CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street, Los Angeles, California 90071 • Telephone (213) 486-9652 • Fax (213) 486-9041

June 9, 1997

Mr. Jonathan Katz, Secretary
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-6009

RE: Proposed Rule 498- Fund Profile
File No. S7-18-96

Dear Mr. Katz:

Capital Research and Management Company ("CRMC") is the investment adviser to the twenty-eight mutual funds in The American Funds Group. As a participant in the profile pilot program, CRMC appreciates the opportunity comment on proposed rule 498, the fund profile.

I. Question-and-Answer Format

Rule 498 would require a profile to contain specific information in a question-and-answer format. One of the objectives of the profile is to allow investors to compare profiles against each other. We agree that the ability to compare profiles is facilitated by requiring profiles to be as consistent across various funds as possible as to format. However, we do not believe that this objective would be compromised by allowing funds to use headings that are substantially similar to the questions proposed by the Commission (e.g., a heading entitled "Fund Goals" tells investors the same thing as "What are the fund's goals?" ). By using the same key words as those contained in the proposed questions, profiles will still permit investors to easily compare each section of a profile against another.

Additionally, we recommend that the headings used in a fund's profile be consistent with headings used in the "Risk/Return Summary" (as proposed in the amendments to Form N-1A) of the same fund's full prospectus. Such an approach would aid investors who wish to find additional information on a particular subject and prevent confusion for those who are examining both the profile and prospectus of the same fund.

II. Portfolio Manager Disclosure

We strongly support the Commission's proposal regarding portfolio manager disclosure. In the event three or more persons manage a fund's portfolio, we believe additional background about each person does not help investors, especially where no one person manages a significant portion of the portfolio's assets. Where there are multiple managers we believe investors are better served by an explanation of the adviser's method of management.

We do agree that even where three or more persons manage a portfolio, if any one person manages a significant portion, additional information about that person should be disclosed. We also agree that 40% of the portfolio's assets is a significant portion of the portfolio and that this is an appropriate point at which to require disclosure. Accordingly, we support this provision of the rule as proposed.

III. Purchase and Redemption Information

Rule 498 would require the fund to disclose any breakpoints in sales charges. While we believe the existence of breakpoints may be meaningful information to investors, listing each breakpoint would risk overburdening the profile with information that will not assist investors in making investment decisions. Accordingly, we recommend that a fund only be required to disclose, if applicable, that sales charge breakpoints exist and the first breakpoint for which an investor could qualify. Investors would thus be informed of the highest sales charge they may incur and, by listing the first breakpoint, the profile should allow investors to deduce that lower breakpoints are available for higher investments. Moreover, this approach does not preclude investors from requesting additional breakpoint information from the fund's distributor or their investment dealer who is required under NASD rules to inform investors when they qualify for a sales charge breakpoint.

IV. Explanation of Profile - Legend on Cover Page

A. Legend: Alternative #1 vs. Alternative #2

The Commission has proposed two different legends for inclusion on the cover page as an explanation of the profile. CRMC supports the use of the first alternative and would further recommend a slight change in the language in the spirit of conciseness. CRMC proposes that the legend read as follows:

This Profile summarizes key information about the Fund that is included in the Fund's prospectus. For more information before you invest, you may obtain the Fund's prospectus and other information about the Fund at no cost by calling .

We believe the additional use of words in the second alternative will not aid investors and therefore, should not be adopted.

B. Three-day Prospectus Delivery Requirement

Under the proposal, a fund would be required to send an investor the full prospectus within three days after receiving a request for it. Many mutual funds are sold through intermediaries, such as discount supermarkets, financial planners, banks, and broker-dealers. Consequently, we request clarification from the Commission that should an investor request a full prospectus from any one of these intermediaries, the intermediary, not the fund will be subject to the three-day delivery requirement.

V. Updating Requirement

Rule 498 would require a fund to update its average annual total return and yield information quarterly. The rule would allow a fund to comply with this requirement by using a sticker or stamp. However, the rule also requires a fund to include on the front cover of the profile the date that investment results were updated. We are unclear on what the Commission means by requiring the date to be included on the front cover.

If it is the Commission's intent to have the date of the update printed of the front cover of the profile, it would appear that a fund could be forced to reprint the entire profile every quarter. This would be a very costly proposition. An alternative would be to take already printed profiles and affix on the cover the date of the update using a sticker or stamp. This would be in addition to using a sticker or stamp to provide the actual updated investment information. This choice would necessitate two separate steps to comply with the requirement and is also overly costly and burdensome.

We would recommend that the Commission consider allowing funds to include the date of the update on the same sticker or stamp presenting the actual updated information. Stickers and stamps are typically included in prospectuses in such a way that investors could easily distinguish the original profile document from the new information.¹ The Commission's staff would also be alerted to the existence of updated information from the update's filing. Accordingly, we believe allowing the date of the update to be included on the same sticker or stamp as the updated information is a less burdensome and costly alternative and facilitates the use of the sticker or stamp as allowed by the Commission.

VI. Use of the Profile

We believe that fund groups will generally use the profile with material qualified under rule 482, such as a cover letter and/or other explanatory material. (We understand that under current rules "supplemental sales material" may not be used with a profile unless accompanied or preceded by a Section 10(a) prospectus as described in the Release.) We assume, and the Commission should clarify, that a profile may be used together with rule 482 material even though the profile may contain a purchase application. Otherwise, investors receiving a profile together with rule 482 material would be uncertain as to whether they could invest in the fund based on the profile or whether they first would be required to obtain the fund's Section 10(a) prospectus. This is because material qualified under rule 482 must state that investors should obtain a prospectus which should be read carefully before investing.

In light of the foregoing, the Commission should interpret rule 482 to permit funds to reference the profile to satisfy the rule's prospectus legend requirement. Further, funds should be allowed to tailor the legend on their 482 pieces intended for use with profiles accordingly.² We believe these clarifications of rule 482 would foster a broader and more effective use of the profile.

CRMC appreciates the Commission's consideration of our comments on proposed rule 498. If you have any questions please contact the undersigned at (213) 486-9652, Michael Downer at (213) 486-9425, or Stuart Strachan at (213) 486-9345.

Sincerely yours,

Kristine M. Nishiyama

¹ Investors would notice a sticker that is inserted or glued to the profile because it is an additional piece of paper that is obviously not part of the original document. Investors would also be able to easily distinguish a stamp containing new information because of the difference in appearance between the stamped information and the original information.

² For example, the Commission should clarify that rule 482 material intended for use with a profile may include a legend that states in effect:

The accompanying profile contains important information about the fund which you should read before you invest. For more detailed information about the fund, a prospectus may be obtained from and in any event, will be automatically sent to you with your initial confirmation of purchase.