ICA
THE INVESTMENT COMPANY OF AMERICA
1995 ANNUAL REPORT
For the year ended December 31
ICA'S CHANGING PORTFOLIO THROUGH THE DECADES
[The American Funds Group(R)]
ICA(SM)
The Investment Company of America(R) seeks long-term growth of capital and
income, placing greater emphasis on future dividends than on current income.
1995 RESULTS AT A GLANCE
Year ended December 31, 1995 (with dividends and capital gain distribution
reinvested)
<TABLE>
<CAPTION>
Standard &
<S> <C> <C>
Poor's 500
ICA Composite Index
Income Results 2.86% 3.03%
Capital Results 27.77% 34.50%
Total Return 30.63% 37.53%
</TABLE>
DIVIDENDS AND CAPITAL GAIN DISTRIBUTION PAID IN 1995
<TABLE>
<CAPTION>
Per Share Payment Date
<S> <C> <C>
Income Dividends $0.12 March 6
$0.12 June 5
$0.12 Sept. 5
$0.12 + $0.02 Dec. 18
$0.50
Capital Gain Distribution $0.91 Dec. 18
</TABLE>
Fund results in this report were computed without a sales charge unless
otherwise indicated. The fund's 30-day yield as of January 31, 1996, calculated
in accordance with the Securities and Exchange Commission formula, was 2.19%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS
Few forecasters expected it a year ago, but 1995 proved to be the
fourth-strongest year for the U.S. stock market since ICA began operations in
1933. Last year was also the best annual total return in a decade for ICA and
for stocks in general as moderate economic growth eased inflation fears,
leading to sharply declining interest rates.
ICA's total return for the year was the tenth best in its history - a solid
30.63% with dividends and the 91-cent capital gain distribution reinvested. It
was the fund's 18th consecutive year of positive returns, twelve of which were
in double digits. Our income dividends totaling 50 cents a share represented an
income return of 2.86%.
The broad market as measured by the unmanaged Standard & Poor's 500 Composite
Index with dividends reinvested rose 37.53%. It was powered by technology
stocks, some categories of which were up as much as 80%. While ICA had some
technology holdings, many of those companies pay very low dividends or none at
all and are more appropriate for funds which do not have income as part of
their stated objective.
It has been well over five years since U.S. stocks have suffered as much as a
10% correction, the longest such period in this century and far beyond the 21
months that has been the average between setbacks over the past 60 years. This
has led to varying levels of concern about the outlook for stock prices among
the individual counselors who manage portions of the ICA portfolio, with some
being more cautious than others. (You will find a brief discussion of the
"multiple portfolio counselor system" employed by ICA on page 15.)
A LONG-TERM, VALUE-ORIENTED APPROACH TO INVESTING
This is ICA's 62nd annual report, its 27th since being numbered among the dozen
largest equity mutual funds. From the beginning, its approach to investing has
focused on extensive research to uncover companies whose stocks represent value
which will grow over time. While the fund tends to maintain individual holdings
over a period of years, the portfolio represents a dynamic selection process.
In the special feature that follows this letter, we invite you to examine the
significant and often dramatic changes which have taken place in ICA's major
investments over six decades, as well as the fund's overall record in each of
those periods. You will also see that the fund's total return over ten-year
periods has been among the best of the twelve equity mutual funds which were
the largest at the beginning of each period going back to 1977-86.
One way to look at the benefit of our portfolio management approach is to
compare its results with a more passive form of investing, an index fund which
seeks to give investors a return close to that of the S&P 500 Index. ICA's
return has exceeded the return on the oldest and largest of the major index
funds in 11 of the 19 years that fund has existed.* Moreover, ICA's only
negative total return was -2.57% in 1977. The index fund's return was -7.84%
that year and has been down twice since. Comparing longer term results, as the
table on this page shows, ICA has produced better returns than the index fund
in all but the most recent ten-year period.
INVESTMENT ACTIVITY DURING 1995
The breadth of the rise in the U.S. equities market is reflected in the results
for ICA's ten largest holdings at year-end. All nine held throughout 1995
showed gains for the year, ranging from 72% for Merck and 70% for Federal
National Mortgage (Fannie Mae) to 8% for Time Warner and 7% for Caterpillar.
Banking, which has been our largest industry holding throughout 1995, is a good
example of ICA's approach to investing. A number of our holdings were purchased
at a time bank stocks were still somewhat in disfavor with investors because of
loan losses and excessive operating costs. Since then, the loan picture has
brightened and bank mergers and consolidations have contributed to rising bank
earnings. The three banks in which we had the biggest investment at the
beginning and at the end of the year - Banc One, BankAmerica and First
Interstate - have been in the portfolio continuously since 1991-92. First
Interstate, which is close to being merged into Wells Fargo, saw its stock more
than double in value during 1995 while BankAmerica was up 64% and Banc One 49%.
We opened this letter by pointing out that by historical standards, last year's
returns were highly unusual. Actually, returns have been remarkably high over
the last two decades both for ICA and the broad market. Measuring those results
over the 19 years the major index fund shown in the table has existed, ICA's
total annual compound return has averaged 14.88% compared with 13.71% for the
index fund. This is more than 1.6 percentage points above ICA's 62-year
average.
It would be unwise to expect such results to continue uninterrupted. Whatever
the environment, however, we will continue to focus our effort on uncovering
investment opportunities with unusual long-term value relative to current
prices. We appreciate that so many of you share our belief in this approach.
Sincerely,
Jon B. Lovelace, Jr.
Chairman of the Board
William C. Newton
President
February 15, 1996
ICA vs. Index Fund* (Rolling 10-year periods)
Average Annual Return/+/
<TABLE>
<CAPTION>
Period ICA Index Fund
<S> <C> <C>
1977-86 16.32% 13.27%
1978-87 17.24 14.73
1979-88 17.10 15.79
1980-89 18.07 17.05
1981-90 15.90 13.47
1982-91 18.56 17.13
1983-92 15.94 15.74
1984-93 15.08 14.61
1985-94 14.36 14.05
1986-95 14.12 14.58
</TABLE>
/+/After expenses.
*This index fund's objective does not include long-term growth of income as
does ICA's. Its annual expense ratio for its most recent fiscal year was 0.19%
as compared to 0.60% for ICA, and while the index fund does not have a sales
charge as does ICA, it charges a $10 per year maintenance fee. (However, this
$10 fee is waived for accounts of $10,000 or more.) Accordingly, an investor
would have paid $123 in aggregate expenses over 10 years on a hypothetical
$1,000 investment in the index fund, assuming a 5% annual rate of return. An
investor would have paid only $128 on the same investment in ICA, including the
effect of the maximum sales charge, and also would have received the benefits
of active portfolio management.
FOLLOWING THE COURSE OF AN INVESTMENT IN ICA (1934-1995)
This chart illustrates a hypothetical $10,000 investment in The Investment
Company of America over the past 62 years, from January 1, 1934 through
December 31, 1995, showing the high, low and closing values for each year. The
table below the chart shows the fund's total return for each of those years.
As you look through the table, you will see that the fund's total return can
fluctuate greatly from year to year. In some years it was well into double
digits. In other years the fund had a negative return. During the entire
period, a $10,000 investment in the fund, with all dividends reinvested, would
have grown to $20,578,696 compared with $9,133,917 in the S&P 500 Index. Over
the same period, $10,000 in a savings account would have grown to $139,402 with
all interest compounded.*
You can use this table to estimate how the value of your own holdings has
grown. Let's say, for example, that you have been reinvesting all of your
dividends and want to know how your investment has done since the end of 1985.
At that time, the table shows the value of the investment illustrated here was
$5,491,890. Since then, it has almost quadrupled to $20,578,696. Thus, in the
same period, the value of your 1985 investment - regardless of size - has also
almost quadrupled.
*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. Unlike investments in the fund, such deposits are
insured and, if held to maturity, offer a guaranteed return of principal and a
fixed rate of interest, but no opportunity for capital growth. Maximum
allowable interest rates were imposed by law until 1983.
$20,578,696/1/ /2/ ICA with dividends reinvested
$9,133,917 S&P 500 with dividends reinvested
$2,779,658/1/ /3/ ICA with dividends taken in cash
$10,000/1/ original investment
<TABLE>
<CAPTION>
Year ended December 31 1934 1935 1936 1937 1938
<S> <C> <C> <C> <C> <C>
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested - - $398 1,006 181
Value at Year-End/1/ $11,822 21,643 31,560 19,424 24,776
Dividends in Cash - - $398 976 170
Value at Year-End/1/ $11,822 21,643 31,042 18,339 23,174
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 0.0% 0.0 1.8 3.2 0.9
Capital Results 18.2% 83.1 44.0 (41.7) 26.7
ICA TOTAL RETURN 18.2% 83.1 45.8 (38.5) 27.6
Fund Expenses/4/ 0.94% 1.13 1.19 1.53 1.89
Year ended December 31 1939 1940 1941 1942 1943
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 536 891 1,262 1,186 1,101
Value at Year-End/1/ 24,986 24,384 22,590 26,376 35,019
Dividends in Cash 498 806 1,089 969 861
Value at Year-End/1/ 22,860 21,460 18,816 20,893 26,861
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 2.2 3.6 5.2 5.3 4.2
Capital Results (1.4) (6.0) (12.6) 11.5 28.6
ICA TOTAL RETURN 0.8 (2.4) (7.4) 16.8 32.8
Fund Expenses/4/ 2.02 1.88 1.95 2.13 1.72
Year ended December 31 1944 1945 1946 1947 1948
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 1,242 1,191 1,775 2,409 2,685
Value at Year-End/1/ 43,193 59,091 57,692 58,217 58,430
Dividends in Cash 942 878 1,277 1,672 1,785
Value at Year-End/1/ 32,130 42,948 40,686 39,332 37,714
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 3.5 2.8 3.0 4.2 4.6
Capital Results 19.8 34.0 (5.4) (3.3) (4.2)
ICA TOTAL RETURN 23.3 36.8 (2.4) 0.9 0.4
Fund Expenses/4/ 1.45 1.06 0.98 1.10 1.08
</TABLE>
- ----
<TABLE>
<CAPTION>
Year ended December 31 1949 1950 1951 1952 1953
<S> <C> <C> <C> <C> <C>
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 2,661 3,152 3,391 3,535 3,927
Value at Year-End/1/ 63,941 76,618 90,274 101,293 101,747
Dividends in Cash 1,689 1,911 1,970 1,974 2,113
Value at Year-End/1/ 39,436 45,185 51,159 55,305 53,362
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 4.6 4.9 4.4 3.9 3.9
Capital Results 4.8 14.9 13.4 8.3 (3.5)
ICA TOTAL RETURN 9.4 19.8 17.8 12.2 0.4
Fund Expenses/4/ 0.96 1.01 0.93 0.81 0.85
Year ended December 31 1954 1955 1956 1957 1958
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 4,104 5,124 5,608 6,228 6,546
Value at Year-End/1/ 158,859 199,215 220,648 194,432 281,479
Dividends in Cash 2,127 2,579 2,748 2,969 3,028
Value at Year-End/1/ 80,780 98,530 106,303 90,911 128,040
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 4.0 3.2 2.8 2.8 3.4
Capital Results 52.1 22.2 8.0 (14.7) 41.4
ICA TOTAL RETURN 56.1 25.4 10.8 (11.9) 44.8
Fund Expenses/4/ 0.88 0.86 0.80 0.76 0.68
Year ended December 31 1959 1960 1961 1962 1963
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 7,013 8,139 8,383 9,122 9,620
Value at Year-End/1/ 321,419 335,998 413,552 358,800 440,900
Dividends in Cash 3,161 3,582 3,603 3,831 3,936
Value at Year-End/1/ 142,882 145,597 175,370 148,178 177,833
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 2.5 2.5 2.5 2.2 2.7
Capital Results 11.7 2.0 20.6 (15.4) 20.2
ICA TOTAL RETURN 14.2 4.5 23.1 (13.2) 22.9
Fund Expenses/4/ 0.64 0.62 0.59 0.61 0.59
</TABLE>
- -----
<TABLE>
<CAPTION>
Year ended December 31 1964 1965 1966 1967 1968
<S> <C> <C> <C> <C> <C>
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 10,708 12,112 15,516 18,359 22,628
Value at Year-End/1/ 512,591 650,689 657,093 846,941 990,640
Dividends in Cash 4,285 4,742 5,946 6,869 8,270
Value at Year-End/1/ 202,346 251,553 248,034 312,473 356,572
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 2.4 2.4 2.4 2.8 2.7
Capital Results 13.9 24.5 (1.4) 26.1 14.3
ICA TOTAL RETURN 16.3 26.9 1.0 28.9 17.0
Fund Expenses/4/ 0.58 0.57 0.52 0.50 0.49
Year ended December 31 1969 1970 1971 1972 1973
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 25,318 27,305 28,565 29,917 33,353
Value at Year-End/1/ 884,824 908,018 1,062,651 1,231,087 1,024,067
Dividends in Cash 9,024 9,438 9,569 9,750 10,569
Value at Year-End/1/ 309,611 307,421 349,727 394,701 317,911
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 2.6 3.1 3.1 2.8 2.7
Capital Results (13.3) (0.5) 13.9 13.1 (19.5)
ICA TOTAL RETURN (10.7) 2.6 17.0 15.9 (16.8)
Fund Expenses/4/ 0.48 0.55 0.51 0.49 0.47
Year ended December 31 1974 1975 1976 1977 1978
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 52,187 49,800 46,441 49,838 55,969
Value at Year-End/1/ 840,310 1,137,660 1,474,369 1,436,402 1,647,483
Dividends in Cash 15,908 14,318 12,804 13,279 14,386
Value at Year-End/1/ 245,526 317,655 398,099 374,307 414,421
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 5.1 5.9 4.1 3.4 3.9
Capital Results (23.0) 29.5 25.5 (6.0) 10.8
ICA TOTAL RETURN (17.9) 35.4 29.6 (2.6) 14.7
Fund Expenses/4/ 0.49 0.48 0.46 0.49 0.49
</TABLE>
- -----
<TABLE>
<CAPTION>
Year ended December 31 1979 1980 1981 1982 1983
<S> <C> <C> <C> <C> <C>
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 69,960 91,302 115,901 146,105 147,156
Value at Year-End/1/ 1,963,310 2,380,187 2,401,091 3,211,997 3,859,712
Dividends in Cash 17,347 21,746 26,420 31,589 30,264
Value at Year-End/1/ 475,669 552,242 530,864 670,590 774,518
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 4.2 4.7 4.9 6.1 4.6
Capital Results 15.0 16.5 (4.0) 27.7 15.6
ICA TOTAL RETURN 19.2 21.2 0.9 33.8 20.2
Fund Expenses/4/ 0.47 0.46 0.45 0.46 0.44
Year ended December 31 1984 1985 1986 1987 1988
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 160,449 174,890 203,830 267,489 318,747
Value at Year-End/1/ 4,117,187 5,491,890 6,685,657 7,049,178 7,989,285
Dividends in Cash 31,680 33,152 37,328 47,452 54,382
Value at Year-End/1/ 791,971 1,017,904 1,200,518 1,220,928 1,327,375
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 4.2 4.2 3.7 4.0 4.5
Capital Results 2.5 29.2 18.0 1.4 8.8
ICA TOTAL RETURN 6.7 33.4 21.7 5.4 13.3
Fund Expenses/4/ 0.47 0.43 0.41 0.42 0.48
Year ended December 31 1989 1990 1991 1992 1993
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 370,835 406,318 320,422 357,779 374,395
Value at Year-End/1/ 10,338,589 10,409,027 13,171,892 14,092,236 15,729,365
Dividends in Cash 60,741 64,056 48,721 52,965 54,005
Value at Year-End/1/ 1,652,751 1,598,821 1,969,876 2,052,162 2,234,153
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 4.6 3.9 3.1 2.7 2.7
Capital Results 24.8 (3.2) 23.4 4.3 8.9
ICA TOTAL RETURN 29.4 0.7 26.5 7.0 11.6
Fund Expenses/4/ 0.52 0.55 0.59 0.58 0.59
Year ended December 31 1994 1995
YEAR-BY-YEAR SUMMARY OF RESULTS
Dividends Reinvested 407,211 450,124
Value at Year-End/1/ 15,753,834 20,578,696
Dividends in Cash 57,286 61,704
Value at Year-End/1/ 2,180,610 2,779,658
ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED
Income Return 2.6 2.9
Capital Results (2.4) 27.7
ICA TOTAL RETURN 0.2 30.6
Fund Expenses/4/ 0.60 0.60
</TABLE>
Average annual compound return for 62 years 3.36% 9.73% 13.09%
Past results are not predictive of future results. The S&P 500 Index is
unmanaged and does not reflect sales charges, commissions or expenses.
/1/These figures, unlike those shown earlier in this report, reflect payment of
the maximum sale charge of 5.75% on the $10,000 investment. Thus, the net
amount invested was $9,425. As outlined in the prospectus, the sales charge is
reduced for larger investments. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares.The maximum
initial sales charge was 8.5% prior to July 1, 1988. No adjustment has been
made for income or capital gain taxes.
/2/Includes dividends of $4,963,345 and capital gain distributions of
$6,542,011 reinvested in the years 1936-1995.
/3/Includes reinvested capital gain distributions of $1,230,159, but does not
reflect income dividends of $933,537 taken in cash.
/4/Fund expense percentages are provided as additional information. They
should not be subtracted from any other figure on the table because the income
return figures already reflect their effect.
[Side Bar] AVERAGE ANNUAL COMPOUND RETURNS*
For periods ended December 31, 1995
Ten Years +13.45%
Five Years +13.25%
One Year +23.10%
*Based on the maximum sales charge of 5.75%
Sales charges are lower for accounts of $50,000 or more. [End Side Bar]
ICA'S CHANGING PORTFOLIO THROUGH THE DECADES
We speak often in these reports about the value of maintaining a long-term
perspective in making investment decisions. By now, we may be "preaching to the
choir." Yet even investing with a view to holding securities for extended
periods requires more than casting seeds and forgetting them. Rather, it is a
dynamic process that over ICA's 62 years has encompassed extensive and often
quite dramatic changes in your fund's portfolio.
In the next few pages, we will look back at those changes at ten-year
intervals. You will be able to see how they have helped ICA maintain an edge
over the broad equities market for so many years. We believe our review of the
past says a good deal about the importance today of painstaking research to
find values, as well as active portfolio management with close attention to the
evolving world around us. It will also reflect ICA's long-term approach, which
includes a degree of skepticism when equity markets are at historically high
valuations.
The table below provides a decade-by-decade look at the fund. It shows that ICA
produced a double-digit average annual compound return more consistently than
the broad market. The fund's return exceeded 5% even in its lowest period. The
two decades in which ICA lagged the S&P 500 Index were ones in which the stock
market had extended periods of advance without prolonged corrections.
TEN-YEAR RETURNS FOR ICA AND S&P 500
(with all dividends and capital gain distributions reinvested)
<TABLE>
<CAPTION>
Total Average Annual ICA Relative
Return Compound Returns to S&P 500
Percentage
Period ICA ICA S&P Point Spread
<S> <C> <C> <C> <C>
1936-1945 173.02% 10.57% 8.43% 2.14
1946-1955 237.13% 12.92% 16.67% -3.75
1956-1965 226.63% 12.57% 11.05% 1.52
1966-1975 74.84% 5.75% 3.27% 2.48
1976-1985 382.74% 17.05% 14.31% 2.74
1986-1995 274.71% 14.12% 14.84% -0.72
</TABLE>
ICA's history dates from 1933, when its new investment manager, Capital
Research and Management Company (CRMC), reconstructed it out of a closed-end
investment company badly damaged in the stock market collapse that began in
1929 and hit bottom in 1932.
By the end of 1935, ICA had a portfolio of 72 stocks, dominated by automotive,
tire and auto parts producers. Of the $7,283,656 total value of the fund, 17.8%
was invested in those companies, led by 3,000 shares of Chrysler valued at
$276,375. If the size of the holding seems small by today's standards, bear in
mind that a 1935 Chrysler cost about $800, barely one-thirtieth of today's
sticker price. Chrysler, by the way, remained profitable in all but one of the
tough years 1929-35, and paid an annual dividend of at least $1.00 a share
throughout the period.
Several other stocks that are still household names were among the largest
holdings, including Minneapolis Honeywell, General Motors and Deere. While
Chrysler, GM and Deere are in the December 31, 1995 portfolio, none have been
there continuously. Some of these stocks have been in and out of the portfolio
more than once. Of course, over the years many names have disappeared through
mergers and other changes in corporate status. All of such changes are part of
the dynamic process of finding value and managing long-term investments amid
changing times.
As we move to the first of our six decades, you will begin to see these changes
unfold.
1935
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1935
Auto Parts & Accessories 10.8%
Machinery 7.0
Public Utilities 6.6
Autos & Trucks 6.2
Building & Construction 4.4
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1935
Chrysler $276,375
American Surety 271,406
Briggs Manufacturing 264,600
General American Investors 212,500
Minneapolis Honeywell Regulator 196,000
Commonwealth & Southern 182,000
Deere 180,200
General Motors 176,313
Electric Bond & Share 170,500
Anaconda Copper Mining 161,563
1945
S&P 500 8.43%
ICA 10.57%
1936-1945 Compound annual returns
1936-1945
FROM PAN TO FIRE: DEPRESSION ENDS IN WAR
The decade 1936-1945 was one of sharp peaks and deep valleys for the general
market. After a spectacular rise in 1936 and early 1937, stocks plummeted 54%
by March 1938, rebounded some, then were generally weak through Pearl Harbor
and into 1942,
the first year of our entry into World War II. The S&P 500 Index recorded its
second-lowest total return of the six decades - a compound annual average of
8.43%.
ICA did better, exceeding the S&P 500 Index average by a solid 2.14 percentage
points per year. Automotive - including tires and parts - still accounted for
nearly 15% of the portfolio. Oil emerged as a major holding at 7%. Paramount
Pictures became the largest individual holding at $277,500. The portfolio
extended across much of American business, with 27 industries represented.
Only two of the ten largest holdings in 1935, Chrysler and Deere, remained on
that list - or in the portfolio at all - in 1945. Conversely, only two others
on the 1945 ten largest list, Goodrich and Ohio Oil (which became Marathon Oil
and later part of USX), were in the portfolio ten years earlier. The fund held
fewer shares of Chrysler and Deere by 1945.
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1945
Oil 7.1%
Tires & Rubber 6.5
Chemicals 5.6
Auto Parts 5.5
Drugs & Cosmetics 5.1
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1945
Paramount Pictures $277,500
B.F. Goodrich 215,250
Chrysler 196,688
American Home Products 169,950
Ohio Oil 153,125
Consolidated Mining & Smelting of Canada 143,500
Sharp & Dohme 143,250
Standard Oil (New Jersey) 133,500
Canada Dry 133,300
Deere 132,750
1955
1946-1955
THE POST-WAR BOOM
Of the six periods we are examining, the 1946-55 decade showed the greatest
return for the broad market, with a largely uninterrupted advance in the last
six-and-a-half years. ICA itself had a total return averaging nearly 13%, yet
it wasn't adequately prepared for so strong a market rise and lagged the S&P
500 by 3.75 percentage points per year.
Of the ten largest holdings at the beginning of the period, only Standard Oil
of New Jersey (now Exxon) was there at the end. Seven, including Chrysler and
Deere, had disappeared entirely from the portfolio. Conversely, seven of the
top ten in 1955 weren't even in the portfolio in 1945.
In contrast to the beginning of the period, when automotive-related businesses
were a major segment of the portfolio, by 1955 the biggest holdings encompassed
many of the raw materials needed to keep pace with growing demands for goods
- -consumer, industrial and defense. One aluminum and three steel companies
together accounted for nearly 7.5% of the value of the portfolio, with smaller
holdings in Metals & Mining and Steel & Iron raising that total to more than
12%.
At the end of the period, ICA's assets had reached almost $76.5 million, with
many holdings valued at more than a million dollars.
S&P 500 16.67%
ICA 12.92%
1946-1955 Compound annual returns
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1955
Oil 10.9%
Utilities 7.2
Machinery 7.1
Building 6.7
Steel & Iron 6.3
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1955
Reynolds Metals $1,526,250
Standard Oil (New Jersey) 1,526,250
Bethlehem Steel 1,472,625
U.S. Steel 1,392,000
Royal Dutch Petroleum 1,366,000
Standard Oil (California) 1,365,000
Armco Steel 1,305,000
North American Aviation 1,237,250
Clark Equipment 1,166,750
International Paper 1,137,500
1965
S&P 500 11.05%
ICA 12.57%
1956-1965 Compound annual returns
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1965
Transportation (air and rail) 13.3%
Chemicals 8.0
Non-ferrous Metals 6.7
Electrical & Electronic 5.4
Utilities 4.5
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1965
Northwest Airlines $16,974,125
Burlington Industries 11,147,500
Delta Air Lines 10,010,000
MCA 9,296,875
American Airlines 8,985,375
Pabst Brewing 8,718,500
Kennecott Copper 8,706,375
Atlantic Refining 8,581,875
The Pennsylvania Railroad 8,368,750
Philips' Incandescent Lamp Works 7,717,500
1956-1965
PROSPERITY AND THE COLD WAR
The late 1950s and early 1960s were troubled times for the nation in its role
as international leader. International competition was becoming increasingly
difficult for some old-line industries such as steel.
For the broad market, it was a strong decade, with the S&P 500 recording an
average annual return of 11.05%. ICA did 1.52 percentage points per year better
at 12.57%.
ICA's scope became global during this period. In 1962 the Capital organization
established an office in Geneva and was pioneering investment research on a
worldwide rather than just a U.S. basis.
Even with all the change evident in the previous two decades, change was even
more dramatic in this one. Autos and oil faded from a dominant place in the
portfolio, to be replaced by other transportation companies, principally
airlines, as rising incomes and cheaper air travel turned America into a nation
of tourists and business travelers.
All ten of the largest holdings in 1965 were different from the 1955 list and
nine weren't in the 1955 portfolio at all.
Fund growth was accelerating: The number of shareholder accounts had risen to
nearly 78,000 by the mid-1960s and total assets had grown to $505 million. The
portfolio listed 128 equity holdings.
1975
1966-1975
WAR, ANTI-WAR AND AN OIL SHOCK
As the period opened, the U.S. was deeply involved in Vietnam. By the time the
period ended, the country had suffered through student protests, lines at the
gas pump, encroaching inflation and a round of wage and price controls, not to
mention Watergate. With all that difficulty came a very bad stock market,
taking a number of hot stocks and mutual funds that invested in them down
sharply in 1969-70 and even more in 1973-74. It was by far the market's worst
of the six 10-year periods. ICA's average annual return also was the lowest
(+5.75%), but it was the fund's second best of the six periods we are examining
relative to stocks in general, a positive margin of nearly 2.5 percentage
points per year.
Once again, only one of the largest holdings of ten years earlier (MCA)
remained in 1975. In fact, only IBM and MCA were even in the portfolio in 1965
- - IBM, a minor $3 million holding, expanded to more than $34 million by 1975.
IBM was part of a major influx of computer-electronic companies, with a new
category, Technology & Communications, accounting for more than 13% of the
portfolio.
With the energy crisis at hand, the fund expanded its oil company holdings.
Interestingly, by 1980, crude oil prices had risen 141% from 1975, oil stocks
generally were up 182% and five of ICA's ten largest holdings were oil
companies. Yet fastforward five more years and none of those companies were in
the largest-holdings list; in fact only one was in the portfolio at all.
By 1969, ICA had assets of $1 billion. It had taken its place among the
nation's twelve largest equity funds, a position it alone would retain
continuously since. (See tables on pages 14 and 15.)
S&P 500 3.27%
ICA 5.75%
1966-1975 Compound annual returns
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1975
Oil 11.5%
Data Processing 6.6
Metals 5.6
Insurance 5.1
Paper 4.4
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1975
Philip Morris $53,000,000
Connecticut General Insurance 40,901,500
Texaco 37,400,000
RCA 35,285,625
IBM 34,422,375
Federal National Mortgage 33,000,000
Sperry Rand 31,400,000
AT&T 30,525,000
Standard Oil (California) 29,375,000MCA
26,752,500
1985
S&P 500 14.31%
ICA 17.05%
1976-1985 Compound annual returns
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1985
Data Processing & Reproduction 9.0%
Chemicals 7.1
Banking 6.7
Telecommunications 5.9
Utilities 5.4
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1985
IBM $155,000,000
Philip Morris 109,585,000
Deutsche Bank 101,316,730
Digital Equipment 87,750,000
Pacific Telesis 67,700,000
Sears, Roebuck 65,910,000
Hoechst 63,670,392
Upjohn 63,293,751
Boeing 58,911,875
Time 55,912,500
1976-1985
INFLATION AND RECOVERY
This was a period of major contrasts, starting with severe inflation in the
economy and with interest rates rising well into the teens. But it was also a
period of remarkable recovery, with inflation and interest rates peaking and
beginning a long period of decline.Despite two major market declines - 19%
between September 1976 and March 1978 as well as 27% between November 1980 and
August 1982 - the market scored even better over the ten-year period than in
the much ballyhooed post-1985 period. ICA saw by far its best decade, with a
compound average annual return of just over 17%, and exceeded the S&P 500 by
its widest margin, 2.74 percentage points per year.Technology and
communications, which included data processing, electronics and
telecommunications, added up to fully a fifth of the portfolio. Health and
personal care made up 5%. Autos, represented by Ford and GM, were back in the
portfolio.Portfolio value had grown to $3 billion by 1985, the number of
shareholder accounts to more than 136,000.
1995
1986-1995
A STRONG MARKET WITH TWO SHARP SETBACKS
Stock prices, recovering fairly quickly from the steep 34% drop in October 1987
and a brief slide of almost 20% between July and October 1990, continued to
soar. ICA's traditional caution in the face of record high market valuations,
however, led to its maintaining a less-than-fully invested position.
Nonetheless, it trailed the extraordinary S&P 500 Index results by less than
three-quarters of a percentage point, producing an average annual compound
return of 14.12%.
By the end of 1995, ICA had assets of $25.7 billion, encompassing more than 190
equity holdings in 31 industries.
Change continued unabated. Banking became the largest industry, reflecting the
investment manager's belief that banks became an excellent value after going
through a long period of difficulty with bad loans and excessive operating
expenses. Health care stocks also became a key part of the portfolio. Chrysler
re-emerged as a holding, joining Ford, GM, Daimler-Benz and Toyota. Of the ten
largest holdings, only one was the same as a decade earlier (two if you count
Time, which later became Time Warner) and the list covers ten industries, from
heavy industry (Caterpillar) to retailing (Wal-Mart). Note that Philip Morris,
Federal National Mortgage (Fannie Mae) and AT&T were in the top ten in 1975.
Royal Dutch Petroleum had been there in 1955.
S&P 500 14.84%
ICA 14.12%
1986-1995 Compound annual returns
LARGEST INDUSTRY HOLDINGS AT DECEMBER 31, 1995
Banking 8.8%
Energy Sources 6.8
Health & Personal Care 6.8
Telecommunications 5.4
Beverages & Tobacco 5.2
LARGEST INDIVIDUAL HOLDINGS AT DECEMBER 31, 1995
Philip Morris $832,600,000
Federal National Mortgage 714,960,000
Royal Dutch Petroleum 515,811,875
Wal-Mart Stores 407,941,000
Caterpillar 384,225,000
DuPont 366,843,750
Merck 350,776,250
Time Warner 343,942,875
Banc One 331,161,875
AT&T 316,951,250
Ranking ICA's ten-year total return among the twelve largest equity mutual
funds at the beginning of each period
<TABLE>
<CAPTION>
Annual Ranked
Total Compound by Total
Period Return* Return* Return+
1970-79 122.18% 8.31% 2
<S> <C> <C> <C>
1971-80 162.41 10.13 2
1972-81 126.21 8.51 3
1973-82 160.88 10.06 2
1974-83 277.35 14.20 2
1975-84 390.54 17.24 2
1976-85 383.67 17.07 2
1977-86 352.62 16.30 1
1978-87 389.07 17.20 1
1979-88 383.40 17.07 4
1980-89 424.02 18.01 2
1981-90 335.29 15.85 1
1982-91 446.00 18.50 1
1983-92 337.22 15.90 3
1984-93 305.58 15.03 3
1985-94 280.81 14.31 2
1986-95/#/ 272.65 14.06 3
</TABLE>
*Ten-year total and average annual compound returns with
dividends and capital gain distributions reinvested as calculated
by Lipper Analytical Services.
+Ranked according to total return of the twelve funds that
were the largest stock and/or balanced funds as of the beginning
of each ten-year period.
#Among this group ICA ranked 10th for five years and 7th for
one year.
Sources: CDA/Wiesenberger and Lipper Analytical Services.
SIX DECADES OF GROWTH AND CHANGE
As you have seen, ICA's portfolio has been anything but static over the 60
years we have examined. Yet it has been changing consistently with a long-term
approach to investing and concern for true values. The average turnover rate
for equity holdings over the past three years has been in the 18% to 21% range
each year, substantially below most in the fund industry.
Familiar names have come and gone and come again in the portfolio. Chrysler,
the largest holding in 1935, wasn't in the portfolio in 1955, reappeared in
1965, was gone again at the end of the next two periods, only to reappear again
in the current portfolio. The importance of various industries in the portfolio
has also changed extensively.
Through it all, the fund has displayed remarkable resiliency. ICA became one of
the dozen largest equity funds in 1969, ranking eleventh that year, and is the
only one of that 1969 list to remain in that group every year since. As the
tables on these pages show, ICA ranks as the second-largest equity mutual fund
and has ranked among the top five in terms of ten-year return in every one of
the 17 periods.
As we've said, ICA's success attests to the value of active investment
management, committed to painstaking research and a long-term approach. It also
speaks to the effectiveness of the unique portfolio management method employed
by ICA's manager, CRMC.
Called the "multiple portfolio counselor system," this method involves
allocating the fund's assets among a number of portfolio counselors. Each
counselor manages and diversifies his or her portion separately, with CRMC's
investment committee ensuring that all purchases and sales are consistent with
the fund's objectives. This approach enables counselors to act on their
strongest individual convictions. At the same time, it provides for continuity
of management and portfolio diversity. As a means of having the fund benefit
from the direct participation of CRMC's research analysts, another segment of
the fund is managed by a group of these analysts.
Summing up the six decades of change, ICA produced a compound total return
averaging 12.11% per year, an edge of more than three-quarters of a percentage
point over the S&P 500 Index. Translated into dollars, that edge on a holding
of $10,000 on December 31, 1935 produced $3,230,680 in additional value by the
end of 1995.
ICA'S RECENT GROWTH
<TABLE>
<CAPTION>
Asset Rank Number of
Year Ended Net Assets Among the Shareholder
December 31 (in millions) 12 Largest Accounts
<S> <C> <C> <C>
1969 $ 1,065.1 11 119,575
1970 1,168.1 7 130,108
1975 1,234.1 6 131,928
1980 1,670.1 3 114,140
1985 3,073.0 3 136,797
1990 5,922.8 3 331,277
1995 25,678.3 2 1,664,460
</TABLE>
THE INVESTMENT COMPANY OF AMERICA
INVESTMENT PORTFOLIO, December 31,1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EQUITY-TYPE SECURITIES Market Percent
- ------------------------------------------ Number of Value of Net
ENERGY Shares (millions) Assets
- ------------------------------------------ --------- --------- ------
Energy Sources-6.78%
Amoco Corp. 3,050,000 $219.219 .85
Atlantic Richfield Co. 375,000 41.531 .16
British Petroleum Co. PLC (American Depositary
Receipts) 500,000 51.063 .20
Chevron Corp. 1,850,000 97.125 .38
Mobil Corp. 400,000 44.800 .17
Murphy Oil Corp. 2,075,000 86.113 .34
Phillips Petroleum Co. 6,000,000 204.750 .80
Royal Dutch Petroleum Co.
(New York Registered Shares) 3,655,000 515.811 2.01
Societe Nationale Elf Aquitaine (American
Depositary Receipts) 514,741 18.917 .07
Texaco Inc. 1,050,000 82.425 .32
TOTAL, Class B 1,329,458 89.570
TOTAL, Class B (American Depositary Receipts) 1,350,000 45.900 .53
Unocal Corp. 4,400,000 128.150
Unocal Corp., $3.50 convertible preferred 415,000 22.721 .59
USX-Marathon Group 4,700,000 91.650 .36
Utilities: Electric & Gas-0.98%
American Electric Power Company, Inc. 600,000 24.300 .09
Entergy Corp. 3,400,000 99.450 .39
Houston Industries Inc. 1,500,000 36.375 .14
Long Island Lighting Co. 5,240,000 85.805 .33
Pacific Gas and Electric Co. 239,100 6.784 .03
--------- ---------
1,992.459 7.76
--------- ---------
- ------------------------------------------
MATERIALS
- ------------------------------------------
Chemicals-1.93%
E.I. du Pont de Nemours and Co. 5,250,000 366.844 1.43
Eastman Chemical Co. 400,000 25.050 .10
Great Lakes Chemical Corp. 250,000 18.000 .07
Imperial Chemical Industries PLC
(American Depositary Receipts) 100,000 4.675 .02
Monsanto Co. 658,800 80.703 .31
Forest Products & Paper-1.31%
Georgia-Pacific Corp. 1,650,000 113.231 .44
International Paper Co. 800,000 30.300 .12
Louisiana-Pacific Corp. 2,500,000 60.625 .24
Weyerhaeuser Co. 3,050,000 131.913 .51
Metals: Nonferrous-1.54%
Alcan Aluminium Ltd. 1,000,000 31.125 .12
Aluminum Co. of America 3,233,500 170.971 .67
Freeport-McMoRan Copper & Gold Inc., Class B 1,200,000 33.750 .13
Inco Ltd. 2,046,000 68.030 .26
Phelps Dodge Corp. 600,000 37.350 .15
Western Mining Corp. Holdings Ltd. 8,305,894 53.262 .21
Metals: Steel-0.56%
Bethlehem Steel Corp./1/ 4,100,000 57.400 .22
USX-U.S. Steel Group 2,900,000 89.175 .34
--------- ------
1,372.404 5.34
--------- ------
- ------------------------------------------
CAPITAL EQUIPMENT
- ------------------------------------------
Aerospace & Military Technology-2.43%
Boeing Co. 1,950,000 152.831 .60
General Motors Corp., Class H 3,354,200 164.775 .64
Litton Industries, Inc./1/ 650,000 28.925 .11
Northrop Grumman Corp. 1,000,000 64.000 .25
Raytheon Co. 1,900,000 89.775 .35
Sundstrand Corp. 875,000 61.578 .24
United Technologies Corp. 660,000 62.618 .24
Data Processing & Reproduction-2.78%
Apple Computer, Inc. 600,000 19.125 .07
Cisco Systems, Inc./1/ 600,000 44.775 .17
Hewlett-Packard Co. 1,896,000 158.790 .62
International Business Machines Corp. 2,175,000 199.556 .78
Oracle Corp./1/ 2,250,000 95.344 .37
Tandem Computers Inc./1/ 1,225,000 13.016 .05
Unisys Corp., $3.75 convertible preferred,
Series A 350,000 9.406 .04
Xerox Corp. 1,270,000 173.990 .68
Electrical & Electronic-0.38%
General Electric Co. 1,345,500 96.876 .38
Electronic Components-1.13%
Intel Corp. 2,000,000 113.500 .44
Motorola, Inc. 500,000 28.500 .11
Texas Instruments Inc. 2,870,000 148.522 .58
Energy Equipment-1.09%
Schlumberger Ltd. 3,450,000 238.913 .93
Western Atlas Inc./1/ 800,000 40.400 .16
Industrial Components-0.51%
Dana Corp. 1,421,500 41.579 .16
Goodyear Tire & Rubber Co. 830,000 37.661 .15
Rockwell International Corp. 1,000,000 52.875 .20
Machinery & Engineering-3.54%
Caterpillar Inc. 6,540,000 384.225 1.50
Cummins Engine Co., Inc. 1,041,800 38.547 .15
Deere & Co. 8,250,000 290.812 1.13
Ingersoll-Rand Co. 700,000 24.587 .10
Mannesmann AG 420,000 133.529 .52
Parker Hannifin Corp. 1,100,000 37.675 .14
--------- ------
3,046.705 11.86
--------- ------
- ------------------------------------------
CONSUMER GOODS
- ------------------------------------------
Automobiles-2.13%
Chrysler Corp. 1,000,000 55.375 .22
Daimler-Benz AG 110,000 55.287 .22
Ford Motor Co., Class A 8,243,316 239.056 .93
General Motors Corp. 3,025,000 159.947 .62
Toyota Motor Corp. 1,760,000 37.284 .14
Beverages & Tobacco-5.22%
Anheuser-Busch Companies, Inc. 1,031,500 68.981 .27
PepsiCo, Inc. 2,450,000 136.894 .53
Philip Morris Companies Inc. 9,200,000 832.600 3.24
RJR Nabisco Holdings Corp. 4,600,000 142.025 .55
Seagram Co. Ltd. 4,600,000 159.275 .63
Food & Household Products-1.80%
Archer Daniels Midland Co. 2,900,000 52.200 .20
ConAgra, Inc. 1,900,000 78.375 .31
CPC International Inc. 980,000 67.252 .26
General Mills, Inc. 500,000 28.875 .11
H.J. Heinz Co. 750,000 24.844 .10
Nestle SA 140,000 154.667 .60
Procter & Gamble Co. 550,000 45.650 .18
Ralston Purina Co. 152,800 9.531 .04
Health & Personal Care-6.75%
Abbott Laboratories 1,750,000 73.063 .28
American Home Products Corp. 1,350,000 130.950 .51
Avon Products, Inc. 950,000 71.606 .28
Bristol-Myers Squibb Co. 1,655,000 142.123 .55
Johnson & Johnson 1,140,000 97.613 .38
Kimberly-Clark Corp. 604,100 49.989 .19
Eli Lilly and Co. 2,900,000 163.125 .64
Merck & Co., Inc. 5,335,000 350.776 1.37
Pharmacia & Upjohn Inc. 2,247,500 87.091 .34
Pfizer Inc. 4,600,000 289.800 1.13
Schering-Plough Corp. 1,846,000 101.068 .39
Warner-Lambert Co. 1,800,000 174.825 .69
Recreation & Other Consumer Products-0.47%
Duracell International Inc. 1,800,000 93.150 .36
Eastman Kodak Co. 400,000 26.800 .11
Textiles & Apparel-0.05%
VF Corp. 300,000 15.825 .05
--------- ------
4,215.922 16.42
--------- ------
- ------------------------------------------
SERVICES
- ------------------------------------------
Broadcasting & Publishing-4.99%
Capital Cities/ABC, Inc. 1,615,000 199.251 .78
Gannett Co., Inc. 480,200 29.472 .11
New York Times Co., Class A 2,250,000 66.656 .26
Tele-Communications, Inc., Series A,
Liberty Media Group/1/ 3,060,225 82.243 .32
Tele-Communications, Inc., Series A,
TCI Group/1/ 12,240,900 243.288 .95
Time Warner Inc. 9,081,000 343.943 1.34
Times Mirror Co., Series A 700,000 23.713
Times Mirror Co., $1.374 preferred equity
redemption cumulative stock, Series B 50,863 1.303 .10
Tribune Co. 350,000 21.394 .08
U S WEST Media Group/1/ 2,600,000 49.400 .19
Viacom Inc., Class B1 4,690,000 222.189 .86
Business & Public Services-3.59%
Browning-Ferris Industries, Inc. 500,000 14.750 .06
Columbia/HCA Healthcare Corp. 1,000,000 50.750 .20
Dun & Bradstreet Corp. 1,350,000 87.413 .34
Federal Express Corp./1/ 1,250,000 92.344 .36
Interpublic Group of Companies, Inc. 2,950,000 127.956 .50
Pitney Bowes Inc. 2,020,000 94.940 .37
United HealthCare Corp. 3,000,000 196.500 .77
WMX Technologies, Inc. 8,550,000 255.431 .99
Leisure & Tourism-1.46%
Darden Restaurants, Inc. 1,000,000 11.875 .05
Walt Disney Co. 4,304,600 253.971 .99
McDonald's Corp. 2,400,000 108.300 .42
Merchandising-2.48%
Gap, Inc. 1,954,200 82.076 .32
May Department Stores Co. 600,000 25.350 .10
Melville Corp. 200,000 6.150 .02
J.C. Penney Co., Inc. 500,000 23.812 .09
Tandy Corp. 416,532 17.286 .07
Toys 'R' Us, Inc./1/ 3,450,000 75.038 .29
Wal-Mart Stores, Inc. 18,232,000 407.941 1.59
Telecommunications-5.44%
AirTouch Communications1 3,650,000 103.112 .40
Ameritech Corp. 1,900,000 112.100 .44
AT&T Corp. 4,895,000 316.951 1.23
GTE Corp. 1,250,000 55.000 .21
MCI Communications Corp. 9,325,000 243.616 .95
Pacific Telesis Group 3,900,000 131.137 .51
SBC Communications Inc. 300,000 17.250 .07
Sprint Corp. 425,000 16.947 .07
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) 3,057,400 97.455 .38
U S WEST Communications Group 2,700,000 96.525 .38
Vodafone Group PLC (American Depositary Receipts) 5,848,000 206.142 .80
Transportation: Airlines-0.40%
AMR Corp./1/ 900,000 66.825 .26
Delta Air Lines, Inc. 395,000 29.181 .11
Delta Air Lines, Inc., $3.50 convertible
preferred, Class C 100,000 5.937 .03
Transportation: Rail & Road-1.44%
Burlington Northern Santa Fe Corp. 250,000 19.500 .08
Conrail, Inc. 950,000 66.500 .26
CSX Corp. 2,500,000 114.063 .44
Norfolk Southern Corp. 300,000 23.812 .09
Union Pacific Corp. 2,225,000 146.850 .57
--------- ------
5,083.638 19.80
--------- ------
- ------------------------------------------
FINANCE
- ------------------------------------------
Banking-8.80%
H.F. Ahmanson & Co. 2,500,000 66.250 .26
Banc One Corp. 8,772,500 331.162 1.29
BankAmerica Corp. 3,850,000 249.288 .97
Bankers Trust New York Corp. 1,050,000 69.825 .27
Chase Manhattan Corp. 1,250,000 75.781 .30
Chemical Banking Corp. 2,500,000 146.875 .57
Citicorp 1,100,000 73.975 .29
Citicorp, $5.375 convertible preferred,
Series 13 300,000 54.675 .21
Comerica Inc. 1,800,000 72.225 .28
Deutsche Bank AG 497,650 23.547 .09
First Chicago NBD Corp. 2,353,000 92.943 .36
First Fidelity Bancorporation 1,350,000 101.756 .40
First Interstate Bancorp 1,375,000 187.687 .73
First Union Corp. 2,150,000 119.594 .47
Fleet Financial Group, Inc. 970,000 39.528 .15
Great Western Financial Corp. 2,500,000 63.750 .25
J.P. Morgan & Co. Inc. 2,000,000 160.500 .63
National City Corp. 1,000,000 33.125 .13
NationsBank Corp. 1,200,000 83.550 .33
PNC Bank Corp. 3,642,000 117.455 .46
SunTrust Banks, Inc. 600,000 41.100 .16
U.S. Bancorp 400,000 13.450 .05
Wachovia Corp. 900,000 41.175 .15
Financial Services-4.12%
American Express Co. 380,000 15.722 .06
Federal Home Loan Mortgage Corp. 2,000,000 167.000 .65
Federal National Mortgage Assn. 5,760,000 714.960 2.78
Student Loan Marketing Assn. 2,450,000 161.394 .63
Insurance-3.03%
Aetna Life and Casualty Co. 400,000 27.700 .11
Allstate Corp. 3,091,110 127.122 .50
American General Corp. 910,000 31.736 .12
American International Group, Inc. 1,822,500 168.581 .66
CIGNA Corp. 550,000 56.788 .22
General Re Corp. 567,800 88.009 .34
Lincoln National Corp. 1,050,000 56.437 .22
SAFECO Corp. 2,850,000 98.325 .38
St. Paul Companies, Inc. 2,240,000 124.600 .48
--------- ------
4,097.590 15.95
--------- ------
- ------------------------------------------
OTHER
- ------------------------------------------
Multi-Industry-2.46%
AlliedSignal Inc. 300,000 14.250 .06
Canadian Pacific Ltd. 1,500,000 27.188 .11
Hanson PLC 3,525,477 10.539
Hanson PLC (American Depositary Receipts) 9,000,000 137.250 .57
Minnesota Mining and Manufacturing Co. 3,570,000 236.512 .92
Tenneco Inc. 2,925,000 145.153 .57
Textron Inc. 891,700 60.190 .23
Gold Mines -0.56%
Barrick Gold Corp. 2,000,000 52.750 .21
Newmont Mining Corp. 2,000,000 90.500 .35
Miscellaneous-1.77%
Equity-type securities in initial period of
acquisition 453.054 1.77
--------- ------
1,227.386 4.79
--------- ------
Total Equity-Type Securities (cost: $13,558.170
million) 21,036.104 81.92
--------- ------
Principal
- ------------------------------------------ Amount
BONDS & NOTES (millions)
- ------------------------------------------ ---------
U.S. Treasuries-6.44%
8.00% January 1997 $175.000 179.785 .70
6.875% April 1997 170.000 173.505 .68
6.375% June 1997 230.000 233.809 .91
5.75% October 1997 300.000 302.907 1.18
8.875% November 1997 25.000 26.609 .10
4.75% August 1998 300.000 296.484 1.15
5.125% November 1998 300.000 299.016 1.16
8.875% November 1998 25.000 27.371 .11
11.625% November 2004 30.000 42.459 .17
7.125% February 2023 62.000 70.893 .28
--------- ------
Total Bonds & Notes (cost: $1,633.233 million) 1,652.838 6.44
--------- ------
Total Investment Securities (cost: $15,191.403
million) 22,688.942 88.36
--------- ------
- ------------------------------------------
SHORT-TERM SECURITIES
- ------------------------------------------
U.S. Treasury Short-Term Securities-3.19%
4.375%-7.50% due 1/31-11/15/96 825.000 819.983 3.19
--------- ------
Corporate Short-Term Notes-6.67%
American Express Credit Corp. 5.47%-5.55%
due 2/8-3/18/96 68.500 67.813 .26
Anheuser-Busch Companies, Inc. 5.55%-5.66%
due 1/5-1/26/96 54.700 54.561 .21
AT&T Corp. 5.40%-5.75% due 1/8-4/4/96 137.100 136.179 .53
BellSouth Telecommunications, Inc. 5.50%-5.70%
due 1/11-2/13/96 40.000 39.833 .16
Chevron Oil Finance Co. 5.63%-5.77%
due 1/30-2/12/96 125.200 124.457 .48
Coca-Cola Co. 5.52%-5.67% due 1/19-2/2/96 81.300 80.971 .32
E.I. du Pont De Nemours and Co. 5.64%-5.73%
due 1/3-1/26/96 96.600 96.299 .38
Emerson Electric Co. 5.66% due 1/25-1/30/96 56.000 55.767 .22
Ford Motor Credit Corp. 5.62%-5.72% due 1/3-2/16/96 154.400 153.761 .60
General Electric Capital Corp. 5.50%-5.80%
due 1/2-2/26/96 123.400 122.830 .48
H.J. Heinz Co. 5.70%-5.75% due 1/4-1/31/96 89.500 89.205 .35
Hewlett-Packard Co. 5.42%-5.62% due 2/13-3/14/96 101.800 100.885 .39
Eli Lilly and Co. 5.50%-5.67% due 1/25-2/27/96 45.000 44.672 .17
Motorola, Inc. 5.57%-5.67% due 1/10-2/6/96 114.178 113.711 .44
J.C. Penney Funding Corp. 5.65%-5.68%
due 1/19-2/23/96 114.400 113.820 .44
PepsiCo, Inc. 5.52%-5.75% due 1/12-2/9/96 103.100 102.638 .40
Procter & Gamble Co. 5.42%-5.66% due 1/9-3/8/96 112.900 112.305 .44
Xerox Corp. 5.67%-5.68% due 1/8-1/19/96 103.700 103.485 .40
Federal Agency Discounts Notes-1.39%
Federal Farm Credit Bank 5.62% due 1/4/96 23.300 23.285 .09
Federal Home Loan Bank 5.54%-5.62%
due 1/22-2/28/96 130.455 129.677 .51
Federal Home Loan Mortgage Corp. 5.53%-5.66%
due 1/16-2/20/96 116.800 116.197 .45
Federal National Mortgage Assn. 5.52%-5.67%
due 1/9-2/14/96 87.250 86.872 .34
Total Short-Term Securities
(cost: $2,892.879 million) 2,889.206 11.25
Excess of cash and receivables over payables 100.170 .39
--------- ------
Total Short-Term Securities, Cash and Receivables,
Net of Payables 2,989.376 11.64
---------- ---------
Net Assets $25,678.318 100.00%
========== =========
</TABLE>
/1/ Non-income-producing securities
See Notes to Financial Statements
Companies appearing in the portfolio
since June 30, 1995
- ------------------------------------------
Aetna Life and Casualty
AlliedSignal
American Electric Power
Anheuser-Busch
Barrick Gold
Chase Manhattan
Federal Home Loan Mortgage
Gap
Great Lakes Chemical
Louisiana-Pacific
NationsBank
J.C. Penney
Seagram
Viacom
- ------------------------------------------
Companies eliminated from the portfolio
since June 30, 1995
- ------------------------------------------
Baxter International
CBS
Hong Kong Telecommunications
Limited
LIN Broadcasting
Microsoft
Texas Utilities
The Investment Company of America
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES (dollars in
at December 31, 1995 millions)
<S> <C> <C>
- ---------------------------------------- ------------- -------------
Assets:
Investment securities at market
(cost: $15,191.403) $22,688.942
Short-term securities at market
(cost: $2,892.879) 2,889.206
Cash .313
Receivables for-
Sales of investments $37.161
Sales of fund's shares 36.879
Dividends and accrued interest 85.600 159.640
------------- -------------
25,738.101
Liabilities:
Payables for-
Purchases of investments 24.023
Repurchases of fund's shares 26.103
Management services 5.501
Accrued expenses 4.156 59.783
------------- -------------
Net Assets at December 31, 1995-
Equivalent to $21.61 per share on
1,188,009,031 shares of $1 par value
capital stock outstanding (authorized
capital stock--2,000,000,000 shares) $25,678.318
=============
STATEMENT OF OPERATIONS (dollars in
for the year ended December 31, 1995 millions)
- ----------------------------------------- ------------- -------------
Investment Income:
Income:
Dividends $480.127
Interest 260.461 $ 740.588
-------------
Expenses:
Management services fee 58.981
Distribution expenses 46.876
Transfer agent fee 19.172
Reports to shareholders 1.628
Registration statement and
prospectus .877
Postage, stationery and supplies 5.293
Directors' fees .410
Auditing and legal fees .124
Custodian fee .642
Taxes (other than federal income tax) .293
Other expenses .197 134.493
------------- -------------
Net investment income 606.095
-------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,026.204
Net increase in unrealized
appreciation on investments 4,320.176
-------------
Net realized gain and increase in
unrealized appreciation on investments 5,346.380
-------------
Net Increase in Net Assets Resulting
from Operations $5,952.475
=============
- ---------------------------------------- ------------- -------------
STATEMENT OF CHANGES IN NET ASSETS (dollars in
millions)
Year ended
December 31
1995 1994
- ----------------------------------------- ------------- -------------
Operations:
Net investment income $ 606.095 $ 542.887
Net realized gain on investments 1,026.204 628.471
Net increase (decrease) in unrealized
appreciation on investments 4,320.176 (1,140.883)
------------- -------------
Net increase in net assets
resulting from operations 5,952.475 30.475
------------- -------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net investment income (556.505) (496.411)
Distributions from net realized
gain on investments (1,033.686) (628.912)
------------- -------------
Total dividends and distributions (1,590.191) (1,125.323)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold: 155,130,380
and 149,158,039 shares, respectively 3,118.719 2,761.027
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 69,096,019 and 56,628,397
shares, respectively 1,453.606 1,014.931
Cost of shares repurchased: 127,074,306
and 130,005,029 shares, respectively (2,535.884) (2,406.547)
------------- -------------
Net increase in net assets resulting from
capital share transactions 2,036.441 1,369.411
------------- -------------
Total Increase in Net Assets 6,398.725 274.563
Net Assets:
Beginning of year 19,279.593 19,005.030
------------- -------------
End of year (including undistributed
net investment income: $277.425
and $227.698, respectively) $25,678.318 $19,279.593
============= =============
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. The Investment Company of America, Inc. (the "fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital and income,
placing greater emphasis on future dividends than on current income. The
following paragraphs summarize the significant accounting policies consistently
followed by the fund in the preparation of its financial statements:
Equity-type securities traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted bid price.
Nonconvertible 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 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 $642,000 includes $250,000 that was paid by these credits
rather than in 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, 1995, net unrealized appreciation on investments for
federal income tax purposes aggregated $7,503,442,000, of which $7,769,282,000
related to appreciated securities and $265,840,000 related to depreciated
securities. During the year ended December 31, 1995, the fund realized, on a
tax basis, a net capital gain of $1,033,386,000 on securities transactions. The
cost of portfolio securities for federal income tax purposes was
$18,074,706,000 at December 31, 1995.
3. The fee of $58,981,000 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;
0.24% of such assets in excess of $13 billion but not exceeding $21 billion;
0.235% of such assets in excess of $21 billion but not exceeding $34 billion;
and 0.231% of such assets in excess of $34 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, 1995,
distribution expenses under the Plan were $46,876,000. As of December 31, 1995,
accrued and unpaid distribution expenses were $3,912,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $19,172,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $14,773,000 (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, 1995, aggregate amounts deferred
were $138,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
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, 1995, the net assets of the
fund would have been $25,682,731,000; the shares outstanding would have been
1,188,851,000; and the net asset value would have been equivalent to $21.60 per
share. During the year ended December 31, 1995, no warrants were exercised for
the purchase of fund shares.
5. As of December 31, 1995, accumulated excess distributions of net realized
gain on investments were $345,000 and additional paid-in capital was
$16,719,194,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $4,730,918,000 and $4,192,276,000, respectively,
during the year ended December 31, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For
the year ended December 31, 1995, such non-U.S. taxes were $7,046,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $59,000 for the year ended December
31, 1995.
The fund reclassified $137,000 to undistributed net investment income from
undistributed net realized gains for the year ended December 31, 1995 and
$7,109,000 to undistributed net realized capital gain from paid in surplus.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year
ended
December
31
1995 1994 1993 1992 1991
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $17.67 $18.72 $17.89 $17.48 $14.52
--------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .52 .51 .54 .49 .51
Net realized and unrealized
gain (loss) on investments 4.83 (.48) 1.51 .71 3.27
--------- ------- ------- ------- -------
Total income from
investment operations 5.35 .03 2.05 1.20 3.78
--------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.50) (.48) (.47) (.47) (.44)
Distributions from net
realized gains (.91) (.60) (.75) (.32) (.38)
--------- ------- ------- ------- -------
Total distributions (1.41) (1.08) (1.22) (.79) (.82)
--------- ------- ------- ------- -------
Net Asset Value, End of Year $21.61 $17.67 $18.72 $17.89 $17.48
========= ======= ======= ======= =======
Total Return* 30.63% .16% 11.62% 6.99% 26.54%
Ratios/Supplemental Data:
Net assets, end of year (in
millions) $25,678 $19,280 $19,005 $15,428 $10,526
Ratio of expenses to average
net assets .60% .60% .59% .58% .59%
Ratio of net income to average
net assets 2.70% 2.83% 3.03% 3.06% 3.29%
Portfolio turnover -
common stocks 20.91% 17.94% 19.57% 7.23% 5.79%
Portfolio turnover -
investment securities 20.37% 31.08% 17.57% 9.73% 6.21%
</TABLE>
*This was calculated without deducting a sales charge. The maximum sales charge
is 5.75% of the fund's offering price.
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,
Inc. (the "Fund") at December 31, 1995, the results of its operations, 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, 1995 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.
PRICE WATERHOUSE LLP
Los Angeles, California
January 31, 1996
1995 Tax Information (Unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
Dividends and Distributions per Share
<TABLE>
<CAPTION>
To Payment Date From Net From Net From Net
Shareholders Investment Realized Realized
of Record Income Short-term Long-term
Gains Gains
<S> <C> <C> <C> <C>
March 3, 1995 March 6, 1995 $0.12 - -
June 2, 1995 June 5, 1995 0.12 - -
September 1, 1995 September 5, 1995 0.12 - -
December 15, 1995 December 18, 1994 0.14 $0.054 $0.856
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 64% of the
dividends paid by the fund from net investment income represent qualifying
dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 24% of the dividends
paid by the fund from net investment income were derived from interest on
direct U.S. Treasury obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
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, 1996, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA BDA/AL/2901
Lit. No. ICA-011-0296
BOARD OF DIRECTORS
CHARLES H. BLACK
Pacific Palisades, California
Private investor and consultant; former Executive Vice President and Director,
KaiserSteel Corporation
JOHN F. BOOKOUT
Houston, Texas
Supervisory Director, Royal Duth Petroleum Company; former President and Chief
Executive Officer, Shell Oil Company
ANN S. BOWERS
Palo Alto, California
Independent human resources consultant
Enterprise 2000
MALCOLM R. CURRIE, PH.D.
Los Angeles, California
Chairman Emeritus, Hughes Aircraft Company
JON B. LOVELACE, JR.
Los Angeles, California
Chairman of the Board of the fund
Vice Chairman of the Board and Chairman of the Executive Committee,
Capital Research and Management Company
JOHN G. MCDONALD
Stanford, California
The IBJ Professor of Finance,
Graduate School of Business,
Stanford University
BAILEY MORRIS-ECK
Washington, D.C.
Editor, International Economic Insights;
Senior Fellow, Institute for International Economics; Consultant
The Independent of London
WILLIAM C. NEWTON
Los Angeles, California
President of the fund
Senior Partner, The Capital Group Partners L.P.
JAMES W. RATZLAFF
San Francisco, California
Executive Vice President of the fund
Senior Partner, The Capital Group Partners L.P.
OLIN C. ROBISON, PH.D.
Middlebury, Vermont
President of the Salzburg Seminar;
Professor and former President,
Middlebury College
ADVISORY BOARD MEMBERS
THOMAS M. CROSBY, JR.*
Minneapolis, Minnesota
Partner, Faegre & Benson (law firm)
MALCOLM FRASER
Melbourne, Australia
Former Prime Minister of Australia
ALLAN E. GOTLIEB
Toronto, Canada
Former Canadian Ambassador to the
United States
WILLIAM H. KLING
St. Paul, Minnesota
President, Minnesota Public Radio;
President, Greenspring Co.; former President,
American Public Radio (now Public Radio International)
ROBERT J. O'NEILL, PH.D.
Oxford, England
Professor and Fellow,
All Souls College, University of Oxford
NORMAN R. WELDON, PH.D.
Miami, Florida
President and Director, Corvita Corporation;
Chairman of the Board, Novoste Corporation
HERBERT L. LUCAS, JR., A member of the advisory board since march 1983,
completed his service December 31. The Board members wish to thank him for his
helpful contributions to the fund.
*Thomas M. Crosby, Jr. was elected to the Advisory Board in 1995.
OTHER OFFICERS
WILLIAM R. GRIMSLEY
San Francisco, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
R. MICHAEL SHANAHAN
Los Angeles, California
Senior Vice President of the fund
Chairman of the Board, Capital Research and Management Company
GREGG E. IRELAND
Washington, D.C.
Vice President of the fund
Vice President, Capital Research and Management Company
ANNE M. LLEWELLYN
Los Angeles, California
Vice President of the fund
Associate, Capital Research and Management Company
JAMES B. LOVELACE
Los Angeles, California
Vice President of the fund
Vice President, Capital Research and Management Company
DONALD D. O'NEAL
San Francisco, California
Vice President of the fund
Vice President, Capital Research and Management Company
PATRICIA L. VAUGHN
Los Angeles, California
Vice President of the fund
Vice President, Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President-Fund Business Management Group, Capital Research and Management
Company
STEVEN N. KEARSLEY
Brea, California
Treasurer of the fund
Vice President and Treasurer, Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Assistant Secretary of the fund
Vice President-Fund Business Management Group, Capital Research and Management
Company
R. MARCIA GOULD
Brea, California
Assistant Treasurer of the fund
Vice President-Fund Business Management Group, Capital Research and Management
Company
MARY C. HALL
Brea, California
Assistant Treasurer Of The Fund
Senior Vice President-Fund Business Management Group, Capital Research and
Management Company
[The American Funds Group(R)]
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, Texas 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
