ICA
THE INVESTMENT COMPANY OF AMERICA
Annual Report 1994
For the year
ended December 31
The Value of Long-Term Investing:
The history of ICA, the origins of its
basic approach and a special 80-year study
of the stock market
ICA(SM)
The Investment Company of America(R) seeks long-term growth of capital and
income, placing greater emphasis on future dividends than on current income.
1994 RESULTS AT A GLANCE
Year ended December 31, 1994
(with dividends and capital gain distributions reinvested)
<TABLE>
<CAPTION>
ICA Standard &
Poor's 500
Composite Index
<S> <C> <C>
Income Results 2.59% 2.86%
Capital Results -2.43% -1.57%
Total Return 0.16% 1.29%
</TABLE>
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS PAID IN 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Per Share Payment Date
Income Dividends $0.11 March 7
$0.11 June 6
$0.11 Sept. 6
$0.11+$0.04 Dec. 19
Capital Gain Distribution $0.60 Dec. 19
</TABLE>
Fund results were computed without a sales charge unless otherwise indicated.
The fund's 30-day yield as of January 31, 1995, calculated in accordance with
the Securities and Exchange Commission formula, was 3.01%. Fund results through
August 1988 do not reflect service and distribution expenses now paid under its
Plan of Distribution. Such expenses may not exceed 0.25% of the fund's average
net assets per year and currently amount to approximately 0.19%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY HAVE A GAIN OR LOSS OF PRINCIPAL WHEN YOU SELL YOUR SHARES.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY,
THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. All investments are subject
to certain risks. For example, those which include common stocks are affected
by fluctuating stock prices. Accordingly, investors should maintain a long-term
perspective.
THE INVESTMENT COMPANY OF AMERICA
This report is dedicated to Jonathan Bell Lovelace, who founded ICA's
investment advisory organization. It examines the value of a long-term
perspective, which was central to his approach to investing. February 16, 1995,
the date of this letter, is the 100th anniversary of his birth.
Fellow Shareholders:
We have said a number of times in these reports that the abnormally large
increases in stock prices since 1982 couldn't continue year after year. Last
year they didn't. The setback was a mild one but left the broad market at
year-end 4.7% below its early-1994 high and moving indecisively.
In that environment, ICA finished the year on the plus side for the 17th
consecutive year, but the return was a scant 0.16% with dividends and the
capital gain distribution reinvested. Our income dividends totaling 48 cents a
share represented an income return of 2.59%. The adjusted change in capital
value was -2.43%.
Those 1994 results were a far cry from the 14% average total return over the
past ten years for both ICA and for the broad U.S. market. At the same time,
ICA remained in the top 14% of the 109 growth and income funds measured by
Lipper Analytical Services over the last ten years, the top 35% of 182 funds
over five years and the top 37% of 347 funds over the last year.
In the 24-month period through January, the prices of U.S. equities, based on
the unmanaged Standard & Poor's 500 Composite Index, have moved in the
narrowest range in ICA's 61-year history - less than 12% between the high and
the low. So long a period with little change in the broad averages has led to
considerable uncertainty about which direction the market will take next.
A FOCUS ON LONG-TERM VALUE
Such a moment makes it timely to remember ICA's basic focus on long-term
values, a personal investment approach which guided Jonathan Bell Lovelace in
his management of the fund beginning more than six decades ago, and which
continues to guide us today. In this letter and the special features that
follow, we focus on ICA's long-term record and his contribution to it. We also
update an unusual study of the market he began in 1925, a study that solidly
reinforced his views on the value of long-term investing.
In last year's annual report, ICA's 60th, we invited you to examine the fund's
record in six 10-year segments. That data showed that ICA has offered its
shareholders good participation in strong markets but has done its best
relative to the overall market in extended periods of moderate change, when
stock-selection skills are particularly important.
We believe that the consistency of ICA's record is a clear reflection of the
effort put into uncovering investment opportunities with unusual long-term
value relative to current prices.
RANKING ICA'S TEN-YEAR TOTAL RETURN
AMONG THE TWELVE LARGEST FUNDS AT
THE BEGINNING OF EACH PERIOD.
<TABLE>
<CAPTION>
Period Total Annual Ranked
Return* Compound by Total
Rate* Return#
<S> <C> <C> <C>
1970-79 122.18% 8.31% 2
1971-80 162.41 10.13 2
1972-81 126.21 8.51 3
1973-82 160.88 10.06 2
1974-83 277.35 14.20 2
1975-84 390.54 17.24 2
1976-85 383.67 17.07 2
1977-86 352.62 16.30 1
1978-87 389.06 17.20 1
1979-88 383.40 17.07 4
1980-89 424.00 18.01 2
1981-90 335.29 15.85 1
1982-91 446.00 18.50 1
1983-92 337.22 15.90 3
1984-93 305.58 15.03 3
1985-94 280.81 14.31 2
</TABLE>
*Ten-year total and compound annual average with dividends and capital gain
distributions reinvested.
#Ranked according to total return of the twelve funds that were the largest
stock and/or balanced funds as of the beginning of each ten-year period.
Sources: CDA/Wiesenberger and Lipper Analytical Services
Annual turnover in the common stock portfolio has been less than 20%. Such low
turnover is in tune with ICA's long-term orientation plus the fund's overall
objective of keeping its costs of doing business low.
Jonathan Lovelace lived to see ICA grow to become one of the nation's dozen
largest equity mutual funds, a ranking it first achieved in 1969. What is
significant in terms of the fund's staying power is that it is the only fund on
the 1969 list of twelve largest to remain continuously in that leadership group
every year since.
What's more, as you can see in the table at left, in the 16 rolling ten-year
periods starting at year-end 1969, ICA's total return has ranked it in the top
three in 15 of the 16 periods and as low as fourth only once. It exceeded the
total return for the oldest and largest market index mutual fund (designed to
give investors a return close to that of the S&P 500) in all nine 10-year
periods of that fund's existence.
A LOOK AT 1994
The best of long-term investments frequently encounter short-term setbacks. In
1994, ICA experienced a market in which for every seven stocks in its portfolio
that rose in value, nine declined. The split among the ten largest holdings was
five and five, with IBM the leader (+30%) along with Caterpillar (+24%). The
biggest declines among the ten largest were registered by Tele-Communications
(-28%) and Time Warner (-21%).
We made relatively few major changes in the portfolio during 1994. Early in the
year, we added to holdings in the capital equipment area, including technology,
which produced good returns for ICA. Later in the year, we took advantage of
what we perceived to be some bargains among financial services companies,
particularly banks.
Considering the narrow range in which stocks have moved over so many months, we
continue to maintain a cautious attitude. As of December 31, equity
holdings accounted for 77% of the portfolio, at the lower end of our historic
73% to 98% range.
We appreciate the continuing confidence you and our fellow investors have shown
in ICA. In this investment climate, we find it especially important to continue
adhering to the investment approach established by Jonathan Bell Lovelace:
choosing those investments that we believe offer long-term value relative to
current market prices.
Sincerely,
Jon B. Lovelace, Jr.
Chairman of the Board
William C. Newton
President
February 16, 1995
A SIMPLE APPROACH
which endures with the fund's growth
Jonathan Bell Lovelace personified what was to become ICA's enduring investment
approach: a sharp focus on finding real investment values in the stock market
to meet the objectives of the fund. He believed that intelligent investing
requires painstakingly thorough research and a consistent long-term
perspective. Here is a brief review of his life and a short history of ICA,
including the organization he created and led for more than three decades.
THE INVESTMENT COMPANY OF AMERICA TRACES ITS ROOTS TO THE MID-1920S,
when Jonathan B. Lovelace and his associates designed a series of innovative
investment trusts for small investors, patterned after successful Scottish unit
trusts he had read about and studied firsthand. An architecture graduate of
Alabama Polytechnic Institute (later to become Auburn University) in his native
state, Jonathan returned from service as an Army captain in France during World
War I. An Army acquaintance who had split from the founders of Merrill Lynch to
form a brokerage firm in Detroit persuaded him to join his firm as its
statistician. There, Jonathan soon discovered his proclivity for stock
analysis.
Jonathan saw that individual customers were repeatedly buying stocks on margin
and thought there should be a way for them to combine their investments, spread
the risk and obtain professional money management. The investment trusts his
firm created, based on his concepts, did exceptionally well in the booming
market of the late 1920s.
As the decade wore on, however, several things happened that led to Jonathan's
departure for the climate and investment opportunities of California. He became
convinced, based on his own research into what companies were worth, that
stocks in general were overvalued. He attempted to persuade his partners of
that, but they remained highly optimistic. Consequently, he withdrew from the
brokerage firm in the late summer of 1929, left Detroit and took most of his
personal investments out of the market and the firm well before the worst of
the market losses occurred.
By 1931, Jonathan had launched what was primarily a research organization in
Los Angeles, later to become Capital Research and Management Company (CRMC). A
year later, he was asked by the Advisory Board of ICA, one of the trusts
created in Detroit, to take over management of ICA, which was highly leveraged
and had declined more than 70% in value. In 1933, it was recapitalized into the
present Investment Company of America. At the time, it had assets of $4.7
million.
From the beginning, Jonathan believed in searching for values that others had
overlooked. His principles were simple ones but demanding in practice: Buy
securities at reasonable prices relative to prospects. Do the thorough research
necessary to determine the actual worth of an organization. Be guided always by
a total commitment to honesty and integrity.
Looking at a company's numbers was by no means enough; he wanted to know the
individuals behind the numbers. He believed that good management often made the
difference. He was fond of saying, "The only difference between Chrysler
Corporation and its predecessor [the struggling Maxwell Motor Company it
absorbed] was Walter Chrysler."
ICA's record in its first ten years was exceptional, with a compound average
annual return of more than 14%, nearly seven percentage points better than the
broad market. During that decade and the one to follow, Jonathan was active in
helping in the development of some other successful ventures, including Capitol
Records, Disney and Lockheed.
Though he drew many talented individuals into the organization, Jonathan would
continue to be the central figure in ICA and CRMC until 1953 when, at 58, he
suffered a heart attack. Upon recovery, he began a gradual process of
transferring the management of ICA and CRMC to others.
Among them were Harleston J. Hall, who had joined the organization as an
analyst in 1936; Charles H. Schimpff, who helped found American Mutual Fund,
which in 1950 was the second fund to come under CRMC management; and Coleman W.
Morton. They joined in the management of the organization for several years
during and following Jonathan's illness. Coleman succeeded Jonathan as
President of ICA in 1962. Other important contributors included Robert L. Cody,
who became President in 1968; Jon B. Lovelace, Jr., who became Chairman of ICA
in 1970 and continues in that position; and William C. Newton, who has been
President since 1985. Another major figure was Ward L. Bishop, who began
building ICA's distributor in 1947.
Coleman Morton remained an active member of ICA's Advisory Board until January
of this year. Jon Sr. said of Coleman that he was "years ahead of his time with
his perceptions about the value of international investment."
Indeed, CRMC was among the first fund management companies to open an overseas
research office (in Geneva in 1962). The objective was not only to find
international stocks in which to invest, but to do the research necessary to
assess the value of U.S. companies in a global setting. In the long run, that
research capability gave the organization the expertise to add
foreign-domiciled companies to a number of fund portfolios and to launch
several funds specifically dedicated to global or entirely international
investments. ICA, itself, had more than 10% of its portfolio invested outside
the U.S. by the early 1960s, long before it was popular to do so.
A NEW APPROACH TO PORTFOLIO MANAGEMENT
Another key change took place during the transition period. The question was
how best to achieve a smooth management transition for what was becoming an
increasingly large and diversified portfolio. In 1958, Jon Jr. recommended that
the organization try a multiple portfolio counselor approach. The investment
committee approved the idea, and the results were such that this is now the
hallmark both of ICA's portfolio management and that of the other funds managed
by CRMC.
Mutual funds typically had been managed either by one person or by a committee.
The multiple portfolio counselor approach has been found to combine the best
aspects of both methods. A fund's assets are allocated among several portfolio
counselors. Each counselor manages and diversifies his or her portion
separately, with CRMC's investment committee ensuring that all purchases and
sales are consistent with the fund's objectives. This approach enables
counselors to act on their strongest individual convictions. At the same time,
it provides for continuity of management, and it permits the counselors to
respond quickly without sacrificing or endangering orderly procedure or
controls.
[Photo Caption]
Jonathan Bell Lovelace
[End Photo Caption]
At first, ICA had just four counselors - Harleston Hall, Jon Sr., Coleman
Morton and Jon Jr. - but as its assets have grown to its present $19 billion,
that number has also grown. In addition, as a means of giving CRMC's research
analysts a direct hand in investing, another segment of the fund has been
managed since 1965 by a group of those analysts. As a result, despite the fact
that the fund has been one of the twelve largest equity funds in the nation
since 1969, the addition of portfolio counselors and analysts has helped make
growth manageable.
ICA'S RECENT GROWTH
ICA's growth has accelerated in recent times. Here is a quick look at the
fund's ranking among equity funds in terms of assets under management over the
last quarter century:
<TABLE>
<CAPTION>
Year Ended Net Assets Asset Rank Number of
December 31 (in millions) Among the Shareholders
12 Largest
<S> <C> <C> <C>
1969 $1,065.1 11 119,575
1974 987.6 6 133,095
1979 1,438.1 5 116,059
1984 2,402.4 2 132,884
1989 5,376.2 3 251,269
1994 19,279.6 2 1,520,155
</TABLE>
CRMC's growth has been phenomenal, as well. By the time Jon Sr. retired from
active investment management in early 1967, the company he founded encompassed
three funds managing $1.1 billion of investors' money.
By modern standards, the organization was still a small one 28 years ago, with
roughly 100 employees in all. Today, CRMC encompasses a family of 28 widely
distributed mutual funds. It has some 2,000 employees and manages approximately
$100 billion. Three of the funds in the family currently rank among the twelve
largest and seven rank among the 25 largest equity funds in the U.S.
Jon Sr. became Chairman Emeritus of ICA in 1970 and remained so until his death
in 1979, at 84. His legacy must be measured in much broader terms than the
success of The American Funds Group and its investment adviser, CRMC. He set a
standard for consistency in managing other people's money through good times
and bad, a standard that is a textbook for intelligent long-term investing. And
he left something else even more important to the future of ICA and CRMC - an
organizational culture with uncommon respect for the individual.
Jonathan B. Lovelace once thwarted a would-be biographer by insisting, "I don't
want this book to be about me but about my associates and the company." The
comment was completely in character for a man who, despite the pioneering
nature of his career, never sought the spotlight. That tradition of avoiding
publicity and focusing on the interests of shareholders has continued at ICA
and CRMC to this day.
Perhaps nothing says more about the origins of ICA's commitment to a long-term
investment focus than the attention its first portfolio manager paid to an
analysis of the stock market over many decades.
101 STOCKS
1913 1993
It was the mid-Twenties, before the speculative binge that led to the stock
market crash. Jonathan Bell Lovelace, statistician for a Detroit brokerage
house, began to study the implications of a long-term approach to investing.
HE CHOSE AS A BASE 1913, THE LAST "NORMAL" YEAR BEFORE THE ONSET OF WORLD WAR I
and the heightened pace of change that followed. It was the year Congress
created the Federal Reserve System. Henry Ford's first Model T production line
began rolling, slashing the cost of the car to $440. It was the base year the
government used for many of its statistics. For Jonathan, then nearing his 30th
birthday, that base year offered a ten-year statistical sample.
On Wall Street, The Commercial and Financial Chronicle listed 101 New York
Stock Exchange stocks in a category labeled Various (as opposed to Rail,
Express, or Coal and Mining). It was a diverse group that later came to be
divided into Industrials and Utilities. Many of the companies have passed
from the scene over the decades, but a substantial majority still exist,
separately or as part of other publicly traded entities.
What Jonathan began was carried on by two others - Albert P. Drasdo, a
finan-cial analyst who was one of Jonathan's early colleagues at Capital, and
Edna M. Riedinger, who has been associated with the company for more than four
decades and took part in the 1963 update of the study, covering 50 years.
Dusty, as she is affectionately known, is responsible for the current update to
80 years, which is presented in this report in honor of the 100th anniversary
of Jonathan's birth.
Needless to say, the study encompasses periods of boom and bust and astounding
change, but what sets this study apart is that it does not, like most others,
simply measure the relative successes of the
survivors. Rather, it is akin to an actuarial table for common stocks; it
measures
the success and total failure alike for a truly unmanaged portfolio. In fact,
it
is as though someone stashed 101 stock certificates, each worth approximately
$10,000, in a safe-deposit box for 80 years. How well would they have rewarded
an investor who owned them all and stuck with them through all the ensuing ups
and downs? And what could we learn from that about the vicissitudes of
investing?
The results - listed by company beginning on page 11 and charted as a total
portfolio on page 14 - provide powerful arguments for some of the precepts of
investing we hold to be most basic: the value of long-term goals, the benefits
of research, diversification and active management of a portfolio, as well as
the sometimes overlooked importance of dividend income. Specifically, the study
shows that:
- - Those 101 certificates, worth $1,014,855 on December 31, 1913, had a total
value of $108,821,444 exactly 80 years later. In addition, those stocks would
have paid their holder $78,355,811 in dividends. Total return, with dividends
reinvested, was not calculated, but even without reinvestment, value plus
dividends in cash produced more than a 184-fold increase in the original
investment. Put another way, a $10,000 investment in 1913 would have grown to
more than $73,000 in 1913 dollars - after adjusting for 80 years of inflation
that reduced the value of the 1913 dollar to less than seven cents.
- - With an average annual yield of 5.4%, cash dividends accounted for 42% of
the total 1993 value. Just as for all U.S. stocks, however, dividend yields for
the 101 dropped to historic lows in recent years, falling to 2.8% in 1993, the
first year under 3%, and have been below average since 1979. The high yield for
the 101 was 10% in 1950.
- - Over the eight-decade span, there were 28 years during which the market value
declined and only 18 in which the decline was as much as 10%. Five of the 28
declines in market prices were more than offset by dividends received.
- - Only nine of the 101 stocks saw their value drop to zero, yet in two of those
cases dividends received before the failure amounted to more than the original
investment. In fact, of the 19 stocks that dropped in value over the 80 years,
dividends more than made up the difference in 12. In sum, there were only seven
outright losers.
- - The top five of the list, on the other hand, led by General Motors, produced
59% of the total market value plus dividends. GM by itself accounted for 29%
of the total and an even more impressive 40% of the dividends. Its domination
of
[Photo Caption]
Clerks on the New York Stock Exchange trading floor in 1913.
[End Photo Caption]
the market value total has fallen sharply since the study was last updated
through 1963 - from nearly 50% to 21%. Its share of the cumulative dividend
total, however, was down only two percentage points in 30 years.
You may be interested in how ICA compares with the 101 Stocks over ICA's first
60 years: The market value of $10,000 invested in ICA at the beginning of 1934
had grown 237 times larger (without dividend reinvestment) by the end of 1993,
compared with a 38-fold gain for the 101 stocks. ICA dividends received in 1993
represented a return that was 5.7 times the original $10,000 investment, while
the 1993 dividends paid by the 101 amounted to a return equal
to just three-quarters of the stocks' 1933 value.
The dramatic difference in favor of ICA speaks volumes in a simple way about
the value that active management of a portfolio can contribute to the long-term
investment process. The 101 stocks studied here represent a totally unmanaged
investment. Of course, many of the most successful companies in the group did
change over time, adapting to new opportunities that reflect the dynamic nature
of the economy. ICA's first portfolio contained eight of these 101 companies;
16 are in its portfolio today.
Even some of what were once the best companies, however, fade from the
scene over time, and as the economy has expanded, ICA's base of equity
ownership has broadened and become increasingly diversified. Today, your
fund lists ownership in 175 companies, compared with 83 in its first year.
To fully recognize the importance of that diversity, consider that an investor
who was able to choose only a few of the stocks from the 101 in 1913 and missed
choosing what turned out to be the top two would have foregone 40% of
the market-value-plus-dividends total recorded by all 101 by 1993. Those
two - GM and Kresge (now Kmart) - were in ICA's portfolio on January 1, 1934;
GM is there now, though it has not been there continuously.
Over the decades, ICA's portfolio counselors have made thousands of investment
judgments, some with good results and some disappointing. With solid research
to discover individual values and the opportunity to actively manage a broad
portfolio, however, they've been right on balance to a sufficient degree to
generate the remarkable record that ICA has produced.
[Side Bars]
WHAT $10,000 PRODUCED IN THE 101 STOCKS
Ranked by 1993 value plus cumulative dividends
By examining all 101 stocks listed in its "Various" category in 1913 by
The Commercial and Financial Chronicle, the study eliminated any
selectivity and included the strong and the weak. 1913 was considered
the last "normal" year prior to World War I; government departments
for a time used that year as the base for key indexes. The value of shares
received in mergers or consolidations is included in the 1993 market value.
Cash dividends or interest are carried through the balance of the period as not
reinvested; so is cash received in liquidations, although it is, of course,
included in market value.
101 Common Stocks by Company
Today's name, representing at least the bulk of the original assets, is in
italics. Where a year appears, it denotes when the original or successor
company ceased to exist.
<TABLE>
<CAPTION>
COMPANY 1993 TOTAL
MARKET VALUE DIVIDENDS
<S> <C> <C>
General Motors $22,777,349 $31,163,268
S.S. Kresge KMART 13,496,625 6,665,614
Corn Products Refining CPC INTERNATIONAL 10,924,366 3,899,353
American Hide & Leather 9,882,587 670,778
TANDY CORP. AND OTHERS
Texas-Pacific Land Trust 5,129,820 5,055,494
Mexican Petroleum AMOCO AND OTHERS 2,878,856 1,755,418
General Electric AND OTHERS 3,502,129 1,032,605
May Department Stores 3,397,838 1,113,063
American Linseed CPC INTERNATIONAL 3,200,400 1,144,145
Weyman-Bruton UST 3,527,136 797,404
Loose Wiles Biscuit AMERICAN BRANDS 2,234,400 1,695,878
Associated Oil - 1984 3,458,560 528,588
Federal Mining & Smelting ASARCO 1,423,017 2,381,404
Sears, Roebuck 2,109,329 1,380,237
Vulcan Detinning VULCAN MATERIALS 2,475,000 952,512
Union Bag & Paper UNION CAMP 1,928,813 1,043,017
International Paper 1,376,138 810,369
National Lead NL INDUSTRIES AND OTHERS 800,506 1,325,973
American Can PRIMERICA 1,261,902 864,801
Standard Milling CPC INTERNATIONAL 1,265,530 587,336
California Petroleum TEXACO 744,573 922,043
American Steel Foundries - 1991 1,139,680 503,804
North American UNION ELECTRIC AND OTHERS 620,344 819,016
United Dry Goods MAY DEPARTMENT STORES 1,114,130 323,651
The Texas Co. TEXACO 548,564 706,557
F.W. Woolworth WOOLWORTH CORP. 663,201 592,972
Bethlehem Steel 220,050 761,880
National Biscuit - 1987 571,090 380,471
American Woolen TEXTRON 512,600 257,474
Westinghouse Electric & Manufacturing 357,771 399,553
WESTINGHOUSE ELECTRIC
American Coal Products ALLIED SIGNAL AND OTHERS 408,092 326,180
Sloss Sheffield Steel & Iron - 1987 310,000 349,392
General Chemical ALLIED SIGNAL AND OTHERS 338,373 267,284
U.S. Cast Iron Pipe & Foundry - 1987 85,000 513,428
American Tobacco AMERICAN BRANDS 312,816 265,770
Allis Chalmers 569 549,922
Pacific Telephone & Telegraph 161,144 298,928
AT&T AND OTHERS
Central & South American Telegraph ITT 267,910 166,296
American Smelting & Refining ASARCO 140,498 268,986
South Porto Rico Sugar - 1976 94,864 255,968
American Car & Foundry - 1984 166,116 171,696
American Brake Shoe & Foundry - 1985 133,326 214,222
BFGoodrich 108,675 195,012
New York Dock - 1982 186,262 97,997
American Stuff - 1985 207,360 81,007
International Mercantile Marine 177,392 117,692
HANSON PLC
Lackawanna Steel BETHLEHEM STEEL 58,509 222,669
Philadelphia Co. DQE 82,386 176,736
American Cotton Oil CPC INTERNATIONAL 195,072 74,785
International Harvester of N.J. 10,395 253,249
NAVISTAR INTERNATIONAL
United Cigar Manufacturers CULBRO AND OTHERS 87,780 142,415
U.S. Steel USX-MARATHON AND OTHERS 53,871 173,173
National Enameling & Stamping - 1980 134,125 90,658
Guggenheim Exploration ASARCO AND OTHERS 85,032 130,241
Peoples Gas Light and Coke 82,442 138,484
PEOPLES ENERGY AND OTHERS
Pullman ALLIEDSIGNAL AND OTHERS 143,377 63,747
U.S. Industrial Alcohol HANSON PLC ADR 32,220 167,376
American Telephone & Telegraph 99,036 101,486
AT&T AND OTHERS
G.W. Helme - 1990 32,199 156,627
New York Air Brake GENERAL SIGNAL 106,320 83,593
Public Service of New Jersey 59,060 131,719
PUBLIC SERVICE ENTERPRISE AND OTHERS
Consolidated Gas CONSOLIDATED EDISON OF N.Y. 82,240 102,870
P. Lorillard - 1993 69,540 103,650
Phelps Dodge 78,000 82,035
Brooklyn Union Gas 61,430 81,294
American Ice Securities - 1979 68,796 72,867
International Harvester NAVISTAR INTERNATIONAL 5,292 126,980
American Sugar Refining - 1984 67,680 50,612
U.S. Rubber - 1985 63,360 46,893
Railway Steel Spring - 1976 29,600 70,670
Liggett & Myers - 1980 33,396 72,776
Studebaker - 1935 216 90,372
Westinghouse Air Brake - 1979 31,950 61,237
American Locomotive - 1976 24,000 65,100
American Beet Sugar - 1973 40,991 44,833
Republic Iron & Steel LTV 91 87,045
Mackay ITT 34,675 42,474
U.S. Realty & Improvement ITT 32,905 37,564
Underwood Typewriter - 1963 6,380 53,460
Pressed Steel Car - 1984 20,534 34,226
Western Union Telegraph NEW VALLEY 0 49,367
American Cities - 1945 25,440 16,608
International Agricultural IMCERA 30,263 12,622
Laclede Gas 10,450 24,972
Virginia-Carolina Chemica MOBIL 16,711 16,769
American Agricultural Chemical - 1981 11,880 21,369
Baldwin Locomotive DIAL AND OTHERS 6,110 24,780
Julius Kayser - 1983 19,306 11,576
Central Leather - 1974 5,382 19,005
Butterick PRIMERICA 13,367 8,474
Pettibone-Mulliken - 1928 20,000 0
American Telegraph & Cable - 1931 2,400 14,800
Distillers Securities - 1924 0 17,850
Pacific Mail Steamship - 1926 6,534 5,280
Crex Carpet - 1934 0 3,965
International Steam Pump - 1916 0 0
M. Rumely - 1915 0 0
American Malt - 1918 0 0
Assets Realization - 1925 0 0
Brunswick Terminal & Railway Securities - 1933 0 0
U.S. Reduction & Refining - 1916 0 0
</TABLE>
[End Side Bars]
[Photo Caption]
Albert P. Drasdo continued Jonathan Lovelace's work on the 101 Stocks study
through 1963.
Dusty Riedinger, one of approximately 30 Capital associates when she joined the
company in 1954, provided the research for the current update of the study.
[End Photo Caption]
INVESTMENT COMPANY OF AMERICA
INVESTMENT PORTFOLIO-December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------ ----------
Percent of
LARGEST INVESTMENT CATEGORIES Net Assets
<S> <C>
- ------------------------------------------ ----------
Services 19.88%
Capital Equipment 15.06
Finance 13.81
LARGEST INDUSTRY HOLDINGS
- ------------------------------------------ ----------
Banking 7.83%
Telecommunications 7.07
Energy Sources 5.97
Data Processing & Reproduction 5.3
Broadcasting & Publishing 5.28
LARGEST INDIVIDUAL HOLDINGS
- ------------------------------------------ ----------
Federal National Mortgage 2.14%
Royal Dutch Petroleum 2.11
Philip Morris 2.09
International Business Machines 1.77
Caterpillar 1.71
Time Warner 1.65
Tele-Communications 1.38
BankAmerica 1.2
DuPont 1.2
WMX Technologies 1.12
</TABLE>
INVESTMENT COMPANY OF AMERICA
December 31, 1994
<TABLE>
<CAPTION>
- ----------------------------- ----- ------------------------------- -----
<S> <C> <C> <C>
COMPANIES WHOSE EQUITY-TYPE
SECURITIES WERE ADDED TO OR
ELIMINATED FROM THE PORTFOLIO
Companies Companies
appearing in the portfolio eliminated from the portfolio
since June 30, 1994 since June 30, 1994
- ----------------------------- ----- ------------------------------- -----
Alcan Aluminium Alcatel Alsthom
Apple Computer American Cyanamid
Archer Daniels Midland Anheuser-Busch Companies
Canadian Pacific Broken Hill Proprietary
Chemical Banking Commonwealth Edison
Comerica Dow Chemical
CS Holding Group ITT
Dana Kimberly-Clark
Georgia Pacific Loews
Ingersoll-Rand Nissan Motor
Limited Rohm and Haas
National City Siemens
Norfolk Southern Sun Microsystems
Northrop Grumman Tektronix
Parker Hannifin Woolworth
Rockwell International
Societe Nationale Elf
Aquitaine
Unicom
United HealthCare
Wachovia
</TABLE>
INVESTMENT COMPANY OF AMERICA
INVESTMENT PORTFOLIO, December 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------ --------- --------- ------
Market Percent
Number of Value of Net
Equity-Type Securities Shares (millions) Assets
<S> <C> <C> <C>
- ------------------------------------------ --------- --------- ------
Energy
- ------------------------------------------ --------- --------- ------
Energy Sources-5.97%
Amoco Corp. 2,955,000 174.714 0.91
Atlantic Richfield Co. 175,000 17.806 0.09
British Petroleum Co. PLC (American Depositary
Receipts) 250,000 19.969 0.1
Chevron Corp. 900,000 40.163 0.21
Mobil Corp. 400,000 33.7 0.17
Murphy Oil Corp. 750,000 31.875 0.17
Phillips Petroleum Co. 5,073,700 166.164 0.86
Royal Dutch Petroleum Co.
(New York Registered Shares) 3,780,000 406.35 2.11
Societe Nationale Elf Aquitaine (American
Depositary Receipts) 464,265 16.365 0.08
Texaco Inc. 1,180,000 70.652 0.37
TOTAL, Class B 1,200,000 69.76 0.36
Unocal Corp. 600,000 16.35 0.19
Unocal Corp., $3.50 convertible preferred/1/ 415,000 20.335
USX-Marathon Group 4,100,000 67.138 0.35
Utilities: Electric & Gas-1.76%
Entergy Corp. 5,500,000 120.312 0.62
Houston Industries Inc. 1,100,000 39.188 0.2
Long Island Lighting Co. 5,240,000 80.565 0.42
Pacific Gas and Electric Co. 1,339,100 32.641 0.17
Texas Utilities Co. 283,692 9.078 0.05
Unicom Corp. 2,395,000 57.48 0.3
--------- ------
1490.605 7.73
--------- ------
- ------------------------------------------ --------- --------- ------
Materials
- ------------------------------------------ --------- --------- ------
Chemicals-1.45%
E.I. du Pont de Nemours and Co. 4,100,000 230.625 1.2
Eastman Chemical Co. 400,000 20.2 0.1
Imperial Chemical Industries PLC
(American Depositary Receipts) 100,000 4.65 0.02
Monsanto Co. 354,300 24.978 0.13
Forest Products & Paper-0.51%
Georgia Pacific 950,000 67.925 0.35
International Paper Co. 400,000 30.15 0.16
Metals: Nonferrous-1.50%
Alcan Aluminium Ltd. 1,000,000 25.375 0.13
Aluminum Co. of America 1,620,000 140.332 0.73
Inco Ltd. 1,964,300 56.228 0.29
Phelps Dodge Corp. 600,000 37.125 0.19
Western Mining Corp. Holdings Ltd. 5,205,894 30.11 0.16
Metals: Steel-0.74%
Bethlehem Steel Corp./2/ 4,000,000 72 0.37
USX-U.S. Steel Group 2,000,000 71 0.37
Miscellaneous Materials-0.21%
Freeport-McMoRan Inc. 1,000,000 17.75
Freeport-McMoRan Inc., $4.375 convertible 0.21
exchangeable preferred stock/1/ 500,000 23.5
--------- ------
851.948 4.41
--------- ------
- ------------------------------------------ --------- --------- ------
Capital Equipment
- ------------------------------------------ --------- --------- ------
Aerospace & Military Technology-1.79%
Boeing Co. 2,100,000 98.175 0.51
Litton Industries, Inc./2/ 1,333,000 49.321 0.25
Northrop Grumman Corp. 900,000 37.8 0.2
Raytheon Co. 1,200,000 76.65 0.4
United Technologies Corp. 1,318,800 82.919 0.43
Data Processing & Reproduction-5.30%
Apple Computer, Inc. 500,000 19.375 0.1
Compaq Computer Corp./2/ 5,250,000 207.375 1.07
Hewlett-Packard Co. 1,298,000 129.638 0.67
International Business Machines Corp. 4,645,000 341.408 1.77
Microsoft Corp./2/ 1,975,000 120.722 0.63
Novell, Inc./2/ 900,000 15.3 0.08
Tandem Computers Inc./2/ 1,225,000 20.978 0.11
Unisys Corp., $3.75 convertible preferred,
Series A 350,000 11.112 0.06
Xerox Corp. 1,570,000 155.43 0.81
Electrical & Electronic-1.09%
General Electric Co. 2,232,500 113.858 0.59
Honeywell Inc. 3,034,800 95.596 0.5
Electronic Components-1.89%
Intel Corp. 1,850,000 117.706 0.61
Motorola, Inc. 1,600,000 92.6 0.48
Texas Instruments Inc. 2,050,000 153.494 0.8
Energy Equipment-1.10%
Schlumberger Ltd. 3,350,000 168.756 0.88
Western Atlas Inc./2/ 1,133,000 42.629 0.22
Industrial Components-0.35%
Dana Corp. 1,352,200 31.608 0.16
Rockwell International Corp. 1,000,000 35.75 0.19
Machinery & Engineering-3.54%
Caterpillar Inc. 5,980,000 329.648 1.71
Cummins Engine Co., Inc. 1,041,800 47.141 0.25
Deere & Co. 1,500,000 99.375 0.52
Ingersoll-Rand Co. 500,000 15.75 0.08
Mannesmann AG 420,000 114.511 0.59
Parker Hannifin Corp. 400,000 18.2 0.09
Sundstrand Corp. 1,275,000 58.012 0.3
--------- ------
2900.837 15.06
--------- ------
- ------------------------------------------ --------- --------- ------
Consumer Goods
- ------------------------------------------ --------- --------- ------
Automobiles-1.95%
Chrysler Corp., $4.625 convertible
preferred, Series A/1/ 100,000 13.687 0.07
Daimler-Benz AG 110,000 54.154 0.37
Daimler-Benz AG (American Depositary Receipts) 330,000 16.253
Ford Motor Co., Class A 2,090,000 58.52
Ford Motor Co., $4.20 cumulative convertible 0.73
preferred, Series A 900,000 82.8
General Motors Corp. 2,700,000 114.075 0.59
Toyota Motor Corp. 1,760,000 37.071 0.19
Beverages & Tobacco-2.87%
American Brands, Inc. 488,500 18.319 0.09
PepsiCo, Inc. 2,450,000 88.813 0.46
Philip Morris Companies Inc. 7,000,000 402.5 2.09
RJR Nabisco Holdings Corp./2/ 8,000,000 44 0.23
Food & Household Products-1.45%
Archer Daniels Midland Co. 2,317,500 47.798 0.25
ConAgra, Inc. 1,400,000 43.75 0.23
CPC International Inc. 980,000 52.185 0.27
Nestle SA 90,000 85.803 0.44
Procter & Gamble Co. 800,000 49.6 0.26
Health & Personal Care-5.27%
Abbott Laboratories 1,750,000 57.094 0.3
American Home Products Corp. 1,175,000 73.731 0.38
Bausch & Lomb Inc. 117,800 3.99 0.02
Baxter International Inc. 900,000 25.425 0.13
Bristol-Myers Squibb Co. 1,755,000 101.571 0.53
Johnson & Johnson 1,040,000 56.94 0.29
Eli Lilly & Co. 1,680,000 110.25 0.57
Merck & Co., Inc. 5,600,000 213.5 1.11
Pfizer Inc. 1,545,000 119.351 0.62
Schering-Plough Corp. 923,000 68.302 0.35
Upjohn Co. 1,550,000 47.663 0.25
Warner-Lambert Co. 1,800,000 138.6 0.72
Recreation & Other Consumer Products-0.45%
Duracell International Inc. 1,554,300 67.418 0.35
Eastman Kodak Co. 400,000 19.1 0.1
Textiles & Apparel-0.13%
VF Corp. 500,000 24.312 0.13
--------- ------
2336.575 12.12
--------- ------
- ------------------------------------------ --------- --------- ------
Services
- ------------------------------------------ --------- --------- ------
Broadcasting & Publishing-5.28%
Capital Cities/ABC, Inc. 1,400,000 119.35 0.62
CBS Inc. 1,145,000 63.404 0.33
Gannett Co., Inc. 1,155,200 61.514 0.32
New York Times Co., Class A 3,350,000 74.119 0.38
Tele-Communications, Inc., Class A/2/ 12,240,900 266.24 1.38
Time Warner Inc. 9,081,000 318.97 1.65
Times Mirror Co., Series A 1,500,000 47.063 0.24
Tribune Co. 1,250,000 68.437 0.36
Business & Public Services-3.20%
Browning-Ferris Industries, Inc. 500,000 14.188 0.08
Dun & Bradstreet Corp. 1,350,000 74.25 0.39
Federal Express Corp./2/ 1,250,000 75.312 0.39
Interpublic Group of Companies, Inc. 2,546,500 81.806 0.42
Pitney Bowes Inc. 2,020,000 64.135 0.33
United HealthCare Corp. 2,000,000 90.25 0.47
WMX Technologies, Inc. 8,250,000 216.563 1.12
Leisure & Tourism-1.28%
Walt Disney Co. 4,254,600 196.243 1.02
McDonald's Corp. 1,700,000 49.725 0.26
Merchandising-1.22%
American Stores Co. 2,100,000 56.438 0.29
Limited Inc. 1,400,000 25.375 0.13
May Department Stores Co. 900,000 30.375 0.16
Melville Corp. 1,400,000 43.225 0.22
Tandy Corp., $2.14 preferred equity redemption
cumulative stock, Series C 1,100,000 41.525 0.22
Toys 'R' Us, Inc./2/ 1,250,000 38.125 0.2
Telecommunications-7.07%
AirTouch Communications/2/ 2,250,000 65.531 0.34
Ameritech Corp. 1,900,000 76.712 0.4
AT&T Corp. 3,895,000 195.724 1.01
GTE Corp. 5,325,000 161.747 0.84
Hong Kong Telecommunications Ltd. (American
Depositary Receipts) 1,500,000 28.688 0.15
LIN Broadcasting Corp./2/ 1,409,600 188.182 0.98
MCI Communications Corp. 9,225,000 169.509 0.88
Pacific Telesis Group 2,424,220 69.09 0.36
Southwestern Bell Corp. 300,000 12.113 0.06
Sprint Corp. 250,000 6.906 0.04
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) 3,457,400 141.753 0.74
U S WEST, Inc. 1,750,000 62.344 0.32
Vodafone Group PLC (American Depositary 5,472,000 183.996 0.95
Receipts)
Transportation: Airlines-0.65%
AMR Corp./2/ 1,275,000 67.894 0.35
Delta Air Lines, Inc. 895,000 45.198
Delta Air Lines, Inc., $3.50 convertible 0.3
preferred, Class C 300,000 13.125
Transportation: Rail & Road-1.18%
Burlington Northern Inc. 650,000 31.281 0.16
Conrail, Inc. 750,000 37.875 0.2
CSX Corp. 850,000 59.181 0.31
Norfolk Southern Corp. 300,000 18.188 0.09
Union Pacific Corp. 1,775,000 80.984 0.42
--------- ------
3832.653 19.88
--------- ------
- ------------------------------------------ --------- --------- ------
Finance
- ------------------------------------------ --------- --------- ------
Banking-7.83%
H.F. Ahmanson & Co. 3,000,000 48.375 0.25
Banc One Corp. 8,272,500 209.915 1.09
BankAmerica Corp. 5,850,000 231.075 1.2
Bankers Trust New York Corp. 1,385,000 76.694 0.4
Chemical Banking Corp. 1,000,000 35.875 0.18
Citicorp 1,200,000 49.65
Citicorp, $5.375 convertible preferred, 0.51
Series 13 420,000 47.985
Comerica Inc. 1,000,000 24.375 0.13
CS Holding Group 60,000 25.688 0.13
Deutsche Bank AG 49,765 23.15 0.12
First Chicago Corp. 1,300,000 62.075 0.32
First Fidelity Bancorporation 700,000 31.412 0.16
First Interstate Bancorp 2,175,000 147.084 0.76
First Union Corp. 2,150,000 88.956 0.46
Great Western Financial Corp. 3,701,500 59.224 0.31
J.P. Morgan & Co. Inc. 1,900,000 106.4 0.55
National City Corp. 800,000 20.7 0.11
NBD Bancorp, Inc. 1,802,800 49.352 0.25
PNC Bank Corp. 4,592,000 97.006 0.5
SunTrust Banks, Inc. 800,000 38.2 0.2
U.S. Bancorp 400,000 8.95 0.05
Wachovia Corp. 882,700 28.467 0.15
Financial Services-2.93%
American Express Co. 2,479,500 73.145 0.38
Federal National Mortgage Assn. 5,660,000 412.473 2.14
Student Loan Marketing Assn. 2,450,000 79.625 0.41
Insurance-3.05%
Allstate Corp. 2,583,000 61.023 0.32
American General Corp. 1,210,000 34.183 0.18
American International Group, Inc. 1,215,000 119.07 0.62
CIGNA Corp. 200,000 12.65 0.07
CKAG Colonia Konzern AG 34,000 27.898 0.15
CKAG Colonia Konzern AG, preferred shares 3,627 1.851
General Re Corp. 950,000 117.562 0.61
Lincoln National Corp. 1,050,000 36.75 0.19
SAFECO Corp. 1,340,000 69.68 0.36
St. Paul Companies, Inc. 2,390,000 106.953 0.55
--------- ------
2663.471 13.81
--------- ------
- ------------------------------------------ --------- --------- ------
Multi-Industry, Gold Mines & Miscellaneous
- ------------------------------------------ --------- --------- ------
Multi-Industry-2.19%
Canadian Pacific Ltd. 1,000,000 15 0.08
Hanson PLC 3,500,000 12.661 0.71
Hanson PLC (American Depositary Receipts) 6,850,000 123.3
Minnesota Mining and Manufacturing Co. 2,745,000 146.514 0.76
Tenneco Inc. 1,825,000 77.563 0.4
Textron Inc. 925,000 46.597 0.24
Gold Mines -0.32%
Newmont Mining Corp. 1,700,000 61.2 0.32
Miscellaneous-1.75%
Equity-type securities in initial period of
acquisition 337.568 1.75
--------- ------
820.403 4.26
--------- ------
- ------------------------------------------- --------- --------- ------
TOTAL EQUITY-TYPE SECURITIES (cost: $11,586.700
million) 14896.492 77.27
--------- --------- ------
Principal
- ------------------------------------------ Amount
Bonds & Notes (millions)
- ------------------------------------------ --------- --------- ------
U.S. Treasuries-12.48%
7.50% January 1996 25 25.047 0.13
4.375% August 1996 400 380.564 1.97
4.375% November 1996 400 377.248 1.96
8.00% January 1997 175 175.903 0.91
6.875% April 1997 170 166.865 0.87
6.375% June 1997 230 222.921 1.16
5.75% October 1997 300 284.391 1.48
8.875% November 1997 25 25.66 0.13
4.75% August 1998 300 270.843 1.4
5.125% November 1998 300 272.907 1.42
8.875% November 1998 25 25.836 0.13
11.625% November 2004 30 37.575 0.19
7.125% February 2023 151.5 137.865 0.72
- ------------------------------------------ --------- ------
TOTAL BONDS & NOTES (cost: $2,532.848 million) 2403.625 12.47
- ------------------------------------------ --------- ------
TOTAL INVESTMENT SECURITIES (cost: $14,119.548
million) 17300.117 89.74
--------- ------
- ------------------------------------------
Short-Term Securities
- ------------------------------------------ --------- --------- ------
U.S. Treasury Short-Term Securities-9.73%
4.25%-8.50% due 2/9-8/15/95 1,907.65 1877.73 9.73
--------- ------
TOTAL SHORT-TERM SECURITIES
(cost: $1,884.691 million) 1877.73 9.73
Excess of cash and receivables over payables 101.746 0.53
--------- ------
TOTAL SHORT-TERM SECURITIES, CASH AND 1979.476 10.26
RECEIVABLES,
NET OF PAYABLES
--------- ------
NET ASSETS 19279.593 100
========= ======
- ------------------------------------------ --------- --------- ------
</TABLE>
Investment Company of America
<TABLE>
<CAPTION>
- ----------------------------------------- ------------- -------------
Statement of Assets and Liabilities (dollars in
at December 31, 1994 millions)
<S> <C> <C>
- ---------------------------------------- ------------- -------------
Assets:
Investment securities at market
(cost: $14,119.548) $17,300.117
Short-term securities at market
(cost: $1,884.691) 1,877.73
Cash 5.306
Receivables for-
Sales of investments $36.065
Sales of fund's shares 51.84
Dividends and accrued interest 90.444 178.349
------------- -------------
19,361.502
Liabilities:
Payables for-
Purchases of investments 54.95
Repurchases of fund's shares 19.33
Management services 4.241
Accrued expenses 3.388 81.909
------------- -------------
Net Assets at December 31, 1994-
Equivalent to $17.67 per share on
1,090,856,938 shares of $1 par value
capital stock outstanding (authorized
capital stock--2,000,000,000 shares) $19,279.593
=============
Statement of Operations (dollars in
for the year ended December 31, 1994 millions)
- ----------------------------------------- ------------- -------------
Investment Income:
Income:
Dividends $425.346
Interest 232.625 $657.971
-------------
Expenses:
Management services fee 50.698
Distribution expenses 38.084
Transfer agent fee 16.006
Reports to shareholders 2.074
Registration statement and
prospectus 1.4
Postage, stationery and supplies 5.024
Directors' fees 0.408
Auditing and legal fees 0.098
Custodian fee 0.771
Taxes (other than federal income tax) 0.296
Other expenses 0.225 115.084
------------- -------------
Net investment income 542.887
-------------
Realized Gain and Change in Unrealized
Appreciation on Investments:
Net realized gain 628.471
Net change in unrealized
appreciation on investments:
Beginning of year 4,314.584
End of year ........ 3,173.701 (1,140.883)
------------- -------------
Net realized gain and change in
unrealized appreciation on investments (512.412)
-------------
Net Increase in Net Assets Resulting
from Operations $30.475
=============
- ---------------------------------------- ------------- -------------
Statement of Changes in Net Assets (dollars in
millions)
Year ended
December 31
1994 1993
- ----------------------------------------- ------------- -------------
Operations:
Net investment income $542.887 $531.116
Net realized gain on investments 628.471 692.804
Net change in unrealized appreciation
on investments (1,140.883) 718.467
------------- -------------
Net increase in net assets
resulting from operations 30.475 1,942.387
------------- -------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net investment income (496.411) (445.535)
Distributions from net realized
gain on investments (628.912) (726.078)
------------- -------------
Total dividends and distributions (1,125.323) (1,171.613)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold: 149,158,039
and 212,849,472 shares, respectively 2,761.027 3,926.672
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 56,628,397 and 55,417,050
shares, respectively 1,014.931 1,030.191
Cost of shares repurchased: 130,005,029
and 115,511,426 shares, respectively (2,406.547) (2,151.043)
------------- -------------
Net increase in net assets resulting from
capital share transactions 1,369.411 2,805.82
------------- -------------
Total Increase in Net Assets 274.563 3,576.594
Net Assets:
Beginning of year 19,005.03 15,428.436
------------- -------------
End of year (including undistributed
net investment income: $227.698
and $181.222, respectively) $19,279.593 $19,005.03
============= =============
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. The Investment Company of America (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company. The following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Equity-type securities are stated at market value based upon closing sales
prices reported on recognized securities exchanges on the last business day of
the year or, for listed securities having no sales reported and for unlisted
securities, upon last-reported bid prices on that date.
Non-convertible bonds and other long-term debt securities are valued at prices
obtained from a bond-pricing service provided by a major dealer in bonds, when
such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean of their representative quoted bid and asked prices or, if such prices are
not available, at the mean of such prices for securities of comparable
maturity, quality and type.
Short-term securities with original or remaining maturities in excess of 60
days are valued at the mean of their quoted bid and asked prices. Short-term
securities with 60 days or less to maturity are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Valuation Committee of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis. Discounts
on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in non-U.S.
currencies are recorded in the financial statements after translation into U.S.
dollars utilizing rates of exchange on the last business day of the year.
Purchases and sales of investment securities, income, and expenses are
calculated using the prevailing exchange rate as accrued. The fund does not
identify the portion of each amount shown in the fund's Statement of Operations
under the caption "Realized Gain and Change in Unrealized Appreciation on
Investments" that arises from changes in non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $771,000 includes $128,000 that was paid by these credits
rather than cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of December 31, 1994, net unrealized appreciation on investments for
federal income tax purposes aggregated $3,190,524,000, of which $3,874,702,000
related to appreciated securities and $684,178,000 related to depreciated
securities. During the year ended December 31, 1994, the fund realized, on a
tax basis, a net capital gain of $628,399,000 on securities transactions. The
cost of portfolio securities for federal income tax purposes was
$15,987,323,000 at December 31, 1994.
3. The fee of $50,698,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.39% of the first $1 billion of average net assets;
0.336% of such assets in excess of $1 billion but not exceeding $2 billion;
0.30% of such assets in excess of $2 billion but not exceeding $3 billion;
0.276% of such assets in excess of $3 billion but not exceeding $5 billion;
0.258% of such assets in excess of $5 billion but not exceeding $8 billion;
0.246% of such assets in excess of $8 billion but not exceeding $13 billion;
and 0.24% of such assets in excess of $13 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended December 31, 1994,
distribution expenses under the Plan were $38,084,000. As of December 31,
1994, accrued and unpaid distribution expenses were $3,206,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $16,006,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $13,495,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors and Advisory Board members of the fund who are unaffiliated with
CRMC may elect to defer part or all of the fees earned for services as members
of the board. Amounts deferred are not funded and are general unsecured
liabilities of the fund. As of December 31, 1994, aggregate amounts deferred
were $61,900.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly
owned subsidiaries of CRMC. Certain Directors and officers of the fund are or
may be considered to be affiliated with CRMC, AFS and/or AFD. No affiliated
officers, directors or employees of CRMC, AFS or AFD received any remuneration
directly from the fund.
4. Option warrants are outstanding, which may be exercised at any time for the
purchase of 842,013 shares of the fund at approximately $5.242 per share. If
all warrants had been exercised on December 31, 1994, the net assets of the
fund would have been $19,284,006,000; the shares outstanding would have been
1,091,699,000; and the net asset value would have been equivalent to $17.66 per
share. During the year ended December 31, 1994, 150 warrants were exercised for
the purchase of 3,291 shares.
5. As of December 31, 1994, accumulated undistributed net realized gain on
investments was $28,000 and additional paid-in capital was $14,787,309,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $5,652,350,000 and $5,991,308,000, respectively,
during the year ended December 31, 1994.
Dividend income is recorded net of foreign taxes paid. For the year ended
December 31, 1994, such foreign taxes amounted to $5,479,000. Net realized
currency gains on dividends, interest, and withholding taxes reclaimable were
$72,000 for the year ended December 31, 1994.
INVESTMENT COMPANY OF AMERICA
December 31, 1994
<TABLE>
<CAPTION>
Per-Share Data and Ratios Year
ended
December
31
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $18.72 $17.89 $17.48 $14.52 $15.24
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income 0.51 0.54 0.49 0.51 0.57
Net realized and unrealized
gain (loss) on investments -0.48 1.51 0.71 3.27 -0.48
------- ------- ------- ------- -------
Total income from
investment operations 0.03 2.05 1.2 3.78 0.09
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income -0.48 -0.47 -0.47 -0.44 -0.59
Distributions from net
realized gains -0.6 -0.75 -0.32 -0.38 -0.22
------- ------- ------- ------- -------
Total distributions -1.08 -1.22 -0.79 -0.82 -0.81
------- ------- ------- ------- -------
Net Asset Value, End of Year $17.67 $18.72 $17.89 $17.48 $14.52
======= ======= ======= ======= =======
Total Return* 0.0016 11.62% 6.99% 26.54% 0.0068
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $19,280 $19,005 $15,428 $10,526 $5,923
Ratio of expenses to average
net assets 0.006 0.0059 0.0058 0.0059 0.0055
Ratio of net income to average
net assets 0.0283 0.0303 0.0306 0.0329 0.0395
Portfolio turnover - common stocks 17.94% 19.57% 7.23% 5.79% 7.48%
Portfolio turnover - investment securities 31.08% 17.57% 9.73% 6.21% 10.94%
*This was calculated without deducting
a sales charge. The maximum sales charge
is 5.75% of the fund's offering price.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of The Investment Company of
America, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of The Investment Company of America
(the "Fund") at December 31, 1994, the results of its operations and the
changes in its net assets and the per-share data and ratios for the periods
indicated in conformity with generally accepted accounting principles. These
financial statements and per-share data and ratios (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994, by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse
Los Angeles, California
January 31, 1995
TAX INFORMATION (UNAUDITED)
During the fiscal year ended December 31, 1994, 69% of the dividends paid by
the fund from investment income earned qualified for the corporate
dividends-received deduction. Of those dividends, 32% was derived from
interest on direct U.S. Treasury obligations.
This information is given to meet certain requirements of the Internal Revenue
Code.
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION about your account or any of the fund's services, please
contact your securities dealer or financial planner, or call the fund's
transfer agent, toll free, at 800/421-0180.
This report is for the information of shareholders of The Investment Company of
America, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after March 31, 1995, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA BDA/GRS
Lit. No. ICA-011-0295
BOARD OF DIRECTORS
CHARLES H. BLACK
Pacific Palisades, California
Private investor and consultant;
former Executive Vice President and Director, KaiserSteel Corporation
JOHN F. BOOKOUT
Houston, Texas
Former Supervisory Director, Royal Dutch Petroleum Company; former President
and Chief Executive Officer, Shell Oil Company
ANN S. BOWERS
Palo Alto, California
Independent human resources consultant, Enterprise 2000
MALCOLM R. CURRIE, PH.D.
Los Angeles, California
Chairman Emeritus, Hughes Aircraft Company
JON B. LOVELACE, JR.
Los Angeles, California
Chairman of the Board of the fund
Vice Chairman of the Board and
Chairman of the Executive Committee,
Capital Research and Management Company
JOHN G. MCDONALD
Stanford, California
The IBJ Professor of Finance, Graduate School of Business, Stanford University
BAILEY U. MORRIS
Washington, D.C.
Editor, International Economic Insights; Senior Fellow, Institute for
International Economics; Consultant, The Independent of London
WILLIAM C. NEWTON
Los Angeles, California
President of the fund
Senior Partner, The Capital Group Partners L.P.
JAMES W. RATZLAFF
San Francisco, California
Executive Vice President of the fund
Vice Chairman of the Board,
Capital Research and Management Company
OLIN C. ROBISON, PH.D.
Middlebury, Vermont
President of the Salzburg Seminar and
President Emeritus, Middlebury College
ADVISORY BOARD MEMBERS
MALCOLM FRASER
Melbourne, Australia
Former Prime Minister of Australia
Allan E. Gotlieb
Toronto, Canada
Former Canadian Ambassador to
the United States
WILLIAM H. KLING
St. Paul, Minnesota
President, Minnesota Public Radio;
President, Greenspring Co.; former President,
American Public Radio (now Public
Radio International)
HERBERT L. LUCAS, JR.
Los Angeles, California
Private investor
ROBERT J. O'NEILL, PH.D.
Oxford, England
Professor and Fellow,
All Souls College, University of Oxford
NORMAN R. WELDON, PH.D.
Miami, Florida
President and Director, Corvita Corporation
IN APPRECIATION
COLEMAN W. MORTON, who served the fund in various capacities since 1949,
including several years as President in the 1960s, as a member of the Board of
Directors and since 1972 as a member of the Advisory Board, retired this past
January. (See page 8 for more about Mr. Morton's role in the fund's history.)
DONALD A. PELS, former Chairman of the Board of LIN Broadcasting Corporation
and an Advisory Board member since 1991, did not stand for re-election to the
Advisory Board.
ALLEN E. PUCKETT, Ph.D., Chairman Emeritus of Hughes Aircraft Company, has
served the fund since 1983 as either a member of the Board of Directors or the
Advisory Board. Mr. Puckett has now retired from the Advisory Board.
The Directors express their deep appreciation to Messrs. Morton, Pels and
Puckett for their valuable service to the fund and its shareholders.
OTHER OFFICERS
WILLIAM R. GRIMSLEY
San Francisco, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
R. MICHAEL SHANAHAN
Los Angeles, California
Senior Vice President of the fund
Chairman of the Board, Capital Research
and Management Company
GREGG E. IRELAND
Washington, D.C.
Vice President of the fund
Vice President, Capital Research and Management Company
ANNE M. LLEWELLYN
Los Angeles, California
Vice President of the fund
Associate, Capital Research and
Management Company
JAMES B. LOVELACE
Los Angeles, California
Vice President of the fund
Vice President, Capital Research and Management Company
DONALD D. O'NEAL
San Francisco, California
Vice President of the fund
Vice President, Capital Research and Management Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
STEVEN N. KEARSLEY
Los Angeles, California
Treasurer of the fund
Vice President and Treasurer,
Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Assistant Secretary of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
MARY C. CREMIN
Los Angeles, California
Assistant Treasurer of the fund
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company
R. MARCIA GOULD
Los Angeles, California
Assistant Treasurer of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
[ THE AMERICAN FUNDS GROUP(R) ]
