SEC File Nos.
811-1880
2-33371
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 52 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 33 (X)
THE INCOME FUND OF AMERICA, INC.
(Exact name of registrant as specified in charter)
P.O. Box 7650, One Market, Steuart Tower, San Francisco, California 94120
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (415) 421-9360
Patrick F. Quan
Secretary
The Income Fund of America, Inc.
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Name and address of agent for service)
Copy to:
Robert E. Carlson, Esq.
Paul, Hastings, Janofsky & Walker, LLP
555 South Flower Street
Los Angeles, California 90071
Approximate date of proposed public offering:
[X] It is proposed that this filing will
become effective on March 15, 2000
pursuant to paragraph (a) of Rule 485.
<PAGE>
The Income Fund of America/(R)/
Prospectus
MARCH 15, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
---------------------------------------------------------
THE INCOME FUND OF AMERICA, INC.
One Market
Steuart Tower, Suite 1800
San Francisco, California 94105
<TABLE>
<CAPTION>
TICKER NEWSPAPER FUND
SYMBOL ABBREVIATION NUMBER
------------------------------------------------------------
<S> <C> <C> <C>
Class A AMECX Inco 06
Class B XXX XXX 206
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Fund 5
-------------------------------------------------------
Investment Objectives, Strategies and Risks 6
-------------------------------------------------------
Management and Organization 9
-------------------------------------------------------
Shareholder Information 11
-------------------------------------------------------
Choosing a Share Class 12
-------------------------------------------------------
Purchase and Exchange of Shares 13
-------------------------------------------------------
Sales Charges 14
-------------------------------------------------------
Sales Charge Reductions and Waivers 16
-------------------------------------------------------
Plans of Distribution 17
-------------------------------------------------------
How to Sell Shares 18
-------------------------------------------------------
Distributions and Taxes 19
-------------------------------------------------------
Financial Highlights 20
-------------------------------------------------------
Appendix 21
-------------------------------------------------------
</TABLE>
1
IFA-010-0300/MC
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
RISK/RETURN SUMMARY
The fund seeks to provide you with current income and secondarily, to make your
investment grow. It invests primarily in a broad range of income-producing
securities, including stocks and bonds. Generally, the fund will invest a
substantial portion of its assets in equity-type securities.
The fund is designed for investors seeking current income and capital
appreciation through a mix of investments that provide above-average price
stability. An investment in the fund is subject to risks, including the
possibility that the fund may decline in value in response to economic,
political or social events in the U.S. or abroad. The prices of equity
securities owned by the fund may be affected by events specifically involving
the companies issuing those securities. The values of debt securities may be
affected by changing interest rates and credit risk assessments. Although all
securities in the fund's portfolio may be adversely affected by currency
fluctuations or world political, social and economic instability, investments
outside the U.S. may be affected to a greater extent.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.
2
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
INVESTMENT RESULTS
The following information illustrates how the fund's results fluctuate. Past
results are not an indication of future results.
Calendar Year Total Returns for Class A Shares
(Results do not include a sales charge, if one were included, results would
be lower.)
[bar chart graphic]
1990 -3.03
1991 23.78
1992 12.03
1993 14.01
1994 -2.50
1995 29.08
1996 15.23
1997 22.16
1998 9.47
1999 x.xx
------------------------------------------------------------------------------
The fund's highest/lowest quarterly results during this time period were:
<TABLE>
<CAPTION>
<S> <C> <C>
Highest 9.62% (quarter ended March 31, 1991)
Lowest -8.16% (quarter ended September 30, 1990)
</TABLE>
3
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
For periods ended DECEMBER 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
Class A x.xx%/1/
-------------------------------------------------------------------
Class B N/A N/A N/A N/A/2/
-------------------------------------------------------------------
S&P 500/3/ x.xx% x.xx% x.xx% x.xx%
-------------------------------------------------------------------
Lehman Index/4/ x.xx% x.xx% x.xx% x.xx%
-------------------------------------------------------------------
</TABLE>
30-day yield: x.xx%
(For current yield information, please call American FundsLine/R/ at
1-800-325-3590)
1 The fund began investment operations for Class A shares on December 1, 1973
when Capital Research and Management Company became the fund's investment
adviser.
2 The fund began investment operations for Class B shares on March 15, 2000.
3 The Standard & Poor's 500 Composite Index is a broad-based measurement of
changes in stock market conditions based on the average performance of 500
widely held common stocks. This index is unmanaged and does not reflect sales
charges, commissions or expenses.
4 The Lehman Brothers Aggregate Bond Index represents investment grade debt.
This index is unmanaged and does not reflect sales charges, commissions or
expenses.
Unlike the bar chart on the previous page, this table reflects the fund's
investment results with the maximum initial or deferred sales charge deducted,
as required by Securities and Exchange Commission rules. Class A share results
are shown with the maximum initial sales charge of 5.75% deducted. Results
would be higher if they were calculated at net asset value. All fund results
reflect the reinvestment of dividend and capital gain distributions.
Class B shares are subject to a maximum deferred sales charge of 5.00% if
shares are redeemed within the first year of purchasing them. The deferred
sales charge is reduced for shares redeemed between two-six years after their
purchase. No results were available for Class B shares as of the date of this
prospectus.
4
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
FEES AND EXPENSES OF THE FUND
Fees and expenses that you may pay if you buy and hold shares of the FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases 5.75%/1/ 0.00%
(as a percentage of offering price)
--------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00% 0.00%
--------------------------------------------------------------------------
Maximum deferred sales charge 0.00%/2/ 5.00%/3/
--------------------------------------------------------------------------
Redemption or exchange fees 0.00% 0.00%
</TABLE>
1 Sales charges are reduced or eliminated for purchases of $25,000 or more.
2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases of $1 million or more made without a
sales charge.
3 Deferred sales charges are reduced after 12 months and eliminated after six
years.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets) CLASS A CLASS B/1/
-----------------------------------------------
<S> <C> <C>
Management Fees 0.28% 0.28%
Distribution and/or Service (12b-1) Fees 0.24%/2/ 1.00%/3/
Other Expenses 0.07% 0.07%
Total Annual Fund Operating Expenses 0.59% 1.35%
</TABLE>
1 Based on estimated amounts for the current fiscal year.
2 Class A 12b-1 expenses may not exceed 0.25% of the fund's average net assets
annually.
3 Class B 12b-1 expenses may not exceed 1.00% of the fund's average net assets
annually.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated and then redeem all
of your shares at the end of those periods. Class B is also shown assuming that
shares are not redeemed at the end of the period. The Example also assumes that
your investment has a 5% return each year and that the fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your cumulative expenses would be:
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $632 $753 $885 $1,270
-----------------------------------------------------------------------------
Class B - assuming redemption $537 $728 $839 $1,316*
Class B - assuming no redemption $137 $428 $739 $1,316*
</TABLE>
* Assumes shares convert to Class A shares after eight years.
5
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund's investment objectives are to provide you with current income while
secondarily striving for capital growth. Normally, the fund invests primarily
in income-producing securities. These include equity securities such as
dividend-paying common stocks and debt securities such as interest-paying
bonds. The fund may invest in securities of issuers domiciled outside the U.S.
Generally, at least 60% of the fund's assets will be invested in equity-type
securities. The fund may also invest up to 20% of its assets in lower quality,
higher yielding debt securities (rated Ba and BB or below).
The prices of equity securities held by the fund will decline in response to
certain events, including those directly involving the companies whose
securities are owned in the fund, adverse conditions affecting the general
economy, overall market declines, world political, social and economic
instability, and currency fluctuations. The values of most debt securities held
by the fund may be affected by changing interest rates, effective maturities
and credit ratings. For example, the values of bonds in the fund's portfolio
generally will decline when interest rates rise and vice versa. Debt securities
are also subject to credit risk which is the possibility that an issuer of a
debt security will fail to make timely payments of principal or interest and
the security will go into default. The values of lower quality and longer
maturity bonds will be subject to greater price fluctuations than higher
quality and shorter maturity bonds. The fund's investment adviser attempts to
reduce these risks through diversification of the portfolio and by doing a
credit analysis of each issuer as well as by monitoring economic and
legislative developments. Investments outside the U.S. may be affected by these
events to a greater extent and may also be affected by differing securities
regulations, higher transaction costs, and administrative difficulties such as
delays in clearing and settling portfolio transactions.
The fund may also hold cash or money market instruments. The size of the fund's
cash position will vary and will depend on various factors, including market
conditions and purchases and redemptions of fund shares. A larger cash position
could detract from the achievement of the fund's objectives, but it also
provides greater liquidity to meet redemptions or to make additional
investments, and it would reduce the fund's exposure in the event of a market
downturn.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of the investment adviser is to
seek undervalued securities that represent good long-term investment
opportunities. Securities may be sold when the investment adviser believes they
no longer represent good long-term value.
6
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
Since the fund's primary goal is to provide you with current income, the fund
also calculates its income generated and dividend rates over various periods
and compares them with the S&P 500.
The following information illustrates the income generated by Class A shares of
the fund compared with the income generated by the S&P 500:
For periods ended JULY 31, 1999:
<TABLE>
<CAPTION>
INCOME GENERATED ON A
$10,000 INVESTMENT/1/ THE FUND S&P 500
<S> <C> <C>
One Year $ 497 $ 147
------------------------------------------------------------
Five Years 3,316 1,641
------------------------------------------------------------
Ten Years 7,077 3,954
------------------------------------------------------------
Lifetime/2/ 38,573 24,881
------------------------------------------------------------
</TABLE>
1 Results are at net asset value and assume capital gain distributions are
reinvested and dividends are taken in cash.
2 For the period beginning DECEMBER 1, 1973 (when Capital Research and
Management Company became the fund's investment adviser).
THE FUND'S CLASS A DIVIDEND RATES COMPARED
WITH THE DIVIDEND RATES OF THE S&P 500/1/
[line chart]
<TABLE>
<CAPTION>
<S> <C> <C>
IFA S&P 500
7/31/89 6.67 3.04
7/31/90 7.07 3.31
7/31/91 7.09 3.11
7/31/92 6.05 2.89
7/31/93 6.19 2.79
7/31/94 6.06 2.80
7/31/95 5.55 2.41
7/31/96 5.19 2.28
7/31/97 4.74 1.61
7/31/98 4.32 1.43
7/31/99 4.86 1.24
-------------------------------------------------------
</TABLE>
/1/ The 12-month dividend rate is calculated by taking the total of
the trailing 12 months' dividends and dividing by the month-end net
asset value adjusted for capital gains. All numbers are calculated
by Lipper Analytical Services.
Past results are not an indication of future results.
7
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
The following chart illustrates the asset mix of THE fund's investment
portfolio as of the end of the fund's fiscal year, JULY 31, 1999.
[pie chart]
U.S. Equities 48.1%
Non-U.S. Equities 12.9%
U.S. Treasury & Federal Agency Obligations 5.6%
Other Fixed-Income Securities* 22.2%
Cash & Equivalents 11.2%
*Includes 4.9% in non-U.S. bonds denominated in U.S. dollars.
<TABLE>
<CAPTION>
* Includes 4.9% in non-U.S. bonds denominated in U.S. dollars.
PERCENT OF
Five Largest Industries in Equity Holdings NET ASSETS
------------------------------------------------------------------------------
<S> <C>
Banking 8.48%
------------------------------------------------------------------------------
Utilities: Electric & Gas 8.38
------------------------------------------------------------------------------
Energy Sources 7.52
------------------------------------------------------------------------------
Telecommunications 5.32
------------------------------------------------------------------------------
Forest Products & Paper 4.08
Ten Largest Equity Holdings
------------------------------------------------------------------------------
U S West 1.94%
------------------------------------------------------------------------------
First Union 1.90
------------------------------------------------------------------------------
Phillips Petroleum 1.54
------------------------------------------------------------------------------
Atlantic Richfield 1.39
------------------------------------------------------------------------------
J.C. Penney 1.29
------------------------------------------------------------------------------
Weyerhaeuser 1.24
------------------------------------------------------------------------------
Bank of America 1.11
------------------------------------------------------------------------------
Houston Industries 0.94
------------------------------------------------------------------------------
USX-Marathon 0.87
------------------------------------------------------------------------------
J.P. Morgan 0.85
Bond Holdings by Quality Category (does not include convertible
securities)
See the Appendix for a description of quality categories
------------------------------------------------------------------------------
U.S. Treasury and Agency 5.71%
------------------------------------------------------------------------------
AAA 1.71
------------------------------------------------------------------------------
AA 0.52
------------------------------------------------------------------------------
A 2.23
------------------------------------------------------------------------------
BBB 4.65
------------------------------------------------------------------------------
BB 3.67
------------------------------------------------------------------------------
B 8.18
------------------------------------------------------------------------------
CCC 1.12
------------------------------------------------------------------------------
CC 0.03
</TABLE>
Because the fund is actively managed, its holdings will change from time to
time.
8
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the FUND. The total management fee paid by the FUND, as a percentage
of average net assets, for the previous fiscal year is discussed earlier under
"Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into THE fund's code of ethics.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested, within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for THE INCOME FUND OF AMERICA, INC. are listed on the
following page.
9
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
AS AN INVESTMENT PROFESSIONAL
YEARS OF EXPERIENCE (INCLUDING THE LAST FIVE YEARS)
AS PORTFOLIO COUNSELOR -----------------------------------
PORTFOLIO COUNSELORS (AND RESEARCH PROFESSIONAL, WITH CAPITAL
FOR IF APPLICABLE) FOR RESEARCH AND
THE INCOME FUND THE INCOME FUND MANAGEMENT
OF AMERICA PRIMARY TITLE(S) OF AMERICA (APPROXIMATE) COMPANY
----------------------------------------------------------------------------------- OR AFFILIATES TOTAL YEARS
-----------------------------------
<S> <C> <C> <C> <C>
JANET A. President and Director of the 6 years (plus 8 years as a 18 years 24 years
MCKINLEY fund. DIRECTOR, CAPITAL research professional prior
RESEARCH AND MANAGEMENT to becoming a portfolio
COMPANY. SENIOR VICE counselor for the fund)
PRESIDENT, CAPITAL RESEARCH
COMPANY*
----------------------------------------------------------------------------------------------------------------------
STEPHEN E. Senior Vice President of the 15 years (plus 11 years as 27 years 34 years
BEPLER fund. SENIOR VICE PRESIDENT, a research professional
CAPITAL RESEARCH COMPANY* prior to becoming a
portfolio counselor for the
fund)
----------------------------------------------------------------------------------------------------------------------
ABNER D. Senior Vice President of the 26 years 33 years 48 years
GOLDSTINE fund. SENIOR VICE PRESIDENT
AND DIRECTOR, CAPITAL
RESEARCH AND MANAGEMENT
COMPANY
----------------------------------------------------------------------------------------------------------------------
DINA N. Senior Vice President of the 8 years 8 years 22 years
PERRY fund. SENIOR VICE PRESIDENT,
CAPITAL RESEARCH AND
MANAGEMENT COMPANY
----------------------------------------------------------------------------------------------------------------------
HILDA L. Vice President of the fund. 2 years (plus 3 years as a 5 years 13 years
APPLBAUM VICE PRESIDENT, CAPITAL research professional prior
RESEARCH COMPANY* to becoming a portfolio
counselor for the fund)
-----------------------------------
-----------------------------------------------------------------------------------
DAVID C. Vice President of the fund. 3 years 12 years 19 years
BARCLAY VICE PRESIDENT, CAPITAL
RESEARCH AND MANAGEMENT
COMPANY
----------------------------------------------------------------------------------------------------------------------
JOHN H. Vice President of the fund. 7 years 17 years 18 years
SMET VICE PRESIDENT, CAPITAL
RESEARCH AND MANAGEMENT
COMPANY
* Company affiliated with Capital Research and Management Company
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services may be terminated or modified at
any time upon 60 days' written notice. For your convenience, American Funds
Service Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
You may invest in the fund through various retirement plans. However, Class B
shares generally are not available to certain retirement plans (for example,
group retirement plans such as 401(k) plans, employer-sponsored 403(b) plans,
and money purchase pension and profit sharing plans). Additionally, some
retirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact American Funds Service
Company, your plan administrator/trustee or dealer.
11
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
CHOOSING A SHARE CLASS
The fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.
Factors you should consider in choosing a class of shares include:
- How long you expect to own the shares
- How much you intend to invest
- The expenses associated with owning shares of each class
- Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)
EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.
Differences between Class A and Class B shares include:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
<S> <S>
Initial sales charge of up to 5.75%. No initial sales charge
Sales charges are reduced for
purchases of $25,000 or more (see
"Sales Charges - Class A")
------------------------------------------------------------------------------
Distribution and service (12b-1) Distribution and service (12b-1) fees
fees of up to 0.25% annually of up to 1.00% annually
------------------------------------------------------------------------------
Higher dividends than Class B shares Lower dividends than Class A shares
due to lower annual expenses due to higher distribution fees and
other expenses
------------------------------------------------------------------------------
No contingent deferred sales charge A contingent deferred sales charge
(except on certain redemptions on applies if you sell shares within six
purchases of $1 million or more years of buying them. The charge
bought without an initial sales starts at 5% and declines thereafter
charge) until it reaches 0% after six years.
(see "Sales Charges - Class B")
------------------------------------------------------------------------------
No purchase maximum Maximum purchase of $100,000
------------------------------------------------------------------------------
Automatically convert to Class A
shares after eight years, reducing
future annual expenses
------------------------------------------------------------------------------
</TABLE>
12
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer
authorized to sell THE fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into shares of the same class of other funds in
The American Funds Group generally without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B shares, the length of
time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<S> <C>
To establish an account (including retirement plan accounts) $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
Purchase Maximum for Class B Shares $100,000
</TABLE>
SHARE PRICE
THE fund calculates its share price, also called net asset value, as of 4:00
p.m. New York time, which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value,
market
13
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
prices are used when available. If a market price for a particular security is
not available, THE fund will determine the appropriate price for the security.
Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of certain Class A and B shares may be subject to contingent
deferred sales charges.
---------------------------------------------------------
SALES CHARGES
CLASS A
The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced for larger purchases as indicated
below.
<TABLE>
<CAPTION> SALES CHARGE AS A
PERCENTAGE OF
-------------------- DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
-----------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%
-----------------------------------------------------------------------
$25,000 but less than $50,000 5.00% 5.26% 4.25%
-----------------------------------------------------------------------
$50,000 but less than $100,000 4.50% 4.71% 3.75%
-----------------------------------------------------------------------
$100,000 but less than $250,000 3.50% 3.63% 2.75%
-----------------------------------------------------------------------
$250,000 but less than $500,000 2.50% 2.56% 2.00%
-----------------------------------------------------------------------
$500,000 but less than $750,000 2.00% 2.04% 1.60%
-----------------------------------------------------------------------
$750,000 but less than $1 million 1.50% 1.52% 1.20%
-----------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF
REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined
contribution-type plans investing $1 million or more, or with 100 or more
eligible employees, and Individual Retirement Account rollovers involving
retirement plan assets invested in the American Funds may invest with no sales
charge and are not subject to a contingent deferred sales charge. Investments
made through certain qualified fee-based programs, and retirement plans,
endowments or foun-
14
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
dations with $50 million or more in assets may also be made with no sales
charge and are not subject to a contingent deferred sales charge. The fund may
pay a dealer concession of up to 1% under its Plan of Distribution on
investments made with no initial sales charge.
CLASS B
Class B shares are sold without any initial sales charge. However, a
contingent deferred sales charge may be applied to shares you sell within six
years of purchase, as shown in the table below.
<TABLE>
<CAPTION>
Contingent deferred sales charge
on shares sold within year as a % of shares being sold
---------------------------------------------------------------
<S> <S>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
Shares acquired through reinvestment of dividends or capital gain distributions
are not subect to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales
charge will be sold first and then shares that you have owned the longest.
CLASS B CONVERSION TO A SHARES
Class B shares automatically convert to Class A shares in the first month of
the eight-year anniversary of the purchase date. This will reduce future
annual expenses. For more information about the conversion of Class B shares,
including information about how shares acquired through reinvestment of
distributions are treated and certain circumstances under which Class B shares
may not convert to Class A shares, please see the statement of additional
information.
15
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your
Class B contingent deferred sales charge using one or any combination of the
methods described below and in the statement of additional information and
"Welcome to the Family."
REDUCING YOUR CLASS A SALES CHARGES
You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.
AGGREGATING ACCOUNTS
To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:
- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.
- solely controlled business accounts.
- single-participant retirement plans.
Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.
CONCURRENT PURCHASES
You may combine simultaneous purchases of Class A and/or B shares of two or
more American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies to qualify for a reduced
Class A sales charge. Direct purchases of money market funds are excluded.
RIGHTS OF ACCUMULATION
You may take into account the current value of your existing Class A and B
holdings in the American Funds, as well as individual holdings in various
American Legacy variable annuities or variable life insurance policies to
determine your Class A sales charge. Direct purchases of money market funds are
excluded.
STATEMENT OF INTENTION
You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
16
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
tend to make over a 13-month period to determine the applicable sales charge.
At your request purchases made during the previous 90 days may be included;
however, capital appreciation and reinvested dividends and capital gains do not
apply toward these combined purchases. A portion of your account may be held in
escrow to cover additional Class A sales charges which may be due if your total
investments over the 13-month period do not qualify for the applicable sales
charge reduction.
CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES
The contingent deferred sales charge on Class B shares may be waived in the
following cases:
- to receive payments through systematic withdrawal plans (up to 12% of the
value of your account);
- to receive certain distributions, such as required minimum distributions,
from retirement accounts; or
- for redemptions due to death or post-purchase disability of the
shareholder.
For more information, please consult your financial adviser, "Welcome to the
Family," and the statement of additional information.
---------------------------------------------------------
PLANS OF DISTRIBUTION
THE fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by THE fund's board of directors. The plans
provide for annual expenses of up to 0.25% for Class A shares and up to 1.00%
for Class B shares. Up to 0.25% of these payments are used to pay service fees
to qualified dealers for providing certain shareholder services. The remaining
0.75% expense for Class B shares is used for financing commissions paid to your
dealer. The 12b-1 fees paid by THE fund, as a percentage of average net assets,
for the previous fiscal year is indicated earlier under "Fees and Expenses of
the Fund." Since these fees are paid out of THE fund's assets or income on an
ongoing basis, over time they will increase the cost and reduce the return of
an investment. The higher fees for Class B shares may cost you more over time
than paying the initial sales charge for Class A shares.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.
17
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
- Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s).
- A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:
- Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day.
- Checks must be made payable to the registered shareholder.
- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), 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 liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American Funds Service Company employs reasonable procedures to confirm that
the instructions received from any person with appropriate account information
are
18
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
genuine. If reasonable procedures are not employed, THE fund may be liable for
losses due to unauthorized or fraudulent instructions.
---------------------------------------------------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
THE fund intends to distribute dividends to you, usually IN MARCH, JUNE,
SEPTEMBER AND DECEMBER. Capital gains, if any, are usually distributed IN
DECEMBER. When a dividend or capital gain is distributed, the net asset value
per share is reduced by the amount of the payment.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash. Most shareholders do not elect
to take capital gain distributions in cash because these distributions reduce
principal value.
TAXES ON DISTRIBUTIONS
Distributions you receive from the FUND may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation.
For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The FUND'S distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the FUND will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.
TAXES ON TRANSACTIONS
Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the FUND is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.
Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.
19
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand THE fund's
results for the past five years and is currently only shown for Class A shares.
When available, a similar table will be shown for Class B shares. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the FUND (assuming reinvestment of all dividends and
distributions). This information has been audited by DELOITTE & TOUCHE LLP,
whose report, along with THE fund's financial statements, is included in the
statement of additional information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JULY 31
------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, $18.25 $18.59 $15.89 $14.92 $13.59
Beginning of Year
------------------------------------------------------------------------------
Income From Investment
Operations:
Net investment income .88 .85 .86 .87 .85
Net gains or losses on
securities (both .45 1.11 3.55 1.11 1.29
realized and unrealized)
------------------------------------------------------------------------------
Total from investment 1.33 1.96 4.41 1.98 2.14
operations
------------------------------------------------------------------------------
Less Distributions:
Dividends (from net
investment income) (.88) (.82) (.90) (.83) (.75)
Distributions (from (1.19) (1.48) (.81) (.18) (.06)
capital gains)
------------------------------------------------------------------------------
Total distributions (2.07) (2.30) (1.71) (1.01) (.81)
------------------------------------------------------------------------------
Net Asset Value, $17.51 $18.25 $18.59 $15.89 $14.92
End of Year
------------------------------------------------------------------------------
Total return* 7.79% 11.32% 29.28% 13.46% 16.42%
------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year $23,012 $22,113 $18,814 $14,459 $12,290
(in millions)
------------------------------------------------------------------------------
Ratio of expenses to .59% .59% .61% .62% .65%
average net assets
------------------------------------------------------------------------------
Ratio of net income 4.99% 4.75% 5.09% 5.56% 6.12%
to average net assets
------------------------------------------------------------------------------
Portfolio turnover rate 44.35% 34.68% 40.92% 37.77% 26.26%
* Excludes maximum sales charge of 5.75%.
</TABLE>
20
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
APPENDIX
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C," according to quality
as described below.
"Aaa--Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large, or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such shares."
"Aa--High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A--Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"Baa--Medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well."
"Ba--Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B--Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small."
"Caa--Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"Ca--Speculative in a high degree; often in default or having other marked
shortcomings."
"C--Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
21
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
Moody's supplies numerical indicators, 1, 2 and 3 to rating categories. The
modifier 1 indicates that the obligation ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and 3 indicates
a ranking toward the lower end of that generic category.
Standard & Poor's Corporation rates the long-term debt securities issued by
various entities in categories ranging from "AAA" to "D," according to quality
as described below.
"AAA--Highest rating. Capacity to pay interest and repay principal is extremely
strong."
"AA--High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree."
"A--Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
"BBB--Regarded as having adequate capacity to pay interest and repay principal.
These bonds normally exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for debt in higher
rated categories."
"BB, B, CCC, CC, C--Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions."
"C1--Reserved for income bonds on which interest is being paid."
"D--In default and payment of interest and/or repayment of principal is in
arrears."
Standard & Poor's applies indicators "+", no character and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
22
THE INCOME FUND OF AMERICA / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext. 11
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FOR 24-HOUR INFORMATION
American FundsLine(R) American FundsLine OnLine(R)
800/325-3590 http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
---------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. If there is any
inconsistency or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.
---------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including financial statements,
investment results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent accountants' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODE OF ETHICS
The SAI contains more detailed information on all aspects of the fund,
including the fund's financial statements and is incorporated by reference into
this prospectus. The code of ethics describes the fund's personal investing
policy.
The fund's code of ethics and current SAI has been filed with the Securities
and Exchange Commission ("SEC"). These and other related materials about the
fund are available for review or to be copied at the SEC's Public Reference
Room in Washington, D.C. (1-800-SEC-0330) or on the SEC's Internet Web site at
http://www.sec.gov.
* * * * *
To request a free copy of any of the documents above:
<TABLE>
<CAPTION>
<S> <C> <C>
Call American Funds Write to the Secretary of the fund
Service Company or P.O. Box 7650San Francisco,
800/421-0180 ext. 1 California 94120
</TABLE>
Investment Company File No. 811-1880
Printed on recycled paper
<PAGE>
THE INCOME FUND OF AMERICA, INC.
Part B
Statement of Additional Information
March 15, 2000
This document is not a prospectus but should be read in conjunction with the
current prospectus of The Income Fund of America, Inc. (the "fund" or "IFA")
dated March 15, 2000. The prospectus may be obtained from your investment dealer
or financial planner or by writing to the fund at the following address:
The Income Fund of America, Inc.
Attention: Secretary
One Market Steuart Tower, Suite 1800
San Francisco, California 94105
(415) 421-9360
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page No.
- ---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 8
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 10
Fund Directors and Officers . . . . . . . . . . . . . . . . . . . . 11
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 18
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 22
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 26
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 29
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Shareholder Account Services and Privileges . . . . . . . . . . . . 32
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 35
General Information . . . . . . . . . . . . . . . . . . . . . . . . 36
Class A Share Investment Results and Related Statistics . . . . . . 37
Financial Statements
</TABLE>
The Income Fund of America -- Page 1
<PAGE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.
OBJECTIVE
. The fund will invest at least 65% of its assets in income producing
securities.
EQUITY SECURITIES
. The fund will generally invest at least 60% of its assets in equity
securities. However, at times the fund may be substantially invested in
equity or debt securities (i.e., more than 60%) or may be solely invested
in equity or debt securities (i.e., 100%).
DEBT SECURITIES
. The fund may invest up to 20% of its assets in straight debt securities
rated BB by Standard & Poor's Corporation (S&P) and Ba by Moody's
Investors Services, Inc. (Moody's) or below or unrated but determined to be
of equivalent quality. (The 20% limit shall not apply to debt securities
that have equity conversion or purchase rights.)
. The fund's high-yield, high-risk securities may be rated as low as Ca by
Moody's or CC by S&P or unrated but determined to be of equivalent quality.
. The fund may invest up to 11/2% of its assets in inverse floating rate
notes.
. The fund may invest up to 5% of its assets in reinsurance related notes and
bonds.
NON-U.S. SECURITIES
. The fund may invest up to 15% of its assets in equity securities of issuers
domiciled outside the U.S. and not included in the Standard & Poor's 500
Composite Index.
. The fund may invest up to 10% of its assets in debt securities of issuers
domiciled outside the U.S. (must be U.S. dollar denominated).
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."
EQUITY SECURITIES - Equity securities represent an ownership position in a
company. These securities may include common stocks and securities with equity
conversion or purchase rights. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The fund's results will be related to the overall markets
for these securities.
INVESTING IN SMALLER CAPITALIZATION STOCKS - The fund may invest in the stocks
of smaller companies (typically companies with market capitalizations of less
than $1.5 billion at the time of
The Income Fund of America -- Page 2
<PAGE>
purchase). The Investment Adviser believes that the issuers of smaller
capitalization stocks often provide attractive investment opportunities.
However, investing in smaller capitalization stocks can involve greater risk
than is customarily associated with investing in stocks of larger, more
established companies. For example, smaller companies often have limited product
lines, markets, or financial resources, may be dependent for management on one
or a few key persons, and can be more susceptible to losses. Also, their
securities may be thinly traded (and therefore have to be sold at a discount
from current prices or sold in small lots over an extended period of time), may
be followed by fewer investment research analysts, and may be subject to wider
price swings thus creating a greater chance of loss than securities of larger
capitalization companies.
DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality, and maturity. In general their prices decline when
interest rates rise and vice versa.
High-yield, high-risk bonds rated Ba or below by Standard & Poor's Corporation
and BB or below by Moody's Investors Services, Inc. (or unrated but considered
to be of equivalent quality) are described by the rating agencies as speculative
and involve greater risk of default or price changes due to changes in the
issuer's creditworthiness than higher rated bonds, or they may already be in
default. The market prices of these securities may fluctuate more than higher
quality securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, or to determine the value
of, high-yield, high-risk bonds.
Certain risk factors relating to "high-yield, high-risk bonds" are discussed
below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk
bonds can be sensitive to adverse economic changes and political and
corporate developments and may be less sensitive to interest rate changes.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would
adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain
additional financing. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices
and yields of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other bonds, may
contain redemption or call provisions. If an issuer exercises these
provisions in a declining interest rate market, the fund would have to
replace the security with a lower yielding security, resulting in a
decreased return for investors. If the issuer of a bond defaults on its
obligations to pay interest or principal or enters into bankruptcy
proceedings, the fund may incur losses or expenses in seeking recovery of
amounts owed to it.
LIQUIDITY AND VALUATION - There may be little trading in the secondary
market for particular bonds, which may affect adversely the fund's ability
to value accurately or dispose of such bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of high-yield, high-risk bonds,
especially in a thin market.
The Income Fund of America -- Page 3
<PAGE>
The Investment Adviser attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.
SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS - The fund may invest in
securities that have a combination of equity and debt characteristics such as
non-convertible preferred stocks and convertible securities. These securities
may at times resemble equity more than debt and vice versa. The risks of
convertible preferred stocks are similar to those of equity securities and they
often automatically convert into common stock. Non-convertible preferred stocks
with stated redemption rates are similar to debt in that they have a stated
dividend rate akin to the coupon of a bond or note even though they are often
classified as equity securities. The prices and yields of non-convertible
preferred stocks generally move with changes in interest rates and the issuer's
credit quality, similar to the factors affecting debt securities.
Bonds, convertible preferred stocks, and other securities may sometimes be
converted into common stock or other securities at a stated conversion ratio.
These securities prior to conversion pay a fixed rate of interest or a dividend.
Because convertible securities have both debt and equity characteristics, their
value varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the credit quality of
the issuer.
INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities, and corporations. The
principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted
principal value. For example, in a period of deflation, principal value will be
adjusted downward, reducing the interest payable.
Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.
REINSURANCE RELATED NOTES AND BONDS - The fund may invest in reinsurance related
notes and bonds. These instruments, which are typically issued by special
purpose reinsurance companies, transfer an element of insurance risk to the note
or bond holders. For example, the reinsurance company would not be required to
repay all or a portion of the principal value of the notes or bonds if losses
due to a catastrophic event under the policy (such as a major hurricane) exceed
certain dollar thresholds. Consequently, the fund may lose the entire amount of
its investment in such bonds or notes if such an event occurs and losses exceed
certain dollar thresholds. In this instance, investors would have no recourse
against the insurance company. These instruments may be issued with fixed or
variable interest rates and rated in a variety of credit quality categories by
the rating agencies.
INVERSE FLOATING RATE NOTES -- The fund may invest to a very limited extent (no
more than 1.5% of its assets) in inverse floating rate notes (a type of
derivative instrument). These notes have
The Income Fund of America -- Page 4
<PAGE>
rates that move in the opposite direction of prevailing interest rates. A
change in prevailing interest rates will often result in a greater change in the
instruments' interest rates. As a result, these instruments may have a greater
degree of volatility than other types of interest-bearing securities.
PASS-THROUGH SECURITIES - The fund may invest in various debt obligations backed
by a pool of mortgages or other assets including loans on single family
residences, home equity loans, mortgages on commercial buildings, credit card
receivables, and leases on airplanes or other equipment. Principal and interest
payments made on the underlying asset pools backing these obligations are
typically passed through to investors. Pass-through securities may have either
fixed or adjustable coupons. These securities include those discussed below.
"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities. The payment of interest and
principal on securities issued by U.S. government agencies is guaranteed by the
full faith and credit of the U.S. government (in the case of GNMA securities) or
the issuer (in the case of FNMA and FHLMC securities). However, the guarantees
do not apply to the market prices and yields of these securities, which vary
with changes in interest rates.
Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities
and the underlying mortgages are not guaranteed by government agencies. In
addition, these securities generally are structured with one or more types of
credit enhancement. Mortgage-backed securities generally permit borrowers to
prepay their underlying mortgages. Prepayments can alter the effective maturity
of these instruments.
"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages,
while privately issued CMOs may be backed by either government agency mortgages
or private mortgages. Payments of principal and interest are passed-through to
each bond at varying schedules resulting in bonds with different coupons,
effective maturities, and sensitivities to interest rates. In fact, some CMOs
may be structured in a way that when interest rates change the impact of
changing prepayment rates on these securities' effective maturities is
magnified.
"Commercial mortgage-backed securities" are backed by mortgages of commercial
property, such as hotels, office buildings, retail stores, hospitals, and other
commercial buildings. These securities may have a lower prepayment uncertainty
than other mortgage-related securities because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of
credit enhancement to protect against potential losses on the underlying
mortgage loans. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans, including the effects of local and other economic
conditions on real estate markets, the ability of tenants to make loan payments,
and the ability of a property to attract and retain tenants.
"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through
The Income Fund of America -- Page 5
<PAGE>
credit enhancements by a third party. The values of these securities are
sensitive to changes in the credit quality of the underlying collateral, the
credit strength of the credit enhancement, changes in interest rates, and at
times the financial condition of the issuer. Some asset-backed securities also
may receive prepayments which can change the securities' effective maturities.
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. For these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government, and
thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct 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 supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but are
not limited to, Farmers Home Administration, Federal Home Loan Bank, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee
Valley Authority, and Federal Farm Credit Bank System.
INVESTING IN VARIOUS COUNTRIES - Investing outside the U.S. involves special
risks, caused by, among other things: currency controls, fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; expropriation or confiscatory taxation; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of Capital Research
and Management Company, investing outside the U.S. also can reduce certain
portfolio risks due to greater diversification opportunities.
The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
The Income Fund of America -- Page 6
<PAGE>
entered into by the fund will involve the purchase or sale of one currency
against the U.S. dollar. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain which might result from an increase in
the value of the currency. The fund will not generally attempt to protect
against all potential changes in exchange rates. The fund will segregate liquid
assets which will be marked to market daily to meet its forward contract
commitments to the extent required by the Securities and Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
CASH AND CASH EQUIVALENTS - These securities include (i) commercial paper
(short-term notes up to 9 months in maturity issued by corporations or
governmental bodies), (ii) commercial bank obligations (e.g., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity)), (iii) savings
association and saving bank obligations (e.g., certificates of deposit issued by
savings banks or savings associations), (iv) securities of the U.S. Government,
its agencies or instrumentalities that mature, or may be redeemed, in one year
or less, and (v) corporate bonds and notes that mature, or that may be redeemed,
in one year or less.
RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures which have been adopted by the fund's board of directors,
taking into account factors such as the frequency and volume of trading, the
commitment of dealers to make markets and the availability of qualified
investors, all of which can change from time to time. The fund may incur certain
additional costs in disposing of illiquid securities.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When the fund agrees to sell such securities it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of the
fund's portfolio securities decline while the fund is in a leveraged position,
greater depreciation of its net assets would likely occur than were it not in
such a position. The fund will not borrow money to settle these transactions and
therefore, will liquidate other portfolio securities in advance of settlement if
necessary to generate additional cash to meet its obligations thereunder.
The Income Fund of America -- Page 7
<PAGE>
The fund may also enter into "roll" transactions which are the sale of
mortgage-backed or other securities together with a commitment to purchase
similar, but not identical securities at a later date. The fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations as of the time of the agreement. The fund intends to treat roll
transactions as two separate transactions: one involving the purchase of a
security and a separate transaction involving the sale of a security. Since the
fund does not intend to enter into roll transactions for financing purposes, it
may treat these transactions as not falling within the definition of "borrowing"
set forth in Section 2(a)(23) of the Investment Company Act of 1940 (the "1940
Act"). The fund will segregate liquid assets which will be marked to market
daily in an amount sufficient to meet its payment obligations in these
transactions.
* * * * * *
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved.
The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio were replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.
The fund may not:
1. Act as underwriter of securities issued by other persons.
2. Invest more than 10% of the value of its total assets in securities that
are illiquid.
3. Borrow money, except temporarily for extraordinary or emergency purposes,
in an amount not exceeding 5% of the value of the Fund's total assets at the
time of such borrowing.
The Income Fund of America -- Page 8
<PAGE>
4. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (this shall not prevent the Fund from investing
in securities or other instruments backed by real estate or securities of
companies engaged in the real estate business).
5. Purchase or deal in commodities or commodity contracts.
6. Lend any security or make any other loan if, as a result, more than 15% of
its total assets would be lent to third parties, but this limitation does not
apply to purchases of debt securities or to repurchase agreements.
7. Purchase securities of any company for the purpose of exercising control or
management.
8. Purchase any securities on "margin", except that it may obtain such
short-term credit as may be necessary for the clearance of purchases of
securities.
9. Sell or contract to sell any security which it does not own unless by
virtue of its ownership of other securities it has at the time of sale a right
to obtain securities, without payment of further consideration, equivalent in
kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions.
10. Purchase or sell puts, calls, straddles, or spreads, but this restriction
shall not prevent the purchase or sale of rights represented by warrants or
convertible securities.
11. Purchase any securities of any issuer, except the U.S. Government (or its
instrumentalities), if immediately after and as a result of such investment (1)
the market value of the securities of such other issuer shall exceed 5% of the
market value of the total assets of the fund, or (2) the fund shall own more
than 10% of the outstanding voting securities of such issuer, provided that this
restriction shall apply only as to 75% of the fund's total assets.
12. Purchase any securities (other than securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities) if immediately after and
as a result of such purchase 25% or more of the market value of the total assets
of the fund would be invested in securities of companies in any one industry.
For purposes of Investment Restriction #2, restricted securities are treated as
illiquid by the fund, with the exception of those securities that have been
determined to be liquid pursuant to procedures adopted by the fund's Board of
Directors. In addition, the fund may not invest more than 15% of the value of
its net assets in securities that are illiquid. Furthermore, the fund may not
issue senior securities.
NON-FUNDAMENTAL POLICIES - The following non-fundamental policies may be changed
without shareholder approval:
1. The Fund does not currently intend to lend portfolio securities.
2. The Fund may not invest in securities of other investment companies, except
as permitted by the Investment Company Act of 1940, as amended.
The Income Fund of America -- Page 9
<PAGE>
Notwithstanding non-fundamental Investment Restriction #2, the fund may invest
in securities of other investment companies if deemed advisable by its officers
in connection with the administration of a deferred compensation plan adopted by
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation on March 8, 1969 and reorganized as a Maryland
corporation on December 16, 1983.
All fund operations are supervised by the fund's Board of Directors which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in "Directors and Director Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.
The fund currently has two classes of shares -- Class A and Class B. The shares
of each class represent an interest in the same investment portfolio. Each
class has equal rights as to voting, redemption, dividends and liquidation,
except that each class bears different distribution expenses and may bear
different transfer agent fees and other expenses properly attributable to the
particular class as approved by the Board of Directors. Class A and Class B
shareholders have exclusive voting rights with respect to the rule 12b-1 Plans
adopted in connection with the distribution of shares. Shares of all classes of
the fund vote together on matters that affect all classes in substantially the
same manner. Each class may have separate voting rights on matters in which the
interests of one class are different from interests of another class. Each
class votes as a class on matters that affect that class alone.
The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority of the votes entitled to be cast, remove any
Director from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed Directors. The fund has
agreed, at the request of the staff of the Securities and Exchange Commission,
to apply the provisions of section 16(c) of the 1940 Act with respect to the
removal of Directors, as though the fund were a common-law trust. Accordingly,
the Directors of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any Directors when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.
The Income Fund of America -- Page 10
<PAGE>
FUND DIRECTORS AND OFFICERS
Directors and Director Compensation
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
FROM THE FUND
POSITION DURING FISCAL YEAR
WITH PRINCIPAL OCCUPATION(S) DURING ENDED
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS JULY 31, 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert A. Fox Director President and Chief Executive Officer, $25,500/4/
P.O. Box 457 Foster Farms, Inc.
1000 Davis Street
Livingston, CA 95334
Age: 62
- -----------------------------------------------------------------------------------------------------------
Roberta L. Hazard Director Consultant; Rear Admiral, United $ 24,000
1419 Audmar Drive States Navy (Retired)
McLean, VA 22101
Age: 65
- -----------------------------------------------------------------------------------------------------------
Leonade D. Jones Director Management consultant; former $34,583/4/
1536 Los Montes Treasurer, The Washington Post Company
Drive
Burlingame, CA 94010
Age: 52
- -----------------------------------------------------------------------------------------------------------
John G. McDonald Director The IBJ Professor of Finance, Graduate $32,900/4/
Stanford University School of Business, Stanford
Stanford, CA 94305 University
Age: 62
- -----------------------------------------------------------------------------------------------------------
+ Janet A. McKinley President and Director, Capital Research and None/5/
630 Fifth Avenue Director Management Company. Senior Vice
New York, NY 10111 President, Capital Research Company*
Age: 45
- -----------------------------------------------------------------------------------------------------------
James K. Peterson Director Managing Director, Oak Glen None/6/
5560 North Via Elena Consultancy, LLC; former Director of
Tucson, AZ Investment Management, IBM Retirement
85718-5510 Fund, IBM Corporation
Age: 58
- -----------------------------------------------------------------------------------------------------------
+ James W. Ratzlaff Director Senior Partner, The Capital Group None/5/
333 South Hope Partners L.P.
Street
Los Angeles, CA
90071
Age: 63
- -----------------------------------------------------------------------------------------------------------
Henry E. Riggs Director President, Keck Graduate Institute of $29,400/4/
535 Watson Drive Applied Life Sciences; former
Claremont, CA 91711 President and Professor of
Age: 65 Engineering, Harvey Mudd College
- -----------------------------------------------------------------------------------------------------------
+ Walter P. Stern Chairman of Vice Chairman, Capital Group None/5/
630 Fifth Avenue the Board International, Inc.; Chairman, Capital
New York, NY 10111 International, Inc.; Director,
Age: 71 Temple-Inland Inc. (forest products)
- -----------------------------------------------------------------------------------------------------------
Patricia K. Woolf Director Private investor; Lecturer, Department $ 31,900
506 Quaker Road of Molecular Biology, Princeton
Princeton, NJ 08540 University; Corporate Director
Age: 66
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/2/ FOR THE DIRECTOR
NAME, ADDRESS AND AGE YEAR ENDED JULY 31, 1999 SERVES/3/
- --------------------------------------------------------------------
<S> <C> <C>
Robert A. Fox $125,500/4/ 7
P.O. Box 457
1000 Davis Street
Livingston, CA 95334
Age: 62
- --------------------------------------------------------------------
Roberta L. Hazard $ 78,000 4
1419 Audmar Drive
McLean, VA 22101
Age: 65
- --------------------------------------------------------------------
Leonade D. Jones $138,000/4/ 6
1536 Los Montes
Drive
Burlingame, CA 94010
Age: 52
- --------------------------------------------------------------------
John G. McDonald $261,250/4/ 9
Stanford University
Stanford, CA 94305
Age: 62
- --------------------------------------------------------------------
+ Janet A. McKinley None/6/ 1
630 Fifth Avenue
New York, NY 10111
Age: 45
- --------------------------------------------------------------------
James K. Peterson None/5/ 2
5560 North Via Elena
Tucson, AZ
85718-5510
Age: 58
- --------------------------------------------------------------------
+ James W. Ratzlaff None/5/ 7
333 South Hope
Street
Los Angeles, CA
90071
Age: 63
- --------------------------------------------------------------------
Henry E. Riggs $104,450/4/ 4
535 Watson Drive
Claremont, CA 91711
Age: 65
- --------------------------------------------------------------------
+ Walter P. Stern None/5/ 3
630 Fifth Avenue
New York, NY 10111
Age: 71
- --------------------------------------------------------------------
Patricia K. Woolf $ 139,950 6
506 Quaker Road
Princeton, NJ 08540
Age: 66
- --------------------------------------------------------------------
</TABLE>
The Income Fund of America -- Page 11
<PAGE>
The Income Fund of America -- Page 12
<PAGE>
* Company affiliated with Capital Research and Management Company.
+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and
Management Company, or the parent company of the Investment Adviser, The
Capital Group Companies, Inc.
1 Amounts may be deferred by eligible Directors under a non-qualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Directors.
2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World
Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
The Income Fund of America, Inc., Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
Money Fund of America, U.S. Government Securities Fund and Washington Mutual
Investors Fund, Inc. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.
3 Includes funds managed by Capital Research and Management Company and
affiliates.
4 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) as of fiscal year
ended July 31, 1999 for participating Directors is as follows: Robert A. Fox
($259,212), Leonade D. Jones ($82,532), John G. McDonald ($149,715) and Henry
E. Riggs ($171,571). Amounts deferred and accumulated earnings thereon are not
funded and are general unsecured liabilities of the fund until paid to the
Directors.
5 Janet A. McKinley, James W. Ratzlaff, and Walter P. Stern are affiliated with
the Investment Adviser and, accordingly, receive no compensation from the
fund.
6 James K. Peterson was elected a Director of the fund on December 1, 1999 and
did not receive any compensation from the fund or any other fund managed by
Capital Research and Management Company or its affiliates for the fiscal year
ended July 31, 1999.
The Income Fund of America -- Page 13
<PAGE>
OFFICERS
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Walter P. Stern
(see above)
- -------------------------------------------------------------------------------
Janet A. McKinley
(see above)
- -------------------------------------------------------------------------------
Darcy B. Kopcho 46 Executive Vice Executive Vice President and
333 South Hope Street President Research Director, Capital
Los Angeles, CA 90071 Research Company
- -------------------------------------------------------------------------------
Stephen E. Bepler 57 Senior Vice Senior Vice President, Capital
630 Fifth Avenue President Research Company*
New York, NY 10111
- -------------------------------------------------------------------------------
Abner D. Goldstine 70 Senior Vice Senior Vice President and
11100 Santa Monica President Director, Capital Research and
Boulevard Management Company
Los Angeles, CA 90025
- -------------------------------------------------------------------------------
Paul G. Haaga, Jr. 51 Senior Vice Executive Vice President and
333 South Hope Street President Director, Capital Research and
Los Angeles, CA 90071 Management Company; Director,
American Funds Service Company;
Director, American Funds
Distributors, Inc.
- -------------------------------------------------------------------------------
Dina N. Perry 54 Senior Vice Senior Vice President, Capital
3000 K Street, N.W. President Research and Management Company
Washington, D.C. 20007
- -------------------------------------------------------------------------------
Hilda L. Applbaum 39 Vice President Vice President, Capital Research
P.O. Box 7650 Company
San Francisco, CA
94120
- -------------------------------------------------------------------------------
David C. Barclay 43 Vice President Vice President, Capital Research
11100 Santa Monica and Management Company
Boulevard
Los Angeles, CA 90025
- -------------------------------------------------------------------------------
John H. Smet 43 Vice President Vice President, Capital Research
11100 Santa Monica and Management Company
Boulevard
Los Angeles, CA 90025
- -------------------------------------------------------------------------------
Patrick F. Quan 41 Secretary Vice President - Fund Business
P.O. Box 7650 Management Group, Capital
San Francisco, CA Research and Management Company
94120
- -------------------------------------------------------------------------------
Anthony W. Hynes, Jr. 37 Treasurer Vice President - Fund Business
135 South State Management Group, Capital
College Blvd. Research and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
R. Marcia Gould 45 Assistant Vice President - Fund Business
135 South State Treasurer Management Group, Capital
College Boulevard Research and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
</TABLE>
* Company affiliated with Capital Research and Management Company.
The Income Fund of America -- Page 14
<PAGE>
All of the officers listed are officers, and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company serves
as Investment Adviser.
No compensation is paid by the fund to any officer or Director who is a
director, officer or employee of the Investment Adviser or affiliated companies.
The fund pays annual fees of $18,000 to Directors who are not affiliated with
the Investment Adviser, plus $1,000 for each Board of Directors meeting
attended, plus $500 for each meeting attended as a member of a committee of the
Board of Directors. In lieu of meeting attendance fees, members of the Proxy
Committee receive an annual retainer fee of $4,000 per annum from the fund if
they serve as a member of four proxy committees, or $5,500 if they serve as a
member of two proxy committees, meeting jointly.
No pension or retirement benefits are accrued as part of fund expenses. The
Directors may elect, on a voluntary basis, to defer all or a portion of their
fees through a deferred compensation plan in effect for the fund. The fund also
reimburses certain expenses of the Directors who are not affiliated with the
Investment Adviser. As of July 31, 1999 the officers and Directors of the fund
and their families, as a group, owned beneficially or of record less than 1% of
the outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains research
facilities in the U.S. and abroad (Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a staff
of professionals, many of whom have a number of years of investment experience.
The Investment Adviser is located at 333 South Hope Street, Los Angeles, CA
90071, and at 135 South State College Boulevard, Brea, CA 92821. The Investment
Adviser's research professionals travel several million miles a year, making
more than 5,000 research visits in more than 50 countries around the world. The
Investment Adviser believes that it is able to attract and retain quality
personnel. The Investment Adviser is a wholly owned subsidiary of The Capital
Group Companies, Inc.
The Investment Adviser is responsible for managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types throughout the world. These investors include privately
owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser will
continue in effect until December 31, 2000, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
The Income Fund of America -- Page 15
<PAGE>
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plan of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; costs of
stationery and forms prepared exclusively for the fund; and costs of assembling
and storing shareholder account data.
The management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income means gross income, computed without
taking account of gains or losses from sales of capital assets, but including
original issue discount as defined for federal income tax purposes. The Internal
Revenue Code in general defines original issue discount to mean the difference
between the issue price and the stated redemption price at maturity of certain
debt obligations. The holder of such indebtedness is in general required to
treat as ordinary income the proportionate part of the original issue discount
attributable to the period during which the holder held the indebtedness.
The management fee is based upon the annual rates of 0.25% on the first $500
million of the fund's net assets, 0.23% on net assets in excess of $500 million
but not exceeding $1 billion, 0.21% on net assets in excess of $1 billion but
not exceeding $1.5 billion, 0.19% on net assets in excess of $1.5 billion but
not exceeding $2.5 billion, 0.17% on net assets in excess of $2.5 billion but
not exceeding $4 billion, 0.16% on net assets in excess of $4 billion but not
exceeding $6.5 billion, 0.15% on net assets in excess of $6.5 billion but not
exceeding $10.5 billion, 0.145% on net assets in excess of $10.5 billion but not
exceeding $17 billion, 0.14% on net assets in excess of $17 billion but not
exceeding $27.5 billion, and 0.135% on net assets in excess of $27.5 billion,
plus 2.25% of the fund's gross investment income for the preceding month.
Assuming net assets of $23 billion and gross investment income levels of 3%, 4%,
5%, 6%, 7% and 8%, management fees would be 0.22%, 0.24%, 0.27%, 0.28%, 0.31%
and 0.34% of net assets, respectively. In connection with the approval of the
Agreement by the fund's Board of Directors, the Investment Adviser has agreed to
waive any fees to the extent they would exceed those payable under the rate
structure contained in its previous agreement. The fee structure referenced
above is lower than that in the previous agreement except in the event that the
fund's net assets were to fall below $8 billion when fees are equal to, or
higher than, that in the previous agreement.
The Agreement provides for a management fee reduction to the extent that the
annual ordinary operating expenses of the fund's Class A shares exceed 1-1/2% of
the first $30 million of the net assets of the fund and 1% of the net assets in
excess thereof. Expenses which are not subject to this limitation are interest,
taxes, and extraordinary expenses. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. To the extent the fund's management fee must be waived due to Class
A share expense ratios exceeding the above limit, management fees will be
reduced similarly for all classes of shares of the fund or other Class A fees
will be waived in lieu of management fees.
The Income Fund of America -- Page 16
<PAGE>
For the fiscal year ended July 31, 1999, the Investment Adviser received
$35,197,000 for the basic management fee (based on a percentage of the net
assets of the fund as expressed above) plus $28,192,000 (based on a percentage
of the fund's gross income as expressed above), for a total fee of $63,389,000.
For the fiscal years ended 1998 and 1997, management fees paid by the fund
amounted to $57,649,000 and $47,820,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted Plans of
Distribution (the Plans), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plans (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of Class A shares during the fiscal year ended
July 31, 1999 amounted to $12,692,000 after allowance of $60,189,000 to dealers.
During the fiscal years ended 1998 and 1997 the Principal Underwriter retained
$17,111,000 and $10,140,000, respectively after an allowance of $82,972,000 and
$49,612,000 to dealers, respectively.
As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have been approved by the full Board of
Directors and separately by a majority of the directors who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. The officers
and directors who are "interested persons" of the fund may be considered to have
a direct or indirect financial interest in the operation of the Plans due to
present or past affiliations with the Investment Adviser and related companies.
Potential benefits of the Plans to the fund include shareholder services,
savings to the fund in transfer agency costs, savings to the fund in advisory
fees and other expenses, benefits to the investment process from growth or
stability of assets and maintenance of a financially healthy management
organization. The selection and nomination of directors who are not "interested
persons" of the fund are committed to the discretion of the directors who are
not "interested persons" during the existence of the Plans. The Plans are
reviewed quarterly and must be renewed annually by the Board of Directors.
Under the Plans the fund may expend up to 0.25% of its net assets annually for
Class A shares and up to 1.00% of its net assets annually for Class B shares to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Directors has approved the category of
expenses for which payment is being made. For Class A shares these include up to
0.25% in service fees for qualified dealers and dealer commissions and
wholesaler compensation on sales of shares exceeding $1 million purchased
without a sales charge (including purchases by employer-sponsored defined
contribution-type retirement plans investing $1 million or more or with 100 or
more eligible employees, rollover IRA accounts as described in "Individual
Retirement Account (IRA) Rollovers" below, and retirement plans, endowments or
foundations with $50 million or more in assets). For Class B shares these
include 0.25% in service fees for qualified dealers and 0.75% in payments to the
Principal Underwriter for financing commissions paid to qualified dealers
selling Class B shares.
Commissions on sales of Class A shares exceeding $1 million (including purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under
The Income Fund of America -- Page 17
<PAGE>
Section 401(a) of the Internal Revenue Code, including any "401(k)" plan with
100 or more eligible employees) in excess of the Class A Plan limitation not
reimbursed during the most recent fiscal quarter are recoverable for five
quarters, provided that such commissions do not exceed the annual expense limit.
After five quarters, commissions are not recoverable.
During the fiscal year ended July 31, 1999, the fund paid or accrued $52,738,000
for compensation to dealers or the Principal Underwriter under the Plan for
Class A shares.
OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS - The fund intends to follow the practice of distributing
substantially all of its investment company taxable income which includes any
excess of net realized short-term gains over net realized long-term capital
losses. Additional distributions may be made, if necessary. The fund also
intends to follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However,
the fund may retain all or part of such gain for reinvestment, after paying the
related federal taxes for which shareholders may then be able to claim a credit
against their federal tax liability. If the fund does not distribute the amount
of capital gain and/or net investment income required to be distributed by an
excise tax provision of the Code, the fund may be subject to that excise tax. In
certain circumstances, the fund may determine that it is in the interest of
shareholders to distribute less than the required amount. In this case, the fund
will pay any income or excise taxes due.
Dividends will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other American
Funds, as provided in the prospectus.
TAXES - The fund intends to elect to be treated as a regulated investment
company under Subchapter M of the Code. A regulated investment company
qualifying under Subchapter M of the Code is required to distribute to its
shareholders at least 90% of its investment company taxable income (including
the excess of net short-term capital gain over net long-term capital losses) and
generally is not subject to federal income tax to the extent that it distributes
annually 100% of its investment company taxable income and net realized capital
gains in the manner required under the Code. The fund intends to distribute
annually all of its investment company taxable income and net realized capital
gains and therefore does not expect to pay federal income tax, although in
certain circumstances the fund may determine that it is in the interest of
shareholders to distribute less than that amount.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October
The Income Fund of America -- Page 18
<PAGE>
31 were the regulated investment company's taxable year), and (iii) the sum of
any untaxed, undistributed net investment income and net capital gains of the
regulated investment company for prior periods. The term "distributed amount"
generally means the sum of (i) amounts actually distributed by the fund from its
current year's ordinary income and capital gain net income and (ii) any amount
on which the fund pays income tax during the periods described above. The fund
intends to distribute net investment income and net capital gains so as to
minimize or avoid the excise tax liability.
Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking into
account any capital loss carry-forward of the fund.
If any net long-term capital gains in excess of net short-term capital losses
are retained by the fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.
Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable as described above, whether
received in shares or in cash. Shareholders electing to receive distributions in
the form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share on
the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another American
Fund, may result in tax consequences (gain or loss) to the shareholder and must
also be reported on the shareholder's federal income tax return.
The Income Fund of America -- Page 19
<PAGE>
Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of the
fund's gross income, a portion of the income distributions of the fund will be
eligible for the deduction for dividends received by corporations. Shareholders
will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days.
Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.
A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the fund which must
be distributed to shareholders in order to maintain the qualification of the
fund as a regulated investment company and to avoid federal income tax at the
level of the fund. Shareholders will be subject to income tax on such original
issue discount, whether or not they elect to receive their distributions in
cash.
The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt U.S. shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year fund shareholders will
receive a statement of the federal income tax status of all distributions.
The Income Fund of America -- Page 20
<PAGE>
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on dividend income received by him or her.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
The Income Fund of America -- Page 21
<PAGE>
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
See "Investment $50 minimum (except where a
Purchase Minimums" for lower minimum is noted under
initial investment "Investment Purchase
minimums. Minimums").
- -------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
- -------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
- -------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an 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.
- -------------------------------------------------------------------------------
</TABLE>
PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250. The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax--
The Income Fund of America -- Page 22
<PAGE>
Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and
the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt
Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. 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).
PURCHASE MAXIMUM FOR CLASS B SHARES -- the maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.
FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):
<TABLE>
<CAPTION>
FUND FUND
NUMBER NUMBER
FUND CLASS A CLASS B
---- ------- -------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . 02 202
American Balanced Fund/(R)/ . . . . . . . . . . . . . . 11 211
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . 03 203
Capital Income Builder/(R)/ . . . . . . . . . . . . . . 12 212
Capital World Growth and Income Fund/SM/ . . . . . . . 33 233
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . 16 216
Fundamental Investors/SM/ . . . . . . . . . . . . . . . 10 210
The Growth Fund of America/(R)/ . . . . . . . . . . . . 05 205
The Income Fund of America/(R)/ . . . . . . . . . . . . 06 206
The Investment Company of America/(R)/ . . . . . . . . 04 204
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . 14 214
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . 07 207
New World Fund/SM/ . . . . . . . . . . . . . . . . . . 36 236
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . 35 235
Washington Mutual Investors Fund/SM/ . . . . . . . . . 01 201
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . 40 240
American High-Income Trust/SM/ . . . . . . . . . . . . 21 221
The Bond Fund of America/SM/ . . . . . . . . . . . . . 08 208
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . 31 231
Intermediate Bond Fund of America/SM/ . . . . . . . . . 23 223
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . 43 243
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . 19 219
The Tax-Exempt Fund of California/(R)/* . . . . . . . . 20 220
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . 24 224
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . 25 225
U.S. Government Securities Fund/SM/ . . . . . . . . . . 22 222
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . 09 209
The Tax-Exempt Money Fund of America/SM/ . . . . . . . 39 N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . 49 N/A
___________
*Available only in certain states.
</TABLE>
The Income Fund of America -- Page 23
<PAGE>
SALES CHARGES
CLASS A SALES CHARGES -- The sales charges you pay when purchasing Class A
shares of 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 "Fund Numbers" for a listing of the funds.)
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE PRICE
- ------------------------------------------ -------- ----- -----
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000 . . . . . . . . . 6.10% 5.75% 5.00%
$25,000 but less than $50,000 . . . 5.26 5.00 4.25
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $100,000 . . . . . . . . 3.90 3.75 3.00
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 $750,000 . 2.04 2.00 1.60
$750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more . . . . . . . . . . none none (see below)
- -----------------------------------------------------------------------------
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF
PURCHASE. Employer-sponsored defined contribution-type plans investing $1
million or more, or with 100 or more eligible employees, and Individual
Retirement Account rollovers from retirement plan assets invested in the
American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by investors in certain qualified fee-based programs,
and retirement plans, endowments or foundations with $50 million or more in
assets may also be made with no sales charge and are
The Income Fund of America -- Page 24
<PAGE>
not subject to a CDSC. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments made with no initial sales charge.
In addition, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:
(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to the funds managed by Capital
Research and Management Company, 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 the
Principal Underwriter (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 $50 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.
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES -- A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. 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 the longest
are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC
may be waived in certain circumstances. See "CDSC Waivers for Class A Shares"
below.
DEALER COMMISSIONS ON CLASS A SHARES - The following commissions (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 defined contribution plan
investing $1 million or more, or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with collective assets of $50
million or more: 1.00% on amounts of $1 million to $4 million, 0.50% on amounts
over $4 million to $10 million, and 0.25% on amounts over $10 million.
The Income Fund of America -- Page 25
<PAGE>
CLASS B SHARES
Class B shares are sold without any initial sales charge. However, a CDSC may
be applied to shares you sell within six years of purchase, as shown in the
table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
------------------------------------------------------------------------------
<S> <C>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances.
See "CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first and then shares that you have owned the
longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO CERTAIN
RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K) PLANS,
EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT SHARING
PLANS.
CONVERSION OF CLASS B SHARES TO CLASS A SHARES -- Class B shares automatically
convert to Class A shares on the first Friday of the month of the eight-year
anniversary of the purchase date (if the first Friday is not a business day,
shares will automatically convert on the next Friday of the month). The
conversion of Class B shares to Class A shares after eight years is subject to
the continuing availability of a private letter ruling from the Internal Revenue
Service, or an opinion of counsel or tax adviser, to the effect that the
conversion of Class B shares is not subject to federal income tax. If such
private letter ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee; HOWEVER, SUCH AN EXCHANGE COULD CONSTITUTE A TAXABLE EVENT FOR
YOU, AND ABSENT SUCH AN EXCHANGE, CLASS B SHARES WOULD CONTINUE TO BE SUBJECT TO
HIGHER EXPENSES FOR LONGER THAN EIGHT YEARS.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you qualify for a reduction in your sales charge
using one or any combination of the methods described below.
The Income Fund of America -- Page 26
<PAGE>
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. This includes
purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to utilize a Statement in order to qualify for a reduced sales
charge, shares equal to 5% of the dollar amount specified in the Statement
will be held in escrow in the shareholder's account out of the initial
purchase (or subsequent purchases, if necessary) by the Transfer Agent. All
dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the
sales charge which would have been paid if the total of such purchases had
been made at a single time. If the difference is not paid by the close of
the period, the appropriate number of shares held in escrow will be
redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for
the balance still outstanding. The Statement may be revised upward at any
time during the 13-month period, and such a revision will be treated as a
new Statement, except that the 13-month period during which the purchase
must be made will remain unchanged. Existing holdings eligible for rights
of accumulation (see below), as well as purchases of Class B shares, and
any individual investments in American Legacy variable annuities and
variable life insurance policies (American Legacy, American Legacy II and
American Legacy III variable annuities, American Legacy Life, American
Legacy Variable Life, and American Legacy Estate Builder) may be credited
toward satisfying the Statement. During the Statement period reinvested
dividends and capital gain distributions, investments in money market
funds, and investments made under a right of reinstatement will not be
credited toward satisfying the Statement.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period, and
any individual investments in American Legacy variable annuities and
variable life insurance policies are added to the figure determined above.
The sum is the Statement amount and applicable breakpoint level. On the
first investment and all other investments made pursuant to the Statement,
a sales charge will be assessed according to the sales charge breakpoint
thus determined.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:
The Income Fund of America -- Page 27
<PAGE>
. employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;
. business accounts solely controlled by these individuals (for example,
the individuals own the entire business);
. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.
Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:
. for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;
. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or
. 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 other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.
CONCURRENT PURCHASES - You may combine purchases of Class A and/or B shares
of two or more funds in The American Funds Group, as well as individual
holdings in American Legacy variable annuities and variable life insurance
policies. Direct purchases of the money market funds are excluded. Shares
of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHTS OF ACCUMULATION - You may take into account the current value of
your existing Class A and B holdings in The American Funds Group, as well
as your holdings in Endowments (shares of which may be owned only by
tax-exempt organizations), to determine your sales charge on investments in
accounts eligible to be aggregated, or when making a gift to an individual
or charity. When determining your sales charge, you may also take into
account the value of your individual holdings, as of the end of the week
prior to your investment, in various American Legacy variable annuities and
variable life insurance policies. Direct purchases of the money market
funds are excluded.
CDSC WAIVERS FOR CLASS A SHARES -- Any CDSC on Class A shares may be waived in
the following cases:
(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).
The Income Fund of America -- Page 28
<PAGE>
(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.
(3) Tax-free returns of excess contributions to IRAs.
(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% of the net asset value of the account
each year.
CDSC WAIVERS FOR CLASS B SHARES -- Any CDSC on Class B shares may be waived in
the following cases:
(1) Systematic withdrawal plans (SWPs) - investors who set up a SWP (see
"Automatic Withdrawals" below) may withdraw up to 12% of the net asset value of
their account each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions) will be
redeemed first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the lowest CDSC
will be redeemed next until the 12% limit is reached.
The 12% limit is calculated on a pro rata basis at the time the first payment is
made and is recalculated thereafter on a pro rata basis at the time of each SWP
payment. Accordingly, shareholders who choose a SWP based on a percentage of
the net asset value of their account, may receive up to 12% without incurring a
CDSC. However, shareholders who choose a specific dollar amount (for example,
$100 per month from a fund that pays income distributions monthly) for their SWP
payment, should be aware that the amount of that payment not subject to a CDSC
may vary over time depending on the net asset value of their account. For
example, for a shareholder wishing to take a SWP of $100 per month, if the net
asset value of the account is $10,000 at the time of payment the shareholder
will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly
payments). However, if at the time of the next payment the net asset value of
the account has fallen to $9,400 the shareholder will receive $94 free of any
CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest
applicable CDSC. This privilege may be revised or terminated at any time.
(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.
(3) Distributions due to death or post-purchase disability of a shareholder.
INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS
Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below) through
an IRA rollover plan. All such rollover investments shall be subject to the
terms and conditions for Class A and B shares contained in the fund's current
prospectus and statement of additional information. In the case of an IRA
rollover involving plan assets invested in the American Funds, the assets may
only be invested in Class A shares of the American Funds. Such investments shall
be at net asset value and will not be subject to a contingent deferred sales
charge. Dealers who initiate and are responsible for such investments will be
compensated pursuant to the schedule applicable to investments of $1 million or
more (see "Dealer Commissions on Class A Shares" above).
The Income Fund of America -- Page 29
<PAGE>
PRICE OF SHARES
Shares are purchased at the offering price next determined after the purchase
order is received and accepted by the fund or the Transfer Agent; this offering
price is effective for orders received prior to the time of determination of the
net asset value and, in the case of orders placed with dealers, accepted by the
Principal Underwriter prior to its close of business. In the case of orders sent
directly to the fund or the Transfer Agent, an investment dealer MUST be
indicated. The dealer is responsible for promptly transmitting purchase orders
to the Principal Underwriter. Orders received by the investment dealer, the
Transfer Agent, or the fund after the time of the determination of the net asset
value will be entered at the next calculated offering price. Prices which appear
in the newspaper are not always indicative of prices at which you will be
purchasing and redeeming shares of the fund, since such prices generally reflect
the previous day's closing price whereas purchases and redemptions are made at
the next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily as of 4:00 p.m. New York time,
which is the normal close of trading on the New York Stock Exchange each day the
Exchange is open. If, for example, the Exchange closes at 1:00 p.m., the fund's
share price would still be determined as of 4:00 p.m. New York time. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. Fixed-income securities are valued at prices obtained
from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.
Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
The Income Fund of America -- Page 30
<PAGE>
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share
Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. You may sell (redeem) shares
in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
. Shares held for you in your dealer's street name must be sold
through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
. Requests must be signed by the registered shareholder(s)
. A signature guarantee is required if the redemption is:
- Over $50,000;
- Made payable to someone other than the registered
shareholder(s); or
- Sent to an address other than the address of record, or an
address of record which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
. Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
. You must include any shares you wish to sell that are in certificate
form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/
. Redemptions by telephone or fax (including American FundsLine/(R)/ and
American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each
day.
. Checks must be made payable to the registered shareholder(s).
The Income Fund of America -- Page 31
<PAGE>
. Checks must be mailed to an address of record that has been used with
the account for at least 10 days.
MONEY MARKET FUNDS
. You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
. You may establish check writing privileges (use the money market funds
application).
- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.
If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge or Class A
shares will be credited to your account). Redemption proceeds of shares
representing direct purchases in the money market funds are excluded. Proceeds
will be reinvested at the next calculated net asset value after your request is
received and accepted by the Transfer Agent.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments into The American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. For
example, if the date you specified falls on a weekend or holiday, your money
will be invested on the next business day. If your bank account cannot be
debited due to insufficient funds, a stop-payment or the closing of the account,
the
The Income Fund of America -- Page 32
<PAGE>
plan may be terminated and the related investment reversed. You may change the
amount of the investment or discontinue the plan at any time by writing to the
Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares of the same class at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") of the same share class into any
other fund in The American Funds Group at net asset value, subject to the
following conditions:
(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B shares of
any other American Fund for dollar cost averaging purposes. Exchange purchases
are subject to the minimum investment requirements of the fund purchased and no
sales charge generally applies. However, exchanges of shares from 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 the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine and
American FundsLine OnLine (see "American FundsLine and American FundsLine
OnLine" below), or by telephoning 800/421-0180 toll-free, faxing (see "Principal
Underwriter and Transfer Agent" in the prospectus for the appropriate fax
numbers) or telegraphing the Transfer Agent. (See "Telephone and Computer
Purchases, 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, computer, fax or telegraph. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is
The Income Fund of America -- Page 33
<PAGE>
received. (See "Purchase of Shares--Price of Shares.") THESE TRANSACTIONS HAVE
THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares of the same class in
amounts of $50 or more among any of the funds in The American Funds Group on any
day (or preceding business day if the day falls on a non-business day of each
month you designate. You must either (a) meet the minimum initial investment
requirement for the receiving fund OR (b) 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 - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.
AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Shareholder Account Services and
Privileges - Telephone and Computer Purchases, Redemptions and Exchanges" below.
You will need your fund number (see the list of funds in The American Funds
Group under "Purchase of Shares - Investment Purchase Minimums" and "Purchase of
Shares - Fund Numbers"), personal identification number (generally the last four
digits of your Social Security number or other tax identification number
associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, any of its affiliates
or mutual funds managed by such affiliates, and each of their respective
directors, trustees, officers, employees and agents harmless from any losses,
expenses, costs or liability (including attorney fees) 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 the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, the fund may be liable
for losses due to unauthorized or fraudulent instructions. In the event that
shareholders are unable to reach the
The Income Fund of America -- Page 34
<PAGE>
fund by telephone because of technical difficulties, market conditions, or a
natural disaster, redemption and exchange requests may be made in writing only.
REDEMPTION OF SHARES - The fund's Articles of Incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder owns of record
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Directors of the fund may from time to time
adopt.
While payment of redemptions normally will be in cash, the fund's Articles of
Incorporation permit payment of the redemption price wholly or partly in
securities or other property included in the assets belonging to the fund when
in the opinion of the fund's Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.
SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.
There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment Adviser
believes that to do so is in the interest of the fund. When such concurrent
authorizations occur, the objective is to allocate the executions in an
equitable manner. The fund will not pay a mark-up for research in principal
transactions.
Brokerage commissions paid on portfolio transactions for the fiscal years ended
July 31, 1999, 1998 and 1997, amounted to $11,431,000, $6,212,000 and
$9,637,000, respectively.
The fund is required to disclose information regarding investments in the
securities of broker-dealers (or parents of broker-dealers that derive more than
15% of their revenue from broker-dealer activities) which have certain
relationships with the fund. During the last fiscal year, J.P. Morgan & Co. was
among the top 10 dealers that received the largest amount of brokerage
commissions and that acted as principals in portfolio transactions. The fund
held equity and debt securities of J.P. Morgan & Co. in the amounts of
$195,009,000 and $1,505,000 as of the close of its most recent fiscal year.
The Income Fund of America -- Page 35
<PAGE>
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S. banks
or foreign branches of U.S. banks.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee of
$10,901,000 for the fiscal period ended July 31, 1999.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, Los
Angeles, CA 90017, serves as the fund's independent auditors providing audit
services, preparation of tax returns and review of certain documents to be filed
with the Securities and Exchange Commission. The financial statements included
in this Statement of Additional Information from the Annual Report have been so
included in reliance on the report Deloitte & Touche LLP, independent auditors,
given on the authority of said firm as experts in accounting and auditing. The
selection of the fund's independent accountants is reviewed and determined
annually by the Board of Directors.
PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on July
31. Shareholders are provided updated prospectuses annually. In addition,
shareholders are provided at least semiannually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent auditors,
Deloitte & Touche LLP. In an effort to reduce the volume of mail shareholders
receive from the fund when a household owns more than one account, the Transfer
Agent has taken steps to eliminate duplicate mailings of prospectuses and
shareholder reports. To receive additional copies of a prospectus or report,
shareholders should contact the Transfer Agent.
PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments. The personal
investing policy is consistent with Investment Company Institute guidelines.
This policy includes: a ban on acquisitions of securities pursuant to an initial
public offering; restrictions on acquisitions of private placement securities;
pre-clearance and reporting requirements; review of duplicate confirmation
statements; annual recertification of compliance with codes of ethics; blackout
periods on personal investing for certain investment personnel; ban on
short-term trading profits for investment personnel; limitations on service as a
director of publicly traded companies; and disclosure of personal securities
transactions.
OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Auditors contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:
The Income Fund of America -- Page 36
<PAGE>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- JULY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $17.51
Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $18.58
</TABLE>
CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield was 4.85% based on a 30-day (or one month) period ended July
31, 1999, computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.
The fund's one year total return and average annual total return for the five-
and ten-year periods ended July 31, 1999 were +1.61%, +14.07% and +11.54%,
respectively. The fund's average annual total return at net asset value for the
one-, five- and ten-year periods ended on July 31, 1999 were +7.79%, +15.43% and
+12.20, respectively.
The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.
In calculating average annual total return, the fund assumes: (1) deduction of
the maximum sales load of 5.75% from the $1,000 initial investment; (2)
reinvestment of dividends and distributions at net asset value on the
reinvestment date determined by the Board; and (3) a complete redemption at the
end of any period illustrated. In addition, the fund will provide lifetime
average total return figures.
The Income Fund of America -- Page 37
<PAGE>
The fund may also, at times, calculate total return based on net asset value per
share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.
The fund may include information on its investment results and/or comparisons of
its investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.
The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.
The fund may compare its investment results with the Consumer Price Index, which
is a measure of the average change in prices over time in a fixed market basket
of goods and services (e.g. food, clothing, and fuels, transportation, and other
goods and services that people buy for day-to-day living).
The investment results for the fund set forth below were calculated as described
in the fund's prospectus. The fund's results will vary from time to time
depending upon market conditions, the composition of the fund's portfolio and
operating expenses of the fund, so that any investment results reported by the
fund should not be considered representative of what an investment in the fund
may earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative to
the risks associated with the fund's investment objective and policies.
The investment results for the fund set forth below were calculated as described
in the fund's prospectus. Data contained in Salomon's Market Performance and
------------------
Lehman Brothers' The Bond Market Report are used to calculate cumulative total
----------------------
return from their base period (12/31/68 and 12/31/72, respectively) for each
index. The percentage increases shown in the table below or used in published
reports of the fund are obtained by subtracting the index results at the
beginning of the period from the index results at the end of the period and
dividing the difference by the index results at the beginning of the period.
The Income Fund of America -- Page 38
<PAGE>
IFA VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
LEHMAN SALOMON
10-YEAR LEHMAN LEHMAN BROTHERS SMITH AVERAGE
PERIOD BROTHERS BROTHERS GOVERNMENT/ BARNEY SAVINGS
8/1-7/31 IFA DJIA/2/ S&P 500/3/ CORPORATE/4/ AGGREGATE/5/ CORPORATE/6/ HIGH-GRADE/7/ ACCOUNT/8/
-------- --- ---- ------- --------- --------- --------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989 - 1999 +198% +423% +395% +124% +113% +113% +128% +61%
1988 - 1998 +241 +458 +443 +154 +140 +140 +178 +65
1987 - 1997 +212 +335 +302 +157 +139 +138 +177 +67
1986 - 1996 +181 +329 +268 +141 +126 +123 +149 +70
1985 - 1995 +197 +390 +306 +179 +160 +158 +206 +75
1984 - 1994 +241 +383 +326 +217 +193 +189 +254 +83
1983 - 1993 +254 +331 +293 +241 +218 +213 +281 +93
1982 - 1992 +351 +526 +476 +295 +251 +242 +330 +105
1981 - 1991 +298 +391 +343 +304 +269 +256 +329 +115
1980 - 1990 +296 +391 +343 +235 +217 +209 +239 +122
1979 - 1989 +317 +409 +416 +202 +201 +197 +202 +124
1978 - 1988 +267 +307 +325 +180 +178 +175 +166 +124
1977 - 1987 +283 +388 +417 +159 +164 +162 +146 +124
1976 - 1986 +265 +208 +270 +179 +181 +180 +169 +124
1975 - 1985 +295 +177 +249 +161 N/A +158 +134 +121
1974 - 1984 +270 +154 +210 +136 N/A +136 +110 +116
1973/1/- 1983 +237 +148 +172 +95 N/A +105 +76 +106
</TABLE>
1 From December 1, 1973
2 The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
3 The Standard & Poor's 500 Composite Index is a broad-based measurement of
changes in stock market conditions based on the average performance of 500
widely held common stocks. This index is unmanaged and does not reflect sales
charges, commissions or expenses.
4 The Lehman Brothers Corporate Bond Index is comprised of a large universe of
bonds issued by industrial, utility and financial companies which have a
minimum rating of Baa by Moody's Investors Service, BBB by Standard and Poor's
Corporation or, in the case of bank bonds not rated by either of the
previously mentioned services, BBB by Fitch Investors Service. This index is
unmanaged and does not reflect sales charges, commissions or expenses.
The Income Fund of America -- Page 39
<PAGE>
5 The Lehman Brothers Aggregate Bond Index represents investment grade debt.
This index is unmanaged and does not reflect sales charges, commissions or
expenses.
6 The Lehman Brothers Government/Corporate Bond Index is comprised of all public
obligations of the U.S. Treasury, all publicly issued debt of U.S. Government
agencies, and corporate debt guaranteed by the U.S. Government (excluding
mortgage-backed securities). It also includes all U.S. dollar denominated, SEC
registered, public, non-convertible debt issued or guaranteed by foreign or
international governments/agencies. Also included are all public, fixed-rate
non-convertible investment grade domestic corporate debt. This index is
unmanaged and does not reflect sales charges, commissions or expenses.
7 The Salomon Smith Barney High-Grade Corporate Bond Index is comprised of a
sample of high-grade corporate bonds which have a rating of AAA or AA by
Standard & Poor's Corporation. This index is unmanaged and does not reflect
sales charges, commissions or expenses.
8 Based on figures supplied by the U.S. League of Savings Institutions and the
Federal Reserve Board which reflect all kinds of savings deposits, including
longer-term certificates. Savings accounts offer a guaranteed return of
principal, but no opportunity for capital growth. During a portion of the
period, the maximum rates paid on some savings deposits were fixed by law.
The Income Fund of America -- Page 40
<PAGE>
IF YOU ARE CONSIDERING IFA FOR AN
INDIVIDUAL RETIREMENT ACCOUNT HERE ARE THE BENEFITS OF SYSTEMATIC INVESTING:
<TABLE>
<CAPTION>
Here's how much you would have if you had
invested $2,000 a year on August 1 of each year
in IFA over the past 5 and 10 years:
5 years 10 years
(8/1/94-7/31/99) (8/1/89-7/31/99)
- ------------------------------------------------------------------------------
<S> <C>
$14,420 $39,977
- ------------------------------------------------------------------------------
</TABLE>
The Income Fund of America -- Page 41
<PAGE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
... and had taken all
dividends and capital
If you had invested gain distributions
$10,000 in IFA in shares, your investment
this many years ago... would have been worrth
this much at July 31, 1999
Number Periods
of Years 8/1-7/31 Value
-------- -------- -----
<S> <C> <C>
1
1998-1999 $ 10,161
2
1997-1999 11,311
3
1996-1999 14,620
4
1995-1999 16,588
5
1994-1999 19,311
6
1993-1999 19,697
7
1992-1999 22,030
8
1991-1999 26,240
9
1990-1999 29,455
10
1989-1999 29,793
11
1988-1999 36,789
12
1987-1999 37,401
13
1986-1999 43,647
14
1985-1999 52,334
15
1984-1999 69,806
16
1983-1999 74,054
17
1982-1999 105,401
18
1981-1999 110,954
19
1980-1999 123,698
20
1979-1999 131,777
21
1978-1999 143,363
22
1977-1999 152,202
23
1976-1999 169,109
24
1975-1999 219,031
25
1974-1999 274,367
26
1973#-1999 264,676
</TABLE>
# From December 1, 1973
The Income Fund of America -- Page 42
<PAGE>
Illustration of a $10,000 investment in IFA with
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(for the period December 1, 1973 through July 31, 1999)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
-------------- ---------------
FISCAL TOTAL FROM FROM
YEAR END ANNUAL DIVIDENDS INVESTMENT FROM INITIAL CAPITAL GAINS DIVIDENDS TOTAL
7/31 DIVIDENDS (CUMULATIVE) COST INVESTMENT REINVESTED REINVESTED VALUE
---- --------- ------------ ---- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1974# $ 347 $ 347 $ 10,347 $ 8,767 - $ 321 $ 9,088
1975 785 1,132 11,132 10,141 - 1,250 11,391
1976 998 2,130 12,130 12,155 - 2,596 14,751
1977 969 3,099 13,099 12,701 - 3,691 16,392
1978 1,117 4,216 14,216 12,584 - 4,820 17,404
1979 1,333 5,549 15,549 12,693 - 6,228 18,921
1980 1,463 7,012 17,012 12,490 - 7,672 20,162
1981 1,743 8,755 18,755 12,818 - 9,667 22,485
1982 2,187 10,942 20,942 12,256 - 11,408 23,664
1983 2,549 13,491 23,491 16,112 - 17,573 33,685
1984 2,896 16,387 26,387 15,254 $ 1,013 19,455 35,722
1985 3,365 19,752 29,752 18,236 2,637 26,804 47,677
1986 3,909 23,661 33,661 18,907 6,434 31,807 57,148
1987 4,431 28,092 38,092 19,578 9,644 37,452 66,674
1988 4,479 32,571 42,571 17,955 10,904 38,957 67,816
1989 5,338 37,909 47,909 20,609 12,515 50,578 83,702
1990 5,269 43,178 53,178 18,907 13,755 51,497 84,643
1991 6,311 49,489 59,489 19,578 14,787 60,070 95,050
1992 6,578 56,067 66,067 21,764 17,093 73,764 113,242
1993 6,995 63,062 73,062 22,592 19,653 83,771 126,686
1994 7,471 70,533 80,533 21,218 21,364 85,868 129,177
1995 8,046 78,579 88,579 23,294 24,107 102,984 150,385
1996 8,581 87,160 97,160 24,809 27,526 118,291 170,626
1997 10,075 97,235 107,235 29,024 42,085 149,477 220,586
1998 10,531 107,766 117,766 28,493 59,845 157,215 245,553
1999 12,446 120,212 130,212 27,338 73,926 163,412 264,676
</TABLE>
The Income Fund of America -- Page 43
<PAGE>
# From December 1, 1973
The dollar amount of capital gain distributions during the period was $63,932.
The Income Fund of America -- Page 44
<PAGE>
EXPERIENCE OF INVESTMENT ADVISER - The Investment Adviser manages nine growth
and growth-income funds that are at least 10 years old. In the rolling 10-year
periods since January 1, 1969 (138 in all), those funds have had better total
returns than their comparable Lipper indexes in 128 of 138 periods.
Note that past results are not an indication of future investment results. Also,
the fund has different investment policies than the funds mentioned above. These
results are included solely for the purpose of informing investors about the
experience and history of Capital Research and Management Company.
The Income Fund of America -- Page 45
ASSET MIX COMPARISON AT JULY 31 FISCAL YEAR-END
FISCAL 1999
[begin pie chart]
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT PORTFOLIO Percent of Net Assets
U.S. Equity Securities/++/ 48.9%
Non-U.S. Equity Securities 10.6
Government Bonds 7.4
Other Fixed-Income Securities 19.8
Cash & Equivalents 13.3
</TABLE>
[end chart]
/++/Also includes 0.2% in Canadian equities that are part of the S&P 500.
<TABLE>
<CAPTION>
<S> <C>
FIVE LARGEST INDUSTRIES IN Percent of Net Assets
EQUITY HOLDINGS
Banking 8.7%
Utilities: Electric & Gas 8.1
Banking 8.0
Telecommunications 6.3
Insurance 3.9
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
TEN LARGEST EQUITY HOLDINGS Percent of Net Assets
First Union 2.5%
Atlantic Richfield 2.1
Chrysler 1.9
U S West 1.6
J.C. Penney 1.6
Texaco 1.5
AT&T 1.4
Ford Motor 1.3
Phillips Petroleum 1.2
Amoco 1.0
</TABLE>
FISCAL 1998
[begin pie chart]
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT PORTFOLIO Percent of Net Assets
U.S. Equity Securities/+/ 48.1%
Non-U.S. Equity Securities 12.9
Government Bonds 6.7
Other Fixed-Income Securities 20.9
Cash & Equivalents 11.2
</TABLE>
[end chart]
/+/Also includes 0.5% in Canadian equities that are part of the S&P 500.
<TABLE>
<CAPTION>
<S> <C>
FIVE LARGEST INDUSTRIES IN Percent of Net Assets
EQUITY HOLDINGS
Banking 8.5%
Utilities: Electric & Gas 8.4
Energy Sources 7.5
Telecommunications 5.3
Forest Products & Paper 4.1
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
TEN LARGEST EQUITY HOLDINGS Percent of Net Assets
U S West 1.9%
First Union 1.9
Phillips Petroleum 1.5
Atlantic Richfield 1.4
J.C. Penney 1.3
Weyerhaeuser 1.2
Bank of America 1.1
Houston Industries .9
USX - Marathon .9
J.P. Morgan .9
</TABLE>
<TABLE>
The Income Fund of America, Inc.
Investment Portfolio, July 31, 1999
<S> <C> <C> <C>
Shares or Market Percent
Principal Value Of Net
Equity Securitites Amount (000) Assets
- -------------------------------------------- -------- ----------------
Banking - 8.48%
First Union Corp. 9,492,600$436,660 1.90%
Bank of America Corp. (formerly BankAmerica Corp.) 3,855,800 255,929 1.11
J.P. Morgan & Co. Inc. 1,525,000 195,009 .85
Commonwealth Bank of Australia 8,480,973 133,558 .58
SB Treasury Co. LLC, Series A, 9.40% noncumulative 126,000,00 122,981 .53
preferred (1)
National Bank of Canada 8,500,000 104,781
NB Capital Corp. 8.35% exchangeable depositary shares 520,000 12,805 .51
Westpac Banking Corp. 18,113,652 117,507 .51
BancWest Corp. 1,900,000 79,206 .34
BANK ONE CORP. 1,140,700 62,239 .27
Tokai Preferred Capital Co. LLC, Series A, 9.98% 61,250,000 59,531 .26
noncumulative preferred (1)
Fuji JGB Investment LLC, Series A, 9.87% noncumulative 67,000,000 59,128 .26
preferred (1)
KeyCorp 1,800,000 56,700 .25
BankBoston Corp. 1,200,000 56,325 .24
Bank of Nova Scotia 2,400,000 50,000 .22
Keystone Financial, Inc. 1,550,000 45,241 .20
Bank of New York Co., Inc. 1,000,000 36,938 .16
BNP U.S. Funding LLC, Series A, 7.738% noncumulative 33,200,000 30,724 .13
preferred (1)
National Australia Bank Ltd. Exchangable Capital Units $800,000 22,600 .10
IBJ Preferred Capital Co. LLC, Series A, 8.79% 10,000,000 8,450 .04
noncumulative preferred (1)
Banco Nacional de Mexico, SA 11.00% exchangeable $4,175,000 3,987 .02
note 2003 (1)
------------------
1,950,29 8.48
------------------
Utilities: Electric & Gas - 8.38%
Dominion Resources, Inc. 3,000,000 132,187 .57
Florida Progress Corp. 3,070,000 125,678 .55
Wisconsin Energy Corp. 4,880,000 122,305 .53
DTE Energy Co. 3,000,000 117,375 .51
Unicom Corp. 2,600,000 102,050 .44
Consolidated Edison, Inc. 2,300,000 100,050 .44
Southern Co. 3,750,000 99,141 .43
Consolidated Natural Gas Co. 1,230,000 77,029 .33
MCN Energy Group Inc. 3,550,000 75,659 .33
KeySpan Corp. (formerly KeySpan Energy Corp.) 2,562,000 71,095 .31
Equitable Resources, Inc. (2) 1,850,000 68,566 .30
BEC Energy 1,600,000 68,200 .30
PECO Energy Co. 1,600,000 67,800 .29
Peoples Energy Corp. 1,700,000 62,581 .27
Carolina Power & Light Co. 1,500,000 61,687 .27
Entergy Corp. 2,000,000 60,625 .26
Ameren Corp. 1,200,000 46,800 .20
K N Energy, Inc. 1,000,000 19,500
K N Energy, Inc. 8.25% PEPS convertible preferred 682,600 21,886 .18
2001 Units
Sempra Energy 1,623,700 36,026 .16
National Power PLC 4,580,000 32,268 .14
GPU, Inc. 840,400 32,250 .14
DQE, Inc. 800,000 31,700 .14
New Jersey Resources Corp. 750,000 29,672 .13
Scottish and Southern Energy PLC 3,000,000 28,640 .12
Sonat Inc. 800,000 28,150 .12
American Electric Power Co., Inc. 700,000 24,762 .11
Scottish Power PLC 2,800,000 23,364 .10
OGE Energy Corp. 950,000 22,503 .10
Central and South West Corp. 1,000,000 21,312 .09
Puget Sound Energy, Inc. 900,000 20,981 .09
CINergy Corp. 625,400 18,723 .08
WICOR, Inc. 600,000 17,400 .08
New England Electric System 318,000 16,476 .07
South Jersey Industries, Inc. 500,000 15,000 .07
Citizens Utilities Trust 5.00% EPPICS convertible 250,000 12,688 .06
preferred 2036
TECO Energy, Inc. 467,200 9,519 .04
Western Resources, Inc. 275,000 7,184 .03
------------------
1,928,83 8.38
------------------
Energy Sources - 7.52%
Phillips Petroleum Co. 6,893,500 353,723 1.54
Atlantic Richfield Co. 3,550,000 319,722 1.39
USX-Marathon Group 6,600,000 200,475 .87
Texaco Inc. 2,124,600 132,389 .58
"Shell" Transport and Trading Co., PLC (New York 2,500,000 120,781 .53
Registered)
Sunoco, Inc. 3,932,000 119,926 .52
Ultramar Diamond Shamrock Corp. 3,925,000 92,728 .40
Conoco Inc., Class A 3,520,000 91,740 .40
Occidental Petroleum Corp. 3,250,000 63,578 .28
Unocal Capital Trust $3.125 convertible preferred 1,040,000 58,110 .25
Mobil Corp. 500,000 51,125 .22
CONSOL Energy Inc. 4,000,000 44,500 .19
Exxon Corp. 500,000 39,688 .17
Ashland Inc. 750,000 28,500 .12
CalEnergy Capital Trust II 6.25% convertible 270,000 12,960 .06
preferred 2012
------------------
1,729,94 7.52
------------------
Telecommunications - 5.32%
U S WEST, Inc. 7,782,400 446,029 1.94
MediaOne Group, Inc. 6.25% PIES convertible 1,710,000 160,740 .70
preferred 2001
SBC Communications Inc. 2,100,000 120,094
SBC Communications Inc. 7.75% DECS convertible 463,000 30,876 .66
preferred 2001
Bell Atlantic Corp. 1,949,300 124,268 .54
AT&T Corp. 2,375,000 123,352 .54
Ameritech Corp. 1,430,000 104,748 .46
Telecom Corp. of New Zealand Ltd. 8,278,400 37,518 .16
Telecom Italia SpA, nonconvertible savings shares 5,353,000 29,346 .13
Koninklijke PTT Nederland NV 339,085 15,488
Koninklijke PTT Nederland NV (ADR) 86,288 3,931 .08
GTE Corp. 175,000 12,895 .06
Omnipoint Corp. (1,3) 92,761 3,977 .02
COLT Telecom Group PLC, warrants, expire 2006 (1,3) 5,000 3,325 .01
Viatel, Inc. (3) 86,992 3,219 .01
Comunicacion Celular SA, Class B, warrants, 31,000 1,922 .01
expire 2003 (1,3)
Allegiance Telecom, Inc., warrants, expire 2008 (1,3) 20,000 1,140 .00
Loral Space & Communications Ltd., warrants, 61,000 707 .00
expire 2007 (3,4)
NEXTLINK Communications, Inc. 14.00% preferred 2009 10,712 536 .00
ICG Holdings, Inc., warrants, expire 2005 (1,3) 19,800 495 .00
CellNet Data Systems, Inc., warrants, expire 2007 (1,3,4) 15,450 284 .00
McCaw International, Ltd., warrants, expire 2007 (1,3,4) 31,500 79 .00
Conecel Holdings Ltd., Class B, warrants, 76,825 8 .00
expire 2000 (1,3,4)
Iridium World Communications Ltd., warrants, 4,000 1 .00
expire 2005 (1,3,4)
------------------
1,224,97 5.32
------------------
Forest Products & Paper - 4.08%
Weyerhaeuser Co. 4,412,900 285,459 1.24
International Paper Co. (formerly Union Camp Corp.) 2,990,168 152,872
International Paper Co., Capital Trust 5.25% convertible 400,000 21,200 .76
preferred 2025
UPM-Kymmene Corp. 4,450,000 149,945 .65
Georgia-Pacific Corp., Timber Group 5,450,000 134,547 .59
Stora Enso Oyj, Class R 7,609,169 95,639
Stora Enso Oyj, Class A 345,942 4,293 .43
Potlatch Corp. 1,350,000 54,759 .24
APP Finance (VI) Mauritius Ltd. 0% convertible $144,000,0 21,600 .09
preferred 2012
Westvaco Corp. 650,000 19,134 .08
------------------
939,448 4.08
------------------
Chemicals - 2.62%
Imperial Chemical Industries PLC (ADR) 3,425,000 157,978 .69
Dow Chemical Co. 1,178,500 146,134 .64
International Flavors & Fragrances Inc. 1,900,000 86,094 .37
Hercules Inc. 2,276,200 79,382 .34
DSM NV 415,384 51,543 .22
Monsanto Co. 6.50% ACES convertible preferred 2001 Units 1,108,800 45,461 .20
Witco Corp. 1,981,600 36,288 .16
------------------
602,880 2.62
------------------
Insurance - 2.46%
American General Corp. 2,014,200 155,849 .68
Italy (Republic of) 5.00% PENs 2001 (exchangeable $65,000,00 107,738 .47
into INA SpA)
SAFECO Corp. 2,500,000 95,156 .41
Ohio Casualty Corp. (2) 4,560,000 81,795 .36
Aetna Inc. 819,700 67,215 .29
Lincoln National Corp. 800,000 40,000 .17
PMI Group, Inc. 303,000 19,373 .08
------------------
567,126 2.46
------------------
Real Estate - 2.42%
Equity Residential Properties Trust 2,100,000 86,756
Equity Residential Properties Trust, Series G, 7.25% 600,000 13,050 .43
convertible preferred
Boston Properties, Inc. 2,634,600 90,235 .39
Spieker Properties, Inc. 1,600,000 61,200 .27
Weingarten Realty Investors 1,325,000 53,497 .23
Meditrust Corp., paired stock 3,340,000 36,322 .16
Amoy Properties Ltd. 35,000,000 32,468 .14
AMB Property Corp. 1,225,000 27,562 .12
ProLogis Trust, Series D, 7.92% preferred 1,080,000 24,840 .11
CenterPoint Properties Corp. 580,000 20,735 .09
Sun Hung Kai Properties Ltd. 2,000,000 17,264 .08
Hysan Development Co. Ltd. 12,849,635 16,804 .07
Glenborough Realty Trust Inc., Series A, 7.75% 800,000 14,700 .06
convertible preferred
Duke-Weeks Realty Corp. (formerly Dukes Realty 300,000 13,548 .06
Investments, Inc.), Series B, 7.99% preferred
cumulative step-up premium rate
Simon DeBartolo Group, Inc., Series C, 7.89% preferred 300,000 13,254 .06
cumulative step-up premium rate
Archstone Communities Trust 564,000 12,161 .05
IAC Capital Trust, Series A, 8.25% TOPRS preferred 300,000 7,350 .03
CarrAmerica Realty Corp., Series B, 8.57% cumulative 280,000 6,545 .03
redeemable preferred
New Plan Realty Trust, Series D, 7.80% preferred cumulative 112,500 5,006 .02
step-up premium rate
Kimco Realty Corp. 100,000 3,750 .02
------------------
557,047 2.42
------------------
Merchandising - 1.81%
J.C. Penney Co., Inc. 6,800,000 297,500 1.29
Coles Myer Ltd. 17,400,882 101,454 .44
PETsMART, Inc. 6.75% convertible subordinated note 2004 (1)$17,500,00 18,200 .08
------------------
417,154 1.81
------------------
Broadcasting & Publishing - 1.64%
Houston Industries Inc. 7.00% ACES convertible 1,780,000 215,491 .94
preferred 2000
Cablevision Systems Corp., Series I, $2.125 cumulative 760,000 78,660 .34
convertible exchangeable preferred
UnitedGlobalCom, Inc., Class C, 7.00% convertible 700,000 38,500 .17
preferred (1)
NTL Inc. (3) 146,039 15,170
NTL Inc., warrants, expire 2008 (1,3,4) 25,650 2,079 .07
Price Communications Corp. (3) 912,117 16,190 .07
MediaOne Group, Inc., Series D, 4.50% convertible preferred 85,800 12,355 .05
------------------
378,445 1.64
------------------
Health & Personal Care - 1.64%
Glaxo Wellcome PLC 6,270,000 160,229 .70
Pharmacia & Upjohn, Inc. 1,300,000 69,956 .30
American Home Products Corp. 800,000 40,800 .18
Eli Lilly and Co. 600,000 39,375 .17
Athena Neurosciences, Inc. 4.75% convertible note 2004 $32,500,00 34,938 .15
Sepracor Inc. 6.25% convertible subordinated debenture $7,350,000 12,339
2005 (1)
Sepracor Inc. 7.00% convertible subordinated debenture $15,000,00 13,912 .11
2005 (1)
Glycomed Inc. 7.50% convertible subordinated debenture 2003$5,000,000 4,037 .02
RainTree Healthcare Corp. (3,4) 279,109 977 .01
------------------
376,563 1.64
------------------
Beverages & Tobacco - 1.55%
Philip Morris Companies Inc. 3,150,000 117,338 .51
Southcorp Ltd. 25,046,175 97,298 .42
Nabisco Group Holdings Corp. (formerly RJR Nabisco 3,000,000 56,250 .24
Holdings Corp.)
Imperial Tobacco Ltd. 4,000,000 40,927 .18
Gallaher Group PLC 4,800,000 28,681 .13
UST Inc. 500,000 15,500 .07
------------------
355,994 1.55
------------------
Metals: Steel & Nonferrous - 1.20%
Phelps Dodge Corp. 1,750,000 103,797 .44
British Steel PLC 25,422,400 67,658 .29
Freeport-McMoRan Copper & Gold Inc., Series A, $1.75 1,400,000 26,075
convertible preferred
Freeport-McMoRan Copper & Gold Inc., Class B 300,000 5,063 .14
Allegheny Teledyne Inc. 1,350,000 28,941 .13
Cyprus Amax Minerals Co., Series A, $4.00 convertible 465,000 20,693 .09
preferred
Inco Ltd. 5.75% convertible debenture 2004 $17,250,00 15,568 .07
Bethlehem Steel Corp. $3.50 convertible preferred 250,000 8,813 .04
------------------
276,608 1.20
------------------
Industrial Components - 1.06%
Dana Corp. 2,350,000 98,113 .43
Federal-Mogul Corp. 7.00% convertible preferred 2027 1,150,000 63,969 .28
Tomkins PLC 13,000,000 59,655 .26
Tower Auto Capital Trust 6.75% convertible preferred 2018 ( 450,000 22,050 .09
------------------
243,787 1.06
------------------
Leisure & Tourism - 1.05%
Seagram Co. Ltd. 7.50% convertible preferred 2002 1,845,000 93,171 .40
Georgia-Pacific Corp., Georgia-Pacific Group 7.50% PEPS 1,400,000 66,150 .29
convertible preferred 2004 Units
Premier Parks Inc. 7.50% PIES convertible preferred 2001 450,000 31,275 .14
Host Marriott Financial Trust 6.75% QUIPS convertible 600,000 22,237 .10
preferred 2026
AMF Bowling Worldwide, Inc. 0% convertible debenture 2018 ($90,000,00 12,600 .05
FelCor Lodging Trust Inc. 450,000 8,775 .04
Royal Caribbean Cruises Ltd., Series A, 7.25% convertible 45,000 6,570 .03
preferred
------------------
240,778 1.05
------------------
Business & Public Services - 1.00%
Cendant Corp. 7.50% PRIDES convertible preferred 1,425,000 48,450 .21
United Utilities PLC 3,521,463 45,224 .20
Alexander & Baldwin, Inc. 1,375,000 34,762 .15
Thames Water PLC 1,500,000 22,909 .10
Budget Group, Inc. 6.25% TIDES convertible preferred 2005 600,000 20,250 .09
Interpublic Group of Companies, Inc. 1.87% convertible $17,000,00 15,449 .07
subordinated note 2006 (1)
Hyder PLC 1,425,000 14,696 .06
Browning-Ferris Industries, Inc. 305,000 13,687 .06
Omnicom Group Inc. 4.25% convertible debenture 2007 (1) $2,500,000 5,669 .02
Nationwide Health Properties, Inc., Series A, 7.677% 50,000 3,519 .02
preferred cumulative step-up premium rate
IKON Office Solutions, Inc. 200,000 2,638 .01
Integrated Health Services, Inc. (3) 280,001 1,575
Integrated Health Services, Inc. 5.75% convertible $1,250,000 687 .01
debenture 2001
------------------
229,515 1.00
------------------
Automobiles - 0.89%
General Motors Corp. 2,085,000 127,055 .55
Ford Motor Co. 1,600,000 77,800 .34
------------------
204,855 .89
------------------
Recreation & Other Consumer Products - 0.86%
EMI Group PLC 15,902,467 132,869 .58
Jostens, Inc. 1,715,000 34,729 .15
Pennzoil-Quaker State Co. 2,000,000 29,625 .13
V2 Music Holdings, warrants, expire 2008 (1,3) 14,750 0 .00
------------------
197,223 .86
------------------
Food & Household Products - 0.70%
General Mills, Inc. 1,935,000 160,242 .70
------------------
Machinery & Engineering - 0.69%
Pall Corp. 2,344,200 49,375 .21
Valmet-Rauma Oyj (3) 3,559,997 47,602 .21
Ingersoll-Rand Co. 6.75% PRIDES convertible preferred 1,400,000 42,000 .18
Thermo Electron Corp. 4.25% convertible subordinated $23,000,00 19,981 .09
debenture 2003 (1)
------------------
158,958 .69
------------------
Electronic Components & Instruments - 0.67%
Micron Technology, Inc. 7.00% convertible subordinated $50,000,00 57,750 .25
note 2004
Advanced Micro Devices, Inc. 6.00% convertible subordinated$51,700,00 37,224 .16
note 2005
Western Digital Corp. 0% convertible subordinated $112,500,0 14,906 .06
debenture 2018 (1)
National Semiconductor Corp. 6.50% convertible debenture $15,000,00 14,250 .06
2002
Premier Farnell PLC 3,280,000 13,695 .06
Thermo Instrument Systems Inc. 4.00% convertible subordinat$10,000,00 8,300 .04
debenture 2005
Quantum Corp. 7.00% convertible subordinated note 2004 $7,000,000 6,440 .03
EMC Corp. 3.25% convertible subordinated note 2002 $500,000 2,689 .01
------------------
155,254 .67
------------------
Financial Services - 0.65%
Household International, Inc. 2,453,280 105,338 .46
Bell Atlantic Financial Services, Inc. 4.25% convertible $39,000,00 43,290 .19
debenture 2005 (1)
------------------
148,628 .65
------------------
Multi-Industry - 0.35%
TI Group PLC 7,000,000 52,042 .23
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed 920,000 18,515
perpetual capital security (1)
Swire Pacific Offshore Financing Ltd. 9.33% cumulative 400,000 8,350 .12
guaranteed perpetual capital security (1)
------------------
78,907 .35
------------------
Miscellaneous Materials & Commodities - 0.34%
De Beers Consolidated Mines Ltd. 1,570,800 39,117
De Beers Consolidated Mines Ltd. (ADR) 93,400 2,312 .18
Crown Cork & Seal Co., Inc. 4.50% convertible preferred 200 1,005,000 27,637 .12
Owens-Illinois, Inc. 4.75% convertible preferred 240,000 9,210 .04
------------------
78,276 .34
------------------
Transportation: Rail & Road - 0.23%
Union Pacific Capital Trust 6.25% TIDES convertible 976,200 47,956
preferred 2028 (1)
Union Pacific Capital Trust 6.25% TIDES convertible 110,000 5,404 .23
preferred 2028
------------------
53,360 .23
------------------
Other Industries - 0.30%
Newell Financial Trust I 5.25% QUIPS convertible 723,000 37,731 .16
preferred 2027
Qantas Airways Ltd. 7,000,000 23,263 .10
Diamond Offshore Drilling, Inc. 3.75% convertible $18,700,00 19,612 .09
debenture 2007
TXI Capital Trust I 5.50% convertible preferred 2028 450,000 16,762 .07
Ingram Micro Inc. 0% convertible debenture 2018 $20,915,00 7,085 .03
Daewoo Corp. 0.50% convertible debenture 2007 (1) $5,000,000 3,100 .01
Protection One Alarm Monitoring, Inc., warrants, expire 57,600 340 .00
2005 (1,3)
------------------
107,893 .46
------------------
Miscellaneous - 2.94%
Other equity securities in initial period of acquisition 677,109 2.94
------------------
TOTAL EQUITY SECURITIES (cost: $11,471,239,000) 14,040,1 61.01
------------------
Principal Market Percent
Amount Value of Net
Bonds & Notes (000) (000) Assets
- -------------------------------------------- -------- ----------------
Broadcasting, Advertising & Publishing - 3.23%
Charter Communications Holdings, LLC:
8.25% 2007 (1) 59,000 $56,050
0%/9.92% 2011 (1,5) 37,500 22,781 .34%
Fox/Liberty Networks, LLC, FLN Finance, Inc.:
0%/9.75% 2007 (5) 45,250 35,861
8.875% 2007 38,100 39,624 .33
Chancellor Media Corp. of Los Angeles:
9.375% 2004 23,000 23,345
8.125% 2007 30,500 29,737
Series B, 8.75% 2007 4,500 4,432
Series B, 10.50% 2007 18,300 19,764 .08
9.00% 2008 9,000 9,000 .29
Time Warner Inc.:
7.75% 2005 9,500 9,707
8.18% 2007 20,000 20,990
9.125% 2013 5,000 5,634
7.25% 2017 19,500 18,612 .24
NTL Inc.:
0%/12.75% 2005 (5) 22,000 21,340
Series B, 10.00% 2007 10,000 10,200
0%/9.75% 2008 (5) 5,000 3,425
Comcast UK Cable Partners Ltd. 0%/11.20% 2007 (5) 19,500 17,989 .23
CSC Holdings, Inc.:
7.25% 2008 8,000 7,545
8.125% 2009 22,000 21,804
9.875% 2013 11,500 12,075 .18
CBS Corp. 7.15% 2005 39,500 38,956 .17
Hearst-Argyle Television, Inc.:
7.00% 2018 25,750 23,060
7.50% 2027 5,000 4,616 .12
Liberty Media Corp. 7.875% 2009 (1) 23,600 23,546 .10
TeleWest PLC:
9.625% 2006 5,000 5,150
0%/11.00% 2007 (5) 20,500 18,296 .10
TCI Communications, Inc.:
8.00% 2005 15,000 15,808
8.75% 2015 6,500 7,315 .10
Century Communications Corp.:
8.75% 2007 13,200 12,936
0% 2008 10,000 4,300 .07
Radio One, Inc. 7.00%/12.00% 2004 (5) 16,500 17,160 .07
Comcast Corp. 10.25% 2001 10,600 11,155
Comcast Cable Communications, Inc. 8.875% 2017 4,000 4,440 .07
STC Broadcasting, Inc. 11.00% 2007 14,500 14,717 .07
Lenfest Communications, Inc.:
7.625% 2008 2,000 1,990
8.25% 2008 12,500 12,625 .06
British Sky Broadcasting Group PLC 8.20% 2009 (1) 14,250 14,134 .06
Falcon Holding Group, LP, Falcon Funding Corp. 8.375% 2010 13,000 12,902 .06
Muzak LP: (1)
9.875% 2009 8,500 8,457
0%/13.00% 2010 (5) 3,750 2,137 .05
Rogers Communications Inc. 8.875% 2007 10,000 10,075 .04
Adelphia Communications Corp.:
8.125% 2003 6,500 6,240
10.50% 2004 3,000 3,180 .04
Ziff-Davis Inc. 8.50% 2008 8,250 7,837 .03
Sun Media Corp. 9.50% 2007 7,071 7,424 .03
Multicanal Participacoes SA, Series B, 12.625% 2004 6,475 6,216 .03
Newsquest Capital PLC:
11.00% 2006 4,225 4,690
Series B, 11.00% 2006 1,200 1,332 .03
Coaxial Communications of Central Ohio, Inc. 10.00% 2006 5,750 5,807 .03
TVN Entertainment Corp. 14.00% 2008 (1) 14,750 5,310 .02
Antenna TV SA 9.00% 2007 5,250 5,014 .02
News America Holdings Inc. 7.43% 2026 5,000 4,952 .02
V2 Music Holdings 0%/14.00% 2008 (1,5) 14,750 4,720 .02
Young Broadcasting Inc.:
10.125% 2005 3,750 3,853
Series B, 8.75% 2007 750 739 .02
RBS Participacoes SA 11.00% 2007 (1) 6,750 4,438 .02
Telemundo Holdings, Inc. 0%/11.50% 2008 (5) 8,500 4,420 .02
Gray Communications Systems, Inc. 10.625% 2006 3,500 3,701 .02
Transwestern Publishing Co. LLC 9.625% 2007 3,500 3,421 .02
American Media Operations, Inc. 10.25% 2009 (1) 2,500 2,512 .01
Acme Television, LLC, Series B, 0%/10.875% 2004 (5) 2,780 2,307 .01
Continental Cablevision, Inc. 8.50% 2001 2,000 2,072 .01
Grupo Televisa, SA 11.875% 2006 750 763 .00
Globo Comunicacoes e Partcipacoes Ltd. 10.625% 2008 500 351 .00
------------------
744,989 3.23
------------------
Wireless Communications - 2.93%
Nextel Communications, Inc.:
0%/9.75% 2007 (5) 76,325 54,572
0%/10.65% 2007 (5) 11,475 8,434
0%/9.95% 2008 (5) 208,900 146,752
10.125% 2004 5,000 5,075
12.00% 2008 8,500 9,626
0%/12.125% 2008 (5) 37,450 19,989
McCaw International, Ltd. (owned by Nextel Communications, 46,850 29,047 1.19
Inc.) 0%/13.00% 2007 (5)
Omnipoint Corp.:
14.00% 2003 (1,4,6) 58,188 61,097
8.578% 2006 (1,7) 14,696 14,549
11.625% 2006 55,350 57,010 .58
Crown Castle International Corp.: (5)
0%/10.625% 2007 4,600 3,243
0%/10.375% 2011 39,750 22,856
0%/11.25% 2011 (1) 41,000 23,677 .21
Clearnet Communications Inc.:(5)
0%/14.75% 2005 22,000 20,020
0%/10.125% 2009 45,000 26,100 .20
PageMart Wireless, Inc.: (5)
0%/15.00% 2005 16,160 15,675
0%/11.25% 2008 31,000 13,950 .13
SpectraSite Holdings, Inc.: (1,5)
0%/12.00% 2008 41,250 23,512
0%/11.25% 2009 6,000 3,120 .11
Dobson Communications Corp. 11.75% 2007 7,000 7,420
Dobson/Sygnet Communications Co. 12.25% 2008 14,250 15,034 .10
CCPR Services, Inc. 10.00% 2007 18,000 18,990 .08
Comunicacion Celular SA 0%/14.125% 2005 (1,5) 31,000 18,677 .08
American Cellular Corp. 10.50% 2008 18,100 18,552 .08
Esat Telecom Group PLC 0%/12.50% 2007 (5) 12,875 9,141 .04
Centennial Cellular Corp. 10.75% 2008 (1) 8,735 8,997 .04
Mobile Telecommunication Technologies Corp. 13.50% 2002 7,685 8,761 .04
Sprint Spectrum LP, Sprint Spectrum Finance Corp. 11.00% 20 6,000 6,752 .03
PTC International Finance BV 0%/10.75% 2007 (5) 5,000 3,562 .02
Cellco Finance NV 15.00% 2005 (1) 650 686 .00
Conecel Holdings Ltd., Series A, 14.00% 2000 (1,4,7,8) 2,950 295 .00
------------------
675,171 2.93
------------------
Banking - 1.42%
SocGen Real Estate Co. LLC, Series A, 7.64%/8.406% 71,500 67,108 .29
(undated) (1,7)
MBNA Corp., MBNA:
Capital A, Series A, 8.278% 2026 10,000 9,124
Capital B, Series B, 5.795% 2027 (7) 32,000 27,633 .16
Dime Bancorp, Inc. 6.375% 2001 15,000 14,964
Dime Capital Trust I, Dime Bancorp, Inc., Series A, 11,925 11,948 .12
9.33% 2027
Riggs Capital Trust II:
8.625% 2026 1,500 1,400
8.875% 2027 25,000 23,948 .11
Advanta Corp.:
Series D, 6.60% 2000 4,000 3,966
Series D, 6.65% 2000 7,500 7,442
7.50% 2000 4,000 3,944
6.91% 2002 5,000 4,476
6.925% 2002 5,000 4,476 .11
Washington Mutual Capital I, Subordinated Capital Income 10,000 9,866
Security 8.375% 2027
Ahmanson Capital Trust I, Capital Security, Series A, 8,000 7,915 .08
8.36% 2026 (1)
Deutsche Bank Capital Funding Trust I 7.872% (undated) (1,7 16,250 15,417 .07
Sakura Capital Funding 5.997% (undated) (1,7) 15,000 12,000 .05
Capital One Capital I 6.545% 2027 (1,7) 13,500 11,934 .05
Bank of America Corp. (formerly BankAmerica Corp.) 12,500 11,324 .05
5.875% 2009
Fleet Capital Trust 6.176% 2028 (7) 10,000 10,045 .04
Standard Chartered Bank 5.75% Eurodollar Note (undated) (7) 15,000 9,265 .04
Bank of Nova Scotia 5.25% Eurodollar Note (undated) (7) 10,000 7,876 .04
Canadian Imperial Bank of Commerce 5.25% Eurodollar Note 10,000 7,750 .03
(undated) (7)
HSBC Holdings PLC 7.50% 2009 7,500 7,474 .03
HSBC Americas, Inc. 7.808% 2026 (1) 8,000 7,345 .03
Bank of Scotland 7.00% (undated) (1,7) 7,500 7,066 .03
Komercni Finance BV 9.00%/10.75% 2008 (1,7) 6,000 5,370 .02
Chase Capital II, Global Floating Rate Capital Security, 5,000 4,736 .02
Series B, 5.495% 2027 (7)
BCI U.S. Funding Trust I 8.01% (undated) (1,7) 5,000 4,663 .02
Chevy Chase Bank, FSB 9.25% 2005 4,000 4,020 .02
J.P. Morgan & Co. Inc., Series A, 6.00% 2009 1,650 1,505 .01
------------------
326,000 1.42
------------------
Business & Public Services - 1.41%
Integrated Health Services, Inc.:
10.25% 2006 (7) 16,900 11,830
Series A, 9.50% 2007 72,595 46,461
Series A, 9.25% 2008 68,298 43,028 .44
Allied Waste North America, Inc.:
7.625% 2006 7,000 6,440
10.00% 2009 (1) 58,625 58,039 .28
Columbia/HCA Healthcare Corp.:
6.87% 2003 10,575 9,803
7.15% 2004 6,000 5,640
6.91% 2005 10,750 9,754
8.85% 2007 16,770 16,686
8.70% 2010 9,500 9,057 .22
Safety-Kleen Services, Inc.:
9.25% 2008 26,500 26,765
9.25% 2009 (1) 13,500 13,635 .18
Paracelsus Healthcare Corp. 10.00% 2006 30,100 22,876 .10
Protection One Alarm Monitoring, Inc. 13.625% 2005 (7) 11,685 13,087 .05
Tenet Healthcare Corp. 8.00% 2005 9,500 9,144 .04
Ceridian Corp. 7.25% 2004 (1) 9,000 8,935 .04
Allegiance Corp. 7.00% 2026 4,000 3,950 .02
LifePoint Hospitals, Inc. 10.75% 2009 (1) 3,750 3,778 .01
Iron Mountain Inc. 8.75% 2009 1,750 1,706 .01
RainTree Healthcare Corp. 11.00% 2003 (3) 1,932 1,705 .01
Mariner Health Group, Inc. 9.50% 2006 15,250 1,372
Mariner Post-Acute Network, Inc. 9.50% 2007 2,000 240 .01
------------------
323,931 1.41
------------------
Telecommunications - 1.34%
Cable & Wireless Communications PLC:
6.625% 2005 26,500 26,646
6.75% 2008 38,000 38,862 .29
NEXTLINK Communications, Inc.:
9.625% 2007 4,000 3,880
9.00% 2008 6,250 5,937
0%/12.25% 2009 (5) 39,500 22,712 .14
Loral Orion Network Systems, Inc. 11.25% 2007 35,175 30,250 .13
Time Warner Telecom Inc. 9.75% 2008 27,975 28,534 .12
Allegiance Telecom, Inc.:
0%/11.75% 2008 (5) 32,000 20,640
12.875% 2008 3,475 3,805 .11
Viatel, Inc.:
11.25% 2008 21,500 21,500
11.50% 2009 (1) 2,000 2,020 .10
Orange PLC:
8.75% 2006 (1) 15,000 15,150
8.00% 2008 6,000 5,790 .09
Qwest Communications International Inc.:
0%/9.47% 2007 (5) 15,000 11,698
10.875% 2007 3,084 3,480
0%/8.29% 2008 (5) 7,500 5,629 .09
US Xchange, LLC 15.00% 2008 13,500 13,837 .06
Netia Holdings BV:
10.25% 2007 3,625 3,199
0%/11.25% 2007 (5) 10,500 6,746 .04
IMPSAT Corp. 12.375% 2008 10,000 7,625 .03
COLT Telecom Group PLC 0%/12.00% 2006 (5) 7,500 6,225 .03
Hermes Europe Railtel BV 11.50% 2007 5,000 5,225 .02
VersaTel Telecom International NV 11.875% 2009 5,250 5,197 .02
Teligent, Inc. 11.50% 2007 4,500 4,331 .02
PanAmSat Corp. 6.125% 2005 4,000 3,710 .02
CellNet Data Systems, Inc. 0%/14.00% 2007 (5) 8,700 3,458 .02
Globe Telecom, Inc. 13.00% 2009 (1) 1,850 1,850 .01
------------------
307,936 1.34
------------------
Energy & Related Companies - 0.89%
Oryx Energy Co.:
9.50% 1999 10,000 10,072
8.00% 2003 5,345 5,435
8.375% 2004 12,750 13,219
8.125% 2005 8,500 8,680 .16
PDVSA Finance Ltd.:
9.375% 2007 (1) 7,500 7,294
9.75% 2010 (1) 5,000 4,820
7.40% 2016 32,865 24,813 .16
Clark Refining & Marketing, Inc. 8.875% 2007 33,080 29,441 .13
Petrozuata Finance, Inc.: (1)
Series A, 7.63% 2009 10,285 8,590
Series B, 8.22% 2017 10,000 7,737 .07
Union Pacific Resources Group, Inc. 7.30% 2009 12,500 12,076 .05
Pioneer Natural Resources Co. 7.20% 2028 15,975 11,444 .05
Pogo Producing Co. 10.375% 2009 10,000 10,450 .05
Conoco Inc. 6.35% 2009 10,000 9,520 .04
Cross Timbers Oil Co.:
Series B, 9.25% 2007 1,000 985
8.75% 2009 8,000 7,680 .04
Petro Stopping Centers, LP 10.50% 2007 7,500 7,687 .03
Husky Terra Nova Finance 8.45% 2012 (1) 7,500 7,409 .03
OXYMAR 7.50% 2016 (1) 8,000 6,559 .03
Newfield Exploration Co., Series B, 7.45% 2007 6,000 5,614 .03
USX Corp. 6.65% 2006 4,500 4,248 .02
------------------
203,773 .89
------------------
Forest Products & Paper - 0.86%
Container Corp. of America:
9.75% 2003 50,206 51,963
Series A, 11.25% 2004 19,500 20,231 .31
Pacifica Papers Inc. 10.00% 2009 (1) 27,750 27,958 .12
Scotia Pacific Co. LLC, Timber Collateralized Notes:
Series B, Class A-2, 7.11% 2028 14,550 12,190
Series B, Class A-3, 7.71% 2028 16,000 11,680 .10
Pindo Deli Finance Mauritius Ltd.:
10.25% 2002 11,000 7,287
10.75% 2007 24,450 15,465 .10
Packaging Corp. of America 9.625% 2009 (1) 12,875 13,197 .06
Copamex Industrias, SA de CV, Series B, 11.375% 2004 13,450 12,004 .05
Kappa Beheer BV 10.625% 2009 (1) 7,000 7,140 .03
Advance Agro Capital BV 13.00% 2007 (7) 7,925 6,063 .03
Grupo Industrial Durango, SA de CV 12.00% 2001 6,000 5,925 .03
Paperboard Industries International Inc. 8.375% 2007 5,500 5,087 .02
Indah Kiat Finance Mauritius Ltd.:
11.875% 2002 700 565
10.00% 2007 3,050 1,952 .01
------------------
198,707 .86
------------------
Financial Services - 0.76%
GS Escrow Corp.:
5.995% 2003 (7) 15,000 14,658
7.125% 2005 23,000 21,775 .16
Capital One Financial Corp. 7.125% 2008 22,500 20,813 .09
BHP Finance Ltd. 6.75% 2013 20,000 18,438 .08
Newcourt Credit Group Inc.: (1)
Series A, 7.125% 2003 12,500 12,232
6.875% 2005 5,000 4,784 .07
Providian National Bank 6.65% 2004 4,000 3,840
Providian Financial Corp. 9.525% 2027 (1) 10,000 9,162 .06
MBNA Corp., MBNA 6.75% 2008 12,500 11,719 .05
Toyota Motor Credit Corp. 6.00% 2003 10,000 9,857 .04
AT&T Capital Corp. 6.60% 2005 10,000 9,511 .04
Wharf Capital International, Ltd. 8.875% 2004 7,000 6,773 .03
Ford Capital BV 10.125% 2000 5,500 5,750 .02
DVI, Inc. 9.875% 2004 5,000 4,875 .02
General Electric Capital Corp. 8.875% 2009 4,000 4,523 .02
Nebhelp Trust, Student Loan Interest Margin Security, 4,644 4,520 .02
Series 1998-1, Class A, 6.68% 2016 (1)
Midland Bank PLC 5.75% Eurodollar Note (undated) (7) 5,000 3,935 .02
Amresco, Inc., Series 1998-A, 9.875% 2005 5,000 3,750 .02
Green Tree Financial Corp. 6.50% 2002 2,635 2,505 .01
AB Spintab 6.80% (undated) (1,7) 1,500 1,449 .01
------------------
174,869 .76
------------------
Transportation - 0.73%
Jet Equipment Trust: (1,9)
Series 1994-A, Class B1, 10.91% 2006 6,364 7,004
Series 1995-B, 10.91% 2014 4,750 5,554
Series 1995-B, Class A, 7.63% 2015 3,634 3,607
Series 1995-A, Class B, 8.64% 2015 13,687 14,387
Series 1995-B, Class C, 9.71% 2015 5,500 5,931
Series 1995-A, Class C, 10.69% 2015 5,000 5,738 .18
Atlas Air, Inc. Pass-Through Trust, Series 1998-1, 32,825 30,401 .13
Class A, 7.38% 2019 (9)
Continental Airlines, Inc.:
9.50% 2001 4,500 4,613
pass-through certificates, Series 1996: (9)
Class A, 6.94% 2015 8,375 8,185
Class C, 9.50% 2015 12,097 12,745 .11
Airplanes Pass Through Trust, pass-through certificate, 22,480 21,592 .10
Series 1, Class C, 8.15% 2019 (9)
USAir, Inc.:(9)
Enhanced Equipment Note, Class C, 8.93% 2009 7,354 7,409
pass-through trust, Series 1993-A3, 10.375% 2013 9,000 9,485 .07
United Air Lines, Inc.:
9.00% 2003 8,000 8,463
pass-through certificate, Series 1996-A2, 7.87% 2019 (9) 5,000 4,703 .06
Teekay Shipping Corp. 8.32% 2008 10,820 10,333 .05
Delta Air Lines, Inc., pass-through certificate, 5,000 5,309 .02
Series 1992-A2, 9.20% 2014 (9)
MC-Cuernavaca Trust 9.25% 2001 (1) 3,703 2,891 .01
------------------
168,350 .73
------------------
General Retailing & Merchandising - 0.72%
J.C. Penney Co., Inc.:
7.95% 2017 28,200 28,000
7.625% (undated) 3,000 2,676 .13
Fred Meyer, Inc.:
7.375% 2005 21,000 20,923
7.45% 2008 4,000 4,010 .11
WestPoint Stevens Inc. 7.875% 2005 18,000 17,505 .08
Stater Bros. Holdings Inc. 11.00% 2001 16,000 16,240 .07
Boyds Collection, Ltd. 9.00% 2008 (1) 14,621 14,329 .06
Sears, Roebuck and Co. 9.375% 2011 12,310 13,918 .06
Salton/Maxim Housewares, Inc. 10.75% 2005 12,625 13,256 .06
May Department Stores Co. 8.375% 2024 10,000 10,451 .04
Federated Department Stores, Inc. 6.30% 2009 10,000 9,245 .04
Philips Electronics NV 7.20% 2026 6,000 5,971 .03
Randall's Food Markets, Inc. 9.375% 2007 4,750 5,189 .02
Tultex Corp.:
10.625% 2005 7,040 2,675
9.625% 2007 4,194 1,594 .02
------------------
165,982 .72
------------------
Leisure & Tourism - 0.64%
International Game Technology: (1)
7.875% 2004 16,000 15,440
8.375% 2009 7,750 7,479 .10
Horseshoe Gaming Holding Corp. 8.625% 2009 (1) 21,500 20,748 .09
AMF Bowling Worldwide, Inc.:
10.875% 2006 17,155 13,896
0%/12.25% 2006 (5) 6,437 3,991 .08
Mirage Resorts, Inc.:
6.625% 2005 3,000 2,832
6.75% 2007 5,000 4,593
6.75% 2008 5,000 4,575 .05
Florida Panthers Holdings, Inc. 9.875% 2009 10,000 9,550 .04
Premier Parks Inc. 9.75% 2007 9,500 9,500 .04
Joseph E. Seagram & Sons, Inc. 6.625% 2005 9,000 8,590 .04
Harrah's Operating Co., Inc. 7.875% 2005 7,750 7,401 .03
Boyd Gaming Corp. 9.25% 2003 7,000 7,070 .03
Royal Caribbean Cruises Ltd. 7.00% 2007 7,000 6,649 .03
Friendly Ice Cream Corp. 10.50% 2007 6,515 5,896 .02
CKE Restaurants, Inc. 9.125% 2009 5,000 4,650 .02
CapStar Hotel Co. 8.75% 2007 4,900 4,606 .02
Regal Cinemas, Inc. 9.50% 2008 5,000 4,500 .02
Carmike Cinemas, Inc. 9.375% 2009 (1) 4,000 3,870 .02
KSL Recreation Group, Inc. 10.25% 2007 1,250 1,269 .01
------------------
147,105 .64
------------------
Multi-Industry - 0.43%
Hutchison Whampoa Finance (CI) Ltd., Series D, 21,000 19,312 .08
6.988% 2037 (1)
Reliance Industries Ltd.:
8.25% 2027 (1) 10,000 8,908
10.50% 2046 (1) 5,750 4,821
Series B, 10.25% (undated) 5,000 3,975 .08
Pan Pacific Industrial Investments PLC 0% 2007 (1) 33,500 16,752 .07
Graham Packaging Co.:
8.75% 2008 8,475 7,967
0%/10.75% 2009 (5) 8,000 5,240 .06
American Standard Inc. 8.25% 2009 (1) 10,250 10,301 .05
Tekni-Plex, Inc. 9.25% 2008 8,000 7,880 .03
Sony Corp. 6.125% 2003 7,500 7,406 .03
Innova, S de RL 12.875% 2007 5,000 3,763 .02
Tenneco Inc. 8.075% 2002 2,000 2,051 .01
------------------
98,376 .43
------------------
Industrial Components - 0.40%
Federal-Mogul Corp.:
7.50% 2004 6,860 6,610
7.375% 2006 (1) 38,000 35,512
7.75% 2006 10,000 9,502
7.50% 2009 (1) 24,000 22,116 .32
TRW Inc. 7.125% 2009 (1) 15,000 14,466 .06
BREED Technologies, Inc. 9.25% 2008 29,500 2,950 .01
Westinghouse Air Brake Co. 9.375% 2005 2,000 2,040 .01
------------------
93,196 .40
------------------
Real Estate - 0.38%
Security Capital Group Inc. 7.15% 2007 17,500 15,833 .07
FelCor Suites LP:
7.375% 2004 10,000 9,197
7.625% 2007 5,000 4,447 .06
ProLogis Trust 7.05% 2006 12,000 11,379 .05
EOP Operating LP:
6.625% 2005 5,250 5,001
6.763% 2007 6,550 6,149 .05
CarrAmerica Realty Corp. 6.625% 2000 10,000 9,907 .04
Spieker Properties Inc.:
7.125% 2006 3,645 3,488
7.50% 2027 5,000 4,439 .04
ERP Operating LP:
7.95% 2002 3,750 3,819
6.63% 2005 1,400 1,331 .02
Omega Healthcare Investors, Inc. 6.95% 2002 5,000 4,715 .02
Irvine Co. 7.46% 2006 (1,4) 5,000 4,698 .02
Beverly Finance Corp. 8.36% 2004 (1) 2,500 2,583 .01
------------------
86,986 .38
------------------
Utilities: Electric & Gas - 0.31%
Israel Electric Corp. Ltd.: (1)
7.75% 2009 6,000 5,898
7.70% 2018 22,500 20,329
8.10% 2096 11,905 9,982 .16
Edison Mission Energy 7.73% 2009 (1) 10,000 10,055 .04
Tennessee Gas Pipeline Co. 7.625% 2037 10,000 9,538 .04
Williams Holdings of Delaware, Inc. 6.50% 2008 10,000 9,259 .04
Transener SA 9.25% 2008 (1) 7,500 6,122 .03
------------------
71,183 .31
------------------
Electronic Components - 0.29%
Hyundai Semiconductor America, Inc.: (1)
8.25% 2004 5,650 4,861
8.625% 2007 20,000 15,813 .09
Zilog, Inc. 9.50% 2005 17,000 15,640 .07
Fairchild Semiconductor Corp. 10.375% 2007 (1) 16,000 15,520 .07
Flextronics International Ltd. 8.75% 2007 9,000 8,955 .04
Advanced Micro Devices, Inc. 11.00% 2003 5,000 4,850 .02
------------------
65,639 .29
------------------
Metals: Steel & Nonferrous - 0.25%
Doe Run Resources Corp., Series B, 11.25% 2005 31,000 28,210 .12
Freeport-McMoRan Copper & Gold Inc.:
7.50% 2006 9,500 7,048
7.20% 2026 16,000 11,931 .08
Kaiser Aluminum & Chemical Corp. 12.75% 2003 8,000 8,080 .04
Inco Ltd. 9.60% 2022 2,625 2,547 .01
------------------
57,816 .25
------------------
Food Retailing: Food Products & Beverages - 0.19%
New World Pasta Co. 9.25% 2009 (1) 9,750 9,360 .04
Home Products International, Inc. 9.625% 2008 10,500 9,345 .04
Canandaigua Wine Co., Inc.:
8.75% 2003 5,000 4,925
Series C, 8.75% 2003 3,250 3,218 .04
Gruma, SA de CV 7.625% 2007 7,750 7,033 .03
Nabisco, Inc. 6.375% 2035 (7) 5,000 4,742 .02
Delta Beverage Group, Inc. 9.75% 2003 3,435 3,538 .02
DGS International Finance Co. BV:
10.00% 2007 (1) 1,250 903
10.00% 2007 275 199 .00
------------------
43,263 .19
------------------
Miscellaneous Materials & Commodities - 0.19%
Owens-Illinois, Inc.:
7.85% 2004 6,000 5,971
7.15% 2005 11,000 10,511
8.10% 2007 5,750 5,682 .10
Printpack, Inc. 10.625% 2006 20,270 19,510 .08
Anchor Glass Container Corp. 11.25% 2005 1,000 1,035 .01
------------------
42,709 .19
------------------
Other Industries - 0.13%
SCG Holding Corp. Semiconductor Components Industries, 10,500 10,553 .05
LLC 12.00% 2009 (1)
Ford Motor Co. 7.45% 2031 10,000 9,765 .04
Jefferson-Pilot Corp. 8.14% 2046 (1) 5,000 4,777 .02
Huntsman Corp. 8.873% 2007 (1,7) 5,000 4,425 .02
------------------
29,520 .13
------------------
Collateralized Mortgage/Asset-Backed Obligations (9)
(excluding those issued by federal agencies) - 3.45%
Gramercy Place Insurance Ltd., Series 1998-A, Class C-2, 52,500 52,327 .23
8.95% 2002 (1)
PP&L Transition Bond Co. LLC, Series 1999-1, 45,100 45,016 .20
Class A-8, 7.15% 2009
Collateralized Mortgage Obligation Trust, Series 63, 42,299 43,845 .19
Class Z, 9.00% 2020
Green Tree Financial Corp., pass-through certificates:
Series 1994-A, Class NIM, 6.90% 2004 1,737 1,730
Series 1995-A, Class NIM, 7.25% 2005 2,099 2,079
Series 1993-2, Class B, 8.00% 2018 14,000 12,858
Series 1995-4, Class B2, 7.70% 2025 1,900 1,401
Series 1995-1, Class B2, 9.20% 2025 5,500 4,769
Series 1995-9, Class A-5, 6.80% 2027 4,000 3,994
Series 1996-2, Class B2, 7.90% 2027 3,500 2,597
Series 1996-10, Class A-6, 7.30% 2028 3,000 2,897
Series 1998-4, Class B2, 8.11% 2028 6,650 5,154 .18
Series 1998-3, Class B2, 8.07% 2030 5,000 3,863
G3 Mortgage Reinsurance Ltd., Series 1: (1,7)
Class A, 6.164% 2008 10,500 10,147
Class B, 6.464% 2008 9,000 8,702
Class C, 8.014% 2008 10,000 9,016
Class D, 11.664% 2008 11,000 10,028 .16
Merrill Lynch Mortgage Investors, Inc.:
Seller Manufactured Housing Contract, Series 1995-C2, 13,449 13,492
Class A-1, 6.973% 2021 (7)
Series 1995-C3, Class A-3, 7.059% 2025 (7) 10,000 9,910
Series 1998-C3, Class A1, 5.65% 2030 4,820 4,588
Mortgage Pass-Through Certificates: (7)
Series 1996-C2, Class A-1, 6.69% 2028 2,678 2,679
Series 1998-C3, Class E, 6.976% 2030 7,980 6,574 .16
CS First Boston Inc.:
Finance Co. Ltd., Series 1995-A, 5.969% 2005 (1,7) 11,375 9,783
Series 1998-FL1, Class E, 6.07% 2013 (1,7) 10,000 9,878
Mortgage Securities Corp., Series 1998-C1, Class A-1A, 13,884 13,520 .14
6.26% 2040
First USA Credit Card Master Trust:
Series 1999-1, Class C, 6.42% 2006 (1) 7,500 7,252
Class A, Floating Rate Asset-Backed Certificates: (1,7)
Series 1998-7, 5.78% 2004 13,000 12,953
Series 1998-8, 6.08% 2008 5,652 5,623
Series 1997-4, 6.00% 2010 6,500 6,399 .14
GMAC Commercial Mortgage Securities, Inc.:
Series 1997-C2, Class E, 7.624% 2011 20,750 18,006
Series 1999-C1:(7)
Class D, 6.865% 2033 7,000 6,529
Class E, 6.865% 2033 4,015 3,453 .12
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A1A, 7.40% 2006 (1) 6,343 6,422
Series 1996-CF2, Class A1A, 6.86% 2021 (1) 4,803 4,822
Series 1998-CF2, Class A1B, 6.24% 2031 15,000 14,008 .11
MBNA Master Credit Card Trust: (1)
Series 1999-D, Class B, 6.95% 2008 4,700 4,540
Series 1998-E, Class C, 6.60% 2010 22,500 20,644 .11
SMA Finance Co., Inc., Series 1998-C1, Class A1, 6.27% 2005 24,864 24,465 .11
Commercial Mortgage Acceptance Corp.:
Series 1998-C2, Class A-1, 5.80% 2006 12,878 12,438
Series 1998-C1, Class A-1, 6.23% 2007 6,056 5,887 .08
First Union-Lehman Brothers Bank of America Commercial 18,794 18,259 .08
Mortgage Trust, Commercial Mortgage Pass-Through
Certificate, Series 1998-C2, 6.28% 2035
GS Mortgage Securities Corp. II, Mortgage Pass-Through 20,000 17,971 .08
Certificate, Series 1998-C1, Class D, 7.243% 2030 (7)
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 2026 (1) 18,250 17,091 .07
Morgan Stanley Capital I, Inc.:
Series 1995-GAL1, Class A-2, 7.50% 2027 (1) 7,500 7,666
Series 1998-WF2, Class A-1, 6.75% 2030 (7) 9,318 9,034 .07
Acominas Overseas Ltd. 8.309% 2022 (1,7) 17,800 13,993 .06
Residential Reinsurance Ltd. 8.711% 2000 (1,7) 14,000 13,860 .06
ComEd Transitional Funding Trust, Transitional Funding
Trust Notes, Series 1998:
Class A-5, 5.44% 2007 9,250 8,743
Class A-6, 5.63% 2009 5,500 5,082 .06
Chase Commercial Mortgage Securities Corp., Series 1998-1, 13,835 13,567 .06
Class A1, 6.34% 2030
Ford Credit Auto Owner Trust:
Series 1998-B, Class C, 6.40% 2002 10,000 9,838
Series 1999-B, Class C, 6.65% 2003 3,000 2,966 .06
Structured Asset Securities Corp., pass-through
certificates: (7)
Series 1998-RF2, Class A, 8.564% 2022 (1) 2,430 2,482
Series 1998-RF1, Class A, 8.689% 2027 (1) 1,926 1,974
Series 1999-BC1, Class M2, 6.393% 2029 7,500 7,513 .05
First Consumer Master Trust, Series 1999-A, Class A, 12,500 11,865 .05
5.80% 2005 (1)
Trinity Re, Ltd. 9.745% 2000 (1,7) 12,000 11,730 .05
FIRSTPLUS Home Loan Owner Trust, Series 1997-1, 10,000 9,971 .04
Class A-6, 6.95% 2015
Team Fleet Financing Corp.: (1)
Series 1999-2A, Class D, 6.314% 2002 (7) 3,000 2,994
Series 1999-3A, Class D, 7.60% 2003 7,000 6,964 .04
Green Tree Recreational, Equipment & Consumer Trust, 10,000 9,927 .04
Series 1999-A, Class A-6, 6.84% 2029
Resolution Trust Corp.:
Series 1992-CHF, Class E, 8.25% 2020 865 863
Series 1993-C1:
Class D, 9.45% 2024 5,538 5,520
Class E, 9.50% 2024 162 162
Series 1993-C2:
Class C, 8.00% 2025 505 503
Class D, 8.50% 2025 2,459 2,452 .04
Freddie Mac Loan Receivables Trust, Series 1998-A, 10,100 9,489 .04
Class A3, 6.69% 2020 (1)
Capital One Secured Note Trust, Series 1999-2, 5.78% 2005 6,250 6,206
Capital One Master Trust, Series 1991-1, Class C, 6.60% 2,500 2,430 .04
2007 (1)
First Nationwide, Series 1999-2, Class 1PA1, 6.50% 2029 8,743 8,366 .04
Fleet Credit Card Master Trust II, Series 1999-A, Class C 8,000 8,008 .03
Floating Rate Asset Backed Interests, 5.475% 2004 (1,7)
H.S. Receivables Corp., Series 1999-1, Class A, 8.13% 7,500 7,575 .03
2004 (1)
PNC Mortgage Securities Corp., Series 1998-10, Class 1-B1, 6,942 6,421 .03
6.50% 2028 (1)
GE Capital Mortgage Services, Inc., Series 1994-9, Class A9 6,864 6,396 .03
6.50% 2024
Bear Stearns Commercial Mortgage Securities Inc., Series 89,481 6,210 .03
1999-C1, Class X, interest only, 1.054% 2031 (7)
First Union Commercial Mortgage Trust, Series 1999-C1, 7,000 6,039 .03
Class E, 6.973% 2035 (7)
Chase Manhattan Credit Card Master Trust, Series 1997-5, 5,585 5,498 .02
Class A, 6.194% 2005
Standard Credit Card Master Trust I, Series 1994-2A, 5,000 5,022 .02
Class A, 7.25% 2008
EQCC Home Equity Loan Trust, Asset Backed Certificates, 5,000 4,983 .02
Series 1999-3, Class A-3F, 7.067% 2025
Metris Master Trust, Series 1998-1A, Class C, 6.03% 5,000 4,807 .02
2005 (1,7)
Nationslink Funding Corp., Series 1999-1, Class D, 5,000 4,676 .02
7.10% 2031
Government Lease Trust Series 1999-C1A, Class B3, 6,687 4,584 .02
4.00% 2011 (1)
Deutsche Mortgage & Asset Receiving Corp., Series 1998-C1, 4,634 4,455 .02
Class A-1, 6.22% 2031
Metropolitan Asset Funding, Inc., Series 1998-A, Class B1, 4,669 4,447 .02
7.728% 2014 (1,7)
UCFC Acceptance Corp., Series 1996-D1, Class A-4, 4,250 4,262 .02
6.776% 2016
Mosaic Re II, Ltd., Class B, 14.185% 2000 (1,7) 4,000 3,992 .02
Money Store Trust, Asset-Backed Certificate, Series 1997-D, 3,844 3,837 .02
6.345% 2021
Residential Funding Mortgage Securities I, Inc., Series 3,965 3,747 .02
1998-S17, Class M-1, 6.75% 2028
Grupo Financiero Banamex Accival, SA de CV 0% 2002 3,944 3,527 .02
Financial Asset Securitization, Inc., Series 1997-NAM1, 2,540 2,553 .01
Class B1, 7.75% 2027
Chase Manhattan Bank, NA, Series 1993-I, Class 2A5, 2,499 2,507 .01
7.25% 2024
Rental Car Finance Corp., Series 1999-1A, Class D, 2,500 2,403 .01
7.10% 2007 (1)
Domestic Inc. 8.686% 2002 (1,7) 2,000 2,010 .01
Chevy Chase Master Credit Card Trust II, Series 1996-C, 2,000 1,987 .01
Class A, 5.32% 2007 (7)
------------------
793,715 3.45
------------------
Federal Agency Obligations: Mortgage Pass-Throughs (9) 1.93%
Government National Mortgage Assn.:
5.50% 2028 3,011 2,673
6.00% 2028-2029 142,488 131,310
6.50% 2028 27,072 25,702
7.00% 2008-2030 53,696 52,364
7.50% 2017-2026 29,849 29,893
8.00% 2017-2023 14,974 15,294
8.50% 2017-2029 14,821 15,452
9.00% 2018-2025 5,379 5,711
9.50% 2009-2021 7,836 8,415
10.00% 2016-2019 681 744
10.50% 2019 53 58 1.25
Fannie Mae:
5.50% 2028 9,873 8,847
5.745% 2028 (7) 7,535 7,391
6.00% 2013 10,316 9,868
6.50% 2013-2028 11,747 11,337
7.00% 2012 7,079 7,055
7.50% 2007-2027 21,857 22,002
8.00% 2009-2024 5,832 5,970
8.50% 2014-2025 4,677 4,857
9.00% 2008-2025 5,151 5,440
9.50% 2022 4,507 4,795
10.00% 2005-2025 12,691 13,712
12.50% 2019 911 1,052
13.00% 2015 2,326 2,722
15.00% 2028 870 1,036 .46
Freddie Mac:
5.125% 2008 25,000 22,293
6.00% 2014 12,386 11,859
8.50% 2008-2020 9,623 9,971
9.00% 2007-2021 5,375 5,600
10.00% 2019 119 128
11.50% 2000 4 4 .22
------------------
443,555 1.93
------------------
Federal Agency Obligations: Collateralized Mortgage
Obligations (9) - 0.10%
Fannie Mae:
Series 1991-78, Class PK, 8.50% 2020 452 452
Series 1994-4, Class ZA, 6.50% 2024 5,599 5,155
Series 1996-4, Class ZA, 6.50% 2022 6,611 6,270
Series 1997-28, Class C, 7.00% 2027 5,000 4,869 .07
Freddie Mac:
Series 178, Class Z, 9.25% 2021 1,993 2,076
Series 1673, Class SA, 5.839% 2024 (7,10) 6,000 4,363 .03
------------------
23,185 .10
------------------
Other Federal Agency Obligations - 0.12%
Fannie Mae, Medium-Term Note 6.75% 2028 30,000 26,841 .12
------------------
Governments & Governmental Authorities (excluding U.S.)
- -1.19%
Brazil (Federal Republic of):
Debt Conversion Bond, Series L, 5.938% 2012 (7) 3,750 2,227
Debt Conversion Bond, Bearer, Series L, 5.938% 2012 (7) 5,000 2,969
Bearer 8.00% 2014 135,246 83,007 .38
Argentina (Republic of):
Eurobond, Series L, 5.938% 2005 (7) 2,093 1,741
9.75% 2027 10,000 7,475
11.00% 2006 31,635 28,867
11.375% 2017 13,400 11,290
11.75% 2009 1,730 1,529 .22
United Mexican States Government Eurobonds:
Series C, 0% 2003 (4) 2,307 0
Global:
11.375% 2016 9,000 9,315
11.50% 2026 19,000 20,378
Units, Series C, 5.874% 2019 (7) 1,500 1,226 .13
Panama (Republic of):
Past Due Interest Eurobond 6.50% 2016 (7) 540 384
8.875% 2027 21,500 17,415
9.375% 2029 5,000 4,650 .10
Philippines (Republic of):
8.875% 2008 12,250 11,990
9.875% 2019 10,750 10,441 .10
Turkey (Republic of) 12.375% 2009 11,750 11,823 .05
Korea (Republic of) 8.875% 2008 11,000 11,286 .05
Venezuela (Republic of):
Eurobond 6.313% 2007 (7) 13,964 10,299
9.25% 2027 1,150 725 .05
Ontario (Province of) 5.50% 2008 10,000 9,066 .04
Poland (Republic of), Past Due Interest Bond, Bearer 9,000 7,970 .03
5.00% 2014 (7)
Mendoza (Province of) 10.00% 2007 (1) 9,500 6,080 .03
Bulgaria (Republic of), Front-Loaded Interest Reduction 2,500 1,530 .01
Bond 2.75% 2012 (7)
Peru (Republic of):(7)
Front-Loaded Interest Reduction Eurobond 3.75% 2017 250 136
Past Due Interest Eurobond 4.50% 2017 1,250 769 .00
------------------
274,588 1.19
------------------
U.S. Treasury Obligations - 3.53%
8.75% August 2000 22,500 23,245 .10
7.75% February 2001 13,000 13,412 .06
5.875% November 2001 12,590 12,641 .05
6.25% August 2002 50,000 50,617 .22
7.25% May 2004 83,630 88,204 .38
7.25% August 2004 100,000 105,641 .46
11.625% November 2004 43,500 54,382 .24
7.50% February 2005 80,860 86,469 .38
6.50% May 2005 10,000 10,238 .04
7.00% July 2006 18,293 19,225 .08
6.125% August 2007 1,465 1,469 .01
3.625% January 2008 (7,11) 51,438 49,927 .22
10.00% May 2010 18,000 21,282 .09
7.50% November 2016 17,000 18,958 .08
8.875% August 2017 73,575 92,923 .40
7.875% February 2021 7,500 8,801 .04
7.125% February 2023 65,250 71,387 .31
6.50% November 2026 70,000 71,772 .31
0% November 2027 21,530 3,839 .02
5.25% February 2029 10,000 8,831 .04
------------------
813,263 3.53
------------------
TOTAL BONDS & NOTES (cost: $6,691,309,000) 6,400,64 27.82
Short-Term Securities
- --------------------------------------------
Corporate Short-Term Notes - 6.41%
BellSouth Telecommunications, Inc. 4.90%-5.30% due 92,800 91,823 .40
8/2/1999-1/27/2000 (1)
Ford Motor Credit Co. 5.00%-5.13% due 9/2-10/19/1999 87,100 86,200 .37
E.I. du Pont de Nemours and Co. 4.89%-5.30% due 84,900 83,186 .36
8/18/1999-2/2/2000
Lucent Technologies Inc. 4.88%-5.08% due 8/5-9/23/1999 80,700 80,453 .35
Archer Daniels Midland Co. 4.84%-5.36% due 8/20/1999-2/10/2 80,300 79,257 .34
Procter & Gamble Co. 5.08%-5.30% due 8/30/1999-1/19/2000 79,700 78,348 .34
IBM Credit Corp. 4.80%-5.01% due 8/11-8/19/1999 75,000 74,847 .33
Coca-Cola Co. 5.00%-5.29% due 9/28/1999-2/1/2000 75,500 73,887 .32
Merck & Co. Inc. 5.29%-5.34% due 2/2/1999-2/4/2000 75,000 72,861 .32
Associates First Capital Corp. 4.84%-4.96% due 8/31-9/20/19 65,000 64,672 .28
International Lease Finance Corp. 5.09%-5.10% due 65,000 64,289 .28
10/8-10/22/1999
H.J. Heinz Co. 5.15%-5.34% due 8/23/1999-1/28/2000 60,200 59,200 .26
Ciesco L.P. 4.90%-5.02% due 8/4-8/17/1999 54,950 54,873 .24
Eastman Kodak Co. 4.78%-5.05% due 8/10-9/24/1999 54,020 53,793 .23
Fortune Brands Inc. 5.00%-5.12% due 8/3-10/8/1999 (1) 52,000 51,622 .22
Monsanto Co. 4.93%-5.15% due 9/17-11/5/1999 50,000 49,472 .21
Johnson & Johnson 4.78%-5.30% due 10/4/1999-1/25/2000 (1) 47,425 46,602 .20
General Electric Capital Corp. 5.10%-5.51% due 46,300 45,368 .20
8/2/1999-1/31/2000
American Home Products Corp. 4.79%-5.37% due 45,100 44,417 .19
8/3/1999-1/26/2000 (1)
General Motors Acceptance Corp. 4.89%-5.12% due 8/3-10/15/1 42,900 42,652 .19
Warner-Lambert Co. 4.83% due 8/25/1999 (1) 40,000 39,858 .17
National Rural Utilities Cooperative Finance Corp. 38,500 38,247 .17
4.78%-5.09% due 8/27-10/4/1999
Household Finance Corp. 5.02% due 8/23/1999 36,400 36,283 .16
Minnesota Mining and Manufacturing Co. 5.00%-5.05% 23,423 23,335 .10
due 8/26-8/27/1999
Gillette Co. 4.87%-5.00% due 8/3-8/4/1999 (1) 22,900 22,889 .10
Schering Corp. 4.87% due 8/31/1999 18,000 17,921 .08
------------------
1,476,35 6.41
------------------
Federal Agency Short-Term Obligations - 5.03%
Freddie Mac 4.73%-5.21% due 8/9/1999-2/3/2000 664,900 659,847 2.87
Fannie Mae 4.691%-5.00% due 8/5-12/3/1999 462,390 459,034 2.00
Federal Home Loan Banks 4.81%-5.22% due 11/19/1999-1/21/200 38,600 37,739 .16
------------------
1,156,62 5.03
------------------
Other Federal Agency Short-Term Obligations - 0.22%
Sallie Mae 5.063% due 10/21/1999 (7) 50,000 49,980 .22
------------------
TOTAL SHORT-TERM SECURITIES (cost: $2,683,797,000) 2,682,95 11.66
------------------
TOTAL INVESTMENT SECURITIES (cost: $20,846,345,000) 23,123,7 100.49
Excess of payables over cash and receivables 111,87 .49
------------------
NET ASSETS 23,011,8 100.00
------------------
------------------
1. Purchased in a private placement transaction; resale to
the public may require registration or sale only to
qualified institutional buyers.
2. The fund owns 5.42% and 7.41% of the outstanding voting
securities of Equitable Resources and Ohio Casualty,
respectively, and thus,is considered an affiliate as
defined in the Investment Company Act of 1940.
3. Non-income-producing security.
4. Valued under procedures established by the Board of
Directors.
5. Step Bond; coupon rate will increase at a later date.
6. Payment in kind; the issuer has the option of paying in
additional securities in lieu of cash.
7. Coupon rate may change periodically.
8. Company not making interest payments; bankruptcy proceedings
pending.
9. Pass-through securities backed by a pool of mortgages or
other loans on which principal payments are periodically
made. Therefore, the effective maturities are shorter than
the stated maturities.
10. Inverse floater, which is a floating rate note whose
interest rate moves in the opposite direction of prevailing
interest rates.
11. Index-linked bond whose principal amount moves with a
government retail price index.
See Notes to Financial Statements
ADR = American Depositary Receipts
</TABLE>
<TABLE>
The Income Fund of America
Financial Statements
<S> <C> <C>
- ----------------------------------------- --------- ---------
Statement of Assets and Liabilities (dollars in
at July 31, 1999 thousands)
- ----------------------------------------- --------- ---------
Assets:
Investment securities at market
(cost: $20,846,345) $23,123,707
Cash 16,467
Receivables for-
Sales of investments $ 22,222
Sales of fund's shares 24,360
Dividends and accrued interest 166,476 213,058
--------- ---------
23,353,232
Liabilities:
Payables for-
Purchases of investments 298,523
Repurchases of fund's shares 28,226
Management services 5,304
Accrued expenses 9,349 341,402
--------- ---------
Net Assets at July 31, 1999-
Equivalent to $17.51 per share on
1,314,463,728 shares of $1 par value
capital stock outstanding (authorized
capital stock--1,600,000,000 shares) $23,011,830
============
- ----------------------------------------- --------- ---------
Statement of Operations (dollars in
for the year ended July 31, 1999 thousands)
- ----------------------------------------- --------- ---------
Investment Income:
Income:
Dividends $506,236
Interest 746,740 $1,252,976
---------
Expenses:
Management services fee 63,389
Distribution expenses 52,738
Transfer agent fee 10,901
Reports to shareholders 670
Registration statement and
prospectus 1,495
Postage, stationery and supplies 2,019
Directors' fees 178
Auditing and legal fees 71
Custodian fee 961
Taxes other than federal income tax 10
Other expenses 123 132,555
--------- ---------
Net investment income 1,120,421
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,485,110
Net change in unrealized appreciation on
investments (912,310)
---------
Net realized gain and change in unrealized
appreciation on investments 572,800
---------
Net Increase in Net Assets Resulting
From Operations $1,693,221
============
- ----------------------------------------- --------- ---------
(dollars in
Statement of Changes in Net Assets thousands)
- ----------------------------------------- --------- ---------
Year ended July 31
1999 1998
--------- ---------
Operations:
Net investment income $ 1,120,421 $ 981,936
Net realized gain on investments 1,485,110 1,220,942
Net change in unrealized appreciation
on investments (912,310) (34,156)
--------- ---------
Net increase in net assets
resulting from operations 1,693,221 2,168,722
--------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (1,109,089) (922,159)
Distributions from net realized
gain on investments (1,454,557) (1,524,937)
--------- ---------
Total dividends and distributions (2,563,646) (2,447,096)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
172,804,800 and 205,557,632
shares, respectively 3,038,713 3,777,990
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
134,016,601 and 122,751,251
shares, respectively 2,310,634 2,182,454
Cost of shares repurchased:
203,714,499 and 129,064,287
shares, respectively (3,580,068) (2,383,307)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 1,769,279 3,577,137
--------- ---------
Total Increase in Net Assets 898,854 3,298,763
Net Assets:
Beginning of year 22,112,976 18,814,213
--------- ---------
End of year (including undistributed
net investment income: $211,028
and $198,455, respectively) $23,011,830 $22,112,976
=========== ===========
See Notes to Financial Statements
</TABLE>
Income Fund of America
Notes to Financial Statements
Year ended July 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Income Fund of America, Inc. (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks current income while secondarily striving
for capital growth through investments in stocks and fixed-income securities.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality, and
type. The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a specific
industry, state or region. Short-term securities maturing within 60 days are
valued at amortized cost, which approximates market value. Securities and
assets for which representative market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed by
the Board of Directors.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed
in terms of non-U.S. currencies are translated into U.S. dollars at the
prevailing market rates at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are accounted for as of the trade date. Realized gains and losses
from securities transactions are determined based on specific identified cost.
In the event securities are purchased on a delayed delivery or "when-issued"
basis, the fund will instruct the custodian to segregate liquid assets
sufficient to meet its payment obligations in these transactions. Dividend
income is recognized on the ex-dividend date, and interest income is recognized
on an accrual basis. Market discounts, premiums, and original issue discounts
on securities purchased are amortized daily over the expected life of the
security.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions
paid to shareholders are recorded on the ex-dividend date.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluation of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes
paid. For the year ended July 31, 1999, such non-U.S. taxes were $6,896,000.
CURRENCY GAINS AND LOSSES - Net realized currency gains on dividends,
interest, withholding taxes reclaimable, and other receivables and payables, on
a book basis, were $37,000.
3. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of July 31, 1999, net unrealized appreciation on investments for
federal income tax purposes aggregated $2,277,405,000, of which $3,176,209,000
related to appreciated securities and $898,804,000 related to depreciated
securities. During the year ended July 31, 1999, the fund realized, on a tax
basis, a net capital gain of $1,483,870,000 on securities transactions.
Net gains related to non-U.S. currency and other transactions of
$1,240,000 were treated as an adjustment to ordinary income for federal income
tax purposes. The cost of portfolio securities for federal income tax purposes
was $20,846,302,000 at July 31, 1999.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $63,389,000 for management services
was incurred pursuant to an agreement with Capital Research and Management
Company (CRMC), with which certain officers and Directors of the fund are
affiliated. The Investment Advisory and Service Agreement in effect through
December 31, 1998 provided for monthly fees, accrued daily, based on an annual
rate of 0.24% of the first $1 billion of average net assets; 0.20% of such
assets in excess of $1 billion but not exceeding $2 billion; 0.18% of such
assets in excess of $2 billion but not exceeding $3 billion; 0.165% of such
assets in excess of $3 billion but not exceeding $5 billion; 0.155% of such
assets in excess of $5 billion but not exceeding $8 billion; 0.15% of such
assets in excess of $8 billion but not exceeding $13 billion; 0.145% of such
assets in excess of $13 billion but not exceeding $21 billion; and 0.14% of
such assets in excess of $21 billion; plus 2.25% of monthly gross investment
income. The Board of Directors approved an amended agreement effective January
1, 1999, reducing the fees to 0.25% of the first $500 million of average net
assets; 0.23% of such assets in excess of $500 million but not exceeding $1
billion; 0.21% of such assets in excess of $1 billion but not exceeding $1.5
billion; 0.19% of such assets in excess of $1.5 billion but not exceeding $2.5
billion; 0.17% of such assets in excess of $2.5 billion but not exceeding $4
billion; 0.16% of such assets in excess of $4 billion but not exceeding $6.5
billion; 0.15% of such assets in excess of $6.5 billion but not exceeding $10.5
billion; 0.145% of such assets in excess of $10.5 billion but not exceeding $17
billion; 0.14% of such assets in excess of $17 billion but not exceeding $27.5
billion; and 0.135% of such assets in excess of $27.5 billion; plus 2.25% of
monthly gross investment income.
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution, the fund may
expend up to 0.25% of its average net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved by the fund's Board of
Directors. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
July 31, 1999, distribution expenses under the Plan were $52,738,000. As of
July 31, 1999, accrued and unpaid distribution expenses were $8,531,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $12,692,000 (after allowances to dealers) as its
portion of the sales charges paid by purchasers of the fund's shares. Such
sales charges are not an expense of the fund and, hence, are not reflected in
the accompanying statement of operations.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $10,901,000.
DEFERRED DIRECTORS'FEES - Directors who are unaffiliated with CRMC may
elect to defer part or all of the fees earned for services as members of the
Board. Amounts deferred are not funded and are general unsecured liabilities of
the fund. As of July 31, 1999, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993), net of any payments to
Directors, were $663,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $9,303,782,000 and $8,651,694,000, respectively,
during the year ended July 31, 1999.
As of July 31, 1999, accumulated undistributed net realized gain on
investments was $1,038,911,000 and additional paid-in capital was
$18,169,967,000. The fund reclassified $1,241,000 to undistributed net
investment income from additional paid-in capital and reclassified $58,314,000
from undistributed net realized gains to additional paid-in capital for the
year ended July 31, 1999 as a result of permanent differences between book and
tax.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $961,000 includes $303,000 that was paid by these credits
rather than in cash.
<TABLE>
The Income Fund of America
Per-Share Data and Ratios
<S> <C> <C> <C> <C> <C>
Year endeJuly 31
------- --------------------- -------
1999 1998 1997 1996 1995
------- --------------------- -------
Net Asset Value, Beginning of Ye $18.25 $18.59 $15.89 $14.92 $13.59
------- --------------------- -------
Income from Investment Operations:
Net investment income .88 .85 .86 .87 .85
Net gains or losses on securities
(both realized and unrealized .45 1.11 3.55 1.11 1.29
------- --------------------- -------
Total from investment operati 1.33 1.96 4.41 1.98 2.14
------- --------------------- -------
Less Distributions:
Dividends (from net investment
income) (.88) (.82) (.90) (.83) (.75)
Distributions (from capital gains)
(1.19) (1.48) (.81) (.18) (.06)
------- --------------------- -------
Total distributions (2.07) (2.30) (1.71) (1.01) (.81)
------- --------------------- -------
Net Asset Value, End of Year $17.51 $18.25 $18.59 $15.89 $14.92
======= ===================== =======
Total Return * 7.79% 11.32% 29.28% 13.46% 16.42%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $23,012$22,113$18,814 $14,459 $12,290
Ratio of expenses to average
net assets .59% .59% .61% .62% .65%
Ratio of net income to average
net assets 4.99% 4.75% 5.09% 5.56% 6.12%
Portfolio turnover rate 44.35% 34.68% 40.92% 37.77% 26.26%
* Excludes maximum sales charge
of 5.75%.
</TABLE>
Independent Auditors' Report
To the Board of Directors and Shareholders of
The Income Fund of America, Inc.:
We have audited the accompanying statement of assets and liabilities of
The Income Fund of America, Inc. (the "Fund"), including the investment
portfolio, as of July 31, 1999, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the per-share data and ratios for each of
the five years in the period then ended. These financial statements and
per-share data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
per-share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of The Income Fund of America, Inc. at July 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the per-share data and ratios
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Los Angeles, California
August 27, 1999
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
<S> <C> <C> <C> <C>
To Shareholders Payment Date From Net From Net From Net Realized
of Record Investment Income Realized Short-term Long-Term Gains
Gains
September 18,1998 September 21,1998 $0.20 - -
December 21, 1998 December 22, 1998 0.28 - $1.19
March 19, 1999 March 22, 1999 0.20 - -
June 18, 1999 June 21, 1999 0.20 - -
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 35% of the dividends
paid by the fund from net investment income represent qualifying dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 5% of the dividends paid
by the fund from net investment income were derived from interest on direct
U.S. Treasury obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2000 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1999 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
PART C
OTHER INFORMATION
THE INCOME FUND OF AMERICA, INC.
ITEM 23. EXHIBITS
(a) Articles of Amendment to Articles of Incorporation dated 12/17/99 and
Articles Supplementary dated 12/28/99
(b) On file (see SEC files nos. 811-1880 and 2-33371)
(c) On file (see SEC files nos. 811-1880 and 2-33371)
(d) Form of Investment Advisory and Service Agreement
(e) Form of Amended and Restated Principal Underwriting Agreement
(f) None
(g) Foreign Custody Manager Agreement
(h) None
(I) Not applicable to this filing
(j) Previously filed (see post-effective #51, filed 9/27/99)
(k) None
(l) Not applicable to this filing
(m) Form of Plan of Distribution relating to Class B Shares
(n) Form of Multiple Class Plan
(o) None
(p) Code of Ethics
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None
ITEM 25. INDEMNIFICATION
Registrant is a joint-insured under Investment Adviser/Mutual Fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities. However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.
ITEM 25. INDEMNIFICATION (CONTINUED)
The Articles of Incorporation state:
The Corporation shall indemnify (a) its directors to the full extent provided
by the general laws of the State of Maryland now or hereafter in force,
including the advance of expenses under the procedures provided by such laws;
(b) its officers to the same extent it shall indemnify its directors; and (c)
its officers who are not directors to such further extent as shall be
authorized by the Board of Directors and be consistent with law. The foregoing
shall not limit the authority of the Corporation to indemnify other employees
and agents consistent with law.
The By-Laws of the Corporation state:
Section 5.01. Any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, may be indemnified by the Corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding in the manner and on the terms provided by, and to
the fullest extent authorized by, applicable state law, and shall be
indemnified by the Corporation against such expenses, judgments, fines, and
amounts in the manner and to the fullest extent required by applicable state
law. However, no indemnification may be made under this section in the absence
of a judicial or administrative determination absolving the prospective
indemnitee of liability to the Corporation or its security holders unless,
based upon a review of all material facts, (1) a majority of a quorum of
directors who are neither interested persons of the Corporation nor parties to
the proceeding, or (2) independent legal counsel in a written opinion,
concludes that such person was not guilty of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties initiated in the conduct
of his office.
Section 5.02. No expenses incurred by a director, officer,
employee, or agent of the Corporation in defending a civil or criminal action,
suit, or proceeding to which he is a party may be paid or reimbursed by the
Corporation in advance of the final disposition of such action, suit, or
proceeding unless:
(1) One of the following determines, on the basis of the facts then known to
it, that there is reason to believe that indemnification would be permissible:
(a) a majority of a quorum of disinterested non-party directors, or, if such
a quorum cannot be obtained, a majority of a committee of two or more
disinterested non-party directors duly designated to act in the matter by a
majority vote of the full board;
(b) special legal counsel selected by such a committee or such a quorum of
disinterested non-party directors; or
(c) the stockholders; and
ITEM 25. INDEMNIFICATION (CONTINUED)
(2) the Corporation receives the following from the prospective recipient of
the advance:
(a) a written affirmation of his good faith belief that he met the standard
of conduct necessary for indemnification; and
(b) an undertaking to repay the advance if it is ultimately determined that
he is not entitled to indemnification under this Article.
Section 5.03. The Corporation is authorized to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article. Anything in this Article V to the contrary notwithstanding, however,
the Corporation shall not pay for insurance which protects any director or
officer against liabilities arising from action involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his office; provided, that any such insurance may cover any of
such categories if it provides only for payment to the Corporation and/or third
parties of any damages caused by a director or officer, and also provides that
the insurance company would be subrogated to the rights of the Corporation to
recover from the director or officer.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
None
ITEM 27. PRINCIPAL UNDERWRITERS
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The Investment Company of America, Intermediate Bond Fund of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of America,
U.S. Treasury Money Fund of America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
#61 Point West Circle
Little Rock, AR 72211
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Suite 1
Boulder, CO 80301-3508
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Senior Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
J. Walter Best, Jr. Regional Vice President None
9013 Brentmeade Blvd.
Brentwood, TN 37027
Joseph T. Blair Senior Vice President None
148 E. Shore Ave.
Groton Long Point, CT 06340
John A. Blanchard Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Mick L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
B J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Greenwood Village, CO 80120
Christopher J. Cassin Senior Vice President None
19 North Grant Street
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and Co-Chief None
Executive Officer
Ruth M. Collier Senior Vice President None
29 Landsdowne Drive
Larchmont, NY 10538
S David Coolbaugh Assistant Vice President None
H Carlo Cordasco Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Director, Senior Vice None
President
Suite 216W
100 Merrick Road
Rockville Centre, NY 11570
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
Daniel B. Frick Regional Vice President None
845 Western Avenue
Glen Ellyn, IL 60137
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director None
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
150 Old Franklin School Road
Pittstown, NJ 08867
H Mary Pat Harris Assistant Vice President None
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
Michael J. Johnston Director None
630 Fifth Avenue, 36th Floor
New York, NY 10111
B Damien M. Jordan Vice President None
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
Mark J. Lien Regional Vice President None
5570 Beechwood Terrace
West Des Moines, IA 50266
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - None
Institutional
Investment Services
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice None
President
L E. Lee McClennahan Senior Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - None
Institutional
Investment Services
David R. Murray Vice President None
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P.O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Gary A. Peace Regional Vice President None
291 Kaanapali Drive
Napa, CA 94558
Samuel W. Perry Regional Vice President None
6133 Calle del Paisano
Scottsdale, AZ 85251
Fredric Phillips Senior Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
7455 80th Place, S.E.
Mercer Island, WA 98040
L John O. Post Senior Vice President None
S Richard P. Prior Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
P.O. Box 472245
Charlotte, NC 28247
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07960
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
414 Logan Ranch Road
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Chairman of the Board and None
1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer
Pittsburgh, PA 15238
William P. Simon Senior Vice President None
912 Castlehill Lane
Devon, PA 19333
L John C. Smith Assistant Vice President - None
Institutional Investment
Services
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
S Sherrie Snyder-Senft Assistant Vice President None
Anthony L. Soave Regional Vice President None
8831 Morning Mist Drive
Clarkston, MI 48348
Theresa Souiller Assistant Vice President None
2652 Excaliber Court
Virginia Beach, VA 23454
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue
Suite 228
San Mateo, CA 94401
LW Eric H. Stern Director None
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
1004 Ditchley Road
Virginia Beach, VA 23451
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
J. David Viale Regional Vice President None
7 Gladstone Lane
Laguna Niguel, CA 92677
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, None
Treasurer and Controller
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
George Wenzel Regional Vice President None
3406 Shakespeare Drive
Troy, MI 48084
H J. D. Wiedmaier Assistant Vice President None
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice None
President
L Robert L. Winston Director, Senior Vice None
President
William R. Yost Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
2887 Player Lane
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and held in the
offices of its investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071, and/or 135 South State
College Boulevard, Brea, California 92821.
Registrant's records covering shareholder accounts are maintained and kept by
its transfer agent, American Funds Service Company, 135 South State College
Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 3500 Wiseman Boulevard, San Antonio, Texas 78251 and
5300 Robin Hood Road, Norfolk, VA 23513.
Registrant's records covering portfolio transactions are maintained and kept
by its custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, New York 10081.
ITEM 29. MANAGEMENT SERVICES
None
ITEM 30. UNDERTAKINGS
None
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City and County of San Francisco, and State of California on the 5th day of
January, 2000.
THE INCOME FUND OF AMERICA, INC.
By /s/ Patrick F. Quan
Patrick F. Quan, Secretary
ATTEST:
/s/ Jennifer L. Yardley
Jennifer L. Yardley
Pursuant to the requirements of the Securities Act of 1933, this amendment to
its registration statement has been signed below on January 5, 2000 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C> <C>
(1) Principal Executive Officer: President and
Director
/s/ Janet A. McKinley
(Janet A. McKinley)
(2) Principal Financial Officer and
Principal Accounting Officer: Treasurer
/s/ Mary C. Hall
(Anthony W. Hynes, Jr.)
(3) Directors:
Robert A. Fox* Director
Roberta L. Hazard* Director
Leonade D. Jones* Director
John G. McDonald* Director
James K. Peterson* Director
/s/ James W. Ratzlaff Director
(James W. Ratzlaff)
Henry E. Riggs* Director
Walter P. Stern* Chairman
Patricia K. Woolf* Director
</TABLE>
*By /s/ Patrick F. Quan
Patrick F. Quan, Attorney-in-Fact
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE INCOME FUND OF AMERICA, INC.
THE INCOME FUND OF AMERICA, INC., a corporation organized and existing under
and by virtue of the laws of the State of Maryland and having its principal
office in the city of Baltimore in that State (the "Corporation"), does hereby
certify:
FIRST: The Articles of Incorporation of the Corporation are hereby amended
in the following respects:
1. Article V is amended in its entirety to read as follows:
V.
CAPITAL STOCK
(1) The total number of shares of stock of all classes and series which the
Corporation has authority to issue is three billion (3,000,000,000) shares of
capital stock (par value $0.001 per share), amount in aggregate par value to
three million dollars ($3,000,000).
(2) Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end company under the Investment Company Act, the Board
of Directors shall have full power and authority, without the approval of the
holders of any outstanding shares, to increase or decrease the number of shares
of capital stock or the number of shares of capital stock of any class or
series that the Corporation has authority to issue.
(3) As used in these Articles of Incorporation, a "series" of shares
represents interests in the same assets, liabilities, income, earnings and
profits of the Corporation; each "class" of shares of a series represents
interests in the same underlying assets, liabilities, income, earnings and
profits, but may differ from other classes of such series with respect to fees
and expenses or such other matters as shall be established by the Board of
Directors. The Board of Directors of the Corporation shall have full power and
authority, from time to time, to classify and reclassify any authorized but
unissued shares of stock of the Corporation, including, without limitation, the
power to classify or reclassify unissued shares into series, and to classify
and reclassify a series into one or more classes of stock that may be invested
together in the common investment portfolio in which the series is invested, by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock. All shares of stock of a
series shall represent the same interest in the Corporation and have the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as the other shares of stock of that series, except to the extent
that the Board of Directors provides for differing preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of shares of stock of
classes of such series as determined pursuant to Articles Supplementary filed
for record with the State Department of Assessments and Taxation of Maryland,
as otherwise determined pursuant to these Articles or by the Board of Directors
in accordance with law.
(4) Initially, the shares of capital stock of the Corporation shall be all of
one class and series designated as "common stock." Notwithstanding any other
provision of these Articles, upon the first classification of unissued shares
of stock into additional series, the Board of Directors shall specify a legal
name for the outstanding series, as well as for the new series, in appropriate
charter documents filed for record with the State Department of Assessments and
Taxation of Maryland providing for such name change and classification, and
upon the first classification of a series into additional classes, the Board of
Directors shall specify a legal name for the outstanding class, as well as for
the new class or classes, in appropriate charter documents filed for record
with the State Department of Assessments and Taxation of Maryland providing for
such name change and classification.
(5) The following is a description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of all series of capital
stock of the Corporation and classes of such series (unless provided otherwise
by the Board of Directors with respect to any such additional series (or class
thereof) at the time it is established and designated):
(a) Assets Belonging to Series. All consideration received by the Corporation
from the issue or sale of shares of a particular series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any investment or reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that series for all purposes, subject only
to the rights of creditors, and shall be so recorded upon the books of account
of the Corporation. Such consideration, assets, income, earnings, profits and
proceeds, including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, together with any General Items (as
defined below) allocated to that series as provided in the following sentence,
are herein referred to collectively as "assets belonging to" that series. In
the event that there are any assets, income, earnings, profits or proceeds of
the Corporation which are not readily identifiable as belonging to any
particular series (collectively, "General Items"), such General Items shall be
allocated by or under the supervision of the Board of Directors to and among
any one or more of the series established and designated from time to time in
such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable; and any General Items so allocated to a
particular series shall belong to that series. Each such allocation by or
under the direction of the Board of Directors shall be conclusive and binding
for all purposes.
(b) Liabilities of Series. The assets belonging to each particular series
shall be charged with the liabilities of the Corporation in respect of that
series, including any class thereof, and all expenses, costs, charges and
reserves attributable to that series, including any such class, and any general
liabilities, expenses, costs, charges or reserves of the Corporation which are
not readily identifiable as pertaining to any particular series, shall be
allocated and charged by or under the supervision of the Board of Directors to
and among any one or more of the series established and designated from time to
time in such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. The liabilities, expenses, costs,
charges and reserves allocated and so charged to a series are herein referred
to collectively as "liabilities of" that series. Each allocation of
liabilities, expenses, costs, charges and reserves by or under the supervision
of the Board of Directors shall be conclusive and binding for all purposes.
(c) Dividends and Distributions. Dividends and capital gains distributions on
shares of a particular series may be paid with such frequency, in such form and
in such amount as the Board of Directors may determine by resolution adopted
from time to time, or pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Board of Directors may determine, after
providing for actual and accrued liabilities of that series. All dividends on
shares of a particular series shall be paid only out of the income belonging to
that series and all capital gains distributions on shares of a particular
series shall be paid only out of the capital gains belonging to that series.
Such dividends and distributions may vary between or among classes of a series
to reflect differing allocations of liabilities and expenses of such series
between or among such classes to such extent as may be provided in or
determined pursuant to Articles Supplementary filed for record with the State
Department of Assessments and Taxation of Maryland or as may otherwise be
determined by the Board of Directors. All dividends and distributions on
shares of a particular series (or class thereof) shall be distributed pro rata
to the holders of that series (or class thereof) in proportion to the number of
shares of that series (or class thereof) held by such holders at the date and
time of record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure, the Board of Directors may determine that no dividend or
distribution shall be payable on shares as to which the stockholder's purchase
order and/or payment have not been received by the time or times established by
the Board of Directors under such program or procedure.
Dividends and distributions may be paid in cash, property or additional
shares of the same or another class or series or a combination thereof, as
determined by the Board of Directors or pursuant to any program that the Board
of Directors may have in effect at the time for the election by stockholders of
the form in which dividends or distributions are to be paid. Any such dividend
or distribution paid in shares shall be paid at the current net asset value
thereof.
(d) Voting. On each matter submitted to a vote of the stockholders, each
holder of shares shall be entitled to one vote for each share standing in his
name on the books of the Corporation, irrespective of the series or class
thereof, and all shares of all series and classes shall vote as a single class
("Single Class Voting"); provided, however, that (i) as to any matter with
respect to which a separate vote of any series or class is required by the
Investment Company Act or by the Maryland General Corporation Law, such
requirement as to a separate vote by that series or class shall apply in lieu
of Single Class Voting; (ii) in the event that the separate vote requirements
referred to in clause (i) above apply with respect to one or more (but less
than all) series or classes, then, subject to clause (iii) below, the shares of
all other series and classes shall vote as a single class; and (iii) as to any
matter which does not affect the interest of a particular series or class,
including liquidation of another series as described in subsection (g) below,
only the holders of shares of the one or more affected series shall be entitled
to vote.
Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of shares of
all classes and series of capital stock or of the total number of shares of any
class or series of capital stock entitled to vote as a separate class, such
action shall be valid and effective if authorized by the affirmative vote of
the holders of a majority of the total number of shares of all classes and
series outstanding and entitled to vote thereon, or of the class or series
entitled to vote thereon as a separate class, as the case may be, except as
otherwise provided in the charter of the Corporation.
(e) Redemption by Stockholders. Each holder of shares of a particular series
shall have the right at such times as may be permitted by the Corporation to
require the Corporation to redeem all or any part of his shares of that series,
at a redemption price per share equal to the net asset value per share of that
series next determined after the shares are properly tendered for redemption,
less such redemption fee or sales charge, if any, as may be established by the
Board of Directors in its sole discretion. Payment of the redemption price
shall be in cash; provided, however, that if the Board of Directors determines,
which determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Corporation may, to the
extent and in the manner permitted by the Investment Company Act, make payment
wholly or partly in securities or other assets belonging to the series of which
the shares being redeemed are a part, at the value of such securities or assets
used in such determination of net asset value.
Notwithstanding the foregoing, the Corporation may postpone payment of the
redemption price and may suspend the right of the holders of shares of any
series to require the Corporation to redeem shares of that series during any
period or at any time when and to the extent permissible under the Investment
Company Act.
(f) Redemption by Corporation. The Board of Directors may cause the
Corporation to redeem at their net asset value the shares of any series (or
class thereof) held in an account having, because of redemptions or exchanges,
a net asset value on the date of the notice of redemption less than the minimum
initial investment in that series (or class thereof) specified by the Board of
Directors from time to time in its sole discretion, provided that at least 60
days prior written notice of the proposed redemption has been given to the
holder of any such account by mail, postage prepaid, at the address contained
in the books and records of the Corporation and such holder has been given an
opportunity to purchase the required value of additional shares.
(g) Liquidation. In the event of the liquidation of a particular series as
herein contemplated, the stockholders of the series that is being liquidated
shall be entitled to receive, as a class, when and as declared by the Board of
Directors, the excess of the assets belonging to that series over the
liabilities of that series. The holders of shares of any particular series
shall not be entitled thereby to any distribution upon liquidation of any other
series. The assets so distributable to the stockholders of any particular
series shall be distributed among such stockholders in proportion to the number
of shares of that series held by them and recorded on the books of the
Corporation. The liquidation of any particular series in which there are
shares then outstanding may be authorized by vote of a majority of the Board of
Directors then in office, without any action by the holders of the outstanding
voting securities of that series, as defined in the Investment Company Act, and
without the vote of the holders of shares of any other series. The liquidation
of a particular series may be accomplished, in whole or in part, by the
transfer of assets of such series to another series or by the exchange of
shares of such series for the shares of another series.
(h) Net Asset Value Per Share. For the purposes referred to in these Articles
of Incorporation, the net asset value of shares of the capital stock of the
Corporation of each series and class as of any particular time (a
"determination time") shall be determined by or pursuant to the direction of
the Board of Directors as follows:
(i) At times when a series is not classified into multiple classes, the net
asset value of each share of stock of a series, as of a determination time,
shall be the quotient obtained by dividing the net value of the assets of the
Corporation belonging to that series (determined as hereinafter provided) as of
such determination time by the total number of shares of that series then
outstanding, including all shares of that series which the Corporation has
agreed to sell for which the price has been determined, and excluding shares of
that series which the Corporation has agreed to purchase or which are subject
to redemption for which the price has been determined.
The net value of the assets of the Corporation belonging to a series shall be
determined in accordance with sound accounting practice by deducting from the
gross value of the assets of the Corporation belonging to that series
(determined as hereinafter provided), the amount of all liabilities of that
series, in each case as of such determination time.
The gross value of the assets of the Corporation belonging to a series as of
such determination time shall be an amount equal to all cash, receivables, the
market value of all securities for which market quotations are readily
available and the fair value of other assets of the Corporation belonging to
that series at such determination time, all determined in accordance with sound
accounting practice and giving effect to the following:
(ii) At times when a series is classified into multiple classes, the net asset
value of each share of stock of a class of such series shall be determined in
accordance with subsections (i) and (iii) of this Section (h) with appropriate
adjustments to reflect differing allocations of liabilities and expenses of
such series between or among classes to such extent as may be provided in or
determined pursuant to Articles Supplementary filed for record with the State
Department of Assessments and Taxation of Maryland or as may otherwise be
determined by the Board of Directors.
(iii) The Board of Directors is empowered, in its discretion, to establish
other methods for determining such net asset value whenever such other methods
are deemed by it to be necessary or desirable, including, without limiting the
generality of the foregoing, any method deemed necessary or desirable in order
to enable the Corporation to comply with any provision of the Investment
Company Act or any rule or regulation thereunder. Subject to the applicable
provisions of the Investment Company Act, the Board of Directors, in its sole
discretion, may prescribe and shall set forth in the By-Laws of the Corporation
or in a duly adopted resolution of the Board of Directors such bases and times
for determining the value of the assets belonging to, and the net asset value
per share of outstanding shares of, each series, or the net income attributable
to such shares, as the Board of Directors deems necessary or desirable. The
Board of Directors shall have full discretion, to the extent not inconsistent
with the Maryland General Corporation Law and the Investment Company Act, to
determine which items shall be treated as income and which items as capital and
whether any item of expense shall be charged to income or capital.
(i) Equality. All shares of each particular series shall represent an equal
proportionate interest in the assets belonging to that series (subject to the
liabilities of that series), and each share of any particular series shall be
equal to each other share of that series. The Board of Directors may from time
to time divide or combine the shares of any particular series into a greater or
lesser number of shares of that series without thereby changing the
proportionate interest in the assets belonging to that series or in any way
affecting the rights of holders of shares of any other series.
(j) Conversion or Exchange Rights.
(i) Subject to compliance with the requirements of the Investment Company
Act, the Board of Directors shall have the authority to provide that holders of
shares of any class or series shall have the right to exchange said shares into
shares of one or more other class or series of shares in accordance with such
requirements and procedures as may be established by the Board of Directors.
(ii) At such times (which may vary among shares of a class) as may be
determined by the Board of Directors, shares of a particular class of a series
may be automatically converted into another class of such series based on the
relative net asset value of such classes at the time of conversion, subject,
however, to any conditions of the conversion that may be imposed by the Board
of Directors.
(6) (a) Shares of the various classes of each series of capital stock shall
represent the same interest in the Corporation and have, except as provided to
the contrary in any subsequently filed charter document, identical voting,
dividend, liquidation, and other rights, terms and conditions with any other
shares of capital stock of that series; provided however, that notwithstanding
anything in the charter of the Corporation to the contrary, shares of the
various classes of a series shall be subject to such differing front-end sales
loads, contingent deferred sales charges, fees or expenses under a plan of
distribution or other arrangement related to distribution of shares issued by
the Corporation, and administrative, recordkeeping, or service fees, each as
may be established from time to time by the Board of Directors in accordance
with the Investment Company Act and any rules or regulations promulgated
thereunder and applicable rules and regulations of self-regulatory
organizations and as shall be set forth in the applicable prospectus for the
shares; and provided further that expenses related solely to a particular class
of a particular series of capital stock (including, without limitation, fees or
expenses under a plan of distribution and administrative expenses under an
administration or service agreement, plan or other arrangement, however
designated) shall be borne solely by such class and shall be appropriately
reflected (in the manner determined by the Board of Directors) in the net asset
value, dividends, distribution and liquidation rights of the shares of the
class in question.
(b) As to any matter with respect to which a separate vote of any class of a
series is required by the Investment Company Act or by the Maryland General
Corporation Law (including, without limitation, approval of any plan, agreement
or other arrangement referred to in subsection (a) above), such requirement as
to a separate vote by that class shall apply in lieu of Single Class Voting,
and if permitted by the Investment Company Act or the Maryland General
Corporation Law, the classes of more than one series shall vote together as a
single class on any such matter which shall have the same effect on each such
class. As to any matter which does not affect the interest of a particular
class of a series, only the holders of shares of the affected classes of that
series shall be entitled to vote.
(c) In furtherance but not in limitation of this Article V, and without
limiting the ability of the Corporation to effect a transaction contemplated by
this paragraph under authority of applicable law or any other independent
provision of the charter, the assets belonging to a particular class or series
of shares of capital stock may be invested partially or entirely in the shares
of a registered or unregistered investment company formed to implement a
"master-feeder" or similar structure operated in conformity with the Investment
Company Act and orders issued pursuant thereto, or in any similar structure
however designated. The Corporation shall also be authorized to exchange the
assets belonging to a class or series for shares in such a registered or
unregistered investment company formed to be a master portfolio upon the
approval of the Board of Directors and without further authorization by the
shareholders of the class or series in question or any other class or classes
or series of capital stock of the Corporation.
(7) The Corporation may issue and sell fractions of shares of capital stock
having pro rata all the rights of full shares, including, without limitation,
the right to vote and to receive dividends, and wherever the words "share" or
"shares" are used in the charter or By-Laws of the Corporation, they shall be
deemed to include fractions of shares where the context does not clearly
indicate that only full shares are intended.
(8) The Corporation shall not be obligated to issue certificates representing
shares of any class or series of capital stock. At the time of issue or
transfer of shares without certificates, the Corporation shall provide the
stockholder with such information as may be required under the Maryland General
Corporation Law.
(9) Any determination as to any of the following matters made by or pursuant
to the direction of the Board of Directors consistent with these Articles of
Incorporation and in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of duties, shall be final and conclusive and
shall be binding upon the Corporation and every holder of shares of capital
stock of the Corporation, of any series or class, namely, the amount of the
assets, obligations, liabilities and expenses of the Corporation or belonging
to any series or with respect to any class; the amount of the net income of the
Corporation from dividends and interest for any period and the amount of assets
at any time legally available for the payment of dividends with respect to any
series or class; the amount of paid-in surplus, annual or other net profits, or
net assets in excess of capital, undivided profits, or excess of profits over
losses on sales of securities belonging to the Corporation or any series or
class; the amount, purpose, time of creation, increase or decrease, alteration
or cancellation of any reserves or charges and the propriety thereof (whether
or not any obligation or liability for which such reserves or charges shall
have been created shall have been paid or discharged) with respect to the
Corporation or any series or class; the market value, or any sale, bid or asked
price to be applied in determining the market value, of any security owned or
held by the Corporation; the fair value of any other asset owned or held by the
Corporation; the number of shares of stock of any series or class issued or
issuable; the existence of conditions permitting the postponement of payment of
the repurchase price of shares of stock of any series or class or the
suspension of the right of redemption as provided by law; any matter relating
to the acquisition, holding and disposition of securities and other assets by
the Corporation; any question as to whether any transaction constitutes a
purchase of securities on margin, a short sale of securities, or an
underwriting of the sale of, or participation in any underwriting or selling
group in connection with the public distribution of any securities; and any
matter relating to the issue, sale, repurchase or other acquisition or
disposition of shares of stock of any series or class.
2. Articles VIII and IX are deleted in their entirety.
3. Articles X through XI are renumbered accordingly.
SECOND: (a) As of immediately before the increase the total number of shares
of stock of all classes which the Corporation has authority to issue is
1,600,000,000 shares of Common Stock (par value $1.00 per share).
(b) As increased the total number of shares of stock of all classes which
the Corporation has authority to issue is 3,000,000,000 shares of Common Stock
(par value $0.001 per share).
(c) The aggregate par value of all shares having a par value is
$1,600,000,000 before the increase and $3,000,000 as increased.
THIRD: The aforesaid amendments were declared advisable and approved by
resolution of a majority of the entire Board of Directors of the Corporation at
meetings duly held on August 12, 1999 and December 8, 1999.
FOURTH: That, pursuant to resolution of the Board of Directors, a meeting of
shareholders of said Corporation was duly called and held on December 1, 1999,
upon notice, duly given at which meeting the necessary number of shares as
required by statute were voted in favor of the amendments.
FIFTH: The amendment of the Articles of Incorporation as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
shareholders of the Corporation.
IN WITNESS WHEREOF, THE INCOME FUND OF AMERICA, INC. has caused these
Articles of Amendment to be signed in its name and on its behalf by its Vice
President and attested by its Secretary, and the said officers of the
Corporation further also acknowledge said instrument to be the corporate act of
the Corporation and state and certify under the penalty of perjury that to the
best of their knowledge, information and belief, the matters and facts therein
set forth with respect to authorization and approval thereof are true and
correct in all material respects, all on December 17, 1999.
THE INCOME FUND OF AMERICA, INC.
By /s/ Hilda L. Applbaum
Hilda L. Applbaum, Vice President
ATTEST:
/s/ Patrick F. Quan
Patrick F. Quan, Secretary
State of California
County of San Francisco
On December 17, 1999 before me, Doris A. Spieker , Notary Public
DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC"
personally appeared Hilda L. Applbaum and Patrick F. Quan
NAME(S) OF SIGNER(S)
= personally known to me - OR - j proved to me on the basis of satisfactory
evidence to be the persons whose names are subscribed to the within instrument
and acknowledged to me that they executed the same in their authorized
capacities, and that by their signatures on the instrument the persons, or the
entity upon behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Doris A. Spieker
SIGNATURE OF NOTARY
THE INCOME FUND OF AMERICA, INC.
ARTICLES SUPPLEMENTARY
The Income Fund of America, Inc., a Maryland corporation having its principal
office in Baltimore City, Maryland (the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: (a) The Board of Directors of the Corporation has divided and further
classified the unissued shares of the authorized common stock of the
Corporation as a class, designated "Class B". The remaining shares of common
stock, including the shares currently issued and outstanding, shall be referred
to as "Class A" shares. The authorized shares of each such class of common
stock shall consist of the sum of (x) the outstanding shares of that class and
(y) one-half (1/2) of the authorized but unissued shares of all classes of
common stock; PROVIDED HOWEVER, that in the event application of the above
formula would result, at the time, in fractional shares of one or more classes,
the number of authorized shares of each such class shall be rounded down to the
nearest whole number of shares; and PROVIDED, FURTHER, that at all times the
aggregate number of authorized Class A and Class B shares of common stock shall
not exceed the authorized number of shares of common stock (I.E., 3,000,000,000
shares until changed by action of the Board of Directors in accordance with
Section 2-208.1 of the Maryland General Corporation Law).
(b) The preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the Class A shares of the Corporation are set forth in the
Charter of the Corporation. The preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the Class B shares of the Corporation are
set forth below.
SECOND: Except to the extent provided otherwise by the Charter of the
Corporation, the Class A shares and the Class B shares of the Corporation shall
represent an equal proportionate interest in the assets of the Corporation
(subject to the liabilities of the Corporation) and each share shall have
identical voting, dividend, liquidation and other rights; PROVIDED, HOWEVER,
that notwithstanding anything in the Charter of the Corporation to the
contrary:
(i) Class A shares and Class B shares may be issued and sold subject to
different sales loads or charges, whether initial, deferred or contingent, or
any combination thereof, as may be established from time to time by the Board
of Directors in accordance with the Investment Company Act of 1940 and
applicable rules and regulations of self-regulatory organizations and as shall
be set forth in the applicable prospectus for the shares;
(ii) Expenses, costs and charges which are determined by or under the
supervision of the Board of Directors to be attributable to the shares of a
particular class may be charged to that class and appropriately reflected in
the net asset value of, or dividends payable on, the shares of that class;
(iii) Except as otherwise provided hereinafter, on the first Friday of the
first calendar month following the expiration of a 96-month period commencing
on the first day of the calendar month during which Class B shares were
purchased by a holder thereof (if such Friday is not a business day, on the
next succeeding business day), such shares (as well as a pro rata portion of
any Class B shares purchased through the reinvestment of dividends or other
distributions paid on all Class B shares held by such holder) shall
automatically convert to Class A shares on the basis of the respective net
asset values of the Class B shares and the Class A shares on the conversion
date; PROVIDED, HOWEVER, that the Board of Directors, in its sole discretion,
may suspend the conversion of Class B shares if any conversion of such shares
would constitute a taxable event under federal income tax law (in which case
the holder of such Class B shares shall have the right to exchange from time to
time any or all of such Class B shares held by such holder for Class A shares
on the basis of the respective net asset values of the Class B shares and Class
A shares on the applicable exchange date and without the imposition of a sales
charge or fee); and PROVIDED, FURTHER, that conversion (or exchange) of Class B
shares represented by stock certificates shall be subject to tender of such
certificates; and
(iv) Subject to the foregoing paragraph, Class A shares and Class B shares may
have such different exchange rights as the Board of Directors shall provide in
compliance with the Investment Company Act of 1940.
THIRD: The foregoing amendment to the Charter of the Corporation does not
increase the authorized capital stock of the Corporation.
FOURTH: The aforesaid shares have been duly classified by the Board of
Directors pursuant to authority and power contained in the Charter of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in
its name and on its behalf by its Vice President and attested by its Secretary
on this 28th day of December, 1999.
THE INCOME FUND OF AMERICA, INC.
/s/ Hilda L. Applbaum
By: Hilda L. Applbaum,
Vice President
ATTEST:
/s/ Patrick F. Quan
Patrick F. Quan,
Secretary
The undersigned, Vice President of The Income Fund of America, Inc., who
executed on behalf of said Corporation the foregoing Articles Supplementary of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of the Corporation the foregoing Articles Supplementary to be the
corporate act of the Corporation and hereby certifies that, to the best of her
knowledge, information and belief, the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Hilda L. Applbaum
Hilda L. Applbaum
Vice President
FORM OF
INVESTMENT ADVISORY AND SERVICE AGREEMENT
THIS AGREEMENT, dated and effective as of the 15th day of March, 2000, by and
between [NAME OF FUND], a Maryland corporation, (hereinafter called the
"Fund") and CAPITAL RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation,
(hereinafter called the "Investment Adviser ").
W I T N E S S E T H:
A. The Fund is an open-end diversified investment company of the management
type, registered under the Investment Company Act of 1940. The Investment
Adviser is registered under the Investment Adviser's Act of 1940 and is engaged
in the business of providing investment advisory services to investment
companies and others, and related activities.
B. The Investment Adviser has provided investment advisory services to the Fund
since [initial agreement date], and is currently providing such services under
a written agreement dated [current agreement date], as renewed.
NOW THEREFORE, in consideration of the premises and the mutual under takings of
the parties, it is covenanted and agreed as follows:
1. The Investment Adviser shall furnish advice to the Fund with respect to
investing in and purchasing and selling securities. The Investment Adviser
shall make available to the Fund all investment information and data maintained
by the Investment Adviser and its facilities for obtaining such information and
data. In addition, the Investment Adviser shall determine what securities
shall be purchased or sold by the Fund.
2. The Investment Adviser shall furnish the services of persons to perform
the executive, administrative, clerical and bookkeeping functions of the Fund,
including the daily determination of net asset value and offering price per
share. The Investment Adviser shall pay the compensation and travel expenses
of all such persons, and they shall serve without additional compensation from
the Fund. The Investment Adviser shall also, at its expense, provide the Fund
with suitable office space (which may be in the offices of the Investment
Adviser) and utilities; all necessary office equipment; and general purpose
accounting forms, supplies, and postage used at the offices of the Fund.
The Fund shall pay all its expenses not assumed by the Investment Adviser as
provided herein. Such expenses shall include, but shall not be limited to,
custodian, stock transfer and dividend disbursing agency fees and expenses;
costs of the designing, printing, and mailing of reports, prospectuses, proxy
statements, and notices to its shareholders; taxes; expenses of the issuance,
sale (including stock certificates, registration and qualification expenses),
or repurchase of shares of the Fund; legal and auditing expenses; compensation,
fees and expense reimbursements paid to directors; association dues; and costs
of stationery and forms prepared exclusively for the Fund.
3. The Fund shall pay to the Investment Adviser on or before the tenth (10th)
day of each month, an amount to be computed by applying to the total net assets
of the Fund as of the last day of the preceding month one-twelfth (1/12th) of
the applicable annual rate(s) set forth below:
[fee schedule]
For the purposes hereof, the total net assets of the Fund shall be determined
in accordance with the method set forth in the currently effective Prospectus
of the Fund.
4. In addition to paying the costs and expenses provided for above, the
Investment Adviser agrees to pay the Fund annually the amount by which the
total expenses for any particular fiscal year ([first day of the month fiscal
year begins to last day of the month fiscal year ends]), except taxes and such
expenses, if any, as may be incurred in connection with any merger,
reorganization, or recapitalization, exceed the sum of the following: [fee
expense cap]
5. The expense limitation described in Section 4 shall apply only to Class A
shares issued by the Fund and shall not apply to any other class(es) of shares
the Fund may issue in the future. Any new class(es) of shares issued by the
Fund will not be subject to an expense limitation. However, notwithstanding
the foregoing, to the extent the Investment Adviser is required to reduce its
management fee pursuant to provisions contained in Section 4 due to the
expenses of the Class A shares exceeding the stated limit, the Investment
Adviser will either (i) reduce its management fee similarly for other classes
of shares, or (ii) reimburse the Fund for other expenses to the extent
necessary to result in an expense reduction only for Class A shares of the
Fund.
6. This agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors or by vote of a majority (within the meaning
of the Investment Company Act of 1940) of the outstanding voting securities of
the Fund, on sixty (60) days' written notice to the Investment Adviser, or by
the Investment Adviser on like notice to the Fund. In the event of termination
other than at the end of a calendar month, the monthly fee shall be prorated
for the portion of the month prior to termination and paid on or before the
tenth (10th) day subsequent to termination. Unless sooner terminated in
accordance with this provision, this agreement shall continue until the close
of business on [agreement expiration date]. It may thereafter be renewed from
year to year by mutual consent; provided that such renewal shall be
specifically approved at least annually by the Board of Directors or by vote of
a majority (within the meaning of the Investment Company Act of 1940) of the
outstanding voting securities of the Fund. In either event, renewal of the
agreement must be approved by a majority of those directors who are not parties
to the agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. Such mutual consent
to renewal shall not be deemed to have been given unless evidenced by writing
signed by both parties.
7. This agreement shall not be assignable by either party hereto, and in the
event of assignment shall automatically be terminated forthwith. The term
"assignment" shall have the meaning defined in the Investment Company Act of
1940.
8. The Investment Adviser shall not be liable to the Fund or to its
shareholders for any error of judgment, act or omission not involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations and duties hereunder.
8. This agreement shall supersede and replace the agreement between the parties
dated [date].
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate original by their officers thereunto duly authorized and
their corporate seals to be affixed as of the day and year first above written.
[NAME OF FUND] CAPITAL RESEARCH AND MANAGEMENT COMPANY
By: By:
[ ] James F. Rothenberg
President President
By: By:
[ ] Michael J. Downer
Secretary Secretary
FORM OF
AMENDED AND RESTATED PRINCIPAL UNDERWRITING AGREEMENT
THIS PRINCIPAL UNDERWRITING AGREEMENT, between [NAME OF FUND], a Maryland
corporation (the "Fund"), and AMERICAN FUNDS DISTRIBUTOR, INC., a California
corporation ("the Distributor").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end diversified investment company which
offers shares of common stock and it is a part of the business of the Fund, and
affirmatively in the interest of the Fund, to offer shares of the Fund either
from time to time or continuously as determined by the Fund's officers subject
to authorization by its Board of Directors; and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of shares of investment companies through securities
broker-dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other to promote the distribution of the shares of the Fund and of all
series or classes of the Fund which may be established in the future;
NOW, THEREFORE, the parties agree as follows:
1. (a) The Distributor shall be the exclusive principal underwriter for the
sale of the shares of the Fund and of each series or class of the Fund which
may be established in the future, except as otherwise provided pursuant to the
following subsection (b). The terms "shares of Fund" or "shares" as used
herein shall mean shares of common stock of the Fund and each series or class
which may be established in the future and become covered by this Agreement in
accordance with Section 23 of this Agreement.
(b) The Fund may, upon 60 days' written notice to the Distributor, from time to
time designate other principal underwriters of its shares with respect to areas
other than the North American continent, Hawaii, Puerto Rico, and such
countries or other jurisdictions as to which the Fund may have expressly waived
in writing its right to make such designation. In the event of such
designation, the right of the Distributor under this Agreement to sell shares
in the areas so designated shall terminate, but this Agreement shall remain
otherwise in full force and effect until terminated in accordance with the
other provisions hereof.
2. In the sale of shares of the Fund, the Distributor shall act as agent of the
Fund except in any transaction in which the Distributor sells such shares as a
dealer to the public, in which event the Distributor shall act as principal for
its own account.
3. The Fund shall sell shares only through the Distributor, except that the
Fund may, to the extent permitted by the 1940 Act and the rules and regulations
promulgated thereunder or pursuant thereto, at any time:
(a) issue shares to any corporation, association, trust, partnership or other
organization, or its, or their, security holders, beneficiaries or members, in
connection with a merger, consolidation or reorganization to which the Fund is
a party, or in connection with the acquisition of all or substantially all the
property and assets of such corporation, association, Fund, partnership or
other organization;
(b) issue shares at net asset value to the holders of shares of capital stock
or beneficial interest of other investment companies served as investment
adviser by any affiliated company or companies of The Capital Group Companies,
Inc., to the extent of all or any portion of amounts received by such
shareholders upon redemption or repurchase of their shares by the other
investment companies;
(c) issue shares at net asset value to its shareholders in connection with the
reinvestment of dividends paid and other distributions made by the Fund;
(d) issue shares at net asset value to persons entitled to purchase shares at
net asset value without sales charge or contingent deferred sales charge as
described in the current prospectus which is part of the Fund's Registration
Statement in effect under the Securities Act of 1933, as amended, for each
series issued by the Fund at the time of such offer or sale (the "Prospectus").
4. The Distributor shall devote its best efforts to the sale of shares of the
Fund and shares of any other mutual funds served as investment adviser by
affiliated companies of The Capital Group Companies, Inc., and insurance
contracts funded by shares of such mutual funds, for which the Distributor has
been authorized to act as a principal underwriter for the sale of shares. The
Distributor shall maintain a sales organization suited to the sale of shares of
the Fund and shall use its best efforts to effect such sales in jurisdictions
as to which the Fund shall have expressly waived in writing its right to
designate another principal underwriter pursuant to subsection 1(b) hereof, and
shall effect and maintain appropriate qualification to do so in all those
jurisdictions in which it sells or offers shares for sale and in which
qualification is required.
5. Within the United States of America, all dealers to whom the Distributor
shall offer and sell shares must be duly licensed and qualified to sell shares
of the Fund. Shares sold to dealers shall be for resale by such dealers only
at the public offering price set forth in the current Prospectus. The
Distributor shall not, without the consent of the Fund, sell or offer for sale
any shares of a series or class issued by the Fund other than as principal
underwriter pursuant to this Agreement.
6. In its sales to dealers, it shall be the responsibility of the Distributor
to insure that such dealers are appropriately qualified to transact business in
the shares under applicable laws, rules and regulations promulgated by such
national, state, local or other governmental or quasi-governmental authorities
as may in a particular instance have jurisdiction.
7. The applicable public offering price of shares shall be the price which is
equal to the net asset value per share, as shall be determined by the Fund in
the manner and at the time or times set forth in and subject to the provisions
of the Prospectus of the Fund.
8. All orders for shares received by the Distributor shall, unless rejected by
the Distributor or the Fund, be accepted by the Distributor immediately upon
receipt and confirmed at an offering price determined in accordance with the
provisions of the Prospectus and the 1940 Act, and applicable rules in effect
thereunder. The Distributor shall not hold orders subject to acceptance nor
otherwise delay their execution. The provisions of this Section shall not be
construed to restrict the right of the Fund to withhold shares from sale under
Section 18 hereof.
9. The Fund or its transfer agent shall be promptly advised of all orders
received, and shall cause shares to be issued upon payment therefor in New York
or Los Angeles Clearing House Funds.
10. The Distributor shall adopt and follow procedures as approved by the
officers of the Fund for the confirmation of sales to dealers, the collection
of amounts payable by dealers on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
Securities and Exchange Commission or the National Association of Securities
Dealers, Inc. ("NASD"), as such requirements may from time to time exist.
11. The Distributor, as a principal underwriter under this Agreement for Class
A shares, shall receive (i) that part of the sales charge which is retained by
the Distributor after allowance of discounts to dealers, unless waived by the
Distributor for certain qualified fee-based programs, as set forth in the
Prospectus of the Fund, and (ii) amounts payable to the Distributor pursuant to
the Fund's Plan of Distribution under Rule 12b-1 under the 1940 Act.
12. The Distributor, as principal underwriter under this agreement for Class B
shares shall receive (i) distribution fees as commissions for the sale of Class
B shares and contingent deferred sales charges ("CDSC") (as defined below), as
set forth in the Fund's Prospectus, and (ii) shareholder service fees at the
rate of 0.25% per annum of the average daily net asset value of Class B shares
pursuant to the Fund's Class B Plan of Distribution under Rule 12b-1 under the
1940 Act.
13. (a) In accordance with the Plan of Distribution of the Fund in respect of
the Class B shares (the "Plan"), the Fund shall pay to the Distributor or, at
the Distributor's direction, to a third-party, monthly in arrears on or prior
to the 10th business day of the following calendar month, the Distributor's
Allocable Portion (as defined below) of a fee (the "Distribution Fee") which
shall accrue daily in an amount equal to the product of (A) the daily
equivalent of 0.75% per annum multiplied by (B) the net asset value of the
Class B shares of the Fund outstanding on such day. The Fund agrees to withhold
from redemption proceeds of the Class B shares, the Distributor's Allocable
Portion of any CDSCs payable with respect to the Class B shares, as provided in
the Fund's Prospectus, and to pay the same over to the Distributor or, at the
Distributor's direction to a third-party, at the time the redemption proceeds
are payable to the holder of such shares redeemed. Payment of these CDSC
amounts to the Distributor is not contingent upon the adoption or continuation
of any Plan.
(b) For purposes of this Agreement, the term "Allocable Portion" of
Distribution Fees and CDSCs payable with respect to Class B shares shall mean
the portion of such Distribution Fees and CDSC allocated to the Distributor in
accordance with the Allocation Schedule attached hereto as Schedule A.
(c) The Distributor shall be considered to have completely earned the right to
the payment of its Allocable Portion of the Distribution Fees and the right to
payment of its Allocable Portion of the CDSCs with respect to each "Commission
Share" (as defined in the Allocation Schedule attached hereto as Schedule A)
upon the settlement date of such Commission Share taken into account in
determining the Distributor's Allocable Portion of Distribution Fees.
(d) The provisions set forth in Section 1 of the Plan (in effect on the date
hereof) relating to Class B shares, together with the related definitions are
hereby incorporated into this Section 13 by reference with the same force and
effect as if set forth herein in their entirety.
14. The Fund agrees to use its best efforts to maintain its registration as a
diversified open-end management investment company under the 1940 Act.
15. The Fund agrees to use its best efforts to maintain an effective Prospectus
under the Securities Act of 1933, as amended, and warrants that such Prospectus
will contain all statements required by and will conform with the requirements
of such Securities Act of 1933 and the rules and regulations thereunder, and
that no part of any such Prospectus, at the time the Registration Statement of
which it is a part becomes effective, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein not misleading (excluding any
information provided by the Distributor in writing for inclusion in the
Prospectus). The Distributor agrees and warrants that it will not in the sale
of shares use any Prospectus, advertising or sales literature not approved by
the Fund or its officers nor make any untrue statement of a material fact nor
omit the stating of a material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made, not
misleading. The Distributor agrees to indemnify and hold the Fund harmless
from any and all loss, expense, damage and liability resulting from a breach of
the agreements and warranties contained in this Section, or from the use of any
sales literature, information, statistics or other aid or device employed in
connection with the sale of shares.
16. The expense of each printing of each Prospectus and each revision thereof
or addition thereto deemed necessary by the Fund's officers to meet the
requirements of applicable laws shall be divided between the Fund, the
Distributor and any other principal underwriter of the shares of the Fund as
follows:
(a) the Fund shall pay the typesetting and make-ready charges;
(b) the printing charges shall be prorated between the Fund, the Distributor,
and any other principal underwriter(s) in accordance with the number of copies
each receives; and
(c) expenses incurred in connection with the foregoing, other than to meet the
requirements of the Securities Act of 1933, as amended, or other applicable
laws, shall be borne by the Distributor, except in the event such incremental
expenses are incurred at the request of any other principal underwriter(s), in
which case such incremental expenses shall be borne by the principal
underwriter(s) making the request.
17. The Fund agrees to use its best efforts to qualify and maintain the
qualification of an appropriate number of the shares of each series or class it
offers for sale under the securities laws of such states as the Distributor and
the Fund may approve. Any such qualification for any series or class may be
withheld, terminated or withdrawn by the Fund at any time in its discretion.
The expense of qualification and maintenance of qualification shall be borne by
the Fund, but the Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund or its
counsel in connection with such qualifications.
18. The Fund may withhold shares of any series or class from sale to any person
or persons or in any jurisdiction temporarily or permanently if, in the opinion
of its counsel, such offer or sale would be contrary to law or if the Directors
or the President or any Vice President of the Fund determines that such offer
or sale is not in the best interest of the Fund. The Fund will give prompt
notice to the Distributor of any withholding and will indemnify it against any
loss suffered by the Distributor as a result of such withholding by reason of
nondelivery of shares of any series or class after a good faith confirmation by
the Distributor of sales thereof prior to receipt of notice of such
withholding.
19. (a) This Agreement may be terminated at any time, without payment of any
penalty, as to the Fund or any series on sixty (60) days' written notice by the
Distributor to the Fund.
1. This Agreement may be terminated as to the Fund or any series or class by
either party upon five (5) days' written notice to the other party in the event
that the Securities and Exchange Commission has issued an order or obtained an
injunction or other court order suspending effectiveness of the Registration
Statement covering the shares of the Fund or such series or class.
(c) This Agreement may be terminated as to the Fund or any series or class by
the Fund upon five (5) days' written notice to the Distributor provided either
of the following events has occurred:
(i) The NASD has expelled the Distributor or suspended its membership in that
organization; or
(ii) the qualification, registration, license or right of the Distributor to
sell shares of any series in a particular state has been suspended or canceled
by the State of California or any other state in which sales of the shares of
the Fund or such series during the most recent 12-month period exceeded 10% of
all shares of such series sold by the Distributor during such period.
(d) This Agreement may be terminated as to the Fund or any series or class at
any time on sixty (60) days' written notice to the Distributor without the
payment of any penalty, by vote of a majority of the Independent Directors or
by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund or such series or class.
20. This Agreement shall not be assignable by either party hereto and in the
event of assignment shall automatically terminate forthwith. The term
"assignment" shall have the meaning set forth in the 1940 Act. Notwithstanding
this Section, this Agreement, with respect to the Fund's Class B shares, has
been approved in accordance with Section 22 in anticipation of the
Distributor's transfer of its Allocable Portion (but not its obligations under
this Agreement) to a third-party pursuant to a "Purchase and Sale Agreement" in
order to raise funds to cover distribution expenditures, and such transfer will
not cause of a termination of this Agreement.
21. No provision of this Agreement shall protect or purport to protect the
Distributor against any liability to the Fund or holders of its shares for
which the Distributor would otherwise be liable by reason of willful
misfeasance, bad faith, or gross negligence.
22. This Agreement shall become effective on March 15, 2000. Unless sooner
terminated in accordance with the other provisions hereof, this Agreement shall
continue in effect until [agreement expiration date], and shall continue in
effect from year to year thereafter but only so long as such continuance is
specifically approved at least annually by (i) the vote of a majority of the
Independent Directors of the Fund cast in person at a meeting called for the
purpose of voting on such approval, and (ii) the vote of either a majority of
the entire Board of Directors of the Fund or a majority (within the meaning of
the 1940 Act) of the outstanding voting securities of the Fund.
23. If the Fund shall at any time issue shares in more than one series or
class, this Agreement shall take effect with respect to such series or class of
the Fund which may be established in the future at such time as it has been
approved as to such series or class by vote of the Board of Directors and the
Independent Directors in accordance with Section 22. The Agreement as approved
with respect to any series or class shall specify the compensation payable to
the Distributor pursuant to Sections 11 and 12, as well as any provisions which
may differ from those herein with respect to such series, subject to approval
in writing by the Distributor. This Agreement may be approved, amended,
continued or renewed with respect to a series or class as provided herein
notwithstanding such approval, amendment, continuance or renewal has not been
effected with respect to any one or more other series or class of the Fund.
This Agreement shall be construed under and shall be governed by the laws of
the State of California, and the parties hereto agree that proper venue of any
action with respect hereto shall be Los Angeles County, California.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate original by their officers thereunto duly authorized, as
of [date].
AMERICAN FUNDS DISTRIBUTORS, INC. [NAME OF FUND]
By: By:
Kevin G. Clifford [ ]
President President
By: By:
Michael J. Downer [ ]
Secretary Secretary
SCHEDULE A
TO THE
AMENDED AND RESTATED PRINCIPAL UNDERWRITING AGREEMENT
ALLOCATION PROCEDURES
The following relates solely to B shares.
The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect
of B shares shall be 100% until such time as the Distributor shall cease to
serve as exclusive distributor of B shares; thereafter, collections that
constitute CDSCs and Distribution Fees relating to B shares shall be allocated
among the Distributor and any successor distributor ("Successor Distributor")
in accordance with this Schedule.
Defined terms used in this Schedule and not otherwise defined herein shall have
the meanings assigned to them in the Amended and Restated Principal
Underwriting Agreement (the "Distribution Agreement"), of which this Schedule
is a part. As used herein the following terms shall have the meanings
indicated:
"Commission Share" means each B share issued under circumstances which would
normally give rise to an obligation of the holder of such share to pay a CDSC
upon redemption of such share (including, without limitation, any B share
issued in connection with a permitted free exchange), and any such share shall
continue to be a Commission Share of the applicable Fund prior to the
redemption (including a redemption in connection with a permitted free
exchange) or conversion of such share, even though the obligation to pay the
CDSC may have expired or conditions for waivers thereof may exist.
"Date of Original Issuance" means in respect of any Commission Share, the date
with reference to which the amount of the CDSC payable on redemption thereof,
if any, is computed.
"Free Share" means, in respect of a Fund, each B share of the Fund, other than
a Commission Share (including, without limitation, any B share issued in
connection with the reinvestment of dividends or capital gains).
"Inception Date" means in respect of a Fund, the first date on which the Fund
issued shares.
"Net Asset Value" means the net asset value determined as set forth in the
Prospectus of each Fund.
"Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share
sold by one of the selling agents listed on Exhibit I. If, subsequent to the
Successor Distributor becoming exclusive distributor of the B shares, the
Distributor reasonably determines that the transfer agent is able to track all
Commission Shares and Free Shares sold by any of the selling agents listed on
Exhibit I in the same manner as Commission Shares and Free Shares are currently
tracked in respect of selling agents not listed on Exhibit I, then Exhibit I
shall be amended to delete such selling agent from Exhibit I so that Commission
Shares and Free Shares sold by such selling agent will no longer be treated as
Omnibus Shares.
PART I: ATTRIBUTION OF B SHARES
B shares that are outstanding from time to time, shall be attributed to the
Distributor and each Successor Distributor in accordance with the following
rules;
(1) Commission Shares other than Omnibus Shares:
(a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission
Shares") attributed to the Distributor shall be those Non-Omnibus Commission
Shares the date of Original Issuance of which occurred on or after the
Inception Date of the applicable Fund and on or prior to the date the
Distributor ceased to be exclusive distributor of B shares of the Fund.
(b) Non-Omnibus Commission Shares attributable to each Successor Distributor
shall be those Non-Omnibus Commission Shares the Date of Original Issuance of
which occurs after the date such Successor Distributor became the exclusive
distributor of B shares of the Fund and on or prior to the date such Successor
Distributor ceased to be the exclusive distributor of B shares of the Fund.
(c) A Non-Omnibus Commission Share of a Fund issued in consideration of the
investment of proceeds of the redemption of a Non-Omnibus Commission Share of
another Fund (the "Redeeming Fund") in connection with a permitted free
exchange, is deemed to have a Date of Original Issuance identical to the Date
of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund,
and any such Commission Share will be attributed to the Distributor or
Successor Distributor based upon such Date of Original Issuance in accordance
with rules (a) and (b) above.
(2) Free Shares:
Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund
outstanding on any date shall be attributed to the Distributor or a Successor
Distributor, as the case may be, in the same proportion that the Non-Omnibus
Commission Shares of a Fund outstanding on such date are attributed to each on
such date; provided that if the Distributor and its transferees reasonably
determines that the transfer agent is able to produce monthly reports that
track the Date of Original Issuance for such Non-Omnibus Free Shares, then such
Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above.
(3) Omnibus Shares:
Omnibus Shares of a Fund outstanding on any date shall be attributed to the the
Distributor or a Successor Distributor, as the case may be, in the same
proportion that the Non-Omnibus Commission Shares of the applicable Fund
outstanding on such date are attributed to it on such date; provided that if
the Distributor reasonably determines that the transfer agent is able to
produce monthly reports that track the Date of Original Issuance for the
Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause
1(a), (b) and (c) above.
PART II: ALLOCATION OF CDSCs
(1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares:
CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be
allocated to the Distributor or a Successor Distributor depending upon whether
the related redeemed Commission Share is attributable to the Distributor or
such Successor Distributor, as the case may be, in accordance with Part I
above.
(2) CDSCs Related to the Redemption of Omnibus Shares:
CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the
Distributor or a Successor Distributor in the same proportion that CDSCs
related to the redemption of Commission Shares are allocated to each thereof;
provided, that if the Distributor reasonably determines that the transfer agent
is able to produce monthly reports which track the Date of Original Issuance
for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus
Shares shall be allocated among the Distributor and any Successor Distributor
depending on whether the related redeemed Omnibus Share is attributable to the
Distributor or a Successor Distributor, as the case may be, in accordance with
Part I above.
PART III: ALLOCATION OF DISTRIBUTION FEE
Assuming that the Distribution Fee remains constant over time so that Part IV
hereof does not become operative:
(1) The portion of the aggregate Distribution Fee accrued in respect of all B
shares of a Fund during any calendar month allocable to the Distributor or a
Successor Distributor is determined by multiplying the total of such
Distribution Fee by the following fraction:
(A + C)/2
(B + D)/2
where:
A= The aggregate Net Asset Value of all B shares of a Fund attributed to the
Distributor or such Successor Distributor, as the case may be, and outstanding
at the beginning of such calendar month
B= The aggregate Net Asset Value of all B shares of a Fund at the beginning of
such calendar month
C= The aggregate Net Asset Value of all B shares of a Fund attributed to the
Distributor or such Successor Distributor, as the case may be, and outstanding
at the end of such calendar month
D= The aggregate Net Asset Value of all B shares of a Fund at the end of such
calendar month
(2) If the Distributor reasonably determines that the transfer agent is able to
produce automated monthly reports that allocate the average Net Asset Value of
the Commission Shares (or all B shares if available) of a Fund among the
Distributor and any Successor Distributor in a manner consistent with the
methodology detailed in Part I and Part III(1) above, the portion of the
Distribution Fee accrued in respect of all such B shares of a Fund during a
particular calendar month will be allocated to the Distributor or a Successor
Distributor by multiplying the total of such Distribution Fee by the following
fraction:
(A)/(B)
where:
A= Average Net Asset Value of all such B shares of a Fund for such calendar
month attributed to the Distributor or a Successor Distributor, as the case may
be
B= Total average Net Asset Value of all such B shares of a Fund for such
calendar month
PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR
DISTRIBUTOR ALLOCABLE PORTION
The parties to the Distribution Agreement recognize that, if the terms of any
distributor's contract, any distribution plan, any prospectus, the Conduct
Rules or any other applicable law change so as to disproportionately reduce, in
a manner inconsistent with the intent of this Distribution Agreement, the
amount of the Distributor's Allocable Portion or any Successor Distributor's
Allocable Portion had no such change occurred, the definitions of the
Distributor's Allocable Portion and/or the Successor Distributor's Allocable
Portion in respect of the B shares relating to a Fund shall be adjusted by
agreement among the relevant parties; provided, however, if the Distributor,
the Successor Distributor and the Fund cannot agree within thirty (30) days
after the date of any such change in applicable laws or in any distributor's
contract, distribution plan, prospectus or the Conduct Rules, they shall submit
the question to arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on each of them.
THE INCOME FUND OF AMERICA, INC.
One Market, Steuart Tower, Suite 1800 S San Francisco, California 94105-1409
Mailing Address: P.O. Box 7650, San Francisco, California 94120-7650
Telephone (415) 421-9360
January 15, 1999
Capital Research and Management Company
333 South Hope Street, 55th Floor
Los Angeles, CA 90071
RE: DELEGATION OF RESPONSIBILITIES UNDER RULE 17F-5
Dear Mesdames/Sirs:
This Agreement confirms, and sets forth the responsibilities of the parties in
connection with, the appointment of Capital Research and Management Company
("CRMC") as the Foreign Custody Manager of The Income Fund of America, Inc.
(the "Corporation"), in accordance with rule 17f-5, as amended, under the
Investment Company Act of 1940 (the "1940 Act"). CRMC hereby accepts such
appointment as of the date first written above. All capitalized terms used
herein and not otherwise defined have the meanings assigned in rule 17f-5.
The Corporation may, from time to time and in accordance with this Agreement,
place or maintain in the care of an Eligible Foreign Custodian, any of the
Corporation's investments (including non-U.S. currencies) for which the primary
market is outside the United States, and such cash and cash equivalents as are
reasonably necessary to effect the Corporation's transactions in such
investments, PROVIDED THAT:
(a) CRMC, as Foreign Custody Manager, determines that the Corporation's assets
will be subject to reasonable care, based on the standards applicable to
custodians in the relevant market, if maintained with the custodian, after
considering all factors relevant to the safekeeping of such assets, including,
without limitation:
(1) the custodian's practices, procedures, and internal controls, including,
but not limited to, the physical protections available for certificated
securities (if applicable), the method of keeping custodial records, and the
security and data protection practices;
(2) whether the custodian has the requisite financial strength to provide
reasonable care for the Corporation's assets;
(3) the custodian's general reputation and standing and, in the case of a
securities depository, the depository's operating history and number of
participants; and
(4) whether the Corporation will have jurisdiction over and be able to enforce
judgments against the custodian, such as by virtue of the existence of any
offices of the custodian in the U.S. or the custodian's consent to service of
process in the U.S.
(b) Each of the Corporation's non-U.S. custody arrangements are governed by a
written contract (or, in the case of a Securities Depository, by such a
contract, by the rules or established practices or procedures of the
depository, or by any combination of the foregoing) that CRMC, as Foreign
Custody Manager, has determined will provide reasonable care for the
Corporation's assets based on the standards set forth in paragraph (a) above.
(1) Such contract shall include provisions that provide:
(i) for indemnification or insurance arrangements (or any combination of the
foregoing) such that the Corporation will be adequately protected against the
risk of loss of assets held in accordance with such contract;
(ii) that the Corporation's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the custodian or its
creditors except a claim of payment for their safe custody or administration
or, in the case of cash deposits, liens or rights in favor of creditors of the
custodian arising under bankruptcy, insolvency, or similar laws;
(iii) that beneficial ownership for the Corporation's assets will be freely
transferable without the payment of money or value other than for safe custody
or administration;
(iv) that adequate records will be maintained identifying the assets as
belonging to the Corporation or as being held by a third party for the benefit
of the Corporation;
(v) that the Corporation's independent public accountants will be given access
to those records or confirmation of the contents of those records; and
(vi) that the Corporation will receive periodic reports with respect to the
safekeeping of the Corporation's assets, including, but not limited to,
notification of any transfer to or from the Corporation's account or a third
party account containing assets held for the benefit of the Corporation.
(2) Such contract may contain, in lieu of any or all of the provisions
specified in subparagraph (1) above, such other provisions that CRMC, as
Foreign Custody Manager, determines will provide, in their entirety, the same
or a greater level of care and protection for Corporation assets as the
specified provisions, in their entirety.
(c) (1) CRMC, as Foreign Custody Manager, will have established a system to
monitor the appropriateness of maintaining the Corporation's assets with a
particular custodian under paragraph (a) above, and the contract governing the
Corporation's arrangements under paragraph (b) above.
(2) If an arrangement no longer meets the requirements of paragraph (c), the
Corporation must withdraw its assets from the custodian as soon as reasonably
practicable.
CRMC, as Foreign Custody Manager, will provide written reports notifying the
Corporation's Board of Directors of the placement of the Corporation's assets
with a particular custodian and of any material change in the Corporation's
arrangements, with the reports to be provided to the Board at such times as the
Board deems reasonable and appropriate based on the circumstances of the
Corporation's non-U.S. custody arrangements.
CRMC, in performing the responsibilities delegated to it as the Corporation's
Foreign Custody Manager, will exercise reasonable care, prudence and diligence
such as a person having responsibility for the safekeeping of the Corporation's
assets would exercise.
This Agreement (and the appointment of CRMC as the Corporation's Foreign
Custody Manager) may be terminated at any time, without payment or any penalty,
by the Board of Directors of the Corporation or by vote of a majority (within
the meaning of the 1940 Act) of the outstanding voting securities of the
Corporation, on sixty (60) days' written notice to CRMC, or by CRMC on like
notice to the Corporation.
The obligations of the Corporation under this Agreement are not binding upon
any of the Directors, officers, employees, agents or shareholders of the
Corporation individually, but bind only the Corporation's estate. CRMC agrees
to look solely to the assets of the Corporation for the satisfaction of any
liability in respect of the Corporation under this Agreement and will not seek
recourse against such Directors, officers, employees, agents or shareholders,
or any of them, or any of their personal assets for such satisfaction.
Very truly yours,
THE INCOME FUND OF AMERICA, INC.
By:/s/Patrick F. Quan
Patrick F. Quan, Secretary
ACCEPTED AND AGREED as of the date first written above:
CAPITAL RESEARCH AND
MANAGEMENT COMPANY
By:/s/Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Executive Vice President
FORM OF
PLAN OF DISTRIBUTION
OF
[FUND]
RELATING TO ITS
CLASS B SHARES
WHEREAS, [Name of Fund] (the "Fund") is a Maryland Corporation that offers
shares of common stock;
WHEREAS, American Funds Distributors, Inc. ("AFD") or any successor entity
designated by the Fund (AFD and any successor collectively are referred to as
"Distributor") will serve as distributor of the shares of common stock of the
Fund, and the Fund and Distributor are parties to a principal underwriting
agreement (the "Agreement");
WHEREAS, the purpose of this Plan of Distribution (the "Plan") is to
authorize the Fund to bear expenses of distribution of its Class B shares; and
WHEREAS, the Board of Directors of the Fund has determined that there is a
reasonable likelihood that this Plan will benefit the Fund and its
shareholders;
NOW, THEREFORE, the Fund adopts this Plan as follows:
1. PAYMENTS TO DISTRIBUTOR. The Fund may expend pursuant to this Plan and as
set forth below an aggregate amount not to exceed 1.00% per annum of the
average net assets of the Fund's Class B shares.
2. SERVICE FEES. The Fund shall pay to the Distributor monthly in arrears a
shareholder servicing fee (the "Shareholder Servicing Fee") at the rate of
0.25% on the Fund's Class B shares outstanding for less than one year at the
end of the month for which such fee is computed. The Fund shall also pay to
the Distributor quarterly a Shareholder Servicing Fee at the rate of 0.25% per
annum on Class B shares that are outstanding for one year or more at the end of
the quarter for which such fee is computed. The Shareholder Servicing Fee is
designed to compensate Distributor for paying Service Fees to broker-dealers
with whom Distributor has an agreement.
3. DISTRIBUTION FEES. The Fund shall pay to the Distributor monthly in arrears
its "Allocable Portion" (as described in Schedule A to this Plan "Allocation
Schedule", and until such time as the Fund designates a successor to AFD as
distributor, the Allocable Portion shall equal 100%) of a fee (the
"Distribution Fee"), which shall accrue each day in an amount equal to the
product of (A) the daily equivalent of 0.75% per annum multiplied by (B) the
net asset value of the Fund's B shares outstanding on each day.
The Distributor may sell and assign its right to its Allocable Portion (but not
its obligations to the Fund under the Agreement) of the Distribution Fee to a
third party, and such transfer shall be free and clear of offsets or claims the
Fund may have against the Distributor, it being understood that the Fund is not
releasing the Distributor from any of its obligations to the Fund under the
Agreement or any of the assets the Distributor continues to own. The Fund may
agree, at the request of the Distributor, to pay the Allocable Portion of the
Distribution Fee directly to the third party transferee.
Any Agreement between the Fund and the Distributor relating to the Fund's B
shares shall provide that:
(i) the Distributor will be deemed to have performed all services required to
be performed in order to be entitled to receive its Allocable Portion of the
Distribution Fee payable in respect of each "Commission Share" (as defined in
the Allocation Schedule) upon the settlement date of each sale of such
Commission Share taken into account in determining such Distributor's Allocable
Portion of the Distribution Fee;
(ii) notwithstanding anything to the contrary in this Plan or the Agreement,
the Fund's obligation to pay the Distributor its Allocable Portion of the
Distribution Fee shall not be terminated or modified (including without
limitation, by change in the rules applicable to the conversion of the B shares
into shares of another class) for any reason (including a termination of this
Plan or the Agreement between such Distributor and the Fund) except:
(a) to the extent required by a change in the Investment Company Act of 1940
(the "1940 Act"), the rules and regulations under the 1940 Act, the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD"), or
any judicial decisions or interpretive pronouncements by the Securities and
Exchange Commission, which is either binding upon the Distributor or generally
complied with by similarly situated distributors of mutual fund shares, in each
case enacted, promulgated, or made after
March 15, 2000,
(b) on a basis which does not alter the Distributor's Allocable Portion of the
Distribution Fee computed with reference to Commission Shares of the Fund, the
Date of Original Issuance (as defined in the Allocation Schedule) of which
occurs on or prior to the adoption of such termination or modification and with
respect to Free Shares (as defined in the Allocation Schedule) which would be
attributed to the Distributor under the Allocation Schedule with reference to
such Commission Shares, or
(c) in connection with a Complete Termination (as defined below) of this Plan
by the Fund;
(iii) the Fund will not take any action to waive or change any contingent
deferred sales charge ("CDSC") in respect to the B shares, the Date of Original
Issuance of which occurs on or prior to the taking of such action except as
provided in the Fund's prospectus or statement of additional information on the
date such Commission Share was issued, without the consent of the Distributor
or its assigns;
(iv) notwithstanding anything to the contrary in this Plan or the Agreement,
none of the termination of the Distributor's role as principal underwriter of
the B shares of the Fund, the termination of the Agreement or the termination
of this Plan will terminate the Distributor's right to its Allocable Portion of
the CDSCs in respect of B shares of the Fund;
(v) except as provided in (ii) above and notwithstanding anything to the
contrary in this Plan or the Agreement, the Fund's obligation to pay the
Distributor's Allocable Portion of the Distribution Fees and CDSCs payable in
respect of the B shares of the Fund shall be absolute and unconditional and
shall not be subject to dispute, offset, counterclaim or any defense
whatsoever, at law or equity, including, without limitation, any of the
foregoing based on the insolvency or bankruptcy of the Distributor; and
(vi) until the Distributor has been paid its Allocable Portion of the
Distribution Fees in respect of the B shares of the Fund, the Fund will not
adopt a plan of liquidation in respect of the B shares without the consent of
the Distributor and its assigns. For purposes of this Plan, the term Allocable
Portion of the Distribution Fees or CDSCs payable in respect of the B shares as
applied to any Distributor shall mean the portion of such Distribution Fees or
CDSCs payable in respect of such B shares of the Fund allocated to the
Distributor in accordance with the Allocation Schedule as it relates to the B
shares of the Fund, and until such time as the Fund designates a successor to
AFD as distributor, the Allocable Portion shall equal 100% of the Distribution
Fees and CDSCs. For purposes of this Plan, the term "Complete Termination" in
respect of this Plan as it relates to the B shares means a termination of this
Plan involving the complete cessation of the payment of Distribution Fees in
respect of all B shares, the termination of the distribution plans and
principal underwriting agreements, and the complete cessation of the payment of
any asset based sales charge (within the meaning of the Conduct Rules of the
NASD) or similar fees in respect of the Fund and any successor mutual fund or
any mutual fund acquiring a substantial portion of the assets of the Fund (the
Fund and such other mutual funds hereinafter referred to as the "Affected
Funds") and in respect of the B shares and every future class of shares (other
than future classes of shares established more than eight years after the date
of such termination) which has substantially similar characteristics to the B
shares (all such classes of shares the "Affected Classes of Shares") of such
Affected Funds taking into account the manner of payment and amount of asset
based sales charge, CDSC or other similar charges borne directly or indirectly
by the holders of such shares; provided that
(a) the Board of Directors of such Affected Funds, including the Independent
Directors (as defined below) of the Affected Funds, shall have determined that
such termination is in the best interest of such Affected Funds and the
shareholders of such Affected Funds, and
(b) such termination does not alter the CDSC as in effect at the time of such
termination applicable to Commission Shares of the Fund, the Date of Original
Issuance of which occurs on or prior to such termination.
2. APPROVAL BY THE BOARD. This Plan shall not take effect until it has been
approved, together with any related agreement, by votes of the majority of both
(i) the Board of Directors of the Fund and (ii) those Directors of the Fund who
are not "interested persons" of the Fund (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of this Plan or any
agreement related to it (the "Independent Directors"), cast in person at a
meeting called for the purpose of voting on this Plan and/or such agreement.
3. REVIEW OF EXPENDITURES. At least quarterly, the Board of Directors shall
be provided by any person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to this Plan or any related agreement, and the
Board shall review, a written report of the amounts expended pursuant to this
Plan and the purposes for which such expenditures were made.
4. TERMINATION OF PLAN. This Plan may be terminated as to the Fund's B-shares
at any time by vote of a majority of the Independent Directors, or by vote of a
majority of the outstanding B shares of the Fund. Unless sooner terminated in
accordance with this provision, this Plan shall continue in effect until March
31, 2000. It may thereafter be continued from year to year in the manner
provided for in paragraph 2 hereof.
Notwithstanding the foregoing or paragraph 6, below, any amendment or
termination of this Plan shall not affect the rights of the Distributor to
receive its Allocable Portion of the Distribution Fee, unless the termination
constitutes a Complete Termination of this Plan as described in paragraph 1
above.
5. REQUIREMENTS OF AGREEMENT. Any Agreement related to this Plan shall be in
writing, and shall provide:
a. that such agreement may be terminated as to the Fund at any time, without
payment of any penalty by the vote of a majority of the Independent Directors
or by a vote of a majority of the outstanding B shares of the Fund, on not more
than sixty (60) days' written notice to any other party to the agreement; and
b. that such agreement shall terminate automatically in the event of its
assignment.
6. AMENDMENT. This Plan may not be amended to increase materially the maximum
amount of fee or other distribution expenses provided for in paragraph 1 hereof
with respect to the Class B shares of the Fund unless such amendment is
approved by vote of a majority of the outstanding voting securities of the
Class B shares of the Fund as provided in paragraph 2 hereof, and no other
material amendment to this Plan shall be made unless approved in the manner
provided for in paragraph 2 hereof.
7. NOMINATION OF DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors shall be committed to the discretion of the
Independent Directors of the Fund.
8. ISSUANCE OF SERIES OF SHARES. If the Fund shall at any time issue shares
in more than one series, this Plan may be adopted, amended, continued or
renewed with respect to a series as provided herein, notwithstanding that such
adoption, amendment, continuance or renewal has not been effected with respect
to any one or more other series of the Fund.
9. RECORD RETENTION. The Fund shall preserve copies of this Plan and any
related agreement and all reports made pursuant to paragraph 3 hereof for not
less than six (6) years from the date of this Plan, or such agreement or
reports, as the case may be, the first two (2) years of which such records
shall be stored in an easily accessible place.
IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its
officers thereunto duly authorized, as of December __, 1999.
[Name of Fund]
By: ____________________________
Its: ____________________________
SCHEDULE A
TO THE
PLAN OF DISTRIBUTION OF
[NAME OF FUND]
RELATING TO ITS CLASS B SHARES
ALLOCATION SCHEDULE
The following relates solely to B shares.
The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect
of B shares shall be 100% until such time as the Distributor shall cease to
serve as exclusive distributor of B shares; thereafter, collections that
constitute CDSCs and Distribution Fees relating to B shares shall be allocated
among the Distributor and any successor distributor ("Successor Distributor")
in accordance with this Schedule.
Defined terms used in this Schedule and not otherwise defined herein shall have
the meanings assigned to them in the Amended and Restated Principal
Underwriting Agreement (the "Distribution Agreement"), of which this Schedule
is a part. As used herein the following terms shall have the meanings
indicated:
"Commission Share" means each B share issued under circumstances which would
normally give rise to an obligation of the holder of such share to pay a CDSC
upon redemption of such share (including, without limitation, any B share
issued in connection with a permitted free exchange), and any such share shall
continue to be a Commission Share of the applicable Fund prior to the
redemption (including a redemption in connection with a permitted free
exchange) or conversion of such share, even though the obligation to pay the
CDSC may have expired or conditions for waivers thereof may exist.
"Date of Original Issuance" means in respect of any Commission Share, the date
with reference to which the amount of the CDSC payable on redemption thereof,
if any, is computed.
"Free Share" means, in respect of a Fund, each B share of the Fund, other than
a Commission Share (including, without limitation, any B share issued in
connection with the reinvestment of dividends or capital gains).
"Inception Date" means in respect of a Fund, the first date on which the Fund
issued shares.
"Net Asset Value" means the net asset value determined as set forth in the
Prospectus of each Fund.
"Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share
sold by one of the selling agents listed on [Exhibit I]. If, subsequent to the
Successor Distributor becoming exclusive distributor of the B shares, the
Distributor reasonably determines that the transfer agent is able to track all
Commission Shares and Free Shares sold by any of the selling agents listed on
Exhibit I in the same manner as Commission Shares and Free Shares are currently
tracked in respect of selling agents not listed on Exhibit I, then Exhibit I
shall be amended to delete such selling agent from Exhibit I so that Commission
Shares and Free Shares sold by such selling agent will no longer be treated as
Omnibus Shares.
PART I: ATTRIBUTION OF B SHARES
B shares that are outstanding from time to time, shall be attributed to the
Distributor and each Successor Distributor in accordance with the following
rules;
(1) Commission Shares other than Omnibus Shares:
(a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission
Shares") attributed to the Distributor shall be those Non-Omnibus Commission
Shares the date of Original Issuance of which occurred on or after the
Inception Date of the applicable Fund and on or prior to the date the
Distributor ceased to be exclusive distributor of B shares of the Fund.
(b) Non-Omnibus Commission Shares attributable to each Successor Distributor
shall be those Non-Omnibus Commission Shares the Date of Original Issuance of
which occurs after the date such Successor Distributor became the exclusive
distributor of B shares of the Fund and on or prior to the date such Successor
Distributor ceased to be the exclusive distributor of B shares of the Fund.
(c) A Non-Omnibus Commission Share of a Fund issued in consideration of the
investment of proceeds of the redemption of a Non-Omnibus Commission Share of
another Fund (the "Redeeming Fund") in connection with a permitted free
exchange, is deemed to have a Date of Original Issuance identical to the Date
of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund,
and any such Commission Share will be attributed to the Distributor or
Successor Distributor based upon such Date of Original Issuance in accordance
with rules (a) and (b) above.
(2) Free Shares:
Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund
outstanding on any date shall be attributed to the Distributor or a Successor
Distributor, as the case may be, in the same proportion that the Non-Omnibus
Commission Shares of a Fund outstanding on such date are attributed to each on
such date; provided that if the Distributor and its transferees reasonably
determines that the transfer agent is able to produce monthly reports that
track the Date of Original Issuance for such Non-Omnibus Free Shares, then such
Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above.
(3) Omnibus Shares:
Omnibus Shares of a Fund outstanding on any date shall be attributed to the
Distributor or a Successor Distributor, as the case may be, in the same
proportion that the Non-Omnibus Commission Shares of the applicable Fund
outstanding on such date are attributed to it on such date; provided that if
the Distributor reasonably determines that the transfer agent is able to
produce monthly reports that track the Date of Original Issuance for the
Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause
1(a), (b) and (c) above.
PART II: ALLOCATION OF CDSCs
(1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares:
CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be
allocated to the Distributor or a Successor Distributor depending upon whether
the related redeemed Commission Share is attributable to the Distributor or
such Successor Distributor, as the case may be, in accordance with Part I
above.
(2) CDSCs Related to the Redemption of Omnibus Shares:
CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the
Distributor or a Successor Distributor in the same proportion that CDSCs
related to the redemption of Commission Shares are allocated to each thereof;
provided, that if the Distributor reasonably determines that the transfer agent
is able to produce monthly reports which track the Date of Original Issuance
for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus
Shares shall be allocated among the Distributor and any Successor Distributor
depending on whether the related redeemed Omnibus Share is attributable to the
Distributor or a Successor Distributor, as the case may be, in accordance with
Part I above.
PART III: ALLOCATION OF DISTRIBUTION FEE
Assuming that the Distribution Fee remains constant over time so that Part IV
hereof does not become operative:
(1) The portion of the aggregate Distribution Fee accrued in respect of all B
shares of a Fund during any calendar month allocable to the Distributor or a
Successor Distributor is determined by multiplying the total of such
Distribution Fee by the following fraction:
(A + C)/2
(B + D)/2
where:
A= The aggregate Net Asset Value of all B shares of a Fund attributed to the
Distributor or such Successor Distributor, as the case may be, and outstanding
at the beginning of such calendar month
B= The aggregate Net Asset Value of all B shares of a Fund at the beginning of
such calendar month
C= The aggregate Net Asset Value of all B shares of a Fund attributed to the
Distributor or such Successor Distributor, as the case may be, and outstanding
at the end of such calendar month
D= The aggregate Net Asset Value of all B shares of a Fund at the end of such
calendar month
(2) If the Distributor reasonably determines that the transfer agent is able to
produce automated monthly reports that allocate the average Net Asset Value of
the Commission Shares (or all B shares if available) of a Fund among the
Distributor and any Successor Distributor in a manner consistent with the
methodology detailed in Part I and Part III(1) above, the portion of the
Distribution Fee accrued in respect of all such B shares of a Fund during a
particular calendar month will be allocated to the Distributor or a Successor
Distributor by multiplying the total of such Distribution Fee by the following
fraction:
(A)/(B)
where:
A= Average Net Asset Value of all such B shares of a Fund for such calendar
month attributed to the Distributor or a Successor Distributor, as the case may
be
B= Total average Net Asset Value of all such B shares of a Fund for such
calendar month
PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR
DISTRIBUTOR'S ALLOCABLE PORTION
The parties to the Distribution Agreement recognize that, if the terms of any
distributor's contract, any distribution plan, any prospectus, the Conduct
Rules or any other applicable law change so as to disproportionately reduce, in
a manner inconsistent with the intent of this Distribution Agreement, the
amount of the Distributor's Allocable Portion or any Successor Distributor's
Allocable Portion had no such change occurred, the definitions of the
Distributor's Allocable Portion and/or the Successor Distributor's Allocable
Portion in respect of the B shares relating to a Fund shall be adjusted by
agreement among the relevant parties; provided, however, if the Distributor,
the Successor Distributor and the Fund cannot agree within thirty (30) days
after the date of any such change in applicable laws or in any distributor's
contract, distribution plan, prospectus or the Conduct Rules, they shall submit
the question to arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on each of them.
FORM OF
MULTIPLE CLASS PLAN
WHEREAS, [Name of Fund] (the "Fund"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company that offers shares of common stock;
WHEREAS, American Funds Distributors, Inc. ("the Distributor") serves as the
principal underwriter for the Fund;
WHEREAS, the Fund has adopted a Plan of Distribution ("12b-1 Plan") under
which the Fund may bear expenses of distribution of its shares, including
payment and/or reimbursement to the Distributor for certain of its expenses
incurred in connection with the Fund;
WHEREAS, the Fund is authorized to divide, and has divided, the shares of the
Fund into two classes, designated as Class A shares and Class B shares;
WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management investment
companies to issue multiple classes of voting stock representing interests in
the same portfolio if, among other things, an investment company adopts a
written Multiple Class Plan (the "Plan") setting forth the separate
arrangement and expense allocation of each class and any related conversion
features or exchange privileges; and
WHEREAS, the Board of Directors of the Fund has determined, that it is in the
best interest of each class of the Fund individually, and the Fund as a whole,
to adopt this Plan;
NOW THEREFORE, the Fund adopts this Plan as follows:
1. Each class of shares will represent interests in the same portfolio of
investments of the Fund, and be identical in all respects to each other class,
except as set forth below. The differences among the various classes of shares
of the Fund will relate to: (i) distribution, service and other charges and
expenses as provided for in paragraph 3 of this Plan; (ii) the exclusive right
of each class of shares to vote on matters submitted to shareholders that
relate solely to that class or the separate voting right of each class on
matters for which the interests of one class differ from the interests of
another class; (iii) such differences relating to eligible investors as may be
set forth in the Fund's prospectus and statement of additional information
("SAI"), as the same may be amended or supplemented from time to time; (iv) the
designation of each class of shares; (v) conversion features; and (vi) exchange
privileges.
2. (a) Certain expenses may be attributable to the Fund, but not a particular
class of shares thereof. All such expenses will be borne by each class on the
basis of the relative aggregate net assets of the classes. Notwithstanding the
foregoing, the Distributor, the investment adviser or other provider of
services to the Fund may waive or reimburse the expenses of a specific class or
classes to the extent permitted by Rule 18f-3 under the 1940 Act and any other
applicable law.
(b) A class of shares may be permitted to bear expenses that are directly
attributable to that class, including: (i) any distribution fees associated
with any rule 12b-1 Plan for a particular class and any other costs relating to
implementing or amending such rule 12b-1 Plan; (ii) any service fees associated
with any rule 12b-1 Plan attributable to such class; and (iii) any shareholder
servicing fees attributable to such class.
(c) Any additional incremental expenses not specifically identified above that
are subsequently identified and determined to be applied properly to one class
of shares of the Fund shall be so applied upon approval by votes of the
majority of both (i) the Board of Directors of the Fund; and (ii) those
Directors of the Fund who are not "interested persons" of the Fund (as defined
in the 1940 Act) ("Independent Directors").
3. Each class of the Fund shall differ in the amount of, and the manner in
which distribution costs are borne by shareholders and in the costs associated
with transfer agency services as follows:
(a) Class A shares
(i) Class A shares are sold at net asset value plus a front-end sales charge,
at net asset value without a front-end sales charge but subject to a contingent
deferred sales charge ("CDSC"), and at net asset value without any sales
charge, as set forth in the Fund's prospectus and SAI.
(ii) Class A shares are subject to an annual distribution expense under the
Fund's Class A Plan of Distribution of up to 0.25% of average net assets, as
set forth in the Fund's prospectus, SAI, and Plan of Distribution. This
expense consists of a service fee of up to 0.25% plus certain other
distribution costs.
(b) Class B shares
(i) Class B shares shall be sold at net asset value without a front-end sales
charge, but are subject to a CDSC and maximum purchase limits as set forth in
the Fund's prospectus and SAI.
(ii) Class B shares shall be subject to an annual distribution expense under
the Fund's Class B Plan of Distribution of up 1.00% of average net assets, as
set forth in the Fund's prospectus, SAI, and Class B Plan of Distribution.
This expense shall consist of a distribution fee of 0.75% and a service fee of
0.25%.
(iii) Class B shares will automatically convert to Class A shares of the Fund
approximately eight years after purchase, as set forth in the Fund's prospectus
and SAI. All conversions shall be effected on the basis of the relative net
asset values of the two Classes without the imposition of any sales load or
other charge.
(iv) Class B shares shall be subject to a fee included within the transfer
agency expense for additional costs associated with tracking the age of each
class B share.
All other rights and privileges of Fund shareholders are identical regardless
of which class shareholders hold.
4. This Plan shall not take effect until it has been approved by votes of the
majority of both (i) the Board of Directors of the Fund; and (ii) the
Independent Directors.
5. This Plan shall become effective with respect to any class of shares of the
Fund, other than Class A or Class B shares, upon the commencement of the
initial public offering thereof (provided that the Plan has previously been
approved with respect to such additional class by votes of the majority of both
(i) the Board of Directors of the Fund; and (ii) Independent Directors prior to
the offering of such additional class of shares), and shall continue in effect
with respect to such additional class or classes until terminated in accordance
with paragraph 7. An addendum setting forth such specific and different terms
of such additional class or classes shall be attached to and made part of this
Plan.
6. No material amendment to the Plan shall be effective unless it is approved
by the votes of the majority of both (i) the Board of Directors of the Fund;
and (ii) Independent Directors.
7. This Plan may be terminated at any time with respect to the Fund as a whole
or any class individually, by the votes of the majority of both (i) the Board
of Directors of the Fund; and (ii) Independent Directors. This Plan may remain
in effect with respect to a particular class or classes of the Fund even if it
has been terminated in accordance with this paragraph with respect to any other
class.
IN WITNESS WHEROF, the Fund has caused this Plan to be executed by its
officers thereunto duly authorized, as of [date].
[Name of Fund]
THE CAPITAL GROUP COMPANIES
CODE OF CONDUCT
(as of October 1, 1999)
All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.
Over the years we have earned a reputation for the highest integrity.
Regardless of lesser standards that may be followed through business or
community custom, we must observe exemplary standards of honesty and integrity.
REPORTING VIOLATIONS
If you know of any violation of our Code of Conduct, you have a responsibility
to report it. Deviations from controls or procedures that safeguard the
company, including the assets of shareholders and clients, should also be
reported.
You can report confidentially to:
- - Your manager or department head
- - CGC Audit Committee:
Donnalisa Barnum
Larry P. Clemmensen
Roberta Conroy
Bill Hurt
Sonny Kamm
Mike Kerr
John McLaughlin
Bob O'Donnell
Tom Rowland
John Smet
Mark Smith
Wally Stern
Antonio Vegezzi
Shaw Wagener
Kelly Webb
- - Mike Downer or any other lawyer in the CGC Legal Group
- - Don Wolfe of Deloitte & Touche LLP (CGC's auditors)
CONFLICTS OF INTEREST
A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at work.
Associates must not place themselves or the company in a position of actual or
potential conflict. Associates may not accept gifts worth more than $100,
excessive business entertainment, loans, or anything else involving personal
gain from those who conduct business with the company. In addition, a business
entertainment event exceeding $200 in value should not be accepted unless the
associate receives permission from the Gifts Policy Committee.
REPORTING -- Although the limitations on accepting gifts applies to ALL
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report ALL gifts received)
and business entertainment in which an event exceeds $75.
GIFTS POLICY COMMITTEE
The Gifts Policy Committee oversees administration of and compliance with the
Policy.
INSIDER TRADING
Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.
While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply to
all CGC associates and extend to activities both within and outside each
associate's duties. All associates must read the Insider Trading Policy in the
Appendix of the CGC Handbook for Associates.
PERSONAL INVESTING POLICY
As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.
You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.
There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.
ALL ASSOCIATES
Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.
Favors or preferential treatment from stockbrokers may not be accepted.
Associates may not subscribe to any initial public offering or any other
securities offering that is subject to allocation (so-called "hot issues").
Generally, this prohibition applies to spouses of associates and any family
member residing in the same household. However, an associate may request that
the Personal Investing Policy Committee consider granting an exception.
COVERED PERSONS
Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. You should take the time to review this memo as ongoing interpretations
of the policy will be explained therein.
Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you are
trustee or custodian have a transaction in a security when the funds or client
accounts are considering or concluding a transaction in the same security.
Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).
PRE-CLEARANCE OF SECURITIES TRANSACTIONS
Before buying or selling securities, covered persons should find out if the
purchase or sale of a particular security would involve a conflict of interest.
This involves checking with the CGC Legal Group based in LAO by calling [phone
number]. (You will generally receive a response within one business day.)
Unless a shorter period is specified, clearance is good for two trading days
(including the day you check). If you have not executed your transaction
within this period, you must again pre-clear your transaction.
Covered persons must promptly submit quarterly reports of certain transactions.
Transactions of securities (including fixed-income securities) or options (see
below) must be pre-cleared as described above and reported except for: gifts
or bequests of securities (although pre-clearance and reporting are required if
these securities are later sold); open-end investment companies (mutual funds);
shares of CGC stock; money market instruments with maturities of one year or
less; direct obligations of the U.S. Government, bankers' acceptances, CDs or
other commercial paper; commodities; and options or futures on broad-based
indices. Covered persons must also report transactions made by family members
in their household and by those for which they are a trustee or custodian.
Reporting forms will be supplied at the appropriate times.
In addition, the following transactions must be reported but need not have been
pre-cleared: transactions in debt instruments rated "A" or above by at least
one national rating service; sales pursuant to tender offers; and dividend
reinvestment plan purchases (provided the purchase pursuant to such plan is
made with dividend proceeds only).
BROKERAGE ACCOUNTS
Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. The broker is
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may be
more favorable than the broker grants to accounts with similar characteristics.
In addition, covered persons must direct their brokers to send duplicate
confirmations and copies of all periodic statements on a timely basis to The
Legal Group of The Capital Group Companies, Inc., [P.O. Box address]. ALL
DOCUMENTS RECEIVED IN THIS POST OFFICE BOX ARE KEPT STRICTLY CONFIDENTIAL.
[If extraneous information is included on an associate's statements (E.G.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]
ANNUAL RECERTIFICATION
All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.
ADDITIONAL RULES FOR INVESTMENT PERSONNEL
DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Any associate who is in a
position to recommend the purchase or sale of securities by the fund or client
accounts must not recommend securities that s/he personally owns without FIRST
disclosing ownership. Typically, a complete disclosure of holdings (such as in
the annual disclosure of personal securities) satisfies this requirement.
BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after A
FUND OR CLIENT ACCOUNT THAT HIS OR HER COMPANY MANAGES transacts in that
security. Profits resulting from transactions occurring within this time
period are subject to special review and may be subject to disgorgement.
BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.
ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS - Investment personnel will
be required to disclose all personal securities holdings upon commencement of
employment and thereafter on an annual basis. Reporting forms will be supplied
for this purpose.
SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company BEFORE
SERVING ON THE BOARD OF DIRECTORS OF PUBLICLY TRADED COMPANIES.
PERSONAL INVESTING POLICY COMMITTEE
Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee.
