THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC OFFERING
AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH
TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.
/s/ Patrick F. Quan
Patrick F. Quan
Secretary
<PAGE>
Prospectus
for Eligible Retirement Plans
The Income
Fund of
America, Inc.
An opportunity for current income and, secondarily,
growth of capital from a portfolio of both stocks and bonds
DECEMBER 1, 1996
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
THE INCOME FUND OF AMERICA, INC.
One Market
Steuart Tower, Suite 1800
San Francisco, CA 94105
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 December 1, 1996,
which contains the fund's financial statements and has been filed with the
Securities and Exchange Commission, 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 COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
RP 06-010-1296
<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....................................................... 0.30%
12b-1 expenses........................................................ 0.23%/2/
Other expenses (including audit, legal, shareholder services,
transfer agent and custodian expenses).............................. 0.09%
Total fund operating expenses......................................... 0.62%
</TABLE>
Summary of Expenses continued on the following page.
<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/ $6 $20 $35 $77
</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, 1996 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
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Year........... $14.92 $13.59 $14.47 $13.94 $12.54 $12.11 $13.20 $11.50 $12.54 $12.11
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. .87 .85 .83 .85 .85 .86 .82 .90 .82 .82
Net realized and
unrealized gain
(loss) on investments 1.11 1.29 (.53) .74 1.48 .53 (.67) 1.68 (.68) 1.08
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total income from in-
vestment operations. 1.98 2.14 .30 1.59 2.33 1.39 .15 2.58 .14 1.90
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Distributions from net
investment income..... (.83) (.75) (.83) (.84) (.85) (.89) (.87) (.88) (.80) (.88)
Distributions from net
realized gains........ (.18) (.06) (.35) (.22) (.08) (.07) (.37) -- (.38) (.59)
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total distributions.. (1.01) (.81) (1.18) (1.06) (.93) (.96) (1.24) (.88) (1.18) (1.47)
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Year................... $15.89 $14.92 $13.59 $14.47 $13.94 $12.54 $12.11 $13.20 $11.50 $12.54
======= ======= ======= ====== ====== ====== ====== ====== ====== ======
Total Return/1/......... 13.46% 16.42% 1.98% 11.88% 19.16% 12.24% 1.12% 23.43% 1.71% 16.67%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, end of
year (in millions).... $14,459 $12,290 $10,537 $9,045 $5,121 $2,771 $2,110 $1,271 $ 925 $ 943
Ratio of expenses to
average net assets.... .62% .65% .63% .62% .66% .73% .67% .69% .55% .54%
Ratio of net income to
average net assets.... 5.56% 6.12% 5.92% 6.05% 6.40% 7.23% 7.36% 7.45% 7.14% 6.55%
Portfolio turnover
rate.................. 37.77% 26.26% 26.42% 29.18% 22.71% 23.35% 18.90% 34.38% 42.83% 38.73%
</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 invest
in securities of issuers domiciled outside the U.S.
Up to 10% of the fund's total assets may be invested
in non-U.S. equity and equity-type securities which are
not included in the Standard & Poor's 500 Composite
Index, and up to 10% may be invested in non-U.S. debt
securities payable in U.S. dollars.
3
<PAGE>
- -------------------------------------------------------------------------------
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 35%. 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, 1996
was as follows: Aaa/AAA-13.16%; Aa/AA-0.40%; A/A-2.00%;
Baa/BBB-3.94%; Ba/BB-5.96%; B/B-8.04%; and Caa/CCC-
0.88%.
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,
4
<PAGE>
- -------------------------------------------------------------------------------
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
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 TOTAL
OF AMERICA, INC. (APPROXIMATE) AFFILIATES YEARS
- -----------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
Stephen E. Bepler Senior Vice President of 12 years (in 24 years 30 years
the fund. addition to
Senior Vice President and 11 years as a
Director, Capital Research research professional
Company* prior to becoming a
portfolio counselor
for the fund)
- -----------------------------------------------------------------------------------------------------
Abner D. Goldstine Senior Vice President of 23 years 29 years 44 years
the fund.
Senior Vice President and
Director, Capital Research
and Management Company
- -----------------------------------------------------------------------------------------------------
Gregg E. Ireland Vice President, Capital 7 years (in 23 years 23 years
Research and Management addition to
Company 5 years as a research
professional prior to
becoming a portfolio
counselor for the
fund)
- -----------------------------------------------------------------------------------------------------
Janet A. McKinley President of the 3 years (in 14 years 20 years
fund. Senior Vice Presi- addition to
dent, Capital Research 8 years as a
Company* research professional
prior to becoming a
portfolio counselor
for the fund)
- -----------------------------------------------------------------------------------------------------
Dina Perry Vice President of the 4 years 5 years 29 years
fund.
Vice President, Capital
Research and Management
Company
- -----------------------------------------------------------------------------------------------------
Richard T. Schotte Senior Vice President of 18 years 19 years 29 years
the fund.
Senior Vice President,
Capital Research and
Management Company
- -----------------------------------------------------------------------------------------------------
John H. Smet Vice President of the 4 years 13 years 14 years
fund.
Vice President, Capital
Research and Management
Company
- -----------------------------------------------------------------------------------------------------
</TABLE>
*COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
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 total return, yield and/or distribution rate basis for
return (at no various periods, with or without sales charges. Results
sales charge) of calculated without a sales charge will be higher. Total
+13.76% a year returns assume the reinvestment of all dividends and
under Capital capital gains distributions. The fund's distribution
Research and rate is calculated by dividing the dividends paid by the
Management fund over the last 12 months by the sum of the month-end
Company's price and the capital gains paid over the last 12 months.
management The SEC yield reflects income the fund expects to earn
(December 1, 1973 based on its current portfolio of securities, while
through the distribution rate is based solely on the fund's
September 30, 1996). past dividends. Accordingly, the fund's SEC yield
and distribution rate may differ.
For the 30-day period ended September 30, 1996, the
fund's SEC yield was 5.14% and the distribution rate
was 5.16% with no sales charge. The fund's total
return over the past 12 months and average annual total
returns over the past five- and ten-year periods were
+14.05%, +12.76% and +11.86%, respectively. These results
were calculated in 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 pay-
distributions are ment.
usually made in
March, June, The terms of your plan will govern how your plan may
September and receive distributions from the fund. Generally, peri-
December. odic distributions from the fund to your plan are rein-
vested in additional fund shares, although your plan
may permit fund distributions from net investment in-
come 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 rein-
vested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a "regu-
lated 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 invest-
ment 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 re-
demptions 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 or-
AND ganized as a Delaware corporation in 1969 and reorga-
MANAGEMENT nized as a Maryland corporation in 1983. The fund's
board supervises fund operations and performs duties
The fund is a required by applicable state and federal law. Members
member of The of the board who are not employed by Capital Research
American Funds and Management Company or its affiliates are paid cer-
Group, which is tain fees for services rendered to the fund as de-
managed by one of scribed 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 mem-
ber 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 un-
der 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 Ange-
les, CA 90071, and at 135 South State College Boule-
vard, 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, but not exceeding
$13 billion, and 0.147% on net assets in excess of
$13 billion plus 2.25% of the portion of the fund's
gross investment income for the preceding month.
Assuming net assets of $14 billion and gross investment
income levels of 3%, 4%, 5%, 6%, 7% and 8%, management
fees would be 0.23%, 0.26%, 0.28%, 0.30%, 0.32% 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 mar-
ket, 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 lo-
cated at 333 South Hope Street, Los Angeles, CA 90071,
135 South State College Boulevard, Brea, CA 92821, 8000
IH-10 West, San Antonio, TX 78230, 8332 Woodfield
Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. Telephone conversa-
tions with American Funds Distributors may be recorded
or monitored for verification, recordkeeping and qual-
ity assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of distribu-
tion or "12b-1 Plan" under which it may finance activi-
ties 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 in-
curred 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 an-
nually (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 Ange-
les, CA 90071, 135 South State College Boulevard, Brea,
CA 92821, 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 $8,735,000 for the fiscal year ended July 31,
1996. Telephone conversations with American Funds Serv-
ice Company may be recorded or monitored for verifica-
tion, 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.
During 1997, American Funds Distributors will provide
compensation to the top one hundred dealers
who have sold shares of the fund or other funds in The
American Funds Group 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.
10
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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.
[LOGO OF This prospectus has been printed on
RECYCLED PAPER] 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.
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