes (cost: $1,230,794,000) 1,211,241 93.51
Principal Market Percent
Amount Value of Net
SHORT-TERM SECURITIES (Cash & Equivalents) (000) (000) Assets
-------------------------------------------- -------- -------- --------
CORPORATE SHORT-TERM NOTES - 6.13%
Corporate Asset Funding 6.54% due 10/6/2000 (3) 4,000 3,974 .31
The Estee Lauder Companies Inc. 11,000 10,956 .84
6.54% due 9/22/2000 (3)
Gannett Co. 6.54% due 10/5/2000 (3) 10,000 9,937 .77
General Electric Capital Corp. 6.65% due 9/1/2000 28,900 28,895 2.23
Paccar Financial Corp. 6.55% due 9/22/2000 5,000 4,980 .38
Park Avenue Receivables Corp. 5,200 5,176 .40
6.53% due 9/26/2000 (3)
Preferred Receivables Funding 15,500 15,480 1.20
Corp. 6.55% due 9/7/2000 (3)
---------- ----------
Total Short-Term Securities (cost: $79,398,000) 79,398 6.13
---------- ----------
Total Investment Securities (cost:$1,310,192,000) 1,290,639 99.64
Excess of cash and receivables over payables 4,603 .36
---------- ----------
NET ASSETS $1,295,242 100.00
---------- ----------
(1) 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.
(2) Coupon rate may change periodically.
(3) Purchased in a private placement transaction; resale to the public
may require registration or may be sold only to qualified
institutional buyers.
(4) Valued under procedures established by the Board of Trustees.
See Notes to Financial Statements
</TABLE>
INTERMEDIATE BOND FUND OF AMERICA
FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
at August 31, 2000 (dollars in thousands)
Assets:
Investment securities at market
(cost: $1,310,192) $1,290,639
Cash 223
Receivables for--
Sales of investments $ 330
Sales of fund's shares 3,972
Accrued interest 11,570 15,872
1,306,734
Liabilities:
Payables for--
Purchases of investments 8,048
Repurchases of fund's shares 1,692
Dividends on fund's shares 431
Management services 434
Other expenses 887 11,492
Net Assets at August 31, 2000-- $1,295,242
Unlimited shares authorized
Class A shares
Net Assets $1,290,214
Shares outstanding 98,639,222
Net asset value per share $13.08
Class B shares
Net Assets $5,028
Shares outstanding 384,441
Net asset value per share $13.08
STATEMENT OF OPERATIONS
for the year ended August 31, 2000 (dollars in thousands)
Investment Income:
Income:
Interest $95,761
Expenses:
Management services fee 5,452
Distribution expenses - Class A 4,160
Distribution expenses - Class B 11
Transfer agent fee - Class A 1,164
Transfer agent fee - Class B 1
Reports to shareholders 76
Registration statement and prospectus 228
Postage, stationery and supplies 201
Trustees' fees 30
Auditing and legal fees 59
Custodian fee 27
Taxes other than federal income tax 22
Other expenses 78 11,509
Net investment income 84,252
Realized Loss and Unrealized
Appreciation on Investments:
Net realized loss (20,564)
Net change in unrealized
depreciation on investments 20,599
Net unrealized appreciation 20,599
Net realized loss and
unrealized appreciation
on investments 35
Net Increase in Net Assets Resulting
from Operations $84,287
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Year ended
August 31,
2000 1999
Operations:
Net investment income $ 84,252 $ 88,615
Net realized loss on investments (20,564) (4,010)
Net unrealized appreciation (depreciation)
on investments 20,599 (61,031)
Net increase in net assets
resulting from operations 84,287 23,574
Dividends Paid to Shareholders:
Dividends from net investment income:
Class A (79,277) (88,570)
Class B (55) 0
Total Dividends (79,332) (88,570)
Capital Share Transactions:
Proceeds from shares sold 491,532 815,044
Proceeds from shares issued in reinvestment
of net investment income dividends 64,630 71,711
Cost of shares repurchased (801,019) (745,398)
Net (decrease) increase in net assets resulting from (244,857) 141,357
capital share transactions
Total (decrease) increase in net assets (239,902) 76,361
Net Assets:
Beginning of year 1,535,144 1,458,783
End of year (including
undistributed net investment
income: $5,492 and $572
respectively) $1,295,242 $1,535,144
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. The fund offers
Class A and Class B shares. Class A shares are sold with an initial sales
charge of up to 3.75%. Class B shares are sold without an initial sales charge
but are subject to a contingent deferred sales charge paid upon redemption.
This charge declines from 5% to zero over a period of six years. Class B shares
have higher distribution expenses and transfer agent fees than Class A shares.
Class B shares are automatically converted to Class A shares eight years after
the date of purchase. Holders of both classes of shares have equal pro rata
rights to assets and identical voting, dividend, liquidation and other rights,
except that each class bears different distribution and transfer agent
expenses, and each class shall have exclusive rights to vote on matters
affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with accounting principles generally accepted in the United
States which require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. 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. Some securities may be
valued on the basis of 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.
Short-term securities maturing within 60 days are valued at amortized cost,
which approximates market value.
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. The ability of the issuers of the
fixed-income securities held by the fund to meet their obligations may be
affected by economic developments in a specific industry, state or region.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are
accounted for as of the trade date. Realized gains and losses from securities
transactions are determined based on specific identified cost. In the event
securities are purchased on a delayed delivery or when-issued basis, the fund
will instruct the custodian to segregate liquid assets sufficient to meet its
payment obligations in these transactions. Dividend income is recognized on the
ex-dividend date, and interest income is recognized on an accrual basis. Market
discounts, premiums, and original issue discounts on fixed-income securities
are amortized daily over the expected life of the security.
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.
ALLOCATIONS - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between the share
classes based on their relative net asset values. Distribution expenses,
transfer agent fees and any other class-specific expenses, are accrued daily
and charged to the applicable share class.
2. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year. As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of August 31, 2000, net unrealized depreciation on investments for book and
federal income tax purposes aggregated $19,553,000, $7,580,000 related to
appreciated securities and $27,133,000 related to depreciated securities.
During the year ended August 31, 2000, the fund realized, on a tax basis, a net
capital loss of $1,800,000 on securities transactions. The fund had available
at August 31, 2000 a net capital loss carryforward totaling $95,211,000 which
may be used to offset capital gains realized during subsequent years through
2008 and thereby relieve the fund and its shareholders of any federal income
tax liability with respect to the capital gains that are so offset. The fund
will not make distributions from capital gains while a capital loss
carryforward remains. In addition, the fund has recognized for tax purposes,
capital losses totaling $5,340,000 which were realized during the period
November 1, 1998 through August 31, 1999 and has deferred for tax purposes, to
fiscal year ended August 31, 2001, the recognition of capital losses totaling
$18,765,0000 which were realized during the period November 1, 1999 to August
31, 2000. The cost of portfolio securities for book and federal income tax
purposes was $1,310,192,000 at August 31, 2000.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $5,452,000 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 based
on the following rates and net asset levels:
<TABLE>
<CAPTION>
NET ASSET LEVEL
RATE IN EXCESS OF UP TO
<S> <C> <C>
0.30% $0 $60 million
0.21 60 million 1 billion
0.18 1 billion 3 billion
0.16 3 billion
</TABLE>
The agreement also provides for fees based on monthly gross investment income
at the following rates:
<TABLE>
<CAPTION>
MONTHLY GROSS INVESTMENT INCOME
RATE IN EXCESS OF UP TO
<S> <C> <C>
3.00% $0 3,333,333
2.50 3,333,333 8,333,333
2.00 8,333,333
</TABLE>
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution for Class A shares,
the fund may expend up to 0.30% of Class A daily 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 in advance
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. Pursuant
to a Plan of Distribution for Class B shares, the fund may expend 1.00% of
Class B daily net assets annually to compensate dealers for their selling and
servicing efforts. Some or all of the unpaid amounts maybe paid by the fund in
the future. During the year ended August 31, 2000, distribution expenses under
the Plan of Distribution for Class A were limited to $4,160,000 on Class A
shares. Had no limitation been in effect, the fund would have paid $4,323,000
in distribution expenses for Class A shares under the Plan. During the year
ended August 31, 2000, distribution expenses under the Plan of Distribution for
Class B were $11,000. As of August 31, 2000, accrued and unpaid distribution
expenses for Class A and Class B shares were $653,000 and $4,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $1,036,000 (after allowances to dealers) during the
year ended August 31, 2000, as its portion of the sales charges paid by
purchasers of the fund's Class A 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- A fee of $1,165,000 was incurred during the year ended
August 31, 2000 pursuant to an agreement with American Funds Service Company
(AFS), the transfer agent for the fund.
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 August 31, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993), net of any payments to
Trustees, were $99,000.
AFFILIATED TRUSTEES' AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Officers of the fund and certain Trustees 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 $637,494,000 and $903,060,000, respectively, during
the year ended August 31, 2000.
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 $27,000 includes $25,000 that was paid by these credits
rather than in cash.
As of August 31, 2000, net assets consisted of the following:
<TABLE>
<S> <C>
dollars in thousands
Capital paid in on shares of beneficial interest $ 1,423,278
Undistributed net Investment Income 5,492
Accumulated net realized loss (113,975)
Reinvested dividends (19,553)
Net Assets $ 1,295,242
</TABLE>
Capital share transactions in the fund were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Year ended August 31, 2000 Year ended August 21, 1999
Amount (000) Shares Amount (000) Shares
Class A Shares:
Sold $ 485,516 37,436,826 $ 815,044 60,775,441
Reinvested dividends 64,579 4,984,201 71,711 5,369,952
Repurchased (799,924) (61,764,311) (745,398) (55,761,176)
Net (decrease) increase (249,829) (19,343,284) 141,357 10,384,217
in Class A
Class B Shares:*
Sold 6,016 465,197 - -
Reinvested dividends 51 3,908 - -
Repurchased (1,095) (84,664) - -
Net increase in Class B 4,972 384,441 - -
Total net (decrease)
increase in fund $ (244,857) (18,958,843) $ 141,357 10,384,217
* Class B shares were not offered before March 15, 2000.
</TABLE>
PER-SHARE DATA AND RATIOS (1)
<TABLE>
<S> <C> <C> <C> <C>
Net
Net asset gains/(losses)
value, Net on securities Total from
beginning investment (both realized investment
Year ended of year income and unrealized) operations
Class A:
2000 $13.01 0.78(2) 0.03(2) $.00
1999 13.56 .76 (.55) 0.21
1998 13.42 .83 0.17 1.00
1997 13.26 .86 0.15 1.01
1996 13.52 .88 (.27) 0.61
Class B:
2000 13.01 0.25(2) 0.13(2) 0.00
Dividends
(from net Net asset
investment Total value, end Total
Year ended income) distributions of year return
Class A:
2000 $(.74) $(.74) $12.27 6.48%
1999 (.76) (.76) 13.01 1.54
1998 (.86) (.86) 13.56 7.68
1997 (.85) (.85) 13.42 7.83
1996 (.87) (.87) 13.26 4.63
Class B:
2000 (.31) (.31) 12.70 3.60
Ratio of Ratio of
Net assets, expenses net income Portfolio
end of year to average to average turnover
Year ended (in millions) net assets net assets rate
Class A:
2000 $1,290 .83% 6.06% 48.18%(5)
1999 1,535 0.75(4) 5.69 70.19
1998 1,459 0.76(4) 6.09 79.19
1997 1,338 .82 6.40 41.55
1996 1,429 .80 6.53 48.25
Class B:
2000 5 1.5(3) 5.4(3) 48.18(5)
</TABLE>
(1) The periods 1996 through 2000 represent fiscal years ended August 31. The
period ended 2000 represents, for Class B shares, the 169 day period
ended August 31, 2000. Class B shares were not offered before
March 15, 2000. Total returns for such periods are based on activity
during the period and thus are not representative of a full year. Total
returns exclude all sales charges, including contingent deferred sales
charges.
(2) Based on average shares outstanding.
(3) Annualized.
(4) Had CRMC not waived management services fees, the fund's expense ratio
would have been 0.78% for the fiscal year ended August 31, 1999 and
0.79% for the fiscal year ended August 31, 1998.
(5) Represents portfolio turnover rate (equivalent for all share classes) for
the year ended August 31, 2000.
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, 2000, 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 for class A shares and the period March 15, 2000
through August 31, 2000 for Class B shares. 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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, 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 for class A shares and the
period March 15, 2000 through August 31, 2000 for class B shares, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Los Angeles, California
October 2, 2000
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, 13% 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 2000 to determine the CALENDAR YEAR amounts to
be included on their respective 1999 tax returns. Shareholders should consult
their tax advisers.
BOARD OF TRUSTEES
AMBASSADOR RICHARD G. CAPEN, JR.
Rancho Santa Fe, California
Corporate director and author;
former United States Ambassador to Spain;
former Vice Chairman of the Board,
Knight-Ridder, Inc.; former Chairman of the
Board and Publisher, The Miami Herald
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President
and Chief Executive Officer,
The Mission Group; former President,
Southern California Edison Company
DIANE C. CREEL
Long Beach, California
President and Chief Executive Officer,
The Earth Technology Corporation
(international consulting engineering)
MARTIN FENTON
San Diego, California
Managing Director, Senior Resource Group, LLC
(development and management of
senior living communities)
LEONARD R. FULLER
Marina del Rey, California
President, Fuller Consulting
(financial management consulting firm)
ABNER D. GOLDSTINE
Los Angeles, California
Vice Chairman of the Board of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the fund
Executive Vice President and Director,
Capital Research and Management Company
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board and Chief Executive Officer,
AECOM Technology Corporation
(architectural engineering)
FRANK M. SANCHEZ
Los Angeles, California
Chairman of the Board and Chief Executive Officer,
The Sanchez Family Corporation dba McDonald's
Restaurants (McDonald's licensee)
JOHN H. SMET
Los Angeles, California
President of the fund
Senior Vice President,
Capital Research and Management Company
DON R. CONLAN, a Trustee since 1996, has retired
from the Board. The Trustees thank him for his many
contributions to the fund.
OTHER OFFICERS
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management
Group, Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, JR.
Brea, California
Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the fund
Assistant Vice President - Fund Business Management Group,
Capital Research and Management Company
The American Funds Group(r)
INTERMEDIATE BOND FUND OF AMERICA
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
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two California Plaza
350 South Grand Avenue
Los Angeles, California 90071-3462
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, OR FOR A
PROSPECTUS FOR ANY OF THE AMERICAN FUNDS, 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. PLEASE READ
THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
This report is for the information of shareholders of Intermediate Bond Fund of
America, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after December 31, 2000, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
CLASS A AND B SHARES - There are two ways to invest in Intermediate Bond Fund
of America. Class A shares are subject to a 3.75% maximum up-front sales charge
that declines for accounts of $100,000 or more. Class B shares, which are not
available for certain employer-sponsored retirement plans, have no up-front
charge. They are, however, subject to additional expenses of approximately
0.75% a year over the first eight years of ownership. If redeemed within six
years, they may also be subject to a contingent deferred sales charge (5%
maximum) that declines over time.
Printed on recycled paper
Litho in USA CGD/CG/4809
Lit. No. IBFA-011-1000
