IBFA 497 Filing

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INTERMEDIATE BOND FUND OF AMERICA

Part B
Statement of Additional Information

November 1, 2005
(as supplemented April 1, 2006)

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, 2005. 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. . . . . . . . . . 7
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 10
Execution of portfolio transactions . . . . . . . . . . . . . . . . 31
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 32
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 34
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 39
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 44
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Shareholder account services and privileges . . . . . . . . . . . . 49
General information . . . . . . . . . . . . . . . . . . . . . . . . 51
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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 substantially all of its assets (at least 80%) in
bonds (bonds include any debt instrument and cash equivalents).

. The fund will invest in debt securities rated A or better by Standard &
Poor's Corporation or Moody's Investors Service or unrated but determined
to be of equivalent quality.

MATURITY

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

* * * * * *

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 interest and may repay the amount borrowed
periodically during the life of the security and 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.

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 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

Intermediate Bond Fund of America -- Page 2
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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. 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

Intermediate Bond Fund of America -- Page 3
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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. 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.

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 loan payments and the
ability of a property to attract and retain tenants.

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 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

Intermediate Bond Fund of America -- Page 4
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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 COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities,
it assumes the risk of any decline in value of the security from the date of the
agreement. When the fund agrees to sell such securities, it does not participate
in further gains or losses with respect to the securities beginning on the date
of the agreement. If the other party to such a transaction fails to deliver or
pay for the securities, the fund could miss a favorable price or yield
opportunity, or could experience a loss.

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.

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).

Intermediate Bond Fund of America -- Page 5
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RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Difficulty in selling such securities may result in a
loss or be costly to the fund. Restricted securities generally can be sold in
privately negotiated transactions, 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.

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 western Europe. 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
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

Intermediate Bond Fund of America -- Page 6
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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 objective, the investment adviser may
increase the fund's exposure to price volatility when it appears likely to
increase current income without undue risk of capital losses.

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, 2005 and 2004 were 76% and 68%, respectively.
See "Financial highlights" in the prospectus for the fund's annual portfolio
turnover rate for each of the last five fiscal years.

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
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

Intermediate Bond Fund of America -- Page 7
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restrictions involving a maximum percentage of assets will be considered
violated unless the excess occurs immediately after, and is caused by, an
acquisition by the fund.

These restrictions provide that the fund may not:

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

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

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

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

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

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

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

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

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

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

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

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;

Intermediate Bond Fund of America -- Page 8
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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 TRUSTEES AND OFFICERS

YEAR FIRST NUMBER OF PORTFOLIOS
POSITION ELECTED WITHIN THE FUND
WITH THE A TRUSTEE PRINCIPAL OCCUPATION(S) DURING COMPLEX/2/ OVERSEEN
NAME AND AGE FUND OF THE FUND/1/ PAST FIVE YEARS BY TRUSTEE
---------------------------------------------------------------------------------------------------------------------
"NON-INTERESTED" TRUSTEES/4/
---------------------------------------------------------------------------------------------------------------------

Richard G. Capen, Trustee 1999 Corporate director and author; 14
Jr. former U.S. Ambassador to Spain;
Age: 71 former Vice Chairman,
Knight-Ridder, Inc. (communications
company); former Chairman and
Publisher, The Miami Herald
----------------
---------------------------------------------------------------------------------------------------------------------
H. Frederick Trustee 1987 Private investor; former President 19
Christie and CEO, The Mission Group
Age: 72 (non-utility holding company,
subsidiary of Southern California
Edison Company)
---------------------------------------------------------------------------------------------------------------------
Diane C. Creel Trustee 1994 Chairman of the Board, President 12
Age: 56 and CEO, Ecovation, Inc. (organic
waste management); former President
and CEO, The Earth Technology
Corporation (international
consulting engineering)

---------------------------------------------------------------------------------------------------------------------
Martin Fenton Chairman of 1989 Chairman of the Board, Senior 16
Age: 70 the Board Resource Group LLC (development and
(independent management of senior living
and communities)
Non-Executive)
and Trustee
---------------------------------------------------------------------------------------------------------------------
Leonard R. Fuller Trustee 1994 President and CEO, Fuller 14
Age: 59 Consulting (financial management
consulting firm)
---------------------------------------------------------------------------------------------------------------------
R. Clark Hooper Trustee 2005 President, Dumbarton Group LLC 15
Age: 59 (consulting); former Executive Vice
President - Policy and Oversight,
NASD
---------------------------------------------------------------------------------------------------------------------
Richard G. Newman Trustee 1991 Chairman of the Board, AECOM 13
Age: 70 Technology Corporation
(engineering, consulting and
professional technical services)
---------------------------------------------------------------------------------------------------------------------
Frank M. Sanchez Trustee 1999 Principal, The Sanchez Family 12
Age: 62 Corporation dba McDonald's
Restaurants (McDonald's licensee)
---------------------------------------------------------------------------------------------------------------------

OTHER DIRECTORSHIPS/3/ HELD
NAME AND AGE BY TRUSTEE
-----------------------------------------------------
"NON-INTERESTED" TRUSTEES/4/
-----------------------------------------------------

Richard G. Capen, Carnival Corporation
Jr.
Age: 71
-----------------------------------------------------
H. Frederick Ducommun Incorporated;
Christie IHOP Corporation;
Age: 72 Southwest Water Company
-----------------------------------------------------
Diane C. Creel Allegheny Technologies;
Age: 56 BF Goodrich;
Foster Wheeler Ltd.
-----------------------------------------------------
Martin Fenton None
Age: 70
-----------------------------------------------------
Leonard R. Fuller None
Age: 59
-----------------------------------------------------
R. Clark Hooper None
Age: 59
-----------------------------------------------------
Richard G. Newman Sempra Energy;
Age: 70 Southwest Water Company
-----------------------------------------------------
Frank M. Sanchez None
Age: 62
-----------------------------------------------------

Intermediate Bond Fund of America -- Page 10

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PRINCIPAL OCCUPATION(S) DURING
YEAR FIRST PAST FIVE YEARS AND
ELECTED POSITIONS HELD NUMBER OF PORTFOLIOS
POSITION A TRUSTEE WITH AFFILIATED ENTITIES WITHIN THE FUND OTHER DIRECTORSHIPS/3/
WITH THE AND/OR OFFICER OR THE PRINCIPAL UNDERWRITER COMPLEX/2/ OVERSEEN HELD
NAME AND AGE FUND OF THE FUND/1/ OF THE FUND BY TRUSTEE BY TRUSTEE
-----------------------------------------------------------------------------------------------------------------------------------
"INTERESTED" TRUSTEES/5,6/
-----------------------------------------------------------------------------------------------------------------------------------

Abner D. Vice 1987 Senior Vice President and 12 None
Goldstine Chairman Director, Capital Research and
Age: 75 and Management Company
Trustee
-----------------------------------------------------------------------------------------------------------------------------------
Paul G. Haaga, Vice 1987 Executive Vice President and 16 None
Jr. Chairman Director, Capital Research and
Age: 56 and Management Company; Director,
Trustee The Capital Group Companies,
Inc.*
-----------------------------------------------------------------------------------------------------------------------------------
John H. Smet President 1993 Senior Vice President, Capital 2 None
Age: 49 and Research and Management
Trustee Company; Director, American
Funds Distributors, Inc.*
-----------------------------------------------------------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 11

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PRINCIPAL OCCUPATION(S) DURING
POSITION YEAR FIRST ELECTED PAST FIVE YEARS AND POSITIONS HELD
WITH THE AN OFFICER WITH AFFILIATED ENTITIES
NAME AND AGE FUND/1/ OF THE FUND/1/ OR THE PRINCIPAL UNDERWRITER OF THE FUND
-----------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS/6/
-----------------------------------------------------------------------------------------------------------------------------------

David A. Hoag Vice President 2004 Senior Vice President, Capital Research Company*
Age: 40
-----------------------------------------------------------------------------------------------------------------------------------
Thomas H. Hogh Vice President 2004 Vice President, Capital International Research, Inc.*
Age: 42
-----------------------------------------------------------------------------------------------------------------------------------
Kristine M. Vice President 2003 Vice President and Counsel - Fund Business Management
Nishiyama Group, Capital Research and Management Company; Vice
Age: 35 President and Counsel, Capital Bank and Trust Company*
-----------------------------------------------------------------------------------------------------------------------------------
Kimberly S. Verdick Secretary Assistant Vice President - Fund Business Management Group,
Age: 41 Capital Research and Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Sharon G. Moseley Treasurer 2002 Vice President - Fund Business Management Group, Capital
Age: 37 Research and Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Susi M. Silverman Assistant Treasurer 2001 Vice President - Fund Business Management Group, Capital
Age: 35 Research and Management Company
-----------------------------------------------------------------------------------------------------------------------------------

* Company affiliated with Capital Research and Management Company.
1 Trustees and officers of the fund serve until their resignation, removal or
retirement.
2 Capital Research and Management Company manages the American Funds, consisting
of 29 funds. Capital Research and Management Company also manages 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 This includes all directorships (other than those of the American Funds) that
are held by each Trustee as a director of a public company or a registered
investment company.
4 A "Non-interested" Trustee refers to a Trustee who is not an "interested
person" within the meaning of the 1940 Act, on the basis of his or her
affiliation with the fund's investment adviser, Capital Research and Management
Company, or affiliated entities (including the fund's principal underwriter).
5 "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).
6 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.

Intermediate Bond Fund of America -- Page 12

<PAGE>

FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2004

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
-------------------------------------------------------------------------------

"NON-INTERESTED" 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 None/2/ Over $100,000
-------------------------------------------------------------------------------
Leonard R. Fuller None $50,001 - $100,000
-------------------------------------------------------------------------------
R. Clark Hooper/3/ None $10,001 - $50,000
-------------------------------------------------------------------------------
Richard G. Newman $50,001 - $100,000 Over $100,000
-------------------------------------------------------------------------------
Frank M. Sanchez $1 - $10,000 $10,001 - $50,000
-------------------------------------------------------------------------------
"INTERESTED" TRUSTEES/4/
-------------------------------------------------------------------------------
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.
2 The dollar range of shares owned by Mr. Fenton in IBFA was $10,001 - $50,000,
as of October 26, 2005.
3 Elected effective June 22, 2005.
4 "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).

TRUSTEE COMPENSATION -- No compensation is paid by the funds to any officer or
Trustee who is a director, officer or employee of the investment adviser or its
affiliates. The fund typically pays each Non-interested Trustee an annual fee of
$3,000. If the aggregate annual fees paid to a Non-interested Trustee by all
funds advised by the investment adviser is less than $50,000, that
Non-interested Trustee would be eligible for a $50,000 alternative fee. This
alternative fee is paid by those funds for which the Non-interested Trustee
serves as a Trustee on a pro-rata basis according to each fund's relative share
of the annual fees that it would typically pay. The alternative fee reflects the
significant time and labor commitment required for a Trustee to oversee even one
fund. A Non-interested Trustee who is Chairman of the Board (an "independent
chair") also receives an additional annual fee of $25,000, paid in equal
portions by the fund and the funds whose boards and committees typically meet
jointly with those of the fund. The fund pays to its independent chair
attendance fees (as described below) for each meeting of a Committee of the
Board of Trustees attended as a non-voting ex-officio member.

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

In addition, the fund generally pays to Non-interested Trustees a pro-rata
portion of fees of: (a) $3,600 for each Board of Trustees meeting attended; (b)
$1,500 for each meeting attended as a member of the Nominating and Governance
Committee; (c) $3,000 for each meeting attended as a member of the Contracts
Committee; and (d) an annual fee of $6,160 for attending all Audit Committee
meetings.

Non-interested Trustees also receive attendance fees of (a) $2,500 for each
director seminar or information session organized by the investment adviser, (b)
$1,500 for each joint Audit Committee meeting with all other audit committees of
funds advised by the investment adviser and (c) $500 for each meeting of the
Board or Committee Chairs of other funds advised by the investment adviser. The
fund and the other funds served by each Non-interested Trustee each pay an equal
portion of these attendance fees.

No pension or retirement benefits are accrued as part of fund expenses.
Non-interested 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 Non-interested Trustees.

TRUSTEE COMPENSATION PAID DURING THE FISCAL YEAR ENDED AUGUST 31, 2005

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/ $5,199 $140,700
------------------------------------------------------------------------------------------------------------------------------------
H. Frederick Christie/3/ 5,298 322,700
------------------------------------------------------------------------------------------------------------------------------------
Diane C. Creel/3/ 6,975 79,430
------------------------------------------------------------------------------------------------------------------------------------
Martin Fenton/3/ 6,300 264,690
------------------------------------------------------------------------------------------------------------------------------------
Leonard R. Fuller/3/ 5,199 190,700
------------------------------------------------------------------------------------------------------------------------------------
R. Clark Hooper/4/ 1,170 18,756
------------------------------------------------------------------------------------------------------------------------------------
Richard G. Newman 6,597 154,430
------------------------------------------------------------------------------------------------------------------------------------
Frank M. Sanchez 6,892 80,340
------------------------------------------------------------------------------------------------------------------------------------

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 for the fiscal year ended August
31, 2005, includes earnings on amounts deferred in previous fiscal years.
2 Capital Research and Management Company manages the American Funds, consisting
of 29 funds. Capital Research and Management Company also manages 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 2005
fiscal year for participating Trustees is as follows: Richard G. Capen, Jr.
($25,826), H. Frederick Christie ($15,956), Diane C. Creel ($26,850), Martin
Fenton ($32,104) and Leonard R. Fuller ($32,909). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Trustees.
4 Ms. Hooper began serving as a Trustee on June 22, 2005.

As of October 1, 2005, 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.

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

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, including 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. The 529
share classes are available only through CollegeAmerica/(R)/ to investors
establishing qualified higher education savings accounts. The R share classes
are generally available only to employer-sponsored retirement plans. 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.

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 account owners 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 shares, the Virginia College Savings Plan/SM/ will
vote any proxies relating to 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.

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

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

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 2005 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; 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'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 2005 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 Non-interested 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 2005 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 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.

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

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 or (b) on the SEC's
website at www.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 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

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

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, 2005. 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 7.65%
201 Progress Parkway Class B 5.15
Maryland Heights, MO 63043-3009
----------------------------------------------------------------------------
MLPF&S Class B 6.50
4800 Deer Lake Drive East, Floor 2 Class C 15.71
Jacksonville, FL 32246-6484
----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class C 6.83
333 W. 34th Street
New York, NY 10001-2402
----------------------------------------------------------------------------
Unified Trust Company NA Class F 15.23
2353 Alexandria Drive, Suite 100
Lexington, KY 40504-3208
----------------------------------------------------------------------------
PFPC Brokerage Services Class F 7.29
760 Moore Road
King of Prussia, PA 19406-1212
----------------------------------------------------------------------------
Gutglass Erickson Bonville Class R-1 8.02
735 N. Water Street, Suite 1400
Milwaukee, WI 53202-4106
----------------------------------------------------------------------------
Nationwide Trust Company Class R-3 12.13
P.O. Box 182029
Columbus, OH 43218-2029
----------------------------------------------------------------------------
CB&T Class R-4 5.22
8515 E. Orchard Road, #2T2
Greenwood Village, CO 80111-5002
----------------------------------------------------------------------------
CGTC Class R-5 5.25
120 S. State College Boulevard
Brea, CA 92821-5805
----------------------------------------------------------------------------

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

INVESTMENT ADVISER -- Capital Research and Management Company, the 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 proxy voting of 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 manage assets in 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 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 a portion of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

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

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF AUGUST 31, 2005:

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
OF FUND MANAGES MANAGES (ASSETS OF
PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS)/2/ IN BILLIONS) IN BILLIONS)/3/
-----------------------------------------------------------------------------------------

John H. Smet $100,001 -- 6 $200.5/5/ None 3 $2.0/6/
$500,000
-----------------------------------------------------------------------------------------
David A. Hoag $500,001 -- 1 $53.9/5/ None None
$1,000,000
-----------------------------------------------------------------------------------------
Thomas H. Hogh None/4/ 3 $69.2/5/ 1 $0.15/6/ 15 $2.6/6/
-----------------------------------------------------------------------------------------

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).
3 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.
4 Portfolio counselor resides outside the United States. As such, tax
considerations may adversely influence his or her ability to own shares of the
fund.
5 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.
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 or account and are not indicative of the total assets managed by
the individual, which is a substantially lower amount.

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, 2006, 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 considering the renewal of the Agreement each year, the Contracts Committee
of the Board of Trustees evaluates information provided by the investment
adviser in accordance with Section 15(c) of the 1940 Act and presents its
recommendations to the full Board of Trustees.

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

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 Non-interested 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 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
------------------------------------------------------------------------------

The Agreement also provides for fees based on monthly gross investment income at
the following 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
-----------------------------------------------------------------------------------

Assuming net assets of $5.3 billion and gross investment income levels of 2%,
3%, 4%, 5% and 6%, management fees would be 0.23%, 0.25%, 0.27%, 0.29% and
0.31%, respectively.

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

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

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 year ended August 31, 2005, the investment adviser was entitled
to receive from the fund management fees of $14,038,000. As a result of the
management fee waivers described below, for the year ended August 31, 2005, the
fee shown on the accompanying financial statements of $14,038,000 was reduced by
$1,002,000 to $13,036,000. For the fiscal years ended August 31, 2004 and 2003,
management fees paid by the fund amounted to $13,143,000 and $13,285,000,
respectively.

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 it is otherwise entitled to receive and will
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.

APPROVAL OF RENEWAL OF INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The
fund's Board of Trustees have approved the renewal of the fund's Investment
Advisory and Service Agreement (the "agreement") with the fund's investment
adviser for an additional one-year term through October 31, 2006. The
renewal of the agreement was approved by the Board following the
recommendation of the Contracts Committee, which is comprised of all of the
fund's Non-interested Trustees. The information, material facts and
conclusions that formed the basis for the Contracts Committee's
recommendation and the Board's subsequent approval are described below.

INFORMATION RECEIVED

MATERIALS REVIEWED -- During the course of each year, the independent Board
members receive a wide variety of materials relating to the services
provided by the investment adviser, including reports on the fund's
investment results, portfolio composition, portfolio trading practices,
shareholder services, and other information relating to the nature, extent
and quality of services provided by the investment adviser to the fund. In
addition, the Contracts Committee requests and reviews supplementary
information that includes extensive materials regarding the fund's
investment results, advisory fee and expense comparisons (including
comparisons to advisory fees charged by an affiliate of the investment
adviser to institutional clients), financial and profitability information
regarding the investment adviser, descriptions of various functions such as
compliance monitoring and portfolio trading practices, and information
about the personnel providing investment management and administrative
services to the fund.

REVIEW PROCESS -- The Contracts Committee received assistance and advice
regarding legal and industry standards from independent counsel to the
independent Board members. The committee discussed the renewal of the
agreement with representatives of

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

the investment adviser and in a private session with independent legal
counsel at which no representatives of the investment adviser were present.
In deciding to recommend the renewal of the agreement, the Contracts
Committee did not identify any single or particular piece of information
that, in isolation, was the controlling factor. This summary describes the
most important, but not all, of the factors considered by the Board and the
Contracts Committee.

NATURE, EXTENT AND QUALITY OF SERVICES

THE INVESTMENT ADVISER, ITS PERSONNEL AND ITS RESOURCES -- The Board and
the Contracts Committee considered the depth and quality of the investment
adviser's investment management process, including its global research
capabilities; the experience, capability and integrity of its senior
management and other personnel; the low turnover rates of its key
personnel; the overall financial strength and stability of its
organization; and the ability of its organizational structure to address
the recent growth in assets under management. The Board and the Contracts
Committee also considered that the investment adviser made available to its
investment professionals a variety of resources and systems relating to
investment management, compliance, trading, results and portfolio
accounting. They considered the investment adviser's commitment to
investing in information technology supporting investment management and
compliance. They further considered the investment adviser's continuing
need to attract and retain qualified personnel and to maintain and enhance
its resources and systems.

OTHER SERVICES -- The Board and the Contracts Committee considered the
investment adviser's policies, procedures and systems to ensure compliance
with applicable laws and regulations and its commitment to these programs;
its efforts to keep the Board members informed; and its attention to
matters that may involve conflicts of interest with the fund. The Board and
the Contracts Committee also considered the nature, extent, quality and
cost of administrative, distribution and shareholder services provided by
the investment adviser to the fund under the agreement and other
agreements, including the information technology, legal, and fund
accounting and treasury functions.

The Board and the Contracts Committee concluded that the nature, extent and
quality of the services provided by the investment adviser have benefited
and will continue to benefit the fund and its shareholders.

INVESTMENT RESULTS

The Board and Contracts Committee considered the investment results of the
fund in light of its objective of providing shareholders with current
income while preserving capital by maintaining a portfolio having an
average effective maturity of no longer than five years and consisting of
debt securities with quality ratings of A or better. They compared the
fund's total returns with the total returns of the Lipper
Short-Intermediate Investment-Grade Funds Index (the Lipper category that
includes the fund), the averages of the funds included in the Index each
year, the Lipper U.S. Government Funds Index, and the Lehman Brothers
Government/Credit (1-7 yr., ex BBB-rated debt) Index.

The Board and the Contracts Committee noted that for the seven months ended
July 31, 2005 the fund's investment results exceeded those of both Lipper
Indexes, the average of the funds included in the Lehman Short-Intermediate
Investment-Grade Funds Index, and

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

the Lehman Index. They also noted that although the fund's investment
results were below those of both Lipper Indexes, the average of the funds
included in the Lipper Short-Intermediate Investment-Grade Funds Index, and
the Lehman Index for the three-, five- and 10-year periods ended July 31,
2005, the fund's standard deviation (a common measure of risk) was below
all the Indexes for those periods. They considered the fund's investment
returns to be good given its emphasis on high-quality securities and
below-average volatility. The Board and the Contracts Committee ultimately
concluded that the investment adviser's record in managing the fund
indicates that its continued management will benefit the fund and its
shareholders.

ADVISORY FEES AND TOTAL EXPENSES

The Board and the Contracts Committee compared the advisory fees and total
expenses of the fund (each as a percentage of average net assets) with the
median fee and expense levels of all other funds in the Lipper
Short-Intermediate Investment-Grade Funds Index. The Board and the
Contracts Committee observed that the fund's advisory fee was below the
median of the other funds included in the Index for the entire 10-year
period ended September 30, 2004, and that although its total expenses were
above the median for such other funds during the period this was
attributable primarily to the fund's distribution plan fees. The Board and
the Contracts Committee also noted the complex-wide 5% voluntary advisory
fee waiver that the investment adviser put into effect during 2004, and the
additional 5% advisory fee waiver implemented effective April 1, 2005. The
Board and the Contracts Committee concluded that the relatively low level
of the fees charged by the investment adviser will benefit the Fund and its
shareholders.

The Board and the Contracts Committee also reviewed information regarding
the advisory fees paid by institutional clients of an affiliate of the
investment adviser with similar investment mandates. They concluded that,
although the fees paid by those clients generally were lower than those
paid by American Funds, the differences appropriately reflected the
investment adviser's significantly greater responsibilities with respect to
American Funds and the more comprehensive regulatory regime applicable to
mutual funds.

INVESTMENT ADVISER COSTS, LEVEL OF PROFITS AND ECONOMIES OF SCALE

The Board and the Contracts Committee reviewed information regarding the
investment adviser's costs of providing services to the American Funds, as
well as the resulting level of profits to the investment adviser, noting
that those results were comparable to the reported results of several
large, publicly held investment management companies. The Contracts
Committee also received information during the past year regarding the
structure and manner in which the investment adviser's investment
professionals were compensated and the investment adviser's view of the
relationship of such compensation to the attraction and retention of
quality personnel. The Board and the Contracts Committee considered the
investment adviser's willingness to invest in technology, infrastructure
and staff to reinforce and offer new services and to accommodate changing
regulatory requirements. They further considered that breakpoints in the
fund's advisory fee structure provide for reductions in the level of fees
charged by the investment adviser to the fund as fund assets and gross
income increase, reflecting economies of scale in the cost of operations
that are shared with fund shareholders. The Board and the Contracts
Committee concluded that the fund's cost structure was reasonable and that

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

the investment adviser was sharing economies of scale with the fund and its
shareholders, to their benefit.

ANCILLARY BENEFITS

The Board and the Contracts Committee considered a variety of other
benefits received by the investment adviser and its affiliates as a result
of the investment adviser's relationship with the fund and the other
American Funds, including fees for administrative services provided to
certain share classes; fees paid to the investment adviser's affiliated
transfer agent; sales charges and distribution fees received and retained
by the fund's principal underwriter, an affiliate of the investment
adviser; and possible ancillary benefits to the investment adviser's
institutional management affiliate. The Board and the committee reviewed
the investment adviser's portfolio trading practices, noting that, while
the investment adviser receives the benefit of research provided by
broker-dealers executing portfolio transactions on behalf of the fund, it
does not obtain third-party research or other services in return for
allocating brokerage to such broker-dealers.

CONCLUSIONS

Based on their review, including their consideration of each of the factors
referred to above, the Board and the Contracts Committee concluded that the
agreement is fair and reasonable to the fund and its shareholders, that the
fund's shareholders received reasonable value in return for the advisory
fees and other amounts paid to the investment adviser by the fund, and that
the renewal of the agreement was in the best interests of the fund and its
shareholders.

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, 2006, 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 Non-interested 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).

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 contracts
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, 2005, the total fees paid by the investment adviser
were $300,000.

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

As compensation for its services, the investment adviser receives transfer agent
fees for transfer agent services provided to the fund's applicable share
classes. Transfer agent fees are paid monthly according to a fee schedule
contained in a Shareholder Services Agreement between the fund and American
Funds Service Company. The investment adviser also receives an administrative
services fee at the annual rate of up to 0.15% of the average daily net assets
for each applicable share class (excluding Class R-5 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 will 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 of Class R-5 shares. This fee is subject to the
same uses and limitations described above.

During the 2005 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

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

CLASS C $661,000
------------------------------------------------------------------------------
CLASS F 543,000
------------------------------------------------------------------------------
CLASS 529-A 144,000
------------------------------------------------------------------------------
CLASS 529-B 40,000
------------------------------------------------------------------------------
CLASS 529-C 113,000
------------------------------------------------------------------------------
CLASS 529-E 9,000
------------------------------------------------------------------------------
CLASS 529-F 16,000
------------------------------------------------------------------------------
CLASS R-1 10,000
------------------------------------------------------------------------------
CLASS R-2 626,000
------------------------------------------------------------------------------
CLASS R-3 230,000
------------------------------------------------------------------------------
CLASS R-4 33,000
------------------------------------------------------------------------------
CLASS R-5 69,000
------------------------------------------------------------------------------

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

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

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 2005 $2,439,000 $ 9,449,000
2004 2,952,000 11,444,000
2003 5,160,000 19,897,000
-----------------------------------------------------------------------------------------------------
CLASS B 2005 125,000 827,000
2004 372,000 1,856,000
2003 1,384,000 8,047,000
-----------------------------------------------------------------------------------------------------
CLASS C 2005 61,000 763,000
2004 595,000 1,112,000
2003 -- 2,836,000
-----------------------------------------------------------------------------------------------------
CLASS 529-A 2005 162,000 615,000
2004 178,000 682,000
2003 244,000 938,000
-----------------------------------------------------------------------------------------------------
CLASS 529-B 2005 20,000 104,000
2004 43,000 206,000
2003 79,000 494,000
-----------------------------------------------------------------------------------------------------
CLASS 529-C 2005 1,000 184,000
2004 38,000 210,000
2003 -- 296,000
-----------------------------------------------------------------------------------------------------

Intermediate Bond Fund of America -- Page 27
<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 Trustees who are not
"interested persons" of the fund and 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 Trustees who are not "interested persons" of the fund are
committed to the discretion of the Trustees who are not "interested persons"
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, 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; (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 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. As of August 31, 2005, unreimbursed expenses
which remain subject to reimbursement under the Plan for Class A shares totaled
$984,000 or .026% of Class A net assets.

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.

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

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.

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.

During the 2005 fiscal year, total 12b-1 expenses, and the portion of the
expense that remained unpaid, were:

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

CLASS A $11,217,000 $1,780,000
---------------------------------------------------------------------------------------
CLASS B 3,190,000 363,000
---------------------------------------------------------------------------------------
CLASS C 3,656,000 723,000
---------------------------------------------------------------------------------------
CLASS F 850,000 229,000
---------------------------------------------------------------------------------------
CLASS 529-A 173,000 36,000
---------------------------------------------------------------------------------------
CLASS 529-B 205,000 25,000
---------------------------------------------------------------------------------------
CLASS 529-C 625,000 140,000
---------------------------------------------------------------------------------------
CLASS 529-E 28,000 7,000
---------------------------------------------------------------------------------------
CLASS 529-F 17,000 0
---------------------------------------------------------------------------------------
CLASS R-1 34,000 10,000
---------------------------------------------------------------------------------------
CLASS R-2 613,000 165,000
---------------------------------------------------------------------------------------
CLASS R-3 385,000 98,000
---------------------------------------------------------------------------------------
CLASS R-4 49,000 14,000
---------------------------------------------------------------------------------------

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

OTHER COMPENSATION TO DEALERS -- As of January 2006, the top dealers that
American Funds Distributors anticipates will receive additional compensation
(as described in the prospectus) include:

A. G. Edwards & Sons, Inc.
AIG Advisors Group
American General Securities Inc.
Ameritas Investment Corp.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Capital Analysts, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.
Edward Jones
Ferris, Baker Watts, Inc.
Genworth Financial Securities Corp.
Hefren-Tillotson, Inc.
Hornor, Townsend & Kent, Inc.
ING Advisors Network Inc.
InterSecurities, Inc./Transamerica Financial Advisors, Inc.
Investacorp, Inc.
Janney Montgomery Scott LLC
Jefferson Pilot Securities Corporation
JJB Hilliard, WL Lyons, Inc./PNC Bank
Legg Mason Wood Walker, Inc.
Lincoln Financial Advisors Corporation
McDonald Investments Inc./Society National Bank
Merrill Lynch, Pierce, Fenner & Smith Inc.
Metlife Enterprises
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley DW
NatCity Investment, Inc.
National Planning Holdings Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC.
Pacific Select Distributors Inc.
Park Avenue Securities LLC
Piper Jaffray & Co.
Princor Financial Services
ProEquities, Inc.
Raymond James Financial Services/Raymond James & Associates
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Inc.
Securian Financial Services/C.R.I. Securities Inc.
Securities Service Network Inc.
Signator Investors, Inc.
Smith Barney
Stifel, Nicolaus & Company, Inc.
The O.N. Equity Sales Company
UBS Financial Services Inc.
US Bancorp Investments, Inc.
Wachovia Securities

Intermediate Bond Fund of America -- Page 30
<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.

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 Banc of America Securities LLC, Citigroup Global Markets
Holdings, Inc., J.P. Morgan Securities, Inc. and First Clearing LLC. As of the
fund's most recent fiscal year-end, the fund held debt securities of Bank of
America Corp. in the amount of $14, 291,000; Citigroup, Inc. in the amount of
$48,445,000; J.P. Morgan Chase & Co. in the amount of $39,575,000; and Wachovia
Corporation in the amount of $13,005,000.

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
August 31, 2005, 2004 and 2003 amounted to $2,058,000, $1,160,000 and
$2,521,000. 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 trading activity increased during the past year, resulting in an
increase in brokerage concessions paid on portfolio transactions.

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

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. 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.
Affiliates of the fund (including the fund's Board members and officers, and
certain personnel of the fund's investment adviser and its affiliates) and
certain service providers (such as the fund's custodian and outside counsel) who
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 Investment Committee of the fund's investment adviser. In exercising
its authority, the Investment Committee determines 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.

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

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 MUST 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 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 the fund's net asset value being
calculated.

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

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

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 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, 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.

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

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

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 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.

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

Distributions of investment company taxable income and net realized capital
gains to individual 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, which includes
any excess of net realized short-term gains over net realized long-term
capital losses. 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.

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 are expected to comprise some portion
of the fund's gross income. To the extent that such dividends constitute
any of the fund's gross

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

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 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.

In addition, some of the bonds may be purchased by the fund at a discount
that exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax
purposes. The gain realized on the disposition of any bond having a market
discount may be treated as taxable ordinary income to the extent it does
not exceed the accrued market discount on such bond or a fund may elect to
include the market discount in income in tax years to which it is
attributable. Generally, accrued market discount may be figured under
either the ratable accrual method or constant interest method. If the fund
has paid a premium over the face amount of a bond, the fund has the option
of either amortizing the premium until bond maturity and reducing the
fund's basis in the bond by the amortized amount, or not amortizing and
treating the premium as part of the bond's basis. In the case of any debt
security having a fixed maturity date of not more than one year from its
date of issue, the gain realized on disposition generally will be treated
as a short-term capital gain. In general, any gain realized on disposition
of a security held less than one year is treated as a short-term capital
gain.

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. Most
foreign countries do not 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

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

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
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. However, conversion from one class to another class in the same
fund should not be a taxable event.

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 share of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days

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

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.

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 COLLEGEAMERICA PROGRAM
DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO
COLLEGEAMERICA 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.

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

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

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. The R share classes are generally available only to
employer-sponsored retirement plans. 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. Purchase minimums may be
waived or reduced in certain cases. For accounts established with an automatic
investment plan, the initial purchase minimum of $250 may be waived if the
purchases (including purchases through exchanges from another fund) made under
the plan are sufficient to reach $250 within five months of account
establishment.

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

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:

. 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.

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. 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

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

redemptions. Systematic purchases include, for example, regular periodic
automatic purchases and automatic reinvestments of dividends and capital gain
distributions.

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. If you redeem your Class B shares after the
contingent deferred sales charge period and with the redemption proceeds
you purchase Class A shares, you are still 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 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.

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

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

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 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;

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

(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;

(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.

EDWARD JONES FREE SWITCH PROGRAM

Eligible clients of broker-dealer Edward Jones may purchase Class A shares
at net asset value under the terms of the Edward Jones Free Switch program.
The program applies to purchases initiated within the 90-day period
beginning August 19, 2005, and ending November 16, 2005, at 3:00 p.m.
Central time. The fund's Board has determined that it would be in the best
interests of the fund and its shareholders and desirable to have the fund
participate in the program.

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 44
<PAGE>

market funds over a 13-month period and receive the same sales charge as if
all shares had been purchased at once.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement will be held in escrow in the
shareholder's account out of the initial purchase (or subsequent purchases,
if necessary) by the Transfer Agent. All dividends and any capital gain
distributions on shares held in escrow will be credited to the
shareholder's account in shares (or paid in cash, if requested). If the
intended investment is not completed within the specified Statement period,
the purchaser will remit to the Principal Underwriter the difference
between the sales charge actually paid and the sales charge which would
have been paid if the total of such purchases had been made at a single
time. The dealer assigned to an account at the time of each purchase made
during the Statement period will receive an appropriate commission
adjustment. 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 will be liable to the Principal Underwriter for the balance
still outstanding.

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 purchase must be made will remain
unchanged. Accordingly, upon your request, the sales charge paid on
investments made 90 days prior to the Statement revision will be adjusted
to reflect the revised Statement.

Existing holdings eligible for rights of accumulation (see below) may be
credited toward satisfying the Statement.

The Statement will be considered completed if the shareholder dies within
the Statement 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 the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the Statement
period will be handled as follows: the total monthly investment will be
multiplied by 13 and then multiplied by 1.5. The current value of existing
American Funds investments (other than shares representing direct purchases
of money market funds) and any rollovers or transfers reasonably
anticipated to be invested in non-money market American Funds during the
Statement period are added to the figure determined above. The sum is the
Statement amount and applicable breakpoint level. On the first investment
and all other investments made pursuant to the Statement, a sales charge
will be assessed according to the sales charge breakpoint thus determined.
There will be no retroactive adjustments in sales charges on investments
made during the Statement period.

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:

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

. individual-type employee benefit plan(s), 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;

. 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

. CollegeAmerica 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 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

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

well as individual holdings in Endowments, American Legacy variable annuity
contracts and variable life insurance policies. 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.
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. 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, the value of accounts
held in nominee or street name are not eligible for calculation at cost
value and instead will 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 you are not
an employer-sponsored retirement plan, you may also take into account the
market value (as of the end of the week prior to your American Funds
investment) of your individual holdings in various American Legacy variable
annuity contracts and variable life insurance policies. An
employer-sponsored retirement plan may also take into account the market
value of its investments in American Legacy Retirement Investment Plans.
Direct purchases of American Funds money market funds are excluded. 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 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

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

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 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 the Virginia College Savings
Plan eliminating the fund 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.

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 48
<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 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may 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 ($50 minimum)
and the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or 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 49
<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.
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 50
<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
checking account signature card.

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 51
<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 $4,079,000 for Class A shares and
$329,000 for Class B shares for the 2005 fiscal year.

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
Non-interested Trustees in their capacities as such. Certain legal matters in
connection with the 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
Non-interested 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 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.

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

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

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 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. On February 7, 2006,
the Attorney General filed a notice that he intends to appeal the Superior
Court's decision to California's Court of Appeal for the Second Appellate
District.

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, a class
action lawsuit has

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

been filed in the U.S. District Court, Central District of California, relating
to these matters. Although the suit was dismissed in its entirety, an amended
complaint relating to management fees has been filed. The investment adviser
believes that this suit is 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."

OTHER INFORMATION -- 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, 2005

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $13.63
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $14.16

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
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 54
<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
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 55
<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
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 56
<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 57
<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 58
<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.

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
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 59

[logo - American Funds/(R/)]

INTERMEDIATE BOND FUND OF AMERICA(R)
Investment portfolio
August 31, 2005



                                                                                                   Principal amount    Market value
Bonds & notes -- 95.75%                                                                                       (000)           (000)

CORPORATE BONDS & NOTES -- 28.67%
Financials -- 16.46%
SLM Corp., Series A, 3.59% 2005(1)                                                                         $  4,000        $  4,000
SLM Corp., Series A, 3.625% 2008                                                                             17,500          17,207
SLM Corp., Series A, 3.95% 2008                                                                               5,000           4,952
SLM Corp., Series A, 3.833% 2009(1)                                                                           5,000           5,003
SLM Corp., Series A, 4.00% 2009                                                                              12,250          12,144
SLM Corp., Series A, 4.00% 2009(1)                                                                            5,000           4,952
SLM Corp., Series A, 4.50% 2010                                                                               5,000           5,018
SLM Corp., Series A, 5.375% 2014                                                                              5,000           5,237
USA Education, Inc. 5.625% 2007                                                                               9,035           9,232
Prudential Insurance Co. of America 6.375% 2006(2)                                                           13,250          13,470
PRICOA Global Funding I, Series 2003-2, 3.90% 2008(2)                                                        10,000           9,856
PRICOA Global Funding I, Series 2004-4, 4.35% 2008(2)                                                         3,000           2,999
PRICOA Global Funding I 4.20% 2010(2)                                                                        10,000           9,919
Prudential Funding LLC 6.60% 2008(2)                                                                         11,795          12,534
Prudential Financial, Inc., Series B, 5.10% 2014                                                              2,000           2,050
Citigroup Inc. 5.75% 2006                                                                                     7,000           7,072
Citigroup Inc. 3.50% 2008                                                                                    22,500          22,145
Citigroup Inc. 4.125% 2010                                                                                   13,150          13,012
Citigroup Inc. 4.625% 2010                                                                                    3,000           3,028
Citigroup Inc. 5.625% 2012                                                                                    3,000           3,188
J.P. Morgan Chase & Co. 5.625% 2006                                                                           5,000           5,059
J.P. Morgan Chase & Co. 5.35% 2007                                                                            6,050           6,153
J.P. Morgan Chase & Co. 4.00% 2008                                                                           15,000          14,928
J.P. Morgan Chase & Co. 3.50% 2009                                                                            5,000           4,868
J.P. Morgan Chase & Co. 4.75% 2015                                                                            3,500           3,500
J.P. Morgan Chase & Co. 4.891% 2015                                                                           5,000           5,067
Bank One Corp. 2.625% 2008                                                                                    6,000           5,747
International Lease Finance Corp., Series P, 3.125% 2007                                                      5,000           4,902
International Lease Finance Corp. 4.50% 2008                                                                  3,000           2,999
International Lease Finance Corp., Series O, 4.55% 2009                                                       1,600           1,611
International Lease Finance Corp. 4.75% 2009                                                                  9,000           8,996
International Lease Finance Corp. 5.00% 2010                                                                  5,280           5,369
American International Group, Inc. 4.25% 2013                                                                 2,000           1,951
ASIF Global Financing XXVIII 3.75% 2007(1,2)                                                                  7,000           7,002
ASIF Global Financing XVIII 3.85% 2007(2)                                                                     8,000           7,909
ASIF Global Financing XIX 4.90% 2013(2)                                                                       3,000           3,058
Household Finance Corp. 5.75% 2007                                                                            8,000           8,165
Household Finance Corp. 7.875% 2007                                                                           6,250           6,578
Household Finance Corp. 4.125% 2008                                                                          13,500          13,409
Household Finance Corp. 6.40% 2008                                                                           10,000          10,548
HSBC Finance Corp. 5.00% 2015                                                                                 3,625           3,651
Monumental Global Funding Trust II, Series 2001-B, 6.05% 2006(2)                                              8,625           8,685
Monumental Global Funding Trust II, Series 2002-A, 5.20% 2007(2)                                             19,350          19,592
Monumental Global Funding II, Series 2004-B, 3.90% 2009(2)                                                    5,000           4,911
Monumental Global Funding II, Series 2004-F, 4.375% 2009(2)                                                   2,000           1,994
Monumental Global Funding II 4.625% 2010(2)                                                                   2,500           2,533
Washington Mutual, Inc. 7.50% 2006                                                                           15,500          15,903
Washington Mutual, Inc. 5.625% 2007                                                                           4,600           4,674
Washington Mutual, Inc. 4.20% 2010                                                                            8,000           7,913
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007(2)                                           24,500          24,990
Allstate Financial Global Funding LLC 7.125% 2005(2)                                                          2,000           2,003
Allstate Financial Global Funding LLC 6.15% 2006(2)                                                           9,000           9,072
Allstate Financial Global Funding LLC 5.25% 2007(2)                                                          10,600          10,736
Allstate Life Global Funding 4.25% 2010                                                                       2,000           1,987
Nationwide Life Insurance Co. 5.35% 2007(2)                                                                  21,350          21,548
North Front Pass Through Trust 5.81% 2024(1,2)                                                                2,000           2,075
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)(1,2)                                                    8,250           8,763
Societe Generale 7.85% (undated)(1,2)                                                                        14,000          14,707
Westfield Capital Corp. Ltd. and WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 2010(2)          22,885          22,608
Genworth Financial, Inc. 3.56% 2007(1)                                                                       12,000          12,025
Genworth Financial, Inc. 4.75% 2009                                                                          10,000          10,128
Wells Fargo & Co. 4.125% 2008                                                                                17,000          16,978
Wells Fargo & Co. 3.125% 2009                                                                                 5,000           4,818
HBOS PLC 3.125% 2007(2)                                                                                      11,500          11,346
HBOS Treasury Services PLC 3.75% 2008(2)                                                                     10,000           9,863
ReliaStar Financial Corp. 8.00% 2006                                                                         11,470          11,877
ReliaStar Financial Corp. 6.50% 2008                                                                          4,000           4,271
ING Security Life Institutional Funding 2.70% 2007(2)                                                         2,000           1,945
ING Security Life Institutional Funding 4.25% 2010(2)                                                         3,000           2,983
Price REIT, Inc. 7.50% 2006                                                                                   5,000           5,183
Kimco Realty Corp., Series C, 3.95% 2008                                                                      7,000           6,955
Kimco Realty Corp., Series C, 4.82% 2014                                                                        795             786
Kimco Realty Corp., Series C, 4.904% 2015                                                                     7,500           7,397
John Hancock Global Funding II, Series 2002-G, 5.00% 2007(2)                                                 19,000          19,251
US Bank NA 4.40% 2008                                                                                        17,000          17,076
Metropolitan Life Global Funding I, Series 2004-10, 3.375% 2007(2)                                           12,000          11,786
Metropolitan Life Global Funding I, Series 2004-7, 4.25% 2009(2)                                              4,000           3,990
Signet Bank 7.80% 2006                                                                                        2,000           2,067
Wachovia Corp., Series G, 4.375% 2010                                                                        13,000          13,005
American Express Credit Corp. 3.743% 2006(1)                                                                  5,000           5,008
American Express Credit Corp. 3.00% 2008                                                                      5,000           4,851
American Express Co. 4.75% 2009                                                                               5,000           5,075
XL Capital Finance (Europe) PLC 6.50% 2012                                                                    4,725           5,114
Twin Reefs Asset Trust (XLFA), Series B, 4.57% (undated)(1,2)                                                 9,700           9,680
CIT Group Inc. 3.65% 2007                                                                                     7,835           7,730
CIT Group Inc. 7.375% 2007                                                                                    3,500           3,667
CIT Group Inc. 6.875% 2009                                                                                    3,000           3,272
NationsBank Corp. 7.50% 2006                                                                                  2,000           2,062
Bank of America Corp. 6.625% 2007                                                                               200             209
Bank of America Corp. 4.375% 2010                                                                             5,000           4,989
Bank of America Corp. 4.50% 2010                                                                              7,000           7,031
Hartford Financial Services Group, Inc. 2.375% 2006                                                          10,375          10,230
Hartford Financial Services Group, Inc. 4.70% 2007                                                            4,000           4,020
Deutsche Bank Capital Funding Trust I, 7.872% (undated)(1,2)                                                 11,950          13,295
New York Life Global Funding 3.875% 2009(2)                                                                   6,750           6,685
New York Life Global Funding 4.625% 2010(2)                                                                   5,000           5,058
Protective Life Insurance Co., Series 2004-D, 4.00% 2009                                                      3,000           2,967
Protective Life Insurance Co., 4.85% 2010                                                                     7,750           7,890
National Westminster Bank PLC 7.375% 2009                                                                     7,000           7,797
National Westminster Bank PLC 7.75% (undated)(1)                                                              2,350           2,497
SunTrust Banks, Inc. 4.415% 2009                                                                             10,000          10,027
Bank of New York Co., Inc., Series E, 2.20% 2006                                                             10,000           9,864
Weingarten Realty Investors, Series A, 5.263% 2012                                                            6,000           6,230
Weingarten Realty Investors, Series A, 4.857% 2014                                                            3,000           2,995
Principal Life Global Funding I 4.40% 2010(2)                                                                 9,000           8,959
Lincoln National Corp. 6.50% 2008                                                                             8,385           8,881
Skandinaviska Enskilda Banken 6.875% 2009                                                                     7,930           8,523
Berkshire Hathaway Finance Corp. 4.125% 2010                                                                  8,000           7,935
Bayerische Landesbank, Series F, 2.50% 2006                                                                   6,625           6,566
Abbey National PLC 6.70% (undated)(1)                                                                         4,672           4,933
Abbey National PLC 7.35% (undated)(1)                                                                         1,000           1,032
Principal Life Insurance Co. 3.20% 2009                                                                       6,000           5,794
Swedish Export Credit Corp. 2.875% 2007                                                                       5,000           4,918
Merita Bank Ltd. 7.50% (undated)(1,2)                                                                         2,825           2,940
Barclays Bank PLC 7.40% 2009                                                                                  1,250           1,396
Den Danske Bank A/S 7.40% 2010(1,2)                                                                             500             526
                                                                                                                            867,558

Telecommunication services -- 2.80%
SBC Communications Inc. 4.125% 2009                                                                          18,750          18,535
SBC Communications Inc. 6.25% 2011                                                                           15,500          16,783
BellSouth Corp. 4.20% 2009                                                                                   18,000          17,876
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006                                              17,500          17,760
France Telecom 8.50% 2011(1)                                                                                 12,500          14,425
Telefonica Europe BV 7.75% 2010                                                                              10,000          11,462
Vodafone Group PLC 7.75% 2010                                                                                 9,525          10,779
British Telecommunications PLC 7.875% 2005(1)                                                                 3,250           3,284
British Telecommunications PLC 8.375% 2010(1)                                                                 4,000           4,702
Singapore Telecommunications Ltd. 6.375% 2011(2)                                                              7,000           7,673
Verizon Global Funding Corp. 7.375% 2012                                                                      5,000           5,801
Deutsche Telekom International Finance BV 8.50% 2010(1)                                                       5,000           5,755
ALLTEL Corp. 4.656% 2007                                                                                      5,000           5,033
Koninklijke KPN NV 8.00% 2010                                                                                 4,000           4,626
Cingular Wireless LLC 5.625% 2006                                                                             3,000           3,045
                                                                                                                            147,539

Consumer staples -- 2.56%
Wal-Mart Stores, Inc. 5.45% 2006                                                                              5,000           5,050
Wal-Mart Stores, Inc. 4.375% 2007                                                                            16,000          16,085
Wal-Mart Stores, Inc. 4.125% 2010                                                                            15,000          14,830
Wal-Mart Stores, Inc. 4.75% 2010                                                                             10,500          10,674
Diageo Capital PLC 3.50% 2007                                                                                12,000          11,832
Diageo Capital PLC 4.375% 2010                                                                               12,500          12,527
Kraft Foods Inc. 4.625% 2006                                                                                  3,000           3,010
Kraft Foods Inc. 4.125% 2009                                                                                  4,000           3,953
Kraft Foods Inc. 6.25% 2012                                                                                   1,600           1,758
Nabisco, Inc. 7.05% 2007                                                                                      9,200           9,635
Pepsi Bottling Group, Inc. 5.625% 2009(2)                                                                    16,650          17,393
Anheuser-Busch Companies, Inc. 9.00% 2009                                                                     2,000           2,362
Anheuser-Busch Companies, Inc. 6.00% 2011                                                                     9,000           9,748
CVS Corp. 4.00% 2009                                                                                          5,000           4,942
CVS Corp. 6.117% 2013(2,3)                                                                                    1,655           1,760
CVS Corp. 5.298% 2027(2,3)                                                                                      975           1,009
Costco Wholesale Corp. 5.50% 2007                                                                             5,250           5,348
PepsiAmericas, Inc. 4.875% 2015                                                                               3,000           3,060
                                                                                                                            134,976

Consumer discretionary -- 2.55%
Kohl's Corp. 6.70% 2006                                                                                       7,074           7,136
Kohl's Corp. 6.30% 2011                                                                                      16,170          17,596
Target Corp. 5.50% 2007                                                                                      17,000          17,354
Target Corp. 3.375% 2008                                                                                      7,200           7,070
DaimlerChrysler North America Holding Corp. 4.75% 2008                                                        7,000           7,007
DaimlerChrysler North America Holding Corp. 7.20% 2009                                                        5,000           5,407
DaimlerChrysler North America Holding Corp. 8.00% 2010                                                        3,000           3,369
DaimlerChrysler North America Holding Corp. 7.75% 2011                                                        3,500           3,929
Gannett Co., Inc. 4.125% 2008                                                                                 8,000           7,975
Gannett Co., Inc. 6.375% 2012                                                                                 7,285           8,046
Viacom Inc. 6.40% 2006                                                                                       10,250          10,338
Viacom Inc. 5.625% 2007                                                                                       5,000           5,096
Walt Disney Co., Series B, 5.375% 2007                                                                       14,000          14,267
Lowe's Companies, Inc. 7.50% 2005                                                                             3,000           3,028
Lowe's Companies, Inc. 8.25% 2010                                                                             5,000           5,831
Carnival Corp. 6.15% 2008                                                                                     5,401           5,637
Sony Capital Corp., Series C, 4.95% 2006(2)                                                                   5,000           5,012
                                                                                                                            134,098

Industrials -- 2.28%
General Electric Capital Corp., Series A, 2.85% 2006                                                          5,000           4,978
General Electric Capital Corp., Series A, 5.00% 2007                                                         23,000          23,349
General Electric Capital Corp., Series A, 5.375% 2007                                                        10,000          10,193
General Electric Capital Corp., Series A, 3.50% 2008                                                          4,000           3,934
General Electric Capital Corp., Series A, 6.00% 2012                                                          2,500           2,709
General Electric Co. 5.00% 2013                                                                               2,000           2,057
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 2011(2,3)                                         22,662          24,130
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 2013(2,3)                            2,248           2,447
John Deere Capital Corp. 3.90% 2008                                                                          18,500          18,351
Caterpillar Inc. 4.50% 2009                                                                                  16,750          16,876
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 1996-B, 6.96% 2009(3)                 3,720           3,894
Burlington Northern and Santa Fe Railway Co. Pass Through Trust, Series 2002-1, 5.943% 2022(3)                  484             527
Northwest Airlines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.264% 2023(3)                              2,335           2,414
Continental Airlines, Inc., MBIA insured, 4.25% 2009(1)                                                       2,000           2,008
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 2023(2,3)              1,338           1,375
Southwest Airlines Co., Series 2001-1, Class A-2, 5.496% 2006(3)                                              1,000           1,013
                                                                                                                            120,255

Utilities -- 0.97%
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007                                                  13,500          13,703
Alabama Power Co., Series U, 2.65% 2006                                                                       5,000           4,970
Georgia Power Co., Series V, 4.10% 2009                                                                       7,000           6,932
Public Service Electric and Gas Co., Series B, 5.125% 2012                                                    8,343           8,637
Duke Energy Corp., First and Refunding Mortgage Bonds, Series A, 3.75% 2008                                   5,000           4,940
Duke Energy Corp., First and Refunding Mortgage Bonds, 4.50% 2010                                             2,250           2,260
Pacificorp Australia LLC, MBIA insured, 6.15% 2008(2)                                                         6,000           6,243
Chilquinta Energia Finance Co. LLC, MBIA insured, 6.47% 2008(2)                                               3,500           3,669
                                                                                                                             51,354

Health care -- 0.55%
UnitedHealth Group Inc. 7.50% 2005                                                                            1,525           1,534
UnitedHealth Group Inc. 5.20% 2007                                                                            3,000           3,032
UnitedHealth Group Inc. 3.75% 2009                                                                           10,000           9,811
Amgen Inc. 4.00% 2009                                                                                        14,500          14,348
                                                                                                                             28,725

Energy -- 0.39%
Petroleum Export Ltd., Class A-1, MBIA insured, 4.623% 2010(2,3)                                              8,500           8,526
BP Capital Markets PLC 2.75% 2006                                                                             8,000           7,853
Oil Enterprises Ltd., MBIA insured, 6.239% 2008(2,3)                                                          3,762           3,880
                                                                                                                             20,259

Materials -- 0.11%
E.I. du Pont de Nemours and Co. 4.125% 2010                                                                   6,000           5,995


U.S. TREASURY BONDS & NOTES -- 17.58%
U.S. Treasury 5.625% 2006                                                                                    24,265          24,479
U.S. Treasury 3.25% 2007                                                                                     58,750          58,117
U.S. Treasury 3.375% 2007(4)                                                                                    473             490
U.S. Treasury 6.25% 2007                                                                                     47,750          49,421
U.S. Treasury 6.625% 2007(5)                                                                                  5,175           5,414
U.S. Treasury 3.375% 2008                                                                                    48,750          48,072
U.S. Treasury 3.375% 2008                                                                                    20,000          19,714
U.S. Treasury 3.625% 2008(4)                                                                                 17,409          18,442
U.S. Treasury 4.75% 2008                                                                                      4,450           4,571
U.S. Treasury 3.625% 2009                                                                                    76,750          76,132
U.S. Treasury 3.875% 2009(4)                                                                                 95,351         103,499
U.S. Treasury 5.50% 2009                                                                                    118,000         124,812
U.S. Treasury 6.00% 2009(5)                                                                                   1,950           2,103
U.S. Treasury 4.00% 2010                                                                                    134,500         135,256
U.S. Treasury 5.00% 2011                                                                                     59,500          62,782
U.S. Treasury 5.00% 2011                                                                                     53,750          56,883
U.S. Treasury 3.875% 2013                                                                                     2,550           2,539
U.S. Treasury 4.25% 2013                                                                                     13,500          13,753
U.S. Treasury 2.00% 2014(4)                                                                                  21,052          21,650
U.S. Treasury 4.25% 2014                                                                                     55,750          56,699
U.S. Treasury 8.75% 2020                                                                                     23,660          35,320
U.S. Treasury Principal Strip 0% 2015                                                                         5,300           3,516
U.S. Treasury Principal Strip 0% 2029                                                                         7,750           2,832
                                                                                                                            926,496

FEDERAL AGENCY BONDS & NOTES -- 17.00%
Freddie Mac 5.25% 2006                                                                                       43,250          43,457
Freddie Mac 5.50% 2006                                                                                       14,000          14,171
Freddie Mac 3.35% 2007                                                                                       28,000          27,677
Freddie Mac 3.375% 2007                                                                                      15,000          14,796
Freddie Mac 4.125% 2009                                                                                      30,000          29,949
Freddie Mac 5.75% 2009                                                                                       75,000          79,016
Freddie Mac 6.625% 2009                                                                                     159,250         173,928
Freddie Mac 4.125% 2010                                                                                     113,750         113,472
Freddie Mac 5.875% 2011                                                                                      56,000          59,972
Freddie Mac 5.00% 2014                                                                                       20,000          20,988
Federal Home Loan Bank 2.00% 2006                                                                            21,575          21,384
Federal Home Loan Bank 2.375% 2006                                                                           17,915          17,741
Federal Home Loan Bank 2.875% 2006                                                                            6,000           5,949
Federal Home Loan Bank 5.125% 2006                                                                           23,995          24,133
Federal Home Loan Bank 3.625% 2007                                                                           33,250          32,967
Federal Home Loan Bank 3.70% 2007                                                                            16,245          16,119
Federal Home Loan Bank 3.375% 2007                                                                           65,000          64,030
Federal Home Loan Bank 3.375% 2008                                                                           36,280          35,620
Federal Home Loan Bank 3.75% 2008                                                                             6,750           6,665
Federal Home Loan Bank 5.823% 2009                                                                           12,500          13,167
Fannie Mae 4.00% 2008                                                                                        30,000          29,895
Fannie Mae 6.625% 2009                                                                                       12,750          13,923
Federal Agricultural Mortgage Corp. 4.25% 2008                                                               32,500          32,563
United States Government-Guaranteed Ship Financing Obligations, Rowan Companies, Inc.
     (Title XI) 5.88% 2012(3)                                                                                 4,328           4,499
                                                                                                                            896,081

ASSET-BACKED OBLIGATIONS(3) -- 12.37%
Drive Auto Receivables Trust, Series 2003-1, Class A-3, MBIA insured, 2.41% 2007(2)                           3,525           3,518
Drive Auto Receivables Trust, Series 2002-1, Class A-4, MBIA insured, 4.09% 2008(2)                           5,344           5,343
Drive Auto Receivables Trust, Series 2005-1, Class A-3, MBIA insured, 3.75% 2009                             13,000          12,900
Drive Auto Receivables Trust, Series 2005-2, Class A-2, MBIA insured, 4.12% 2010(2)                          10,250          10,228
Drive Auto Receivables Trust, Series 2004-1, Class A-4, MBIA insured, 4.14% 2010(2)                          13,000          12,982
Drive Auto Receivables Trust, Series 2005-2, Class A-3, MBIA insured, 4.26% 2012(2)                           4,250           4,223
ARG Funding Corp., Series 2005-1, Class A-1, MBIA insured, 4.02% 2009(2)                                      6,750           6,678
ARG Funding Corp., Series 2005-2, Class A-1, AMBAC insured, 4.54% 2009(2)                                     6,500           6,508
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 2010(2)                                     15,750          15,553
CPS Auto Receivables Trust, Series 2003-A, Class A-2, XLCA insured, 2.89% 2009(2)                             1,645           1,613
CPS Auto Receivables Trust, Series 2002-B, Class A-2, XLCA insured, 3.50% 2009(2)                             4,856           4,833
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured, 3.52% 2009(2)                             1,216           1,212
CPS Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 3.87% 2010(2)                              5,000           4,965
CPS Auto Receivables Trust, Series 2004-D, Class A-2, XLCA insured, 3.86% 2011(2)                            13,234          13,141
Residential Asset Securities Corp. Trust, Series 2003-KS2, Class A-I-3, 2.66% 2028                              295             294
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031                            6,105           6,185
Residential Asset Securities Corp. Trust, Series 2003-KS8, Class A-I-6, 4.83% 2033                            1,500           1,504
Residential Asset Securities Corp. Trust, Series 2004-KS2, Class M-II-1, 4.151% 2034(1)                       7,000           6,980
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-1-2, 3.871% 2035(1)                      10,000          10,003
CWABS, Inc., Series 2004-10, Class AF-3, 3.842% 2030                                                         14,250          14,045
CWABS, Inc., Series 2004-10, Class AF-4, 4.506% 2032                                                          4,250           4,203
CWABS, Inc., Series 2004-10, Class 2-AV-2, 3.991% 2033(1)                                                     5,000           5,006
New Century Home Equity Loan Trust, Series 2001-NC2, Class M-1, 4.429% 2031(1)                               10,720          10,743
New Century Home Equity Loan Trust, Series 2004-A, Class M-II, FGIC insured, 5.65% 2034                      10,750          11,073
Banco Itau SA, Series 2002-2, XLCA insured, 3.946% 2006(1,2)                                                  9,000           9,000
Banco Itau SA, Series 2002, XLCA insured, 3.996% 2007(1,2)                                                   12,650          12,650
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-3, FGIC insured, 4.16% 2034       21,500          21,289
Citibank Credit Card Issuance Trust, Class 2002-A1, 4.95% 2009                                                4,000           4,043
Citibank Credit Card Issuance Trust, Class 2000-A3, 6.875% 2009                                              12,500          13,197
Citibank Credit Card Issuance Trust, Class 2003-A3, 3.10% 2010                                                2,900           2,825
Credit-Based Asset Servicing and Securitization LLC, Series 2004-CB8, Class AF-1, 3.633% 2021                11,458          11,372
Credit-Based Asset Servicing and Securitization LLC, Series 2004-CB8, Class AF-2, 4.134% 2026                 3,950           3,907
Credit-Based Asset Servicing and Securitization LLC, Series 2005-CB4, Class AF-4, 5.028% 2035(1)              4,485           4,537
Capital One Multi-asset Execution Trust, Series 2003-1, Class A, 3.961% 2009(1)                              19,000          19,052
MBNA Credit Card Master Note Trust, Series 2005-6, Class A, 4.50% 2013                                       18,500          18,515
Drivetime Auto Owner Trust, Series 2003-A, Class A-3, XLCA insured, 2.524% 2008(2)                            2,345           2,330
Drivetime Auto Owner Trust, Series 2005-A, Class A-3, MBIA insured, 4.302% 2009(2)                            8,250           8,256
Drivetime Auto Owner Trust, Series 2004-C, Class A-3, XLCA insured, 3.493% 2010(2)                            7,000           6,919
Centex Home Equity Loan Trust, Series 2005-A, Class AF-2, 3.90% 2024                                          2,500           2,475
Centex Home Equity Loan Trust, Series 2005-A, Class AF-4, 4.72% 2031                                          3,000           2,986
Centex Home Equity Loan Trust, Series 2003-C, Class AF-6, 4.81% 2033                                          1,700           1,708
Centex Home Equity Loan Trust, Series 2005-A, Class AF-6, 4.69% 2035                                          7,500           7,584
Long Beach Acceptance Auto Receivables Trust, Series 2004-C, Class A-3, FSA insured, 3.402% 2009              4,750           4,717
Long Beach Acceptance Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 2.841% 2010(1)           5,000           4,905
Long Beach Acceptance Auto Receivables Trust, Series 2004-C, Class A-4, FSA insured, 3.777% 2011              4,350           4,315
Lehman ABS Manufactured Housing Contract Trust, Series 2001-B, Class A-3, 4.35% 2014                         13,907          13,650
Massachusetts RRB Special Purpose Trust, Series 2005-1, Class A-4, 4.40% 2015                                12,800          12,766
Capital One Master Trust, Series 1998-1, Class A, 6.31% 2011                                                 11,950          12,568
Hyundai Auto Receivables Trust, Series 2002-A, Class B, 3.54% 2009(2)                                        12,125          12,080
Wells Fargo Home Equity Trust, Series 2004-2, Class AI-4, 4.43% 2025                                          5,000           4,968
Wells Fargo Home Equity Trust, Series 2004-2, Class AI-5, 4.89% 2028                                          6,750           6,712
Structured Asset Investment Loan Trust, Series 2004-BNC2, Class A-4, 3.961% 2034(1)                          10,500          10,545
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-2, 3.87% 2011                                        5,000           4,980
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012                                        5,250           5,250
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012                      10,000           9,999
Prestige Auto Receivables Trust, Series 2003-1, Class A-2, FSA insured, 2.41% 2010(2)                         2,194           2,170
Prestige Auto Receivables Trust, Series 2004-1, Class A-2, FSA insured, 3.69% 2011(2)                         7,297           7,242
MBNA Master Credit Card Trust II, Series 2000-D, Class B, 4.001% 2009(1)                                      5,750           5,786
MBNA Master Credit Card Trust II, Series 2000-E, Class A, 7.80% 2012                                          2,580           2,973
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-1, 2.87% 2013                              1,916           1,896
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-2, 3.79% 2017                              5,300           5,223
Origen Manufactured Housing Contract Trust, Series 2004-B, Class A-3, 4.75% 2021                              1,500           1,489
WFS Financial Owner Trust, Series 2002-3, Class A-4, 3.50% 2010                                               6,004           5,983
WFS Financial Owner Trust, Series 2004-1, Class A-4, 2.81% 2011                                               2,600           2,548
SeaWest Securitization, LLC, Series 2002-A, Class A-3, XLCA insured, 3.58% 2008(2)                            4,787           4,773
SeaWest Securitization, LLC, Series 2003-A, Class A-2, XLCA insured, 2.84% 2009(2)                            3,698           3,668
California Infrastructure and Economic Development Bank, Special Purpose Trust, SCE-1,
     Series 1997-1, Class A-6, 6.38% 2008                                                                     4,163           4,219
California Infrastructure and Economic Development Bank, Special Purpose Trust, PG&E-1,
     Series 1997-1, Class A-7, 6.42% 2008                                                                     3,800           3,848
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009                                            6,260           6,467
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-8, 7.15% 2009                                            1,200           1,287
PF Export Receivables Master Trust, Series 2001-B, MBIA insured, 6.60% 2011(2)                                6,951           7,363
AESOP Funding II LLC, Series 2002-1A, Class A-1, AMBAC insured, 3.85% 2006(2)                                 2,375           2,374
AESOP Funding II LLC, Series 2003-2, Class A-1, MBIA insured, 2.74% 2007(2)                                   5,000           4,951
MMCA Auto Owner Trust, Series 2001-2, Class B, 5.75% 2007                                                       190             190
MMCA Auto Owner Trust, Series 2001-3, Class B, 4.521% 2008(1)                                                   439             439
MMCA Auto Owner Trust, Series 2002-4, Class A-4, 3.05% 2009                                                   3,942           3,915
MMCA Auto Owner Trust, Series 2002-3, Class A-4, 3.57% 2009                                                   2,770           2,764
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009                                            7,000           7,308
Morgan Stanley ABS Capital I, Inc., Series 2004-OP1, Class A-2B, 3.931% 2034(1)                               7,000           7,017
Countryplace Manufactured Housing Contract, Series 2005-1, Class A-2, AMBAC insured, 4.42% 2035(2)            7,000           6,972
AmeriCredit Automobile Receivables Trust, Series 2003-A-M, Class A-4-A, MBIA insured, 3.10% 2009              2,000           1,977
AmeriCredit Automobile Receivables Trust, Series 2002-C, Class A-4, FSA insured, 3.55% 2009                   5,000           4,980
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2001-A, Class AF-6, 6.537% 2030             1,343           1,363
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2004-C, Class A-II-2, 3.911% 2035(1)        5,500           5,509
Providian Gateway Master Trust, Series 2004-DA, Class A, 3.35% 2011(2)                                        7,000           6,872
Option One Mortgage Loan Trust, Series 2000-2, Class M-1, 4.511% 2030(1)                                      4,051           4,055
Option One Mortgage Loan Trust, Series 2000-3, Class M-1, 4.541% 2030(1)                                      2,660           2,662
Household Automotive Trust, Series 2001-3, Class A-4, 4.37% 2008                                              6,439           6,450
Saxon Asset Securities Trust, Series 2002-2, Class AF-5, 5.99% 2031                                             694             706
Saxon Asset Securities Trust, Series 2004-2, Class AF-5, 4.99% 2035                                           5,300           5,402
Onyx Acceptance Owner Trust, Series 2002-C, Class A-4, MBIA insured, 4.07% 2009                               5,747           5,750
Nebhelp Trust, Student Loan Interest Margin Securities, Series 1, Class A, MBIA insured, 6.68% 2016(2)        5,302           5,417
SLM Private Credit Student Loan Trust, Series 2002-A, Class A-2, 3.96% 2030(1)                                5,000           5,124
Vanderbilt Mortgage and Finance, Inc., Series 2000-C, Class A-4, 7.905% 2026                                  4,658           5,006
UPFC Auto Receivables Trust, Series 2004-A, Class A-3, AMBAC insured, 3.27% 2010                              5,000           4,949
USAA Auto Owner Trust, Series 2004-3, Class A-3, 3.16% 2009                                                   5,000           4,946
Park Place Securities, Inc., Series 2005-WHQ3, Class A-2-A, 3.721% 2035(1)                                    4,438           4,436
Nordstrom Private Label Credit Card Master Note Trust, Series 2001-1, Class A, 4.82% 2010(2)                  4,250           4,281
Spirit Master Funding LLC, Net-Lease Mortgage Notes, Series 2005-1, Class A-1, AMBAC insured, 5.05% 2023(2)   3,986           3,994
Green Tree Financial Corp., Series 1997-6, Class A-6, 6.90% 2029                                              1,116           1,179
Green Tree Financial Corp., Series 1997-6, Class A-7, 7.14% 2029                                              2,628           2,798
AMRESCO Residential Securities Corp. Mortgage Loan Trust, Series 1997-2, Class A-7, 7.57% 2027                3,554           3,546
Impac CMB Grantor Trust, Series 2004-6, Class M-4, 4.791% 2034(1)                                             3,413           3,430
Chase Credit Card Owner Trust, Series 2003-4, Class B, 4.221% 2016(1)                                         3,000           3,076
Home Equity Asset Trust, Series 2004-7, Class M-1, 4.261% 2035(1)                                             2,500           2,521
Nordstrom Credit Card Master Note Trust, Series 2002-1, Class B, 4.271% 2010(1,2)                             2,250           2,264
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4, Class A-2B, 3.951% 2035(1)             2,000           2,004
Long Beach Mortgage Loan Trust, Series 2005-WL2, Class III-A2, 3.779% 2035(1)                                 2,000           2,000
Litigation Settlement Monetized Fee Trust I, Series 2001-1, Class A-1, 8.33% 2031(2)                          1,866           1,928
Franklin Auto Trust, Series 2002-1, Class A-4, MBIA insured, 4.51% 2010                                       1,854           1,859
Bear Stearns Asset Backed Securities I Trust, Series 2004-FR3, Class I-A-I, 3.891% 2030(1)                    1,590           1,591
Banco Nacional de Mexico, SA, Series 1999-A, Class A-1, MBIA insured, 7.50% 2006(2)                           1,339           1,358
Financial Pacific Funding II, LLC, Series 2003-A, Class A, FSA insured, 2.29% 2009(2)                         1,202           1,185
Navistar Financial Owner Trust, Series 2002-A, Class B, 4.95% 2009                                              568             569
Conseco Finance Home Equity Loan Trust, Series 2001-B, Class II-M-1, 7.581% 2032                                162             162
NPF VI, Inc., Series 2002-1, Class A, 1.99% 2008(1,2,6)                                                       1,500              52
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007(2,6)                                                        1,000              45
                                                                                                                            652,144

FEDERAL AGENCY MORTGAGE-BACKED OBLIGATIONS(3) -- 7.26%
Fannie Mae 7.00% 2008                                                                                           131             137
Fannie Mae 8.50% 2008                                                                                             4               4
Fannie Mae 7.00% 2009                                                                                           158             166
Fannie Mae 7.00% 2009                                                                                            37              39
Fannie Mae 7.50% 2009                                                                                           284             292
Fannie Mae 7.50% 2009                                                                                            99             104
Fannie Mae 7.50% 2009                                                                                            98             103
Fannie Mae 7.50% 2009                                                                                            39              40
Fannie Mae 8.50% 2009                                                                                            28              30
Fannie Mae 9.00% 2009                                                                                           207             217
Fannie Mae 9.00% 2009                                                                                           202             213
Fannie Mae 9.50% 2009                                                                                           250             267
Fannie Mae 7.00% 2010                                                                                            95              99
Fannie Mae 9.50% 2010                                                                                            14              14
Fannie Mae 7.00% 2011                                                                                           678             710
Fannie Mae 7.00% 2011                                                                                           310             325
Fannie Mae 7.00% 2011                                                                                            39              41
Fannie Mae 7.00% 2012                                                                                           463             485
Fannie Mae 6.00% 2013                                                                                         6,816           7,043
Fannie Mae 8.50% 2014                                                                                            41              43
Fannie Mae 6.00% 2015                                                                                         5,399           5,579
Fannie Mae 7.00% 2015                                                                                         2,651           2,775
Fannie Mae 7.00% 2015                                                                                           683             715
Fannie Mae 7.00% 2015                                                                                           130             136
Fannie Mae 7.00% 2015                                                                                            60              63
Fannie Mae 7.50% 2015                                                                                         1,320           1,389
Fannie Mae 7.50% 2015                                                                                         1,202           1,264
Fannie Mae 7.50% 2015                                                                                           603             634
Fannie Mae 7.50% 2015                                                                                           594             625
Fannie Mae 7.50% 2015                                                                                           193             203
Fannie Mae 7.50% 2015                                                                                           136             143
Fannie Mae 7.50% 2015                                                                                            91              96
Fannie Mae 9.00% 2015                                                                                           776             845
Fannie Mae 13.50% 2015                                                                                          317             379
Fannie Mae 7.00% 2016                                                                                         1,861           1,949
Fannie Mae 7.00% 2016                                                                                           698             731
Fannie Mae 7.00% 2016                                                                                           566             593
Fannie Mae 7.00% 2016                                                                                           385             403
Fannie Mae 7.00% 2016                                                                                           306             320
Fannie Mae 7.50% 2016                                                                                           600             631
Fannie Mae 9.00% 2016                                                                                         1,030           1,134
Fannie Mae 11.50% 2016                                                                                          373             429
Fannie Mae 5.50% 2017                                                                                         1,629           1,666
Fannie Mae 6.00% 2017                                                                                         1,894           1,956
Fannie Mae 7.00% 2017                                                                                         2,166           2,268
Fannie Mae 7.00% 2017                                                                                         1,095           1,146
Fannie Mae 7.00% 2017                                                                                           766             802
Fannie Mae 5.00% 2018                                                                                         3,422           3,452
Fannie Mae 5.00% 2018                                                                                         1,396           1,409
Fannie Mae 9.00% 2018                                                                                            30              33
Fannie Mae 10.00% 2018                                                                                          184             210
Fannie Mae 11.50% 2019                                                                                        1,171           1,351
Fannie Mae 11.00% 2020                                                                                          277             323
Fannie Mae 11.00% 2020                                                                                          135             155
Fannie Mae 11.50% 2020                                                                                          285             329
Fannie Mae 10.00% 2021                                                                                          222             249
Fannie Mae 9.50% 2022                                                                                            91             102
Fannie Mae 7.00% 2023                                                                                           119             126
Fannie Mae 7.50% 2023                                                                                           288             308
Fannie Mae 10.00% 2025                                                                                          360             410
Fannie Mae 8.50% 2026                                                                                            76              83
Fannie Mae 9.304% 2026(1)                                                                                     1,666           1,858
Fannie Mae 9.50% 2026                                                                                           756             858
Fannie Mae 8.50% 2027                                                                                           120             131
Fannie Mae 7.50% 2029                                                                                           296             315
Fannie Mae 6.50% 2031                                                                                           131             135
Fannie Mae 7.00% 2031                                                                                            67              71
Fannie Mae 7.50% 2031                                                                                           210             223
Fannie Mae 7.50% 2031                                                                                           169             180
Fannie Mae 6.50% 2032                                                                                           602             623
Fannie Mae 3.759% 2033(1)                                                                                     3,315           3,278
Fannie Mae 3.763% 2033(1)                                                                                    10,320          10,211
Fannie Mae 4.028% 2033(1)                                                                                     1,343           1,329
Fannie Mae 4.195% 2033(1)                                                                                    20,372          20,329
Fannie Mae 5.50% 2034                                                                                         9,890           9,996
Fannie Mae 6.00% 2034                                                                                        32,704          33,478
Fannie Mae 6.50% 2034                                                                                        15,312          15,830
Fannie Mae 4.495% 2035(1)                                                                                     2,765           2,765
Fannie Mae, Series 91-50, Class H, 7.75% 2006                                                                   123             124
Fannie Mae, Trust D2, 11.00% 2009                                                                               223             235
Fannie Mae, Series 2000-T5B, 7.30% 2010                                                                      14,000          15,745
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012                                                              7,000           7,043
Fannie Mae, Series 88-16, Class B, 9.50% 2018                                                                    40              43
Fannie Mae, Series 90-93, Class G, 5.50% 2020                                                                   145             145
Fannie Mae, Series 90-21, Class Z, 9.00% 2020                                                                   713             783
Fannie Mae, Series 2001-4, Class GA, 10.246% 2025(1)                                                          1,657           1,857
Fannie Mae, Series 2001-4, Class NA, 11.847% 2025(1)                                                          4,509           5,159
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028                                                             2,996           3,186
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029                                                             2,487           2,651
Fannie Mae, Series 2001-20, Class D, 11.056% 2031(1)                                                            242             283
Fannie Mae, Series 2005-29, Class AK, 4.50% 2035                                                              8,866           8,776
Fannie Mae, Series 2003-W10, Class 1A-2B, 3.112% 2037                                                         2,837           2,824
Fannie Mae, Series 2003-W4, Class 1A-2, 3.063% 2038                                                             419             417
Fannie Mae, Series 1999-T2, Class A-1, 7.50% 2039                                                             1,305           1,389
Fannie Mae, Series 2003-W4, Class 1A-3, 3.991% 2040                                                          19,000          18,838
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041                                                            2,088           2,194
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041                                                              1,093           1,153
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042                                                                905             958
Freddie Mac 7.00% 2008                                                                                          158             165
Freddie Mac 8.00% 2008                                                                                           26              27
Freddie Mac 8.50% 2008                                                                                           13              14
Freddie Mac 8.75% 2008                                                                                           38              39
Freddie Mac 8.50% 2009                                                                                          118             123
Freddie Mac 8.00% 2010                                                                                           99             102
Freddie Mac 9.50% 2010                                                                                            7               7
Freddie Mac 8.00% 2012                                                                                          226             237
Freddie Mac 9.50% 2013                                                                                           27              29
Freddie Mac 6.00% 2014                                                                                          216             223
Freddie Mac 6.00% 2014                                                                                          114             117
Freddie Mac 4.00% 2015                                                                                        9,333           9,110
Freddie Mac 7.00% 2015                                                                                          174             182
Freddie Mac 6.00% 2017                                                                                          774             799
Freddie Mac 8.00% 2017                                                                                          440             474
Freddie Mac 8.00% 2017                                                                                          157             169
Freddie Mac 8.00% 2017                                                                                          118             127
Freddie Mac 5.00% 2018                                                                                        5,447           5,493
Freddie Mac 5.00% 2018                                                                                        2,134           2,152
Freddie Mac 8.50% 2018                                                                                           34              35
Freddie Mac 10.00% 2018                                                                                         769             881
Freddie Mac 11.00% 2018                                                                                         169             192
Freddie Mac 8.50% 2019                                                                                          113             124
Freddie Mac 10.00% 2019                                                                                         590             681
Freddie Mac 8.50% 2020                                                                                           54              59
Freddie Mac 8.50% 2021                                                                                           58              64
Freddie Mac 10.00% 2021                                                                                         313             354
Freddie Mac 10.00% 2025                                                                                         487             550
Freddie Mac 8.50% 2027                                                                                           40              44
Freddie Mac 9.00% 2030                                                                                          460             511
Freddie Mac 4.061% 2033(1)                                                                                    2,226           2,210
Freddie Mac 6.00% 2033                                                                                        3,276           3,353
Freddie Mac 6.00% 2034                                                                                        9,796          10,027
Freddie Mac 6.00% 2034                                                                                        4,423           4,527
Freddie Mac 6.00% 2034                                                                                        3,276           3,354
Freddie Mac 6.50% 2034                                                                                        2,109           2,179
Freddie Mac 4.62% 2035(1)                                                                                    14,675          14,672
Freddie Mac 4.648% 2035(1)                                                                                   30,950          30,949
Freddie Mac 4.792% 2035(1)                                                                                    7,539           7,554
Freddie Mac, Series H009, Class A-2, 1.876% 2008(1)                                                           1,491           1,476
Freddie Mac, Series 2310, Class B, 9.904% 2015(1)                                                               173             193
Freddie Mac, Series 2310, Class A, 10.581% 2017(1)                                                              646             704
Freddie Mac, Series 1567, Class A, 4.025% 2023(1)                                                               129             124
Freddie Mac, Series T-041, Class 3-A, 7.50% 2032                                                              1,258           1,335
Freddie Mac, Series T-056, Class A-2A, 2.842% 2036                                                            2,344           2,336
Government National Mortgage Assn. 8.50% 2007                                                                    29              30
Government National Mortgage Assn. 8.50% 2008                                                                   116             120
Government National Mortgage Assn. 8.50% 2008                                                                     6               6
Government National Mortgage Assn. 9.00% 2008                                                                   158             166
Government National Mortgage Assn. 9.50% 2009                                                                   859             909
Government National Mortgage Assn. 6.00% 2013                                                                 3,293           3,428
Government National Mortgage Assn. 6.00% 2014                                                                 4,552           4,730
Government National Mortgage Assn. 6.00% 2014                                                                 3,480           3,616
Government National Mortgage Assn. 9.00% 2016                                                                    25              27
Government National Mortgage Assn. 8.50% 2017                                                                   122             133
Government National Mortgage Assn. 8.50% 2020                                                                    26              28
Government National Mortgage Assn. 9.50% 2020                                                                   115             127
Government National Mortgage Assn. 9.50% 2020                                                                   110             122
Government National Mortgage Assn. 8.50% 2021                                                                   331             362
Government National Mortgage Assn. 8.50% 2021                                                                   140             153
Government National Mortgage Assn. 8.50% 2021                                                                     3               3
Government National Mortgage Assn. 9.00% 2021                                                                   127             140
Government National Mortgage Assn. 8.50% 2022                                                                    63              69
Government National Mortgage Assn. 8.50% 2022                                                                    63              69
Government National Mortgage Assn. 8.50% 2022                                                                    20              22
Government National Mortgage Assn. 8.50% 2023                                                                   325             356
Government National Mortgage Assn. 6.50% 2034                                                                   188             197
Government National Mortgage Assn. 7.00% 2034                                                                   730             773
Government National Mortgage Assn. 4.00% 2035(1)                                                             12,357          12,202
Government National Mortgage Assn. 4.00% 2035(1)                                                              3,707           3,655
Government National Mortgage Assn. 4.00% 2035(1)                                                              3,456           3,408
Government National Mortgage Assn. 4.00% 2035(1)                                                              3,398           3,346
Government National Mortgage Assn. 5.50% 2035                                                                 6,980           7,102
Government National Mortgage Assn., Series 2004-84, Class A, 3.624% 2017                                      3,817           3,748
Government National Mortgage Assn., Series 2002-28, Class A, 4.776% 2018                                      2,090           2,111
                                                                                                                            382,434

COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS (PRIVATELY ORIGINATED)(3) -- 6.47%
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 7-A-1, 5.00% 2020                                 5,369           5,342
Countrywide Alternative Loan Trust, Series 2004-14T2, Class A-11, 5.50% 2034                                  5,000           5,093
Countrywide Alternative Loan Trust, Series 2004-14T2, Class A-6, 5.50% 2034                                   3,190           3,207
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035                                  22,330          22,750
Countrywide Alternative Loan Trust, Series 2005-54C, Class 4-P-4, 5.50% 2035                                  6,325           6,441
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-9, 5.50% 2035                                   4,921           5,005
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035                                 8,021           8,130
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035                                  9,600           9,817
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035                                 4,460           4,554
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032                            3,645           3,675
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032                            2,519           2,543
CS First Boston Mortgage Securities Corp., Series 2003-AR12, Class II-A-2, 4.322% 2033(1)                     1,682           1,679
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033                            3,392           3,488
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033                            6,325           6,497
CS First Boston Mortgage Securities Corp., Series 2004-AR1, Class II-A-1, 4.723% 2034(1)                      5,775           5,771
CS First Boston Mortgage Securities Corp., Series 2005-1, Class I-A-27, 5.50% 2035                           18,332          18,519
CS First Boston Mortgage Securities Corp., Series 2005-6, Class VI-A-1, 6.00% 2035                           12,671          12,952
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-CB2, Class VII-A, 5.50% 2019                       6,677           6,711
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR7, Class A-7, 3.842% 2033(1)                    11,029          10,888
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 2033(1)                        5,218           5,193
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.354% 2033(1)                     6,857           6,809
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR1, Class A-6, 4.491% 2033(1)                     1,567           1,559
Morgan Stanley Mortgage Trust, Series 2004-3, Class 4-A, 5.701% 2034(1)                                      23,895          24,160
Bear Stearns ARM Trust, Series 2003-6, Class I-A-2, 4.00% 2033(1)                                             2,201           2,174
Bear Stearns ARM Trust, Series 2003-3, Class II-A-2, 4.119% 2033(1)                                           3,944           3,903
Bear Stearns ARM Trust, Series 2004-1, Class I-2-A-5, 4.442% 2034(1)                                          4,099           4,074
Bear Stearns ARM Trust, Series 2005-1, Class II-A-2, 4.989% 2035(1)                                          11,802          11,849
Mastr Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033                                          2,567           2,606
Mastr Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034                                          3,139           3,202
Mastr Alternative Loan Trust, Series 2005-1, Class 1-A-1, 5.50% 2035                                          7,546           7,703
Mastr Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035                                          3,726           3,766
Mastr Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035                                          3,288           3,425
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019                                      4,523           4,540
Residential Accredit Loans, Inc., Series 2004-QS8, Class A-11, 5.50% 2034                                     5,000           5,088
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034                                        7,390           7,518
Residential Accredit Loans, Inc., Series 2004-QS12, Class M-1, 6.00% 2034                                     1,286           1,335
Residential Asset Mortgage Products Trust, Series 2004-RZ1, Class A-I-2, 2.34% 2027                             822             817
Residential Asset Mortgage Products Trust, Series 2004-RS3, Class A-I-2, 3.052% 2029                          7,100           7,061
Residential Asset Mortgage Products Trust, Series 2004-RS9, Class A-I-4, AMBAC insured, 4.767% 2032           8,550           8,581
Residential Asset Mortgage Products Trust, Series 2003-RZ4, Class A-7, 4.79% 2033(1)                          1,000           1,001
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.564% 2027(1,2)                                 3,263           3,338
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.744% 2027(1,2)                                 3,323           3,417
Structured Asset Securities Corp., Series 1999-RF1, Class A, 7.878% 2028(1,2)                                 4,842           5,056
Structured Asset Securities Corp., Series 2003-17A, Class 3-A1, 4.01% 2033(1)                                 2,403           2,396
Banc of America Mortgage Securities Trust, Series 2003-F, Class 2-A-1, 3.734% 2033(1)                         2,781           2,734
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1, 4.088% 2033(1)                         4,229           4,190
Banc of America Mortgage Securities Trust, Series 2003-D, Class 2-A-1, 4.183% 2033(1)                         4,688           4,643
CHL Mortgage Pass-Through Trust, Series 2003-HYB3, Class 4-A-1, 3.47% 2033(1)                                 4,074           4,001
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.74% 2033(1)                                     1,924           1,894
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-1, 4.375% 2034(1)                                  5,295           5,259
Specialty Underwriting and Residential Finance Trust, Series 2004-AA1, Class I-A-1, 5.00% 2034                8,826           8,831
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 4.98% 2035(1)                                          8,700           8,733
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-3, 5.50% 2035                               4,930           5,032
Residential Asset Securitization Trust, Series 2005-A6CB, Class A-7, 6.00% 2035                               2,919           2,999
PUMA Global Trust No.1, Class B, 3.92% 2033(1)                                                                5,500           5,512
First Horizon Mortgage Pass Through Trust, Series 2004-AR1, Class II-A-1, 4.912% 2034(1)                      5,317           5,328
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035                               3,872           3,980
Wells Fargo Mortgage-backed Securities Trust, Series 2003-M, Class A-1, 4.724% 2033(1)                        3,621           3,586
Paine Webber CMO, Series O, Class 5, 9.50% 2019                                                                 347             377
                                                                                                                            340,732

COMMERCIAL MORTGAGE-BACKED SECURITIES(3) -- 5.43%
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001-CIBC1, Class A-2, 6.001% 2033             2,958           3,026
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C2, Class A-1, 4.326% 2034               14,765          14,694
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-1, 3.175% 2037            1,022           1,015
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.511% 2037           5,000           5,226
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039              12,392          12,197
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046              7,500           7,551
CS First Boston Mortgage Securities Corp., Series 2002-FL2, Class A-2, 3.938% 2010(1,2)                       1,328           1,328
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-2, 5.935% 2034                            4,573           4,595
CS First Boston Mortgage Securities Corp., Series 2002-CKP1, Class A-1, 4.627% 2035                           1,948           1,951
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035                             7,000           7,569
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-2, 6.103% 2036                            4,047           4,133
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-1, 4.637% 2037                           3,701           3,709
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class A-1B, 6.48% 2040                             3,931           4,131
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class C, 6.78% 2040                                6,450           6,919
CS First Boston Mortgage Securities Corp., Series 1999-C1, Class D, 8.088% 2041(1)                            1,500           1,677
Bear Stearns Commercial Mortgage Securities Inc., Series 1998-C1, Class A-1, 6.34% 2030                       7,736           7,895
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 1.268% 2031(1,2)   81,234           3,011
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, 5.91% 2031                                  4,116           4,187
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035                     5,931           5,876
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-1, 6.08% 2035                     7,357           7,558
Bear Stearns Commercial Mortgage Securities Inc., Series 2004-PWR6, Class A-1, 3.688% 2041                    3,011           2,981
Morgan Stanley Capital I, Inc., Series 2003-KIDS, Class A, 4.253% 2016(1,2)                                   8,535           8,564
Morgan Stanley Capital I, Inc., Series 2003-KIDS, Class B, 4.623% 2016(1,2)                                   2,000           2,008
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-1, 6.12% 2031                                       3,834           3,898
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A-2, 6.53% 2031                                       4,815           5,106
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class D, 7.03% 2031                                         4,000           4,287
Morgan Stanley Capital I, Inc., Series 2004-RR2, Class A-1, 4.39% 2033(2)                                     2,449           2,432
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 2033(2)                         3,153           3,228
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class B, 6.758% 2033                              2,000           2,194
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-2, 6.226% 2035                            3,435           3,522
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035                           13,350          14,471
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 2035(2)                                           12,000          11,962
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 2035(2)                                               8,180           8,155
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2014                             4,250           4,283
Wachovia Bank Commercial Mortgage Trust, Series 2003-C9, Class A-2, 3.958% 2035                               7,200           7,095
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042                              7,500           7,589
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036                               2,500           2,725
Banc of America Commercial Mortgage Inc., Series 2003-2, Class A-1, 3.411% 2041                               4,181           4,101
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-1, 3.812% 2041                               6,444           6,376
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1, 7.543% 2032                             3,994           4,262
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-1, 7.656% 2032                                98              98
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032                             6,000           6,616
GE Capital Commerical Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037                                  10,883          10,817
First Union National Bank Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.739% 2032                   2,326           2,425
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class A-1, 5.585% 2034                   7,355           7,602
LB-UBS Commercial Mortgage Trust, Series 2001-C7, Class A-3, 5.642% 2025                                      4,403           4,539
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025                                       1,750           1,980
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026                                      1,465           1,555
Nomura Asset Securities Corp., Series 1998-D6, Class A-1A, 6.28% 2030                                         7,034           7,141
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035                           5,125           5,418
DLJ Commercial Mortgage Corp., Series 1998-CF2, Class A-4, 6.90% 2031(1)                                      3,250           3,480
DLJ Commercial Mortgage Corp., Series 1999-CG1, Class A-1B, 6.46% 2032                                        1,750           1,859
GMAC Commercial Mortgage Securities, Inc., Series 1999-C1, Class A-1, 5.83% 2033                              4,357           4,383
LB Commercial Mortgage Trust, Series 1998-C1, Class A-3, 6.48% 2030                                           3,519           3,658
GGP Mall Properties Trust, Series 2001-GGP1, Class A-2, 5.007% 2011(2)                                        2,412           2,436
Prudential Securities Secured Financing Corp., Series 1999-NRF1, Class C, 6.746% 2031                         2,000           2,138
Tower Ventures, LLC, Series 2004-1, Class A, 3.711% 2034(2)                                                   1,347           1,316
Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.206% 2033                                             1,158           1,187
First Union National Bank-Bank of America, N.A. Commercial Mortgage Trust,
     Series 2001-C1, Class A-1, 5.711% 2033                                                                     295             298
                                                                                                                            286,433

NON-U.S. GOVERNMENT BONDS & NOTES -- 0.76%
KfW International Finance Inc. 2.50% 2005                                                                     5,000           4,992
KfW 3.25% 2007                                                                                               23,000          22,668
Corporacion Andina de Fomento 7.375% 2011                                                                     7,000           7,876
Corporacion Andina de Fomento 6.875% 2012                                                                     4,159           4,648
                                                                                                                             40,184

MUNICIPALS -- 0.21%
California Maritime Infrastructure Authority, Taxable Lease Rev. Bonds
     (San Diego Unified Port Dist.-South Bay Plant Acquisition), Series 1999, 6.63% 2009(2,3)                 6,146           6,307
California Golden State Tobacco Securitization Corp., Tobacco Settlement Asset-backed Bonds,
     Series 2003-A1, 5.00% 2021                                                                               2,365           2,407
State of New Jersey, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
     Series 2003, 4.375% 2019                                                                                 1,560           1,581
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
     Series 2001-A, Class A, 6.36% 2025                                                                         665             668
                                                                                                                             10,963


Total bonds & notes (cost: $5,035,500,000)                                                                                5,046,226


Preferred stocks -- 0.65%                                                                                    Shares

FINANCIALS -- 0.65%
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred(1,2)                  8,250,000           9,943
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred(1,2)                                       6,795,000           7,254
BNP Paribas Capital Trust 9.003% noncumulative trust preferred(1,2)                                       1,250,000           1,492
Royal Bank of Scotland Group PLC, Series 3 Preference Shares, 7.816%(1)                                   7,500,000           7,586
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares(1,2)               6,000,000           6,834
ING Capital Funding Trust III 8.439% noncumulative preferred(1)                                           1,000,000           1,171

Total preferred stocks (cost: $36,304,000)                                                                                   34,280


                                                                                                   Principal amount
Short-term securities -- 1.99%                                                                                (000)

General Electric Capital Corp. 3.56% due 9/1/2005                                                           $32,600          32,597
USAA Capital Corp. 3.48% due 9/7/2005                                                                        30,000          29,980
PepsiCo Inc. 3.47% due 9/23/2005(2)                                                                          20,000          19,956
Hershey Co. 3.46% due 9/8/2005(2)                                                                            10,000           9,992
Gannett Co. 3.51% due 9/22/2005(2)                                                                            8,600           8,581
Federal Home Loan Bank 3.315% due 9/14/2005                                                                   3,500           3,495

Total short-term securities (cost: $104,602,000)                                                                            104,601


Total investment securities (cost: $5,176,406,000)                                                                        5,185,107
Other assets less liabilities                                                                                                84,943

Net assets                                                                                                               $5,270,050



(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
    $747,939,000, which represented 14.19% of the net assets of the fund.
(3) Pass-through securities backed by a pool of mortgages or other loans on
    which principal payments are periodically made.  Therefore, the effective
    maturities are shorter than the stated maturities.
(4) Index-linked bond whose principal amount moves with a government retail
    price index.
(5) This security, or a portion of this security, has been segregated to cover
    funding requirements on investment transactions settling in the future.
(6) Company not making scheduled interest payments; bankruptcy proceedings
    pending.



See Notes to Financial Statements



FINANCIAL STATEMENTS

Statement of assets and liabilities
at August 31, 2005                            (dollars and shares in thousands,
                                                      except per-share amounts)



Assets:
 Investment securities at market (cost: $5,176,406)                                                            $5,185,107
 Cash                                                                                                                 122
 Receivables for:
  Sales of investments                                                                 $61,583
  Sales of fund's shares                                                                15,152
  Interest                                                                              47,612                    124,347
                                                                                                                5,309,576
Liabilities:
 Payables for:
  Purchases of investments                                                              23,084
  Repurchases of fund's shares                                                           8,956
  Dividends on fund's shares                                                             2,048
  Investment advisory services                                                           1,091
  Services provided by affiliates                                                        4,099
  Deferred Trustees' compensation                                                          136
  Other fees and expenses                                                                  112                     39,526
Net assets at August 31, 2005                                                                                  $5,270,050

Net assets consist of:
 Capital paid in on shares of beneficial interest                                                              $5,297,328
 Undistributed net investment income                                                                                  533
 Accumulated net realized loss                                                                                    (36,512)
 Net unrealized appreciation                                                                                        8,701
Net assets at August 31, 2005                                                                                  $5,270,050



Shares  of  beneficial  interest  issued  and  outstanding  -  unlimited  shares
authorized, 386,529 total shares outstanding



                                                                                                             Net asset value
                                                                  Net assets      Shares outstanding           per share (1)

Class A                                                           $3,744,884                 274,667                  $13.63
Class B                                                              303,058                  22,228                   13.63
Class C                                                              360,067                  26,409                   13.63
Class F                                                              376,972                  27,649                   13.63
Class 529-A                                                           99,184                   7,274                   13.63
Class 529-B                                                           21,404                   1,570                   13.63
Class 529-C                                                           68,961                   5,058                   13.63
Class 529-E                                                            6,197                     454                   13.63
Class 529-F                                                           12,065                     885                   13.63
Class R-1                                                              4,205                     308                   13.63
Class R-2                                                             93,188                   6,835                   13.63
Class R-3                                                             89,627                   6,574                   13.63
Class R-4                                                             24,126                   1,769                   13.63
Class R-5                                                             66,112                   4,849                   13.63


(1) Maximum offering price and redemption price per share were equal to the net
    asset value per share for all share classes, except for classes A and
    529-A, for which the maximum offering prices per share were $14.16 for
    each.

See Notes to Financial Statements



Statement of operations
for the year ended August 31, 2005                      (dollars in thousands)



Investment income:
 Income:
  Interest                                                                                                               $203,041

 Fees and expenses: (1)
  Investment advisory services                                                                     14,038
  Distribution services                                                                            21,042
  Transfer agent services                                                                           4,408
  Administrative services                                                                           2,682
  Reports to shareholders                                                                             225
  Registration statement and prospectus                                                               256
  Postage, stationery and supplies                                                                    554
  Trustees' compensation                                                                               63
  Auditing and legal                                                                                   94
  Custodian                                                                                            35
  State and local taxes                                                                                50
  Other                                                                                                21
  Total fees and expenses before reimbursements/waivers                                            43,468
 Less reimbursement/waiver of fees and expenses:
  Investment advisory services                                                                      1,002
  Administrative services                                                                             300
  Total fees and expenses after reimbursements/waivers                                                                     42,166
 Net investment income                                                                                                    160,875


Net realized loss and unrealized depreciation on investments:

 Net realized loss on investments                                                                                          (1,302)

 Net unrealized depreciation on investments                                                                               (58,564)

  Net realized loss and unrealized depreciation on investments                                                            (59,866)

Net increase in net assets resulting from operations                                                                     $101,009

(1)  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,
                                                                                                     2005                    2004
Operations:
 Net investment income                                                                           $160,875                $138,170

 Net realized (loss) gain on investments                                                           (1,302)                 16,291

 Net unrealized (depreciation) appreciation on investments                                        (58,564)                 17,999

  Net increase in net assets resulting from operations                                            101,009                 172,460

Dividends paid or accrued to shareholders from net investment income                             (165,219)               (146,214)

Capital share transactions                                                                        159,390                (118,450)

Total increase (decrease) in net assets                                                            95,180                 (92,204)

Net assets:
 Beginning of year                                                                              5,174,870               5,267,074
 End of year (including undistributed and distributions in excess of
  net investment income: $533 and $(38), respectively)                                         $5,270,050              $5,174,870

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(R)  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) are  sponsored  by the  Commonwealth  of  Virginia  and 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         Conversion feature
                                               charge upon redemption
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
  Classes A and 529-A       Up to 3.75%         None (except 1% for                   None
                                                certain redemptions
                                                 within one year of
                                                purchase without an
                                               initial sales charge)
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
  Classes B and 529-B           None           Declines from 5% to 0%    Classes B and 529-B convert to
                                               for redemptions within         classes A and 529-A,
                                               six years of purchase    respectively, after eight years
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
        Class C                 None         1% for redemptions within    Class C converts to Class F
                                                one year of purchase             after 10 years
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
      Class 529-C               None         1% for redemptions within                None
                                                one year of purchase
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
      Class 529-E               None                    None                          None
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
  Classes F and 529-F           None                    None                          None
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3,          None                    None                          None
      R-4 and R-5
---------------------------------------------------------------------------------------------------------


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.

--------
CollegeAmerica is a registered trademark of the Virginia College Savings
Plan.(SM)


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,  the date
          the security is expected to be called or refunded by the issuer or the
          date at which the investor  can redeem the  security  with the issuer.
          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 are 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 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 in
          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.

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
short-term capital gains and losses;  capital losses related to sales of certain
securities within 30 days of purchase;  deferred  expenses;  cost of investments
sold; paydowns on investments;  and net capital losses. 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.  As of August 31, 2005, the cost of investment  securities for federal
income tax purposes was $5,177,236,000.

During the year ended August 31, 2005,  the fund  reclassified  $5,941,000  from
capital paid in on shares of  beneficial  interest to  accumulated  net realized
loss,  $4,919,000  from  accumulated  net  realized  loss to  undistributed  net
investment income and $4,000 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, 2005, the components of  distributable  earnings on a tax basis
were as follows (dollars in thousands):



Undistributed net investment income                                                                            $1,997
Short-term and long-term capital loss deferrals                                                               (35,682)
Gross unrealized appreciation on investment securities                                                         32,459
Gross unrealized depreciation on investment securities                                                        (24,588)
Net unrealized appreciation on investment securities                                                            7,871


Short-term  and long-term  capital loss  deferrals  above  include  capital loss
carryforwards of $3,837,000,  $7,139,000, $1,587,000, $13,436,000 and $2,039,000
expiring in 2006, 2008, 2009, 2011 and 2012, respectively. These numbers reflect
the expiration of a capital loss  carryforward of $5,941,000 and the utilization
of a capital loss  carryforward  of $1,109,000  during the year ended August 31,
2005.  The  remaining  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.  Also included in short-term  and long-term  capital loss
deferrals above are capital losses of $7,644,000,  that were realized during the
period November 1, 2004,  through August 31, 2005.  During the year ended August
31, 2005, the fund realized, on a tax basis, a net capital gain of $1,109,000.

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



Share class                                               Year ended August 31, 2005              Year ended August 31, 2004
Class A                                                                    $ 123,277                               $ 113,329
Class B                                                                        8,346                                   8,194
Class C                                                                        9,397                                   8,890
Class F                                                                       11,254                                   7,566
Class 529-A                                                                    2,905                                   2,022
Class 529-B                                                                      500                                     377
Class 529-C                                                                    1,541                                   1,031
Class 529-E                                                                      168                                     106
Class 529-F                                                                      339                                     151
Class R-1                                                                         89                                      53
Class R-2                                                                      2,112                                   1,289
Class R-3                                                                      2,277                                   1,305
Class R-4                                                                        648                                     238
Class R-5                                                                      2,366                                   1,663
Total                                                                      $ 165,219                               $ 146,214


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  ("AFS"),  the fund's
transfer agent, and American Funds  Distributors,  Inc.  ("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 a portion of investment advisory services
fees. At the beginning of the period, CRMC waived 5% of these fees and increased
the waiver to 10% on April 1, 2005. During the year ended August 31, 2005, total
investment  advisory services fees waived by CRMC were $1,002,000.  As a result,
the fee shown on the accompanying financial statements of $14,038,000, which was
equivalent  to an  annualized  rate of 0.270%,  was reduced to  $13,036,000,  or
0.251% 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 on the following  page. 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 for providing certain shareholder services.  The remaining amounts
          available  to be paid under  each plan are paid to selling  dealers to
          compensate them for their selling activities.

          For classes 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, 2005,  unreimbursed expenses subject to reimbursement
          totaled  $984,000  for Class A.  There were no  unreimbursed  expenses
          subject to reimbursement for Class 529-A.



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


          TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
          AFS for classes 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 below.

          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 classes 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, 2005, the total  administrative  services fees paid by CRMC
          were  $3,000,  $285,000  and  $12,000 for  classes  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 in 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, 2005, were as follows (dollars in thousands):



         --------------------------------------------------------------------------------------------------------------
           Share class    Distribution    Transfer agent                     Administrative services
                            services         services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
                                                                  CRMC          Transfer agent      Commonwealth of
                                                             administrative        services             Virginia
                                                                services                             administrative
                                                                                                        services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
             Class A         $11,217          $4,079         Not applicable     Not applicable       Not applicable
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
             Class B          3,190             329          Not applicable     Not applicable       Not applicable
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
             Class C          3,656          Included             $540               $121            Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
             Class F           850           Included              467                 76            Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
           Class 529-A         173           Included              123                 21                 $89
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
           Class 529-B         205           Included              29                  11                  20
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
           Class 529-C         625           Included              87                  26                  63
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
           Class 529-E          28           Included               8                  1                    6
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
           Class 529-F          17           Included              14                  2                   10
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
            Class R-1           34           Included               5                  5             Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
            Class R-2          613           Included              123                503            Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
            Class R-3          385           Included              115                115            Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
            Class R-4           49           Included              29                  4             Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
            Class R-5    Not applicable      Included              66                  3             Not applicable
                                                in
                                          administrative
                                             services
         --------------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------------
              Total          $21,042          $4,408             $1,606              $888                 $188
         --------------------------------------------------------------------------------------------------------------


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 $63,000,  shown on the  accompanying
financial  statements,  includes $45,000 in current fees (either paid in cash or
deferred) and a net increase of $18,000 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(1)                Reinvestments of dividends
                                                                          Amount        Shares               Amount        Shares
Year ended August 31, 2005
Class A                                                                $ 974,015        71,256            $ 108,403         7,938
Class B                                                                   39,599         2,896                7,135           522
Class C                                                                   99,786         7,302                7,872           577
Class F                                                                  172,180        12,601                9,937           728
Class 529-A                                                               30,726         2,248                2,875           210
Class 529-B                                                                3,336           244                  496            36
Class 529-C                                                               21,651         1,584                1,524           111
Class 529-E                                                                1,981           145                  166            12
Class 529-F                                                                5,047           369                  335            24
Class R-1                                                                  2,486           182                   85             6
Class R-2                                                                 42,179         3,087                2,083           153
Class R-3                                                                 47,431         3,471                2,243           164
Class R-4                                                                 18,507         1,353                  637            47
Class R-5                                                                 19,785         1,447                1,238            91
Total net increase
   (decrease)                                                        $ 1,478,709       108,185            $ 145,029        10,619

Year ended August 31, 2004
Class A                                                              $ 1,229,151        89,051             $ 99,086         7,185
Class B                                                                   71,164         5,158                7,091           514
Class C                                                                  147,783        10,701                7,417           538
Class F                                                                  180,248        13,082                6,709           487
Class 529-A                                                               37,504         2,717                1,999           145
Class 529-B                                                                5,665           410                  374            27
Class 529-C                                                               23,218         1,682                1,021            74
Class 529-E                                                                2,267           164                  104             8
Class 529-F                                                                4,487           325                  150            11
Class R-1                                                                  2,973           216                   51             4
Class R-2                                                                 47,501         3,440                1,271            92
Class R-3                                                                 40,821         2,959                1,287            93
Class R-4                                                                  9,643           700                  235            17
Class R-5                                                                 33,388         2,426                  781            57
Total net increase
   (decrease)                                                        $ 1,835,813       133,031            $ 127,576         9,252




Share class                                                                  Repurchases(1)               Net increase (decrease)
                                                                          Amount         Shares             Amount        Shares
Year ended August 31, 2005
Class A                                                             $ (1,059,234)       (77,512)          $ 23,184         1,682
Class B                                                                  (78,093)        (5,715)           (31,359)       (2,297)
Class C                                                                 (126,048)        (9,224)           (18,390)       (1,345)
Class F                                                                 (105,346)        (7,716)            76,771         5,613
Class 529-A                                                              (12,210)          (894)            21,391         1,564
Class 529-B                                                               (1,727)          (126)             2,105           154
Class 529-C                                                               (8,949)          (655)            14,226         1,040
Class 529-E                                                                 (811)           (60)             1,336            97
Class 529-F                                                                 (512)           (37)             4,870           356
Class R-1                                                                 (1,266)           (93)             1,305            95
Class R-2                                                                (21,018)        (1,539)            23,244         1,701
Class R-3                                                                (22,665)        (1,659)            27,009         1,976
Class R-4                                                                 (7,765)          (571)            11,379           829
Class R-5                                                                (18,704)        (1,370)             2,319           168
Total net increase
   (decrease)                                                       $ (1,464,348)      (107,171)         $ 159,390        11,633

Year ended August 31, 2004
Class A                                                             $ (1,561,047)      (113,107)        $ (232,810)      (16,871)
Class B                                                                 (124,322)        (9,006)           (46,067)       (3,334)
Class C                                                                 (207,734)       (15,053)           (52,534)       (3,814)
Class F                                                                 (106,859)        (7,755)            80,098         5,814
Class 529-A                                                              (16,172)        (1,172)            23,331         1,690
Class 529-B                                                               (2,344)          (169)             3,695           268
Class 529-C                                                               (9,237)          (669)            15,002         1,087
Class 529-E                                                                 (616)           (45)             1,755           127
Class 529-F                                                                 (241)           (18)             4,396           318
Class R-1                                                                 (1,706)          (124)             1,318            96
Class R-2                                                                (18,175)        (1,318)            30,597         2,214
Class R-3                                                                (16,183)        (1,173)            25,925         1,879
Class R-4                                                                 (2,272)          (164)             7,606           553
Class R-5                                                                (14,931)        (1,085)            19,238         1,398
Total net increase
   (decrease)                                                       $ (2,081,839)      (150,858)        $ (118,450)       (8,575)

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


5.       INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES

The fund made purchases and sales of investment securities, excluding short-term
securities, of $4,090,731,000 and $3,756,170,000,  respectively, during the year
ended August 31, 2005.

The fund  receives  a  reduction  in its  custodian  fee equal to the  amount of
interest calculated on certain cash balances held at the custodian bank. For the
year  ended  August  31,  2005,  the  custodian  fee of  $35,000,  shown  on the
accompanying  financial  statements,  was offset by this reduction,  rather than
paid in cash.



Financial highlights (1)



                                                                                  Income from investment operations(2)
                                                                                                        Net
                                                           Net asset                         (losses) gains
                                                              value,              Net         on securities         Total from
                                                           beginning       investment        (both realized         investment
                                                           of period           income        and unrealized)        operations
Class A:
 Year ended 8/31/2005                                         $13.80             $.44                 $(.16)              $.28
 Year ended 8/31/2004                                          13.74              .39                   .08                .47
 Year ended 8/31/2003                                          13.81              .39                  (.02)               .37
 Year ended 8/31/2002                                          13.69              .64                   .14                .78
 Year ended 8/31/2001                                          13.08              .78                   .65               1.43
Class B:
 Year ended 8/31/2005                                          13.80              .35                  (.16)               .19
 Year ended 8/31/2004                                          13.74              .30                   .08                .38
 Year ended 8/31/2003                                          13.81              .29                  (.02)               .27
 Year ended 8/31/2002                                          13.69              .55                   .14                .69
 Year ended 8/31/2001                                          13.08              .69                   .65               1.34
Class C:
 Year ended 8/31/2005                                          13.80              .34                  (.16)               .18
 Year ended 8/31/2004                                          13.74              .29                   .08                .37
 Year ended 8/31/2003                                          13.81              .28                  (.02)               .26
 Year ended 8/31/2002                                          13.69              .53                   .14                .67
 Period from 3/15/2001 to 8/31/2001                            13.61              .29                   .10                .39
Class F:
 Year ended 8/31/2005                                          13.80              .44                  (.16)               .28
 Year ended 8/31/2004                                          13.74              .39                   .08                .47
 Year ended 8/31/2003                                          13.81              .38                  (.02)               .36
 Year ended 8/31/2002                                          13.69              .64                   .14                .78
 Period from 3/19/2001 to 8/31/2001                            13.60              .32                   .11                .43
Class 529-A:
 Year ended 8/31/2005                                          13.80              .43                  (.16)               .27
 Year ended 8/31/2004                                          13.74              .39                   .08                .47
 Year ended 8/31/2003                                          13.81              .37                  (.02)               .35
 Period from 2/19/2002 to 8/31/2002                            13.59              .30                   .23                .53
Class 529-B:
 Year ended 8/31/2005                                          13.80              .32                  (.16)               .16
 Year ended 8/31/2004                                          13.74              .27                   .08                .35
 Year ended 8/31/2003                                          13.81              .26                  (.02)               .24
 Period from 2/26/2002 to 8/31/2002                            13.58              .24                   .24                .48
Class 529-C:
 Year ended 8/31/2005                                          13.80              .32                  (.16)               .16
 Year ended 8/31/2004                                          13.74              .27                   .08                .35
 Year ended 8/31/2003                                          13.81              .26                  (.02)               .24
 Period from 2/19/2002 to 8/31/2002                            13.59              .25                   .23                .48
Class 529-E:
 Year ended 8/31/2005                                          13.80              .39                  (.16)               .23
 Year ended 8/31/2004                                          13.74              .34                   .08                .42
 Year ended 8/31/2003                                          13.81              .34                  (.02)               .32
 Period from 3/15/2002 to 8/31/2002                            13.43              .24                   .40                .64
Class 529-F:
 Year ended 8/31/2005                                          13.80              .44                  (.16)               .28
 Year ended 8/31/2004                                          13.74              .38                   .08                .46
 Period from 9/16/2002 to 8/31/2003                            13.86              .30                  (.02)               .28




Financial highlights (1)                                          (continued)

                                                                                  Income from investment operations(2)
                                                                                                        Net
                                                           Net asset                         (losses) gains
                                                              value,              Net         on securities         Total from
                                                           beginning       investment        (both realized         investment
                                                           of period           income        and unrealized)        operations
Class R-1:
 Year ended 8/31/2005                                         $13.80             $.34                 $(.16)              $.18
 Year ended 8/31/2004                                          13.74              .29                   .08                .37
 Year ended 8/31/2003                                          13.81              .28                  (.02)               .26
 Period from 6/13/2002 to 8/31/2002                            13.63              .09                   .18                .27
Class R-2:
 Year ended 8/31/2005                                          13.80              .34                  (.16)               .18
 Year ended 8/31/2004                                          13.74              .29                   .08                .37
 Year ended 8/31/2003                                          13.81              .28                  (.02)               .26
 Period from 5/31/2002 to 8/31/2002                            13.61              .11                   .21                .32
Class R-3:
 Year ended 8/31/2005                                          13.80              .39                  (.16)               .23
 Year ended 8/31/2004                                          13.74              .34                   .08                .42
 Year ended 8/31/2003                                          13.81              .33                  (.02)               .31
 Period from 6/26/2002 to 8/31/2002                            13.69              .09                   .13                .22
Class R-4:
 Year ended 8/31/2005                                          13.80              .44                  (.16)               .28
 Year ended 8/31/2004                                          13.74              .39                   .08                .47
 Year ended 8/31/2003                                          13.81              .38                  (.02)               .36
 Period from 6/27/2002 to 8/31/2002                            13.66              .09                   .16                .25
Class R-5:
 Year ended 8/31/2005                                          13.80              .48                  (.16)               .32
 Year ended 8/31/2004                                          13.74              .44                   .08                .52
 Year ended 8/31/2003                                          13.81              .43                  (.02)               .41
 Period from 5/15/2002 to 8/31/2002                            13.52              .18                   .29                .47




Financial highlights (1)



                                                            Dividends
                                                            (from net         Net asset                            Net assets,
                                                           investment        value, end              Total       end of period
                                                               income)        of period          return (3)       (in millions)
Class A:
 Year ended 8/31/2005                                           $(.45)           $13.63              2.08%              $3,745
 Year ended 8/31/2004                                            (.41)            13.80               3.49               3,768
 Year ended 8/31/2003                                            (.44)            13.74               2.68               3,981
 Year ended 8/31/2002                                            (.66)            13.81               5.89               3,071
 Year ended 8/31/2001                                            (.82)            13.69              11.23               1,628
Class B:
 Year ended 8/31/2005                                            (.36)            13.63               1.39                 303
 Year ended 8/31/2004                                            (.32)            13.80               2.78                 339
 Year ended 8/31/2003                                            (.34)            13.74               1.96                 383
 Year ended 8/31/2002                                            (.57)            13.81               5.14                 205
 Year ended 8/31/2001                                            (.73)            13.69              10.47                  46
Class C:
 Year ended 8/31/2005                                            (.35)            13.63               1.32                 360
 Year ended 8/31/2004                                            (.31)            13.80               2.70                 383
 Year ended 8/31/2003                                            (.33)            13.74               1.86                 434
 Year ended 8/31/2002                                            (.55)            13.81               5.04                 212
 Period from 3/15/2001 to 8/31/2001                              (.31)            13.69               2.92                  22
Class F:
 Year ended 8/31/2005                                            (.45)            13.63               2.08                 377
 Year ended 8/31/2004                                            (.41)            13.80               3.48                 304
 Year ended 8/31/2003                                            (.43)            13.74               2.65                 223
 Year ended 8/31/2002                                            (.66)            13.81               5.85                 104
 Period from 3/19/2001 to 8/31/2001                              (.34)            13.69               3.24                  13
Class 529-A:
 Year ended 8/31/2005                                            (.44)            13.63               2.03                  99
 Year ended 8/31/2004                                            (.41)            13.80               3.49                  79
 Year ended 8/31/2003                                            (.42)            13.74               2.58                  55
 Period from 2/19/2002 to 8/31/2002                              (.31)            13.81               3.98                  15
Class 529-B:
 Year ended 8/31/2005                                            (.33)            13.63               1.20                  22
 Year ended 8/31/2004                                            (.29)            13.80               2.58                  20
 Year ended 8/31/2003                                            (.31)            13.74               1.77                  16
 Period from 2/26/2002 to 8/31/2002                              (.25)            13.81               3.58                   3
Class 529-C:
 Year ended 8/31/2005                                            (.33)            13.63               1.21                  69
 Year ended 8/31/2004                                            (.29)            13.80               2.59                  55
 Year ended 8/31/2003                                            (.31)            13.74               1.78                  40
 Period from 2/19/2002 to 8/31/2002                              (.26)            13.81               3.58                  11
Class 529-E:
 Year ended 8/31/2005                                            (.40)            13.63               1.73                   6
 Year ended 8/31/2004                                            (.36)            13.80               3.11                   5
 Year ended 8/31/2003                                            (.39)            13.74               2.30                   3
 Period from 3/15/2002 to 8/31/2002                              (.26)            13.81               4.79                   1
Class 529-F:
 Year ended 8/31/2005                                            (.45)            13.63               2.05                  12
 Year ended 8/31/2004                                            (.40)            13.80               3.37                   7
 Period from 9/16/2002 to 8/31/2003                              (.40)            13.74               2.00                   3




Financial highlights (1)                                           (continued)



                                                            Dividends
                                                            (from net         Net asset                            Net assets,
                                                           investment        value, end              Total       end of period
                                                               income)        of period             return        (in millions)
Class R-1:
 Year ended 8/31/2005                                           $(.35)           $13.63              1.30%                  $4
 Year ended 8/31/2004                                            (.31)            13.80               2.68                   3
 Year ended 8/31/2003                                            (.33)            13.74               1.87                   2
 Period from 6/13/2002 to 8/31/2002                              (.09)            13.81               2.02                  -*  (6)
Class R-2:
 Year ended 8/31/2005                                            (.35)            13.63               1.34                  93
 Year ended 8/31/2004                                            (.31)            13.80               2.72                  71
 Year ended 8/31/2003                                            (.33)            13.74               1.90                  40
 Period from 5/31/2002 to 8/31/2002                              (.12)            13.81               2.34                   1
Class R-3:
 Year ended 8/31/2005                                            (.40)            13.63               1.72                  90
 Year ended 8/31/2004                                            (.36)            13.80               3.11                  63
 Year ended 8/31/2003                                            (.38)            13.74               2.29                  37
 Period from 6/26/2002 to 8/31/2002                              (.10)            13.81               1.58                   1
Class R-4:
 Year ended 8/31/2005                                            (.45)            13.63               2.08                  24
 Year ended 8/31/2004                                            (.41)            13.80               3.47                  13
 Year ended 8/31/2003                                            (.43)            13.74               2.64                   5
 Period from 6/27/2002 to 8/31/2002                              (.10)            13.81               1.87                   -  (6)
Class R-5:
 Year ended 8/31/2005                                            (.49)            13.63               2.40                  66
 Year ended 8/31/2004                                            (.46)            13.80               3.81                  65
 Year ended 8/31/2003                                            (.48)            13.74               2.97                  45
 Period from 5/15/2002 to 8/31/2002                              (.18)            13.81               3.49                  27




Financial highlights (1)




                                                                 Ratio of expenses     Ratio of expenses
                                                                    to average net        to average net            Ratio of
                                                                     assets before          assets after          net income
                                                                   reimbursements/       reimbursements/          to average
                                                                           waivers           waivers (4)          net assets
Class A:
 Year ended 8/31/2005                                                          .70%                  .69%               3.22%
 Year ended 8/31/2004                                                          .70                   .70                2.84
 Year ended 8/31/2003                                                          .70                   .70                2.84
 Year ended 8/31/2002                                                          .76                   .76                4.70
 Year ended 8/31/2001                                                          .81                   .81                5.78
Class B:
 Year ended 8/31/2005                                                         1.40                  1.38                2.52
 Year ended 8/31/2004                                                         1.39                  1.39                2.15
 Year ended 8/31/2003                                                         1.40                  1.40                2.05
 Year ended 8/31/2002                                                         1.46                  1.46                3.86
 Year ended 8/31/2001                                                         1.50                  1.50                4.85
Class C:
 Year ended 8/31/2005                                                         1.47                  1.45                2.45
 Year ended 8/31/2004                                                         1.47                  1.47                2.07
 Year ended 8/31/2003                                                         1.49                  1.49                1.93
 Year ended 8/31/2002                                                         1.55                  1.55                3.67
 Period from 3/15/2001 to 8/31/2001                                            .81                   .81                2.16
Class F:
 Year ended 8/31/2005                                                          .70                   .68                3.23
 Year ended 8/31/2004                                                          .70                   .70                2.80
 Year ended 8/31/2003                                                          .71                   .71                2.69
 Year ended 8/31/2002                                                          .79                   .79                4.47
 Period from 3/19/2001 to 8/31/2001                                            .40                   .40                2.43
Class 529-A:
 Year ended 8/31/2005                                                          .75                   .73                3.18
 Year ended 8/31/2004                                                          .70                   .70                2.81
 Year ended 8/31/2003                                                          .76                   .76                2.56
 Period from 2/19/2002 to 8/31/2002                                            .91 (5)               .91 (5)            4.11 (5)
Class 529-B:
 Year ended 8/31/2005                                                         1.59                  1.57                2.34
 Year ended 8/31/2004                                                         1.59                  1.59                1.93
 Year ended 8/31/2003                                                         1.59                  1.59                1.70
 Period from 2/26/2002 to 8/31/2002                                           1.64 (5)              1.64 (5)            3.38 (5)
Class 529-C:
 Year ended 8/31/2005                                                         1.57                  1.55                2.36
 Year ended 8/31/2004                                                         1.58                  1.58                1.94
 Year ended 8/31/2003                                                         1.58                  1.58                1.74
 Period from 2/19/2002 to 8/31/2002                                           1.63 (5)              1.63 (5)            3.36 (5)
Class 529-E:
 Year ended 8/31/2005                                                         1.06                  1.04                2.88
 Year ended 8/31/2004                                                         1.06                  1.06                2.44
 Year ended 8/31/2003                                                         1.06                  1.06                2.28
 Period from 3/15/2002 to 8/31/2002                                            .51                   .51                1.73
Class 529-F:
 Year ended 8/31/2005                                                          .72                   .70                3.22
 Year ended 8/31/2004                                                          .81                   .81                2.67
 Period from 9/16/2002 to 8/31/2003                                            .81 (5)               .81 (5)            2.23 (5)




Financial highlights    (1)     (continued)


                                                                 Ratio of expenses     Ratio of expenses
                                                                    to average net        to average net            Ratio of
                                                                     assets before          assets after          net income
                                                                   reimbursements/       reimbursements/          to average
                                                                           waivers           waivers (4)          net assets
Class R-1:
 Year ended 8/31/2005                                                         1.59%                 1.47%               2.46%
 Year ended 8/31/2004                                                         1.62                  1.48                2.03
 Year ended 8/31/2003                                                         1.85                  1.48                1.61
 Period from 6/13/2002 to 8/31/2002                                            .38                   .31                 .69
Class R-2:
 Year ended 8/31/2005                                                         1.80                  1.43                2.49
 Year ended 8/31/2004                                                         1.89                  1.45                2.05
 Year ended 8/31/2003                                                         1.99                  1.44                1.55
 Period from 5/31/2002 to 8/31/2002                                            .48                   .37                 .80
Class R-3:
 Year ended 8/31/2005                                                         1.09                  1.05                2.87
 Year ended 8/31/2004                                                         1.10                  1.07                2.43
 Year ended 8/31/2003                                                         1.13                  1.06                1.99
 Period from 6/26/2002 to 8/31/2002                                            .25                   .20                 .64
Class R-4:
 Year ended 8/31/2005                                                          .71                   .69                3.25
 Year ended 8/31/2004                                                          .71                   .71                2.74
 Year ended 8/31/2003                                                          .73                   .71                2.55
 Period from 6/27/2002 to 8/31/2002                                            .16                   .13                 .68
Class R-5:
 Year ended 8/31/2005                                                          .39                   .37                3.53
 Year ended 8/31/2004                                                          .39                   .39                3.11
 Year ended 8/31/2003                                                          .40                   .40                3.10
 Period from 5/15/2002 to 8/31/2002                                            .13                   .13                1.28





                                                                                  Year ended August 31
                                                                   2005       2004        2003        2002        2001

Portfolio turnover rate for all classes of shares                   76%        68%         65%         59%         73%


(1) Based on operations for the period 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 the year ended August 31, 2005,
    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



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Trustees 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, 2005, 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, 2005, 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 the
Fund as of August 31, 2005, 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 7, 2005





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 information below is provided for the
fund's fiscal year ending August 31, 2005.

For state tax  purposes,  certain  states may exempt from income  taxation  that
portion of the income  dividends  paid by the fund that were derived from direct
U.S. government obligations. The fund designates $38,593,000 as interest derived
on direct U.S. government obligations.

INDIVIDUAL  SHAREHOLDERS  SHOULD  REFER  TO THEIR  FORM  1099-DIV  OR OTHER  TAX
INFORMATION  WHICH WILL BE MAILED IN JANUARY 2006 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2005 TAX RETURNS.  SHAREHOLDERS  SHOULD  CONSULT
THEIR TAX ADVISERS.