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<PAGE> PAGE 4
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<PAGE> PAGE 7
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SIGNATURE PATRICK F. QUAN
TITLE SECRETARY
INDEPENDENT AUDITORS' REPORT
The Income Fund of America, Inc.:
In planning and performing our audit of the financial statements of
The Income Fund of America, Inc. ("the Fund") for the year ended July
31, 1996, we considered its internal control structure, including
procedures for safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control structure.
The management of the Fund is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control
structure policies and procedures. Two of the objectives of an
internal control structure are to provide management with reasonable,
but not absolute, assurance that assets are safeguarded against loss
from unauthorized use or disposition and that transactions are
executed in accordance with management's authorization and recorded
properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of changes
in conditions or that the effectiveness of the design and operation
may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure
that might be material weaknesses under standards established by the
American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of the
specific internal control structure elements does not reduce to a
relatively low level the risk that errors and irregularities in
amounts that would be material in relation to the financial statements
being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions.
However, we noted no matters involving the internal control structure,
including procedures for safeguarding securities, that we consider to
be material weaknesses as defined above as of July 31, 1996.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
Deloitte & Touche LLP
August 30, 1996
Los Angeles, California
INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of April,
1996, is made and entered into by and between THE INCOME FUND OF
AMERICA, INC., a Maryland corporation (hereinafter called the "Fund"),
and CAPITAL RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation
(hereinafter called the "Adviser"). The parties agree as follows:
1. The Fund hereby employs the Adviser to determine what
securities shall be purchased or sold by the Fund with respect to the
investment and reinvestment of the assets of the Fund. The Adviser
hereby accepts such employment and agrees to render the services and
to assume the obligation to the extent herein set forth, for the
compensation herein provided. The Adviser shall, for all purposes
herein, be deemed an independent contractor and not an agent of the
Fund.
2. The Adviser agrees to provide supervision of the portfolio
of the Fund and to determine what securities or other property shall
be purchased or sold by the Fund, giving due consideration to the
policies of the Fund as expressed in the Fund's Articles of
Incorporation, By-Laws, Registration Statement under the Investment
Company Act of 1940 (the "1940 Act"), Registration Statement under the
Securities Act of 1933 (the "1933 Act"), and prospectus as in use from
time to time, as well as to the factors affecting the Fund's status
as a regulated investment company under the Internal Revenue Code.
The Adviser shall provide adequate facilities and qualified
personnel for the placement of orders for the purchase, or other
acquisition, and sale, or other disposition, of portfolio securities
for the Fund. With respect to such transactions, the Adviser, subject
to such directions as may be furnished from time to time by the Board
of Directors of the Fund, shall endeavor as the primary objective to
obtain the most favorable prices and executions of orders. Subject
to such primary objective, the Adviser may place orders with brokerage
firms which have sold shares of the Fund or which furnish statistical
and other information to the Adviser, taking into account the value
and quality of the brokerage services of such broker-dealers,
including the availability and quality of such statistical and other
information. Receipt by the Adviser of any such statistical and other
information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable pursuant to
Section 5 hereof.
3. The Adviser shall furnish the services of persons to perform
the executive, administrative, clerical, and bookkeeping functions of
the Fund, including the daily determination of net asset value and
offering price per share. The Adviser shall pay the compensation and
travel expenses of all such persons, and they shall serve without
additional compensation from the Fund. The Adviser shall also, at its
expense, provide the Fund with suitable office space (which may be in
the offices of the Adviser); all necessary small office equipment and
utilities; and general purpose accounting forms, supplies, and postage
used at the offices of the Fund.
4. The Fund shall pay all its expenses not assumed by the
Adviser as provided herein. Such expenses shall include, but shall
not be limited to, custodian, stock transfer and dividend disbursing
fees and expenses; costs of the designing, printing and mailing of
reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares
of the Fund (including stock certificates, registration and
qualification fees and expenses); legal and auditing expenses;
compensation, fees, and expenses paid to directors; association dues;
costs of stationery and forms prepared exclusively for the Fund; and
costs of assembling and storing shareholder account data.
5. The Fund shall pay to the Investment Adviser on or before
the tenth (10th) day of each month, as compensation for the services
rendered by the Investment Adviser during the preceding month, the sum
of the following amounts:
(a) 0.24% per annum on the first $1 billion of the Fund's net
assets; 0.20% per annum on the portion of such net assets
from $1 billion to $2 billion; 0.18% per annum on the
portion of such net assets from $2 billion to $3 billion;
0.165% per annum on the portion of such net assets from $3
billion to $5 billion; 0.155% per annum on the portion of
such net assets from $5 billion to $8 billion; 0.15% per
annum on the portion of such net assets from $8 billion to
$13 billion; and 0.147% thereafter ("Net Asset Portion");
plus
(b) 2.25% of the Fund's gross investment income for the
preceding month ("Investment Income Portion").
Net Asset Portion shall be accrued daily at the applicable rates
set forth above. The net asset value of the Fund shall be determined
in the manner set forth in the Articles of Incorporation and
prospectus of the Fund as of the close of the New York Stock Exchange
on each day on which said Exchange is open, and in the case of
Saturdays, Sundays, and other days on which said Exchange shall not
be open, as at the close of the last preceding day on which said
Exchange shall have been open.
Upon any termination of this agreement on a day other than the
last day of the semi-annual fiscal period of the Fund, the fee for the
period from the beginning of the semi-annual fiscal period in which
termination occurs to the date of termination shall be prorated
according to the proportion which such period bears to the full
semi-annual fiscal period of the Fund.
6. The Adviser agrees to reduce the fee payable to it under
this Agreement by the amount by which the ordinary operating expenses
of the Fund for any fiscal year of the Fund, excluding interest, taxes
and extraordinary expenses, shall exceed one and one-half percent
(1-1/2%) of the first $30 million of average net assets of the Fund
determined pursuant to Section 5, plus one percent (1%) of such
average net assets in excess thereof. Costs incurred in connection
with the purchase or sale of portfolio securities, including brokerage
fees and commissions, which are capitalized in accordance with
generally accepted accounting principles applicable to investment
companies, shall be accounted for as capital items and not as
expenses. Proper accruals shall be made by the Fund for any projected
reduction hereunder and corresponding amounts shall be withheld from
the fees paid by the Fund to the Adviser. Any additional reduction
computed at the end of the fiscal year shall be deducted from the fee
for the last month of such fiscal year, and any excess shall be paid
to the Fund immediately after the fiscal year end, and in any event
prior to publication of the Fund's annual report, as a reduction of
the fees previously paid during the fiscal year.
7. Nothing contained in this Agreement shall be construed to
prohibit the Adviser from performing investment advisory, management,
or distribution services for other investment companies and other
persons or companies, or to prohibit affiliates of the Adviser from
engaging in such businesses or in other related or unrelated
businesses.
8. The Adviser shall have no liability to the Fund, or its
shareholders, for any error of judgment, mistake of law, or for any
loss arising out of any investment, or for any other act or omission
in the performance of its obligations to the Fund not involving
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties hereunder.
9. This Agreement shall continue in effect until the close of
business on November 30, 1996. It may thereafter be renewed from year
to year by mutual consent, provided that such renewal shall be
specifically approved at least annually by either (i) the Board of
Directors of the Fund, or by the vote of a majority (as defined in the
1940 Act) of the outstanding voting securities of the Fund, and (ii)
a majority of those directors who are not parties to this 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. Such mutual consent to renewal shall not be deemed to have
been given unless evidenced by a writing signed by both parties
hereto.
10. This Agreement may be terminated at any time, without
payment of any penalty, by the Board of Directors of the Fund or by
the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund, on sixty (60) days' written notice to
the Adviser, or by the Adviser on like notice to the Fund. This
Agreement shall automatically terminate in the event of its assignment
(as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate originals by their officers thereunto duly
authorized as of the day and year first above written.
CAPITAL RESEARCH AND MANAGEMENT
THE INCOME FUND OF AMERICA, INC. COMPANY
By: /s/ Walter P. Stern By: /s/ James F. Rothenberg
Walter P. Stern, Chairman James F. Rothenberg, President
By: /s/ Patrick F. Quan By: /s/ Michael J. Downer
Patrick F. Quan, Secretary Michael J. Downer, Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-1-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 12,944,090
<INVESTMENTS-AT-VALUE> 14,350,211
<RECEIVABLES> 214,415
<ASSETS-OTHER> 4,819
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,569,445
<PAYABLE-FOR-SECURITIES> 63,447
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,834
<TOTAL-LIABILITIES> 110,281
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,458,261
<SHARES-COMMON-STOCK> 909,913,014
<SHARES-COMMON-PRIOR> 823,830,743
<ACCUMULATED-NII-CURRENT> 159,002
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 525,840
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,406,174
<NET-ASSETS> 14,459,164
<DIVIDEND-INCOME> 328,343
<INTEREST-INCOME> 524,572
<OTHER-INCOME> 0
<EXPENSES-NET> 85,856
<NET-INVESTMENT-INCOME> 767,059
<REALIZED-GAINS-CURRENT> 630,886
<APPREC-INCREASE-CURRENT> 276,975
<NET-CHANGE-FROM-OPS> 1,674,920
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 718,292
<DISTRIBUTIONS-OF-GAINS> 152,790
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 143,040,894
<NUMBER-OF-SHARES-REDEEMED> 103,371,820
<SHARES-REINVESTED> 46,413,197
<NET-CHANGE-IN-ASSETS> 2,169,007
<ACCUMULATED-NII-PRIOR> 110,419
<ACCUMULATED-GAINS-PRIOR> 47,534
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 42,065
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 85,856
<AVERAGE-NET-ASSETS> 13,803,709
<PER-SHARE-NAV-BEGIN> 14.92
<PER-SHARE-NII> .87
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> .83
<PER-SHARE-DISTRIBUTIONS> .18
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.89
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
