<PAGE>
PROSPECTUS
for Eligible Retirement Plans
THE INVESTMENT
COMPANY OF AMERICA(R)
AN OPPORTUNITY FOR LONG-TERM
GROWTH OF CAPITAL AND INCOME
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
February 28, 1995
THE INVESTMENT COMPANY OF AMERICA
333 South Hope Street
Los Angeles, CA 90071
The company's investment objectives are long-term growth of capital and
income. The company strives to accomplish these objectives through constant
supervision, careful selection and broad diversification of a portfolio which
ordinarily consists principally of common stocks.
This prospectus relates only to shares of the company offered without a sales
charge through eligible retirement plans. For a prospectus regarding shares of
the company to be acquired otherwise, contact the Secretary of the company at
the address indicated above.
This prospectus presents information you should know before investing in the
company. It should be retained for future reference.
You may obtain the statement of additional information for the company dated
February 28, 1995, which contains the company's financial statements, without
charge, by writing to the Secretary of the company at the above address or
telephoning 800/421-0180. These requests will be honored within three business
days of receipt.
SHARES OF THE COMPANY ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
INSURED,
GUARANTEED, OR ENDORSED BY THE U.S. GOVERNMENT, ANY BANK, THE
FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY, ENTITY
OR PERSON. THE PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS,
INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
04-010-0295
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY
OF EXPENSES
Average annual
expenses paid over a
10-year period would
be approximately
$8 per year,
assuming a $1,000
investment and a 5%
annual return.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses.......... 2
Financial Highlights......... 3
Investment Objectives and
Policies................... 3
Investment Techniques........ 4
Investment Results........... 7
Dividends, Distributions
and Taxes.................. 7
Company Organization and
Management................. 8
Purchasing Shares............ 9
Shareholder Services......... 11
Redeeming Shares............. 11
</TABLE>
This table is designed to help you understand costs of
investing in the company. These are historical ex-
penses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the
company with no sales charge./1/ The company also has
no sales charge on reinvested dividends, redemption
fees or exchange fees.
ANNUAL COMPANY OPERATING EXPENSES (as a percentage of
average net assets)
<TABLE>
<S> <C>
Management fees......................................... 0.26%
12b-1 expenses.......................................... 0.20%/2/
Other expenses (including audit, legal, shareholder
services, transfer agent and custodian expenses)...... 0.14%
Total company operating expenses........................ 0.60%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
cumulative expenses on a $1,000
investment, assuming
a 5% annual return./3/ $6 $19 $33 $75
</TABLE>
/1/ Retirement plans of organizations with $100 million
or more in collective retirement plan assets may
purchase shares of the company with no sales charge.
In addition, any defined contribution plan qualified
under Section 401(a) of the Internal Revenue Code
including a "401(k)" plan with 200 or more eligible
employees or any other plan that invests at least $1
million in shares of the company (or in combination
with shares of other funds in The American Funds
Group other than the money market funds) may purchase
shares at net asset value; however, a contingent
deferred sales charge of 1% applies on certain
redemptions within 12 months following such
purchases. (See "Redeeming Shares--Contingent
Deferred Sales Charge.")
/2/ These expenses may not exceed 0.25% of the company's
average net assets annually. (See "Company
Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term
shareholders may pay more than the economic
equivalent of the maximum front-end sales charge
permitted by the National Association of Securities
Dealers.
/3/ Use of this assumed 5% return is required by the
Securities and Exchange Commission; it is not an
illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information has been audited by Price
HIGHLIGHTS Waterhouse LLP, independent accountants, whose unquali-
fied report relating to the most recent five years is
(For a share included in the statement of additional information.
outstanding This information should be read in conjunction with the
throughout the financial statements and accompanying notes which are
fiscal year) also included in the statement of additional informa-
tion.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
1986 1985
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of Year...... $ 18.72 $ 17.89 $ 17.48 $ 14.52 $15.24 $12.94 $12.61 $13.19
$13.51 $11.00
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... .51 .54 .49 .51 .57 .61 .51 .46 .45
.45
Net realized and
unrealized gain (loss)
on investments......... (.48) 1.51 .71 3.27 (.48) 3.13 1.14 .23 2.12
2.99
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from Investment
Operations........... .03 2.05 1.20 3.78 .09 3.74 1.65 .69 2.57
3.44
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net in-
vestment income....... (.48) (.47) (.47) (.44) (.59) (.59) (.56) (.52) (.44)
(.44)
Distributions from net
realized gains........ (.60) (.75) (.32) (.38) (.22) (.85) (.76) (.75) (2.45)
(.49)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total Distributions... (1.08) (1.22) (.79) (.82) (.81) (1.44) (1.32) (1.27) (2.89)
(.93)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Year.............. $ 17.67 $ 18.72 $ 17.89 $ 17.48 $14.52 $15.24 $12.94 $12.61
$13.19 $13.51
======= ======= ======= ======= ====== ======
====== ====== ====== ======
Total Return/1/........ .16% 11.62% 6.99% 26.54% .68% 29.41% 13.34%
5.44% 21.74% 33.39%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of Year
(in millions)......... $19,280 $19,005 $15,428 $10,526 $5,923 $5,376 $4,119 $3,889
$3,730 $3,073
Ratios of Expenses to
Average Net Assets.... .60% .59% .58% .59% .55% .52% .48%
.42% .41% .43%
Ratio of Net Income to
Average Net Assets.... 2.83% 3.03% 3.06% 3.29% 3.95% 4.11% 3.78%
3.14% 3.47% 3.80%
Portfolio Turnover Rate
--common stocks...... 17.94% 19.57% 7.23% 5.79% 7.48% 14.47% 10.39%
10.76% 10.80% 17.15%
--investment securi-
ties............... 31.08% 17.57% 9.73% 6.21% 10.94% 18.22% 16.41% 11.47%
10.31% 17.51%
</TABLE>
--------
/1/ Calculated with no sales charge.
INVESTMENT The company's investment objectives are long-term
OBJECTIVES growth of capital and income. The company strives to
AND POLICIES accomplish these objectives through constant supervi-
sion, careful selection and broad diversification. In
The company aims the selection of securities for investment, the possi-
to provide you bilities of appreciation and potential dividends are
with long-term given more weight than current yield. The company ordi-
growth of capital narily invests principally in common stocks. However,
and income. assets may also be held in securities convertible into
common stocks, straight debt securities (rated in the
top three quality categories by Standard & Poor's Cor-
poration or Moody's Investors Service, Inc. or deter-
mined to be of equivalent quality by Capital Research
and Management Company), cash or cash equivalents, U.S.
Government securities, or nonconvertible preferred
stocks. (See the statement of additional information
for a description of cash equivalents.)
3
<PAGE>
- -------------------------------------------------------------------------------
Additionally, the company may from time to time invest
in common stocks and other securities of issuers domi-
ciled outside the U.S. (See "Investment Techniques--
Risks of Investing in Various Countries.")
The company's investments are limited to securities in-
cluded on its eligible list, which consists of securi-
ties deemed suitable investment media in light of the
company's investment objectives and policies. Securi-
ties are added to, or deleted from, the eligible list
by the board of directors, reviewing and acting upon
the recommendations of Capital Research and Management
Company.
The company's investment restrictions (which are de-
scribed in the statement of additional information) and
objectives cannot be changed without shareholder ap-
proval. All other investment practices may be changed
by the company's board.
ACHIEVEMENT OF THE COMPANY'S INVESTMENT OBJECTIVES
CAN-
NOT, OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL
LOSS FROM FLUCTUATING PRICES INHERENT IN ANY
INVESTMENT
IN SECURITIES.
INVESTMENT RISKS OF INVESTING Because the company invests in
TECHNIQUES stocks, the company is subject to market risks, includ-
ing, for example, the possibility that stock prices in
Investing in general may decline over short or even extended peri-
stocks involves ods. The company may also invest in fixed-income secu-
certain risks. rities, including bonds, which have market values which
tend to vary inversely with the level of interest
rates--when interest rates rise, their values will tend
to decline and vice versa. Although under normal market
conditions longer term securities yield more than
shorter term securities of similar quality, they are
subject to greater price fluctuations. These fluctua-
tions in the value of the investments will be reflected
in the company's net asset value per share.
4
<PAGE>
- -------------------------------------------------------------------------------
RISKS OF INVESTING IN VARIOUS COUNTRIES Generally, the
company will invest no more than approximately 10% of
its assets in securities of issuers which are not
included in the Standard & Poor's 500 Composite Index
(a broad measure of the U.S. stock market) and which
are domiciled outside the U.S. Of course, investing
internationally involves special risks caused by, among
other things: fluctuating currency values; different
accounting, auditing, and financial reporting
regulations and practices in some countries; changing
local and regional economic, political, and social
conditions; differing securities market structures; and
occasional administrative difficulties such as delays
in clearing and settling portfolio transactions or in
receiving payment of dividends.
However, in the opinion of Capital Research and
Management Company, global investing also can reduce
certain portfolio risks due to greater diversification
opportunities.
Additional costs could be incurred in connection with
the company's investment activities outside the U.S.
Brokerage commissions are generally higher outside the
U.S., and the company will bear certain expenses in
connection with its currency transactions. The company
may enter into currency exchange contracts for the
purpose of fixing the dollar cost or proceeds for a
transaction. Furthermore, increased custodian costs may
be associated with the maintenance of assets in certain
jurisdictions.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the company is divided into
segments which are managed by individual counselors.
Each counselor decides how the segment will be invested
(within the limits provided by the company's objectives
and policies and by Capital Research and Management
Company's investment committee). In addition, Capital
Research and Management Company's research
professionals make investment decisions with respect to
a portion of the company's portfolio. The primary
individual portfolio counselors for the company are
listed on the next page.
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --
YEARS OF
EXPERIENCE
YEARS OF EXPERIENCE
AS INVESTMENT
AS PORTFOLIO
PROFESSIONAL
COUNSELOR (AND
(APPROXIMATE)
RESEARCH
PROFESSIONAL IF WITH
CAPITAL
PORTFOLIO APPLICABLE) FOR
RESEARCH AND
COUNSELORS FOR THE THE INVESTMENT
MANAGEMENT
INVESTMENT COMPANY COMPANY OF AMERICA
COMPANY OR ITS TOTAL
OF AMERICA PRIMARY TITLE(S) (APPROXIMATE)
AFFILIATES YEARS
- --------------------------------------------------------------------------------------------------------------------
- --
<S> <C> <C> <C>
<C>
Jon B. Lovelace, Jr. Chairman of the Board of 37 years (plus 5 years as 43
years 43 years
the Company. Vice Chairman of research professional prior
the Board of Directors and to becoming a portfolio
Chairman of the Executive counselor for the company)
Committee, Capital Research and
Management Company
William C. Newton President and Director of the 33 years 36
years 42 years
Company. Senior Partner, The
Capital Group Partners L.P.*
William R. Grimsley Senior Vice President of the 23 years 25
years 32 years
Company. Senior Vice President
and Director, Capital Research
and Management Company
R. Michael Shanahan Senior Vice President of the 4 years (plus 13 years as 30
years 30 years
Company. Chairman of the investment professional prior
Board and Principal to becoming a portfolio
Executive Officer, Capital counselor for the company)
Research and Management
Company
Gregg E. Ireland Vice President of the Company. 3 years (plus 10 years as 22
years 22 years
Vice President, Capital Research research professional prior
and Management Company to becoming a portfolio
counselor for the company)
James B. Lovelace Vice President of the Company. 3 years (plus 4 years as 13
years 13 years
Vice President, Capital Research research professional; prior
and Management Company to becoming a portfolio
counselor for the company)
Donald D. O'Neal Vice President of the Company. 3 years (plus 4 years as
10 years 10 years
Vice President, Capital Research research professional prior
and Management Company to becoming a portfolio
counselor for the company)
George A. Miller Senior Vice President and 4 years (plus 15 years as 20
years 34 years
Director, Capital Research and research professional prior
Management Company to becoming a portfolio
counselor for the company)
</TABLE>
* Company affiliated with Capital Research and Management Company
6
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT RESULTS The company may from time to time compare its invest-
ment results to various unmanaged indices or other mu-
The company has tual funds in reports to shareholders, sales literature
averaged a total and advertisements. The results may be calculated on a
return (at no total return and/or yield basis for various periods,
sales charge) of with or without sales charges. Results calculated with-
12.94% a year over out a sales charge will be higher. Total returns assume
its lifetime the reinvestment of all dividends and capital gain dis-
(January 1, 1934 tributions.
through December
31, 1994). The company's yield and the average annual total
returns are calculated in accordance with Securities
and Exchange Commission requirements with no sales
charge. The company's yield for the 30-day period ended
December 31, 1994 was 3.32%. The company's total return
over the past 12 months and average annual total
returns over the past five-year and ten-year periods,
as of December 31, 1994, were 0.16%, 8.79%, and 14.36%,
respectively. Of course, past results are not an
indication of future results. Further information
regarding the company's investment results is contained
in the company's annual report which may be obtained
without charge by writing to the Secretary of the
company at the address indicated on the cover of this
prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS AND in March, June, September and December. Capital gains,
TAXES if any, are usually distributed in December. When a
dividend or capital gain is distributed, the net asset
Income value per share is reduced by the amount of the pay-
distributions are ment.
usually made in
March, June, The terms of your plan will govern how your plan may
September and receive distributions from the company. Generally, pe-
December. riodic distributions from the company to your plan are
reinvested in additional company shares, although your
plan may permit company distributions from net invest-
ment income to be received by you in cash while rein-
vesting capital gains distributions in additional
shares or all company distributions to be received in
cash. Unless you select another option, all distribu-
tion will be reinvested in additional company shares.
FEDERAL TAXES The company intends to operate as a
"regulated investment company" under the Internal
Revenue Code. In any fiscal year in which the company
so qualifies and distributes to shareholders all of its
net investment income and net capital gains, the
company itself is relieved of federal income tax. The
tax treatment of redemptions from a retirement plan may
differ from redemptions from an ordinary shareholder
account.
Please see the statement of additional information and
your tax adviser for further information.
7
<PAGE>
- -------------------------------------------------------------------------------
COMPANY COMPANY ORGANIZATION AND VOTING RIGHTS The
company, an
ORGANIZATION open-end, diversified management investment company,
AND was organized as a Delaware corporation in 1933. The
MANAGEMENT company's board supervises company operations and per-
forms duties required by applicable state and federal
The company is a law. Members of the board who are not employed by Capi-
member of The tal Research and Management Company or its affiliates
American Funds are paid certain fees for services rendered to the com-
Group, which is pany as described in the statement of additional infor-
managed by one of mation. They may elect to defer all or a portion of
the largest and these fees through a deferred compensation plan in ef-
most experienced fect for the company. All shareholders have one vote
investment per share owned and, at the request of the holders of
advisers. at least 10% of the shares, the company will hold a
meeting at which any member of the board could be re-
moved by a majority vote.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the company and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071 and at 135 South State College
Boulevard, Brea, CA 92621. Capital Research and
Management Company manages the investment portfolio and
business affairs of the company and receives a fee at
the annual rate of 0.39% on the first $1.0 billion of
the company's net assets, plus 0.336% on net assets
over $1 billion to $2 billion, plus 0.30% on net assets
over $2 billion to $3 billion, plus 0.276% on net
assets over $3 billion to $5 billion, plus 0.258% on
net assets over $5 billion to $8 billion, plus 0.246%
on net assets over $8 billion to $13 billion, plus
0.24% on net assets in excess of $13 billion.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the company's
portfolio securities transactions are placed by Capital
Research and Management Company, which strives to
obtain the best available prices, taking into account
the costs and quality of executions. In the over-the-
counter
8
<PAGE>
- -------------------------------------------------------------------------------
market, purchases and sales are transacted directly
with principal market-makers except in those
circumstances where it appears better prices and
executions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the company or have provided
investment research, statistical, and other related
services for the benefit of the company and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
company's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
PLAN OF DISTRIBUTION The company has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
these expenses are approved in advance by the board and
the expenses paid under the plan were incurred within
the last 12 months and accrued while the plan is in
effect. Expenditures by the company under the plan may
not exceed 0.25% of its average net assets annually
(all of which may be for service fees).
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los
Angeles, CA 90071, 135 South State College Boulevard,
Brea, CA 92621, 8000 IH-10 West, San Antonio, TX 78230,
8332 Woodfield Crossing Boulevard, Indianapolis, IN
46240, and 5300 Robin Hood Road, Norfolk, VA 23513. It
was paid a fee of $16,006,000 for the fiscal year ended
December 31, 1994. Telephone conversations with
American Funds Service Company may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
PURCHASING SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE
THROUGH YOUR
RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PUR-
CHASE SHARES OF THE COMPANY THROUGH YOUR
EMPLOYER'S
PLAN OR LIMITATIONS ON THE AMOUNT THAT MAY BE PUR-
CHASED, PLEASE CONSULT WITH YOUR EMPLOYER. Shares are
sold to eligible retirement plans at the net asset
value per share next determined
9
<PAGE>
- -------------------------------------------------------------------------------
after receipt of an order by the company or American
Funds Service Company. Orders must be received before
the close of regular trading on the New York Stock Ex-
change in order to receive that day's net asset value.
Plans of organizations with collective retirement plan
assets of $100 million or more may purchase shares at
net asset value. In addition, any defined contribution
plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more
eligible employees or any other plan that invests at
least $1 million in shares of the company (or in combi-
nation with shares of other funds in The American Funds
Group other than the money market funds) may purchase
shares at net asset value; however, a contingent de-
ferred sales charge of 1% is imposed on certain redemp-
tions within one year of such purchase. (See "Redeeming
Shares-- Contingent Deferred Sales Charge.") Plans may
also qualify to purchase shares at net asset value by
completing a statement of intention to purchase $1 mil-
lion in fund shares subject to a commission over a max-
imum of 13 consecutive months. Certain redemptions of
such shares may also be subject to a contingent de-
ferred sales charge as described above. (See the state-
ment of additional information.)
American Funds Distributors, at its expense (from a
designated percentage of its income), will provide ad-
ditional promotional incentives to dealers. Currently
these incentives are limited to the top one hundred
dealers who have sold shares of the company or other
funds in The American Funds Group. These incentive pay-
ments will be based on a pro rata share of a qualifying
dealer's sales.
Qualified dealers currently are paid a continuing serv-
ice fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund Organi-
zation and Management--Plan of Distribution.") These
services include processing purchase and redemption
transactions, establishing shareholder accounts and
providing certain information and assistance with re-
spect to the company.
Shares of the company are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value after the order is
received by the company or American Funds Service
Company. In the case of orders sent directly to the
company or American Funds Service Company, an
investment dealer MUST be indicated. Dealers are
responsible for promptly transmitting orders. (See the
statement of additional information under "Purchase of
Shares--Price of Shares.")
The company's net asset value per share is determined
as of the close of trading (currently 4:00 p.m., New
York time) on each day the New York Stock Exchange is
open. The current value of the company's total assets,
less all liabilities, is divided by the total number of
shares outstanding and the result, rounded to the
nearer cent, is the net asset value per share.
10
<PAGE>
- -------------------------------------------------------------------------------
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on any restrictions in your plan, you may be able to
exchange shares automatically or cross-reinvest
dividends in shares of other funds. Contact your plan
administrator/trustee regarding how to use these
services. Also, see the company's statement of
additional information for a description of these and
other services that may be available through your plan.
These services are available only in states where the
fund to be purchased may be legally offered and may be
terminated or modified at any time upon 60 days'
written notice.
REDEEMING Subject to any restrictions imposed by your plan, you
SHARES can sell your shares through the plan to the company
any day the New York Stock Exchange is open. For more
information about how to sell shares of the company
through your retirement plan, including any charges
that may be imposed by the plan, please consult with
your employer.
--------------------------------------------------------
By contacting Your plan administrator/trustee must
your plan send a letter of instruction
administrator/ specifying the name of the company,
trustee the number of shares or dollar amount
to be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners or their legal
representatives must be guaranteed by
a bank, savings association, credit
union, or member firm of a domestic
stock exchange or the National
Association of Securities Dealers,
Inc., that is an eligible guarantor
institution. Your plan
administrator/trustee should verify
with the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required to redeem shares from
certain accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
--------------------------------------------------------
By contacting Shares may also be redeemed through
your an investment dealer; however you or
investment your plan may be charged for this
dealer service. SHARES HELD FOR YOU IN AN
INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER
AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE
COMPANY
OR AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if
11
<PAGE>
- -------------------------------------------------------------------------------
shares acquired by exchange were then redeemed within
12 months of the initial purchase); for distributions
from qualified retirement plans and other employee
benefit plans; and for redemptions in connection with
loans made by qualified retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because the company's
net asset value fluctuates, reflecting the market value
of the company's portfolio, the amount you receive for
shares redeemed may be more or less than the amount
paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency.
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE
COMPANY
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE
RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE
COMPANY TO BE ACQUIRED OTHERWISE, CONTACT THE
SECRETARY OF THE COMPANY AT THE ADDRESS INDICATED
ON
THE FRONT.
12
<PAGE>
PROSPECTUS
THE INVESTMENT
COMPANY OF AMERICA(R)
AN OPPORTUNITY FOR LONG-TERM
GROWTH OF CAPITAL AND INCOME
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
February 28, 1995
THE INVESTMENT COMPANY OF AMERICA
333 South Hope Street
Los Angeles, CA 90071
The company's investment objectives are long-term growth of capital and
income. The company strives to accomplish these objectives through constant
supervision, careful selection and broad diversification of a portfolio which
ordinarily consists principally of common stocks.
This prospectus presents information you should know before investing in the
company. It should be retained for future reference.
You may obtain the statement of additional information dated February 28,
1995, which contains the company's financial statements, without charge, by
writing to the Secretary of the company at the above address or telephoning
800/421-0180. These requests will be honored within three business days of
receipt.
SHARES OF THE COMPANY ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
INSURED,
GUARANTEED, OR ENDORSED BY, THE U.S. GOVERNMENT, ANY BANK, THE
FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY, ENTITY
OR PERSON. THE PURCHASE OF COMPANY SHARES INVOLVES INVESTMENT
RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
04-010-0295
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY
OF EXPENSES
Average annual
expenses paid over a
10-year period would
be approximately
$13 per year,
assuming a $1,000
investment and a 5%
annual return.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Expenses.......................... 2
Financial Highlights......................... 3
Investment Objective and Policies............ 3
Investment Techniques........................ 5
Investment Results........................... 7
Dividends, Distributions and Taxes........... 7
Company Organization and Management.......... 8
The American Funds Shareholder Guide......... 11-20
Purchasing Shares......................... 11
Reducing Your Sales Charge................ 14
Shareholder Services...................... 16
Redeeming Shares.......................... 18
Retirement Plans.......................... 20
</TABLE>
IMPORTANT PHONE
NUMBERS
Shareholder Services:
800/421-0180 ext. 1
Dealer Services:
800/421-9900 ext. 11
American FundsLine(R):
800/325-3590
(24-hour information)
This table is designed to help you understand costs of
investing in the company. These are historical ex-
penses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price)................... 5.75%/1/
</TABLE>
The company has no sales charge on reinvested dividends, deferred sales
charge,/2/ redemption fees or exchange fees.
ANNUAL COMPANY OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees......................................... 0.26%
12b-1 expenses.......................................... 0.20%/3/
Other expenses (including audit, legal, shareholder
services, transfer agent and custodian expenses)...... 0.14%
Total company operating expenses........................ 0.60%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
cumulative expenses on a $1,000
investment, assuming
a 5% annual return./4/ $63 $76 $89 $128
</TABLE>
/1/ Sales charges are reduced for certain large
purchases. (See "The American Funds Shareholder
Guide: Purchasing Shares--Sales Charges.")
/2/ Any defined contribution plan qualified under Section
401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or
any other purchaser investing at least $1 million in
shares of the company (or in combination with shares
of other funds in The American Funds Group other than
the money market funds) may purchase shares at net
asset value; however, a contingent deferred sales
charge of 1% applies on certain redemptions within 12
months following such purchases. (See "The American
Funds Shareholder Guide: Redeeming Shares--Contingent
Deferred Sales Charge.")
/3/ These expenses may not exceed 0.25% of the company's
average net assets annually. (See "Company
Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term
shareholders may pay more than the economic
equivalent of the maximum front-end sales charge
permitted by the National Association of Securities
Dealers.
/4/ Use of this assumed 5% return is required by the
Securities and Exchange Commission; it is not an
illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information has been audited by Price
HIGHLIGHTS Waterhouse LLP, independent accountants, whose unquali-
fied report relating to the most recent five years is
(For a share included in the statement of additional information.
outstanding This information should be read in conjunction with the
throughout the financial statements and accompanying notes which are
fiscal year) also included in the statement of additional informa-
tion.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
1986 1985
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of Year...... $ 18.72 $ 17.89 $ 17.48 $ 14.52 $15.24 $12.94 $12.61 $13.19
$13.51 $11.00
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... .51 .54 .49 .51 .57 .61 .51 .46 .45
.45
Net realized and
unrealized gain (loss)
on investments......... (.48) 1.51 .71 3.27 (.48) 3.13 1.14 .23 2.12
2.99
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from Investment
Operations........... .03 2.05 1.20 3.78 .09 3.74 1.65 .69 2.57
3.44
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income..... (.48) (.47) (.47) (.44) (.59) (.59) (.56) (.52) (.44)
(.44)
Distributions from net
realized gains........ (.60) (.75) (.32) (.38) (.22) (.85) (.76) (.75) (2.45)
(.49)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total Distributions... (1.08) (1.22) (.79) (.82) (.81) (1.44) (1.32) (1.27) (2.89)
(.93)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Year.............. $ 17.67 $ 18.72 $ 17.89 $ 17.48 $14.52 $15.24 $12.94 $12.61
$13.19 $13.51
======= ======= ======= ======= ====== ======
====== ====== ====== ======
Total Return/1/........ .16% 11.62% 6.99% 26.54% .68% 29.41% 13.34%
5.44% 21.74% 33.39%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of Year
(in millions)......... $19,280 $19,005 $15,428 $10,526 $5,923 $5,376 $4,119 $3,889
$3,730 $3,073
Ratios of Expenses to
Average Net Assets.... .60% .59% .58% .59% .55% .52% .48%
.42% .41% .43%
Ratio of Net Income to
Average Net Assets.... 2.83% 3.03% 3.06% 3.29% 3.95% 4.11% 3.78%
3.14% 3.47% 3.80%
Portfolio Turnover Rate
--common stocks...... 17.94% 19.57% 7.23% 5.79% 7.48% 14.47% 10.39%
10.76% 10.80% 17.15%
--investment
securities......... 31.08% 17.57% 9.73% 6.21% 10.94% 18.22% 16.41%
11.47% 10.31% 17.51%
</TABLE>
--------
/1/ This was calculated without deducting a sales charge. The maximum sales
charge is 5.75% of the company's offering price.
INVESTMENT The company's investment objectives are long-term
OBJECTIVES growth of capital and income. The company strives to
AND POLICIES accomplish these objectives through constant supervi-
sion, careful selection and broad diversification. In
the selection of securities for investment, the possi-
The company aims bilities of appreciation and potential dividends are
to provide you given more weight than current yield. The company ordi-
with long-term narily invests principally in common stocks. However,
growth of capital assets may also be held in securities convertible into
and income. common stocks, straight debt securities (rated in the
top three quality categories by Standard & Poor's Cor-
poration or Moody's Investors Service, Inc. or deter-
mined to be of equivalent quality by Capital Research
and Management Company), cash or cash equivalents, U.S.
Government securities, or nonconvertible preferred
stocks. (See the statement of additional information
for a description of cash equivalents.)
3
<PAGE>
- -------------------------------------------------------------------------------
Additionally, the company may from time to time invest
in common stocks and other securities of issuers domi-
ciled outside the U.S. (See "Investment Techniques--
Risks of Investing in Various Countries.")
The company's investments are limited to securities in-
cluded on its eligible list, which consists of securi-
ties deemed suitable investment media in light of the
company's investment objectives and policies. Securi-
ties are added to, or deleted from, the eligible list
by the board of directors, reviewing and acting upon
the recommendations of Capital Research and Management
Company.
The company's investment restrictions (which are de-
scribed in the statement of additional information) and
objectives cannot be changed without shareholder ap-
proval. All other investment practices may be changed
by the company's board.
ACHIEVEMENT OF THE COMPANY'S INVESTMENT OBJECTIVES
CAN-
NOT, OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL
LOSS FROM FLUCTUATING PRICES INHERENT IN ANY
INVESTMENT
IN SECURITIES.
4
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS OF INVESTING Because the company invests in
TECHNIQUES stocks, the company is subject to market risks includ-
ing, for example, the possibility that stock prices in
Investing in general may decline over short or even extended periods.
stocks involves The company may also invest in fixed-income securities,
certain risks. including bonds, which have market values which tend to
vary inversely with the level of interest rates--when
interest rates rise, their values will tend to decline
and vice versa. Although under normal market conditions
longer term securities yield more than shorter term se-
curities of similar quality, they are subject to greater
price fluctuations. These fluctuations in the value of
the investments will be reflected in the company's net
asset value per share.
RISKS OF INVESTING IN VARIOUS COUNTRIES Generally, the
company will invest no more than approximately 10% of
its assets in securities of issuers which are not
included in the Standard & Poor's 500 Composite Index (a
broad measure of the U.S. stock market) and which are
domiciled outside the U.S. Of course, investing
internationally involves special risks caused by, among
other things: fluctuating currency values; different
accounting, auditing, and financial reporting
regulations and practices in some countries; changing
local and regional economic, political, and social
conditions; differing securities market structures; and
occasional administrative difficulties such as delays in
clearing and settling portfolio transactions or in
receiving payment of dividends.
However, in the opinion of Capital Research and
Management Company, global investing also can reduce
certain portfolio risks due to greater diversification
opportunities.
Additional costs could be incurred in connection with
the company's investment activities outside the U.S.
Brokerage commissions are generally higher outside the
U.S., and the company will bear certain expenses in
connection with its currency transactions. The company
may enter into currency exchange contracts for the
purpose of fixing the dollar cost or proceeds for a
transaction. Furthermore, increased custodian costs may
be associated with the maintenance of assets in certain
jurisdictions.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic investment
philosophy of Capital Research and Management Company is
to seek fundamental values at reasonable prices, using a
system of multiple portfolio counselors in managing
mutual fund assets. Under this system the portfolio of
the company is divided into segments which are managed
by individual counselors. Each counselor decides how the
segment will be invested (within the limits provided by
the company's objectives and policies and by Capital
Research and Management Company's investment committee).
In addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the company's portfolio. The
primary individual portfolio counselors for the company
are listed on the next page.
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --
YEARS OF
EXPERIENCE
YEARS OF EXPERIENCE
AS INVESTMENT
AS PORTFOLIO
PROFESSIONAL
COUNSELOR (AND
(APPROXIMATE)
RESEARCH
PROFESSIONAL IF WITH
CAPITAL
PORTFOLIO APPLICABLE) FOR
RESEARCH AND
COUNSELORS FOR THE THE INVESTMENT
MANAGEMENT
INVESTMENT COMPANY COMPANY OF AMERICA
COMPANY OR ITS TOTAL
OF AMERICA PRIMARY TITLE(S) (APPROXIMATE)
AFFILIATES YEARS
- --------------------------------------------------------------------------------------------------------------------
- --
<S> <C> <C> <C>
<C>
Jon B. Lovelace, Jr. Chairman of the Board of 37 years (plus 5 years as 43
years 43 years
the Company. Vice Chairman of research professional prior
the Board of Directors and to becoming a portfolio
Chairman of the Executive counselor for the company)
Committee, Capital Research and
Management Company
William C. Newton President and Director of the 33 years 36
years 42 years
Company. Senior Partner, The
Capital Group Partners L.P.*
William R. Grimsley Senior Vice President of the 23 years 25
years 32 years
Company. Senior Vice President
and Director, Capital Research
and Management Company
R. Michael Shanahan Senior Vice President of the 4 years (plus 13 years as 30
years 30 years
Company. Chairman of the investment professional prior
Board and Principal to becoming a portfolio
Executive Officer, Capital counselor for the company)
Research and Management
Company
Gregg E. Ireland Vice President of the Company. 3 years (plus 10 years as 22
years 22 years
Vice President, Capital Research research professional prior
and Management Company to becoming a portfolio
counselor for the company)
James B. Lovelace Vice President of the Company. 3 years (plus 4 years as 13
years 13 years
Vice President, Capital Research research professional; prior
and Management Company to becoming a portfolio
counselor for the company)
Donald D. O'Neal Vice President of the Company. 3 years (plus 4 years as
10 years 10 years
Vice President, Capital Research research professional prior
and Management Company to becoming a portfolio
counselor for the company)
George A. Miller Senior Vice President and 4 years (plus 15 years as 20
years 34 years
Director, Capital Research and research professional prior
Management Company to becoming a portfolio
counselor for the company)
</TABLE>
* Company affiliated with Capital Research and Management Company
6
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT RESULTS The company may from time to time compare its invest-
ment results to various unmanaged indices or other mu-
The company has tual funds in reports to shareholders, sales literature
averaged a total and advertisements. The results may be calculated on a
return of 12.83% a yield and/or total return basis for various periods,
year (assuming the with or without sales charges. Results calculated with-
maximum sales out a sales charge will be higher. Total returns assume
charge was paid) the reinvestment of all dividends and capital gain dis-
over its lifetime tributions.
(January 1, 1934
through December The company's yield and the average annual total
31, 1994). returns are calculated in accordance with Securities
and Exchange Commission rules which require that the
maximum sales charge be deducted. The company's yield
for the 30-day period ended December 31, 1994 was
3.13%. The company's total return over the past year
and average annual total returns over the past five-
and ten-year periods, as of December 31, 1994, were
-5.60%, 7.51%, and 13.69%, respectively. Of course, past
results are not an indication of future results.
Further information regarding the company's investment
results is contained in the company's annual report
which may be obtained without charge by writing to the
Secretary of the company at the address indicated on
the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS AND in March, June, September and December. Capital gains,
TAXES if any, are usually distributed in December. When a
dividend or capital gain is distributed, the net asset
Income value per share is reduced by the amount of the pay-
distributions are ment.
usually made in
March, June, FEDERAL TAXES The company intends to operate as a
September and "regulated investment company" under the Internal
December. Revenue Code. In any fiscal year in which the company
so qualifies and distributes to shareholders all of its
net investment income and net capital gains, the
company itself is relieved of federal income tax.
All dividends and capital gains are taxable whether
they are reinvested or received in cash--unless you are
exempt from taxation or entitled to tax deferral. Early
each year, you will be notified as to the amount and
federal tax status of all dividends and capital gains
paid during the prior year. Such dividends and capital
gains may also be subject to state or local taxes.
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT
TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL
SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING
DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS
NOTIFIED THE COMPANY THAT THE TAXPAYER
IDENTIFICATION
NUMBER LISTED ON YOUR ACCOUNT IS INCORRECT
ACCORDING TO
THEIR RECORDS OR THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, FEDERAL LAW GENERALLY REQUIRES THE
COMPANY
TO WITHHOLD 31% FROM ANY DIVIDENDS AND/OR
REDEMPTIONS
(INCLUDING EXCHANGE REDEMPTIONS). Amounts withheld are
applied to your federal tax liability; a refund may be
obtained from the Service if withholding results in
overpayment of taxes. Federal law also requires the
7
<PAGE>
- -------------------------------------------------------------------------------
company to withhold 30% or the applicable tax treaty
rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation
shareholder accounts.
This is a brief summary of some of the tax laws that
affect your investment in the company. Please see the
statement of additional information and your tax ad-
viser for further information.
COMPANY COMPANY ORGANIZATION AND VOTING RIGHTS The
company, an
ORGANIZATION open-end, diversified management investment company,
AND was organized as a Delaware corporation in 1933. The
MANAGEMENT company's board supervises company operations and per-
forms duties required by applicable state and federal
The company is a law. Members of the board who are not employed by Capi-
member of The tal Research and Management Company or its affiliates
American Funds are paid certain fees for services rendered to the com-
Group, which is pany as described in the statement of additional infor-
managed by one of mation. They may elect to defer all or a portion of
the largest and these fees through a deferred compensation plan in ef-
most experienced fect for the company. All shareholders have one vote
investment per share owned and, at the request of the holders of
advisers. at least 10% of the shares, the company will hold a
meeting at which any member of the board could be re-
moved by a majority vote.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the company and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071 and at 135 South State College
Boulevard, Brea, CA 92621. (See "The American Funds
Shareholder Guide: Purchasing Shares--Investment
Minimums and Fund Numbers" for a listing of funds in
The American Funds Group.) Capital Research and
Management Company manages the investment portfolio and
business affairs of the company and receives a fee at
the annual rate of 0.39% on the first $1.0 billion of
the company's net assets, plus 0.336% on net assets
over $1.0 billion to $2.0 billion, plus 0.30% on net
assets over $2.0 billion to $3.0 billion, plus 0.276%
on net assets over $3.0 billion to $5.0 billion, plus
0.258% on net assets over $5 billion to $8 billion,
plus 0.246% on net assets over $8 billion to $13
billion, plus 0.24% on net assets in excess of $13
billion.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
8
<PAGE>
- -------------------------------------------------------------------------------
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the company's portfo-
lio securities transactions are placed by Capital Re-
search and Management Company, which strives to obtain
the best available prices, taking into account the
costs and quality of executions. In the over-the-
counter market, purchases and sales are transacted di-
rectly with principal market-makers except in those
circumstances where it appears better prices and execu-
tions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the company or have provided
investment research, statistical, and other related
services for the benefit of the company and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
company's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
PLAN OF DISTRIBUTION The company has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the company
under the plan may not exceed 0.25% of its average net
assets annually (all of which may be for service fees).
(See "Purchasing Shares--Sales Charges" below.)
TRANSFER AGENT American Funds Service Company, a wholly
owned subsidiary of Capital Research and Management
Company, is the transfer agent and performs shareholder
service functions. It was paid a fee of $16,006,000 for
the year ended December 31, 1994. Telephone
conversations with American Funds Service Company may
be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
9
<PAGE>
- --------------------------------------------------------------------------------
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
SERVICE ADDRESS AREAS SERVED
AREA
-----------------------------------------------------------
WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92622-2205 MT, NV, OR, UT, WA
Fax: 714/671-7080 and outside the U.S.
-----------------------------------------------------------
CENTRAL- P.O. Box 659522 AR, CO, IA, KS, LA,
WEST San Antonio, TX 78265-9522 MN, MO, ND, NE, NM,
Fax: 210/530-4050 OK, SD, TX and WY
-----------------------------------------------------------
CENTRAL- P.O. Box 6007 AL, IL, IN, KY, MI,
EAST Indianapolis, IN 46206-6007 MS, OH, TN and WI
Fax: 317/735-6620
-----------------------------------------------------------
EAST P.O. Box 2280 CT, DE, FL, GA, MA,
Norfolk, VA 23501-2280 MD, ME, NC, NH, NJ,
Fax: 804/670-4773 NY, PA, RI, SC, VA,
VT, WV and
Washington, D.C.
-----------------------------------------------------------
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 FOR SERVICE.
-----------------------------------------------------------
[MAP OF THE UNITED STATES]
-----------------------------------------------------------
West (light grey); Central-West (white); Central-East
(dark grey), East (orange)
10
<PAGE>
THE AMERICAN FUNDS SHAREHOLDER GUIDE
PURCHASING SHARES METHOD INITIAL INVESTMENT ADDITIONAL
INVESTMENTS
---------------------------------------------------------
Your investment See "Investment $50 minimum (except
dealer can help Minimums and Fund where a lower
you establish your Numbers" for minimum is noted
account--and help initial under "Investment
you add to it investment Minimums and Fund
whenever you like. minimums. Numbers").
---------------------------------------------------------
By Visit any Mail directly to
contacting investment dealer your investment
your who is registered dealer's address
investment in the state printed on your
dealer where the account statement.
purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
---------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check
account payable to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the
account envelope provided
application. with your account
statement.
---------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account number(s), investments in the
if necessary. same manner as
Please indicate described under
an investment "Initial Investment."
dealer on the
account. Instruct
your bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco,
CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
---------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
SHARE PRICE Shares are purchased at the next offering
price after the order is received by the company or
American Funds Service Company. In the case of orders
sent directly to the company or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of trading (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange is open. The current
value of the company's total assets, less all liabilities,
is divided by the total number of shares outstanding and
the result, rounded to the nearer cent, is the net asset
value per share. The net asset value per share of the
money market funds normally will remain constant at $1.00
based on the funds' current practice of valuing their
shares on the basis of the penny-rounding method in
accordance with rules of the Securities and Exchange
Commission.
11
<PAGE>
- -------------------------------------------------------------------------------
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost
or destroyed certificates.
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT
AVAILABLE FOR THE MONEY MARKET FUNDS.
INVESTMENT MINIMUMS AND FUND NUMBERS Here are the
minimum initial investments required by the funds in
The American Funds Group along with fund numbers for
use with our automated phone line, American
FundsLine(R) (see description below):
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
- ---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R).......................... $1,000 02
American Balanced Fund(R).............. 500 11
American Mutual Fund(R)................ 250 03
Capital Income Builder(R).............. 1,000 12
Capital World Growth and Income
Fund(SM)............................. 1,000 33
EuroPacific Growth Fund(R)............. 250 16
Fundamental Investors(SM).............. 250 10
The Growth Fund of America(R).......... 1,000 05
The Income Fund of America(R).......... 1,000 06
The Investment Company of America(R)... 250 04
The New Economy Fund(R)................ 1,000 14
New Perspective Fund(R)................ 250 07
SMALLCAP World Fund(SM)................ 1,000 35
Washington Mutual Investors Fund(SM)... 250 01
</TABLE>
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
- ---- ---------- ------
<S> <C> <C>
BOND FUNDS
American High-Income Municipal Bond
Fund(SM)............................. $1,000 40
American High-Income Trust(R).......... 1,000 21
The Bond Fund of America(SM)........... 1,000 08
Capital World Bond Fund(R)............. 1,000 31
Intermediate Bond Fund of America(R)... 1,000 23
Limited Term Tax-Exempt Bond Fund of
America(SM).......................... 1,000 43
The Tax-Exempt Bond Fund of
America(SM).......................... 1,000 19
The Tax-Exempt Fund of California(R)*.. 1,000 20
The Tax-Exempt Fund of Maryland(R)*.... 1,000 24
The Tax-Exempt Fund of Virginia(R)*.... 1,000 25
U.S. Government Securities Fund(SM).... 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of
America(R)........................... 2,500 09
The Tax-Exempt Money Fund of
America(SM).......................... 2,500 39
The U.S. Treasury Money Fund of
America(SM).......................... 2,500 49
</TABLE>
--------
* Available only in certain states.
For retirement plan investments, the minimum is $250,
except that the money market funds have a minimum of
$1,000 for individual retirement accounts (IRAs).
Minimums are reduced to $50 for purchases through
"Automatic Investment Plans" (except for the money
market funds) or to $25 for purchases by retirement
plans through payroll deductions and may be reduced or
waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
12
<PAGE>
- -------------------------------------------------------------------------------
SALES CHARGES The sales charges you pay when purchasing
the stock, stock/bond, and bond funds of The American
Funds Group are set forth below. The money market funds
of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for
a listing of the funds.)
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING
OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
--------------------- ---------- -------- -------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000................. 6.10% 5.75% 5.00%
$50,000 but less than $100,000.... 4.71 4.50 3.75
BOND FUNDS
Less than $25,000................. 4.99 4.75 4.00
$25,000 but less than $50,000..... 4.71 4.50 3.75
$50,000 but less than $100,000.... 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000... 3.63 3.50 2.75
$250,000 but less than $500,000... 2.56 2.50 2.00
$500,000 but less than $1,000,000. 2.04 2.00 1.60
$1,000,000 or more................ none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1
million or more, for purchases by any defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees (paid pursuant to the
company's plan of distribution), and for purchases made
at net asset value by certain retirement plans of
organizations with collective retirement plan assets of
$100 million or more as set forth in the statement of
additional information (paid by American Funds
Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will provide
additional promotional incentives to dealers. Currently
these incentives are limited to the top one hundred
dealers who have sold shares of the company or other
funds in The American Funds Group. These incentive
payments will be based on a pro rata share of a
qualifying dealer's sales.
Any defined contribution plan qualified under Section
401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or
any other purchaser investing at least $1 million in
shares of the company (or in combination with shares of
other funds in The American Funds Group other than the
money market funds) may purchase shares at net asset
value; however, a contingent deferred sales
13
<PAGE>
- -------------------------------------------------------------------------------
charge of 1% is imposed on certain redemptions within
one year of the purchase. (See "Redeeming Shares--
Contingent Deferred Sales Charge.")
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund
Organization and Management--Plan of Distribution").
These services include processing purchase and
redemption transactions, establishing shareholder
accounts and providing certain information and
assistance with respect to the company.
NET ASSET VALUE PURCHASES The stock, stock/bond and
bond funds may sell shares at net asset value to: (1)
current or retired directors, trustees, officers and
advisory board members of the funds managed by Capital
Research and Management Company, employees of
Washington Management Corporation, employees and
partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members of the
above persons, and trusts or plans primarily for such
persons; (2) current or retired registered
representatives or full-time employees and their
spouses and minor children of dealers having sales
agreements with American Funds Distributors and plans
for such persons; (3) companies exchanging securities
with the company through a merger, acquisition or
exchange offer; (4) trustees or other fiduciaries
purchasing shares for certain retirement plans of
organizations with retirement plan assets of $100
million or more; (5) insurance company separate
accounts; (6) accounts managed by subsidiaries of The
Capital Group Companies, Inc.; and (7) The Capital
Group Companies, Inc., its affiliated companies and
Washington Management Corporation. Shares are offered
at net asset value to these persons and organizations
due to anticipated economies in sales effort and
expense.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE include those by you, your spouse and your children
under the age of 21, if all parties are purchasing
You and your shares for their own account(s), which may include
immediate family purchases through employee benefit plan(s) such as an
may combine IRA, individual-type 403(b) plan or single-participant
investments to Keogh-type plan or by a business solely controlled by
reduce your costs. these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) for a diversified common
trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating
14
<PAGE>
- -------------------------------------------------------------------------------
fund shares. Purchases made for nominee or street name
accounts (securities held in the name of an investment
dealer or another nominee such as a bank trust
department instead of the customer) may not be
aggregated with those made for other accounts and may
not be aggregated with other nominee or street name
accounts unless otherwise qualified as described above.
CONCURRENT PURCHASES To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your invest-
ment may also be reduced by taking into account the
current value of your existing holdings in The American
Funds Group. Direct purchases of the money market funds
are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application.)
YOU MUST LET YOUR INVESTMENT DEALER OR AMERICAN
FUNDS
SERVICE COMPANY KNOW IF YOU QUALIFY FOR A REDUCTION
IN
YOUR SALES CHARGE USING ONE OR ANY COMBINATION OF
THE
METHODS DESCRIBED ABOVE.
15
<PAGE>
- -------------------------------------------------------------------------------
SHAREHOLDER AUTOMATIC INVESTMENT PLAN You may make regular
monthly
SERVICES or quarterly investments through automatic charges to
your bank account. Once a plan is established, your ac-
The company offers count will normally be charged by the 10th day of the
you a valuable month during which an investment is made (or by the
array of services 15th day of the month in the case of any retirement
designed to plan for which Capital Guardian Trust Company--another
increase the affiliate of The Capital Group Companies, Inc.--acts as
convenience and trustee or custodian).
flexibility of
your investment-- AUTOMATIC REINVESTMENT Dividends and capital gain dis-
services you can tributions are reinvested in additional shares at no
use to alter your sales charge unless you indicate otherwise on the
investment program account application. You also may elect to have divi-
as your needs and dends and/or capital gain distributions paid in cash by
circumstances informing the company, American Funds Service Company
change. or your investment dealer.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of ad-
ditional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
EXCHANGE PRIVILEGE You may exchange shares into other
funds in The American Funds Group. Exchange purchases
are subject to the minimum investment requirements of
the fund purchased and no sales charge generally
applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on
the fund being purchased, unless the money market fund
shares were acquired by an exchange from a fund having
a sales charge, or by reinvestment or cross-
reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American FundsLine(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Redeeming Shares--Telephone Redemptions and
Exchanges" below.) Shares held in corporate-type re-
tirement plans for which Capital Guardian Trust Company
serves as trustee may not be exchanged by telephone,
fax or telegraph. Exchange redemptions and purchases
are processed simultaneously at the share prices next
determined after the exchange order is received. (See
"Purchasing Shares--Share Price.") THESE TRANSACTIONS
HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND
PURCHASES.
AUTOMATIC EXCHANGES You may automatically exchange
shares (in amounts of $50 or more) among any of the
funds in The American Funds Group on any day (or pre-
ceding business day if the day falls on a non-business
day) of each month you designate. You must either meet
the
16
<PAGE>
- -------------------------------------------------------------------------------
minimum initial investment requirement for the receiv-
ing fund OR the originating fund's balance must be at
least $5,000 and the receiving fund's minimum must be
met within one year.
AUTOMATIC WITHDRAWALS You may make automatic withdraw-
als of $50 or more as follows: five or more times per
year if you have an account of $10,000 or more, or four
or fewer times per year if you have an account of
$5,000 or more. Withdrawals are made on or about the
15th day of each month you designate, and checks will
be sent within seven days. (See "Other Important Things
to Remember.") Additional investments in a withdrawal
account must not be less than one year's scheduled
withdrawals or $1,200, whichever is greater. However,
additional investments in a withdrawal account may be
inadvisable due to sales charges and tax liabilities.
THESE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE
FUND TO BE PURCHASED MAY BE LEGALLY OFFERED AND
MAY BE
TERMINATED OR MODIFIED AT ANY TIME UPON 60 DAYS'
WRITTEN NOTICE.
ACCOUNT STATEMENTS Your account is opened in accordance
with your registration instructions. Transactions in
the account, such as additional investments and
dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service
Company.
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, redeem shares (up to $10,000 per fund, per
account each day), or exchange shares around the clock
with American FundsLine(R). To use this service, call
800/325-3590 from a TouchTone(TM) telephone.
Redemptions and exchanges through American FundsLine(R)
are subject to the conditions noted above and in
"Redeeming Shares--Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of
funds in The American Funds Group under "Purchasing
Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of
your Social Security number or other tax identification
number associated with your account) and account
number.
17
<PAGE>
- -------------------------------------------------------------------------------
REDEEMING By writing to Send a letter of instruction
SHARES American specifying the name of the company,
Funds Service the number of shares or dollar amount
You may take money Company (at to be sold, your name and account
out of your the number. You should also enclose any
account whenever appropriate certificate shares you wish to
you please. address redeem. For redemptions over $50,000
indicated and for certain redemptions of
under $50,000 or less (see below), your
"Company signature must be guaranteed by a
Organization bank, savings association, credit
and union, or member firm of a domestic
Management-- stock exchange or the National
Transfer Association of Securities Dealers,
Agent") Inc., that is an eligible guarantor
institution. You should verify with
the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required for redemption of shares
held in corporate, partnership or
fiduciary accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
--------------------------------------------------------
By contacting If you redeem shares through your
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
--------------------------------------------------------
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the
conditions
noted in this
section and
in "Telephone
Redemptions
and
Exchanges"
below)
--------------------------------------------------------
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
--------------------------------------------------------
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR
ANY
REDEMPTION OF $50,000 OR LESS PROVIDED THE REDEMPTION
CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S)
AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE
ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST
10
DAYS.
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER
AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE
COMPANY
OR AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine(R)), telex, fax
or telegraph redemption and/or exchange options, you
agree to hold the company, American Funds Service
Company, any of its affiliates or mutual funds managed
by such affiliates, and each of their respective
directors, trustees,
18
<PAGE>
- -------------------------------------------------------------------------------
officers, employees and agents harmless from any
losses, expenses, costs or liability (including
attorney fees) which may be incurred in connection
with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these
options. However, you may elect to opt out of these
options by writing American Funds Service Company (you
may reinstate them at any time also by writing American
Funds Service Company). If American Funds Service
Company does not employ reasonable procedures to
confirm that the instructions received from any person
with appropriate account information are genuine, the
company may be liable for losses due to unauthorized or
fraudulent instructions. In the event that shareholders
are unable to reach the company by telephone because of
technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made
in writing only.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee benefit
plans; for distributions from 403(b) plans or IRAs due
to death, disability or attainment of age 59 1/2; for
tax-free returns of excess contributions to IRAs; for
redemptions through certain automatic withdrawals not
exceeding 10% of the amount that would otherwise be
subject to the charge; and for redemptions in
connection with loans made by qualified retirement
plans.
REINSTATEMENT PRIVILEGE You may reinvest proceeds from
a redemption or a dividend or capital gain distribution
without sales charge (any contingent deferred sales
charge paid will be credited to your account) in any
fund in The American Funds Group. Send a written
request and a check to American Funds Service Company
within 90 days after the date of the redemption or
distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same
fund within 30 days. If you redeem your shares within
90 days after purchase and the sales charge on the
purchase of other shares is waived under the
reinstatement privilege, the sales charge you
previously paid for
19
<PAGE>
- -------------------------------------------------------------------------------
the shares may not be taken into account when you
calculate your gain or loss on that redemption.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
RETIREMENT You may invest in the company through various
PLANS retirement plans including the following plans for
which Capital Guardian Trust Company acts as trustee or
custodian: IRAs, Simplified Employee Pension plans,
403(b) plans and Keogh- and corporate-type business
retirement plans. For further information about any of
the plans, agreements, applications and annual fees,
contact American Funds Distributors or your investment
dealer. To determine which retirement plan is
appropriate for you, please consult your tax adviser.
TAX-EXEMPT FUNDS SHOULD NOT SERVE AS INVESTMENTS
FOR
RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL
INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE
SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
20
THE INVESTMENT COMPANY OF AMERICA
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
This document is not a prospectus but should be read in conjunction with the
current Prospectus of The Investment Company of America (the company or ICA)
dated February 28, 1995. The Prospectus may be obtained from your investment
dealer or financial planner or by writing to the company at the following
address:
THE INVESTMENT COMPANY OF AMERICA
ATTENTION: SECRETARY
333 SOUTH HOPE STREET
LOS ANGELES, CA 90071
(213) 486-9200
The fund has two forms of prospectuses. Each reference to the prospectus in
this Statement of Additional Information includes both of the company's
prospectuses. Shareholders who purchase shares at net asset value through
eligible retirement plans should note that not all of the services or features
described below may be available to them, and they should contact their
employer for details.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ITEM PAGE NO.
<S> <C>
INVESTMENT POLICIES 1
DESCRIPTION OF CERTAIN SECURITIES 2
INVESTMENT RESTRICTIONS 4
COMPANY DIRECTORS AND OFFICERS 6
ADVISORY BOARD 12
MANAGEMENT 16
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 18
PURCHASE OF SHARES 21
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 23
REDEMPTION OF SHARES 24
EXECUTION OF PORTFOLIO TRANSACTIONS 24
GENERAL INFORMATION 25
INVESTMENT RESULTS 27
FINANCIAL STATEMENTS 35
</TABLE>
INVESTMENT POLICIES
FIXED-INCOME SECURITIES -- The company may invest in intermediate- and
long-term debt securities. If market interest rates increase, such
fixed-income securities generally decline in value and vice versa. If the
currency in which the security is denominated declines against the U.S. dollar,
the dollar value of the security will decline and vice versa.
DESCRIPTION OF CERTAIN SECURITIES
BOND RATINGS - The company may invest in debt securities which are rated in the
top three quality categories by Standard & Poor's Corporation or Moody's
Investors Service, Inc. or determined to be equivalent by Capital Research and
Management Company (the Investment Adviser). The top three rating categories
for Standard & Poor's and Moody's are described below:
STANDARD & POOR'S CORPORATION:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions, than debt in higher categories."
MOODY'S INVESTORS SERVICE, INC.:
"Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities, or fluctuation of protective elements may be
of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities."
"Bonds rated A are judged to be of upper medium grade obligations. These
bonds possess many favorable investment attributes. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. In these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but
are not limited to, Federal Land Banks, Farmers Home Administration, Central
Bank Cooperatives, and Federal Intermediate Credit Banks.
CASH EQUIVALENTS - These securities include (1) commercial paper (short-term
notes up to 9 months in maturity issued by corporations or governmental
bodies), (2) commercial bank obligations
(E.G., certificates of deposit (interest-bearing time deposits), bankers'
acceptances (time drafts on a commercial bank where the bank accepts an
irrevocable obligation to pay at maturity) and documented discount notes
(corporate promissory discount notes accompanied by a commercial bank guarantee
to pay at maturity), (3) savings association and savings bank obligations
(e.g., certificates of deposit issued by savings banks or savings and loan
associations), (4) securities of the U.S. Government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (5)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.
CURRENCY TRANSACTIONS -- For the purpose of hedging currency exchange rate
risks, the company may enter into forward currency contracts. The company does
not have any current intention of entering into forward currency contracts
other than currency exchange contracts which will be entered into only during
the period between the trade date and the settlement date of a security
transaction to fix the dollar cost or proceeds for the transaction.
A forward currency contract involves 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. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks). At the
maturity of a forward contract, the company may either accept or make delivery
of the currency specified in the contract or, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
Closing transactions with respect to forward contracts are usually effected
with the currency trader who is a party to the original contract.
INVESTMENT RESTRICTIONS
The company has adopted certain investment restrictions, which are fundamental
policies and cannot be changed without a majority vote of its outstanding
shares. Such majority is defined within the Investment Company Act of 1940
(the 1940 Act) as the vote of the lesser of (i) 67% or more of the outstanding
voting securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy, or (ii) more
than 50% of the outstanding voting securities.
These restrictions (which do not apply to the purchase of securities issued or
guaranteed by the U.S. Government) provide that the company shall make no
investment:
Which involves promotion or business management by the company;
In any security about which reliable information is not available with respect
to the history, management, assets, earnings, and income of the issuer;
If the investment would cause more than 5% of the value of the total assets of
the company, as they exist at the time of investment, to be invested in the
securities of any one issuer;
If the investment would cause more than 20% of the value of the total assets of
the company to be invested in the securities in any one industry;
If the investment would cause the company to own more than 10% of the
outstanding voting securities of any one issuer, provided that this restriction
shall apply as to 75% of the company's total assets; or
In any security which has not been placed on the company's Eligible List. (See
the Prospectus)
The company is not permitted to buy securities on margin, sell securities
short, borrow money, or to invest in real estate. (Although it has not been the
practice of the company to make such investments (and it has no current
intention of doing so at least for the next 12 months), the company may invest
in the securities of real estate investment trusts.)
The company has also adopted other fundamental policies which require the
company not to:
Concentrate its investment in any particular industry or group of industries.
Some degree of concentration may occur from time to time (within the 20%
limitation of the Certificate of Incorporation) as certain industries appear to
present desirable fields for investment.
Engage generally in the making of loans. Although the company has reserved the
right to make loans to unaffiliated persons subject to certain restrictions,
including requirements concerning collateral and amount of any loan, no loans
have been made since adoption of this fundamental policy more than 50 years
ago.
Act as underwriter of securities issued by others, engage in distribution of
securities for others, engage in the purchase and sale of commodities or
commodity contracts, borrow money, invest in real estate, or make investments
in other companies for the purpose of exercising control or management.
Pledge, encumber or assign all or any part of its property and assets as
security for a debt.
Invest in the securities of other investment companies.
Notwithstanding the restriction on investing in the securities of other
investment companies, the company may invest in securities of other investment
companies if deemed advisable by its officers in connection with the
administration of a deferred compensation plan adopted by Directors pursuant to
an exemptive order granted by the Securities and Exchange Commission.
Additional investment restrictions adopted by the company and which may be
changed by the Board of Directors without shareholder approval, provide that
the company may not:
Purchase and sell securities for short-term profits; however, securities will
be sold without regard to the time that they have been held whenever investment
judgement makes such action seem advisable.
Purchase or retain the securities of any issuer if those officers and directors
of the company or the Investment Adviser who own beneficially more than one
half of 1% of such issuer together own more than 5% of the securities of such
issuer.
Invest in securities of companies which, with their predecessors, have a record
of less than three years' continuous operations.
Invest in puts, calls, straddles, spreads or any combination thereof.
Purchase partnership interests in oil, gas or mineral exploration, drilling or
mining ventures.
Invest in excess of 10% of the market value of its total assets in securities
which may require registration under the Securities Act of 1933 prior to sale
by the company (restricted securities), or other securities that are not
readily marketable.
COMPANY DIRECTORS AND OFFICERS
Directors and Director Compensation
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S)
DURING AGGREGATE TOTAL COMPENSATION TOTAL
NUMBER
REGISTRANT PAST 5 YEARS (POSITIONS WITHIN THE
COMPENSATION FROM ALL FUNDS OF
FUND
ORGANIZATIONS LISTED MAY HAVE (INCLUDING
MANAGED BY CAPITAL BOARDS ON
CHANGED DURING THIS PERIOD) VOLUNTARILY
DEFERRED RESEARCH AND WHICH
COMPENSATION/1/) FROM
MANAGEMENT COMPANY/2/
DIRECTOR
THE COMPANY DURING
SERVES
FISCAL YEAR ENDED
12/31/94
<S> <C> <C> <C> <C>
<C>
Charles H. Black Director Private investor and consultant; $54,200
$102,300 4
525 Alma Real Drive KaiserSteel Corporation, former
Pacific Palisades, CA Executive Vice President and
90272 Director
Age: 68
John F. Bookout Director Royal Dutch Petroleum, former $49,600
$49,600 1
One Shell Plaza Supervisory Director; Shell Oil
P.O. Box 2463 Company, former President and
Houston, TX 77252 Chief Executive Officer
Age: 72
Ann S. Bowers Director Enterprise 2000, Human resources $51,600
$51,600 1
1570 Emerson consultant
Palo Alto, CA 94301
Age: 57
Malcolm R. Currie Director Hughes Aircraft Company, $47,800
$47,800 1
Bldg. C-1 Chairman Emeritus
Mail Station A-100
P.O. Box 80028
Los Angeles, CA
90080-0028
Age: 68
+ Jon B. Lovelace, Jr. Chairman of Capital Research and Management None/3/
None/3/ 4
333 South Hope Street the Board and Company, Vice Chairman of the
Los Angeles, CA Director Board and Chairman of the
90071-1443 Executive Committee
Age: 68
John G. McDonald Director The IBJ Professor of Finance, $55,400/4/
$124,600 6
Graduate School of Graduate School of Business,
Finance Stanford University
Stanford University
Stanford, CA 94305
Age: 57
Bailey U. Morris Director THE INDEPENDENT OF LONDON, $47,800
$47,800 1
International Economic Consultant
Insights, Editor
Institute for International
Economics
11 Dupont Circle NW
Suite 620
Washington, D.C.
20036-1207
Senior Fellow
Age: 50
+ William C. Newton President and The Capital Group Partners, L.P., None/3/
None/3/ 1
333 South Hope Street Director Senior Partner
Los Angeles, CA
90071-1443
Age: 64
+ James W. Ratzlaff Executive Vice Capital Research and Management None/3/
None/3/ 8
P.O. Box 7650 President and Company, Vice Chairman of the
San Francisco, CA Director Board; American Funds Service
94120-7650 Company, Director; The Capital
Age: 58 Group Partners, L.P., Senior Partner
Olin C. Robison Director President of the Salzburg Seminar; $49,000
$72,400 2
The Painter House Middlebury College, Professor and
Middlebury College former President
Middlebury, VT 05753
Age: 58
</TABLE>
# Positions within the organizations may have changed during this period.
+ Directors who are considered "interested persons as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and Management
Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of directors of the parent company of a registered broker-dealer.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the company in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund Inc. American Variable Insurance
Series is another fund managed by Capital Research and Management Company that
serves as the underling investment vehicle for certain variable insurance
contracts.
/3/ Jon B. Lovelace, Jr., William C. Newton, and James W. Ratzlaff are
affiliated with the Investment Adviser and, accordingly, receive no
compensation from the company.
/4/ Since the plan's adoption, the total amount of deferred compensation
accrued by the company (plus earnings thereon) for participating Directors is
as follows: John B. McDonald ($57,184). Amounts deferred and accumulated
earnings thereon are not funded and are general unsecured liabilities of the
company until paid to the Director.
Each unaffiliated Director is paid a director's fee of $32,000 per annum, plus
$2,000 for each Board of Directors meeting attended, plus $600 for each meeting
attended as a member of a committee of the Board of Directors. No pension or
retirement benefits are accrued as part of company expenses. The Directors and
Advisory Board members may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
company. All of the officers listed are officers of the Investment Adviser and
officers and/or directors/trustees of some of the other mutual funds served by
the Investment Adviser. No compensation is paid by the company to any officer
or director who is a director or officer of the Investment Adviser or
affiliated companies. As of January 31, 1995 the officers and Directors and
their families as a group, owned beneficially or of record less than 1% of the
outstanding shares of the company.
OFFICERS
JON B. LOVELACE, JR., Chairman of the Board
WILLIAM C. NEWTON, President
JAMES W. RATZLAFF, Executive Vice President
Company officers whose other positions are not described above are:
WILLIAM R. GRIMSLEY***, Senior Vice President. Capital Research and Management
Company, Senior Vice President and Director
R. MICHAEL SHANAHAN*, Senior Vice President. Capital Research and Management
Company, Chairman of the Board and Principal Executive Officer
GREGG E. IRELAND****, Vice President. Capital Research and Management Company,
Vice President
ANNE M. LLEWELLYN*, Vice President. Capital Research and Management Company,
Associate
JAMES B. LOVELACE****, Vice President. Capital Research and Management
Company,
Vice President
DONALD D. O'NEAL***, Vice President. Capital Research and Management Company,
Vice President
VINCENT P. CORTI*, Secretary. Capital Research and Management Company, Vice
President,
Fund Business Management Group
STEVEN N. KEARSLEY**, Treasurer. Capital Research and Management Company,
Vice President and Treasurer; American Funds Service Company, Director
JULIE F. WILLIAMS*, Assistant Secretary. Capital Research and Management
Company,
Vice President, Fund Business Management Group
MARY C. CREMIN**, Assistant Treasurer. Capital Research and Management
Company,
Senior Vice President, Fund Business Management Group
R. MARCIA GOULD**, Assistant Treasurer. Capital Research and Management
Company,
Vice President, Fund Business Management Group
# Positions within the organizations may have changed during this period.
+ Considered "interested persons" of the company as defined in the 1940 Act, on
the basis of their affiliation with the Investment Adviser.
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92621.
*** Address is Four Embarcadero Center, Suite 1800, San Francisco, CA 94111
**** Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
ADVISORY BOARD
The Board of Directors has established an Advisory Board whose members are, in
the judgement of the Directors, highly knowledgeable about political and
economic matters. In addition to holding meetings with the Board of Directors,
members of the Advisory Board, while not participating in specific investment
decisions, consult from time to time with the Investment Adviser, primarily
with respect to trade and business conditions. Members of the Advisory Board,
however, possess no authority or responsibility with respect to the Company's
investments or management. The members of the Advisory Board and their current
or former principal occupations are listed on the next page:
ADVISORY BOARD MEMBERS
Advisory Board Member Compensation
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S)
DURING AGGREGATE TOTAL COMPENSATION TOTAL NUMBER
REGISTRANT PAST 5 YEARS (POSITIONS WITHIN THE
COMPENSATION FROM ALL FUNDS OF FUND
ORGANIZATIONS LISTED MAY HAVE (INCLUDING
MANAGED BY CAPITAL BOARDS ON
CHANGED DURING THIS PERIOD) VOLUNTARILY
DEFERRED RESEARCH AND WHICH
COMPENSATION/1/) FROM
MANAGEMENT COMPANY/2/ DIRECTOR
THE COMPANY DURING
SERVES
FISCAL YEAR ENDED
12/31/94
<S> <C> <C> <C> <C>
<C>
Malcolm Fraser Advisory Former Prime Minister of Australia $5,500
$5,500 1
44th Floor Board member
ANZ Tower
55 Collins Street
Melbourne, Victoria 3000
Australia
Age: 64
Allan E. Gotlieb Advisory Former Canadian Ambassador to $5,500
$5,500 1
P.O. Box 85 Board member the United States
Toronto, Ontario
M5L 1B9
Age: 67
William H. Kling Advisory Minnesota Public Radio, President; $7,500/3/
$59,333 5
45 East Seventh Street Board member Greenspring Co., President;
St. Paul, MN 55101 American Public Radio (now Public
Age: 52 Radio International), former
President
Herbert L. Lucas, Jr. Advisory Private investor $7,500 $7,500
1
12011 San Vincente Blvd Board member
Suite 708
Los Angeles, CA 90049
Age: 68
Robert J. O'Neill Advisory Chichele Professor of the History of $7,500
$35,000 3
St. Mary's Close Board member War and Fellow of All Souls
27 Church Green College
Whitney, OXON
OX8 6AZ
Age: 58
Norman R. Weldon Advisory Corvita Corporation, President and $6,500
$29,133 3
8210 N.W. 27th Street Board member Director; Cordis Corporation,
Miami, FL 33122 former President and Director
Age: 60
</TABLE>
# Positions within the organizations may have changed during this period.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the company in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund Inc. American Variable Insurance
Series is another fund managed by Capital Research and Management Company that
serves as the underling investment vehicle for certain variable insurance
contracts.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the company (plus earnings thereon) for participating Directors is
as follows: William H. Kling ($6,699). Amounts deferred and accumulated
earnings thereon are not funded and are general unsecured liabilities of the
company until paid to the Director.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have a number of years of investment experience. The Investment
Adviser's professionals travel several million miles a year, making more than
5,000 research visits in more than 50 countries around the world. The
Investment Adviser believes that it is able to attract and retain quality
personnel.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types. These investors include privately owned business and large
corporations as well as schools, colleges, foundations and other non-profit and
tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and
Service
Agreement (the Agreement) between the company and the Investment Adviser will
continue until April 30, 1995, unless sooner terminated, and may be renewed
from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities, and (ii) the vote of a majority of directors who are not parties to
the Agreement or interested persons (as defined in the 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
company for its acts or omissions in performance of its obligations to the
company not involving willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations under the Agreement. The Agreement also
provides that either party has the right to terminate it, without penalty, upon
60 days' written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform executive, administrative, clerical and bookkeeping functions of the
company; provides suitable office space and utilities; necessary small office
equipment and general purpose accounting forms, supplies, and postage used at
the offices of the company. The company will pay all expenses not expressly
assumed by the Investment Adviser, including, but not limited to, custodian,
transfer and dividend disbursing agency fees and expenses; costs of the
designing, printing and mailing of reports, proxy statements, and notices to
its shareholders; taxes; expenses of the issuance and redemption of shares
(including registration and qualification expenses); expenses pursuant to the
company's Plan of Distribution (described below); legal and auditing expenses;
compensation, fees and expenses paid to Directors and members of the Advisory
Board who are not affiliated with the Investment Adviser; association dues; and
costs of stationery and forms prepared exclusively for the company.
As compensation for its services, the Investment Adviser receives a monthly
fee which is accrued daily, calculated at the annual rate of 0.39% on the first
$1.0 billion of net assets, plus 0.336% on net assets over $1 billion to $2.0
billion, plus 0.30% on net assets over $2.0 billion to $3.0 billion, plus
0.276% on net assets over $3 billion to $5.0 billion, plus 0.258% on net assets
over $5.0 billion to $8.0 billion, plus 0.246% on net assets over $8.0 billion
to $13.0 billion, plus 0.24% on net assets over $13.0 billion. The Agreement
provides that the Investment Adviser shall pay the company amount by which
normal operating expenses, with the exception of interest, taxes, brokerage
costs, distribution expenses pursuant to the Plan of Distribution, and
extraordinary expenses, if any, as may be incurred in connection with any
merger, reorganization, or recapitalization, exceed the lesser of (i) 1-1/2% of
the average value of the company's net assets for the fiscal year up to $30
million, plus 1% of the average value of the company's net assets for the
fiscal year in excess of $30 million, or (ii) 25% of the gross investment
income of the company. Only one state (California) continues to impose expense
limitations on funds registered for sale therein. The California provision
currently limits annual expenses to the sum of 2-1/2% of the first $30 million
of average net assets, 2% of the next $70 million and 1-1/2% of the remaining
average net assets. Rule 12b-1 distribution plan expenses would be excluded
from this limit. Other expenses which are not subject to this limitation are
interest, taxes, and extraordinary items such as litigation. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not as expenses.
During the years ended December 31, 1994, 1993, and 1992, Investment Adviser's
total fees amounted to $50,698,000, $47,340,000, and $35,742,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the company's shares. The company
has adopted a Plan of Distribution (the Plan), pursuant to rule 12b-1 under the
1940 Act (see "Company Organization and Management - Principal Underwriter" in
the Prospectus). The Principal Underwriter receives amounts payable pursuant
to the Plan (see below) and commissions consisting of that portion of the sales
charge remaining after the discounts which it allows to investment dealers.
Commissions retained by the Principal Underwriter on sales of company shares
during the year ended December 31, 1994 amounted to $13,495,000 after allowance
of $73,910,000 to dealers. During the years ended December 31, 1993 and 1992
the Principal Underwriter retained $21,581,000 and $31,074,000, respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors, and separately by
a majority of the Directors who are not interested persons of the company and
who have no direct or indirect financial interest in the operation of the Plan
or the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the company. The
officers and directors who are "interested persons" of the company may be
considered to have a direct or indirect financial interest in the operation of
the Plan due to present or past affiliations with the investment adviser and
related companies. Potential benefits of the Plan to the company are improved
shareholder services, savings to the company in transfer agency costs, savings
to the company in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of Directors who
are not "interested persons" of the company is committed to the discretion of
the Directors who are not "interested persons" during the existence of the
Plan. The Plan is reviewed quarterly and must be approved annually by the
Board of Directors.
Under the Plan the company may expend up to 0.25% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of company shares, provided the company's Board of Directors has approved
the category of expenses for which payment is being made. These include
service fees for qualified dealers and dealer commissions and wholesaler
compensation on sales of shares exceeding $1 million (including purchases by
any defined contribution plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k) plan with 200 or more eligible employees).
Only expenses incurred during the preceding 12 months and accrued while the
Plan is in effect may be paid by the company. During the year ended December
31, 1994, the company paid or accrued $38,084,000 under the Plan as
compensation to dealers.
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit commercial banks from engaging in the business of
underwriting, selling or distributing securities, but permit banks to make
shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the company and alternate means for
continuing the servicing of such shareholders would be sought. In such event,
changes in the operation of the company might occur and shareholders serviced
by such bank might no longer be able to avail themselves of any automatic
investment or other services then being provided by such bank. It is not
expected that shareholders would suffer adverse financial consequences as a
result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The company intends to meet all the requirements and has elected the tax
status of a "regulated investment company" under the provisions of Subchapter M
of the Internal Revenue Code of 1986 (the Code). Under Subchapter M, if the
company distributes within specified times at least 90% of its investment
company taxable income, it will be taxed only on that portion of such
investment company taxable income which it retains.
To qualify, the company must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities held for less than three
months; and (c) diversify its holdings so that at the end of each fiscal
quarter, (i) at least 50% of the market value of the company's assets is
represented by cash, cash items, U.S. Government securities and other
securities, but such other securities must be limited, in respect of any one
issuer to an amount not greater than 5% of the company's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or in two or more issuers which the company controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the company from its current year's ordinary income and
net capital gain income and (ii) any amount on which the company pays income
tax during the periods described above. The company intends, to the extent
practicable, to meet these distribution requirements to minimize or avoid the
excise tax liability.
The company also intends to continue distributing to shareholders all of the
excess of net long-term capital gain over net short-term capital loss on sales
of securities. If the net asset value of shares of the company should, by
reason of a distribution of realized capital gains, be reduced below a
shareholder's cost, such distribution would to that extent be a return of
capital to that shareholder even though taxable to the shareholder, and a sale
of shares by a shareholder at net asset value at that time would establish a
capital loss for federal tax purposes.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that the Company pays the dividend no later
than the end of January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the company
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 company, or of a different fund, the sales charge previously
incurred in acquiring the company's shares shall not be taken into account (to
the extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose 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 shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.
Under the Code, distributions of net investment income by the company to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign
partnership (a foreign shareholder) will be subject to U.S. withholding tax (at
a rate of 30% or lower treaty rate). Withholding will not apply if a dividend
paid by the Company to a foreign shareholder is "effectively connected" with a
U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens or domestic corporations will apply.
Distributions of net long-term capital gains not effectively connected with a
U.S. trade or business are not subject to tax withholding, but in the case of a
foreign shareholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the
individual is physically present in the U.S. for more than 182 days during the
taxable year.
As of the date of this statement of additional information, the maximum
federal individual stated tax rate applicable to ordinary income is 39.6%
(effective tax rates may be higher for some individuals due to phase out of
exemptions and elimination of deductions); the maximum individual tax rate
applicable to net capital gain is 28%; and the maximum corporate tax applicable
to ordinary income and net capital gain is 35% (except that corporations which
have taxable income in excess of $100,000 for a taxable year will be required
to pay an additional amount of tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by a shareholder with respect to either distributions from the
company or disposition of company shares will be affected by a combination of
tax law rules covering, E.G., deductions, credits, deferrals, exemptions,
sources of income and other matters. Under the Code, an individual is entitled
to establish and contribute to an IRA each year (prior to the tax return filing
deadline for that year) whereby earnings on investments are tax-deferred. In
addition, in some cases, the IRA contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and distributions may also be subject to state or local
taxes. Shareholders should consult their own tax advisers for additional
details as to their particular tax status.
PURCHASE OF SHARES
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the company or American
Funds Service Company (the Transfer Agent); this offering price is effective
for orders received prior to the time of determination of the net asset value
and, in the case of orders placed with dealers, accepted by the Principal
Underwriter prior to its close of business. The dealer is responsible for
promptly transmitting purchase orders to the Principal Underwriter. Orders
received by the investment dealer, the Transfer Agent, or the company after the
time of the determination of the net asset value will be entered at the next
calculated offering price. Prices which appear in the newspaper are not always
indicative of prices at which you will be purchasing and redeeming shares of
the company since such prices generally reflect the previous day's closing
price whereas purchases and redemptions are made at the next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day. The net asset
value per share is determined as follows:
1. Stocks, and convertible bonds and debentures, traded on the New York Stock
Exchange are valued at the last sale price on such exchange on the day of
valuation, or if there is no sale on the day of valuation, at the last-reported
bid price. Non-convertible bonds and debentures, and other long-term debt
securities normally are valued at prices obtained for the day of valuation from
a bond pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, an
over-the-counter or exchange quotation may be used. U.S. Treasury bills, and
other short-term obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, certificates of deposit issued by banks,
corporate short-term notes and other short-term investments with original or
remaining maturities in excess of 60 days are valued at the mean of
representative quoted bid and asked prices for such securities or, if such
prices are not available, for securities of comparable maturity, quality and
type. Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the company if acquired within 60 days of
maturity or, if already held by the company on the 60th day, based on the value
determined on the 61st day. Other securities are valued on the basis of last
sale or bid prices in what is, in the opinion of the Investment Advisor, the
broadest and most representative market, which may be either a securities
exchange or the over-the-counter market. Where quotations are not readily
available, securities are valued at fair value as determined in good faith by
the Board of Directors. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including accruals of taxes and other expense items; and
3. The net assets so obtained are then divided by the total number of shares
outstanding (excluding treasury shares), and the result, rounded to the nearer
cent, is the net asset value per share.
Any purchase order may be rejected by the Principal Underwriter or by the
company. The Principal Underwriter will not knowingly sell shares of the
company directly or indirectly to any person or entity, where, after the sale,
such person, or entity would own beneficially directly or indirectly more than
3% of the outstanding shares of the company without the consent of a majority
of the company's Directors.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period pursuant to the terms of a written Statement of Intention (the
Statement) in the form provided by the Principal Underwriter and signed by the
purchaser. The Statement is not a binding obligation to purchase the indicated
amount. When a shareholder signs a Statement in order to qualify for a reduced
sales charge, shares equal to 5% of the dollar amount specified in the
Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will 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 purchases had been made at a
single time. If the difference is not paid within 20 days after written
request by the Principal Underwriter or the securities dealer, the appropriate
number of shares will be redeemed to pay such difference. If the proceeds from
this redemption are inadequate, the purchaser will be liable to the Principal
Underwriter for the balance still outstanding. The Statement may be revised
upward at any time during the 13-month period, and such a revision will be
treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The investment made the first
month of the 13-month period will be multiplied by 13 and then multiplied by
1.5. On the first investment and all other investments made pursuant to the
Statement, a sales charge will be assessed according to the sales charge
breakpoint thus determined. There will be no retroactive adjustments in sales
charges on investments previously made during the 13-month period.
DEALER COMMISSIONS - The following commissions will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any defined contribution plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k) plan with 200 or more eligible employees, and
for purchases made at net asset value by certain retirement plans of
organizations with collective retirement plan assets of $100 million or more:
1.00% on amounts of $1 million to $2 million, 0.80% on amounts over $2 million
to $3 million, 0.50% on amounts over $3 million to $50 million, 0.25% on
amounts over $50 million to $100 million, and 0.15% on amounts over $100
million. The level of dealer commissions will be determined based on sales
made over a 12-month period commencing from the date of the first sale at net
asset value. See "The American Funds Shareholder Guide" in the company's
prospectus for more information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of accounts for retirement plans for which
Capital Guardian Trust Company serves as trustee or custodian.) Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement showing the current transaction. Participation in the
plan will begin within 30 days after receipt of the account application. If
the shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or closing of the account, the plan may be terminated and
the related investment reversed. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the company of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one
fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. The cross-reinvestment of
dividends and capital gain distributions will be at net asset value (without
sales charge).
REDEMPTION OF SHARES
REDEMPTIONS - The company's Certificate of Incorporation permits the company to
direct the Transfer Agent to redeem the Common shares owned by any holder of
capital stock of the company if the value of such shares in the account of such
holder is less than the required minimum initial investment amount applicable
to that account as set forth in the company's current registration statement
under the 1940 Act, and subject to such further terms and conditions as the
Board of Directors of the company may from time to time adopt. Prior notice of
at least 60 days will be given to a shareholder before the involuntary
redemption provision is made effective with respect to the shareholder's
account. The shareholder will have not less than 30 days from the date of such
notice within which to bring the account up to the minimum determined as set
forth above.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the company may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the company, they are effected only when the
Investment Adviser believes that to do so is in the interest of the company.
When such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The company will not pay a mark-up for
research in principal transactions.
As of the end of the company's most recent fiscal year, amounts held in
certain equity and debt securities of some of its regular brokers and dealers
were as follows: American Express Co., $73,145,000 (equity); General Electric
Co., $113,858,000 (equity); and J.P. Morgan & Co. Inc., $106,400,000 (equity).
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the years ended December 31, 1994, 1993, and
1992 amounted to $8,999,000, $11,089,000, and $9,347,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the company, including
proceeds from the sale of shares of the company and of securities in the
company's portfolio, are held by The Chase Manhattan Bank, N.A., One Chase
Manhattan Plaza, New York, NY 10081, as Custodian. Non-U.S. securities may be
held by the Custodian, pursuant to sub-custodial arrangements, in non-U.S.
banks or non-U.S. branches of U.S. banks.
INDEPENDENT ACCOUNTANT - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the company's independent accountant since
its inception, 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
have been so included in reliance on the report of the independent accountants
given on the authority of said firm as experts in auditing and accounting. The
selection of the company's independent accountant is reviewed and determined
annually by the Board of Directors.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The company has made an undertaking, 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 company were a common-law trust. Accordingly, the Directors of the
company shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
REPORTS TO SHAREHOLDERS - The company's fiscal year ends on December 31.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio and financial statements audited annually by the company's
independent accountants, Price Waterhouse LLP.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
THE WARRANTS OF THE COMPANY - On December 31, 1994, there were outstanding
38,378 option warrants, unlimited in time, to purchase shares of the company.
As originally issued in 1933 in exchange for shares of a predecessor trust,
each warrant permitted the purchase of one share of the company at $115 per
share. By reason of adjustments for stock dividends and stock splits, each
outstanding warrant now represents an option to purchase approximately 21.940
shares at approximately $5.242 per share, and, if all warrants were exercised,
approximately 842,013 shares would be issued. Whenever the offering price of
the company's shares exceeds the price at which shares may be purchased by the
exercise of warrants, the holders of such warrants may, by exercising their
options, purchase shares at a price lower than the offering price of shares.
No warrants are currently owned by officers or directors of the company.
The financial statements, including the investment portfolio and the report of
Independent Auditors, contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- DECEMBER 31, 1994
<S> <C>
Net asset value and redemption price per share $17.67
(Net assets divided by shares outstanding)
Maximum offering price per share $18.75
(100/94.25 of net asset value per share, which
takes into account the company's current maximum
sales charge)
</TABLE>
INVESTMENT RESULTS
The company's yield is 3.13% based on a 30-day (or one month) period ended
December 31, 1994, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The company's total return over the past year and average annual total returns
for the five- and ten-year periods ending on December 31, 1994 were -5.60%,
7.51% and 13.69%, respectively. The average annual total return (T) is
computed by equating the value at the end of the period (ERV) with a
hypothetical initial investment of $1,000 (P) over a period of years (n)
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent dividends
and capital gain distributions are reinvested at net asset value on the
reinvestment date determined by the Board of Directors. The sum of the initial
shares purchased and shares acquired through reinvestment is multiplied by the
net asset value per share as of the end of the period in order to determine
ending value. The difference between the ending value and the initial
investment divided by the initial investment converted to a percentage equals
total return. The resulting percentage indicates the positive or negative
investment results that an investor would have experienced from reinvested
dividends and capital gain distributions and changes in share price during the
periods. Total return may be calculated for the one-, five-, ten-year and for
other periods. The average annual total return over periods greater than one
year may also be computed by utilizing ending values as determined above.
The company may also, at times, calculate total return based on net asset
value per share (rather than the offering price), in which case the figure
would not reflect the effect of any sales charges which would have been paid if
shares were purchased during the period reflected in the computation.
Consequently, total return calculated in this manner will be higher. Total
return for the unmanaged indices will be calculated assuming reinvestment of
dividends and interest, but will not reflect any deductions for advisory fees,
brokerage costs or administrative expenses.
The following assumptions will be reflected in computations made in accordance
with the formulas stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. In
addition, the company will provide lifetime average total return figures.
The company may include information on its investment results and/or
comparisons of its investment results to various unmanaged indices (such as The
Dow Jones Average of 30 Industrial Stocks and The Standard & Poor's 500 Stock
Composite Index) or results of other mutual funds or investment or savings
vehicles in advertisements or in reports furnished to present or prospective
shareholders.
The company may also refer to results compiled by organizations such as CDA
Investment Technologies, Ibbotson Associates, Lipper Analytical Services,
Morningstar, Inc., Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the company may, from time to time,
refer to results published in various newspapers or periodicals, including
BARRON'S, FORBES, FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S
PERSONAL FINANCE
MAGAZINE, MONEY, U.S. NEWS AND WORLD REPORT and THE WALL STREET
JOURNAL.
The company may from time to time compare its investment results with the
following:
(1) Average of Savings Institution deposits, which is a measure of all kinds
of savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions). Savings deposits offer a
guaranteed rate of return on principal, but no opportunity for capital growth.
The period shown may include periods during which the maximum rates paid on
some savings deposits were fixed by law.
(2) The Consumer Price Index, which is a measure of the average change in
prices over time in a fixed market basket of goods and services (E.G. food,
clothing, shelter, and fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
The company may also from time to time illustrate the benefits of tax-deferral
by comparing taxable investments to investments made through tax-deferred
retirement plans.
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management
Company manages nine common stock funds that are at least 10 years old. In
the rolling 10-year periods since 1964 (115 in all), those funds have had
better total returns than the Standard & Poor's 500 Composite Stock Index in 94
of the 115 periods.
Note that past results are not an indication of future investment results.
Also, the company has different investment policies than some of the funds
mentioned above. These results are included solely for the purpose of
informing investors about the experience and history of Capital Research and
Management Company.
The investment results set forth below were calculated as described in the
company's prospectus. The company's results will vary from time to time
depending upon market conditions, the composition of the company's portfolio
and operating expenses of the company, so that any investment results reported
by the company should not be considered representative of what an investment in
the company may earn in any future period. These factors and possible
differences in calculation methods should be considered when comparing the
company's investment results with those published for other mutual funds, other
investment vehicles and unmanaged indices. The company's results also should
be considered relative to the risks associated with the company's investment
objective and policies.
SELECTED SIGNIFICANT EVENTS DURING THE COMPANY'S LIFETIME - The
company has
compiled the investment results that follow notwithstanding the numerous
economic, political and/or historical events that have occurred throughout the
company's existence, including the depression, the 1935 civil war in Spain, a
struggling economy in 1936, a recession in 1937, indications of war in 1938, a
war in Europe in 1939, the fall of France in 1940, the attack on Pearl Harbor
in 1941, wartime price controls in 1942, industry mobilizing in 1943, consumer
goods shortages in 1944, the prediction of a post-war depression in 1945, the
Dow Jones Average exceeding 200 in 1946, the beginning of the Cold War in 1947,
the Berlin blockade in 1948, Russia exploding an atomic bomb in 1949, the
Korean War in 1950, excess profits tax in 1951, the U.S. seizure of steel mills
in 1952, Russia exploding a hydrogen bomb in 1953, the Dow Jones Average
exceeding 300 in 1954, President Eisenhower's illness in 1955, the Suez crisis
in 1956, Russia launching Sputnik in 1957, a recession in 1958, Castro seizing
power in Cuba in 1959, Russia shooting down a U-2 plane in 1960, the building
of the Berlin Wall in 1961, the Cuban missile crisis in 1962, President
Kennedy's assassination in 1963, the Gulf of Tonkin in 1964, civil rights
marches in 1965, escalation of the Vietnam war in 1966, Newark race riots in
1967, seizure of the USS Pueblo in 1968, a substantial market decline in 1969,
invasion of Cambodia in 1970, wage-price freezes in 1971, the largest U.S.
trade deficit in history in 1972, an energy crisis in 1973, the steepest market
drop in 40 years in 1974, clouded economic prospects in 1975, slowing economic
recovery in 1976, a market slump in 1977, escalation of interest rates in 1978,
steep oil price increases in 1979, interest rates reaching all-time highs in
1980, the beginning of a steep recession in 1981, the worst recession in 40
years in 1982, the stock market reaching new highs in 1983, a record federal
deficit in 1984, economic growth slowing in 1985, the Dow Jones Average nearing
2000 in 1986, a record-setting stock market decline in 1987, the fear of
recession in 1988, the "junk" bond debacle in 1989, the Middle East Crisis in
1990 and a recession in 1991.
The investment results set forth below were calculated as described in the
company's prospectus.
ICA VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
10-Year ICA DJIA/1/ S&P 500/2/ Average
Periods Savings
1/1 -12/31 Account/3/
<S> <C> <C> <C> <C>
1985 - 1994 + 261% + 349% + 282% + 77%
1984 - 1993 + 284 + 333 + 301 + 88
1983 - 1992 + 314 + 367 + 346 + 99
1982 - 1991 + 417 + 452 + 404 + 112
1981 - 1990 + 312 + 328 + 267 + 122
1980 - 1989 + 396 + 426 + 402 + 125
1979 - 1988 + 357 + 340 + 352 + 125
1978 - 1987 + 362 + 289 + 313 + 125
1977 - 1986 + 327 + 221 + 264 + 125
1976 - 1985 + 355 + 211 + 281 + 123
1975 - 1984 + 362 + 237 + 297 + 119
1974 - 1983 + 255 + 154 + 175 + 113
1973 - 1982 + 146 + 75 + 91 + 106
1972 - 1981 + 113 + 63 + 87 + 95
1971 - 1980 + 147 + 86 + 125 + 85
1970 - 1979 + 109 + 66 + 77 + 79
1969 - 1978 + 57 + 32 + 36 + 75
1968 - 1977 + 60 + 39 + 42 + 72
1967 - 1976 + 111 + 90 + 90 + 69
1966 - 1975 + 65 + 30 + 38 + 67
1965 - 1974 + 55 + 3 + 13 + 63
1964 - 1973 + 119 + 60 + 79 + 60
1963 - 1972 + 223 + 123 + 158 + 57
1962 - 1971 + 142 + 74 + 98 + 55
1961 - 1970 + 155 + 94 + 119 + 52
1960 - 1969 + 160 + 67 + 112 + 50
</TABLE>
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
/2/ The Standard & Poor's 500 Stock Composite Index is comprised of industrial,
transportation, public utilities and financial stocks and represents a large
portion of the value of issues traded on the New York Stock Exchange. Selected
issues traded on the American Stock Exchange are also included.
/3/ Based on figures supplied by the U.S. League of Savings Institutions and
the Federal Reserve Board which reflect all kinds of savings deposits,
including longer-term certificates. Savings accounts offer a guaranteed return
of principal, but no opportunity for capital growth. During a portion of the
period, the maximum rates paid on some savings deposits were fixed by law.
THE BENEFITS OF SYSTEMATIC INVESTING IN ICA..........
<TABLE>
<CAPTION>
An initial investment of $1,000 in ICA on January 1 would have grown to these
amounts over the past 10, 20, 30, and 40 years:
<S> <C> <C> <C>
10 years 20 years 30 years 40 years
(1/1/85 - (1/1/75 - (1/1/65 - (1/1/55 -
12/31/94) 12/31/94) 12/31/94) 12/31/94)
$ 3,607 $ 17,678 $ 28,973 $ 93,448
*****
</TABLE>
<TABLE>
<CAPTION>
$1,000 invested in ICA followed by annual $500 investments (all investments made on
January 1) would have grown to these amounts over the past 10, 20, 30, 40 years:
<S> <C> <C> <C>
10 years 20 years 30 years 40 years
(1/1/85 - (1/1/75 - (1/1/65 - (1/1/55 -
12/31/94) 12/31/94) 12/31/94) 12/31/94)
$ 11,046 $ 62,399 $ 158,444 $ 473,895
*****
</TABLE>
<TABLE>
<CAPTION>
$2,000 invested in ICA on January 1 of each year would have grown to these amounts
over the past 5, 10, 20 and 30 years:
<S> <C> <C> <C>
5 years 10 years 20 years 30 years
(1/1/90 - (1/1/85 - (1/1/75 - (1/1/65 -
12/31/94) 12/31/94) 12/31/94) 12/31/94)
$ 11,974 $ 36,969 $ 214,715 $ 577,599
SEE THE
DIFFERENCE TIME
CAN MAKE IN AN
INVESTMENT
PROGRAM...
</TABLE>
<TABLE>
<CAPTION>
If you had invested Periods ... and taken all
$10,000 in ICA 1/1-12/31 distributions in shares,
this many years ago... your investment would
Number have been worth this
of Years much at December 31, 1994
Value
<S> <C> <C>
1 1994 $ 9,441
2 1993 - 1994 10,537
3 1992 - 1994 11,270
4 1991 - 1994 14,261
5 1990 - 1994 14,361
6 1989 - 1994 18,584
7 1988 - 1994 21,062
8 1987 - 1994 22,216
9 1986 - 1994 27,044
10 1985 - 1994 36,067
11 1984 - 1994 38,459
12 1983 - 1994 46,234
13 1982 - 1994 61,819
14 1981 - 1994 62,374
15 1980 - 1994 75,615
16 1979 - 1994 90,147
17 1978 - 1994 103,337
18 1977 - 1994 100,683
19 1976 - 1994 130,478
20 1975 - 1994 176,785
21 1974 - 1994 145,008
22 1973 - 1994 120,639
23 1972 - 1994 139,759
24 1971 - 1994 163,575
25 1970 - 1994 167,759
26 1969 - 1994 149,884
27 1968 - 1994 175,303
28 1967 - 1994 225,947
29 1966 - 1994 228,194
30 1965 - 1994 289,725
</TABLE>
Results of a $10,000 investment in ICA/a/
with capital gain distributions taken in shares
(For the lifetime of the company January 1, 1934 through December 31, 1994)
<TABLE>
<CAPTION>
TOTAL VALUE ASSUMING CAPITAL VALUE ASSUMING
DIVIDENDS REINVESTED DIVIDENDS IN CASH
Year Dividends Value of Dividends Value of
Ended Reinvested Investment Taken in Investment
12/31 During Year at Year-End Cash at Year-End
<S> <C> <C> <C> <C>
1934 --- $11,822 --- $11,822
1935 --- 21,643 --- 21,643
1936 $398 31,560 $398 31,042
1937 1,006 19,424 976 18,339
1938 181 24,776 170 23,174
1939 536 24,986 498 22,860
1940 891 24,384 806 21,460
1941 1,262 22,590 1,089 18,816
1942 1,186 26,376 969 20,893
1943 1,101 35,019 861 26,861
1944 1,242 43,193 942 32,130
1945 1,191 59,091 878 42,948
1946 1,775 57,692 1,277 40,686
1947 2,409 58,217 1,672 39,332
1948 2,685 58,430 1,785 37,714
1949 2,661 63,941 1,689 39,436
1950 3,152 76,618 1,911 45,185
1951 3,391 90,274 1,970 51,159
1952 3,535 101,293 1,974 55,305
1953 3,927 101,747 2,113 53,362
1954 4,104 158,859 2,127 80,780
1955 5,124 199,215 2,579 98,530
1956 5,608 220,648 2,748 106,303
1957 6,228 194,432 2,969 90,911
1958 6,546 281,479 3,028 128,040
1959 7,013 321,419 3,161 142,882
1960 8,139 335,998 3,582 145,597
1961 8,383 413,552 3,603 175,370
1962 9,122 358,800 3,831 148,178
1963 9,620 440,900 3,936 177,833
1964 10,708 512,591 4,285 202,346
1965 12,112 650,689 4,742 251,553
1966 15,516 657,093 5,946 248,034
1967 18,359 846,941 6,869 312,473
1968 22,628 990,640 8,270 356,572
1969 25,318 884,824 9,024 309,611
1970 27,305 908,018 9,438 307,421
1971 28,565 1,062,651 9,569 349,727
1972 29,917 1,231,087 9,750 394,701
1973 33,353 1,024,067 10,569 317,911
</TABLE>
Results of a $10,000 investment in ICA (cont.)
<TABLE>
<CAPTION>
TOTAL VALUE ASSUMING CAPITAL VALUE ASSUMING
DIVIDENDS REINVESTED DIVIDENDS IN CASH
Year Dividends Value of Dividends Value of
Ended Reinvested Investment Taken in Investment
12/31 During Year at Year-End Cash at Year-End
<S> <C> <C> <C> <C>
1974 52,187 840,310 15,908 245,526
1975 49,800 1,137,660 14,318 317,655
1976 46,441 1,474,369 12,804 398,099
1977 49,838 1,436,402 13,279 374,307
1978 55,969 1,647,483 14,386 414,421
1979 69,960 1,963,310 17,347 475,669
1980 91,302 2,380,187 21,746 552,242
1981 115,901 2,401,091 26,420 530,864
1982 146,105 3,211,997 31,589 670,590
1983 147,156 3,859,712 30,264 774,518
1984 160,449 4,117,187 31,680 791,971
1985 174,890 5,491,890 33,152 1,017,904
1986 203,830 6,685,657 37,328 1,200,518
1987 267,489 7,049,178 47,452 1,220,928
1988 318,747 7,989,285 54,382 1,327,375
1989 370,835 10,338,589 60,741 1,652,751
1990 406,318 10,409,027 64,056 1,598,821
1991 320,422 13,171,892 48,721 1,969,876
1992 357,779 14,092,236 52,965 2,052,162
1993 374,395 15,729,365 54,005 2,234,153
1994 407,211 15,753,834/b/ 57,286 2,180,610/c/
</TABLE>
/a/ Results reflect payment of a sales charge of 5.75% on the $10,000
investment. Thus, the net amount invested was $9,425. There is no sales
charge on dividends reinvested or capital gain distributions taken in shares.
Results do not take into account income and capital gain taxes.
/b/ The total "cost" of this investment ($10,000 plus $4,513,221 in reinvested
dividends) was $4,523,221. Total value includes reinvested dividends and
capital gain distributions totaling $5,715,772 taken in shares in the years
1936-1994.
/c/ Capital Value includes capital gain distributions taken in shares (total
$1,117,858) but does not include the amount of dividends received in cash
($871,833).
INVESTMENT COMPANY OF AMERICA
December 31, 1994
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>
<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.
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
