Part B
Statement of Additional Information
December 1, 1998
as amended August 1, 1999
This document is not a prospectus but should be read in conjunction with the
current prospectus dated December 1, 1998 of The Cash Management Trust of
America ("CMTA"), The U.S. Treasury Money Fund of America ("CTRS") and The
Tax-Exempt Money Fund of America ("CTEX"). The prospectus may be obtained from
your investment dealer or financial planner or by writing to the funds at the
following address:
The Cash Management Trust of America
The U.S. Treasury Money Fund of America
The Tax-Exempt Money Fund of America
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through employer-sponsored
defined contribution 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
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Item Page No.
<S> <C>
Certain Investment Limitations 2
Description of Certain Securities and Investment Techniques 3
Investment Restrictions 8
Fund Organization 13
Fund Officers and Trustees 14
Management 18
Dividends and Taxes 20
Additional Information Concerning Taxes 23
Purchase of Shares 24
Selling Shares 29
Shareholder Account Services and Privileges 30
Execution of Portfolio Transactions 32
General Information 32
Investment Results and Related Statistics 34
Description of Ratings for Debt Securities 38
Financial Statements attached
</TABLE>
CERTAIN INVESTMENT LIMITATIONS
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
CASH MANAGEMENT TRUST OF AMERICA
DEBT SECURITIES
- - The fund will invest substantially all of its assets in securities rated in
the highest short-term rating categories (I.E., Prime-1, A-1).
MATURITY
- - The fund's dollar-weighted average portfolio maturity will be approximately
35 days or less.
U.S. TREASURY MONEY FUND
U.S. TREASURY SECURITIES
- - The fund will invest substantially all of its assets in U.S. Treasury
securities.
MATURITY
- - The fund's dollar-weighted average portfolio maturity will be approximately
90 days or less.
TAX-EXEMPT MONEY FUND OF AMERICA
TAX-EXEMPT SECURITIES
- - The fund will invest at least 80% of its assets in securities the interest on
which is exempt from federal income tax.
DEBT SECURITIES
- - The fund may invest up to 20% of its assets in securities that are subject to
alternative minimum taxes.
- - The fund will invest substantially all of its assets in securities rated in
the highest short-term rating categories (I.E., Prime-1, A-1).
MATURITY
- - The fund's dollar-weighted average portfolio maturity will be approximately
60 days or less.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Objective, Strategies and Risks."
INVESTMENT POLICIES -- Each fund seeks to maintain a constant net asset value
of $1.00 per share for purchases and redemptions. To do so, each fund uses the
penny-rounding method of valuing securities pursuant to rule 2a-7 under the
Investment Company Act of 1940, certain requirements of which are summarized
below.
In accordance with rule 2a-7, each fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase only
instruments having remaining maturities of 13 months or less (25 months or less
in the case of U.S. Government securities) determined in accordance with
procedures established by the Board of Trustees to present minimal credit
risks.
CMTA and CTEX may invest in securities that are rated in the two highest
rating categories for debt obligations by at least two nationally recognized
statistical rating organizations (or one rating organization if the instrument
was rated by only one such organization) or, if unrated, are of comparable
quality as determined in accordance with procedures established by the Board of
Trustees ("eligible securities"). The nationally recognized statistical rating
organizations currently rating instruments of the type each fund may purchase
are Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff and
Phelps, Inc., Fitch Investors Service, Inc., and IBCA Limited and IBCA Inc.
Subsequent to its purchase, an issue of securities may cease to be rated or its
rating may be reduced below the minimum rating required for its purchase.
Neither event requires the elimination of such securities from a fund's
portfolio, but Capital Research and Management Company (the "Investment
Adviser") will consider such an event in its determination of whether the fund
should continue to hold the securities. Investments in eligible securities not
rated in the highest category by at least two rating organizations (or one
rating organization if the instrument was rated by only one such organization),
and unrated eligible securities not determined by the Board of Trustees to be
of comparable quality to those rated in the highest category, will be limited
to 5% of a fund's total assets, with the investment in any one such issuer
being limited to no more than the greater of 1% of a fund's total assets or
$1,000,000. It is the current policy of CMTA and CTEX to invest only in
instruments rated in the highest short-term rating category by Moody's
Investors Service, Inc. and Standard & Poor's Corporation or in instruments
that do not have short-term ratings by Moody's or S&P but determined to be of
comparable quality in accordance with procedures established by the Board of
Trustees or that are issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities as to the payment of principal and interest.
CTRS invests exclusively in U.S. Treasury securities, which are of the highest
credit quality.
THE CASH MANAGEMENT TRUST OF AMERICA
CMTA may invest in the short-term securities described below:
1. COMMERCIAL PAPER: Short-term notes (usually maturing in 90 days or less)
issued by companies or governmental bodies.
2. COMMERCIAL BANK OBLIGATIONS: Certificates of deposit (interest-bearing
time deposits), bank notes, bankers' acceptances (time drafts drawn on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity) representing direct or contingent obligations of commercial banks
with assets in excess of $1 billion, based on latest published reports, or
obligations issued by commercial banks with assets of less than $1 billion if
the principal amount of such obligation is fully insured by the U. S.
Government. Commercial banks issuing obligations in which CMTA invests must be
on an approved list that is monitored on a regular basis; currently all
approved banks have assets in excess of $10 billion.
3. SAVINGS ASSOCIATION OBLIGATIONS: Certificates of deposit (interest-bearing
time deposits) issued by savings banks or savings and loan associations that
have assets in excess of $1 billion, based on latest published reports, or
obligations issued by institutions with assets of less than $1 billion if the
principal amount of such obligation is fully insured by the U. S. Government.
Savings associations issuing obligations in which CMTA invests must be on an
approved list that is monitored on a regular basis; currently all approved
savings associations have assets in excess of $10 billion.
4. U.S. GOVERNMENT SECURITIES: These securities include (1) direct
obligations of the Treasury (such as Treasury bills, notes and bonds), (2) U.S.
Government agency obligations guaranteed as to principal and interest by the
Treasury, and (3) obligations of certain U.S. Government agencies and
instrumentalities which are neither direct obligations of, nor guaranteed by,
the Treasury. The latter 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; others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but
are not limited to Federal Land Banks, Farmers Home Administration, Federal
Home Loan Mortgage Corporation, Federal Home Loan Bank System, Federal Farm
Credit System, and the Federal National Mortgage Association.
5. CORPORATE BONDS AND NOTES: Corporate obligations that mature, or may be
redeemed by CMTA, in 13 months or less. These obligations may originally have
been issued with maturities in excess of 13 months. CMTA may currently invest
only in corporate bonds or notes of issuers having outstanding short-term
securities rated in the top rating category by Standard & Poor's Corporation or
by Moody's Investors Service, Inc. See "Description of Ratings for Debt
Securities" for a description of high-quality ratings by Standard & Poor's
Corporation and Moody's Investors Service, Inc.
THE TAX-EXEMPT MONEY FUND OF AMERICA
MUNICIPAL SECURITIES -- Municipal securities generally include debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which municipal securities may be issued
include refunding outstanding obligations, obtaining funds for general
operating expenses and lending such funds to other public institutions and
facilities. In addition, certain types of bonds have been issued by
municipalities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity or
sewage or solid waste disposal; the interest paid on such obligations may be
excludable from gross income for federal income tax purposes, although current
tax laws have eliminated or placed substantial limitations on the purposes of
new issues whose interest will be so excluded. Such obligations are considered
to be tax-exempt municipal securities, provided that the interest paid thereon
qualifies as excludable from federal income tax in the opinion of bond counsel
to the issuer; however, the interest on certain of these obligations may be a
tax preference item for purposes of the alternative minimum tax. There are, of
course, variations in the security of municipal securities, both within a
particular classification and between classifications.
Tax anticipation notes, bond anticipation notes and revenue anticipation notes
are issued on an interim basis in expectation of tax collections, revenue
receipts or bond sales. Grant anticipation notes are issued in anticipation of
receipt of intergovernmental grants. Construction loan notes are issued to
provide short-term construction financing for building projects. General
obligations bonds are unsecured promissory obligations issued by
municipalities. General obligation bonds are backed by the full faith, credit,
and unlimited taxing power of a municipality and repaid with general revenue
and other borrowings. Revenue bonds are issued by municipalities to finance
facilities which generate income, and are repayable from the revenue received
from the facilities built with the borrowed funds. Industrial development
bonds are issued by municipalities to finance facilities that are then leased
to private businesses and typically are repaid by the private business. CTEX
may also purchase other types of municipal securities which have a remaining
life of 13 months or less.
For the purpose of diversification under the Investment Company Act of 1940
(the "1940 Act"), the identification of the issuer of municipal securities
depends on the terms and conditions of the security. When the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets
and revenues of the non-governmental user, then such non-governmental user
would be deemed to be the sole issuer. If, however, in either case, the
creating government or some other entity guarantees a security, such a guaranty
may be considered a separate security and would then be treated as an issue of
such government or other entity.
The fund may invest in municipal securities that are supported by credit and
liquidity enhancements, which include letters of credit from domestic and
non-U.S. banks and other financial institutions. Changes in the credit quality
of these institutions could cause the fund to experience a loss and may affect
its share price. To the extent that the credit quality of these institutions
is downgraded, investments in such securities could increase the level of
illiquidity of the fund's portfolio for the remaining maturity of the
instruments.
TEMPORARY TAXABLE INVESTMENTS -- A portion of CTEX's assets, which will
normally be less than 20%, may be invested in high-quality taxable short-term
securities. Such temporary investments may include: (1) obligations of the
U.S. Treasury; (2) obligations of agencies and instrumentalities of the U.S.
Government; and (3) money market instruments, such as certificates of deposit
issued by domestic banks, corporate commercial paper, and bankers' acceptances.
These investments may be made when deemed advisable for temporary defensive
purposes or when the Investment Adviser believes there is an unusual disparity
between the after-tax income available on taxable investments and the income
available on tax-exempt securities.
THE U.S. TREASURY MONEY FUND OF AMERICA
REVERSE REPURCHASE AGREEMENTS -- Although CTRS has no current intention to do
so during the next 12 months, the fund is authorized to enter into reverse
repurchase agreements. A reverse repurchase agreement is the sale of a
security by a fund and its agreement to repurchase the security at a specified
time and price. CTRS will segregate liquid assets, which will be marked to
market daily, in an amount sufficient to cover its obligations under reverse
repurchase agreements with broker-dealers (but no collateral is required on
reverse repurchase agreements with banks). Under the 1940 Act, these
transactions may be considered borrowings by CTRS; accordingly, CTRS will limit
these transactions, together with any other borrowings, to no more than
one-third of its total assets. Although these transactions will not be entered
into for leveraging purposes, to the extent CTRS' aggregate commitments under
these transactions exceed its holdings of cash and securities that do not
fluctuate in value (such as short-term money market instruments), CTRS
temporarily will be in a leveraged position (I.E., it will have an amount
greater than its net assets subject to market risk). Should market values of
CTRS' 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 CTRS' aggregate commitments under these transactions
increase, the opportunity for leverage similarly increases.
THE TAX-EXEMPT MONEY FUND OF AMERICA AND THE U.S. TREASURY MONEY FUND OF
AMERICA
LOANS OF PORTFOLIO SECURITIES -- Although CTEX or CTRS have no current
intention of doing so during the next 12 months, each 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 a 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. A fund may at any time call a loan of its portfolio securities and
obtain the return of the loaned securities. A fund will receive any interest
paid on the loaned securities and a fee or a portion of the interest earned on
the collateral. Each fund will limit its loans of portfolio securities to an
aggregate of 10% of the value of its total assets, determined at the time any
such loan is made.
REPURCHASE AGREEMENTS -- Although CTEX or CTRS have no current intention of
doing so during the next 12 months, each fund is authorized to enter into
repurchase agreements, subject to the standards applicable to CMTA's repurchase
agreement transactions as described below.
THE CASH MANAGEMENT TRUST OF AMERICA, THE U.S. TREASURY MONEY FUND OF AMERICA
AND THE TAX-EXEMPT MONEY FUND OF AMERICA
MONEY MARKET INSTRUMENTS -- The funds invest in various high-quality money
market instruments that mature, or may be redeemed or resold, in 13 months or
less (25 months or less in the case of U.S. Government securities). For Cash
Management Trust they include: (1) commercial paper (notes issued by
corporations or governmental bodies), (2) commercial bank obligations such as
certificates of deposit, bank notes, and bankers' acceptances (time drafts on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity), (3) savings association and savings bank obligations, (4) securities
of the U.S. Government, its agencies or instrumentalities, and (5) corporate
bonds and notes. Cash Management Trust may invest in securities issued by
non-U.S. entities or in securities with credit and liquidity support features
provided by non-U.S. entities. Since these securities are issued by entities
that may have substantial operations outside the U.S. they may involve
additional risks and considerations. These securities may be affected by
unfavorable political, economic, or governmental developments that could affect
the repayment of principal or payment of interest. Securities of U.S. issuers
with substantial operations outside the U.S. may also be subject to similar
risks.
U.S. Treasury Money Fund may invest in instruments that include U.S. Treasury
bills, notes, and bonds. Tax-Exempt Money Fund invests in money market
instruments that are issued by states, territories, or possessions of the
United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities ("municipalities") to obtain funds for various
public purposes. Tax-Exempt Money Fund may purchase various types of municipal
securities including tax, bond, revenue, and grant anticipation notes,
construction loan notes, municipal commercial paper, general obligation bonds,
revenue bonds and industrial development bonds. In addition, Tax-Exempt Money
Fund may invest in municipal securities that are supported by credit and
liquidity enhancements, which include letters of credit from domestic and non-
U.S. banks and other financial institutions. Changes in the credit quality of
these institutions could cause the fund to experience a loss and may affect its
share price. To the extent that the credit quality of these institutions is
downgraded, investments in such securities could increase the level of
illiquidity of the fund's portfolio for the remaining maturity of the
instruments.
REPURCHASE AGREEMENTS -- Cash Management Trust 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. The seller must maintain with the fund's custodian collateral equal to
at least 100% of the repurchase price including accrued interest as monitored
daily by Capital Research and Management Company. The fund only enters into
repurchase agreements involving securities in which it could otherwise invest
and with selected banks and securities dealers whose financial condition is
monitored by Capital Research and Management Company. If the seller under the
repurchase agreement defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, liquidation of the
collateral by the fund may be delayed or limited.
VARIABLE AND FLOATING RATE OBLIGATIONS -- The funds may invest in variable and
floating rate obligations which have interest rates that are adjusted at
designated intervals or whenever interest rates change. The rate adjustment
feature tends to limit the extent to which the market value of the obligation
will fluctuate.
"PUT" SECURITIES -- Cash Management Trust and Tax-Exempt Money Fund may
purchase securities that provide for the right to resell them to the issuer, a
bank, or a broker-dealer typically at the par value plus accrued interest
within a specified period of time prior to maturity. This right is commonly
known as a "put" or a "demand feature." The funds may pay a higher price for
such securities than would otherwise be paid for the same security without such
a right. The funds will enter into these transactions only with issuers, banks,
or broker-dealers that are determined by Capital Research and Management
Company to present minimal credit risks. If an issuer, bank, or broker-dealer
should default on its obligation to repurchase, the funds might be unable to
recover all or a portion of any loss sustained. There is no specific limit on
the extent to which the funds may invest in such securities.
MATURITY -- Each fund determines net asset value using the penny-rounding
method, according to rules of the Securities and Exchange Commission, which
permits it to maintain a constant net asset value of $1.00 per share under
normal conditions. These rules require, among other things, that each fund
limit its investments to securities that will mature no more than 13 months (25
months in the case of securities of the U.S. Government, its agencies or
instrumentalities) from the date of purchase, and that the dollar-weighted
average portfolio maturity of its investments be 90 days or less. For this
purpose, certain variable and floating rate obligations and "put" securities
which may otherwise have stated maturities in excess of 13 months (25 months in
the case of U.S. Government securities) will be deemed to have remaining
maturities equal to the period remaining until the next readjustment of the
interest rate or until the fund is entitled to repayment or repurchase of the
security. Cash Management Trust, U.S. Treasury Money Fund and Tax-Exempt Money
Fund currently intend to maintain dollar-weighted average portfolio maturities
of approximately 35 days or less, 90 days or less and 60 days or less,
respectively.
FORWARD COMMITMENTS -- The funds may purchase or sell securities under which it
gives or receives a commitment to complete the transaction beyond the normal
settlement date. When the fund agrees to purchase such securities it assumes
the uncertainty of any decline in the value of the securities beginning on the
date of the agreement. When a 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 beginning on the date of the
agreement.
Each fund 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 a fund's aggregate commitments under these transactions exceed
its holdings of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the fund temporarily will be in a
leveraged position (because it will have an amount greater than its net assets
subject to market risk). Should market values of a fund's portfolio securities
decline while the fund is in a leveraged position, greater depreciation of its
net assets will likely occur than were it not in such a position. A 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.
INVESTMENT RESTRICTIONS
Each fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares. Such majority is defined by the 1940 Act as the vote of
the lesser of (i) 67% or more of the outstanding voting securities 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. Investment limitations expressed in the following investment
restrictions as a percentage of assets are considered at the time securities
are purchased.
CMTA may not:
1. Invest its assets in issues other than those of the U.S. Government, its
agencies or instrumentalities, obligations of commercial banks and savings
institutions with total assets in excess of $1 billion, commercial paper, and
investment-grade corporate obligations--all maturing in one year or less. CMTA
may, however, invest in obligations issued by commercial banks and savings
institutions with assets of less than $1 billion if the principal amounts of
such obligations are fully insured by the U. S. Government;
2. Invest more than 5% of its total assets in the securities of any one
issuer, except the U.S. Government, its agencies and instrumentalities. With
respect to 25% of total assets, commercial banks are excluded from this 5%
limitation;
3. Invest more than 25% of total assets in the securities of issuers in the
same industry. Electric, natural gas distribution, natural gas pipeline,
combined electric and natural gas, and telephone utilities are considered
separate industries for purposes of this restriction. Obligations of the U.S.
Government, its agencies and instrumentalities are not subject to this 25%
limitation on industry concentration. In addition, CMTA may, if deemed
advisable, invest more than 25% of its assets in the obligations of commercial
banks;
4. Enter into any repurchase agreement if, as a result, more than 10% of
total assets would be subject to repurchase agreements maturing in more than
seven days;
5. Make loans to others except for the purchase of debt securities or
entering into repurchase agreements as listed above;
6. Borrow money, except from banks for temporary purposes and then in an
amount not in excess of 33-1/3% of total assets. This borrowing power is
reserved to facilitate the orderly sale of portfolio securities to accommodate
unusually heavy redemption requests, if they should occur; it is not included
for investment purposes;
7. Pledge more than 15% of its assets and then only to secure temporary
borrowings from banks;
8. Sell securities short;
9. Invest in puts, calls, straddles, spreads or any combination thereof;
10. Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization), real
estate, or commodities;
11. Engage in the underwriting of securities issued by others.
Notwithstanding Investment Restriction #9, the fund may invest in securities
with put and call features. Notwithstanding Investment Restriction #10, 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 Trustees pursuant to an exemptive order granted by
the Securities and Exchange Commission.
For purposes of Investment Restriction #1, CMTA currently invests only in high
quality obligations in accordance with rule 2a-7 under the 1940 Act, as
described in the prospectus. (CMTA will notify shareholders 180 days in
advance in the event it no longer is required to adhere to rule 2a-7 and it
intends to stop relying on the rule.) For purposes of Investment Restriction
#2, the fund may invest more than 5% of its total assets in the securities of
any one issuer only to the extent allowed under rule 2a-7 of the Investment
Company Act of 1940. For purposes of Investment Restriction #3, CMTA will not
invest 25% or more of total assets in the securities of issuers in the same
industry. Additionally, for purposes of Investment Restriction #3, the
Investment Adviser currently interprets the term "commercial banks" to mean
domestic branches of U.S. banks. These policies are non-fundamental and may be
changed by the Board of Trustees without shareholder approval.
For purposes of Investment Restriction #4, the fund will not enter into any
repurchase agreement if, as a result, more than 10% of net assets would be
subject to repurchase agreements maturing in more than seven days.
CTRS may not:
1. Purchase any security (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities), if immediately after and
as a result of such investment (a) with respect to 75% of CTRS' total assets,
more than 5% of CTRS' total assets would be invested in securities of the
issuer, or (b) CTRS would hold more than 10% of any class of securities or of
the total securities of the issuer (for this purpose all indebtedness of an
issuer shall be deemed a single class).
2. Buy or sell real estate (including real estate limited partnerships) in
the ordinary course of its business; however, CTRS may invest in securities
secured by real estate or interests therein;
3. Acquire securities for which there is no readily available market 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 such securities
would exceed, in the aggregate, 10% of CTRS' total assets;
4. Make loans to others, except by the purchase of debt securities, entering
into repurchase agreements or making loans of portfolio securities;
5. Sell securities short;
6. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales of securities;
7. Borrow money, except from banks for temporary or emergency purposes, not
in excess of 5% of the value of CTRS' total assets, excluding the amount
borrowed. This borrowing provision is intended to facilitate the orderly sale
of portfolio securities to accommodate unusually heavy redemption requests, if
they should occur; it is not intended for investment purposes. In the event
that the asset coverage for CTRS' borrowings falls below 300%, CTRS will reduce
within three days (excluding Sundays and holidays), the amount of its
borrowings in order to provide for 300% asset coverage, and except that CTRS
may enter into reverse repurchase agreements, provided that reverse repurchase
agreements and any other transactions constituting borrowing by CTRS may not
exceed one-third of CTRS' total assets;
8. Mortgage, pledge, or hypothecate its assets, except in an amount up to 5%
of the value of its total assets, but only to secure borrowings for temporary
or emergency purposes;
9. Underwrite any issue of securities, except to the extent that the purchase
of securities directly from the issuer in accordance with CTRS' investment
objective, policies and restrictions, and later resale, may be deemed to be an
underwriting;
10. Knowingly purchase securities of other managed investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
11. Buy or sell commodities or commodity contracts (including futures
contracts) or oil, gas or other mineral exploration or development programs;
12. Write, purchase or sell puts, calls, straddles, spreads or any
combination thereof, except that this shall not prevent the purchase of
securities which have "put" or "stand-by commitment" features;
13. Purchase or retain the securities of any issuer, if, to the knowledge of
CTRS, those individual officers and Board members of CTRS, its Investment
Adviser, or principal underwriter, 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 more than 5% of the value of CTRS' total assets in securities of
any issuer with a record of less than three years continuous operation,
including predecessors;
15. Invest 25% or more of total assets in the securities of issuers in the
same industry. Electric, natural gas distribution, natural gas pipeline,
combined electric and natural gas, and telephone utilities are considered
separate industries for purposes of this restriction. Obligations of the U.S.
Government, its agencies and instrumentalities, are not subject to this 25% or
more limitation on industry concentration. In addition, CTRS may, if deemed
advisable, invest 25% or more of its assets in the obligations of commercial
banks.
Notwithstanding Investment Restriction #10, 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 Trustees
pursuant to an exemptive order granted by the Securities and Exchange
Commission.
For purposes of Investment Restriction #11, the term "oil, gas or other
mineral exploration or development programs" includes oil, gas or other mineral
exploration or development leases. For purposes of Investment Restriction #15,
the Investment Adviser currently interprets the term "commercial banks" to mean
domestic branches of U.S. banks. Finally, CTRS will not invest more than 5% of
its net assets valued at market at the time of purchase, in warrants including
not more than 2% of such net assets in warrants that are not listed on either
the New York Stock Exchange or the American Stock Exchange; however, warrants
acquired in units or attached to securities may be deemed to be without value
for the purpose of this restriction. These policies are not deemed fundamental
and may be changed by the Board of Trustees without shareholder approval.
CTEX may not:
1. Purchase any security (other than securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities), if immediately after and
as a result of such investment (a) with respect to 75% of CTEX's total assets,
more than 5% of CTEX's total assets would be invested in securities of the
issuer, or (b) CTEX would hold more than 10% of any class of securities or of
the total securities of the issuer (for this purpose all indebtedness of an
issuer shall be deemed a single class).
2. Enter into any repurchase agreement if, as a result, more than 10% of the
value of CTEX's total assets would be subject to repurchase agreements maturing
in more than seven days;
3. Buy or sell real estate (including real estate limited partnerships) in
the ordinary course of its business; however, CTEX may invest in securities
secured by real estate or interests therein;
4. Acquire securities subject to restrictions on disposition or securities
for which there is no readily available market (including securities of foreign
issuers not listed on any recognized foreign or domestic exchange), 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 such securities
would exceed, in the aggregate, 10% of CTEX's total assets;
5. Make loans to others, except for the purchase of debt securities, entering
into repurchase agreements or making loans of portfolio securities;
6. Sell securities short, except to the extent that CTEX contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;
7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales of securities;
8. Borrow money, except from banks for temporary or emergency purposes, not
in excess of 5% of the value of CTEX's total assets, excluding the amount
borrowed. This borrowing provision is intended to facilitate the orderly sale
of portfolio securities to accommodate unusually heavy redemption requests, if
they should occur; it is not intended for investment purposes. In the event
that the asset coverage for CTEX's borrowings falls below 300%, CTEX will
reduce within three days (excluding Sundays and holidays), the amount of its
borrowings in order to provide for 300% asset coverage;
9. Mortgage, pledge, or hypothecate its assets, except in an amount up to 5%
of the value of its total assets, but only to secure borrowings for temporary
or emergency purposes;
10. Underwrite any issue of securities, except to the extent that the purchase
of municipal securities directly from the issuer in accordance with CTEX's
investment objective, policies and restrictions, and later resale, may be
deemed to be an underwriting;
11. Invest in companies for the purpose of exercising control or management;
12. Knowingly purchase securities of other managed investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
13. Buy or sell commodities or commodity contracts or oil, gas or other
mineral exploration or development programs;
14. Write, purchase or sell puts, calls, straddles, spreads or any combination
thereof, except that this shall not prevent the purchase of municipal
securities which have "put" or "stand-by commitment" features;
15. Purchase or retain the securities of any issuer, if, to the knowledge of
CTEX, those individual officers and Board members of CTEX, its Investment
Adviser, or principal underwriter, 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;
16. Invest more than 5% of the value of CTEX's total assets in securities of
any issuer with a record of less than three years continuous operation,
including predecessors;
17. 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.
For purposes of Investment Restriction #2, the fund will not enter into any
repurchase agreement if, as a result, more than 10% of net assets would be
subject to repurchase agreements maturing in more than seven days.
For the purpose of CTEX's investment restrictions, the identification of the
"issuer" of municipal securities that are not general obligation securities is
made by the Investment Adviser on the basis of the characteristics of the
securities as described, the most significant of which is the ultimate source
of funds for the payment of principal and interest on such securities. For
purposes of investment restriction #13 the term "commodities contract" includes
futures contracts.
Notwithstanding Investment Restriction #12, 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 Trustees
pursuant to an exemptive order granted by the Securities and Exchange
Commission.
For purposes of Investment Restriction #16, the fund may invest more than 5%
of its total assets in the securities of any one issuer only to the extent
allowed under rule a-7 of the Investment Company Act of 1940.
The following policies of CTEX are not deemed fundamental, and thus may be
changed by the Board of Trustees without shareholder approval: CTEX may not
invest 25% or more of its assets in municipal securities the issuers of which
are located in the same state, unless such securities are guaranteed by the
U.S. Government, or more than 25% of its total assets in securities the
interest on which is paid from revenues of similar type projects. CTEX may
invest no more than an aggregate of 20% of its total assets in industrial
development securities. There could be economic, business or political
developments which might affect all municipal securities of a similar category
or type or issued by issuers within any particular geographical area or
jurisdiction. Finally, CTEX will not invest more than 5% of its net assets
valued at market at the time of purchase, in warrants including not more than
2% of such net assets in warrants that are not listed on either the New York
Stock Exchange or the American Stock Exchange; however, warrants acquired in
units or attached to securities may be deemed to be without value for the
purpose of this restriction.
FUND ORGANIZATION
Each fund is an open-end, diversified management investment company. Each was
organized as a Massachusetts business trust (Cash Management Trust on March 1,
1976, Tax-Exempt Money Fund on December 5, 1988 and U.S. Treasury Money Fund on
December 19, 1990).
All fund operations are supervised by the fund's board of trustees. The board
meets periodically and performs duties required by applicable state and federal
laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in "Trustees and Trustee Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund. FUND OFFICERS AND TRUSTEES
Trustees and Trustee Compensation
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS AND WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AGE REGISTRANT DURING (INCLUDING FROM ALL FUNDS OF FUND
PAST 5 YEARS VOLUNTARILY MANAGED BY BOARDS ON
DEFERRED CAPITAL WHICH
COMPENSATION/1/) RESEARCH AND TRUSTEE
FROM EACH FUND MANAGEMENT SERVES/2/
DURING FISCAL COMPANY OR ITS
YEAR ENDED AFFILIATES/2/
SEPTEMBER 30, DURING FISCAL
1998 YEAR ENDED
SEPTEMBER 30,
1998
<S> <C> <C> <C> <C> <C>
H. Frederick Trustee Private $6,000 CMTA $180,700 19
Christie Investor. $2,400 CTEX
Age: 65 Former $2,900 CTRS
P.O. Box 144 President and
Palos Verdes CEO, The
Estates, CA Mission Group
90274 (non-utility
holding
company,
subsidiary of
Southern
California
Edison
Company)
+Don R. Trustee President none/4/ none/4/ 12
Conlan (retired),
Age: 62 The Capital
1630 Milan Group
Avenue Companies,
South Inc.
Pasadena, CA
91030
Diane C. Trustee CEO and $5,200 CMTA $44,650 12
Creel President, $1,600 CTEX
Age: 50 The Earth $2,100 CTRS
100 W. Technology
Broadway Corporation
Suite 5000 (international
Long Beach, consulting
CA 90802 engineering)
Martin Trustee Chairman, $5,600/3/ CMTA $122,584 15
Fenton, Jr. Senior $2,000/3/ CTEX
Age: 63 Resource Group $2,500/3/ CTRS
4660 La LLC
Jolla (management of
Village senior living
Drive centers)
Suite 725
San Diego,
CA 92122
Leonard R. Trustee President, $6,000 CMTA $49,850 12
Fuller Fuller $2,400 CTEX
Age: 52 Consulting $2,900 CTRS
4337 Marina (financial
City Drive management
Suite 841 consulting
ETN firm)
Marina del
Rey, CA
90292
+*Abner D. President, Senior Vice none/4/ none/4/ 12
Goldstine PEO President and
Age: 68 and Director,
Trustee Capital
Research and
Management
Company
+**Paul G. Chairman Executive Vice none/4/ none/4/ 14
Haaga, Jr. of the President and
Age: 49 Board Director,
Capital
Research and
Management
Company
Herbert Trustee Private $6,000 CMTA $68,484 13
Hoover III Investor $2,400 CTEX
Age: 71 $2,900 CTRS
1520 Circle
Drive
San Marino,
CA 91108
Richard G. Trustee Chairman, $5,600/3/ CMTA $100,650 13
Newman President and $2,000/3/ CTEX
Age: 64 CEO, $2,500/3/ CTRS
3250 AECOM
Wilshire Technology
Boulevard Corporation
Los Angeles, (architectural
CA 90010-1599 engineering)
</TABLE>
+ Trustees who are considered "interested persons as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of directors of the parent company of a registered broker-dealer.
* 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 each fund in 1994. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustee.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 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 plan's adoption, the total amount of deferred compensation
accrued by each fund (plus earnings thereon) for participating Trustees is as
follows: Martin Fenton, Jr. ($4,365 - CMTA; $421 - CTEX and $975 - CTRS), and
Richard G. Newman ($20,619 - CMTA; $9,226 - CTEX and $10,248 - CTRS). Amounts
deferred and accumulated earnings thereon are not funded and are general
unsecured liabilities of the fund until paid to the Trustee.
/4/ Don R. Conlan, Abner D. Goldstine and Paul G. Haaga, Jr. and are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION(S)
HELD WITH DURING PAST 5 YEARS
REGISTRANT
<S> <C> <C> <C>
Teresa S. Cook 46 Vice Senior Vice President -
333 South Hope Street President Investment Management
Los Angeles, CA 90071 (CMTA and Group, Capital Research
CTRS only) and Management Company
Michael J. Downer 43 Vice Senior Vice President -
333 South Hope Street President Fund Business Management
Los Angeles, CA 90071 Group, Capital Research
and Management Company
Neil L. Langberg 45 Senior Vice Vice President -
11100 Santa Monica President Investment Management
Blvd. (CTEX) Group, Capital Research
Los Angeles, CA 90025 and Management Company
Sarah P. Lucas 44 Assistant Assistant Vice President
333 South Hope Street Vice - Investment Management
Los Angeles, CA 90071 President Group, Capital Research
(CMTA and and Management Company
CTRS only)
Julie F. Williams 50 Secretary Vice President - Fund
333 South Hope Street Business Management
Los Angeles, CA 90071 Group, Capital Research
and Management Company
Anthony W. Hynes, Jr. 35 Treasurer Vice President - Fund
135 South State Business Management
College Blvd. Group, Capital Research
Brea, CA 92821 and Management Company
Kimberly S. Verdick 33 Assistant Assistant Vice President
333 South Hope Street Secretary - Fund Business
Los Angeles, CA 90071 Management Group, Capital
Research and Management
Company
Todd L. Miller 39 Assistant Assistant Vice President
135 South State Treasurer - Fund Business
College Blvd. Management Group, Capital
Brea, CA 92821 Research and Management
Company
</TABLE>
# Positions within the organizations listed may have changed during this
period.
No compensation is paid by a fund to any officer or Trustee who is a director
or officer of the Investment Adviser. The funds pay annual fees to Trustees
who are not affiliated with the Investment Adviser as follows: CMTA - $4,000;
CTEX - $400 and CTRS - $900. In addition, each fund pays $200 for each Board
of Trustees meeting attended, plus $200 for each meeting attended as a member
of a committee of the Board of Trustees. The Trustees may elect, on a
voluntary basis, to defer all or a portion of these fees through a deferred
compensation plan in effect for each fund. The funds also reimburse certain
expenses of the Trustees who are not affiliated with the Investment Adviser. As
of November 1, 1998, the officers and Trustees and their families as a group,
owned beneficially or of record fewer than 1% of the outstanding shares of each
fund.
MANAGEMENT
INVESTMENT ADVISER -- The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have a number of years of investment experience. The Investment
Adviser's research professionals travel several million miles a year, making
more than 5,000 research visits in more than 50 countries around the world.
The Investment Adviser believes that it is able to attract and retain quality
personnel.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations as well as schools, colleges, foundations and
other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- Each fund has an Investment
Advisory and Service Agreement (the "Agreement") with the Investment Adviser
which provides that the Investment Adviser shall determine which securities
shall be purchased or sold by each fund and provides certain services to each
fund.
The CMTA Agreement will continue in effect until May 31, 1999, unless sooner
terminated. The CTEX Agreement will continue in effect until October 1, 1999,
unless sooner terminated, and the CTRS Agreement will continue in effect until
October 31, 1999, unless sooner terminated. Each Agreement 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. Each 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
qualified persons to perform the executive, administrative, clerical and
bookkeeping functions of each fund; provides suitable office space and
utilities; and provides necessary small office equipment, and general purpose
accounting forms, supplies, and postage used at the office of the funds
relating to the services furnished by the Investment Adviser. Each fund pays
all expenses not specifically assumed by the Investment Adviser, including, but
not limited to, custodian, stock transfer and dividend disbursing fees and
expenses; costs of designing, printing and mailing reports, prospectuses, proxy
statements, and notices to shareholders; taxes; expenses for the issuance and
redemption of shares of the fund (including stock certificates, registration
and qualification fees and expenses); expenses pursuant to the funds' Plan of
Distribution (described below); legal and auditing expenses; compensation,
fees, and expenses paid to trustees unaffiliated with the Investment Adviser;
association dues; costs of stationery and forms prepared exclusively for the
funds; and costs of assembling and storing shareholder account data.
Capital Research and Management Company manages the investment portfolios and
business affairs of the funds and receives an annual fee from each fund as
follows:
Cash Management Trust: 0.32% on the first $1 billion of average net assets;
plus 0.29% on average net assets between $1 billion and $2 billion; plus 0.27%
on average net assets in excess of $2 billion;
U.S. Treasury Money Fund: 0.30% on the first $800 million of average net
assets; plus 0.285% on average net assets in excess of $800 million;
Tax-Exempt Money Fund: 0.44% on the first $200 million of average net assets;
plus 0.42% on average net assets between $200 million and $600 million; plus
0.38% on the portion of average net assets between $600 million and $1.2
billion; plus 0.34% on average net assets in excess of $1.2 billion.
The Investment Adviser has agreed to waive its fees by any amount necessary to
assure that such expenses do not exceed applicable expense limitations in any
state in which the funds' shares are being offered for sale.
CMTA The Agreement provides that the Investment Adviser will reimburse CMTA for
any expenses incurred by CMTA in any fiscal year, exclusive of interest, taxes,
brokerage costs and extraordinary items such as litigation and acquisitions, to
the extent such expenses exceed the lesser of 25% of gross income for the
preceding year or the sum of (a) 1-1/2% of the average daily net assets of the
preceding year up to and including $30 million, and (b) 1% of any excess of
average daily net assets of the preceding year over $30 million. The
Investment Advisory fee is included as an expense of CMTA and is subject to the
expense limitation described in the preceding sentence.
CTEX The Investment Adviser has agreed to bear any CTEX expenses (with the
exception of interest, taxes, brokerage costs and extraordinary expenses such
as litigation and acquisitions) in excess of 0.75% of CTEX's average net assets
per annum, subject to reimbursement by CTEX, during a period which will
terminate at the earlier of (i) such time as no reimbursement has been required
for a period of 12 consecutive months, provided no advances are outstanding, or
(ii) October 2, 1999. Additionally, the Investment Adviser voluntarily agreed
to waive its fees to the extent necessary to ensure that fund expenses do not
exceed 0.65% of the average daily net assets. There can be no assurance that
this voluntary fee waiver will continue in the future. Each month, to the
extent CTEX owes money to the Investment Adviser pursuant to this provision of
the Agreement and CTEX's annualized expense ratio for the month is below 0.75%,
CTEX will reimburse the Investment Adviser until CTEX's annualized expense
ratio equals 0.75% or the debt is repaid, whichever comes first.
CTRS The Investment Adviser has agreed to bear any CTRS expenses (with the
exception of interest, taxes, brokerage costs and extraordinary expenses such
as litigation and acquisitions) in excess of 0.75% of CTRS's average net assets
per annum, subject to reimbursement by CTRS during a period which will
terminate at the earlier of (i) such time as no reimbursement has been required
for a period of 12 consecutive months, provided no advances are outstanding, or
(ii) February 1, 2001. Additionally, the Investment Adviser voluntarily agreed
to waive its fees to the extent necessary to ensure that fund expenses do not
exceed 0.675% of the average daily net assets. There can be no assurance that
this voluntary fee waiver will continue in the future. Each month, to the
extent CTRS owes money to the Investment Adviser pursuant to this provision of
the Agreement and CTRS' annualized expense ratio for the month is below 0.75%,
CTRS will reimburse the Investment Adviser until CTRS' annualized expense ratio
equals 0.75% or the debt is repaid, whichever comes first.
During the fiscal years ended September 30, 1998, 1997, and 1996, the
Investment Adviser's total fees from CMTA amounted to $11,113,000, $10,230,000,
and $9,671,000, respectively. During the fiscal years ended September 30,
1998, 1997, and 1996, the Investment Adviser's total fees from CTEX amounted to
$800,000, $699,000, and $648,000, respectively. Voluntary fee waivers for CTEX
amounted to $110,000 during the fiscal year ended September 30, 1998. During
the fiscal years ended 1998, 1997, and 1996, the Investment Adviser's total
fees from CTRS amounted to $875,000, $808,000, and $699,000, respectively.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of each 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 funds have each 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).
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Trustees and separately by a
majority of the Trustees who are not "interested persons" of the funds 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 each fund. The
officers and Trustees who are "interested persons" of the funds due to present
or past affiliations with the Investment Adviser and related companies may be
considered to have a direct or indirect financial interest in the operation of
the Plan. Potential benefits of the Plan to the funds are improved shareholder
services, savings to the funds in transfer agency costs, savings to the funds
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 funds is committed to the 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 each fund may expend up to 0.15% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of the funds' shares, provided the funds' Boards of Trustees have approved
the category of expenses for which payment is being made. In this regard, each
fund's Board of Trustees has approved one category of expenses: a service fee
to be paid to qualified dealers. During the fiscal year ended September 30,
1998, CMTA, CTRS and CTEX paid $3,209,000, $295,000, and $94,000, respectively,
to the Principal Underwriter under the Plan (compensation to dealers). As of
September 30, 1998, distribution expenses accrued and unpaid were $232,000,
$24,000 and $7,000 for CMTA, CTRS and CTEX, respectively.
DIVIDENDS AND TAXES
DAILY INCOME DIVIDENDS -- A dividend from net investment income is declared
each day on shares of each fund. This dividend is payable to everyone who was
a shareholder at the close of business the previous day. Accordingly, when
shares are purchased dividends begin to accrue on the day following receipt by
the Transfer Agent of payment for the shares; when shares are redeemed, the
shares are entitled to the dividend declared on the day the redemption request
is received by the Transfer Agent. Dividends are automatically reinvested in
shares, on the last business day of the month, at net asset value (without
sales charge), unless a shareholder otherwise instructs the Transfer Agent in
writing. Shareholders so requesting will be mailed checks in the amount of the
accumulated dividends.
Under the penny-rounding method of pricing (see "Purchase of Shares"), each
fund rounds its per share net asset value to the nearer cent to maintain a
stable net asset value of $1.00 per share. Accordingly its share price
ordinarily would not reflect realized or unrealized gains or losses unless such
gains or losses were to cause the net asset value to deviate from $1.00 by one
half-cent or more. Pursuant to Securities and Exchange Commission regulations,
the Trustees have undertaken, as a particular responsibility within their
overall duty of care owed to shareholders, to assure to the extent reasonably
practicable that each fund's net asset value per share, rounded to the nearer
cent, will not deviate from $1.00. Among the steps that could be taken to
maintain the net asset value at $1.00 when realized or unrealized gains or
losses approached one half-cent per share would be to reflect all or a portion
of such gains or losses in the daily dividends declared. This would cause the
amount of the daily dividends to fluctuate and to deviate from a fund's net
investment income for those days, and could cause the dividend for a particular
day to be negative. In that event a fund would offset any such amount against
the dividends that had been accrued but not yet paid for that month.
Alternatively, each fund has reserved the right to adjust its total number of
shares outstanding, if deemed advisable by the Trustees, in order to maintain
the net asset value of its shares at $1.00. This would be done either by
regarding each shareholder as having contributed to the capital of the fund the
number of full and fractional shares that proportionately represents the
excess, thereby reducing the number of outstanding shares, or by declaring a
stock dividend and increasing the number of outstanding shares. Each
shareholder will be deemed to have agreed to such procedure by investing in a
fund. Such action would not change a shareholder's pro rata share of net
assets, but would reflect the increase or decrease in the value of the
shareholder's holdings which resulted from the change in net asset value.
TAXES -- Each fund intends to meet all the requirements and has elected the tax
status of a "regulated investment company" under the provisions of Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). Under
Subchapter M, if a fund distributes within specified times at least 90% of the
sum of its investment company taxable income and tax-exempt income, if any, it
will be taxed only on that portion, if any, of the investment company taxable
income which it retains.
To qualify, a fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities or currencies; and (b)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of each fund's assets is represented by cash, cash
items, U.S. Government securities and securities of other regulated investment
companies, and other securities which must be limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain net income 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 a 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
funds intend to meet these distribution requirements to avoid the excise tax
liability.
The funds do not ordinarily realize short- or long-term capital gains or
losses on sales of securities. If a fund should realize gains or losses, it
would distribute to shareholders all of the excess of net long-term capital
gain over net short-term capital loss on sales of securities. Although each
fund generally maintains a stable net asset value of $1.00 per share, if the
net asset value of shares of a fund should, by reason of a distribution of
realized capital gains, be reduced below a shareholder's cost, such
distribution would in effect be a return of capital to that shareholder even
though taxable to the shareholder, and a sale of shares by a shareholder at net
asset value at that time would establish a capital loss for federal tax
purposes. See also "Purchase of Shares" below.
If for any taxable year a fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits.
If a shareholder exchanges or otherwise disposes of shares of a fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares will not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares.
As of the date of this statement of additional information, the maximum
individual tax rate applicable to ordinary income is 39.6% (effective tax rates
may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate generally
applicable to net capital gains on assets held more than one year is 20%, and
the maximum corporate tax applicable to ordinary income and net capital gains
is 35%. However, to eliminate the benefit of lower marginal corporate income
tax rates, corporations which have taxable income in excess of $100,000 in a
taxable year will be required to pay an additional amount of tax of up to
$11,750, and corporations which have taxable income in excess of $15,000,000
for a taxable year will be required to pay an additional amount of income tax
up to $100,000. Naturally, the amount of tax payable by a taxpayer will be
affected by a combination of tax law rules covering, E.G., deductions, credits,
deferrals, exemptions, sources of income and other matters. Under the Code, an
individual is entitled to establish an Individual Retirement Account ("IRA")
each year (prior to the tax return filing deadline for that year) whereby
earnings on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
STATE TAXES -- Information relating to the percentage of CTEX's income derived
from securities issued in a particular state is available upon request from the
Transfer Agent at year end.
Since all of CTRS' dividends are expected to be attributable to income on U.S.
Treasury securities, they are generally exempt from state personal income
taxes. Also, some states do not have personal income taxes. CTRS believes
that, as of the date of this publication, neither the District of Columbia nor
any state impose an income tax on dividends attributable to income on U.S.
Treasury securities paid by the fund to individuals. However, other taxes may
apply to dividends paid by CTRS to individual shareholders. Further, any
distributions of capital gains will not be exempt from income taxes. Because
tax laws vary from state to state and may change over time, you should consult
your tax adviser or state tax authorities regarding the tax status of
distributions from CTRS. Corporate shareholders may be subject to income tax
or other types of tax on dividends they receive, even in those states that do
not impose an income tax on distributions to individual shareholders of CTRS.
Corporate shareholders should therefore seek advice from their tax adviser
regarding the tax treatment of distributions from CTRS.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional federal, state and local
tax considerations generally affecting CTEX and its shareholders. No attempt
is made to present a detailed explanation of the tax treatment ofCTEX or its
shareholders, and the discussion here and in the funds' prospectus is not
intended as a substitute for careful tax planning. Investors should consult
their own tax advisers for additional details as to their particular tax
situations.
CTEX
GENERAL -- CTEX is not intended to constitute a balanced investment program and
is not designed for investors seeking capital appreciation or maximum
tax-exempt income irrespective of fluctuations in principal. Shares of CTEX
would generally not be suitable for tax-exempt institutions or tax-deferred
retirement plans (E.G., corporate-type plans, Keogh-type plans and IRA's).
Such retirement plans would not gain any benefit from the tax-exempt nature of
CTEX's dividends because such dividends would be ultimately taxable to
beneficiaries when distributed to them. In addition, CTEX may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who regularly uses a part of such facilities in his trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, partnerships and their partners and S
Corporations and their shareholders.
The percentage of total dividends paid by CTEX with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for CTEX to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the aggregate
value of CTEX's assets must consist of tax-exempt securities. Not later than
60 days after the close of its taxable year, CTEX will notify each shareholder
of the portion of the dividends paid by CTEX to the shareholder with respect to
such taxable year which constitutes exempt-interest dividends. Shareholders
are required by the Code to report to the federal government all
exempt-interest dividends received from the fund (as well as all other similar
interest). The aggregate amount of dividends so designated cannot, however,
exceed the excess of the amount of interest excludable from gross income from
tax under Section 103 of the Code received by CTEX during the taxable year over
any amounts disallowed as deductions under Sections 265 and 171(a)(2) of the
Code.
Interest on indebtedness incurred by a shareholder to purchase or carry CTEX
shares is not deductible for federal income tax purposes if CTEX distributes
exempt-interest dividends during the shareholder's taxable year. Although CTEX
normally maintains a constant net asset value of $1.00 per share, in the event
a shareholder receives an exempt-interest dividend with respect to any share
and such share is held for six months or less, and is sold or exchanged at a
loss, such loss will be disallowed to the extent of the amount of such
exempt-interest dividend.
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 dealer who is investment dealer's address
investment registered in the state printed on your account
dealer where the purchase is statement.
made and who has a
sales agreement with
American Funds
Distributors.
By mail Make your check payable Fill out the account
to the fund and mail to additions form at the
the address indicated bottom of a recent account
on the account statement, make your check
application. Please payable to the fund, write
indicate an investment your account number on your
dealer on the account check, and mail the check and
application. form in the envelope provided
with your account 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 "Telephone Purchases,
Sales and Exchanges" in the
prospectus).
By computer Please contact your Complete the American
investment dealer to FundsLink Authorization Form.
open account, then Once you establish the
follow the procedures privilege, you, your
for additional financial advisor or any
investments. person with your account
information may access
American FundsLine OnLine(r)
on the Internet and make
investments by computer
(subject to conditions noted
in "Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described
necessary. Please under "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>
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>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) $1,000 02
American Balanced Fund(r) 500 11
American Mutual Fund(r) 250 03
Capital Income Builder(r) 1,000 12
Capital World Growth and Income 1,000 33
Fund(sm)
EuroPacific Growth Fund(r) 250 16
Fundamental Investors(sm) 250 10
The Growth Fund of America(r) 1,000 05
The Income Fund of America(r) 1,000 06
The Investment Company of America(r) 250 04
The New Economy Fund(r) 1,000 14
New Perspective Fund(r) 250 07
New World Fund (SM) 1,000+ 36
SMALLCAP World Fund(r) 1,000 35
Washington Mutual Investors Fund(sm) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(r)
American High-Income Trust(sm) 1,000 21
The Bond Fund of America(sm) 1,000 08
Capital World Bond Fund(r) 1,000 31
Intermediate Bond Fund of 1,000 23
America(sm)
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(sm)
The Tax-Exempt Bond Fund of 1,000 19
America(r)
The Tax-Exempt Fund of 1,000 20
California(r)*
The Tax-Exempt Fund of Maryland(r)* 1,000 24
The Tax-Exempt Fund of Virginia(r)* 1,000 25
U.S. Government Securities Fund(sm) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of 2,500 09
America(r)
The Tax-Exempt Money Fund of 2,500 39
America(sm)
The U.S. Treasury Money Fund of 2,500 49
America(sm)
___________
*Available only in certain states.
+Effective September 15, 1999.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND
FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investments of $1 million or more and
investments made by employer-sponsored defined contribution-type plans with 100
or more eligible employees are sold with no initial sales charge. A contingent
deferred sales charge may be imposed on certain redemptions by these accounts
made within one year of purchase. Investments by retirement plans, foundations
or endowments with $50 million or more in assets, and employer-sponsored
defined contribution-type plans with 100 or more eligible employees may be made
with no sales charge and are not subject to a contingent deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of foundations or endowments with 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 -- American Funds Distributors, at its expense
(from a designated percentage of its income) currently provides additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the prospectus for the stock and stock/bond funds apply to
purchases of $50,000 or more and for the bond funds apply to purchases of
$50,000 or more made within a 13-month period subject to the following
statement of intention (the Statement) terms. The Statement is not a binding
obligation to purchase the indicated amount. When a shareholder elects to use
the Statement in order to qualify for a reduced sales charge, shares equal to
5% of the dollar amount specified in the Statement will be held in escrow in
the shareholder's account out of the initial purchase (or subsequent purchases,
if necessary) by the Transfer Agent. All dividends and any capital gain
distributions on shares held in escrow will be credited to the shareholder's
account in shares (or paid in cash, if requested). If the intended investment
is not completed within the specified 13-month period, the purchaser will pay
to the Principal Underwriter the difference between the sales charge actually
paid and the sales charge which would have been paid if the total 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 and there will be no retroactive reduction of the
sales charges paid on prior purchases. Existing holding 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)
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 product are added to the figure determined
above. The sum is the Statement amount and applicable breakpoint level. On
the first investment and all other investments made pursuant to the statement
of intention, a sales charge will be assessed according to the sales charge
breakpoint thus determined. There will be no retroactive adjustments in sales
charges on investments previously made during the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
PRICE OF MONEY MARKET FUND SHARES -- The price you pay for fund shares
(normally $1.00) is the net asset value per share which is calculated once
daily at the normal close of trading (currently 4:00 p.m., New York time) each
day the New York Stock Exchange is open. For example, if the Exchange closes
at 1:00 p.m. on one day and at 4:00 p.m. on the next, the fund's share price
would be determined as of 4:00 p.m. New York time on both days. The New York
Stock Exchange is currently closed on weekends and on the following holidays:
New Year's Day, Martin Luther King, Jr.'s Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
The valuation of each fund's portfolio securities and calculation of its net
asset value are based upon the penny-rounding method of pricing pursuant to
Securities and Exchange Commission regulations. Under the Securities and
Exchange Commission regulations permitting the use of the penny-rounding method
of pricing, each fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase instruments having remaining maturities
of 13 months or less only (25 months or less in the case of U.S. Government
securities), and invest only in securities determined by the Board of Trustees
to be of high quality with minimal credit risks.
1. All securities with 60 days or less to maturity are amortized to maturity
based on their cost if acquired within 60 days of maturity or, if already held
on the 60th day, based on the value determined on the 61st day. The maturities
of variable or floating rate instruments, with the right to resell them at an
agreed-upon price to the issuer or dealer, are deemed to be the time remaining
until the later of the next interest adjustment date or until they can be
resold.
Other securities with more than 60 days remaining to maturity are valued at
prices obtained from a pricing service selected by the Investment Adviser,
except that, where such prices are not available or where the Investment
Adviser has determined that such prices do not reflect current market value,
they are valued at the mean between current bid and ask quotations obtained
from one or more dealers in such securities.
Where market prices or market quotations are not readily available, securities
are valued at fair value as determined in good faith by the Board of Trustees
or a committee thereof. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including proper accruals of expense items; and
3. The 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. The net asset value of each share will normally remain constant at
$1.00.
In case of orders sent directly to a fund or American funds Service Company,
an investment dealer MUST be indicated. Any purchase order may be rejected by
the Principal Underwriter or by the funds.
SELLING SHARES
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application).
- -- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions 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 -- The automatic investment plan enables you to make
regular monthly or quarterly investments in shares through automatic charges to
your bank accounts. With shareholder authorization and bank approval, the
Transfer Agent will automatically charge the bank account for the amount
specified ($50 minimum), which will be automatically invested in shares at the
offering price on or about the dates you select. Bank accounts will be charged
on the day or a few days before investments are credited, depending on the
bank's capabilities, and you will receive a confirmation statement at least
quarterly. Participation in the plan will begin within 30 days after receipt
of the account application. If your bank account cannot be charged due to
insufficient funds, a stop-payment order or closing of your account, the plan
may be terminated and the related investment reversed. You may change the
amount of the investment or discontinue the plan at any time by writing the
Transfer Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
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 specified fund of sufficient
shares, deposited by the shareholder with the Transfer Agent, to provide the
withdrawal payment specified.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - -You may elect to
cross-reinvest dividends or dividends and capital gain distributions paid by
that fund (the "paying fund") into any other fund in The American Funds Group
(the "receiving fund") subject to the following conditions: (i) the aggregate
value of your account(s) in the paying fund(s) must equal or exceed $5,000
(this condition is waived if the value of the account in the receiving fund
equals or exceeds that fund's minimum initial investment requirement), (ii) as
long as the value of the account in the receiving fund is below that fund's
minimum initial investment requirement, dividends and capital gain
distributions paid by the receiving fund must be automatically reinvested in
the receiving fund, and (iii) if this privilege is discontinued with respect to
a particular receiving fund, the value of the account in that fund must equal
or exceed the fund's minimum initial investment requirement or the fund will
have the right, if you fail to increase the value of the account to such
minimum within 90 days after being notified of the deficiency, automatically to
redeem the account and send the proceeds to you. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
CHECK WRITING -- When the checks you write are presented to The Chase Manhattan
Bank for payment, the bank will instruct the Transfer Agent to withdraw the
appropriate number of shares from your account (provided payment for the shares
has been collected). The bank's rules and regulations governing such checking
accounts include the right of the bank not to honor checks in amounts exceeding
the value of the account at the time the check is presented for payment. Each
month canceled checks will be returned to you. Generally, you pay no fee for
this check writing service; however, reasonable service charges for "regular or
frequent use" of this service may be assessed in the future. Besides being
convenient, this procedure enables you to continue earning daily income
dividends on your money until your checks actually clear.
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.
AUTOMATIC EXCHANGES -- You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments, will be reflected on regular confirmation statements from American
Funds Service Company. Dividend and capital gain reinvestments and purchases
through automatic investment plans and certain retirement plans will be
confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(R) -- 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 this service, 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 "Redeeming
Shares--Telephone and Computer Purchases, Redemptions and Exchanges" below. You
will need your fund number (see the list of funds in The American Funds Group
under "Purchase of Shares--Investment Minimums and Fund Numbers"), personal
identification number (the last four digits of your Social Security number or
other tax identification number associated with your account) and account
number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) and American FundsLine OnLine, fax or
telegraph redemption and/or exchange options, you agree to hold the fund,
American Funds Service Company, any of its affiliates or mutual funds managed
by such affiliates, and each of their respective directors, trustees, officers,
employees and agents harmless from any losses, expenses, costs or liability
(including attorney fees) which may be incurred in connection with the exercise
of these privileges. Generally, all shareholders are automatically eligible to
use these options. However, you may elect to opt out of these options by
writing American Funds Service Company (you may also reinstate them at any time
by writing American Funds Service Company). If American Funds Service Company
does not employ reasonable procedures to confirm that the instructions received
from any person with appropriate account information are genuine, the fund may
be liable for losses due to unauthorized or fraudulent instructions. In the
event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural disaster, redemption
and exchange requests may be made in writing only.
REDEMPTION OF SHARES -- Each fund's Declaration of Trust permits the fund to
direct the Transfer Agent to redeem your shares if, through redemptions, market
decline or otherwise, they have a value of less than the minimum initial
investment amount required of new shareholders (determined, for this purpose
only, as the greater of the shareholder's cost or the current net asset value
of the shares, including any shares acquired through reinvestment of income
dividends and capital gain distributions). We will give you prior notice of at
least 60 days before the involuntary redemption provision is made effective
with respect to your account. You will have not less than 30 days from the
date of such notice within which to bring the account up to the minimum
determined as set forth above.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for each fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available
prices, taking into account the costs and promptness of executions.
Fixed-income securities are generally traded on a "net" basis with a dealer
acting as principal for its own account without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are usually purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, securities also may be
purchased directly from an issuer, in which case no commissions or discounts
are paid.
Subject to the above policy, in circumstances in which two or more brokers
either directly or through their correspondent clearing agents are in a
position to offer comparable prices and executions, preference may be given to
brokers that have sold shares of the funds or have provided investment
research, statistical, and other related services to the Investment Adviser for
the benefit of the funds and/or of other funds served by the Investment
Adviser.
Portfolio transactions for the funds 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 funds, they
are effected only when the Investment Adviser believes that to do so is in the
interest of the funds. When such concurrent authorizations occur, the
objective is to allocate the executions in an equitable manner.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the funds, including
proceeds from the sale of shares of the funds and of securities in either
fund's portfolio, are held by The Chase Manhattan Bank, One Chase Manhattan
Plaza, New York, NY 10081, as Custodian.
TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the record 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. During the fiscal year ended September 30,
1998, CMTA, CTRS and CTEX paid $5,767,000, $349,000 and $146,000, respectively,
to American Funds Service Company.
INDEPENDENT ACCOUNTANTS -- PricewaterhouseCoopers LLP, 400 South Hope Street,
Los Angeles, CA 90071, has served as the funds' independent accountant since
inception, providing audit services, preparation of tax returns and review of
certain documents to be filed with the Securities and Exchange Commission. The
financial statements included in this statement of additional information have
been so included in reliance on the report of the independent accountants
given on the authority of said firm as experts in accounting and auditing.
REPORTS TO SHAREHOLDERS -- Each fund's fiscal year ends on September 30. It
provides shareholders at least semiannually with reports showing the investment
portfolio and financial statements audited annually by each fund's independent
accountants, PricewaterhouseCoopers LLP, whose selection is determined annually
by the Trustees. The financial statements contained in the annual report are
included in this statement of additional information. 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 -- Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on
personal investing for certain investment personnel; ban on short-term trading
profits for investment personnel; limitations on service as a director of
publicly traded companies; and disclosure of personal securities transactions.
You may obtain a summary of the personal investing policy by contacting the
Secretary of the fund.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY -- Under the laws of certain states,
including Massachusetts, where the funds were organized, and California, where
each 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 in which they have invested. However,
the risk of a shareholder incurring any financial loss on account of
shareholder liability is limited to circumstances in which a fund itself would
be unable to meet its obligations. The Declaration of Trust of each fund
contains an express disclaimer of shareholder liability for acts or obligations
of the fund and provides that notice of the disclaimer may be given in each
agreement, obligation, or instrument which is entered into or executed by the
fund or its Trustees. Each Declaration of Trust provides for indemnification
out of fund property of any shareholder held personally liable for the
obligations of the fund and also provides for the fund to reimburse such
shareholder for all legal and other expenses reasonably incurred in connection
with any such claim or liability.
Under each Declaration of Trust, the Trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. Each fund
will provide indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.
SHAREHOLDER VOTING RIGHTS - All shares of each fund have equal voting rights
and may be voted in the elections of Trustees and on other matters submitted to
the vote of shareholders. As permitted by Massachusetts law, there will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. At that time, the Trustees then in
office will call a shareholders meeting for the election of Trustees. The
Trustees of a fund must call a meeting of shareholders for the purpose of
voting upon the question of removal of any trustee when requested to do so by
the record holders of 10% of the outstanding shares of a fund. At such
meeting, a trustee may be removed after the holders of record of not less than
two-thirds of the outstanding shares have declared that the trustee be removed
either by declaration in writing or by votes cast in person or by proxy.
Except as set forth above, the Trustees will continue to hold office and may
appoint successor Trustees. The shares do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the
election of Trustees of a fund can elect all the Trustees of a fund. No
amendment may be made to any fund's Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the fund except
that amendments may be made upon the sole approval of the Trustees to conform
the Declaration of Trust to the requirements of applicable Federal laws or
regulations or the requirements of the regulated investment company provisions
of the Code; however, the Trustees will not be held liable for failing to do
so. If not terminated by the vote or written consent of a majority of the
outstanding shares, each fund will continue indefinitely.
INVESTMENT RESULTS AND RELATED STATISTICS
Each fund may from time to time provide yield information (including CTEX
tax-equivalent yield information) or comparisons of the fund's yield to various
averages in advertisements or in reports furnished to current or prospective
shareholders. Yield will be calculated on a seven-day, tax-equivalent and
effective basis, as appropriate, pursuant to formulas prescribed by the
Securities and Exchange Commission:
Seven-day yield = (net change in account value x 365/7)
Tax-equivalent yield = tax-exempt portion of seven-day yield/(1-stated income
tax rate) + taxable portion of seven day yield
Effective yield* = [1 + (net change in account value) 1/7]/365/
*The effective yield will assume a year's compounding of the seven-day yield.
CMTA
The seven-day and effective yields for the period ended September 30, 1998 are
calculated as follows:
ASSUMPTIONS:
Value of hypothetical pre-existing account with exactly one share at the
beginning of the period: $1.0000000
Value of same account* (excluding capital changes) at the end of the seven-day
period ending September 30, 1998: $1.00095789
*Value includes additional shares acquired with dividends paid on the original
share.
CALCULATION: Ending account value: $1.00095789
Less beginning account value: $1.00000000
Net change in account value: $0.00095789
Seven-day yield = ( 0.00095789 X 365/7) = 4.99%
Effective yield = [1 + (0.00095789) 1/7]/365/ = 5.12%
CTRS
The seven-day and effective yields for the period ended September 30, 1998 are
calculated as follows:
ASSUMPTIONS:
Value of hypothetical pre-existing account with exactly one share at the
beginning of the period: $1.0000000
Value of same account* (excluding capital changes) at the end of the seven-day
period ending September 30, 1998: $1.0008351
*Value includes additional shares acquired with dividends paid on the original
share.
CALCULATION: Ending account value: $1.0008351
Less beginning account value: $1.00000000
Net change in account value: $0.0008351
Seven-day yield = (0.0008351 X 365/7) = 4.35%
Effective yield = [1 + (0.0008351) 1/7]/365/ = 4.45%
CTEX
The seven-day, effective and tax-equivalent yields for the period ended
September 30, 1998 are calculated as follows:
ASSUMPTIONS:
Value of hypothetical pre-existing account with exactly one share at the
beginning of the period: $1.0000000
Value of same account* (excluding capital changes) at the end of the seven-day
period ending September 30, 1998: $1.00055251
*Value includes additional shares acquired with dividends paid on the original
share.
CALCULATION: Ending account value: $1.00055251
Less beginning account value: $1.0000000
Net change in account value: $0.00055251
Tax-exempt portion of net change: $0.00055251
Taxable portion of net change: $ -0-
Seven-day yield = ($0.00055251 X 365/7) = 2.88%
Seven-day tax equivalent yield = ($0.00055251 X 365/7(1-0.396)) = 4.77%
Effective yield = [1 + ($0.00055251) 1/7]/365/ = 2.92%
Each fund's investment results may also be calculated for longer periods in
accordance with the following method: by subtracting (a) the net asset value
of one share at the beginning of the period, from (b) the net asset value of
all shares an investor would own at the end of the period for the share held at
the beginning of the period (assuming reinvestment of all dividends and
distributions) and dividing by (c) the net asset value per share at the
beginning of the period. The resulting percentage indicates the positive or
negative rate of return that an investor would have earned from reinvested
dividends and distributions and any changes in share price during the period.
Based on the foregoing formula, the lifetime return of CMTA was 387.0% (for the
period 11/3/76 through 9/30/98), the lifetime return of CTEX was 32.2% (for the
period 10/24/89 through 9/30/98), and the lifetime return of CTRS was 36.0%
(for the period 2/1/91 through 9/30/98).
Each fund's investment 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 yield figure should not be considered
representative of what an investment in a fund may earn in any future period.
These factors and possible differences in calculation methods should be
considered when comparing each fund's investment results with those published
for other investment companies, other investment vehicles and averages.
Investment results also should be considered relative to the risks associated
with the investment objective and policies.
CMTA VS. MONEY MARKET FUND AVERAGE ("MMFA") AND BANK AVERAGE ("BA")
The information below permits investors to compare the results of similar
investment vehicles.
<TABLE>
<CAPTION>
5-Year Period CMTA MMFA* BA**
<S> <C> <C> <C>
10/1/93 - 9/30/98 +26.0% +25.7% +21.3%
10-Year Period
1988 - 1998 67.7% 66.8% 60.7%
1987 - 1997 70.7 69.2 64.0
1986 - 1996 72.4 70.3 66.6
1985 - 1995 75.6 73.1 71.5
1984 - 1994 80.9 78.0 79.0
1983 - 1993 93.6 89.3 89.9
1982 - 1992 105.7 100.0 101.3
1981 - 1991 126.2 118.6 113.3
1980 - 1990 149.2 135.9 121.5
1979 - 1989 159.8 NA 124.1
1978 - 1988 162.0 NA 123.8
1977 - 1987 159.8 NA 123.9
</TABLE>
* BASED ON YIELDS COMPILED BY THE FOLLOWING PUBLICATIONS: FOR FIGURES PRIOR TO
1/1/91, THE SOURCE IS THE MONEY MARKET FUND SURVEY PUBLISHED BY SURVEY
PUBLICATIONS; FOR FIGURES BEGINNING 1/1/91, IBC/DONOGHUE'S MONEY FUND REPORT IS
USED. THESE PUBLICATIONS PROVIDE 30-DAY AVERAGE YIELD FIGURES ON "X" NUMBER OF
MONEY MARKET FUNDS. THIS YIELD FIGURE IS MATHEMATICALLY CONVERTED TO A
PER-SHARE DIVIDEND AMOUNT WHICH IS THEN USED TO PRODUCE HYPOTHETICAL RESULTS
FOR THE AVERAGE MONEY MARKET FUND.
** CALCULATED FROM FIGURES SUPPLIED BY THE U.S. LEAGUE OF SAVINGS INSTITUTIONS
AND THE FEDERAL RESERVE BOARD WHICH ARE BASED ON EFFECTIVE ANNUAL RATES OF
INTEREST ON BOTH PASSBOOK AND CERTIFICATE ACCOUNTS. SAVINGS ACCOUNTS OFFER A
GUARANTEED RETURN OF PRINCIPAL AND A FIXED RATE OF INTEREST BUT NO OPPORTUNITY
FOR CAPITAL GROWTH.
CTEX VS. TAX-EXEMPT MONEY MARKET FUND AVERAGE ("MMFA") AND BANK AVERAGE ("BA")
<TABLE>
<CAPTION>
Tax-Exempt
Lifetime Period CTEX MMFA/#/ BA
<S> <C> <C> <C>
10/24/89 - 9/30/98 +32.2% +32.8% +49.8%
</TABLE>
# SAME AS * EXCEPT IT IS FOR TAX-EXEMPT MONEY MARKET FUNDS
CTRS VS. GOVT MONEY MARKET FUND AVERAGE (" GOVT MMFA") AND BANK AVERAGE ("BA")
<TABLE>
<CAPTION>
Lifetime Period CTRS Govt BA
<S> <C> <C> <C>
2/1/91 - 9/30/98 +36.0% +37.6% +37.2%
</TABLE>
@ SAME AS * EXCEPT IT IS FOR GOVERNMENT MONEY MARKET FUNDS
DESCRIPTION OF RATINGS FOR DEBT SECURITIES
COMMERCIAL PAPER RATINGS
STANDARD & POOR'S CORPORATION: "A-1" and "A-2" are the two highest commercial
paper rating categories and are described as follows:
"A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong."
"A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
'A-1'."
MOODY'S INVESTORS SERVICE, INC.: "Prime-1" and "Prime-2" are the two highest
commercial paper rating categories and are described as follows:
"ISSUERS RATED PRIME-1 (or related supporting institutions) 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 earning coverage of fixed financial charges and high
internal cash generation.
- - Well established access to a range of financial markets and assured sources
of alternate liquidity."
"ISSUERS RATED PRIME-2 (or related supporting institutions) 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 alternative liquidity is
maintained."
BOND RATINGS
STANDARD & POOR'S CORPORATION: "AAA" and "AA" are the two highest bond rating
categories, and are described as follows:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
MOODY'S INVESTORS SERVICE, INC.: "Aaa" and "Aa" are the two highest bond
rating categories, and are described as follows:
"Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities, or fluctuation of protective elements may be
of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities."
NOTE RATINGS
STANDARD & POOR'S CORPORATION: "SP-1" and "SP-2" are the two highest note
rating categories, and are described as follows:
"SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus (+) designation."
"SP-2 Satisfactory capacity to pay principal and interest."
MOODY'S INVESTORS SERVICE, INC.: "MIG-1" and "MIG-2" are the two highest note
rating categories, and are described as follows:
"MIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing."
"MIG 2: This designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
<TABLE>
The U.S. Treasury Money Fund of America
Investment Portfolio
September 30, 1998
<S> <C> <C> <C>
Principal Market
Yield at Amount Value
Acquisition (000) (000)
- -------------------------------------- ------------- ------- -------------
U.S. Treasury Securities - 99.78%
U.S. Treasury bills 10/1/98 5.02% $27,985 $27,981
U.S. Treasury bills 10/8/98 4.98% - 5.02% 2,190 2,188
U.S. Treasury bills 10/15/98 4.90% - 5.08% 75,910 75,763
U.S. Treasury bills 10/22/98 4.99% - 5.02% 29,065 28,985
U.S. Treasury bills 10/29/98 4.84% - 4.94% 7,680 7,651
U.S. Treasury bills 11/5/98 5.01% - 5.04% 14,690 14,626
U.S. Treasury bills 11/12/98 4.85% - 4.99% 37,165 36,964
U.S. Treasury bills 11/19/98 4.99% 51,110 50,819
U.S. Treasury bills 12/3/98 4.78% - 4.84% 36,130 35,871
U.S. Treasury bills 12/10/98 4.48% - 4.82% 34,545 34,261
U.S. Treasury bills 12/17/98 4.54% - 4.74% 38,000 37,661
U.S. Treasury bills 1/7/99 4.42% 2,070 2,046
-------------
Total Investment Securities
(cost: $354,597,000) 354,816
Excess of cash and receivables 794
over payables -------------
Net Assets $355,610
=============
See Notes to Financial Statements
</TABLE>
<TABLE>
U.S. Treasury Money Fund of America
Financial Statements
<S> <C> <C>
- ---------------------------------------- ------------ ------------
Statement of Assets and Liabilities
at September 30, 1998 (dollars in thousands)
- ---------------------------------------- ------------ ------------
Assets:
Investment securities at market
(cost: $354,597) $354,816
Cash 428
Receivables for --
Sales of fund's shares 3,976
------------
359,220
Liabilities:
Payables for --
Repurchases of fund's shares $3,413
Dividends payable 66
Management services 87
Accrued expenses 44 3,610
------------ ------------
Net Assets at September 30, 1998 --
Equivalent to $1.00 per share on
355,390,391 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $355,610
=============
Statement of Operations
for year ended September 30, 1998 (dollars in thousands)
------------ ------------
Investment Income:
Income:
Interest $ 14,959
Expenses:
Management services fee $875
Distribution expenses 295
Transfer agent fee 349
Reports to shareholders 29
Registration statement and prospectus 80
Postage, stationery and supplies 64
Trustees' fees 16
Auditing and legal fees 22
Custodian fee 14 1,744
------------ ------------
Net investment income 13,215
------------
Increase in Unrealized Appreciation
on Investments:
Net unrealized
appreciation on investments:
Beginning of year 78
End of year 219
------------
Net increase in unrealized appreciation
on investments 141
------------
Net Increase in Net Assets Resulting
from Operations $13,356
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- ------------- -------------
Year ended Year ended
9/30/1998 9/30/1997
Operations: ------------- -------------
Net investment income 13,215 $ 12,404
Net unrealized appreciation
on investments 141 55
------------- -------------
Net increase in net assets
resulting from operations 13,356 12,459
------------- -------------
Dividends Paid to Shareholders (13,215) (12,403)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
660,343,206 and 422,021,875
shares, respectively 660,344 422,022
Proceeds from shares issued in
reinvestment of net investment income
dividends: 12,201,748 and
11,622,401 shares, respectively 12,201 11,622
Cost of shares repurchased:
596,431,556 and 410,155,308
shares, respectively (596,431) (410,155)
------------- -------------
Net increase in net assets resulting
from capital share transactions 76,114 23,489
------------- -------------
Total Increase in Net Assets 76,255 23,545
Net Assets:
Beginning of year 279,355 255,810
------------- -------------
End of year $355,610 $279,355
============= =============
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The U.S. Treasury Money 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 to provide income on cash
reserves, while preserving capital and maintaining liquidity, through
investments in U.S. Treasury securities maturing in one year or less.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
NET ASSET VALUE - The fund uses the penny-rounding method of valuing its
shares, in accordance with Securities and Exchange Commission (SEC) rules.
This method permits the fund to maintain a constant net asset value of $1.00
per share, provided the market value of the fund's shares does not deviate from
$1.00 by more than one-half of 1% and the fund complies with other restrictions
set forth in the SEC rules.
SECURITY VALUATION - Fixed-income securities are valued at prices obtained from
a pricing service, when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, such securities
will be valued at the mean quoted bid and asked prices or at prices for
securities of comparable maturity, quality and type. Securities with original
maturities of one year or less having 60 days or less to maturity are amortized
to maturity based on their cost if acquired within 60 days of maturity or, if
already held on the 60th day, based on the value determined on the 61st day.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - As is customary in the
mutual fund industry, securities transactions are accounted for on the date the
securities are purchased or sold. Interest income is reported on the accrual
basis. Discounts and premiums on securities purchased are amortized.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily after the determination of the fund's net investment income and
are paid to shareholders monthly.
2. FEDERAL INCOME TAXATION
It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income to its shareholders. Therefore, no
federal income tax provision is required.
As of September 30, 1998, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $219,000, of which all related to
appreciated securities. There was no difference between book and tax realized
gains on securities transactions for the year ended September 30, 1998. The
cost of portfolio securities for book and federal income tax purposes was
$354,597,000 at September 30, 1998.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $875,000 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 $800 million of
average net assets and 0.285% of such assets in excess of $800 million.
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution with American Funds
Distributors, Inc. (AFD), the fund may expend up to 0.15% 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 September 30, 1998, distribution expenses under
the Plan were $295,000. As of September 30, 1998, accrued and unpaid
distribution expenses were $24,000.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $349,000.
DIRECTORS' 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 September 30, 1998, aggregate amounts deferred and earnings thereon were
$10,000.
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 of $1,345,446,000
and $1,284,194,000, respectively, during the year ended September 30, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $14,000 includes $13,000 that was paid by these credits
rather than in cash.
<TABLE>
PER-SHARE DATA AND RATIOS
<S> <C> <C> <C> <C> <C>
- ------------------------------ --------------------------------------
Year endSeptembe30
--------------------------------------
1998 1997 1996 1995 1994
--------------------------------------
Net Asset Value, Beginning
of Year $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------
Income from Investment
Operations:
Net investment income .045 .046 .046 .048 .028
Total income from investment --------------------------------------
operations .045 .046 .046 .048 .028
--------------------------------------
Less Distributions:
Dividends from net investment
income (.045) (.046) (.046) (.048) (.028)
--------------------------------------
Total distributions (.045) (.046) (.046) (.048) (.028)
--------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
======================================
Total Return 4.63% 4.71% 4.66% 4.89% 2.89%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $356 $279 $256 $231 $199
Ratio of expenses to average
net assets .59% .53% .65% .67% .67%
Ratio of net income to
average net assets 4.49% 4.61% 4.53% 4.79% 2.91%
</TABLE>
Report of Independent Accountants
To the Board of Trustees and Shareholders of The U.S. Treasury Money Fund of
America:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of The U.S. Treasury Money Fund of
America (the "fund") at September 30, 1998, the results of its operations, the
changes in its net assets and the per-share data and ratios for the years
indicated in conformity with generally accepted accounting principles. These
financial statements and per-share data and ratios (hereafter referred to as
"financial statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Los Angeles, California
October 30, 1998
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions.
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, all of the dividends paid by the fund
from net investment income were 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
plan trusts may need this information for their annual information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FISCAL YEAR AND NOT THE CALENDAR
YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION
WHICH WILL BE MAILED IN JANUARY 1999 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO
BE INCLUDED ON THEIR RESPECTIVE 1998 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
