Intermediate Bond Fund of America

<PAGE>

INTERMEDIATE BOND FUND OF AMERICA

Part B
Statement of Additional Information

November 1, 2006

(as supplemented July 2, 2007)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of Intermediate Bond Fund of
America (the "fund" or "IBFA") dated November 1, 2006. You may obtain a
prospectus from your financial adviser or by writing to the fund at the
following address:

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

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

TABLE OF CONTENTS

Item Page no.
---- --------

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 2
Fundamental policies and investment restrictions. . . . . . . . . . 8
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 10
Execution of portfolio transactions . . . . . . . . . . . . . . . . 28
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 28
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 31
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 36
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 41
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Shareholder account services and privileges . . . . . . . . . . . . 46
General information . . . . . . . . . . . . . . . . . . . . . . . . 48
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Financial statements

Intermediate Bond Fund of America -- Page 1
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CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

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

DEBT SECURITIES

. The fund will invest at least 80% of its assets in bonds (bonds include any
debt instrument and cash equivalents).

. The fund will primarily invest in debt securities rated A or better by a
nationally recognized statistical rating organization or unrated but
determined to be of equivalent quality by the fund's investment adviser.

. The fund may invest up to 10% of its assets in securities rated BBB or Baa
(or in unrated securities determined to be of equivalent quality by the
fund's investment adviser).

MATURITY

. The fund's dollar-weighted average maturity will be no less than three years and no
longer than five years. The maturity of a debt instrument is normally its ultimate
maturity date unless it is likely that a maturity shortening device (such as a
call, put, refunding or redemption provision) will cause the debt instrument
to be repaid.

* * * * * *

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

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."

DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and accrue interest at the
applicable coupon rate over a specified time period. The market prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general, market prices of debt securities decline when interest
rates rise and increase when interest rates fall. The prices of these securities
can be adversely affected by the outcome of financial contracts (such as
derivatives) held by third parties relating to various assets or indices.

Certain additional risk factors relating to debt securities are discussed below:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or
substantial period of rising interest rates, issuers that are highly
leveraged may experience increased financial stress that would adversely
affect their ability to meet projected business goals, to obtain additional
financing and to service their principal and interest payment obligations.
Periods of

Intermediate Bond Fund of America -- Page 2
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economic change and uncertainty also can be expected to result in increased
volatility of market prices and yields of certain debt securities.

PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest
rate market, the fund would have to replace the security with a lower
yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or
principal or is the subject of bankruptcy proceedings, the fund may incur
losses or expenses in seeking recovery of amounts owed to it.

LIQUIDITY AND VALUATION -- There may be little trading in the secondary
market for particular debt securities, which may affect adversely the
fund's ability to value accurately or dispose of such debt securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and/or liquidity of debt
securities.

U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:

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

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Administration (FHA),
the Export-Import Bank (Exim Bank), the Overseas Private Investment
Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
Business Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by pools of mortgages or other assets including, but not limited to,
loans on single family residences, home equity loans, mortgages on commercial
buildings, credit card receivables and leases on airplanes or other equipment.
Principal and interest payments made on the underlying asset pools backing these
obligations are typically passed through to investors, net of any fees paid to

Intermediate Bond Fund of America -- Page 3
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any guarantor of the securities. Pass-through securities may have either fixed
or adjustable coupons. These securities include:

"MORTGAGE-BACKED SECURITIES" -- These securities may be issued by U.S.
government agencies and government-sponsored entities, such as Ginnie Mae,
Fannie Mae and Freddie Mac, and by private entities. The payment of
interest and principal on mortgage-backed obligations issued by U.S.
government agencies may be guaranteed by the full faith and credit of the
U.S. government (in the case of Ginnie Mae), or may be guaranteed by the
issuer (in the case of Fannie Mae and Freddie Mac). However, these
guarantees do not apply to the market prices and yields of these
securities, which vary with changes in interest rates.

Mortgage-backed securities issued by private entities are structured
similarly to those issued by U.S. government agencies. However, these
securities and the underlying mortgages are not guaranteed by any
government agencies. These securities generally are structured with one or
more types of credit enhancement such as insurance or letters of credit
issued by private companies. Mortgage-backed securities generally permit
borrowers to prepay their underlying mortgages. Prepayments can alter the
effective maturity of these instruments.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -- CMOs are also backed by a
pool of mortgages or mortgage loans, which are divided into two or more
separate bond issues. CMOs issued by U.S. government agencies are backed by
agency mortgages, while privately issued CMOs may be backed by either
government agency mortgages or private mortgages. Payments of principal and
interest are passed through to each bond issue at varying schedules
resulting in bonds with different coupons, effective maturities and
sensitivities to interest rates. Some CMOs may be structured in a way that
when interest rates change, the impact of changing prepayment rates on the
effective maturities of certain issues of these securities is magnified.
CMOs may be less liquid or may exhibit greater price volatility than other
types of mortgage or asset-backed securities.

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

ASSET-BACKED SECURITIES -- These securities are backed by other assets such
as credit card, automobile or consumer loan receivables, retail installment
loans, or participations in pools of leases. Credit support for these
securities may be based on the underlying assets and/or provided through
credit enhancements by a third party. The values of these securities are
sensitive to changes in the credit quality of the underlying collateral,
the

Intermediate Bond Fund of America -- Page 4
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credit strength of the credit enhancement, changes in interest rates and at
times the financial condition of the issuer. Some asset-backed securities
also may receive prepayments that can change their effective maturities.

INFLATION-INDEXED BONDS -- The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities and corporations. The
principal value of this type of bond is adjusted in response to changes in the
level of the consumer price index. The interest rate is fixed at issuance as a
percentage of this adjustable principal. The actual interest income may
therefore both rise and fall as the level of the consumer price index rises and
falls. In particular, in a period of deflation the interest income would fall.
While the interest income may adjust upward or downward without limit in
response to changes in the consumer price index, the principal has a floor at
par, meaning that the investor receives at least the par value at redemption.

Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed and will fluctuate.

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

FORWARD COMMITMENT, WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The fund
may enter into commitments to purchase or sell securities at a future date. When
the fund agrees to purchase such securities, it assumes the risk of any decline
in value of the security from 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.

The fund will not use these transactions for the purpose of leveraging and will
segregate liquid assets that will be marked to market daily in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent the
fund's aggregate commitments in connection with these transactions exceed its
segregated assets, the fund temporarily could be in a leveraged position
(because it may have an amount greater than its net assets subject to market
risk). Should market values of the fund's portfolio securities decline while the
fund is in a leveraged position, greater depreciation of its net assets would
likely occur than if it were not in such a position. The fund will not borrow
money to settle these transactions and, therefore, will liquidate other
portfolio securities in advance of settlement if necessary to generate
additional cash to meet its obligations. After a transaction is entered into,
the fund may still dispose of or renegotiate the transaction. Additionally,
prior to receiving delivery of securities as part of a transaction, the fund may
sell such securities.

Intermediate Bond Fund of America -- Page 5
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The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement involves the sale of a security by
a fund and its agreement to repurchase the security at a specified time and
price. A "roll" transaction involves the sale of mortgage-backed or other
securities together with a commitment to purchase similar, but not identical,
securities at a later date. The fund assumes the risk of price and yield
fluctuations during the time of the commitment. The fund will segregate liquid
assets that will be marked to market daily in an amount sufficient to meet its
payment obligations under "roll" transactions and reverse repurchase agreements
with broker-dealers (no collateral is required for reverse repurchase agreements
with banks).

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities may only be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or in a registered public offering. Where registration is required, the holder
of a registered security may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. Difficulty in selling such securities may
result in a loss to the fund or cause it to incur additional administrative
costs.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the fund's board of trustees, taking into account
factors such as the frequency and volume of trading, the commitment of dealers
to make markets and the availability of qualified investors, all of which can
change from time to time. The fund may incur certain additional costs in
disposing of illiquid securities.

INVESTING IN VARIOUS COUNTRIES -- The fund may only invest in non-U.S.
securities that are U.S. dollar-denominated and are in the three highest rating
categories. Accordingly, the risks described below are substantially lessened.

Investing outside the United States involves special risks, caused by, among
other things: fluctuating local currency values; different accounting, auditing,
and financial reporting regulations and practices in some countries; changing
local and regional economic, political, and social conditions; expropriation or
confiscatory taxation and greater market volatility. However, in the opinion of
the fund's investment adviser, investing outside the United States also can
reduce certain portfolio risks due to greater diversification opportunities.

The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing countries
only to a limited extent.

CASH AND CASH EQUIVALENTS -- These include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank

Intermediate Bond Fund of America -- Page 6
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notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

VARIABLE AND FLOATING RATE OBLIGATIONS -- The interest rates payable on certain
securities in which the fund may invest may not be fixed but may fluctuate based
upon changes in market rates or credit ratings. Variable and floating rate
obligations bear coupon rates that are adjusted at designated intervals, based
on the then current market rates of interest or credit ratings. The rate
adjustment features tend to limit the extent to which the market value of the
obligations will fluctuate.

ADJUSTMENT OF MATURITIES -- The investment adviser seeks to anticipate movements
in interest rates and may adjust the maturity distribution of the portfolio
accordingly, keeping in mind the fund's objectives.

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

The fund does not currently intend to engage in this investment practice over
the next 12 months.

* * * * * *

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

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. Transaction costs are
usually reflected in the spread between the bid and asked price.

A fund's portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. The fund's portfolio turnover rates for
the fiscal years ended August 31, 2006 and 2005 were 71% and 76%, respectively.
See "Financial highlights" in the prospectus for the fund's annual portfolio
turnover rate for each of the last five fiscal years.

Intermediate Bond Fund of America -- Page 7
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FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions, which may not be changed without approval by
holders of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), as the vote of the
lesser of (a) 67% or more of the outstanding voting securities present at a
shareholder meeting, if the holders of more than 50% of the outstanding voting
securities are present in person or by proxy, or (b) more than 50% of the
outstanding voting securities. All percentage limitations are considered at the
time securities are purchased and are based on the fund's net assets unless
otherwise indicated. None of the following investment restrictions involving a
maximum percentage of assets will be considered violated unless the excess
occurs immediately after, and is caused by, an acquisition by the fund.

These restrictions provide that the fund may not:

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

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

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

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

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

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

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

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

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

Intermediate Bond Fund of America -- Page 8
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10. Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;

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

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

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

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

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

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

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

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

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

NONFUNDAMENTAL POLICY -- The following policy may be changed without shareholder
approval.

The fund may not issue senior securities, except as permitted by the 1940 Act.

Intermediate Bond Fund of America -- Page 9
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MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

"INDEPENDENT" TRUSTEES/1/

NUMBER OF
NAME, AGE AND PORTFOLIOS/3/
POSITION WITH FUND PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
(YEAR FIRST ELECTED/2/) DURING PAST FIVE YEARS BY TRUSTEE BY TRUSTEE
-----------------------------------------------------------------------------------------------------------

Richard G. Capen, Jr., 72 Corporate director and author; 15 Carnival Corporation
Trustee (1999) former U.S. Ambassador to
Spain; former Vice Chairman,
Knight-Ridder, Inc.
(communications company);
former Chairman and Publisher,
The Miami Herald
----------------
-----------------------------------------------------------------------------------------------------------
H. Frederick Christie, 73 Private investor; former 21 Ducommun Incorporated;
Trustee (1987) President and CEO, The Mission IHOP Corporation;
Group (non-utility holding Southwest Water Company
company, subsidiary of
Southern California Edison
Company)
-----------------------------------------------------------------------------------------------------------
Diane C. Creel, 57 Chairman of the Board, 13 Allegheny Technologies;
Trustee (1994) President and CEO, Ecovation, BF Goodrich;
Inc. (organic waste Foster Wheeler Ltd.
management); former President
and CEO, The Earth Technology
Corporation (international
consulting engineering)
-----------------------------------------------------------------------------------------------------------
James G. Ellis, 60 Vice Provost, Globalization, 12 Genius Products;
Trustee (2006) University of Southern Professional Business Bank
California; Dean, Marshall
School of Business, University of
Southern California; Professor,
Marshall School of Business,
University of Southern California
-----------------------------------------------------------------------------------------------------------
Martin Fenton, 71 Chairman of the Board, Senior 18 None
Chairman of the Board Resource Group LLC
(Independent and (development and management of
Non-Executive) (1989) senior living communities)
-----------------------------------------------------------------------------------------------------------
Leonard R. Fuller, 60 President and CEO, Fuller 16 None
Trustee (1994) Consulting (financial
management consulting firm)
-----------------------------------------------------------------------------------------------------------
R. Clark Hooper, 60 Private investor; former 18 JPMorgan Value
Trustee (2005) President, Dumbarton Group Opportunities Fund
LLC (consulting); former
Executive Vice President -
Policy and Oversight, NASD
-----------------------------------------------------------------------------------------------------------
Richard G. Newman,/5/ 71 Chairman of the Board, AECOM 14 Sempra Energy;
Trustee (1991) Technology Corporation Southwest Water Company
(engineering, consulting and
professional technical
services)
-----------------------------------------------------------------------------------------------------------
Frank M. Sanchez, 63 Principal, The Sanchez Family 13 None
Trustee (1999) Corporation dba McDonald's
Restaurants (McDonald's
licensee)
-----------------------------------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 10
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"INTERESTED" TRUSTEES/6,7/

PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS
AND POSITIONS NUMBER OF
NAME, AGE AND POSITION HELD WITH AFFILIATED ENTITIES PORTFOLIOS/3/
WITH FUND (YEAR FIRST OR THE PRINCIPAL UNDERWRITER OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
ELECTED/2/) OF THE FUND BY DIRECTOR BY TRUSTEE
----------------------------------------------------------------------------------------------------------

Abner D. Goldstine, 76 Senior Vice President and 13 None
Vice Chairman of the Director, Capital Research and
Board (1987) Management Company
----------------------------------------------------------------------------------------------------------
Paul G. Haaga, Jr., 57 Vice Chairman of the Board, 16 None
Vice Chairman of the Capital Research and
Board (1987) Management Company; Director,
The Capital Group Companies,
Inc.*
----------------------------------------------------------------------------------------------------------
John H. Smet, 50 Senior Vice President, Capital 2 None
President and Trustee Research and Management
(1993) Company; Director, American
Funds Distributors, Inc.*
----------------------------------------------------------------------------------------------------------

OTHER OFFICERS/7/

NAME, AGE AND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
POSITION WITH FUND AND POSITIONS HELD WITH AFFILIATED ENTITIES
(YEAR FIRST ELECTED/2/) OR THE PRINCIPAL UNDERWRITER OF THE FUND
---------------------------------------------------------------------------------------

David A. Hoag, 41 Senior Vice President, Capital Research Company*
Vice President (2004)
---------------------------------------------------------------------------------------
Thomas H. Hogh, 43 Vice President, Capital International Research, Inc.*
Vice President (2004)
---------------------------------------------------------------------------------------
Kristine M. Nishiyama, 36 Vice President and Counsel - Fund Business Management
Vice President (2003) Group, Capital Research and Management Company; Vice
President and Counsel, Capital Bank and Trust
Company*
---------------------------------------------------------------------------------------
Kimberly S. Verdick, 42 Vice President - Fund Business Management Group,
Secretary (1994) Capital Research and Management Company
---------------------------------------------------------------------------------------
Ari M. Vinocor, 32 Vice President - Fund Business Management Group,
Treasurer (2007) Capital Research and Management Company
---------------------------------------------------------------------------------------
Courtney R. Taylor, 32 Assistant Vice President - Fund Business
Assistant Secretary (2006) Management Group, Capital Research and Management
Company
---------------------------------------------------------------------------------------
Sharon G. Moseley, 39 Vice President - Fund Business Management Group,
Assistant Treasurer (2002) Capital Research and Management Company
---------------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 11
<PAGE>

/*/ Company affiliated with Capital Research and Management Company.

/1/ An "independent" trustee refers to a trustee who is not an "interested person"
within the meaning of the 1940 Act.
/2/ Trustees and officers of the fund serve until their resignation, removal or
retirement.

/3/ Funds managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which serves as the
underlying investment vehicle for certain variable insurance contracts, and
Endowments, whose shareholders are limited to certain nonprofit organizations.

/4/ This includes all directorships (other than those in the American Funds) that
are held by each trustee as a director of a public company or a registered
investment company.

/5/ The investment adviser and its affiliates use a subsidiary of AECOM, Inc. to
perform architectural and space management services. The investment adviser's
business relationship with the subsidiary preceded its acquisition by AECOM
in 1994. The total fees relating to this engagement for the last two years
represent less than 0.1% of AECOM, Inc.'s 2005 gross revenues.

/6/ "Interested persons," within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
/7/ All of the officers listed are officers and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company
serves as investment adviser.

THE ADDRESS FOR ALL TRUSTEES AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY.

FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2005

AGGREGATE DOLLAR RANGE/1/
OF SHARES
OWNED IN ALL FUNDS
IN THE AMERICAN FUNDS
DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY TRUSTEE
-------------------------------------------------------------------------------

"INDEPENDENT" TRUSTEES
-------------------------------------------------------------------------------
Richard J. Capen, Jr. None Over $100,000
-------------------------------------------------------------------------------
H. Frederick Christie None Over $100,000
-------------------------------------------------------------------------------
Diane C. Creel $1 - $10,000 $10,001 - $50,000
-------------------------------------------------------------------------------
Martin Fenton $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
Leonard R. Fuller None $50,001 - $100,000
-------------------------------------------------------------------------------
R. Clark Hooper None $50,001 - $100,000
-------------------------------------------------------------------------------
Richard G. Newman $50,001 - $100,000 Over $100,000
-------------------------------------------------------------------------------
Frank M. Sanchez $1 - $10,000 $10,001 - $50,000
-------------------------------------------------------------------------------
"INTERESTED" TRUSTEES
-------------------------------------------------------------------------------
Abner D. Goldstine Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Paul G. Haaga, Jr. $1 - $10,000 Over $100,000
-------------------------------------------------------------------------------
John H. Smet Over $100,000 Over $100,000
-------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" trustees include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.

Intermediate Bond Fund of America -- Page 12
<PAGE>

TRUSTEE COMPENSATION -- No compensation is paid by the fund to any officer or
trustee who is a director, officer or employee of the investment adviser or its
affiliates. The boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The fund typically pays each independent trustee an annual
fee, which ranges from $3,000 to $5,240, based primarily on the total number of
board clusters on which that independent trustee serves.

In addition, the fund generally pays independent trustees attendance and other
fees for meetings of the board and its committees. Board and committee chairs
receive additional fees for their services.

Independent trustees also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The fund and the other funds served
by each independent trustee each pay an equal portion of these attendance fees.

No pension or retirement benefits are accrued as part of fund expenses.
Independent trustees may elect, on a voluntary basis, to defer all or a portion
of their fees through a deferred compensation plan in effect for the fund. The
fund also reimburses certain expenses of the independent trustees.

TRUSTEE COMPENSATION PAID DURING THE FISCAL YEAR ENDED AUGUST 31, 2006

TOTAL COMPENSATION (INCLUDING
AGGREGATE COMPENSATION VOLUNTARILY DEFERRED
(INCLUDING VOLUNTARILY COMPENSATION/1/)
DEFERRED COMPENSATION/1/) FROM ALL FUNDS MANAGED BY
NAME FROM THE FUND CAPITAL RESEARCH AND MANAGEMENT
COMPANY OR ITS AFFILIATES/2/
-------------------------------------------------------------------------------------------------------

Richard J. Capen, Jr./3/ $5,049 $141,420
-------------------------------------------------------------------------------------------------------
H. Frederick Christie/3/ 5,174 368,920
-------------------------------------------------------------------------------------------------------
Diane C. Creel/3/ 7,201 84,340
-------------------------------------------------------------------------------------------------------
Martin Fenton/3/ 8,358 326,280
-------------------------------------------------------------------------------------------------------
Leonard R. Fuller/3/ 5,226 215,420
-------------------------------------------------------------------------------------------------------
R. Clark Hooper 5,242 171,420
-------------------------------------------------------------------------------------------------------
Richard G. Newman 6,456 157,340
-------------------------------------------------------------------------------------------------------
Frank M. Sanchez 7,409 86,840
-------------------------------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 13
<PAGE>

/1/ Amounts may be deferred by eligible trustees under a nonqualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more American Funds
as designated by the trustees. Compensation shown in this table for the fiscal
year ended August 31, 2006 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.

/2/ Funds managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which serves as the
underlying investment vehicle for certain variable insurance contracts, and
Endowments, whose shareholders are limited to certain nonprofit organizations.
/3/ Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2006
fiscal year for participating trustees is as follows: Richard G. Capen, Jr.
($34,100), H. Frederick Christie ($18,155), Diane C. Creel ($33,374), Martin
Fenton ($42,164) and Leonard R. Fuller ($37,286). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the trustees.

As of October 1, 2006, the officers and trustees of the fund and their families,
as a group, owned beneficially or of record less than 1% of the outstanding
shares of the fund.

FUND ORGANIZATION AND THE BOARD OF TRUSTEES -- The fund, an open-end,
diversified management investment company, was organized as a Massachusetts
business trust on December 7, 1987. Although the board of trustees has delegated
day-to-day oversight to the investment adviser, all fund operations are
supervised by the fund's board, which meets periodically and performs duties
required by applicable state and federal laws.

Massachusetts common law provides that a trustee of a Massachusetts business
trust owes a fiduciary duty to the trust and must carry out his or her
responsibilities as a trustee in accordance with that fiduciary duty. Generally,
a trustee will satisfy his or her duties if he or she acts in good faith and
uses ordinary prudence.

Members of the board who are not employed by the investment adviser or its
affiliates are paid certain fees for services rendered to the fund as described
above. They may elect to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund.

The fund has several different classes of shares, consisting of Class A, B, C,
F, 529-A, 529-B, 529-C, 529-E, 529-F, R-1, R-2, R-3, R-4 and R-5 shares. Shares
of each class represent an interest in the same investment portfolio. Each class
has pro rata rights as to voting, redemption, dividends and liquidation, except
that each class bears different distribution expenses and may bear different
transfer agent fees and other expenses properly attributable to the particular
class as approved by the board of trustees and set forth in the fund's rule
18f-3 Plan. Each class' shareholders have exclusive voting rights with respect
to the respective class' rule 12b-1 plans adopted in connection with the
distribution of shares and on other matters in which the interests of one class
are different from interests in another class. Shares of all classes of the fund
vote together on matters that affect all classes in substantially the same
manner. Each class votes as a class on matters that affect that class alone.
Note that CollegeAmerica/(R)/ account owners invested in Class 529 shares are
not shareholders of the fund and, accordingly, do not have the rights of a
shareholder, such as the right to vote proxies relating to fund shares. As the
legal owner of the fund's Class 529 shares, the Virginia College Savings
Plan/SM/ will vote any proxies relating to such fund shares.

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

Intermediate Bond Fund of America -- Page 14
<PAGE>

REMOVAL OF TRUSTEES BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority of the votes entitled to be cast, remove any
trustee from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed trustees. The fund has
agreed, at the request of the staff of the Securities and Exchange Commission,
to apply the provisions of section 16(c) of the 1940 Act with respect to the
removal of trustees, as though the fund were a common-law trust. Accordingly,
the trustees of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any trustees when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.

COMMITTEES OF THE BOARD OF TRUSTEES -- The fund has an audit committee comprised
of Diane C. Creel, Martin Fenton, Richard G. Newman and Frank M. Sanchez, none
of whom is an "interested person" of the fund within the meaning of the 1940
Act. The committee provides oversight regarding the fund's accounting and
financial reporting policies and practices, its internal controls and the
internal controls of the fund's principal service providers. The committee acts
as a liaison between the fund's independent registered public accounting firm
and the full board of trustees. Four audit committee meetings were held during
the 2006 fiscal year.

The fund has a contracts committee comprised of Richard G. Capen, Jr.; H.
Frederick Christie; Diane C. Creel; Martin Fenton; Leonard R. Fuller; Richard G.
Newman; and Frank M. Sanchez, none of whom is an "interested person" of the fund
within the meaning of the 1940 Act. The committee's principal function is to
request, review and consider the information deemed necessary to evaluate the
terms of certain agreements between the fund and its investment adviser or the
investment adviser's affiliates, such as the Investment Advisory and Service
Agreement, Principal Underwriting Agreement, Administrative Services Agreement
and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act,
that the fund may enter into, renew or continue, and to make its recommendations
to the full board of trustees on these matters. One contracts committee meeting
was held during the 2006 fiscal year.

The fund has a nominating and governance committee comprised of Richard G.
Capen, Jr.; H. Frederick Christie; Diane C. Creel; Martin Fenton; Leonard R.
Fuller; R. Clark Hooper; Richard G. Newman; and Frank M. Sanchez, none of whom
is an "interested person" of the fund within the meaning of the 1940 Act. The
committee periodically reviews such issues as the board's composition,
responsibilities, committees, compensation and other relevant issues, and
recommends any appropriate changes to the full board of trustees. The committee
also evaluates, selects and nominates independent trustee candidates to the full
board of trustees. While the committee normally is able to identify from its own
and other resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill future
vacancies on the board. Such suggestions must be sent in writing to the
nominating and governance committee of the fund, addressed to the fund's
secretary, and must be accompanied by complete biographical and occupational
data on the prospective nominee, along with a written consent of the prospective
nominee for consideration of his or her name by the committee. Three nominating
and governance committee meetings were held during the 2006 fiscal year.

PROXY VOTING PROCEDURES AND GUIDELINES -- The fund and its investment adviser
have adopted Proxy Voting Guidelines (the "Guidelines") with respect to voting
proxies of securities held by the fund, other American Funds, Endowments and
American Funds Insurance Series. Certain American Funds have established
separate proxy committees that vote proxies or delegate to a voting officer the
authority to vote on behalf of those funds. Proxies for all other funds are
voted

Intermediate Bond Fund of America -- Page 15
<PAGE>

by a committee of the investment adviser under authority delegated by those
funds' boards. Therefore, if more than one fund invests in the same company,
they may vote differently on the same proposal.

All U.S. proxies are voted. Non-U.S. proxies also are voted, provided there is
sufficient time and information available. After a proxy is received, the
investment adviser prepares a summary of the proposals in the proxy. A
discussion of any potential conflicts of interest is also included in the
summary. After reviewing the summary, one or more research analysts familiar
with the company and industry make a voting recommendation on the proxy
proposals. A second recommendation is made by a proxy coordinator (a senior
investment professional) based on the individual's knowledge of the Guidelines
and familiarity with proxy-related issues. The proxy summary and voting
recommendations are then sent to the appropriate proxy voting committee for the
final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy committee members are
alerted to the potential conflict. The proxy committee may then elect to vote
the proxy or seek a third-party recommendation or vote of an ad hoc group of
committee members.

The Guidelines, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Guidelines provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website at americanfunds.com and (c) on the SEC's website at sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Guidelines is available upon request, free
of charge, by calling American Funds Service Company at 800/421-0180 or visiting
the American Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director is generally supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions may also be
supported. Typically, proposals to declassify the board (elect all
directors annually) are supported based on the belief that this increases
the directors' sense of accountability to shareholders.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill, to
provide for confidential voting and to provide for cumulative voting are
usually supported. Proposals to

Intermediate Bond Fund of America -- Page 16
<PAGE>

eliminate the right of shareholders to act by written consent or to take
away a shareholder's right to call a special meeting are not typically
supported.

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items are generally voted in favor of
management's recommendations unless circumstances indicate otherwise.

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on October 1, 2006. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

NAME AND ADDRESS OWNERSHIP PERCENTAGE
----------------------------------------------------------------------------

Edward D. Jones & Co. Class A 7.71%
201 Progress Parkway Class B 5.16
Maryland Heights, MO 63043-3009
----------------------------------------------------------------------------
MLPF&S Class B 6.82
4800 Deer Lake Drive, E., Floor 2 Class C 13.71
Jacksonville, FL 32246-6484
----------------------------------------------------------------------------
Citigroup Global Markets, INc. Class C 7.86
333 W. 34th Street
New York, NY 10001-2402
----------------------------------------------------------------------------
Unified Trust Company, NA Class F 12.60
2353 Alexandria Drive, Suite 100
Lexington, KY 40504-3208
----------------------------------------------------------------------------
PFPC Brokerage Services Class F 12.56
760 Moore Road
King of Prussia, PA 19406-1212
----------------------------------------------------------------------------
Gutglass, Erickson, Bonville & Larson S.C. Class R-1 7.46
735 N. Water Street, Suite 1400
Milwaukee, WI 53202-4106
----------------------------------------------------------------------------
Nationwide Trust Company Class R-3 8.18
P.O. Box 182029
Columbus, OH 43218-2029
----------------------------------------------------------------------------
CB&T Trustee Class R-4 6.89
8515 E. Orchard Road, #2T2
Greenwood Village, CO 80111-5002
----------------------------------------------------------------------------
Wilmington Trust Co. Class R-4 5.97
P.O. Box 8880
Wilmington, DE 19899-8880
----------------------------------------------------------------------------
Stanton Trust Company, NA Class R-4 5.39
3405 Annapolis Lane, N., Suite 100
Minneapolis, MN 55447-5343
----------------------------------------------------------------------------
New York Life Trust Co. Class R-4 5.26
169 Lackawanna Avenue
Parsippany, NJ 07054-1007
----------------------------------------------------------------------------
CGTC Agent Class R-5 5.24
120 S. State College Boulevard
Brea, CA 92821-5805
----------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 17
<PAGE>

INVESTMENT ADVISER -- Capital Research and Management Company, the fund's
investment adviser, founded in 1931, maintains research facilities in the United
States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London,
Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 135 South State College Boulevard,
Brea, CA 92821. It is a wholly owned subsidiary of The Capital Group Companies,
Inc., a holding company for several investment management subsidiaries. The
investment adviser manages equity assets for the American Funds through two
divisions. These divisions generally function separately from each other with
respect to investment research activities and they make investment decisions for
the funds on a separate basis.

POTENTIAL CONFLICTS OF INTEREST -- The investment adviser has adopted policies
and procedures that address conflicts of interest that may arise between a
portfolio counselor's management of the fund and his or her management of other
funds and accounts. Potential areas of conflict could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, personal investing activities, portfolio
counselor compensation and voting relating to portfolio securities. The
investment adviser has adopted policies and procedures that it believes are
reasonably designed to address these conflicts. However, there is no guarantee
that such policies and procedures will be effective or that the investment
adviser will anticipate all potential conflicts of interest.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage. Portfolio counselors and investment
analysts may also make investment decisions for other mutual funds advised by
Capital Research and Management Company.

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing will vary depending on the
individual's portfolio results, contributions to the organization and other
factors. In order to encourage a long-term focus, bonuses based on investment
results are principally

Intermediate Bond Fund of America -- Page 18
<PAGE>

determined by comparing pretax total returns to relevant benchmarks over both
the most recent year and a four-year rolling average, with the greater weight
placed on the four-year rolling average. For portfolio counselors, benchmarks
may include measures of the marketplaces in which the relevant fund invests and
measures of the results of comparable mutual funds. For investment analysts,
benchmarks may include relevant market measures and appropriate industry or
sector indexes reflecting their areas of expertise. Capital Research and
Management Company also separately compensates analysts for the quality of their
research efforts. The benchmarks against which Intermediate Bond Fund of America
portfolio counselors are measured include: the Lehman Brothers Government/Credit
1-7 Years ex. BBB Index.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage portions of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF AUGUST 31, 2006:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) THAT
THAT THAT PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR MANAGES AND
OF FUND MANAGES AND MANAGES AND ASSETS OF
PORTFOLIO SHARES ASSETS OF RICS ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS/2/ IN BILLIONS/3/ IN BILLIONS/4/
-----------------------------------------------------------------------------------------

John H. Smet $100,001 -- 6 $231.8 None 3 $2.42
$500,000
-----------------------------------------------------------------------------------------
David A. Hoag $500,001 -- 1 $ 71.7 None None
$1,000,000
-----------------------------------------------------------------------------------------
Thomas H. Hogh None/5/ 3 $ 86.3 1 $0.20 7 $1.36
-----------------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.

/2/ Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not
indicative of the total assets managed by the individual, which is a
substantially lower amount. No fund has an advisory fee that is based on the
performance of the fund.
/3/ Represents funds advised or sub-advised by Capital Research and Management
Company and sold outside the United States and/ or fixed-income assets in
institutional accounts managed by investment adviser subsidiaries of Capital
Group International, Inc., an affiliate of Capital Research and Management
Company. Assets noted are the total net assets of the funds or accounts and are
not indicative of the total assets managed by the individual, which is a
substantially lower amount. No fund or account has an advisory fee that is
based on the performance of the fund or account.
/4/ Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.
/5/ Portfolio counselor resides outside the United States. As such, tax
considerations may adversely influence his or her ability to own shares of the
fund.
/6/ Represents fixed-income assets in institutional accounts managed by investment
adviser subsidiaries of Capital Group International, Inc., an affiliate of
Capital Research and Management Company. Assets noted are the total net assets
of the fund and are not indicative of the total assets managed by the
individual, which is a substantially lower amount.

Intermediate Bond Fund of America -- Page 19
<PAGE>

INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until October 31, 2007, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (a) 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 (b) the vote of a majority of trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the investment adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).

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

The management fee is based upon the daily net assets of the fund and monthly
gross investment income. Gross investment income is determined in accordance
with generally accepted accounting principles and does not include gains or
losses from sales of capital assets.

The management fee is based on the following annualized rates and daily net
asset levels:

Net asset level

RATE IN EXCESS OF UP TO
------------------------------------------------------------------------------

0.30% $ 0 $ 60,000,000
------------------------------------------------------------------------------
0.21 60,000,000 1,000,000,000
------------------------------------------------------------------------------
0.18 1,000,000,000 3,000,000,000
------------------------------------------------------------------------------
0.16 3,000,000,000 6,000,000,000
------------------------------------------------------------------------------
0.15 6,000,000,000
------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 20
<PAGE>

The Agreement also provides for fees based on monthly gross investment income at
the following annualized rates:

Monthly gross investment income

RATE IN EXCESS OF UP TO
---------------------------------------------------------------------------------------

3.00% $ 0 $3,333,333
---------------------------------------------------------------------------------------
2.50 3,333,333 8,333,333
---------------------------------------------------------------------------------------
2.00 8,333,333
---------------------------------------------------------------------------------------

The investment adviser has agreed that in the event the Class A expenses of the
fund (with the exclusion of interest, taxes, brokerage costs, distribution
expenses pursuant to a plan under rule 12b-1 and extraordinary expenses such as
litigation and acquisitions or other expenses excludable under applicable state
securities laws or regulations) for any fiscal year ending on a date on which
the Agreement is in effect exceed the expense limitations, if any, applicable to
the fund pursuant to state securities laws or any related regulations, it will
reduce its fee by the extent of such excess and, if required pursuant to any
such laws or any regulations thereunder, will reimburse the fund in the amount
of such excess. To the extent the fund's management fee must be waived due to
Class A share expense ratios exceeding the above limit, management fees will be
reduced similarly for all classes of shares of the fund, or other Class A fees
will be waived in lieu of management fees.

For the fiscal years ended August 31, 2006 and 2005, the investment adviser was
entitled to receive from the fund management fees of $14,572,000 and
$14,038,000, respectively. After giving effect to the management fee
waivers/expense reimbursements described below, the fund paid the investment
adviser management fees of $13,115,000 (a reduction of $1,457,000) and
$13,036,000 (a reduction of $1,002,000) for the fiscal years ended August 31,
2006 and 2005, respectively. For the fiscal year ended August 31, 2004, the fund
paid the investment adviser management fees of $13,143,000.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. Beginning April 1, 2005, this waiver increased
to 10% of the management fees that the investment adviser is otherwise entitled
to receive and this waiver is expected to continue at this level until further
review. As a result of this waiver, management fees will be reduced similarly
for all classes of shares of the fund.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until October
31, 2007, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by the vote of a majority of trustees who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The fund may terminate the Administrative Agreement at any time
by vote of a majority of independent trustees. The investment adviser has the
right to terminate the Administrative Agreement upon 60 days' written notice to
the fund. The Administrative Agreement automatically terminates in the event of
its assignment (as defined in the 1940 Act).

Intermediate Bond Fund of America -- Page 21
<PAGE>

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and all Class R and 529 shares. The investment adviser may
contract with third parties, including American Funds Service Company, the
fund's Transfer Agent, to provide these services. Services include, but are not
limited to, shareholder account maintenance, transaction processing, tax
information reporting and shareholder and fund communications. In addition, the
investment adviser monitors, coordinates and oversees the activities performed
by third parties providing such services. For Class R-1, Class R-2 and Class
R-3 shares,the investment adviser has agreed to pay a portion of the fees
payable under the Administrative Agreement that would otherwise have been paid
by the fund. For the year ended August 31, 2006, the total fees paid by the
investment adviser were $308,000.

The investment adviser receives an administrative services fee at the annual
rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding
Class R-5 shares) and 529 shares for administrative services provided to these
share classes. Administrative services fees are paid monthly and accrued daily.
The investment adviser uses a portion of this fee to compensate third parties
for administrative services provided to the fund. Of the remainder, the
investment adviser does not retain more than 0.05% of the average daily net
assets for each applicable share class. For Class R-5 shares, the administrative
services fee is calculated at the annual rate of up to 0.10% of the average
daily net assets. The administrative services fee includes compensation for
transfer agent and shareholder services provided to the fund's Class C, F, R and
529 shares. In addition to making administrative service fee payments to
unaffiliated third parties, the investment adviser also makes payments from the
administrative services fee to American Funds Service Company according
to a fee schedule contained in a Shareholder Services Agreement between the fund
and American Funds Service Company.

During the 2006 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
------------------------------------------------------------------------------

CLASS C $537,000
------------------------------------------------------------------------------
CLASS F 446,000
------------------------------------------------------------------------------
CLASS 529-A 123,000
------------------------------------------------------------------------------
CLASS 529-B 30,000
------------------------------------------------------------------------------
CLASS 529-C 95,000
------------------------------------------------------------------------------
CLASS 529-E 8,000
------------------------------------------------------------------------------
CLASS 529-F 16,000
------------------------------------------------------------------------------
CLASS R-1 12,000
------------------------------------------------------------------------------
CLASS R-2 710,000
------------------------------------------------------------------------------
CLASS R-3 272,000
------------------------------------------------------------------------------
CLASS R-4 44,000
------------------------------------------------------------------------------
CLASS R-5 68,000
------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 22
<PAGE>

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds Distributors,
Inc. (the "Principal Underwriter") is the principal underwriter of the fund's
shares. The Principal Underwriter is located at 333 South Hope Street, Los
Angeles, CA 90071; 135 South State College Boulevard, Brea, CA 92821; 3500
Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.

The Principal Underwriter receives revenues from sales of the fund's shares. For
Class A and 529-A shares, the Principal Underwriter receives commission revenue
consisting of that portion of the Class A and 529-A sales charge remaining after
the allowances by the Principal Underwriter to investment dealers. For Class B
and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees
paid by the fund for distribution expenses to a third party and receives the
revenue remaining after compensating investment dealers for sales of Class B and
529-B shares. The fund also pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers of Class B and 529-B shares.
For Class C and 529-C shares, the Principal Underwriter receives any contingent
deferred sales charges that apply during the first year after purchase. The fund
pays the Principal Underwriter for advancing the immediate service fees and
commissions paid to qualified dealers of Class C and 529-C shares. For Class
529-E shares, the fund pays the Principal Underwriter for advancing the
immediate service fees and commissions paid to qualified dealers. For Class F
and 529-F shares, the fund pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers and advisers who sell Class F
and 529-F shares. For Class R-1, R-2, R-3 and R-4 shares, the fund pays the
Principal Underwriter for advancing the immediate service fees paid to qualified
dealers and advisers who sell Class R-1, R-2, R-3 and R-4 shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR
REVENUE COMPENSATION
FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
-----------------------------------------------------------------------------------------------------

CLASS A 2006 $1,854,000 $ 7,159,000
2005 2,439,000 9,449,000
2004 2,952,000 11,444,000
-----------------------------------------------------------------------------------------------------
CLASS B 2006 66,000 415,000
2005 125,000 827,000
2004 372,000 1,856,000
-----------------------------------------------------------------------------------------------------
CLASS C 2006 155,000 513,000
2005 61,000 763,000
2004 595,000 1,112,000
-----------------------------------------------------------------------------------------------------
CLASS 529-A 2006 127,000 490,000
2005 162,000 615,000
2004 178,000 682,000
-----------------------------------------------------------------------------------------------------
CLASS 529-B 2006 9,000 52,000
2005 20,000 104,000
2004 43,000 206,000
-----------------------------------------------------------------------------------------------------
CLASS 529-C 2006 18,000 135,000
2005 1,000 184,000
2004 38,000 210,000
-----------------------------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 23
<PAGE>

The fund has adopted plans of distribution (the "Plans") pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full board of trustees and separately by a majority of the independent trustees
of the fund who have no direct or indirect financial interest in the operation
of the Plans or the Principal Underwriting Agreement. Potential benefits of the
Plans to the fund include quality shareholder services; savings to the fund in
transfer agency costs; and benefits to the investment process from growth or
stability of assets. The selection and nomination of independent trustees are
committed to the discretion of the independent trustees during the existence of
the Plans. The Plans may not be amended to increase materially the amount spent
for distribution without shareholder approval. Plan expenses are reviewed
quarterly and the Plans must be renewed annually by the board of trustees.

Under the Plans, the fund may annually expend the following amounts to finance
any activity primarily intended to result in the sale of fund shares, provided
the fund's board of trustees has approved the category of expenses for which
payment is being made: (a) for Class A shares, up to 0.30% of the average daily
net assets attributable to Class A shares; (b) for Class 529-A shares, up to
0.50% of the average daily net assets attributable to Class 529-A shares; (c)
for Class B and 529-B shares, up to 1.00% of the average daily net assets
attributable to Class B and 529-B shares, respectively; (d) for Class C and
529-C shares, up to 1.00% of the average daily net assets attributable to Class
C and 529-C shares, respectively; (e) for Class 529-E shares, up to 0.75% of the
average daily net assets attributable to Class 529-E shares; (f) for Class F and
529-F shares, up to 0.50% of the average daily net assets attributable to Class
F and 529-F shares, respectively; (g) for Class R-1 shares, up to 1.00% of the
average daily net assets attributable to Class R-1 shares; (h) for Class R-2
shares, up to 1.00% of the average daily net assets attributable to Class R-2
shares; (i) for Class R-3 shares, up to 0.75% of the average daily net assets
attributable to Class R-3 shares; and (j) for Class R-4 shares, up to 0.50% of
the

Intermediate Bond Fund of America -- Page 24
<PAGE>

average daily net assets attributable to Class R-4 shares. The fund has not
adopted a Plan for Class R-5 shares; accordingly, no 12b-1 fees are paid from
Class R-5 share assets.

For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to the amount allowable under the fund's Class
A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying
distribution-related expenses, including for Class A and 529-A shares dealer
commissions and wholesaler compensation paid on sales of shares of $1 million or
more purchased without a sales charge (including purchases by employer-sponsored
defined contribution-type retirement plans investing $1 million or more or with
100 or more eligible employees, and retirement plans, endowments and foundations
with $50 million or more in assets -- "no load purchases"). Commissions on no
load purchases of Class A and 529-A shares in excess of the Class A and 529-A
plan limitations not reimbursed to the Principal Underwriter during the most
recent fiscal quarter are recoverable for five quarters, provided that such
commissions do not exceed the annual expense limit. After five quarters, these
commissions are not recoverable.

For Class B and 529-B shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including the financing of commissions paid to
qualified dealers.

For Class C and 529-C shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.75% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class 529-E shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class F and 529-F shares: currently up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers or advisers.

For Class R-1 shares: (a) up to 0.25% is paid to the Principal Underwriter for
paying service-related expenses, including paying service fees to qualified
dealers, and (b) up to 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including commissions paid to qualified dealers.

For Class R-2 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.50% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-3 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

Intermediate Bond Fund of America -- Page 25
<PAGE>

For Class R-4 shares: currently up to 0.25% is paid to the Principal Underwriter
for paying service-related expenses, including paying service fees to qualified
dealers or advisers.

As of the end of the 2006 fiscal year, total 12b-1 expenses, and the portion of
the expenses that remained unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
--------------------------------------------------------------------------------------------

CLASS A $10,341,000 $1,740,000
--------------------------------------------------------------------------------------------
CLASS B 2,794,000 316,000
--------------------------------------------------------------------------------------------
CLASS C 3,311,000 634,000
--------------------------------------------------------------------------------------------
CLASS F 1,023,000 267,000
--------------------------------------------------------------------------------------------
CLASS 529-A 238,000 56,000
--------------------------------------------------------------------------------------------
CLASS 529-B 212,000 26,000
--------------------------------------------------------------------------------------------
CLASS 529-C 715,000 160,000
--------------------------------------------------------------------------------------------
CLASS 529-E 34,000 9,000
--------------------------------------------------------------------------------------------
CLASS 529-F 0 0
--------------------------------------------------------------------------------------------
CLASS R-1 45,000 12,000
--------------------------------------------------------------------------------------------
CLASS R-2 741,000 188,000
--------------------------------------------------------------------------------------------
CLASS R-3 477,000 116,000
--------------------------------------------------------------------------------------------
CLASS R-4 70,000 20,000
--------------------------------------------------------------------------------------------

OTHER COMPENSATION TO DEALERS -- As of January 2007, the top dealers (or their
affiliates) that American Funds Distributors anticipates will receive additional
compensation (as described in the prospectus) include:

A. G. Edwards & Sons, Inc.
AIG Advisors Group:
Advantage Capital Corporation
AIG Financial Advisors, Inc.
American General Securities Incorporated
FSC Securities Corporation
Royal Alliance Associates, Inc.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.
Edward Jones

Intermediate Bond Fund of America -- Page 26
<PAGE>

Genworth Financial Securities Corporation
Hefren-Tillotson, Inc.
HTK/Janney Montgomery Group:
Hornor, Townsend & Kent, Inc.
Janney Montgomery Scott LLC
ING Advisors Network Inc.:
Bancnorth Investment Group, Inc.
Financial Network Investment Corporation
Guaranty Brokerage Services, Inc.
ING Financial Partners, Inc.
Multi-Financial Securities Corporation
Primevest Financial Services, Inc.
InterSecurities/Transamerica:
InterSecurities, Inc.
Transamerica Financial Advisors, Inc.
J.J.B. Hilliard/PNC Bank:
J.J.B. Hilliard, W.L. Lyons, Inc.
PNC Bank, National Association
PNC Brokerage Corp.
PNC Investments LLC
Lincoln Financial Advisors Corporation:
Lincoln Financial Advisors Corporation
Jefferson Pilot Securities Corporation
LPL Financial Services:
Linsco/Private Ledger Corp.
Uvest Investment Services
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Metlife Enterprises:
Metlife Securities Inc.
Tower Square Securities
New England Securities
Walnut Street Securities, Inc.
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley DW Inc.
National Planning Holdings Inc.:
Invest Financial Corporation
Investment Centers of America, Inc.
National Planning Corporation
SII Investments, Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC
Pacific Select Distributors Inc.:
Associated Securities Corp.
Contemporary Financial Solutions, Inc.
M.L. Stern & Co., LLC
Mutual Service Corporation
Sorrento Pacific Financial, LLC
United Planners' Financial Services of America
Waterstone Financial Group, Inc.
Park Avenue Securities LLC
Princor Financial Services Corporation
Raymond James Group:
Raymond James & Associates, Inc.
Raymond James Financial Services Inc.
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Incorporated
Securian/C.R.I.:
CRI Securities, LLC
Securian Financial Services, Inc.
Smith Barney
U.S. Bancorp Investments, Inc.
UBS Financial Services Inc.
First Clearing LLC
Wells Fargo Investments, L.L.C.

Intermediate Bond Fund of America -- Page 27
<PAGE>

EXECUTION OF PORTFOLIO TRANSACTIONS

As described in the prospectus, the investment adviser places orders with
broker-dealers for the fund's portfolio transactions. Portfolio transactions for
the fund may be executed as part of concurrent authorizations to purchase or
sell the same security for other funds served by the investment adviser, or for
trusts or other accounts served by affiliated companies of the investment
adviser. When such concurrent authorizations occur, the objective is to allocate
the executions in an equitable manner.

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
August 31, 2006, 2005 and 2004 amounted to $1,882,000, $2,058,000 and
$1,160,000. With respect to fixed-income securities, brokerage commissions
include explicit investment dealer concessions and may exclude other transaction
costs which may be reflected in the spread between the bid and asked price. The
volume of securities purchased by the fund in underwritten offerings increased
from 2004 to 2005, resulting in an increase in brokerage concessions paid on
portfolio transactions.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year.

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Citigroup Global Markets, Inc., J.P. Morgan Securities,
Inc., J.J.B Hilliard, W.L. Lyons, Inc. and First Clearing LLC. As of the fund's
most recent fiscal year-end, the fund held debt securities of Citigroup, Inc. in
the amount of $47,815,000; J.P. Morgan Chase & Co. in the amount of $39,921,210;
Wachovia Corporation in the amount of $7,783,000; and PNC Financial Services
Group, Inc. in the amount of $3,975,044.

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's board
of trustees and compliance will be periodically assessed by the board in
connection with reporting from the fund's Chief Compliance Officer.

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the

Intermediate Bond Fund of America -- Page 28
<PAGE>

public portfolio typically is posted on the website approximately 45 days after
the end of the calendar quarter. Such portfolio holdings information may then be
disclosed to any person pursuant to an ongoing arrangement to disclose portfolio
holdings information to such person no earlier than one day after the day on
which the information is posted on the American Funds website. The fund's
custodian, outside counsel and auditor, each of which require portfolio holdings
information for legitimate business and fund oversight purposes, may receive the
information earlier.

Affiliated persons of the fund as described above who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements to maintain the confidentiality of such information, preclear
securities trades and report securities transactions activity, as applicable.
Third party service providers of the fund receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons may be bound by agreements (including confidentiality agreements)
that restrict and limit their use of the information to legitimate business uses
only. Neither the fund nor its investment adviser or any affiliate thereof
receives compensation or other consideration in connection with the disclosure
of information about portfolio securities.

Subject to board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the appropriate investment-related committees of the fund's investment
adviser. In exercising their authority, the committees determine whether
disclosure of information about the fund's portfolio securities is appropriate
and in the best interest of fund shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the investment
adviser's code of ethics specifically requires, among other things, the
safeguarding of information about fund holdings and contains prohibitions
designed to prevent the personal use of confidential, proprietary investment
information in a way that would conflict with fund transactions. In addition,
the investment adviser believes that its current policy of not selling portfolio
holdings information and not disclosing such information to unaffiliated third
parties until such holdings have been made public on the American Funds website
(other than to certain fund service providers for legitimate business and fund
oversight purposes) helps reduce potential conflicts of interest between fund
shareholders and the investment adviser and its affiliates.

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value price is effective
for orders received prior to the time of determination of the net asset value
and, in the case of orders placed with dealers or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment dealer should be indicated. The dealer is responsible for
promptly transmitting purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, the Transfer
Agent or the fund after the time of the determination of the net asset value
will be entered at the next calculated

Intermediate Bond Fund of America -- Page 29
<PAGE>

offering price. Note that investment dealers or other intermediaries may have
their own rules about share transactions and may have earlier cut-off times than
those of the fund. For more information about how to purchase through your
intermediary, contact your intermediary directly.

Prices that appear in the newspaper do not always indicate prices at which you
will be purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price, while purchases and redemptions are
made at the next calculated price. The price you pay for shares, the offering
price, is based on the net asset value per share, which is calculated once daily
as of approximately 4:00 p.m. New York time, which is the normal close of
trading on the New York Stock Exchange, each day the Exchange is open. If, for
example, the Exchange closes at 1:00 p.m., the fund's share price would still be
determined as of 4:00 p.m. New York time. The New York Stock Exchange is
currently closed on weekends and on the following holidays: New Year's Day;
Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving; and Christmas Day. Each share class
of the fund has a separately calculated net asset value (and share price).

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

1. Equity securities, including depositary receipts, are valued at the
official closing price of, or the last reported sale price on, the exchange or
market on which such securities are traded, as of the close of business on the
day the securities are being valued or, lacking any sales, at the last available
bid price. Prices for each security are taken from the principal exchange or
market in which the security trades. Fixed-income securities are valued at
prices obtained from an independent 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 bid prices, if asked prices are not available) or at prices for
securities of comparable maturity, quality and type. The pricing services base
bond prices on, among other things, an evaluation of the yield curve as of
approximately 3:00 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to calculation of the fund's net asset
value.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by the
investment adviser.

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. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.

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

Securities and assets for which market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the

Intermediate Bond Fund of America -- Page 30
<PAGE>

fund's board. Subject to board oversight, the fund's board has delegated the
obligation to make fair valuation determinations to a valuation committee
established by the fund's investment adviser. The board receives regular reports
describing fair-valued securities and the valuation methods used.

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable by the investment adviser, are valued in good
faith by the valuation committee based upon what the fund might reasonably
expect to receive upon their current sale. The valuation committee considers all
indications of value available to it in determining the fair value to be
assigned to a particular security, including, without limitation, the type and
cost of the security, contractual or legal restrictions on resale of the
security, relevant financial or business developments of the issuer, actively
traded similar or related securities, conversion or exchange rights on the
security, related corporate actions, significant events occurring after the
close of trading in the security and changes in overall market conditions. The
fund follows standard industry practice by typically reflecting changes in its
holdings of portfolio securities on the first business day following a portfolio
trade.

2. Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to the fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other expense
items attributable to particular share classes, are deducted from total assets
attributable to such share classes.

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

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. The fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances, the fund may
determine that it is in the interest of shareholders to distribute less than
that amount.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not

Intermediate Bond Fund of America -- Page 31
<PAGE>

limited to, gains from options, futures or forward contracts) derived with
respect to the business of investing in such 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 the fund's assets is represented by cash, U.S.
government securities and securities of other regulated investment companies,
and other securities (for purposes of this calculation, generally limited in
respect of any one issuer, to an amount not greater than 5% of the market value
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 (other than U.S. government securities or the securities of other
regulated investment companies) any one issuer; two or more issuers which the
fund controls and which are determined to be engaged in the same or similar
trades or businesses; or the securities of certain publicly traded partnerships.

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 (a) 98% of ordinary income (generally net investment income)
for the calendar year, (b) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year) and
(c) 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 (a) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (b) any amount on which the fund pays income tax during the periods
described above. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is in the interest of shareholders to distribute a lesser
amount.

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.

Distributions of investment company taxable income and net realized capital
gains to shareholders will be taxable whether received in shares or in cash,
unless such shareholders are exempt from taxation. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of that share on the reinvestment date. Dividends and capital gain
distributions by the fund to a tax-deferred retirement plan account are not
taxable currently.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income. Investment
company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and
certain foreign currency gains, if any, less expenses and certain foreign
currency losses.

Intermediate Bond Fund of America -- Page 32
<PAGE>

Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time the fund accrues receivables or
liabilities denominated in a foreign currency and the time the fund
actually collects such receivables, or pays such liabilities, generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of
debt securities denominated in a foreign currency and on disposition of
certain futures contracts, forward contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition
are also treated as ordinary gain or loss. These gains or losses, referred
to under the Code as Section 988 gains or losses, may increase or decrease
the amount of the fund's investment company taxable income to be
distributed to its shareholders as ordinary income.

If the fund invests in stock of certain passive foreign investment
companies, the fund may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with respect to, or gain from the
disposition of, such stock. The tax would be determined by allocating such
distribution or gain ratably to each day of the fund's holding period for
the stock. The distribution or gain so allocated to any taxable year of the
fund, other than the taxable year of the excess distribution or
disposition, would be taxed to the fund at the highest ordinary income rate
in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the fund's investment company taxable
income and, accordingly, would not be taxable to the fund to the extent
distributed by the fund as a dividend to its shareholders.

To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any
gains for tax purposes at that time. Under this election, deductions for
losses are allowable only to the extent of any prior recognized gains, and
both gains and losses will be treated as ordinary income or loss. The fund
will be required to distribute any resulting income, even though it has not
sold the security and received cash to pay such distributions. Upon
disposition of these securities, any gain recognized is treated as ordinary
income and loss is treated as ordinary loss to the extent of any prior
recognized gain.

Dividends from domestic corporations may comprise some portion of the
fund's gross income. To the extent that such dividends constitute any of
the fund's gross income, a portion of the income distributions of the fund
may be eligible for the deduction for dividends received by corporations.
Corporate shareholders will be informed of the portion of dividends that so
qualifies. The dividends-received deduction is reduced to the extent that
either the fund shares, or the underlying shares of stock held by the fund,
with respect to which dividends are received, are treated as debt-financed
under federal income tax law, and is eliminated if the shares are deemed to
have been held by the shareholder or the fund, as the case may be, for less
than 46 days during the 90-day period beginning on the date that is 45 days
before the date on which the shares become ex-dividend. Capital gain
distributions are not eligible for the dividends-received deduction.

A portion of the difference between the issue price of zero coupon
securities and their face value (original issue discount) is considered to
be income to the fund each year, even though the fund will not receive cash
interest payments from these securities. This

Intermediate Bond Fund of America -- Page 33
<PAGE>

original issue discount (imputed income) will comprise a part of the
investment company taxable income of the fund that must be distributed to
shareholders in order to maintain the qualification of the fund as a
regulated investment company and to avoid federal income taxation at the
level of the fund.

The price of a bond purchased after its original issuance may reflect
market discount which, depending on the particular circumstances, may
affect the tax character and amount of income required to be recognized by
a fund holding the bond. In determining whether a bond is purchased with
market discount, certain de minimis rules apply.

Dividend and interest income received by the fund from sources outside the
United States may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Some
foreign countries impose taxes on capital gains with respect to investments
by foreign investors.

CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to follow the practice
of distributing the entire excess of net realized long-term capital gains
over net realized short-term capital losses. Net capital gains for a fiscal
year are computed by taking into account any capital loss carry forward of
the fund.

If any net long-term capital gains in excess of net short-term capital
losses are retained by the fund for reinvestment, requiring federal income
taxes to be paid thereon by the fund, the fund intends to elect to treat
such capital gains as having been distributed to shareholders. As a result,
each shareholder will report such capital gains as long-term capital gains
taxable to individual shareholders at a maximum 15% capital gains rate,
will be able to claim a pro rata share of federal income taxes paid by the
fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on fund
shares by the difference between a pro rata share of the retained gains and
such shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
Under the 2003 Tax Act, all or a portion of a fund's dividend distribution
may be a "qualified dividend." If the fund meets the applicable holding
period requirement, it will distribute dividends derived from qualified
corporation dividends to shareholders as qualified dividends. Interest
income from bonds and money market instruments and nonqualified foreign
dividends will be distributed to shareholders as nonqualified fund
dividends. The fund will report on Form 1099-DIV the amount of each
shareholder's dividend that may be treated as a qualified dividend. If a
shareholder meets the requisite holding period requirement, qualified
dividends are taxable at a maximum rate of 15%.

CAPITAL GAINS -- Distributions of the excess of net long-term capital gains
over net short-term capital losses that the fund properly designates as
"capital gain dividends" generally will be taxable as long-term capital
gain. Regardless of the length of time the shares of the fund have been
held by a shareholder, a capital gain distribution by the fund is subject

Intermediate Bond Fund of America -- Page 34
<PAGE>

to a maximum tax rate of 15%. Any loss realized upon the redemption of
shares held at the time of redemption for six months or less from the date
of their purchase will be treated as a long-term capital loss to the extent
of any amounts treated as distributions of long-term capital gains during
such six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Investors should consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.

If a shareholder exchanges or otherwise disposes of shares of the 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 purposes 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 fund(s).

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

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

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

Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.

Intermediate Bond Fund of America -- Page 35
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F
SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE APPLICABLE PROGRAM
DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO
THESE ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE RETIREMENT PLAN
SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR INFORMATION
REGARDING PURCHASES, SALES AND EXCHANGES.

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- for initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent account statement and mailing the form, along with a
check made payable to the fund, using the envelope provided with your
account statement.

The amount of time it takes for us to receive regular U.S. postal mail may
vary and there is no assurance that we will receive such mail on the day
you expect. Mailing addresses for regular U.S. postal mail can be found in
the prospectus. To send investments or correspondence to us via overnight
mail or courier service, use any of the following addresses:

American Funds
8332 Woodfield Crossing Blvd.
Indianapolis, IN 46240-2482

American Funds
3500 Wiseman Blvd.
San Antonio, TX 78251-4321

American Funds
5300 Robin Hood Rd.
Norfolk, VA 23513-2407

BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this document for more
information regarding this service.

BY INTERNET -- using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this document for more information
regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

Intermediate Bond Fund of America -- Page 36
<PAGE>

Your bank should include the following information when
wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's board.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. Class R-5 shares are also available to clients of the
Personal Investment Management group of Capital Guardian Trust Company who do
not have an intermediary associated with their accounts and without regard to
the $1 million purchase minimum. In addition, the American Funds state
tax-exempt funds are qualified for sale only in certain jurisdictions, and
tax-exempt funds in general should not serve as retirement plan investments. The
fund and the Principal Underwriter reserve the right to reject any purchase
order.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases.

In the case of American Funds non-tax-exempt funds, the initial purchase minimum
of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

Intermediate Bond Fund of America -- Page 37
<PAGE>

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

Certain accounts held on the fund's books, known as omnibus accounts, contain
multiple underlying accounts that are invested in shares of the fund. These
underlying accounts are maintained by entities such as financial intermediaries
and are subject to the applicable initial purchase minimums as described in the
prospectus and statement of additional information.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchanges from Class A shares of The Cash
Management Trust of America to Class B or C shares of Intermediate Bond Fund of
America, Limited Term Tax-Exempt Bond Fund of America and Short-Term Bond Fund
of America are not permitted. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds 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. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" below. THESE TRANSACTIONS HAVE THE
SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" above).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for
example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

The fund, through its transfer agent, American Funds Service Company,
maintains surveillance procedures to detect frequent trading in fund
shares. Under these procedures, various analytics are used to evaluate
factors that may be indicative of frequent trading. For example,
transactions in fund shares that exceed certain monetary thresholds may be
scrutinized. American Funds Service Company also may review transactions
that occur close in time to other transactions in the same account or in
multiple accounts under common ownership or influence. Trading activity
that is identified through these procedures or as a result of any other
information available to the fund will be evaluated to determine whether
such activity might constitute frequent trading. These procedures may be
modified from time to time as appropriate to improve the detection of
frequent trading, to facilitate monitoring for frequent trading in
particular retirement plans or other accounts, and to comply with
applicable laws.

In addition to the fund's broad ability to restrict potentially harmful
trading, the fund's board of directors has adopted a "purchase blocking
policy," under which any shareholder redeeming shares (including
redemptions that are part of an exchange transaction) having a value of
$5,000 or more from the fund will be precluded from investing in the
fund (including investments that are part of an exchange transaction)
for 30 calendar days after the redemption transaction. Under the fund's
purchase blocking policy, certain purchases will not be prevented and
certain redemptions will not trigger a purchase block, such as: systematic
redemptions and purchases where the entity maintaining the shareholder
account is able to identify the transaction as a systematic redemption or
purchase; purchases and redemptions of shares having a value of less than
$5,000; transactions in Class 529 shares; purchases and redemptions
resulting from reallocations by American Funds Target Date Retirement
Series; retirement plan contributions, loans and distributions (including
hardship withdrawals) identified as such on the retirement plan
recordkeeper's system; and purchase transactions involving transfers of
assets, rollovers, Roth IRA conversions and IRA recharacterizations, where
the entity maintaining the shareholder account is able to identify the
transaction as one of these types of transactions.

The fund reserves the right to waive the purchase blocking policy in those
instances where American Funds Service Company determines that its
surveillance procedures are adequate to detect frequent trading in fund
shares.

American Funds Service Company will work with certain intermediaries (such
as investment dealers holding shareholder accounts in street name,
retirement plan recordkeepers, insurance company separate accounts and bank
trust companies) to apply their procedures which American Funds Service
Company believes are reasonably designed to enforce the frequent trading
policies of the fund. You should refer to disclosures provided by the
intermediaries with which you have an account to determine the specific
trading restrictions that apply to you.

If American Funds Service Company identifies any activity that may
constitute frequent trading, it reserves the right to contact the
intermediary and request that the intermediary either provide information
regarding an account owner's transactions or restrict the account owner's
trading. If American Funds Service Company is not satisfied that the
intermediary has taken appropriate action, American Funds Service Company
may terminate the intermediary's ability to transact in fund shares.

There is no guarantee that all instances of frequent trading in fund shares
will be prevented.

Notwithstanding the fund's surveillance procedures and purchase blocking
policy, all transactions in fund shares remain subject to the fund's and
American Funds Distributors' right to restrict potentially abusive trading
generally (including the types of transactions described above that will
not be prevented or trigger a block under the purchase blocking policy).

Intermediate Bond Fund of America -- Page 38
<PAGE>

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

AUTOMATIC CONVERSIONS -- As described more fully in the prospectus, Class
B, 529-B and C shares automatically convert to Class A, 529-A and F shares,
respectively, after a certain period from the purchase date.

MOVING FROM CLASS B TO CLASS A SHARES -- Under the right of reinvestment
policy as described in the prospectus, if you redeem Class B shares during
the contingent deferred sales charge period, you may reinvest the proceeds
in Class A shares without paying a Class A sales charge if you notify
American Funds Service Company and the reinvestment occurs within 90 days
after the date of redemption and is made into the same account from which
you redeemed the shares. If you redeem your Class B shares after the
contingent deferred sales charge period, you may either reinvest the
proceeds in Class B shares or purchase Class A shares. If you purchase
Class A shares, you are responsible for paying any applicable Class A sales
charges.

MOVING FROM CLASS C TO CLASS A SHARES -- If you redeem Class C shares and
with the redemption proceeds purchase Class A shares, you are still
responsible for paying any Class C contingent deferred sales charges and
applicable Class A sales charges.

MOVING FROM CLASS C TO CLASS F SHARES -- If you are part of a qualified
fee-based program and you wish to redeem your Class C shares and with the
redemption proceeds purchase Class F shares for the program, you are still
responsible for paying any applicable Class C contingent deferred sales
charge.

MOVING FROM CLASS F TO CLASS A SHARES -- You can redeem Class F shares held
in a qualified fee-based program and with the redemption proceeds purchase
Class A shares without paying an initial Class A sales charge if all of the
following are met: (a) you are leaving or have left the fee-based program,
(b) you have held the Class F shares in the program for at least one year,
and (c) you notify American Funds Service Company and purchase the Class A
shares within 90 days after redeeming the Class F shares.

MOVING FROM CLASS A TO CLASS F SHARES -- If you are part of a qualified
fee-based program and you wish to redeem your Class A shares and with the
redemption proceeds purchase Class F shares for the program, any Class A
sales charges (including contingent deferred sales charges) that you paid
or are payable will not be credited back to your account.

MOVING FROM CLASS A TO CLASS R SHARES -- Provided it is eligible to invest
in Class R shares, a retirement plan currently invested in Class A shares
may redeem its shares and purchase Class R shares with the redemption
proceeds. Any Class A sales charges that the retirement plan previously
paid will not be credited back to the plan's account.

MOVING BETWEEN OTHER SHARE CLASSES -- If you desire to move your
investment between share classes and the transaction is not described in
this statement of additional information, please contact American Funds
Service Company at 800/421-0180 for information on the transaction.

NON-REPORTABLE TRANSACTIONS -- As described above, automatic conversions
will be non-reportable for tax purposes. In addition, except in the case of
a movement between a 529 share class and a non-529 share class or vice
versa, an exchange of shares from one share class of a fund to another
share class of the same fund will be treated as a non-reportable exchange
for tax purposes, provided that the exchange request is received in writing
by American Funds Service Company and processed as a single transaction.

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

Individual 403(b) plans may be treated similarly to employer-sponsored
plans for Class A sales charge purposes (i.e., individual participant
accounts are eligible to be aggregated together) if: (a) the American Funds
are principal investment options; (b) the employer facilitates the
enrollment process by, for example, allowing for onsite group enrollment

Intermediate Bond Fund of America -- Page 39
<PAGE>

meetings held during working hours; and (c) there is only one dealer firm
assigned to the plans.

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds stock, stock/bond and bond funds may be sold at net asset
value to:

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

(2) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the spouses, children or parents of the Eligible
Persons are listed in the account registration with the
parents-in-law) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such
dealers), plans for the dealers, and plans that include as
participants only the Eligible Persons, their spouses, parents and/or
children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or full-time employees (collectively,
"Eligible Persons") (and their (a) spouses or equivalents if
recognized under local law, (b) parents and children, including
parents and children in step and adoptive relationships, sons-in-law
and daughters-in-law and (c) parents-in-law, if the Eligible Persons
or the spouses, children or parents of the Eligible Persons are listed
in the account registration with the parents-in-law) of RIA firms that
are authorized to sell shares of the funds, plans for the RIA firms,
and plans that include as participants only the Eligible Persons,
their spouses, parents and/or children;

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

(5) insurance company separate accounts;

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

(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation;

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

Intermediate Bond Fund of America -- Page 40
<PAGE>

(9) wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts
whose underlying investments are managed by any affiliate of The
Capital Group Companies, Inc.; and

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

TRANSFERS TO COLLEGEAMERICA -- A transfer from the Virginia Prepaid
Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a
CollegeAmerica account will be made with no sales charge. No commission
will be paid to the dealer on such a transfer.

MOVING BETWEEN ACCOUNTS -- Investments in certain account types may be moved to
other account types without incurring additional Class A sales charges. These
transactions include, for example:

. redemption proceeds from a non-retirement account (for example, a
joint tenant account) used to purchase fund shares in an IRA or other
individual-type retirement account;

. required minimum distributions from an IRA or other individual-type
retirement account used to purchase fund shares in a non-retirement
account; and

. death distributions paid to a beneficiary's account that are used by
the beneficiary to purchase fund shares in a different account.

LOAN REPAYMENTS -- Repayments on loans taken from a retirement plan or an
individual-type retirement account are not subject to sales charges if American
Funds Service Company is notified of the repayment.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to sales charges. These purchases consist of purchases of $1 million or
more, purchases by employer-sponsored defined contribution-type retirement plans
investing $1 million or more or with 100 or more eligible employees, and
purchases made at net asset value by certain retirement plans, endowments and
foundations with assets of $50 million or more. Commissions on such investments
(other than IRA rollover assets that roll over at no sales charge under the
fund's IRA rollover policy as described in the prospectus) are paid to dealers
at the following rates: 1.00% on amounts to $4 million, 0.50% on amounts over $4
million to $10 million and 0.25% on amounts over $10 million. Commissions are
based on cumulative investments and are not annually reset.

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
American Funds non-money

Intermediate Bond Fund of America -- Page 41
<PAGE>

market funds over a 13-month period and receive the same sales charge
(expressed as a percentage of your purchases) as if all shares had been
purchased at once.

The market value of your existing holdings eligible to be aggregated (see
below) as of the day immediately before the start of the Statement period
may be credited toward satisfying the Statement.

The Statement may be revised upward at any time during the Statement
period, and such a revision will be treated as a new Statement, except that
the Statement period during which the purchases must be made will remain
unchanged. Purchases made from the date of revision will receive the
reduced sales charge, if any, resulting from the revised Statement.

The Statement will be considered completed if the shareholder dies within
the 13-month Statement period. Commissions to dealers will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement may 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 Statement period,
the purchaser may be required to remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge
which would have been paid if the total of such purchases had been made at
a single time. Any dealers assigned to the shareholder's account at the
time a purchase was made during the Statement period will receive a
corresponding commission adjustment if appropriate. If the difference is
not paid by the close of the Statement 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 may be liable
to the Principal Underwriter for the balance still outstanding.

Certain payroll deduction retirement plans purchasing Class A shares under
a Statement on or before November 12, 2006, may continue to purchase Class
A shares at the sales charge determined by that particular Statement until
the plans' values reach the amounts specified in their Statements. Upon
reaching such amounts, the Statements for these plans will be deemed
completed and will terminate at that time. After such termination, these
plans are eligible for additional sales charge reductions by meeting the
criteria under the fund's rights of accumulation policy.

In addition, if you currently have individual holdings in American Legacy
variable annuity contracts or variable life insurance policies that were
established on or before March 31, 2007, you may continue to apply
purchases under such contracts and policies to a statement of intention.

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

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plans, such as an IRA, individual
403(b) plan (see exception in "Purchases by certain 403(b) plans"
under "Sales charges") or single-participant Keogh-type plan;

Intermediate Bond Fund of America -- Page 42
<PAGE>

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);

. trust accounts established by you or your immediate family (for trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

. endowments or foundations established and controlled by you or your
immediate family; or

. 529 accounts, which will be aggregated at the account owner level
(Class 529-E accounts may only be aggregated with an eligible employer
plan).

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

. for a single trust estate or fiduciary account, including employee
benefit plans other than the individual-type employee benefit plans
described above;

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

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

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations; or

. for individually established participant accounts of a 403(b) plan
that is treated similarly to an employer-sponsored plan for sales
charge purposes (see "Purchases by certain 403(b) plans" under "Sales
charges" above), or made for two or more such 403(b) plans that are
treated similarly to employer-sponsored plans for sales charge
purposes, in each case of a single employer or affiliated employers as
defined in the 1940 Act.

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

CONCURRENT PURCHASES -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as individual holdings in Endowments. Shares of
money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge also qualify. However,
direct purchases of American Funds money market funds are excluded. If you
currently have individual holdings in American Legacy variable annuity
contracts or variable life insurance policies that were established on or
before March 31, 2007, you may continue to combine purchases made under
such contracts and policies to reduce your Class A sales charge.

Intermediate Bond Fund of America -- Page 43
<PAGE>

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments, to determine your sales charge on investments in accounts
eligible to be aggregated. Direct purchases of American Funds money market
funds are excluded. Subject to your investment dealer's or recordkeeper's
capabilities, your accumulated holdings will be calculated as the higher of
(a) the current value of your existing holdings (the "market value") or (b)
the amount you invested (including reinvested dividends and capital gains,
but excluding capital appreciation) less any withdrawals (the "cost
value"). Depending on the entity on whose books your account is held, the
value of your holdings in that account may not be eligible for calculation
at cost value. For example, accounts held in nominee or street name may not
be eligible for calculation at cost value and instead may be calculated at
market value for purposes of rights of accumulation.

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

When determining your American Funds Class A sales charge, if your
investment is not in an employer-sponsored retirement plan, you may also
continue to take into account the market value (as of the day prior to your
American Funds investment) of your individual holdings in various American
Legacy variable annuity contracts and variable life insurance policies that
were established on or before March 31, 2007. An employer-sponsored
retirement plan may also continue to take into account the market value of
its investments in American Legacy Retirement Investment Plans that were
established on or before March 31, 2007.

If you make a gift of American Funds Class A shares, upon your request, you
may purchase the shares at the sales charge discount allowed under rights
of accumulation of all of your American Funds and applicable American
Legacy accounts.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or postpurchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions made after the Transfer Agent is
notified of the death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

. Redemptions through a systematic withdrawal plan (SWP) (see "Automatic
withdrawals" under "Shareholder account services and privileges"
below). For

Intermediate Bond Fund of America -- Page 44
<PAGE>

each SWP payment, assets that are not subject to a CDSC, such as
appreciation on shares and shares acquired through reinvestment of
dividends and/or capital gain distributions, will be redeemed first
and will count toward the 12% limit. If there is an insufficient
amount of assets not subject to a CDSC to cover a particular SWP
payment, shares subject to the lowest CDSC will be redeemed next until
the 12% limit is reached. Any dividends and/or capital gain
distributions taken in cash by a shareholder who receives payments
through a SWP will also count toward the 12% limit. In the case of a
SWP, the 12% limit is calculated at the time a systematic redemption
is first made, and is recalculated at the time each additional
systematic redemption is made. Shareholders who establish a SWP should
be aware that the amount of a payment not subject to a CDSC may vary
over time depending on fluctuations in the value of their accounts.
This privilege may be revised or terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds money market funds are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or elimination of the fund by
the Virginia College Savings Plan as an option for additional investment within
CollegeAmerica.

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders. To contact American Funds Service Company via overnight mail or
courier service, see "Purchase and exchange of shares."

A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on any redemptions.

Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.

Intermediate Bond Fund of America -- Page 45
<PAGE>

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, equals the dollar amount requested.

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 10
business days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may request that redemption proceeds of $1,000 or more from money market
funds be wired to your bank by writing American Funds Service Company. A
signature guarantee is required on all requests to wire funds.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments in the American Funds through automatic debits
from your bank account. To set up a plan, you must fill out an account
application and specify the amount that you would like to invest and the date
on which you would like your investments to occur. The plan will begin within
30 days after your account application is received. Your bank account will be
debited on the day or a few days before your investment is made, depending on
the bank's capabilities. The Transfer Agent will then invest your money into
the fund you specified on or around the date you specified. If the date you
specified falls on a weekend or holiday, your money will be invested on the
following business day. However, if the following business day falls in the
next month, your money will be invested on the business day immediately
preceding the weekend or holiday. If your bank account cannot be debited due to
insufficient funds, a stop-payment or the closing of the account, the plan may
be terminated and the related investment reversed. You may change the amount of
the investment or discontinue the plan at any time by contacting the Transfer
Agent.

AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
unless you indicate otherwise on the account application. You also may elect to
have dividends and/or capital gain distributions paid in cash by informing the
fund, the Transfer Agent or your investment dealer. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

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

Intermediate Bond Fund of America -- Page 46
<PAGE>

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

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

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

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

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of
shares, you may automatically withdraw shares from any of the American Funds.
You can make automatic withdrawals of $50 or more as often as you wish if your
account is worth at least $10,000, or up to four times a year for an account
worth at least $5,000. You can designate the day of each period for withdrawals
and request that checks be sent to you or someone else. Withdrawals may also be
electronically deposited to your bank account. The Transfer Agent will withdraw
your money from the fund you specify on or around the date you specify. If the
date you specified falls on a weekend or holiday, the redemption will take place
on the previous business day. However, if the previous business day falls in the
preceding month, the redemption will take place on the following business day
after the weekend or holiday.

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

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

AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above

Intermediate Bond Fund of America -- Page 47
<PAGE>

and in "Telephone and Internet purchases, redemptions and exchanges" below. You
will need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) that may be incurred in connection
with the exercise of these privileges. Generally, all shareholders are
automatically eligible to use these services. However, you may elect to opt out
of these services by writing the Transfer Agent (you may also reinstate them at
any time by writing the Transfer Agent). If the Transfer Agent does not employ
reasonable procedures to confirm that the instructions received from any person
with appropriate account information are genuine, it and/or 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.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds. This can be
done by using an account 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 of registered shareholders exactly as indicated on your
account application.

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

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds non-U.S. securities, the Custodian may hold these
securities pursuant to subcustodial arrangements in non-U.S. banks or non-U.S.
branches of U.S. banks.

Intermediate Bond Fund of America -- Page 48
<PAGE>

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, 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. The principal office of American Funds Service Company is
located at 135 South State College Boulevard, Brea, CA 92821-5823. American
Funds Service Company was paid a fee of $3,994,000 for Class A shares and
$300,000 for Class B shares for the 2006 fiscal year. American Funds Service
Company is also compensated for certain transfer agency services provided to all
other share classes from the administrative services fees paid to Capital
Research and Management Company, as described under "Administrative services
agreement."

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 695 Town
Center Drive, Costa Mesa, California 92626, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been so included in reliance
on the report of Deloitte & Touche LLP, independent registered public accounting
firm, given on the authority of said firm as experts in accounting and auditing.
The selection of the fund's independent registered public accounting firm is
reviewed and determined annually by the board of trustees.

INDEPENDENT LEGAL COUNSEL -- Paul, Hastings, Janofsky & Walker LLP, 515 South
Flower Street, Los Angeles, CA 90071, serves as counsel for the fund and for
independent trustees in their capacities as such. Certain legal matters in
connection with certain shares of beneficial interest offered by the prospectus
have been passed upon for the fund by Paul, Hastings, Janofsky & Walker LLP.
Counsel does not provide legal services to the fund's investment adviser or any
of its affiliated companies. A determination with respect to the independence of
the fund's "independent legal counsel" will be made at least annually by the
independent trustees of the fund, as prescribed by the 1940 Act and related
rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on August 31. Shareholders are provided updated prospectuses annually
and at least semiannually with reports showing the fund's investment portfolio
or summary investment portfolio, financial statements and other information. The
fund's annual financial statements are audited by the fund's independent
registered public accounting firm, Deloitte & Touche LLP. In addition,
shareholders may also receive proxy statements for the fund. 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 prospectuses, shareholder reports and proxy statements. To
receive additional copies of a prospectus, report or proxy statement,
shareholders should contact the Transfer Agent.

Intermediate Bond Fund of America -- Page 49
<PAGE>

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

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

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance 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.

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD filed an administrative
complaint against the Principal Underwriter. The complaint alleges violations of
certain NASD rules by the Principal Underwriter with respect to the selection of
broker-dealer firms that buy and sell securities for mutual fund investment
portfolios. The complaint seeks sanctions, restitution and disgorgement. On
August 30, 2006, the NASD Hearing Panel ruled against the Principal Underwriter
and imposed a $5 million fine. The Principal Underwriter has appealed this
decision to the NASD's National Adjudicatory Council.

On March 24, 2005, the investment adviser and Principal Underwriter filed a
complaint against the Attorney General of the State of California in Los Angeles
County Superior Court. The complaint alleged that the Attorney General
threatened to take enforcement actions against the investment adviser and
Principal Underwriter that are without merit and preempted by federal law. On
the same day, following the filing of the investment adviser's and Principal
Underwriter's complaint, the Attorney General of the State of California filed a
complaint against the Principal Underwriter and investment adviser. Filed in Los
Angeles County Superior Court, the Attorney General's complaint alleged
violations of certain sections of the California Corporations Code with respect
to so-called "revenue sharing" disclosures in mutual fund prospectuses and
statements of additional information. On November 22, 2005, the Los Angeles
Superior Court dismissed the Attorney General's complaint. The Attorney General
subsequently appealed the Superior Court's decision to California's Court of
Appeal for the Second Appellate District. On January 26, 2007, the Court of
Appeal issued a ruling allowing the California Attorney General to proceed with
his civil action.

The investment adviser and Principal Underwriter believe that the likelihood
that these matters could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. The SEC is conducting a related investigation
as of the date of this statement of additional information. The investment
adviser and Principal Underwriter are cooperating fully. In addition, class
action lawsuits have been filed in the U.S. District Court, Central District of
California, relating to these matters. The investment adviser believes that
these suits are without merit and will defend itself vigorously. Further updates
on these issues will be available on the American Funds website
(americanfunds.com) under "American Funds regulatory matters."

Intermediate Bond Fund of America -- Page 50
<PAGE>

OTHER INFORMATION -- The fund reserves the right to modify the privileges
described in this statement of additional information at any time.

The financial statements including the investment portfolio and the report
of the fund's independent registered public accounting firm contained in the
annual report are included in this statement of additional information. The
following information is not included in the annual report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- AUGUST 31, 2006

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $13.39
Maximum offering price per share
(100/97.50 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $13.73

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F
-----------------------------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 002 202 302 402
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . 011 211 311 411
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . 003 203 303 403
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . 012 212 312 412
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 033 233 333 433
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . 016 216 316 416
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . 010 210 310 410
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . 005 205 305 405
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . 006 206 306 406
The Investment Company of America/(R)/ . . . . . . . . . . . . 004 204 304 404
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . 014 214 314 414
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . 007 207 307 407
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . 036 236 336 436
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . 035 235 335 435
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . 001 201 301 401
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . 040 240 340 440
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . 021 221 321 421
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 008 208 308 408
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . 031 231 331 431
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . 023 223 323 423
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . 043 243 343 443
Short-Term Bond Fund of America/SM/ . . . . . . . . . . . . . 048 248 348 448
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . 019 219 319 419
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . 020 220 320 420
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . 024 224 324 424
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . 025 225 325 425
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . 022 222 322 422
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . 009 209 309 409
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . 039 N/A N/A N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . 049 N/A N/A N/A
___________
*Qualified for sale only in certain jurisdictions.

Intermediate Bond Fund of America -- Page 51
<PAGE>

FUND NUMBERS
---------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
The Investment Company of
America . . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors Fund
. . . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America . . . . . . . . . . . . 1023 1223 1323 1523 1423
Short-Term Bond Fund of America 1048 1248 1348 1548 1448
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
The Cash Management Trust of
America . . . . . . . . . . . . 1009 1209 1309 1509 1409

Intermediate Bond Fund of America -- Page 52
<PAGE>

FUND NUMBERS
----------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . . 2102 2202 2302 2402 2502
American Balanced Fund . . . . . . . 2111 2211 2311 2411 2511
American Mutual Fund . . . . . . . . 2103 2203 2303 2403 2503
Capital Income Builder . . . . . . . 2112 2212 2312 2412 2512
Capital World Growth and Income Fund 2133 2233 2333 2433 2533
EuroPacific Growth Fund . . . . . . 2116 2216 2316 2416 2516
Fundamental Investors . . . . . . . 2110 2210 2310 2410 2510
The Growth Fund of America . . . . . 2105 2205 2305 2405 2505
The Income Fund of America . . . . . 2106 2206 2306 2406 2506
The Investment Company of America . 2104 2204 2304 2404 2504
The New Economy Fund . . . . . . . . 2114 2214 2314 2414 2514
New Perspective Fund . . . . . . . . 2107 2207 2307 2407 2507
New World Fund . . . . . . . . . . . 2136 2236 2336 2436 2536
SMALLCAP World Fund . . . . . . . . 2135 2235 2335 2435 2535
Washington Mutual Investors Fund . . 2101 2201 2301 2401 2501
BOND FUNDS
American High-Income Municipal Bond
Fund . . . . . . . . . . . . . . . . N/A N/A N/A N/A 2540
American High-Income Trust . . . . . 2121 2221 2321 2421 2521
The Bond Fund of America . . . . . . 2108 2208 2308 2408 2508
Capital World Bond Fund . . . . . . 2131 2231 2331 2431 2531
Intermediate Bond Fund of America . 2123 2223 2323 2423 2523
Limited Term Tax-Exempt Bond Fund of
America. . . . . . . . . . . . . . . N/A N/A N/A N/A 2543
Short-Term Bond Fund of America. . . 2148 2248 2348 2448 2548
The Tax-Exempt Bond Fund of America N/A N/A N/A N/A 2519
The Tax-Exempt Fund of California* . N/A N/A N/A N/A 2520
The Tax-Exempt Fund of Maryland* . . N/A N/A N/A N/A 2524
The Tax-Exempt Fund of Virginia* . . N/A N/A N/A N/A 2525
U.S. Government Securities Fund . . 2122 2222 2322 2422 2522
MONEY MARKET FUNDS
The Cash Management Trust of America 2109 2209 2309 2409 2509
The Tax-Exempt Money Fund of America N/A N/A N/A N/A 2539
The U.S. Treasury Money Fund of
America . . . . . . . . . . . . . . 2149 2249 2349 2449 2549
___________
*Qualified for sale only in certain
jurisdictions.

Intermediate Bond Fund of America -- Page 53
<PAGE>

APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

Intermediate Bond Fund of America -- Page 54
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

Intermediate Bond Fund of America -- Page 55
<PAGE>

C
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

FITCH

LONG-TERM CREDIT RATINGS

AAA
Highest credit quality. 'AAA' ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA
Very high credit quality. 'AA' ratings denote expectations of very low credit
risk. They indicate very strong capacity for payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.

High credit quality. 'A' ratings denote expectations of low credit risk. The
capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB
Good credit quality. 'BBB' ratings indicate that there is currently expectations
of low credit risk. The capacity for payment of financial commitments is
considered adequate but adverse changes in circumstances and economic conditions
are more likely to impair this capacity. This is the lowest investment grade
category.

BB
Speculative. 'BB' ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.

Highly speculative.
. For issuers and performing obligations, 'B' ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently

Intermediate Bond Fund of America -- Page 56
<PAGE>

being met; however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
. For individual obligations, may indicate distressed or defaulted
obligations with potential for extremely high recoveries. Such obligations
would possess a Recovery Rating of 'R1' (outstanding).

CCC
. For issuers and performing obligations, default is a real possibility.
Capacity for meeting financial commitments is solely reliant upon
sustained, favorable business or economic conditions.
. For individual obligations, may indicate distressed or defaulted
obligations with potential for average to superior levels of recovery.
Differences in credit quality may be denoted by plus/minus distinctions.
Such obligations typically would possess a Recovery Rating of 'R2'
(superior), or 'R3' (good) or 'R4' (average).

CC
. For issuers and performing obligations, default of some kind appears
probable.
. For individual obligations, may indicate distressed or defaulted
obligations with a Recovery Rating of 'R4' (average) or 'R5' (below
average).

C
. For issuers and performing obligations, default is imminent.
. For individual obligations, may indicate distressed or defaulted
obligations with potential for below-average to poor recoveries. Such
obligations would possess a Recovery Rating of 'R6' (poor).

RD
Indicates an entity that has failed to make due payments (within the applicable
grace period) on some but not all material financial obligations, but continues
to honor other classes of obligations.

D
Indicates an entity or sovereign that has defaulted on all of its financial
obligations. Default generally is defined as the following:
The modifiers "+" or "-" may be appended to a rating to denote relative
status within major rating categories. Such suffixes are not added to the
'AAA' Long-term rating category, to categories below 'CCC', or to
Short-term ratings other than 'F1'. (The +/- modifiers are only used to
denote issues within the CCC category, whereas issuers are only rated CCC
without the use of modifiers.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.

P-2

Intermediate Bond Fund of America -- Page 57
<PAGE>

Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.

P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to
repay short-term obligations.

STANDARD & POOR'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

A-1
A short-term obligation rated A-1 is rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.

A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

A-3
A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

Intermediate Bond Fund of America -- Page 58

[logo - American Funds®]

Intermediate Bond Fund of America^®

Investment portfolio

August 31, 2006

Bonds & notes — 95.82%	Principal amount (000)			Market value (000)

CORPORATE BONDS & NOTES — 25.71%
Financials — 15.29%
Citigroup Inc. 4.20% 2007	$	29,500		$	29,121
Citigroup Inc. 4.125% 2010		13,150			12,713
Citigroup Inc. 4.625% 2010		3,000			2,940
Citigroup Inc. 5.625% 2012		3,000			3,041
USA Education, Inc. 5.625% 2007		9,035			9,049
SLM Corp., Series A, 3.625% 2008		5,000			4,876
SLM Corp., Series A, 3.95% 2008		3,000			2,916
SLM Corp., Series A, 4.00% 2009		12,250			11,909
SLM Corp., Series A, 5.37% 2009¹		5,000			4,843
SLM Corp., Series A, 5.625% 2009¹		5,000			5,008
SLM Corp., Series A, 4.50% 2010		5,000			4,852
J.P. Morgan Chase & Co. 5.35% 2007		6,050			6,047
Bank One Corp. 2.625% 2008		6,000			5,730
J.P. Morgan Chase & Co. 4.00% 2008		15,000			14,744
J.P. Morgan Chase & Co. 3.50% 2009		5,000			4,803
J.P. Morgan Chase & Co. 6.75% 2011		5,000			5,277
J.P. Morgan Chase & Co. 4.75% 2015		3,500			3,320
Household Finance Corp. 5.75% 2007		8,000			8,012
Household Finance Corp. 7.875% 2007		1,250			1,265
Household Finance Corp. 4.125% 2008		13,500			13,174
Household Finance Corp. 6.40% 2008		10,000			10,187
HSBC Finance Corp. 5.00% 2015		3,625			3,486
ASIF Global Financing XVIII 3.85% 2007²		8,000			7,864
International Lease Finance Corp. 4.50% 2008		3,000			2,958
International Lease Finance Corp. 4.75% 2009		7,000			6,895
American International Group, Inc. 4.70% 2010		3,000			2,940
International Lease Finance Corp. 5.00% 2010		3,280			3,229
American International Group, Inc. 5.05% 2015		4,000			3,875
ILFC E-Capital Trust I 5.90% 2065^1,2		7,000			7,005
PRICOA Global Funding I, Series 2003-2, 3.90% 2008²		10,000			9,695
PRICOA Global Funding I, Series 2004-4, 4.35% 2008²		3,000			2,947
Prudential Funding, LLC, Series B, 6.60% 2008²		11,795			12,037
PRICOA Global Funding I 4.20% 2010²		10,000			9,649
Santander Issuances, SA Unipersonal 5.774% 2016^1,2		3,000			3,005
Santander Issuances, SA Unipersonal 5.805% 2016^1,2		17,500			17,693
Abbey National PLC 6.70% (undated)¹		3,022			3,082
Abbey National PLC 7.35% (undated)¹		8,000			8,022
HBOS Treasury Services PLC 3.625% 2007²		11,500			11,334
HBOS PLC 5.375% (undated)^1,2		14,200			13,862
HBOS PLC, Series B, 5.92% (undated)^1,2		5,000			4,812
Monumental Global Funding II, Series 2002-A, 5.20% 2007²		13,500			13,487
Monumental Global Funding II, Series 2004-B, 3.90% 2009²		5,000			4,828
Monumental Global Funding II, Series 2004-F, 4.375% 2009²		2,000			1,953
Monumental Global Funding II, Series 2006-A, 5.567% 2009^1,2		2,000			2,003
Monumental Global Funding II, Series 2005-B, 4.625% 2010²		2,500			2,446
Price REIT, Inc. 7.50% 2006		5,000			5,013
Kimco Realty Corp., Series C, 3.95% 2008		7,000			6,838
Kimco Realty Corp., Series C, 4.82% 2014		795			751
Kimco Realty Corp., Series C, 4.904% 2015		7,500			7,102
Kimco Realty Corp., Series C, 5.783% 2016		4,500			4,512
Wells Fargo & Co. 4.125% 2008		17,000			16,733
Wells Fargo & Co. 4.20% 2010		7,500			7,273
Westfield Capital Corp. Ltd. and WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 2010²		24,885			23,913
American Express Credit Corp. 3.00% 2008		5,000			4,819
American Express Co. 4.75% 2009		5,000			4,951
American Express Credit Corp., Series B, 5.00% 2010		7,000			6,954
American Express Co. 6.80% 2066¹		6,250			6,504
Genworth Financial, Inc. 5.479% 2007¹		12,000			12,022
Genworth Financial, Inc. 4.75% 2009		10,000			9,878
ReliaStar Financial Corp. 8.00% 2006		11,470			11,512
ING Security Life Institutional Funding 2.70% 2007²		2,000			1,972
ReliaStar Financial Corp. 6.50% 2008		4,000			4,094
ING Security Life Institutional Funding 4.25% 2010²		3,000			2,921
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007²		19,500			19,530
John Hancock Global Funding II, Series 2002-G, 5.00% 2007²		19,000			18,895
XL Capital Finance (Europe) PLC 6.50% 2012		4,725			4,876
XL Capital Ltd. 5.25% 2014		4,000			3,834
Twin Reefs Asset Trust (XLFA), Series B, 6.37% (undated)^1,2		9,700			9,678
Washington Mutual, Inc. 5.625% 2007		1,600			1,601
Washington Mutual, Inc. 5.50% 2011		11,000			11,021
Washington Mutual, Inc. 5.95% 2013		5,000			5,080
US Bank National Assn. 4.40% 2008		17,000			16,788
Metropolitan Life Global Funding I, Series 2004-10, 3.375% 2007²		12,000			11,654
Metropolitan Life Global Funding I, Series 2004-7, 4.25% 2009²		4,000			3,898
Nationwide Life Insurance Co. 5.35% 2007²		12,850			12,847
North Front Pass Through Trust 5.81% 2024^1,2		2,000			1,955
CIT Group Inc. 3.65% 2007		7,835			7,666
CIT Group Inc. 7.375% 2007		3,500			3,539
CIT Group Inc. 6.875% 2009		3,000			3,124
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)^1,2		13,500			13,805
American Honda Finance Corp. 5.125% 2010²		13,000			12,926
National Westminster Bank PLC 7.375% 2009		7,000			7,436
Royal Bank of Scotland Group PLC 5.00% 2014		2,400			2,326
National Westminster Bank PLC 7.75% (undated)¹		2,350			2,403
New York Life Global Funding 3.875% 2009²		6,750			6,546
New York Life Global Funding 4.625% 2010²		5,000			4,891
Principal Life Global Funding I 4.40% 2010²		9,000			8,670
Principal Life Income Fundings Trust, Series 2005-34, 5.20% 2010		2,000			1,992
Protective Life Insurance Co., Series 2004-D, 4.00% 2009		3,000			2,896
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		7,750			7,644
Hartford Financial Services Group, Inc. 4.70% 2007		4,000			3,968
Hartford Financial Services Group, Inc. 5.55% 2008		5,805			5,830
Signet Bank 7.80% 2006		2,000			2,001
Wachovia Corp., Series G, 4.375% 2010		8,000			7,783
SunTrust Banks, Inc. 4.415% 2009		10,000			9,780
Lincoln National Corp. 6.50% 2008		8,385			8,524
Skandinaviska Enskilda Banken 6.875% 2009		7,930			8,193
Berkshire Hathaway Finance Corp. 4.125% 2010		8,000			7,730
Bank of America Corp. 6.625% 2007		200			202
Bank of America Corp. 4.50% 2010		7,000			6,828
Allstate Financial Global Funding LLC 5.25% 2007²		4,750			4,747
Allstate Life Global Funding 4.25% 2010		2,000			1,941
Union Bank of California, NA 5.95% 2016		5,750			5,897
Principal Life Insurance Co. 3.20% 2009		6,000			5,721
Simon Property Group, LP 5.75% 2012		5,000			5,050
ACE INA Holdings Inc. 5.875% 2014		5,000			5,000
Korea Development Bank 4.625% 2010		5,000			4,857
PNC Funding Corp. 5.125% 2010		4,000			3,975
Merita Bank Ltd. 7.50% (undated)^1,2		2,825			2,848
St. Paul Travelers Companies, Inc. 6.25% 2016		2,250			2,333
ERP Operating LP 6.625% 2012		2,000			2,110
UniCredito Italiano Capital Trust II 9.20% (undated)²		1,246			1,399
Barclays Bank PLC 7.40% 2009		1,250			1,330
Den Danske Bank A/S 7.40% 2010^1,2		500			508
					776,772


Industrials — 2.67%
General Electric Capital Corp., Series A, 5.00% 2007		23,000			22,947
General Electric Capital Corp., Series A, 5.375% 2007		10,000			10,003
General Electric Capital Corp., Series A, 3.50% 2008		4,000			3,892
General Electric Capital Corp., Series A, 6.00% 2012		2,500			2,587
General Electric Co. 5.00% 2013		2,000			1,966
General Electric Capital Corp., Series A, 5.00% 2016		5,000			4,864
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 2011^2,3		18,969			19,635
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 2013^2,3		2,223			2,330
John Deere Capital Corp., Series D, 4.375% 2008		21,500			21,213
Caterpillar Inc. 4.50% 2009		16,750			16,458
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 2014		13,860			14,304
Continental Airlines, Inc., Series 2006-1, Class G, FGIC insured, 5.633% 2015¹		10,000			10,000
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 1996-B, 6.96% 2009³		2,833			2,879
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-1, 5.943% 2022³		464			477
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 2023^2,3		1,126			1,117
Southwest Airlines Co., Series 2001-1, Class A-2, 5.496% 2008³		1,000			1,001
					135,673


Telecommunication services — 2.33%
SBC Communications Inc. 6.25% 2011		34,250			35,227
BellSouth Corp. 4.20% 2009		18,000			17,412
France Télécom 7.75% 2011¹		12,500			13,663
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006		11,000			10,997
Vodafone Group PLC 7.75% 2010		9,525			10,192
Singapore Telecommunications Ltd. 6.375% 2011²		7,000			7,303
Verizon Global Funding Corp. 7.375% 2012		5,000			5,447
Deutsche Telekom International Finance BV 8.00% 2010¹		5,000			5,442
Nextel Communications, Inc., Series D, 7.375% 2015		5,000			5,150
British Telecommunications PLC 8.375% 2010¹		4,000			4,466
Cingular Wireless LLC 5.625% 2006		3,000			3,001
					118,300


Consumer discretionary — 1.76%
Kohl’s Corp. 6.30% 2011		17,670			18,300
Kohl’s Corp. 7.375% 2011		7,300			7,863
Walt Disney Co., Series B, 5.375% 2007		14,000			14,003
Target Corp. 5.50% 2007		5,000			5,003
Target Corp. 5.375% 2009		8,200			8,260
DaimlerChrysler North America Holding Corp. 4.75% 2008		7,000			6,928
DaimlerChrysler North America Holding Corp. 8.00% 2010		3,000			3,236
Gannett Co., Inc. 4.125% 2008		7,000			6,844
Lowe's Companies, Inc. 8.25% 2010		5,000			5,509
Carnival Corp. 6.15% 2008		5,401			5,453
Viacom Inc. 5.625% 2007		5,000			5,002
Home Depot, Inc. 5.20% 2011		3,000			2,999
					89,400


Consumer staples — 1.42%
Diageo Capital PLC 3.50% 2007		12,000			11,738
Diageo Capital PLC 4.375% 2010		12,500			12,096
Wal-Mart Stores, Inc. 4.125% 2010		10,000			9,650
Wal-Mart Stores, Inc. 4.75% 2010		10,500			10,351
Kraft Foods Inc. 4.625% 2006		3,000			2,996
Nabisco, Inc. 7.05% 2007		9,200			9,287
Kraft Foods Inc. 4.125% 2009		4,000			3,866
Kraft Foods Inc. 6.25% 2012		1,600			1,659
Costco Wholesale Corp. 5.50% 2007		5,525			5,519
Anheuser-Busch Companies, Inc. 6.00% 2011		5,000			5,152
					72,314


Utilities — 1.17%
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007		13,500			13,488
PSEG Power LLC, Series B, 5.125% 2012		8,343			8,215
Ohio Power Co., Series J, 5.30% 2010		8,000			7,956
Duke Energy Corp., First and Refunding Mortgage Bonds, Series A, 3.75% 2008		5,000			4,888
Duke Energy Corp., First and Refunding Mortgage Bonds, 4.50% 2010		2,250			2,191
Georgia Power Co., Series V, 4.10% 2009		7,000			6,773
National Grid PLC 6.30% 2016		5,990			6,151
Pacificorp Australia LLC, AMBAC insured, 6.15% 2008²		6,000			6,058
Chilquinta Energia Finance Co. LLC, MBIA insured, 6.47% 2008²		3,500			3,548
					59,268


Health care — 0.53%
Amgen Inc. 4.00% 2009		14,500			14,002
UnitedHealth Group Inc. 5.20% 2007		3,000			2,997
UnitedHealth Group Inc. 3.75% 2009		10,000			9,648
					26,647


Energy — 0.29%
Petroleum Export Ltd., Class A-1, MBIA insured, 4.623% 2010^2,3		7,556			7,453
Qatar Petroleum 5.579% 2011^2,3		5,000			5,031
Oil Enterprises Ltd., MBIA insured, 6.239% 2008^2,3		2,444			2,459
					14,943


Information technology — 0.25%
Cisco Systems, Inc. 5.25% 2011		12,750			12,762


Total corporate bonds & notes (cost: $1,382,606,000)					1,306,079


U.S. TREASURY BONDS & NOTES — 15.69%
U.S. Treasury 3.125% 2007		13,775			13,592
U.S. Treasury 3.375% 2007⁴		2,497			2,496
U.S. Treasury 3.625% 2008⁴		14,317			14,502
U.S. Treasury 4.75% 2008⁵		3,575			3,574
U.S. Treasury 3.625% 2009		86,025			83,566
U.S. Treasury 5.50% 2009		52,500			53,562
U.S. Treasury 6.00% 2009		6,100			6,315
U.S. Treasury 4.00% 2010		173,750			169,813
U.S. Treasury 2.375% 2011⁴		19,932			20,011
U.S. Treasury 4.25% 2011		62,000			60,896
U.S. Treasury 4.50% 2011		18,625			18,478
U.S. Treasury 4.875% 2011		29,950			30,156
U.S. Treasury 5.00% 2011		133,275			135,326
U.S. Treasury 3.625% 2013		43,000			40,346
U.S. Treasury 3.875% 2013		43,000			41,018
U.S. Treasury 4.25% 2014		18,250			17,671
U.S. Treasury 9.25% 2016		15,000			20,079
U.S. Treasury 8.125% 2019		10,000			13,075
U.S. Treasury 8.75% 2020⁵		12,410			17,164
U.S. Treasury 7.875% 2021		5,500			7,158
U.S. Treasury 6.50% 2026		11,700			13,991
U.S. Treasury Principal Strip 0% 2014⁵		10,000			7,053
U.S. Treasury Principal Strip 0% 2029⁵		21,750			7,257
					797,099


FEDERAL AGENCY BONDS & NOTES — 14.75%
Freddie Mac 4.125% 2009		30,000			29,187
Freddie Mac 5.75% 2009		68,000			69,226
Freddie Mac 6.625% 2009		118,750			124,095
Freddie Mac 4.125% 2010		15,000			14,538
Freddie Mac 5.50% 2011		86,000			87,790
Freddie Mac 5.875% 2011		50,000			51,352
Freddie Mac 5.75% 2016		3,000			3,094
Fannie Mae 4.75% 2007		20,800			20,690
Fannie Mae 4.75% 2007		10,250			10,224
Fannie Mae 5.25% 2007		26,500			26,498
Fannie Mae 6.34% 2007		5,000			5,056
Fannie Mae 4.00% 2008		30,000			29,426
Fannie Mae 6.625% 2009		12,750			13,324
Fannie Mae 5.25% 2012		56,000			55,967
Federal Home Loan Bank 3.375% 2007		65,000			63,691
Federal Home Loan Bank 3.70% 2007		10,245			10,091
Federal Home Loan Bank 3.375% 2008		36,280			35,349
Federal Home Loan Bank 3.75% 2008		6,750			6,577
Federal Home Loan Bank 5.625% 2016		26,275			26,835
Federal Agricultural Mortgage Corp. 4.25% 2008		28,500			28,039
Federal Agricultural Mortgage Corp. 4.875% 2011²		17,750			17,570
Federal Agricultural Mortgage Corp. 5.125% 2011		1,500			1,500
Small Business Administration, Series 2002-20K, 5.08% 2022³		6,219			6,168
Small Business Administration, Series 2003-20J, 4.92% 2023³		9,361			9,190
United States Government-Guaranteed Ship Financing Obligations, Rowan Companies, Inc. (Title XI) 5.88% 2012³		3,710			3,776
					749,253


COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS (PRIVATELY ORIGINATED)³— 11.24%
Countrywide Alternative Loan Trust, Series 2005-J8, Class 2-A-1, 5.00% 2020		6,669			6,489
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 7-A-1, 5.00% 2020		4,476			4,359
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 5.432% 2035¹		6,599			6,605
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		18,602			18,530
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		16,700			16,288
Countrywide Alternative Loan Trust, Series 2005-64CB, Class 1-A-7, 5.50% 2035		13,892			13,804
Countrywide Alternative Loan Trust, Series 2005-30CB, Class 2-A-1, 5.50% 2035		7,652			7,455
Countrywide Alternative Loan Trust, Series 2005-54CB, Class 1-A-7, 5.50% 2035		6,325			6,304
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-9, 5.50% 2035		4,030			4,013
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035		6,857			6,746
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		8,074			8,033
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035		3,465			3,443
Countrywide Alternative Loan Trust, Series 2006-6CB, Class 1-A-1, 5.50% 2036		6,729			6,684
Countrywide Alternative Loan Trust, Series 2006-16CB, Class A-2, 6.00% 2036		26,512			26,521
Countrywide Alternative Loan Trust, Series 2006-24CB, Class A-1, 6.00% 2036		7,833			7,828
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		1,712			1,719
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		1,365			1,374
CS First Boston Mortgage Securities Corp., Series 2003-AR12, Class II-A-2, 4.317% 2033¹		983			970
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		1,790			1,803
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		3,233			3,273
CS First Boston Mortgage Securities Corp., Series 2004-AR1, Class II-A-1, 4.668% 2034¹		3,843			3,797
CS First Boston Mortgage Securities Corp., Series 2005-1, Class I-A-27, 5.50% 2035		16,219			16,048
CS First Boston Mortgage Securities Corp., Series 2005-6, Class VI-A-1, 6.00% 2035		10,631			10,615
CS First Boston Mortgage Securities Corp., Series 2006-2R, Class A-PO, principal only, 0% 2036		23,241			15,463
CS First Boston Mortgage Securities Corp., Series 2006-2, Class 5-A-6, 6.00% 2036		11,200			11,205
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019		11,941			11,618
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		5,535			5,490
Residential Accredit Loans, Inc., Series 2004-QS12, Class M-1, 6.00% 2034		1,268			1,274
Residential Accredit Loans, Inc., Series 2005-QS12, Class A-7, 5.50% 2035		12,836			12,798
Residential Accredit Loans, Inc., Series 2005-QS9, Class A-6, 5.50% 2035		3,000			2,885
Residential Accredit Loans, Inc., Series 2005-QS5, Class A-5, 5.75% 2035		7,000			6,866
Residential Accredit Loans, Inc., Series 2005-QS14, Class 2-A-1, 6.00% 2035		6,277			6,235
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-CB2, Class VII-A, 5.50% 2019		5,509			5,497
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR7, Class A-7, 3.842% 2033¹		5,236			5,157
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 2033¹		4,345			4,271
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.338% 2033¹		3,848			3,788
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR1, Class A-6, 4.482% 2033¹		1,188			1,173
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR2, Class 2-A1, 5.844% 2037¹		8,231			8,170
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 5.584% 2045¹		6,323			6,345
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.883% 2036¹		33,026			32,861
Bear Stearns ARM Trust, Series 2003-6, Class I-A-2, 3.984% 2033¹		1,685			1,651
Bear Stearns ARM Trust, Series 2003-3, Class II-A-2, 4.048% 2033¹		1,380			1,358
Bear Stearns ARM Trust, Series 2004-1, Class I-2-A-5, 4.376% 2034¹		2,831			2,779
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 2035¹		6,500			6,317
Bear Stearns ARM Trust, Series 2005-1, Class II-A-2, 4.962% 2035¹		8,796			8,693
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.692% 2034¹		20,219			19,713
Banc of America Mortgage Securities Trust, Series 2004-7, Class 4-A-1, 5.00% 2019		10,341			10,052
Banc of America Mortgage Securities Trust, Series 2003-F, Class 2-A-1, 3.734% 2033¹		2,096			2,047
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1, 4.088% 2033¹		3,100			3,048
Banc of America Mortgage Securities Trust, Series 2003-D, Class 2-A-1, 4.183% 2033¹		3,606			3,545
MASTR Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033		1,923			1,925
MASTR Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034		2,438			2,423
MASTR Alternative Loan Trust, Series 2005-1, Class 1-A-1, 5.50% 2035		6,684			6,510
MASTR Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035		3,340			3,280
MASTR Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035		2,461			2,483
J.P. Morgan Mortgage Trust, Series 2005-A1, Class 4-A-1, 4.78% 2035¹		16,968			16,341
Wells Fargo Mortgage-backed Securities Trust, Series 2003-M, Class A-1, 4.713% 2033¹		3,171			3,060
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR16, Class A-1, 5.704% 2036¹		13,000			12,957
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA8, Class I-A-14, 5.50% 2035		6,585			6,562
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA11, Class I-A-5, 5.75% 2036		8,337			8,294
Lehman Mortgage Trust, Series 2005-2, Class 3-A3, 5.50% 2035		13,274			13,228
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A1, 6.029% 2035¹		6,796			6,792
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.981% 2036¹		4,528			4,525
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.697% 2033¹		1,403			1,375
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-1, 4.297% 2034¹		3,307			3,245
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.697% 2035¹		6,018			5,953
Washington Mutual Securities Corp., Series 2005-AR1, Class A-1-A, 5.584% 2035¹		10,032			10,048
Residential Asset Mortgage Products Trust, Series 2004-RS9, Class A-I-4, AMBAC insured, 4.767% 2032		8,550			8,450
Residential Asset Mortgage Products Trust, Series 2003-RZ4, Class A-7, 4.79% 2033¹		1,000			972
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.52% 2027^1,2		2,470			2,491
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.731% 2027^1,2		2,595			2,608
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.853% 2028^1,2		3,695			3,775
Bear Stearns ALT-A Trust, Series 2005-9, Class II-6A-1, 5.839% 2035¹		8,576			8,550
Bear Stearns Asset-backed Securities I Trust, Series 2005-AC8, Class A-4, 5.50% 2035		7,950			7,912
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 4.947% 2035¹		6,825			6,760
Specialty Underwriting and Residential Finance Trust, Series 2004-AA1, Class I-A-1, 5.00% 2034		6,760			6,634
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035		4,205			4,178
Residential Asset Securitization Trust, Series 2005-A6CB, Class A-7, 6.00% 2035		2,438			2,438
PUMA Global Trust No.1, Class B, 5.904% 2033¹		5,500			5,507
Residential Funding Mortgage Securities I, Inc., Series 2004-S9, Class II-A-1, 4.75% 2019		5,659			5,450
HarborView Mortgage Loan Trust, Series 2005-15, Class 2-A1A2, 6.125% 2045¹		5,364			5,417
First Horizon Mortgage Pass Through Trust, Series 2004-AR1, Class II-A-1, 4.898% 2034¹		4,196			4,159
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035		3,222			3,218
Paine Webber CMO, Series O, Class 5, 9.50% 2019		269			291
					570,811


ASSET-BACKED OBLIGATIONS³— 10.48%
ARG Funding Corp., Series 2005-1, Class A-1, MBIA insured, 4.02% 2009²		6,750			6,630
ARG Funding Corp., Series 2005-2, Class A-1, AMBAC insured, 4.54% 2009²		6,500			6,433
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 2011²		22,750			22,082
Drive Auto Receivables Trust, Series 2005-1, Class A-3, MBIA insured, 3.75% 2009		12,693			12,619
Drive Auto Receivables Trust, Series 2005-2, Class A-2, MBIA insured, 4.12% 2010²		4,776			4,738
Drive Auto Receivables Trust, Series 2004-1, Class A-4, MBIA insured, 4.14% 2010²		13,000			12,854
Drive Auto Receivables Trust, Series 2005-2, Class A-3, MBIA insured, 4.26% 2012²		4,250			4,182
Drive Auto Receivables Trust, Series 2006-1, Class A-4, FSA insured, 5.54% 2013²		10,000			10,136
Drive Auto Receivables Trust, Series 2005-3, Class A-4, FSA insured, 5.09% 2013²		10,000			9,997
MBNA Credit Card Master Note Trust, Series 2006-1, Class A, 4.90% 2011		7,500			7,480
MBNA Credit Card Master Note Trust, Series 2005-6, Class A, 4.50% 2013		18,500			18,144
CPS Auto Receivables Trust, Series 2003-A, Class A-2, XLCA insured, 2.89% 2009²		745			733
CPS Auto Receivables Trust, Series 2002-B, Class A-2, XLCA insured, 3.50% 2009²		1,855			1,839
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured, 3.52% 2009²		513			508
CPS Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 3.87% 2010²		5,000			4,922
CPS Auto Receivables Trust, Series 2004-D, Class A-2, XLCA insured, 3.86% 2011²		7,934			7,819
CPS Auto Receivables Trust, Series 2005-C, Class A-2, FSA insured, 4.79% 2012²		5,000			4,937
CPS Auto Receivables Trust, Series 2006-B, Class A-4, MBIA insured, 5.81% 2016²		3,000			3,022
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-2, 3.87% 2011		5,000			4,912
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012		5,250			5,115
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-2, 5.03% 2014		9,000			8,976
Drivetime Auto Owner Trust, Series 2005-A, Class A-3, MBIA insured, 4.302% 2009²		7,500			7,423
Drivetime Auto Owner Trust, Series 2006-A, Class A-3, XLCA insured, 5.501% 2011²		10,000			10,070
Capital One Multi-asset Execution Trust, Series 2005-8, Class A, 4.40% 2011		10,000			9,872
Capital One Multi-asset Execution Trust, Series 2006-10, Class A, 5.15% 2014		6,400			6,413
West Penn Funding LLC, Transition Bonds, Series 2005-A, Class A-1, 4.46% 2010²		16,279			15,984
Prestige Auto Receivables Trust, Series 2004-1, Class A-2, FSA insured, 3.69% 2011²		3,626			3,584
Prestige Auto Receivables Trust, Series 2006-1A, Class A-2, FSA insured, 5.25% 2013²		12,000			12,037
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031		5,212			5,208
Residential Asset Securities Corp. Trust, Series 2003-KS8, Class A-I-6, 4.83% 2033		1,500			1,466
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-1-2, 5.554% 2035¹		7,500			7,515
PSE&G Transition Funding II LLC, Series 2005-1, Class A-2, 4.34% 2014		14,050			13,626
Citibank Credit Card Issuance Trust, Class 2000-A3, 6.875% 2009		12,500			12,721
Massachusetts RRB Special Purpose Trust, Series 2005-1, Class A-4, 4.40% 2015		12,800			12,262
MASTR Asset-backed Securities Trust, Series 2006-AB1, Class A-4, 5.719% 2036		12,185			12,048
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-3, 4.35% 2014		11,565			11,033
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-4, 7.905% 2026		3,576			3,770
Vanderbilt Mortgage and Finance, Inc., Series 2000-D, Class A-4, 7.715% 2027		6,420			6,700
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-3, FGIC insured, 4.16% 2034		10,045			9,955
UPFC Auto Receivables Trust, Series 2004-A, Class A-3, AMBAC insured, 3.27% 2010		3,712			3,644
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		6,250			6,234
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012		10,000			9,806
Bear Stearns Asset-backed Securities I Trust, Series 2005-CL1, Class A-1, 5.824% 2034¹		9,648			9,670
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-1, Class A-5, MBIA insured, 5.08% 2011²		5,750			5,698
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 2011²		4,000			3,964
AmeriCredit Automobile Receivables Trust, Series 2003-A-M, Class A-4-A, MBIA insured, 3.10% 2009		1,035			1,016
AmeriCredit Automobile Receivables Trust, Series 2002-C, Class A-4, FSA insured, 3.55% 2009		2,443			2,424
AmeriCredit Automobile Receivables Trust, Series 2006-A-F, Class A-4, FSA insured, 5.64% 2013		6,000			6,086
Honda Auto Receivables Owner Trust, Series 2006-2, Class A-4, 5.28% 2012		8,750			8,792
MBNA Master Credit Card Trust II, Series 2000-D, Class B, 5.76% 2009¹		5,750			5,766
MBNA Master Credit Card Trust II, Series 2000-E, Class A, 7.80% 2012		2,580			2,817
Credit-Based Asset Servicing and Securitization LLC, Series 2004-CB8, Class AF-2, 4.134% 2035		3,823			3,778
Credit-Based Asset Servicing and Securitization LLC, Series 2005-CB4, Class AF-4, 5.028% 2035¹		4,485			4,357
First Investors Auto Owner Trust, Series 2006-A, Class A-4, MBIA insured, 5.00% 2013²		8,000			7,980
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-1, 2.87% 2013		245			244
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-2, 3.79% 2017		6,050			5,904
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-3, 4.75% 2021		1,500			1,434
Irwin Home Equity, Series 2006-1, Class 2-A2, 5.39% 2035²		7,500			7,429
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009		7,000			7,083
Countryplace Manufactured Housing Contract, Series 2005-1, Class A-2, AMBAC insured, 4.42% 2035²		7,000			6,877
Providian Gateway Master Trust, Series 2004-DA, Class A, 3.35% 2011²		7,000			6,859
Advanta Business Card Master Trust, Series 2005-A3, Class A, 4.70% 2011		6,750			6,684
CWABS, Inc., Series 2004-10, Class AF-3, 3.842% 2030		5,706			5,650
CWABS, Inc., Series 2004-10, Class 2-AV-2, 5.674% 2033¹		768			768
New Century Home Equity Loan Trust, Series 2001-NC2, Class M-1, 6.555% 2031¹		6,132			6,139
Capital One Master Trust, Series 1998-1, Class A, 6.31% 2011		5,950			6,059
Structured Asset Investment Loan Trust, Series 2004-BNC2, Class A-4, 5.644% 2034¹		5,640			5,647
GS Auto Loan Trust, Series 2006-1, Class A-4, 5.60% 2014		5,250			5,271
J.P. Morgan Mortgage Acquisition Trust, Series 2006-CW2, Class AF-4, 6.08% 2036¹		5,000			5,036
Vega ContainerVessel PLC, Series 2006-1, Class A, XLCA insured, 5.562% 2021²		5,000			5,030
Long Beach Acceptance Auto Receivables Trust, Series 2004-C, Class A-4, FSA insured, 3.777% 2011		4,350			4,261
Nordstrom Private Label Credit Card Master Note Trust, Series 2001-1, Class A, 4.82% 2010²		4,250			4,249
Nebhelp Trust, Student Loan Interest Margin Securities, Series 1, Class A, MBIA insured, 6.68% 2016²		3,865			3,871
Spirit Master Funding LLC, Net-Lease Mortgage Notes, Series 2005-1, Class A-1, AMBAC insured, 5.05% 2023²		3,813			3,643
Morgan Stanley ABS Capital I, Inc., Series 2004-OP1, Class A-2B, 5.614% 2034¹		3,293			3,297
USAA Auto Owner Trust, Series 2004-3, Class A-3, 3.16% 2009		3,246			3,216
Green Tree Financial Corp., Series 1997-6, Class A-6, 6.90% 2029		922			949
Green Tree Financial Corp., Series 1997-6, Class A-7, 7.14% 2029		2,171			2,249
Chase Credit Card Owner Trust, Series 2003-4, Class B, 5.98% 2016¹		3,000			3,082
AMRESCO Residential Securities Corp. Mortgage Loan Trust, Series 1997-2, Class A-7, 7.57% 2027		2,565			2,557
WFS Financial Owner Trust, Series 2004-1, Class A-4, 2.81% 2011		2,521			2,465
Nordstrom Credit Card Master Note Trust, Series 2002-1, Class B, 6.03% 2010^1,2		2,250			2,258
Centex Home Equity Loan Trust, Series 2005-A, Class AF-2, 3.90% 2024		1,727			1,718
Litigation Settlement Monetized Fee Trust I, Series 2001-1, Class A-1, 8.33% 2031²		1,552			1,583
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4, Class A-2B, 5.634% 2035¹		1,487			1,488
SeaWest Securitization, LLC, Series 2002-A, Class A-3, XLCA insured, 3.58% 2008²		890			885
SeaWest Securitization, LLC, Series 2003-A, Class A-2, XLCA insured, 2.84% 2009²		509			501
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-8, 7.15% 2009		1,200			1,239
CWHEQ Home Equity Loan Trust, Series 2006-S2, Class A-5, FGIC insured, 5.753% 2027		1,000			1,003
California Infrastructure and Economic Development Bank, Special Purpose Trust, SCE-1,
Series 1997-1, Class A-6, 6.38% 2008		830			830
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A, Class AF-6, 6.537% 2030		812			808
MMCA Auto Owner Trust, Series 2002-4, Class A-4, 3.05% 2009		701			699
Saxon Asset Securities Trust, Series 2002-2, Class AF-5, 5.99% 2031		694			693
California Infrastructure and Economic Development Bank, Special Purpose Trust, PG&E-1,
Series 1997-1, Class A-7, 6.42% 2008		448			449
Financial Pacific Funding II, LLC, Series 2003-A, Class A, FSA insured, 2.29% 2009²		278			277
Banco Nacional de México, SA, Series 1999-A, Class A-1, MBIA insured, 7.50% 2006²		199			199
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007^2,6		1,000			27
NPF VI, Inc., Series 2002-1, Class A, 2.825% 2008^1,2,6		1,500			22
					532,429


FEDERAL AGENCY MORTGAGE-BACKED OBLIGATIONS³— 9.63%
Fannie Mae 7.00% 2008		65			66
Fannie Mae 7.00% 2009		82			82
Fannie Mae 7.00% 2009		17			17
Fannie Mae 7.50% 2009		129			130
Fannie Mae 7.50% 2009		68			70
Fannie Mae 7.50% 2009		66			67
Fannie Mae 7.50% 2009		15			15
Fannie Mae 8.50% 2009		14			15
Fannie Mae 9.00% 2009		121			124
Fannie Mae 9.00% 2009		114			116
Fannie Mae 9.50% 2009		166			173
Fannie Mae 7.00% 2010		53			54
Fannie Mae 9.50% 2010		3			3
Fannie Mae 7.00% 2011		444			452
Fannie Mae 7.00% 2011		214			218
Fannie Mae 7.00% 2011		27			27
Fannie Mae 7.00% 2012		319			326
Fannie Mae 8.50% 2014		13			13
Fannie Mae 7.00% 2015		1,873			1,932
Fannie Mae 7.00% 2015		500			511
Fannie Mae 7.00% 2015		92			94
Fannie Mae 7.00% 2015		43			44
Fannie Mae 7.50% 2015		932			971
Fannie Mae 7.50% 2015		853			889
Fannie Mae 7.50% 2015		443			462
Fannie Mae 7.50% 2015		408			426
Fannie Mae 7.50% 2015		100			103
Fannie Mae 7.50% 2015		95			100
Fannie Mae 7.50% 2015		71			74
Fannie Mae 9.00% 2015		533			567
Fannie Mae 13.50% 2015		243			281
Fannie Mae 7.00% 2016		1,382			1,411
Fannie Mae 7.00% 2016		561			573
Fannie Mae 7.00% 2016		418			427
Fannie Mae 7.00% 2016		267			273
Fannie Mae 7.00% 2016		211			216
Fannie Mae 7.50% 2016		398			409
Fannie Mae 9.00% 2016		770			828
Fannie Mae 11.50% 2016		307			345
Fannie Mae 7.00% 2017		1,516			1,549
Fannie Mae 7.00% 2017		899			918
Fannie Mae 7.00% 2017		546			557
Fannie Mae 5.00% 2018		1,160			1,140
Fannie Mae 9.00% 2018		23			24
Fannie Mae 10.00% 2018		149			166
Fannie Mae 11.50% 2019		881			988
Fannie Mae 11.00% 2020		232			263
Fannie Mae 11.00% 2020		95			106
Fannie Mae 11.50% 2020		195			218
Fannie Mae 6.00% 2021		1,000			1,013
Fannie Mae 6.00% 2021		520			527
Fannie Mae 10.00% 2021		191			211
Fannie Mae 9.50% 2022		64			70
Fannie Mae 7.00% 2023		96			99
Fannie Mae 7.50% 2023		235			246
Fannie Mae 10.00% 2025		244			271
Fannie Mae 8.50% 2026		73			79
Fannie Mae 9.324% 2026¹		1,248			1,360
Fannie Mae 9.50% 2026		494			554
Fannie Mae 8.50% 2027		116			125
Fannie Mae 7.50% 2029		221			229
Fannie Mae 7.00% 2031		47			48
Fannie Mae 7.50% 2031		146			151
Fannie Mae 7.50% 2031		121			126
Fannie Mae 3.743% 2033¹		2,372			2,327
Fannie Mae 3.769% 2033¹		8,068			7,907
Fannie Mae 4.181% 2033¹		14,365			14,185
Fannie Mae 5.50% 2034		7,835			7,718
Fannie Mae 4.48% 2035¹		2,325			2,281
Fannie Mae 5.50% 2036		4,874			4,786
Fannie Mae 5.50% 2036		1,719			1,688
Fannie Mae 6.00% 2036		7,000			7,015
Fannie Mae 6.00% 2036		3,991			3,998
Fannie Mae 6.00% 2036		2,714			2,719
Fannie Mae 6.50% 2036		8,280			8,403
Fannie Mae, Series D, Class 2, 11.00% 2009		119			124
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010		14,000			15,071
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012		31,365			30,281
Fannie Mae, Series 2002-T11, Class B, 5.341% 2012		4,025			4,057
Fannie Mae, Series 88-16, Class B, 9.50% 2018		26			28
Fannie Mae, Series 90-93, Class G, 5.50% 2020		97			97
Fannie Mae, Series 90-21, Class Z, 9.00% 2020		549			592
Fannie Mae, Series 2001-4, Class GA, 10.279% 2025¹		1,229			1,358
Fannie Mae, Series 2001-4, Class NA, 11.906% 2025¹		3,266			3,636
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		2,126			2,204
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029		1,816			1,887
Fannie Mae, Series 2001-20, Class D, 11.066% 2031¹		192			214
Fannie Mae, Series 2005-29, Class AK, 4.50% 2035		8,161			7,867
Fannie Mae, Series 2006-56, Class OG, principal only, 0% 2036		13,971			10,576
Fannie Mae, Series 2006-43, Class PX, 6.00% 2036		30,000			30,485
Fannie Mae, Series 2006-49, Class PA, 6.00% 2036		9,736			9,909
Fannie Mae, Series 1999-T2, Class A-1, 7.50% 2039		951			991
Fannie Mae, Series 2003-W4, Class 1A-3, 3.991% 2040		4,038			4,011
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		1,507			1,549
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		795			822
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		633			654
Government National Mortgage Assn. 8.50% 2007		17			17
Government National Mortgage Assn. 8.50% 2008		45			46
Government National Mortgage Assn. 8.50% 2008		4			4
Government National Mortgage Assn. 9.00% 2008		92			95
Government National Mortgage Assn. 9.50% 2009		524			543
Government National Mortgage Assn. 9.00% 2016		19			21
Government National Mortgage Assn. 8.50% 2017		114			122
Government National Mortgage Assn. 8.50% 2020		25			27
Government National Mortgage Assn. 9.50% 2020		86			95
Government National Mortgage Assn. 9.50% 2020		53			58
Government National Mortgage Assn. 8.50% 2021		259			280
Government National Mortgage Assn. 8.50% 2021		112			121
Government National Mortgage Assn. 8.50% 2021		1			1
Government National Mortgage Assn. 9.00% 2021		97			106
Government National Mortgage Assn. 8.50% 2022		61			65
Government National Mortgage Assn. 8.50% 2022		35			38
Government National Mortgage Assn. 8.50% 2022		19			21
Government National Mortgage Assn. 8.50% 2023		280			301
Government National Mortgage Assn. 4.00% 2035¹		10,356			10,158
Government National Mortgage Assn. 4.00% 2035¹		6,266			6,131
Government National Mortgage Assn. 4.00% 2035¹		5,362			5,246
Government National Mortgage Assn. 4.00% 2035¹		900			879
Government National Mortgage Assn. 5.50% 2036		20,408			20,175
Government National Mortgage Assn. 5.50% 2036		3,476			3,436
Government National Mortgage Assn. 6.00% 2036		39,750			40,050
Government National Mortgage Assn. 6.50% 2036		30,896			31,542
Government National Mortgage Assn. 6.50% 2036		21,609			22,061
Government National Mortgage Assn., Series 2004-84, Class A, 3.624% 2017		3,446			3,333
Freddie Mac 7.00% 2008		78			79
Freddie Mac 8.00% 2008		10			10
Freddie Mac 8.50% 2008		8			8
Freddie Mac 8.75% 2008		13			13
Freddie Mac 8.50% 2009		56			58
Freddie Mac 8.00% 2010		68			69
Freddie Mac 9.50% 2010		3			3
Freddie Mac 8.00% 2012		120			124
Freddie Mac 9.50% 2013		7			7
Freddie Mac 6.00% 2014		160			161
Freddie Mac 6.00% 2014		85			86
Freddie Mac 4.00% 2015		7,667			7,243
Freddie Mac 7.00% 2015		133			137
Freddie Mac 6.00% 2017		583			590
Freddie Mac 8.00% 2017		312			327
Freddie Mac 8.00% 2017		116			121
Freddie Mac 8.00% 2017		87			91
Freddie Mac 5.00% 2018		1,742			1,711
Freddie Mac 8.50% 2018		16			16
Freddie Mac 10.00% 2018		599			667
Freddie Mac 11.00% 2018		115			127
Freddie Mac 8.50% 2019		90			96
Freddie Mac 10.00% 2019		459			514
Freddie Mac 8.50% 2020		30			32
Freddie Mac 8.50% 2021		44			47
Freddie Mac 10.00% 2021		231			255
Freddie Mac 10.00% 2025		318			350
Freddie Mac 8.50% 2027		30			33
Freddie Mac 9.00% 2030		382			415
Freddie Mac 4.037% 2033¹		1,681			1,652
Freddie Mac 4.605% 2035¹		12,579			12,330
Freddie Mac 4.646% 2035¹		9,003			8,827
Freddie Mac 4.79% 2035¹		6,587			6,479
Freddie Mac 6.00% 2036		25,660			25,706
Freddie Mac, Series 2310, Class B, 9.927% 2015¹		106			115
Freddie Mac, Series 2356, Class GD, 6.00% 2016		22,105			22,519
Freddie Mac, Series 2310, Class A, 10.553% 2017¹		444			479
Freddie Mac, Series 1567, Class A, 4.665% 2023¹		105			97
Freddie Mac, Series T-041, Class 3-A, 7.50% 2032		893			925
Freddie Mac, Series 3061, Class PN, 5.50% 2035		18,906			18,866
Freddie Mac, Series 3171, Class MO, principal only, 0% 2036		13,182			9,666
Freddie Mac, Series 3156, Class NG, 6.00% 2036		9,765			9,946
					489,351


COMMERCIAL MORTGAGE-BACKED SECURITIES³— 7.85%
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001-CIBC1, Class A-2, 6.001% 2033		108			108
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C2, Class A-1, 4.326% 2034		13,625			13,276
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-1, 3.175% 2037		289			287
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-4, 4.529% 2037		8,500			8,216
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.511% 2037¹		5,000			5,014
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		11,836			11,464
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-C3, Class A-3, 4.545% 2042		5,000			4,825
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042		6,750			6,632
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		7,500			7,364
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		7,000			7,247
CS First Boston Mortgage Securities Corp., Series 2003-C5, Class A-2, 3.808% 2036		2,700			2,630
CS First Boston Mortgage Securities Corp., Series 2003-CK2, Class A-4, 4.801% 2036		1,000			969
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		8,250			8,602
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-1, 4.637% 2037		761			759
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 2040		13,500			13,316
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class A-1B, 6.48% 2040		3,644			3,705
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class C, 6.78% 2040		6,450			6,660
CS First Boston Mortgage Securities Corp., Series 1999-C1, Class D, 8.067% 2041¹		1,500			1,615
Bear Stearns Commercial Mortgage Securities Inc., Series 1998-C1, Class A-1, 6.34% 2030		4,646			4,666
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 1.244% 2031^1,2		78,287			2,254
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class A-1, 5.91% 2031		2,062			2,066
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		5,719			5,576
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-1, 6.08% 2035		3,572			3,623
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-4, 4.521% 2041		12,250			11,796
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-AB, 4.804% 2042		4,500			4,368
GE Capital Commercial Mortgage Corp., Series 2000-1, Class A-2, 6.496% 2033		10,000			10,395
GE Capital Commerical Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037		10,363			10,113
GMAC Commercial Mortgage Securities, Inc., Series 2001-C2, Class A-1, 6.25% 2034		823			839
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		18,500			19,261
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 2035²		12,000			11,739
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 2035²		8,180			8,066
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		2,397			2,493
Banc of America Commercial Mortgage Inc., Series 2003-2, Class A-1, 3.411% 2041		3,394			3,304
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-3, 4.561% 2041		3,565			3,448
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-3B, 5.401% 2045¹		10,500			10,473
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 2033²		2,519			2,535
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class B, 6.758% 2033		2,000			2,094
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-2, 6.226% 2035		1,161			1,168
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		13,350			13,888
Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.206% 2033		95			95
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		13,000			12,075
Commercial Mortgage Trust, Series 2004-LNB2, Class A-2, 3.60% 2039		6,974			6,732
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-2, 3.958% 2035		7,600			7,382
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2041		4,250			4,115
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042		7,500			7,392
Tower Ventures, LLC, Series 2006-1, Class A1-FX, 5.361% 2036²		11,350			11,325
Tower Ventures, LLC, Series 2006-1, Class C, 5.707% 2036²		7,063			7,067
LB-UBS Commercial Mortgage Trust, Series 2001-C7, Class A-3, 5.642% 2025		3,280			3,307
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025		1,750			1,889
LB-UBS Commercial Mortgage Trust, Series 2002-C4, Class A-2, 4.023% 2026		7,750			7,592
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026		1,465			1,498
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035		5,125			5,240
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036		6,685			6,473
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-2, 6.53% 2031		4,758			4,862
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class D, 7.03% 2031		4,000			4,155
Morgan Stanley Capital I, Inc., Series 2004-RR2, Class A-1, 4.39% 2033²		1,892			1,854
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 2035²		8,350			8,344
SBA CMBS Trust, Series 2005-1, Class B, 5.565% 2035²		1,270			1,273
Merrill Lynch Mortgage Investors, Inc., Series 2005-MCP1, Class A-2, 4.556% 2043		9,790			9,547
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1, 7.543% 2032		3,248			3,333
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		5,375			5,690
Government Lease Trust, Series 1999-GSA1, Class A-4, MBIA insured, 6.48% 2011²		8,500			8,749
First Union National Bank Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.739% 2032		1,485			1,508
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class A-1, 5.585% 2034		5,574			5,609
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 2037		7,000			6,928
DLJ Commercial Mortgage Corp., Series 1998-CF2, Class A-4, 6.90% 2031¹		3,250			3,360
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032		1,750			1,794
GE Commercial Mortgage Corp., Series 2003-C2, Class A-2, 4.17% 2037		3,200			3,128
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.333% 2045		2,000			2,000
LB Commercial Mortgage Trust, Series 1998-C1, Class A-3, 6.48% 2030		3,003			3,030
Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C, 6.746% 2031		2,000			2,066
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.375% 2042¹		2,000			1,988
Nomura Asset Securities Corp., Series 1998-D6, Class A-1A, 6.28% 2030		158			158
GGP Mall Properties Trust, Series 2001-GGP1, Class A-2, 5.007% 2011²		17			17
					398,429


NON-U.S. GOVERNMENT AGENCY BONDS & NOTES — 0.36%
Corporación Andina de Fomento 6.875% 2012		17,000			17,974


MUNICIPALS — 0.11%
California Maritime Infrastructure Authority, Taxable Lease Revenue Bonds
(San Diego Unified Port District-South Bay Plant Acquisition), Series 1999, 6.63% 2009²		5,069			5,118
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
Series 2001-A, Class A, 6.36% 2025		577			577
					5,695


Total bonds & notes (cost: $4,908,215,000)					4,867,120


Preferred securities — 1.08%		Shares

FINANCIALS — 1.08%
Société Générale 7.85%^1,2		14,000,000			14,208
Deutsche Bank Capital Funding Trust I, 7.872%^1,2		11,950,000			12,648
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred^1,2		11,795,000			12,088
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares^1,2		6,000,000			6,491
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred^1,2		5,500,000			6,238
ING Capital Funding Trust III 8.439% noncumulative preferred¹		2,665,000			2,953

Total preferred securities (cost: $58,206,000)					54,626


		Principal amount			Market value
Short-term securities — 3.13%		(000	)		(000	)

Bank of America Corp. 5.35% due 9/25/2006	$	39,700		$	39,554
Ranger Funding Co. LLC 5.27% due 10/6/2006^2,5		6,500			6,466
Concentrate Manufacturing Co. of Ireland 5.21% due 9/1-9/11/2006²		34,550			34,516
Variable Funding Capital Corp. 5.26% due 9/22/2006²		25,700			25,617
Abbott Laboratories 5.21% due 10/24/2006^2,5		19,500			19,348
Park Avenue Receivables Co., LLC 5.25% due 9/26/2006²		15,800			15,740
General Electric Capital Corp. 5.27% due 9/1/2006		13,000			12,998
Scripps (E.W.) Co. 5.29% due 9/12/2006²		4,900			4,891

Total short-term securities (cost: $159,128,000)					159,130


Total investment securities (cost: $5,125,549,000)					5,080,876
Other assets less liabilities					(1,328	)

Net assets				$	5,079,548

¹ Coupon rate may change periodically.

² Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $807,475,000, which represented 15.90% of the net assets of the fund.

³ Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

⁴ Index-linked bond whose principal amount moves with a government retail price index.

⁵This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

⁶ Scheduled interest and/or principal payment was not received.

MFGEFP-923-1006-S6846

Financial statements

Statement of assets and liabilities
at August 31, 2006		(dollars and shares in thousands, except per-share amounts)

Assets:
Investment securities at market (cost: $5,125,549)			$	5,080,876
Receivables for:
Sales of investments	$	15,546
Sales of fund's shares		8,289
Interest		47,744		71,579
				5,152,455
Liabilities:
Payables for:
Purchases of investments		55,666
Repurchases of fund's shares		9,220
Dividends on fund's shares		1,190
Bank overdraft		1,402
Investment advisory services		1,116
Services provided by affiliates		4,103
Deferred trustees' compensation		162
Other fees and expenses		48		72,907
Net assets at August 31, 2006			$	5,079,548

Net assets consist of:
Capital paid in on shares of beneficial interest			$	5,196,619
Undistributed net investment income				1,158
Accumulated net realized loss				(73,556	)
Net unrealized depreciation				(44,673	)
Net assets at August 31, 2006			$	5,079,548

Shares of beneficial interest issued and outstanding - unlimited shares authorized (379,255 total shares outstanding)
		Net assets	Shares outstanding		Net asset value per share*

Class A	$	3,513,070	262,297	$	13.39
Class B		263,022	19,638		13.39
Class C		306,568	22,889		13.39
Class F		446,244	33,318		13.39
Class 529-A		114,937	8,581		13.39
Class 529-B		21,464	1,603		13.39
Class 529-C		75,199	5,615		13.39
Class 529-E		7,098	530		13.39
Class 529-F		17,802	1,329		13.39
Class R-1		4,778	357		13.39
Class R-2		105,497	7,877		13.39
Class R-3		104,828	7,827		13.39
Class R-4		33,045	2,467		13.39
Class R-5		65,996	4,927		13.39
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $13.91 each.

See Notes to Financial Statements

Statement of operations
for the year ended August 31, 2006		(dollars in thousands)
Investment income:
Income:
Interest				$	236,334

Fees and expenses(*):
Investment advisory services	$	14,572
Distribution services		20,001
Transfer agent services		4,294
Administrative services		2,583
Reports to shareholders		253
Registration statement and prospectus		202
Postage, stationery and supplies		492
Trustees' compensation		62
Auditing and legal		84
Custodian		26
State and local taxes		50
Other		57
Total fees and expenses before reimbursements/waivers		42,676
Less reimbursements/waivers of fees and expenses:
Investment advisory services		1,457
Administrative services		308
Total fees and expenses after reimbursements/waivers					40,911
Net investment income					195,423

Net realized loss and unrealized depreciation on investments:
Net realized loss on investments					(39,022	)
Net unrealized depreciation on investments					(53,374	)
Net realized loss and unrealized depreciation on investments					(92,396	)
Net increase in net assets resulting from operations				$	103,027

(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

See Notes to Financial Statements



Statements of changes in net assets		(dollars in thousands)


		Year ended August 31
		2006			2005
Operations:
Net investment income	$	195,423		$	160,875

Net realized loss on investments		(39,022	)		(1,302	)

Net unrealized depreciation on investments		(53,374	)		(58,564	)

Net increase in net assets resulting from operations		103,027			101,009

Dividends paid or accrued to shareholders from net investment income		(196,646	)		(165,219	)

Capital share transactions		(96,883	)		159,390

Total (decrease) increase in net assets		(190,502	)		95,180

Net assets:
Beginning of year		5,270,050			5,174,870
End of year (including
undistributed net investment income: $1,158 and $533, respectively)	$	5,079,548		$	5,270,050


See Notes to Financial Statements

Notes to financial statements

1.	Organization and significant accounting policies

Organization - Intermediate Bond Fund of America (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks current income, consistent with preservation of capital, within certain guidelines for quality and maturity.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Class A and 529-A	Up to 3.75% (2.50% as of November 1, 2006)	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Class B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Class B and 529-B convert to Class A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Class F and 529-F	None	None	None
Class R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Some securities may be valued based on their effective maturity, or average life, which may be shorter than the stated maturity. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available or are considered unreliable are fair valued as determined in good faith under procedures adopted by authority of the fund's board of trustees. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.

Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations - Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. Realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders - Dividends paid to shareholders are declared daily after the determination of the fund’s net investment income and are paid to shareholders monthly. Distributions paid to shareholders are recorded on the ex-dividend date.

Mortgage dollar rolls - The fund may enter into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a financing transaction; therefore, any gain or loss is considered unrealized until the roll reaches completion. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Income is generated as consideration for entering into these transactions and is included in interest income on the accompanying financial statements.

2. Federal income taxation and distributions

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as cost of investments sold; paydowns on fixed-income securities; net capital losses; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.

During the year ended August 31, 2006, the fund reclassified $1,858,000 from accumulated net realized loss to undistributed net investment income, $3,836,000 from capital paid in on shares of beneficial interest to accumulated net realized loss and $10,000 from undistributed net investment income to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.

As of August 31, 2006, the components of distributable earnings, unrealized appreciation (depreciation) and cost of investments on a tax basis were as follows:

	(dollars in thousands)
Undistributed ordinary income				$1,214
Capital loss carryforwards*:
Expiring 2008	$	(7,139	)
Expiring 2009		(1,587	)
Expiring 2011		(13,436	)
Expiring 2012		(2,039	)
Expiring 2014		(11,583	)		(35,784	)
Post-October capital loss deferrals (realized during the period November 1, 2005, through August 31, 2006)†					(37,192	)
Gross unrealized appreciation on investment securities					16,100
Gross unrealized depreciation on investment securities					(60,057	)
Net unrealized depreciation on investment securities					(43,957	)
Cost of investment securities					5,124,833
*Reflects the expiration of capital loss carryforwards of $3,836,000. The capital loss carryforwards will be used to offset any capital gains realized by the fund in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain.
†These deferrals are considered incurred in the subsequent year.

Ordinary income distributions paid or accrued to shareholders from net investment income were as follows (dollars in thousands):

Share class	Year ended August 31, 2006		Year ended August 31, 2005
Class A	$	141,829	$	123,277
Class B		9,118		8,346
Class C		10,630		9,397
Class F		16,411		11,254
Class 529-A		4,198		2,905
Class 529-B		667		500
Class 529-C		2,273		1,541
Class 529-E		249		168
Class 529-F		609		339
Class R-1		144		89
Class R-2		3,190		2,112
Class R-3		3,441		2,277
Class R-4		1,115		648
Class R-5		2,772		2,366
Total	$	196,646	$	165,219

3. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ^SM ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc.^SM ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.30% on the first $60 million of daily net assets and decreasing to 0.15% on such assets in excess of $6 billion. The agreement also provides for monthly fees, accrued daily, based on a declining series of rates beginning with 3.00% on the first $3,333,333 of the fund's monthly gross income and decreasing to 2.00% on such income in excess of $8,333,333. CRMC is currently waiving 10% of investment advisory services fees. During the year ended August 31, 2006, total investment advisory services fees waived by CRMC were $1,457,000. As a result, the fee shown on the accompanying financial statements of $14,572,000, which was equivalent to an annualized rate of 0.285%, was reduced to $13,115,000, or 0.256% of average daily net assets.

Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of trustees approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.30% to 1.00% as noted below. In some cases, the board of trustees has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class A and 529-A, the board of trustees has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.30% is not exceeded. As of August 31, 2006, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.30%	0.30%
Class 529-A	0.30	0.50
Class B and 529-B	1.00	1.00
Class C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Class 529-E and R-3	0.50	0.75
Class F, 529-F and R-4	0.25	0.50

Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described on the following page.

Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended August 31, 2006, the total administrative services fees paid by CRMC were $4,000, $300,000 and $4,000 for Class R-1, R-2 and R-3, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the year ended August 31, 2006, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
Share class	Distribution services	Transfer agent services	CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$10,341	$3,994	Not applicable	Not applicable	Not applicable
Class B	2,794	300	Not applicable	Not applicable	Not applicable
Class C	3,311	Included in administrative services	$421	$116	Not applicable
Class F	1,023		349	97	Not applicable
Class 529-A	238		96	27	$ 107
Class 529-B	212		19	11	21
Class 529-C	715		65	30	72
Class 529-E	34		6	2	7
Class 529-F	-		13	3	15
Class R-1	45		6	6	Not applicable
Class R-2	741		146	564	Not applicable
Class R-3	477		140	132	Not applicable
Class R-4	70		40	4	Not applicable
Class R-5	Not applicable		65	3	Not applicable
Total	$20,001	$4,294	$1,366	$995	$222

Deferred trustees’ compensation - Since the adoption of the deferred compensation plan in 1993, trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $62,000, shown on the accompanying financial statements, includes $46,000 in current fees (either paid in cash or deferred) and a net increase of $16,000 in the value of the deferred amounts.

Affiliated officers and trustees - Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or trustees received any compensation directly from the fund.

4. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class	Sales(*)			Reinvestments of dividends			Repurchases(*)					Net (decrease) increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount		Shares
Year ended August 31, 2006
Class A	$	819,076	61,233	$	125,949	9,422	$	(1,110,396	)	(83,025	)	$	(165,371	)	(12,370	)
Class B		28,546	2,136		7,897	590		(71,068	)	(5,316	)		(34,625	)	(2,590	)
Class C		74,910	5,599		9,151	684		(131,074	)	(9,803	)		(47,013	)	(3,520	)
Class F		207,114	15,481		14,555	1,089		(145,626	)	(10,901	)		76,043		5,669
Class 529-A		29,774	2,225		4,194	314		(16,468	)	(1,232	)		17,500		1,307
Class 529-B		2,260	169		667	50		(2,487	)	(186	)		440		33
Class 529-C		18,387	1,374		2,271	170		(13,202	)	(988	)		7,456		556
Class 529-E		2,112	158		248	19		(1,346	)	(101	)		1,014		76
Class 529-F		6,764	506		608	46		(1,437	)	(108	)		5,935		444
Class R-1		2,326	174		141	11		(1,818	)	(136	)		649		49
Class R-2		40,556	3,031		3,173	238		(29,768	)	(2,227	)		13,961		1,042
Class R-3		46,721	3,493		3,423	256		(33,379	)	(2,496	)		16,765		1,253
Class R-4		16,563	1,239		1,111	83		(8,350	)	(624	)		9,324		698
Class R-5		19,003	1,421		1,631	122		(19,595	)	(1,464	)		1,039		79
Total net increase
(decrease)	$	1,314,112	98,239	$	175,019	13,094	$	(1,586,014	)	(118,607	)	$	(96,883	)	(7,274	)

Year ended August 31, 2005
Class A	$	974,015	71,256	$	108,403	7,938	$	(1,059,234	)	(77,512	)	$	23,184		1,682
Class B		39,599	2,896		7,135	522		(78,093	)	(5,715	)		(31,359	)	(2,297	)
Class C		99,786	7,302		7,872	577		(126,048	)	(9,224	)		(18,390	)	(1,345	)
Class F		172,180	12,601		9,937	728		(105,346	)	(7,716	)		76,771		5,613
Class 529-A		30,726	2,248		2,875	210		(12,210	)	(894	)		21,391		1,564
Class 529-B		3,336	244		496	36		(1,727	)	(126	)		2,105		154
Class 529-C		21,651	1,584		1,524	111		(8,949	)	(655	)		14,226		1,040
Class 529-E		1,981	145		166	12		(811	)	(60	)		1,336		97
Class 529-F		5,047	369		335	24		(512	)	(37	)		4,870		356
Class R-1		2,486	182		85	6		(1,266	)	(93	)		1,305		95
Class R-2		42,179	3,087		2,083	153		(21,018	)	(1,539	)		23,244		1,701
Class R-3		47,431	3,471		2,243	164		(22,665	)	(1,659	)		27,009		1,976
Class R-4		18,507	1,353		637	47		(7,765	)	(571	)		11,379		829
Class R-5		19,785	1,447		1,238	91		(18,704	)	(1,370	)		2,319		168
Total net increase
(decrease)	$	1,478,709	108,185	$	145,029	10,619	$	(1,464,348	)	(107,171	)	$	159,390		11,633

(*) Includes exchanges between share classes of the fund.

5. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $3,485,218,000 and $3,494,111,000, respectively, during the year ended August 31, 2006.

Financial highlights(1)

			Income from investment operations(2)

		Net asset value, beginning of period		Net investment income		Net (losses) gains on securities (both realized and unrealized	)		Total from investment operations		Dividends (from net investment income	)		Net asset value, beginning of period	Total return(3	)		Net assets, end of period (in millions	)			Ratio of expenses to average net assets before reimbursements/ waivers				Ratio of expenses to average net assets after reimbursements/ waivers		(4	)	Ratio of net income to average net assets
Class A:
Year ended 8/31/2006	$	13.63	$	.53	$	(.24	)	$	.29	$	(.53	)	$	13.39	2.20	%	$	3,513				.71	%			.68	%			3.93	%
Year ended 8/31/2005		13.80		.44		(.16	)		.28		(.45	)		13.63	2.08			3,745				.70				.69				3.22
Year ended 8/31/2004		13.74		.39		.08			.47		(.41	)		13.80	3.49			3,768				.70				.70				2.84
Year ended 8/31/2003		13.81		.39		(.02	)		.37		(.44	)		13.74	2.68			3,981				.70				.70				2.84
Year ended 8/31/2002		13.69		.64		.14			.78		(.66	)		13.81	5.89			3,071				.76				.76				4.70
Class B:
Year ended 8/31/2006		13.63		.44		(.24	)		.20		(.44	)		13.39	1.50			263				1.42				1.39				3.23
Year ended 8/31/2005		13.80		.35		(.16	)		.19		(.36	)		13.63	1.39			303				1.40				1.38				2.52
Year ended 8/31/2004		13.74		.30		.08			.38		(.32	)		13.80	2.78			339				1.39				1.39				2.15
Year ended 8/31/2003		13.81		.29		(.02	)		.27		(.34	)		13.74	1.96			383				1.40				1.40				2.05
Year ended 8/31/2002		13.69		.55		.14			.69		(.57	)		13.81	5.14			205				1.46				1.46				3.86
Class C:
Year ended 8/31/2006		13.63		.43		(.24	)		.19		(.43	)		13.39	1.44			307				1.47				1.44				3.17
Year ended 8/31/2005		13.80		.34		(.16	)		.18		(.35	)		13.63	1.32			360				1.47				1.45				2.45
Year ended 8/31/2004		13.74		.29		.08			.37		(.31	)		13.80	2.70			383				1.47				1.47				2.07
Year ended 8/31/2003		13.81		.28		(.02	)		.26		(.33	)		13.74	1.86			434				1.49				1.49				1.93
Year ended 8/31/2002		13.69		.53		.14			.67		(.55	)		13.81	5.04			212				1.55				1.55				3.67
Class F:
Year ended 8/31/2006		13.63		.54		(.24	)		.30		(.54	)		13.39	2.25			446				.66				.63				3.99
Year ended 8/31/2005		13.80		.44		(.16	)		.28		(.45	)		13.63	2.08			377				.70				.68				3.23
Year ended 8/31/2004		13.74		.39		.08			.47		(.41	)		13.80	3.48			304				.70				.70				2.80
Year ended 8/31/2003		13.81		.38		(.02	)		.36		(.43	)		13.74	2.65			223				.71				.71				2.69
Year ended 8/31/2002		13.69		.64		.14			.78		(.66	)		13.81	5.85			104				.79				.79				4.47
Class 529-A:
Year ended 8/31/2006		13.63		.52		(.24	)		.28		(.52	)		13.39	2.17			115				.75				.72				3.91
Year ended 8/31/2005		13.80		.43		(.16	)		.27		(.44	)		13.63	2.03			99				.75				.73				3.18
Year ended 8/31/2004		13.74		.39		.08			.47		(.41	)		13.80	3.49			79				.70				.70				2.81
Year ended 8/31/2003		13.81		.37		(.02	)		.35		(.42	)		13.74	2.58			55				.76				.76				2.56
Period from 2/19/2002 to 8/31/2002		13.59		.30		.23			.53		(.31	)		13.81	3.98			15				.91		(5	)	.91		(5	)	4.11		(5	)
Class 529-B:
Year ended 8/31/2006		13.63		.42		(.24	)		.18		(.42	)		13.39	1.37			21				1.55				1.52				3.10
Year ended 8/31/2005		13.80		.32		(.16	)		.16		(.33	)		13.63	1.20			22				1.59				1.57				2.34
Year ended 8/31/2004		13.74		.27		.08			.35		(.29	)		13.80	2.58			20				1.59				1.59				1.93
Year ended 8/31/2003		13.81		.26		(.02	)		.24		(.31	)		13.74	1.77			16				1.59				1.59				1.70
Period from 2/26/2002 to 8/31/2002		13.58		.24		.24			.48		(.25	)		13.81	3.58			3				1.64		(5	)	1.64		(5	)	3.38		(5	)
Class 529-C:
Year ended 8/31/2006		13.63		.42		(.24	)		.18		(.42	)		13.39	1.38			75				1.53				1.51				3.12
Year ended 8/31/2005		13.80		.32		(.16	)		.16		(.33	)		13.63	1.21			69				1.57				1.55				2.36
Year ended 8/31/2004		13.74		.27		.08			.35		(.29	)		13.80	2.59			55				1.58				1.58				1.94
Year ended 8/31/2003		13.81		.26		(.02	)		.24		(.31	)		13.74	1.78			40				1.58				1.58				1.74
Period from 2/19/2002 to 8/31/2002		13.59		.25		.23			.48		(.26	)		13.81	3.58			11				1.63		(5	)	1.63		(5	)	3.36		(5	)
Class 529-E:
Year ended 8/31/2006		13.63		.49		(.24	)		.25		(.49	)		13.39	1.89			7				1.02				1.00				3.63
Year ended 8/31/2005		13.80		.39		(.16	)		.23		(.40	)		13.63	1.73			6				1.06				1.04				2.88
Year ended 8/31/2004		13.74		.34		.08			.42		(.36	)		13.80	3.11			5				1.06				1.06				2.44
Year ended 8/31/2003		13.81		.34		(.02	)		.32		(.39	)		13.74	2.30			3				1.06				1.06				2.28
Period from 3/15/2002 to 8/31/2002		13.43		.24		.40			.64		(.26	)		13.81	4.79			1				.51				.51				1.73
Class 529-F:
Year ended 8/31/2006		13.63		.55		(.24	)		.31		(.55	)		13.39	2.39			18				.52				.50				4.15
Year ended 8/31/2005		13.80		.44		(.16	)		.28		(.45	)		13.63	2.05			12				.72				.70				3.22
Year ended 8/31/2004		13.74		.38		.08			.46		(.40	)		13.80	3.37			7				.81				.81				2.67
Period from 9/16/2002 to 8/31/2003		13.86		.30		(.02	)		.28		(.40	)		13.74	2.00			3				.81		(5	)	.81		(5	)	2.23		(5	)



Class R-1:
Year ended 8/31/2006	$	13.63	$	.43	$	(.24	)	$	.19	$	(.43	)	$	13.39	1.43	%	$	5				1.58	%			1.46	%			3.17	%
Year ended 8/31/2005		13.80		.34		(.16	)		.18		(.35	)		13.63	1.30			4				1.59				1.47				2.46
Year ended 8/31/2004		13.74		.29		.08			.37		(.31	)		13.80	2.68			3				1.62				1.48				2.03
Year ended 8/31/2003		13.81		.28		(.02	)		.26		(.33	)		13.74	1.87			2				1.85				1.48				1.61
Period from 6/13/2002 to 8/31/2002		13.63		.09		.18			.27		(.09	)		13.81	2.02			-		(6	)	.38				.31				.69
Class R-2:
Year ended 8/31/2006		13.63		.43		(.24	)		.19		(.43	)		13.39	1.45			106				1.77				1.44				3.19
Year ended 8/31/2005		13.80		.34		(.16	)		.18		(.35	)		13.63	1.34			93				1.80				1.43				2.49
Year ended 8/31/2004		13.74		.29		.08			.37		(.31	)		13.80	2.72			71				1.89				1.45				2.05
Year ended 8/31/2003		13.81		.28		(.02	)		.26		(.33	)		13.74	1.90			40				1.99				1.44				1.55
Period from 5/31/2002 to 8/31/2002		13.61		.11		.21			.32		(.12	)		13.81	2.34			1				.48				.37				.80
Class R-3:
Year ended 8/31/2006		13.63		.48		(.24	)		.24		(.48	)		13.39	1.83			105				1.09				1.05				3.57
Year ended 8/31/2005		13.80		.39		(.16	)		.23		(.40	)		13.63	1.72			90				1.09				1.05				2.87
Year ended 8/31/2004		13.74		.34		.08			.42		(.36	)		13.80	3.11			63				1.10				1.07				2.43
Year ended 8/31/2003		13.81		.33		(.02	)		.31		(.38	)		13.74	2.29			37				1.13				1.06				1.99
Period from 6/26/2002 to 8/31/2002		13.69		.09		.13			.22		(.10	)		13.81	1.58			1				.25				.20				.64
Class R-4:
Year ended 8/31/2006		13.63		.53		(.24	)		.29		(.53	)		13.39	2.20			33				.71				.68				3.96
Year ended 8/31/2005		13.80		.44		(.16	)		.28		(.45	)		13.63	2.08			24				.71				.69				3.25
Year ended 8/31/2004		13.74		.39		.08			.47		(.41	)		13.80	3.47			13				.71				.71				2.74
Year ended 8/31/2003		13.81		.38		(.02	)		.36		(.43	)		13.74	2.64			5				.73				.71				2.55
Period from 6/27/2002 to 8/31/2002		13.66		.09		.16			.25		(.10	)		13.81	1.87			-		(6	)	.16				.13				.68
Class R-5:
Year ended 8/31/2006		13.63		.57		(.24	)		.33		(.57	)		13.39	2.51			66				.41				.38				4.24
Year ended 8/31/2005		13.80		.48		(.16	)		.32		(.49	)		13.63	2.40			66				.39				.37				3.53
Year ended 8/31/2004		13.74		.44		.08			.52		(.46	)		13.80	3.81			65				.39				.39				3.11
Year ended 8/31/2003		13.81		.43		(.02	)		.41		(.48	)		13.74	2.97			45				.40				.40				3.10
Period from 5/15/2002 to 8/31/2002		13.52		.18		.29			.47		(.18	)		13.81	3.49			27				.13				.13				1.28

	Year ended August 31
		2006		2005		2004		2003		2002

Portfolio turnover rate for all classes of shares		71	%	76	%	68	%	65	%	59	%

(1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) Total returns exclude all sales charges, including contingent deferred sales charges.

(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown,

CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan

share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services.

(5) Annualized.

(6) Amount less than $1 million.

See Notes to Financial Statements

<page>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of Intermediate Bond Fund of America:

We have audited the accompanying statement of assets and liabilities of Intermediate Bond Fund of America (the “Fund”), including the investment portfolio, as of August 31, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2006, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Intermediate Bond Fund of America as of August 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche, LLP

Costa Mesa, California

October 10, 2006

<page>

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 certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amount for the fund’s fiscal year ended August 31, 2006:

U.S. government income that may be exempt from state taxation $37,210,000

Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed in January 2007, to determine the calendar year amounts to be included on their 2006 tax returns. Shareholders should consult their tax advisers.