<PAGE>


                         The Income Fund of America/(R)/

                                   Prospectus

<TABLE>
<CAPTION>
         TABLE OF CONTENTS
------------------------------------------------------
<S>      <S>
   1      Risk/Return Summary
------------------------------------------------------
   4      Fees and Expenses of the Fund
------------------------------------------------------
   5      Investment Objectives, Strategies and Risks
------------------------------------------------------
   8      Management and Organization
------------------------------------------------------
  10      Shareholder Information
------------------------------------------------------
  11      Choosing a Share Class
------------------------------------------------------
  13      Purchase and Exchange of Shares
------------------------------------------------------
  14      Sales Charges
------------------------------------------------------
  16      Sales Charge Reductions and Waivers
------------------------------------------------------
  17      Plans of Distribution
------------------------------------------------------
  18      How to Sell Shares
------------------------------------------------------
  19      Distributions and Taxes
------------------------------------------------------
  20      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>



<PAGE>

 RISK/RETURN SUMMARY

 The fund seeks to provide you with current income, and secondarily to make your
 investment grow. It invests primarily in a broad range of income-producing
 securities, including stocks and bonds. Generally, the fund will invest a
 substantial portion of its assets in equity-type securities.

 The fund is designed for investors seeking current income and capital
 appreciation through a mix of investments that provide above-average price
 stability. An investment in the fund is subject to risks, including the
 possibility that the fund'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 values of equity securities owned by the fund may be affected by events
 specifically involving the companies issuing those securities. The values of
 debt securities owned by the fund may be affected by changing interest rates
 and credit risk assessments. Lower quality and longer maturity bonds may be
 subject to greater price fluctuations than higher quality and shorter maturity
 bonds. 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.


                                       1

                                         THE INCOME FUND OF AMERICA / PROSPECTUS

<PAGE>


 HISTORICAL INVESTMENT 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   23.78%
 1992   12.03%
 1993   14.01%
 1994   -2.50%
 1995   29.08%
 1996   15.23%
 1997   22.16%
 1998    9.47%
 1999    0.52%
 2000    9.98%
 [end bar chart]


    The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
        <S>                           <C>     <C>
        HIGHEST                       9.65%  (quarter ended March 31, 1991)
        LOWEST                        -4.91%  (quarter ended September 30, 1998)
</TABLE>


                                       2

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>



 Unlike the bar chart on the previous page, the table below reflects the fund's
 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 began investment operations on March 15, 2001,
 comparable results for those classes 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 12/1/73/1/
 (with the maximum sales          3.66%       9.93%       12.31%      13.14%
 charge imposed)
 ------------------------------------------------------------------------------
 S&P 500/2/                      -9.11%      18.29%       17.41%      14.19%
 ------------------------------------------------------------------------------
 Lehman Brothers Aggregate       11.63%       6.46%        7.96%        N/A
 Bond Index/3/
 ------------------------------------------------------------------------------
 Lehman Brothers
 Government/Credit Bond          11.85%       6.24%        8.00%       8.96%
 Index/4/
 ------------------------------------------------------------------------------
 Class A 30-day yield:  5.21%
 (For current yield information, please call American FundsLine at
 1-800-325-3590.)
 ------------------------------------------------------------------------------
</TABLE>



 1 The lifetime figure is from December 1, 1973, when Capital Research and
  Management Company became investment adviser for the fund.
 2 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.
 3 The Lehman Brothers Aggregate Bond Index represents investment grade debt.
  This index is unmanaged and does not reflect sales charges, commissions or
  expenses. This index was not in existence as of the date Capital Research and
  Managment Company became the fund's investment adviser; therefore, lifetime
  results are not available.
 4 The Lehman Brothers Government/Credit Bond Index is a market value-weighted
  index that tracks the total return performance of fixed-rate, publicly placed,
  dollar-denominated obligations issued by the U.S. Treasury, U.S. government
  agencies, quasi-federal corporations, and corporations whose debt is
  guaranteed by the U.S. government. This index is unmanaged and does not
  reflect sales charges, commissions or expenses.


                                       3

                                         THE INCOME FUND OF AMERICA / 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                                                0.30%     0.30%       0.30%        0.30%
 -----------------------------------------------------------------------------------------------------------
 Distribution and/or Service (12b-1) Fees/3/                    0.23%     1.00%       1.00%        0.25%
 -----------------------------------------------------------------------------------------------------------
 Other Expenses                                                 0.10%     0.08%       0.19%        0.19%
 -----------------------------------------------------------------------------------------------------------
 Total Annual Fund Operating Expenses                           0.63%     1.38%       1.49%        0.74%
 -----------------------------------------------------------------------------------------------------------
</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
  class' average net assets annually.

 EXAMPLE

 The examples below are intended to help you compare the cost of investing in
 the fund with the cost of investing in other mutual funds. The examples assume
 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 the first year. The "Class B- and Class C-assuming
 redemption" examples reflect applicable contingent deferred sales charges
 through six years and one year, respectively (after which times they are
 eliminated). The examples do not include fees charged by financial
 intermediaries, typically applicable mainly to Class F shares. 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>
                                             ONE YEAR         THREE YEARS         FIVE YEARS         TEN YEARS
 <S>                                      <C>              <C>                 <C>                <C>
 Class A                                       $636               $765               $906              $1,316
 ----------------------------------------------------------------------------------------------------------------------------------
 Class B - assuming redemption                 $640               $837               $955              $1,452
 -------------------------------------------------------------------------------------------------------------------
 Class B - assuming no redemption              $140               $437               $755              $1,452
 -------------------------------------------------------------------------------------------------------------------
 Class C - assuming redemption                 $252               $471               $813              $1,779
 -------------------------------------------------------------------------------------------------------------------
 Class C - assuming no redemption              $152               $471               $813              $1,779
 -------------------------------------------------------------------------------------------------------------------
 Class F - excludes intermediary fees/*/       $ 76               $237               $411              $  918
 -------------------------------------------------------------------------------------------------------------------
 *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>




                                       4

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>

 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS

 The fund's investment objectives are to provide you with current income while
 secondarily striving for capital growth. Normally, the fund invests primarily
 in income-producing securities. These include equity securities such as
 dividend-paying common stocks and debt securities such as interest-paying
 bonds. The fund may invest in securities of issuers domiciled outside the U.S.
 Generally, at least 60% of the fund's assets will be invested in equity-type
 securities. The fund may also invest up to 20% of its assets in lower quality,
 higher yielding debt securities (rated Ba and BB or below).

 The 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 values of most debt securities held by the fund may be affected by changing
 interest rates and individual securities by changes in their effective
 maturities and credit ratings. For example, the values of bonds in the fund's
 portfolio generally will decline when interest rates rise and vice versa. Debt
 securities are also subject to credit risk, which is the possibility that the
 credit strength of an issuer will weaken and/or an issuer of a debt security
 will fail to make timely payments of principal or interest and the security
 will go into default. The values of lower quality and longer maturity bonds
 will be subject to greater price fluctuations than higher quality and shorter
 maturity bonds. The fund's investment adviser attempts to reduce these risks
 through diversification of the portfolio and ongoing credit analysis of each
 issuer as well as by monitoring economic and legislative developments.

 Investments outside the U.S. may be affected by these events to a greater
 extent and may also be affected by differing securities regulations, higher
 transaction costs, and administrative difficulties such as delays in clearing
 and settling portfolio transactions.

 The fund may also hold cash or money market instruments. The size of the fund's
 cash position will vary and will depend on various factors, including market
 conditions and purchases and redemptions of fund shares. A larger cash position
 could detract from the achievement of the fund's objectives, but it also 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.


                                       5

                                         THE INCOME FUND OF AMERICA / PROSPECTUS

<PAGE>



 Since the fund's primary goal is to provide you with current income, the fund
 also calculates its income generated and dividend rates over various periods
 and compares them with the S&P 500.

 The following information illustrates the income generated by Class A shares of
 the fund compared with the income generated by the S&P 500:

 For periods ended July 31, 2000:

<TABLE>
<CAPTION>
 INCOME GENERATED ON A
 $10,000 INVESTMENT/1/       THE FUND           S&P 500
 <S>                     <C>               <C>
 One Year                    $   508            $   125
 ------------------------------------------------------------
 Five Years                    3,239              1,394
 ------------------------------------------------------------
 Ten Years                     7,801              3,981
 ------------------------------------------------------------
 Lifetime/2/                  41,036             26,623
 ------------------------------------------------------------
</TABLE>


 1 Results are at net asset value and assume capital gain distributions are
  reinvested and dividends are taken in cash.
 2 For the period beginning December 1, 1973 (when Capital Research and
  Management Company became the fund's investment adviser).


           THE FUND'S CLASS A DIVIDEND RATES COMPARED
           WITH THE DIVIDEND RATES OF THE S&P 500/1/

 [LINE CHART]
 7/31/90   7.18%   3.31%
 7/31/91   7.11%   3.11%
 7/31/92   6.06%   2.89%
 7/31/93   6.23%   2.79%
 7/31/94   6.14%   2.80%
 7/31/95   5.56%   2.41%
 7/31/96   5.22%   2.28%
 7/31/97   4.84%   1.61%
 7/31/98   4.49%   1.43%
 7/31/99   5.03%   1.24%
 7/31/00   5.64%   1.15%
 [END LINE CHART]

 /1/ The 12-month dividend rate is calculated by taking the total of
 the trailing 12 months' dividends and dividing by the month-end net
 asset value adjusted for capital gains. All numbers are calculated
 by Lipper, Inc.





 Past results are not an indication of future results.


                                       6

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>

 HOLDINGS BY INVESTMENT TYPE AS OF JULY 31, 2000
 [pie chart]
 U.S. Equities 48.5%
 Non-U.S. Equities 14.7%
 Government Bonds 5.5%
 Other Fixed-Income Securities 22.4%
 Cash & Equivalents 8.9%
 [end pie chart]

<TABLE>
<CAPTION>

                                                                   PERCENT OF
 FIVE LARGEST INDUSTRIES IN EQUITY HOLDINGS AS OF JULY 31, 2000    NET ASSETS
 ------------------------------------------------------------------------------
 <S>                                                              <C>
 Utilities: Electric & Gas                                            8.7%
 ------------------------------------------------------------------------------
 Energy Sources & Equipment                                           6.3
 ------------------------------------------------------------------------------
 Banking                                                              6.2
 ------------------------------------------------------------------------------
 Forest Products & Paper                                              4.8
 ------------------------------------------------------------------------------
 Real Estate                                                          3.4

 TEN LARGEST EQUITY HOLDINGS AS OF JULY 31, 2000
 ------------------------------------------------------------------------------
 First Union                                                          1.6%
 ------------------------------------------------------------------------------
 Philip Morris                                                        1.3
 ------------------------------------------------------------------------------
 Royal Dutch Petroleum/"Shell" Transport and Trading                  1.2
 ------------------------------------------------------------------------------
 Georgia-Pacific                                                      1.2
 ------------------------------------------------------------------------------
 Weyerhaeuser                                                         1.1
 ------------------------------------------------------------------------------
 Dow Chemical                                                         1.1
 ------------------------------------------------------------------------------
 Time Warner                                                          1.1
 ------------------------------------------------------------------------------
 Bank of America                                                      1.1
 ------------------------------------------------------------------------------
 Consolidated Edison                                                  1.0
 ------------------------------------------------------------------------------
 Ford Motor                                                           1.0
 BOND HOLDINGS BY QUALITY CATEGORY AS OF JULY 31, 2000
 (DOES NOT INCLUDE CONVERTIBLE SECURITIES)
 See the Appendix in the Statement of Additional Information for
 a description of quality categories
 ------------------------------------------------------------------------------
 U.S. Treasury and Agency                                             4.8%
 ------------------------------------------------------------------------------
 AAA                                                                  1.6
 ------------------------------------------------------------------------------
 AA                                                                   0.7
 ------------------------------------------------------------------------------
 A                                                                    2.1
 ------------------------------------------------------------------------------
 BBB                                                                  6.3
 ------------------------------------------------------------------------------
 BB                                                                   3.2
 ------------------------------------------------------------------------------
 B                                                                    8.6
 ------------------------------------------------------------------------------
 CCC                                                                  0.5
 ------------------------------------------------------------------------------
 CC and below                                                         0.1
 ------------------------------------------------------------------------------
</TABLE>



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


                                       7

                                         THE INCOME FUND OF AMERICA / PROSPECTUS

<PAGE>

 MANAGEMENT AND ORGANIZATION

 INVESTMENT ADVISER

 Capital Research and Management Company, an experienced investment management
 organization founded in 1931, serves as investment adviser to the fund and
 other funds, including those in The American Funds Group. Capital Research and
 Management Company, a wholly owned subsidiary of The Capital Group Companies,
 Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
 Research and Management Company manages the investment portfolio and business
 affairs of the fund. The total management fee paid by the fund, as a percentage
 of average net assets, for the previous fiscal year appears 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 managed by individual counselors. Counselors
 decide how their respective segments will be invested, within the limits
 provided by a fund's objective(s) and policies and by Capital Research and
 Management Company's investment committee. In addition, Capital Research and
 Management Company's research professionals may make investment decisions with
 respect to a portion of a fund's portfolio. The primary individual portfolio
 counselors for The Income Fund of America are:




<TABLE>
<CAPTION>
 PORTFOLIO COUNSELOR/ FUND                             PRIMARY TITLE WITH INVESTMENT ADVISER
 TITLE (IF APPLICABLE)           COUNSELOR SINCE       (OR AFFILIATE) AND INVESTMENT EXPERIENCE
 -------------------------------------------------------------------------------------------------------
 <S>                          <C>                     <C>
 JANET A. MCKINLEY              1993 (8 years as a
 Chairman of the Board and    research professional    Director, Capital Research and Management Company
 Principal Executive Officer      for the fund)        Investment professional since 1976 and with
                                                       Capital Research and Management Company or
                                                       affiliate since 1982
 -------------------------------------------------------------------------------------------------------
 STEPHEN E. BEPLER             1985 (11 years as a     Senior Vice President, Capital Research Company
 Senior Vice President        research professional    Investment professional since 1966 and with
                                  for the fund)        Capital Research and Management Company or
                                                       affiliate  since 1972
 -------------------------------------------------------------------------------------------------------
 ABNER D. GOLDSTINE                    1973            Senior Vice President and Director, Capital
 Senior Vice President                                 Research and Management Company
                                                       Investment professional since 1952 and with
                                                       Capital Research and Management Company or
                                                       affiliate since 1967
 -------------------------------------------------------------------------------------------------------
 DINA N. PERRY                         1992            Senior Vice President, Capital Research and
 Senior Vice President                                 Management Company
                                                       Investment professional since 1978 and with
                                                       Capital Research and Management Company or
                                                       affiliate since 1991
 -------------------------------------------------------------------------------------------------------
 HILDA L. APPLBAUM              1998 (6 years as a     Vice President, Capital Research Company
 Vice President               research professional    Investment professional since 1987 and with
                                  for the fund)        Capital Research and Management Company or
                                                       affiliate since 1995
 -------------------------------------------------------------------------------------------------------
 DAVID C. BARCLAY                      1996            Senior Vice President and Director, Capital
 Vice President                                        Research and Management Company
                                                       Investment professional since 1981 and with
                                                       Capital Research and Management Company or
                                                       affiliate since 1988
 -------------------------------------------------------------------------------------------------------
 JOHN H. SMET                          1993            Senior Vice President, Capital Research and
 Vice President                                        Management Company
                                                       Investment professional since 1982 and with
                                                       Capital Research and Managment Company or
                                                       affiliate since 1983
 -------------------------------------------------------------------------------------------------------
</TABLE>




                                       8

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>

[This page is deliberately left blank for this filing.]



                                       9

                                         THE INCOME FUND OF AMERICA / PROSPECTUS

<PAGE>

 SHAREHOLDER INFORMATION

 SHAREHOLDER SERVICES

 American Funds Service Company, the fund's transfer agent, offers you a wide
 range of services you can use to alter your investment program should your
 needs and circumstances change. These services may be terminated or modified at
 any time upon 60 days written notice. For your convenience, American Funds
 Service Company has four service centers across the country.

                  AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
                    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.


                                       10

THE INCOME FUND OF AMERICA / 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.

 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

 . Total 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)

 . 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

 . 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

 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.


                                       11

                                         THE INCOME FUND OF AMERICA / 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 sales   none (except on certain redemptions on purchases
  charge                      of $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 sales   starts at 5.00% and declines each year until it
  charge                      reaches 0% 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 sales   1.00% if shares are sold within one year after
  charge                      being purchased
  12b-1 fees                  1.00% annually
  Dividends                   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 sales   none
  charge
  12b-1 fees                  currently 0.25% annually (may not exceed 0.50%
                              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>




                                       12

THE INCOME FUND OF AMERICA / 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. These firms and advisers
 typically charge ongoing fees for services they provide.

 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>



                                       13

                                         THE INCOME FUND OF AMERICA / 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        none             none             none
 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




                                       14

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>

 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%
 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>
 CLASS B SHARES SOLD WITHIN YEAR           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.

 See "Plans of Distribution" below for ongoing compensation paid to your dealer
 or financial adviser for all share classes.

 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.


                                       15

                                         THE INCOME FUND OF AMERICA / PROSPECTUS

<PAGE>

 SALES CHARGE REDUCTIONS AND WAIVERS

 You must let your investment dealer or American Funds Service Company know if
 you qualify for a reduction in your Class A sales charge or waiver of your
 Class B 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/or, 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.


                                       16

THE INCOME FUND OF AMERICA / 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 directors. 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.


                                       17

                                         THE INCOME FUND OF AMERICA / PROSPECTUS

<PAGE>

 HOW TO SELL SHARES

 Once a sufficient period of time has passed to reasonably assure that checks or
 drafts (including certified or cashiers' checks) for shares purchased have
 cleared (normally 15 calendar days), you may sell (redeem) those shares in any
 of the following ways:

 THROUGH YOUR DEALER OR FINANCIAL ADVISER (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 dealer or 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 any redemptions.

 . 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.


                                       18

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>

 DISTRIBUTIONS AND TAXES

 DIVIDENDS AND DISTRIBUTIONS

 The fund intends to distribute dividends to you, usually in March, June,
 September and December. Capital gains, if any, are usually distributed in
 December. When a dividend or capital gain is distributed, the net asset value
 per share is reduced by the amount of the payment.

 You may elect to reinvest dividends and/or capital gain distributions to
 purchase additional shares of this fund or any other 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.


                                       19

                                         THE INCOME FUND OF AMERICA / 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
  July 31        year        income         unrealized)       operations   income)       gains)      distributions      year
-----------------------------------------------------------------------------------------------------------------------------------
<S>          <C>           <C>         <C>                    <C>         <C>         <C>            <C>            <C>
 CLASS A:
   2000         $17.51       $.88/2/         $(1.28 )/2/        $(.40)      $(.87)       $(.81)         $(1.68)        $15.43
   1999          18.25        .88               .45              1.33        (.88)       (1.19)          (2.07)         17.51
   1998          18.59        .85              1.11              1.96        (.82)       (1.48)          (2.30)         18.25
   1997          15.89        .86              3.55              4.41        (.90)        (.81)          (1.71)         18.59
   1996          14.92        .87              1.11              1.98        (.83)        (.18)          (1.01)         15.89
 CLASS B:
   2000          14.93        .24/2/            .41/2/            .65        (.19)        -               (.19)         15.39
<CAPTION>

                                           Ratio of    Ratio of net
                            Net assets,   expenses to   income to
Years ended                 end of year   average net  average net      Portfolio
  July 31    Total return  (in millions)    assets        assets      turnover rate
------------------------------------------------------------------------------------
<S>          <C>           <C>            <C>          <C>           <C>
 CLASS A:
   2000        (2.08)%        $18,102        .63 %        5.52 %         34.73%/4/
   1999         7.79           23,012        .59          4.99           44.35
   1998        11.32           22,113        .59          4.75           34.68
   1997        29.28           18,814        .61          5.09           40.92
   1996        13.46           14,459        .62          5.56           37.77
 CLASS B:
   2000         4.33               29       1.38/3/       4.57/3/        34.73/4/
</TABLE>



1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended
 July 31.  The period ended 2000 represents, for Class B shares, the 138-day
 period ended July 31, 2000.  Class B shares were not offered before March 15,
 2000.  Total return for Class B 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.

2 Based on average shares outstanding.

3 Annualized.

4 Represents portfolio turnover rate (equivalent for all share classes) for the
 year ended July 31, 2000.




                                       20

THE INCOME FUND OF AMERICA / PROSPECTUS



<PAGE>

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


                                       21

                                         THE INCOME FUND OF AMERICA / 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 publicinfo@sec.gov 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. You may also
 occasionally receive proxy statements 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, or a free
 copy of the SAI or Codes of Ethics, please call American Funds Service Company
 at 800/421-0180 or write to the Secretary of the fund at P.O. Box 7650, San
 Francisco, California 94120.
 Investment Company File No. 811-1880
                                                       Printed on recycled paper

                                                            IFA-010-0301/RRD

<PAGE>


                        THE INCOME FUND OF AMERICA, INC.

                                     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 Income Fund of America, Inc. (the "fund" or "IFA")
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 Income Fund of America, Inc.
                              Attention: Secretary
                                   One Market
                           Steuart Tower, Suite 1800
                        San Francisco, California 94105
                                 (415) 421-9360

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.


                               TABLE OF CONTENTS



<TABLE>
<CAPTION>
Item                                                                  Page No.
----                                                                  --------
<S>                                                                   <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . .        2
Description of Certain Securities and Investment Techniques . . . .        2
Fundamental Policies and Investment Restrictions. . . . . . . . . .        8
Fund Organization and Voting Rights . . . . . . . . . . . . . . . .       10
Fund Directors and Other Officers . . . . . . . . . . . . . . . . .       11
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       15
Taxes and Distributions . . . . . . . . . . . . . . . . . . . . . .       19
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . .       24
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . .       26
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . .       29
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . .       32
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . .       33
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .       34
Shareholder Account Services and Privileges . . . . . . . . . . . .       36
Execution of Portfolio Transactions . . . . . . . . . . . . . . . .       38
General Information . . . . . . . . . . . . . . . . . . . . . . . .       39
Class A Share Investment Results and Related Statistics . . . . . .       40
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       42
Financial Statements
</TABLE>





                      The Income Fund of America - Page 1

<PAGE>


                 CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.


OBJECTIVE

 .    The fund will invest at least 65% of its assets in income-producing
     securities.

EQUITY SECURITIES

 .    The fund will generally invest at least 60% of its assets in equity
     securities.  However, at times the fund may be substantially invested in
     equity or debt securities (i.e., more than 60%) or may be solely invested
     in equity or debt securities (i.e., 100%).

DEBT SECURITIES

 .    The fund may invest up to 20% of its assets in straight debt securities
     rated  BB by Standard & Poor's Corporation (S&P) and Ba by Moody's
     Investors Services, Inc. (Moody's) or below or unrated but determined to be
     of equivalent quality.  (The 20% limit shall not apply to debt securities
     that have equity conversion or purchase rights.)
 .    The fund may invest up to 11/2% of its assets in inverse floating rate
     notes.
 .    The fund may invest up to 5% of its assets in reinsurance related notes and
     bonds.

NON-U.S. SECURITIES

 .    The fund may invest up to 15% of its assets in equity securities of issuers
     domiciled outside the U.S. and not included in the Standard & Poor's 500
     Composite Index.
 .    The fund may invest up to 10% of its assets in debt securities of issuers
     domiciled outside the U.S. (must be U.S. dollar denominated).

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.


          DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."


EQUITY SECURITIES - Equity securities represent an ownership position in a
company. These securities may include common stocks and securities with equity
conversion or purchase rights. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The fund's results will be related to the overall markets
for these securities.


INVESTING IN SMALLER CAPITALIZATION STOCKS - The fund may invest in the stocks
of smaller 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


                      The Income Fund of America - Page 2

<PAGE>



smaller capitalization stocks can involve greater risk than is customarily
associated with investing in stocks of larger, more established companies. For
example, smaller companies often have limited product lines, markets, or
financial resources, may be dependent for management on one or a few key
persons, and can be more susceptible to losses. Also, their securities may be
thinly traded (and therefore have to be sold at a discount from current prices
or sold in small lots over an extended period of time), may be followed by fewer
investment research analysts, and may be subject to wider price swings, thus
creating a greater chance of loss than securities of larger capitalization
companies.


DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality, and maturity. In general, their prices decline when
interest rates rise and vice versa.


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, like
     other 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 increased 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


                      The Income Fund of America - Page 3

<PAGE>



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. These
securities may at times behave more like equity than debt and vice versa. Some
types of convertible bonds or preferred stock automatically convert into common
stock. 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.


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.


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


                      The Income Fund of America - Page 4

<PAGE>


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.


INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities, and corporations. The
principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted
principal value. For example, in a period of deflation, principal value will be
adjusted downward, reducing the interest payable.


Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.


REINSURANCE RELATED NOTES AND BONDS - The fund may invest in reinsurance related
notes and bonds. These instruments, which are typically issued by special
purpose reinsurance companies, transfer an element of insurance risk to the note
or bond holders. For example, the reinsurance company would not be required to
repay all or a portion of the principal value of the notes or bonds if losses
due to a catastrophic event under the policy (such as a major hurricane) exceed
certain dollar thresholds. Consequently, the fund may lose the entire amount of
its investment in such bonds or notes if such an event occurs and losses exceed
certain dollar thresholds. In this instance, investors would have no recourse
against the insurance company. These instruments may be issued with fixed or
variable interest rates and rated in a variety of credit quality categories by
the rating agencies.


INVERSE FLOATING RATE NOTES - The fund may invest to a very limited extent (no
more than 1.5% of its assets) in inverse floating rate notes (a type of
derivative instrument). These notes have rates that move in the opposite
direction of prevailing interest rates.  A change in prevailing interest rates
will often result in a greater change in the instruments' interest rates. As a
result, these instruments may have a greater degree of volatility than other
types of interest-bearing securities.


PASS-THROUGH SECURITIES - The fund may invest in various debt obligations backed
by a pool of mortgages or other assets including, but not limited to, loans on
single family residences, home equity loans, mortgages on commercial buildings,
credit card receivables, and leases on airplanes or other equipment. Principal
and interest payments made on the underlying asset pools backing these
obligations are typically passed through to investors. Pass-through securities
may have either fixed or adjustable coupons. These securities include those
discussed below.


"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities.


                      The Income Fund of America - Page 5

<PAGE>


The payment of interest and principal on securities issued by U.S. government
agencies is guaranteed by the full faith and credit of the U.S. government (in
the case of GNMA securities) or the issuer (in the case of FNMA and FHLMC
securities). However, the guarantees do not apply to the market prices and
yields of these securities, which vary with changes in interest rates.


Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities
and the underlying mortgages are not guaranteed by government agencies. In
addition, these securities generally are structured with one or more types of
credit enhancement. Mortgage-backed securities generally permit borrowers to
prepay their underlying mortgages. Prepayments can alter the effective maturity
of these instruments.


"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages,
while privately issued CMOs may be backed by either government agency mortgages
or private mortgages. Payments of principal and interest are passed through to
each bond at varying schedules resulting in bonds with different coupons,
effective maturities, and sensitivities to interest rates. In fact, some CMOs
may be structured in a way that when interest rates change the impact of
changing prepayment rates on these securities' effective maturities is
magnified.


"Commercial mortgage-backed securities" are backed by mortgages of commercial
property, such as hotels, office buildings, retail stores, hospitals, and other
commercial buildings. These securities may have a lower prepayment uncertainty
than other mortgage-related securities because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of
credit enhancement to protect against potential losses on the underlying
mortgage loans. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans, including the effects of local and other economic
conditions on real estate markets, the ability of tenants to make loan payments,
and the ability of a property to attract and retain tenants.


"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. The values of these securities are sensitive to changes in the
credit quality of the underlying collateral, the credit strength of the credit
enhancement, changes in interest rates, and at times the financial condition of
the issuer. Some asset-backed securities also may receive prepayments which can
change the securities' effective maturities.


U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include 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


                      The Income Fund of America - Page 6

<PAGE>



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: 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.


RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. Securities not actively traded will be considered
illiquid unless they have been specifically determined to be liquid under
procedures which have been adopted by the fund's board of directors, taking into
account factors such as the frequency and volume of trading, the commitment of
dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.


FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities,
it assumes the risk of any decline in value of the security beginning on the
date of the agreement. When the fund agrees to sell such securities, it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.


The fund will not use these transactions for the purpose of leveraging and will
segregate liquid assets which will be marked to market daily in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent the
fund's aggregate commitments under these transactions exceed its segregated
assets, the fund temporarily could be in a leveraged position (because it may
have an amount greater than its net assets subject to market risk). Should
market values of the fund's portfolio securities decline while the fund is in a
leveraged position, greater depreciation of its net assets would likely occur
than were it not in such a position. The fund will not borrow money to settle
these transactions and therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.


The fund may also enter into "roll" transactions which are the sale of
mortgage-backed or other securities together with a commitment to purchase
similar, but not identical, securities at a later date. The fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations as of the time of the agreement. The fund intends to treat roll
transactions as two separate transactions: one involving the purchase of a
security and a separate transaction involving the sale of a security. Since the
fund does not intend to enter into roll transactions for


                      The Income Fund of America - Page 7

<PAGE>


financing purposes, it may treat these transactions as not falling within the
definition of "borrowing" set forth in Section 2(a)(23) of the Investment
Company Act of 1940 (the "1940 Act"). The fund will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions.

                        *     *     *     *     *     *

PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.


Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved, although the price
usually includes a profit to the dealer.


The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio was replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.


                FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.


The fund may not:


1.   Act as underwriter of securities issued by other persons.

2.   Invest more than 10% of the value of its total assets in securities that
are illiquid.

3.   Borrow money, except temporarily for extraordinary or emergency purposes,
in an amount not exceeding 5% of the value of the Fund's total assets at the
time of such borrowing.

4.   Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (this shall not prevent the Fund from investing
in securities or other instruments backed by real estate or securities of
companies engaged in the real estate business).

5.   Purchase or deal in commodities or commodity contracts.


                      The Income Fund of America - Page 8

<PAGE>


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

7.   Purchase securities of any company for the purpose of exercising control or
management.

8.   Purchase any securities on "margin", except that it may obtain such
short-term credit as may be necessary for the clearance of purchases of
securities.

9.   Sell or contract to sell any security which it does not own unless by
virtue of its ownership of other securities it has at the time of sale a right
to obtain securities, without payment of further consideration, equivalent in
kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions.

10.  Purchase or sell puts, calls, straddles, or spreads, but this restriction
shall not prevent the purchase or sale of rights represented by warrants or
convertible securities.

11.  Purchase any securities of any issuer, except the U.S. Government (or its
instrumentalities), if immediately after and as a result of such investment (1)
the market value of the securities of such other issuer shall exceed 5% of the
market value of the total assets of the fund, or (2) the fund shall own more
than 10% of the outstanding voting securities of such issuer, provided that this
restriction shall apply only as to 75% of the fund's total assets.

12.  Purchase any securities (other than securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities) if immediately after and
as a result of such purchase 25% or more of the market value of the total assets
of the fund would be invested in securities of companies in any one industry.

For purposes of Investment Restriction #2, restricted securities are treated as
illiquid by the fund, with the exception of those securities that have been
determined to be liquid pursuant to procedures adopted by the fund's Board of
Directors. In addition, the fund may not invest more than 15% of the value of
its net assets in securities that are illiquid. Furthermore, the fund may not
issue senior securities.


NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed without shareholder approval:


1.    The Fund does not currently intend to lend portfolio securities.

2.   The Fund may not invest in securities of other investment companies, except
as permitted by the Investment Company Act of 1940, as amended.

Notwithstanding non-fundamental Investment Restriction #2, the fund may invest
in securities of other investment companies if deemed advisable by its officers
in connection with the administration of a deferred compensation plan adopted by
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.


                      The Income Fund of America - Page 9

<PAGE>


                      FUND ORGANIZATION AND VOTING RIGHTS

The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation on March 8, 1969 and reorganized as a Maryland
corporation on December 16, 1983.


All fund operations are supervised by the fund's Board of Directors which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in "Directors and Director Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.


The fund 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 Directors 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 respective class' 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.


REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority of the votes entitled to be cast, remove any
Director from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed Directors. The fund has
agreed, at the request of the staff of the Securities and Exchange Commission,
to apply the provisions of section 16(c) of the 1940 Act with respect to the
removal of Directors, as though the fund were a common-law trust. Accordingly,
the Directors of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any Directors when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.


                      The Income Fund of America - Page 10

<PAGE>



                          FUND DIRECTORS AND OFFICERS

                      Directors and Director Compensation


<TABLE>
<CAPTION>
                                                                                            AGGREGATE
                                                                                           COMPENSATION
                                                                                      (INCLUDING VOLUNTARILY
                                                                                             DEFERRED
                                                                                         COMPENSATION/1/)
                                                                                          FROM THE FUND
                            POSITION                                                    DURING FISCAL YEAR
                              WITH              PRINCIPAL OCCUPATION(S) DURING                ENDED
NAME, ADDRESS AND AGE      REGISTRANT                    PAST 5 YEARS                     JULY 31, 2000
--------------------------------------------------------------------------------------------------------------
<S>                     <C>                <C>                                        <C>
 Robert A. Fox           Director           Managing General Partner, Fox                    $25,928/3/
 2110 Waverley Street                       Investments LP; Professor and Executive
 Palo Alto, CA 94301                        in Residence, University of California,
 Age: 63                                    Davis; former President and Chief
                                            Executive Officer, Foster Farms
--------------------------------------------------------------------------------------------------------------
 Roberta L. Hazard       Director           Consultant; Rear Admiral, United States           $25,250
 1419 Audmar Drive                          Navy (Retired)
 McLean, VA 22101
 Age: 66
--------------------------------------------------------------------------------------------------------------
 Leonade D. Jones        Director           Co-Founder and Adviser, VentureThink             $31,500/3/
 1536 Los Montes                            LLC and Versura Inc.; former Treasurer,
 Drive                                      The Washington Post Company
 Burlingame, CA 94010
 Age: 53
--------------------------------------------------------------------------------------------------------------
 +Darcy B. Kopcho        President and      Executive Vice President and Research             None/4/
 333 South Hope          Director           Director, Capital Research Company
 Street
 Los Angeles, CA
 90071
 Age: 47
--------------------------------------------------------------------------------------------------------------
 John G. McDonald        Director           The IBJ Professor of Finance, Graduate           $29,875/3/
 Stanford University                        School of Business, Stanford University
 Stanford, CA 94305
 Age: 63
--------------------------------------------------------------------------------------------------------------
 + Janet A. McKinley     Chairman of the    Director, Capital Research and                    None/4/
 630 Fifth Avenue        Board              Management Company
 New York, NY 10111
 Age: 45
--------------------------------------------------------------------------------------------------------------
 James K. Peterson       Director           Managing Director, Oak Glen                      $18,000/5/
 5560 North Via Elena                       Consultancy, LLC; former Director of
 Tucson, AZ                                 Investment Management; IBM Retirement
 85718-5510                                 Fund, IBM Corporation
 Age: 59
--------------------------------------------------------------------------------------------------------------
 + James W. Ratzlaff     Director           Retired Senior Partner, The Capital               None/4/
 333 South Hope                             Group Partners L.P.
 Street
 Los Angeles, CA
 90071
 Age: 64
--------------------------------------------------------------------------------------------------------------
 Henry E. Riggs          Director           President, Keck Graduate Institute of            $28,250/3/
 535 Watson Drive                           Applied Life Sciences; former President
 Claremont, CA 91711                        and Professor of Engineering, Harvey
 Age: 66                                    Mudd College
--------------------------------------------------------------------------------------------------------------
 Patricia K. Woolf       Director           Private investor; Lecturer, Department            $29,000
 506 Quaker Road                            of Molecular Biology, Princeton
 Princeton, NJ 08540                        University; Corporate Director
 Age: 66
--------------------------------------------------------------------------------------------------------------
<CAPTION>
                             TOTAL COMPENSATION
                           (INCLUDING VOLUNTARILY
                                  DEFERRED
                            COMPENSATION/1/) FROM      TOTAL NUMBER
                            ALL FUNDS MANAGED BY         OF FUND
                            CAPITAL RESEARCH AND          BOARDS
                             MANAGEMENT COMPANY          ON WHICH
                        OR ITS AFFILIATES/2/ FOR THE     DIRECTOR
NAME, ADDRESS AND AGE     YEAR ENDED JULY 31, 2000      SERVES/2/
--------------------------------------------------------------------
<S>                     <C>                           <C>
 Robert A. Fox                   $147,500/3/                7
 2110 Waverley Street
 Palo Alto, CA 94301
 Age: 63
--------------------------------------------------------------------
 Roberta L. Hazard                 $83,000                  4
 1419 Audmar Drive
 McLean, VA 22101
 Age: 66
--------------------------------------------------------------------
 Leonade D. Jones                $140,000/3/                6
 1536 Los Montes
 Drive
 Burlingame, CA 94010
 Age: 53
--------------------------------------------------------------------
 +Darcy B. Kopcho                  None/4/                  1
 333 South Hope
 Street
 Los Angeles, CA
 90071
 Age: 47
--------------------------------------------------------------------
 John G. McDonald                $238,500/3/                8
 Stanford University
 Stanford, CA 94305
 Age: 63
--------------------------------------------------------------------
 + Janet A. McKinley               None/4/                  1
 630 Fifth Avenue
 New York, NY 10111
 Age: 45
--------------------------------------------------------------------
 James K. Peterson               $34,833/5/                 2
 5560 North Via Elena
 Tucson, AZ
 85718-5510
 Age: 59
--------------------------------------------------------------------
 + James W. Ratzlaff               None/4/                  3
 333 South Hope
 Street
 Los Angeles, CA
 90071
 Age: 64
--------------------------------------------------------------------
 Henry E. Riggs                  $96,000/3/                 4
 535 Watson Drive
 Claremont, CA 91711
 Age: 66
--------------------------------------------------------------------
 Patricia K. Woolf                $137,000                  6
 506 Quaker Road
 Princeton, NJ 08540
 Age: 66
--------------------------------------------------------------------
</TABLE>




                      The Income Fund of America - Page 11


<PAGE>

* Company affiliated with Capital Research and Management Company.

+ "Interested persons" within the meaning of the 1940 Act on the basis of their
  affiliation with the fund's Investment Adviser, Capital Research and
  Management Company, or the parent company of the Investment Adviser, The
  Capital Group Companies, Inc.


                      The Income Fund of America - Page 12


<PAGE>

1  Amounts may be deferred by eligible Directors under a non-qualified deferred
  compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
  an earnings rate determined by the total return of one or more funds in The
  American Funds Group as designated by the Directors.

2 Capital Research and Management Company manages The American Funds Group
  consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
  American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
  American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
  Management Trust of America, Capital Income Builder, Inc., Capital World
  Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
  Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
  The Income Fund of America, Inc., Intermediate Bond Fund of America, The
  Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
  The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
  SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
  Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
  Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
  Money Fund of America, U.S. Government Securities Fund and Washington Mutual
  Investors Fund, Inc. Capital Research and Management Company also manages
  American Variable Insurance Series and Anchor Pathway Fund, which serve as the
  underlying investment vehicle for certain variable insurance contracts; and
  Endowments, whose shareholders are limited to (i) any entity exempt from
  taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
  amended ("501(c)(3) organization");      (ii) any trust, the present or future
  beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
  formed for the primary purpose of benefiting a 501(c)(3) organization. An
  affiliate of Capital Research and Management Company, Capital International,
  Inc., manages Emerging Markets Growth Fund, Inc.

3 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 Directors is as follows: Robert A. Fox
  ($366,194), Leonade D. Jones ($112,285), John G. McDonald ($191,177) and Henry
  E. Riggs ($196,555). Amounts deferred and accumulated earnings thereon are not
  funded and are general unsecured liabilities of the fund until paid to the
  Directors.

4 Darcy B. Kopcho, Janet A. McKinley and James W. Ratzlaff are affiliated with
  the Investment Adviser and, accordingly, receive no compensation from the
  fund.

5 James K. Peterson was elected a Director of the fund on December 1, 1999.


                      The Income Fund of America - Page 13


<PAGE>



                                 OTHER OFFICERS


<TABLE>
<CAPTION>
                               POSITION(S)     PRINCIPAL OCCUPATION(S) DURING
   NAME AND ADDRESS     AGE  WITH REGISTRANT            PAST 5 YEARS
-------------------------------------------------------------------------------
<S>                     <C>  <C>              <C>
Janet A. McKinley
(see above)
-------------------------------------------------------------------------------
Darcy B. Kopcho
(see above)
-------------------------------------------------------------------------------
Stephen E. Bepler       5    Senior Vice      Senior Vice President, Capital
630 Fifth Avenue        8    President        Research Company
New York, NY 10111
-------------------------------------------------------------------------------
Abner D. Goldstine      7    Senior Vice      Senior Vice President and
11100 Santa Monica      1    President        Director, Capital Research and
Boulevard                                     Management Company
Los Angeles, CA 90025
-------------------------------------------------------------------------------
Paul G. Haaga, Jr.      52   Senior Vice      Executive Vice President and
333 South Hope Street        President        Director, Capital Research and
Los Angeles, CA 90071                         Management Company; Director,
                                              American Funds Service Company;
                                              Director, American Funds
                                              Distributors, Inc.
-------------------------------------------------------------------------------
Dina N. Perry           55   Senior Vice      Senior Vice President, Capital
3000 K Street, N.W.          President        Research and Management Company
Washington, D.C. 20007
-------------------------------------------------------------------------------
Hilda L. Applbaum       40   Vice President   Vice President, Capital Research
P.O. Box 7650                                 Company*
San Francisco, CA
94120
-------------------------------------------------------------------------------
David C. Barclay        44   Vice President   Senior Vice President and
11100 Santa Monica                            Director, Capital Research and
Boulevard                                     Management Company.
Los Angeles, CA 90025
-------------------------------------------------------------------------------
John H. Smet            44   Vice President   Senior Vice President, Capital
11100 Santa Monica                            Research and Management Company
Boulevard
Los Angeles, CA 90025
-------------------------------------------------------------------------------
Patrick F. Quan         4    Secretary        Vice President - Fund Business
P.O. Box 7650           2                     Management Group, Capital
San Francisco, CA                             Research and Management Company
94120
-------------------------------------------------------------------------------
Dayna Yamabe            33   Treasurer        Vice President - Fund Business
135 South State                               Management Group, Capital
College Blvd.                                 Research and Management Company
Brea, CA 92821
-------------------------------------------------------------------------------
R. Marcia Gould         4    Assistant        Vice President - Fund Business
135 South State         6    Treasurer        Management Group, Capital
College Boulevard                             Research and Management Company
Brea, CA 92821
-------------------------------------------------------------------------------
</TABLE>



* Company affiliated with Capital Research and Management Company.




                      The Income Fund of America - Page 14

<PAGE>



All of the officers listed are officers and/or directors/trustees of one or more
of the other funds for which Capital Research and Management Company serves as
Investment Adviser.


No compensation is paid by the fund to any officer or Director who is a
director, officer or employee of the Investment Adviser or affiliated companies.
The fund pays annual fees of $19,000 to Directors who are not affiliated with
the Investment Adviser, plus $1,000 for each Board of Directors meeting
attended, plus $500 for each meeting attended as a member of a committee of the
Board of Directors. In lieu of meeting attendance fees, members of the Proxy
Committee receive an annual retainer fee of $4,500 per annum from the fund if
they serve as a member of four proxy committees, or $6,250 if they serve as a
member of two proxy committees, meeting jointly. No pension or retirement
benefits are accrued as part of fund expenses. The Directors may elect, on a
voluntary basis, to defer all or a portion of their fees through a deferred
compensation plan in effect for the fund. The fund also reimburses certain
expenses of the Directors who are not affiliated with the Investment Adviser. As
of February 15, 2001 the officers and Directors of the fund and their families,
as a group, owned beneficially or of record less than 1% of the outstanding
shares of the fund.


                                   MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, 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 December 31, 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 Directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).


                      The Income Fund of America - Page 15

<PAGE>



The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; 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 management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income is determined in accordance with
generally accepted accounting principles and does not include gains or losses
from sales of capital assets.


The management fee is based upon the annual rates of 0.25% on the first $500
million of the fund's net assets, 0.23% on net assets in excess of $500 million
but not exceeding $1 billion, 0.21% on net assets in excess of $1 billion but
not exceeding $1.5 billion, 0.19% on net assets in excess of $1.5 billion but
not exceeding $2.5 billion, 0.17% on net assets in excess of $2.5 billion but
not exceeding $4 billion, 0.16% on net assets in excess of $4 billion but not
exceeding $6.5 billion, 0.15% on net assets in excess of $6.5 billion but not
exceeding $10.5 billion, 0.144% on net assets in excess of $10.5 billion but not
exceeding $13 billion, 0.141% on net assets in excess of $13 billion but not
exceeding $17 billion, 0.138% on net assets in excess of $17 billion but not
exceeding $21 billion, 0.135% on net assets in excess of $21 billion but not
exceeding $27 billion, 0.133% on net assets in excess of $27 billion but not
exceeding $34 billion, 0.131% on net assets in excess of $34 billion but not
exceeding $44 billion, and 0.129% on net assets in excess of $44 billion, plus
2.25% of the fund's gross investment income for the preceding month. Assuming
net assets of $20 billion and gross investment income levels of 3%, 4%, 5%, 6%,
7% and 8%, management fees would be 0.22%, 0.25%, 0.27%, 0.29%, 0.31% and 0.34%
of net assets, respectively.


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 year ended July 31, 2000, the Investment Adviser received
$31,861,000 for the basic management fee (based on a percentage of the net
assets of the fund as expressed above) plus $28,085,000 (based on a percentage
of the fund's gross income as expressed


                      The Income Fund of America - Page 16

<PAGE>


above), for a total fee of $59,946,000. For the fiscal years ended 1999 and
1998, management fees paid by the fund amounted to $63,389,000 and $57,649,000,
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
December 31, 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 Directors 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 Administrative Agreement provides that the fund may
terminate the agreement at any time by vote of a majority of Directors 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 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 their 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 AND PLANS OF DISTRIBUTION - 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 by the Principal Underwriter to
investment dealers. For Class B shares, the Principal Underwriter sells the
rights to Class B 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 qualified dealers
of Class B shares.


                      The Income Fund of America - Page 17

<PAGE>



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 qualified dealers of Class C shares. For Class F shares,
the fund pays the Principal Underwriter for advancing the immediate service fees
paid to qualified dealers and advisers of Class F shares.


Commissions retained by the Principal Underwriter on sales of Class A shares
during the 2000 fiscal year amounted to $5,605,000 after an allowance of
$25,442,000 to dealers. During the fiscal years ended 1999 and 1998, the
Principal Underwriter retained $12,692,000 and $17,111,000, respectively, on
sales of Class A shares after an allowance of $60,189,000 and $82,972,000 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 $173,000 after compensation of $1,142,000 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
Directors and separately by a majority of the directors who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. Potential
benefits of the Plans to the fund include shareholder services, savings to the
fund in transfer agency costs, savings to the fund in advisory fees and other
expenses, benefits to the investment process from growth or stability of assets
and maintenance of a financially healthy management organization. The selection
and nomination of directors who are not "interested persons" of the fund are
committed to the discretion of the directors who are not "interested persons"
during the existence of the Plans. The Plans 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 Directors.


Under the Plans, the fund may annually expend (i) for Class A shares, up to
0.25% of its net assets attributable to Class A shares, (ii) for Class B shares,
1.00% of its net assets attributable to Class B shares, (iii) for Class C
shares, 1.00% of its net assets attributable to Class C shares, and (iv) for
Class F shares, up to 0.50% of its net assets attributable to 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 Directors has approved the category of
expenses for which payment is being made.


For Class A shares, (i) up to 0.25% is reimbursed to the Principal Underwriter
for paying service-related expenses, including service fees paid to qualified
dealers, and (ii) up to the amount allowable under the fund's Class A 12b-1
limit is reimbursed to the Principal Underwriter for paying distribution-related
expenses, including dealer commissions and wholesaler compensation paid on sales
of shares of $1 million or more 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, and
retirement plans, endowments and foundations with $50 million or more in assets)
("no load purchases"). Commissions on no load purchases of Class A shares 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.


For Class B shares, (i) 0.25% is paid to the Principal Underwriter for paying
service-related expenses, including service fees paid to qualified dealers, and
(ii) 0.75% is paid to the Principal


                      The Income Fund of America - Page 18

<PAGE>



Underwriter for distribution-related expenses, including the financing of
commissions paid to qualified dealers.


For Class C shares, (i) 0.25% is paid to the Principal Underwriter for paying
service-related expenses, including service fees paid to qualified dealers, and
(ii) 0.75% is paid to the Principal Underwriter for paying distribution-related
expenses, including commissions paid to qualfied dealers.


For Class F shares, 0.25% is paid to the Principal Underwriter for paying
service-related expenses, including service fees paid to qualified dealers or
advisers.  Currently, no compensation is paid under the fund's Class F Plan for
distribution-related expenses.


During the 2000 fiscal year, the fund paid or accrued $47,041,000 for
compensation to dealers or the Principal Underwriter under the Plan for Class A
shares and $54,000 under the Plan for Class B shares. As of July 31, 2000,
accrued and unpaid distribution expenses for Class A and Class B shares were
$7,043,000 and $22,000, 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.


                            TAXES AND DISTRIBUTIONS

FUND TAXATION - 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 not 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


                      The Income Fund of America - Page 19

<PAGE>



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 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. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is the interest of shareholders to distribute a lesser amount.


DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS - Dividends and capital gain
distributions on fund 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.


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 that share on the reinvestment
date.


     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.  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.

     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
     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


                      The Income Fund of America - Page 20

<PAGE>



     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.  Upon
     disposition of these securities, any gain recognized is treated as ordinary
     income and loss is treated as ordinary loss to the extent of any prior
     recognized gain.


     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. Capital gain distributions are not eligible for the
     dividends-received deduction.


     A portion of the difference between the issue price of zero coupon
     securities and their face value ("original issue discount") is considered
     to be income to the fund each year, even though the fund will not receive
     cash interest payments from these securities.  This original issue discount
     (imputed income) will comprise a part of the investment company taxable
     income of the fund which must be distributed to shareholders in order to
     maintain the qualification of the fund as a regulated investment company
     and to avoid federal income taxation at the level of the fund.


     In addition, some of the bonds may be purchased by a fund at a discount
     that exceeds the original issue discount on such bonds, if any.  This
     additional discount represents market discount for federal income tax
     purposes.  The gain realized on the disposition of any bond having market
     discount generally will be treated as taxable ordinary income to the extent
     it does not exceed the accrued market discount on such bond (unless a fund
     elects to include market discount in income in tax years to which it is
     attributable).  Generally, market discount accrues on a daily basis for
     each day the bond is held by a fund on a straight-line basis over the time
     remaining to the bond's maturity.  In the case of any debt security having
     a fixed maturity date of not more than one year from its date of issue, the
     gain realized on disposition generally will be treated as short-term
     capital gain.


                      The Income Fund of America - Page 21

<PAGE>



     In general, any gain realized on disposition of a security held less than
     one year is treated as short-term capital gain.


     CAPITAL GAIN DISTRIBUTIONS - 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. 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.


SHAREHOLDER TAXATION - In January of each year individual shareholders of the
fund will receive a statement of the federal income tax status of all
distributions. Shareholders of the fund also may be subject to state and local
taxes on distributions received from the fund. Distributions of the excess of
net long-term capital gains over net short-term capital losses which the fund
properly designates as "capital gain dividends" generally will be taxable to
individual shareholders at a maximum 20% capital gains rate, regardless of the
length of time the shares of the fund have been held by such shareholders. 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 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.


Redemptions of shares, including exchanges for shares of another American Fund,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.  However, conversion from one class to another class in the same
fund should not be a taxable event.


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


                      The Income Fund of America - Page 22

<PAGE>



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 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 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.


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 a lower rate under an
applicable income tax treaty) on dividend income received by the shareholder.


Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.


                      The Income Fund of America - Page 23

<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 Income Fund of America - Page 24

<PAGE>



pension and profit sharing plans.  In addition, 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)/ . . . .     04       204       304        404
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        N/A
___________
*Available only in certain states.
</TABLE>




                      The Income Fund of America - Page 25

<PAGE>


                                 SALES CHARGES

CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of stock, stock/bond, and bond funds of The American Funds Group are set forth
below. The money market funds of The American Funds Group are offered at net
asset value. (See "Fund Numbers" for a listing of the funds.)

<TABLE>
<CAPTION>
                                                                                           DEALER
                                                                   SALES CHARGE AS       CONCESSION
                                                                  PERCENTAGE OF THE:    AS PERCENTAGE
                                                                  ------------------       OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE                                            NET AMOUNT  OFFERING     OFFERING
                                                                 -INVESTED-   PRICE         PRICE
----------------------------------------------------------------- --------    -----         -----
<S>                                                              <C>         <C>       <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000  . . . . . . . . . . . . . . . . . . . . . .     6.10%      5.75%         5.00%
$25,000 but less than $50,000  . . . . . . . . . . . . . . . .     5.26       5.00          4.25
$50,000 but less than $100,000. .                                  4.71       4.50          3.75
BOND FUNDS
Less than $100,000 . . . . . . . .                                 3.90       3.75          3.00
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 .                                  3.63       3.50          2.75
$250,000 but less than $500,000 .                                  2.56       2.50          2.00
$500,000 but less than $750,000 .                                  2.04       2.00          1.60
$750,000 but less than $1 million                                  1.52       1.50          1.20
$1 million or more . . . . . . . . . .        none     none    (see below)
-----------------------------------------------------------------------------
</TABLE>


CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge.  HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE


                      The Income Fund of America - Page 26

<PAGE>



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 the plans.  403(b)
plans meeting these criteria may invest with no sales charge and are not subject
to a CDSC if investing $1 million or more or having 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.;

(6)  The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation; and

(7)	wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts whose
underlying investments are managed by any affiliate of The Capital Group
Companies, Inc.


Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense.


                      The Income Fund of America - Page 27

<PAGE>



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 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.


CLASS F SALES CHARGE - Class F shares are sold with no initial or contingent
deferred sales charge.


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 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. Commissions are based on
cumulative investments and are not annually reset.


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.


                      The Income Fund of America - Page 28

<PAGE>



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 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 values 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 for equity funds and $100,000 or more for bond
     funds 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.
     The dealer assigned to the account at the end of the period will
     receive an appropriate commission adjustment. 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


                      The Income Fund of America - Page 29

<PAGE>



     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 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.


                      The Income Fund of America - Page 30

<PAGE>


     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;

     .
          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 (or any
          employer-sponsored retirement plan for such an endowment or
          foundation) or any endowments or foundations 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).


                      The Income Fund of America - Page 31

<PAGE>


(2)  Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.

(3)  Tax-free returns of excess contributions to IRAs.

(4)  Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% 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 ("SWPs") (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. An IRA rollover
involving plan assets that offered an investment option managed by any
affiliate of The Capital Group Companies, Inc., including any of the
American Funds, may be invested in Class A shares 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 Class A share investments of
$1 million or more (see "Dealers Commissions and Compensation" above).



                      The Income Fund of America - Page 32

<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, the Transfer Agent or either of their designees. 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;


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


                      The Income Fund of America - Page 33

<PAGE>



3.   Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.

Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Directors.


                                 SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A, B and C
shares may be subject to a CDSC.  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 any 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.

     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.


                      The Income Fund of America - Page 34

<PAGE>


     -     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 of 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 CDSC, 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 CDSC on Class A or C shares will be credited
to your account). In addition, 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 Income Fund of America - Page 35

<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 net asset value 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 Income Fund of America - Page 36

<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 Income Fund of America - Page 37

<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 Articles of Incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder 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 Directors of the fund may from time to time
adopt.


While payment of redemptions normally will be in cash, the fund's Articles of
Incorporation 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 Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.


SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.


                      EXECUTION OF PORTFOLIO TRANSACTIONS

The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.


There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment


                      The Income Fund of America - Page 38

<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 $11,946,000, $11,431,000 and $6,212,000,
respectively.


The fund is required to disclose information regarding investments in the
securities of broker-dealers (or parents of broker-dealers that derive more than
15% of their revenue from broker-dealer activities) which have certain
relationships with the fund. During the last fiscal year, J.P. Morgan & Co. was
among the top 10 dealers that received the largest amount of brokerage
commissions and that acted as principals in portfolio transactions. The fund
held equity securities of J.P. Morgan & Co. in the amount of $48,060,000 as of
the close of its most recent fiscal year.


                              GENERAL INFORMATION

CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S. banks
or 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
$13,775,000 for Class A shares and $4,000 for Class B shares for the 2000 fiscal
year.


INDEPENDENT AUDITORS - Deloitte & Touche LLP, Two California Plaza, 350 South
Grand Avenue, 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 Directors.


PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS - The fund's fiscal
year ends on July 31. Shareholders are provided updated prospectuses annually
and 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 addition, shareholders may also receive proxy statements for the fund.
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, shareholder reports and proxy
statements. To receive additional copies of a prospectus, report or proxy
statement, shareholders should contact the Transfer Agent.


                      The Income Fund of America - Page 39

<PAGE>



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.


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 -- JULY 31, 2000

<TABLE>
<CAPTION>
<S>                                                               <C>
Net asset value and redemption price per share
  (Net assets divided by shares outstanding). .                    $15.43
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). . . . . . . . . . . . . . . .                     $     16.37
</TABLE>


            CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS

The fund's yield was 5.52% based on a 30-day (or one month) period ended July
31, 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 returns at the maximum
offering price for the five- and ten-year periods ended July 31, 2000 were
-7.72%, 10.19% and 11.17%,


                      The Income Fund of America - Page 40

<PAGE>



respectively.  The fund's one year total return and average annual total returns
at net asset value for the five- and ten-year periods ended on July 31, 2000
were -2.08%, 11.50% and 11.84%, 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 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 Income Fund of America - Page 41

<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 Income Fund of America - Page 42

<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 implied '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 Income Fund of America - Page 43

<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 Income Fund of America - Page 44

<TABLE>
The Income Fund of America, Inc.
Investment Portfolio, July 31, 2000

                                                                                Shares or       Market  Percent
                                                                                Principal        Value   of Net
EQUITY SECURITIES                                                                  Amount         (000)  Assets
<S>                                                                       <C>             <C>          <C>
Utilities: Electric & Gas - 8.67%
Consolidated Edison, Inc.                                                        6,016,500      182,375     1.00
DTE Energy Co.                                                                   3,400,000      106,675      .59
Southern Co.                                                                     4,301,100      105,108      .58
Unicom Corp.                                                                     2,350,000       96,497      .53
Ameren Corp.                                                                     2,500,000       90,469      .50
Equitable Resources, Inc. (1)                                                    1,697,500       88,376      .49
PECO Energy Co.                                                                  2,045,000       87,296      .48
MCN Energy Group Inc.                                                            3,550,000       76,769      .42
American Electric Power Co., Inc.                                                2,105,000       69,070      .38
Florida Progress Corp.                                                           1,395,000       68,355      .38
Entergy Corp.                                                                    2,450,100       66,459      .37
GPU, Inc.                                                                        2,380,700       63,089      .35
Dominion Resources, Inc.                                                         1,375,000       62,477      .34
Wisconsin Energy Corp.                                                           2,900,000       57,637      .32
El Paso Energy Capital Trust I 4.75%                                               650,000       39,975      .22
convertible preferred 2028
Scottish Power PLC                                                               4,300,000       36,072      .20
OGE Energy Corp.                                                                 1,810,000       34,390      .19
Cinergy Corp.                                                                    1,250,000       32,500      .18
Northeast Utilities                                                              1,450,000       32,081      .18
New Jersey Resources Corp.                                                         750,000       30,000      .16
Coastal Corp., FELINE PRIDES, 6.625% 2004                                          800,000       26,350      .14
Pinnacle West Capital Corp.                                                        487,300       19,279      .11
Eastern Enterprises                                                                300,000       18,787      .10
Kinder Morgan, Inc. 8.25% PEPS                                                     341,300       15,977      .09
 convertible preferred 2001, units
Peoples Energy Corp.                                                               501,300       15,885      .09
Puget Sound Energy, Inc.                                                           700,000       15,881      .09
South Jersey Industries, Inc.                                                      500,000       13,531      .07
National Power PLC                                                               1,580,000       10,882      .06
TECO Energy, Inc.                                                                  467,200       10,249      .06
                                                                                              1,572,491     8.67

Energy Sources & Equipment - 6.25%
"Shell" Transport and Trading Co., PLC                                           4,202,800      202,785
 (New York registered)
Royal Dutch Petroleum Co. (New York registered)                                    300,000       17,475     1.21
Phillips Petroleum Co.                                                           3,375,000      171,492      .95
USX-Marathon Group                                                               6,800,000      165,325      .91
Texaco Inc.                                                                      2,854,600      141,124      .78
CONSOL Energy Inc. (1)                                                           4,500,000       77,344      .43
Conoco Inc., Class A                                                             1,963,800       43,940
Conoco Inc., Class B                                                             1,350,000       31,134      .41
Ultramar Diamond Shamrock Corp.                                                  2,900,000       66,337      .37
Sunoco, Inc.                                                                     2,142,000       52,211      .29
Occidental Petroleum Corp.                                                       2,500,000       50,625      .28
Unocal Capital Trust $3.125 convertible preferred                                1,040,000       46,020      .25
Kerr-McGee Corp. 5.50% DECS convertible notes 2004                                 865,000       36,330      .20
Diamond Offshore Drilling, Inc. 3.75%                                          $18,700,000       19,862      .11
 convertible debentures 2007
Pogo Trust I, Series A, 6.50% convertible                                          200,000       10,250      .06
 preferred 2029
                                                                                              1,132,254     6.25

Banking - 6.24%
First Union Corp.                                                               11,161,400      288,104     1.59
Bank of America Corp.                                                            4,179,800      198,018     1.09
FleetBoston Financial Corp.                                                      3,021,280      108,200      .60
Commonwealth Bank of Australia                                                   6,307,037      101,452      .56
Westpac Banking Corp.                                                           13,634,249       96,780      .53
Bank of Nova Scotia                                                              2,400,000       60,609      .33
BANK ONE CORP.                                                                   1,868,500       59,442      .33
Lloyds TSB Group PLC                                                             5,400,000       48,212      .27
J.P. Morgan & Co. Inc.                                                             360,000       48,060      .27
Bank of New York Co., Inc.                                                         855,000       40,025      .22
Wells Fargo & Co.                                                                  590,000       24,374      .13
BancWest Corp.                                                                   1,200,000       22,125      .12
National Australia Bank Ltd.,                                                     $800,000       20,400      .11
 exchangeable capital units
NB Capital Corp. 8.35% exchangeable depositary shares                              520,000       12,025      .07
Banco Nacional de Mexico, SA 11.00%                                             $4,175,000        4,300      .02
 exchangeable notes 2003 (2)
                                                                                              1,132,126     6.24

Forest Products & Paper - 4.76%
Georgia-Pacific Corp., Timber Group (1)                                          5,450,000      165,203
Georgia-Pacific Corp., Georgia-Pacific Group                                     1,400,000       43,400     1.15
 7.50% PEPS convertible preferred 2004, units
Weyerhaeuser Co.                                                                 4,542,900      207,554     1.14
UPM-Kymmene Corp.                                                                5,120,000      126,318      .70
International Paper Co.                                                          2,689,640       91,448
International Paper Co., Capital Trust 5.25%                                       400,000       16,500      .59
 convertible preferred 2025
AssiDoman AB                                                                     5,600,000       86,831      .48
Potlatch Corp.                                                                   1,350,000       46,406      .26
Stora Enso Oyj, Class R                                                          3,375,111       32,713      .18
APP Finance (VI) Mauritius Ltd. 0%                                            $144,000,000       22,320      .12
 convertible debentures 2012
Westvaco Corp.                                                                     650,000       17,834      .10
Kimberly-Clark de Mexico, SA de CV                                               2,400,000        6,948      .04
                                                                                                863,475     4.76

Real Estate - 3.41%
Equity Residential Properties Trust                                              2,190,000      109,226
Equity Residential Properties Trust,                                               600,000       14,025      .68
 Series G, 7.25% convertible preferred
Boston Properties, Inc.                                                          2,634,600      109,336      .60
Spieker Properties, Inc.                                                         1,275,000       65,902      .36
Amoy Properties Ltd.                                                            70,000,000       63,734      .35
Weingarten Realty Investors                                                      1,325,000       54,822      .30
AMB Property Corp.                                                               1,225,000       29,247      .16
Hysan Development Co. Ltd.                                                      20,691,635       26,269      .14
CenterPoint Properties Corp.                                                       580,000       24,650      .14
ProLogis Trust, Series D, 7.92% preferred                                        1,080,000       22,275      .12
Equity Office Properties Trust                                                     525,000       16,012      .09
Sun Hung Kai Properties Ltd.                                                     2,000,000       15,902      .09
Archstone Communities Trust                                                        564,000       14,629      .08
Duke-Weeks Realty Corp., Series B, 7.99%                                           300,000       12,187      .07
 preferred cumulative step-up premium rate
Simon DeBartolo Group, Inc., Series C,                                             300,000       11,925      .07
 7.89% preferred cumulative step-up premium rate
Meditrust Corp., paired stock                                                    3,340,000        8,350      .05
IAC Capital Trust, Series A, 8.25% TOPRS preferred                                 300,000        6,750      .04
Hongkong Land Holdings Ltd.                                                      2,800,000        4,760      .03
New Plan Realty Trust, Series D, 7.80%                                             112,500        4,461      .02
preferred cumulative step-up premium rate
Kimco Realty Corp.                                                                 100,000        4,125      .02
                                                                                                618,587     3.41

Diversified Telecommunication Services - 3.12%
AT&T Corp.                                                                       4,725,000      146,180      .81
SBC Communications Inc.                                                            985,000       41,924
SBC Communications Inc. 7.75% DECS                                                 463,000       41,207      .46
 convertible preferred 2001
Telecom Italia SpA, nonconvertible savings shares                               12,520,000       79,033      .44
Verizon Communications (formed by the merger                                     1,128,000       53,016      .29
 of Bell Atlantic Corp. and GTE Corp.)
Qwest Communications International Inc. (merged                                  1,125,937       52,849      .29
 with U S West, Inc.)
Global Crossing Ltd. 6.75% convertible preferred                                   120,000       25,500
Global Crossing Ltd. 7.00% convertible preferred                                    25,000        4,294
Global Crossing Ltd. 7.00% convertible preferred (2)                                80,000       13,740      .24
Telefonos de Mexico, SA de CV 4.25% convertible                                $27,660,000       34,430      .19
 debentures 2004
TELUS Corp.                                                                      1,051,700       32,324      .18
Koninklijke PTT Nederland NV                                                       683,636       24,735
Koninklijke PTT Nederland NV (ADR)                                                  93,964        3,459      .15
Rhythms NetConnections Inc. 6.75%                                                  250,000       10,812      .06
 convertible preferred (2)
Allegiance Telecom, Inc., warrants, expire 2008 (2,3,4)                             20,000        1,814      .01
NEXTLINK Communications, Inc. 14.00% preferred 2009 (5)                             12,292          624      .00
ICG Holdings, Inc., warrants, expire 2005 (2,3,4)                                   19,800          140      .00
                                                                                                566,081     3.12

Beverages & Tobacco - 2.97%
Philip Morris Companies Inc.                                                     9,400,000      237,350     1.31
R.J. Reynolds Tobacco Holdings, Inc. (1)                                         5,200,000      147,550      .81
Southcorp Ltd.                                                                  28,767,057       81,406      .45
Imperial Tobacco Ltd.                                                            4,000,000       38,948      .22
Gallaher Group PLC                                                               4,800,000       25,526      .14
UST Inc.                                                                           500,000        7,250      .04
                                                                                                538,030     2.97

Chemicals - 2.89%
Dow Chemical Co.                                                                 7,051,500      202,731     1.12
DSM NV                                                                           3,072,005       93,457      .52
Imperial Chemical Industries PLC (ADR)                                           3,230,000       92,661      .51
Monsanto Co. 6.50% ACES convertible                                              1,108,800       53,222      .29
 preferred 2001, units
Hercules Inc.                                                                    3,400,000       50,787      .28
Crompton Corp.                                                                   1,831,394       17,971      .10
International Flavors & Fragrances Inc.                                            409,300       10,949      .06
Millennium Chemicals Inc.                                                          150,400        2,331      .01
                                                                                                524,109     2.89

Merchandising - 2.85%
Safeway PLC                                                                     41,150,000      169,980      .94
May Department Stores Co.                                                        4,670,000      110,912      .61
J.C. Penney Co., Inc.                                                            6,800,000      109,650      .61
J Sainsbury PLC                                                                  8,650,000       42,080      .23
Coles Myer Ltd.                                                                 10,619,900       40,500      .22
Woolworths Ltd.                                                                  9,000,385       31,564      .17
PETsMART, Inc. 6.75% convertible                                               $17,500,000       11,725      .07
 subordinated notes 2004 (2)
Tultex Corp., warrants, expire 2007 (3,4)                                        1,522,401            0      .00
                                                                                                516,411     2.85

Insurance - 2.48%
American General Corp.                                                           2,394,800      159,703      .88
Royal & Sun Alliance Insurance Group PLC                                        14,550,000       88,273      .49
HSB Group, Inc. (1)                                                              1,450,000       51,475      .28
SAFECO Corp.                                                                     2,200,000       50,737      .28
XL Capital Ltd.                                                                    720,000       47,520      .26
Lincoln National Corp.                                                             800,000       34,900      .19
Ohio Casualty Corp.                                                              2,000,000       17,781      .10
                                                                                                450,389     2.48

Food & Household Products - 2.13%
General Mills, Inc.                                                              4,544,100      156,203      .86
H.J. Heinz Co.                                                                   2,600,000      103,837      .57
Nabisco Group Holdings Corp.                                                     3,000,000       79,500      .44
Kellogg Co.                                                                      1,780,000       46,169      .26
                                                                                                385,709     2.13

Transportation - 1.62%
British Airways PLC                                                             26,000,000      146,639      .81
CSX Corp.                                                                        2,350,000       58,309      .32
Union Pacific Capital Trust 6.25% TIDES                                            110,000        4,634
 convertible preferred 2028
Union Pacific Capital Trust 6.25% TIDES                                            976,200       41,122      .25
convertible preferred 2028 (2)
Norfolk Southern Corp.                                                           1,300,000       24,212      .14
Canadian National Railway Co. 5.25%                                                400,000       18,600      .10
 convertible preferred 2029
                                                                                                293,516     1.62

Electronic Components & Instruments - 1.60%
Advanced Micro Devices, Inc. 6.00% convertible                                 $45,150,000       92,846      .51
 subordinated notes 2005
Hubbell Inc., Class B                                                            2,580,000       62,242      .34
Burr-Brown Corp. 4.25% convertible subordinated                                $17,800,000       26,447      .15
notes 2007 (2)
SCI Systems, Inc. 3.00% convertible subordinated                               $20,000,000       21,271      .12
 debentures 2007
Semtech Corp. 4.50% convertible subordinated                                   $18,530,000       20,290      .11
notes 2007 (2)
Adaptec, Inc. 4.75% convertible subordinated                                   $23,000,000       19,904      .11
 notes 2004
Macronix International Co., Ltd. 1.00% convertible                             $16,500,000       19,140      .10
 subordinated notes 2005 (2)
Premier Farnell PLC                                                              1,280,000        9,913      .05
Thermo Instrument Systems Inc. 4.00% convertible                               $10,000,000        8,375      .05
 subordinated debentures 2005
Quantum Corp. 7.00% convertible subordinated                                    $7,000,000        5,530      .03
 notes 2004
Thomas & Betts Corp.                                                               250,000        4,875      .03
                                                                                                290,833     1.60

Health & Personal Care - 1.58%
Sepracor Inc. 6.25% convertible subordinated                                    $7,350,000       32,707
 debentures 2005 (2)
Sepracor Inc. 7.00% convertible subordinated                                    $6,000,000       10,740
 debentures 2005
Sepracor Inc. 7.00% convertible subordinated                                   $15,000,000       26,850      .39
 debentures 2005 (2)
Eli Lilly and Co.                                                                  550,000       57,131      .32
Athena Neurosciences, Inc. 4.75% convertible notes 2004                        $32,500,000       49,319      .27
Pharmacia Corp. (formerly Pharmacia & Upjohn, Inc.)                                788,065       43,147      .24
American Home Products Corp.                                                       765,000       40,593      .22
IVAX Corp. 5.50% convertible subordinated                                      $15,000,000       22,575      .12
notes 2007 (2)
Glycomed Inc. 7.50% convertible subordinated                                    $5,000,000        4,000      .02
 debentures 2003
                                                                                                287,062     1.58

Broadcasting & Publishing - 1.53%
Time Warner Inc. (formerly Houston Industries                                    2,605,520      199,811     1.10
 Inc. 7.00% ACES convertible preferred 2000)
UnitedGlobalCom, Inc., Class C, 7.00% convertible                                   75,000        4,875
 preferred
UnitedGlobalCom, Inc., Class C, 7.00% convertible                                  700,000       45,500
 preferred (2)
UnitedGlobalCom, Inc., Class D, 7.00% convertible                                  500,000       25,219      .42
 preferred
NTL Inc., warrants, expire 2008 (2,3,4)                                             25,650        1,191      .01
TVN Entertainment Corp., warrants, expire 2008 (2,3,4)                              10,000            0      .00
                                                                                                276,596     1.53

Business & Public Services - 1.49%
Thames Water PLC                                                                 3,725,000       44,501      .24
Cendant Corp. 7.50% PRIDES convertible preferred                                 1,425,000       28,856
Cendant Corp., rights, expire 2001 (3)                                           1,400,000       10,500      .22
Waste Management, Inc. 4.00% covertible debentures 2002                        $42,000,000       38,745      .21
United Utilities PLC                                                             3,521,463       35,080      .19
Alexander & Baldwin, Inc.                                                        1,375,000       34,633      .19
Interpublic Group of Companies, Inc. 1.87%                                     $17,000,000       16,001
 convertible subordinated notes 2006 (2)
Interpublic Group of Companies, Inc. 1.87%                                      $5,500,000        5,198      .12
 convertible subordinated notes 2006
PSINet Inc., Series D, 7.00% convertible                                           650,000       16,900      .09
 preferred 2049 (2)
Amkor Technology, Inc. 5.00% convertible notes 2007 (2)                        $15,000,000       12,394      .07
Budget Group, Inc. 6.25% TIDES convertible                                         583,000       12,243      .07
 preferred 2005
Hyder PLC                                                                        1,489,173        7,205      .04
Pitney Bowes Inc.                                                                  150,000        5,194      .03
Nationwide Health Properties, Inc., Series A,                                       50,000        2,868      .02
 7.677% preferred cumulative step-up premium rate
Integrated Health Services, Inc. 5.75% convertible                              $1,250,000            0      .00
 debentures 2001 (6)
                                                                                                270,318     1.49

Financial Services - 1.29%
Household International, Inc.                                                    2,453,280      109,324      .60
Bell Atlantic Financial Services, Inc. 5.75%                                    $3,500,000        3,408
 convertible debentures 2003
Bell Atlantic Financial Services, Inc. 5.75%                                   $24,500,000       23,974
 convertible debentures 2003 (2)
Bell Atlantic Financial Services, Inc. 4.25%                                   $39,000,000       45,825      .40
 convertible debentures 2005 (2)
Health Care Property Investors, Inc.                                             1,287,900       38,315      .21
Fannie Mae                                                                         200,000        9,975      .06
Wilshire Financial Services Group Inc. (1)                                       2,150,517        2,554      .02
                                                                                                233,375     1.29

Automobiles - 1.07%
Ford Motor Co.                                                                   3,778,600      175,941      .97
General Motors Corp.                                                               300,000       17,081      .10
                                                                                                193,022     1.07

Multi-Industry - 1.00%
BFGoodrich Co.                                                                   2,200,000       78,513      .43
TI Group PLC                                                                     7,000,000       38,274      .21
Thyssen Krupp AG                                                                 2,185,000       37,695      .21
Swire Pacific Capital Ltd. 8.84% cumulative                                      1,125,000       22,500
 guaranteed perpetual capital securities (2)
Swire Pacific Offshore Financing Ltd. 9.33%                                        195,000        3,900      .15
 cumulative guaranteed perpetual capital securities (2)
                                                                                                180,882     1.00

Leisure & Tourism - 0.88%
Seagram Co. Ltd. 7.50% ACES convertible preferred 2002                           1,960,000      103,145      .57
Host Marriott Financial Trust 6.75% QUIPS                                          600,000       22,500      .12
convertible preferred 2026
Six Flags Inc. (formerly Premier Parks Inc.)                                       450,000       15,244      .09
 7.50% PIES convertible preferred 2001
FelCor Lodging Trust Inc.                                                          450,000        9,844      .06
AMCV Capital Trust I 7.00% convertible preferred 2015                              200,000        7,650      .04
AMF Bowling Worldwide, Inc. 0% convertible                                     $26,391,000          495      .00
debentures 2018 (2)
                                                                                                158,878      .88

Metals: Steel & Nonferrous - 0.82%
Phelps Dodge Corp.                                                               2,084,841       84,827      .47
Freeport-McMoRan Copper & Gold Inc., Series A,                                   1,400,000       16,975
 $1.75 convertible preferred
Freeport-McMoRan Copper & Gold Inc., Class B                                       300,000        2,700      .11
Corus Group PLC                                                                 14,519,000       18,324      .10
Inco Ltd. 5.75% convertible debentures 2004                                    $17,250,000       15,353      .08
USX-U.S. Steel Group                                                               600,000       10,763      .06
                                                                                                148,942      .82

Industrial Components - 0.81%
Dana Corp.                                                                       2,475,000       56,770      .31
Tomkins PLC                                                                     13,000,000       42,940      .24
Federal-Mogul Corp. 7.00% convertible preferred 2027                             1,150,000       24,150      .13
Tower Automotive Capital Trust 6.75%                                                67,500        2,109
 convertible preferred 2018
Tower Automotive Capital Trust 6.75%                                               450,000       14,063      .09
convertible preferred 2018 (2)
Visteon Corp.                                                                      494,743        6,926      .04
                                                                                                146,958      .81

Recreation & Other Consumer Products - 0.57%
EMI Group PLC                                                                    8,260,267       76,718      .42
Pennzoil-Quaker State Co.                                                        2,000,000       25,000      .14
V2 Music Holdings PLC 6.50% 2012 (2,4)                                          $8,122,000        2,193
V2 Music Holdings, warrants, expire 2008 (2,3,4)                                    14,750            0      .01
                                                                                                103,911      .57

Machinery & Engineering - 0.56%
Pall Corp.                                                                       1,998,300       41,465      .23
Ingersoll-Rand Co. 6.75% PRIDES convertible preferred                            1,400,000       28,788      .16
Metso Oyj                                                                        1,779,998       19,399      .11
Thermo Electron Corp. 4.25% convertible                                        $13,000,000       12,090      .06
 subordinated debentures 2003 (2)
                                                                                                101,742      .56

Miscellaneous Materials & Commodities - 0.56%
Crown Cork & Seal Co., Inc.                                                      3,950,000       55,053      .31
Anglogold Ltd.                                                                     675,000       26,748      .15
Iluka Resources Ltd. (formerly Westralian Sands Ltd.)                            4,044,436       11,071      .06
Owens-Illinois, Inc. 4.75% convertible preferred                                   340,000        7,735      .04
                                                                                                100,607      .56

Wireless Telecommunication Services - 0.24%
Price Communications Corp. (3)                                                     933,222       20,764      .11
MediaOne Group, Inc. 7.00% PIES convertible                                        480,000       19,800      .11
 preferred 2002
VoiceStream Wireless Corp. (formerly Omnipoint                                      25,965        3,330      .02
 Corp.) (3)
McCaw International, Ltd., warrants, expire                                         31,500           79      .00
 2007 (2,3,4)
Comunicacion Celular SA, Class B, warrants,                                         31,000            3      .00
 expire 2003 (2,3,4)
                                                                                                 43,976      .24

Other Industries - 0.30%
Newell Financial Trust I 5.25% QUIPS                                               823,000       31,686      .17
 convertible preferred 2027
TXI Capital Trust I 5.50% convertible preferred 2028                               450,000       13,781      .08
Ingram Micro Inc. 0% convertible debentures 2018                               $24,515,000        9,224      .05
Protection One Alarm Monitoring, Inc.,                                              57,600           15      .00
 warrants, expire 2005 (2,3,4)
                                                                                                 54,706      .30

Miscellaneous - 1.51%
Other equity securities in initial                                                              273,807     1.51
period of acquisition

Total Equity Securities   (cost: $11,119,224,000)                                            11,458,793    63.20


                                                                                Principal       Market  Percent
                                                                                   Amount        Value   of Net
BONDS & NOTES                                                                        (000)        (000)  Assets

Wireless Telecommunication Services - 4.06%
Nextel Communications, Inc.:
 0%/9.75% 2007 (7)                                                                  74,325       55,372
 0%/10.65% 2007 (7)                                                                  5,975        4,661
 0%/9.95% 2008 (7)                                                                 177,650      129,240
 12.00% 2008                                                                         4,000        4,300
 0%/12.125% 2008 (7)                                                                37,450       24,155
 12.75% 2010 (2)                                                                     2,000        1,960
McCaw International, Ltd. (owned by                                                 46,850       36,074
 Nextel Communications, Inc.) 0%/13.00% 2007 (7)
Nextel Partners, Inc.:
 0%/14.00% 2009 (7)                                                                 26,029       17,830
 11.00% 2010 (2)                                                                     5,000        4,988     1.54
Omnipoint Corp.: (4)
 11.625% 2006                                                                       55,350       62,130
 11.50% 2009 (2)                                                                    27,750       31,080      .51
VoiceStream Wireless Corp.: (2)
 10.375% 2009                                                                       43,374       46,519
 0%/11.875% 2009 (7)                                                                45,725       32,236      .43
Clearnet Communications Inc.:
 0%/14.75% 2005 (7)                                                                  6,000        6,150
 DLJ Secured Loan Trust, Class A-2, 9.995% 2007 (2,8)                               25,000       25,125
0%/10.125% 2009 (7)                                                                 49,150       28,507      .33
Crown Castle International Corp.: (7)
 0%/10.625% 2007                                                                     4,600        3,473
 0%/10.375% 2011                                                                    39,750       24,744
 0%/11.25% 2011                                                                     40,500       26,122      .30
SpectraSite Holdings, Inc.: (7)
 0%/12.00% 2008                                                                     38,250       25,819
 0%/11.25% 2009                                                                      7,000        4,165      .16
PageMart Wireless, Inc.: (7)
 0%/15.00% 2005                                                                     16,160       15,675
 0%/11.25% 2008                                                                     31,000       12,400      .15
Comunicacioon Celular SA 0%/14.125% 2005 (2,7)                                      31,000       23,637      .13
Leap Wireless International, Inc. 0%/14.50% 2010 (2,7)                              47,750       21,249      .12
PanAmSat Corp. 6.125% 2005                                                          17,000       15,676      .09
Loral Orion Network Systems, Inc. 11.25% 2007                                       24,950       15,594      .09
Dobson Communications Corp. 10.875% 2010 (2)                                        14,750       14,492      .08
Dobson/Sygnet Communications Co. 12.25% 2008                                        10,750       11,046      .06
Sprint Spectrum LP, Sprint Spectrum                                                  6,000        6,588      .04
Finance Corp. 11.00% 2006
PTC International Finance BV 0%/10.75% 2007 (7)                                      5,000        3,588      .02
Teligent, Inc. 11.50% 2007                                                           2,000        1,480      .01
Cellco Finance NV 15.00% 2005                                                          650          704      .00
                                                                                                736,779     4.06

Broadcasting, Advertising & Publishing - 2.89%
Charter Communications Holdings, LLC.:
 8.25% 2007                                                                         35,000       31,150
 10.00% 2009                                                                        10,000        9,750
 0%/11.75% 2010 (7)                                                                  2,000        1,150
 0%/9.92% 2011 (7)                                                                  53,750       30,906      .40
Fox/Liberty Networks, LLC, FLN Finance, Inc.:
 8.875% 2007                                                                        33,850       34,019
 0%/9.75% 2007(7)                                                                   43,750       36,203      .39
NTL Inc.:
 0%/12.75% 2005 (7)                                                                 22,000       22,550
 Series B, 10.00% 2007                                                              10,000        9,650
Comcast UK Cable Partners Ltd. 0%/11.20% 2007 (7)                                   18,500       17,344      .27
Time Warner Inc.:
 9.625% 2002                                                                         3,000        3,104
 7.75% 2005                                                                          9,500        9,580
 8.18% 2007                                                                         20,000       20,447
 9.125% 2013                                                                         5,000        5,505
 7.25% 2017                                                                          8,000        7,457      .25
Chancellor Media Corp. of Los Angeles:
 8.125% 2007                                                                        30,500       30,729
 Series B, 8.75% 2007                                                                4,500        4,545
 9.00% 2008                                                                          9,000        9,203      .25
CBS Corp. 7.15% 2005                                                                29,500       29,019      .16
TeleWest PLC:
 9.625% 2006                                                                         5,000        4,750
 0%/11.00% 2007 (7)                                                                 20,500       19,680      .13
CSC Holdings, Inc.:
 7.25% 2008                                                                          8,000        7,523
 8.125% 2009                                                                         8,000        7,844
 9.875% 2013                                                                         6,000        6,120      .12
Radio One, Inc. 7.00%/12.00% 2004 (7)                                               16,500       17,737      .10
TCI Communications, Inc. 8.00% 2005                                                 15,000       15,307      .08
Adelphia Communications Corp. 10.50% 2004                                            3,000        3,008
Century Communications Corp. 8.75% 2007                                             13,200       11,748      .08
STC Broadcasting, Inc. 11.00% 2007                                                  14,500       14,282      .08
British Sky Broadcasting Group PLC 8.20% 2009                                       14,250       13,219      .07
Hearst-Argyle Television, Inc. 7.00% 2018                                           12,425       10,620      .06
Rogers Communications Inc. 8.875% 2007                                              10,000       10,000      .05
Young Broadcasting Inc.:
 10.125% 2005                                                                        3,750        3,712
 Series B, 8.75% 2007                                                                5,250        4,909      .05
Liberty Media Corp. 7.875% 2029                                                      8,600        8,376      .05
Multicanal Participacoes SA, Series B, 12.625% 2004                                  6,475        6,710      .04
Sun Media Corp. 9.50% 2007                                                           6,071        6,071      .03
Telemundo Holdings, Inc., Series B, 0%/11.50% 2008 (7)                               8,500        6,035      .03
Antenna TV SA 9.00% 2007                                                             5,250        4,883      .03
Acme Television, LLC, Series B, 0%/10.875% 2004 (7)                                  4,920        4,692      .03
Fox Family Worldwide, Inc. 0%/10.25% 2007 (7)                                        5,000        3,612      .02
RBS Participacoes SA 11.00% 2007 (2)                                                 4,250        3,559      .02
Gray Communications Systems, Inc. 10.625% 2006                                       3,500        3,535      .02
American Media Operations 10.25% 2009                                                3,500        3,439      .02
TransWestern Publishing Co. LLC 9.625% 2007                                          3,500        3,439      .02
Muzak LP:
 9.875% 2009                                                                         1,250        1,100
 0%/13.00% 2010 (7)                                                                  3,750        2,025      .02
TVN Entertainment Corp. 14.00% 2008                                                 10,000        2,013      .01
Lenfest Communications, Inc. 7.625% 2008                                             2,000        1,954      .01
                                                                                                524,213     2.89

Banking - 2.83%
SB Treasury Co. LLC, Series A, 9.40%                                               126,000      121,165      .67
 noncumulative preferred (2)
SocGen Real Estate Co. LLC, Series A,                                               71,500       65,774      .36
 7.64%/8.406% (undated) (2,7,8)
MBNA Corp., MBNA:
 Capital A, Series A, 8.278% 2026                                                    8,200        6,787
 Capital B, Series B, 7.191% 2027 (8)                                               32,000       26,790      .19
Fuji JGB Investment LLC, Series A, 9.87%                                            34,250       33,072      .18
 noncumulative preferred (2,8)
BNP U.S. Funding LLC, Series A, 7.738%                                              33,200       30,799      .17
noncumulative preferred (2,8)
Tokai Preferred Capital Co. LLC, Series A,                                          31,500       30,365      .17
 9.98%/11.091% noncumulative preferred (2,7)
HSBC Capital Funding LP, Series 1, 9.547%                                           21,500       22,383
 noncumulative preferred (2,8)
Midland Bank PLC 7.188% Eurodollar notes                                             5,000        3,950      .15
 (undated) (8)
Dime Bancorp, Inc. 6.375% 2001                                                      15,000       14,888
Dime Capital Trust I, Dime Bancorp, Inc.,                                            9,425        8,702      .13
 Series A, 9.33% 2027
Riggs Capital Trust II:
 8.625% 2026                                                                         1,500        1,177
 8.875% 2027                                                                        25,000       20,140      .12
Advanta Corp.:
 7.50% 2000                                                                          4,000        3,998
 6.925% 2002                                                                         5,000        4,410
 6.91% 2002                                                                          5,000        4,410
 Series D, 6.833% 2002                                                               5,000        4,390      .09
Washington Mutual Capital I, subordinated                                           10,000        8,894
 capital income securities 8.375% 2027
Ahmanson Capital Trust I, capital securities,                                        8,000        7,041      .09
 Series A, 8.36% 2026 (2)
Capital One Capital I 7.941% 2027 (2,8)                                             13,500       11,543      .06
Standard Chartered Bank 7.063% Eurodollar notes                                     15,000        9,969      .05
 (undated) (8)
Skandinaviska Enskilda Banken AB 7.50% (undated) (2,8)                              10,405        9,223      .05
IBJ Preferred Capital Co. LLC, Series A, 8.79%                                      10,000        9,078      .05
 noncumulative preferred (2,8)
Canadian Imperial Bank of Commerce 6.50%                                            10,000        7,787      .04
 Eurodollar notes (undated) (8)
Bank of Nova Scotia 6.50% Eurodollar notes                                          10,000        7,753      .04
 (undated) (8)
HSBC Americas, Inc. 7.808% 2026 (2)                                                  8,000        6,925      .04
Bank of Scotland 7.00% (undated) (2,8)                                               7,500        6,842      .04
Komercni Finance BV 9.00%/10.75% 2008 (2,7)                                          6,000        5,775      .03
Sakura Capital Funding 7.778% (undated) (2,8)                                        5,000        4,813      .03
BCI US Funding Trust I 8.01% (undated) (2,8)                                         5,000        4,577      .03
Citigroup Inc. 7.45% 2002                                                            4,000        4,017      .02
Chevy Chase Bank, FSB 9.25% 2005                                                     4,000        3,760      .02
Fleet Capital Trust 7.775% 2028 (8)                                                  2,500        2,416      .01
                                                                                                513,613     2.83

Business & Public Services - 1.14%
Allied Waste North America, Inc.:
 7.625% 2006                                                                         5,000        4,512
 10.00% 2009                                                                        76,375       66,446      .39
Columbia/HCA Healthcare Corp.:
 6.87% 2003                                                                         10,575       10,007
 7.15% 2004                                                                          6,000        5,610
 6.91% 2005                                                                         10,750        9,863
 8.85% 2007                                                                         16,770       16,602
 8.70% 2010                                                                          9,500        9,286      .28
Waste Management, Inc.:
 6.70% 2001                                                                          3,000        2,965
 6.50% 2002                                                                          7,000        6,657
 6.375% 2003                                                                         5,050        4,761
 7.00% 2004                                                                          4,060        3,799
 7.00% 2006                                                                          6,500        5,983
 7.10% 2026                                                                         20,125       19,190      .24
Cendant Corp. 7.75% 2003                                                            12,000       11,574      .06
Concentra Operating Corp., Series A, 13.00% 2009                                    11,000        9,350      .05
Paracelsus Healthcare Corp. 10.00% 2006                                             30,100        7,826      .04
Protection One Alarm Monitoring, Inc. 13.625% 2005 (8)                               3,246        2,532      .02
Actuant Corp. 13.00% 2009 (2)                                                        2,500        2,531      .02
KinderCare Learning Centers, Inc., Series B, 9.50% 2009                              2,500        2,288      .01
Integrated Health Services, Inc.: (6)
 10.25% 2006 (8)                                                                    16,900          169
 Series A, 9.50% 2007                                                               87,095          871
 Series A, 9.25% 2008                                                               68,298          683      .01
Iron Mountain Inc.  8.75% 2009                                                       1,750        1,575      .01
Safety-Kleen Services, Inc.:
 9.25% 2008                                                                         20,000          800
 9.25% 2009                                                                         10,000          312      .01
Mariner Health Group, Inc. 9.50% 2006 (6)                                           15,250          153      .00
                                                                                                206,345     1.14

Forest Products & Paper - 0.87%
Container Corp. of America:
 10.75% 2002                                                                         2,050        2,060
 9.75% 2003                                                                         45,550       45,550
 Series A, 11.25% 2004                                                              19,500       19,695      .37
Scotia Pacific Co. LLC, Timber Collateralized notes:
 Series B, Class A-2, 7.11% 2014                                                    15,800       12,446
 Series B, Class A-3, 7.71% 2014                                                    16,000       10,880      .13
Pindo Deli Finance Mauritius Ltd.:
 10.25% 2002                                                                        12,000        8,310
 10.75% 2007                                                                        24,150       13,584      .12
International Paper Co. 7.67% 2002 (2,8)                                            15,000       14,992      .08
Packaging Corp. of America, Series B, 9.625% 2009                                   12,875       13,132      .07
Grupo Industrial Durango, SA de CV 12.00% 2001                                       6,000        6,135      .04
Copamex Industrias, SA de CV, Series B, 11.375% 2004                                 5,930        5,767      .03
Advance Agro Capital BV 13.00% 2007                                                  4,925        3,349      .02
Indah Kiat Finance Mauritius Ltd.:
 11.875% 2002                                                                          700          548
 10.00% 2007                                                                         3,050        1,777      .01
                                                                                                158,225      .87

Diversified Telecommunication Services - 0.80%
NEXTLINK Communications, Inc.:
 9.00% 2008                                                                          1,250        1,125
 0%/12.125% 2009 (7)                                                                14,000        7,980
 0%/12.25% 2009 (7)                                                                 34,500       20,700      .17
Allegiance Telecom, Inc.:
 0%/11.75% 2008 (7)                                                                 32,000       23,520
 12.875% 2008                                                                        3,475        3,753      .15
GT Group Telecom Inc., units, 0%/13.25% 2010 (2,7)                                  24,750       13,117      .07
Qwest Communications International Inc.                                             15,000       12,944      .07
0%/9.47% 2007 (7)
US Xchange, LLC 15.00% 2008 (4)                                                     13,500       12,582      .07
Viatel, Inc.:
 11.25% 2008                                                                        16,550        9,434
 0%/12.50% 2008 (7)                                                                  4,000        1,460
 11.50% 2009                                                                         1,000          580      .06
Netia Holdings BV:
 10.25% 2007                                                                         3,625        3,081
 0%/11.25% 2007 (7)                                                                  9,250        6,614      .05
SBA Communications Corp. 0%/12.00% 2008 (7)                                         11,175        8,102      .05
AT&T Corp. 6.50% 2002                                                                7,000        6,920      .04
COLT Telecom Group PLC 0%/12.00% 2006 (7)                                            7,500        6,619      .04
IMPSAT Corp. 12.375% 2008                                                            5,000        4,063      .02
VersaTel Telecom International NV 11.875% 2009                                       2,250        2,216      .01
                                                                                                144,810      .80

Energy & Related Companies - 0.77%
Clark Refining & Marketing, Inc.:
 9.50% 2004                                                                          1,675        1,524
 8.375% 2007                                                                         4,960        4,067
 8.875% 2007                                                                        46,750       32,725      .21
Oryx Energy Co.:
 8.00% 2003                                                                          5,345        5,388
 8.375% 2004                                                                        12,750       13,155
 8.125% 2005                                                                         8,500        8,664      .15
PDVSA Finance Ltd.:
 9.75% 2010                                                                          5,000        4,810
 7.40% 2016                                                                         18,465       14,818      .11
Petrozuata Finance, Inc.: (2)
 Series A, 7.63% 2009                                                               10,285        8,700
 Series B, 8.22% 2017                                                               10,000        7,925      .09
Pogo Producing Co. 10.375% 2009                                                     10,000       10,325      .06
AES Drax Holdings Ltd. 10.41% 2020 (2)                                               6,000        6,202      .04
OXYMAR 7.50% 2016 (2)                                                                8,000        5,976      .03
Cross Timbers Oil Co. 8.75% 2009                                                     5,750        5,578      .03
Newfield Exploration Co., Series B, 7.45% 2007                                       6,000        5,503      .03
Louis Dreyfus Natural Gas Corp. 6.875% 2007                                          5,000        4,510      .02
                                                                                                139,870      .77

Transportation - 0.76%
Jet Equipment Trust: (2,9)
 Series 1995-B, 10.91% 2014                                                          4,750        5,152
 Series 1995-B, Class A, 7.63% 2015                                                  3,533        3,433
 Series 1995-A, Class B, 8.64% 2015                                                 13,250       13,144
 Series 1995-B, Class C, 9.71% 2015                                                  5,500        5,650
 Series 1995-A, Class C, 10.69% 2015                                                 5,000        5,329      .18
Atlas Air, Inc., Pass-Through Trust, Series                                         32,291       30,286      .17
 1998-1, Class A, 7.38% 2019 (9)
Airplanes Pass Through Trust, pass-through                                          21,457       19,963      .11
 certificates, Series 1, Class C, 8.15%  2019 (9)
Pegasus Aviation Lease Securitization, Series                                       19,000       19,321      .10
 2000-1, Class A2, 8.37% 2030 (2)(9)
Continental Airlines, Inc.:
 9.50% 2001                                                                          4,500        4,590
 pass-through certificates, Series 1996: (9)
  Class A, 6.94% 2015                                                                7,985        7,677
  Class C, 9.50% 2015                                                                5,767        5,870      .10
United Air Lines, Inc.:
 9.00% 2003                                                                          8,000        7,907
 pass-through certificates, Series 1996-A2,                                          5,000        4,287      .07
 7.87% 2019 (9)
Delta Air Lines, Inc., pass-through certificates,                                    5,000        4,886      .03
 Series 1992-A2, 9.20% 2014 (9)
                                                                                                137,495      .76
Financial Services - 0.72%
GS Escrow Corp.:
 7.00% 2003                                                                          1,550        1,421
 7.391% 2003 (8)                                                                    15,000       14,293
 7.125% 2005                                                                        27,000       24,535      .22
Capital One Financial Corp. 7.125% 2008                                             22,500       19,895      .11
BHP Finance Ltd. 6.75% 2013                                                         20,000       17,992      .10
MBNA Corp., MBNA 6.75% 2008                                                         12,500       11,393      .06
Toyota Motor Credit Corp. 6.00% 2003                                                10,000        9,706      .06
Providian Financial Corp. 9.525% 2027 (2)                                           10,000        7,466      .04
AB Spintab: (2,8)
 6.80% (undated)                                                                     5,150        5,015
 7.50% (undated)                                                                     2,500        2,368      .04
Wharf Capital International, Ltd. 8.875% 2004                                        7,000        7,123      .04
Nebhelp Trust, Student Loan Interest Margin                                          4,155        4,038      .02
 Securities, Series 1998-1, Class A, 6.68% 2016 (2,9)
Ford Motor Credit Co. 6.55% 2002                                                     3,000        2,953      .02
Green Tree Financial Corp. 6.50% 2002                                                2,635        1,660      .01
                                                                                                129,858      .72

General Retailing & Merchandising - 0.59%
J.C. Penney Co., Inc.:
 6.50% 2002                                                                          8,500        7,992
 7.625% 2007                                                                         4,000        2,730
 7.95% 2017                                                                         30,025       24,544      .19
Fred Meyer, Inc. 7.375% 2005                                                        20,000       19,453      .11
WestPoint Stevens Inc. 7.875% 2005                                                  18,000       15,750      .09
Boyds Collection, Ltd.,Series B, 9.00% 2008                                         14,621       13,159      .07
Sears, Roebuck and Co. 9.375% 2011                                                  12,310       13,039      .07
Salton/Maxim Housewares, Inc. 10.75% 2005                                            9,450        9,308      .05
Levi Strauss & Co. 6.80% 2003                                                        1,500        1,260      .01
                                                                                                107,235      .59

Leisure & Tourism - 0.58%
Horseshoe Gaming Holding Corp., Series B, 8.625% 2009                               21,500       20,425      .11
International Game Technology 7.875% 2004                                           16,000       15,440      .09
Six Flags Entertainment Corp. 8.875% 2006                                            2,000        1,910
Premier Parks Inc. 9.75% 2007                                                       13,875       13,389      .08
Mirage Resorts, Inc.:
 6.625% 2005                                                                         3,000        2,815
 6.75% 2007                                                                          3,250        2,924
 6.75% 2008                                                                         10,500        9,394      .08
Florida Panthers Holdings, Inc. 9.875% 2009                                         10,000        9,425      .05
Joseph E. Seagram & Sons, Inc. 6.625% 2005                                           9,000        8,612      .05
Boyd Gaming Corp. 9.25% 2003                                                         7,000        6,895      .04
Royal Caribbean Cruises Ltd. 7.00% 2007                                              7,000        5,938      .03
Friendly Ice Cream Corp. 10.50% 2007                                                 3,190        2,584      .02
CKE Restaurants, Inc. 9.125% 2009                                                    3,250        2,112      .01
AMF Bowling Worldwide, Inc.:
 10.875% 2006                                                                        5,500        1,760
 0%/12.25% 2006 (7)                                                                  1,437          316      .01
KSL Recreation Group, Inc. 10.25% 2007                                               1,250        1,206      .01
Carmike Cinemas, Inc., Series B, 9.375% 2009                                         1,550          667      .00
                                                                                                105,812      .58

Electronic Components - 0.49%
Fairchild Semiconductor Corp.:
 10.125% 2007                                                                        1,000        1,013
 10.375% 2007                                                                       24,750       25,307      .15
Hyundai Semiconductor America, Inc.: (2)
 8.25% 2004                                                                          9,840        8,816
 8.625% 2007                                                                        20,000       16,997      .14
Advanced Micro Devices, Inc. 11.00% 2003                                            12,500       13,562      .07
Zilog, Inc. 9.50% 2005                                                              14,050       12,364      .07
Flextronics International Ltd. 8.75% 2007                                            9,000        8,640      .05
SCG Holding Corp. 12.00% 2009                                                        2,125        2,284      .01
                                                                                                 88,983      .49

Utilities: Electric & Gas - 0.40%
Israel Electric Corp. Ltd.: (2)
 7.75% 2009                                                                          6,000        5,822
 8.25% 2009                                                                          8,000        8,056
 7.70% 2018                                                                         22,500       20,537
 8.10% 2096                                                                         14,405       12,389      .26
Edison Mission Energy 7.73% 2009                                                    10,000        9,742      .05
Williams Holdings of Delaware, Inc. 6.50% 2008                                      10,000        9,189      .05
Transener SA 9.25% 2008 (2)                                                          6,850        6,131      .04
                                                                                                 71,866      .40

Insurance - 0.31%
Conseco, Inc. 9.00% 2006                                                             5,175        3,519
Conseco Financing Trust II, capital trust                                           14,750        6,638
 pass-through securities (TRUPS), 8.70% 2026 (9)
Conseco Finance Home Loan Trust: (9)
 Series 1999-G, Class B-2, 10.96% 2029                                              13,688       11,048
 Series 2000-A, Class BV-2, 9.426% 2031 (8)                                          7,100        6,337      .15
Royal & Sun Alliance Insurance Group PLC 8.95% 2029 (2)                              8,750        8,888      .05
ReliaStar Financial Corp. 8.00% 2006                                                 8,000        8,091      .04
Allstate Corp. 7.20% 2009                                                            7,000        6,699      .04
Jefferson-Pilot Corp. 8.14% 2046 (2)                                                 5,000        4,547      .03
                                                                                                 55,767      .31

Multi-Industry - 0.28%
Reliance Industries Ltd.:
 8.25% 2027 (2)                                                                     12,000       11,284
 10.50% 2046 (2)                                                                     5,750        5,336
 Series B, 10.25% 2097                                                               5,000        4,421      .11
Graham Packaging Co.:
 8.75% 2008                                                                          8,475        7,458
 0%/10.75% 2009 (7)                                                                  8,000        4,880      .07
American Standard Inc. 8.25% 2009 (2)                                               10,250        9,891      .05
Innova, S de RL 12.875% 2007                                                         5,000        4,737      .03
Tekni-Plex, Inc. 12.75% 2010 (2)                                                     3,000        3,068      .02
                                                                                                 51,075      .28

Miscellaneous Materials & Commodities - 0.26%
Owens-Illinois, Inc.:
 7.85% 2004                                                                          6,000        5,530
 7.15% 2005                                                                         11,000        9,677
 8.10% 2007                                                                          5,750        5,107      .11
Printpack, Inc. 10.625% 2006                                                        20,270       19,662      .11
Equistar Chemicals, LP 8.50% 2004                                                    7,500        7,507      .04
                                                                                                 47,483      .26

Metals: Steel & Nonferrous - 0.24%
Doe Run Resources Corp., Series B, 11.25% 2005                                      30,525       17,094      .10
Freeport-McMoRan Copper & Gold Inc.:
 7.50% 2006                                                                          9,500        5,914
 7.20% 2026                                                                         16,000       10,885      .09
Kaiser Aluminum & Chemical Corp. 12.75% 2003                                         8,000        7,220      .04
Inco Ltd. 9.60% 2022                                                                 2,625        2,578      .01
                                                                                                 43,691      .24

Real Estate - 0.24%
FelCor Suites LP:
 7.375% 2004                                                                        10,000        9,107
 7.625% 2007                                                                         5,000        4,475      .08
Security Capital Group Inc. 7.15% 2007                                              15,000       13,500      .07
ProLogis Trust 7.05% 2006                                                           12,000       11,352      .06
Irvine Co. 7.46% 2006 (2,4)                                                          5,000        4,612      .03
                                                                                                 43,046      .24

Industrial Components - 0.24%
Federal-Mogul Corp.:
 7.50% 2004                                                                          3,500        2,905
 7.375% 2006                                                                        32,000       25,920
 7.75% 2006                                                                          6,000        4,860
 7.50% 2009                                                                          5,775        4,418      .21
TRW Inc. 7.125% 2009                                                                 5,000        4,595      .03
BREED Technologies, Inc. 9.25% 2008 (6)                                             29,500          295      .00
                                                                                                 42,993      .24

Food & Household Products - 0.17%
Home Products International, Inc. 9.625% 2008                                       10,500        8,610      .05
Gruma, SA de CV 7.625% 2007                                                          7,750        6,839      .04
Canandaigua Wine Co., Inc.:
 8.75% 2003                                                                          5,000        4,925
 Series C, 8.75% 2003                                                                1,250        1,231      .03
New World Pasta Co. 9.25% 2009                                                       9,000        6,120      .03
Delta Beverage Group, Inc. 9.75% 2003                                                3,435        3,332      .02
DGS International Finance Co. BV 10.00% 2007 (2)                                     1,075          304      .00
                                                                                                 31,361      .17

Aerospace & Military Technology - 0.11%
Hughes Electronics Corp. 7.568% 2000 (2,8)                                          20,000       20,000      .11
                                                                                                 20,000      .11

Collateralized Mortgage/Asset-Backed Obligations (9)
(excluding those issued by federal agencies) - 3.60%
Green Tree Financial Corp., pass-through certificates:
 Series 1995-A, Class NIM, 7.25% 2005                                                  855          832
 Series 1993-2, Class B, 8.00% 2018                                                 14,000       12,622
 Series 1995-4, Class B-2, 7.70% 2025                                                1,900        1,041
 Series 1995-3, Class B-2, 8.10% 2025                                               16,121        9,323
 Series 1995-1, Class B-2, 9.20% 2025                                                5,500        3,574
 Series 1995-2, Class B-2, 8.80% 2026                                               11,457        7,077
 Series 1996-2, Class B-2, 7.90% 2027                                               12,950        7,085
 Series 1996-10, Class A-6, 7.30% 2028                                               2,998        2,828
 Series 1996-10, Class B-2, 7.74% 2028                                               4,923        2,599
 Series 1997-1, Class B-2, 7.76% 2028                                                7,396        3,929
 Series 1997-2, Class B-2, 8.05% 2028                                                3,418        1,871
 Series 1998-4, Class B-2, 8.11% 2028                                                6,650        3,961
 Series 1998-3, Class B-2, 8.07% 2030                                                5,000        2,725
Green Tree Recreational, Equipment & Consumer                                       10,000        9,829      .38
 Trust, Series 1999-A, Class A-6, 6.84% 2010
Merrill Lynch Mortgage Investors, Inc.:
 Series 1995-C3, Class A-3, 7.068% 2025 (8)                                         25,340       24,962
 Mortgage pass-through certificates:
  Series 1996-C2, Class A-1, 6.69% 2028 (8)                                          2,046        2,021
  Series 1998-C3, Class E, 6.974% 2030 (8)                                           7,980        6,625
  Series 1999-C1, Class A-2, 7.56% 2031                                             11,750       11,786      .25
CS First Boston, Inc.:
 Finance Co. Ltd., Series 1995-A, 10.00% 2005 (2,8)                                 11,375        9,896
 Series 98-FL1, Class E, 7.495% 2013 (2,8)                                          12,300       12,251
 Mortgage Securities Corp., Series 1998-C1,                                         12,620       12,152      .19
 Class A-1A, 6.26% 2040
Gramercy Place Insurance Ltd., Series 1998-A,                                       32,904       32,555      .18
 Class C-2, 8.95% 2002 (2)
Collateralized Mortgage Obligation Trust, Series                                    29,310       29,905      .17
 63, Class Z, 9.00% 2020
Bayview Financial Acquisition Trust: (2,8)
 Series 2000-A, Class B, 9.12% 2030                                                 10,558       10,543
 Series 1998-A, Class M3, 8.62% 2038                                                 5,526        5,440
 Bayview Financial Revolving Mortgage Loan,                                         10,000        9,903      .14
 Series 1999-1, Class M2, 7.92% 2029
MBNA Master Credit Card Trust: (2)
 Series 1999-D, Class B, 6.95% 2008                                                  4,700        4,472
 Series 1998-E, Class C, 6.60% 2010                                                 22,500       20,720      .14
SMA Finance Co., Inc., Series 1998-C1, Class A1,                                    25,607       24,963      .14
 6.27% 2005 (2)
DLJ Mortgage Acceptance Corp.:
 Series 1997-CF1, Class A1A, 7.40% 2006 (2)                                          5,824        5,834
 Series 1996-CF2, Class A1A, 6.86% 2021 (2)                                          3,822        3,792
 Series 1998-CF2, Class A1B, 6.24% 2031                                             15,000       13,804      .13
First USA Credit Card Master Trust, Class A,
 floating-rate asset-backed certificates: (8)
 Series 1998-8, 7.528% 2008 (2)                                                     13,315       13,258
 Series 1997-4, 7.649% 2010                                                          6,500        6,357      .11
GMAC Commercial Mortgage Securities, Inc.,                                          20,750       18,452      .10
Series 1997-C2, Class E, 7.624% 2011
GS Mortgage Securities Corp. II, mortgage                                           20,000       18,397      .10
pass-through certificates, Series 1998-C1,
 Class D, 7.242% 2030 (8)
L.A. Arena Funding, LLC, Series 1, Class A,                                         18,250       17,132      .09
 7.656% 2026 (2)
First Union-Lehman Brothers Bank of America                                         17,614       16,962      .09
Commercial Mortgage Trust, commercial mortgage
 pass-through certificates, Series 1998-C2, 6.28% 2035
Deutsche Mortgage & Asset Receiving Corp.,                                          16,657       16,048      .09
 Series 1998-C1, Class A-1, 6.22% 2031
Commercial Mortgage Acceptance Corp.:
 Series 1998-C1, Class A-1, 6.23% 2007                                               4,921        4,747
 Series 1998-C2, Class A-1, 5.80% 2030                                              11,387       10,858      .09
Morgan Stanley Capital I, Inc.:
 Series 1995-GAL1, Class A-2, 7.50% 2005 (2)                                         7,054        7,107
 Series 1998-WF2, Class A-1, 6.34% 2030                                              8,644        8,361      .09
Residential Reinsurance Ltd. 10.94% 2001 (2,8)                                      15,000       14,962      .08
Metris Master Trust: (2,8)
 Series 1998-1A, Class C, 7.48% 2005                                                 5,000        4,922
 Series 1997-2, Class C, 7.68% 2006                                                 10,000        9,884      .08
Ford Credit Auto Owner Trust:
 Series 1998-B, Class C, 6.40% 2002                                                 10,000        9,801
 Series 1999-B, Class C, 6.65% 2003                                                  3,000        2,930      .07
Structured Asset Securities Corp.,
 pass-through certificates: (8)
 Series 1998-RF2, Class A, 8.54% 2027 (2)                                            2,007        2,043
 Series 1998-RF1, Class A, 8.667% 2027 (2)                                           1,581        1,615
 Series 1999-BC1, Class M2, 7.92% 2029                                               7,500        7,523      .06
Team Fleet Financing Corp.: (2)
 Series 1999-2A, Class D, 7.77% 2002 (8)                                             3,000        2,990
 Series 1999-3A, Class D, 7.60% 2003                                                 7,000        6,916      .05
FIRSTPLUS Home Loan Owner Trust, Series                                             10,000        9,909      .05
 1997-1, Class A-6, 6.95% 2015
Freddie Mac Loan Receivables Trust, Series 1998-A,                                  10,100        9,338      .05
 Class A3, 6.69% 2020 (2)
Resolution Trust Corp.:
 Series 1993-C1, Class D, 9.45% 2024                                                 1,096        1,092
 Series 1993-C2, Class D, 8.50% 2025                                                   163          162
 Series 1995-1, Class A-1, 7.12% 2028                                                8,071        7,934      .05
Chase Commercial Mortgage Securities Corp.,                                          8,919        8,655      .05
 Series 1998-1, Class A1, 6.34% 2030
Capital One Secured Note Trust, Series 1999-2,                                       6,250        6,217
 7.226% 2005 (2,8)
Capital One Master Trust, Series 1999-1, Class C,                                    2,500        2,402      .05
 6.60% 2007 (2)
Fleet Credit Card Master Trust II, Series 1999-A,                                    8,000        8,129      .05
 Class C, floating-rate asset-backed interests,
 7.775% 2004 (2,8)
Nehi Ltd., Series 2000-A, 10.869% 2003 (2,8)                                         8,000        8,000      .04
First Nationwide, Series 1999-2, Class 1PA1                                          8,199        7,635      .04
, 6.50% 2029
H.S. Receivables Corp., Series 1999-1, Class A,                                      6,875        6,785      .04
 8.13% 2004 (2)
GE Capital Mortgage Services, Inc.,                                                  7,321        6,473      .04
 Series 1994-9, Class A9, 6.50% 2024
PNC Mortgage Securities Corp., Series                                                6,865        6,175      .03
 1998-10, Class 1-B1, 6.50% 2028 (2)
First Union Commercial Mortgage Trust,                                               7,000        5,994      .03
 Series 1999-C1, Class E, 6.973% 2035 (8)
Bear Stearns Commercial Mortgage Securities                                         88,385        5,644      .03
 Inc., Series 1999-C1, Class X, interest only,
 1.053% 2031 (8)
EQCC Home Equity Loan Trust, asset-backed certificates,                              5,000        4,953      .03
 Series 1999-3, Class A-3F, 7.067% 2024
Nationslink Funding Corp., Series 1999-1, Class D,                                   5,000        4,639      .03
 7.10% 2031 (8)
Government Lease Trust, Series 1999-C1A, Class B3,                                   6,687        4,557      .03
 4.00% 2011 (2)
Metropolitan Asset Funding, Inc., Series 1998-A,                                     4,669        4,499      .03
 Class B1, 7.728% 2014 (2)
Providian Master Trust, Series 2000-1, Class                                         4,000        4,000      .02
 C, 7.776% 2009 (2,8)
Residential Funding Mortgage Securities I, Inc.,                                     3,923        3,602      .02
 Series 1998-S17, Class M-1, 6.75% 2028
NPF XII, Inc., Series 1999-3, Class B, 7.638%                                        3,000        2,998      .02
 2003 (2,8)
Grupo Financiero Banamex Accival, SA de CV 0% 2002                                   2,698        2,480      .01
Financial Asset Securitization, Inc., Series                                         2,513        2,443      .01
 1997-NAM1, Class B1, 7.75% 2027
Rental Car Finance Corp., Series 1999-1A, Class D,                                   2,500        2,354      .01
 7.10% 2007 (2)
Chevy Chase Master Credit Card Trust II, Series                                      2,000        1,995      .01
1996-C, Class A,  6.766% 2007 (8)
Chase Manhattan Bank, NA, Series 1993-I, Class 2A5,                                  1,778        1,769      .01
7.25% 2024                                                                                      653,018     3.60

Federal Agency Obligations: Mortgage
 Pass-Throughs (9) - 1.95%
Government National Mortgage Assn.:
 6.00% 2029                                                                         68,023       62,623
 7.00% 2022-2029                                                                    40,194       39,055
 7.50% 2017-2030                                                                   127,306      126,220
 8.00% 2017-2030                                                                    31,546       31,837
 8.50% 2017-2021                                                                     3,640        3,733
 9.00% 2008-2020                                                                     2,995        3,107
 9.50% 2009-2021                                                                     6,015        6,319
 10.00% 2016-2025                                                                   39,590       41,709
 10.50% 2019                                                                            36           38     1.74

Fannie Mae:
 7.50% 2023                                                                          2,792        2,771
 8.00% 2024                                                                          2,450        2,472
 8.50% 2030                                                                          2,750        2,794
 9.00% 2008-2023                                                                     3,861        3,965
 9.50% 2022                                                                          3,339        3,488
 10.00% 2005-2025                                                                    9,386        9,884
 12.50% 2019                                                                           715          808
 13.00% 2015                                                                         1,759        1,995
 15.00% 2028                                                                           700          822      .16

Freddie Mac:
 8.50% 2008-2010                                                                     3,817        3,878
 9.00% 2007                                                                          2,605        2,666
 11.00% 2018                                                                         2,342        2,536      .05
                                                                                                352,720     1.95

Federal Agency Obligations: Collateralized
Mortgage Obligations (9) - 0.09%
Fannie Mae:
 Series 1996-4, Class ZA, 6.50% 2022                                                 7,054        6,262
 Series 1994-4, Class ZA, 6.50% 2024                                                 5,974        5,407      .06
Freddie Mac:
 Series 178, Class Z, 9.25% 2021                                                     1,387        1,430
 Series 1673, Class SA, 4.33% 2024 (8,10)                                            6,000        3,790      .03
                                                                                                 16,889      .09

Other Federal Agency Obligations - 0.29%
Fannie Mae:
 5.25% 2009                                                                         30,000       26,419
 Medium-Term Note 6.75% 2028                                                        30,000       25,997      .29
                                                                                                 52,416      .29

Governments & Governmental Authorities
 (excluding U.S.) - 0.73%
United Mexican States Government Eurobonds:
 Series C, 0% 2003 (4)                                                               2,307            0
 Global:
  11.375% 2016                                                                      15,500       18,034
  11.50% 2026                                                                       12,000       14,670
 Units, Series C, 7.80% 2019 (8)                                                     1,500        1,494      .19
Panama (Republic of):
 Interest Reduction Bonds 4.50% 2014 (8)                                               250          204
 Past Due Interest Eurobonds 7.75% 2016 (8)                                            547          452
 8.875% 2027                                                                        21,500       18,651
 9.375% 2029                                                                         5,000        4,813      .13
Argentina (Republic of):
 9.75% 2027                                                                          5,000        3,973
 11.00% 2006                                                                         1,635        1,588
 11.375% 2017                                                                       12,900       11,778
 11.75% 2009                                                                         2,230        2,113      .11
Turkey (Republic of) 12.375% 2009                                                   11,750       12,719      .07
Philippines (Republic of) 8.875% 2008                                               11,000        9,790      .05
Ontario (Province of) 5.50% 2008                                                    10,000        8,972      .05
Poland (Republic of), Past Due Interest Bond,                                        9,000        8,181      .05
 Bearer, 6.00% 2014 (8)
Brazil (Federal Republic of):
 Debt Conversion Bonds, Series L, 7.438% 2012 (8)                                    3,750        2,801
 Debt Conversion Bonds, Bearer, Series L,                                            5,000        3,734
 7.438% 2012 (8)
 Bearer 8.00% 2014 (5)                                                               2,155        1,609      .05
Venezuela (Republic of), Eurobonds, 7.875% 2007 (8)                                  5,179        4,331      .02
Mendoza (Province of) 10.00% 2007                                                    3,485        2,396      .01
                                                                                                132,303      .73

U.S. Treasury Obligations - 2.45%
 8.75% August 2000                                                                  22,500       22,514      .12
 6.25% August 2002                                                                  50,000       49,914      .28
 7.00% July 2006                                                                    18,293       19,002      .10
 3.842% January 2008 (8,11)                                                         65,000       67,067      .37
 5.50% May 2009                                                                     27,500       26,383      .15
 10.00% May 2010                                                                    35,500       40,609      .22
 0% February 2015 STRIP                                                             46,440       19,332      .11
 8.875% August 2017                                                                145,025      186,470     1.03
 6.125% November 2027                                                                5,000        5,064      .03
 0% November 2027 STRIP                                                             20,930        4,299      .02
 5.25% February 2029                                                                 3,000        2,708      .02
                                                                                                443,362     2.45

Total Bonds and Notes   (cost: $5,574,896,000)                                                5,051,228    27.86


                                                                                  Shares/
                                                                                Principal       Market  Percent
                                                                                   Amount        Value   of Net
SHORT-TERM SECURITIES                                                                (000)        (000)  Assets

Corporate Short-Term Notes  -  7.36%
BellSouth Capital Funding Corp. 6.51%-6.55%                                        107,000      106,120      .58
 due 8/16-10/2/2000 (2)
Equilon Enterprises, LLC 6.50%-6.53% due                                            93,000       92,009      .51
8/10-10/18/2000
Bell Atlantic Financial Services, Inc.                                              84,800       84,322      .47
6.50%-6.55% due 8/14-9/11/2000
Preferred Receivables Funding Corp. 6.51%-6.56%                                     79,900       79,579      .44
 due 8/8-9/8/2000 (2)
Procter & Gamble Co. 6.48%-6.50% due 8/17-9/26/2000                                 80,000       79,429      .44
American Express Credit Corp. 6.49%-6.51%                                           77,500       77,000      .42
 due 8/25-9/18/2000
AT&T Corp. 6.54%-6.61% due 8/1-8/8/2000                                             75,000       74,922      .41
Wal-Mart Stores, Inc. 6.48%-6.53% due                                               69,000       68,339      .38
 8/15-10/24/2000 (2)
USAA Capital Corp. 6.48%-6.60% due 8/2-9/28/2000                                    67,500       67,050      .37
CIT Group, Inc. 6.51%-6.54% due 8/23-9/19/2000                                      63,900       63,450      .35
General Electric Capital Corp. 6.50%-6.54%                                          60,400       60,232      .33
 due 8/11-8/28/2000
Motorola, Inc. 6.50%-6.53% due 8/18-10/27/2000                                      60,300       59,717      .33
SBC Communications Inc. 6.50%-6.57% due                                             60,000       59,434      .33
 9/11-10/11/2000 (2)
Pharmacia Corp. 6.49%-6.52% due 8/11-8/29/2000                                      54,100       53,913      .30
International Lease Finance Corp. 6.53%-6.55%                                       53,000       52,810      .29
 due 8/4-9/11/2000
Corporate Asset Funding Co. Inc. 6.50%-6.61%                                        50,200       49,990      .28
 due 8/14-9/12/2000 (2)
Lucent Technologies Inc. 6.54%-6.60% due 8/3-8/17/2000                              49,744       49,653      .27
Marsh USA Inc. 6.50%-6.52% due 10/17-12/12/2000 (2)                                 50,000       48,981      .27
Alcoa Inc. 6.50%-6.62% due 8/1-10/11/2000                                           42,200       42,015      .23
Emerson Electric Co. 6.49% due 9/18/2000 (2)                                        37,515       37,182      .21
Minnesota Mining and Manufacturing Co. 6.54%                                        19,200       19,020      .10
 due 9/21/2000
Kimberly-Clark Corp. 6.52% due 8/8/2000 (2)                                          9,500        9,486      .05
                                                                                              1,334,653     7.36

Federal Agency Short-Term Obligations  -  1.28%

Fannie Mae 6.425%-6.50% due 9/21-10/26/2000                                        152,400      150,469      .83
Freddie Mac 6.40%-6.45% due 9/14-9/21/2000                                          81,800       81,066      .45
                                                                                                231,535     1.28
Total Short Term Securities   (cost: $1,566,193,000)                                          1,566,188     8.64
Total Investment Securities   (cost:$18,260,313,000)                                         18,076,209    99.70
Excess of cash and receivables over payables                                                     54,820      .30
NET ASSETS                                                                                   18,131,029   100.00


1. The fund owns 5.02%, 5.03%, 5.16%, 5.73%, 6.76%
 and 10.73% of the outstanding voting
   securities of HSB Group, R.J. Reynolds Tobacco
Holdings, Equitable Resources, CONSOL
   Energy, Georgia-Pacific and Wilshire Financial
 Services Group, respectively, and thus is
   considered an affiliate as defined in the
Investment Company Act of 1940.
2. Purchased in a private placement transaction;
resale to the public may require
   registration or sale only to qualified
 institutional buyers.
3. Non-income-producing security.
4. Valued under procedures established by the
 Board of Directors.
5. Payment in kind; the issuer has the option of
 paying additional securities in
   lieu of cash.
6. Company not making interest payments; bankruptcy
 proceedings pending.
7. Step Bond; coupon rate will increase at a later date.
8. Coupon rate may change periodically.
9. Pass-through securities backed by a pool of
 mortgages or other loans on which
   principal payments are periodically made.
Therefore, the effective maturities are
   shorter than the stated maturities.
10.Inverse floater, which is a floating-rate
 note whose interest rate moves in
   the opposite direction of prevailing interest rates.
11.Index-linked bond whose principal amount moves
 with a government retail price
   index.

ADR = American Depositary Receipts

See Notes to Financial Statements
</TABLE>

<TABLE>
The Income Fund of America
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
at July 31, 2000                                                               (dollars in       thousands)
<S>                                                                        <C>             <C>
Assets:
Investment securities at market
 (cost: $18,260,313)                                                                            $18,076,209
Cash                                                                                                  3,082
Receivables for--
 Sales of investments                                                             $ 31,090
 Sales of fund's shares                                                              9,759
 Forward currency contracts - net                                                        0
 Dividends and accrued interest                                                    120,026          160,875
                                                                                                 18,240,166

Liabilities:
Payables for--
 Purchases of investments                                                           70,358
 Repurchases of fund's shares                                                       25,526
 Forward currency contracts - net                                                        0
 Dividends on fund's shares                                                              0
 Management services                                                                 4,076
 Accrued expenses                                                                    9,177          109,137
Net Assets at July 31, 2000--
 (authorized capital stock -- 3,000,000,000 shares)                                             $18,131,029

Class A shares, $.001 par value
 Net assets                                                                                     $18,102,315
 Shares outstanding                                                                            1,173,447,200
 Net asset value per share                                                                           $15.43
Class B shares, $.001 par value
 Net assets                                                                                         $28,714
 Shares outstanding                                                                                1,865,200
 Net asset value per share                                                                           $15.39

NOTE
the sum of Net Assets at a fund level s/b equal to the master level Net assets


STATEMENT OF OPERATIONS
for the year ended July 31, 2000                                               (dollars in       thousands)
Investment Income:
Income:
 Dividends                                                                        $551,878
 Interest                                                                          692,092       $1,243,970

Expenses:
 Management services fee                                                            59,946
 Distribution expenses - Class A                                                    47,041
 Distribution expenses - Class B                                                        54
 Transfer agent fee - Class A                                                       13,775
 Transfer agent fee - Class B                                                            4
 Reports to shareholders                                                               559
 Registration statement and prospectus                                               1,024
 Postage, stationery and supplies                                                    3,526
 Directors' fees                                                                       188
 Auditing and legal fees                                                                84
 Custodian fee                                                                       1,060
 Taxes other than federal income tax                                                     2
 Other expenses                                                                        240          127,503
 Net investment income                                                                           $1,116,467

Realized Gain and Unrealized
 Depreciation on Investments:
Net realized gain                                                                                   781,307
Net change from unrealized appreciation to
 unrealized depreciation on investments                                                          (2,461,585)
 Open forward currency contracts                                                      0.000
 Net realized gain and unrealized
  depreciation on investments                                                                    (1,680,278)

Net Decrease in Net Assets Resulting
 from Operations                                                                                 $ (563,811)




STATEMENT OF CHANGES IN NET ASSETS                                             (dollars in       thousands)

                                                                                Year Ended          July 31

                                                                                      2000             1999

Operations:
Net investment income                                                           $1,116,467       $1,120,421
Net realized gain on investments                                                   781,307        1,485,110
Net change in unrealized appreciation
 on investments                                                                 (2,461,585)        (912,310)
Net change in net assets
 resulting from operations                                                        (563,811)       1,693,221

Dividends and Distributions Paid to
 Shareholders:
Dividends from net investment income:
 Class A                                                                        (1,091,155)      (1,109,089)
 Class B                                                                              (238)               -
Distributions from net realized gain on investments:
 Class A                                                                        (1,033,505)      (1,454,557)
 Class B                                                                                 -                -
  Total dividends and distributions                                             (2,124,898)      (2,563,646)

Capital Share Transactions:
Proceeds from shares sold                                                        1,598,045        3,038,713
Proceeds from shares issued in reinvestment
 of net investment income dividends and
  distributions of net realized gain on investments                              1,893,382        2,310,634
Cost of shares repurchased                                                      (5,683,519)      (3,580,068)
 Net change in net assets resulting from
  capital share transactions                                                    (2,192,092)       1,769,279
Total Change in Net Assets                                                      (4,880,801)         898,854

Net Assets:
Beginning of year                                                               23,011,830       22,112,976
End of year (including
 undistributed net investment
 income of: $234,999 and $211,028,
 respectively)                                                                 $18,131,029      $23,011,830


See Notes to Financial Statements
</TABLE>

    Income Fund of America
 Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - The Income Fund of America (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company.  The fund seeks current income while secondarily striving
for capital growth through investments in stocks and fixed-income securities.
The fund offers Class A and Class B shares.  Class A shares are sold with an
initial sales charge of up to 5.75%.  Class B shares are sold without an
initial sales charge but subject to a contingent deferred sales charge paid
upon redemption. This charge declines from 5% to zero over a period of six
years. Class B shares have higher distribution expenses and transfer agent fees
than Class A shares. Class B shares are automatically converted to Class A
shares eight years after the date of purchase. Holders of both classes of
shares have equal pro rata rights to assets and identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution and transfer agent expenses, and each class shall have exclusive
rights to vote on matters affecting only their class.

SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements.  Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:

SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price.  In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type.  Short-term securities maturing within 60 days are valued at amortized
cost, which approximates market value.  Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith by a committee appointed by the Board of
Directors.  The ability of the issuers of the fixed income securities held by
the fund to meet their obligations may be affected by economic developments in
a specific industry, state or region.

NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period.  Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions.  The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -

Security transactions are accounted for as of the trade date. Realized gains
and losses from securities transactions are determined based on specific
identified cost.  In the event securities are purchased on a delayed delivery
or `when-issued' basis, the fund will instruct the custodian to segregate
liquid assets sufficient to meet its payment obligations in these transactions.
Dividend income is recognized on the ex-dividend date, and interest income is
recognized on an accrual basis. Market discounts, premiums,  and original issue
discounts on securities purchased are amortized daily over the expected life of
the security.

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.

ALLOCATIONS - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between Class A
and Class B based on their relative net asset values. Distribution expenses,
transfer agent fees and any other class-specific expenses are accrued daily and
charged to the applicable share class.

2. NON-U.S. INVESTMENTS

INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluation of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the securities markets.

TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid.
For the year ended July 31, 2000, such non-U.S. taxes were $12,298,000.

CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends,
interest, sales of non-U.S. bonds and notes, and other receivables and
payables, on a book basis, were $368,000 for the year ended July 31, 2000.

3. FEDERAL INCOME TAXATION

The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year.  As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made.  Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes.  In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.

  As of July 31, 2000, net unrealized depreciation on investments for federal
income tax purposes aggregated $185,101,000 of which $1,711,657,000 related to
appreciated securities and $1,896,758,000 related to depreciated securities.
During the year ended July 31, 2000, the fund realized, on a tax basis, a net
capital gain of $782,678,000 on securities transactions.  Net losses incurred
during the period related to non-U.S. currency and other transactions of
$1,371,000 are treated as an adjustment to ordinary income for federal income
tax purposes.  The cost of portfolio securities for federal income tax purposes
was $18,261,310,000 at July 31, 2000.

4. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $59,946,000 for management services was
incurred pursuant to an agreement with Capital Research and Management Company
(CRMC), with which certain officers and Directors of the fund are affiliated.
The Investment Advisory and Service Agreement provides for monthly fees,
accrued daily, based on the following rates and net asset levels:

<TABLE>
<CAPTION>
                            Net Asset Level (in billions)

Rate                       In Excess of               Up to

<S>                        <C>                        <C>
 .25%                       $0                         $.5

 .23%                       $.5                        $1

 .21%                       $1                         $1.5

 .19%                       $1.5                       $2.5

 .17%                       $2.5                       $4

 .16%                       $4                         $6.5

 .15%                       $6.5                       $10.5

 .145%                      $10.5                      $17

 .14%                       $17                        $27.5

 .135%                      $27.5

</TABLE>

The Board of Directors approved an amended agreement effective January 1, 2000,
reducing the fees to:

<TABLE>
<CAPTION>
                            Net Asset Level (in billions)

Rate                       In Excess of               Up to

<S>                        <C>                        <C>
 .25%                       $0                         $.5

 .23%                       $.5                        $1

 .21%                       $1                         $1.5

 .19%                       $1.5                       $2.5

 .17%                       $2.5                       $4

 .16%                       $4                         $6.5

 .15%                       $6.5                       $10.5

 .144%                      $10.5                      $13

 .141%                      $13                        $17

 .138%                      $17                        $21

 .135%                      $21                        $27

 .133%                      $27                        $34

 .131%                      $34                        $44

 .129%                      $44

</TABLE>

The agreement also provides for fees based on 2.25% of the fund's monthly gross
investment income.

DISTRIBUTION EXPENSES -  Pursuant to a Plan of Distribution, the fund may
expend up to 0.25% of Class A daily net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved in advance by the
fund's Board of Directors. Fund expenses under the Plan include payments to
dealers to compensate them for their selling and servicing efforts. Pursuant to
a Plan of Distribution for Class B shares, the fund may expend 1.00% of Class B
daily net assets annually to compensate dealers for their selling and servicing
efforts. During the year ended July 31, 2000, distribution expenses under the
Plans of Distribution for Class A and Class B shares were $47,041,000 and
54,000, respectively. As of July 31, 2000, accrued and unpaid distribution
expenses for Class A and Class B shares were $7,043,000 and $22,000,
respectively.  American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $5,605,000 (after allowances to
dealers) during the year ended July 31, 2000 as its portion of the sales
charges paid by purchasers of the fund's Class A shares. Such sales charges are
not an expense of the fund and, hence, are not reflected in the accompanying
statement of operations.

TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $13,779,000 during the year ended July 31,
2000.

DEFERRED DIRECTORS' FEES -  Directors who are unaffiliated with CRMC may elect
to defer part or all of the fees earned for services as members of the Board.
Amounts deferred are not funded and are general unsecured liabilities of the
fund.  As of July 31, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993), net of any payments to
Directors, were $866,000.

AFFILIATED DIRECTORS' AND OFFICERS -  CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Certain
Directors and officers of the fund are or may be considered to be affiliated
with CRMC, AFS and AFD. No such persons received any remuneration directly from
the fund.

5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES

The fund made purchases and sales of investment securities, excluding
short-term securities, of $6,391,648,000 and $8,092,328,000, respectively,
during the year ended July 31, 2000.

As of July 31, 2000, net assets consisted of the following:
     (dollars in thousands)

<TABLE>
<CAPTION>
<S>                                                  <C>   <C>
Capital paid in on shares of beneficial                        $17,543,774
interest

Undistributed net investment income                                234,999

Accumulated net realized gain                                      536,381

Net unrealized depreciation                                      (184,125)

Net assets                                                     $18,131,029

</TABLE>

The fund reclassified $1,103,000 from undistributed net investment income to
additional paid-in capital and reclassified $250,332,000 from undistributed net
realized gains to additional paid-in capital for the year ended July 31, 2000
as a result of permanent differences between book and tax.

Capital shares transactions in the fund were as follows:
<TABLE>
Capital share transactions table:
                                                                                            (dollars in        thousands)

                                                           Year ended     July 31, 2000      Year ended     July 31, 1999
                                                               Amount            Shares          Amount            Shares
<S>                                                  <C>              <C>               <C>             <C>
Class A Shares:
  Sold                                                    $ 1,568,830        97,712,045      $3,038,713       172,804,800
  Reinvested dividends and distributions                    1,893,179       121,733,105       2,310,634       134,016,601
  Repurchased                                              (5,682,984)     (360,461,678)     (3,580,068)     (203,714,499)
   Net increase in Class A                                 (2,220,975)     (141,016,528)      1,769,279       103,106,902
Class B Shares: +
  Sold                                                         29,215         1,886,538              -                 -
  Reinvested dividends and distributions                          203            13,113              -                 -
  Repurchased                                                    (535)          (34,451)             -                 -
   Net increase in Class B                                     28,883         1,865,200              -                 -
Total net increase in fund                                $(2,192,092)     (139,151,328)     $1,769,279       103,106,902



+  Class B shares not offered before
 March 15, 2000.
</TABLE>


Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
During the year ended July 31, 2000, the custodian fee of $1,060,000 includes
$9,000 that was paid by these credits rather than in cash.

<TABLE>
PER-SHARE DATA AND RATIOS (1)

                                                                                                         Net
                                                                  Net asset                    gains/(losses)
                                                                      value,         Net        on securities
                                                                   beginning   investment      (both realized
                         Year ended                                  of year       income     and unrealized)
<S>                                                              <C>           <C>            <C>
Class A:
2000                                                                   $17.51    $.88 (2)         $(1.28) (2)
1999                                                                    18.25          .88                0.45
1998                                                                    18.59          .85                1.11
1997                                                                    15.89          .86                3.55
1996                                                                    14.92          .87                1.11
Class B:
2000                                                                    14.93     .24 (2)            0.41 (2)



                                                                               Dividends
                                                                 Total from   (from net      Distributions
                                                                  investment  investment     (from capital
                         Year ended                               operations    income)          gains)
Class A:
2000                                                                  $(0.40)   $(.87)           $(.81)
1999                                                                    1.33     (.88)           (1.19)
1998                                                                    1.96     (.82)           (1.48)
1997                                                                    4.41     (.90)           (.81)
1996                                                                    1.98     (.83)           (.18)
Class B:
2000                                                                    0.65     (.19)             -



                                                                              Net asset
                                                                  Total       value, end         Total
                         Year ended                           distributions     of year          return
Class A:
2000                                                             $(1.68)        $15.43      (2.08)%
1999                                                             (2.07)          17.51            7.79
1998                                                             (2.30)          18.25           11.32
1997                                                             (1.71)          18.59           29.28
1996                                                             (1.01)          15.89           13.46
Class B:
2000                                                              (.19)          15.39            4.33



                                                                               Ratio of        Ratio of
                                                               Net assets,     expenses        net income
                                                               end of year    to average       to average
                         Year ended                           (in millions)   net assets       net assets
Class A:
2000                                                            $18,102          .63%            5.52%
1999                                                             23,012           .59             4.99
1998                                                             22,113           .59             4.75
1997                                                             18,814           .61             5.09
1996                                                             14,459           .62             5.56
Class B:
2000                                                               29          1.38 (3)         4.57 (3)



                                                                Portfolio
                                                                turnover
                         Year ended                               rate
Class A:
2000                                                           34.73% (4)
1999                                                              44.35
1998                                                              34.68
1997                                                              40.92
1996                                                              37.77
Class B:
2000                                                            34.73 (4)



(1) The years 1996 through 2000 represent,
 for Class A shares, fiscal years
ended July 31.
The period ended July 31, 2000 represents,
 for Class B shares, the 138-day period
 ended
July 31, 2000.  Class B shares were not
 offered before March 15, 2000.
Total return for Class B 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.
(2) Based on average shares outstanding.
(3) Annualized.
(4) Represents portfolio turnover rate
 (equivalent for all share classes) for
 the year ended ended July 31, 2000.
</TABLE>

 Income Fund of America
 Notes to Financial Statements
 Year ended July 31, 2000

Tax Information (unaudited)

We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year.

During the fiscal year ended July 31, 2000, the fund paid a long-term capital
gain distribution of $1,033,505,000 to Class A shareholders.  The fund also
designates as a capital gain distribution a portion of earnings and profits
paid to shareholders in redemption of their shares.

Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 37% of the dividends
paid by the fund from net investment income represent qualifying dividends.

Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 3% of the dividends paid
by the fund from net investment income were derived from interest on direct
U.S. Treasury obligations.

Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.

SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2001 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2000 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.



Independent Auditors' Report
To the Board of Directors and Shareholders of
The Income Fund of America, Inc.:

 We have audited the accompanying statement of assets and liabilities of The
Income Fund of America, Inc. (the "Fund"), including the investment portfolio,
as of July 31, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the per-share data and ratios for each of the five years
in the period then ended for Class A shares and the period March 15, 2000
through July 31, 2000 for Class B shares. These financial statements and
per-share data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
per-share data and ratios based on our audits.

 We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and per-share data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of July 31, 2000, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

 In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of The Income Fund of America, Inc. at July 31, 2000, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the per-share data and ratios
for each of the five years in the period then ended for Class A shares and the
period March 15, 2000 through July 31, 2000 for Class B shares, in conformity
with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Los Angeles, California
September 1, 2000