NEW ECONOMY FUND, 485APOS, 2000-12-29

NEW ECONOMY FUND
485APOS, 2000-12-29

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SEC. File Nos. 2-83848
811-3735

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 25
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 22

THE NEW ECONOMY FUND
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)

Registrant's telephone number, including area code:
(213) 486-9200

Chad L. Norton
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)

Copies to:
MICHAEL J. FAIRCLOUGH, ESQ.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)

Approximate date of proposed public offering:
It is proposed that this filing become effective on March 15, 2001, pursuant to
paragraph(a) of rule 485.

<PAGE>

The New Economy Fund

Prospectus

<TABLE>
<CAPTION>
TABLE OF CONTENTS
------------------------------------------------------
<S> <S>
1 Risk/Return Summary
------------------------------------------------------
3 Fees and Expenses of the Funds
------------------------------------------------------
4 Investment Objectives, Strategies and Risks
------------------------------------------------------
6 Management and Organization
------------------------------------------------------
8 Shareholder Information
------------------------------------------------------
9 Choosing a Share Class
------------------------------------------------------
11 Purchase and Exchange of Shares
------------------------------------------------------
12 Sales Charges
------------------------------------------------------
14 Sales Charge Reductions and Waivers
------------------------------------------------------
15 Plans of Distribution
------------------------------------------------------
16 How to Sell Shares
------------------------------------------------------
17 Distributions and Taxes
------------------------------------------------------
18 Financial Highlights
------------------------------------------------------
</TABLE>

MARCH 15, 2001

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>

RISK/RETURN SUMMARY

The fund seeks to make your investment grow over time by investing primarily in
stocks of companies in the services and information area of the global economy.

The fund is designed for investors seeking greater capital appreciation through
investments in stocks of issuers based around the world. Investors in the fund
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations. An investment in the fund is subject to risks, including
the possibility that the fund's income and the value of its investments may
fluctuate 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.

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.

THE NEW ECONOMY FUND / PROSPECTUS
NEF-010-0301/RRD

<PAGE>

HISTORICAL RESULTS

The following information provides some indication of the risks of investing in
the fund by showing changes in the fund's investment results from year-to-year
and by showing how the fund's average annual returns for various periods
compare with those of a broad measure of market performance. 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]

1991 29.17
1992 16.82
1993 30.95
1994 -8.11
1995 24.37
1996 12.89
1997 28.85
1998 28.84
1999 45.88
2000 xx.xx
[end bar]
The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 27.15% (quarter ended December 31, 1999)
LOWEST -xx.xx% (quarter ended _______________)
</TABLE>

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

Unlike the bar chart on the previous page, the table below reflects results
with the maximum initial or deferred sales charge imposed, as required by
Securities and Exchange Commission rules. Class A share results reflect the
maximum initial sales charge of 5.75%. Sales charges are reduced for purchases
of $25,000 or more. Results would be higher if calculated without a sales
charge. All fund results reflect the reinvestment of dividend and capital gain
distributions.

Since the fund's Class B shares began investment operations on March 15, 2000
and Class C and F shares on March 15, 2001, comparable results are not
available for the 2000 calendar year.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 2000:
------------------------------------------------------------------------------
ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
Class A - began 12/1/83
(with the maximum sales xx.xx % xx.xx% xx.xx% xx.xx%
charge imposed)
------------------------------------------------------------------------------
S&P 500/1/ xx.xx% xx.xx% xx.xx% xx.xx%
------------------------------------------------------------------------------
Lipper Growth Fund xx.xx% xx.xx% xx.xx% xx.xx%
Index/2/
------------------------------------------------------------------------------
MSCI EAFE Index/3/ xx.xx% xx.xx% xx.xx% xx.xx%
------------------------------------------------------------------------------
Russell 2500 Index/4/ xx.xx% xx.xx% xx.xx% xx.xx%
------------------------------------------------------------------------------
</TABLE>

1 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
measurement of changes in stock market conditions based on the average
weighted performance of 500 widely held common stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.

2 The Lipper Growth Fund Index is an equally weighted performance index with 30
of the largest growth funds (representing about 51% of all growth fund
assets). These funds normally invest in companies with long-term earnings
expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged indices. The results of the underlying
funds in the index include the reinvestment of dividend and capital gain
distributions and brokerage commissions paid by the funds for portfolio
transactions, but do not reflect sales charges.

3 The Morgan Stanley Capital International EAFE (Europe, Australasia, Far East)
Index measures all major stock markets outside North America. This index is
unmanaged and does not reflect sales charges, commissions or expenses.

4 The Russell 2500 Index tracks small- and medium-size U.S. stocks. This index
is unmanaged and does not reflect sales charges, commissions or expenses.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

FEES AND EXPENSES OF THE FUND

SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS F
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge imposed on purchases (as a 5.75%/1/ none none none
percentage of offering price)
----------------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested none none none none
dividends
----------------------------------------------------------------------------------------------
Maximum deferred sales charge none/2/ 5.00%/3/ 1.00%/4/ none
----------------------------------------------------------------------------------------------
Redemption or exchange fees none none none none
----------------------------------------------------------------------------------------------
</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.
4 Deferred sales charge is eliminated after 12 months.

ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
CLASS A CLASS B/1/ CLASS C/2/ CLASS F/2/
----------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.41% 0.41% 0.41% 0.41%
Distribution and/or Service 0.24% 1.00% 1.00% 1.00%
(12b-1) Fees/3/
Other Expenses 0.13% 0.13% 0.19% 0.18%
Total Annual Fund Operating Expenses 0.78% 1.54% 1.60% 0 .84%
-------------------------------------------------------------------------------------------------------
</TABLE>
1 Annualized.
2 Based on estimated amounts for the current fiscal year.
3 Class A and F 12b-1 fees may not exceed 0.25% and 0.50%, respectively, 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, that your investment
has a 5% return each year and that the fund's operating expenses remain the
same as shown above. The "Class A" example reflects the maximum initial sales
charge in Year One. The "Class B and Class C-assuming redemption" examples
reflect applicable contingent deferred sales charges through Years Six and One,
respectively (after which times they are eliminated). Examples do not include
fees charged by financial intermediaries. Both Class B examples reflect Class A
expenses for Years 9 and 10 since Class B shares automatically convert to Class
A after eight years. 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 $650 $810 $ 983 $1,486
----------------------------------------------------------------------------------------------------------------------------------
Class B - assuming redemption $657 $886 $1,039 $1,630
-------------------------------------------------------------------------------------------------------------------
Class B - assuming no redemption $157 $486 $ 839 $1,630
-------------------------------------------------------------------------------------------------------------------
Class C - assuming redemption $263 $505 $ 871 $1,900
-------------------------------------------------------------------------------------------------------------------
Class C - assuming no redemption $163 $605 $ 871 $1,900
-------------------------------------------------------------------------------------------------------------------
Class F - excludes intermediary fees/*/ $ 86 $268 $ 466 $1,037
-------------------------------------------------------------------------------------------------------------------
/*/ Fees charged by financial intermediaries are independent of fund expenses and will increase the overall cost
of your investment. Intermediary fees typically range from 0.50% to 3.00% of assets annually depending on
services offered.
</TABLE>

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

The fund seeks to provide you with long-term growth of capital. It invests
primarily in stocks of companies in the services and information area of the
global economy, although a portion of its assets may be invested outside these
areas. Companies in the services and information area include, for example,
those involved in the fields of telecommunications, computer systems and
software, the Internet, broadcasting and publishing, health care, advertising,
leisure, tourism, financial services, distribution and transportation.
Providing you with current income is a secondary consideration.

The values of equity securities held by the fund may 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 and interest rate fluctuations. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss, particularly in the case of smaller
capitalization stocks.

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 objective, but it also would
reduce the fund's exposure in the event of a market downturn and provide
liquidity to make additional investments or to meet redemptions.

The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
investments. 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.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

Unlike the investment results table shown on an earlier page, the table below
reflects results calculated without a sales charge.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000:
ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
Class A - began
12/1/83
(with no sales charge xx.xx% xx.xx% xx.xx% xx.xx%
imposed)
--------------------------------------------------------------------------------
S&P 500/1/ xx.xx% xx,xx% xx.xx% xx.xx%
--------------------------------------------------------------------------------
Lipper Growth Fund xx.xx% xx.xx% xx.xx% xx.xx%
Index/2/
--------------------------------------------------------------------------------
MSCI EAFE Index/3/ xx.xx% xx.xx% xx.xx% xx.xx%
--------------------------------------------------------------------------------
Russell 2500 Index/4/ xx.xx% xx.xx% xx.xx% xx.xx%
--------------------------------------------------------------------------------
</TABLE>

4 The Russell 2500 Index tracks small- and medium-size U.S. stocks. This index
is unmanaged and does not reflect sales charges, commissions or expenses.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

The following chart illustrates the industry mix of the fund's investment
portfolio as of the end of the fund's fiscal year, November 30, 2000.

LARGEST INDUSTRY HOLDINGS

<TABLE>
<CAPTION>
PERCENT PERCENT OF
OF NET ASSETS
PERCENT INVESTED BY NET
COUNTRY ASSETS TEN LARGEST EQUITY HOLDINGS
---------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
United States xx%

---------------------------------------
Europe
---------------------------------------
Germany x.x
---------------------------------------
United Kingdom x.x
---------------------------------------
Italy x.x
---------------------------------------
Sweden x.x
---------------------------------------
Switzerland .x
---------------------------------------
Denmark .x
---------------------------------------
Netherlands .x
---------------------------------------
France .x
---------------------------------------
Luxembourg .x
---------------------------------- ---------------------------------------
Asia/Pacific
Japan x.x
South Korea x.x
Australia x.x
Taiwan x.x
Hong Kong .x
Philippines .x
China .x
Malaysia .x
Thailand .x
Singapore .x
----------------------------------
Latin America & Canada
Mexico x.x
Canada x.x
Brazil .x
----------------------------------
Supranational x.x
----------------------------------
Total Non-U.S. xx%
----------------------------------
</TABLE>

Because the fund is actively managed, its holdings will change from time to
time.

THE NEW ECONOMY FUND / 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."

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 New Economy Fund are:

<TABLE>
<CAPTION>
PORTFOLIO COUNSELOR/ FUND TITLE COUNSELOR SINCE PRIMARY TITLE WITH INVESTMENT ADVISER
(IF APPLICABLE) (OR AFFILIATE) AND INVESTMENT EXPERIENCE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GORDON CRAWFORD 1994 (1988 as a research professional) Senior Vice President and Director - Capital Research
Chairman of the Board and Management Company
Investment professional with Capital Research and
Management Company or affiliate since 1971
----------------------------------------------------------------------------------------------------------------------------------
TIMOTHY D. ARMOUR 1991 (1986 as a research professional) Chairman and Chief Executive Officer - Capital Research
President, Principal Executive Company
Officer and Trustee Investment professional with Capital Research and
Management Company or affiliate since 1983
----------------------------------------------------------------------------------------------------------------------------------
CLAUDIA P. HUNTINGTON 1995 (1983 as a research professional) Senior Vice President - Capital Research and Management
Senior Vice President Company
Investment professional with Capital Research and
Management Company or affiliate since 1975; within the
industry since 1973
----------------------------------------------------------------------------------------------------------------------------------
ALWYN W. HEONG 1999 (1995 as a research professional) Vice President - Capital Research Company
Vice President Investment professional with Capital Research and
Management Company or affiliate since 1992; within the
industry since 1988
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

THE NEW ECONOMY FUND / 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

Call toll-Free from anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180

[map of the United States]

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>

A MORE DETAILED DESCRIPTION OF POLICIES AND SERVICES IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION AND THE OWNER'S GUIDE SENT TO NEW AMERICAN
FUNDS SHAREHOLDERS TITLED "WELCOME TO THE FAMILY." Both are available by
writing or calling American Funds Service Company.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

CHOOSING A SHARE CLASS

The fund offers four different classes of shares. Each share class represents
investments in the same portfolio of securities, but each class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation. WHEN YOU PURCHASE SHARES OF THE FUND, YOU MUST CHOOSE A
SHARE CLASS. IF NONE IS CHOSEN YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES.

Shares of the fund may be purchased through various investment programs or
accounts, including many types of retirement plans. The services or share
classes available to you may vary depending upon how you wish to purchase
shares of the fund. For example, Class B and C shares generally are not
available to certain retirement plans, including employer-sponsored retirement
plans such as 401(k) plans, employer-sponsored 403(b) plans, and money purchase
pension and profit sharing plans. In addition, Class F shares are generally
only available to fee-based programs of investment firms and registered
investment advisers that have special agreements with the fund's distributor.

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.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>
SUMMARY OF THE PRIMARY DIFFERENCES AMONG SHARE CLASSES

<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------
<S> <S>
Initial sales charge up to 5.75% (reduced or eliminated for purchases of
$25,000 or more)
Contingent deferred none (except on certain redemptions on purchases of
sales charge $1 million or more bought without an initial sales
charge)
12b-1 fees up to 0.25% annually
Dividends higher than other classes due to lower annual
expenses
Purchase maximum none
Conversion none
CLASS B SHARES
------------------------------------------------------------------------------
Initial sales charge none
Contingent deferred starts at 5.00% and declines each year until it
sales charge reaches 0.00% after six years
12b-1 fees 1.00% annually
Dividends lower than Class A and F shares due to higher
distribution fees and other expenses
Purchase maximum $100,000
Conversion automatic conversion to Class A shares after eight
years, reducing future annual expenses
CLASS C SHARES
------------------------------------------------------------------------------
Initial sales charge none
Contingent deferred 1.00% if shares are sold within one year after being
sales charge purchased
12b-1 fees 1.00% annually
Dividends typically lower than Class A and F shares due to
higher distribution fees and other expenses
Purchase maximum $500,000
Conversion automatic conversion to Class F shares after ten
years, reducing future annual expenses
CLASS F SHARES
------------------------------------------------------------------------------
Initial sales charge none
Contingent deferred none
sales charge
12b-1 fees 0.25% annually
Dividends higher than Class B and C shares due to lower
distribution fees, but typically lower than Class A
shares due to higher other expenses
Purchase maximum none
Conversion none
------------------------------------------------------------------------------
</TABLE>

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

PURCHASE AND EXCHANGE OF SHARES

PURCHASE OF CLASS A, B AND C SHARES

Generally, you may open an account and purchase Class A, B and C shares by
contacting any investment dealer (who may impose transaction charges in
addition to those described in this prospectus) authorized to sell the fund's
shares. You may purchase additional shares in various ways, including through
your investment dealer and by mail, telephone, the Internet and bank wire.

PURCHASE OF CLASS F SHARES

Generally, you may only open an account and purchase Class F shares through
fee-based programs of investment firms and registered investment advisers with
special agreements with the fund's distributor.

EXCHANGE

Generally, you may exchange your shares into shares of the same class of other
funds in The American Funds Group without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B and C 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 DISTRIBUTOR, RESERVE THE
RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON, INCLUDING PURCHASES WHICH
ARE PART OF EXCHANGE ACTIVITY THAT COULD INVOLVE ACTUAL OR POTENTIAL HARM TO
THE FUND.

<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR ALL CLASSES OF 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
------------------------------------------------------------------------
PURCHASE MAXIMUM FOR CLASS C SHARES $500,000
------------------------------------------------------------------------
</TABLE>

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

SHARE PRICE

The fund calculates its share price, also called net asset value, as of
approximately 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 prices are used when available. The fund has adopted
procedures to make "fair value" determinations when reliable market prices for
particular securities are not available.

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. A contingent deferred sales charge may apply at the time you sell
certain Class A, B and C shares.

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 or eliminated 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 5.00% 5.26% 4.25%
$50,000
-------------------------------------------------------------------------------
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
-------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
-------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
-------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.60%
$750,000
-------------------------------------------------------------------------------
$750,000 but less than $1 1.50% 1.52% 1.20%
million
-------------------------------------------------------------------------------
$1 million or more and
certain other investments
described below
-------------------------------------------------------------------------------
</TABLE>

CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE

INVESTMENTS OF $1 MILLION OR MORE MAY BE SUBJECT TO A 1% CONTINGENT DEFERRED
SALES CHARGE IF SHARES ARE SOLD 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. Also exempt are investments made through retirement plans, endowments
or foundations with $50 million or more in assets, and investments made through
accounts that purchased fund shares before March 15, 2001 and are part of
certain qualified fee-based programs. The distributor may pay dealers up to 1%

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

on investments made in Class A shares with no initial sales charge. The fund
may reimburse the distributor for these payments through its Plan of
Distribution (see below).

CLASS B AND C

Class B and C shares are sold without any initial sales charge. American Funds
Distributors pays 4% of the amount invested to dealers who sell Class B shares
and 1% to dealers who sell Class C shares.

For Class C shares, a contingent deferred sales charge of 1% applies if shares
are sold within one year of purchase. For Class B shares, 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>
<S> <C> <C> <C> <C> <C> <C>
YEARS AFTER PURCHASE OF CLASS B SHARES 1 2 3 4 5 6
----------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE 5% 4% 4% 3% 2% 1%
</TABLE>

Shares acquired through reinvestment of dividends or capital gain distributions
are not subject 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 and C 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.

CONVERSION OF CLASS B AND C SHARES

Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. Class C shares automatically
convert to Class F shares in the month of the ten-year anniversary of the
purchase date. The Internal Revenue Service currently takes the position that
these automatic conversions are not taxable. Should their position change,
shareholders would still have the option of converting but may face certain tax
consequences.

THE NEW ECONOMY FUND / 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 or C contingent deferred sales charge.

REDUCING YOUR CLASS A SALES CHARGE

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 your own account(s)
and, for instance:

. 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.

CONCURRENT PURCHASES

You may combine simultaneous purchases of any class of 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 (or if greater, the amount you
invested less any withdrawals) of your existing holdings in any class of shares
of 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
combine all non-money market fund purchases of all share classes, as well as
individual American Legacy variable annuity and life insurance policies you
intend 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.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B AND C SHARES

The contingent deferred sales charge on Class B and C shares may be waived in
the following cases:

. when receiving payments through systematic withdrawal plans (up to 12% of the
value of each fund account);

. when receiving required minimum distributions from retirement accounts upon
reaching age 70 1/2; or

. for redemptions due to death or post-purchase disability of the shareholder.

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 trustees. The plans
provide for annual expenses of up to 0.25% for Class A shares, 1.00% for Class
B and C shares, and up to 0.50% for Class F shares. For all share classes, up
to 0.25% of these expenses may be used to pay service fees to qualified dealers
for providing certain shareholder services. The remaining expense for each
share class may be used for distribution expenses.

The 12b-1 fees paid by the fund, as a percentage of average net assets, for the
previous fiscal year are 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 and C 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 pay, or sponsor informational meetings for,
dealers as described in the statement of additional information.

THE NEW ECONOMY FUND / 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.

. Class F shares must be sold through your financial adviser.

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.

. American Funds Service Company reserves the right to require signature
guarantee(s) on all redemptions.
<r/>
. 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, fax, or computer (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 genuine. If reasonable procedures are not employed, it and/or the fund may
be liable for losses due to unauthorized or fraudulent instructions.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

The fund intends to distribute dividends to you, usually in 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 American Fund, 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 is the
difference between the cost of your shares, including any sales charges, and
the price you receive when you sell them.

Please see your tax adviser for further information.

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

FINANCIAL HIGHLIGHTS/1/

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 and B
shares. A similar table will be shown for Class C and F shares beginning with
the fund's 2001 fiscal year end. 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>
Net gains/(losses) on
Net asset securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Years ended beginning of investment and investment investment (from capital Total value, end of
November 30 period income unrealized) operations income) gains) distributions year
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000
1999 $23.65 $.10 $8.83 $8.93 $(.14) $(2.54) $(2.68) $29.90
1998 20.92 .13 4.44 4.57 (.12) (1.72) (1.84) 23.65
1997 18.50 .12 3.57 3.69 (.14) (1.13) (1.27) 20.92
1996 16.98 .14 2.26 2.40 (.19) (.69) (.88) 18.50
CLASS B:
2000
<CAPTION>

Ratio of Ratio of
Net assets, expenses to income to
Years ended end of year average net average net Portfolio
November 30 Total return/1/ (in millions) assets assets turnover rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000
1999 41.71% $9,522 .78% .42% 47.93%
1998 23.73 6,039 .79 .60 38.55
1997 21.64 4,804 .81 .66 31.62
1996 15.00 4,223 .84 .85 29.54
CLASS B:
2000
</TABLE>

1 The years 1996 through 2000 represent for Class A shares, fiscal years ended
November 30. The period 2000 represents for Class B shares, the 260-day period
ended November 30, 2000. Class B shares were not offered before March 15,
2000. The total return for such periods is based on activity during the period
and thus is not representative of a full year. Total returns exclude all sales
charges, including contingent deferred sales charges.

<PAGE>

---------------------------------------------------------
NOTES

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE NEW ECONOMY FUND / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext. 11
FOR 24-HOUR INFORMATION American FundsLine(R)
800/325-3590
American FundsLine OnLine(R)
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.

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 CODES 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 Codes of Ethics describe the personal investing policies adopted by the
fund and the fund's investment adviser and its affiliated companies.

The Codes of Ethics and current SAI have 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. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

HOUSEHOLD MAILINGS Each year you are automatically sent an updated
prospectus, annual and semi-annual report for the fund. In order to reduce the
volume of mail you receive, when possible, only one copy of these documents
will be sent to shareholders that are part of the same family and share the
same residential address.

If you would like to receive individual copies of these documents at no
charge, please call American Funds Service Company at 800/421-0180 or write to
the Secretary of the fund at 333 South Hope Street, Los Angeles, California
90071.
Investment Company File No. 811-3735
Printed on recycled paper

<PAGE>

THE NEW ECONOMY FUND

Part B
Statement of Additional Information

March 15, 2001

This document is not a prospectus but should be read in conjunction with the
current prospectus of The New Economy Fund (the "fund" or "NEF") dated March 15,
2001. The prospectus may be obtained from your investment dealer or financial
planner or by writing to the fund at the following address:

The New Economy Fund
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
(213) 486-9200

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. . . . . . . . . . 6
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 8
Fund Trustees and Other Officers. . . . . . . . . . . . . . . . . . 9
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 17
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 21
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 26
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 29
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Shareholder Account Services and Privileges . . . . . . . . . . . . 33
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 35
General Information . . . . . . . . . . . . . . . . . . . . . . . . 36
Class A Share Investment Results and Related Statistics . . . . . . 37
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Financial Statements . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

The New Economy Fund - 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.

INVESTMENT OBJECTIVE
. Generally, the fund will invest primarily in securities of companies that
derive their revenues primarily from operations in the services and
information area of the global economy. These could include, for example,
companies involved in the areas of telecommunications, computer systems and
software, the Internet, broadcasting and publishing, health care,
advertising, leisure, tourism, financial services, distribution and
transportation.
. The fund may invest up to 25% of its assets in companies outside the
services and information area.

DEBT SECURITIES
. The fund may invest up to 10% of its assets in straight debt securities
rated Baa/BBB or below by Moody's Investors Services, Inc. (Moody's) or
Standard & Poor's Corporation (S&P) or in unrated securities that are
determined to be of equivalent quality.

NON-U.S. SECURITIES
. The fund may invest up to 40% of its assets in securities of issuers
domiciled outside the U.S. and not included in the S&P 500 Index, including
securities denominated in currencies other than the U.S. dollar.

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 Objective, 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.

The growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss, particularly in the case of
smaller capitalization stocks.

INVESTING IN SMALLER CAPITALIZATION STOCKS - The fund may invest in the stocks
of smaller capitalization companies (typically companies with market
capitalizations of less than $1.5 billion at the time of 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

The New Economy Fund - Page 2

<PAGE>

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.

INVESTING IN VARIOUS COUNTRIES - Investing outside the U.S. involves special
risks, caused by, among other things: currency controls and 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
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 the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.

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

The New Economy Fund - Page 3

<PAGE>

as interest rates, credit quality, and maturity. In general, their prices
decline when interest rates rise and vice versa.

Lower rated bonds, rated Ba or below by S&P and BB or below by Moody's 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, lower rated bonds.

Certain risk factors relating to "lower rated bonds" are discussed below.

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower rated bonds may
be sensitive to adverse economic changes and political and corporate
developments and may be 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
lower rated bonds.

PAYMENT EXPECTATIONS - Lower rated 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 value and liquidity of lower rated bonds.

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 stock may be similar to those of equity securities. Some
types of convertible bonds or preferred stock automatically convert into common
stock. Non-convertible preferred stock 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 stock generally move with changes in
interest rates and the issuer's credit quality, similar to the factors affecting
debt securities.

The New Economy Fund - Page 4

<PAGE>

Convertible bonds, convertible preferred stock, 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.

U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include direct obligations of the U.S. Treasury, such as Treasury bills, notes
and bonds. 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.

CASH AND CASH EQUIVALENTS - These securities include: (i) commercial paper
(e.g., short-term notes up to 9 months in maturity issued by corporations,
governmental bodies or bank/ corporation sponsored conduits (asset-backed
commercial paper)), (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 savings bank obligations (e.g., bank notes and 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.

REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements, under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the Investment Adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the Investment Adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization of the collateral by the fund
may be delayed or limited.

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

The New Economy Fund - Page 5

<PAGE>

board of trustees, 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.

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. Invest in securities of another issuer (other than the U.S. or its agencies
or instrumentalities), if immediately after and as a result of such investment
more than 5% of the value of the total assets of the fund would be invested in
the securities of such other issuer, or more than 10% of the outstanding voting
securities of such issuer would be owned by the fund;

2. Invest in companies for the purpose of exercising control or management;

3. Purchase the securities of companies in a particular industry (other than
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities) if thereafter 25% or more of the value of its total assets
would consist of securities issued by companies in that industry;

4. Buy or sell real estate in the ordinary course of its business; however,
the fund may invest in securities secured by real estate or interests therein or
issued by companies, including real estate investment trusts, which invest in
real estate or interests therein;

5. Buy or sell commodities or commodity contracts in the ordinary course of
its business provided, however, that entering into a forward currency contract
shall not be prohibited by this restriction;

6. Invest more than 10% of the value of its total assets in securities which
are not readily marketable or engage in the business of underwriting of
securities of other issuers, except to the extent that the disposal of an
investment position may technically constitute the fund an underwriter as that
term is defined under the Securities Act of 1933;

7. Lend any security or make any other loan if, as a result, more than 15% or
its total assets would be lent to third parties, but this limitation does not
apply to purchases of debt securities or to repurchase agreements;

The New Economy Fund - Page 6

<PAGE>

8. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost, securities identical to
those sold short;

9. Purchase securities on margin;

10. Enter into any repurchase agreement if, as a result, more than 10% of the
fund's total assets would be subject to repurchase agreements maturing in more
than seven days (see above);

11. Borrow amounts in excess of 5% of the value of its total assets or issue
senior securities; in any event, the fund may borrow only as a temporary measure
for extraordinary or emergency purposes and not for investment in securities; or

12. Invest in puts, calls, straddles or spreads, or combinations thereof.

For purposes of investment restriction number 7, the fund does not currently
intend to lend portfolio securities.

The following investment policies of the fund may be changed by action of the
Board of Trustees without shareholder approval:

1. The fund may not invest in securities of other investment companies, except
as permitted by the 1940 Act.

2. The fund may not invest more than 15% of the value of its net assets in
illiquid securities.

The New Economy Fund - Page 7

<PAGE>

FUND ORGANIZATION AND VOTING RIGHTS

The fund, an open-end, diversified management investment company, was organized
as a Massachusetts business trust on May 17, 1983.

All fund operations are supervised by the fund's Board of Trustees 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 "Trustees and Trustee 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 has four classes of shares - Class A, B, C and F. 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 Trustees and set forth in the fund's rule 18f-3 Plan.
Class A, B, C and F shareholders have exclusive voting rights with respect to
the fund's rule 12b-1 Plans adopted in connection with the distribution of
shares and on other matters in which the interests of one class are different
from interests in another class. Shares of all classes of the fund vote
together on matters that affect all classes in substantially the same manner.
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.

The New Economy Fund - Page 8

<PAGE>

FUND TRUSTEES AND OFFICERS

Trustees and Trustee Compensation

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 NOVEMBER 30, 2000
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
+ Timothy D. Armour President and Chairman and Chief Executive Officer, none/4/
333 South Hope Street Trustee Capital Research Company*
Los Angeles, CA 90071
Age: 40
------------------------------------------------------------------------------------------------------------------------
Joseph C. Berenato Trustee Chairman, President and Chief Executive $10,000/3/
30205 Cheret Place Officer, Ducommun Incorporated
Rancho Palos Verdes, CA 90275
Age: 54
------------------------------------------------------------------------------------------------------------------------
Richard G. Capen, Jr. Trustee Corporate Director and author; former $ 20,715
Box 2494 United States Ambassador to Spain;
Rancho Santa Fe, CA former Vice Chairman of the Board;
92067 Knight Ridder, Inc., former Chairman
Age: 66 and Publisher, The Miami Herald
----------------
------------------------------------------------------------------------------------------------------------------------
H. Frederick Christie Trustee Private Investor. Former President and $20,658/3/
P.O. Box 144 Chief Executive Officer, The Mission
Palos Verdes Estates, CA Group (non-utility holding company,
90274 subsidiary of Southern California
Age: 67 Edison Company)
------------------------------------------------------------------------------------------------------------------------
+ Gordon Crawford Chairman of the Non-Executive Chairman, The Capital none/4/
333 South Hope Street Board Group Companies, Inc.; Senior Vice
Los Angeles, CA 90071 President and Director, Capital
Age: 54 Research and Management Company
------------------------------------------------------------------------------------------------------------------------
John G. Freund Trustee Founder and Managing Director, Skyline none/5/
Age: Ventures; former Managing Director,
Alternative Asset Management Group,
Chancellor Capital Management
------------------------------------------------------------------------------------------------------------------------
+ Graham Holloway Trustee Former Chairman of the Board, American none/4/
17309 Club Hill Drive Funds Distributors, Inc.
Dallas, TX 75248
Age: 70
------------------------------------------------------------------------------------------------------------------------
Leonade D. Jones Trustee Vice President and Chief Financial $20,500/3/
1536 Los Montes Drive Officer, VentureThink LLC; Executive
Burlingame, CA 94010 Vice President and Chief Financial
Age: 52 Officer, Vesura, Inc.; Management
consultant; former Treasurer, The
Washington Post Company
------------------------------------------------------------------------------------------------------------------------
William H. Kling Trustee President, American Public Media Group; $19,100/3/
2619 Lake of the Isles Parkway President, Minnesota Public Radio;
East President, Greenspring Co.; former
St. Paul, MN 55408 President, American Public Radio (now
Age: 58 Public Radio International)
------------------------------------------------------------------------------------------------------------------------
Norman R. Weldon Trustee Managing Director, Partisan Management $ 20,000
7026 Timbers Drive Group, Inc.; former Chairman of the
Evergreen, CO 80439 Board, Novoste Corporation; Director,
Age: 66 Enable Medical; former President and
Director, Corvita Corporation
------------------------
------------------------------------------------------------------------------------------------
Patricia K. Woolf Trustee Private investor; Corporate Director, $ 19,000
506 Quaker Road Lecturer, Department of Molecular
Princeton, NJ 08540 Biology, Princeton University
Age: 66
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM
ALL FUNDS MANAGED BY TOTAL NUMBER
CAPITAL RESEARCH AND OF FUND
MANAGEMENT COMPANY BOARDS
OR ITS AFFILIATES/2/ FOR THE ON WHICH
YEAR ENDED TRUSTEE
NAME, ADDRESS AND AGE NOVEMBER 30, 2000 SERVES/2/
------------------------------------------------------------------------------
<S> <C> <C>
+ Timothy D. Armour none/4/ 1
333 South Hope Street
Los Angeles, CA 90071
Age: 40
------------------------------------------------------------------------------
Joseph C. Berenato $21,500/3/ 2
30205 Cheret Place
Rancho Palos Verdes, CA 90275
Age: 54
------------------------------------------------------------------------------
Richard G. Capen, Jr. $ 100,023 14
Box 2494
Rancho Santa Fe, CA
92067
Age: 66
------------------------------------------------------------------------------
H. Frederick Christie $214,973/3/ 19
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 67
------------------------------------------------------------------------------
+ Gordon Crawford none/4/ 2
333 South Hope Street
Los Angeles, CA 90071
Age: 54
------------------------------------------------------------------------------
John G. Freund none/5/ 2
Age:
------------------------------------------------------------------------------
+ Graham Holloway none/4/ 2
17309 Club Hill Drive
Dallas, TX 75248
Age: 70
------------------------------------------------------------------------------
Leonade D. Jones $143,000/3/ 5
1536 Los Montes Drive
Burlingame, CA 94010
Age: 52
------------------------------------------------------------------------------
William H. Kling $117,750/3/ 6
2619 Lake of the Isles Parkway
East
St. Paul, MN 55408
Age: 58
------------------------------------------------------------------------------
Norman R. Weldon $ 53,250 3
7026 Timbers Drive
Evergreen, CO 80439
Age: 66
------------------------------------------------------------------------------
Patricia K. Woolf $ 140,000 6
506 Quaker Road
Princeton, NJ 08540
Age: 66
------------------------------------------------------------------------------
</TABLE>

<PAGE>

+ "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 Trustees 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 Trustees.

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 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2000
fiscal year for participating Trustees is as follows: Joseph C. Berenato
($8,457), Frederick Christie ($84,769), Leonade D. Jones ($76,786), and
William H. Kling ($110,177). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the Trustees.

4 Timothy D. Armour, Gordon Crawford, and E. Graham Holloway are affiliated with
the Investment Adviser and, accordingly, receive no compensation from the
fund.

5 John G. Freund was elected to the Board of Trustees effective December 1,
2000. Therefore, no fees were paid to him during the fiscal year.

The New Economy Fund - Page 11

<PAGE>

OTHER OFFICERS

<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Claudia P. Huntington 48 Senior Vice Senior Vice President, Capital
333 South Hope Street President Research and Management Company
Los Angeles, CA 90071
-------------------------------------------------------------------------------
Vincent P. Corti 44 Vice President Vice President -- Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company.
-------------------------------------------------------------------------------
Alwyn W. Heong 40 Vice President Vice President, Capital Research
630 Fifth Ave. Company*
New York, NY 10111
-------------------------------------------------------------------------------
Ulrich A. Volk 39 Vice President Vice President, Capital Research
25 Bedford Street Company*
London, England WC2E
9HN
-------------------------------------------------------------------------------
Chad L. Norton 40 Secretary Vice President -- Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
-------------------------------------------------------------------------------
David A. Pritchett 34 Treasurer Vice President -- Fund Business
5300 Robin Hood Road Management Group, Capital
Norfolk, VA 23513 Research and Management Company
-------------------------------------------------------------------------------
Sheryl F. Johnson 32 Assistant Vice President -- Fund Business
5300 Robin Hood Road Treasurer Management Group, Capital
Norfolk, VA 23513 Research and Management Company
-------------------------------------------------------------------------------
</TABLE>

* Company affiliated with Capital Research and Management Company

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 Trustee who is a director,
officer or employee of the Investment Adviser or affiliated companies. The fund
pays annual fees of $13,000 to Trustees who are not affiliated with the
Investment Adviser, plus $1,000 for each Board of Trustees meeting attended,
plus $500 for each meeting attended as a member of a committee of the Board of
Trustees.

No pension or retirement benefits are accrued as part of fund expenses. The
Trustees 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 Trustees who are not affiliated with the
Investment Adviser. As of November 30, 2000 the officers and Trustees of the
fund and their families, as a group, owned beneficially or of record less than
1% of the outstanding shares of the fund.

The New Economy Fund - Page 12

<PAGE>

MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management
Company, 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 $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts 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 November 30, 2001, 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 Trustees, 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 Trustees 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 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; shareholder recordkeeping and
administrative services; 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 Plans 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 New Economy Fund - Page 13

<PAGE>

As compensation for its services, the Investment Adviser receives a monthly fee
which is accrued daily, calculated at the annual rates of:

0.58% on the first $500 million of the fund's net assets;
0.48% on assets from $500 million to $1 billion;
0.44% on assets from $1 billion to $1.5 billion;
0.41% on assets from $1.5 billion to $2.5 billion;
0.39% on assets from $2.5 billion to $4 billion;
0.38% on assets from $4 billion to $6.5 billion;
0.37% on assets from $6.5 billion to $10.5 billion;
0.365% on assets from $10.5 billion to $13 billion;
0.36% on assets from $13 billion to $17 billion;
0.355% on assets from $17 billion to $21 billion;
0.35% on assets from $21 billion to $27 billion; and
0.345% on assets over $27 billion.

If net assets fall below $3 billion, the Agreement provides for lower fees
calculated at the annual rates of 0.60% on the first $300 million of the fund's
net assets, 0.48% on assets over $300 million to $750 million, 0.45% on assets
over $750 million to $1.25 billion, and 0.42% on assets over $1.25 billion.

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 average net
assets in excess thereof. Expenses which are not subject to these limitations
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 this 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.

For the fiscal years ended 2000, 1999, and 1998, the Investment Adviser received
advisory fees of $XXX, $30,866,000, and $23,295,000, respectively.

ADMINISTRATIVE SERVICES AGREEMENT - The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the Investment Adviser,
relating to the fund's Class C and F shares, will continue in effect until
November 30, 2001, 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 the vote of a majority of Trustees who are not parties to
the Administrative 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 fund may terminate the
agreement at any time by vote of a majority of Trustees who are not interested
persons of the fund. The Investment Adviser has the right to terminate the
Administrative Agreement upon 60 days' written notice to the fund. The
Administrative Agreement automatically terminates in the event of its assignment
(as defined in the 1940 Act).

Under the Administrative Agreement, the Investment Adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares. The Investment Adviser contracts with third parties, including
American Funds Service Company, the fund's

The New Economy Fund - Page 14

<PAGE>

Transfer Agent, to provide these services. Services include, but are not
limited to shareholder account maintenance, transaction processing, tax
information reporting, and shareholder and fund communications. In addition, the
Investment Adviser monitors, coordinates and oversees the activities performed
by third parties.

As compensation for its services, the Investment Adviser receives transfer agent
fees for transfer agent services provided to the fund's Class C and F shares.
Transfer agent fees are paid monthly according to a fee schedule contained in a
Shareholder Services Agreement between the fund and American Funds Service
Company. The fund's Class C and F shares pay only those transfer agent fees
that are attributed to accounts and activities generated by each respective
share class. The Investment Adviser also receives an administrative services
fee for administrative services provided to the fund's Class C and F shares.
Administrative services fees are paid monthly, accrued daily and calculated at
the annual rate of 0.15% of the average net assets of the fund's Class C and F
shares.

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). In addition, the Principal Underwriter receives
revenues from sales of the fund's shares. For Class A shares, the Principal
Underwriter receives commission revenue consisting of that portion of the Class
A sales charge remaining after the allowances which it allows to investment
dealers. For Class B shares, the Principal Underwriter sells the rights to 12b-1
fees paid by the fund for distribution expenses to a third party and receives
the revenue remaining after compensating investment dealers for sales of Class B
shares. The fund also pays the Principal Underwriter for advancing the immediate
service fees paid to dealers by the Principal Underwriter for sales of Class B
shares. For Class C shares, the Principal Underwriter receives any contingent
deferred sales charges that apply to Class C shares during the first year after
purchase. The fund pays the Principal Underwriter for advancing the immediate
service fees and commissions paid to dealers by the Principal Underwriter for
sales of Class C shares.

Commissions retained by the Principal Underwriter on sales of Class A shares
during the 2000 fiscal year amounted to $XXX after allowance of $XXX to dealers.
During the fiscal years ended 1999 and 1998, the Principal Underwriter retained
$5,506,000 and $2,489,000, respectively, on sales of Class A shares after an
allowance of $27,016,000 and $12,263,000 to dealers, respectively. Revenue
retained and service fees received by the Principal Underwriter on sales of
Class B shares during the 2000 fiscal year amounted to $XXX after compensation
of $X to dealers.

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
Trustees and separately by a majority of the trustees 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 trustees 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

The New Economy Fund - Page 15

<PAGE>

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 trustees who are not
"interested persons" of the fund are committed to the discretion of the trustees
who are not "interested persons" during the existence of the Plans. The Plans
may not be amended to increase materially the amount spent for distribution
without shareholder approval. Plan expenses are reviewed quarterly and the Plans
must be renewed annually by the Board of Trustees.

Under the Plans, the fund may expend up to 0.25% of its net assets annually for
Class A shares, 1.00% of its net assets annually for Class B shares, 1.00% of
its net assets annually for Class C shares and up to 0.50% of its net assets
annually for Class F shares, to finance any activity which is primarily intended
to result in the sale of fund shares, provided the fund's Board of Trustees has
approved the category of expenses for which payment is being made.

For Class A shares, up to 0.25% is paid as service fees to qualified dealers and
as 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, 0.25% is paid as service fees to qualified dealers and 0.75%
as payments to the Principal Underwriter for financing commissions paid to
qualified dealers selling Class B shares. For Class C shares, 0.25% is paid as
service fees to qualified dealers and 0.75% as commissions to dealers selling
Class C shares. For Class F shares, 0.25% is paid as service fees to qualified
dealers.

Commissions on sales of Class A shares of $1 million or more (including
purchases by any employer-sponsored 403(b) plan or purchases by any defined
contribution plan qualified under 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 to the Principal Underwriter 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,
these commissions are not recoverable.

During the 2000 fiscal year, the fund paid or accrued $XXX for compensation to
dealers or the Principal Underwriter under the Plan for Class A shares and $XXX
under the Plan for Class B shares. As of November 30, 2000, accrued and unpaid
distribution expenses for Class A and Class B shares were $X and $X
respectively.

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.

The New Economy Fund - Page 16

<PAGE>

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 on Class A, B, C and F shares will be reinvested in shares of the fund
of the same class unless shareholders indicate in writing that they wish to
receive them in cash or in shares of the same class of other American Funds, as
provided in the prospectus.

TAXES - The fund has elected 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.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including, but no limited to, gains from options, futures or forward contracts)
derived with respect to the business of investing in such securities or
currencies, and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and securities of other
regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the fund's assets and 10% of the
outstanding voting securities of such issuer), and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or two or more issuers which the fund controls and which are
determined to be engaged in the same or similar trades or businesses.

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 New Economy Fund - Page 17

<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 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 has 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 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.

Redemptions of shares, including exchanges for shares of another American Fund,
may result in tax consequences (gain or loss) to the shareholder.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other funds. Also,
any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.

The New Economy Fund - Page 18

<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 during the
90-day period beginning on the date which is 45 days before the date on which
the shares become ex-dividend.

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.

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.

In January of each year fund shareholders will receive a statement of the
federal income tax status of all distributions.

Dividend and interest income received by the fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however. Most foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.

Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the fund accrues receivables or liabilities
denominated in a foreign currency and the time the fund actually collects such
receivables, or pays such liabilities, generally are

The New Economy Fund - Page 19

<PAGE>

treated as ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a foreign currency and on disposition of certain
futures contracts, forward contracts and options, gains or losses attributable
to fluctuations in the value of foreign currency between the date of acquisition
of the security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of the fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.

If the fund invests in stock of certain passive foreign investment companies,
the fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the fund at
the highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock. Any
amount of distribution or gain allocated to the taxable year of the distribution
or disposition would be included in the fund's investment company taxable income
and, accordingly, would not be taxable to the fund to the extent distributed by
the fund as a dividend to its shareholders.

To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any gains
for tax purposes at that time. Under this election, deductions for losses are
allowable only to the extent of any prior recognized gains, and both gains and
losses will be treated as ordinary income or loss. The fund will be required to
distribute any resulting income, even though it has not sold the security and
received cash to pay such distributions.

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 New Economy Fund - Page 20

<PAGE>

PURCHASE OF SHARES

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
-------------------------------------------------------------------------------
<S> <C> <C>
See "Purchase $50 minimum (except where a
Minimums" for initial lower minimum is noted under
investment minimums. "Purchase 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.)
-------------------------------------------------------------------------------
</TABLE>

The funds and the Principal Underwriter reserve the right to reject any purchase
order. Generally, Class F shares may only be purchased through fee-based
programs of investment firms and registered investment advisers who have special
agreements with the fund's distributor. Class B and C shares are generally not
available to certain employer-sponsored retirement plans, such as 401(k) plans,
employer-sponsored 403(b) plans, and money purchase

The New Economy Fund - Page 21

<PAGE>

pension and profit sharing plans. In addtion, the state tax-exempt funds are
only offered in certain states and tax-exempt funds in general should not serve
as retirement plan investments.

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-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. Purchase 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. The minimum
is $50 for additional investments (except for retirement plan payroll deductions
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.

PURCHASE MAXIMUM FOR CLASS C SHARES - The maximum purchase order for Class C
shares for all American Funds is $500,000.

FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):

<TABLE>
<CAPTION>
FUND FUND FUND FUND
NUMBER NUMBER NUMBER NUMBER
FUND CLASS A CLASS B CLASS C CLASS F
------- -------
<S> <C> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS

AMCAP Fund/(R)/ . . . . . . . . . . . . . . . 02 202 302 402
American Balanced Fund/(R)/ . . . . . . . . . 11 211 311 411
American Mutual Fund/(R)/ . . . . . . . . . . 03 203 303 403
Capital Income Builder/(R)/ . . . . . . . . . 12 212 312 412
Capital World Growth and Income Fund/SM/ . . . 33 233 333 433
EuroPacific Growth Fund/(R)/ . . . . . . . . . 16 216 316 416
Fundamental Investors/SM/ . . . . . . . . . . 10 210 310 410
The Growth Fund of America/(R)/ . . . . . . . 05 205 305 405
The Income Fund of America/(R)/ . . . . . . . 06 206 306 406
The Investment Company of America/(R)/ . . . . 40
04 204 304 4
The New Economy Fund/(R)/ . . . . . . . . . . 14 214 314 414
New Perspective Fund/(R)/ . . . . . . . . . . 07 207 307 407
New World Fund/SM/ . . . . . . . . . . . . . . 36 236 336 436
SMALLCAP World Fund/(R)/ . . . . . . . . . . . 35 235 335 435
Washington Mutual Investors Fund/SM/ . . . . . 01 201 301 401
BOND FUNDS

American High-Income Municipal Bond Fund/(R)/ 40 240 340 440
American High-Income Trust/SM/ . . . . . . . . 21 221 321 421
The Bond Fund of America/SM/ . . . . . . . . . 08 208 308 408
Capital World Bond Fund/(R)/ . . . . . . . . . 31 231 331 431
Intermediate Bond Fund of America/SM/ . . . . 23 223 323 423
Limited Term Tax-Exempt Bond Fund of
America/SM/. . . . . . . . . . . . . . . . . 43 243 343 443
The Tax-Exempt Bond Fund of America/(R)/ . . . 19 219 319 419
The Tax-Exempt Fund of California/(R)/* . . . 20 220 320 420
The Tax-Exempt Fund of Maryland/(R)/* . . . . 24 224 324 424
The Tax-Exempt Fund of Virginia/(R)/* . . . . 25 225 325 425
U.S. Government Securities Fund/SM/ . . . . . 22 222 322 422
MONEY MARKET FUNDS

The Cash Management Trust of America/(R)/ . . 09 209 309 409
The Tax-Exempt Money Fund of America/SM/ . . . 39 N/A N/A N/A
The U.S. Treasury Money Fund of America/SM/ . 49 N/A N/A
___________
*Available only in certain states.
</TABLE>

The New Economy Fund - Page 22

<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>

The New Economy Fund - Page 23

<PAGE>

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 plans with 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 CDSC. 403(b) plans may be
treated as employer-sponsored plans for sales charge purposes if: (i) the
American Funds are principal investment options; (ii) the employer facilitates
the enrollment process by, for example, allowing for onsite group enrollment
meetings held during working hours; and (iii) there is only one dealer firm
assigned to all employee accounts invested in the American Funds. 403(b) plans
meeting the above criteria may invest with no sales charge and are not subject
to a CDSC if investing $1 million or more or have 100 or more eligible
employees.

Investments made through accounts that purchased Class A shares of the fund
before March 15, 2001 and are part of 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 not subject to a CDSC. A dealer
concession of up to 1% may be paid by the fund under its Class A 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, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees 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) insurance company separate accounts;

(5) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and

(6) 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 AND C SHARES - Except as described
above, a CDSC of 1% applies to redemptions of Class A shares of the American
Funds, other than the

The New Economy Fund - Page 24

<PAGE>

money market funds, made within 12 months following the purchase of Class A
shares of $1 million or more made without an initial sales charge. A CDSC of 1%
also applies to redemptions of Class C shares of the American Funds made within
12 months following the purchase of the Class C shares. 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 and C Shares" below.

CLASS B SALES CHARGES - 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 followed by shares that you have owned the
longest during the six-year period.

DEALER COMMISSIONS AND COMPENSATION - For Class A shares, commissions (up to 1%)
are paid to dealers who initiate and are responsible for purchases of $1 million
or more, for purchases by any employer-sponsored defined contribution-type 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. Commissions on investments in Class A shares are paid at the
following rates: 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.

For Class B shares, compensation equal to 4.00% of the amount invested is paid
by the Principal Underwriter to dealers who sell Class B shares.

For Class C shares, compensation equal to 1.00% of the amount invested is paid
by the Principal Underwriter to dealers who sell Class C shares.

CONVERSION OF CLASS B AND C SHARES - Class B shares automatically convert to
Class A shares in the month of the eight-year anniversary of the purchase date.
Class C shares automatically convert to Class F shares in the month of the
ten-year anniversary of the purchase date. The conversion of shares is subject
to the Internal Revenue Service's continued position that the

The New Economy Fund - Page 25

<PAGE>

conversions are not subject to federal income tax. In the event the Internal
Revenue Service no longer takes this position, the automatic conversion feature
may be suspended, in which event no further conversions of Class B or C shares
would occur while such suspension remained in effect. In that event, at your
option, Class B shares could be exchanged for Class A shares and Class C shares
for Class F shares on the basis of the 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. Absent such an exchange,
Class B and C shares would continue to be subject to higher expenses for longer
than eight years and ten years, respectively.

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.

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 future
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 use 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 Statement 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. Accordingly, upon your request, the sales charge paid on
investments made 90 days prior to the Statement revision will be adjusted
to reflect the revised Statement.

Existing holdings eligible for rights of accumulation (see below),
including Class A shares held in a fee-based arrangement, other classes of
shares of the American Funds, and any individual investments in American
Legacy variable annuities and variable life insurance policies (American
Legacy, American Legacy II and American Legacy III

The New Economy Fund - Page 26

<PAGE>

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. The Statement will be considered completed if the shareholder
dies within the 13-month Statement period. Commissions will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

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. There will be no retroactive adjustments in sales charges
on investments made during the 13-month period.

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 made by you and your
immediate family (your spouse and your children under the age of 21), if
all parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plan(s), such as an IRA, 403(b) plan
(see exception below), or single-participant Keogh-type plan;

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);

. trust accounts established by you or your immediate family. 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; or

. endowments or foundations established and controlled by you or your
immediate family.

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, excluding
individual-type employee benefit plans described above;

The New Economy Fund - Page 27

<PAGE>

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
individual-type employee benefit plans described above;

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares;

. for non-profit, charitable or educational organizations, such as an
endowment or foundation (or any employer-sponsored retirement plan for
such an endowment or foundation) established and controlled by the
organization; or

. for participant accounts of a 403(b) plan that is treated as an
employer-sponsored plan (see "Class A Purchases Not Subject to Sales
Charges" above), or made for two or more 403(b) plans that are treated
as employer-sponsored plans of a single employer or affiliated
employers as defined in the 1940 Act.

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 all classes of 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. Shares of money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a sales charge also
qualify. However, direct purchases of the money market funds are excluded.

RIGHTS OF ACCUMULATION - You may take into account the current value (or if
greater, the amount you invested less any withdrawals) of your existing
holdings in all share classes of 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 AND C SHARES - Any CDSC on Class A and C 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).

(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.

The New Economy Fund - Page 28

<PAGE>

(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% each year of the lesser of the original
purchase cost or the current market value of the shares being sold that would
otherwise be subject to a CDSC.

CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:

(1) Redemptions through systematic withdrawal plans ("SWP") (see "Automatic
Withdrawals" below) not exceeding 12% each year of the lesser of the original
purchase cost or the current market value of the shares being sold that would
otherwise be subject to a 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% fee from CDSC 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. Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account. 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. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.

INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS

Assets from a 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 will be subject to the terms and conditions
for Class A, B, C and F shares contained in the fund's current prospectus and
statement of additional information. In the case of an IRA rollover involving
plan assets that offered an investment option managed by any affiliate of the
The Capital Group Companies, Inc., including any American Funds, the assets may
only be invested in Class A shares of the American Funds. Such investments will
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 New Economy Fund - 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 do not always
indicate 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 approximately 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;

The New Economy Fund - Page 30

<PAGE>

2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and

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
Trustees.

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, B and C
shares may be subject to contingent deferred sales charges. Generally, Class F
shares may only be sold through fee-based programs of investment firms and
registered investment advisers with special agreements with the fund's
distributor.

You may sell (redeem) other classes of 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.
The Transfer Agent reserves the right to require a signature guarantee
on all redemptions.

- 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.

The New Economy Fund - Page 31

<PAGE>

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).

- 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.

- Check writing is not available for Class B, C or F shares of The
Cash Management Trust.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable 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, B, C or F 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 on Class A
or C shares will be credited to your account). Proceeds from a redemption or a
dividend or capital gain distribution of Class C shares may be reinvested in
Class C shares. Redemption proceeds of shares representing direct purchases in
the money market funds that are reinvested in non-money market funds will be
subject to a sales charge. Proceeds will be reinvested at the next calculated
net asset value after your request is received and accepted by the Transfer
Agent.

The New Economy Fund - Page 32

<PAGE>

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available if
your account is held with an investment dealer.

AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments in 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 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 and fund 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 or C
shares of any other American Fund for dollar cost averaging purposes. Exchange
purchases are subject to the minimum investment

The New Economy Fund - Page 33

<PAGE>

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.

Exchanges of Class F shares generally may only be done through fee-based
programs of investment firms and registered investment advisers with special
agreements with the fund's distributor. You may exchange shares of other classes
by writing to the Transfer Agent (see "Selling 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 "American Funds Service Company
Service Areas" -- "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 Bank and 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 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.

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, purchases through automatic investment
plans and certain retirement plans, as well as automatic exchanges and
withdrawals 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) from non-retirement plan
accounts, 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
"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 - Purchase Minimums" and "Purchase of Shares - Fund
Numbers"), personal identification number

The New Economy Fund - Page 34

<PAGE>

(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, it and/or the fund may
be liable for losses due to unauthorized or fraudulent instructions. In the
event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural disaster, redemption and
exchange requests may be made in writing only.

REDEMPTION OF SHARES - The fund's Declaration of Trust 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 of record owns
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 Trustees of the fund may from time to time
adopt.

While payment of redemptions normally will be in cash, the fund's Declaration of
Trust permits 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 Trustees, 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

The New Economy Fund - Page 35

<PAGE>

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
2000, 1999 and 1998, amounted to $XXX, $7,477,000 and $4,096,000, respectively.

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 State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02101, 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 non-U.S. 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
$XXX for Class A shares and $X for Class B shares for the 2000 fiscal year.

INDEPENDENT AUDITORS - Deloitte & Touche LLP, Two California Plaza, 350 South
Grand Avenue, Suite 200, Los Angeles, CA 90071, 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 of 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 auditors is
reviewed and determined annually by the Board of Trustees.

PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on
November 30. 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, including
securities in which the fund may invest from time to time. 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.

The New Economy Fund - Page 36

<PAGE>

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:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- NOVEMBER 30, 2000

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $24.69
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). . . . . . . . . . . . . . . . $ 26.20
</TABLE>

CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS

The fund's yield was 0.32% based on a 30-day (or one month) period ended
November 30, 2000, 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 at maximum
offering price for the five- and ten-year periods ended November 30, 2000 were
XX%, XX% and XX%, respectively. The fund's one year total return and average
annual total return at net asset value for the five- and ten-year periods ended
on November 30, 2000 were XX%, XX% and XX%, 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 at the maximum offering price, 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

The New Economy Fund - Page 37

<PAGE>

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. From time to time, the fund may calculate investment results for Class
B, C and F shares.

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 New Economy Fund - Page 38

<PAGE>

APPENDIX
Description of Bond Ratings

BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.

Moody's rates the long-term debt securities issued by various entities from
-------
"Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Ratings are described as follows:

"Bonds which are rated Aaa are judged to be of the best quality. They 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 issues."

"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."

"Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. 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."

"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. 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."

"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often 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. Uncertainty of position characterizes
bonds in this class."

"Bonds which are rated 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."

The New Economy Fund - Page 39

<PAGE>

"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."

"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."

"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."

S & P rates the long-term securities debt of various entities in categories
-----
ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Ratings are described as follows:

"Debt rated 'AAA' has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong."

"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."

"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."

"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."

"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.

"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."

"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."

"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."

"The rating 'C1' is reserved for income bonds on which no interest is being
paid."

The New Economy Fund - Page 40

<PAGE>

"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."

The New Economy Fund - Page 41

PART C
OTHER INFORMATION
THE NEW ECONOMY FUND

ITEM 23. EXHIBITS

(a) Establishment and Designation of Class of Shares of Beneficial Interest
Without Par Value
(b) Previously filed (see Post-Effective Amendment No. 21 filed 1/30/98)
(c) Share Certificate
(d) Previously filed (see Post-Effective Amendment No. 21 filed 1/30/98)
(e) Form of Amended and Restated Principal Underwriting Agreement
(f) None
(g) Previously filed (see Post-Effective Amendment No. 24 filed 3/10/00)
(h) Form of Administrative Services Agreement
(i) Legal Opinion for Class C and Class F Shares (to be filed by amendment)
(j) Consent of Independent Auditors (to be filed by amendment)
(k) None
(l) None
(m) Form of Plan of Distribution relating to Class C and Class F Shares
(n) Amended Form of Multiple Class Plan
(o) None
(p) Previously filed (see Post-Effective Amendment No. 24 filed 3/10/00)

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None

ITEM 25. INDEMNIFICATION

Registrant is a joint-insured under Investment Advisor/Mutual Fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company.
These policies insure its officers and trustees 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.

Article VI of the Trust's By-Laws states:

(a) The Trust shall indemnify any Trustee or officer of the Trust 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 (other than action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgement, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person reasonably believed to be opposed to the best interests of the the
Trust, and, with repsect to any criminal action or proceeding, had reasonable
cause to believe that such person's conduct was unlawful.

(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances ofthe case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.

(c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith, without the necessity for the determination as to the
standard of conduct as provided in subparagraph (d).

(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion; and any
determinations so made shall be conclusive.

(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested trustees or independent legal counsel.

(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.

(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled and
shall continue as to a person who has ceased to be Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such person.

(h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed
to protect any Trustee or officer of the Trust against any liability to the
Trust or to its shareholders to which such person would otherwise be subject by
reason of willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.

(i) The Trust shall have power to purchase and maintain insurance on behalf
of any person against any liability asserted against or incurred by such
person, whether or not the Trust would have the power to indemnify such person
against such liability under the provisions of this Article.

Insofar as indemnification for liability arising under the Securities Act of
1933 (the Act) may be permitted to Trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer of controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer of controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF 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, EuroPacific
Growth Fund, 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, 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 Vice President None

27304 Park Vista Road

Agoura Hills, CA 91301

John A. Agar Vice President None

1501 N. University, Suite 227A

Little Rock, AR 72207

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 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

8925 Northlake Hills Circle

Jonestown, TX 78645

Alan Brown Vice President None

4129 Laclede Avenue

St. Louis, MO 63108

B J. Peter Burns Vice President None

Brian C. Casey 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 O. 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

William F. Daugherty Regional Vice President None

1216 Highlander Way

Mechanicsburg, PA 17055

Daniel J. Delianedis Vice President None

8689 Braxton Drive

Eden Prairie, MN 55347

James A. DePerno, Jr. Regional Vice President None

91 Church Street

East Aurora, NY 14052

L Bruce De Priester Vice President None

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

2627 Mission Street

San Marino, CA 91108

Peter J. Doran Director, Executive Vice None
President

100 Merrick Road, Suite 216W

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

John Fodor Senior 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 Senior Vice President None

6744 Avalon

Dallas, TX 75214

Robert S. Irish 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 Senior Vice President None

John P. Keating Regional Vice President None

2285 Eagle Harbor Parkway

Orange Park, FL 32073

Dorothy Klock Vice President None

515 East 89th Street, Apt. 4G

New York, NY 10128

H Diane Koske Assistant Vice President

Andrew R. LeBlanc Regional Vice President None

78 Eton Road

Garden City, NY 11530

Arthur J. Levine Senior Vice President None

12558 Highlands Place

Fishers, IN 46038

B Karl A. Lewis Assistant Vice President None

T. Blake Liberty 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 Vice President None

Louis Linquata Regional Vice President None

170 South Battin

Wichita, KS 67218

LW Robert W. Lovelace Director None

Stephen A. Malbasa Senior 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

James R. McCrary Regional Vice President None

963 1st Street, #1

Hermosa Beach, CA 90254

S John V. McLaughlin Senior Vice President None

Terry W. McNabb Vice President None

2002 Barrett Station Road

St. Louis, MO 63131

William E. Noe 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

Jeffrey Olson Regional Vice President None

930 S. Cowley Street, #305

Spokane, WA 99202

Gary A. Peace Regional Vice President None

291 Kaanapali Drive

Napa, CA 94558

Samuel W. Perry Regional Vice President None

4730 East Indian School Road

Suite 120

Phoenix, AZ 85018

David Petzke Regional Vice President None

4016 Saint Lucia Street

Boulder, CO 80301

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 388

Glenville, NC 28736

George S. Ross Senior Vice President None

P.O. Box 376

Southport, ME 04576

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 Vice President None

10538 Cheviot Drive

Los Angeles, CA 90064

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

Brad W. Short Regional Vice President None

1601 Seal Way

Seal Beach, CA 90740

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

Rodney G. Smith Senior Vice President None

100 N. Central Expressway

Suite 1214

Richardson, TX 75080

S Sherrie L. Snyder-Senft Assistant Vice President None

Anthony L. Soave Regional Vice President None

8831 Morning Mist Drive

Clarkston, MI 48348

L Therese L. Souiller Assistant Vice President None

Nicholas D. Spadaccini 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 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

3021 Kensington Trace

Tarpon Springs, FL 34689

L Drew W. Taylor Vice President None

Gary J. Thoma Regional Vice President None

604 Thelosen Drive

Kimberly, WI 54136

L James P. Toomey Vice President None

I Christopher E. Trede Vice President None

George F. Truesdail Senior 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

39 Old Course Drive

Newport Beach, CA 92660

Thomas E. Warren 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 J. Wenzel Regional Vice President None

251 Barden Road

Bloomfield, MI 48304

H J. D. Wiedmaier Assistant Vice President None

SF N. Dexter Williams Senior 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 Senior Vice President None

9320 Overlook Trail

Eden Prairie, MN 55347

Janet M. Young Regional Vice President None

1616 Vermont

Houston, TX 77006

Jonathan A. Young Regional Vice President None

329 Downing Drive

Chesapeake, VA 23322

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
SF Business Address, One Market, Steuart Tower, Suite 1800, San Francisco, CA
94105-1016
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240

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, State Street Bank and Trust Company, 225 Franklin Street,
Boston, MA 02101.

ITEM 29. MANAGEMENT SERVICES

None

ITEM 30. UNDERTAKINGS

n/a

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 of Los Angeles, and State of California, on the 29th day of December,
2000.

The New Economy Fund
By: /s/ Timothy D. Armour
Timothy D. Armour, President

Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed below on December 29, 2000, by the
following persons in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE

<S> <C> <C>
(1) Principal Executive Officer:

/s/ Timothy D. Armour President

Timothy D. Armour

(2) Principal Financial Officer and

Principal Accounting Officer:

/s/ David A. Pritchett Treasurer

David A. Pritchett

(3) Trustees:

Timothy D. Armour* President and Trustee

Joseph C. Berenato* Trustee

Richard G. Capen, Jr.* Trustee

H. Frederick Christie* Trustee

Gordon Crawford* Chairman and Trustee

John G. Freund* Trustee

E. Graham Holloway* Trustee

Leonade D. Jones* Trustee

William H. Kling* Trustee

Norman R. Weldon* Trustee

Patricia K. Woolf* Trustee

</TABLE>

*By /s/ Chad L. Norton
Chad L. Norton
(Attorney-in-Fact)