<PAGE>
PROSPECTUS
THE INCOME FUND OF AMERICA, INC.(R)
AN OPPORTUNITY FOR CURRENT INCOME
AND, SECONDARILY, GROWTH OF CAPITAL
FROM A DIVERSIFIED PORTFOLIO OF
SECURITIES INCLUDING STOCKS AND
BONDS
OCTOBER 1, 1995
(amended March 1, 1996)
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
THE INCOME FUND OF AMERICA, INC.
Four Embarcadero Center
Suite 1800
San Francisco, CA 94111
The investment objective of the fund is to emphasize current income while
secondarily striving to attain capital growth. The fund believes that a
portfolio with relatively high current income can also generate growth of
capital. The fund strives to accomplish this objective by investing in a
broadly diversified portfolio of securities including stocks and bonds.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information dated October 1, 1995,
which contains the fund's financial statements, without charge, by writing to
the Secretary of the fund at the above address or telephoning 800/421-0180.
These requests will be honored within three business days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
06-010-0396
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SUMMARY OF
EXPENSES
Average annual
expenses paid over a
10-year period would
be approximately $13
per year, assuming a
$1,000 investment and
a 5% annual return.
TABLE OF CONTENTS
Summary of Expenses..............................2
Financial Highlights.............................3
Investment Objective and Policies................3
Certain Securities and Investment Techniques.....4
Investment Results...............................8
Dividends, Distributions and Taxes...............8
Fund Organization and Management.................9
The American Funds Shareholder Guide.............12-20
Purchasing Shares................................12
Reducing Your Sales Charge.......................15
Shareholder Services.............................16
Redeeming Shares.................................18
Retirement Plans.................................20
IMPORTANT PHONE NUMBERS
Shareholder Services: 800/421-0180 ext. 1
Dealer Services: 800/421-9900 ext. 11
American FundsLine(R) 800/325-3590
(24-hour information)
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price)................................... 5.75%/1/
The fund has no sales charge on reinvested dividends, deferred sales
charge,/2/ redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management fees....................................................... 0.32%
12b-1 expenses........................................................ 0.23%/3/
Other expenses (including audit, legal, shareholder services, transfer
agent and custodian expenses)........................................ 0.10%
Total fund operating expenses......................................... 0.65%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative ex-
penses on a $1,000 investment, assuming a 5%
annual return./4/ $64 $77 $92 $134
</TABLE>
/1/ Sales charges are reduced for certain large purchases. (See "The American
Funds Shareholder Guide: Purchasing Shares--Sales Charges.")
/2/ Any defined contribution plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more eligible employees
or any other purchaser investing at least $1 million in shares of the fund
(or in combination with shares of other funds in The American Funds Group
other than the money market funds) may purchase shares at net asset value;
however, a contingent deferred sales charge of 1% applies on certain
redemptions within 12 months following such purchases. (See "The American
Funds Shareholder Guide: Redeeming Shares--Contingent Deferred Sales
Charge.")
/3/ These expenses may not exceed 0.25% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/4/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
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FINANCIAL The following information for the ten years ended July
HIGHLIGHTS 31, 1995 has been derived from financial statements
(For a share which have been audited by Deloitte & Touche llp, inde-
outstanding pendent accountants. This information should be read in
throughout the conjunction with the financial statements and related
fiscal year) notes, which are included in the statement of addi-
tional information.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $13.59 $14.47 $13.94 $12.54 $12.11 $13.20 $11.50 $12.54 $12.11 $11.68
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income.. .85 .83 .85 .85 .86 .82 .90 .82 .82 .90
Net realized and
unrealized gain
(loss) on invest-
ments................. 1.29 (.53) .74 1.48 .53 (.67) 1.68 (.68) 1.08 1.21
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total income from in-
vestment operations. 2.14 .30 1.59 2.33 1.39 .15 2.58 .14 1.90 2.11
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Distributions from net
investment income..... (.75) (.83) (.84) (.85) (.89) (.87) (.88) (.80) (.88) (.88)
Distributions from net
realized gains........ (.06) (.35) (.22) (.08) (.07) (.37) -- (.38) (.59) (.80)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.. (.81) (1.18) (1.06) (.93) (.96) (1.24) (.88) (1.18) (1.47) (1.68)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $14.92 $13.59 $14.47 $13.94 $12.54 $12.11 $13.20 $11.50 $12.54 $12.11
======= ======= ====== ====== ====== ====== ====== ====== ====== ======
Total Return/1/......... 16.42% 1.98% 11.88% 19.16% 12.24% 1.12% 23.43% 1.71% 16.67% 19.87%
Ratios/Supplemental
Data:
Net Assets, end of
year (in millions).... $12,290 $10,537 $9,045 $5,121 $2,771 $2,110 $1,271 $ 925 $ 943 $ 546
Ratio of expenses to
average net assets.... .65% .63% .62% .66% .73% .67% .69% .55% .54% .55%
Ratio of net income to
average net assets.... 6.12% 5.92% 6.05% 6.40% 7.23% 7.36% 7.45% 7.14% 6.55% 7.32%
Portfolio turnover
rate.................. 26.26% 26.42% 29.18% 22.71% 23.35% 18.90% 34.38% 42.83% 38.73% 41.48%
</TABLE>
--------
/1/ Excludes maximum sales charge of 5.75%.
INVESTMENT The fund's investment objective is to emphasize current
OBJECTIVE income while secondarily striving to attain capital
AND POLICIES growth. The fund believes that a portfolio with rela-
tively high current income can also generate growth of
The fund aims to capital.
provide you with
current income The portfolio of the fund is managed to earn current
while secondarily income on, and to anticipate long-term capital growth
striving for of, the portfolio as a whole rather than any individual
capital growth. security in it. The fund may invest in common and pre-
ferred stocks, straight debt securities (including gov-
ernment securities) or debt securities with equity con-
version or purchase rights, and cash and cash equiva-
lents. In addition, the fund may invest in various
mortgage-related securities including those issued by
the Government National Mortgage Association (GNMA),
the Federal National Mortgage Association (FNMA), and
the Federal Home Loan Mortgage Corporation (FHLMC), and
collateralized obligations (CMOs) and mortgage-backed
bonds. The fund may also invest to a very limited ex-
tent in inverse floating rate notes (a type of deriva-
tive instrument). (See the statement of additional in-
formation for a description of cash equivalents, mort-
gage- related securities and inverse floating rate
notes.) The mix of these securities is determined on
the basis of existing and anticipated conditions. The
relative percentages of each type of security in the
portfolio may be expected to fluctuate and at times the
fund may be invested solely in fixed-income securities
or solely in equity securities. The fund may also
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invest no more than 10% of its assets in equity securi-
ties of issuers which are not included in the Standard
& Poor's 500 Composite Index (a broad measure of the
U.S. stock market) and which are domiciled outside the
U.S. Furthermore, the fund may invest in fixed-income
securities of issuers domiciled outside the U.S. pro-
vided such fixed-income securities are U.S. dollar-de-
nominated. The fund will maintain at least 65% of the
value of its total assets in income-producing securi-
ties under normal market conditions.
The fund's straight debt securities may consist of
bonds that are rated, measured at the time of purchase,
as low as CC by Standard & Poor's Corporation or Ca by
Moody's Investors Service, Inc. (or unrated but consid-
ered of similar quality). However, securities rated BB
and Ba or below (or unrated but considered of similar
quality) must represent no more than 20% of the fund's
total assets. Securities rated BB and Ba or below (or
unrated but considered of similar quality) are commonly
referred to as "junk bonds" or "high-yield, high-risk"
bonds. The 20% limit shall not apply to debt securities
that have equity conversion or purchase rights.
During the previous fiscal year, the monthly average
percentage of the fund's net assets in fixed-income
investments was 44%. The average monthly composition of
the fund's portfolio based on the higher of the Moody's
or S&P ratings for the fiscal year ended July 31, 1995
was as follows: Aaa/AAA-20.01%; Aa/AA-0.42%; A/A-1.91%;
Baa/BBB-6.09%; Ba/BB-5.29%; B/B-9.01%; and Caa/CCC-
0.76%.
The fund's investment restrictions (which are described
in the statement of additional information) and
objective cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board.
The fund's rate of portfolio turnover will depend
primarily on market conditions. The rate of portfolio
turnover will not be a limiting factor when changes are
appropriate.
Achievement of the fund's investment objective cannot,
of course, be assured due to the risk of capital loss
from fluctuating prices inherent in any investment in
securities.
CERTAIN RISKS OF INVESTING IN STOCKS AND BONDS Because the fund
SECURITIES AND invests in common stocks or securities convertible into
INVESTMENT common stocks, the fund is subject to stock market
TECHNIQUES risks. For example, the fund is subject to the possi-
bility that stock prices in general will decline over
Investing in short or even extended periods.
stocks and bonds
involves certain The fund also invests in fixed-income securities, in-
risks. cluding bonds, which have market values which tend to
vary inversely with the level of interest rates--when
interest rates rise, their values will tend to decline
and vice versa. Although under normal market conditions
longer term securities yield more than shorter term se-
curities of similar quality, they are subject
4
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to greater price fluctuations. These fluctuations in
the value of the fund's investments will be reflected
in its net asset value per share. The values of high-
yield, high-risk securities may be subject to greater
fluctuations in value than are higher rated securities
because the values of high-yield, high-risk securities
tend to reflect short-term corporate and market devel-
opments and investor perceptions of the issuer's credit
quality to a greater extent. It may be more difficult
to dispose of, or determine the value of, high-yield,
high-risk securities. See the statement of additional
information for a description of the ratings and for
more information about the risks of high-yield, high-
risk securities. High-yield, high-risk securities rated
CC or Ca generally are described by the rating agencies
as "speculative in a high degree; often in default or
[having] other marked shortcomings."
U.S. GOVERNMENT SECURITIES Securities guaranteed by the
U.S. Government include: (1) direct obligations of the
U.S. Treasury (such as Treasury bills, notes and bonds)
and (2) federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury.
Certain securities issued by U.S. Government instrumen-
talities and certain federal agencies are neither di-
rect obligations of, nor guaranteed by, the Treasury.
However, they generally involve federal sponsorship in
one way or another: some are backed by specific types
of collateral; some are supported by the issuer's right
to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase
certain obligations of the issuer; and others are sup-
ported only by the credit of the issuing government
agency or instrumentality.
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS AND
"ROLL" TRANSACTIONS The fund may purchase securities on
a delayed delivery or "when-issued" basis and enter
into firm commitment agreements (transactions whereby
the payment obligation and interest rate are fixed at
the time of the transaction but the settlement is de-
layed). The fund as purchaser assumes the risk of any
decline in value of the security beginning on the date
of the agreement or purchase. As the fund's aggregate
commitments under these transactions increase, the op-
portunity for leverage similarly increases.
The fund also may enter into "roll" transactions, which
consist of the sale of securities together with a com-
mitment (for which the fund typically receives a fee)
to purchase similar, but not identical, securities at a
later date.
PRIVATE PLACEMENTS Private placements may be either
purchased from another institutional investor that
originally acquired the securities in a private place-
ment or directly from the issuers of the securities.
Generally, securities acquired in private placements
are subject to contractual
5
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restrictions on resale and may not be resold except
pursuant to a registration statement under the Securi-
ties Act of 1933 or in reliance upon an exemption from
the registration requirements under the Act, for exam-
ple, private placements sold pursuant to Rule 144A. Ac-
cordingly, any such obligation will be deemed illiquid
unless it has been specifically determined to be liquid
under procedures adopted by the fund's board of direc-
tors.
In determining whether these securities are liquid,
factors such as the frequency and volume of trading and
the commitment of dealers to make markets will be
considered. Additionally, the liquidity of any
particular security will depend on such factors as the
availability of "qualified" institutional investors and
the extent of investor interest in the security, which
can change from time to time.
RISKS OF INVESTING IN VARIOUS COUNTRIES The fund may
invest in non-U.S. issuers as described above. These
issuers may not be subject to uniform accounting,
auditing and financial reporting standards and
practices or regulatory requirements comparable to
those applicable to U.S. issuers. There may also be
less public information available about non-U.S.
issuers. Additionally, specific local political and
economic factors must be evaluated in making these
investments including trade balances and imbalances,
and related economic policies; expropriation or
confiscatory taxation; limitations on the removal of
funds or other assets; political or social instability;
the diverse structure and liquidity of the various
securities markets; and nationalization policies of
governments around the world. However, investing
outside the U.S. can also reduce certain risks due to
greater diversification opportunities.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objective and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the fund
are listed on the following page.
6
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<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
PORTFOLIO COUNSELOR
PORTFOLIO COUNSELORS PRIMARY TITLE(S) (AND RESEARCH
FOR PROFESSIONAL, IF APPLICABLE)
THE INCOME FUND OF FOR THE INCOME FUND OF
AMERICA, INC. AMERICA, INC. (APPROXIMATE)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stephen E. Bepler Senior Vice President of the fund. 11 years (in addition to 11 years
Senior Vice President and Director, as a research professional prior
Capital Research Company* to becoming a portfolio
counselor for the fund)
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Abner D. Goldstine Senior Vice President of the fund. 22 years
Senior Vice President and Director,
Capital Research and Management
Company
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Gregg E. Ireland Vice President, Capital Research and 6 years (in addition to 5 years as
Management Company a research professional prior
to becoming a portfolio
counselor for the fund)
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Janet A. McKinley Executive Vice President of the fund. 2 years (in addition to 8 years
Senior Vice President, as a research professional prior
Capital Research Company* to becoming a portfolio
counselor for the fund)
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George A. Miller President of the fund. 20 years
Senior Vice President and Director,
Capital Research and Management Com-
pany
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Dina Perry Vice President of the fund. 3 years
Vice President, Capital Research and
Management Company
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Richard T. Schotte Senior Vice President of the fund. 17 years
Senior Vice President, Capital
Research and Management Company
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John H. Smet Vice President of the fund. 3 years
Vice President, Capital
Research and Management Company
</TABLE>
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
WITH CAPITAL
RESEARCH AND
PORTFOLIO COUNSELORS MANAGEMENT
FOR COMPANY OR
THE INCOME FUND OF ITS
AMERICA, INC. AFFILIATES TOTAL YEARS
- -------------------------------------------------------
<S> <C> <C>
Stephen E. Bepler 23 years 29 years
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Abner D. Goldstine 28 years 43 years
- -------------------------------------------------------
Gregg E. Ireland 22 years 22 years
- -------------------------------------------------------
Janet A. McKinley 13 years 19 years
- -------------------------------------------------------
George A. Miller 20 years 34 years
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Dina Perry 4 years 29 years
- -------------------------------------------------------
Richard T. Schotte 18 years 28 years
- -------------------------------------------------------
John H. Smet 12 years 13 years
</TABLE>
* COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
7
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INVESTMENT The fund may from time to time compare its investment
RESULTS results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a
averaged a total yield and/or total return basis for various periods,
return of +13.29% with or without sales charges. Results calculated with-
a year (assuming out a sales charge will be higher. Total returns assume
the maximum sales the reinvestment of all dividends and capital gain dis-
charge was paid) tributions.
under Capital
Research and As of June 30, 1995, the fund's yield for the past 30-
Management day period was 5.36%, and total return over the past 12
Company's months and average annual total returns over the past
management five- and ten-year periods were +9.60%, +10.34% and
(December 1, 1973 +11.11%, respectively. These results were calculated in
through June 30, accordance with Securities and Exchange Commission
1995). rules which require that the maximum sales charge be
deducted. Of course, past results are not an indication
of future results. Further information regarding the
fund's investment results is contained in the fund's
annual report which may be obtained without charge by
writing to the Secretary of the fund at the address in-
dicated on the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS in March, June, September and December. Capital gains,
AND TAXES if any, are usually distributed in December. When a
dividend or capital gain is distributed, the net asset
Income value per share is reduced by the amount of the pay-
distributions are ment.
usually made in
March, June, FEDERAL TAXES The fund intends to operate as a "regu-
September and lated investment company" under the Internal Revenue
December. Code. In any fiscal year in which the fund so qualifies
and distributes to shareholders all of its net invest-
ment income and net capital gains, the fund itself is
relieved of federal income tax.
All dividends and capital gains are taxable whether
they are reinvested or received in cash--unless you are
exempt from taxation or entitled to tax deferral. Early
each year, you will be notified as to the amount and
federal tax status of all dividends and capital gains
paid during the prior year. Such dividends and capital
gains may also be subject to state or local taxes.
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS NOTI-
FIED THE FUND THAT THE TAXPAYER IDENTIFICATION NUMBER
LISTED ON YOUR ACCOUNT IS INCORRECT ACCORDING TO THEIR
RECORDS OR THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING,
FEDERAL LAW GENERALLY REQUIRES THE FUND TO WITHHOLD 31%
FROM ANY DIVIDENDS AND/OR REDEMPTIONS (INCLUDING EX-
CHANGE REDEMPTIONS). Amounts withheld are applied to
your federal tax liability; a refund may be obtained
from the Service if withholding results in overpayment
of taxes. Federal law also requires the fund to with-
hold 30% or the applicable tax treaty rate from divi-
dends paid to certain nonresident alien, non-U.S. part-
nership and non-U.S. corporation shareholder accounts.
8
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This is a brief summary of some of the tax laws that
affect your investment in the fund. Please see the
statement of additional information and your tax
adviser for further information.
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND organized as a Delaware corporation in 1969 and
MANAGEMENT reorganized as a Maryland corporation in 1983. The
fund's board supervises fund operations and performs
The fund is a duties required by applicable state and federal law.
member of The Members of the board who are not employed by Capital
American Funds Research and Management Company or its affiliates are
Group, which is paid certain fees for services rendered to the fund as
managed by one of described in the statement of additional information.
the largest and They may elect to defer all or a portion of these fees
most experienced through a deferred compensation plan in effect for the
investment fund. Shareholders have one vote per share owned and,
advisers. 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. There will not usually be a shareholder meeting
in any year except, for example, when the election of
the board is required to be acted upon by shareholders
under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92621. (See "The American Funds
Shareholder Guide: Purchasing Shares--Investment
Minimums and Fund Numbers" for a listing of funds in
The American Funds Group.) Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rates of 0.24% on the first $1 billion of the
fund's net assets, 0.20% on net assets in excess of $1
billion but not exceeding $2 billion, 0.18% on net
assets in excess of $2 billion but not exceeding $3
billion, 0.165% on net assets in excess of $3 billion
but not exceeding $5 billion, 0.155% on net assets in
excess of $5 billion but not exceeding $8 billion, and
0.15% on net assets in excess of $8 billion, plus 2.25%
of the portion of the fund's gross investment income
for the preceding month. Assuming net assets of $12
billion and gross investment income levels of 3%, 4%,
5%, 6%, 7% and 8%, management fees would be 0.24%,
0.26%, 0.28%, 0.30%, 0.33% and 0.35%, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
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Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. In the over-the-counter
market, purchases and sales are transacted directly
with principal market-makers except in those
circumstances where it appears better prices and
executions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.25% of its average net assets
annually (all of which may be for service fees). See
"The American Funds Shareholder Guide: Purchasing
Shares--Sales Charges" below.
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TRANSFER AGENT American Funds Service Company, a wholly
owned subsidiary of Capital Research and Management
Company, is the transfer agent and performs shareholder
service functions. It was paid a fee of $7,211,000 for
the fiscal year ended July 31, 1995. Telephone
conversations with American Funds Service Company may
be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
SERVICE ADDRESS AREAS SERVED
AREA
--------------------------------------------------------------
WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92622-2205 MT, NV, OR, UT, WA and
Fax: 714/671-7080 outside the U.S.
--------------------------------------------------------------
CENTRAL- P.O. Box 659522 AR, CO, IA, KS, LA,
WEST San Antonio, TX 78265-9522 MN, MO, ND, NE, NM,
Fax: 210/530-4050 OK, SD, TX, and WY
--------------------------------------------------------------
CENTRAL- P.O. Box 6007 AL, IL, IN, KY, MI,
EAST Indianapolis, IN 46206-6007 MS, OH, TNand WI
Fax: 317/735-6620
--------------------------------------------------------------
EAST P.O. Box 2280 CT, DE, FL, GA, MA,
Norfolk, VA 23501-2280 MD, ME, NC, NH, NJ,
Fax: 804/670-4773 NY, PA, RI, SC, VA,
VT, WV and Washington,
D.C.
--------------------------------------------------------------
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 FOR SERVICE.
--------------------------------------------------------------
[MAP OF THE UNITED STATES OF AMERICA]
--------------------------------------------------------------
West (light grey); Central-West (white); Central-East
(dark grey), East (gold)
11
<PAGE>
THE AMERICAN FUNDS SHAREHOLDER GUIDE
PURCHASING SHARES METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
---------------------------------------------------------
Your investment By See "Investment $50 minimum (except
dealer can help contacting Minimums and Fund where a lower
you establish your your Numbers" for minimum is noted
account--and help investment initial under "Investment
you add to it dealer investment Minimums and Fund
whenever you like. minimums. Numbers").
Visit any Mail directly to
investment dealer your investment
who is registered dealer's address
in the state printed on your
where the account statement.
purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
---------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check
account payable to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the
account envelope provided
application. with your account
statement.
---------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account investments in the
number(s), if same manner as
necessary. Please described under
indicate an "Initial Investment."
investment dealer
on the account.
Instruct your
bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco,
CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
---------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
SHARE PRICE Shares are purchased at the offering price
next determined after the order is received by the fund
or American Funds Service Company. In the case of orders
sent directly to the fund or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of trading (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange is open. The
current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share. The net asset value
per share of the money market funds normally will remain
constant at $1.00 based on the funds' current practice
of valuing their shares using the penny-rounding method
in accordance with rules of the Securities and Exchange
Commission.
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost or
destroyed certificates.
12
<PAGE>
- -------------------------------------------------------------------------------
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT
AVAILABLE FOR THE MONEY MARKET FUNDS.
INVESTMENT MINIMUMS AND FUND NUMBERS Here are the
minimum initial investments required by the funds in
The American Funds Group along with fund numbers for
use with our automated phone line, American
FundsLine(R) (see description below):
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R)......... $1,000 02
American Balanced
Fund(R).............. 500 11
American Mutual
Fund(R).............. 250 03
Capital Income
Builder(R)........... 1,000 12
Capital World Growth
and Income Fund(SM).. 1,000 33
EuroPacific Growth
Fund(R).............. 250 16
Fundamental
Investors(SM)........ 250 10
The Growth Fund of
America(R)........... 1,000 05
The Income Fund of
America(R)........... 1,000 06
The Investment Company
of America(R)........ 250 04
The New Economy
Fund(R).............. 1,000 14
New Perspective
Fund(R).............. 250 07
SMALLCAP World
Fund(SM)............. 1,000 35
Washington Mutual In-
vestors Fund(SM)..... 250 01
</TABLE>
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
BOND FUNDS
American High-Income Mu-
nicipal Bond FundSM.... $1,000 40
American High-Income
Trust(R)............... 1,000 21
The Bond Fund of
America(SM)............ 1,000 08
Capital World Bond
Fund(R)................ 1,000 31
Intermediate Bond Fund
of America(R).......... 1,000 23
Limited Term Tax-Exempt
Bond Fund of
America(SM)............ 1,000 43
The Tax-Exempt Bond Fund
of America(SM)......... 1,000 19
The Tax-Exempt Fund of
California(R)*......... 1,000 20
The Tax-Exempt Fund of
Maryland(R)*........... 1,000 24
The Tax-Exempt Fund of
Virginia(R)*........... 1,000 25
U.S. Government Securi-
ties Fund(SM).......... 1,000 22
MONEY MARKET FUNDS
The Cash Management
Trust of America(R).... 2,500 09
The Tax-Exempt Money
Fund of America(SM).... 2,500 39
The U.S. Treasury Money
Fund of America(SM).... 2,500 49
</TABLE>
--------
* Available only in certain states.
For retirement plan investments, the minimum is $250,
except that the money market funds have a minimum of
$1,000 for individual retirement accounts (IRAs).
Minimums are reduced to $50 for purchases through
"Automatic Investment Plans" (except for the money
market funds) or to $25 for purchases by retirement
plans through payroll deductions and may be reduced or
waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES The sales charges you pay when purchasing
the stock, stock/bond, and bond funds of The American
Funds Group are set forth below. The money market funds
of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for
a listing of the funds.)
13
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
--------------------- ---------- -------- -------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000...... 6.10% 5.75% 5.00%
$50,000 but less than
$100,000.............. 4.71 4.50 3.75
BOND FUNDS
Less than $25,000...... 4.99 4.75 4.00
$25,000 but less than
$50,000............... 4.71 4.50 3.75
$50,000 but less than
$100,000.............. 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000. 3.63 3.50 2.75
$250,000 but less than $500,000. 2.56 2.50 2.00
$500,000 but less than $1,000,000. 2.04 2.00 1.60
$1,000,000 or more..... none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1
million or more, for purchases by any employer-
sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue
Code including a "401(k)" plan with 200 or more
eligible employees (paid pursuant to the fund's plan of
distribution), and for purchases made at net asset
value by certain retirement plans of organizations with
collective retirement plan assets of $100 million or
more as set forth in the statement of additional
information (paid by American Funds Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will, during
calendar year 1996, provide additional compensation to
dealers. Currently these payments are limited to the
top one hundred dealers who have sold shares of the
fund or other funds in The American Funds Group. These
payments will be based on a pro rata share of a
qualifying dealer's sales. American Funds Distributors
will, on an annual basis, determine the advisability of
continuing these payments.
Any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees or any other purchaser
investing at least $1 million in shares of the fund (or
in combination with shares of other funds in The
American Funds Group other than the money market funds)
may purchase shares at net asset value; however, a
contingent deferred sales charge of 1% is imposed on
certain redemptions made within twelve months of the
purchase. (See "Redeeming Shares--Contingent Deferred
Sales Charge.")
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to
14
<PAGE>
- -------------------------------------------------------------------------------
compensate them for providing certain services. (See
"Fund Organization and Management--Plan of
Distribution.") These services include processing
purchase and redemption transactions, establishing
shareholder accounts and providing certain information
and assistance with respect to the fund.
NET ASSET VALUE PURCHASES The stock, stock/bond and
bond funds may sell shares at net asset value to: (1)
current or retired directors, trustees, officers and
advisory board members of the funds managed by Capital
Research and Management Company, employees of
Washington Management Corporation, employees and
partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members of the
above persons, and trusts or plans primarily for such
persons; (2) current registered representatives,
retired registered representatives with respect to
accounts established while active, or full-time
employees (and their spouses, parents, and children) of
dealers who have sales agreements with American Funds
Distributors (or who clear transactions through such
dealers) and plans for such persons or the dealers; (3)
companies exchanging securities with the fund through a
merger, acquisition or exchange offer; (4) trustees or
other fiduciaries purchasing shares for certain
retirement plans of organizations with retirement plan
assets of $100 million or more; (5) insurance company
separate accounts; (6) accounts managed by subsidiaries
of The Capital Group Companies, Inc.; and (7) The
Capital Group Companies, Inc., its affiliated companies
and Washington Management Corporation. Shares are
offered at net asset value to these persons and
organizations due to anticipated economies in sales
effort and expense.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE include those by you, your spouse and your children
under the age of 21, if all parties are purchasing
You and your shares for their own account(s), which may include
immediate family purchases through employee benefit plan(s) such as an
may combine IRA, individual-type 403(b) plan or single-participant
investments to Keogh-type plan or by a business solely controlled by
reduce your costs. these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) for a diversified common
trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating
fund shares. Purchases made for nominee or street name
accounts (securities held in the name of an investment
dealer or another nominee such as a bank trust
department instead of the customer) may not be
aggregated with those made for
15
<PAGE>
- -------------------------------------------------------------------------------
other accounts and may not be aggregated with other
nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your invest-
ment may also be reduced by taking into account the
current value of your existing holdings in The American
Funds Group. Direct purchases of the money market funds
are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application and
the statement of additional information under "Purchase
of Shares--Statement of Intention.")
YOU MUST LET YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY KNOW IF YOU QUALIFY FOR A REDUCTION IN
YOUR SALES CHARGE USING ONE OR ANY COMBINATION OF THE
METHODS DESCRIBED ABOVE.
SHAREHOLDER AUTOMATIC INVESTMENT PLAN You may make regular monthly
SERVICES or quarterly investments through automatic charges to
your bank account. Once a plan is established, your ac-
The fund offers count will normally be charged by the 10th day of the
you a valuable month during which an investment is made (or by the
array of services 15th day of the month in the case of any retirement
designed to plan for which Capital Guardian Trust Company--another
increase the affiliate of The Capital Group Companies, Inc.--acts as
convenience and trustee or custodian).
flexibility of
your investment-- AUTOMATIC REINVESTMENT Dividends and capital gain dis-
services you can tributions are reinvested in additional shares at no
use to alter your sales charge unless you indicate otherwise on the
investment program account application. You also may elect to have divi-
as your needs and dends and/or capital gain distributions paid in cash by
circumstances informing the fund, American Funds Service Company or
change. your investment dealer.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of ad-
ditional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
16
<PAGE>
- -------------------------------------------------------------------------------
EXCHANGE PRIVILEGE You may exchange shares into other
funds in The American Funds Group. Exchange purchases
are subject to the minimum investment requirements of
the fund purchased and no sales charge generally
applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on
the fund being purchased, unless the money market fund
shares were acquired by an exchange from a fund having
a sales charge, or by reinvestment or cross-
reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American FundsLine(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for
which Capital Guardian Trust Company serves as trustee
may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simul-
taneously at the share prices next determined after the
exchange order is received. (See "Purchasing Shares--
Share Price.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES You may automatically exchange
shares (in amounts of $50 or more) among any of the
funds in The American Funds Group on any day (or pre-
ceding business day if the day falls on a non-business
day) of each month you designate. You must either meet
the minimum initial investment requirement for the re-
ceiving fund OR the originating fund's balance must be
at least $5,000 and the receiving fund's minimum must
be met within one year.
AUTOMATIC WITHDRAWALS You may make automatic
withdrawals of $50 or more as follows: five or more
times per year if you have an account of $10,000 or
more, or four or fewer times per year if you have an
account of $5,000 or more. Withdrawals are made on or
about the 15th day of each month you designate, and
checks will be sent within seven days. (See "Other
Important Things to Remember.") Additional investments
in a withdrawal account must not be less than one
year's scheduled withdrawals or $1,200, whichever is
greater. However, additional investments in a
withdrawal account may be inadvisable due to sales
charges and tax liabilities.
THESE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE
FUND TO BE PURCHASED MAY BE LEGALLY OFFERED AND MAY BE
TERMINATED OR MODIFIED AT ANY TIME UPON 60 DAYS'
WRITTEN NOTICE.
ACCOUNT STATEMENTS Your account is opened in accordance
with your registration instructions. Transactions in
the account, such as additional investments and
dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service
Company. Purchases through automatic investment plans
will be confirmed at least quarterly.
17
<PAGE>
- -------------------------------------------------------------------------------
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, redeem shares (up to $10,000 per fund, per
account each day), or exchange shares around the clock
with American FundsLine(R). To use this service, call
800/325-3590 from a TouchTone(TM) telephone.
Redemptions and exchanges through American FundsLine(R)
are subject to the conditions noted above and in
"Redeeming Shares--Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of
funds in The American Funds Group under "Purchasing
Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of
your Social Security number or other tax identification
number associated with your account) and account
number.
REDEEMING By writing to Send a letter of instruction
SHARES American specifying the name of the fund, the
Funds Service number of shares or dollar amount to
You may take money Company (at be sold, your name and account
out of your the number. You should also enclose any
account whenever appropriate share certificates you wish to
you please. address redeem. For redemptions over $50,000
indicated and for certain redemptions of
under "Fund $50,000 or less (see below), your
Organization signature must be guaranteed by a
and bank, savings association, credit
Management-- union, or member firm of a domestic
Transfer stock exchange or the National
Agent") Association of Securities Dealers,
Inc., that is an eligible guarantor
institution. You should verify with
the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required for redemption of shares
held in corporate, partnership or
fiduciary accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
By contacting If you redeem shares through your
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the
conditions
noted in this
section and
in "Telephone
Redemptions
and
Exchanges"
below)
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY
REDEMPTION OF $50,000 OR LESS PROVIDED THE REDEMPTION
CHECK IS MADE PAYABLE TO THE REGISTERED SHAREHOLDER(S)
AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE
ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST 10
DAYS.
18
<PAGE>
- -------------------------------------------------------------------------------
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine(R)), fax or
telegraph redemption and/or exchange options, you agree
to hold the fund, American Funds Service Company, any
of its affiliates or mutual funds managed by such
affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including
attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these
options. However, you may elect to opt out of these
options by writing American Funds Service Company (you
may reinstate them at any time also by writing American
Funds Service Company). If American Funds Service
Company does not employ reasonable procedures to
confirm that the instructions received from any person
with appropriate account information are genuine, the
fund may be liable for losses due to unauthorized or
fraudulent instructions. In the event that shareholders
are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made
in writing only.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions made
within twelve months of purchase on investments of $1
million or more and on any investment made with no
initial sales charge by any employer-sponsored 403(b)
plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee benefit
plans; for redemptions resulting from participant-
directed switches among investment options within a
participant-directed employer-sponsored retirement
plan; for distributions from 403(b) plans or IRAs due
to death, disability or attainment of age 59 1/2; for
tax-free returns of excess contributions to IRAs; for
redemptions through certain automatic withdrawals not
exceeding 10% of the amount that would otherwise be
subject to the charge; and for redemptions in
connection with loans made by qualified retirement
plans.
REINSTATEMENT PRIVILEGE You may reinvest proceeds from
a redemption or a dividend or capital gain distribution
without a sales charge (any contingent deferred sales
charge paid will be credited to your
19
<PAGE>
- -------------------------------------------------------------------------------
account) in any fund in The American Funds Group. Send
a written request and a check to American Funds Service
Company within 90 days after the date of the redemption
or distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same
fund within 30 days. If you redeem your shares within
90 days after purchase and the sales charge on the
purchase of other shares is waived under the
reinstatement privilege, the sales charge you
previously paid for the shares may not be taken into
account when you calculate your gain or loss on that
redemption.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
RETIREMENT You may invest in the funds through various retirement
PLANS plans including the following plans for which Capital
Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh- and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact
American Funds Distributors or your investment dealer.
To determine which retirement plan is appropriate for
you, please consult your tax adviser. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS INVESTMENTS FOR RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
20
<PAGE>
PROSPECTUS
for Eligible Retirement Plans
THE INCOME FUND OF AMERICA, INC.(R)
AN OPPORTUNITY FOR CURRENT INCOME
AND, SECONDARILY, GROWTH OF CAPITAL FROM A
DIVERSIFIED PORTFOLIO OF SECURITIES
INCLUDING STOCKS AND BONDS
OCTOBER 1, 1995
(amended March 1, 1996)
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
THE INCOME FUND OF AMERICA, INC.
Four Embarcadero Center
Suite 1800
San Francisco, CA 94111
The investment objective of the fund is to emphasize current income while
secondarily striving to attain capital growth. The fund believes that a
portfolio with relatively high current income can also generate growth of
capital. The fund strives to accomplish this objective by investing in a
broadly diversified portfolio of securities including stocks and bonds.
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND OFFERED WITHOUT A SALES
CHARGE TO ELIGIBLE RETIREMENT PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE
FUND TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF THE FUND AT THE
ADDRESS INDICATED ABOVE.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
You may obtain the statement of additional information dated October 1, 1995,
which contains the fund's financial statements, without charge, by writing to
the Secretary of the fund at the above address or telephoning 800/421-0180.
These requests will be honored within three business days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
RP 06-010-0396
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY OF EXPENSES
Average annual
expenses paid over a
10-year period would
be approximately $8
per year, assuming a
$1,000 investment and
a 5% annual return.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses.............................. 2
Financial Highlights............................. 3
Investment Objective and Policies................ 3
Certain Securities and Investment Techniques..... 4
Investment Results............................... 7
Dividends, Distributions and Taxes............... 7
Fund Organization and Management................. 8
Purchasing Shares................................ 10
Shareholder Services............................. 11
Redeeming Shares................................. 11
</TABLE>
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the fund with no sales
charge./1/ The fund also has no sales charge on reinvested dividends, deferred
sales charge, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees....................................................... 0.32%
12b-1 expenses........................................................ 0.23%
Other expenses (including audit, legal, shareholder services, transfer
agent and custodian expenses)........................................ 0.10%/2/
Total fund operating expenses......................................... 0.65%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative ex-
penses on a $1,000 investment, assuming a 5%
annual return./3/ $7 $21 $36 $81
</TABLE>
/1/ Retirement plans of organizations with $100 million or more in collective
retirement plan assets may purchase shares of the fund with no sales charge.
In addition, any defined contribution plan qualified under Section 401(a) of
the Internal Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at least $1 million in
shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares
at net asset value; however, a contingent deferred sales charge of 1%
applies on certain redemptions within 12 months following such purchases.
(See "Redeeming Shares--Contingent Deferred Sales Charge.")
/2/ These expenses may not exceed 0.25% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/3/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information for the ten years ended July
HIGHLIGHTS 31, 1995 has been derived from financial statements
(For a share which have been audited by Deloitte & Touche llp, inde-
outstanding pendent accountants. This information should be read in
throughout the conjunction with the financial statements and related
fiscal year) notes, which are included in the statement of addi-
tional information.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $13.59 $14.47 $13.94 $12.54 $12.11 $13.20 $11.50 $12.54 $12.11 $11.68
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income.. .85 .83 .85 .85 .86 .82 .90 .82 .82 .90
Net realized and
unrealized gain
(loss) on investments 1.29 (.53) .74 1.48 .53 (.67) 1.68 (.68) 1.08 1.21
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total income from in-
vestment operations. 2.14 .30 1.59 2.33 1.39 .15 2.58 .14 1.90 2.11
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Distributions from net
investment income..... (.75) (.83) (.84) (.85) (.89) (.87) (.88) (.80) (.88) (.88)
Distributions from net
realized gains........ (.06) (.35) (.22) (.08) (.07) (.37) -- (.38) (.59) (.80)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.. (.81) (1.18) (1.06) (.93) (.96) (1.24) (.88) (1.18) (1.47) (1.68)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $14.92 $13.59 $14.47 $13.94 $12.54 $12.11 $13.20 $11.50 $12.54 $12.11
======= ======= ====== ====== ====== ====== ====== ====== ====== ======
Total Return/1/......... 16.42% 1.98% 11.88% 19.16% 12.24% 1.12% 23.43% 1.71% 16.67% 19.87%
Ratios/Supplemental
Data:
Net Assets, end of
year (in millions).... $12,290 $10,537 $9,045 $5,121 $2,771 $2,110 $1,271 $ 925 $ 943 $ 546
Ratio of expenses to
average net assets.... .65% .63% .62% .66% .73% .67% .69% .55% .54% .55%
Ratio of net income to
average net assets.... 6.12% 5.92% 6.05% 6.40% 7.23% 7.36% 7.45% 7.14% 6.55% 7.32%
Portfolio turnover
rate.................. 26.26% 26.42% 29.18% 22.71% 23.35% 18.90% 34.38% 42.83% 38.73% 41.48%
</TABLE>
--------
/1/ Calculated with no sales charge.
INVESTMENT The fund's investment objective is to emphasize current
OBJECTIVE income while secondarily striving to attain capital
AND POLICIES growth. The fund believes that a portfolio with rela-
tively high current income can also generate growth of
The fund aims to capital.
provide you with
current income The portfolio of the fund is managed to earn current
while secondarily income on, and to anticipate long-term capital growth
striving for of, the portfolio as a whole rather than any individual
capital growth. security in it. The fund may invest in common and pre-
ferred stocks, straight debt securities (including gov-
ernment securities) or debt securities with equity con-
version or purchase rights, and cash and cash equiva-
lents. In addition, the fund may invest in various
mortgage-related securities including those issued by
the Government National Mortgage Association (GNMA),
the Federal National Mortgage Association (FNMA), and
the Federal Home Loan Mortgage Corporation (FHLMC), and
collateralized mortgage obligations (CMOs) and mort-
gage-backed bonds. The fund may also invest to a very
limited extent in inverse floating rate notes (a type
of derivative instrument). (See the statement of addi-
tional information for a description of cash equiva-
lents, mortgage-related securities and inverse floating
rate notes.) The mix of these securities is determined
on the basis of existing and anticipated conditions.
The relative percentages of each type of security in
the portfolio may be expected to fluctuate and at times
the fund may be invested solely in fixed-income securi-
ties or solely in equity securities. The fund may also
invest no more than 10% of its assets in equity securi-
ties of issuers which are not included in the Standard
& Poor's 500 Composite
3
<PAGE>
- -------------------------------------------------------------------------------
Index (a broad measure of the U.S. stock market) and
which are domiciled outside the U.S. Furthermore, the
fund may invest in fixed-income securities of issuers
domiciled outside the U.S. provided such fixed-income
securities are U.S. dollar-denominated. The fund will
maintain at least 65% of the value of its total assets
in income-producing securities under normal market con-
ditions.
The fund's straight debt securities may consist of
bonds that are rated, measured at the time of purchase,
as low as CC by Standard & Poor's Corporation or Ca by
Moody's Investors Service, Inc. (or unrated but consid-
ered of similar quality). However, securities rated BB
and Ba or below (or unrated but considered of similar
quality) must represent no more than 20% of the fund's
total assets. Securities rated BB and Ba or below (or
unrated but considered of similar quality) are commonly
referred to as "junk bonds" or "high-yield, high-risk"
bonds. The 20% limit shall not apply to debt securities
that have equity conversion or purchase rights.
During the previous fiscal year, the monthly average
percentage of the fund's net assets in fixed-income in-
vestments was 44%. The average monthly composition of
the fund's portfolio based on the higher of the Moody's
or S&P ratings for the fiscal year ended July 31, 1995
was as follows: Aaa/AAA-20.01%; Aa/AA-0.42%; A/A-1.91%;
Baa/BBB-6.09%; Ba/BB-5.29%; B/B-9.01%; and Caa/CCC-
0.76%.
The fund's investment restrictions (which are described
in the statement of additional information) and objec-
tive cannot be changed without shareholder approval.
All other investment practices may be changed by the
fund's board.
The fund's rate of portfolio turnover will depend pri-
marily on market conditions. The rate of portfolio
turnover will not be a limiting factor when changes are
appropriate.
Achievement of the fund's investment objective cannot,
of course, be assured due to the risk of capital loss
from fluctuating prices inherent in any investment in
securities.
CERTAIN RISKS OF INVESTING IN STOCKS AND BONDS Because the fund
SECURITIES AND invests in common stocks or securities convertible into
INVESTMENT common stocks, the fund is subject to stock market
TECHNIQUES risks. For example, the fund is subject to the possi-
bility that stock prices in general will decline over
Investing in short or even extended periods.
stocks and bonds
involves certain The fund also invests in fixed-income securities, in-
risks. cluding bonds, which have market values which tend to
vary inversely with the level of interest rates--when
interest rates rise, their values will tend to decline
and vice versa. Although under normal market conditions
longer term securities yield more than shorter term se-
curities of similar quality, they are subject to
greater price fluctuations. These fluctuations in the
value of the fund's investments will be reflected in
its net asset value per share. The values of high-
yield, high-risk securities may be subject to greater
fluctuations in value than are higher rated securities
because the values of high-yield, high-risk securities
tend to reflect short-term corporate and market devel-
opments and investor perceptions of the issuer's credit
quality to a greater extent. It may be more difficult
to dispose of, or determine the value of, high-yield,
high-risk securities. See the statement of additional
4
<PAGE>
- -------------------------------------------------------------------------------
information for a description of the ratings and for
more information about the risks of high-yield, high-
risk securities. High-yield, high-risk securities rated
CC or Ca generally are described by the rating agencies
as "speculative in a high degree; often in default or
[having] other marked shortcomings."
U.S. GOVERNMENT SECURITIES Securities guaranteed by the
U.S. Government include: (1) direct obligations of the
U.S. Treasury (such as Treasury bills, notes and bonds)
and (2) federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury.
Certain securities issued by U.S. Government instrumen-
talities and certain federal agencies are neither di-
rect obligations of, nor guaranteed by, the Treasury.
However, they generally involve federal sponsorship in
one way or another: some are backed by specific types
of collateral; some are supported by the issuer's right
to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase
certain obligations of the issuer; and others are sup-
ported only by the credit of the issuing government
agency or instrumentality.
WHEN-ISSUED SECURITIES, FIRM COMMITMENT AGREEMENTS AND
"ROLL" TRANSACTIONS The fund may purchase securities on
a delayed delivery or "when-issued" basis and enter
into firm commitment agreements (transactions whereby
the payment obligation and interest rate are fixed at
the time of the transaction but the settlement is
delayed). The fund as purchaser assumes the risk of any
decline in value of the security beginning on the date
of the agreement or purchase. As the fund's aggregate
commitments under these transactions increase, the
opportunity for leverage similarly increases.
The fund also may enter into "roll" transactions, which
consist of the sale of securities together with a com-
mitment (for which the fund typically receives a fee)
to purchase similar, but not identical, securities at a
later date.
PRIVATE PLACEMENTS Private placements may be either
purchased from another institutional investor that
originally acquired the securities in a private place-
ment or directly from the issuers of the securities.
Generally, securities acquired in private placements
are subject to contractual restrictions on resale and
may not be resold except pursuant to a registration
statement under the Securities Act of 1933 or in reli-
ance upon an exemption from the registration require-
ments under the Act, for example, private placements
sold pursuant to Rule 144A. Accordingly, any such obli-
gation will be deemed illiquid unless it has been spe-
cifically determined to be liquid under procedures
adopted by the fund's board of directors.
In determining whether these securities are liquid,
factors such as the frequency and volume of trading and
the commitment of dealers to make markets will be con-
sidered. Additionally, the liquidity of any particular
security will depend on such factors as the availabil-
ity of "qualified" institutional investors and the ex-
tent of investor interest in the security, which can
change from time to time.
RISKS OF INVESTING IN VARIOUS COUNTRIES The fund may
invest in non-U.S. issuers as described above. These
issuers may not be subject to
5
<PAGE>
- -------------------------------------------------------------------------------
uniform accounting, auditing and financial reporting
standards and practices or regulatory requirements com-
parable to those applicable to U.S. issuers. There may
also be less public information available about non-
U.S. issuers. Additionally, specific local political
and economic factors must be evaluated in making these
investments including trade balances and imbalances,
and related economic policies; expropriation or confis-
catory taxation; limitations on the removal of funds or
other assets; political or social instability; the di-
verse structure and liquidity of the various securities
markets; and nationalization policies of governments
around the world. However, investing outside the U.S.
can also reduce certain risks due to greater diversifi-
cation opportunities.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the fund's
objective and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the fund's portfolio. The
primary individual portfolio counselors for the fund
are listed below.
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
YEARS OF EXPERIENCE AS INVESTMENT PROFESSIONAL
PORTFOLIO COUNSELOR (APPROXIMATE)
(AND WITH CAPITAL
RESEARCH PROFESSIONAL, RESEARCH AND
PRIMARY TITLE(S) IF APPLICABLE) FOR MANAGEMENT
PORTFOLIO COUNSELORS THE INCOME FUND OF COMPANY OR
FOR THE INCOME FUND AMERICA, INC. ITS
OF AMERICA, INC. (APPROXIMATE) AFFILIATES TOTAL YEARS
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Stephen E. Bepler Senior Vice President of the fund. 11 years (in addition 23 years 29 years
Senior Vice President and Director, to 11 years as a
Capital Research Company* research professional
prior to becoming a
portfolio counselor for
the fund)
- ----------------------------------------------------------------------------------------------------------------------
Abner D. Goldstine Senior Vice President of the fund. 22 years 28 years 43 years
Senior Vice President and Director,
Capital Research and Management
Company
- ----------------------------------------------------------------------------------------------------------------------
Gregg E. Ireland Vice President, Capital Research and 6 years (in addition to 22 years 22 years
Management Company 5 years as a research
professional prior to
becoming a portfolio
counselor for the fund)
- ----------------------------------------------------------------------------------------------------------------------
Janet A. McKinley Executive Vice President of the fund. 2 years (in addition to 13 years 19 years
Senior Vice President, Capital Re- 8 years as a research
search professional prior to
Company* becoming a portfolio
counselor for the fund)
- ----------------------------------------------------------------------------------------------------------------------
George A. Miller President of the fund. Senior Vice 20 years 20 years 34 years
President and Director, Capital
Research and Management Company
- ----------------------------------------------------------------------------------------------------------------------
Dina Perry Vice President of the fund. 3 years 4 years 29 years
Vice President, Capital Research and
Management Company
- ----------------------------------------------------------------------------------------------------------------------
Richard T. Schotte Senior Vice President of the fund. 17 years 18 years 28 years
Senior Vice President, Capital
Research and Management Company
- ----------------------------------------------------------------------------------------------------------------------
John H. Smet Vice President of the fund. 3 years 12 years 13 years
Vice President, Capital
Research and Management Company
- ----------------------------------------------------------------------------------------------------------------------
* COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a
averaged a total yield and/or total return basis for various periods,
return (at no with or without sales charges. Results calculated
sales charge) of without a sales charge will be higher. Total returns
+13.61% a year assume the reinvestment of all dividends and capital
under Capital gain distributions.
Research and
Management As of June 30, 1995, the fund's yield for the past 30-
Company's day period was 5.69%, and total return over the past 12
management months and average annual total returns over the past
(December 1, 1973 five- and ten-year periods were +16.29%, +11.66% and
through June 30, +11.76%, respectively. These results were calculated in
1995). accordance with Securities and Exchange Commission
requirements at no sales charge. Of course, past
results are not an indication of future results.
Further information regarding the fund's investment
results is contained in the fund's annual report which
may be obtained without charge by writing to the
Secretary of the fund at the address indicated on the
cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS in March, June, September and December. Capital gains,
AND TAXES if any, are usually distributed in December. When a
dividend or capital gain is distributed, the net asset
Income value per share is reduced by the amount of the
distributions are payment.
usually made in
March, June, The terms of your plan will govern how your plan may
September and receive distributions from the fund. Generally,
December. periodic distributions from the fund to your plan are
reinvested in additional fund shares, although your
plan may permit fund distributions from net investment
income to be received by you in cash while reinvesting
capital gain distributions in additional shares or all
fund distributions to be received in cash. Unless you
select another option, all distributions will be
reinvested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. In any fiscal year in which the fund so
qualifies and distributes to shareholders all of its
net investment income and net capital gains, the fund
itself is relieved of federal income tax. The tax
treatment of redemptions from a retirement plan may
differ from redemptions from an ordinary shareholder
account.
Please see the statement of additional information and
your tax adviser for further information.
7
<PAGE>
- -------------------------------------------------------------------------------
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was
AND organized as a Delaware corporation in 1969 and
MANAGEMENT reorganized as a Maryland corporation in 1983. The
fund's board supervises fund operations and performs
The fund is a duties required by applicable state and federal law.
member of The Members of the board who are not employed by Capital
American Funds Research and Management Company or its affiliates are
Group, which is paid certain fees for services rendered to the fund as
managed by one of described in the statement of additional information.
the largest and They may elect to defer all or a portion of these fees
most experienced through a deferred compensation plan in effect for the
investment fund. Shareholders have one vote per share owned and,
advisers. 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. There will not usually be a shareholder meeting
in any year except, for example, when the election of
the board is required to be acted upon by shareholders
under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92621. Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rates of 0.24% on the first $1 billion of the
fund's net assets, 0.20% on net assets in excess of $1
billion but not exceeding $2 billion, 0.18% on net
assets in excess of $2 billion but not exceeding $3
billion, 0.165% on net assets in excess of $3 billion
but not exceeding $5 billion, 0.155% on net assets in
excess of $5 billion but not exceeding $8 billion, and
0.15% on net assets in excess of $8 billion, plus 2.25%
of the portion of the fund's gross investment income
for the preceding month. Assuming net assets of $12
billion and gross investment income levels of 3%, 4%,
5%, 6%, 7% and 8%, management fees would be 0.24%,
0.26%, 0.28%, 0.30%, 0.33% and 0.35%, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by
8
<PAGE>
- -------------------------------------------------------------------------------
the Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. In the over-the-counter
market, purchases and sales are transacted directly
with principal market-makers except in those
circumstances where it appears better prices and
executions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.25% of its average net assets
annually (all of which may be for service fees.)
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, 135 South State College Boulevard,
Brea, CA 92621, 8000 IH-10 West, San Antonio, TX 78230,
5300 Robin Hood Road, Norfolk, VA 23513 and 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240.
It was paid a fee of $7,211,000 for the fiscal year
ended July 31, 1995. Telephone conversations with
American Funds Service Company may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
9
<PAGE>
- -------------------------------------------------------------------------------
PURCHASING SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PURCHASE SHARES OF THE FUND THROUGH YOUR PLAN OR
LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT WITH YOUR EMPLOYER. Shares are sold to eligible
retirement plans at the net asset value per share next
determined after receipt of an order by the fund or
American Funds Service Company. Orders must be received
before the close of regular trading on the New York
Stock Exchange in order to receive that day's net asset
value. Plans of organizations with collective
retirement plan assets of $100 million or more may
purchase shares at net asset value. In addition, any
defined contribution plan qualified under Section
401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or
any other plan that invests at least $1 million in
shares of the fund (or in combination with shares of
other funds in The American Funds Group other than the
money market funds) may purchase shares at net asset
value; however, a contingent deferred sales charge of
1% is imposed on certain redemptions within one year of
such purchase. (See "Redeeming Shares--Contingent
Deferred Sales Charge.") Plans may also qualify to
purchase shares at net asset value by completing a
statement of intention to purchase $1 million in fund
shares subject to commission over a maximum of 13
consecutive months. Certain redemptions of such shares
may also be subject to a contingent deferred sales
charge as described above. (See the statement of
additional information.)
The minimum initial investment is $250, except that the
money market funds have a minimum of $1,000 for
individual retirement accounts (IRAs). Minimums are
reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds)
or to $25 for purchases by retirement plans through
payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds
Group.
American Funds Distributors, at its expense (from a
designated percentage of its income), will provide
additional promotional incentives to dealers. Currently
these incentives are limited to the top hundred dealers
who have sold shares of the fund or other funds in The
American Funds Group. The incentive payments will be
based on a pro rata share of a qualifying dealer's
sales.
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
annually in order to promote selling efforts and to
compensate them for providing certain services. (See
"Fund Organization and Management--Plan of
Distribution.") These services include processing
purchase and redemption transactions, establishing
shareholder accounts and providing certain information
and assistance with respect to the fund.
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Shares of the fund are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value after the order is
received by the fund or American Funds Service Company.
In the case of orders sent directly to the fund or
American Funds Service Company, an investment dealer
must be indicated. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The fund's net asset value per share is determined as
of the close of trading (currently 4:00 p.m., New York
time) on each day the New York Stock Exchange is open.
The current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share.
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on your plan, you may be able to exchange shares
automatically or cross-reinvest dividends in shares of
other funds. Contact your plan administrator/trustee
regarding how to use these services. Also, see the
fund's statement of additional information for a
description of these and other services that may be
available through your plan. These services are
available only in states where the fund to be purchased
may be legally offered and may be terminated or
modified at any time upon 60 days' written notice.
REDEEMING SHARES Subject to any restrictions imposed by your plan, you
can sell your shares through the plan any day the New
York Stock Exchange is open. For more information about
how to sell shares of the fund through your retirement
plan, including any charges that may be imposed by the
plan, please consult with your employer.
By Your plan administrator/trustee must
contacting send a letter of instruction
your plan specifying the name of the fund, the
administrator/ number of shares or dollar amount to
trustee be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners (i.e., trustees or
their legal representatives) must be
guaranteed by a bank, savings
association, credit union, or member
firm of a domestic stock exchange or
the National Association of
Securities Dealers, Inc., that is an
eligible guarantor institution. Your
plan administrator/trustee should
verify with the institution that it
is an eligible guarantor prior to
signing. Additional documentation may
be required to redeem shares from
certain accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
By Shares may also be redeemed through
contacting an investment dealer; however, you or
an your plan may be charged for this
investment service. SHARES HELD FOR YOU IN AN
dealer INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
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THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND ALL
REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and, subject to regulatory approval, on any
investment made with no initial sales charge by any
defined contribution plan qualified under Section
401(a) of the Internal Revenue Code including "401(k)"
plans with 200 or more eligible employees. The charge
is 1% of the lesser of the value of the shares redeemed
(exclusive of reinvested dividends and capital gain
distributions) or the total cost of such shares. Shares
held for the longest period are assumed to be redeemed
first for purposes of calculating this charge. The
charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee benefit
plans; for redemptions resulting from participant-
directed switches among investment options within a
401(k) plan; and for redemptions in connection with
loans made by qualified retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because the fund's
net asset value fluctuates, reflecting the market value
of the portfolio, the amount you receive for shares
redeemed may be more or less than the amount paid for
them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE FUND
TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF
THE FUND AT THE ADDRESS INDICATED ON THE FRONT.
12
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THE INCOME FUND OF AMERICA, INC.
March 1, 1996 Supplement to Prospectus
dated October 1, 1995
The third paragraph on page 3 is amended to read as follows:
The portfolio of the fund is managed to earn current income on, and to
anticipate long-term capital growth of, the portfolio as a whole rather than
any individual security in it. The fund may invest in common and preferred
stocks, straight debt securities (including government securities) or debt
securities with equity conversion or purchase rights, and cash and cash
equivalents. In addition, the fund may invest in various mortgage-related
securities including those issued by the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corporation (FHLMC), and collateralized obligations
(CMOs) and mortgage-backed bonds. The fund may also invest to a very limited
extent in inverse floating rate notes (a type of derivative instrument). (See
the statement of additional information for a description of cash equivalents,
mortgage-related securities and inverse floating rate notes.) The mix of these
securities is determined on the basis of existing and anticipated conditions.
The relative percentages of each type of security in the portfolio may be
expected to fluctuate and at times the fund may be invested solely in
fixed-income securities or solely in equity securities. The fund may also
invest no more than 10% of its assets in securities of issuers which are not
included in the Standard and Poor's 500 Composite Index (a broad measure of the
U.S. stock market) and which are domiciled outside the U.S. Furthermore, the
fund may invest in fixed-income securities of issuers domiciled outside the
U.S. provided such fixed-income securities are U.S. dollar-denominated. The
fund will maintain at least 65% of the value of its total assets in
income-producing securities under normal market conditions.
Please keep this supplement with your copy of the Prospectus.
