ifa497.htm

....

<PAGE>

THE INCOME FUND OF AMERICA, INC.

Part B
Statement of Additional Information

October 1, 2009

(as supplemented March 1, 2010)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of The Income Fund of America,
Inc. (the "fund" or "IFA") dated October 1, 2009. You may obtain a prospectus
from your financial adviser 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

Certain privileges and/or services described below may not be available to all
shareholders (including shareholders who purchase shares at net asset value
through eligible retirement plans) depending on the shareholder's investment
dealer or retirement plan recordkeeper. Please see your financial adviser,
investment dealer, plan recordkeeper or employer for more information.

Class A AMECX Class 529-A CIMAX Class R-1 RIDAX
Class B IFABX Class 529-B CIMBX Class R-2 RIDBX
Class C IFACX Class 529-C CIMCX Class R-3 RIDCX
Class F-1 IFAFX Class 529-E CIMEX Class R-4 RIDEX
Class F-2 AMEFX Class 529-F-1 CIMFX Class R-5 RIDFX
Class R-6 RIDGX

TABLE OF CONTENTS

Item Page no.
---- --------

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 3
Fund policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 15
Execution of portfolio transactions . . . . . . . . . . . . . . . . 38
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 41
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 46
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 51
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 59
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Shareholder account services and privileges . . . . . . . . . . . . 65
General information . . . . . . . . . . . . . . . . . . . . . . . . 68
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Investment portfolio
Financial statements

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 circumstances, 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, the composition of the fund's investments in equity,
debt and cash or money market instruments may vary substantially depending
on various factors, including market conditions. 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
(i.e., debt securities that do not have equity conversion or purchase
rights) rated BB+ or below by Standard & Poor's Corporation (S&P) and Ba1
or below by Moody's Investors Service (Moody's) or unrated but determined
to be of equivalent quality by the fund's investment adviser.

INVESTING OUTSIDE THE U.S.

. The fund may invest up to 25% of its assets in equity securities of issuers
domiciled outside the United States and not included in the S&P 500
Composite Index.

. The fund may invest up to 10% of its assets in debt securities of issuers
domiciled outside the United States (must be U.S. dollar denominated).

* * * * * *

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

The Income Fund of America -- Page 2
<PAGE>

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. Equity securities held by the fund typically consist of common stocks
and may also include securities with equity conversion or purchase rights. The
prices of equity securities fluctuate based on, among other things, events
specific to their issuers and market, economic and other conditions. For
example, prices of these securities can be affected by financial contracts held
by the issuer or third parties (such as derivatives) relating to the security or
other assets or indices.

There may be little trading in the secondary market for particular equity
securities, which may adversely affect the fund's ability to value accurately or
dispose of such equity securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and/or
liquidity of equity 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 $3.5 billion at the time of purchase). The
investment adviser believes that the issuers of smaller capitalization stocks
often provide attractive investment opportunities. However, investing in smaller
capitalization stocks can involve greater risk than is customarily associated
with investing in stocks of larger, more established companies. For example,
smaller companies often have limited product lines, limited operating histories,
limited markets or financial resources, may be dependent on one or a few key
persons for management 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 -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or 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 and their values accrete over
time to face value at maturity. The market prices of debt securities fluctuate
depending on such factors as interest rates, credit quality and maturity. In
general, market prices of debt securities decline when interest rates rise and
increase when interest rates fall.

Lower rated debt securities, rated Ba1 or below by Moody's and/or BB+ or below
by S&P or unrated but determined by the fund's investment adviser 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 debt securities, 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, and to determine the value
of, lower rated debt securities.

Certain additional risk factors relating to debt securities are discussed below:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
sensitive to economic changes, political and corporate developments, and
interest rate changes. In

The Income Fund of America -- Page 3
<PAGE>

addition, during an economic downturn or substantial period of rising
interest rates, issuers that are highly leveraged may experience increased
financial stress that could adversely affect their ability to meet
projected business goals, to obtain additional financing and to service
their principal and interest payment obligations. Periods of economic
change and uncertainty also can be expected to result in increased
volatility of market prices and yields of certain debt securities. For
example, prices of these securities can be affected by financial contracts
held by the issuer or third parties (such as derivatives) relating to the
security or other assets or indices.

PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest
rate market, the fund would have to replace the security with a lower
yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or
principal or is the subject of 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 debt securities, which may affect adversely the
fund's ability to value accurately or dispose of such debt securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and/or liquidity of debt
securities.

The investment adviser attempts to reduce the risks described above through
diversification of the fund's portfolio and by credit analysis of each issuer,
as well as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.

Credit ratings for debt securities provided by rating agencies reflect an
evaluation of the safety of principal and interest payments, not market value
risk. The rating of an issuer is a rating agency's view of past and future
potential developments related to the issuer and may not necessarily reflect
actual outcomes. There can be a lag between the time of developments relating to
an issuer and the time a rating is assigned and updated.

Bond rating agencies may assign modifiers (such as +/-) to ratings categories to
signify the relative position of a credit within the rating category. Investment
policies that are based on ratings categories should be read to include any
security within that category, without giving consideration to the modifier
except where otherwise provided. See the Appendix for more information about
credit ratings.

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 or vice versa. Some
types of convertible bonds, preferred stocks or other preferred securities
automatically convert into common stocks or other securities at a stated
conversion ratio and some may be subject to redemption at the option of the
issuer at a predetermined price. These securities, prior to conversion, may pay
a fixed rate of interest or a dividend. Because convertible securities have both
debt and equity characteristics, their values vary in response to many factors,
including the values of the securities into which they are convertible, general
market and economic conditions, and convertible market valuations, as well as
changes in interest rates, credit spreads and the credit quality of the issuer.

The Income Fund of America -- Page 4
<PAGE>

These securities may include hybrid securities, which also have equity and debt
characteristics. Such securities are normally at the bottom of an issuer's debt
capital structure. As such, they may be more sensitive to economic changes than
more senior debt securities. These securities may also be viewed as more
equity-like by the market when the issuer or its parent company experience
financial problems.

The prices and yields of nonconvertible preferred securities or preferred stocks
generally move with changes in interest rates and the issuer's credit quality,
similar to the factors affecting debt securities. Nonconvertible preferred
securities will be treated as debt for fund investment limit purposes.

INVESTING OUTSIDE THE U.S. -- Investing outside the United States may involve
additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial
reporting, disclosure, and regulatory and legal standards and practices;
changing local, regional and global economic, political and social conditions;
expropriation; changes in tax policy; greater market volatility; different
securities market structures; higher transaction costs; and various
administrative difficulties, such as delays in clearing and settling portfolio
transactions or in receiving payment of dividends. However, in the opinion of
the investment adviser, investing outside the United States also can reduce
certain portfolio risks due to greater diversification opportunities.

The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing countries
only to a limited extent.

Additional costs could be incurred in connection with the fund's investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the fund will bear certain expenses in connection
with its currency transactions. Furthermore, increased custodian costs may be
associated with maintaining assets in certain jurisdictions.

CURRENCY TRANSACTIONS -- The fund may 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 that may 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
that will be marked to market daily to meet its forward contract commitments to
the extent required by the Securities and Exchange Commission.

Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions also may affect the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.

The Income Fund of America -- Page 5
<PAGE>

OBLIGATIONS BACKED BY THE "FULL FAITH AND CREDIT" OF THE U.S. GOVERNMENT -- U.S.
government obligations include the following types of securities:

U.S. TREASURY SECURITIES -- U.S. Treasury securities 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.

FEDERAL AGENCY SECURITIES -- The securities of certain U.S. government
agencies and government-sponsored entities are guaranteed as to the timely
payment of principal and interest by the full faith and credit of the U.S.
government. Such agencies and entities include The Federal Financing Bank
(FFB), the Government National Mortgage Association (Ginnie Mae), the
Veterans Administration (VA), the Federal Housing Administration (FHA), the
Export-Import Bank (Exim Bank), the Overseas Private Investment Corporation
(OPIC), the Commodity Credit Corporation (CCC) and the Small Business
Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

On September 7, 2008, Freddie Mac and Fannie Mae were placed into
conservatorship by their new regulator, the Federal Housing Finance Agency.
Simultaneously, the U.S. Treasury made a commitment of indefinite duration to
maintain the positive net worth of both firms.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by pools 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, net of any fees paid to
any insurer or any guarantor of the securities. Pass-through securities may have
either fixed or adjustable coupons. These securities include:

MORTGAGE-BACKED SECURITIES -- These securities may be issued by U.S.
government agencies and government-sponsored entities, such as Ginnie Mae,
Fannie Mae and Freddie Mac, and by private entities. The payment of
interest and principal on mortgage-backed obligations issued by U.S.
government agencies may be guaranteed by the full faith and credit of the
U.S. government (in the case of Ginnie Mae), or may be guaranteed by the
issuer (in the case of Fannie Mae and Freddie Mac). However, these
guarantees do not apply to the market prices and yields of these
securities, which vary with changes in interest rates.

The Income Fund of America -- Page 6
<PAGE>

Mortgage-backed securities issued by private entities are structured
similarly to those issued by U.S. government agencies. However, these
securities and the underlying mortgages are not guaranteed by any
government agencies. These securities generally are structured with one or
more types of credit enhancements such as insurance or letters of credit
issued by private companies. Mortgage-backed securities generally permit
borrowers to prepay their underlying mortgages. Prepayments can alter the
effective maturity of these instruments.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -- 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 issue at varying schedules
resulting in bonds with different coupons, effective maturities and
sensitivities to interest rates. Some CMOs may be structured in a way that
when interest rates change, the impact of changing prepayment rates on the
effective maturities of certain issues of these securities is magnified.
CMOs may be less liquid or may exhibit greater price volatility than other
types of mortgage or asset-backed securities.

COMMERCIAL MORTGAGE-BACKED SECURITIES -- These securities are backed by
mortgages on 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 rental payments and the
ability of a property to attract and retain tenants. Commercial
mortgage-backed securities may be less liquid or exhibit greater price
volatility than other types of mortgage or asset-backed securities.

ASSET-BACKED SECURITIES -- These 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 that can change their effective
maturities.

REAL ESTATE INVESTMENT TRUSTS -- The fund may invest in securities issued by
real estate investment trusts (REITs), which primarily invest in real estate or
real estate-related loans. Equity REITs own real estate properties, while
mortgage REITs hold construction, development and/or long-term mortgage loans.
The values of REITs may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property taxes,
interest rates, tax laws and regulatory requirements, such as those relating to
the environment. Both types of REITs are dependent upon management skill and the
cash flows generated by their holdings, the real estate market in general and
the possibility of failing to qualify for any applicable pass--

The Income Fund of America -- Page 7
<PAGE>

through tax treatment or failing to maintain any applicable exemptive status
afforded under relevant laws.

INFLATION-INDEXED BONDS -- The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities and corporations.

The principal amount of an inflation-indexed bond is adjusted in response to
changes in the level of the consumer price index. Repayment of the original bond
principal upon maturity (as adjusted for inflation) is guaranteed in the case of
U.S. Treasury inflation-indexed bonds, and therefore the principal amount of
such bonds cannot be reduced below par even during a period of deflation.
However, the current market value of these bonds is not guaranteed and will
fluctuate, reflecting the rise and fall of yields. In certain jurisdictions
outside the United States the repayment of the original bond principal upon the
maturity of an inflation-indexed bond is not guaranteed, allowing for the amount
of the bond repaid at maturity to be less than par.

The interest rate for inflation-indexed bonds is fixed at issuance as a
percentage of this adjustable principal. Accordingly, the actual interest income
may both rise and fall as the principal amount of the bonds adjusts in response
to movements of the consumer price index. For example, typically interest income
would rise during a period of inflation and fall during a period of deflation.

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, such a note or bond could provide that
the reinsurance company would not be required to repay all or a portion of the
principal value of the note or bond 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.

CASH AND CASH EQUIVALENTS -- The fund may hold cash or invest in cash
equivalents. Cash equivalents include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities may only be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or in a registered public offering. Where registration is required, the holder
of a registered security may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement.

The Income Fund of America -- Page 8
<PAGE>

Difficulty in selling such securities may result in a loss to the fund or cause
it to incur additional administrative costs.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures 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.

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

LOAN ASSIGNMENTS AND PARTICIPATIONS -- The fund may invest in loans or other
forms of indebtedness that represent interests in amounts owed by corporations
or other borrowers (collectively "borrowers"). The investment adviser defines
debt securities to include investments in loans, such as loan assignments and
participations. Loans may be originated by the borrower in order to address its
working capital needs, as a result of a reorganization of the borrower's assets
and liabilities (recapitalizations), to merge with or acquire another company
(mergers and acquisitions), to take control of another company (leveraged
buy-outs), to provide temporary financing (bridge loans), or for other corporate
purposes. Most corporate loans are variable or floating rate obligations.

Some loans may be secured in whole or in part by assets or other collateral. In
other cases, loans may be unsecured or may become undersecured by declines in
the value of assets or other collateral securing such loan. The greater the
value of the assets securing the loan the more the lender is protected against
loss in the case of nonpayment of principal or interest. Loans made to highly
leveraged borrowers may be especially vulnerable to adverse changes in economic
or market conditions and may involve a greater risk of default.

Some loans may represent revolving credit facilities or delayed funding loans,
in which a lender agrees to make loans up to a maximum amount upon demand by the
borrower during a specified term. These commitments may have the effect of
requiring the fund to increase its investment in a company at a time when it
might not otherwise decide to do so (including at a time when the company's
financial condition makes it unlikely that such amounts will be repaid). To the
extent that the fund is committed to advance additional funds, the fund will
segregate assets determined to be liquid in an amount sufficient to meet such
commitments.

Some loans may represent debtor-in-possession financings (commonly known as "DIP
financings"). DIP financings are arranged when an entity seeks the protections
of the bankruptcy

The Income Fund of America -- Page 9
<PAGE>

court under Chapter 11 of the U.S. Bankruptcy Code. These financings allow the
entity to continue its business operations while reorganizing under Chapter 11.
Such financings constitute senior liens on unencumbered collateral (i.e.,
collateral not subject to other creditors' claims). There is a risk that the
entity will not emerge from Chapter 11 and be forced to liquidate its assets
under Chapter 7 of the U.S. Bankruptcy Code. In the event of liquidation, the
fund's only recourse will be against the collateral securing the DIP financing.

The investment adviser generally makes investment decisions based on publicly
available information, but may rely on non-public information if necessary.
Borrowers may offer to provide lenders with material, non-public information
regarding a specific loan or the borrower in general. The investment adviser
generally chooses not to receive this information. As a result, the investment
adviser may be at a disadvantage compared to other investors that may receive
such information. The investment adviser's decision not to receive material,
non-public information may impact the investment adviser's ability to assess a
borrower's requests for amendments or waivers of provisions in the loan
agreement. However, the investment adviser may on a case-by-case basis decide to
receive such information when it deems prudent. In these situations the
investment adviser may be restricted from trading the loan or buying or selling
other debt and equity securities of the borrower while it is in possession of
such material, non-public information, even if such loan or other security is
declining in value.

The fund normally acquires loan obligations through an assignment from another
lender, but also may acquire loan obligations by purchasing participation
interests from lenders or other holders of the interests. When the fund
purchases assignments it acquires direct contractual rights against the borrower
on the loan. The fund acquires the right to receive principal and interest
payments directly from the borrower and to enforce its rights as a lender
directly against the borrower. However, because assignments are arranged through
private negotiations between potential assignees and potential assignors, the
rights and obligations acquired by a fund as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender. Loan
assignments are often administered by a financial institution that acts as agent
for the holders of the loan, and the fund may be required to receive approval
from the agent and/or borrower prior to the purchase of a loan. Risks may also
arise due to the ability of the agent to meet its obligations under the loan
agreement.

Loan participations are loans or other direct debt instruments that are
interests in amounts owed by the borrower to another party. They may represent
amounts owed to lenders or lending syndicates, to suppliers of goods or
services, or to other parties. The fund will have the right to receive payments
of principal, interest and any fees to which it is entitled only from the lender
selling the participation and only upon receipt by the lender of the payments
from the borrower. In connection with purchasing participations, the fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the loan, nor any rights of set-off
against the borrower. In addition, the fund may not directly benefit from any
collateral supporting the loan in which it has purchased the participation and
the fund will have to rely on the agent bank or other financial intermediary to
apply appropriate credit remedies. As a result, the fund will be subject to the
credit risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, a fund may be treated as a general creditor of the lender and may
not benefit from any set-off between the lender and the borrower.

Loan assignments and participations are generally subject to legal or
contractual restrictions on resale and are not currently listed on any
securities exchange or automatic quotation system.

The Income Fund of America -- Page 10
<PAGE>

Risks may arise due to delayed settlements of loan assignments and
participations. The investment adviser expects that most loan assignments and
participations purchased for the fund will trade on a secondary market. However,
although secondary markets for investments in loans are growing among
institutional investors, there may be a limited number of investors interested
in a specific loan. It is possible that loan participations, in particular,
could be sold only to a limited number of institutional investors. If there is
no active secondary market for a particular loan, it may be difficult for the
investment adviser to sell the fund's interest in such loan at a price that is
acceptable to it and to obtain pricing information on such loan.

Investments in loan participations and assignments present the possibility that
the fund could be held liable as a co-lender under emerging legal theories of
lender liability. In addition, if the loan is foreclosed, the fund could be part
owner of any collateral and could bear the costs and liabilities of owning and
disposing of the collateral. In addition, some loan participations and
assignments may not be rated by major rating agencies and may not be protected
by the securities laws.

FORWARD COMMITMENT, WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- 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 from 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 that 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 in connection with 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 if it were 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. After a transaction is entered into,
the fund may still dispose of or renegotiate the transaction. Additionally,
prior to receiving delivery of securities as part of a transaction, the fund may
sell such securities.

The fund may also enter into "roll" transactions which involve 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
risk of price and yield fluctuations during the time of the commitment. 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 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 may be taxable when
distributed to shareholders.

The Income Fund of America -- Page 11
<PAGE>

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. Transaction costs are
usually reflected in the spread between the bid and asked price.

The fund's portfolio turnover rates for the fiscal years ended July 31, 2009 and
2008 were 49% and 38%, respectively. The portfolio turnover rate would equal
100% if each security in a fund's portfolio were replaced once per year. See
"Financial highlights" in the prospectus for the fund's annual portfolio
turnover rate for each of the last five fiscal years.

The Income Fund of America -- Page 12
<PAGE>

FUND POLICIES

All percentage limitations in the following fund policies are considered at the
time securities are purchased and are based on the fund's net assets unless
otherwise indicated. None of the following policies 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.

FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies,
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, as amended (the "1940 Act"), as the vote of the lesser of (a) 67% or more
of the voting securities present at a shareholder meeting, if the holders of
more than 50% of the outstanding voting securities are present in person or by
proxy, or (b) more than 50% of the outstanding voting securities.

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.

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

The Income Fund of America -- Page 13
<PAGE>

(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.

CHANGES TO FUNDAMENTAL POLICIES - At a meeting of the fund's shareholders on
November 24, 2009, shareholders approved changes to the fundamental policies
listed above. The fund plans to implement the new fundamental policies in 2010
or early 2011; however, the fund reserves the right to delay the implementation.
The new policies are set forth in a joint proxy statement available on the SEC's
website at sec.gov.

NONFUNDAMENTAL POLICIES -- The following policies may be changed without
shareholder approval:

1. The fund does not currently intend to engage in an ongoing or regular
securities lending program.

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

3. The fund may not acquire securities of open-end investment companies or
unit investment trusts registered under the 1940 Act in reliance on Sections
12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.

Notwithstanding non-fundamental Investment Restrictions #2 and #3, 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 SEC.

The Income Fund of America -- Page 14
<PAGE>

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

"INDEPENDENT" DIRECTORS/1/

NAME, AGE AND NUMBER OF
POSITION WITH FUND PORTFOLIOS/3/
(YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
AS A DIRECTOR/2/) DURING PAST FIVE YEARS BY DIRECTOR BY DIRECTOR
---------------------------------------------------------------------------------------------------
Mary Jane Elmore, 55 Managing Director and 3 None
Director (2008) General Partner,
Institutional Venture
Partners; former Product
Marketing Manager, Intel
Corporation's Development
Systems Division
---------------------------------------------------------------------------------------------------
Robert A. Fox, 72 Managing General Partner, 9 None
Chairman of the Board Fox Investments LP;
(Independent and corporate director;
Non-Executive) (1972) retired President and
CEO, Foster Farms
(poultry producer)
---------------------------------------------------------------------------------------------------
Leonade D. Jones, 62 Co-founder, VentureThink 9 None
Director (1993) LLC (developed and
managed e-commerce
businesses) and Versura
Inc. (education loan
exchange); former
Treasurer, The Washington
Post Company
---------------------------------------------------------------------------------------------------
William D. Jones, 54 Real estate developer/ 6 Sempra Energy;
Director (2008) owner, President and CEO, SouthWest Water Company
CityLink Investment
Corporation (acquires,
develops and manages real
estate ventures in
selected urban
communities) and City
Scene Management Company
(provides commercial
asset and property
management services)
---------------------------------------------------------------------------------------------------
John M. Lillie, 72 Former CEO, American 3 None
Director (2003) President Companies
(container shipping and
transportation services);
former CEO, Lucky Stores;
former CEO, Leslie Salt
---------------------------------------------------------------------------------------------------
John G. McDonald, 72 Stanford Investors 12 iStar Financial, Inc.;
Director (1976) Professor, Graduate Plum Creek Timber Co.;
School of Business, Scholastic Corporation;
Stanford University Varian, Inc.
---------------------------------------------------------------------------------------------------
James J. Postl, 63 Former President and CEO, 3 Cooper Industries;
Director (2008) Pennzoil-Quaker State Pulte, Inc.
Company (automotive
products and services)
---------------------------------------------------------------------------------------------------
Henry E. Riggs, 74 President Emeritus, Keck 5 None
Director (1989) Graduate Institute of
Applied Life Sciences
---------------------------------------------------------------------------------------------------
Isaac Stein, 63 President, Waverley 3 Alexza Pharmaceuticals,
Director (2004) Associates (private Inc.; Maxygen, Inc.
investment fund);
Chairman Emeritus of the
Board of Trustees,
Stanford University
---------------------------------------------------------------------------------------------------

The Income Fund of America -- Page 15
<PAGE>

"INTERESTED" DIRECTORS/5/

PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS
NAME, AGE AND AND POSITIONS NUMBER OF
POSITION WITH FUND HELD WITH AFFILIATED ENTITIES PORTFOLIOS/3/
(YEAR FIRST ELECTED OR THE PRINCIPAL UNDERWRITER OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
AS A DIRECTOR/OFFICER/2/) OF THE FUND BY DIRECTOR BY DIRECTOR
---------------------------------------------------------------------------------------------------------
Hilda L. Applbaum, 48 Senior Vice President - 1 None
Vice Chairman of the Board Capital World Investors,
(1998) Capital Research and
Management Company
---------------------------------------------------------------------------------------------------------

The Income Fund of America -- Page 16
<PAGE>

OTHER OFFICERS/6/

NAME, AGE AND
POSITION WITH FUND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
(YEAR FIRST ELECTED AND POSITIONS HELD WITH AFFILIATED ENTITIES
AS AN OFFICER/2/) OR THE PRINCIPAL UNDERWRITER OF THE FUND
-------------------------------------------------------------------------------
David C. Barclay, 53 Senior Vice President - Fixed Income, Capital
President (1998) Research and Management Company
-------------------------------------------------------------------------------
Abner D. Goldstine, Senior Vice President - Fixed Income, Capital
79 Research and Management Company; Director, Capital
Senior Vice President Research and Management Company
(1993)
-------------------------------------------------------------------------------
Dina N. Perry, 64 Senior Vice President - Capital World Investors,
Senior Vice President Capital Research and Management Company; Director,
(1994) Capital Research and Management Company
-------------------------------------------------------------------------------
Paul F. Roye, 56 Senior Vice President - Fund Business Management
Senior Vice President Group, Capital Research and Management Company;
(2007) Director, American Funds Service Company*; former
Director, Division of Investment Management, United
States Securities and Exchange Commission
-------------------------------------------------------------------------------
Andrew B. Suzman, 42 Senior Vice President - Capital World Investors,
Senior Vice President Capital Research Company*
(2004)
-------------------------------------------------------------------------------
Joanna F. Jonsson, 46 Senior Vice President - Capital World Investors,
Vice President (2006) Capital Research Company*; Director, The Capital
Group Companies, Inc.*; Director, American Funds
Distributors, Inc.*; Director, Capital International
Limited*
-------------------------------------------------------------------------------
John H. Smet, 53 Senior Vice President - Fixed Income, Capital
Vice President (1994) Research and Management Company; Director, The
Capital Group Companies, Inc.*
-------------------------------------------------------------------------------
Steven T. Watson, 54 Senior Vice President - Capital World Investors,
Vice President (2006) Capital Research Company*; Director, Capital Research
Company*; Director, The Capital Group Companies,
Inc.*
-------------------------------------------------------------------------------
Patrick F. Quan, 51 Vice President - Fund Business Management Group,
Secretary (1986) Capital Research and Management Company
-------------------------------------------------------------------------------
Jennifer M. Buchheim, Vice President - Fund Business Management Group,
36 Capital Research and Management Company
Treasurer (2005)
-------------------------------------------------------------------------------
Julie E. Lawton, 36 Associate - Capital Research and Management Company
Assistant Secretary
(2010)
-------------------------------------------------------------------------------
Bryan K. Nielsen, 36 Vice President, Capital Guardian Trust Company*; Vice
Assistant Treasurer President, Capital International, Inc.*
(2008)
-------------------------------------------------------------------------------

The Income Fund of America -- Page 17
<PAGE>

* Company affiliated with Capital Research and Management Company.

1 The term "independent" director refers to a director who is not an "interested
person" of the fund within the meaning of the 1940 Act.
2 Directors and officers of the fund serve until their resignation, removal or
retirement.
3 Funds managed by Capital Research and Management Company, including the
American Funds; American Funds Insurance Series,(R) which is composed of 16
funds and serves as the underlying investment vehicle for certain variable
insurance contracts; American Funds Target Date Retirement Series,(R) Inc.,
which is composed of nine funds and is available through tax-deferred
retirement plans and IRAs; and Endowments, which is composed of two portfolios
and is available to certain nonprofit organizations.
4 This includes all directorships (other than those in the American Funds or
other funds managed by Capital Research and Management Company) that are held
by each director as a director of a public company or a registered investment
company.
5 "Interested persons" of the fund 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 affiliated entities (including the fund's principal
underwriter).
6 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.

THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: SECRETARY.

The Income Fund of America -- Page 18
<PAGE>

FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2008:

AGGREGATE
DOLLAR
RANGE/1/ OF
INDEPENDENT
AGGREGATE DIRECTORS
DOLLAR RANGE/1/ DOLLAR DEFERRED
OF SHARES RANGE/1 /OF COMPENSATION/2/
OWNED IN INDEPENDENT ALLOCATED TO
ALL FUNDS DIRECTORS ALL FUNDS
IN THE DEFERRED WITHIN
DOLLAR RANGE/1/ AMERICAN FUNDS COMPENSATION/2/ AMERICAN FUNDS
OF FUND FAMILY OVERSEEN ALLOCATED FAMILY OVERSEEN
NAME SHARES OWNED BY DIRECTOR TO FUND BY DIRECTOR
-----------------------------------------------------------------------------------------
"INDEPENDENT" DIRECTORS
-----------------------------------------------------------------------------------------
Mary Jane Elmore $50,001 - Over $100,000 $10,001 - $50,001 -
$100,000 $50,000 $100,000
-----------------------------------------------------------------------------------------
Robert A. Fox Over $100,000 Over $100,000 Over $100,000 Over $100,000
-----------------------------------------------------------------------------------------
Leonade D. Jones $50,001 - Over $100,000 Over $100,000 Over $100,000
$100,000
-----------------------------------------------------------------------------------------
William D. Jones $10,001 - Over $100,000 $1 - $10,000 $50,001 -
$50,000 $100,000
-----------------------------------------------------------------------------------------
John M. Lillie Over $100,000 Over $100,000 N/A N/A
-----------------------------------------------------------------------------------------
John G. McDonald $10,001 - Over $100,000 N/A N/A
$50,000
-----------------------------------------------------------------------------------------
James J. Postl Over $100,000 Over $100,000 $10,001 - Over $100,000
$50,000
-----------------------------------------------------------------------------------------
Henry E. Riggs Over $100,000 Over $100,000 Over $100,000 Over $100,000
-----------------------------------------------------------------------------------------
Isaac Stein Over $100,000 Over $100,000 N/A N/A
-----------------------------------------------------------------------------------------

The Income Fund of America -- Page 19
<PAGE>

AGGREGATE
DOLLAR RANGE/1/
OF SHARES
OWNED IN
ALL FUNDS
IN THE
DOLLAR RANGE/1/ AMERICAN FUNDS
OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY DIRECTOR
-----------------------------------------------------------------------------
"INTERESTED" DIRECTOR
-----------------------------------------------------------------------------
Hilda L. Applbaum Over $100,000 Over $100,000
-----------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" directors include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.
2 Eligible directors may defer their compensation under a nonqualified deferred
compensation plan. Deferred amounts accumulate at an earnings rate determined
by the total return of one or more American Funds as designated by the
director.

DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
director who is a director, officer or employee of the investment adviser or its
affiliates. The boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The fund typically pays each independent director an annual
fee, which ranges from $13,000 to $25,000, based primarily on the total number
of board clusters on which that independent director serves.

In addition, the fund generally pays independent directors attendance and other
fees for meetings of the board and its committees. Board and committee chairs
receive additional fees for their services.

Independent directors also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The fund and the other funds served
by each independent director each pay an equal portion of these attendance fees.

No pension or retirement benefits are accrued as part of fund expenses.
Independent 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 independent directors.

The Income Fund of America -- Page 20
<PAGE>

DIRECTOR COMPENSATION EARNED DURING THE FISCAL YEAR ENDED JULY 31, 2009

TOTAL COMPENSATION (INCLUDING
AGGREGATE COMPENSATION VOLUNTARILY DEFERRED COMPENSATION/1/)
(INCLUDING VOLUNTARILY FROM ALL FUNDS MANAGED BY
DEFERRED COMPENSATION/1/) CAPITAL RESEARCH AND MANAGEMENT
NAME FROM THE FUND COMPANY OR ITS AFFILIATES/2/
------------------------------------------------------------------------------------------
Mary Jane Elmore/3/ $44,084 $135,458
------------------------------------------------------------------------------------------
Robert A. Fox/3/ 45,537 335,250
------------------------------------------------------------------------------------------
Leonade D. Jones/3/ 64,232 382,805
------------------------------------------------------------------------------------------
William D. Jones/3/ 44,000 239,917
------------------------------------------------------------------------------------------
John M. Lillie 59,168 163,985
------------------------------------------------------------------------------------------
John G. McDonald/3/ 45,084 420,917
------------------------------------------------------------------------------------------
James J. Postl/3/ 49,084 135,875
------------------------------------------------------------------------------------------
Henry E. Riggs/3/ 54,952 308,089
------------------------------------------------------------------------------------------
Isaac Stein 55,750 148,375
------------------------------------------------------------------------------------------

1 Amounts may be deferred by eligible directors under a nonqualified 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 American Funds
as designated by the directors. Compensation shown in this table for the fiscal
year ended July 31, 2009 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
2 Funds managed by Capital Research and Management Company, including the
American Funds; American Funds Insurance Series,(R) which is composed of 16
funds and serves as the underlying investment vehicle for certain variable
insurance contracts; American Funds Target Date Retirement Series,(R) Inc.,
which is composed of nine funds and is available through tax-deferred
retirement plans and IRAs; and Endowments, which is composed of two portfolios
and is available to certain nonprofit organizations.
3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2009
fiscal year for participating directors is as follows: Mary Jane Elmore
($45,441), Robert A. Fox ($839,139), Leonade D. Jones ($101,407), William D.
Jones ($13,813) John G. McDonald ($721,308), James J. Postl ($50,747) and Henry
E. Riggs ($489,694). Amounts deferred and accumulated earnings thereon are not
funded and are general unsecured liabilities of the fund until paid to the
directors.

As of February 1, 2010, 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.

FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- 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. At a meeting of the fund's shareholders on November 24, 2009,
shareholders approved the reorganization of the fund to a Delaware statutory
trust. The reorganization is expected to be completed in 2010 or early 2011;
however, the fund reserves the right to delay the implementation. A summary
comparison of the governing documents and state laws affecting the Delaware
statutory trust and the current form of organization of the fund can be found in
a joint proxy statement available on the SEC's website at sec.gov. Although the
board of directors has delegated day-to-day oversight to the investment adviser,
all fund operations are supervised by the fund's board, which meets periodically
and performs duties required by applicable state and federal laws.

The Income Fund of America -- Page 21
<PAGE>

Under Maryland law, the business affairs of a fund are managed under the
direction of the board of directors, and all powers of the fund are exercised by
or under the authority of the board except as reserved to the shareholders by
law or the fund's charter or by-laws. Maryland law requires each director to
perform his/her duties as a director, including his/her duties as a member of
any board committee on which he/she serves, in good faith, in a manner he/she
reasonably believes to be in the best interest of the fund, and with the care
that an ordinarily prudent person in a like position would use under similar
circumstances.

Independent board members are paid certain fees for services rendered to the
fund as described above. 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 several different classes of shares. Shares of each class represent
an interest in the same investment portfolio. Each class has pro rata 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. Each class'
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. Note that 529 college savings
plan account owners invested in Class 529 shares are not shareholders of the
fund and, accordingly, do not have the rights of a shareholder, such as the
right to vote proxies relating to fund shares. As the legal owner of the fund's
Class 529 shares, the Virginia College Savings Plan/SM/ will vote any proxies
relating to such fund shares.

The fund does not hold annual meetings of shareholders. However, significant
matters that require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.

The fund's articles of incorporation and by-laws as well as separate
indemnification agreements that the fund has entered into with independent
directors provide in effect that, subject to certain conditions, the fund will
indemnify its officers and directors against liabilities or expenses actually
and reasonably incurred by them relating to their service to the fund. However,
directors are not protected from liability by reason of their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.

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 22
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an audit committee
comprised of Robert A. Fox, Leonade D. Jones, John M. Lillie, James J. Postl and
Isaac Stein, none of whom is an "interested person" of the fund within the
meaning of the 1940 Act. The committee provides oversight regarding the fund's
accounting and financial reporting policies and practices, its internal controls
and the internal controls of the fund's principal service providers. The
committee acts as a liaison between the fund's independent registered public
accounting firm and the full board of directors. Four audit committee meetings
were held during the 2009 fiscal year.

The fund has a contracts committee comprised of Mary Jane Elmore, Robert A. Fox,
Leonade D. Jones, William D. Jones, John M. Lillie, John G. McDonald, James J.
Postl, Henry E. Riggs and Isaac Stein, none of whom is an "interested person" of
the fund within the meaning of the 1940 Act. The committee's principal function
is to request, review and consider the information deemed necessary to evaluate
the terms of certain agreements between the fund and its investment adviser or
the investment adviser's affiliates, such as the Investment Advisory and Service
Agreement, Principal Underwriting Agreement, Administrative Services Agreement
and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act,
that the fund may enter into, renew or continue, and to make its recommendations
to the full board of directors on these matters. Two contracts committee
meetings were held during the 2009 fiscal year.

The fund has a nominating committee comprised of Leonade D. Jones, William D.
Jones, John M. Lillie, John G. McDonald and Henry E. Riggs, none of whom is an
"interested person" of the fund within the meaning of the 1940 Act. The
committee periodically reviews such issues as the board's composition,
responsibilities, committees, compensation and other relevant issues, and
recommends any appropriate changes to the full board of directors. The committee
also evaluates, selects and nominates independent director candidates to the
full board of directors. While the committee normally is able to identify from
its own and other resources an ample number of qualified candidates, it will
consider shareholder suggestions of persons to be considered as nominees to fill
future vacancies on the board. Such suggestions must be sent in writing to the
nominating committee of the fund, addressed to the fund's secretary, and must be
accompanied by complete biographical and occupational data on the prospective
nominee, along with a written consent of the prospective nominee for
consideration of his or her name by the committee. Four nominating committee
meetings were held during the 2009 fiscal year.

PROXY VOTING PROCEDURES AND PRINCIPLES -- The fund's investment adviser, in
consultation with the fund's board, has adopted Proxy Voting Procedures and
Principles (the "Principles") with respect to voting proxies of securities held
by the fund, other American Funds, Endowments and American Funds Insurance
Series. The complete text of these principles is available on the American Funds
website at americanfunds.com. Proxies are voted by a committee of the
appropriate equity investment division of the investment adviser under authority
delegated by the funds' boards. Therefore, if more than one fund invests in the
same company, they may vote differently on the same proposal. In addition, the
funds' boards monitor the proxy voting process and provide guidance with respect
to the Principles.

All U.S. proxies are voted. Proxies for companies outside the U.S. also are
voted, provided there is sufficient time and information available. After a
proxy statement is received, the investment adviser prepares a summary of the
proposals contained in the proxy statement. A discussion of any potential
conflicts of interest also is included in the summary. For proxies of securities
managed by a particular investment division of the investment adviser, the
initial voting recommendation is made by one or more of the division's
investment analysts familiar with the company and industry. A second
recommendation is made by a proxy coordinator (an investment

The Income Fund of America -- Page 23
<PAGE>

analyst with experience in corporate governance and proxy voting matters) within
the appropriate investment division, based on knowledge of these Principles and
familiarity with proxy-related issues. The proxy summary and voting
recommendations are made available to the appropriate proxy voting committee for
a final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy voting committee members
are alerted to the potential conflict. The proxy voting committee may then elect
to vote the proxy or seek a third-party recommendation or vote of an ad hoc
group of committee members.

The Principles, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Principles provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website and (c) on the SEC's website at sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Principles is available upon request, free
of charge, by calling American Funds Service Company or visiting the American
Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director generally is supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions also may be
supported.

GOVERNANCE PROVISIONS -- Typically, proposals to declassify a board (elect
all directors annually) are supported based on the belief that this
increases the directors' sense of accountability to shareholders. Proposals
for cumulative voting generally are supported in order to promote
management and board accountability and an opportunity for leadership
change. Proposals designed to make director elections more meaningful,
either by requiring a majority vote or by requiring any director receiving
more withhold votes than affirmative votes to tender his or her
resignation, generally are supported.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill generally
are supported. (There may be certain circumstances, however, when a proxy
voting committee of a fund or an investment division of the investment
adviser believes that a company needs to maintain anti-takeover
protection.) Proposals to eliminate the right of shareholders to act by
written consent or to take away a shareholder's right to call a special
meeting typically are not supported.

The Income Fund of America -- Page 24
<PAGE>

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items generally are voted in favor of
management's recommendations unless circumstances indicate otherwise.

The following table identifies those investors who own of record, or are known
by the fund to own beneficially 5% or more of any class of its shares as of the
opening of business on February 1, 2010. Unless otherwise indicated, the
ownership percentages below represent ownership of record rather than beneficial
ownership.

NAME AND ADDRESS OWNERSHIP OWNERSHIP PERCENTAGE
-------------------------------------------------------------------------------
Edward D. Jones & Co. Record Class A 29.43%
Omnibus Account Class B 17.16
Maryland Heights, MO
-------------------------------------------------------------------------------
First Clearing, LLC Record Class A 9.19
Custody Account Class B 10.26
St. Louis, MO Class C 13.40
Class F-1 8.13
-------------------------------------------------------------------------------
Merrill Lynch Record Class B 6.55
Omnibus Account Class C 15.52
Jacksonville, FL Class F-2 37.71
-------------------------------------------------------------------------------
Citigroup Global Markets, Inc. Record Class B 5.38
Omnibus Account Class C 11.43
New York, NY Class F-1 5.83
-------------------------------------------------------------------------------
LPL Financial Record Class F-1 9.21
Omnibus Account Class F-2 6.57
San Diego, CA
-------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record Class F-1 9.12
Custody Account
San Francisco. CA
-------------------------------------------------------------------------------
TD Ameritrade, Inc. Record Class F-2 5.48
FEBO Individual Investors Beneficial
Omaha, NE
-------------------------------------------------------------------------------
Hartford Life Insurance Co. Separate Record Class R-1 44.62
Account Beneficial Class R-3 9.13
401K Plan
Hartford, CT
-------------------------------------------------------------------------------
ING Life Insurance & Annuity Record Class R-3 15.08
Hartford, CT
-------------------------------------------------------------------------------
Principal Financial Group Record Class R-4 6.27
Omnibus Account
Des Moines, IA
-------------------------------------------------------------------------------
NFS, LLC FEBO Record Class R-4 5.47
State Street Bank Trust Co. Beneficial
Purchase, NY
-------------------------------------------------------------------------------
Mac & Co. Record Class R-5 12.44
Retirement Plan Beneficial
Pittsburgh, PA
-------------------------------------------------------------------------------
Nationwide Trust Company Record Class R-5 12.01
Columbus, OH
-------------------------------------------------------------------------------
Edward D. Jones & Co. Record Class R-5 9.52
Retirement Plan Beneficial
Norwood, MA
-------------------------------------------------------------------------------
Intersil Corporation Record Class R-5 9.19
Profit Sharing Plan Beneficial
Baltimore, MD
-------------------------------------------------------------------------------
NFS, LLC FEBO Record Class R-5 5.71
KLA-TENCOR Corporation
Retirement Plan Beneficial
Lewisville, TX
-------------------------------------------------------------------------------
American Funds 2020 Target Date Record Class R-6 17.45
Retirement Fund
Norfolk, VA
-------------------------------------------------------------------------------
American Funds 2010 Target Date Record Class R-6 15.93
Retirement Fund
Norfolk, VA
-------------------------------------------------------------------------------
American Funds 2015 Target Date Record Class R-6 14.36
Retirement Fund
Norfolk, VA
-------------------------------------------------------------------------------
American Funds 2025 Target Date Record Class R-6 14.21
Retirement Fund
Norfolk, VA
-------------------------------------------------------------------------------
American Funds 2030 Target Date Record Class R-6 14.12
Retirement Fund
Norfolk, VA
-------------------------------------------------------------------------------
American Funds 2035 Target Date Record Class R-6 7.57
Retirement Fund
Norfolk, VA
-------------------------------------------------------------------------------

The Income Fund of America -- Page 25
<PAGE>

UNLESS OTHERWISE NOTED, REFERENCES IN THIS STATEMENT OF ADDITIONAL INFORMATION
TO CLASS F SHARES, CLASS R SHARES OR CLASS 529 SHARES REFER TO BOTH F SHARE
CLASSES, ALL R SHARE CLASSES OR ALL 529 SHARE CLASSES, RESPECTIVELY.

The Income Fund of America -- Page 26
<PAGE>

INVESTMENT ADVISER -- Capital Research and Management Company, the fund's
investment adviser, founded in 1931, maintains research facilities in the United
States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London,
Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 6455 Irvine Center Drive, Irvine,
CA 92618. It is a wholly owned subsidiary of The Capital Group Companies, Inc.,
a holding company for several investment management subsidiaries. Capital
Research and Management Company manages equity assets through two investment
divisions, Capital World Investors and Capital Research Global Investors, and
manages fixed-income assets through its Fixed Income division. Capital World
Investors and Capital Research Global Investors make investment decisions on an
independent basis.

Rather than remain as investment divisions, Capital World Investors and Capital
Research Global Investors may be incorporated into wholly owned subsidiaries of
Capital Research and Management Company. In that event, Capital Research and
Management Company would continue to be the investment adviser, and day-to-day
investment management of equity assets would continue to be carried out through
one or both of these subsidiaries. Although not currently contemplated, Capital
Research and Management Company could incorporate its Fixed Income division in
the future and engage it to provide day-to-day investment management of
fixed-income assets. Capital Research and Management Company and each of the
funds it advises have applied to the U.S. Securities and Exchange Commission for
an exemptive order that would give Capital Research and Management Company the
authority to use, upon approval of the fund's board, its management subsidiaries
and affiliates to provide day-to-day investment management services to the fund,
including making changes to the management subsidiaries and affiliates providing
such services. The fund's shareholders approved this arrangement at a meeting of
the fund's shareholders on November 24, 2009. There is no assurance that Capital
Research and Management Company will incorporate its investment divisions or
exercise any authority, if granted, under an exemptive order.

The investment adviser has adopted policies and procedures that address issues
that may arise as a result of an investment professional's management of the
fund and other funds and accounts. Potential issues could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, investment professional compensation and
voting relating to portfolio securities. The investment adviser believes that
its policies and procedures are reasonably designed to address these issues.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage.

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing plans will vary depending on
the individual's portfolio results, contributions to the organization and other
factors.

To encourage a long-term focus, bonuses based on investment results are
calculated by comparing pretax total investment returns to relevant benchmarks
over the most recent year, a four-year rolling average and an eight-year rolling
average with greater weight placed on the

The Income Fund of America -- Page 27
<PAGE>

four-year and eight-year rolling averages. For portfolio counselors, benchmarks
may include measures of the marketplaces in which the fund invests and measures
of the results of comparable mutual funds. For investment analysts, benchmarks
may include relevant market measures and appropriate industry or sector indexes
reflecting their areas of expertise. Capital Research and Management Company
makes periodic subjective assessments of analysts' contributions to the
investment process and this is an element of their overall compensation. The
investment results of each of the fund's portfolio counselors may be measured
against one or more of the following benchmarks, depending on his or her
investment focus: Lipper Income Funds Index, Lipper High Current Yield Bond
Funds Average, Lipper Corporate Debt Funds A Rated Average, Barclays Capital
U.S. Aggregate Index (formerly Lehman Brothers U.S. Aggregate Index), MSCI
World Index (ex-U.S.), MSCI USA Index, Barclays Capital U.S. Corporate High
Yield Index 2% Issuer Cap, Lipper Corporate Debt Funds BBB-Rated Average and
Barclays Capital Baa Corporate Index.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage portions of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF JULY 31, 2009:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) FOR WHICH
FOR WHICH FOR WHICH PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR IS A MANAGER
OF FUND IS A MANAGER IS A MANAGER (ASSETS OF
PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS)/2/ IN BILLIONS)/3/ IN BILLIONS)/4/
-------------------------------------------------------------------------------------------
Hilda L. Applbaum $100,001 - 2 $ 44.9 None None
$500,000
-------------------------------------------------------------------------------------------
David C. Barclay Over 4 $155.3 3 $0.48 17 $6.42
$1,000,000
-------------------------------------------------------------------------------------------
Abner D. $500,001 - 2 $102.3 None None
Goldstine $1,000,000
-------------------------------------------------------------------------------------------
Dina N. Perry $500,001 - 3 $123.6 1 $0.82 None
$1,000,000
-------------------------------------------------------------------------------------------
Andrew B. Suzman Over 2 $ 90.6 1 $0.07 None
$1,000,000
-------------------------------------------------------------------------------------------
Joanna F. Jonsson $100,001 - 1 $ 39.0 1 $0.07 None
$500,000
-------------------------------------------------------------------------------------------
John H. Smet $500,001 - 7 $192.1 None None
$1,000,000
-------------------------------------------------------------------------------------------
Steven T. Watson $100,001 - 3 $129.6 None None
$500,000
-------------------------------------------------------------------------------------------
Grant L. $100,001 - None None None
Cambridge $500,000
-------------------------------------------------------------------------------------------
James R. Mulally $500,001 - 3 $142.3 1 $0.03 None
$1,000,000
-------------------------------------------------------------------------------------------

The Income Fund of America -- Page 28
<PAGE>

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
2 Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not the
total assets managed by the individual, which is a substantially lower amount.
No fund has an advisory fee that is based on the performance of the fund.
3 Represents funds advised or sub-advised by Capital Research and Management
Company or its affiliates and sold outside the United States and/or
fixed-income assets in institutional accounts managed by investment adviser
subsidiaries of Capital Group International, Inc., an affiliate of Capital
Research and Management Company. Assets noted are the total net assets of the
funds or accounts and are not the total assets managed by the individual, which
is a substantially lower amount. No fund or account has an advisory fee that is
based on the performance of the fund or account.
4 Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.

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, 2010, 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 (a) 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 (b) 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). In addition, the Agreement provides that the investment adviser may
delegate all, or a portion of, its investment management responsibilities to one
or more subsidiary advisers that is approved by the fund's board, pursuant to an
agreement between the investment adviser and such subsidiary. Any such
subsidiary adviser will be paid solely by the investment adviser out of its
fees.

The Income Fund of America -- Page 29
<PAGE>

In addition to providing investment advisory services, the investment adviser
furnishes the services and pays the compensation and travel expenses of persons
to perform the fund's executive, administrative, clerical and bookkeeping
functions, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies and postage used at
the fund's offices. 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
expenses; costs of the designing, printing and mailing of reports, prospectuses,
proxy statements and notices to its shareholders; taxes; expenses of the
issuance and redemption of fund shares (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 independent directors; 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 daily 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 daily net assets, 0.23% on daily net assets in excess of
$500 million but not exceeding $1 billion, 0.21% on daily net assets in excess
of $1 billion but not exceeding $1.5 billion, 0.19% on daily net assets in
excess of $1.5 billion but not exceeding $2.5 billion, 0.17% on daily net assets
in excess of $2.5 billion but not exceeding $4 billion, 0.16% on daily net
assets in excess of $4 billion but not exceeding $6.5 billion, 0.15% on daily
net assets in excess of $6.5 billion but not exceeding $10.5 billion, 0.144% on
daily net assets in excess of $10.5 billion but not exceeding $13 billion,
0.141% on daily net assets in excess of $13 billion but not exceeding $17
billion, 0.138% on daily net assets in excess of $17 billion but not exceeding
$21 billion, 0.135% on daily net assets in excess of $21 billion but not
exceeding $27 billion, 0.133% on daily net assets in excess of $27 billion but
not exceeding $34 billion, 0.131% on daily net assets in excess of $34 billion
but not exceeding $44 billion, 0.129% on daily net assets in excess of $44
billion but not exceeding $55 billion, 0.127% on daily net assets in excess of
$55 billion but not exceeding $71 billion, and 0.125% on daily net assets in
excess of $71 billion but not exceeding $89 billion, 0.123% on daily net assets
in excess of $89 billion, plus 2.25% of the fund's gross investment income for
the preceding month.

For the fiscal years ended July 31, 2009, 2008 and 2007, the investment adviser
was entitled to receive from the fund management fees of $161,670,000,
$210,885,000 and $193,966,000, respectively. After giving effect to the
management fee waiver described below, the fund paid the investment adviser
management fees of $154,169,000 (a reduction of $7,501,000), $189,791,000 (a
reduction of $21,094,000) and $174,569,000 (a reduction of $19,397,000) for the
fiscal years ended July 31, 2009, 2008 and 2007, respectively.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. From April 1, 2005 through December 31, 2008,
this waiver increased to 10% of the management fees that the investment adviser
was otherwise entitled to receive. The waiver was discontinued effective January
1, 2009.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's

The Income Fund of America -- Page 30
<PAGE>

Class C, F, R and 529 shares will continue in effect until December 31, 2010,
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 fund may terminate the Administrative Agreement at any time by vote of a
majority of independent directors. 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, and Class R and 529 shares. The investment adviser may contract
with third parties, including American Funds Service Company,/(R)/ the fund's
Transfer Agent, to provide some of 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, oversees and assists with the
activities performed by third parties providing such services.

The investment adviser receives an administrative services fee at the annual
rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding
Class R-5 and R-6 shares) and 529 shares for administrative services provided to
these share classes. Administrative services fees are paid monthly and accrued
daily. The investment adviser uses a portion of this fee to compensate third
parties for administrative services provided to the fund. Of the remainder, the
investment adviser does not retain more than 0.05% of the average daily net
assets for each applicable share class. For Class R-5 and R-6 shares, the
administrative services fee is calculated at the annual rate of up to 0.10% and
0.05%, respectively, of the average daily net assets of such class. The
administrative services fee includes compensation for transfer agent and
shareholder services provided to the fund's Class C, F, R and 529 shares. In
addition to making administrative service fee payments to unaffiliated third
parties, the investment adviser also makes payments from the administrative
services fee to American Funds Service Company according to a fee schedule,
based principally on the number of accounts serviced, contained in a Shareholder
Services Agreement between the fund and American Funds Service Company. A
portion of the fees paid to American Funds Service Company for transfer agent
services is also paid directly from the relevant share class.

The Income Fund of America -- Page 31
<PAGE>

During the 2009 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
------------------------------------------------------------------------------
CLASS C $8,667,000
------------------------------------------------------------------------------
CLASS F-1 2,296,000
------------------------------------------------------------------------------
CLASS F-2 157,000
------------------------------------------------------------------------------
CLASS 529-A 531,000
------------------------------------------------------------------------------
CLASS 529-B 99,000
------------------------------------------------------------------------------
CLASS 529-C 239,000
------------------------------------------------------------------------------
CLASS 529-E 25,000
------------------------------------------------------------------------------
CLASS 529-F-1 16,000
------------------------------------------------------------------------------
CLASS R-1 110,000
------------------------------------------------------------------------------
CLASS R-2 2,145,000
------------------------------------------------------------------------------
CLASS R-3 1,802,000
------------------------------------------------------------------------------
CLASS R-4 834,000
------------------------------------------------------------------------------
CLASS R-5 466,000
------------------------------------------------------------------------------
CLASS R-6 29,000
------------------------------------------------------------------------------

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds
Distributors,/(R)/ 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; 6455 Irvine Center Drive, Irvine, CA
92618; 3500 Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.

The Principal Underwriter receives revenues relating to sales of the fund's
shares, as follows:

. For Class A and 529-A shares, the Principal Underwriter receives
commission revenue consisting of the balance of the Class A and 529-A
sales charge remaining after the allowances by the Principal
Underwriter to investment dealers.

. For Class B and 529-B shares sold prior to April 21, 2009, the
Principal Underwriter sold its rights to the 0.75%
distribution-related portion of the 12b-1 fees paid by the fund, as
well as any contingent deferred sales charges, to a third party. The
Principal Underwriter compensated investment dealers for sales of
Class B and 529-B shares out of the proceeds of this sale and kept any
amounts remaining after this compensation was paid.

. For Class C and 529-C shares, the Principal Underwriter receives any
contingent deferred sales charges that apply during the first year
after purchase.

In addition, the fund reimburses the Principal Underwriter for advancing
immediate service fees to qualified dealers and advisers upon the sale of Class
C and 529-C shares. The fund also

The Income Fund of America -- Page 32
<PAGE>

reimbursed the Principal Underwriter for advancing immediate service fees to
qualified dealers on sales of Class B and 529-B shares prior to April 21, 2009.
The fund also reimburses the Principal Underwriter for service fees (and, in the
case of Class 529-E shares, commissions) paid on a quarterly basis to qualified
dealers and advisers in connection with investments in Class F-1, 529-F-1,
529-E, R-1, R-2, R-3 and R-4 shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR
REVENUE COMPENSATION
FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
-----------------------------------------------------------------------------------------------------
CLASS A 2009 $17,114,000 $ 74,296,000
2008 32,105,000 136,408,000
2007 45,058,000 193,258,000
-----------------------------------------------------------------------------------------------------
CLASS B 2009 487,000 3,882,000
2008 1,760,000 10,385,000
2007 2,586,000 17,915,000
-----------------------------------------------------------------------------------------------------
CLASS C 2009 1,845,000 5,058,000
2008 6,127,000 11,562,000
2007 -- 20,465,000
-----------------------------------------------------------------------------------------------------
CLASS 529-A 2009 468,000 2,169,000
2008 714,000 3,223,000
2007 846,000 3,843,000
-----------------------------------------------------------------------------------------------------
CLASS 529-B 2009 30,000 207,000
2008 59,000 431,000
2007 71,000 471,000
-----------------------------------------------------------------------------------------------------
CLASS 529-C 2009 19,000 348,000
2008 87,000 562,000
2007 -- 700,000
-----------------------------------------------------------------------------------------------------

The Income Fund of America -- Page 33
<PAGE>

Plans of distribution -- The fund has adopted plans of distribution (the
"Plans") pursuant to rule 12b-1 under the 1940 Act. The Plans permit the fund to
expend amounts to finance any activity 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.

Each Plan is specific to a particular share class of the fund. As the fund has
not adopted a Plan for Class F-2, Class R-5 or Class R-6, no 12b-1 fees are paid
from Class F-2, Class R-5 or Class R-6 share assets and the following disclosure
is not applicable to these share classes.

Payments under the Plans may be made for service-related and/or
distribution-related expenses. Service-related expenses include paying service
fees to qualified dealers. Distribution-related expenses include commissions
paid to qualified dealers. The amounts actually paid under the Plans for the
past fiscal year, expressed as a percentage of the fund's average daily net
assets attributable to the applicable share class, are disclosed in the
prospectus under "Fees and expenses of the fund." Further information regarding
the amounts available under each Plan is in the "Plans of Distribution" section
of the prospectus.

Following is a brief description of the Plans:

CLASS A AND 529-A -- For Class A and 529-A shares, up to 0.25% of the
fund's average daily net assets attributable to such shares is reimbursed
to the Principal Underwriter for paying service-related expenses, and the
balance available under the applicable Plan may be paid to the Principal
Underwriter for distribution-related expenses. The fund may annually expend
up to 0.25% for Class A shares and up to 0.50% for Class 529-A shares under
the applicable Plan.

Distribution-related expenses for Class A and 529-A shares include dealer
commissions and wholesaler compensation paid on sales of shares of $1
million or more purchased without a sales charge. Commissions on these "no
load" purchases (which are described in further detail under the "Sales
Charges" section of this statement of additional information) in excess of
the Class A and 529-A Plan limitations and not reimbursed to the Principal
Underwriter during the most recent fiscal quarter are recoverable for five
quarters, provided that the reimbursement of such commissions does not
cause the fund to exceed the annual expense limit. After five quarters,
these commissions are not recoverable.

CLASS B AND 529-B -- The Plans for Class B and 529-B shares provide for
payments to the Principal Underwriter of up to 0.25% of the fund's average
daily net assets attributable to such shares for paying service-related
expenses and 0.75% for distribution-related expenses, which include the
financing of commissions paid to qualified dealers.

OTHER SHARE CLASSES (CLASS C, 529-C, F-1, 529-F-1, 529-E, R-1, R-2, R-3 AND
R-4) -- The Plans for each of the other share classes that have adopted
Plans provide for payments to the Principal Underwriter for paying
service-related and distribution-related expenses of up to the following
amounts of the fund's average daily net assets attributable to such shares:

The Income Fund of America -- Page 34
<PAGE>

TOTAL
SERVICE DISTRIBUTION ALLOWABLE
RELATED RELATED UNDER
SHARE CLASS PAYMENTS/1/ PAYMENTS/1/ THE PLANS/2/
----------------------------------------------------------------------------------
Class C 0.25% 0.75% 1.00%
----------------------------------------------------------------------------------
Class 529-C 0.25 0.75 1.00
----------------------------------------------------------------------------------
Class F-1 0.25 -- 0.50
----------------------------------------------------------------------------------
Class 529-F-1 0.25 -- 0.50
----------------------------------------------------------------------------------
Class 529-E 0.25 0.25 0.75
----------------------------------------------------------------------------------
Class R-1 0.25 0.75 1.00
----------------------------------------------------------------------------------
Class R-2 0.25 0.50 1.00
----------------------------------------------------------------------------------
Class R-3 0.25 0.25 0.75
----------------------------------------------------------------------------------
Class R-4 0.25 -- 0.50
----------------------------------------------------------------------------------

1 Amounts in these columns represent the amounts approved by the board of
directors under the applicable Plan.
2 The fund may annually expend the amounts set forth in this column under
the current Plans with the approval of the board of directors.

During the 2009 fiscal year, 12b-1 expenses accrued and paid, and if applicable,
unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
------------------------------------------------------------------------------
CLASS A $103,168,000 $13,688,000
------------------------------------------------------------------------------
CLASS B 29,790,000 2,695,000
------------------------------------------------------------------------------
CLASS C 56,271,000 7,320,000
------------------------------------------------------------------------------
CLASS F-1 4,738,000 879,000
------------------------------------------------------------------------------
CLASS 529-A 1,093,000 178,000
------------------------------------------------------------------------------
CLASS 529-B 871,000 92,000
------------------------------------------------------------------------------
CLASS 529-C 2,200,000 352,000
------------------------------------------------------------------------------
CLASS 529-E 131,000 22,000
------------------------------------------------------------------------------
CLASS 529-F-1 -- --
------------------------------------------------------------------------------
CLASS R-1 689,000 117,000
------------------------------------------------------------------------------
CLASS R-2 3,149,000 521,000
------------------------------------------------------------------------------
CLASS R-3 4,308,000 709,000
------------------------------------------------------------------------------
CLASS R-4 1,325,000 255,000
------------------------------------------------------------------------------

The Income Fund of America -- Page 35
<PAGE>

Approval of the Plans -- 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 independent
directors of the fund who have no direct or indirect financial interest in the
operation of the Plans or the Principal Underwriting Agreement. In addition, the
selection and nomination of independent directors of the fund are committed to
the discretion of the independent directors during the existence of the Plans.

Potential benefits of the Plans to the fund include quality shareholder
services, savings to the fund in transfer agency costs, and benefits to the
investment process from growth or stability of assets. The Plans may not be
amended to materially increase the amount spent for distribution without
shareholder approval. Plan expenses are reviewed quarterly by the board of
directors and the Plans must be renewed annually by the board of directors.

FEE TO VIRGINIA COLLEGE SAVINGS PLAN -- With respect to Class 529 shares, as
compensation for its oversight and administration, Virginia College Savings Plan
receives a quarterly fee accrued daily and calculated at the annual rate of
0.10% on the first $30 billion of the net assets invested in Class 529 shares of
the American Funds, 0.09% on net assets between $30 billion and $60 billion,
0.08% on net assets between $60 billion and $90 billion, 0.07% on net assets
between $90 billion and $120 billion, and 0.06% on net assets between $120
billion and $150 billion. The fee for any given calendar quarter is accrued and
calculated on the basis of average net assets of Class 529 shares of the
American Funds for the last month of the prior calendar quarter.

OTHER COMPENSATION TO DEALERS -- As of July 2009, the top dealers (or their
affiliates) that American Funds Distributors anticipates will receive additional
compensation (as described in the prospectus) include:

AIG Advisors Group
Advantage Capital Corporation
American General Securities Incorporated
FSC Securities Corporation
Royal Alliance Associates, Inc.
SagePoint Financial, Inc.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc
Cambridge Investment Research, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Edward Jones
Genworth Financial Securities Corporation
Hefren-Tillotson, Inc.
HTK / Janney Montgomery Group
Hornor, Townsend & Kent, Inc.
Janney Montgomery Scott LLC
ING Advisors Network Inc.
Bancnorth Investment Group, Inc.
Financial Network Investment Corporation
Guaranty Brokerage Services, Inc.
ING Financial Partners, Inc.
Multi-Financial Securities Corporation
Primevest Financial Services, Inc.

The Income Fund of America -- Page 36
<PAGE>

Intersecurities / Transamerica
InterSecurities, Inc.
Transamerica Financial Advisors, Inc.
J. J. B. Hilliard, W. L. Lyons, LLC
JJB Hilliard/PNC Bank
PNC Bank, National Association
PNC Investments LLC
Lincoln Financial Advisors Corporation
Lincoln Financial Securities Corporation
LPL Group
Associated Securities Corp.
LPL Financial Corporation
Mutual Service Corporation
Uvest Investment Services
Waterstone Financial Group, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Metlife Enterprises
Metlife Securities Inc.
New England Securities
Tower Square Securities, Inc.
Walnut Street Securities, Inc.
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley Smith Barney LLC
National Planning Holdings Inc.
Invest Financial Corporation
Investment Centers of America, Inc.
National Planning Corporation
SII Investments, Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC
Park Avenue Securities LLC
PFS Investments Inc.
Raymond James Group
Raymond James & Associates, Inc.
Raymond James Financial Services Inc.
RBC Capital Markets Corporation
Robert W. Baird & Co. Incorporated
Securian / C.R.I.
CRI Securities, LLC
Securian Financial Services, Inc.
U.S. Bancorp Investments, Inc.
UBS Financial Services Inc.
Wells Fargo Network
A. G. Edwards, A Division Of Wells Fargo Advisors, LLC
First Clearing LLC
H.D. Vest Investment Securities, Inc.
Wells Fargo Advisors Financial Network, LLC
Wells Fargo Advisors Investment Services Group
Wells Fargo Advisors Latin American Channel
Wells Fargo Advisors Private Client Group
Wells Fargo Investments, LLC

The Income Fund of America -- Page 37
<PAGE>

EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the fund's
portfolio transactions. Purchases and sales of equity securities on a securities
exchange or an over-the-counter market are effected through broker-dealers who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions relating
to securities traded on U.S. exchanges and may not be subject to negotiation.
Equity securities may also be purchased from underwriters at prices that include
underwriting fees. Purchases and sales of fixed-income securities are generally
made with an issuer or a primary market-maker acting as principal with no stated
brokerage commission. The price paid to an underwriter for fixed-income
securities includes underwriting fees. Prices for fixed-income securities in
secondary trades usually include undisclosed compensation to the market-maker
reflecting the spread between the bid and ask prices for the securities.

In selecting broker-dealers, the investment adviser strives to obtain "best
execution" (the most favorable total price reasonably attainable under the
circumstances) for the fund's portfolio transactions, taking into account a
variety of factors. These factors include the size and type of transaction, the
nature and character of the markets for the security to be purchased or sold,
the cost, quality and reliability of the executions and the broker-dealer's
ability to offer liquidity and anonymity. The investment adviser considers these
factors, which involve qualitative judgments, when selecting broker-dealers and
execution venues for fund portfolio transactions. The investment adviser views
best execution as a process that should be evaluated over time as part of an
overall relationship with particular broker-dealer firms rather than on a
trade-by-trade basis. The fund does not consider the investment adviser as
having an obligation to obtain the lowest commission rate available for a
portfolio transaction to the exclusion of price, service and qualitative
considerations.

The investment adviser may execute portfolio transactions with broker-dealers
who provide certain brokerage and/or investment research services to it, but
only when in the investment adviser's judgment the broker-dealer is capable of
providing best execution for that transaction. The receipt of these services
permits the investment adviser to supplement its own research and analysis and
makes available the views of, and information from, individuals and the research
staffs of other firms. Such views and information may be provided in the form of
written reports, telephone contacts and meetings with securities analysts. These
services may include, among other things, reports and other communications with
respect to individual companies, industries, countries and regions, economic,
political and legal developments, as well as scheduling meetings with corporate
executives and seminars and conferences related to relevant subject matters. The
investment adviser considers these services to be supplemental to its own
internal research efforts and therefore the receipt of investment research from
broker-dealers does not tend to reduce the expenses involved in the investment
adviser's research efforts. If broker-dealers were to discontinue providing such
services it is unlikely the investment adviser would attempt to replicate them
on its own, in part because they would then no longer provide an independent,
supplemental viewpoint. Nonetheless, if it were to attempt to do so, the
investment adviser would incur substantial additional costs. Research services
that the investment adviser receives from broker-dealers may be used by the
investment adviser in servicing the fund and other funds and accounts that it
advises; however, not all such services will necessarily benefit the fund.

The investment adviser may pay commissions in excess of what other
broker-dealers might have charged - including on an execution-only basis - for
certain portfolio transactions in recognition of brokerage and/or investment
research services provided by a broker-dealer. In this regard, the investment
adviser has adopted a brokerage allocation procedure consistent with the

The Income Fund of America -- Page 38
<PAGE>

requirements of Section 28(e) of the U.S. Securities Exchange Act of 1934.
Section 28(e) permits an investment adviser to cause an account to pay a higher
commission to a broker-dealer that provides certain brokerage and/or investment
research services to the investment adviser, if the investment adviser makes a
good faith determination that such commissions are reasonable in relation to the
value of the services provided by such broker-dealer to the investment adviser
in terms of that particular transaction or the investment adviser's overall
responsibility to the fund and other accounts that it advises. Certain brokerage
and/or investment research services may not necessarily benefit all accounts
paying commissions to each such broker-dealer; therefore, the investment adviser
assesses the reasonableness of commissions in light of the total brokerage and
investment research services provided by each particular broker-dealer.

In accordance with its internal brokerage allocation procedure, each equity
investment division of the investment adviser periodically assesses the
brokerage and investment research services provided by each broker-dealer from
which it receives such services. Using its judgment, each equity investment
division of the investment adviser then creates lists with suggested levels of
commissions for particular broker-dealers and provides those lists to its
trading desks. Neither the investment adviser nor the fund incurs any obligation
to any broker-dealer to pay for research by generating trading commissions. The
actual level of business received by any broker-dealer may be less than the
suggested level of commissions and can, and often does, exceed the suggested
level in the normal course of business. As part of its ongoing relationships
with broker-dealers, the investment adviser routinely meets with firms,
typically at the firm's request, to discuss the level and quality of the
brokerage and research services provided, as well as the perceived value and
cost of such services. In valuing the brokerage and investment research services
the investment adviser receives from broker-dealers in connection with its good
faith determination of reasonableness, the investment adviser does not attribute
a dollar value to such services, but rather takes various factors into
consideration, including the quantity, quality and usefulness of the services to
the investment adviser.

The investment adviser seeks, on an ongoing basis, to determine what the
reasonable levels of commission rates are in the marketplace. The investment
adviser takes various considerations into account when evaluating such
reasonableness, including, (a) rates quoted by broker-dealers, (b) the size of a
particular transaction in terms of the number of shares and dollar amount, (c)
the complexity of a particular transaction, (d) the nature and character of the
markets on which a particular trade takes place, (e) the ability of a
broker-dealer to provide anonymity while executing trades, (f) the ability of a
broker-dealer to execute large trades while minimizing market impact, (g) the
extent to which a broker-dealer has put its own capital at risk, (h) the level
and type of business done with a particular broker-dealer over a period of time,
(i) historical commission rates, and (j) commission rates that other
institutional investors are paying.

When executing portfolio transactions in the same equity security for the funds
and accounts, or portions of funds and accounts, over which the investment
adviser, through its equity investment divisions, has investment discretion,
each of the investment divisions will normally aggregate its respective
purchases or sales and execute them as part of the same transaction or series of
transactions. When executing portfolio transactions in the same fixed-income
security for the fund and the other funds or accounts over which it or one of
its affiliated companies has investment discretion, the investment adviser will
normally aggregate such purchases or sales and execute them as part of the same
transaction or series of transactions. The objective of aggregating purchases
and sales of a security is to allocate executions in an equitable manner among
the funds and other accounts that have concurrently authorized a transaction in
such security.

The Income Fund of America -- Page 39
<PAGE>

The investment adviser may place orders for the fund's portfolio transactions
with broker-dealers who have sold shares of the funds managed by the investment
adviser or its affiliated companies; however, it does not consider whether a
broker-dealer has sold shares of the funds managed by the investment adviser or
its affiliated companies when placing any such orders for the fund's portfolio
transactions.

Brokerage commissions paid on portfolio transactions for the fiscal years ended
July 31, 2009, 2008 and 2007 amounted to $34,408,000, $33,091,000 and
$28,442,000, respectively.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year.

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Citigroup Global Markets Inc., Goldman Sachs & Co.,
Morgan Stanley, Credit Suisse Group and First Tennessee. As of the fund's most
recent fiscal year-end, the fund held equity securities of Citigroup Inc. in the
amount of $223,917,000. As of that date, the fund held debt securities of
Citigroup Inc. in the amount of $30,649,000; Goldman Sachs Group Inc. in the
amount of $38,855,000; Morgan Stanley in the amount of $13,449,000; Credit
Suisse Group in the amount of $3,194,000 and First Horizon National Corp. in the
amount of $2,601,000.

The Income Fund of America -- Page 40
<PAGE>

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's board
of directors and compliance will be periodically assessed by the board in
connection with reporting from the fund's Chief Compliance Officer.

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. In addition, the fund's list of top 10 equity portfolio
holdings measured by percentage of net assets invested, dated as of the end of
each calendar month, is permitted to be posted on the American Funds website no
earlier than the tenth day after such month. Such portfolio holdings information
may then be disclosed to any person pursuant to an ongoing arrangement to
disclose portfolio holdings information to such person no earlier than one day
after the day on which the information is posted on the American Funds website.
The fund's custodian, outside counsel and auditor, each of which requires
portfolio holdings information for legitimate business and fund oversight
purposes, may receive the information earlier.

Affiliated persons of the fund, including officers of the fund and employees of
the investment adviser and its affiliates, who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements not to trade in securities based on confidential and proprietary
investment information, to maintain the confidentiality of such information, and
to preclear securities trades and report securities transactions activity, as
applicable. For more information on these restrictions and limitations, please
see the "Code of Ethics" section in this statement of additional information and
the Code of Ethics. Third party service providers of the fund, as described in
this statement of additional information, receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons will be bound by agreements (including confidentiality agreements)
or fiduciary obligations that restrict and limit their use of the information to
legitimate business uses only. Neither the fund nor its investment adviser or
any affiliate thereof receives compensation or other consideration in connection
with the disclosure of information about portfolio securities.

Subject to board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the appropriate investment-related committees of the fund's investment
adviser. In exercising their authority, the committees determine whether
disclosure of information about the fund's portfolio securities is appropriate
and in the best interest of fund shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the investment
adviser's code of ethics specifically requires, among other things, the
safeguarding of information about fund holdings and contains prohibitions
designed to prevent the personal use of confidential, proprietary investment
information in a way that would conflict with fund transactions. In addition,
the investment adviser believes that its current policy of not selling portfolio
holdings information and not disclosing such information to unaffiliated

The Income Fund of America -- Page 41
<PAGE>

third parties until such holdings have been made public on the American Funds
website (other than to certain fund service providers for legitimate business
and fund oversight purposes) helps reduce potential conflicts of interest
between fund shareholders and the investment adviser and its affiliates.

The Income Fund of America -- Page 42
<PAGE>

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value 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 or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment dealer should be indicated. The dealer is responsible for
promptly transmitting purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, 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. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.

Prices that 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, while 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 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 p.m., the fund's share price would still be determined
as of 4 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. Each share class of the fund has a separately
calculated net asset value (and share price).

All portfolio securities of funds managed by Capital Research and Management
Company (other than American Funds Money Market Fund) are valued, and the net
asset values per share for each share class are determined, as indicated below.
The fund follows standard industry practice by typically reflecting changes in
its holdings of portfolio securities on the first business day following a
portfolio trade.

Equity securities, including depositary receipts, are valued at the official
closing price of, or 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. Prices for each security are taken from the principal exchange or market
in which the security trades. Fixed-income securities are valued at prices
obtained from one or more independent pricing vendors, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued in good faith at the mean
quoted bid and asked prices that are reasonably and timely available (or bid
prices, if asked prices are not available) or at prices for securities of
comparable maturity, quality and type. The pricing vendors base bond prices on,
among other things, valuation matrices which may incorporate dealer-supplied
valuations, proprietary pricing models and an evaluation of the yield curve as
of approximately 3 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to calculation of the fund's net asset
value.

The Income Fund of America -- Page 43
<PAGE>

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by the
investment adviser.

Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity, or if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.

Assets or liabilities initially expressed in terms of currencies other than U.S.
dollars 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 market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's board. Subject to board oversight, the
fund's board has delegated the obligation to make fair valuation determinations
to a valuation committee established by the fund's investment adviser. The board
receives regular reports describing fair-valued securities and the valuation
methods used.

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to consider certain relevant principles and factors when
making all fair value determinations. As a general principle, securities lacking
readily available market quotations, or that have quotations that are considered
unreliable by the investment adviser, are valued in good faith by the valuation
committee based upon what the fund might reasonably expect to receive upon their
current sale. Fair valuations and valuations of investments that are not
actively trading involve judgment and may differ materially from valuations that
would have been used had greater market activity occurred. The valuation
committee considers relevant indications of value that are reasonably and timely
available to it in determining the fair value to be assigned to a particular
security, such as the type and cost of the security, contractual or legal
restrictions on resale of the security, relevant financial or business
developments of the issuer, actively traded similar or related securities,
conversion or exchange rights on the security, related corporate actions,
significant events occurring after the close of trading in the security and
changes in overall market conditions. The valuation committee employs additional
fair value procedures to address issues related to equity holdings of applicable
fund portfolios outside the United States. Securities owned by these funds trade
in markets that open and close at different times, reflecting time zone
differences. If significant events occur after the close of a market (and before
these fund's net asset values are next determined) which affect the value of
portfolio securities, appropriate adjustments from closing market prices may be
made to reflect these events. Events of this type could include, for example,
earthquakes and other natural disasters or significant price changes in other
markets (e.g., U.S. stock markets).

Each class of shares represents interests in the same portfolio of investments
and is identical in all respects to each other class, except for differences
relating to distribution, service and other charges and expenses, certain voting
rights, differences relating to eligible investors, the designation of each
class of shares, conversion features and exchange privileges. Expenses
attributable to the fund, but not to a particular class of shares, are borne by
each class pro rata based on relative aggregate net assets of the classes.
Expenses directly attributable to a class of

The Income Fund of America -- Page 44
<PAGE>

shares are borne by that class of shares. Liabilities, including accruals of
taxes and other expense items attributable to particular share classes, are
deducted from total assets attributable to such share classes.

Net assets so obtained for each share class are divided by the total number of
shares outstanding of that share class, and the result, rounded to the nearest
cent, is the net asset value per share for that share class.

The Income Fund of America -- Page 45
<PAGE>

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (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, net income from certain
publicly traded partnerships 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), two or more issuers which the fund
controls and which are determined to be engaged in the same or similar trades or
businesses or the securities of certain publicly traded partnerships.

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"
generally means the sum of (a) 98% of ordinary income (generally net investment
income) for the calendar year, (b) 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 (c) 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 (a) amounts actually
distributed by the fund from its current year's ordinary income and capital gain
net income and (b) 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 in the interest of shareholders to distribute a
lesser amount.

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

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

The Income Fund of America -- Page 46
<PAGE>

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. Dividends and capital gain
distributions by 529 share classes will be automatically reinvested.

Distributions of investment company taxable income and net realized capital
gains to shareholders will be taxable whether received in shares or in cash,
unless such shareholders are exempt from taxation. 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 and capital gain
distributions by the fund to a tax-deferred retirement plan account are not
taxable currently. When a dividend or a capital gain is distributed by the fund,
the net asset value per share is reduced by the amount of the payment.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income. 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. To the extent the fund invests in stock of domestic and
certain foreign corporations and meets the applicable holding period
requirement, it may receive "qualified dividends". The fund will designate
the amount of "qualified dividends" to its shareholders in a notice sent
within 60 days of the close of its fiscal year and will report "qualified
dividends" to shareholders on Form 1099-DIV.

Under the Code, gains or losses attributable to fluctuations in exchange
rates that 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 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.

The Income Fund of America -- Page 47
<PAGE>

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 to corporate shareholders may be eligible for the deduction for
dividends received by corporations. Corporate shareholders will be informed
of the portion of dividends that so qualifies. 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 91-day period beginning on the date that 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 that 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.

The price of a bond purchased after its original issuance may reflect
market discount which, depending on the particular circumstances, may
affect the tax character and amount of income required to be recognized by
a fund holding the bond. In determining whether a bond is purchased with
market discount, certain de minimis rules apply.

Dividend and interest income received by the fund from sources outside the
United States may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Some
foreign countries impose taxes on capital gains with respect to investments
by foreign investors.

CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to distribute its net
capital gain each year. The fund's net capital gain is 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 carryforward 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 15% capital gains rate,
will be able to claim a pro rata share of federal income taxes paid by the
fund on such gains

The Income Fund of America -- Page 48
<PAGE>

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 such
shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts 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.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
All or a portion of a fund's dividend distribution may be a "qualified
dividend." If the fund meets the applicable holding period requirement, it
will distribute dividends derived from qualified corporation dividends to
shareholders as qualified dividends. Interest income from bonds and money
market instruments and nonqualified foreign dividends will be distributed
to shareholders as nonqualified fund dividends. The fund will report on
Form 1099-DIV the amount of each shareholder's dividend that may be treated
as a qualified dividend. If a shareholder other than a corporation meets
the requisite holding period requirement, qualified dividends are taxable
at a maximum rate of 15%.

CAPITAL GAINS -- Distributions of net capital gain that the fund properly
designates as "capital gain dividends" generally will be taxable as
long-term capital gain, regardless of the length of time the shares of the
fund have been held by a shareholder. For non-corporate shareholders, a
capital gain distribution by the fund is subject to a maximum tax rate of
15%. 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 gains (including any undistributed
amounts treated as distributed capital gains, as described above) during
such six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. 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 subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

The Income Fund of America -- Page 49
<PAGE>

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 backup withholding of federal income tax in the case of non-exempt
U.S. shareholders who fail to furnish the fund 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 50
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F-1 SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR
529-F-1 SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE APPLICABLE
PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY
RELATING TO THESE ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE
RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR
INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES.

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- For initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent transaction confirmation and mailing the form, along
with a check made payable to the fund, using the envelope provided with
your confirmation.

The amount of time it takes for us to receive regular U.S. postal mail may
vary and there is no assurance that we will receive such mail on the day
you expect. Mailing addresses for regular U.S. postal mail can be found in
the prospectus. To send investments or correspondence to us via overnight
mail or courier service, use either of the following addresses:

American Funds
8332 Woodfield Crossing Blvd.
Indianapolis, IN 46240-2482

American Funds
5300 Robin Hood Rd.
Norfolk, VA 23513-2407

BY TELEPHONE -- Using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this statement of additional
information for more information regarding this service.

BY INTERNET -- Using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this statement of additional
information for more information regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

The Income Fund of America -- Page 51
<PAGE>

Your bank should include the following information when wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

OTHER PURCHASE INFORMATION -- 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.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. The American Funds state tax-exempt funds are qualified
for sale only in certain jurisdictions, and tax-exempt funds in general should
not serve as retirement plan investments. In addition, the fund and the
Principal Underwriter reserve the right to reject any purchase order.

Class R-5 and R-6 shares may be made available to certain charitable foundations
organized and maintained by The Capital Group Companies, Inc. or its affiliates.

Class R-5 and R-6 shares may also be made available to the Virginia College
Savings Plan for use in the Virginia Education Savings Trust and the Virginia
Prepaid Education Program.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases.

In the case of American Funds non-tax-exempt funds, the initial purchase minimum
of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

The Income Fund of America -- Page 52
<PAGE>

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

Certain accounts held on the fund's books, known as omnibus accounts, contain
multiple underlying accounts that are invested in shares of the fund. These
underlying accounts are maintained by entities such as financial intermediaries
and are subject to the applicable initial purchase minimums as described in the
prospectus and this statement of additional information. However, in the case
where the entity maintaining these accounts aggregates the accounts' purchase
orders for fund shares, such accounts are not required to meet the fund's
minimum amount for subsequent purchases.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of American Funds Money
Market Fund may be made to Class C shares of other American Funds for dollar
cost averaging purposes. Exchanges are not permitted from Class A shares of
American Funds Money Market Fund to Class C shares of Intermediate Bond Fund of
America, Limited Term Tax-Exempt Bond Fund of America or Short-Term Bond Fund of
America. Exchange purchases are subject to the minimum investment requirements
of the fund purchased and no sales charge generally applies. However, exchanges
of shares from American Funds Money Market Fund are subject to applicable sales
charges, unless the American Funds 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 made through fee-based programs of
investment firms that have special agreements with the fund's distributor and
certain registered investment advisers.

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" in this statement of additional
information. THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" in this
statement of additional information).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for

The Income Fund of America -- Page 53
<PAGE>

example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

If you wish to "move" your investment between share classes (within the
same fund or between different funds), we generally will process your
request as an exchange of the shares you currently hold for shares in the
new class or fund. Below is more information about how sales charges are
handled for various scenarios.

EXCHANGING CLASS B SHARES FOR CLASS A SHARES -- If you exchange Class B
shares for Class A shares during the contingent deferred sales charge
period you are responsible for paying any applicable deferred sales charges
attributable to those Class B shares, but you will not be required to pay a
Class A sales charge. If, however, you exchange your Class B shares for
Class A shares after the contingent deferred sales charge period, you are
responsible for paying any applicable Class A sales charges.

EXCHANGING CLASS C SHARES FOR CLASS A SHARES -- If you exchange Class C
shares for Class A shares, you are still responsible for paying any Class C
contingent deferred sales charges and applicable Class A sales charges.

EXCHANGING CLASS C SHARES FOR CLASS F SHARES -- If you are part of a
qualified fee-based program and you wish to exchange your Class C shares
for Class F shares to be held in the program, you are still responsible for
paying any applicable Class C contingent deferred sales charges.

EXCHANGING CLASS F SHARES FOR CLASS A SHARES -- You can exchange Class F
shares held in a qualified fee-based program for Class A shares without
paying an initial Class A sales charge if all of the following requirements
are met: (a) you are leaving or have left the fee-based program, (b) you
have held the Class F shares in the program for at least one year, and (c)
you notify American Funds Service Company of your request. If you have
already redeemed your Class F shares, the foregoing requirements apply and
you must purchase Class A shares within 90 days after redeeming your Class
F shares to receive the Class A shares without paying an initial Class A
sales charge.

EXCHANGING CLASS A SHARES FOR CLASS F SHARES -- If you are part of a
qualified fee-based program and you wish to exchange your Class A shares
for Class F shares to be held in the program, any Class A sales charges
(including contingent deferred sales charges) that you paid or are payable
will not be credited back to your account.

The Income Fund of America -- Page 54
<PAGE>

EXCHANGING CLASS A SHARES FOR CLASS R SHARES -- Provided it is eligible to
invest in Class R shares, a retirement plan currently invested in Class A
shares may exchange its shares for Class R shares. Any Class A sales
charges that the retirement plan previously paid will not be credited back
to the plan's account.

EXCHANGING CLASS F-1 SHARES FOR CLASS F-2 SHARES -- If you are part of a
qualified fee-based program that offers Class F-2 shares, you may exchange
your Class F-1 shares for Class F-2 shares to be held in the program.

MOVING BETWEEN OTHER SHARE CLASSES -- If you desire to move your investment
between share classes and the particular scenario is not described in this
statement of additional information, please contact American Funds Service
Company at 800/421-0180 for more information.

NON-REPORTABLE TRANSACTIONS -- Automatic conversions described in the
prospectus will be non-reportable for tax purposes. In addition, except in
the case of a movement between a 529 share class and a non-529 share class,
an exchange of shares from one share class of a fund to another share class
of the same fund will be treated as a non-reportable exchange for tax
purposes, provided that the exchange request is received in writing by
American Funds Service Company and processed as a single transaction.

The Income Fund of America -- Page 55
<PAGE>

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

A 403(b) plan may not invest in Class A or C shares unless such plan was
invested in Class A or C shares before January 1, 2009.

Participant accounts of a 403(b) plan that were treated as an
individual-type plan for sales charge purposes before January 1, 2009, may
continue to be treated as accounts of an individual-type plan for sales
charge purposes. Participant accounts of a 403(b) plan that were treated as
an employer-sponsored plan for sales charge purposes before January 1,
2009, may continue to be treated as accounts of an employer-sponsored plan
for sales charge purposes. Participant accounts of a 403(b) plan that is
established on or after January 1, 2009 are treated as accounts of an
employer-sponsored plan for sales charge purposes.

PURCHASES BY SEP PLANS AND SIMPLE IRA PLANS

Participant accounts in a Simplified Employee Pension (SEP) plan or a
Savings Incentive Match Plan for Employees of Small Employers IRA (SIMPLE
IRA) plan will be aggregated together for Class A sales charge purposes if
the SEP plan or SIMPLE IRA plan was established after November 15, 2004 by
an employer adopting a prototype plan produced by American Funds
Distributors, Inc. In the case where the employer adopts any other plan
(including, but not limited to, an IRS model agreement), each participant's
account in the plan will be aggregated with the participant's own personal
investments that qualify under the aggregation policy. A SEP plan or SIMPLE
IRA plan with a certain method of aggregating participant accounts as of
November 15, 2004 may continue with that method so long as the employer has
not modified the plan document since that date.

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds 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 of the above persons, and
trusts or plans primarily for such persons;

(2) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the

The Income Fund of America -- Page 56
<PAGE>

spouses, children or parents of the Eligible Persons are listed in the
account registration with the parents-in-law) of dealers who have
sales agreements with the Principal Underwriter (or who clear
transactions through such dealers), plans for the dealers, and plans
that include as participants only the Eligible Persons, their spouses,
parents and/or children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or full-time employees (collectively,
"Eligible Persons") (and their (a) spouses or equivalents if
recognized under local law, (b) parents and children, including
parents and children in step and adoptive relationships, sons-in-law
and daughters-in-law and (c) parents-in-law, if the Eligible Persons
or the spouses, children or parents of the Eligible Persons are listed
in the account registration with the parents-in-law) of RIA firms that
are authorized to sell shares of the funds, plans for the RIA firms,
and plans that include as participants only the Eligible Persons,
their spouses, parents and/or children;

(4) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;

(5) insurance company separate accounts;

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

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

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

(9) 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.; and

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

TRANSFERS TO COLLEGEAMERICA -- A transfer from the Virginia Prepaid
Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a
CollegeAmerica account will be made with no sales charge. No commission
will be paid to the dealer on such a transfer.

MOVING BETWEEN ACCOUNTS -- Investments in certain account types may be moved to
other account types without incurring additional Class A sales charges. These
transactions include, for example:

The Income Fund of America -- Page 57
<PAGE>

. redemption proceeds from a non-retirement account (for example, a
joint tenant account) used to purchase fund shares in an IRA or other
individual-type retirement account;

. required minimum distributions from an IRA or other individual-type
retirement account used to purchase fund shares in a non-retirement
account; and

. death distributions paid to a beneficiary's account that are used by
the beneficiary to purchase fund shares in a different account.

LOAN REPAYMENTS -- Repayments on loans taken from a retirement plan or an
individual-type retirement account are not subject to sales charges if American
Funds Service Company is notified of the repayment.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to initial sales charges. These purchases consist of purchases of $1
million or more, purchases by employer-sponsored defined contribution-type
retirement plans investing $1 million or more or with 100 or more eligible
employees, and purchases made at net asset value by certain retirement plans,
endowments and foundations with assets of $50 million or more. Commissions on
such investments (other than IRA rollover assets that roll over at no sales
charge under the fund's IRA rollover policy as described in the prospectus) are
paid to dealers at the following rates: 1.00% on amounts of less than $4
million, 0.50% on amounts of at least $4 million but less than $10 million and
0.25% on amounts of at least $10 million. Commissions are based on cumulative
investments over the life of the account with no adjustment for redemptions,
transfers, or market declines. For example, if a shareholder has accumulated
investments in excess of $4 million (but less than $10 million) and subsequently
redeems all or a portion of the account(s), purchases following the redemption
will generate a dealer commission of 0.50%.

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

The Income Fund of America -- Page 58
<PAGE>

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
the American Funds (excluding American Funds Money Market Fund) over a
13-month period and receive the same sales charge (expressed as a
percentage of your purchases) as if all shares had been purchased at once,
unless the Statement is upgraded as described below.

The Statement period starts on the date on which your first purchase made
toward satisfying the Statement is processed. The market value of your
existing holdings eligible to be aggregated (see below) as of the day
immediately before the start of the Statement period may be credited toward
satisfying the Statement.

You may revise the commitment you have made in your Statement upward at any
time during the Statement period. If your prior commitment has not been met
by the time of the revision, the Statement period during which purchases
must be made will remain unchanged. Purchases made from the date of the
revision will receive the reduced sales charge, if any, resulting from the
revised Statement. If your prior commitment has been met by the time of the
revision, your original Statement will be considered met and a new
Statement will be established.

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

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement may 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 Statement period,
the purchaser may be required to 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. Any dealers assigned to the shareholder's account at the
time a purchase was made during the Statement period will receive a
corresponding commission adjustment if appropriate. 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 may be liable
to the Principal Underwriter for the balance still outstanding.

Certain payroll deduction retirement plans purchasing Class A shares under
a Statement on or before November 12, 2006, may continue to purchase Class
A shares at the sales charge determined by that particular Statement until
the plans' values reach the amounts specified in their Statements. Upon
reaching such amounts, the Statements for these plans will be deemed
completed and will terminate. In addition, effective May 1, 2009, the

The Income Fund of America -- Page 59
<PAGE>

Statements for these plans will expire if they have not been met by the
next anniversary of the establishment of such Statement. After such
termination, these plans are eligible for additional sales charge
reductions by meeting the criteria under the fund's rights of accumulation
policy.

In addition, if you currently have individual holdings in American Legacy
variable annuity contracts or variable life insurance policies that were
established on or before March 31, 2007, you may continue to apply
purchases under such contracts and policies to a Statement.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms and those in the prospectus with
their first purchase.

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plans, such as an IRA,
single-participant Keogh-type plan, or a participant account of a
403(b) plan that is treated as an individual-type plan for sales
charge purposes (see "Purchases by certain 403(b) plans" under "Sales
charges" in this statement of additional information);

. SEP plans and SIMPLE IRA plans established after November 15, 2004 by
an employer adopting any plan document other than a prototype plan
produced by American Funds Distributors, Inc.;

. 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 (for trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

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

. 529 accounts, which will be aggregated at the account owner level
(Class 529-E accounts may only be aggregated with an eligible employer
plan).

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

. for a single trust estate or fiduciary account, including employee
benefit plans other than the 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, excluding the
individual-type employee benefit plans described above;

The Income Fund of America -- Page 60
<PAGE>

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

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations;

. for participant accounts of a 403(b) plan that is treated as an
employer-sponsored plan for sales charge purposes (see "Purchases by
certain 403(b) plans" under "Sales charges" in this statement of
additional information), or made for participant accounts of two or
more such plans, in each case of a single employer or affiliated
employers as defined in the 1940 Act; or

. for a SEP or SIMPLE IRA plan established after November 15, 2004 by an
employer adopting a prototype plan produced by American Funds
Distributors, Inc.

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 -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as holdings in Endowments and applicable holdings
in the American Funds Target Date Retirement Series. 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 American Funds Money Market Fund are excluded. If you currently have
individual holdings in American Legacy variable annuity contracts or
variable life insurance policies that were established on or before March
31, 2007, you may continue to combine purchases made under such contracts
and policies to reduce your Class A sales charge.

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments and applicable holdings in the American Funds Target Date
Retirement Series, to determine your sales charge on investments in
accounts eligible to be aggregated. Direct purchases of American Funds
Money Market Fund are excluded. Subject to your investment dealer's or
recordkeeper's capabilities, your accumulated holdings will be calculated
as the higher of (a) the current value of your existing holdings (the
"market value") as of the day prior to your American Funds investment or
(b) the amount you invested (including reinvested dividends and capital
gains, but excluding capital appreciation) less any withdrawals (the "cost
value"). Depending on the entity on whose books your account is held, the
value of your holdings in that account may not be eligible for calculation
at cost value. For example, accounts held in nominee or street name may not
be eligible for calculation at cost value and instead may be calculated at
market value for purposes of rights of accumulation.

The Income Fund of America -- Page 61
<PAGE>

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

When determining your American Funds Class A sales charge, if your
investment is not in an employer-sponsored retirement plan, you may also
continue to take into account the market value (as of the day prior to your
American Funds investment) of your individual holdings in various American
Legacy variable annuity contracts and variable life insurance policies that
were established on or before March 31, 2007. An employer-sponsored
retirement plan may also continue to take into account the market value of
its investments in American Legacy Retirement Investment Plans that were
established on or before March 31, 2007.

You may not purchase Class C or 529-C shares if such combined holdings
cause you to be eligible to purchase Class A or 529-A shares at the $1
million or more sales charge discount rate (i.e. at net asset value).

If you make a gift of American Funds Class A shares, upon your request, you
may purchase the shares at the sales charge discount allowed under rights
of accumulation of all of your American Funds and applicable American
Legacy accounts.

RIGHT OF REINVESTMENT -- As described in the prospectus, certain
transactions may be eligible for investment without a sales charge pursuant
to the fund's right of reinvestment policy. Recent legislation suspended
required minimum distributions from individual retirement accounts and
employer-sponsored retirement plan accounts for the 2009 tax year. Given
this suspension, proceeds from an automatic withdrawal plan to satisfy a
required minimum distribution may be invested without a sales charge for
the 2009 tax year, or any subsequent period, to the extent such legislation
is extended. This policy is subject to any restrictions regarding the
investment of proceeds from a required minimum distribution that may be
established by the transfer agent.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or post-purchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions made after the Transfer Agent is
notified of the death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

The Income Fund of America -- Page 62
<PAGE>

. Redemptions through an automatic withdrawal plan ("AWP") (see
"Automatic withdrawals" under "Shareholder account services and
privileges" in this statement of additional information). For each AWP
payment, assets that are not subject to a CDSC, such as appreciation
on shares and shares acquired through reinvestment of dividends and/or
capital gain distributions, will be redeemed first and will count
toward the 12% limit. If there is an insufficient amount of assets not
subject to a CDSC to cover a particular AWP payment, shares subject to
the lowest CDSC will be redeemed next until the 12% limit is reached.
Any dividends and/or capital gain distributions taken in cash by a
shareholder who receives payments through an AWP will also count
toward the 12% limit. In the case of an AWP, the 12% limit is
calculated at the time an automatic redemption is first made, and is
recalculated at the time each additional automatic redemption is made.
Shareholders who establish an AWP should be aware that the amount of a
payment not subject to a CDSC may vary over time depending on
fluctuations in the value of their accounts. This privilege may be
revised or terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds Money Market Fund are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or elimination of the fund by
the Virginia College Savings Plan as an option for additional investment within
CollegeAmerica.

The Income Fund of America -- Page 63
<PAGE>

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders. To contact American Funds Service Company via overnight mail or
courier service, see "Purchase and exchange of shares."

A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the Financial
Industry Regulatory Authority, 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 with your written request
any shares you wish to sell that are in certificate form.

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 10
business 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 request that redemption proceeds of $1,000 or more from American Funds
Money Market Fund be wired to your bank by writing American Funds Service
Company. A signature guarantee is required on all requests to wire funds.

The Income Fund of America -- Page 64
<PAGE>

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges described in the
prospectus and this statement of additional information may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

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 that you would like to invest 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. If the date you
specified falls on a weekend or holiday, your money will be invested on the
following business day. However, if the following business day falls in the next
month, your money will be invested on the business day immediately preceding the
weekend or holiday. 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 contacting 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. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

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 may be automatically converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

(1) 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);

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

(3) 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.

The Income Fund of America -- Page 65
<PAGE>

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- Depending on the type of account, for all share classes
except R shares, you may automatically withdraw shares from any of the American
Funds. You can make automatic withdrawals of $50 or more. You can designate the
day of each period for withdrawals and request that checks be sent to you or
someone else. Withdrawals may also be electronically deposited to your bank
account. The Transfer Agent will withdraw your money from the fund you specify
on or around the date you specify. If the date you specified falls on a weekend
or holiday, the redemption will take place on the previous business day.
However, if the previous business day falls in the preceding month, the
redemption will take place on the following business day after the weekend or
holiday. You should consult with your adviser or intermediary to determine if
your account is eligible for automatic withdrawals.

Withdrawal payments are not to be considered as dividends, yield or income.
Generally, 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.

Redemption proceeds from an automatic withdrawal plan are not eligible for
reinvestment without a sales charge.

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 AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its

The Income Fund of America -- Page 66
<PAGE>

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) that may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these services. However, you may
elect to opt out of these services 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.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds Money Market Fund upon meeting
the fund's initial purchase minimum of $1,000. This can be done by using an
account 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 account
application.

REDEMPTION OF SHARES -- The fund's articles of incorporation permit 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 permit payment of the redemption price wholly or partly with
portfolio securities or other fund assets under conditions and circumstances
determined by the fund's board of directors. For example, redemptions could be
made in this manner if the board determined that making payments wholly in cash
over a particular period would be unfair and/or harmful to other fund
shareholders.

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

The Income Fund of America -- Page 67
<PAGE>

GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds securities of issuers outside the U.S., the
Custodian may hold these securities pursuant to subcustodial arrangements in
banks outside the U.S. or branches of U.S. banks outside the U.S.

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, 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. The principal office of American Funds Service Company is
located at 6455 Irvine Center Drive, Irvine, CA 92618. American Funds Service
Company was paid a fee of $47,413,000 for Class A shares and $3,197,000 for
Class B shares for the 2009 fiscal year. American Funds Service Company is also
compensated for certain transfer agency services provided to all share classes
from the administrative services fees paid to Capital Research and Management
Company and from the relevant share class, as described under "Administrative
services agreement."

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 695 Town
Center Drive, Costa Mesa, California 92626, serves as the fund's independent
registered public accounting firm, 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 audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
report appearing herein. Such financial statements have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing. The selection of the fund's independent registered
public accounting firm is reviewed and determined annually by the board of
directors.

INDEPENDENT LEGAL COUNSEL -- Bingham McCutchen LLP, 355 South Grand Avenue,
Suite 4400, Los Angeles, CA 90071, serves as independent legal counsel
("counsel") for the fund and for independent directors in their capacities as
such. A determination with respect to the independence of the fund's counsel
will be made at least annually by the independent directors of the fund, as
prescribed by the 1940 Act and related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on July 31. Shareholders are provided updated summary prospectuses
annually and at least semi-annually with reports showing the fund's investment
portfolio or summary investment portfolio, financial statements and other
information. Shareholders may request a copy of the fund's current prospectus at
no cost by calling 800/421-0180 or by sending an e-mail request to
prospectus@americanfunds.com. The fund's annual financial statements are audited
by the

The Income Fund of America -- Page 68
<PAGE>

fund's independent registered public accounting firm, 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 summary prospectuses, shareholder reports and
proxy statements. To receive additional copies of a summary prospectus, report
or proxy statement, shareholders should contact the Transfer Agent.

Shareholders may also elect to receive updated summary prospectuses, annual
reports and semi-annual reports electronically by signing up for electronic
delivery on our website, americanfunds.com. Upon electing the electronic
delivery of updated summary prospectuses and other reports, a shareholder will
no longer automatically receive such documents in paper form by mail. A
shareholder who elects electronic delivery is able to cancel this service at any
time and return to receiving updated summary prospectuses and other reports in
paper form by mail.

Summary prospectuses, prospectuses, annual reports and semi-annual reports that
are mailed to shareholders by the American Funds organization are printed with
ink containing soy and/or vegetable oil on paper containing recycled fibers.

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance 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.

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD (now the Financial Industry
Regulatory Authority, or FINRA) filed an administrative complaint against the
Principal Underwriter. The complaint alleges violations of certain NASD rules by
the Principal Underwriter with respect to the selection of broker-dealer firms
that buy and sell securities for mutual fund investment portfolios. The
complaint seeks sanctions, restitution and disgorgement. On August 30, 2006, a
FINRA Hearing Panel ruled against the Principal Underwriter and imposed a $5
million fine. On April 30, 2008, FINRA's National Adjudicatory Council affirmed
the decision by FINRA's Hearing Panel. The Principal Underwriter has appealed
this decision to the Securities and Exchange Commission.

The investment adviser and Principal Underwriter believe that the likelihood
that this matter could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. In addition, class action lawsuits have been
filed in the U.S. District Court, Central District of California, relating to
this and other matters. The investment adviser believes that these suits are
without merit and will defend itself vigorously.

The Income Fund of America -- Page 69
<PAGE>

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- JULY 31, 2009

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $14.04
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). . . . . . . . . . . . . . . . $14.90

OTHER INFORMATION -- The fund reserves the right to modify the privileges
described in this statement of additional information at any time.

The financial statements, including the investment portfolio and the report of
the fund's independent registered public accounting firm contained in the annual
report, are included in this statement of additional information. The following
information on fund numbers is not included in the annual report:

The Income Fund of America -- Page 70
<PAGE>

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
-------------------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F-1 CLASS F-2
-------------------------------------------------------------------------------
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . 002 202 302 402 602
American Balanced Fund/(R)/ 011 211 311 411 611
American Mutual Fund/(R)/ . 003 203 303 403 603
Capital Income Builder/(R)/ 012 212 312 412 612
Capital World Growth and
Income Fund/SM/ . . . . . . 033 233 333 433 633
EuroPacific Growth Fund/(R)/ 016 216 316 416 616
Fundamental Investors/SM/ . 010 210 310 410 610
The Growth Fund of
America/(R)/. . . . . . . . 005 205 305 405 605
The Income Fund of
America/(R)/. . . . . . . . 006 206 306 406 606
International Growth and
Income Fund/SM/ . . . . . . 034 234 334 434 634
The Investment Company of
America/(R)/. . . . . . . . 004 204 304 404 604
The New Economy Fund/(R)/ . 014 214 314 414 614
New Perspective Fund/(R)/ . 007 207 307 407 607
New World Fund/(R)/ . . . . 036 236 336 436 636
SMALLCAP World Fund/(R)/ . 035 235 335 435 635
Washington Mutual Investors
Fund/SM/ . . . . . . . . . 001 201 301 401 601
BOND FUNDS
American Funds Short-Term
Tax-Exempt Bond Fund/SM/ . 039 N/A N/A 439 639
American High-Income
Municipal Bond Fund/(R)/ . 040 240 340 440 640
American High-Income
Trust/SM/ . . . . . . . . . 021 221 321 421 621
The Bond Fund of America/SM/ 008 208 308 408 608
Capital World Bond Fund/(R)/ 031 231 331 431 631
Intermediate Bond Fund of
America/SM/ . . . . . . . . 023 223 323 423 623
Limited Term Tax-Exempt Bond
Fund of America/SM/ . . . . 043 243 343 443 643
Short-Term Bond Fund of
America/SM/ . . . . . . . . 048 248 348 448 648
The Tax-Exempt Bond Fund of
America/(R)/. . . . . . . . 019 219 319 419 619
The Tax-Exempt Fund of
California/(R)/*. . . . . . 020 220 320 420 620
The Tax-Exempt Fund of
Maryland/(R)/*. . . . . . . 024 224 324 424 624
The Tax-Exempt Fund of
Virginia/(R)/*. . . . . . . 025 225 325 425 625
U.S. Government Securities
Fund/SM/. . . . . . . . . . 022 222 322 422 622
MONEY MARKET FUNDS
American Funds Money Market
Fund/SM/ . . . . . . . . . 059 259 359 459 659
___________
*Qualified for sale only in certain jurisdictions.

The Income Fund of America -- Page 71
<PAGE>

FUND NUMBERS
----------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F-1
-------------------------------------------------------------------------------
STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
International Growth and Income
Fund . . . . . . . . . . . . . 1034 1234 1334 1534 1434
The Investment Company of
America. . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors
Fund . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America. . . . . . . . . . . . 1023 1223 1323 1523 1423
Short-Term Bond Fund of America 1048 1248 1348 1548 1448
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
American Funds Money Market
Fund . . . . . . . . . . . . . 1059 1259 1359 1559 1459

The Income Fund of America -- Page 72
<PAGE>

FUND NUMBERS
------------------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5 R-6
-------------------------------------------------------------------------------
STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . 2102 2202 2302 2402 2502 2602
American Balanced Fund . . . . . . 2111 2211 2311 2411 2511 2611
American Mutual Fund . . . . . . . 2103 2203 2303 2403 2503 2603
Capital Income Builder . . . . . . 2112 2212 2312 2412 2512 2612
Capital World Growth and Income
Fund . . . . . . . . . . . . . . . 2133 2233 2333 2433 2533 2633
EuroPacific Growth Fund . . . . . 2116 2216 2316 2416 2516 2616
Fundamental Investors . . . . . . 2110 2210 2310 2410 2510 2610
The Growth Fund of America . . . . 2105 2205 2305 2405 2505 2605
The Income Fund of America . . . . 2106 2206 2306 2406 2506 2606
International Growth and Income
Fund . . . . . . . . . . . . . . . 2134 2234 2334 2434 2534 2634
The Investment Company of America 2104 2204 2304 2404 2504 2604
The New Economy Fund . . . . . . . 2114 2214 2314 2414 2514 2614
New Perspective Fund . . . . . . . 2107 2207 2307 2407 2507 2607
New World Fund . . . . . . . . . . 2136 2236 2336 2436 2536 2636
SMALLCAP World Fund . . . . . . . 2135 2235 2335 2435 2535 2635
Washington Mutual Investors Fund . 2101 2201 2301 2401 2501 2601
BOND FUNDS
American High-Income Trust . . . . 2121 2221 2321 2421 2521 2621
The Bond Fund of America . . . . . 2108 2208 2308 2408 2508 2608
Capital World Bond Fund . . . . . 2131 2231 2331 2431 2531 2631
Intermediate Bond Fund of America 2123 2223 2323 2423 2523 2623
Short-Term Bond Fund of America. . 2148 2248 2348 2448 2548 2648
U.S. Government Securities Fund . 2122 2222 2322 2422 2522 2622
MONEY MARKET FUNDS
American Funds Money Market Fund . 2159 2259 2359 2459 2559 2659
___________
*Qualified for sale only in certain
jurisdictions.

The Income Fund of America -- Page 73
<PAGE>

FUND NUMBERS
---------------------------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS
FUND CLASS A R-1 R-2 R-3 R-4 R-5 R-6
-------------------------------------------------------------------------------
AMERICAN FUNDS TARGET DATE RETIREMENT SERIES/(R)/
American Funds 2050 Target
Date Retirement Fund/(R)/ 069 2169 2269 2369 2469 2569 2669
American Funds 2045 Target
Date Retirement Fund/(R)/ 068 2168 2268 2368 2468 2568 2668
American Funds 2040 Target
Date Retirement Fund/(R)/ 067 2167 2267 2367 2467 2567 2667
American Funds 2035 Target
Date Retirement Fund/(R)/ 066 2166 2266 2366 2466 2566 2666
American Funds 2030 Target
Date Retirement Fund/(R)/ 065 2165 2265 2365 2465 2565 2665
American Funds 2025 Target
Date Retirement Fund/(R)/ 064 2164 2264 2364 2464 2564 2664
American Funds 2020 Target
Date Retirement Fund/(R)/ 063 2163 2263 2363 2463 2563 2663
American Funds 2015 Target
Date Retirement Fund/(R)/ 062 2162 2262 2362 2462 2562 2662
American Funds 2010 Target
Date Retirement Fund/(R)/ 061 2161 2261 2361 2461 2561 2661

The Income Fund of America -- Page 74
<PAGE>

APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

The Income Fund of America -- Page 75
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

The Income Fund of America -- Page 76
<PAGE>

C
A C rating is assigned to obligations that are currently highly vulnerable to
nonpayment, obligations that have payment arrearages allowed by the terms of the
documents, or obligations of an issuer that is the subject of a bankruptcy
petition or similar action which have not experienced a payment default. Among
others, the C rating may be assigned to subordinated debt, preferred stock or
other obligations on which cash payments have been suspended in accordance with
the instrument's terms.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's 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 or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)

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.

The Income Fund of America -- Page 77

....

[logo – American Funds®]

The Income Fund of America®

Investment portfolio

July 31, 2009

Common stocks — 57.24%	Shares			Value (000)

CONSUMER STAPLES — 7.23%
Kraft Foods Inc., Class A		26,500,821		$	751,033
Philip Morris International Inc.		15,252,096			710,748
Coca-Cola Co.		9,000,000			448,560
H.J. Heinz Co.		10,111,700			388,896
Unilever NV, depository receipts		7,880,000			215,305
Unilever NV (New York registered)		5,051,750			137,408
Hershey Co.		6,904,100			275,819
Diageo PLC		15,650,000			245,136
Kimberly-Clark Corp.		3,325,000			194,346
Clorox Co.		3,050,000			186,080
Reynolds American Inc.		3,650,000			158,812
Tesco PLC		24,525,000			150,507
SYSCO Corp.		6,210,000			147,550
General Mills, Inc.		2,060,000			121,355
SABMiller PLC		3,876,000			89,774
Coca-Cola Amatil Ltd.		11,162,990			86,778
ConAgra Foods, Inc.		1,340,400			26,312
					4,334,419


INDUSTRIALS — 7.21%
Waste Management, Inc.1		26,835,500			754,346
United Technologies Corp.		11,560,000			629,673
Schneider Electric SA		5,311,115			482,508
Emerson Electric Co.		11,245,000			409,093
Masco Corp.		16,253,200			226,407
Cooper Industries, Ltd., Class A		6,005,000			197,865
Finmeccanica SpA		12,066,442			182,990
Atlas Copco AB, Class A		13,000,000			154,676
United Parcel Service, Inc., Class B		2,650,000			142,384
Avery Dennison Corp.		5,101,582			136,365
Rockwell Automation		3,000,000			124,230
Hubbell Inc., Class B		3,272,100			122,115
Vallourec SA		773,982			101,821
Qantas Airways Ltd.		50,541,438			97,697
AB SKF, Class B		6,275,786			93,989
Watsco, Inc.		1,707,900			89,596
De La Rue PLC1		6,369,718			88,551
Macquarie Korea Infrastructure Fund1		21,541,078			88,477
Applied Industrial Technologies, Inc.1		2,738,790			60,582
Österreichische Post AG		1,372,283			42,111
R.R. Donnelley & Sons Co.		2,845,400			39,551
SembCorp Industries Ltd		16,689,500			37,250
Delta Air Lines, Inc.2		1,588,066			11,005
Corporate Executive Board Co.		525,000			9,859
UAL Corp.2		59,995			247
					4,323,388


TELECOMMUNICATION SERVICES — 7.07%
Verizon Communications Inc.		42,935,600			1,376,945
AT&T Inc.		45,359,621			1,189,783
Koninklijke KPN NV		45,739,757			687,459
Telefónica, SA		24,752,800			615,815
Telstra Corp. Ltd.		45,368,954			133,439
Bell Aliant Regional Communications Income Fund		4,109,700			101,256
Vodafone Group PLC		30,000,000			61,469
Telefónica 02 Czech Republic, AS		2,018,317			55,154
Telekomunikacja Polska SA		1,674,900			8,598
Sprint Nextel Corp., Series 12		760,501			3,042
CenturyTel, Inc.		52,094			1,635
American Tower Corp., Class A2		42,271			1,441
XO Holdings, Inc.2		9,158			5
					4,236,041


UTILITIES — 6.57%
GDF Suez		22,188,284			847,707
Entergy Corp.		4,942,600			397,039
Duke Energy Corp.		23,431,172			362,714
FirstEnergy Corp.		8,096,500			333,576
Exelon Corp.		5,300,000			269,558
RWE AG		3,075,663			259,737
E.ON AG		6,460,000			244,549
PG&E Corp.		4,654,665			187,909
DTE Energy Co.		5,000,000			172,300
Hongkong Electric Holdings Ltd.		26,754,000			147,588
Snam Rete Gas SpA		29,708,326			130,100
Consolidated Edison, Inc.		3,000,000			118,080
PPL Corp.		3,300,000			111,507
Progress Energy, Inc.		2,045,400			80,671
American Electric Power Co., Inc.		2,500,000			77,400
NiSource Inc.		4,859,596			62,640
DUET Group		38,369,915			52,591
Spark Infrastructure		50,400,000			44,933
Southern Co.		1,250,000			39,250
					3,939,849


HEALTH CARE — 5.33%
Merck & Co., Inc.		34,875,000			1,046,599
Bristol-Myers Squibb Co.		33,025,500			717,974
Eli Lilly and Co.		12,890,000			449,732
Pfizer Inc		24,050,000			383,117
Alcon, Inc.		1,577,400			201,276
Novartis AG (ADR)		3,000,000			136,860
Johnson & Johnson		2,150,000			130,914
AstraZeneca PLC (United Kingdom)		2,500,000			117,018
Schering-Plough Corp.		439,243			11,644
Clarent Hospital Corp.1,2,3		484,684			24
					3,195,158


ENERGY — 4.94%
Royal Dutch Shell PLC, Class B (ADR)		8,100,000			425,493
Royal Dutch Shell PLC, Class A (ADR)		5,000,000			263,200
Royal Dutch Shell PLC, Class B		3,797,147			98,537
Chevron Corp.		10,265,000			713,109
TOTAL SA		3,855,000			213,792
TOTAL SA (ADR)		3,640,000			202,566
Spectra Energy Corp		18,311,414			336,198
Diamond Offshore Drilling, Inc.		3,030,000			272,306
ConocoPhillips		5,500,000			240,405
Penn West Energy Trust		10,775,000			140,435
ARC Energy Trust		3,569,700			57,983
					2,964,024


FINANCIALS — 4.77%
Unibail-Rodamco SE, non-registered shares		1,693,800			295,978
HSBC Holdings PLC (Hong Kong)		14,326,382			142,534
HSBC Holdings PLC (United Kingdom)		10,000,000			101,154
HSBC Holdings PLC (ADR)		350,000			17,745
People’s United Financial, Inc.		13,000,000			211,250
Bank of America Corp.		13,926,233			205,969
Banco Santander, SA		12,846,200			186,026
Macquarie Group Ltd.		4,500,000			165,048
Equity Residential, shares of beneficial interest		6,842,800			164,227
U.S. Bancorp		7,994,000			163,158
Crédit Agricole SA		10,492,341			149,772
First Niagara Financial Group, Inc.1		9,730,000			127,949
Arthur J. Gallagher & Co.		5,000,000			114,500
JPMorgan Chase & Co.		2,695,000			104,162
Hospitality Properties Trust1		6,000,000			94,740
Alexandria Real Estate Equities, Inc.1		2,450,000			93,369
SunTrust Banks, Inc.		4,000,000			78,000
QBE Insurance Group Ltd.		4,662,792			75,759
HCP, Inc.		2,442,300			62,914
Itaúsa — Investimentos Itaú SA, preferred nominative		11,967,770			61,487
Citigroup Inc.		18,459,230			58,516
Wells Fargo & Co.		2,200,000			53,812
Itaú Unibanco Banco Múltiplo SA (ADR)		2,313,048			41,380
Boardwalk Real Estate Investment Trust		1,199,000			36,760
ING Groep NV, depository receipts		2,816,200			36,117
AXA SA		875,000			18,495
					2,860,821


CONSUMER DISCRETIONARY — 3.56%
McDonald’s Corp.		11,916,400			656,117
Home Depot, Inc.		20,150,000			522,691
Nordstrom, Inc.		8,807,400			232,867
Vivendi SA		6,374,470			163,767
H & M Hennes & Mauritz AB, Class B		2,277,000			135,145
Tatts Group Ltd.		53,500,000			109,212
VF Corp.		1,065,000			68,895
Regal Entertainment Group, Class A		4,827,018			60,048
CBS Corp., Class B, nonvoting shares		7,000,000			57,330
Tupperware Brands Corp.		1,477,844			50,350
Leggett & Platt, Inc.		1,874,000			32,514
Kesa Electricals PLC		10,900,000			23,708
Ford Motor Co.2		2,169,728			17,358
Time Warner Cable Inc.2		66,361			2,194
Adelphia Recovery Trust, Series ACC-12		19,531,478			293
American Media Operations, Inc.2,3,4		281,006			3
					2,132,492


INFORMATION TECHNOLOGY — 3.33%
Intel Corp.		20,000,000			385,000
Microchip Technology Inc.1		14,128,000			380,467
Automatic Data Processing, Inc.		9,625,000			358,531
Microsoft Corp.		12,095,000			284,474
Paychex, Inc.		9,293,000			246,265
Maxim Integrated Products, Inc.		12,650,000			224,158
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		11,054,998			115,746
Taiwan Semiconductor Manufacturing Co. Ltd.		127,995			230
ZiLOG, Inc.2		455,000			1,133
					1,996,004


MATERIALS — 2.94%
E.I. du Pont de Nemours and Co.		13,940,000			431,164
Weyerhaeuser Co.1		10,728,000			375,909
Dow Chemical Co.		10,630,000			225,037
MeadWestvaco Corp.1		10,600,696			206,608
PPG Industries, Inc.		2,837,100			156,041
Grupo México, SAB de CV, Series B		85,993,834			121,681
Fletcher Building Ltd.		25,461,500			120,693
Impala Platinum Holdings Ltd.		4,437,112			107,922
Freeport-McMoRan Copper & Gold Inc.		300,000			18,090
Georgia Gulf Corp.1,2,3,4		113,556			1,571
					1,764,716


MISCELLANEOUS — 4.29%
Other common stocks in initial period of acquisition					2,569,145


Total common stocks (cost: $35,976,713,000)					34,316,057



Preferred stocks — 1.55%

FINANCIALS — 1.54%
SMFG Preferred Capital USD 3 Ltd. 9.50%4,5		177,055,000			190,026
SMFG Preferred Capital USD 1 Ltd. 6.078%4,5		11,200,000			9,856
SMFG Preferred Capital USD 2 Ltd. 8.75% noncumulative4		9,400,000			9,398
Mizuho Capital Investment (USD) 2 Ltd. 14.95%4,5		167,300,000			194,370
Mizuho Capital Investment (USD) 1 Ltd. 6.686% noncumulative4,5		50,000			40
Barclays Bank PLC 7.434%3,4,5		77,913,000			61,162
Barclays Bank PLC 8.55%4,5		8,061,000			6,368
Barclays Bank PLC 6.86%4,5		5,207,000			3,497
Barclays Bank PLC, Series 1, 6.278% noncumulative5		3,200,000			2,128
Barclays Bank PLC 7.375%4,5		2,457,000			1,796
Barclays Bank PLC 5.926%4,5		1,000,000			641
Vornado Realty Trust, Series I, 6.625%		3,380,000			66,552
JPMorgan Chase & Co., Series I, 7.90%5		49,330,000			47,030
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up4,5		25,000,000			24,750
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up4,5		10,000,000			10,850
BNP Paribas 7.195%4,5		35,100,000			25,950
BNP Paribas Capital Trust 9.003% noncumulative trust4,5		9,135,000			7,818
Woori Bank 6.208%4,5		45,000,000			32,013
Société Générale 5.922%4,5		48,073,000			30,809
Public Storage, Inc., Series F, 6.45%		1,000,000			20,600
Public Storage, Inc., Series V, 7.50% cumulative depositary shares		400,000			9,808
Santander Finance Preferred S.A., Unipersonal, 6.50%		820,000			18,132
PNC Preferred Funding Trust I 6.517%4,5		30,900,000			18,303
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative4,5		39,475,000			18,233
ILFC E-Capital Trust I 5.90%4,5		25,300,000			8,223
ILFC E-Capital Trust II 6.25%4,5		18,790,000			6,107
QBE Capital Funding II LP 6.797%4,5		18,715,000			13,880
General Motors Corp. 9.00%4		28,785			13,256
Fannie Mae, Series O, 7.00%4,5		3,275,507			8,189
Fannie Mae, Series S, 8.25% noncumulative		1,511,450			2,966
AXA SA, Series B, 6.379%4,5		15,625,000			10,966
Resona Preferred Global Securities (Cayman) Ltd. 7.191%4,5		11,772,000			8,603
Royal Bank of Scotland Group PLC, Series U, 7.64%5		16,800,000			7,737
Standard Chartered PLC 6.409%4,5		10,000,000			6,709
XL Capital Ltd., Series E, 6.50%5		10,000,000			5,958
BAC Capital Trust XIV 5.63%5		10,000,000			5,903
Banco Bilbao Vizcaya Argentaria, SA, 5.919%5		8,805,000			5,731
Freddie Mac, Series W, 5.66%2		1,912,800			2,032
Freddie Mac, Series Z, 8.375%2		1,100,000			1,444
Freddie Mac, Series V, 5.57%2		759,375			807
Shinhan Bank 5.663% 20355		2,075,000			1,531
Shinhan Bank 6.819% 20365		400,000			283
IndyMac Bancorp, Inc., Series A, 8.50% noncumulative2,4		2,948,000			30
					920,485


MISCELLANEOUS — 0.01%
Other preferred stocks in initial period of acquisition					6,428


Total preferred stocks (cost: $1,243,701,000)					926,913



Warrants — 0.00%

TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc., Series A, warrants, expire 20102,3		18,316			1
XO Holdings, Inc., Series B, warrants, expire 20102		13,738			—
XO Holdings, Inc., Series C, warrants, expire 20102		13,738			—
GT Group Telecom Inc., warrants, expire 20102,3,4		15,000			—
					1


INDUSTRIALS — 0.00%
Atrium Corp., warrants, expire 20182,3,4		3,456			—


FINANCIALS — 0.00%
Citigroup Inc., warrants, expire 20192,3		54.923077			—


Total warrants (cost: $779,000)					1


	Shares or
Convertible securities — 2.25%	principal amount

HEALTH CARE — 0.62%
Schering-Plough Corp., 6.00% convertible preferred 2010		1,000,000			233,240
Mylan Inc. 6.50% convertible preferred 2010		140,000			123,480
Incyte Corp. 3.50% convertible notes 20114	$	15,000,000			13,050
					369,770


MATERIALS — 0.35%
Cia. Vale do Rio Doce, Class A, 5.50% convertible preferred 2010		1,000,000			41,810
Cia. Vale do Rio Doce, Series 1, 5.50% convertible preferred 2010		2,590,000			107,071
Georgia Gulf Corp. 10.00% convertible preferred1,2,3,4		2,545,684			35,212
Freeport-McMoRan Copper & Gold Inc. 6.75% convertible preferred 2010		290,000			26,749
					210,842


FINANCIALS — 0.28%
Citigroup, Series M, Common Stock Equivalent2,3		54.923077			165,401
Alexandria Real Estate Equities, Inc. 8.00% convertible notes 20291,4	$	463,000			521
					165,922


CONSUMER STAPLES — 0.22%
Archer Daniels Midland Co., 6.25% convertible preferred 2011, units		2,570,000			101,386
Bunge Ltd. 5.125% convertible preferred 2010		13,300			9,144
Bunge Ltd. 4.875% convertible preferred		272,700			24,894
					135,424


INFORMATION TECHNOLOGY — 0.17%
Advanced Micro Devices, Inc. 6.00% convertible notes 2015	$	92,245,000			56,269
Advanced Micro Devices, Inc. 5.75% convertible notes 2012	$	63,525,000			47,088
					103,357


ENERGY — 0.11%
El Paso Corp., 4.99% convertible preferred		73,150			63,641


INDUSTRIALS — 0.05%
UAL Corp. 4.50% convertible notes 2021	$	72,600,000			28,496


CONSUMER DISCRETIONARY — 0.00%
Ford Motor Co. 4.25% convertible notes 2036	$	700			1


MISCELLANEOUS — 0.45%
Other convertible securities in initial period of acquisition					271,079


Total convertible securities (cost: $1,487,695,000)					1,348,532


	Principal amount
Bonds & notes — 34.61%		(000	)

MORTGAGE-BACKED OBLIGATIONS6 — 6.29%
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010	$	36,750			38,263
Fannie Mae 4.89% 2012		10,000			10,509
Fannie Mae 4.00% 2015		3,676			3,796
Fannie Mae 7.00% 2016		125			134
Fannie Mae 5.00% 2018		10,667			11,250
Fannie Mae 5.50% 2018		9,252			9,824
Fannie Mae 10.00% 2018		184			210
Fannie Mae 5.50% 2020		25,676			27,199
Fannie Mae 6.00% 2021		1,025			1,092
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		16,643			17,109
Fannie Mae 5.00% 2022		16,537			17,229
Fannie Mae 9.50% 2022		178			200
Fannie Mae 5.50% 2023		46,932			49,306
Fannie Mae 5.50% 2023		22,953			24,114
Fannie Mae 7.50% 2023		7			7
Fannie Mae 4.00% 2024		34,468			34,849
Fannie Mae 4.00% 2024		20,761			20,991
Fannie Mae 4.00% 2024		19,858			20,077
Fannie Mae 4.00% 2024		3,173			3,207
Fannie Mae 4.50% 2024		32,081			32,987
Fannie Mae 5.50% 2017		20,155			21,116
Fannie Mae 10.00% 2025		125			129
Fannie Mae, Series 2001-4, Class GA, 10.086% 20255		635			722
Fannie Mae, Series 2001-4, Class NA, 11.838% 20255		47			53
Fannie Mae 6.00% 2026		15,716			16,571
Fannie Mae 7.00% 2026		2,054			2,241
Fannie Mae 6.00% 2028		23,164			24,350
Fannie Mae 7.00% 2028		6,301			6,875
Fannie Mae 7.00% 2028		1,107			1,208
Fannie Mae 7.50% 2031		267			293
Fannie Mae, Series 2001-20, Class E, 9.626% 20315		526			598
Fannie Mae 5.50% 2033		3,516			3,663
Fannie Mae 4.567% 20355		4,017			4,173
Fannie Mae 5.00% 2035		92,721			95,227
Fannie Mae 5.50% 2035		13,087			13,622
Fannie Mae 5.50% 2035		6,048			6,306
Fannie Mae 6.50% 2035		385			415
Fannie Mae 7.00% 2035		6,795			7,419
Fannie Mae 5.50% 2036		30,911			32,150
Fannie Mae 6.00% 2036		17,565			18,470
Fannie Mae, Series 2006-43, Class PX, 6.00% 2036		7,045			7,427
Fannie Mae 6.50% 2036		13,441			14,346
Fannie Mae 5.50% 2037		83,128			86,538
Fannie Mae, Series 2007-33, Class HE, 5.50% 2037		21,339			22,254
Fannie Mae 5.50% 2037		16,443			17,118
Fannie Mae 5.63% 20375		14,212			15,037
Fannie Mae 6.00% 2037		320,698			336,871
Fannie Mae 6.00% 2037		66,683			70,045
Fannie Mae 6.00% 2037		28,562			30,020
Fannie Mae 6.00% 2037		26,147			27,539
Fannie Mae 6.00% 2037		18,337			19,262
Fannie Mae 6.00% 2037		17,424			18,227
Fannie Mae, Series 2007-24, Class P, 6.00% 2037		16,141			17,036
Fannie Mae 6.00% 2037		9,446			9,955
Fannie Mae 6.00% 2037		8,781			9,224
Fannie Mae 6.00% 2037		2,114			2,215
Fannie Mae 6.50% 2037		50,846			54,272
Fannie Mae 6.50% 2037		14,337			15,357
Fannie Mae 6.50% 2037		12,366			13,199
Fannie Mae 6.50% 2037		12,156			13,020
Fannie Mae 6.50% 2037		11,211			11,940
Fannie Mae 6.50% 2037		6,527			6,966
Fannie Mae 7.00% 2037		30,714			33,340
Fannie Mae 7.00% 2037		21,417			23,369
Fannie Mae 7.00% 2037		11,869			12,884
Fannie Mae 7.00% 2037		9,674			10,502
Fannie Mae 7.00% 2037		8,828			9,583
Fannie Mae 7.00% 2037		6,664			7,234
Fannie Mae 7.00% 2037		3,593			3,868
Fannie Mae 7.00% 2037		3,115			3,353
Fannie Mae 7.00% 2037		1,867			2,026
Fannie Mae 7.50% 2037		20,650			22,399
Fannie Mae 7.50% 2037		3,822			4,146
Fannie Mae 7.50% 2037		2,924			3,171
Fannie Mae 7.50% 2037		1,252			1,358
Fannie Mae 7.50% 2037		946			1,019
Fannie Mae 7.50% 2037		747			804
Fannie Mae 8.00% 2037		1,211			1,271
Fannie Mae 8.00% 2037		1,121			1,177
Fannie Mae 4.50% 2038		13,043			13,130
Fannie Mae 5.50% 2038		86,022			89,321
Fannie Mae 6.00% 2038		27,847			29,242
Fannie Mae 5.00% 2038		23,736			24,289
Fannie Mae 6.00% 2039		87,733			92,089
Fannie Mae: 6.00% 2037		13,160			13,795
Fannie Mae 6.50% 2039		30,000			32,086
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		1,255			1,354
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		858			939
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2041		600			668
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		1,357			1,489
Fannie Mae 6.50% 2047		5,238			5,581
Fannie Mae 6.50% 2047		5,223			5,565
Fannie Mae 6.50% 2047		4,987			5,314
Fannie Mae 6.50% 2047		3,632			3,869
Fannie Mae 6.50% 2047		3,401			3,624
Fannie Mae 6.50% 2047		2,021			2,153
Fannie Mae 6.50% 2047		1,409			1,501
Fannie Mae 6.50% 2047		1,034			1,102
Fannie Mae 7.00% 2047		5,539			5,995
Fannie Mae 7.00% 2047		3,346			3,621
Fannie Mae 7.00% 2047		3,019			3,267
Fannie Mae 7.00% 2047		2,684			2,905
Fannie Mae 7.00% 2047		1,574			1,703
Freddie Mac 8.50% 2009		—			—
Freddie Mac 8.50% 2010		6			6
Freddie Mac 5.00% 2018		6,554			6,904
Freddie Mac 5.50% 2018		3,248			3,443
Freddie Mac 11.00% 2018		114			129
Freddie Mac, Series 2890, Class KT, 4.50% 2019		25,425			25,753
Freddie Mac 5.50% 2019		8,788			9,317
Freddie Mac, Series 178, Class Z, 9.25% 2021		66			72
Freddie Mac, Series 2289, Class NB, 11.347% 20225		115			132
Freddie Mac 5.00% 2023		23,194			24,115
Freddie Mac 5.00% 2023		20,412			21,222
Freddie Mac 5.00% 2023		13,899			14,451
Freddie Mac 5.00% 2023		7,328			7,632
Freddie Mac 5.00% 2024		27,365			28,395
Freddie Mac 6.00% 2026		3,586			3,781
Freddie Mac 6.00% 2027		6,233			6,554
Freddie Mac 4.627% 20355		5,720			5,958
Freddie Mac 5.00% 2035		10,422			10,694
Freddie Mac, Series 3061, Class PN, 5.50% 2035		4,919			5,173
Freddie Mac 5.00% 2036		8,991			9,213
Freddie Mac, Series 3257, Class PA, 5.50% 2036		21,044			22,083
Freddie Mac 7.00% 2036		1,688			1,826
Freddie Mac 5.00% 2037		2,650			2,715
Freddie Mac, Series 3286, Class JN, 5.50% 2037		28,382			29,595
Freddie Mac, Series 3312, Class PA, 5.50% 2037		21,646			22,569
Freddie Mac, Series 3318, Class JT, 5.50% 2037		15,923			16,604
Freddie Mac, Series 3271, Class OA, 6.00% 2037		19,981			21,357
Freddie Mac 6.50% 2037		6,576			7,030
Freddie Mac 5.932% 20385		3,766			3,962
Freddie Mac 6.50% 2038		27,487			29,358
Freddie Mac 5.00% 2039		27,710			28,338
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035		63,503			57,295
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		12,471			8,520
Countrywide Alternative Loan Trust, Series 2005-54CB, Class 2-A-5, 5.50% 2035		11,354			5,734
Countrywide Alternative Loan Trust, Series 2005-50CB, Class 3-A-1, 6.00% 2035		11,598			7,419
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		3,644			2,622
Countrywide Alternative Loan Trust, Series 2006-14CB, Class A-2, 0.685% 20365		4,891			2,100
Countrywide Alternative Loan Trust, Series 2006-6CB, Class 1-A-4, 5.50% 2036		10,000			6,029
Countrywide Alternative Loan Trust, Series 2007-14T2, Class A-4, 0.635% 20375		26,195			11,882
Countrywide Alternative Loan Trust, Series 2007-2CB, Class 1-A-9, 5.75% 2037		14,423			8,645
Countrywide Alternative Loan Trust, Series 2007-7T2, Class A-27, 6.00% 2037		35,051			19,952
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 3-A-1, 5.84% 20475		27,337			14,285
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 4-A-1, 5.904% 20475		15,623			8,458
Government National Mortgage Assn. 9.50% 2009		1			1
Government National Mortgage Assn. 9.00% 2016		29			33
Government National Mortgage Assn. 8.50% 2017		7			7
Government National Mortgage Assn. 8.50% 2017		3			3
Government National Mortgage Assn. 8.50% 2021		146			163
Government National Mortgage Assn. 8.50% 2021		26			28
Government National Mortgage Assn. 8.50% 2021		5			5
Government National Mortgage Assn. 9.50% 2021		93			106
Government National Mortgage Assn. 10.00% 2021		975			1,124
Government National Mortgage Assn. 10.00% 2025		889			1,019
Government National Mortgage Assn. 6.00% 2038		66,000			69,468
Government National Mortgage Assn. 6.50% 2038		38,262			40,732
Government National Mortgage Assn. 6.50% 2038		2,948			3,139
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR12, Class 1-A2, 5.787% 20365		10,000			5,965
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY3, Class 4-A1, 5.324% 20375		18,744			14,288
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY6, Class 2-A3, 5.737% 20375		47,319			32,354
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY7, Class 2-A1, 5.798% 20375		16,110			9,046
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY5, Class 3-A1, 5.808% 20375		31,643			23,596
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY7, Class 4-A2, 5.846% 20375		15,599			10,237
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20374		7,250			6,764
American Tower Trust I, Series 2007-1A, Class B, 5.537% 20374		20,000			18,947
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20374		37,375			34,673
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20374		20,500			18,816
American Tower Trust I, Series 2007-1A, Class F, 6.639% 20374		5,550			5,066
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-CIBC5, Class A-1, 4.372% 2037		2,027			2,046
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-2, 4.739% 2037		1,615			1,615
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC11, Class A-2, 5.016% 2037		14,040			14,075
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		750			758
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-C3, Class A-2, 4.223% 2042		11,687			11,453
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-2, 4.79% 2042		2,807			2,812
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CIBC14, Class A-4, 5.481% 20445		3,840			3,333
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A-4, 5.875% 20455		27,700			24,529
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		9,857			9,858
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 20353,4		10,000			9,900
SBA CMBS Trust, Series 2005-1, Class B, 5.565% 20353,4		7,000			6,860
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20364		12,000			11,731
SBA CMBS Trust, Series 2006-1A, Class D, 5.852% 20363,4		5,000			4,850
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20364		18,000			17,091
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20364		17,000			15,949
SBA CMBS Trust, Series 2006-1A, Class H, 7.389% 20364		1,670			1,553
CS First Boston Mortgage Securities Corp., Series 2001-CKN5, Class A-4, 5.435% 2034		3,638			3,730
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		2,653			2,388
CS First Boston Mortgage Securities Corp., Series 2001-CP4, Class A-4, 6.18% 2035		7,345			7,617
CS First Boston Mortgage Securities Corp., Series 2005-5, Class IV-A-1, 6.25% 2035		4,607			3,501
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		8,767			9,036
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-AB, 4.614% 2037		10,000			10,038
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037		6,910			7,162
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-2, 5.10% 20385		8,000			7,811
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-2FX, 5.207% 20405		3,050			2,958
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20405		10,900			10,510
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 20354		37,750			36,425
Crown Castle Towers LLC, Series 2006-1, Class E, 6.065% 20363,4		9,000			8,820
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20363,4		16,575			16,243
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20363,4		1,250			1,225
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.493% 20355		5,775			3,527
CHL Mortgage Pass-Through Trust, Series 2007-HY5, Class 3-A-1, 6.175% 20375		17,864			12,445
CHL Mortgage Pass-Through Trust, Series 2007-8, Class 1-A-1, 6.00% 2038		8,138			6,367
CHL Mortgage Pass-Through Trust, Series 2007-HY5, Class 1-A-1, 5.92% 20475		34,883			23,201
CHL Mortgage Pass-Through Trust, Series 2007-HY4, Class 1-A-1, 6.075% 20475		19,978			13,292
Wells Fargo Alternative Loan Trust, Series 2007-PA1, Class A-1, 0.605% 20375		10,142			5,774
Wells Fargo Alternative Loan Trust, Series 2007-PA4, Class III-A-1, 6.065% 20375		14,623			6,966
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class III-A-1, 6.25% 2037		30,996			20,916
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class IV-A-1, 6.50% 2037		41,015			23,413
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2041		15,000			14,965
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-4, 5.083% 20425		5,000			4,852
Wachovia Bank Commercial Mortgage Trust, Series 2005-C22, Class A-4, 5.265% 20445		22,000			21,329
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		12,500			11,992
Wells Fargo Mortgage-backed Securities Trust, Series 2006-1, Class A-3, 5.00% 2021		6,065			5,514
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR15, Class A-1, 5.715% 20365		12,021			8,745
Wells Fargo Mortgage-backed Securities Trust, Series 2007-11, Class A-96, 6.00% 2037		41,887			35,300
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-8, Class 3-AF, 0.665% 20365		6,150			3,636
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.879% 20365		10,534			6,544
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 6-A, 5.884% 20365		25,834			16,473
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-12, Class 2-A1, 5.88% 20375		10,019			5,726
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-9, Class 2-A1, 5.901% 20475		6,177			3,858
GE Commercial Mortgage Corp., Series 2004-C1, Class A-2, 3.915% 2038		2,494			2,370
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.336% 20445		13,000			12,405
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.334% 20455		17,000			16,265
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.625% 20365		15,101			9,599
IndyMac INDX Mortgage Loan Trust, Series 2006-AR25, Class 3-A-1, 5.922% 20365		38,572			20,110
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		9,717			10,070
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-4, 5.115% 20455		3,000			2,743
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-3B, 5.219% 20455		17,730			16,268
Citigroup Mortgage Loan Trust, Inc., Series 2005-8, Class I-A4A, 5.557% 20355		17,701			11,996
Citigroup Mortgage Loan Trust, Inc., Series 2006-AR5, Class 2-A7A, 6.219% 20365		23,183			13,152
Citigroup Mortgage Loan Trust, Inc., Series 2007-AR5, Class 1-A2A, 5.604% 20375		5,263			2,645
Banc of America Mortgage Securities, Inc., Series 2004-7, Class 7-A-1, 5.00% 2019		24,214			23,646
Bear Stearns ARM Trust, Series 2005-6, Class I-A-1, 4.039% 20355		12,370			8,282
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 20355		20,000			11,656
Bear Stearns ARM Trust, Series 2006-2, Class 2-A-1, 5.65% 20365		4,798			3,220
Bank of America 5.50% 20124		22,500			23,044
ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A-3, 5.172% (undated)5		27,410			21,568
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 2-A-1, 6.50% 2037		18,800			10,733
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 3-A-1, 7.00% 2037		18,195			10,366
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		6,051			4,400
Residential Accredit Loans, Inc., Series 2005-QA12, Class CB-I, 5.436% 20355		9,008			4,706
Residential Accredit Loans, Inc., Series 2007-QS5, Class A-5, 0.585% 20375		19,621			7,808
Residential Accredit Loans, Inc., Series 2007-QS11, Class A-1, 7.00% 2037		6,710			3,822
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20264		21,353			20,096
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2006-LDP6, Class A-4, 5.475% 20435		20,250			18,915
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-2, 5.117% 2037		9,890			9,890
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 20375		10,000			8,890
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.207% 20425		17,875			18,040
Nationwide Building Society, Series 2007-2, 5.50% 20124		17,500			17,460
Structured Products Asset Return Certificates Trust, Series 2001-CF1, Class A, 6.36% 20333		16,095			16,272
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class A-5, 5.617% 2048		20,000			16,102
GSR Mortgage Loan Trust, Series 2004-2F, Class VIIA-1, 4.50% 2019		12,681			12,244
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A-1, 5.50% 2020		3,110			3,063
Thornburg Mortgage Securities Trust, Series 2006-5, Class A-1, 0.405% 20465		14,800			13,789
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		11,545			11,976
LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class A-4, 5.197% 20305		11,422			11,034
Lehman Mortgage Trust, Series 2005-2, Class 5-A1, 1.185% 20355		15,686			10,857
Banc of America Funding Trust, Series 2007-7, Class 2-A-1, 6.00% 2037		15,452			10,806
Morgan Stanley Dean Witter Capital I Trust, Series 2000-LIFE2, Class A-2, 7.20% 2033		9,881			10,413
J.P. Morgan Mortgage Trust, Series 2006-A3, Class 3-A-3, 5.73% 20365		2,000			1,193
J.P. Morgan Mortgage Trust, Series 2006-A7, Class 2-A-4, 5.782% 20375		13,875			8,476
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.428% 20274,5		213			154
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.536% 20274,5		181			159
Structured Asset Securities Corp., Series 2005-3, Class 1-A-5, 5.00% 2035		11,162			8,790
American Home Mortgage Assets Trust, Series 2007-3, Class II-2A-1, 6.25% 20375		16,152			7,716
American General Mortgage Loan Trust, Series 2006-1, Class A-5, 5.75% 20354,5		9,504			7,397
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		6,925			6,759
GS Mortgage Securities Corp. II, Series 2001-ROCK, Class D, 6.878% 20184		6,000			6,484
Four Times Square Trust, Series 2000-4TS, Class C, 7.86% 20154		6,000			6,280
BCAP LLC Trust, Series 2006-AA2, Class A-1, 0.455% 20375		13,308			6,279
Bear Stearns Asset-backed Securities I Trust, Series 2005-AC3, Class II-A-1, 5.25% 2020		6,497			5,950
Bear Stearns ALT-A Trust, Series 2006-2, Class II-4-A-1, 5.866% 20365		10,046			4,959
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		401			404
GE Capital Commercial Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037		3,900			3,909
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		3,819			4,002
GSAA Home Equity Trust, Series 2007-10, Class A-1A, 6.00% 2037		4,678			2,805
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1, Class A-2, 7.56% 2031		2,652			2,651
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 0.658% 20314,5		18,430			401
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		1,466			1,474
Harborview Mortgage Loan Trust, Series 2006-6, Class 1A, 4.808% 20365		2,947			1,485
Morgan Stanley Mortgage Loan Trust, Series 2006-3AR, Class 3-A-1, 5.964% 20365		874			472
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027		263			248
					3,768,710


BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 5.54%
U.S. Treasury 1.125% 2011		57,260			57,003
U.S. Treasury 4.50% 2011		16,165			17,358
U.S. Treasury 4.625% 2011		407,750			439,701
U.S. Treasury 4.875% 2011		53,820			57,430
U.S. Treasury 3.00% 20123,7		114,173			120,818
U.S. Treasury 2.75% 2013		10,345			10,566
U.S. Treasury 3.375% 2013		146,750			154,111
U.S. Treasury 3.50% 2013		52,000			54,852
U.S. Treasury 3.625% 2013		171,910			182,144
U.S. Treasury 4.25% 2013		110,582			119,782
U.S. Treasury 1.875% 2014		50,000			48,699
U.S. Treasury 2.25% 2014		70,000			69,229
U.S. Treasury 4.25% 2014		91,000			98,237
U.S. Treasury 1.875% 20153,7		74,756			75,800
U.S. Treasury 2.375% 2016		8,600			8,233
U.S. Treasury 3.25% 2016		70,695			71,347
U.S. Treasury 3.25% 2016		41,620			41,935
U.S. Treasury 8.875% 2017		7,500			10,380
U.S. Treasury 1.625% 20183,7		20,414			20,329
U.S. Treasury 3.50% 2018		351,940			354,537
U.S. Treasury 3.75% 2018		42,900			43,770
U.S. Treasury 2.75% 2019		2,800			2,631
U.S. Treasury 3.125% 2019		65,100			63,081
U.S. Treasury 8.125% 2019		24,000			32,923
U.S. Treasury 7.875% 2021		50,000			68,097
U.S. Treasury 6.25% 2023		175,190			214,306
U.S. Treasury 6.00% 2026		20,000			24,188
U.S. Treasury 6.50% 2026		14,385			18,352
U.S. Treasury 5.50% 2028		49,375			57,075
U.S. Treasury 4.50% 2036		204,890			211,293
U.S. Treasury 4.375% 2038		39,755			40,159
U.S. Treasury 3.50% 2039		70,000			60,517
U.S. Treasury Principal Strip 0% 2039		16,000			4,356
Fannie Mae 5.25% 2012		74,000			78,345
Fannie Mae 4.625% 2013		80,000			83,192
Fannie Mae 6.25% 2029		47,000			56,072
Federal Home Loan Bank 1.75% 2012		46,960			46,747
Federal Home Loan Bank 3.625% 2013		29,815			31,070
Federal Home Loan Bank 5.25% 2014		11,125			12,333
Freddie Mac 6.625% 2009		39,355			39,650
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 1.625% 2011		4,400			4,441
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.20% 2012		11,750			11,842
CoBank ACB 7.875% 20184		10,000			9,616
CoBank ACB 1.229% 20224,5		8,315			5,682
Federal Agricultural Mortgage Corp. 4.875% 20114		11,000			11,653
Federal Agricultural Mortgage Corp. 5.50% 20114		3,000			3,214
United States Government Agency-Guaranteed (FDIC insured), Regions Bank 3.25% 2011		13,375			13,885
United States Government Agency-Guaranteed (FDIC insured), Sovereign Bancorp, Inc. 2.75% 2012		12,500			12,646
United States Government Agency-Guaranteed (FDIC insured), PNC Funding Corp. 2.30% 2012		12,500			12,634
United States Government Agency-Guaranteed (FDIC insured), Bank of America Corp., Series L, 3.125% 2012		12,000			12,402
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 2.875% 2011		12,000			12,337
United States Agency for International Development, Republic of Egypt 4.45% 2015		10,000			10,361
					3,321,361


CONSUMER DISCRETIONARY — 4.26%
CCH II, LLC and CCH II Capital Corp. 10.25% 2010		39,050			41,979
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20124		48,548			48,669
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		23,350			23,408
Charter Communications Operating, LLC, Term Loan B, 4.25% 20145,6,8		49,570			45,564
Charter Communications Operating, LLC, Term Loan B, 7.25% 20145,6,8		6,913			6,921
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20144		15,000			15,038
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 10.875% 20144		24,550			26,637
CCH I, LLC and CCH I Capital Corp. 11.00% 20159		1,725			222
Allison Transmission Holdings, Inc., Term Loan B, 3.06% 20145,6,8		112,644			98,106
Allison Transmission Holdings, Inc. 11.00% 20154		24,300			22,235
Allison Transmission Holdings, Inc. 12.00% 20154,5,10		60,950			50,284
NTL Cable PLC 8.75% 2014		30,564			31,022
NTL Cable PLC 9.125% 2016		32,000			32,480
NTL Cable PLC 9.50% 2016		86,065			88,647
Univision Communications, Inc., First Lien Term Loan B, 2.535% 20145,6,8		78,344			63,491
Univision Communications Inc. 12.00% 20144		11,435			12,235
Univision Communications Inc. 10.50% 20154,5,10		104,290			69,874
News America Inc. 5.30% 2014		29,150			30,331
News America Holdings Inc. 8.00% 2016		6,000			6,862
News America Inc. 7.25% 2018		1,405			1,582
News America Holdings Inc. 8.25% 2018		4,000			4,765
News America Inc. 6.90% 20194		30,000			34,030
News America Inc. 6.40% 2035		750			750
News America Inc. 6.65% 2037		22,000			22,874
News America Inc. 6.75% 2038		15,000			15,270
News America Inc. 7.85% 20394		3,500			4,040
Michaels Stores, Inc., Term Loan B, 2.563% 20135,6,8		30,882			25,419
Michaels Stores, Inc. 10.00% 2014		85,125			80,443
Michaels Stores, Inc. 0%/13.00% 201611		2,245			1,033
Time Warner Inc. 5.50% 2011		5,185			5,497
AOL Time Warner Inc. 6.75% 2011		3,815			4,069
AOL Time Warner Inc. 6.875% 2012		18,450			20,151
Time Warner Companies, Inc. 9.125% 2013		5,000			5,793
Time Warner Inc. 5.875% 2016		19,985			21,007
Time Warner Companies, Inc. 7.25% 2017		9,500			10,468
AOL Time Warner Inc. 7.625% 2031		10,750			11,692
Time Warner Inc. 6.50% 2036		19,000			19,136
Cox Communications, Inc. 7.875% 2009		12,500			12,521
Cox Communications, Inc. 4.625% 2010		8,250			8,332
Cox Communications, Inc. 7.75% 2010		10,000			10,527
Cox Communications, Inc. 5.45% 2014		13,500			14,255
Cox Communications, Inc. 5.875% 20164		25,000			26,072
Cox Communications, Inc. 8.375% 20394		16,845			21,115
Time Warner Cable Inc. 7.50% 2014		22,400			25,562
Time Warner Cable Inc. 6.75% 2018		29,000			32,288
Time Warner Cable Inc. 8.25% 2019		3,500			4,258
Time Warner Cable Inc. 6.55% 2037		25,000			26,763
Federated Retail Holdings, Inc. 5.35% 2012		4,490			4,406
Macy’s Retail Holdings, Inc. 8.875% 20155		17,510			18,155
Federated Retail Holdings, Inc. 5.90% 2016		56,600			51,374
Federated Retail Holdings, Inc. 6.375% 2037		14,300			10,741
Toys “R” Us, Inc. 7.625% 2011		38,345			36,044
Toys “R” Us-Delaware, Inc., Term Loan B, 4.536% 20125,6,8		14,940			14,427
Toys “R” Us, Inc. 10.75% 20174		30,000			30,900
MGM MIRAGE 8.50% 2010		49,305			46,717
MGM MIRAGE 6.75% 2012		9,150			7,000
MGM MIRAGE 6.75% 2013		8,200			6,294
MGM MIRAGE 13.00% 20134		10,725			12,146
MGM MIRAGE 10.375% 20144		1,675			1,805
MGM MIRAGE 7.50% 2016		4,000			2,940
MGM MIRAGE 11.125% 20174		2,450			2,707
Sally Holdings LLC and Sally Capital Inc. 9.25% 2014		63,375			65,593
Sally Holdings LLC and Sally Capital Inc. 10.50% 2016		2,650			2,743
J.C. Penney Co., Inc. 8.00% 2010		35,705			36,147
J.C. Penney Co., Inc. 9.00% 2012		12,006			12,618
J.C. Penney Corp., Inc. 5.75% 2018		13,000			11,911
Comcast Cable Communications, Inc. 6.75% 2011		4,660			4,964
Comcast Corp. 5.85% 2015		13,200			14,326
Comcast Corp. 5.90% 2016		10,000			10,718
Comcast Corp. 6.30% 2017		4,000			4,412
Comcast Corp. 6.45% 2037		13,500			14,499
Comcast Corp. 6.95% 2037		10,275			11,709
Royal Caribbean Cruises Ltd. 8.75% 2011		27,025			27,160
Royal Caribbean Cruises Ltd. 11.875% 2015		18,175			18,811
Staples, Inc. 7.75% 2011		16,115			17,163
Staples, Inc. 7.375% 2012		9,000			9,582
Staples, Inc. 9.75% 2014		15,625			18,322
AMC Entertainment Inc. 8.75% 20194		42,400			41,976
TL Acquisitions, Inc., Term Loan B, 2.79% 20145,6,8		15,115			13,017
Thomson Learning 10.50% 20154		33,050			28,588
Warner Music Group 7.375% 2014		22,665			20,625
Warner Music Group 9.50% 20164		17,300			18,425
Dollar General Corp., Term Loan B2, 3.06% 20145,6,8		5,000			4,857
Dollar General Corp. 10.625% 2015		19,125			21,420
Dollar General Corp. 11.875% 20175,10		11,200			12,600
Regal Cinemas Corp., Series B, 9.375% 2012		7,250			7,286
Regal Cinemas Corp. 8.625% 20194		29,095			30,113
Boyd Gaming Corp. 7.75% 2012		28,400			27,761
Boyd Gaming Corp. 6.75% 2014		10,504			9,427
Tenneco Automotive Inc., Series B, 10.25% 2013		5,144			5,195
Tenneco Automotive Inc. 8.625% 2014		27,750			24,004
Tenneco Inc. 8.125% 2015		6,950			6,342
Cinemark USA, Inc., Term Loan B, 2.21% 20135,6,8		3,696			3,546
Cinemark USA, Inc. 8.625% 20194		30,375			31,590
Quebecor Media Inc. 7.75% 2016		24,450			23,350
Quebecor Media Inc. 7.75% 2016		11,195			10,691
DaimlerChrysler North America Holding Corp., Series E, 5.75% 2011		14,150			14,597
DaimlerChrysler North America Holding Corp. 7.30% 2012		7,875			8,439
DaimlerChrysler North America Holding Corp. 6.50% 2013		5,400			5,718
Marriott International, Inc., Series J, 5.625% 2013		8,745			8,748
Marriott International, Inc., Series I, 6.375% 2017		19,500			18,689
Target Corp. 6.00% 2018		24,500			26,741
Walt Disney Co. 6.375% 2012		15,000			16,542
Walt Disney Co. 5.625% 2016		3,000			3,301
Walt Disney Co. 5.875% 2017		4,000			4,417
UPC Holding BV 9.875% 20184		23,000			23,000
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		24,535			22,879
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013		7,187			7,376
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 7.625% 2016		15,000			15,263
CSC Holdings, Inc., Series B, 6.75% 2012		400			400
CSC Holdings, Inc. 8.50% 20144		7,000			7,245
CSC Holdings, Inc. 8.625% 20194		14,375			14,842
Thomson Reuters Corp. 5.95% 2013		3,625			3,917
Thomson Reuters Corp. 6.50% 2018		14,260			15,770
Seminole Tribe of Florida 6.535% 20204,6		10,000			8,417
Seminole Tribe of Florida 7.804% 20204,6		9,980			8,200
Viacom Inc. 5.75% 2011		2,500			2,613
Viacom Inc. 6.25% 2016		12,750			13,482
Kabel Deutschland GmbH 10.625% 2014		14,825			15,603
Princeton University 4.95% 2019		15,000			15,538
KB Home 6.25% 2015		16,905			15,384
Beazer Homes USA, Inc. 8.375% 2012		11,298			7,965
Beazer Homes USA, Inc. 8.125% 2016		13,050			7,373
Meritage Corp. 7.00% 2014		4,960			4,216
Meritage Homes Corp. 6.25% 2015		5,350			4,400
Meritage Corp. 7.731% 20174		9,500			6,413
Mohegan Tribal Gaming Authority 8.00% 2012		2,100			1,733
Mohegan Tribal Gaming Authority 6.125% 2013		4,175			3,444
Mohegan Tribal Gaming Authority 7.125% 2014		4,950			3,490
Mohegan Tribal Gaming Authority 6.875% 2015		8,775			6,099
President & Fellows of Harvard University 5.00% 20144		12,000			12,861
Vidéotron Ltée 6.875% 2014		7,169			7,061
Vidéotron Ltée 6.375% 2015		4,905			4,586
Seneca Gaming Corp. 7.25% 2012		8,000			7,440
Seneca Gaming Corp., Series B, 7.25% 2012		3,275			3,046
Hanesbrands Inc., Series B, 4.593% 20145		12,300			10,455
LBI Media, Inc. 8.50% 20174		19,605			10,391
Education Management LLC and Education Management Finance Corp. 8.75% 2014		8,640			8,716
Education Management LLC and Education Management Finance Corp. 10.25% 2016		1,570			1,605
Neiman Marcus Group, Inc. 9.75% 20155,10		11,858			8,834
ERAC USA Finance Co. 7.00% 20374		10,000			8,410
American Media Operation 9.00% 20134,10		966			493
American Media Operation 14.00% 20134,5,10		15,329			7,741
CBS Corp. 8.875% 2019		7,100			7,404
Radio One, Inc. 6.375% 2013		22,565			7,164
Bon-Ton Department Stores, Inc. 10.25% 2014		12,850			6,232
Claire’s Stores, Inc., Term Loan B, 3.035% 20145,6,8		9,059			5,997
Technical Olympic USA, Inc. 9.00% 20109		10,675			1,228
Technical Olympic USA, Inc. 9.00% 20109		7,815			899
Technical Olympic USA, Inc. 9.25% 20114,9		33,175			3,815
Wendy’s/Arby’s Group Inc. 10.00% 20164		5,400			5,589
Standard Pacific Corp. 6.25% 2014		2,800			2,086
Standard Pacific Corp. 7.00% 2015		3,830			2,892
Sealy Mattress Co. 8.25% 2014		3,325			3,051
Sealy Mattress Co. 10.875% 20164		1,425			1,560
Cooper-Standard Automotive Inc. 7.00% 20129		19,650			4,520
WPP Finance (UK) 8.00% 2014		4,000			4,269
Liberty Media Corp. 8.25% 2030		4,325			3,136
Goodyear Tire & Rubber Co. 5.01% 20095		3,000			3,004
Pinnacle Entertainment, Inc. 7.50% 2015		3,075			2,744
Fox Acquisition LLC 13.375% 20164		4,175			2,401
Delphi Automotive Systems Corp. 6.55% 20069		17,105			107
Delphi Automotive Systems Corp. 6.50% 20099		54,466			340
Delphi Corp. 6.50% 20139		72,580			272
Delphi Automotive Systems Corp. 7.125% 20299		104,355			652
Delphi Trust I 8.25% 20333,9		30,031			—
Local T.V. Finance LLC 10.00% 20154,5,10		5,014			1,141
Ford Motor Co. 9.50% 2011		1,000			895
Kohl’s Corp. 6.00% 2033		180			170
Kohl’s Corp. 6.875% 2037		320			337
Visteon Corp. 7.00% 20149		18,000			405
					2,557,067


FINANCIALS — 4.20%
Simon Property Group, LP 4.875% 2010		5,000			5,043
Simon Property Group, LP 5.375% 2011		32,700			33,569
Simon Property Group, LP 6.35% 2012		5,000			5,083
Simon Property Group, LP 5.30% 2013		6,000			5,987
Simon Property Group, LP 5.25% 2016		89,670			81,748
Simon Property Group, LP 6.10% 2016		5,550			5,320
Simon Property Group, LP 5.875% 2017		32,510			30,589
Simon Property Group, LP 6.125% 2018		48,390			45,830
Simon Property Group, LP 10.35% 2019		5,000			5,990
Ford Motor Credit Co. 7.375% 2009		26,200			26,154
Ford Motor Credit Co. 9.75% 20105		58,100			57,843
Ford Motor Credit Co. 7.25% 2011		4,450			4,181
Ford Motor Credit Co. 7.375% 2011		1,800			1,736
Ford Motor Credit Co. 9.875% 2011		7,500			7,435
Ford Motor Credit Co. 3.26% 20125		63,005			53,633
Ford Motor Credit Co. 7.80% 2012		3,500			3,292
Ford Motor Credit Co. 8.00% 2016		9,925			8,908
Westfield Group 5.40% 20124		15,490			15,581
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20144		25,275			23,280
Westfield Group 7.50% 20144		20,000			20,414
Westfield Group 5.70% 20164		47,925			43,268
Westfield Group 7.125% 20184		50,890			49,440
Bank of America Corp. 4.25% 2010		840			854
Bank of America Corp. 4.375% 2010		10,199			10,401
Countrywide Financial Corp., Series A, 4.50% 2010		2,695			2,719
Bank of America Corp. 4.50% 2010		1,625			1,652
Countrywide Financial Corp., Series B, 5.80% 2012		16,495			16,941
Bank of America Corp., Series L, 7.375% 2014		12,000			13,085
Bank of America Corp. 5.30% 2017		61,990			56,542
Bank of America Corp. 6.10% 2017		12,500			11,913
Bank of America Corp. 5.65% 2018		6,850			6,545
Merrill Lynch & Co., Inc. 6.875% 2018		7,500			7,572
NB Capital Trust II 7.83% 2026		5,575			4,767
NB Capital Trust IV 8.25% 2027		6,205			5,460
Residential Capital Corp. 8.375% 2010		14,500			10,150
General Motors Acceptance Corp. 6.875% 20114		58,489			54,541
General Motors Acceptance Corp. 7.25% 20114		13,998			13,333
General Motors Acceptance Corp. 6.875% 20124		6,851			6,269
General Motors Acceptance Corp. 7.00% 20124		21,516			19,687
General Motors Acceptance Corp. 7.50% 20134		6,484			5,576
General Motors Acceptance Corp. 2.868% 20144,5		10,438			7,633
General Motors Acceptance Corp. 8.00% 20184		6,366			4,902
CIT Group Inc., Series A, 0.974% 20095		13,250			10,352
CIT Group Inc. 6.50% 20093		15			8
CIT Group Inc. 6.875% 2009		15,000			8,874
CIT Group Inc. 0.759% 20105		5,000			2,931
CIT Group Inc. 4.25% 2010		14,774			8,643
CIT Group Inc. 7.625% 2012		8,310			4,536
CIT Group Inc., Term Loan, 13.00% 20125,6,8		70,000			73,045
CIT Group Inc. 5.40% 2013		511			274
CIT Group Inc. 12.00% 20184		21,073			2,845
Liberty Mutual Group Inc. 6.50% 20354		21,275			15,062
Liberty Mutual Group Inc. 7.50% 20364		10,530			7,707
Liberty Mutual Group Inc., Series A, 7.80% 20874,5		9,070			6,090
Liberty Mutual Group Inc., Series C, 10.75% 20884,5		79,430			67,049
Zions Bancorporation 5.65% 2014		30,260			19,867
Zions Bancorporation 5.50% 2015		44,392			29,208
Zions Bancorporation 6.00% 2015		59,970			39,445
Independence Community Bank Corp. 4.90% 2010		5,000			4,985
Sovereign Bancorp, Inc. 2.738% 20135		7,710			6,487
Santander Issuances, SA Unipersonal 0.969% 20164,5		15,200			12,729
Santander Issuances, SA Unipersonal 5.805% 20164,5		15,700			12,565
Sovereign Bancorp, Inc. 8.75% 2018		37,380			40,214
Santander Perpetual, SA Unipersonal 6.671% (undated)4,5		12,800			10,706
Realogy Corp., Term Loan B, 3.309% 20135,6,8		43,696			33,927
Realogy Corp., Term Loan DD, 3.309% 20135,6,8		4,987			3,872
Realogy Corp., Letter of Credit, 3.37% 20135,6,8		13,024			10,112
Realogy Corp. 10.50% 2014		47,810			21,993
Realogy Corp. 11.75% 20145,10		20,177			7,365
Capital One Financial Corp. 6.25% 2013		20,000			20,125
Capital One Capital III 7.686% 20365		19,750			15,602
Capital One Capital IV 6.745% 20375		10,850			7,831
Capital One Capital V 10.25% 2039		13,250			13,514
Rouse Co. 3.625% 20099		32,561			23,607
Rouse Co. 7.20% 20129		28,039			20,889
Rouse Co. 5.375% 20139		2,770			2,036
Rouse Co. 6.75% 20134,9		13,400			9,782
JPMorgan Chase & Co. 4.891% 20155		10,000			8,789
JPMorgan Chase Bank NA 6.00% 2017		14,567			15,161
JPMorgan Chase Capital XXV, Series Y, 6.80% 2037		27,612			25,316
JPMorgan Chase Capital XX, Series T, 6.55% 20665		2,726			2,332
JPMorgan Chase Capital XXII, Series V, 6.45% 20875		3,100			2,622
UniCredito Italiano SpA 5.584% 20174,5		32,750			28,416
UniCredito Italiano SpA 6.00% 20174		23,150			20,359
HVB Funding Trust I 8.741% 20314		4,670			3,246
SLM Corp., Series A, 5.40% 2011		15,000			12,555
SLM Corp., Series A, 0.804% 20145		10,000			6,618
SLM Corp., Series A, 5.00% 2015		12,000			8,302
SLM Corp., Series A, 8.45% 2018		24,500			19,628
Hospitality Properties Trust 6.75% 20131		28,915			26,956
Hospitality Properties Trust 5.125% 20151		2,160			1,747
Hospitality Properties Trust 6.30% 20161		2,400			1,950
Hospitality Properties Trust 5.625% 20171		1,485			1,148
Hospitality Properties Trust 6.70% 20181		16,175			13,144
Scotland International Finance No. 2 BV 4.25% 20134		35			29
HBOS PLC 6.75% 20184		34,625			26,641
HBOS PLC 6.00% 20334		300			199
HBOS PLC 5.375% (undated)4,5		20,000			10,448
HBOS Capital Funding LP 6.071% (undated)4,5		12,400			4,745
Kimco Realty Corp. 6.00% 2012		3,250			3,107
Kimco Realty Corp., Series C, 5.783% 2016		22,000			19,050
Kimco Realty Corp. 5.70% 2017		21,985			18,583
Resona Bank, Ltd. 5.85% (undated)4,5		48,929			39,194
National City Preferred Capital Trust I 12.00% (undated)5		37,250			39,112
Goldman Sachs Group, Inc. 6.25% 2017		4,805			5,154
Goldman Sachs Group, Inc. 5.95% 2018		7,095			7,488
Goldman Sachs Group, Inc. 6.15% 2018		24,490			26,213
HSBC Finance Corp. 4.625% 2010		14,000			14,138
HSBC Finance Corp. 5.70% 2011		7,500			7,609
HSBC Holdings PLC 6.50% 2037		18,000			17,014
Standard Chartered Bank 6.40% 20174		40,995			36,948
Korea Development Bank 5.30% 2013		29,600			29,233
Korea Development Bank 8.00% 2014		6,050			6,577
Fifth Third Capital Trust IV 6.50% 20675		58,155			35,184
Lazard Group LLC 7.125% 2015		29,222			29,203
Lazard Group LLC 6.85% 2017		5,322			5,175
ProLogis 5.50% 2012		2,292			2,167
ProLogis 5.625% 2015		6,765			5,773
ProLogis 5.625% 2016		3,750			3,196
ProLogis 6.625% 2018		25,175			21,418
Metropolitan Life Global Funding I, 5.125% 20134		10,000			10,204
MetLife Inc. 10.75% 20395		2,500			2,681
MetLife Capital Trust IV 7.875% 20674,5		21,500			18,321
MetLife Capital Trust X 9.25% 20684,5		1,000			964
International Lease Finance Corp., Series R, 5.40% 2012		10,000			7,361
International Lease Finance Corp., Series R, 6.625% 2013		3,500			2,425
American General Finance Corp., Series I, 5.40% 2015		17,250			10,001
American General Finance Corp., Series J, 6.90% 2017		12,500			7,235
Host Marriott, LP, Series M, 7.00% 2012		15,050			14,975
Host Marriott, LP, Series K, 7.125% 2013		7,000			6,825
Host Marriott, LP, Series O, 6.375% 2015		950			883
Host Hotels & Resorts, LP, Series Q, 6.75% 2016		3,550			3,310
Host Hotels & Resorts LP 9.00% 20174		900			911
HSBK (Europe) BV 7.75% 20134		2,165			1,781
HSBK (Europe) BV 7.25% 20174		36,110			24,284
Prudential Financial, Inc., Series D, 6.10% 2017		5,000			4,916
Prudential Holdings, LLC, Series C, 8.695% 20234,6		17,250			16,566
Prudential Financial, Inc. 8.875% 20685		5,000			4,496
UnumProvident Finance Co. PLC 6.85% 20154		28,500			23,585
ERP Operating LP 5.50% 2012		4,000			4,064
ERP Operating LP 6.625% 2012		2,000			2,066
ERP Operating LP 5.20% 2013		2,500			2,483
ERP Operating LP 6.584% 2015		2,705			2,654
ERP Operating LP 5.75% 2017		1,660			1,589
ERP Operating LP 7.125% 2017		10,000			10,153
Development Bank of Singapore Ltd. 7.875% 20104		10,000			10,355
Development Bank of Singapore Ltd. 7.125% 20114		5,000			5,353
DBS Bank Ltd. 1.119% 20214,5		7,250			5,965
ZFS Finance (USA) Trust II 6.45% 20654,5		12,500			11,375
ZFS Finance (USA) Trust V 6.50% 20674,5		11,950			10,157
Lincoln National Corp. 5.65% 2012		12,000			11,887
Lincoln National Corp. 7.00% 20665		11,040			7,342
Citigroup Inc. 6.50% 2013		5,000			5,099
Citigroup Inc. 6.00% 2017		6,375			5,844
Citigroup Inc. 6.125% 2017		8,000			7,369
Catlin Insurance Ltd. 7.249% (undated)4,5		34,090			18,089
American Express Co. 6.15% 2017		12,610			12,437
American Express Co. 8.15% 2038		4,500			5,088
New York Life Global Funding 4.65% 20134		17,000			17,461
Wells Fargo & Co. 4.375% 2013		10,850			11,116
Corestates Capital I 8.00% 20264		5,714			4,942
Monumental Global Funding 5.50% 20134		10,000			9,711
Monumental Global Funding III 0.709% 20144,5		8,000			6,307
Hartford Financial Services Group, Inc. 6.30% 2018		9,250			7,752
Glen Meadow Pass-Through Trust 6.505% 20674,5		15,500			8,022
Morgan Stanley, Series F, 6.00% 2015		8,000			8,292
Morgan Stanley, Series F, 5.95% 2017		5,000			5,157
Royal Bank of Scotland Group PLC 5.00% 2013		6,427			5,553
Royal Bank of Scotland Group PLC 5.00% 2014		1,836			1,551
Royal Bank of Scotland Group PLC 5.05% 2015		6,136			4,848
Developers Diversified Realty Corp. 4.625% 2010		6,165			5,955
Developers Diversified Realty Corp. 5.375% 2012		2,000			1,706
Developers Diversified Realty Corp. 5.50% 2015		5,000			3,622
Barclays Bank PLC 5.20% 2014		10,050			10,434
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		10,000			10,134
Principal Life Insurance Co. 5.30% 2013		10,000			10,109
AXA SA 6.463% (undated)4,5		15,000			10,066
Genworth Financial, Inc. 6.15% 20665		17,665			8,401
Banco Mercantil del Norte, SA 6.135% 20164,5		2,000			1,794
Banco Mercantil del Norte, SA 6.862% 20214,5		6,850			5,750
Société Générale 5.75% 20164		7,400			6,995
Paribas, New York Branch 6.95% 2013		6,000			6,078
BNP Paribas 4.80% 20154		195			170
BNP Paribas 5.125% 20154		245			231
Nationwide Mutual Insurance 5.81% 20244,5		10,000			6,287
Charles Schwab Corp., Series A, 6.375% 2017		4,000			4,331
Schwab Capital Trust I 7.50% 20375		1,795			1,546
Nationwide Financial Services, Inc. 6.75% 20675		8,780			5,593
Northern Rock PLC 5.60% (undated)3,4,5		16,380			1,638
Northern Rock PLC 6.594% (undated)3,4,5		33,985			3,398
Huntington National Bank 5.50% 2016		510			379
Huntington National Bank 6.60% 2018		5,750			4,283
Huntington National Bank 5.375% 2019		384			266
CNA Financial Corp. 5.85% 2014		5,625			4,849
Brandywine Operating Partnership, LP 5.75% 2012		4,190			3,829
iStar Financial, Inc. 8.625% 2013		7,500			3,750
Lehman Brothers Holdings Inc., Series I, 6.875% 20189		20,000			3,650
Credit Suisse Group AG 5.50% 2014		3,000			3,194
First Tennessee Bank 5.05% 2015		3,400			2,601
United Dominion Realty Trust, Inc. 5.00% 2012		2,500			2,419
TuranAlem Finance BV 8.25% 20374		10,000			2,150
Assurant, Inc. 5.625% 2014		2,295			2,057
LaBranche & Co Inc. 11.00% 2012		1,750			1,623
Plum Creek Timberlands, LP 5.875% 2015		1,500			1,343
Chubb Corp. 6.375% 20675		1,000			811
Ambac Financial Group, Inc. 6.15% 20875		8,405			756
Capmark Financial Group Inc. 3.606% 20105		1,555			531
					2,515,564


TELECOMMUNICATION SERVICES — 2.63%
Verizon Communications Inc. 3.75% 20114		33,750			34,781
ALLTEL Corp. 7.00% 2012		17,686			19,628
Verizon Communications Inc. 5.55% 20144		64,695			70,429
Verizon Global Funding Corp. 4.90% 2015		3,560			3,698
Verizon Communications Inc. 5.50% 2017		18,000			19,123
Verizon Communications Inc. 6.10% 2018		11,300			12,480
Verizon Communications Inc. 8.75% 2018		15,000			19,215
Verizon Communications Inc. 6.35% 2019		26,025			29,377
Verizon Global Funding Corp. 7.75% 2030		6,705			8,020
Verizon Communications Inc. 6.25% 2037		50,000			53,126
Nextel Communications, Inc., Series E, 6.875% 2013		89,000			81,658
Nextel Communications, Inc., Series F, 5.95% 2014		49,255			42,852
Nextel Communications, Inc., Series D, 7.375% 2015		136,815			123,476
Qwest Capital Funding, Inc. 7.90% 2010		42,010			42,535
Qwest Capital Funding, Inc. 7.25% 2011		83,120			82,704
Qwest Communications International Inc. 7.25% 2011		30,025			30,025
Qwest Corp. 8.875% 2012		12,400			12,927
Qwest Capital Funding, Inc. 7.625% 2021		3,900			3,218
U S WEST Capital Funding, Inc. 6.875% 2028		18,815			13,641
Qwest Capital Funding, Inc. 7.75% 2031		13,885			10,761
SBC Communications Inc. 6.25% 2011		5,500			5,855
AT&T Corp. 7.30% 20115		8,205			9,119
AT&T Wireless Services, Inc. 8.125% 2012		16,935			19,236
AT&T Inc. 4.95% 2013		28,750			30,393
AT&T Inc. 6.70% 2013		15,000			16,964
SBC Communications Inc. 5.10% 2014		3,500			3,754
SBC Communications Inc. 5.625% 2016		10,000			10,702
AT&T Inc. 5.80% 2019		17,250			18,727
AT&T Corp. 8.00% 20315		5,000			6,224
AT&T Inc. 6.55% 2039		3,000			3,342
Centennial Communications Corp. 6.347% 20135		47,300			46,295
Centennial Communications Corp. 10.00% 2013		3,775			3,907
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013		15,500			15,926
Centennial Communications Corp., Centennial Cellular Operating Co. LLC
and Centennial Puerto Rico Operations Corp. 8.125% 20145		37,775			38,058
Telecom Italia Capital SA 4.00% 2010		1,470			1,481
Telecom Italia Capital SA 4.875% 2010		1,630			1,664
Telecom Italia Capital SA, Series B, 5.25% 2013		6,700			6,924
Telecom Italia Capital SA 5.25% 2015		29,500			30,079
Telecom Italia Capital SA 6.999% 2018		12,900			14,260
Telecom Italia Capital SA 7.175% 2019		25,000			27,900
Telecom Italia Capital SA 7.20% 2036		7,150			7,693
Telecom Italia Capital SA 7.721% 2038		6,600			7,461
American Tower Corp. 7.125% 2012		59,325			60,512
American Tower Corp. 7.00% 2017		11,200			11,074
American Tower Corp. 7.25% 20194		24,050			23,810
Cricket Communications, Inc. 9.375% 2014		60,900			62,118
Cricket Communications, Inc. 7.75% 20164		19,300			19,300
Windstream Corp. 8.125% 2013		6,000			6,090
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015		7,125			7,130
Windstream Corp. 8.625% 2016		58,100			59,262
Wind Acquisition SA 11.75% 20174		64,275			69,096
Crown Castle International Corp. 9.00% 2015		33,850			35,458
Crown Castle International Corp. 7.75% 20174		13,750			14,094
MetroPCS Wireless, Inc., Term Loan B, 3.313% 20135,6,8		8,674			8,319
MetroPCS Wireless, Inc. 9.25% 2014		17,300			17,992
MetroPCS Wireless, Inc. 9.25% 20144		17,050			17,732
Rogers Wireless Inc. 7.25% 2012		3,140			3,571
Rogers Wireless Inc. 7.50% 2015		16,750			19,410
Vodafone Group PLC 5.625% 2017		11,975			12,731
Vodafone Group PLC 6.15% 2037		7,810			8,360
Deutsche Telekom International Finance BV 5.875% 2013		5,625			6,073
Deutsche Telekom International Finance BV 4.875% 2014		10,000			10,395
Deutsche Telekom International Finance BV 6.75% 2018		2,000			2,256
Singapore Telecommunications Ltd. 6.375% 2011		4,825			5,229
Singapore Telecommunications Ltd. 7.375% 20314		3,800			4,561
Cincinnati Bell Inc. 7.25% 2013		9,500			9,274
France Télécom 7.75% 20115		8,500			9,245
SBA Telecommunications, Inc. 8.00% 20164		8,275			8,399
Koninklijke KPN NV 8.375% 2030		4,660			5,849
NTELOS Inc., Term Loan B, 2.54% 20115,6,8		5,746			5,741
Embarq Corp. 6.738% 2013		5,000			5,257
Trilogy International Partners LLC, Term Loan B, 4.098% 20125,6,8		5,250			3,570
Level 3 Financing, Inc. 9.25% 2014		4,000			3,510
PCCW-HKT Capital No. 3 Ltd. 5.25% 20154		1,305			1,221
Hawaiian Telcom Communications, Inc. 9.75% 20139		16,945			254
Hawaiian Telcom Communications, Inc. 8.765% 20135,9		15,920			119
Hawaiian Telcom Communications, Inc., Series B, 12.50% 20159		7,075			9
					1,576,659


INDUSTRIALS — 2.15%
Nielsen Finance LLC, Term Loan B, 2.30% 20135,6,8		8,881			8,242
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014		65,850			66,509
Nielsen Finance LLC and Nielsen Finance Co. 11.625% 2014		38,275			40,476
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 201611		81,675			59,827
Nielsen Finance LLC and Nielsen Finance Co. 11.50% 2016		21,585			22,718
Nielsen Finance LLC, Term Loan 1L, 8.50% 20176,8		12,000			11,820
Continental Airlines, Inc. 8.75% 2011		27,750			17,760
Continental Airlines, Inc., Series 2000-2, Class A-2, 7.487% 20126		11,700			11,305
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 20166		9,356			8,117
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 20176		5,263			3,802
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20186		953			724
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20196		16,509			14,177
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20196		4,778			4,219
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20196		826			638
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20206		15,490			14,473
Continental Airlines, Inc., Series 1999-1, Class B, 6.795% 20206		782			581
Continental Airlines, Inc., Series 2003-ERJ3, Class A, 7.875% 20206		11,393			7,035
Continental Airlines, Inc., Series 1999-2, Class A-1, 7.256% 20216		674			593
Continental Airlines, Inc., Series 1999-2, Class B, 7.566% 20216		5,204			4,384
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20226		13,342			10,998
Continental Airlines, Inc., Series 2007-1, Class B, 6.903% 20226		11,380			7,731
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20226		2,574			2,141
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20226		6,468			5,494
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20226		5,581			4,116
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 20126		8,050			7,758
Northwest Airlines, Inc., Term Loan B, 4.10% 20135,6,8		5,475			4,407
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20146		46,035			40,683
Delta Air Lines, Inc., Series 1992-A2, 9.20% 20143,6,9		3,174			3,031
Northwest Airlines, Inc., Term Loan A, 2.35% 20185,6,8		56,836			43,480
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20246		18,109			14,306
US Investigations Services, Inc., Term Loan B, 3.359% 20155,6,8		18,667			17,236
US Investigations Services, Inc. 10.50% 20154		41,545			35,521
US Investigations Services, Inc. 11.75% 20164		15,775			12,699
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20106		367			363
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20116,9		5,302			6,323
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20126		14,554			14,190
United Air Lines, Inc., Term Loan B, 2.313% 20145,6,8		51,378			29,499
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20146		272			269
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20156		145			144
United Air Lines, Inc., Series 1996-A2, 7.87% 20193,6,9		2,421			53
United Air Lines, Inc., Series 2007-1, Class B, 7.336% 20214,6		5,051			2,576
United Air Lines, Inc., Series 2007-1, Class A, 6.636% 20246		8,926			6,555
American Airlines, Inc., Series 2003-1, Class G, AMBAC insured, 3.857% 20126		1,216			1,148
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20126		17,745			14,728
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 20126		1,653			1,586
American Airlines, Inc., Series 2001-2, Class B, 8.608% 20126		4,595			3,791
AMR Corp. 9.00% 2012		11,000			5,115
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20136		17,138			16,178
AMR Corp. 9.00% 2016		2,000			910
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20196		13,303			6,785
AMR Corp. 10.00% 2021		3,000			1,410
American Airlines, Inc., Series 2001-1, Class A-1, 6.977% 20226		6,590			3,888
Hawker Beechcraft Acquisition Co., LLC, Term Loan B, 2.285% 20145,6,8		57,027			39,821
Hawker Beechcraft Acquisition Co., LLC, Letter of Credit, 2.598% 20145,6,8		3,325			2,322
Hawker Beechcraft Acquisition Co., LLC 8.50% 2015		5,300			3,114
Hawker Beechcraft Acquisition Co., LLC 9.625% 20155,10		11,530			5,592
Hawker Beechcraft Acquisition Co., LLC 9.75% 2017		4,105			2,073
Ashtead Group PLC 8.625% 20154		15,700			13,580
Ashtead Capital, Inc. 9.00% 20164		44,685			38,653
Allied Waste North America, Inc., Series B, 6.50% 2010		12,000			12,424
Allied Waste North America, Inc., Series B, 5.75% 2011		8,800			9,122
Allied Waste North America, Inc., Series B, 6.125% 2014		2,500			2,574
Allied Waste North America, Inc., Series B, 7.375% 2014		4,500			4,651
Allied Waste North America, Inc. 7.25% 2015		8,500			8,808
Allied Waste North America, Inc. 6.875% 2017		7,250			7,442
ARAMARK Corp., Letter of Credit, 2.025% 20145,6,8		765			728
ARAMARK Corp., Term Loan B, 2.473% 20145,6,8		12,047			11,467
ARAMARK Corp. 4.528% 20155		8,050			7,044
ARAMARK Corp. 8.50% 2015		24,575			24,882
RailAmerica Inc. 9.25% 20174		39,500			40,883
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20114,6		20,156			20,050
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20134,6		8,304			8,329
BAE Systems Holdings Inc. 4.95% 20144		1,375			1,416
Norfolk Southern Corp. 5.75% 20164		15,760			16,538
Norfolk Southern Corp. 5.75% 2018		12,000			12,464
Burlington Northern Santa Fe Corp. 7.00% 2014		23,600			26,498
BNSF Funding Trust I 6.613% 20555		2,910			2,428
Union Pacific Corp. 5.125% 2014		15,325			16,056
Union Pacific Corp. 5.75% 2017		2,065			2,177
Union Pacific Corp. 5.70% 2018		8,000			8,376
Waste Management, Inc. 5.00% 20141		7,000			6,961
Waste Management, Inc. 7.375% 20191		7,200			8,193
WMX Technologies, Inc. 7.10% 20261		10,125			10,752
Koninklijke Philips Electronics NV 5.75% 2018		23,250			24,330
CSX Corp. 5.75% 2013		4,960			5,187
CSX Corp. 6.25% 2015		3,460			3,732
CSX Corp. 6.15% 2037		11,800			11,545
DynCorp International and DIV Capital Corp., Series B, 9.50% 2013		19,675			19,823
USG Corp. 6.30% 2016		10,000			7,875
USG Corp. 9.25% 20185		10,500			9,713
United Technologies Corp. 6.125% 2019		15,000			16,890
American Standard Inc. 7.625% 2010		16,501			16,845
Caterpillar Financial Services Corp., Series F, 4.85% 2012		8,335			8,724
Caterpillar Financial Services Corp., Series F, 6.20% 2013		2,500			2,668
Caterpillar Financial Services Corp., Series F, 5.50% 2016		5,000			5,111
Sequa Corp., Term Loan B, 3.85% 20145,6,8		19,263			16,149
Honeywell International Inc. 3.875% 2014		13,605			13,964
General Electric Co. 5.25% 2017		11,250			11,422
Atlas Copco AB 5.60% 20174		11,405			11,279
Kansas City Southern Railway Co. 13.00% 2013		8,625			9,617
Kansas City Southern Railway Co. 8.00% 2015		1,500			1,462
B/E Aerospace 8.50% 2018		9,525			9,501
Navios Maritime Holdings Inc. 9.50% 2014		11,095			9,378
CEVA Group PLC 10.00% 20144		8,825			6,575
CEVA Group PLC, Bridge Loan, 7.052% 20153,5,6,8		6,691			2,743
RBS Global, Inc. and Rexnord LLC 9.50% 2014		7,800			6,825
RBS Global, Inc. and Rexnord LLC 8.875% 2016		575			434
Esterline Technologies Corp. 6.625% 2017		7,500			7,050
Esco Corp. 4.504% 20134,5		3,725			3,148
Esco Corp. 8.625% 20134		4,000			3,700
TransDigm Inc. 7.75% 2014		6,865			6,779
Interface Inc. 11.375% 20134		5,600			5,922
H&E Equipment Services, Inc. 8.375% 2016		6,800			5,746
Atrium Companies, Inc., Term Loan B, 11.75% 20125,6,8,10		12,945			5,449
Atrium Companies, Inc. 15.00% 20124,10		7,408			148
John Deere Capital Corp. 5.40% 2011		2,000			2,144
John Deere Capital Corp. 5.10% 2013		500			536
John Deere Capital Corp., Series D, 5.50% 2017		2,500			2,603
Lockheed Martin Corp. 4.121% 2013		5,000			5,141
RSC Holdings III, LLC, Second Lien Term Loan B, 4.08% 20135,6,8		6,105			4,830
Accuride Corp. 8.50% 2015		9,655			1,762
RSC Equipment Rental, Inc. and RSC Holdings III, LLC 9.50% 2014		1,375			1,186
Alion Science and Technology Corp. 10.25% 2015		1,740			940
					1,286,806


HEALTH CARE — 1.93%
Tenet Healthcare Corp. 7.375% 2013		18,620			18,015
Tenet Healthcare Corp. 9.00% 20154		1,672			1,772
Tenet Healthcare Corp. 9.25% 2015		11,200			11,144
Tenet Healthcare Corp. 10.00% 20184		1,672			1,856
Tenet Healthcare Corp. 8.875% 20194		111,500			118,190
HealthSouth Corp. 7.218% 20145		40,525			38,093
HealthSouth Corp. 10.75% 2016		84,200			88,620
Boston Scientific Corp. 5.45% 2014		12,950			12,675
Boston Scientific Corp. 6.40% 2016		30,623			30,011
Boston Scientific Corp. 5.125% 2017		22,737			20,350
Boston Scientific Corp. 7.00% 2035		59,710			52,545
HCA Inc., Term Loan B, 2.848% 20135,6,8		25,220			23,742
HCA Inc. 9.125% 2014		5,090			5,255
HCA Inc. 9.25% 2016		5,480			5,727
HCA Inc. 9.625% 20165,10		3,000			3,135
HCA Inc. 8.50% 20194		50,980			52,509
HCA Inc. 7.875% 20204		21,365			21,018
Roche Holdings Inc. 4.50% 20124		33,000			34,803
Roche Holdings Inc. 6.00% 20194		45,000			49,089
Elan Finance PLC and Elan Finance Corp. 4.883% 20115		20,140			19,234
Elan Finance PLC and Elan Finance Corp. 7.75% 2011		15,911			15,871
Elan Finance PLC and Elan Finance Corp. 4.793% 20135		14,285			12,714
Elan Finance PLC and Elan Finance Corp. 8.875% 2013		22,665			22,325
Abbott Laboratories 5.60% 2017		17,480			19,022
Abbott Laboratories 5.125% 2019		44,000			46,572
VWR Funding, Inc. 11.25% 20155,10		70,410			62,313
Warner Chilcott Corp. 8.75% 2015		41,924			42,134
Pfizer Inc. 4.45% 2012		13,000			13,772
Pfizer Inc. 5.35% 2015		20,000			22,162
PTS Acquisition Corp. 9.50% 20155,10		56,135			35,926
Coventry Health Care, Inc. 5.875% 2012		8,000			7,861
Coventry Health Care, Inc. 6.30% 2014		26,750			24,181
Coventry Health Care, Inc. 5.95% 2017		2,000			1,683
Cardinal Health, Inc. 4.00% 2015		25,000			22,632
Cardinal Health, Inc. 5.80% 2016		10,000			9,867
GlaxoSmithKline Capital Inc. 4.85% 2013		13,500			14,338
GlaxoSmithKline Capital Inc. 5.65% 2018		7,705			8,379
GlaxoSmithKline Capital Inc. 6.375% 2038		8,100			9,358
Team Finance LLC and Health Finance Corp. 11.25% 2013		26,600			27,398
Novartis Capital Corp. 4.125% 2014		17,250			18,009
Schering-Plough Corp. 6.00% 2017		13,843			15,264
Express Scripts Inc. 5.25% 2012		3,160			3,340
Express Scripts Inc. 7.25% 2019		8,985			10,372
UnitedHealth Group 6.00% 2017		12,430			12,638
Surgical Care Affiliates, Inc. 9.625% 20154,5,10		6,289			4,622
Surgical Care Affiliates, Inc. 10.00% 20174		9,500			6,792
Symbion Inc. 11.75% 20155,10		15,786			11,050
WellPoint, Inc. 6.00% 2014		10,000			10,407
Humana Inc. 6.45% 20163		9,375			8,766
Viant Holdings Inc. 10.125% 20174		8,335			7,043
Merck & Co., Inc. 5.00% 2019		6,000			6,242
Biogen Idec Inc. 6.00% 2013		6,000			6,204
Hospira, Inc. 5.55% 2012		5,295			5,517
United Surgical Partners International Inc. 9.25% 20175,10		3,265			2,808
Bausch & Lomb Inc. 9.875% 2015		2,250			2,256
CHS/Community Health Systems, Inc. 8.875% 2015		205			212
					1,157,833


INFORMATION TECHNOLOGY — 1.69%
NXP BV and NXP Funding LLC 3.259% 20135		128,470			79,170
NXP BV and NXP Funding LLC 10.00% 20133,12		37,639			33,687
NXP BV and NXP Funding LLC 7.875% 2014		88,940			62,258
NXP BV and NXP Funding LLC 9.50% 2015		116,350			57,302
Electronic Data Systems Corp., Series B, 6.00% 20135		100,425			110,540
Hewlett-Packard Co. 6.125% 2014		35,000			39,345
Hewlett-Packard Co. 5.50% 2018		9,500			10,292
Electronic Data Systems Corp. 7.45% 2029		6,555			8,134
Sanmina-SCI Corp. 3.379% 20104,5		1,732			1,715
Sanmina-SCI Corp. 6.75% 2013		28,475			26,055
Sanmina-SCI Corp. 3.379% 20144,5		23,750			20,781
Sanmina-SCI Corp. 8.125% 2016		72,305			64,351
Freescale Semiconductor, Inc., Term Loan B, 2.059% 20135,6,8		61,193			45,305
Freescale Semiconductor, Inc. 4.504% 20145		15,500			8,293
Freescale Semiconductor, Inc. 8.875% 2014		47,875			32,316
Freescale Semiconductor, Inc. 10.125% 2016		18,374			9,554
Jabil Circuit, Inc. 5.875% 2010		49,890			51,511
Jabil Circuit, Inc. 8.25% 2018		40,725			40,114
First Data Corp., Term Loan B2, 3.035% 20145,6,8		73,332			62,439
First Data Corp. 9.875% 20154		12,500			10,609
SunGard Data Systems Inc. 9.125% 2013		48,785			50,005
KLA-Tencor Corp. 6.90% 2018		50,500			48,967
National Semiconductor Corp. 6.15% 2012		20,250			20,105
National Semiconductor Corp. 6.60% 2017		7,250			6,614
Ceridian Corp. 11.25% 2015		28,425			24,374
Celestica Inc. 7.625% 2013		23,320			23,670
Cisco Systems, Inc. 4.95% 2019		20,000			21,047
Hughes Communications, Inc. 9.50% 2014		15,750			15,829
Serena Software, Inc. 10.375% 2016		13,430			12,691
Oracle Corp. 3.75% 2014		10,000			10,325
Sensata Technologies BV, Term Loan B, 2.246% 20135,6,8		3,753			3,159
Sensata Technologies BV 8.00% 20145		6,625			5,399
					1,015,956


CONSUMER STAPLES — 1.50%
Altria Group, Inc. 8.50% 2013		20,000			23,125
Altria Group, Inc. 9.70% 2018		68,000			82,821
Altria Group, Inc. 9.25% 2019		84,485			101,205
Altria Group, Inc. 9.95% 2038		23,500			30,026
Altria Group, Inc. 10.20% 2039		18,000			23,489
PepsiCo, Inc. 7.90% 2018		65,000			81,942
Diageo Capital PLC 7.375% 2014		47,510			54,629
Diageo Capital PLC 5.50% 2016		7,490			7,876
SUPERVALU INC., Term Loan B, 1.535% 20125,6,8		1,518			1,464
SUPERVALU INC. 7.50% 2012		3,323			3,365
Albertson’s, Inc. 7.25% 2013		14,122			13,910
SUPERVALU INC. 7.50% 2014		1,000			973
SUPERVALU INC. 8.00% 2016		14,700			14,663
Albertson’s, Inc. 8.00% 2031		12,650			11,069
Kroger Co. 7.50% 2014		15,000			17,095
Kroger Co. 6.40% 2017		17,950			19,626
Kroger Co. 6.80% 2018		830			939
Kroger Co. 6.15% 2020		2,595			2,775
Stater Bros. Holdings Inc. 8.125% 2012		22,625			22,964
Stater Bros. Holdings Inc. 7.75% 2015		17,750			17,218
Anheuser-Busch InBev NV 7.75% 20194		25,000			29,250
British American Tobacco International Finance PLC 9.50% 20184		22,520			28,106
Duane Reade Inc. 9.75% 2011		14,120			13,485
Duane Reade Inc. 11.75% 20154		14,150			13,785
CVS Caremark Corp. 0.968% 20105		5,000			4,985
CVS Caremark Corp. 5.789% 20264,6		4,250			3,688
CVS Caremark Corp. 6.036% 20286		13,145			12,198
CVS Caremark Corp. 6.943% 20306		5,819			5,659
Coca-Cola Co. 4.875% 2019		25,000			26,271
Wesfarmers Ltd. 6.998% 20134		25,000			26,074
Rite Aid Corp., Term Loan T4 9.50% 20155,6,8		10,000			10,300
Rite Aid Corp. 9.75% 20164		10,000			10,600
Rite Aid Corp. 7.70% 2027		8,000			3,840
Rite Aid Corp. 6.875% 2028		2,300			1,046
Kraft Foods Inc. 6.75% 2014		10,820			12,170
Kraft Foods Inc. 6.875% 2038		10,875			12,453
Tyson Foods, Inc. 10.50% 20144		6,050			6,746
Tyson Foods, Inc. 7.85% 20165		11,500			11,672
Unilever Capital Corp. 3.65% 2014		17,500			17,923
Procter & Gamble Co. 3.50% 2015		17,250			17,596
Kimberly-Clark Corp. 7.50% 2018		13,500			16,561
Safeway Inc. 6.25% 2014		7,000			7,677
Safeway Inc. 6.35% 2017		8,000			8,776
Constellation Brands, Inc. 8.125% 2012		9,250			9,389
Constellation Brands, Inc. 8.375% 2014		3,675			3,822
Constellation Brands, Inc. 7.25% 2017		3,000			2,947
H.J. Heinz Co. 15.59% 20114,5		11,800			16,015
Vitamin Shoppe Industries Inc. 8.383% 20125		11,650			11,126
Smithfield Foods, Inc., Series B, 7.75% 2013		2,800			2,394
Smithfield Foods, Inc. 10.00% 20144		3,825			4,007
Dole Food Co., Inc. 8.875% 2011		6,085			6,070
Delhaize Group 6.50% 2017		3,850			4,072
Elizabeth Arden, Inc. 7.75% 2014		3,150			2,835
Pilgrim’s Pride Corp. 7.625% 20159		2,700			2,504
					897,216


ENERGY — 1.39%
TransCanada PipeLines Ltd. 6.50% 2018		19,595			22,233
TransCanada PipeLines Ltd. 7.125% 2019		19,060			22,671
TransCanada PipeLines Ltd. 6.20% 2037		400			434
TransCanada PipeLines Ltd. 7.625% 2039		11,000			14,018
TransCanada PipeLines Ltd. 6.35% 20675		82,975			64,813
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20094,6		5,406			5,400
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20096		104			104
Ras Laffan Liquefied Natural Gas III 5.50% 20144		2,950			3,030
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20144,6		13,329			14,664
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20146		4,325			4,758
Ras Laffan Liquefied Natural Gas III 6.75% 20194		4,715			4,924
Ras Laffan Liquefied Natural Gas II 5.298% 20204,6		44,850			43,719
Ras Laffan Liquefied Natural Gas III 5.838% 20274,6		52,650			46,808
Williams Companies, Inc. 2.597% 20104,5		8,000			7,603
Williams Companies, Inc. 6.375% 20104		4,700			4,795
Transcontinental Gas Pipe Line Corp., Series B, 7.00% 2011		10,000			10,750
Williams Companies, Inc. 7.125% 2011		38,750			40,697
Williams Companies, Inc. 8.125% 2012		14,810			15,901
Williams Companies, Inc. 8.75% 20204		5,625			6,367
Williams Companies, Inc. 7.875% 2021		14,900			16,236
Williams Companies, Inc. 8.75% 2032		10,530			11,904
Enbridge Energy Partners, LP, Series B, 6.50% 2018		5,225			5,422
Enbridge Energy Partners, LP 9.875% 2019		15,750			19,384
Enbridge Energy Partners, LP, Series B, 7.50% 2038		6,000			6,867
Enbridge Energy Partners, LP 8.05% 20775		20,045			15,264
Gaz Capital SA 6.51% 20224		26,200			21,091
Gaz Capital SA 7.288% 20374		20,650			16,262
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20144,6		22,398			21,054
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20146		10,217			9,604
Kinder Morgan Energy Partners LP 5.85% 2012		2,400			2,537
Kinder Morgan Energy Partners LP 5.125% 2014		10,325			10,661
Kinder Morgan Energy Partners LP 6.00% 2017		2,950			3,039
Kinder Morgan Energy Partners LP 9.00% 2019		11,770			14,357
Energy Transfer Partners, LP 8.50% 2014		10,860			12,562
Energy Transfer Partners, LP 9.00% 2019		6,535			8,027
Energy Transfer Partners, LP 9.70% 2019		7,140			8,967
Chevron Corp. 4.95% 2019		25,000			26,617
Premcor Refining Group Inc. 6.125% 2011		14,500			14,961
Premcor Refining Group Inc. 6.75% 2011		11,150			11,464
Drummond Co., Inc. 7.375% 20163,4		30,955			26,002
Shell International Finance B.V. 4.00% 2014		20,000			21,040
Petroplus Finance Ltd. 6.75% 20144		3,750			3,356
Petroplus Finance Ltd. 7.00% 20174		20,550			17,673
Enbridge Inc. 5.60% 2017		20,400			20,428
Arch Coal Inc. 8.75% 20164		20,000			20,300
ConocoPhillips 5.75% 2019		17,250			18,894
Enterprise Products Operating LP 4.95% 2010		2,400			2,443
Enterprise Products Operating LLC 5.65% 2013		10,000			10,480
Sunoco, Inc. 4.875% 2014		5,310			5,031
Sunoco, Inc. 5.75% 2017		8,000			7,611
Rockies Express Pipeline LLC 6.85% 20184		10,000			10,999
StatoilHydro ASA 3.875% 2014		10,000			10,299
BP Capital Markets PLC 3.625% 20144		10,000			10,257
Pemex Project Funding Master Trust 5.75% 2018		4,500			4,455
Pemex Project Funding Master Trust 6.625% 2035		5,000			4,746
Qatar Petroleum 5.579% 20114,6		8,890			9,127
XTO Energy Inc. 6.25% 2017		7,750			8,448
Canadian Natural Resources Ltd. 5.70% 2017		7,350			7,738
Williams Partners L.P. and Williams Partners Finance Corp. 7.25% 2017		7,200			7,066
TEPPCO Partners LP 7.00% 20675		7,475			5,781
Husky Energy Inc. 5.90% 2014		120			129
Husky Energy Inc. 7.25% 2019		155			178
Husky Energy Inc. 6.80% 2037		4,425			4,786
PETRONAS Capital Ltd. 7.00% 20124		4,000			4,423
Delek & Avner-Yam Tethys Ltd. 5.326% 20134,6		2,273			2,138
TNK-BP Finance SA 7.50% 20164		1,500			1,391
					835,188


UTILITIES — 1.38%
Edison Mission Energy 7.50% 2013		35,525			32,594
Edison Mission Energy 7.75% 2016		35,300			29,829
Midwest Generation, LLC, Series B, 8.56% 20166		11,625			11,683
Edison Mission Energy 7.00% 2017		19,525			15,644
Edison Mission Energy 7.20% 2019		39,450			30,081
Homer City Funding LLC 8.734% 20266		12,459			11,244
Edison Mission Energy 7.625% 2027		20,850			13,761
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2006-E, 5.55% 2037		6,500			6,788
Texas Competitive Electric Holdings Co. LLC, Term Loan B2, 3.802% 20145,6,8		19,182			14,899
Texas Competitive Electric Holdings Co. LLC, Series A, 10.25% 2015		111,144			87,804
Texas Competitive Electric Holdings Co. LLC, Series B, 10.25% 2015		41,665			32,915
Texas Competitive Electric Holdings Co. LLC 11.25% 20165,10		16,794			10,748
AES Corp. 9.375% 2010		4,802			4,934
AES Corp. 8.75% 20134		34,656			35,522
AES Corp. 7.75% 2015		10,000			9,725
AES Red Oak, LLC, Series A, 8.54% 20196		34,497			31,909
AES Red Oak, LLC, Series B, 9.20% 20296		7,000			6,125
MidAmerican Energy Co. 4.65% 2014		3,200			3,382
MidAmerican Energy Co. 5.95% 2017		10,625			11,625
MidAmerican Energy Holdings Co. 5.75% 2018		15,320			16,367
PacifiCorp. 5.50% 2019		5,000			5,411
MidAmerican Energy Holdings Co. 6.125% 2036		10,150			10,819
MidAmerican Energy Holdings Co. 6.50% 2037		3,000			3,360
Israel Electric Corp. Ltd. 7.25% 20194		1,800			1,860
Israel Electric Corp. Ltd. 9.375% 20204		36,715			42,426
Israel Electric Corp. Ltd. 8.10% 20964		4,905			4,575
Nevada Power Co., General and Refunding Mortgage Bonds, Series A, 8.25% 2011		6,000			6,537
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series H, 6.25% 2012		7,500			7,815
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012		4,250			4,538
Sierra Pacific Resources 8.625% 2014		2,725			2,780
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015		5,675			5,888
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016		13,700			14,132
Sierra Pacific Resources 6.75% 2017		3,000			2,792
NRG Energy, Inc. 7.25% 2014		7,825			7,708
NRG Energy, Inc. 7.375% 2016		36,625			35,526
National Rural Utilities Cooperative Finance Corp. 5.50% 2013		27,850			29,883
National Rural Utilities Cooperative Finance Corp., Collateral Trust Bonds, 10.375% 2018		6,000			7,777
Cilcorp Inc. 8.70% 2009		9,000			9,090
Ameren Corp. 8.875% 2014		10,000			10,714
Union Electric Co. 5.40% 2016		8,000			7,903
Cilcorp Inc. 9.375% 2029		3,000			3,705
Consumers Energy Co., First Mortgage Bonds, 6.70% 2019		26,800			30,389
Electricité de France SA 5.50% 20144		15,000			16,340
Electricité de France SA 6.95% 20394		8,000			9,760
PSEG Power LLC 7.75% 2011		7,500			8,103
PSEG Power LLC 5.00% 2014		10,000			10,384
Public Service Electric and Gas Co., Series E, 5.30% 2018		1,000			1,063
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20164		9,250			8,909
Abu Dhabi National Energy Co. PJSC (TAQA) 6.165% 20174		4,000			3,858
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20364		7,750			6,752
Alabama Power Co., Series R, 4.70% 2010		1,250			1,297
Alabama Power Co., Series 2008-B, 5.80% 2013		4,500			4,939
Alabama Power Co., Series Q, 5.50% 2017		1,000			1,073
Alabama Power Co. 6.00% 2039		9,000			9,874
PG&E Corp. 5.75% 2014		9,000			9,829
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034		4,000			4,355
E.ON International Finance BV 5.80% 20184		13,000			13,893
Progress Energy, Inc. 6.05% 2014		4,500			4,858
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc. 5.25% 2015		6,000			6,356
Virginia Electric and Power Co., Series 2003-A, 4.75% 2013		6,000			6,284
Virginia Electric and Power Co., Series B, 5.95% 2017		4,500			4,931
Veolia Environnement 5.25% 2013		8,000			8,329
AES Panamá, SA 6.35% 20164		4,500			4,289
Enersis SA 7.375% 2014		3,500			3,790
Appalachian Power Co., Series M, 5.55% 2011		3,000			3,110
Intergen Power 9.00% 20174		3,000			2,970
FPL Energy National Wind Portfolio, LLC 6.125% 20194,6		1,572			1,463
					830,016


MATERIALS — 0.73%
Dow Chemical Co. 7.60% 2014		40,450			43,998
Dow Chemical Co. 8.55% 2019		38,300			42,089
Dow Chemical Co. 9.40% 2039		1,160			1,398
International Paper Co. 7.40% 2014		12,500			13,371
International Paper Co. 7.95% 2018		36,545			38,990
International Paper Co. 9.375% 2019		15,385			18,027
Owens-Brockway Glass Container Inc. 8.25% 2013		16,000			16,440
Owens-Brockway Glass Container Inc. 7.375% 20164		18,055			17,965
Nalco Co. 7.75% 2011		3,370			3,404
Nalco Co. 8.875% 2013		1,000			1,040
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 9.00% 2014		7,200			7,308
Nalco Co., Term Loan B, 6.50% 20165,6,8		5,540			5,588
Nalco Co. 8.25% 20174		11,445			11,960
ArcelorMittal 6.125% 2018		26,525			25,662
Rio Tinto Finance (USA) Ltd. 5.875% 2013		10,000			10,601
Rio Tinto Finance (USA) Ltd. 8.95% 2014		6,500			7,560
Rio Tinto Finance (USA) Ltd. 9.00% 2019		5,000			5,892
Freeport-McMoRan Copper & Gold Inc. 6.875% 2014		3,100			3,210
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015		16,880			17,871
BHP Billiton Finance (USA) Ltd. 5.50% 2014		17,595			19,132
Domtar Corp. 5.375% 2013		2,350			2,086
Domtar Corp. 7.125% 2015		17,145			15,431
Georgia-Pacific Corp. 8.125% 2011		4,000			4,120
Georgia-Pacific Corp., First Lien Term Loan B, 2.65% 20125,6,8		4,832			4,689
Georgia-Pacific LLC 8.25% 20164		7,315			7,608
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		16,155			10,501
Georgia Gulf Corp., Term Loan, Revolver, 6.50% 20111,5,6,8,13		4,250			3,889
Georgia Gulf Corp., Term Loan B, 9.50% 20131,5,6,8		6,246			5,758
Graphic Packaging International, Inc. 8.50% 2011		6,088			6,134
Graphic Packaging International, Inc. 9.50% 20174		2,150			2,150
Jefferson Smurfit Corp. (U.S.) 8.25% 20129		1,205			615
Stone Container Corp. 8.375% 20129		5,438			2,828
Jefferson Smurfit Corp. (U.S.) 7.50% 20139		3,630			1,806
Smurfit-Stone Container Enterprises, Inc. 8.00% 20179		5,070			2,573
Stora Enso Oyj 6.404% 20164		4,500			3,334
Stora Enso Oyj 7.25% 20364		5,445			3,164
FMG Finance Pty Ltd. 10.625% 20164		6,000			6,225
Airgas, Inc. 6.25% 2014		2,450			2,456
Airgas, Inc. 7.125% 20184		3,500			3,412
AMH Holdings, Inc. 11.25% 2014		12,905			5,549
Ashland Inc., Term Loan B, 7.65% 20145,6,8		3,329			3,392
Weyerhaeuser Co. 7.375% 20321		1,500			1,287
Weyerhaeuser Co. 6.875% 20331		2,500			1,939
Rockwood Specialties Group, Inc. 7.50% 2014		3,240			3,127
AEP Industries Inc. 7.875% 2013		3,010			2,732
UPM-Kymmene Corp. 5.625% 20144		3,000			2,403
Arbermarle Corp. 5.10% 2015		2,570			2,280
CRH America, Inc. 6.00% 2016		110			103
CRH America, Inc. 8.125% 20183		2,045			2,106
Plastipak Holdings, Inc. 8.50% 20154		2,275			2,173
Momentive Performance Materials Inc. 9.75% 2014		2,665			1,746
Smurfit Capital Funding PLC 7.50% 2025		2,175			1,642
Corporación Nacional del Cobre de Chile 6.375% 20124		1,500			1,638
Rock-Tenn Co. 9.25% 20164		1,430			1,512
Praxair, Inc. 4.375% 2014		1,000			1,054
C10 Capital (SPV) Ltd. 6.722% (undated)4,5		1,300			735
Neenah Paper, Inc. 7.375% 2014		90			63
					435,766


ASSET-BACKED OBLIGATIONS6 — 0.70%
Honda Auto Receivables Owner Trust, Series 2006-3, Class A-4, 5.11% 2012		17,500			17,894
Honda Auto Receivables Owner Trust, Series 2007-2, Class A-4, 5.57% 2013		24,500			25,717
AmeriCredit Automobile Receivables Trust, Series 2007-C-M, Class A-4-A, MBIA insured, 5.55% 2014		12,000			11,608
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-4-A, FSA insured, 5.56% 2014		7,000			6,339
AmeriCredit Automobile Receivables Trust, Series 2008-A-F, Class A-4, FSA insured, 6.96% 2014		15,000			13,820
Drive Auto Receivables Trust, Series 2005-3, Class A-4, FSA insured, 5.09% 20134		12,707			13,090
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20144		15,265			15,414
CPS Auto Receivables Trust, Series 2006-A, Class 1-A-4, FSA insured, 5.33% 20124		4,870			4,737
CPS Auto Receivables Trust, Series 2006-B, Class A-4, MBIA insured, 5.81% 20124		2,321			2,333
CPS Auto Receivables Trust, Series 2006-C, Class A-4, XLCA insured, 5.14% 20134		9,528			9,165
CPS Auto Receivables Trust, Series 2007-B, Class A-4, FSA insured, 5.60% 20144		10,000			10,016
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		1,433			1,440
UPFC Auto Receivables Trust, Series 2007-B, Class A-3, AMBAC insured, 6.15% 2014		23,250			23,652
ARG Funding Corp., Series 2005-2, Class A-4, AMBAC insured, 4.84% 20114		20,000			19,168
Conseco Finance Home Loan Trust, Series 1999-G, Class B-2, 10.96% 2029		14,099			5,360
Green Tree Financial Corp., Series 2008-MH1, Class A-3, 8.97% 20384		13,039			12,588
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012		9,024			9,190
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-3, 5.12% 2014		8,040			8,563
American Express Issuance Trust, Series 2005-1, Class C, 0.618% 20115		17,500			16,235
Nissan Auto Lease Trust, Series 2008-A, Class A-3a, 5.14% 2011		14,000			14,474
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-3, FSA insured, 5.17% 2011		891			894
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.18% 2013		11,500			11,025
BMW Vehicle Owner Trust, Series 2006-A, Class A-4, 5.07% 2011		10,381			10,609
Chase Issuance Trust, Series 2008-4, Class A, 4.65% 2015		10,000			10,368
CWHEQ Revolving Home Equity Loan Trust, Series 2006-I, Class 2-A, FSA insured, 0.428% 20375		6,019			3,586
CWHEQ Revolving Home Equity Loan Trust, Series 2007-C, Class A, FGIC insured, 0.438% 20375		25,079			6,070
Washington Mutual Master Note Trust, Series 2007-C1, Class C-1, 0.688% 20144,5		7,550			7,261
Washington Mutual Master Note Trust, Series 2006-C2A, Class C-2, 0.788% 20154,5		2,300			1,976
J.P. Morgan Mortgage Acquisition Corp., Series 2005-FRE1, Class A-F-4, 5.488% 20355		10,476			8,732
AEP Texas Central Transitioning Funding II LLC, Secured Transition Bonds, Series A, Class A-3, 5.09% 2017		8,265			8,680
First Horizon ABS Trust, Series 2006-HE2, Class A, FSA insured, 0.415% 20265		4,720			2,068
First Horizon ABS Trust, Series 2007-HE1, Class A, FSA insured, 0.405% 20295		9,101			4,621
Prestige Auto Receivables Trust, Series 2005-1A, Class A-2, FSA insured, 4.37% 20124		2,199			2,211
Prestige Auto Receivables Trust, Series 2006-1A, Class A-2, FSA insured, 5.25% 20134		4,346			4,402
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011		2,200			2,207
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012		4,368			4,373
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 20114		6,375			6,256
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-2, FGIC insured, 6.054% 20375		5,000			2,110
GMAC Mortgage Loan Trust, Series 2007-HE2, Class A-3, FGIC insured, 6.193% 20375		10,000			3,783
Advanta Business Card Master Trust, Series 2005-A2, Class A-2, 0.419% 20135		5,932			5,457
Home Equity Asset Trust, Series 2004-7, Class M-1, 0.905% 20355		10,000			5,348
Capital One Multi-asset Execution Trust, Series 2006-1, Class C, 0.578% 20145		2,000			1,674
Capital One Multi-asset Execution Trust, Series 2003-3, Class C, 2.538% 20165		4,600			3,495
Citibank Credit Card Issuance Trust, Series 2008, Class C6, 6.30% 2014		2,000			1,953
Citibank Credit Card Issuance Trust, Series 2008, Class A5, 4.85% 2015		3,000			3,119
MBNA Credit Card Master Note Trust, Series 2001-C, Class C, 7.10% 20134		5,000			4,907
Susquehanna Auto Lease Trust, Series 2007-1, Class A-3, 5.25% 20104		4,879			4,899
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024		4,878			4,880
RAMP Trust, Series 2003-RZ4, Class A-7, 4.79% 20335		5,319			4,870
MBNA Master Credit Card Trust II, Series 2000-H, Class B, 0.888% 20135		5,000			4,801
CarMax Auto Owner Trust, Series 2007-2, Class A-3, 5.23% 2011		3,987			4,065
Ameriquest Mortgage Securities Inc., Series 2003-12, Class M-1, 1.035% 20345		5,852			3,755
CWHEQ Home Equity Loan Trust, Series 2006-S2, Class A-5, FGIC insured, 5.753% 2027		9,468			3,637
Home Equity Mortgage Trust, Series 2006-2, Class 1A-1, 5.367% 20365		2,593			434
Home Equity Mortgage Trust, Series 2006-4, Class A-1, 5.671% 20365		5,377			489
Home Equity Mortgage Trust, Series 2006-6, Class 2A-1, 0.385% 20375		23,559			1,086
Home Equity Mortgage Trust, Series 2006-5, Class A-1, 5.50% 20375		13,952			1,341
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031		4,201			3,166
Residential Asset Securities Corp. Trust, Series 2003-KS6, Class A-2, 0.885% 20335		124			97
BA Credit Card Trust, Series 2007-2, Class C-2, 0.558% 20125		3,315			3,182
Metropolitan Asset Funding, Inc., Series 1998-A, Class B-1, 7.728% 20143,4		3,577			3,148
SACO I Trust, Series 2006-7, Class A, 0.415% 20365		17,441			1,322
SACO I Trust, Series 2006-12, Class I-A, 0.425% 20365		10,451			1,796
Residential Funding Mortgage Securities II, Inc., Series 2006-HSA2, Class A-I-5, FGIC insured, 5.63% 20365		9,341			2,844
First Franklin Mortgage Loan Trust, Series 2006-FFA, Class A-3, 0.405% 20265		13,956			1,317
NovaStar Mortgage Funding Trust, Series 2004-4, Class B-1, 1.985% 20355		7,500			606
Long Beach Mortgage Loan Trust, Series 2006-A, Class A-1, 0.375% 20365		15,894			524
Merrill Lynch Mortgage Investors Trust, Series 2007-SL1, Class A-1, 0.585% 20375		3,613			86
					420,333


BONDS & NOTES OF GOVERNMENTS & GOVERNMENT AGENCIES OUTSIDE THE U.S. — 0.20%
United Mexican States Government Global 6.375% 2013		14,765			16,131
United Mexican States Government Global 5.875% 2014		20,000			21,258
United Mexican States Government Global 11.375% 2016		9,118			12,309
United Mexican States Government Global 5.625% 2017		3,640			3,731
United Mexican States Government Global 6.75% 2034		7,740			8,011
United Mexican States Government Global 6.05% 2040		2,000			1,885
Russian Federation 8.25% 20106		667			686
Russian Federation 7.50% 20306		18,499			18,661
Polish Government 6.375% 2019		9,985			10,392
Brazil (Federal Republic of) Global 6.00% 2017		6,000			6,261
Brazil (Federal Republic of) Global 8.00% 20186		3,022			3,430
State of Qatar 9.75% 2030		4,000			5,360
Banque Centrale de Tunisie 7.375% 2012		3,500			3,798
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014		2,500			3,175
Corporación Andina de Fomento 5.75% 2017		2,000			1,935
Peru (Republic of) 7.125% 2019		1,080			1,172
South Africa (Republic of) 6.875% 2019		750			823
					119,018


MUNICIPALS — 0.00%
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds,
Series 2002-A, Class A, 6.72% 2025		3,087			2,522
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
Series 2001-A, Class A, 6.36% 2025		534			463
					2,985


MISCELLANEOUS — 0.02%
Other bonds & notes in initial period of acquisition					10,168


Total bonds & notes (cost: $21,871,898,000)					20,750,646



Short-term securities — 3.87%

Federal Home Loan Bank 0.163%–0.85% due 8/3–10/27/2009		738,813			738,656
Fannie Mae 0.19%–0.45% due 8/17–11/17/2009		387,200			387,067
U.S. Treasury Bills 0.135%–0.40% due 8/6–10/8/2009		240,300			240,262
Freddie Mac 0.22%–0.51% due 8/10–10/13/2009		231,400			231,353
Pfizer Inc 0.21%–0.25% due 8/18–9/9/20094		149,991			149,954
Procter & Gamble International Funding S.C.A. 0.20% due 8/11–9/14/20094		95,100			95,082
Park Avenue Receivables Co., LLC 0.25% due 8/4–8/12/20094		47,100			47,097
JPMorgan Chase & Co. 0.18% due 8/4/2009		25,000			24,999
Jupiter Securitization Co., LLC 0.27% due 9/11/20094		12,500			12,496
Abbott Laboratories 0.20%–0.23% due 8/18–9/21/20094		72,800			72,786
Private Export Funding Corp. 0.22%–0.26% due 8/12–9/10/20094		56,100			56,096
Wal-Mart Stores Inc. 0.55% due 9/21/20094		45,000			44,981
Federal Farm Credit Banks 0.70% due 12/22/2009		44,600			44,542
Emerson Electric Co. 0.20%–0.21% due 8/19–8/24/20094		42,200			42,194
Coca-Cola Co. 0.23% due 8/20/20094		40,700			40,695
NetJets Inc. 0.21% due 8/13/20094		30,000			29,998
E.I. duPont de Nemours and Co. 0.18% due 8/31/20094		25,000			24,996
Johnson & Johnson 0.20% due 8/13/20094		21,200			21,199
Merck & Co. Inc. 0.20% due 8/17/2009		17,200			17,198

Total short-term securities (cost: $2,321,404,000)					2,321,651


Total investment securities (cost: $62,902,190,000)					59,663,800
Other assets less liabilities					285,369

Net assets				$	59,949,169

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

1	Represents an affiliated company as defined under the Investment Company Act of 1940.
2	Security did not produce income during the last 12 months.

3	Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, was $629,071,000, which represented 1.05% of the net assets of the fund.

Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $4,802,201,000, which represented 8.01% of the net assets of the fund.

5	Coupon rate may change periodically.

6	Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

7	Index-linked bond whose principal amount moves with a government retail price index.

8	Loan participations and assignments; may be subject to legal or contractual restrictions on resale. The total value of all such loans was $802,748,000, which represented 1.34% of the net assets of the fund.

9	Scheduled interest and/or principal payment was not received.

10	Payment in kind; the issuer has the option of paying additional securities in lieu of cash.

11	Step bond; coupon rate will increase at a later date.

12	Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 7/17/2009 at a cost of $29,405,000) may be subject to legal or contractual restrictions on resale.

13	Unfunded loan commitment; the total value of all unfunded loan commitments was $1,711,000, which represented less than .01% of the net assets of the fund.

Key to abbreviation

ADR = American Depositary Receipts

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s summary prospectus and prospectus, which can be obtained from your financial professional and should be read carefully before investing.

MFGEFP-906-0909O-S21428

	Beginning shares or principal amount		Additions		Reductions		Ending shares or principal amount			Dividend or interest income (000	)		Value of affiliates at 7/31/09 (000	)
Waste Management, Inc.		19,150,500		7,685,000		-		26,835,500	$	25,484		$	754,346
WMX Technologies, Inc. 7.10% 2026	$	10,125,000		-		-	$	10,125,000		719			10,752
Waste Management, Inc. 7.375% 2019		-	$	7,200,000		-	$	7,200,000		228			8,193
Waste Management, Inc. 5.00% 2014	$	7,000,000		-		-	$	7,000,000		352			6,961
Waste Management, Inc. 6.50% 2008	$	5,000,000		-	$	5,000,000		-		6			-
Microchip Technology Inc.		14,128,000		-		-		14,128,000		19,143			380,467
Weyerhaeuser Co.		10,728,000		-		-		10,728,000		12,337			375,909
Weyerhaeuser Co. 6.875% 2033	$	2,500,000		-		-	$	2,500,000		174			1,939
Weyerhaeuser Co. 7.375% 2032	$	3,500,000		-	$	2,000,000	$	1,500,000		257			1,287
MeadWestvaco Corp.		11,500,696		-		900,000		10,600,696		10,374			206,608
Hospitality Properties Trust		4,500,000		1,500,000		-		6,000,000		7,154			94,740
Hospitality Properties Trust 6.75% 2013	$	18,365,000	$	24,665,000	$	14,115,000	$	28,915,000		3,108			26,956
Hospitality Properties Trust 6.70% 2018	$	16,175,000		-		-	$	16,175,000		1,088			13,144
Hospitality Properties Trust 6.30% 2016	$	2,368,000	$	3,687,000	$	3,655,000	$	2,400,000		260			1,950
Hospitality Properties Trust 5.125% 2015	$	2,160,000	$	3,710,000	$	3,710,000	$	2,160,000		276			1,747
Hospitality Properties Trust 5.625% 2017	$	1,485,000	$	3,530,000	$	3,530,000	$	1,485,000		142			1,148
Hospitality Properties Trust 6.85% 2012		-	$	6,000,000	$	6,000,000		-		379			-
First Niagara Financial Group, Inc.		-		9,730,000		-		9,730,000		2,513			127,949
Alexandria Real Estate Equities, Inc.		-		2,450,000		-		2,450,000		2,272			93,369
Alexandria Real Estate Equities, Inc. 8.00% convertible notes 2029 (2)		-	$	463,000		-	$	463,000		1			521
De La Rue PLC		-		8,876,271		2,506,553		6,369,718		35,352			88,551
De La Rue PLC, Class B		-		6,982,526		6,982,526		-		-			-
Macquarie Korea Infrastructure Fund		21,023,070		518,008		-		21,541,078		6,345			88,477
Applied Industrial Technologies, Inc.		-		2,738,790		-		2,738,790		451			60,582
Georgia Gulf Corp. 10.00% convertible preferred (2) (4) (7)		-		2,545,684				2,545,684		-			35,212
Georgia Gulf Corp., Term Loan B, 9.50% 2013 (3) (5) (8)		-	$	6,246,177		-	$	6,246,177		-			5,758
Georgia Gulf Corp., Term Loan, Revolver, 6.50% 2011 (3) (5) (8) (9)		-	$	4,250,000		-	$	4,250,000		-			3,889
Georgia Gulf Corp. (2) (4) (7)		-		113,556		-		113,556		-			1,571
Clarent Hospital Corp. (4) (7)		484,684		-		-		484,684		-			24
Arthur J. Gallagher & Co. (10)		5,403,700		5,000,000		5,403,700		5,000,000		4,289			-
Goodman Fielder Ltd. (10)		67,000,000		-		67,000,000		-		5,717			-
Hershey Co. (10)		10,821,000		-		3,916,900		6,904,100		11,301			-
iStar Financial, Inc. 8.625% 2013 (10)	$	35,675,000	$	2,542,000	$	30,717,000	$	7,500,000		2,844			-
iStar Financial, Inc., Series B, 5.125% 2011 (10)	$	15,000,000	$	1,930,000	$	16,930,000		-		752			-
iStar Financial, Inc. 5.375% 2010 (10)	$	14,010,000		-	$	14,010,000		-		684			-
iStar Financial, Inc. 5.50% 2012 (10)	$	3,700,000	$	4,000,000	$	7,700,000		-		593			-
iStar Financial, Inc. 2.536% 2010 (10)	$	3,248,000	$	3,500,000	$	6,748,000		-		578			-
iStar Financial, Inc. 6.00% 2010 (10)	$	6,950,000		-	$	6,950,000		-		488			-
iStar Financial, Inc., Series B, 1.66% 2009 (10)		-	$	2,420,000	$	2,420,000		-		423			-
iStar Financial, Inc. 6.50% 2013 (10)	$	5,133,000		-	$	5,133,000		-		404			-
iStar Financial, Inc. 5.875% 2016 (10)		-	$	7,165,000	$	7,165,000		-		359			-
iStar Financial, Inc. 5.65% 2011 (10)	$	3,418,000	$	217,000	$	3,635,000		-		301			-
iStar Financial, Inc. 5.15% 2012 (10)		-	$	3,400,000	$	3,400,000		-		232			-
iStar Financial, Inc. 6.05% 2015 (10)	$	4,152,000	$	460,000	$	4,612,000		-		205			-
iStar Financial, Inc., Series B, 5.70% 2014 (10)	$	2,918,000		-	$	2,918,000		-		173			-
iStar Financial, Inc., Series B, 5.95% 2013 (10)	$	808,000		-	$	808,000		-		50			-
iStar Financial, Inc., Series F, 7.80% cumulative redeemable (10)		400,000		-		400,000		-		42			-
iStar Financial, Inc. 5.80% 2011 (10)		-	$	485,000	$	485,000		-		40			-
iStar Financial, Inc. (10)		8,574,350		-		8,574,350		-		-			-
Lite-On Technology Corp. (10)		107,917,127		8,789,585		116,706,712		-		8,242			-
Polaris Industries Inc. (10)		1,707,000		-		1,707,000		-		-			-

									$	166,132		$	2,392,050

Statement of assets and liabilities
at July 31, 2009	(dollars in thousands)

Assets:
Investment securities, at value:
Unaffiliated issuers (cost: $59,782,537)	$	57,271,750
Affiliated issuers (cost: $3,119,653)		2,392,050	$	59,663,800
Cash denominated in currencies other than U.S. dollars (cost: $2,915)				2,915
Cash				520
Receivables for:
Sales of investments		271,484
Sales of fund's shares		57,907
Dividends and interest		447,652
Other		1,163		778,206
				60,445,441
Liabilities:
Payables for:
Purchases of investments		365,317
Repurchases of fund's shares		83,694
Investment advisory services		12,111
Services provided by affiliates		32,462
Directors' deferred compensation		2,414
Other		274		496,272
Net assets at July 31, 2009			$	59,949,169

Net assets consist of:
Capital paid in on shares of capital stock			$	74,080,736
Undistributed net investment income				367,574
Accumulated net realized loss				(11,261,198	)
Net unrealized depreciation				(3,237,943	)
Net assets at July 31, 2009			$	59,949,169

(dollars and shares in thousands, except per-share amounts)
Total authorized capital stock - 5,500,000 shares, $.001 par value (4,274,747 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share*
Class A	$	45,569,324		3,244,718	$	14.04
Class B		2,835,081		203,370		13.94
Class C		5,636,893		405,110		13.91
Class F-1		1,801,398		128,463		14.02
Class F-2		349,533		24,893		14.04
Class 529-A		607,527		43,312		14.03
Class 529-B		91,477		6,545		13.98
Class 529-C		240,956		17,228		13.99
Class 529-E		28,956		2,069		14.00
Class 529-F-1		18,650		1,330		14.03
Class R-1		74,146		5,301		13.99
Class R-2		462,723		33,213		13.93
Class R-3		936,265		66,851		14.01
Class R-4		629,080		44,846		14.03
Class R-5		394,640		28,101		14.04
Class R-6		272,520		19,397		14.05

(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Classes A and 529-A, for which the maximum offering prices per share were $14.90 and $14.89, respectively.


See Notes to Financial Statements

Statement of operations
for the year ended July 31, 2009	(dollars in thousands)

Investment income:
Income:
Dividends (net of non-U.S. taxes of $70,570; also includes $151,016 from affiliates)	$	1,860,177
Interest (includes $15,116 from affiliates)		1,706,544		$	3,566,721

Fees and expenses*:
Investment advisory services		161,670
Distribution services		207,733
Transfer agent services		50,610
Administrative services		18,313
Reports to shareholders		5,678
Registration statement and prospectus		2,221
Directors' compensation		(3	)
Auditing and legal		157
Custodian		2,151
Other		2,551
Total fees and expenses before waiver		451,081
Less investment advisory services waiver		7,501
Total fees and expenses after waiver					443,580
Net investment income					3,123,141

Netrealized loss andunrealized depreciation on investments and currency:
Net realized loss on:
Investments (includes $494,644 net loss from affiliates)		(11,233,999	)
Currency transactions		(13,295	)		(11,247,294	)
Net unrealized depreciation on:
Investments		(2,332,205	)
Currency translations		(321	)		(2,332,526	)
Net realized loss and unrealized depreciation on investments and currency					(13,579,820	)
Net decrease in net assets resulting from operations				$	(10,456,679	)

(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

See Notes to Financial Statements



Statements of changes in net assets		(dollars in thousands)

	Year ended July 31
	2009			2008
Operations:
Net investment income	$	3,123,141		$	3,704,181
Net realized (loss) gain on investments and currency transactions		(11,247,294	)		1,080,635
Net unrealized depreciation on investments and currency translations		(2,332,526	)		(13,173,955	)
Net decrease in net assets resulting from operations		(10,456,679	)		(8,389,139	)

Dividends and distributions paid or accrued to shareholders:
Dividends from net investment income		(2,991,184	)		(3,903,711	)
Distributions from net realized gain on investments		-			(3,639,343	)
Total dividends and distributions paid or accrued to shareholders		(2,991,184	)		(7,543,054	)

Net capital share transactions		(3,089,104	)		6,122,868

Total decrease in net assets		(16,536,967	)		(9,809,325	)

Net assets:
Beginning of year		76,486,136			86,295,461
End of year (including undistributed
net investment income: $367,574 and $245,333, respectively)	$	59,949,169		$	76,486,136



See Notes to Financial Statements

(dollars in thousands)
Undistributed ordinary income	$	384,422
Post-October currency loss deferrals (realized during the period November 1, 2008, through July 31, 2009)*		(5,010	)
Capital loss carryforward expiring in 2017†		(1,328,267	)
Post-October capital loss deferrals (realized during the period November 1, 2008, through July 31, 2009)*		(9,914,222	)
Gross unrealized appreciation on investment securities		3,716,352
Gross unrealized depreciation on investment securities		(6,976,639	)
Net unrealized depreciation on investment securities		(3,260,287	)
Cost of investment securities		62,924,087
*These deferrals are considered incurred in the subsequent year.
†The capital loss carryforward will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains.

							Percent
				Value			of net
Common stocks - 57.24%	Shares				(000	)	assets

Consumer staples - 7.23%
Kraft Foods Inc., Class A		26,500,821		$	751,033			1.25	%
Philip Morris International Inc.		15,252,096			710,748			1.19
Coca-Cola Co.		9,000,000			448,560			.75
H.J. Heinz Co.		10,111,700			388,896			.65
Unilever NV, depository receipts		7,880,000			215,305
Unilever NV (New York registered)		5,051,750			137,408			.59
Hershey Co.		6,904,100			275,819			.46
Diageo PLC		15,650,000			245,136			.41
Other securities					1,161,514			1.93
					4,334,419			7.23

Industrials - 7.21%
Waste Management, Inc. (1)		26,835,500			754,346			1.26
United Technologies Corp.		11,560,000			629,673			1.05
Schneider Electric SA		5,311,115			482,508			.80
Emerson Electric Co.		11,245,000			409,093			.68
Other securities					2,047,768			3.42
					4,323,388			7.21

Telecommunication services - 7.07%
Verizon Communications Inc.		42,935,600			1,376,945			2.30
AT&T Inc.		45,359,621			1,189,783			1.99
Koninklijke KPN NV		45,739,757			687,459			1.15
Telefónica, SA		24,752,800			615,815			1.03
Other securities					366,039			.60
					4,236,041			7.07

Utilities - 6.57%
GDF Suez		22,188,284			847,707			1.41
Entergy Corp.		4,942,600			397,039			.66
Duke Energy Corp.		23,431,172			362,714			.61
FirstEnergy Corp.		8,096,500			333,576			.55
Exelon Corp.		5,300,000			269,558			.45
RWE AG		3,075,663			259,737			.43
E.ON AG		6,460,000			244,549			.41
Other securities					1,224,969			2.05
					3,939,849			6.57

Health care - 5.33%
Merck & Co., Inc.		34,875,000			1,046,599			1.75
Bristol-Myers Squibb Co.		33,025,500			717,974			1.20
Eli Lilly and Co.		12,890,000			449,732			.75
Pfizer Inc		24,050,000			383,117			.64
Other securities					597,736			.99
					3,195,158			5.33

Energy - 4.94%
Royal Dutch Shell PLC, Class B (ADR)		8,100,000			425,493
Royal Dutch Shell PLC, Class A (ADR)		5,000,000			263,200
Royal Dutch Shell PLC, Class B		3,797,147			98,537			1.31
Chevron Corp.		10,265,000			713,109			1.19
TOTAL SA		3,855,000			213,792
TOTAL SA (ADR)		3,640,000			202,566			.70
Spectra Energy Corp		18,311,414			336,198			.56
Diamond Offshore Drilling, Inc.		3,030,000			272,306			.45
ConocoPhillips		5,500,000			240,405			.40
Other securities					198,418			.33
					2,964,024			4.94

Financials - 4.77%
Unibail-Rodamco SE, non-registered shares		1,693,800			295,978			.49
HSBC Holdings PLC (Hong Kong)		14,326,382			142,534
HSBC Holdings PLC (United Kingdom)		10,000,000			101,154
HSBC Holdings PLC (ADR)		350,000			17,745			.44
Other securities					2,303,410			3.84
					2,860,821			4.77

Consumer discretionary - 3.56%
McDonald's Corp.		11,916,400			656,117			1.10
Home Depot, Inc.		20,150,000			522,691			.87
Other securities					953,684			1.59
					2,132,492			3.56

Information technology - 3.33%
Intel Corp.		20,000,000			385,000			.64
Microchip Technology Inc. (1)		14,128,000			380,467			.64
Automatic Data Processing, Inc.		9,625,000			358,531			.60
Microsoft Corp.		12,095,000			284,474			.48
Paychex, Inc.		9,293,000			246,265			.41
Other securities					341,267			.56
					1,996,004			3.33

Materials - 2.94%
E.I. du Pont de Nemours and Co.		13,940,000			431,164			.72
Weyerhaeuser Co. (1)		10,728,000			375,909			.63
Other securities					957,643			1.59
					1,764,716			2.94

Miscellaneous - 4.29%
Other common stocks in initial period of acquisition					2,569,145			4.29


Total common stocks (cost: $35,976,713,000)					34,316,057			57.24


							Percent
				Value			of net
Preferred stocks - 1.55%	Shares				(000	)	assets

Financials - 1.54%
Fannie Mae, Series O, 7.00% (2) (3)		3,275,507			8,189
Fannie Mae, Series S, 8.25% noncumulative		1,511,450			2,966			.02
Freddie Mac, Series W, 5.66% (4)		1,912,800			2,032
Freddie Mac, Series Z, 8.375% (4)		1,100,000			1,444
Freddie Mac, Series V, 5.57% (4)		759,375			807			.01
Other securities					905,047			1.51
					920,485			1.54

Miscellaneous - 0.01%
Other preferred stocks in initial period of acquisition					6,428			.01


Total preferred stocks (cost: $1,243,701,000)					926,913			1.55


							Percent
				Value			of net
Warrants - 0.00%					(000	)	assets

Other - 0.00%
Other securities					1			.00


Total warrants (cost: $779,000)					1			.00


							Percent
				Value			of net
Convertible securities - 2.25%					(000	)	assets

Other - 1.80%
Other securities					1,077,453			1.80


Miscellaneous - 0.45%
Other convertible securities in initial period of acquisition					271,079			.45


Total convertible securities (cost: $1,487,695,000)					1,348,532			2.25


	Principal						Percent
	amount			Value			of net
Bonds & notes - 34.61%		(000	)		(000	)	assets

Mortgage-backed obligations (5) - 6.29%
Fannie Mae:
6.00% 2037	$	320,698			336,871
4.00%-11.838% 2010-2047 (3)		1,471,906			1,545,057			3.14
Freddie Mac 4.50%-11.347% 2009-2039 (3)		353,238			368,381			.61
Other securities					1,518,401			2.54
					3,768,710			6.29

Bonds & notes of U.S. government & government agencies - 5.54%
U.S. Treasury:
4.625% 2011		407,750			439,701
3.50% 2018		351,940			354,537
0%-8.875% 2011-2039 (6) (7)		1,916,642			2,059,001			4.76
Fannie Mae 4.625%-6.25% 2012-2029		201,000			217,609			.36
Federal Home Loan Bank 1.75%-5.25% 2012-2014		87,900			90,150			.15
Freddie Mac 6.625% 2009		39,355			39,650			.07
Other securities					120,713			.20
					3,321,361			5.54

Consumer discretionary - 4.26%
Other securities					2,557,067			4.26


Financials - 4.20%
Other securities					2,515,564			4.20


Telecommunication services - 2.63%
Verizon Communications Inc. 3.75%-8.75% 2011-2037 (2)		218,770			238,531
Verizon Global Funding Corp. 4.90%-7.75% 2015-2030		10,265			11,718
ALLTEL Corp. 7.00% 2012		17,686			19,628			.45
AT&T Inc. 4.95%-6.70% 2013-2039		64,000			69,426
SBC Communications Inc. 5.10%-6.25% 2011-2016		19,000			20,311
AT&T Wireless Services, Inc. 8.125% 2012		16,935			19,236
AT&T Corp. 7.30%-8.00% 2011-2031 (3)		13,205			15,343			.21
Koninklijke KPN NV 8.375% 2030		4,660			5,849			.01
Other securities					1,176,617			1.96
					1,576,659			2.63

Industrials - 2.15%
United Technologies Corp. 6.125% 2019		15,000			16,890			.03
Other securities					1,269,916			2.12
					1,286,806			2.15

Health care - 1.93%
Merck & Co., Inc. 5.00% 2019		6,000			6,242			.01
Other securities					1,151,591			1.92
					1,157,833			1.93

Information technology - 1.69%
Other securities					1,015,956			1.69


Consumer staples - 1.50%
Kraft Foods Inc. 6.75%-6.875% 2014-2038		21,695			24,623			.04
Other securities					872,593			1.46
					897,216			1.50

Energy - 1.39%
Chevron Corp. 4.95% 2019		25,000			26,617			.04
Shell International Finance B.V. 4.00% 2014		20,000			21,040			.04
Other securities					787,531			1.31
					835,188			1.39

Utilities - 1.38%
Other securities					830,016			1.38


Other - 1.63%
Other securities					978,102			1.63


Miscellaneous - 0.02%
Other bonds & notes in initial period of acquisition					10,168			.02


Total bonds & notes (cost: $21,871,898,000)					20,750,646			34.61


	Principal						Percent
	amount			Value			of net
Short-term securities - 3.87%		(000	)		(000	)	assets

Federal Home Loan Bank 0.163%-0.85% due 8/3-10/27/2009		738,813			738,656			1.23
Fannie Mae 0.19%-0.45% due 8/17-11/17/2009		387,200			387,067			.65
U.S. Treasury Bills 0.135%-0.40% due 8/6-10/8/2009		240,300			240,262			.40
Freddie Mac 0.22%-0.51% due 8/10-10/13/2009		231,400			231,353			.39
Merck & Co. Inc. 0.20% due 8/17/2009		17,200			17,198			.03
Other securities					707,115			1.17

Total short-term securities (cost: $2,321,404,000)					2,321,651			3.87


Total investment securities (cost: $62,902,190,000)					59,663,800			99.52
Other assets less liabilities					285,369			.48

Net assets				$	59,949,169			100.00	%

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Classes B and 529-B*	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to Classes A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F-1 after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F-1, F-2 and 529-F-1	None	None	None
Classes R-1, R-2, R-3, R-4, R-5 and R-6	None	None	None

	Year ended July 31, 2009						Year ended July 31, 2008
Share class	Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income		Long-term capital gains		Total distributions paid or accrued

Class A	$	2,325,379	$	-	$	2,325,379	$	3,047,396	$	2,754,859	$	5,802,255
Class B		136,968		-		136,968		192,964		209,621		402,585
Class C		256,919		-		256,919		345,974		379,554		725,528
Class F-1		100,766		-		100,766		143,928		131,893		275,821
Class F-2*		7,086		-		7,086		-		-		-
Class 529-A		28,341		-		28,341		32,028		28,944		60,972
Class 529-B		3,910		-		3,910		4,561		5,017		9,578
Class 529-C		9,875		-		9,875		11,330		12,364		23,694
Class 529-E		1,290		-		1,290		1,467		1,412		2,879
Class 529-F-1		884		-		884		1,060		924		1,984
Class R-1		3,112		-		3,112		3,369		3,565		6,934
Class R-2		18,615		-		18,615		21,554		23,660		45,214
Class R-3		42,400		-		42,400		47,747		46,144		93,891
Class R-4		27,738		-		27,738		26,228		22,570		48,798
Class R-5		24,864		-		24,864		24,105		18,816		42,921
Class R-6†		3,037		-		3,037		-		-		-
Total	$	2,991,184	$	-	$	2,991,184	$	3,903,711	$	3,639,343	$	7,543,054


*Class F-2 was offered beginning August 1, 2008.
†Class R-6 was offered beginning May 1, 2009.

Share class	Currently approved limits	Plan limits
Class A	0.25%	0.25%
Class 529-A	0.25	0.50
Classes B and 529-B	1.00	1.00
Classes C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Classes 529-E and R-3	0.50	0.75
Classes F-1, 529-F-1 and R-4	0.25	0.50

Investment securities:	Level 1		Level 2		Level 3		Total
Common stocks:
Consumer staples	$	4,334,419	$	-	$	-	$	4,334,419
Industrials		4,323,388		-		-		4,323,388
Telecommunication services		4,236,041		-		-		4,236,041
Utilities		3,939,849		-		-		3,939,849
Health care		3,195,134		-		24		3,195,158
Energy		2,964,024		-		-		2,964,024
Financials		2,860,821		-		-		2,860,821
Consumer discretionary		2,132,489		-		3		2,132,492
Information technology		1,996,004		-		-		1,996,004
Materials		1,763,145		-		1,571		1,764,716
Miscellaneous		2,569,145		-		-		2,569,145
Preferred stocks		103,388		823,525		-		926,913
Warrants		-		1		-		1
Convertible securities		633,736		679,584		35,212		1,348,532
Bonds & notes:
Corporate bonds & notes		-		12,666,478		5,827		12,672,305
Mortgage-backed obligations		-		3,704,540		64,170		3,768,710
Bonds & notes of U.S. government & government agencies		-		3,321,361		-		3,321,361
Other		-		974,954		3,148		978,102
Miscellaneous		-		10,168		-		10,168
Short-term securities		-		2,321,651		-		2,321,651
Total	$	35,051,583	$	24,502,262	$	109,955	$	59,663,800

The following table reconciles the valuation of the fund's Level 3 investment securities and related transactions for the year ended July 31, 2009 (dollars in thousands):


	Beginning		Net			Net					Net transfers		Ending
	value		purchases			realized			Net unrealized		into		value
	at 8/1/2008		and sales			loss (*)			appreciation (*)		Level 3		at 7/31/2009
Investment securities	$	13,973	$	(6,810	)	$	(12,495	)	$	24,283	$	91,004	$	109,955

Net unrealized depreciation during the period on Level 3 investment securities held at July 31, 2009 (dollars in thousands) (*):													$	(9,010	)

(*) Net realized loss and unrealized appreciation (depreciation) are included in the related amounts on investments in the statement of operations.

Share class	Sales(1)				Reinvestments of dividends and distributions				Repurchases(1)						Net (decrease) increase
	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
Year ended July 31, 2009
Class A	$	7,205,248		549,358	$	2,373,774		178,565	$	(11,841,997	)		(900,906	)	$	(2,262,975	)		(172,983	)
Class B		225,316		17,290		138,270		10,469		(920,167	)		(70,319	)		(556,581	)		(42,560	)
Class C		878,445		67,357		254,471		19,314		(1,801,420	)		(137,322	)		(668,504	)		(50,651	)
Class F-1		590,677		45,076		93,918		7,046		(1,108,912	)		(83,595	)		(424,317	)		(31,473	)
Class F-2(2)		383,801		28,528		3,803		299		(49,989	)		(3,934	)		337,615			24,893
Class 529-A		109,544		8,299		31,358		2,373		(84,367	)		(6,378	)		56,535			4,294
Class 529-B		8,754		662		4,324		329		(12,210	)		(936	)		868			55
Class 529-C		47,175		3,597		10,888		826		(46,838	)		(3,523	)		11,225			900
Class 529-E		5,281		403		1,428		108		(4,485	)		(340	)		2,224			171
Class 529-F-1		4,831		364		975		74		(4,473	)		(338	)		1,333			100
Class R-1		20,173		1,525		3,405		259		(20,485	)		(1,541	)		3,093			243
Class R-2		144,128		11,008		20,373		1,553		(130,743	)		(9,974	)		33,758			2,587
Class R-3		261,898		19,795		47,120		3,570		(251,304	)		(19,136	)		57,714			4,229
Class R-4		257,894		19,483		30,577		2,325		(158,713	)		(12,150	)		129,758			9,658
Class R-5		267,248		20,467		26,549		2,013		(349,808	)		(27,338	)		(56,011	)		(4,858	)
Class R-6(3)		242,772		19,212		3,035		233		(646	)		(48	)		245,161			19,397
Total net increase
(decrease)	$	10,653,185		812,424	$	3,044,268		229,356	$	(16,786,557	)		(1,277,778	)	$	(3,089,104	)		(235,998	)

Year ended July 31, 2008
Class A	$	8,146,230		423,511	$	5,292,485		276,012	$	(9,068,488	)		(480,352	)	$	4,370,227			219,171
Class B		335,424		17,532		359,218		18,809		(743,435	)		(39,833	)		(48,793	)		(3,492	)
Class C		1,289,999		67,111		638,186		33,450		(1,521,685	)		(81,759	)		406,500			18,802
Class F-1		879,704		45,563		226,732		11,841		(893,923	)		(47,364	)		212,513			10,040
Class 529-A		150,265		7,824		60,016		3,138		(72,570	)		(3,856	)		137,711			7,106
Class 529-B		15,162		792		9,456		495		(9,895	)		(525	)		14,723			762
Class 529-C		67,666		3,539		23,327		1,220		(43,922	)		(2,335	)		47,071			2,424
Class 529-E		7,434		387		2,834		149		(4,142	)		(218	)		6,126			318
Class 529-F-1		7,451		385		1,936		101		(4,146	)		(222	)		5,241			264
Class R-1		43,273		2,254		6,695		351		(23,119	)		(1,220	)		26,849			1,385
Class R-2		202,674		10,639		44,310		2,325		(164,675	)		(8,734	)		82,309			4,230
Class R-3		511,403		26,501		91,683		4,801		(307,548	)		(16,371	)		295,538			14,931
Class R-4		391,084		20,374		47,284		2,481		(180,160	)		(9,619	)		258,208			13,236
Class R-5		378,573		19,654		38,894		2,045		(108,822	)		(5,759	)		308,645			15,940
Total net increase
(decrease)	$	12,426,342		646,066	$	6,843,056		357,218	$	(13,146,530	)		(698,167	)	$	6,122,868			305,117


(1)Includes exchanges between share classes of the fund.
(2)Class F-2 was offered beginning August 1, 2008.
(3)Class R-6 was offered beginning May 1, 2009.

			(Loss) income from investment operations(2)								Dividends and distributions
	Net asset value, beginning of period		Net investment income		Net (losses) gains on securities (both realized and unrealized)			Total from investment operations			Dividends (from net investment income)			Distributions (from capital gains)			Total dividends and distributions			Net asset value, end of period		Total return(3)(4)			Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers			Ratio of expenses to average net assets after reimbursements/ waivers(4)			Ratio of net income to average net assets(4)
Class A:
Year ended 7/31/2009	$	16.98	$	.74	$	(2.98	)	$	(2.24	)	$	(.70	)	$	-		$	(.70	)	$	14.04		(12.72	)%	$	45,569		.64	%		.63	%		5.50	%
Year ended 7/31/2008		20.54		.87		(2.67	)		(1.80	)		(.91	)		(.85	)		(1.76	)		16.98		(9.46	)		58,029		.57			.54			4.53
Year ended 7/31/2007		19.33		.87		1.73			2.60			(.93	)		(.46	)		(1.39	)		20.54		13.66			65,713		.56			.54			4.22
Year ended 7/31/2006		18.70		.81		.94			1.75			(.76	)		(.36	)		(1.12	)		19.33		9.77			53,188		.56			.53			4.35
Year ended 7/31/2005		17.10		.77		1.61			2.38			(.65	)		(.13	)		(.78	)		18.70		14.12			47,196		.55			.54			4.26
Class B:
Year ended 7/31/2009		16.87		.63		(2.95	)		(2.32	)		(.61	)		-			(.61	)		13.94		(13.37	)		2,835		1.41			1.39			4.74
Year ended 7/31/2008		20.43		.72		(2.66	)		(1.94	)		(.77	)		(.85	)		(1.62	)		16.87		(10.16	)		4,149		1.33			1.31			3.76
Year ended 7/31/2007		19.22		.70		1.74			2.44			(.77	)		(.46	)		(1.23	)		20.43		12.83			5,094		1.32			1.30			3.46
Year ended 7/31/2006		18.61		.66		.93			1.59			(.62	)		(.36	)		(.98	)		19.22		8.87			4,442		1.33			1.31			3.58
Year ended 7/31/2005		17.01		.63		1.61			2.24			(.51	)		(.13	)		(.64	)		18.61		13.32			4,135		1.34			1.32			3.48
Class C:
Year ended 7/31/2009		16.84		.62		(2.94	)		(2.32	)		(.61	)		-			(.61	)		13.91		(13.43	)		5,637		1.45			1.44			4.69
Year ended 7/31/2008		20.39		.71		(2.65	)		(1.94	)		(.76	)		(.85	)		(1.61	)		16.84		(10.22	)		7,676		1.38			1.35			3.72
Year ended 7/31/2007		19.19		.69		1.73			2.42			(.76	)		(.46	)		(1.22	)		20.39		12.80			8,911		1.37			1.35			3.41
Year ended 7/31/2006		18.58		.65		.93			1.58			(.61	)		(.36	)		(.97	)		19.19		8.83			6,675		1.38			1.36			3.52
Year ended 7/31/2005		16.99		.61		1.60			2.21			(.49	)		(.13	)		(.62	)		18.58		13.17			5,756		1.43			1.41			3.38
Class F-1:
Year ended 7/31/2009		16.95		.74		(2.97	)		(2.23	)		(.70	)		-			(.70	)		14.02		(12.71	)		1,801		.66			.65			5.49
Year ended 7/31/2008		20.52		.86		(2.68	)		(1.82	)		(.90	)		(.85	)		(1.75	)		16.95		(9.56	)		2,712		.61			.58			4.48
Year ended 7/31/2007		19.30		.86		1.74			2.60			(.92	)		(.46	)		(1.38	)		20.52		13.69			3,075		.60			.57			4.18
Year ended 7/31/2006		18.68		.80		.93			1.73			(.75	)		(.36	)		(1.11	)		19.30		9.68			1,957		.60			.57			4.30
Year ended 7/31/2005		17.08		.75		1.61			2.36			(.63	)		(.13	)		(.76	)		18.68		14.01			1,603		.67			.65			4.14
Class F-2:
Year ended 7/31/2009		16.91		.68		(2.82	)		(2.14	)		(.73	)		-			(.73	)		14.04		(12.19	)		350		.44			.43			5.39
Class 529-A:
Year ended 7/31/2009		16.96		.73		(2.96	)		(2.23	)		(.70	)		-			(.70	)		14.03		(12.72	)		608		.70			.68			5.44
Year ended 7/31/2008		20.52		.85		(2.66	)		(1.81	)		(.90	)		(.85	)		(1.75	)		16.96		(9.55	)		662		.65			.63			4.46
Year ended 7/31/2007		19.31		.85		1.73			2.58			(.91	)		(.46	)		(1.37	)		20.52		13.57			655		.65			.63			4.14
Year ended 7/31/2006		18.68		.80		.94			1.74			(.75	)		(.36	)		(1.11	)		19.31		9.70			452		.63			.61			4.27
Year ended 7/31/2005		17.08		.75		1.61			2.36			(.63	)		(.13	)		(.76	)		18.68		13.98			328		.70			.68			4.13
Class 529-B:
Year ended 7/31/2009		16.92		.62		(2.96	)		(2.34	)		(.60	)		-			(.60	)		13.98		(13.47	)		91		1.51			1.50			4.63
Year ended 7/31/2008		20.47		.69		(2.65	)		(1.96	)		(.74	)		(.85	)		(1.59	)		16.92		(10.25	)		110		1.46			1.43			3.65
Year ended 7/31/2007		19.26		.68		1.73			2.41			(.74	)		(.46	)		(1.20	)		20.47		12.71			117		1.45			1.43			3.34
Year ended 7/31/2006		18.65		.64		.92			1.56			(.59	)		(.36	)		(.95	)		19.26		8.71			92		1.47			1.44			3.44
Year ended 7/31/2005		17.05		.59		1.61			2.20			(.47	)		(.13	)		(.60	)		18.65		13.05			74		1.55			1.53			3.28
Class 529-C:
Year ended 7/31/2009		16.93		.62		(2.96	)		(2.34	)		(.60	)		-			(.60	)		13.99		(13.45	)		241		1.50			1.49			4.63
Year ended 7/31/2008		20.49		.70		(2.67	)		(1.97	)		(.74	)		(.85	)		(1.59	)		16.93		(10.29	)		276		1.45			1.43			3.66
Year ended 7/31/2007		19.27		.69		1.74			2.43			(.75	)		(.46	)		(1.21	)		20.49		12.77			285		1.45			1.42			3.35
Year ended 7/31/2006		18.65		.64		.93			1.57			(.59	)		(.36	)		(.95	)		19.27		8.77			201		1.46			1.43			3.45
Year ended 7/31/2005		17.06		.59		1.60			2.19			(.47	)		(.13	)		(.60	)		18.65		13.00			153		1.54			1.52			3.29
Class 529-E:
Year ended 7/31/2009		16.93		.68		(2.95	)		(2.27	)		(.66	)		-			(.66	)		14.00		(12.98	)		29		1.00			.98			5.14
Year ended 7/31/2008		20.49		.79		(2.66	)		(1.87	)		(.84	)		(.85	)		(1.69	)		16.93		(9.83	)		32		.94			.92			4.17
Year ended 7/31/2007		19.28		.79		1.73			2.52			(.85	)		(.46	)		(1.31	)		20.49		13.27			32		.94			.91			3.86
Year ended 7/31/2006		18.66		.74		.93			1.67			(.69	)		(.36	)		(1.05	)		19.28		9.32			23		.94			.92			3.96
Year ended 7/31/2005		17.06		.69		1.61			2.30			(.57	)		(.13	)		(.70	)		18.66		13.63			17		1.02			1.01			3.80

Class 529-F-1:
Year ended 7/31/2009	$	16.96	$	.75	$	(2.96	)	$	(2.21	)	$	(.72	)	$	-		$	(.72	)	$	14.03		(12.56	)%	$	19		.50	%		.48	%		5.64	%
Year ended 7/31/2008		20.52		.89		(2.66	)		(1.77	)		(.94	)		(.85	)		(1.79	)		16.96		(9.35	)		21		.44			.42			4.67
Year ended 7/31/2007		19.30		.90		1.73			2.63			(.95	)		(.46	)		(1.41	)		20.52		13.87			20		.44			.41			4.37
Year ended 7/31/2006		18.68		.83		.93			1.76			(.78	)		(.36	)		(1.14	)		19.30		9.85			10		.44			.42			4.46
Year ended 7/31/2005		17.08		.75		1.60			2.35			(.62	)		(.13	)		(.75	)		18.68		13.96			5		.70			.68			4.14
Class R-1:
Year ended 7/31/2009		16.92		.62		(2.95	)		(2.33	)		(.60	)		-			(.60	)		13.99		(13.36	)		74		1.46			1.44			4.68
Year ended 7/31/2008		20.48		.71		(2.67	)		(1.96	)		(.75	)		(.85	)		(1.60	)		16.92		(10.25	)		86		1.39			1.37			3.73
Year ended 7/31/2007		19.27		.70		1.72			2.42			(.75	)		(.46	)		(1.21	)		20.48		12.75			75		1.41			1.39			3.41
Year ended 7/31/2006		18.65		.64		.94			1.58			(.60	)		(.36	)		(.96	)		19.27		8.79			37		1.45			1.41			3.46
Year ended 7/31/2005		17.05		.61		1.61			2.22			(.49	)		(.13	)		(.62	)		18.65		13.15			19		1.50			1.45			3.36
Class R-2:
Year ended 7/31/2009		16.86		.61		(2.95	)		(2.34	)		(.59	)		-			(.59	)		13.93		(13.54	)		463		1.56			1.54			4.58
Year ended 7/31/2008		20.42		.70		(2.66	)		(1.96	)		(.75	)		(.85	)		(1.60	)		16.86		(10.26	)		516		1.44			1.42			3.66
Year ended 7/31/2007		19.22		.69		1.72			2.41			(.75	)		(.46	)		(1.21	)		20.42		12.73			539		1.44			1.39			3.38
Year ended 7/31/2006		18.60		.64		.94			1.58			(.60	)		(.36	)		(.96	)		19.22		8.83			379		1.52			1.40			3.48
Year ended 7/31/2005		17.01		.61		1.60			2.21			(.49	)		(.13	)		(.62	)		18.60		13.16			271		1.58			1.42			3.39
Class R-3:
Year ended 7/31/2009		16.94		.68		(2.95	)		(2.27	)		(.66	)		-			(.66	)		14.01		(12.99	)		936		1.00			.99			5.14
Year ended 7/31/2008		20.50		.79		(2.66	)		(1.87	)		(.84	)		(.85	)		(1.69	)		16.94		(9.83	)		1,061		.95			.93			4.16
Year ended 7/31/2007		19.29		.79		1.73			2.52			(.85	)		(.46	)		(1.31	)		20.50		13.26			978		.94			.92			3.86
Year ended 7/31/2006		18.67		.73		.93			1.66			(.68	)		(.36	)		(1.04	)		19.29		9.29			579		.96			.94			3.94
Year ended 7/31/2005		17.07		.70		1.60			2.30			(.57	)		(.13	)		(.70	)		18.67		13.68			394		.97			.96			3.85
Class R-4:
Year ended 7/31/2009		16.96		.72		(2.95	)		(2.23	)		(.70	)		-			(.70	)		14.03		(12.72	)		629		.70			.69			5.43
Year ended 7/31/2008		20.53		.85		(2.68	)		(1.83	)		(.89	)		(.85	)		(1.74	)		16.96		(9.56	)		597		.66			.63			4.49
Year ended 7/31/2007		19.31		.85		1.74			2.59			(.91	)		(.46	)		(1.37	)		20.53		13.57			451		.65			.63			4.15
Year ended 7/31/2006		18.69		.79		.93			1.72			(.74	)		(.36	)		(1.10	)		19.31		9.60			255		.66			.64			4.22
Year ended 7/31/2005		17.09		.76		1.60			2.36			(.63	)		(.13	)		(.76	)		18.69		14.00			120		.67			.65			4.17
Class R-5:
Year ended 7/31/2009		16.97		.76		(2.96	)		(2.20	)		(.73	)		-			(.73	)		14.04		(12.53	)		395		.40			.38			5.72
Year ended 7/31/2008		20.54		.91		(2.68	)		(1.77	)		(.95	)		(.85	)		(1.80	)		16.97		(9.26	)		559		.36			.33			4.80
Year ended 7/31/2007		19.32		.91		1.74			2.65			(.97	)		(.46	)		(1.43	)		20.54		13.94			350		.36			.33			4.42
Year ended 7/31/2006		18.70		.85		.93			1.78			(.80	)		(.36	)		(1.16	)		19.32		9.92			168		.36			.34			4.56
Year ended 7/31/2005		17.10		.80		1.61			2.41			(.68	)		(.13	)		(.81	)		18.70		14.33			81		.37			.35			4.45
Class R-6:
Period from 5/1/2009 to 7/31/2009		12.55		.19		1.48			1.67			(.17	)		-			(.17	)		14.05		13.42			272		.09			.09			1.45

Qualified dividend income	$	2,074,422,000
Corporate dividends received deduction	$	1,295,781,000
U.S. government income that may be exempt from state taxation	$	70,594,000