ICA
The Investment Company of America
1997 Semi-Annual Report
For the six months ended June 30
[cover: sketch of hillside, lighthouse, seagull, tennis shoes,
telescope,glasses, book, pen, and blanket]
[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.
About Our Cover:
An artist's sketch of a scene on Martha's Vineyard, Massachusetts.
[sketch: Map of Martha's Vineyard]
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended June 30, 1997,
assuming payment of the 5.75% maximum sales charge at the beginning of the
stated periods - 10 years: +237.61%, or +12.94% a year; 5 years: +107.93%, or
+15.77% a year; 12 months: +23.03%. Sales charges are lower for accounts of
$50,000 or more. The fund's 30-day yield as of July 31, 1997, calculated in
accordance with the Securities and Exchange Commission formula, was 1.69%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE 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:
ICA's gain for the first half of 1997 was larger than that of most full years
in its 63 1/2-year history. In the six months ended June 30, the value of your
investment in the fund rose 18.05% if you reinvested the income dividends, as
most did. The distributions were paid in March and June and totaled 24 cents a
share. Those of you who took dividends in cash earned an income return of .99%
while the value of your investment increased 17.00%.
With the U.S. stock market setting repeated new highs, more than 85% of the 187
stocks the fund held throughout the fiscal period gained ground. Over the six
months, the unmanaged Standard & Poor's 500 Composite Index, which measures the
stocks of large U.S. companies, posted a gain of 20.6% with dividends
reinvested.
The U.S. stock market has now gone an unprecedented 6.7 years without a
correction - generally defined as a decline of 10% or more. The current period
did include the market's first decline of any significant size since 1990,
stopping an eyelash short of the 10% mark. The drop turned out to be of little
significance to the market overall, which recovered quickly.
During the 1997 first half, the prices of a great number of individual stocks
moved dramatically. This volatility led to moderately higher turnover for ICA,
but still at a level well below the mutual fund industry average, and produced
net-realized capital gains of roughly $1.68 per share.
The fund's capital gains are particularly noteworthy in light of this year's
new tax law. The change lowered the capital gains rate on sales of securities
held for more than 18 months to 20% from 28% for assets sold on or after May 7,
1997. This change increases the importance of minimizing short-term gains,
which will continue to be taxed as regular income, in favor of long-term gains.
Unfortunately, the new law's midyear effective date and other details will make
this an unusually complicated year for shareholder tax reporting.
Though we are pleased to report a strong six-month gain for ICA, it is
important not to set expectations based on such short-term results. Over the
fund's 63 1/2 years, it has produced a total return of 307,492% which works out
to an annualized compound return of 13.5%. Over the same period, the annualized
return of the S&P 500 has been 12.0%.
Sincerely,
/s/Jon B. Lovelace, Jr.
Jon B. Lovelace, Jr.
Chairman of the Board
/s/William C. Newton
William C. Newton
President
August 14, 1997
<TABLE>
INVESTMENT PORTFOLIO - June 30, 1997
- ------------------------------------- ----------
<S> <C>
Percent of
Largest Individual Equity Holdings Net Assets
- ------------------------------------- ----------
Philip Morris 3.63%
Federal National Mortgage 2.73
Royal Dutch Petroleum 2.02
Time Warner 1.64
DuPont 1.62
Pfizer 1.58
Caterpillar 1.50
BankAmerica 1.45
Warner-Lambert 1.37
Oracle 1.37
- ------------------------------------- ----------
Percent of
Largest Industry Holdings Net Assets
- ------------------------------------- ----------
Banking 8.81%
Energy Sources 7.71
Health & Personal Care 7.54
Telecommunications 5.27
Beverages & Tobacco 5.19
- ------------------------------------- ----------
Percent of
Largest Investment Categories Net Assets
- ------------------------------------- ----------
Consumer Goods 17.46%
Finance 17.04
Services 16.51
Capital Equipment 14.14
Energy 8.72
- ------------------------------------- ----------
</TABLE>
<TABLE>
THE INVESTMENT COMPANY OF AMERICA
INVESTMENT PORTFOLIO, June 30, 1997
- ------------------------------------------ Unaudited
Equity-Type Securities Market Percent
- ------------------------------------------ Number of Value of Net
Energy Shares (millions) Assets
- ------------------------------------------ --------- --------- ------
<S> <C> <C> <C>
Energy Sources-7.71%
Amoco Corp. 2,339,700 $ 203.408 .56
Atlantic Richfield Co. 2,350,000 165.675 .46
British Petroleum Co. PLC (American Depositary
Receipts) 1,036,482 77.607 .21
Broken Hill Proprietary Co. Ltd. 1,590,999 23.388 .06
Chevron Corp. 3,062,200 226.411 .62
Exxon Corp. 1,000,000 61.500 .17
Mobil Corp. 1,300,000 90.837 .25
Murphy Oil Corp. 2,175,000 106.031 .29
Pennzoil Co. 265,900 20.408 .06
Phillips Petroleum Co. 3,800,000 166.250 .46
Royal Dutch Petroleum Co.
(New York Registered Shares) 13,480,000 732.975 2.02
Elf Aquitaine (American Depositary Receipts) 3,000,000 163.312 .45
Texaco Inc. 1,500,000 163.125 .45
TOTAL, Class B 1,359,340 137.450 .00
TOTAL, Class B (American Depositary Receipts) 2,033,520 102.947 .66
Union Pacific Resources Group, Inc. 2,100,000 52.238 .14
Unocal Corp. 3,400,000 131.962 .37
USX-Marathon Group 6,000,000 173.250 .48
Utilities: Electric & Gas-1.01%
American Electric Power Co., Inc. 1,100,000 46.200 .13
Duke Energy Corp. 1,123,230 53.845 .15
El Paso Natural Gas Co. 119,605 6.578 .02
Florida Progress Corp. 400,000 12.525 .03
GPU, Inc. 1,500,000 53.813 .15
Houston Industries Inc. 2,000,000 42.875 .12
Long Island Lighting Co. 4,100,000 94.300 .26
Southern Co. 1,600,000 35.000 .10
Union Electric Co. 550,000 20.728 .05
--------- ---------
3,164.638 8.72
--------- ---------
- ------------------------------------------
Materials
- ------------------------------------------
Chemicals-2.43%
Air Products and Chemicals, Inc. 1,935,000 157.219 .43
E.I. du Pont de Nemours and Co. 9,350,000 587.881 1.62
Eastman Chemical Co. 550,000 34.925 .10
Hoechst AG 350,000 14.855 .04
Imperial Chemical Industries PLC
(American Depositary Receipts) 1,200,000 68.250 .19
Monsanto Co. 450,000 19.378 .05
Forest Products & Paper-2.61%
Champion International Corp. 1,950,000 107.738 .30
Georgia-Pacific Corp. 4,118,900 351.651 .97
International Paper Co. 1,500,000 72.844 .20
Louisiana-Pacific Corp. 2,900,000 61.262 .17
Union Camp Corp. 1,530,000 76.500 .21
Weyerhaeuser Co. 5300000 275.600 .76
Metals: Nonferrous-1.53%
Alcan Aluminium Ltd. 1,000,000 34.688 .10
Aluminum Co. of America 4,200,000 316.575 .87
Freeport-McMoRan Copper & Gold Inc., Class B 1,200,000 37.350 .10
Inco Ltd. 1,700,000 51.106 .14
Phelps Dodge Corp. 750,000 63.891 .18
WMC Ltd. 8,495,372 53.521 .14
Metals: Steel-0.28%
USX-U.S. Steel Group 2,900,000 101.681 .28
--------- ------
2,486.915 6.85
--------- ------
- ------------------------------------------
Capital Equipment
- ------------------------------------------
Aerospace & Military Technology-1.53%
Boeing Co. 1,320,000 70.042 .19
General Motors Corp., Class H 3,882,800 224.232 .62
McDonnell Douglas Corp. 700,000 47.950 .13
Raytheon Co. 1,700,000 86.700 .24
Sundstrand Corp. 1,250,000 67.500 .19
United Technologies Corp. 720,000 59.760 .16
Data Processing & Reproduction-4.28%
Cisco Systems, Inc. /1/ 1,200,000 80.550 .22
Computer Associates International, Inc. 2,115,100 117.785 .32
Digital Equipment Corp. /1/ 1,750,000 62.016 .17
Hewlett-Packard Co. 2,750,000 154.000 .42
International Business Machines Corp. 4,384,600 395.436 1.09
Oracle Corp. /1/ 9,862,500 496.823 1.37
Tandem Computers Inc. /1/ 1,225,000 24.806 .07
3Com Corp. /1/ 2,600,000 117.000 .32
Xerox Corp. 1,300,000 102.538 .30
Electrical & Electronic-0.87%
General Electric Co. 1,600,000 104.600 .29
Lucent Technologies Inc. 1,938,000 139.657 .38
Siemens AG 1,250,000 74.257 .20
Electronic Components-1.18%
Intel Corp. 750,000 106.359 .29
Texas Instruments Inc. 3,822,500 321.329 .89
Energy Equipment-2.19%
Baker Hughes Inc. 1,200,000 46.425 .13
Dresser Industries, Inc. 1,100,000 40.975 .11
Halliburton Co. 1,450,000 114.913 .32
Schlumberger Ltd. 3,500,000 437.500 1.21
Western Atlas Inc. /1/ 2,100,000 153.825 .42
Industrial Components-0.38%
Dana Corp. 1,821,500 69.217 .19
Goodyear Tire & Rubber Co. 650,000 41.153 .11
Rockwell International Corp. 467,600 27.588 .08
Machinery & Engineering-3.71%
Caterpillar Inc. 5,080,000 545.465 1.50
Cummins Engine Co., Inc. 1,041,800 73.512
Cummins Engine Co., Inc. /2/ 958,200 67.613 .39
Deere & Co. 7,250,000 397.844 1.10
Ingersoll-Rand Co. 1,600,000 98.800 .27
Mannesmann AG 150,000 66.864 .18
Parker Hannifin Corp. 1,590,000 96.493 .27
--------- ------
5,131.527 14.14
--------- ------
- ------------------------------------------
Consumer Goods
- ------------------------------------------
Automobiles-2.21%
Chrysler Corp. 7,800,000 255.938 .71
Ford Motor Co., Class A 4,000,000 151.000 .42
General Motors Corp. 3,125,000 174.023 .48
Honda Motor Co., Ltd. 843,000 25.423
Honda Motor Co., Ltd.
(American Depositary Receipts) 2,610,000 157.089 .50
Toyota Motor Corp. 1,279,000 37.789 .10
Beverages & Tobacco-5.19%
Anheuser-Busch Companies, Inc. 1,563,000 65.548 .18
PepsiCo, Inc. 3,700,000 138.981 .38
Philip Morris Companies Inc. 29,700,000 1,317.938 3.63
RJR Nabisco Holdings Corp. 6,100,000 201.300 .55
Seagram Co. Ltd. 4,000,000 161.000 .45
Food & Household Products-2.32%
Archer Daniels Midland Co. 3,000,000 70.500 .19
ConAgra, Inc. 586,000 37.577 .10
CPC International Inc. 1,441,100 133.032 .37
General Mills, Inc. 2,525,000 164.441 .45
Kellogg Co. 1,033,300 88.476 .24
Nestle SA 140,000 184.685 .51
Procter & Gamble Co. 450,000 63.562 .18
Unilever NV (New York Registered Shares) 450,000 98.100 .28
Health & Personal Care-7.54%
Abbott Laboratories 1,500,000 100.125 .28
American Home Products Corp. 1,500,000 114.750 .31
Avon Products, Inc. 861,600 60.797 .17
Bristol-Myers Squibb Co. 1,600,000 129.600 .36
Gillette Co. 952,000 90.202 .25
Johnson & Johnson 1,331,800 85.735 .24
Kimberly-Clark Corp. 450,000 22.387 .06
Eli Lilly and Co. 3,076,300 336.278 .93
Merck & Co., Inc. 3,200,000 331.200 .91
Pharmacia & Upjohn, Inc. 4,847,500 168.451 .46
Pfizer Inc 4,800,000 573.600 1.58
Schering-Plough Corp. 3,767,600 180.374 .50
SmithKline Beecham PLC
(American Depositary Receipts) 500,000 45.812 .12
Warner-Lambert Co. 4,004,000 497.497 1.37
Recreation & Other Consumer Products-0.20%
Eastman Kodak Co. 600,000 46.050 .13
Mattel, Inc. 800,000 27.100 .07
--------- ------
6,336.360 17.46
--------- ------
- ------------------------------------------
Services
- ------------------------------------------
Broadcasting & Publishing-4.22%
New York Times Co., Class A 2,449,100 121.230 .33
Tele-Communications, Inc., Series A,
Liberty Media Group /1/ 8,278,125 196.605 .54
Tele-Communications, Inc., Series A,
TCI Group /1/ 12,599,700 187.421 .52
Time Warner Inc. 12,350,000 595.888 1.64
Tribune Co. 1,128,100 54.219 .15
U S WEST Media Groupc /1/ 5,185,000 104.996 .29
Viacom Inc., Class B /1/ 8,950,000 268.500 .75
Business & Public Services-2.70%
Browning-Ferris Industries, Inc. 2,500,000 83.125 .23
Columbia/HCA Healthcare Corp. 3,503,600 137.735 .38
Electronic Data Systems Corp. 1,915,000 78.515 .22
Federal Express Corp. /1/ 1,435,000 82.871 .23
First Data Corp. 3,000,000 131.813 .36
Humana Inc. /1/ 2,100,000 48.563 .13
Interpublic Group of Companies, Inc. 1,746,500 107.082 .30
United HealthCare Corp. 1,000,000 52.000 .14
Waste Management, Inc. (Formerly WMX Technologies, Inc.) 8,054,233 258.742 .71
Leisure & Tourism-1.28%
Walt Disney Co. 4,623,412 371.029 1.02
McDonald's Corp. 2,000,000 96.625 .26
Merchandising-2.18%
AutoZone, Inc. /1/ 2,640,000 62.205 .17
Limited Inc. 6,539,300 132.421 .36
May Department Stores Co. 1,300,000 61.425 .17
J.C. Penney Co., Inc. 1,000,000 52.188 .14
Wal-Mart Stores, Inc. 14,350,000 485.209 1.34
Telecommunications-5.27%
AirTouch Communications /1/ 5,560,600 152.221 .42
Ameritech Corp. 4,147,300 281.757 .78
AT&T Corp. 10,735,000 376.396 1.04
MCI Communications Corp. 6,325,000 242.129 .67
SBC Communications Inc. 1,500,000 92.813 .26
Sprint Corp. 2,065,000 108.671 .30
Telefonica de Espana, SA
(American Depositary Receipts) 1,610,000 138.863 .38
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) 3,057,400 145.991 .40
U S WEST Communications Group 5,000,000 188.437 .52
Vodafone Group PLC (American Depositary Receipts) 3,848,000 186.387 .50
Transportation: Airlines-0.43%
AMR Corp. /1/ 1,250,000 115.625 .32
Delta Air Lines, Inc. 471,050 38.626 .11
Transportation: Rail & Road-0.43%
Union Pacific Corp. 2,175,000 153.338 .43
--------- ------
5,991.661 16.51
--------- ------
- ------------------------------------------
Finance
- ------------------------------------------
Banking-8.81%
H.F. Ahmanson & Co. 2,400,000 103.200 .28
Banc One Corp. 3,200,000 155.000 .43
Bank of New York Co., Inc. 2,800,000 121.800 .34
BankAmerica Corp. 8,144,000 525.797 1.45
Bankers Trust New York Corp. 1,477,400 128.533 .35
Chase Manhattan Corp. 2,450,000 237.803 .66
Citicorp 500,000 60.281 .17
Comerica Inc. 1,800,000 122.400 .34
CoreStates Financial Corp 2,750,000 147.813 .41
First Chicago NBD Corp. 4,250,000 257.125 .71
First Union Corp. 545,800 50.487 .14
Fleet Financial Group, Inc. 3,723,900 235.537 .65
Great Western Financial Corp. 2,500,000 134.375 .37
KeyCorp 2,150,000 120.131 .33
J.P. Morgan & Co. Inc. 2,400,000 250.500 .69
National City Corp. 1,500,000 78.750 .22
Norwest Corp. 1,800,000 101.250 .28
PNC Bank Corp. 2,250,000 93.656 .26
Toronto-Dominion Bank 3,420,000 101.339 .28
U.S. Bancorp 1,250,000 80.156 .22
Wachovia Corp. 900,000 52.481 .14
Wells Fargo & Co. 148,400 39.994 .09
Financial Services-4.94%
Federal Home Loan Mortgage Corp. 12,621,600 433.867 1.20
Federal National Mortgage Assn. 22,700,000 990.288 2.73
Household International, Inc. 876,400 102.922 .28
Student Loan Marketing Assn. 2,102,000 266.954 .73
Insurance-3.29%
Aetna Inc. 780,900 79.945 .22
Allstate Corp. 2,313,000 168.849 .47
American General Corp. 1,591,400 75.989 .21
American International Group, Inc. 1,822,500 272.236 .75
CIGNA Corp. 200,000 35.500 .10
General Re Corp. 1,217,800 221.640 .61
Lincoln National Corp. 1,050,000 67.594 .19
SAFECO Corp. 2,098,900 97.992 .27
St. Paul Companies, Inc. 2,240,000 170.800 .47
--------- ------
6,182.984 17.04
--------- ------
- ------------------------------------------
Other
- ------------------------------------------
Multi-Industry-1.39%
AlliedSignal Inc. 1,300,000 109.200 .30
Canadian Pacific Ltd. 2,000,000 56.875 .16
Minnesota Mining and Manufacturing Co. 520,000 53.040 .15
Tenneco Inc. 3,550,000 160.415 .44
Textron Inc. 1,897,400 125.940 .34
Gold Mines -0.63%
Barrick Gold Corp. 3,000,000 66.000 .18
Newmont Mining Corp. 2,500,000 97.500 .27
Placer Dome Inc. 4,000,000 65.500 .18
Miscellaneous-2.14%
Equity-type securities in initial period of 0
acquisition 774.906 2.14
--------- ------
1,509.376 4.16
--------- ------
Total Equity-Type Securities (cost: $17,070.931
million) 30,803.461 84.88
--------- ------
Principal
- ------------------------------------------ Amount
Bonds & Notes (millions)
- ------------------------------------------ ---------
U.S. Treasuries-3.80%
4.75% August 1998 $300.000 296.157 .82
5.125% November 1998 300.000 296.625 .82
8.875% November 1998 25.000 25.945 .07
5.75% December 1998 250.000 249.258 .68
6.00% August 1999 250.000 249.375 .69
5.875% November 1999 250.000 248.398 .68
11.625% November 2004 10.000 12.956 .04
--------- ------
Total Bonds & Notes (cost: $1,381.084 million) 1,378.714 3.80
--------- ------
Total Investment Securities (cost: $18,452.015
million) 32,182.175 88.68
--------- ------
- ------------------------------------------
Short-Term Securities
- ------------------------------------------
U.S. Treasuries and Other Federal Agencies-4.80%
Treasury Notes 5.75%-8.875% due 10/31-11/15/97 $325.000 325.523 .90
Treasury Bills 5.085%-5.21% due 7/24-10/9/97 599.800 593.362 1.64
Federal Home Loan Banks 5.42%-5.50%
due 7/25-8/28/97 231.900 230.308 .64
Federal Home Loan Mortgage Corp. 5.42%-5.57%
due 7/14-9/10/97 342.529 340.536 .94
Federal National Mortgage Assn. 5.44%-5.54%
due 7/2-9/8/97 252.030 250.751 .68
Corporate Short-Term Notes-6.04%
Abbott Laboratories 5.47%-5.48%
due 7/18-7/28/97 97.542 97.206 .28
American Express Credit Corp. 5.54%
due 7/1-9/3/97 80.000 79.508 .22
Ameritech Corp. 5.50%-5.555%
due 7/7-9/17/97 109.200 108.461 .30
AT&T Corp. 5.50%-5.52%
due 7/15-9/4/97 90.000 89.710 .25
CPC International Inc. 5.55%-5.62%
due 8/6-9/25/97 /2/ 89.900 85.111 .23
Coca-Cola Co. 5.52%
due 8/7-9/12/97 93.700 92.829 .26
Walt Disney Co. 5.52%
due 8/25-8/29/97 99.300 98.418 .28
E.I. du Pont De Nemours and Co. 5.50%-5.54%
due 7/11-9/16/97 74.600 74.100 .21
Ford Motor Credit Co. 5.53%-5.60% due 7/8-9/2/97 85.700 85.231 .23
Gannett Co., Inc. 5.50% due 7/10-8/15/97 /2/ 90.000 89.606 .25
General Electric Capital Corp. 5.53%-5.62%
due 7/9-9/15/97 107.500 106.737 .29
H.J. Heinz Co. 5.50%-5.58%
due 7/1-7/25/97 94.000 93.767 .26
IBM Credit Corp. 5.54%-5.56% due 7/1-9/2/97 73.300 72.944 .20
Lucent Technologies Inc. 5.50%-5.57%
due 7/14-9/22/97 85.400 84.758 .22
Minnesota Mining and Manufacturing Co. 5.50%-5.53%
due 7/17-8/27/97 68.500 68.208 .18
Monsanto Co. 5.57%-5.63%
due 7/14-8/14/97 92.400 91.890 .26
Motorola, Inc. 5.49%-5.53%
due 7/29-9/11/97 88.800 88.131 .24
PepsiCo, Inc. 5.48%-5.50%
due 7/3-7/30/97 91.300 91.011 .26
Pfizer Inc 5.47%-5.50%
due 7/28-7/31/97 /2/ 106.500 106.041 .30
Procter & Gamble Co. 5.52%-5.57%
due 7/25-9/10/97 101.100 100.300 .28
Rockwell International Corp. 5.63%
due 7/16/97 20.000 19.951 .05
Shell Oil Co. 5.46%-5.52%
due 7/3-7/15/97 39.800 39.727 .11
Southwestern Bell Telephone Co. 5.49%-5.50%
due 7/7-8/12/97 103.000 102.643 .29
Warner-Lambert Co. 5.50%-5.52%
due 7/11-9/22/97 /2/ 87.000 86.547 .24
Weyerhaeuser Co. 5.52%-5.57%
due 7/10-8/14/97 30.900 30.794 .09
Xerox Corp. 5.53%-5.57%
due 7/14-9/12/97 109.600 108.902 .26
Total Short-Term Securities
(cost: $3,944.773 million) 3,933.011 10.84
Excess of cash and receivables over payables 175.191 .48
--------- ------
Total Short-Term Securities, Cash and Receivables,
Net of Payables 4,108.202 11.32
----------- ---------
Net Assets $36,290.377 100.00%
============ =========
/1/ Non-income-producing securities.
/2/ Purchased in a private placement transaction;
resale to the public may require registration or
sale only to qualified institutional buyers.
See Notes to Financial Statements
</TABLE>
<TABLE>
The Investment Company of America Unaudited
Financial Statements
- ----------------------------------------- ------------- -------------
Statement of Assets and Liabilities (dollars in
at June 30, 1997 millions)
- ---------------------------------------- ------------- -------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $18,452.015) $32,182.175
Short-term securities at market
(cost: $3,944.773) 3,933.011
Cash .046
Receivables for-
Sales of investments $175.151
Sales of fund's shares 35.897
Dividends and accrued interest 80.898 291.946
------------- -------------
36,407.178
Liabilities:
Payables for-
Purchases of investments 55.201
Repurchases of fund's shares 45.390
Management services 7.572
Accrued expenses 8.638 116.801
------------- -------------
Net Assets at June 30, 1997-
Equivalent to $28.35 per share on
1,279,986,846 shares of $1 par value
capital stock outstanding (authorized
capital stock--2,000,000,000 shares) $36,290.377
=============
Unaudited
Statement of Operations (dollars in
for the six months ended June 30, 1997 millions)
- ----------------------------------------- ------------- -------------
Investment Income:
Income:
Dividends $304.742
Interest 120.827 $ 425.569
-------------
Expenses:
Management services fee 42.092
Distribution expenses 37.648
Transfer agent fee 10.229
Reports to shareholders 1.494
Registration statement and
prospectus .787
Postage, stationery and supplies 3.755
Directors' fees .215
Auditing and legal fees .090
Custodian fee .375
Taxes (other than federal income tax) .328
Other expenses .150 97.163
------------- -------------
Net investment income 328.406
-------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 2,153.681
Net increase in unrealized
appreciation on investments 3,073.145
-------------
Net realized gain and increase in
unrealized appreciation on investments 5,226.826
-------------
Net Increase in Net Assets Resulting
from Operations $ 5,555.232
=============
- ---------------------------------------- ------------- -------------
(dollars in
millions)
Six months
ended Year ended
Statement of Changes in Net Assets 6/30/97 /1/ 12/31/96
- ----------------------------------------- ------------- -------------
Operations:
Net investment income $ 328.406 $ 611.069
Net realized gain on investments 2,153.681 1,256.875
Net increase in unrealized
appreciation on investments 3,073.145 3,151.153
------------- -------------
Net increase in net assets
resulting from operations 5,555.232 5,019.097
------------- -------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net investment income (305.784) (606.665)
Distributions from net realized
gain on investments - (1,256.817)
------------- -------------
Total dividends and distributions (305.784) (1,863.482)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold: 76,173,754
and 154,894,329 shares, respectively 1,978.328 3,568.101
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 10,222,362 and 70,957,086
shares, respectively 274.712 1,707.735
Cost of shares repurchased: 80,838,564
and 139,431,152 shares, respectively (2,087.583) (3,234.297)
------------- -------------
Net increase in net assets resulting from
capital share transactions 165.457 2,041.539
------------- -------------
Total Increase in Net Assets 5,414.905 5,197.154
Net Assets:
Beginning of period 30,875.472 25,678.318
------------- -------------
End of period (including undistributed
net investment income: $304.451
and $281.829, respectively) $36,290.377 $30,875.472
============= =============
/1/ Unaudited
See Notes to Financial Statements
</TABLE>
Unaudited
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. Long-term and short-term securities
with original or remaining maturities in excess of 60 days are valued at the
mean of their representative quoted bid and asked prices or, if such prices are
not available, at prices for securities of comparable maturity, quality and
type. Securities denominated in non-U.S. currencies are generally valued on the
basis of bid quotations. 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 by
the Board of Directors or a committee thereof.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. 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 effects of the
changes in foreign currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
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 $375,000 includes $25,000 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 June 30, 1997, net unrealized appreciation on investments for federal
income tax purposes aggregated $13,727,816,000, of which $13,972,201,000
related to appreciated securities and $244,385,000 related to depreciated
securities. During the six months ended June 30, 1997, the fund realized, on a
tax basis, a net capital gain of $2,153,701,000 on securities transactions. The
cost of portfolio securities for federal income tax purposes was
$22,387,370,000 at June 30, 1997.
3. The fee of $42,092,000 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 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 six months ended June 30, 1997,
distribution expenses under the Plan were $37,648,000. As of June 30, 1997,
accrued and unpaid distribution expenses were $6,398,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $10,229,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $8,291,000 (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 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 June 30, 1997, aggregate amounts deferred and earnings thereon were
$417,000.
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 837,954 shares of the fund at approximately $5.242 per share. If
all warrants had been exercised on June 30, 1997, the net assets of the fund
would have been $36,294,770,000; the shares outstanding would have been
1,280,825,000; and the net asset value would have been equivalent to $28.34 per
share. During the six months ended June 30, 1997, 15 warrants were exercised
for the purchase of 329 shares.
5. As of June 30, 1997, accumulated undistributed net realized gain on
investments was $2,153,648,000 and additional paid-in capital was
$18,834,055,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $4,078,156,000 and $5,934,454,000, respectively,
during the six months ended June 30, 1997.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
six months ended June 30, 1997, such non-U.S. taxes were $6,043,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $20,000 for the six months ended
June 30, 1997.
<TABLE> Year
Per-Share Data and Ratios Six months ended
ended December
June 30, 31
1997 /1/ 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $24.23 $21.61 $17.67 $18.72 $17.89 $17.48
----------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .26 .49 .52 .51 .54 .49
Net realized and unrealized
gain (loss) on investments 4.10 3.66 4.83 (.48) 1.51 .71
----------- ------- ------- ------- ------- -------
Total income from
investment operations 4.36 4.15 5.35 .03 2.05 1.20
----------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.24) (.50) (.50) (.48) (.47) (.47)
Distributions from net
realized gains - (1.03) (.91) (.60) (.75) (.32)
----------- ------- ------- ------- ------- -------
Total distributions (.24) (1.53) (1.41) (1.08) (1.22) (.79)
----------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $28.35 $24.23 $21.61 $17.67 $18.72 $17.89
=========== ======= ======= ======= ======= =======
Total Return /2/ 18.05% /3/ 19.35% 30.63% .16% 11.62% 6.99%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $36,290 $30,875 $25,678 $19,280 $19,005 $15,428
Ratio of expenses to average
net assets .29% .59% .60% .60% .59% .58%
Ratio of net income to average
net assets .99% /3/ 2.17% 2.70% 2.83% 3.03% 3.06%
Average commissions paid
per share /4/ 5.07 c 5.79 c 6.16 c 5.11 c 6.20 c 7.43 c
Portfolio turnover -
common stocks 12.50% /3/ 17.46% 20.91% 17.94% 19.57% 7.23%
Portfolio turnover -
investment securities 13.48% /3/ 19.56% 20.37% 31.08% 17.57% 9.73%
/1/ Unaudited
/2/ Calculated without
deducting a sales charge.
The maximum sales charge is 5.75%
of the fund's offering price.
/3/ Based on operations for the period
shown and, accordingly, not
representative of a full year's
operations.
/4/ Brokerage commissions paid on portfolio
transactions increase the cost of
securities purchased or reduce the
proceeds of securities sold and are
not separately reflected in the fund's statement
of operations. Shares traded on a
principal basis (without commissions), such as most
over-the-counter and fixed-income
transactions, are excluded.
Generally, non-U.S. commissions
are lower than U.S. commissions when
expressed as cents per share but
higher when expressed as a percentage
of transactions because of the lower
per-share prices of many non-U.S. securities.
</TABLE>
[illustration: pathway]
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 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
(PLEASE WRITE TO THE ADDRESS NEAREST YOU.)
American Funds Service Company
P.O. Box 2205
Brea, California 92822-2205
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
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
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 FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180, OR VISIT WWW.AMERICANFUNDS.COM ON THE
WORLD WIDE WEB.
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 September 30, 1997, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Printed on recycled paper
Litho in USA WG/FS/3480
(c)1997 American Funds Distributors, Inc.
Lit. No. ICA-013-0897
[The American Funds Group (r)]
