INTERMEDIATE BOND FUND OF AMERICA, 497, 2000-01-07

INTERMEDIATE BOND FUND OF AMERICA
497, 2000-01-07

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PROSPECTUS SUPPLEMENT
January 10, 2000
for the following funds with prospectuses dated February 1, 1999 - December 1,
1999

<TABLE>
<CAPTION>
<S> <C>
AMCAP Fund, Inc. Limited Term Tax-Exempt Bond
American Balanced Fund, Inc. Fund of America
American High-Income Municipal The New Economy Fund
Bond Fund, Inc. New Perspective Fund, Inc.
American High-Income Trust SMALLCAP World Fund, Inc.
The Bond Fund of America, Inc. The Tax-Exempt Bond Fund of
Capital World Bond Fund, Inc. America, Inc.
Capital World Growth and The Tax-Exempt Fund of
Income Fund, Inc. California
The Cash Management Trust of The Tax-Exempt Fund of
America Maryland
EuroPacific Growth Fund The Tax-Exempt Fund of
Fundamental Investors, Inc. Virginia
The Growth Fund of America, The Tax-Exempt Money Fund
Inc. of America
The Income Fund of America, U.S. Government Securities
Inc. Fund
Intermediate Bond Fund of The U.S. Treasury Money Fund
America of America
The Investment Company of Washington Mutual Investors
America Fund, Inc.
</TABLE>

The initial investment minimum for all funds in The American Funds Group(r),
except the money market funds and the state tax-exempt funds, is now $250. The
initial investment minimum for the money market funds (The Cash Management
Trust of America, The Tax-Exempt Money Fund of America and The U.S. Treasury
Money Fund of America) and the state tax-exempt funds (The Tax-Exempt Fund of
California, The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of
Virginia) is $1,000.

In addition, effective January 10, 2000, the sales charges applied to purchases
of the equity and fixed-income funds in The American Funds Group are as
follows:

<TABLE>
<CAPTION>
EQUITY FUNDS FIXED-INCOME FUNDS

Sales Charge Dealer Sales Charge Dealer
as % of Concession as % of Concession
as a % of as a % of
Offering Offering
Price Price

AMOUNT OF SALE Offering Net Offering Net
Price Amount Price Amount
Invested Invested

<S> <C> <C> <C> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%

$25,000 but less than 5.00 5.26 4.25 3.75% 3.90% 3.00%
$50,000

$50,000 but less than 4.50 4.71 3.75
$100,000

$100,000 but less than 3.50 3.63 2.75 3.50 3.63 2.75
$250,000

$250,000 but less than 2.50 2.56 2.00 2.50 2.56 2.00
$500,000

$500,000 but less than 2.00 2.04 1.60 2.00 2.04 1.60
$750,000

$750,000 but less than 1.50 1.52 1.20 1.50 1.52 1.20
$1 million

$1 million and above none none see none none see
prospectus prospectus

</TABLE>

THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE
PUBLIC OFFERING AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR
AND ACCURATE ENGLISH TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS
FOR THE FUND.

/s/ Julie F. Williams
Julie F. Williams
Secretary

PROSPECTUS SUPPLEMENT
January 10, 2000
for the following funds with prospectuses dated February 1, 1999 - December 1,
1999

In addition, effective January 10, 2000, the sales charges applied to purchases
of the equity and fixed-income funds in The American Funds Group are as
follows:

<TABLE>
<CAPTION>
EQUITY FUNDS FIXED-INCOME FUNDS

Sales Charge Dealer Sales Charge Dealer
as % of Concession as % of Concession
as a % of as a % of
Offering Offering
Price Price

AMOUNT OF SALE Offering Net Offering Net
Price Amount Price Amount
Invested Invested

<S> <C> <C> <C> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%

$25,000 but less than 5.00 5.26 4.25 3.75% 3.90% 3.00%
$50,000

$50,000 but less than 4.50 4.71 3.75
$100,000

$100,000 but less than 3.50 3.63 2.75 3.50 3.63 2.75
$250,000

$250,000 but less than 2.50 2.56 2.00 2.50 2.56 2.00
$500,000

$500,000 but less than 2.00 2.04 1.60 2.00 2.04 1.60
$750,000

$750,000 but less than 1.50 1.52 1.20 1.50 1.52 1.20
$1 million

$1 million and above none none see none none see
prospectus prospectus

</TABLE>
<PAGE>
INTERMEDIATE BOND FUND OF AMERICA

Part B
Statement of Additional Information

November 1, 1999
(as amended January 10, 2000)

This document is not a prospectus but should be read in conjunction with the
current prospectus of Intermediate Bond Fund of America (the "fund" or "IBFA")
dated November 1, 1999. The prospectus may be obtained from your investment
dealer or financial planner or by writing to the fund at the following address:

Intermediate Bond Fund of America
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
(213) 486-9200

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Page No.
- ---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 6
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 8
Fund Trustees and Officers. . . . . . . . . . . . . . . . . . . . . 9
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 15
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 19
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shareholder Account Services and Privileges . . . . . . . . . . . . 27
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 30
General Information . . . . . . . . . . . . . . . . . . . . . . . . 30
Investment Results and Related Statistics . . . . . . . . . . . . . 32
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Financial Statements
</TABLE>

Intermediate Bond Fund of America -- Page 1

<PAGE>

CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.

DEBT SECURITIES

- - The fund will invest at least 65% of its assets in bonds (any debt
securities having initial maturities in excess of one year).
- - The fund will invest in debt securities rated A or better by Standard &
Poor's Corporation or Moody's Investors Service, Inc. or unrated but
determined to be of equivalent quality.

MATURITY

- - The fund's average effective maturity will be no longer than five years.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions. The
descriptions below are intended to supplement the material in the prospectus
under "Investment Objective, Strategies and Risks."

DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality, and maturity. In general their prices decline when
interest rates rise and vice versa.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by a pool of mortgages or other assets including loans on single family
residences, home equity loans, mortgages on commercial buildings, credit card
receivables, and leases on airplanes or other equipment. Principal and interest
payments made on the underlying asset pools backing these obligations are
typically passed through to investors. Pass-through securities may have either
fixed or adjustable coupons. These securities include those discussed below.

"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities. The payment of interest and
principal on securities issued by U.S. government agencies is guaranteed by the
full faith and credit of the U.S. government (in the case of GNMA securities) or
the issuer (in the case of FNMA and FHLMC securities). However, the guarantees
do not apply to the market prices and yields of these securities, which vary
with changes in interest rates.

Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities
and the underlying mortgages are not guaranteed by government agencies. In
addition, these securities generally are structured with one or more types of
credit enhancement. Mortgage-backed

Intermediate Bond Fund of America -- Page 2

<PAGE>

securities generally permit borrowers to prepay their underlying mortgages.
Prepayments can alter the effective maturity of these instruments.

"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages,
while privately issued CMOs may be backed by either government agency mortgages
or private mortgages. Payments of principal and interest are passed-through to
each bond at varying schedules resulting in bonds with different coupons,
effective maturities, and sensitivities to interest rates. In fact, some CMOs
may be structured in a way that when interest rates change the impact of
changing prepayment rates on these securities' effective maturities is
magnified.

"Commercial mortgage-backed securities" are backed by mortgages of commercial
property, such as hotels, office buildings, retail stores, hospitals, and other
commercial buildings. These securities may have a lower prepayment uncertainty
than other mortgage-related securities because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of
credit enhancement to protect against potential losses on the underlying
mortgage loans. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans, including the effects of local and other economic
conditions on real estate markets, the ability of tenants to make loan payments,
and the ability of a property to attract and retain tenants.

"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. The values of these securities are sensitive to changes in the
credit quality of the underlying collateral, the credit strength of the credit
enhancement, changes in interest rates, and at times the financial condition of
the issuer. Some asset-backed securities also may receive prepayments which can
change the securities' effective maturities.

U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. For these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government, and
thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.

Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but are
not limited to, Farmers Home Administration, Federal Home Loan Bank, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee
Valley Authority, and Federal Farm Credit Bank System.

Intermediate Bond Fund of America -- Page 3

<PAGE>

INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities, and corporations. The
principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted
principal value. For example, in a period of deflation, principal value will be
adjusted downward, reducing the interest payable.

Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.

OTHER SECURITIES -- While the fund may not make direct purchases of common
stocks, the fund may purchase convertible securities and debt securities that
are issued as a unit together with common stock, or other equity interests,
provided that these securities meet the fund's maturity and quality standards at
the time of purchase.

REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements, under
which it buys a security and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and price. Repurchase agreements
permit the fund to maintain liquidity and earn income over periods of time as
short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the Investment Adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the Investment Adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
fund may be delayed or limited.

FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When the fund agrees to sell such securities it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.

As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of the
fund's portfolio securities decline while the fund is in a leveraged position,
greater depreciation of its net assets would likely occur than were it not in
such a position. As the fund's aggregate commitments under these transactions
increase the

Intermediate Bond Fund of America -- Page 4

<PAGE>

opportunity for leverage similarly may increase. The fund will not borrow money
to settle these transactions and therefore, will liquidate other portfolio
securities in advance of settlement if necessary to generate additional cash to
meet its obligations thereunder.

The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement is the sale of a security by a fund
and its agreement to repurchase the security at a specified time and price. A
"roll" transaction is the sale of mortgage-backed or other securities together
with a commitment to purchase similar, but not identical securities at a later
date. The fund assumes the rights and risks of ownership, including the risk of
price and yield fluctuations as of the time of the agreement. The fund intends
to treat roll transactions as two separate transactions: one involving the
purchase of a security and a separate transaction involving the sale of a
security. Since the fund does not intend to enter into roll transactions for
financing purposes, it may treat these transactions as not falling within the
definition of "borrowing" set forth in Section 2(a)(23) of the Investment
Company Act of 1940. The fund will segregate liquid assets which will be marked
to market daily in an amount sufficient to meet its payment obligations under
"roll" transactions and reverse repurchase agreements with broker-dealers (no
collateral is required for reverse repurchase agreements with banks).

RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures that have been adopted by the fund's board of trustees, taking
into account factors such as the frequency and volume of trading, the commitment
of dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.

INVESTING IN VARIOUS COUNTRIES -- Investing outside the U.S. involves special
risks, caused by, among other things: currency controls, fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; expropriation or confiscatory taxation; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of Capital Research
and Management Company, investing outside the U.S. also can reduce certain
portfolio risks due to greater diversification opportunities.

The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.

CASH AND CASH EQUIVALENTS - These securities include (i) commercial paper
(short-term notes up to 9 months in maturity issued by corporations or
governmental bodies), (ii) commercial bank obligations (e.g., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity)), (iii) savings
association and saving bank obligations (e.g., certificates of deposit issued by
savings banks or savings associations), (iv) securities of the U.S. Government,
its agencies or instrumentalities that

Intermediate Bond Fund of America -- Page 5

<PAGE>

mature, or may be redeemed, in one year or less, and (v) corporate bonds and
notes that mature, or that may be redeemed, in one year or less.

VARIABLE AND FLOATING RATE OBLIGATIONS - The interest rates payable on certain
securities in which the fund may invest may not be fixed but may fluctuate based
upon changes in market rates. Variable and floating rate obligations bear coupon
rates that are adjusted at designated intervals, based on the then current
market rates of interest on which the coupon rates are based. Variable and
floating rate obligations permit the fund to "lock in" the current interest rate
for only the period until the next scheduled rate adjustment, but the rate
adjustment feature tends to limit the extent to which the market value of the
obligation will fluctuate.

ADJUSTMENT OF MATURITIES - The Investment Adviser seeks to anticipate movements
in interest rates and adjusts the maturity distribution of the portfolio
accordingly. Keeping in mind the fund's objective, the Investment Adviser will
increase the fund's exposure to this price volatility only when it appears
likely to increase current income without undue risk to capital.

The fund may also engage in the following investment practices, although it has
no current intention to do so over the next twelve months:

LOANS OF PORTFOLIO SECURITIES -- The fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors whose
financial condition is monitored by the Investment Adviser. The borrower must
maintain with the fund's custodian collateral consisting of cash, cash
equivalents or U.S. Government securities equal to at least 100% of the value of
the borrowed securities, plus any accrued interest. The Investment Adviser will
monitor the adequacy of the collateral on a daily basis. The fund may at any
time call a loan of its portfolio securities and obtain the return of the loaned
securities. The fund will receive any interest paid on the loaned securities and
a fee or a portion of the interest earned on the collateral. The fund will limit
its loans of portfolio securities to an aggregate of 33 1/3% of the value of its
total assets, measured at the time any such loan is made.

* * * * * *

PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved.

The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio were replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940

Intermediate Bond Fund of America -- Page 6

<PAGE>

Act") as the vote of the lesser of (i) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy, or (ii) more
than 50% of the outstanding voting securities. All percentage limitations are
considered at the time securities are purchased and are based on the fund's net
assets unless otherwise indicated. None of the following investment restrictions
involving a maximum percentage of assets will be considered violated unless the
excess occurs immediately after, and is caused by, an acquisition by the fund.

These restrictions provide that the fund may not:

1. Purchase any security (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities ("U.S. Government
securities") if, immediately after and as a result of such investment, more than
5% of the value of the fund's total assets would be invested in securities of
the issuer;

2. Invest 25% or more of the value of its total assets in the securities of
issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. Government securities;

3. Invest in companies for the purpose of exercising control or management;

4. Knowingly purchase securities of other managed investment companies, except
in connection with a merger, consolidation, acquisition, or reorganization;

5. Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the fund may purchase or sell readily
marketable debt securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein, including real
estate investment trusts;

6. Acquire securities subject to contractual restrictions preventing their
ready disposition or enter into repurchase agreements or purchase time deposits
maturing in more than seven days if, immediately after and as a result, the
value of illiquid securities held by the fund would exceed, in the aggregate,
10% of the value of the fund's total assets;

7. Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933;

8. Make loans, except that this does not prevent the fund from purchasing
marketable debt securities and entering into repurchase agreements or making
loans of portfolio securities;

9. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;

10. Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;

11. Borrow money, except from banks for temporary or emergency purposes, not in
excess of 5% of the value of the fund's total assets, except that the fund may
enter into reverse repurchase agreements, provided that the fund will limit its
aggregate borrowings to no more than one-third of its total assets;

Intermediate Bond Fund of America -- Page 7

<PAGE>

12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the sale of securities pursuant to a reverse
repurchase agreement;

13. Purchase or retain the securities of any issuer, if those individual
officers and Trustees of the fund, its investment adviser, or distributor, each
owning beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;

14. Invest in interests in oil, gas, or other mineral exploration or
development programs;

15. Invest more than 5% of its total assets in warrants which are unattached to
securities;

16. Write, purchase or sell puts, calls or combinations thereof;

17. Invest more than 5% of its total assets in securities of companies having,
together with their predecessors, a record of less than three years of
continuous operation.

A further investment policy of the fund, which may be changed by action of the
Board of Trustees without shareholder approval, is that the fund will not invest
in securities of an issuer if the investment would cause the fund to own more
than 10% of the outstanding voting securities of any one issuer. With respect to
Investment Restriction #15, investments in warrants, valued at the lower of cost
or market, will not exceed 5% of the value of the fund's net assets, with no
more than 2% being unlisted on the New York or American Stock Exchanges.
(Warrants acquired by the fund in units or attached to securities may be deemed
to be without value.)

Notwithstanding Investment Restriction #4, the fund may invest in securities of
other investment companies if deemed advisable by its officers in connection
with the administration of a deferred compensation plan adopted by the Trustees
pursuant to an exemptive order granted by the Securities and Exchange
Commission. For purposes of Investment Restriction #6, the fund will not invest
more than 15% of its net assets in illiquid securities.

FUND ORGANIZATION AND VOTING RIGHTS

The fund, an open-end, diversified management investment company, was organized
as a Massachusetts business trust on December 7, 1987.

All fund operations are supervised by the fund's board of trustees which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in "Trustees and Trustee Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.

The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.

Intermediate Bond Fund of America -- Page 8

<PAGE>

FUND TRUSTEES AND OFFICERS

Trustees and Trustee Compensation

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
FROM THE FUND
POSITION DURING FISCAL YEAR
WITH PRINCIPAL OCCUPATION(S) DURING ENDED
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS AUGUST 31, 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard G. Capen, Jr. Trustee Corporate Director and author; former none/3/
6077 San Elijo, Box 2494 United States Ambassador to Spain;
Rancho Santa Fe, CA 92067 former Vice Chairman of the Board,
Age: 63 Knight-Ridder, Inc., former Chariman
and Publisher, the Miami Herald
- ------------------------------------------------------------------------------------------------------------------
H. Frederick Christie Trustee Private Investor. Former President and $4,100/3/
P.O. Box 144 Chief Executive Officer, The Mission
Palos Verdes Estates, CA Group (non-utility holding company,
90274 subsidiary of Southern California
Age: 66 Edison Company)
- ------------------------------------------------------------------------------------------------------------------
+ Don R. Conlan Trustee President (Retired), The Capital Group none/4/
1630 Milan Avenue Companies, Inc.
South Pasadena, CA 91030
Age: 63
- ------------------------------------------------------------------------------------------------------------------
Diane C. Creel Trustee CEO and President, The Earth Technology $4,300/3/
100 W. Broadway Corporation (international consulting
Suite 5000 engineering)
Long Beach, CA 90802
Age: 50
- ------------------------------------------------------------------------------------------------------------------
Martin Fenton Trustee Chairman, Senior Resource Group $4,900/3/
4660 La Jolla Village (management of senior living centers)
Drive
Suite 725
San Diego, CA 92122
Age: 64
- ------------------------------------------------------------------------------------------------------------------
Leonard R. Fuller Trustee President, Fuller Consulting (financial $4,100/3/
4337 Marina City Drive management consulting firm)
Suite 841 ETN
Marina del Rey, CA 90292
Age: 53
- ------------------------------------------------------------------------------------------------------------------
+* Abner D. Goldstine Vice Chairman Senior Vice President and Director, none/4/
Age: 69 and Trustee Capital Research and Management Company
------------------------
- ------------------------------------------------------------------------------------------
+** Paul G. Haaga, Jr. Chairman of Executive Vice President and Director, none/4/
Age: 50 the Board Capital Research and Management Company
------------------------
- ------------------------------------------------------------------------------------------
Richard G. Newman Trustee Chairman, President and CEO, AECOM $4,500/3/
3250 Wilshire Boulevard Technology Corporation (architectural
Los Angeles, CA 90010-1599 engineering)
Age: 64
- ------------------------------------------------------------------------------------------------------------------
Frank M. Sanchez Trustee Chairman of the Board, The Sanchez none/3/
5234 Via San Delarro, #1 Family Corporation dba McDonald's
Los Angeles, CA 90022 Restaurants (McDonald's licensee)
Age: 55
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/2/ FOR THE TRUSTEE
NAME, ADDRESS AND AGE YEAR ENDED AUGUST 31, 1999 SERVES/2/
- --------------------------------------------------------------------------
<S> <C> <C>
Richard G. Capen, Jr. $ 43,700 8
6077 San Elijo, Box 2494
Rancho Santa Fe, CA 92067
Age: 63
- --------------------------------------------------------------------------
H. Frederick Christie $206,600 19
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 66
- --------------------------------------------------------------------------
+ Don R. Conlan none/4/ 12
1630 Milan Avenue
South Pasadena, CA 91030
Age: 63
- --------------------------------------------------------------------------
Diane C. Creel $ 48,000 12
100 W. Broadway
Suite 5000
Long Beach, CA 90802
Age: 50
- --------------------------------------------------------------------------
Martin Fenton $131,600 15
4660 La Jolla Village
Drive
Suite 725
San Diego, CA 92122
Age: 64
- --------------------------------------------------------------------------
Leonard R. Fuller $ 51,600 12
4337 Marina City Drive
Suite 841 ETN
Marina del Rey, CA 90292
Age: 53
- --------------------------------------------------------------------------
+* Abner D. Goldstine none/4/ 12
Age: 69
- --------------------------------------------------------------------------
+** Paul G. Haaga, Jr. none/4/ 14
Age: 50
- --------------------------------------------------------------------------
Richard G. Newman $107,100 13
3250 Wilshire Boulevard
Los Angeles, CA 90010-1599
Age: 64
- --------------------------------------------------------------------------
Frank M. Sanchez $ 4,000 7
5234 Via San Delarro, #1
Los Angeles, CA 90022
Age: 55
- --------------------------------------------------------------------------
</TABLE>

Intermediate Bond Fund of America -- Page 9

<PAGE>

Intermediate Bond Fund of America -- Page 10

<PAGE>

+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and
Management Company or the parent company of the Investment Adviser, The
Capital Group Companies, Inc.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071
1 Amounts may be deferred by eligible Trustees under a non-qualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustees.

2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World
Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
The Income Fund of America, Inc., Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
Money Fund of America, U.S. Government Securities Fund and Washington Mutual
Investors Fund, Inc. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.

3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) as of fiscal year
ended August 31, 1999 for participating Trustees is as follows: H. Frederick
Christie ($9,379,), Diane C. Creel ($4,659), Martin Fenton ($15,207), Leonard
R. Fuller ($9,710) and Richard G. Newman ($35,458). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Trustees.

4 Don R. Conlan, Abner D. Goldstine, and Paul G. Haaga, Jr. are affiliated with
the Investment Adviser and, accordingly, receive no compensation from the
fund.

Intermediate Bond Fund of America -- Page 11

<PAGE>

OFFICERS

<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
John Smet 43 President and PEO Vice President, Capital
11100 Santa Monica Research and Management Company
Blvd.
Los Angeles, CA 90025
- -------------------------------------------------------------------------------
Michael J. Downer 44 Vice President Senior Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
- -------------------------------------------------------------------------------
Julie F. Williams 51 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
- -------------------------------------------------------------------------------
Anthony W. Hynes, Jr. 36 Treasurer Vice President - Fund Business
135 South State Management Group, Capital
College Blvd. Research and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
Kimberly S. Verdick 35 Assistant Assistant Vice President - Fund
333 South Hope Street Secretary Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
- -------------------------------------------------------------------------------
Todd L. Miller 40 Assistant Assistant Vice President - Fund
135 South State Treasurer Business Management Group,
College Blvd. Capital Research and Management
Brea, CA 92821 Company
- -------------------------------------------------------------------------------
</TABLE>

All of the officers listed are officers, and/or directors/trustees of one of
more of the other funds for which Capital Research and Management Company serves
as Investment Adviser.

No compensation is paid by a fund to any officer or Trustee who is a director,
officer or employee of the Investment Adviser or affiliated companies. The fund
pays annual fees of $2,500 to Trustees who are not affiliated with the
Investment Adviser, plus $200 for each Board of Trustees meeting attended, plus
$200 for each meeting attended as a member of a committee of the Board of
Trustees. No pension or retirement benefits are accrued as part of fund
expenses. The Trustees may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the Trustees who are not
affiliated with the Investment Adviser. As of October 1, 1999 the officers and
Directors of the fund and their families, as a group, owned beneficially or of
record less than 1% of the outstanding shares of the fund.

MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains research
facilities in the U.S. and abroad (Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a staff
of professionals, many of whom have a number of years of investment experience.
The Investment Adviser is located at 333 South Hope Street, Los Angeles, CA
90071, and at 135 South State College Boulevard, Brea, CA 92821. The

Intermediate Bond Fund of America -- Page 12

<PAGE>

Investment Adviser's research professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.

An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital International
Perspective, providing financial and market information about more than 2,400
companies around the world.

The Investment Adviser is responsible for managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types throughout the world. These investors include privately
owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.

INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser will
continue in effect until October 24, 2000, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Trustees, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).

The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plan of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; costs of
stationery and forms prepared exclusively for the fund; and costs of assembling
and storing shareholder account data.

The management fee is based upon the net assets of the fund and monthly gross
investment income. For the purpose of such computations under the Agreement,
gross investment income means gross income, computed without taking account of
gains or losses from sales of capital assets, but including original issue
discount as defined for federal income tax purposes. The Internal Revenue Code
in general defines original issue discount to mean the difference between the
issue price and the stated redemption price at maturity of certain debt
obligations. The holder of such indebtedness is in general required to treat as
ordinary income the proportionate part of

Intermediate Bond Fund of America -- Page 13

<PAGE>

the original issue discount attributable to the period during which the holder
held the indebtedness.

The management fee is based upon the annual rates of 0.30% on the first $60
million of the fund's average net assets, 0.21% on average net assets in excess
of $60 million but not exceeding $1 billion, 0.18% on average net assets in
excess of $1 billion but not exceeding $3 billion, 0.16% on average net assets
in excess of $3 billion plus 3% of the first $40 million of annual gross income,
plus 2.5% of annual gross investment income in excess of $40 million but not
exceeding $100 million, plus 2% of annual gross investment income in excess of
$100 million. Assuming net assets of $1.5 billion and gross investment income
levels of 6%, 7%, 8%, 9% and 10%, management fees would be 0.37%, 0.39%, 0.41%,
0.43% and 0.45%, respectively.

The Agreement provides for a management fee reduction to the extent that the
fund's annual ordinary operating expenses exceed 1-1/2% of the first $30 million
of the net assets of the fund and 1% of the net assets in excess thereof.
Expenses which are not subject to this limitation are interest, taxes, and
extraordinary expenses. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses.

For the fiscal years ended August 31, 1999, 1998, 1997, the Investment Adviser
received advisory fees of $5,863,000, $5,328,000, and $5,535,000, respectively.

PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the fiscal year ended
August 31, 1999 amounted to $1,880,000 after allowance of $7,634,000 to dealers.
During the fiscal years ended 1998 and 1997 the Principal Underwriter retained
$1,328,000 and $5,507,000, respectively after an allowance of $5,443,000 and
$1,333,000 to dealers, respectively.

As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has been approved by the full Board of
Trustees and separately by a majority of the trustees who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plan or the Principal Underwriting Agreement, and the Plan
has been approved by the vote of a majority of the outstanding voting securities
of the fund. The officers and trustees who are "interested persons" of the fund
may be considered to have a direct or indirect financial interest in the
operation of the Plan due to present or past affiliations with the Investment
Adviser and related companies. Potential benefits of the Plan to the fund
include improved shareholder services, savings to the fund in transfer agency
costs, savings to the fund in advisory fees and other expenses, benefits to the
investment process from growth or stability of assets and maintenance of a
financially healthy management organization. The selection and nomination of
trustees who are not "interested persons" of the fund are committed to the

Intermediate Bond Fund of America -- Page 14

<PAGE>

discretion of the trustees who are not "interested persons" during the existence
of the Plan. The Plan is reviewed quarterly and must be renewed annually by the
Board of Trustees.

Under the Plan the fund may expend up to 0.30% of its net assets annually to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Trustees has approved the category of
expenses for which payment is being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales of
shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan, any defined contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with 100 or more eligible
employees or a community foundation).

Commissions on sales of shares exceeding $1 million (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During the
fiscal year ended August 31, 1999, the fund paid or accrued $4,671,000 for
compensation to dealers under the Plan. As of August 31, 1999, accrued and
unpaid distribution expenses were $722,000.

The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting, selling
or distributing securities, but permit banks to make shares of mutual funds
available to their customers and to perform administrative and shareholder
servicing functions. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. If a bank were prohibited from so acting,
shareholder clients of such bank would be permitted to remain shareholders of
the fund and alternate means for continuing the servicing of such shareholders
would be sought. In such event, changes in the operation of the fund might occur
and shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being provided by
such bank. It is not expected that shareholders would suffer adverse financial
consequences as a result of any of these occurrences.

In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein, and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS - The fund intends to follow the practice of distributing
substantially all of its investment company taxable income which includes any
excess of net realized short-term gains over net realized long-term capital
losses. Additional distributions may be made, if necessary. The fund also
intends to follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However,
the fund may retain all or part of such gain for reinvestment, after paying the
related federal taxes for which shareholders may then be able to claim a credit
against their federal tax liability. If the fund does not distribute the amount
of capital gain and/or net investment income required to be distributed by an
excise tax provision of the Code, the fund may be subject to that excise tax. In
certain circumstances,

Intermediate Bond Fund of America -- Page 15

<PAGE>

the fund may determine that it is in the interest of shareholders to distribute
less than the required amount. In this case, the fund will pay any income or
excise taxes due.

Dividends will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other American
Funds, as provided in the prospectus.

TAXES - The fund intends to elect to be treated as a regulated investment
company under Subchapter M of the Code. A regulated investment company
qualifying under Subchapter M of the Code is required to distribute to its
shareholders at least 90% of its investment company taxable income (including
the excess of net short-term capital gain over net long-term capital losses) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code. The fund intends to distribute annually all
of its investment company taxable income and net realized capital gains and
therefore does not expect to pay federal income tax, although in certain
circumstances the fund may determine that it is in the interest of shareholders
to distribute less than that amount.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which the fund pays income tax during the periods
described above. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.

Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking into
account any capital loss carry-forward of the fund.

If any net long-term capital gains in excess of net short-term capital losses
are retained by a fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.

Distributions of investment company taxable income are taxable to shareholders
as ordinary income.

Intermediate Bond Fund of America -- Page 16

<PAGE>

Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.

Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable as described above, whether
received in shares or in cash. Shareholders electing to receive distributions in
the form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share on
the reinvestment date.

All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another American
Fund, may result in tax consequences (gain or loss) to the shareholder and must
also be reported on the shareholder's federal income tax return.

Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of the
fund's gross income, a portion of the income distributions of the fund will be
eligible for the deduction for dividends received by corporations. Shareholders
will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.

A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the fund which must
be distributed to shareholders in order to maintain the qualification of the
fund as a regulated investment company and to avoid federal income tax at the
level of the fund.

Intermediate Bond Fund of America -- Page 17

<PAGE>

Shareholders will be subject to income tax on such original issue discount,
whether or not they elect to receive their distributions in cash.

The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt U.S. shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.

Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year fund shareholders will
receive a statement of the federal income tax status of all distributions.

The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on dividend income received by him or her.

Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.

Intermediate Bond Fund of America -- Page 18

<PAGE>

PURCHASE OF SHARES

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers "for initial "Investment Minimums and Fund
investment minimums. Numbers").
- -------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
- -------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
- -------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By wire Call800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:

Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco, CA
94106
(ABA#121000248)

For credit to the
account of:
American Funds Service
Company a/c#
4600-076178
(fund name)
(your fund acct. no.)
- -------------------------------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER.
- -------------------------------------------------------------------------------
</TABLE>

Intermediate Bond Fund of America -- Page 19

<PAGE>

INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine/(R)/ (see description
below):

<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250 02
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 11
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 03
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 12
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . . . . . . 250 33
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 16
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . . . . . . 250 10
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . . . . . . 250 05
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . . . . . . 250 06
The Investment Company of America/(R)/ . . . . . . . . . . . . . . . . . 250 04
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 14
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 07
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 36
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . . 250 35
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . . . . . . 250 01
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . . . . . . 250 40
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . . . . . . 250 21
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . . . . . . 250 08
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 31
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 250 23
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . . . . . . 250 43
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . . . . . . 250 19
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . . . . . . 1,000 20
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . . . . . . 1,000 24
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . . . . . . 1,000 25
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . . . . . . 250 22
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . . . . . . 1,000 09
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . . . . . . 1,000 39
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . . . . . . 1,000 49
___________
*Available only in certain states.
</TABLE>

Minimums are reduced to $50 for purchases through "Automatic Investment Plans"
(except for the money market funds) or to $25

Intermediate Bond Fund of America -- Page 20

<PAGE>

for purchases by retirement plans through payroll deductions and may be reduced
or waived for shareholders of other funds in The American Funds Group.
TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is
$50 for additional investments (except as noted above).

SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below. The
money market funds of The American Funds Group are offered at net asset value.
(See "Investment Minimums and Fund Numbers" for a listing of the funds.)

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount of Purchase SALES CHARGE AS DEALER
at the Offering Price PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE

NET AMOUNT OFFERING
INVESTED PRICE

STOCK AND STOCK/BOND FUNDS

Less than $25,000 6.10% 5.75% 5.00%

$25,000 but less than $50,000 5.26 5.00 4.25

$50,000 but less than $100,000 4.71 4.50 3.75

BOND FUNDS

Less than $100,000 3.90 3.75 3.00

STOCK, STOCK/BOND, AND BOND
FUNDS

$100,000 but less than 3.63 3.50 2.75
$250,000

$250,000 but less than 2.56 2.50 2.00
$500,000

$500,000 but less than 2.04 2.00 1.60
$750,000

$750,000 but less than 1.52 1.50 1.20
$1,000,000

$1,000,000 or more none none (see below)

</TABLE>

PURCHASES NOT SUBJECT TO SALES CHARGES - Investment of $1 million or more are
sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED SALES
CHARGE MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE.
Employer-sponsored defined contribution-type plans investing $1 million or more,
or with 100 or more eligible employees, may invest with no sales charge and are
not subject to a contingent deferred sales charge. Investments made by
retirement plans, endowments or foundations with $50 million or more in assets
may also be made with no sales charge and are not subject to a contingent
deferred sales charge. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments made with no initial sales charge.

Intermediate Bond Fund of America -- Page 21

<PAGE>

In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:

(1) current or retired directors, trustees, officers and advisory board members
of the funds managed by Capital Research and Management Company, employees of
Washington Management Corporation, employees and partners of The Capital Group
Companies, Inc. and its affiliated companies, certain family members of the
above persons, and trusts or plans primarily for such persons;

(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;

(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;

(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and

(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.

DEALER COMMISSIONS - Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at net
asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 1.00% on amounts of $1 million to
$4 million, 0.50% on amounts over $4 million to $10 million, and 0.25% on
amounts over $10 million.

OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.

Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing certain
information and assistance with respect to the fund.

REDUCING YOUR SALES CHARGE - You and your "immediate family" (your spouse and
your children under age 21) may combine investments to reduce your costs. You
must let your

Intermediate Bond Fund of America -- Page 22

<PAGE>

investment dealer or American Funds Service Company (the "Transfer Agent") know
if you qualify for a reduction in your sales charge using one or any combination
of the methods described below.

STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a over a 13-month period and receive the
same sales charge as if all shares had been purchased at once. This
includes purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to utilize a Statement in order to qualify for a reduced sales
charge, shares equal to 5% of the dollar amount specified in the Statement
will be held in escrow in the shareholder's account out of the initial
purchase (or subsequent purchases, if necessary) by the Transfer Agent. All
dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the
sales charge which would have been paid if the total of such purchases had
been made at a single time. If the difference is not paid by the close of
the period, the appropriate number of shares held in escrow will be
redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for
the balance still outstanding. The Statement may be revised upward at any
time during the 13-month period, and such a revision will be treated as a
new Statement, except that the 13-month period during which the purchase
must be made will remain unchanged. Existing holdings eligible for rights
of accumulation (see the account application) and any individual
investments in American Legacy products (American Legacy, American Legacy
II and American Legacy III variable annuities, American Legacy Life,
American Legacy Variable Life, and American Legacy Estate Builder) may be
credited toward satisfying the Statement. During the Statement period
reinvested dividends and capital gain distributions, investments in money
market funds, and investments made under a right of reinstatement will not
be credited toward satisfying the Statement.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period, and
any individual investments in American Legacy products are added to the
figure determined above. The sum is the Statement amount and applicable
breakpoint level. On the first investment and all other investments made
pursuant to the Statement, a sales charge will be assessed according to the
sales charge breakpoint thus determined.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.

Intermediate Bond Fund of America -- Page 23

<PAGE>

AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:

- employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;

- business accounts solely controlled by these individuals (for example,
the individuals own the entire business);

- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

- for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;

- made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or

- for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares.

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES - You may combine purchases of two or more funds in
The American Funds Group, except direct purchases of the money market
funds. Shares of money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a sales charge do
qualify.

RIGHTS OF ACCUMULATION - You may take into account the current value of
your existing holdings in The American Funds Group, as well as your
holdings in Endowments (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or
charity. When determining your sales charge, you may also take into account
the value of your individual holdings, as of the end of the week prior to
your investment, in various American Legacy products (American Legacy,
American Legacy II and American Legacy III variable annuities, American
Legacy Life, American Legacy Variable Life, and American Legacy Estate
Builder). Direct purchases of the money market funds are excluded.

PRICE OF SHARES - Shares are purchased at the offering price next determined
after the purchase order is received and accepted by the fund or the Transfer
Agent; this offering price is effective for orders received prior to the time of
determination of the net asset value and, in the case of orders placed with
dealers, accepted by the Principal Underwriter prior to its close of business.
In

Intermediate Bond Fund of America -- Page 24

<PAGE>

the case of orders sent directly to the fund or the Transfer Agent, an
investment dealer MUST be indicated. The dealer is responsible for promptly
transmitting purchase orders to the Principal Underwriter. Orders received by
the investment dealer, the Transfer Agent, or the fund after the time of the
determination of the net asset value will be entered at the next calculated
offering price. Prices which appear in the newspaper are not always indicative
of prices at which you will be purchasing and redeeming shares of the fund,
since such prices generally reflect the previous day's closing price whereas
purchases and redemptions are made at the next calculated price.

The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York time) each day the New York Stock Exchange is
open. For example, if the Exchange closes at 1:00 p.m. on one day and at 4:00
p.m. on the next, the fund's share price would be determined as of 4:00 p.m. New
York time on both days. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:

1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. Fixed-income securities are valued at prices obtained
from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.

Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.

Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;

2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and

3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share

Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity,

Intermediate Bond Fund of America -- Page 25

<PAGE>

where, after the sale, such person or entity would own beneficially directly or
indirectly more than 4.5% of the outstanding shares of the fund without the
consent of a majority of the fund's Board of Trustees.

SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. You may sell (redeem) shares in
your account in any of the following ways:

THROUGH YOUR DEALER (certain charges may apply)

- Shares held for you in your dealer's street name must be sold
through the dealer.

WRITING TO AMERICAN FUNDS SERVICE COMPANY

- Requests must be signed by the registered shareholder(s)

- A signature guarantee is required if the redemption is:

- Over $50,000;

- Made payable to someone other than the registered
shareholder(s); or

- Sent to an address other than the address of record, or an
address of record which has been changed within the last 10 days.

Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.

- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.

- You must include any shares you wish to sell that are in
certificate form.

TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/

- Redemptions by telephone or fax (including American FundsLine/(R)/ and
American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each
day.

- Checks must be made payable to the registered shareholder(s).

- Checks must be mailed to an address of record that has been used with
the account for at least 10 days.

Intermediate Bond Fund of America -- Page 26

<PAGE>

MONEY MARKET FUNDS

- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.

- You may establish check writing privileges (use the money market funds
application).

- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group within
90 days after the date of the redemption or distribution. Redemption proceeds of
shares representing direct purchases in the money market funds are excluded.
Proceeds will be reinvested at the next calculated net asset value after your
request is received and accepted by the Transfer Agent.

CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds made
within twelve months of purchase on investments of $1 million or more (other
than redemptions by employer-sponsored retirement plans). The charge is 1% of
the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be redeemed first for purposes
of calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from 403(b) plans or IRAs due to death, disability
or attainment of age 591/2; for tax-free returns of excess contributions to
IRAs; and for redemptions through certain automatic withdrawals not exceeding
10% of the amount that would otherwise be subject to the charge.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments into the American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or

Intermediate Bond Fund of America -- Page 27

<PAGE>

around the date you specified. If your bank account cannot be debited due to
insufficient funds, a stop-payment or the closing of the account, the plan may
be terminated and the related investment reversed. You may change the amount of
the investment or discontinue the plan at any time by writing to the Transfer
Agent.

AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares at no sales charge unless you indicate otherwise on the
account application. You also may elect to have dividends and/or capital gain
distributions paid in cash by informing the fund, the Transfer Agent or your
investment dealer.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:

(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),

(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,

(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.

You may exchange shares by writing to the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine and
American FundsLine OnLine (see "American FundsLine and American FundsLine
OnLine" below), or by telephoning 800/421-0180 toll-free, faxing (see "Principal
Underwriter and Transfer Agent" in the prospectus for the appropriate fax
numbers) or telegraphing the Transfer Agent. (See "Telephone and Computer
Purchases, Redemptions and Exchanges" below.) Shares held in corporate-type
retirement plans for which Capital Guardian Trust Company serves as trustee may
not be exchanged by telephone, computer, fax or telegraph. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "Purchase of Shares--Price of
Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.

Intermediate Bond Fund of America -- Page 28

<PAGE>

AUTOMATIC EXCHANGES - You may automatically exchange shares in amounts of $50 or
more among any of the funds in The American Funds Group on any day (or preceding
business day if the day falls on a non-business day of each month you designate.
You must either (a) meet the minimum initial investment requirement for the
receiving fund OR (b) the originating fund's balance must be at least $5,000 and
the receiving fund's minimum must be met within one year.

AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.

ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.

AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Shareholder Account Services and
Privileges - Telephone and Computer Purchases, Redemptions and Exchanges" below.
You will need your fund number (see the list of funds in The American Funds
Group under "Purchase of Shares - Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of your Social Security
number or other tax identification number associated with your account) and
account number.

TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, any of its affiliates
or mutual funds managed by such affiliates, and each of their respective
directors, trustees, officers, employees and agents harmless from any losses,
expenses, costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, the fund may be liable
for losses due to unauthorized or fraudulent instructions. In the event that
shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions, or a natural disaster, redemption and exchange
requests may be made in writing only.

SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.

Intermediate Bond Fund of America -- Page 29

<PAGE>

REDEMPTION OF SHARES - The fund's declaration of trust permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder owns of record
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Trustees of the fund may from time to time
adopt.

EXECUTION OF PORTFOLIO TRANSACTIONS

The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.

There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment Adviser
believes that to do so is in the interest of the fund. When such concurrent
authorizations occur, the objective is to allocate the executions in an
equitable manner. The fund will not pay a mark-up for research in principal
transactions.

Dealer concessions paid on underwriting transactions for the fiscal years ended
August 31, 1999, 1998 and 1997, amounted to $1,558,000, $1,197,000 and $827,000,
respectively.

GENERAL INFORMATION

CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S.
banks or foreign branches of U.S. banks.

TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee of
$961,000 for the fiscal year ended August 31, 1999.

INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, serves as the fund's independent auditors
providing audit services, preparation of tax returns and review of certain
documents to be filed with the Securities and Exchange Commission. The financial
statements included in this Statement of Additional Information from the Annual
Report have been so included in reliance on the report Deloitte & Touche LLP,
independent auditors, given on the authority of said firm as experts in
accounting and auditing. The selection of the fund's independent accountants is
reviewed and determined annually by the Board of Trustees.

Intermediate Bond Fund of America -- Page 30

<PAGE>

REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on August 31. Shareholders
are provided at least semiannually with reports showing the investment
portfolio, financial statements and other information. The fund's annual
financial statements are audited by the fund's independent auditors, Deloitte &
Touche LLP. In an effort to reduce the volume of mail shareholders receive from
the fund when a household owns more than one account, the Transfer Agent has
taken steps to eliminate duplicate mailings of shareholder reports. To receive
additional copies of a report, shareholders should contact the Transfer Agent.

YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the Year 2000 problem.
However, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the fund. In addition, the fund's investments
could be adversely affected by the Year 2000 problem. For example, the
markets for securities in which the fund invests could experience
settlement problems and liquidity issues. Corporate and governmental
data processing errors may cause losses for individual companies and
overall economic uncertainties. Earnings of individual issuers are likely
to be affected by the costs of addressing the problem, which may be
substantial and may be reported inconsistently.

PERSONAL INVESTING POLICY - The fund, Capital Research and Management
Company and its affiliated companies, including the fund's principal
underwriter, have adopted codes of ethics which allow for personal
investments. The personal investing policy is consistent with Investment
Company Institute guidelines. This policy includes: a ban on acquisitions
of securities pursuant to an initial public offering; restrictions on
acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods
on personal investing for certain investment personnel; ban on short-term
trading profits for investment personnel; limitations on service as a
director of publicly traded companies; and disclosure of personal
securities transactions.

SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts where the fund was organized and California where
the fund's principal office is located, shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable
as partners for the obligations of the fund. However, the risk of a
shareholder incurring any financial loss on account of shareholder
liability is limited to circumstances in which the fund itself would be
unable to meet its obligations. The Declaration of Trust contains an
express disclaimer of shareholder liability for acts, omissions,
obligations or affairs of the fund and provides that notice of the
disclaimer may be given in each agreement, obligation, or instrument
which is entered into or executed by the fund or Trustees. The
Declaration of Trust provides for indemnification out of fund property
of any shareholder held personally liable for the obligations of the fund
and also provides for the fund to reimburse such shareholder for all legal
and other expenses reasonably incurred in connection with any such claim
or liability.

Intermediate Bond Fund of America -- Page 31

<PAGE>

Under the Declaration of Trust, the Trustees, officers, employees or agents of
the fund are not liable for actions or failure to act; however, they are not
protected from liability by reason of their willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
their office.

OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Auditors contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- AUGUST 31, 1999

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $13.01
Maximum offering price per share
(100/95.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $13.66
</TABLE>

INVESTMENT RESULTS AND RELATED STATISTICS

The fund's yield is 5.21% based on a 30-day (or one month) period ended August
31, 1999, computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:

YIELD = 2[( a-b/cd + 1)/6/ -1]

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the
period.

The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.

The fund's one year total return and average annual total return for the five-
and ten-year periods ended August 31, 1999 were -3.31%, 4.94% and 6.31%,
respectively. The fund's average annual total return at net asset value for the
one-, five- and ten-year periods ended on August 31, 1999 were 1.54%, 5.97% and
6.83, respectively.

In calculating average annual total return, the fund assumes: (1) deduction of
the maximum sales load of 4.75% from the $1,000 initial investment; (2)
reinvestment of dividends and distributions

Intermediate Bond Fund of America -- Page 32

<PAGE>

at net asset value on the reinvestment date determined by the Board; and (3) a
complete redemption at the end of any period illustrated. In addition, the fund
will provide lifetime average total return figures.

The fund may also, at times, calculate total return based on net asset value per
share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.

The fund may include information on its investment results and/or comparisons of
its investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.

The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.

The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.

The fund may compare its investment results with the Consumer Price Index, which
is a measure of the average change in prices over time in a fixed market basket
of goods and services (e.g. food, clothing, and fuels, transportation, and other
goods and services that people buy for day-to-day living).

The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.

The investment results for the fund set forth below were calculated as described
in the fund's prospectus. The fund's results will vary from time to time
depending upon market conditions, the composition of the fund's portfolio and
operating expenses of the fund, so that any investment results reported by the
fund should not be considered representative of what an investment in the fund
may earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative to
the risks associated with the fund's investment objective and policies.

Intermediate Bond Fund of America -- Page 33

<PAGE>

Note that past results are not an indication of future investment results. Also,
the fund has different investment policies than the funds mentioned above. These
results are included solely for the purpose of informing investors about the
experience and history of Capital Research and Management Company.

EXPERIENCE OF INVESTMENT ADVISER - The Investment Adviser manages nine growth
and growth-income funds that are at least 10 years old. In the rolling 10-year
periods since January 1, 1969 (138 in all), those funds have had better total
returns than their comparable Lipper indexes and 128 of 138 periods.

IF YOU ARE CONSIDERING IBFA FOR AN
INDIVIDUAL RETIREMENT ACCOUNT HERE ARE THE BENEFITS OF SYSTEMATIC INVESTING:

Here's how much you would have if you had invested $2,000 a year on September 1
of each year in IBFA over the past 3, 5 and 10 years:

2 years 4 years Lifetime
(9/1/97-8/31/99) (9/1/95-8/31/99) (2/19/88-8/31/99)
- ----------------------------------------------------------------------------------
<S> <C> <C>
$4,017 $8,613 $34,737
- ----------------------------------------------------------------------------------
</TABLE>

Intermediate Bond Fund of America -- Page 34

<PAGE>

SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
. . . AND HAD TAKEN
ALL DIVIDENDS AND
CAPITAL GAIN
DISTRIBUTIONS
IN SHARES, YOUR
IF YOU HAD INVESTMENT WOULD
INVESTED $10,000 HAVE BEEN WORTH
IN IBFA THIS MANY THIS MUCH AT
YEARS AGO . . . AUGUST 31, 1999

NUMBER PERIODS
OF YEARS 9/1 - 8/31 VALUE**
<S> <C> <C>
1
1998 - 1999 $ 9,669
2
1997 - 1999 10,414
3
1996 - 1999 11,230
4
1995 - 1999 11,753
5
1994 - 1999 12,726
6
1993 - 1999 12,499
7
1992 - 1999 13,744
8
1991 - 1999 15,504
9
1990 - 1999 17,315
10
1989 - 1999 18,429
11
1988 - 1999 20,089
Lifetime 1988* - 1999 20,277
</TABLE>

* From inception, 2/19/88 through 8/31/97.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.

Intermediate Bond Fund of America -- Page 35

<PAGE>

Illustration of a $10,000 investment in IBFA with dividends reinvested
(For the lifetime of the Fund February 19, 1988 - August 31, 1999)

<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES**
-------------- -----------------
FISCAL TOTAL FROM FROM FROM
YEAR END ANNUAL DIVIDENDS INVESTMENT INITIAL CAPITAL GAINS DIVIDENDS TOTAL
8/31 DIVIDENDS (CUMULATIVE) COST INVESTMENT REINVESTED REINVESTED VALUE
---- --------- ------------ ---- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1988* $ 411 $ 411 $10,411 $9,207 --- $ 406 $ 9,613
1989 885 1,296 11,296 9,187 --- 1,291 10,478
1990 1,000 2,296 12,296 8,913 --- 2,239 11,152
1991 1,029 3,325 13,325 9,127 --- 3,333 12,460
1992 1,033 4,358 14,358 9,520 --- 4,534 14,054
1993 1,022 5,380 15,380 9,760 --- 5,692 15,452
1994 1,020 6,400 16,400 8,920 70 6,184 15,174
1995 1,084 7,484 17,484 9,013 71 7,355 16,439
1996 1,096 8,580 18,580 8,840 70 8,289 17,199
1997 1,135 9,715 19,715 8,947 70 9,528 18,545
1998 1,224 10,939 20,939 9,040 71 10,858 19,969
1999 1,149 12,088 22,088 8,673 68 11,536 20,277
</TABLE>

The dollar amount of capital gain distributions during the period was $75.
* From inception on February 19, 1988.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.

Intermediate Bond Fund of America -- Page 36

<PAGE>

APPENDIX
Description of Commercial Paper Ratings

MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.

Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

S&P ratings of commercial paper are graded into four categories ranging from "A"
for the highest quality obligations to "D" for the lowest.

A -- Issues assigned its highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with numbers
1, 2, and 3 to indicate the relative degree of safety.

A-1 -- This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 -- Capacity for timely payments on issues with this designation is strong;
however, the relative degree of safety is not as high as for issues designated
"A-1."

Intermediate Bond Fund of America -- Page 37

<TABLE>
Intermediate Bond Fund of America
Investment Portfolio, August 31, 1999
<S> <C> <C> <C>

Principa Market Percent
Amount Value Of Net
Bonds & Notes (000) (000) Assets
- -------------------------------------------- -------- -------- --------

FEDERAL AGENCY MORTGAGE PASS-THROUGH OBLIGATIONS (1)
- -21.05%
Fannie Mae:
5.769% 2033 (2) $10,177 $ 9,954
6.00% 2013 13,167 12,529
6.50% 2013-2029 9,881 9,525
7.00% 2008-2028 14,558 14,363
7.50% 2009-2030 13,152 13,184
8.00% 2002-2028 1,981 2,013
8.282% 2002 (2) 7,026 7,090
8.50% 2008-2027 6,421 6,635
9.00% 2001-2022 7,024 7,356
9.50% 2009-2022 4,513 4,783
10.00% 2017-2025 10,870 11,750
10.50% 2004-2020 797 863
11.00% 2000-2020 1,937 2,132
12.00% 2015-2019 9,442 10,681
12.25% 2012-2013 1,414 1,586
12.50% 2016-2029 3,023 3,431
13.00% 2015-2028 2,416 2,795
15.00% 2028 896 1,06 7.91%
Fannie Mae/Government National Mortgage Assn.:
11.00% 2029 728 806
11.50% 2029 218 243
12.50% 2029 2,110 2,394
15.00% 2029 478 58 .28
Fannie Mae Grantor Trust, Series 1999-T2, Class A1, 6,569 6,55 .43
7.50% 2039
Freddie Mac:
6.00% 2014-2029 15,805 14,960
6.50% 2014 24,800 24,096
7.00% 2008 2,094 2,085
8.00% 2003-2017 13,140 13,460
8.50% 2008-2027 6,162 6,373
8.75% 2008-2009 582 596
9.00% 2028 1,458 1,521
9.50% 2010-2013 784 818
10.00% 2005-2019 9,442 10,053
11.00% 2018 46 51
12.00% 2016 107 119
12.50% 2015-2019 723 818
12.75% 2019 28 3 4.88
Government National Mortgage Association:
6.00% 2013-2029 5,404 5,113
6.50% 2013-2029 23,411 22,357
7.00% 2007-2029 14,814 14,425
7.50% 2022-2028 19,156 19,011
8.00% 2023-2027 21,078 21,344
8.50% 2007-2023 9,652 10,008
9.00% 2008-2025 6,387 6,720
9.50% 2009-2021 10,994 11,737
10.00% 2019 4,522 4,940
10.25% 2012 195 209
10.50% 2019 50 5 7.55
-------------------
323,21 21.05
-------------------

FEDERAL AGENCY COLLATERALIZED MORTGAGE OBLIGATONS (1)
- -1.71%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 7,000 7,085
Series 91-146, Class Z, 8.00% 2006 1,998 2,046
Trust D2, 11.00% 2009 2,144 2,315
Series 88-16, Class B, 9.50% 2018 309 328
Series 90-93, Class G, 5.50% 2020 1,610 1,530
Series 1991-78, Class PK, 8.50% 2020 233 232
Series 90-21, Class Z, 9.00% 2020 9,195 9,46 1.50
Freddie Mac:
Series 83-B, Class 3, 12.50% 2013 70 77
Series 1567, Class A, 5.526% 2023 (2) 1,565 1,524
Series 2030, Class F, 5.768% 2028 (2) 1,565 1,57 .21
-------------------
26,17 1.71
-------------------
FEDERAL AGENCY OBLIGATIONS - NON-MORTGAGE - 3.86%
Fannie Mae Notes:
4.75% 2003 3,000 2,809
5.625% 2004 9,000 8,651
6.00% 2008 10,650 10,043
5.25% 2009 10,000 8,89 1.98
FHLB Bonds, 5.625% 2001 3,000 2,97 1.19
Freddie Mac Notes:
5.125% 2003 5,750 5,476
5.75% 2003 500 488
5.125% 2008 22,605 19,91 1.69
-------------------
59,25 3.86
-------------------

U.S. TREASURY OBLIGATIONS - 15.11%
6.375% January 2000 12,500 12,541
13.375% August 2001 16,750 19,050
10.75% February 2003 5,000 5,722
10.75% May 2003 10,500 12,135
5.75% August 2003 1,760 1,748
11.125% August 2003 12,500 14,678
7.25% May 2004 37,146 39,015
7.25% August 2004 13,250 13,939
7.875% November 2004 4,245 4,581
11.625% November 2004 35,500 44,026
7.50% February 2005 3,500 3,724
7.25% February 2007 30,250 30,349
6.125% August 2007 19,005 18,943
10.375% November 2009 5,000 5,881
7.125% February 2023 5,250 5,68 15.11
-------------------
232,01 15.11
-------------------

ASSET BACKED OBLIGATIONS (1) - 17.33%
Case Equipment Loan Trust, Series 1999-A, 7,139 7,05 .46
Class B, 5.90% 2005
Chase Manhattan Credit Card Master Trust, 8,750 8,60 .56
Series 1997-5, Class A, 6.194% 2005
ComEd Transitional Funding Trust, Transitional
Funding Trust Note:
Series 1998, Class A-4, 5.39% 2005 2,000 1,920
Series 1998, Class A-5, 5.44% 2007 9,000 8,50 .68
EquiCredit Funding, Series 1996-A, Class A2, 1,369 1,37 .09
6.95% 2012
First Consumer Master Trust:
Series 1999-A, Class A, 5.80% 2005 (3) 8,000 7,647
Series 1999-A, Class B, 6.28% 2005 (3) 9,000 8,54 1.06
FIRSTPLUS Home Loan Owner Trust:
Series 1997-1, Class A3, 6.45% 2009 391 390
Series 1997-4, Class A5, 6.62% 2015 6,200 6,08 .42
Green Tree Financial Corp., pass-through certificates:
Series 1998-2, Class A5, 6.24% 2016 3,500 3,43 3.00
Series 1993-3, Class A5, 5.75% 2018 5,632 5,609
Series 1995-9, Class A4, 6.45% 2027 3,593 3,592
Series 1996-8, Class A4, 7.00% 2027 4,052 4,059
Series 1996-10, Class A4, 6.42% 2028 3,489 3,490
Series 1996-10, Class A5, 6.83% 2028 14,000 13,742
Series 1997-6, Class A5, 6.68% 2029 5,000 4,995
Series 1997-6, Class A6, 6.90% 2029 3,000 2,987
Series 1997-6, Class A7, 7.14% 2029 4,250 4,214
Green Tree Home Improvement Loan Trust:
Series 1997-D, Class HIA3, 6.77% 2023 5,000 4,997
Series 1997-C, Class HIA2, 6.46% 2028 51 5 .33
Green Tree Recreational, Equipment & Consumer Trust, 8,000 7,93 .52
Series 1999-A, Class A6, 6.84% 2029
Greenpoint Manufactured Housing, Series 1999-2, 4,250 4,16 .27
Class A2, 5.84% 2030
Health Care Securitization Program, Series 1999-3, 18,750 18,56 1.21
Class A, 7.05% 2003 (3)
Honda Auto Lease Trust, Asset Backed Notes, Series 5,000 4,97 .32
1999-A, Class C, 6.90% 2005
LML Auto Lease Securitization, Series 1999-A, 17,738 17,59 1.15
Class A, 6.45% 2004 (3)
Mission State Fund, LLC, Class A1 6.19% 07-15-03 (3) 5,875 5,79 .38
The Money Store Home Equity Trust:
Series 1996-B, Class A14, 7.35% 2012 5,000 4,994
Series 1994-D, Class A5, 8.925% 2022 9,621 9,90 .97
Nebhelp Trust, Student Loan Interest Margin Securities, 18,577 18,34 1.20
Series 1998-1, Class A, 6.68% 2016 (3)
PECO Energy Co., Series 1999-A, Class A2, 5.63% 2005 2,500 2,42 .16
PP&L Transition Bond Co. LLC:
Series 1999-1, Class A5, 6.83% 2007 11,250 11,211
Series 1999-1, Class A8, 7.15% 2009 23,000 22,88 2.22
Puerto Rico Public Financing Corp., Series 1, Class A, 17,969 17,44 1.14
6.15% 2008
Rental Car Finance Corp., Series 1999-1, Class C, 2,000 1,89 .12
6.50% 2007 (3)
Student Loan Funding LLC, Series 1998-B, Class B3, 13,500 12,72 .83
6.25% 2019 (3)
Triad Auto Receivables Owner Trust, Series 1999-1, 4,000 3,93 .26
Class A2, 6.09% 2005
-------------------
266,08 17.33
-------------------

COMMERCIAL MORTGAGE-BACKED SECURITIES (1) - 15.96%
Asset Securitization Corp., Series 1997-D5, 171,754 15,61 1.02
Class A-PS1, interest only, 1.59% 2043 (2),(4)
Bear Stearns Commercial Mortgage Securities Inc.:
Series 1998-C1, Class A1, 6.34% 2030 5,499 5,323
Series 1999-C1, Class X, interest only, 2031 (2) 92,865 6,31 .76
Chase Commercial Mortgage Securities Corp.:
Series 1996-1, Class A1, 7.60% 2005 1,620 1,651
Series 1997-1, Class A1, 7.27% 2029 (4) 3,200 3,230
Series 1998-1, Class A1, 6.34% 2030 6,419 6,253
Series 1998-2, Class A2, 6.39% 2030 (4) 26,000 24,39 2.31
Commercial Mortgage Acceptance Corp.:
Series 1998-C1, Class A1, 6.23% 2007 2,317 2,24 .41
Series 1998-C2, Class A1, 5.80% 2030 (4) 4,199 4,046
CS First Boston Mortgage Securities Corp., 12,744 12,34 .80
Series 1998-C1, Class A1A, 6.26% 2040
Deutsche Mortgage & Asset Receiving Corp., 12,909 12,35 .80
Series 1998-C1, Class A1, 6.22% 2031
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A1A, 7.40% 2006 (3) 6,022 6,071
Series 1995-CF2, Class A1B, 6.85% 2027 (3) 10,000 9,931
Series 1996-CF1, Class A1A, 7.28% 2028 2,190 2,200
Series 1998-CF2, Class A1B, 6.24% 2031 7,250 6,739
Series 1998-CF2, Class A3, 6.65% 2031 5,250 4,873
Series 1998-CF2, Class A4, 6.90% 2031 3,250 3,02 2.14
Freddie Mac Loan Receivables Trust, Series 1998-A, 8,000 7,47 .49
Class A3, 6.69% 2020 (3)
GMAC Commercial Mortgage Securities, Inc., 13,955 13,94 .91
Series 1996-C1, Class A2A, 6.79% 2028
GS Mortgage Securities Corp. II, Series 1999-GSFL II, 10,000 9,97 .65
Class D, 6.257% 2027 (2),(3),(4)
J.P. Morgan Commercial Mortgage Finance Corp.:
Series 1995-C1, Class A2, 7.416% 2010 (2) 18,155 18,153
Series 1997-C4, Class A1, 6.939% 2028 127 12 1.19
LB Commerical Mortgage Trust, Series 1998-C1, 1,563 1,52 .10
Class A1, 6.33% 2030
Merrill Lynch Mortgage Investors, Inc.:
Series 1995-C2, Class A1, 7.129% 2021 (2) 2,983 2,979
Series 1995-C3, Class A2, 6.819% 2025 (2) 5,180 5,132
Series 1995-C3, Class A3, 7.059% 2025 (2) 1,500 1,483
Series 1997-C1, Class A1, 6.95% 2029 (2) 12,648 12,658
Series 1998-C3, Class A1, 5.65% 2030 6,235 5,90 1.83
Mortgage Capital Funding, Inc., Series 1998-MC1, 12,871 12,53 .82
Class A1 6.417% 2030
Nomura Asset Securities Corp., Series 1998-D6, 8,995 8,74 .57
Class AA1, 6.28% 2030 (2)
Prudential Securities Secured Financing Corp., 2,000 1,85 .12
Series 1999-NRF1, Class C, 6.746% 2009
Security National Mortgage Loan Trust, Series 1999-1, 7,619 7,56 .49
Class B, 9.858% 2030 (3)
SMA Finance Co., Inc., Series 1998-C1, Class A1, 8,493 8,30 .54
6.27% 2032 (3)
-------------------
244,95 15.96
-------------------

COLLATERALIZED MORTGAGE OBLIGATIONS
(PRIVATELY ORIGINATED)(1) - 6.65%
Chase Manhattan Bank, NA, Series 1993-I, Class 2A5, 1,801 1,80 .12
7.25% 2024
First Nationwide, Series 1999-2, Class 1PA1, 6.50% 2029 7,002 6,67 .44
Morgan Stanley Capital I Inc.:
Series 1995-GA1, Class A1, 7.00% 2002 (3) 1,725 1,731
Series 1998-HF1, Class A1, 6.19% 2007 (2) 7,014 6,753
Series 1998-HF2, Class A1, 6.01% 2030 4,750 4,541
Series 1998-WF1, Class A1, 6.25% 2030 12,133 11,696
Series 1998-WF2, Class A1, 6.34% 2030 (2) 6,487 6,260
Series 1998-HF2, Class A2, 6.48% 2030 6,000 5,685
Series 1999-FNV1, Class D, 7.03% 2032 4,000 3,76 2.63
Paine Webber CMO, Series O, Class 5, 9.50% 2019 2,566 2,68 .17
Residential Accredit Loans, Inc., Series 1997-QS12, 3,000 2,97 .19
Class A4, 6.875% 2027 (2)
Residential Funding Mortgage Securities I, Inc., 1,981 1,84 .12
Series 1998-S17, Class M1, 6.75% 2028
Structured Asset Securities Corp.:
Series 1998-RF2, Class A, 8.582% 2022 (2),(3) 15,308 15,413
Series 1998-RF1, Class A, 8.694% 2027 (2),(3) 17,168 17,474
Series 1999-BC1, Class M2, 6.464% 2029 (2) 7,500 7,51 2.63
Structured Asset Notes Transaction, Ltd., 5,435 5,39 .35
Series 1996-A, Class A1, 7.156% 2003 (3)
-------------------
102,21 6.65
-------------------
FINANCIAL SERVICES - 5.78%
ABN AMRO Bank N.V. 7.55% 2006 3,000 3,04 .20
Associates Corp. of North America 6.45% 2001 7,000 6,97 .45
BankAmerica Corp.:
6.65% 2001 3,000 3,005
5.875% 2009 3,175 2,81 .38
Barclays North American Capital Corp. 9.75% 2021 7,230 7,80 .51
Beverly Finance Corp. 8.36% 2004 (3) 10,000 10,30 .67
DBS Bank Ltd. 7.875% 2009 (3) 3,000 2,97 .19
Ford Motor Credit Co.:
5.75% 2004 9,000 8,552
6.70% 2004 7,375 7,25 1.03
General Electric Capital Corp. 8.375% 2001 1,500 1,54 .10
General Motors Acceptance Corp.:
6.75% 2002 3,000 2,995
6.85% 2004 12,000 11,89 .97
Household Finance Corp. 6.00% 2004 4,000 3,81 .25
Ikon Capital Inc. 6.33% 2000 2,500 2,50 .16
Lend Lease (US) Finance Inc. 6.75% 2005 5,000 4,84 .32
NationsBank Corp. 6.125% 2004 3,000 2,88 .19
Toyota Credit Canada 6.625% 2002 3,000 3,00 .20
Toyota Motor Credit Corp. 6.125% 2000 2,495 2,49 .16
-------------------
88,70 5.78
-------------------
INDUSTRIAL & SERVICE - 3.70%
Carnival Corp. 7.70% 2004 2,000 2,04 .14
Cox Radio, Inc. 6.375% 2005 3,500 3,30 .22
McKesson Corp. 6.30% 2005 2,000 1,78 .12
McKesson Finance of Canada 6.55% 2002 (3) 3,200 3,07 .20
Oil Enterprises Ltd. 6.239% 2008 (3) 9,652 9,24 .60
Pacificorp Australia LLC 6.15% 2008 (3) 10,000 9,09 .59
Pemex Finance Ltd. 5.72% 2003 (3) 5,000 4,89 .32
Philip Morris Companies Inc. 8.250% 2003 1,500 1,55 .10
R.P. Scherer International Corp. 6.75% 2004 4,325 4,24 .28
Sears Roebuck Acceptance Corp. 6.90% 2003 3,000 3,00 .20
Sears Roebuck and Co. 8.51% 2001 1,000 1,03 .07
Sony Corp. 6.125% 2003 8,500 8,36 .54
Sotheby's Holdings, Inc. 6.875% 2009 1,000 91 .06
Wal-Mart Stores, Inc. 5.65% 2000 4,000 3,99 .26
-------------------
56,56 3.70
-------------------

TRANSPORTATION - 2.53%
Continental Airlines:
Series 1998-3, Class C1, 7.08% 2004 6,999 6,642
Series 1999-2, Class C2, 7.434% 2004 (1),(2) 4,000 3,976
Series 1998-2, Class A, 6.41% 2007 18,780 18,043
Series 1996-2, Class A, 7.75% 2016 (1),(4) 1,256 1,23 1.95
Jet Equipment Trust, Series 1995-B, Class A, 9,003 8,89 .58
7.63% 2015 (2012) (1),(3),(4)
-------------------
38,79 2.53
-------------------

UTILITIES - 1.07%
AT&T Corp. 5.625% 2004 3,000 2,86 .19
National Rural Utilities Cooperative Finance Corp.:
5.30% 2003 3,205 3,03 .50
5.50% 2005 5,000 4,690
Texas Utilities Co., Series A, 6.20% 2002 6,000 5,89 .38
-------------------
16,48 1.07
-------------------

GOVERNMENTS (EXCLUDING U.S.) & GOVERNMENT AUTHORITIES
- -0.97%
Canadian Government 6.125% 2002 2,000 1,98 .13
KfW International Finance Inc. 7.625% 2004 2,500 2,58 .17
Ontario (Province of):
7.75% 2002 4,000 4,109
7.375% 2003 2,500 2,55 .43
Victoria (Territory of) Public Authorities Finance 3,500 3,63 .24
Agency, 8.45% 2001
-------------------
14,86 .97
-------------------

TAXABLE MUNICIPAL BONDS - 0.68%
California Maritime Infrastructure Authority 11,000 10,48 .68
6.63% 2009 (3)
-------------------
10,48 .68

DEVELOPMENT AUTHORITIES - 0.19%
Corporacion Andina de Fomento 7.75% 2004 3,000 2,96 .19
-------------------
2,96 .19
-------------------
TOTAL BONDS & NOTES (cost: $1,522,929,000) 1,482,77 96.59

Short-Term Securities
- --------------------------------------------

COMMERCIAL PAPER - 2.68%
Associates Corp. of North America 5.53% due 9/1/99 21,360 21,35 1.39
Pfizer Inc. 5.18% due 9/17/99 9,800 9,77 .64
President and Fellows of Harvard College:
5.20% due 9/13/99 6,000 5,989
5.20% due 9/16/99 4,000 3,99 .65
-------------------
Total Short-Term Securities (cost: $41,113,000) 41,11 2.68
-------------------
Total Investment Securities (cost: $1,564,042,000) 1,523,89 99.27

-------------------
Excess of cash and receivables over payables 11,25 .73
--------- ----------
NET ASSETS 1,535,14 100.00%
========= ==========
(1)Pass-through securies 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 may be limited to qualified institutional buyers;
resale to the public may require registration.

(4) 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.

See Notes to Financial Statements

</TABLE>

<TABLE>
Intermediate Bond Fund of America
Financial Statements
<S> <C> <C>
- ---------------------------------------- ------------ -----------
Statement of Assets and Liabilities
at August 31, 1999 (dollars in thousands)
- ---------------------------------------- ------------ -----------
Assets:
Investment securities at market
(cost: $1,564,042) $1,523,890
Cash 145
Receivables for-
Sales of investments $ 746
Sales of fund's shares 5,009
Accrued interest 13,346 19,101
------------ -----------
1,543,136
Liabilities:
Payables for-
Purchases of investments 2,175
Repurchases of fund's shares 3,840
Dividends payable 683
Management services 495
Other 799 7,992
------------ -----------
Net Assets at August 31, 1999
Equivalent to $13.01 per share on 117,982,506 shares
of beneficial interest issued and outstanding;
unlimited shares authorized $1,535,144
=========

Statement of Operations
for the year ended August 31, 1999 (dollars in thousands)
------------ -----------
Investment Income:
Income:
Interest $ 100,232

Expenses:
Management services fee $ 5,863
Distribution expenses 4,671
Transfer agent fee 961
Reports to shareholders 110
Registration statement and prospectus 132
Postage, stationery and supplies 182
Trustees' fees 26
Auditing and legal fees 45
Custodian fee 30
Taxes other than federal income tax 17
Other expenses 51
------------
Total expenses before reimbursement 12,088
Reimbursement of expenses 471 11,617
Net investment income ------------ -----------
88,615
Realized Loss and Unrealized Depreciation -----------
on Investments:
Net realized loss (4,010)
Net unrealized depreciation on investments:
Beginning of year 20,879
End of year (40,152)
------------
Net unrealized depreciation on investments (61,031)
-----------
Net realized loss and unrealized depreciation
on investments (65,041)
-----------
Net Increase in Net Assets Resulting
from Operations $23,574
===========

Statement of Changes in Net Assets (dollars in thousands)
- ---------------------------------------- --------------------------
For year ended For year ended
August 31 August 31
1999 1998
Operations: --------------- ----------
Net investment income $ 88,615 $ 82,968
Net realized gain (loss) on investments (4,010) 2,961
Net unrealized appreciation (depreciation) on investments (61,031) 14,795
--------------------------
Net increase in net assets
resulting from operations 23,574 100,724
--------------------------

Dividends Paid From Net Investment Income (88,570) (86,313)
--------------------------
Capital Share Transactions:
Proceeds from shares sold:
60,775,441 and 49,876,745 shares, respectively 815,044 672,768
Proceeds from shares issued in
reinvestment of net investment income
dividends: 5,369,952 and 4,954,203 shares,
respectively 71,711 66,762
Cost of shares repurchased: 55,761,176 and
46,961,620 shares, respectively (745,398) (633,193)
--------------------------
Net increase in net assets resulting
from capital share transactions 141,357 106,337
--------------------------
Total Increase in Net Assets 76,361 120,748

Net Assets:
Beginning of year 1,458,783 1,338,035
--------------------------
End of year (including undistributed
net investment income of $572 and
$527, respectively) $1,535,144 $1,458,783
============= =========

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 financial statements have been
prepared in conformity with generally accepted accounting principles 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. The ability of the
issuers of the debt securities held by the fund to meet their obligations may
be affected by economic developments in a specific industry, state or region.
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.

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 securities purchased 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.

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, 1999, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $40,152,000, of which $4,058,000
related to appreciated securities and $44,209,000 related to depreciated
securities. There was no difference between book and tax realized losses on
securities transactions for the year ended August 31, 1999. During the year
ended August 31, 1999, the fund realized, on a tax basis, a net capital loss of
$4,010,000 on securities transactions. The fund had available at August 31,
1999 a net capital loss carryforward totaling $93,411,000 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. The fund will not make
distributions from capital gains while a capital loss carryforward remains. In
addition, the fund has deferred, for tax purposes, to fiscal year ending August
31, 2000, the recognition of capital losses totaling $1,513,000 which were
realized during the period November 1, 1998 through August 31, 1999. The cost
of portfolio securities for book and federal income tax purposes was
$1,564,042,000 at August 31, 1999.

3. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $5,863,000 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
(asset-based); and 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
(income-based). During the year, 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 year ended
August 31, 1999, distribution expenses under the Plan were limited to
$4,671,000. Had no limitation been in effect, the fund would have paid
$5,086,000 in distribution expenses under the Plan. As of August 31, 1999,
accrued and unpaid distribution expenses were $722,000

American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $1,880,000 (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 $961,000.

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 August 31, 1999, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993) net of any
payments to Trustees, were $74,000.

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 $1,231,000 and $1,047,000, respectively, during the
year ended August 31, 1999.

As of August 31, 1999, accumulated net realized loss on investments was
$93,411,000 and additional paid-in capital was $1,668,135,000.

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 $30,000 includes $34,000 that was paid by these credits
rather than in cash.
<TABLE>
<S> <C> <C> <C>
Per-Share Data and Ratios
Year Ended August 31
1999 1998 1997

Net Asset Value, Beginning of Year $13.56 $13.42 $13.26
------------------------------
Income From Investment Operations:
Net investment income .76 .83 .86
Net gains or losses on securities (both
realized and unrealized) (.55) .17 .15
------------------------------
Total from investment operations .21 1.00 1.01
-----------------------------
Less Distributions:
Dividends (from net investment income) (.76) (.86) (.85)
-----------------------------
Total distributions (.76) (.86) (.85)
-----------------------------
Net Asset Value, End of Year $13.01 $13.56 $13.42
============================

Total Return (1) 1.54% 7.68% 7.83%

Ratios/Supplemental Data:
Net assets, end of year(in millions) $1,535 $1,459 $1,338
Ratio of expenses to average net assets .75% (2) .76% (2) .82%
Ratio of net income to average net assets 5.69% 6.09% 6.40%
Portfolio turnover rate 70.19% 79.19% 41.55%

1996 1995 1994

Net Asset Value, Beginning of Year $13.52 $13.38 $14.64
------------------- ---------
Income From Investment Operations:
Net investment income .88 .93 .95
Net gains or losses on securities (both
realized and unrealized) (.27) .13 (1.20)
------------------- ---------
Total from investment operations .61 1.06 (.25)
------------------- ---------
Less Distributions:
Dividends (from net investment income) (.87) (.92) (.94)
------------------- ---------
Total distributions (.87) (.92) (.94)
------------------- ---------
Net Asset Value, End of Year $13.26 $13.52 $13.45
======== ======= =======

Total Return (1) 4.63% 8.33%(1.80%)

Ratios/Supplemental Data:
Net assets, end of year(in millions) $1,429 $1,501 $1,626
Ratio of expenses to average net assets .80% .78% .83%
Ratio of net income to average net assets 6.53% 6.96% 6.79%
Portfolio turnover rate 48.25% 71.91% 52.94%

(1) Excludes maximum sales charge of 4.75%.
(2) Had CRMC not waived management services fees,
the fund's expense ratio would have been .78%
for the fiscal year ended August 31, 1999 and
.79% for the fiscal year ended August 31, 1998.

</TABLE>

Independent Auditors' Report
To the Board of Trustees and Shareholders
of Intermediate Bond Fund of America:

We have audited the accompanying statement of assets and liabilities of
Intermediate Bond Fund of America (the "fund"), including investment portfolio,
as of August 31, 1999, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the per-share data and ratios for each of the five
years in the period then ended. These financial statements and per-share data
and ratios are the responsibility of the fund's management. Our responsibility
is to express an opinion on these financial statements and per-share data and
ratios based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at August 31, 1999, 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, 1999, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the per-share data and
ratios for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP
Los Angeles, California
September 30, 1999

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, 20% 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.