SEC File Nos. 2-10811
811-116
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 100
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 24
THE INVESTMENT COMPANY OF AMERICA
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
JOHN B. POWER, ESQ.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
The Registrant has filed a declaration pursuant to rule 24f-2
registering an indefinite number of shares under the Securities Act of 1933.
The Registrant intends to file its 24f-2 notice for fiscal 1996 on or about
February 18, 1997.
Approximate date of proposed public offering:
It is proposed that this filing become effective on March 1, 1997,
pursuant to paragraph (a) of rule 485.
THE INVESTMENT COMPANY OF AMERICA
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN PROSPECTUS (PART "A")
PART "A" OF FORM N-1A
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Financial Highlights; Investment Results
4. General Description of Registrant Investment Policies and Risks; Securities and
Investment Techniques; Fund Organization and Management
5. Management of the Fund Financial Highlights; Securities and Investment Techniques;
Multiple Portfolio Counselor System; Fund Organization and Management
6. Capital Stock and Other Securities Investment Policies and Risks; Securities and Investment
Techniques; Dividends, Distributions and Taxes; Fund Organization and Management
7. Purchase of Securities Being Offered Purchasing Shares
8. Redemption or Repurchase Selling Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
<S> <C> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History Fund Organization and Management (Part "A")
13 Investment Objectives and Policies Description of Certain Securities;
Investment Restrictions.
14. Management of the Registrant Fund Directors and Officers; Management
15. Control Persons and Principal Holders Fund Directors and Officers
of Securities
16. Investment Advisory and Other Services Management
17. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
18. Capital Stock and Other Securities None
19. Purchase, Redemption and Pricing of Purchase of Shares; Shareholder Account
Securities Being Offered Services and Privileges; Redeeming Shares
20. Tax Status Dividends, Distributions and Federal Taxes
21. Underwriter Management -- Principal Underwriter
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART "C"
<S> <C>
24. Financial Statements and Exhibits
25. Persons Controlled by or under Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
<PAGE>
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
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The Investment Company of America(R)
Prospectus
MARCH 1, 1997
<PAGE>
THE INVESTMENT COMPANY OF AMERICA
333 South Hope Street
Los Angeles, CA 90071
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Expenses 3
..................................
Financial Highlights 4
..................................
Investment Policies and Risks 5
..................................
Securities and Investment
Techniques 5
..................................
Multiple Portfolio Counselor
System 6
..................................
Investment Results 8
..................................
Dividends, Distributions and
Taxes 9
..................................
Fund Organization and
Management 10
..................................
Shareholder Services 13
</TABLE>
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The fund's investment objectives are long-term growth of capital and income.
The fund strives to accomplish these objectives through constant supervision,
careful selection and broad diversification of a portfolio which ordinarily
consists principally of common stocks.
This prospectus presents information you should know before investing in the
fund. You should keep it on file for future reference.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE FUND IS NOT
A DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY ENTITY OR PERSON
INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
04-010-0397
<PAGE>
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EXPENSES
The effect of the expenses described below is reflected in the fund's share
price or return.
You may pay certain shareholder transaction expenses when you buy or sell
shares of the fund. Fund operating expenses are paid out of the fund's earned
income.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price) 5.75%
</TABLE>
................................................................................
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. There is no sales
charge on reinvested dividends, and no deferred sales charge or redemption or
exchange fees. A contingent deferred sales charge of 1% applies on certain
redemptions made within 12 months following purchases without a sales charge.
FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
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<S> <C>
Management fees 0.26%
................................................................................
12b-1 expenses 0.21%/1/
................................................................................
Other expenses 0.12%
................................................................................
Total fund operating expenses 0.59%
</TABLE>
/1/ 12b-1 expenses may not exceed 0.25% of the fund's average net assets
annually. Due to these distribution expenses, long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
EXAMPLES
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
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<TABLE>
<S> <C>
One year $ 63
................................................................................
Three years $ 75
................................................................................
Five years $ 89
................................................................................
Ten years $127
</TABLE>
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO PURCHASE
SHARES AT A REDUCED OR NO SALES CHARGE.
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THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 3
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FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse llp, independent
accountants. This table should be read together with the financial statements
which are included in the statement of additional information and annual
report.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year xxxxxx $17.67 $18.72 $17.89 $17.48 $14.52 $15.24 $12.94 $12.61 $13.19
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INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income xxx .52 .51 .54 .49 .51 .57 .61 .51 .46
................................................................................................................
Net realized and
unrealized gain (loss)
on investments xxxx 4.83 (.48) 1.51 .71 3.27 (.48) 3.13 1.14 .23
................................................................................................................
Total from investment
operations xxxx 5.35 .03 2.05 1.20 3.78 .09 3.74 1.65 .69
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LESS DISTRIBUTIONS:
Dividends from net
investment
income xxxxx (.50) (.48) (.47) (.47) (.44) (.59) (.59) (.56) (.52)
................................................................................................................
Distributions from net
realized gains xxxxxx (.91) (.60) (.75) (.32) (.38) (.22) (.85) (.76) (.75)
................................................................................................................
Total distributions xxxxxx (1.41) (1.08) (1.22) (.79) (.82) (.81) (1.44) (1.32) (1.27)
................................................................................................................
Net asset value,
end of year xxxxxx $21.61 $17.67 $18.72 $17.89 $17.48 $14.52 $15.24 $12.94 $12.61
- ----------------------------------------------------------------------------------------------------------------
Total return/1/ xxxxxx 30.63% .16% 11.62% 6.99% 26.54% .68% 29.41% 13.34% 5.44%
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RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of year (in millions) xxxxxxx $25,678 $19,280 $19,005 $15,428 $10,526 $5,923 $5,376 $4,119 $3,889
...............................................................................................................
Ratio of expenses to
average net assets xxxx .60% .60% .59% .58% .59% .55% .52% .48% .42%
...............................................................................................................
Ratio of net income to
average net assets xxxxx 2.70% 2.83% 3.03% 3.06% 3.29% 3.95% 4.11% 3.78% 3.14%
...............................................................................................................
Average
commissions paid per
share/2/ xxxxx 6.16c 5.11c 6.20c 7.43c 6.99c 5.88c 8.04c 8.24c 6.68c
...............................................................................................................
Portfolio turnover
rate
--common stocks xxxxxx 20.91% 17.94% 19.57% 7.23% 5.79% 7.48% 14.47% 10.39% 10.76%
--investment securities xxxxxx 20.37% 31.08% 17.57% 9.73% 6.21% 10.94% 18.22% 16.41% 11.47%
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</TABLE>
/1/ Calculated without deducting a sales charge. The maximum sales charge is
5.75% of the fund's offering price.
/2/ Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold, and are not
reflected in the fund's statement of operations. Shares traded on a
principal basis (without commissions) are excluded. Generally, non-U.S.
commissions are lower that 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.
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4 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
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<PAGE>
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INVESTMENT POLICIES AND RISKS
The fund's investment objectives are long-term growth of capital and income.
The fund strives to accomplish these objectives through constant supervision,
careful selection and broad diversification. In the selection of securities for
investment, the possibilities of appreciation and potential dividends are given
more weight than current yield. The fund ordinarily invests principally in
common stocks. However, assets may also be held in securities convertible into
common stocks, straight debt securities (rated in the top three quality
categories by Standard & Poor's Corporation or Moody's Investors Service, Inc.
or determined to be of equivalent quality by the fund's investment adviser,
Capital Research and Management Company), cash or cash equivalents, U.S.
Government securities, private placement securities or nonconvertible preferred
stocks. Additionally, the fund may from time to time invest in common stocks
and other securities of issuers domiciled outside the U.S. MORE INFORMATION ON
THE FUND'S INVESTMENT POLICIES IS CONTAINED IN ITS STATEMENT OF ADDITIONAL
INFORMATION.
The fund's investments are limited to securities included on its eligible list,
which consists of securities deemed suitable investment media in light of the
fund's investment objectives and policies. Securities are added to, or deleted
from, the eligible list by the board of directors, reviewing and acting upon
the recommendations of Capital Research and Management Company.
The fund's fundamental investment restrictions (described in the statement of
additional information) and objectives may not be changed without shareholder
approval. All other investment practices may be changed by the fund's board of
directors.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVES CANNOT, OF COURSE, BE ASSURED
DUE TO THE RISK OF CAPITAL LOSS FROM FLUCTUATING PRICES INHERENT IN ANY
INVESTMENT IN SECURITIES.
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SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES
Equity securities represent an ownership position in a company. These
securities may include common stocks and securities with equity conversion or
purchase rights. The prices of equity securities fluctuate based on changes in
the financial condition of their issuers and on market and economic conditions.
The fund's results will be related to the overall market for these securities.
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THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 5
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<PAGE>
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DEBT SECURITIES
Bonds and other debt securities are used by issuers to borrow money. Issuers
pay investors interest and generally must repay the amount borrowed at
maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. The prices of
debt securities fluctuate depending on such factors as interest rates, credit
quality and maturity. In general their prices decline when interest rates rise
and vice versa.
INVESTING IN VARIOUS COUNTRIES
The fund may invest up to 10% of its assets in securities of issuers that are
domiciled outside the U.S. and not included in the Standard & Poor's Composite
Index (a broad measure of the U.S. stock market). Investing outside the U.S.
involves special risks, particularly in certain developing countries, caused
by, among other things, fluctuating currency values; different accounting,
auditing, and financial reporting regulations and practices in some countries;
changing local and regional economic, political and social conditions; greater
market volatility; differing securities market structures; and various
administrative difficulties such as delays in clearing and settling portfolio
transactions or in receiving payment of dividends. However, in the opinion of
Capital Research and Management Company, investing outside the U.S. also can
reduce certain portfolio risks due to greater diversification opportunities.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. The fund can purchase and sell currencies to
facilitate transactions in securities denominated in currencies other than the
U.S. dollar. Brokerage commissions may be higher outside the U.S., and the fund
will bear certain expenses in connection with its currency transactions.
Furthermore, increased custodian costs may be associated with the maintenance
of assets in certain jurisdictions.
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MULTIPLE PORTFOLIO COUNSELOR SYSTEM
The basic investment philosophy of Capital Research and Management Company is
to seek fundamental values at reasonable prices, using a system of multiple
portfolio counselors in managing mutual fund assets. Under this system the
portfolio of the fund is divided into segments which are managed by individual
counselors. Counselors decide how their respective segments will be invested
(within the limits provided by the fund's objectives and policies and by
Capital Research and Management Company's investment committee). In addition,
Capital Research and Management Company's research professionals make
investment decisions with respect to a portion of the fund's portfolio.
The primary individual portfolio counselors for the fund are listed on the
following page.
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6 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
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<PAGE>
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<TABLE>
<CAPTION>
YEARS OF EXPERIENCE
AS
INVESTMENT
PROFESSIONAL
(APPROXIMATE)
......................
YEARS OF
EXPERIENCE
AS PORTFOLIO
COUNSELOR
(AND RESEARCH
PROFESSIONAL IF WITH CAPITAL
APPLICABLE) FOR RESEARCH AND
THE INVESTMENT MANAGEMENT
PORTFOLIO COUNSELORS COMPANY OF COMPANY OR
FOR THE INVESTMENT AMERICA ITS TOTAL
COMPANY OF AMERICA PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JON B. Chairman of the 39 years (plus 45 years 45 years
LOVELACE, JR. Board of the 5 years as a
Fund. Vice research
Chairman of the professional
Board of prior to
Directors, becoming a
Capital portfolio
Research and counselor for
Management the fund)
Company
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WILLIAM C. President and 35 years 38 years 44 years
NEWTON Director of the
Fund. Senior
Partner, The
Capital Group
Partners L.P.*
- -------------------------------------------------------------------------------
WILLIAM R. Senior Vice 25 years 27 years 34 years
GRIMSLEY President of
the Fund.
Senior Vice
President and
Director,
Capital
Research and
Management
Company
- -------------------------------------------------------------------------------
R. MICHAEL Senior Vice 6 years (plus 32 years 32 years
SHANAHAN President of 13 years as an
the Fund. investment
Chairman of the professional
Board and prior to
Principal becoming a
Executive portfolio
Officer, counselor for
Capital the fund)
Research and
Management
Company
- -------------------------------------------------------------------------------
GREGG E. Vice President 5 years (plus 24 years 24 years
IRELAND of the Fund. 10 years as a
Vice President, research
Capital professional
Research and prior to
Management becoming a
Company portfolio
counselor for
the fund)
- -------------------------------------------------------------------------------
JAMES B. Vice President 5 years (plus 4 15 years 15 years
LOVELACE of the Fund. years as a
Vice President, research
Capital professional
Research and prior to
Management becoming a
Company portfolio
counselor for
the fund)
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DONALD D. Vice President 5 years (plus 4 12 years 12 years
O'NEAL of the Fund. years as a
Vice President, research
Capital professional
Research and prior to
Management becoming a
Company portfolio
counselor for
the fund)
- -------------------------------------------------------------------------------
DINA N. Vice President, 3 years (plus 2 5 years 30 years
PERRY Capital years as a
Research and research
Management professional
Company prior to
becoming a
portfolio
counselor for
the fund)
- -------------------------------------------------------------------------------
JAMES F. President and 3 years (plus 9 27 years 27 years
ROTHENBERG Director, years as a
Capital research
Research and professional
Management prior to
Company becoming a
portfolio
counselor for
the fund)
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</TABLE>
*Company affiliated with Capital Research and Management Company.
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THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 7
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<PAGE>
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INVESTMENT RESULTS
The fund may from time to time compare investment results to various indices or
other mutual funds. Fund results may be calculated on a total return, yield
and/or distribution rate basis. Results calculated without a sales charge will
be higher.
X TOTAL RETURN is the change in value of an investment in the fund over a given
period, assuming reinvestment of any dividends and capital gain
distributions.
X YIELD is computed by dividing the net investment income per share earned by
the fund over a given period of time by the maximum offering price per share
on the last day of the period, according to a formula mandated by the
Securities and Exchange Commission. A yield calculated using this formula may
be different than the income actually paid to shareholders.
X DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by dividing the dividends paid over the last
12 months by the sum of the month-end price and the capital gain
distributions paid over the last 12 months.
INVESTMENT RESULTS
(FOR PERIODS ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
AVERAGE
ANNUAL THE FUND THE FUND AT
TOTAL AT NET MAXIMUM
RETURNS: ASSET VALUE/1/ SALES CHARGE/1/,/2/ S&P 500/3/
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
One year 19.35% 12.48% 22.90%
................................................................................
Five years 13.27% 11.93% 15.18%
................................................................................
Ten years 13.90% 13.23% 15.26%
................................................................................
Lifetime/4/ 13.30% 13.19% 11.79%
</TABLE>
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Yield/1/,/2/: 1.90%
Distribution Rate/2/: 1.87%
/1/ These fund results were calculated according to a standard that is required
for all stock and bond funds.
/2/ The maximum sales charge has been deducted.
/3/ The Standard & Poor's 500 Index represents stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
/4/ The fund began investment operations January 1, 1934.
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8 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
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<PAGE>
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[PASTE UP GRAPH]
Past results are not an indication of future results.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund usually pays dividends four times a year (in March, June, September
and December). Capital gains, if any, are also usually distributed in December.
When a dividend or capital gain is distributed, the net asset value per share
is reduced by the amount of the payment.
FEDERAL TAXES
In any fiscal year in which the fund qualifies as a regulated investment
company and distributes to shareholders all of its net investment income and
net capital gains, the fund itself is relieved of federal income tax.
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash -- unless you are exempt from taxation or
entitled to tax deferral. Early each year, you will be notified as to the
amount and federal tax status of all income distributions paid during the prior
year. Such distributions may also be subject to state or local taxes. The tax
treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
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THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 9
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<PAGE>
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YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE
FUND TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal law
also requires the fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
This is a brief summary of some of the tax laws that affect your investment in
the fund. Please see the statement of additional information and your tax
adviser for further information.
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FUND ORGANIZATION AND MANAGEMENT
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation in 1933. All fund operations are supervised by the
fund's board of directors who meet periodically and perform duties required by
applicable state and federal laws. Members of the board who are not employed by
Capital Research and Management Company or its affiliates are paid certain fees
for services rendered to the fund as described in the statement of additional
information. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.
THE INVESTMENT ADVISER
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the investment adviser to the fund
and other funds, including those in The American Funds Group. Capital Research
and Management Company, a wholly owned subsidiary of The Capital Group
Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA
90071. Capital Research and Management Company manages the investment portfolio
and business affairs of the fund. The management fee paid by the fund to
Capital Research and Management Company may not exceed 0.39% of the fund's
average net assets annually and declines at certain asset levels. The total
management fee paid by the fund, as a percentage of average net assets, for the
previous fiscal year is discussed earlier under "Expenses."
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10 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
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<PAGE>
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Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's "code of ethics."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the board and the expenses paid under the
Plan were incurred within the preceding 12 months and accrued while the Plan is
in effect. The 12b-1 fee paid by the fund, as a percentage of average net
assets, for the previous fiscal year is discussed earlier under "Expenses."
PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by Capital
Research and Management Company, which strives to obtain the best available
prices, taking into account the costs and quality of executions. Fixed-income
securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed price which includes an
amount of compensation to the dealer, generally referred to as a concession or
discount. On occasion, securities may be purchased directly from an issuer, in
which case no commissions or discounts are paid. In the over-the-counter
market, purchases and sales are transacted directly with principal market-
makers except in those circumstances where it appears better prices and
executions are available elsewhere.
Subject to the above policy, when two or more brokers are in a position to
offer comparable prices and executions, preference may be given to brokers who
have sold shares of the fund or have provided investment research, statistical,
and other related services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
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THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 11
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<PAGE>
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PRINCIPAL UNDERWRITER AND TRANSFER AGENT
American Funds Distributors, Inc. and American Funds Service Company serve as
the principal underwriter and transfer agent for the fund, respectively. They
are headquartered at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821, respectively.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
[MAP OF UNITED STATES OF AMERICA APPEARS HERE]
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12 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
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<PAGE>
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SHAREHOLDER SERVICES
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services,
which are summarized below, are available only in states where they may be
legally offered and may be terminated or modified at any time upon 60 days'
written notice. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT
POLICIES IS CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. In
addition, an easy-to-read guide to owning a fund in The American Funds Group
titled "Welcome to the Family" is sent to new shareholders and is available by
writing or calling American Funds Service Company.
THE SERVICES DESCRIBED MAY NOT BE AVAILABLE THROUGH SOME RETIREMENT PLANS. IF
YOU ARE INVESTING THROUGH A RETIREMENT PLAN, YOU SHOULD CONTACT YOUR PLAN
ADMINISTRATOR/TRUSTEE ABOUT WHAT SERVICES ARE AVAILABLE AND WITH QUESTIONS
ABOUT YOUR ACCOUNT.
- --------------------------------------------------------------------------------
PURCHASING SHARES
HOW TO PURCHASE SHARES
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may add to your account through your
dealer or directly through American Funds Service Company by mail, wire, or
bank debit. You may also establish or add to your account by exchanging shares
from any of your other accounts in The American Funds Group. The fund and
American Funds Distributors reserve the right to reject any purchase order.
Various purchase options are available as described below subject to certain
investment minimums and limitations described in the statement of additional
information and "Welcome to the Family."
X Automatic Investment Plan
You may invest monthly or quarterly through automatic withdrawals from your
bank account.
X Automatic Reinvestment
You may reinvest your dividends and capital gain distributions into the fund
(with no sales charge). This will be done automatically unless you elect to
have the dividends and/or capital gain distributions paid to you in cash.
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THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 13
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<PAGE>
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X Cross-Reinvestment
You may invest your dividends and capital gain distributions into any other
fund in The American Funds Group.
X Exchange Privilege
You may exchange your shares into other funds in The American Funds Group
generally with no sales charge. Exchanges of shares from the money market
funds that were initially purchased with no sales charge will generally be
subject to the appropriate sales charge. You may also elect to automatically
exchange shares among any of the funds in The American Funds Group. Exchange
requests may be made in writing, by telephone including American
FundsLine(R) (see below) or by fax. EXCHANGES HAVE THE SAME TAX CONSEQUENCES
AS ORDINARY SALES AND PURCHASES.
X Retirement Plans
You may invest in the fund through various retirement plans. For further
information contact your investment dealer or American Funds Distributors.
SHARE PRICE
The fund's share price, also called net asset value, is determined as of the
close of trading (normally 4:00 p.m., Eastern time) every day the New York
Stock Exchange is open. The fund calculates its net asset value per share,
generally using market prices, by dividing the total value of its assets after
subtracting liabilities by the number of its shares outstanding. Shares are
purchased at the offering price next determined after your investment is
received and accepted by American Funds Service Company. The offering price is
the net asset value plus a sales charge, if applicable.
SHARE CERTIFICATES
Shares are credited to your account and certificates are not issued unless you
request them by writing to American Funds Service Company.
INVESTMENT MINIMUMS
<TABLE>
- --------------------------------------------------------------
<S> <C>
To establish an account $250
For a retirement plan account $250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account $ 25
</TABLE>
- --------------------------------------------------------------------------------
14 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
SALES CHARGES
A sales charge may apply, as described below, when purchasing shares. Sales
charges may be reduced for larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
..................... DEALER
NET CONCESSION AS
OFFERING AMOUNT % OF OFFERING
INVESTMENT PRICE INVESTED PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
................................................................................
$50,000 but less than $100,000 4.50% 4.71% 3.75%
................................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
................................................................................
$500,000 but less than $1 million 2.00% 2.04% 1.60%
................................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 200 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF PURCHASE BY THESE
ACCOUNTS. A dealer concession of up to 1% may be paid by the fund from its Plan
of Distribution on these investments. Investments by retirement plans,
foundations or endowments with $50 million or more in assets may be made with
no sales charge and are not subject to a contingent deferred sales charge. A
dealer concession of up to 1% may be paid by American Funds Distributors on
these investments. Investments by certain individuals and entities including
employees and other associated persons of dealers authorized to sell shares of
the fund and Capital Research and Management Company and its affiliated
companies are not subject to a sales charge.
- --------------------------------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 15
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ADDITIONAL DEALER COMPENSATION
In addition to the concessions listed, up to 0.25% of average net assets is
paid annually to qualified dealers for providing certain services pursuant to
the fund's Plan of Distribution. During 1997, American Funds Distributors will
also provide additional compensation to the top one hundred dealers who have
sold shares of funds in The American Funds Group based on the pro rata share of
a qualifying dealer's sales.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your costs. You
must let your investment dealer or American Funds Service Company know if you
qualify for a reduction in your sales charge using one or any combination of
the methods described below.
X Aggregation
Investments that may be aggregated include those made by you, your spouse
and your children under the age of 21, if all parties are purchasing shares
for their own account(s), including any business account solely "controlled
by," as well as any retirement plan or trust account solely for the benefit
of, these individuals. Investments made for multiple employee benefit plans
of a single employer or "affiliated" employers may be aggregated provided
they are not also aggregated with individual accounts. Finally, investments
made by a common trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating fund shares may be
aggregated.
Purchases made for nominee or street name accounts will generally not be
aggregated with those made for other accounts unless qualified as described
above.
X Concurrent Purchases
You may combine concurrent purchases of two or more funds in The American
Funds Group, except direct purchases of the money market funds. Shares of
the money market funds purchased through an exchange, reinvestment or cross-
reinvestment from a fund having a sales charge do qualify.
X Right of Accumulation
You may take into account the current value of your existing holdings in The
American Funds Group to determine your sales charge. Direct purchases of the
money market funds are excluded.
- --------------------------------------------------------------------------------
16 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
X Statement of Intention
You may enter into a non-binding commitment to invest a certain amount
(which, at your request, may include purchases made during the previous 90
days) in non-money market fund shares over a 13-month period. A portion of
your account may be held in escrow to cover additional sales charges which
may be due if your total investments over the statement period are
insufficient to qualify for the applicable sales charge reduction.
- --------------------------------------------------------------------------------
SELLING SHARES
HOW TO SELL SHARES
You may sell (redeem) shares in your account by contacting your investment
dealer or American Funds Service Company. You may also use American
FundsLine(R) (see below). In addition, you may sell shares in amounts of $50 or
more automatically. If you sell shares through your investment dealer you may
be charged for this service. Shares held for you in your dealer's street name
must be sold through the dealer.
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. Sale requests may be
made in writing, by telephone, including American FundsLine(R) (see below), or
by fax. Sales by telephone or fax are limited to $10,000 in accounts registered
to individual(s) (including non-retirement trust accounts). In addition, checks
must be made payable to the registered shareholder(s) and mailed to an address
of record that has been used with the account for at least 10 days. Proceeds
will not be mailed until sufficient time has passed to provide reasonable
assurance that checks or drafts (including certified or cashier's checks) for
shares purchased have cleared (which may take up to 15 calendar days from the
purchase date). Except for delays relating to clearance of checks for share
purchases or in extraordinary circumstances (and as permissible under the
Investment Company Act of 1940), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. The fund may, with 60
days' written notice, close your account if due to a sale of shares the account
has a value of less than the minimum required initial investment.
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your
signature must be guaranteed by a bank, savings association, credit union, or
member firm of a domestic stock exchange or the National Association of
Securities Dealers, Inc., that is an eligible guarantor institution. A
signature guarantee is not currently required for any sale of $50,000 or less
provided the check is made
- --------------------------------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 17
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
payable to the registered shareholder(s) and is mailed to the address of record
on the account, and provided the address has been used with the account for at
least 10 days. Additional documentation may be required for sales of shares
held in corporate, partnership or fiduciary accounts.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge in any fund in The American Fund Group
within 90 days after the date of the redemption or distribution. Reinvestment
will be at the next calculated net asset value after receipt and acceptance by
American Funds Service Company.
- --------------------------------------------------------------------------------
OTHER IMPORTANT THINGS TO REMEMBER
AMERICAN FUNDSLINE(R)
You may check your share balance, the price of your shares, or your most recent
account transactions, sell shares (up to $10,000 per fund, per account each
day), or exchange shares around the clock with American FundsLine(R). To use
this service, call 800/325-3590 from a TouchTone(TM) telephone.
TELEPHONE PURCHASES, SALES AND EXCHANGES
Unless you opt out of the telephone (including American FundsLine(R)) or fax
purchase, sale and/or exchange options (see below), you agree to hold the fund,
American Funds Service Company, any of its affiliates or mutual funds managed
by such affiliates, and each of their respective directors, trustees, officers,
employees and agents harmless from any losses, expenses, costs or liability
(including attorney fees) which may be incurred in connection with the exercise
of these privileges provided American Funds Service Company employs reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine. If reasonable procedures are not
employed, the fund may be liable for losses due to unauthorized or fraudulent
instructions.
Generally, all shareholders are automatically eligible to use these options.
However, you may elect to opt out of these options by writing American Funds
Service Company. (You may also reinstate them at any time by writing to
American Funds Service Company.)
ACCOUNT STATEMENTS
You will receive regular confirmation statements reflecting transactions in
your account. Purchases through automatic investment plans and certain
retirement plans will be confirmed at least quarterly.
- --------------------------------------------------------------------------------
18 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
NOTES
- --------------------------------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 19
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
NOTES
- --------------------------------------------------------------------------------
20 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
NOTES
- --------------------------------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 21
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
NOTES
- --------------------------------------------------------------------------------
22 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
NOTES
- --------------------------------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS 23
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
<TABLE>
<CAPTION>
FOR SHAREHOLDER FOR DEALER FOR 24-HOUR
SERVICES SERVICES INFORMATION
<S> <C> <C>
American Funds American Funds American
Service Company Distributors FundsLine(R)
800/421-0180 ext. 1 800/421-9900 ext. 11 800/325-3590
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL STATEMENT OF ADDITIONAL
REPORT TO SHAREHOLDERS INFORMATION (SAI)
Includes financial Contains more detailed
statements, detailed information on all aspects
performance information, of the fund, including the
portfolio holdings, a fund's financial statements.
statement from portfolio
management and the A current SAI has been filed
independent accountants' with the Securities and
report. Exchange Commission and is
incorporated by reference
CODE OF ETHICS (is legally part of the
prospectus).
Includes a description of
the fund's personal
investing policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary of
Service Company the fund
800/421-0180 ext. 1 333 South Hope Street
Los Angeles, CA 90071
This prospectus has been printed on recycled paper.
[LOGO OF
RECYCLE
PAPER]
- --------------------------------------------------------------------------------
24 THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
- --------------------------------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997
This document is not a prospectus but should be read in conjunction with the
current prospectus of The Investment Company of America (the fund or ICA) dated
March 1, 1997. The prospectus may be obtained from your investment dealer or
financial planner or by writing to the fund at the following address:
THE INVESTMENT COMPANY OF AMERICA
ATTENTION: SECRETARY
333 SOUTH HOPE STREET
LOS ANGELES, CA 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through eligible
retirement plans should note that not all of the services or features described
below may be available to them, and they should contact their employer for
details.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ITEM PAGE NO.
<S> <C>
DESCRIPTION OF CERTAIN SECURITIES 2
INVESTMENT RESTRICTIONS 4
FUND DIRECTORS AND OFFICERS 6
ADVISORY BOARD 11
MANAGEMENT 13
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 16
PURCHASE OF SHARES 18
REDEEMING SHARES 25
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 26
EXECUTION OF PORTFOLIO TRANSACTIONS 28
GENERAL INFORMATION 29
INVESTMENT RESULTS 30
FINANCIAL STATEMENTS ATTACHED
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Policies and Risks."
BOND RATINGS - The fund may invest in debt securities which are rated in the
top three quality categories by Standard & Poor's Corporation or Moody's
Investors Service, Inc. or determined to be of equivalent quality by Capital
Research and Management Company (the Investment Adviser). The top three rating
categories for Standard & Poor's and Moody's are described below:
STANDARD & POOR'S CORPORATION:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions, than debt in higher categories."
MOODY'S INVESTORS SERVICE, INC.:
"Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities, or fluctuation of protective elements may be
of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than the Aaa securities."
"Bonds rated A are judged to be of upper medium grade obligations. These
bonds possess many favorable investment attributes. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. In these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but
are not limited to, Federal Land Banks, Farmers Home Administration, Central
Bank Cooperatives, and Federal Intermediate Credit Banks.
CASH EQUIVALENTS - These securities include (1) commercial paper (short-term
notes up to 9 months in maturity issued by corporations or governmental
bodies), (2) commercial bank obligations (E.G., certificates of deposit
(interest-bearing time deposits), and bankers' acceptances (time drafts on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity, (3) savings association and savings bank obligations (e.g.,
certificates of deposit issued by savings banks or savings and loan
associations), (4) securities of the U.S. Government, its agencies or
instrumentalities that mature, at the time of purchase, or may be redeemed, in
one year or less, and (5) corporate bonds and notes that mature, at the time of
purchase, or that may be redeemed, in one year or less.
CURRENCY TRANSACTIONS
Although the fund has no current intention to do so, it has the ability to
enter into forward currency contracts to protect against changes in currency
exchange rates. A forward currency contract is an obligation to purchase or
sell a specific currency at a future date and price, both of which are set at
the time of the contract. The fund intends to enter into forward currency
contracts solely to hedge into the U.S. dollar its exposure to other
currencies. The fund will segregate liquid assets which will be marked to
market daily to meet its forward contract commitments to the extent required by
the Securities and Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to
which the fund may enter into forward contracts. Such transactions may also
affect, for U.S. federal income tax purposes, the character and timing of
income, gain or loss recognized by the fund.
U.S. PRIVATE PLACEMENTS Private placements may be either purchased from
another institutional investor that originally acquired the securities in a
private placement or directly from the issuers of the securities. Generally,
securities acquired in such private placements are subject to contractual
restrictions on resale and may not be resold except pursuant to a registration
statement under the Securities Act of 1933 or in reliance upon an exemption
from the registration requirements under the Act (for example, private
placements sold pursuant to Rule 144A). Accordingly, all such private
placements will be considered illiquid unless they have been specifically
determined to be liquid taking into account factors such as the frequency and
volume of trading and the commitment of dealers to make markets under
procedures which may be adopted by the fund's board of directors.
Additionally, investing in private placement securities could have the effect
of increasing the level of illiquidity of the fund's portfolio to the extent
that "qualified" institutional investors become, for a period of time,
uninterested in purchasing these securities. The fund has no current intention
of investing in private placements sold pursuant to Rule 144A, and, in any
case, the fund will not invest more than 10% of its total assets in illiquid
securities.
INVESTMENT RESTRICTIONS
The fund has adopted certain investment restrictions, which are fundamental
policies and cannot be changed without a majority vote of its outstanding
shares. A majority vote is defined in the Investment Company Act of 1940 (the
1940 Act) as the vote of the lesser of (i) 67% or more of the outstanding
voting securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy, or (ii) more
than 50% of the outstanding voting securities.
These restrictions (which do not apply to the purchase of securities issued or
guaranteed by the U.S. Government) provide that the fund shall make no
investment:
Which involves promotion or business management by the fund;
In any security about which reliable information is not available with respect
to the history, management, assets, earnings, and income of the issuer;
If the investment would cause more than 5% of the value of the total assets of
the fund, as they exist at the time of investment, to be invested in the
securities of any one issuer;
If the investment would cause more than 20% of the value of the total assets of
the fund to be invested in the securities in any one industry;
If the investment would cause the fund to own more than 10% of the outstanding
voting securities of any one issuer, provided that this restriction shall apply
as to 75% of the fund's total assets; or
In any security which has not been placed on the fund's Eligible List. (See the
prospectus).
The fund is not permitted to buy securities on margin, sell securities short,
borrow money, or to invest in real estate. (Although it has not been the
practice of the fund to make such investments (and it has no current intention
of doing so at least for the next 12 months), the fund may invest in the
securities of real estate investment trusts.)
The fund has also adopted other fundamental policies which cannot be changed
without shareholder approval. These policies require the fund not to:
Concentrate its investment in any particular industry or group of industries.
Some degree of concentration may occur from time to time (within the 20%
limitation of the Certificate of Incorporation) as certain industries appear to
present desirable fields for investment.
Engage generally in the making of loans. Although the fund has reserved the
right to make loans to unaffiliated persons subject to certain restrictions,
including requirements concerning collateral and amount of any loan, no loans
have been made since adoption of this fundamental policy more than 50 years
ago.
Act as underwriter of securities issued by others, engage in distribution of
securities for others, engage in the purchase and sale of commodities or
commodity contracts, borrow money, invest in real estate, or make investments
in other companies for the purpose of exercising control or management.
Pledge, encumber or assign all or any part of its property and assets as
security for a debt.
Invest in the securities of other investment companies.
Notwithstanding the restriction on investing in the securities of other
investment companies, the fund may invest in securities of other investment
companies if deemed advisable by its officers in connection with the
administration of a deferred compensation plan adopted by Directors pursuant to
an exemptive order granted by the Securities and Exchange Commission.
Additional investment restrictions adopted by the fund and which may be changed
by the Board of Directors without shareholder approval, provide that the fund
may not:
Purchase and sell securities for short-term profits; however, securities will
be sold without regard to the time that they have been held whenever investment
judgment makes such action seem advisable.
Purchase or retain the securities of any issuer if those officers and directors
of the fund or the Investment Adviser who own beneficially more than one half
of 1% of such issuer together own more than 5% of the securities of such
issuer.
Invest in securities of companies which, with their predecessors, have a record
of less than three years' continuous operations.
Invest in puts, calls, straddles, spreads or any combination thereof.
Purchase partnership interests in oil, gas or mineral exploration, drilling or
mining ventures.
Invest in excess of 10% of the market value of its total assets in securities
which may require registration under the Securities Act of 1933 prior to sale
by the fund (restricted securities), or other securities that are not readily
marketable.
FUND DIRECTORS AND OFFICERS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL COMPENSATION TOTAL
AND AGE WITH OCCUPATION(S) COMPENSATION (INCLUDING NUMBER
REGISTRANT DURING (INCLUDING VOLUNTARILY OF
PAST 5 YEARS VOLUNTARILY DEFERRED FUND
(POSITIONS WITHIN DEFERRED COMPENSATION/1/) BOARDS
THE ORGANIZATIONS COMPENSATION/1/) FROM ALL FUNDS ON
LISTED MAY FROM THE FUND MANAGED WHICH
HAVE CHANGED DURING FISCAL BY CAPITAL DIRECTOR
DURING THIS YEAR ENDED RESEARCH AND SERVES/3/
PERIOD) 12/31/96 MANAGEMENT
COMPANY/2/
<S> <C> <C> <C> <C> <C>
Charles H. Director Private investor $60,400 $115,400 4
Black and consultant;
525 Alma Real former Executive
Drive Vice President
Pacific and Director,
Palisades, CA KaiserSteel
90272 Corporation
Age: 70
Ann S. Bowers Director Senior Trustee, $55,800 $55,800 1
The Noyce The Noyce
Foundatioin Foundation; Human
450 Sheridan resources
Avenue consultant,
Palo Alto, CA Enterprise 2000
94306
Age: 59
Malcolm R. Director Chairman $48,600/4/ $48,600 1
Currie Emeritus, Hughes
28780 Wagon Aircraft Company
Road
Agoura, CA
91301
Age: 69
+Jon B. Chairman of Vice Chairman of None/5/ None/5/ 4
Lovelace, Jr. the Board the Board,
333 South Hope Capital Research
Street and Management
Los Angeles, CA Company
90071
Age: 70
John G. Director The IBJ Professor $62,200/4/ $153,800 7
McDonald of Finance,
Graduate School Graduate School
of Business of Business,
Stanford Stanford
University University
Stanford, CA
94305
Age: 59
Bailey Morris-Eck Director Senior Advisor, $49,800 $49,800 1
ARA/SCO Room Inter-American
3250 Affairs, Clinton
U.S. Department Administration;
of State Senior Feloow,
Washington, Institute for
D.C. 20520 International
Age: 52 Economics;
Consultant, THE
INDEPENDENT OF
LONDON
Richard G. Director Chairman, $29,200/4/ /6/ $72,500 13
Newman President and
3250 Wilshire CEO, AECOM
Blvd. Technology
Los Angeles, CA Corporation
90010 (architectural
Age: 62 engineering)
+William C. President Senior Partner, None/5/ None/5/ 1
Newton and The Capital Group
333 South Hope Director Partners, L.P.
Street
Los Angeles, CA
90071
Age: 66
+James W. Executive Senior Partner, None/5/ None/5/ 8
Ratzlaff Vice The Capital Group
P.O. Box 7650 President Partners L.P.;
San Francisco, and
CA 94120 Director
Age: 60
Olin C. Robison Director President of the $52,200 $77,500 2
The Marble Salzburg Seminar;
Works President
2 Maple Street Emeritus,
Middlebury, VT Middlebury
05753 College
Age: 60
William J. Director Chairman and $None/7/ $None 1
Spencer Chief Executive
2706 Montopolis Officer, SEMATECH
Drive (research and
Austin, TX development
78741 consortium)
Age: 66
</TABLE>
+ Directors who are considered "interested persons" as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), on the basis of
their affiliation with the fund's Investment Adviser, Capital Research and
Management Company.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund Inc. American Variable Insurance
Series and the Anchor Pathway Fund are two other funds managed by Capital
Research and Management Company that serve as underlying investment vehicles
for certain variable insurance contracts.
/3/ Includes funds managed by Capital Research and Management Company and
affiliates.
/4/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors is as
follows: Malcolm R. Currie ($46,484), John G. McDonald ($188,120) and Richard
G. Newman ($31,127). Amounts deferred and accumulated earnings thereon are not
funded and are general unsecured liabilities of the fund until paid to the
Director.
/5/ Jon B. Lovelace, Jr., William C. Newton, and James W. Ratzlaff are
affiliated with the Investment Adviser and, accordingly, receive no
compensation from the fund.
/6/ Richard G. Newman was elected to the Board on April 23, 1996 and,
therefore, did not receive a full year of compensation.
/7/ William J. Spencer was elected to the Board on January 15, 1997 and,
therefore, received no compensation from the fund during the fiscal year ended
December 31, 1996.
OFFICERS/#/
JON B. LOVELACE, JR., Chairman of the Board (see above).
WILLIAM C. NEWTON, President (see above).
JAMES W. RATZLAFF, Executive Vice President (see above).
* WILLIAM R. GRIMSLEY, Senior Vice President.
Senior Vice President and Director, Capital Research and Management Company.
** R. MICHAEL SHANAHAN, Senior Vice President.
Chairman of the Board and Principal Executive Officer, Capital Research and
Management Company.
GREGG E. IRELAND, Vice President. 3000 K Street, N.W., Washington, D.C.
20007.
Vice President, Capital Research and Management Company.
** ANNE M. LLEWELLYN, Vice President.
Associate, Capital Research and Management Company.
** JAMES B. LOVELACE, Vice President.
Vice President, Capital Research and Management Company.
* DONALD D. O'NEAL, Vice President.
Vice President, Capital Research and Management Company.
** PATRICIA L. VAUGHN, Vice President.
Vice President and Director, Capital Research Company.
** VINCENT P. CORTI, Secretary.
Vice President - Fund Business Management Group, Capital Research and
Management Company.
*** STEVEN N. KEARSLEY, Treasurer.
Vice President and Treasurer, Capital Research and Management Company.
** JULIE F. WILLIAMS, Assistant Secretary.
Vice President - Fund Business Management Group, Capital Research and
Management Company.
*** R. MARCIA GOULD, Assistant Treasurer.
Vice President - Fund Business Management Group, Capital Research and
Management Company.
*** MARY C. HALL, Assistant Treasurer.
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company.
# Positions within the organizations may have changed during this period.
* Address is P.O. Box 7650, San Francisco, CA 94120.
** Address is 333 South Hope Street, Los Angeles, CA 90071.
*** Address is 135 South State College Boulevard, Brea, CA 92821.
All of the officers listed are officers or employees of the Investment
Adviser or affiliated companies. No compensation is paid by the fund to any
officer or director who is a director, officer or employee of the Investment
Adviser or affiliated companies. Each unaffiliated Director is paid a fee of
$36,000 per annum, plus $2,000 for each Board of Directors meeting attended,
plus $600 for each meeting attended as a member of a committee of the Board of
Directors. In addition, members of the Proxy Committee receive an annual fee
determined at the end of the year by the Board of Directors. For the fiscal
year ended December 31, 1996, each member of the Proxy Committee received a fee
of $6,400. No pension or retirement benefits are accrued as part of fund
expenses. The Directors and Advisory Board members may elect, on a voluntary
basis, to defer all or a portion of their fees through a deferred compensation
plan in effect for the fund. As of January 31, 1997 the officers and Directors
and their families as a group, owned beneficially or of record less than 1% of
the outstanding shares of the fund.
ADVISORY BOARD
The Board of Directors has established an Advisory Board whose members are, in
the judgment of the Directors, highly knowledgeable about political and
economic matters. In addition to holding meetings with the Board of Directors,
members of the Advisory Board, while not participating in specific investment
decisions, consult from time to time with the Investment Adviser, primarily
with respect to trade and business conditions. Members of the Advisory Board,
however, possess no authority or responsibility with respect to the fund's
investments or management. The members of the Advisory Board and their current
or former principal occupations are as follows:
ADVISORY BOARD MEMBERS
Advisory Board Member Compensation
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
AND AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS (POSITIONS VOLUNTARILY VOLUNTARILY BOARDS ON
WITHIN THE DEFERRED DEFERRED WHICH
ORGANIZATIONS COMPENSATION/1/) COMPENSATION/1/) ADVISORY
LISTED MAY FROM THE FUND FROM ALL FUNDS BOARD
HAVE CHANGED DURING FISCAL MANAGED MEMBER
DURING THIS YEAR ENDED BY CAPITAL SERVES/3/
PERIOD) 12/31/96 RESEARCH AND
MANAGEMENT
COMPANY/2/
<S> <C> <C> <C> <C> <C>
John F. Advisory Supervisory $22,450 $22,450 1
Bookout Board Director, Royal
601 Jefferson Member and Dutch Petroleum
Street former Company; former
Houston, TX Director President and
77002 Chief Executive
Age: 74 Officer, Shell Oil
Company
Thomas M. Advisory Partner, Faegre & $7,500 $7,500 1
Crosby, Jr. Board Benson (law firm)
2200 Norwest Member
Center
90 South
Seventh Street
Minneapolis,
MN 55402
Age: 58
Malcolm Fraser Advisory Former Prime $6,500 $6,500 1
ANZ Tower Board Minister of
55 Collins Member Australia
Street
Melbourne,
Victoria 3000
Australia
Age: 66
Allan E. Advisory Former Canadian $7,500 $7,500 1
Gotlieb Board Ambassador to the
P.O. Box 85 Member United States
Toronto,
Ontario M5L
1B9
Canada
Age: 69
William H. Advisory President, $6,500/3/ $72,350 5
Kling Board Minnesota Public
45 East Member Radio; President,
Seventh Street Greenspring Co.;
St. Paul, MN former President,
55101 American Public
Age: 54 Radio (now Public
Radio
International)
Robert J. Advisory Chichele Professor $7,500 $35,200 3
O'Neill Board of the History of
St. Mary's Member War and Fellow of
Close All Souls College
27 Church
Green
Witney, OXON
OX8 6AZ
United Kingdom
Age: 60
Norman R. Advisory Managing Director, $7,500 $36,150 3
Weldon Board Partisan
15600 N.W. Member Management Group;
67th Avenue Chairman of the
Miami Lakes, Board, Novoste
FL 33014 Corporation
Age: 62
</TABLE>
/1/ Amounts may be deferred by eligible advisory board members under a
non-qualified deferred compensation plan adopted by the fund in 1993. Deferred
amounts accumulate at an earnings rate determined by the total return of one or
more funds in The American Funds Group as designated by the Advisory Board
member.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund Inc. American Variable Insurance
Series and the Anchor Pathway Fund are two other funds managed by Capital
Research and Management Company that serve as underlying investment vehicles
for certain variable insurance contracts.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Advisory Board
members is as follows: William H. Kling ($28,195). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Advisory Board member.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types. These investors include privately owned business and large
corporations as well as schools, colleges, foundations and other non-profit and
tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and
Service Agreement (the Agreement) between the fund and the Investment Adviser
will continue until April 30, 1998, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities, and (ii) the vote of a majority of directors who are not parties to
the Agreement or interested persons (as defined in the Act) of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The Agreement provides that the Investment Adviser has no liability to the fund
for its acts or omissions in performance of its obligations to the fund not
involving willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The Agreement also provides that
either party has the right to terminate it, without penalty, upon 60 days'
written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform executive, administrative, clerical and bookkeeping functions of the
company; provides suitable office space and utilities; necessary small office
equipment and general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund will pay all expenses not expressly assumed
by the Investment Adviser, including, but not limited to, custodian, transfer
and dividend disbursing agency fees and expenses; costs of the designing,
printing and mailing of reports, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares
(including registration and qualification expenses); expenses pursuant to the
fund's Plan of Distribution (described below); legal and auditing expenses;
compensation, fees and expenses paid to Directors and members of the Advisory
Board who are not affiliated with the Investment Adviser; association dues; and
costs of stationery and forms prepared exclusively for the fund.
As compensation for its services, the Investment Adviser receives a monthly fee
which is accrued daily, calculated at the annual rate of 0.39% on the first
$1.0 billion of net assets, plus 0.336% on net assets over $1.0 billion to $2.0
billion, plus 0.30% on net assets over $2.0 billion to $3.0 billion, plus
0.276% on net assets over $3.0 billion to $5.0 billion, plus 0.258% on net
assets over $5.0 billion to $8.0 billion, plus 0.246% on net assets over $8.0
billion to $13.0 billion, plus 0.24% on net assets over $13.0 billion to $21.0
billion, plus 0.235% on net assets over $21.0 billion to $34.0 billion, plus
0.231% on net assets in excess of $34.0 billion. The Agreement provides that
the Investment Adviser shall pay the fund an amount by which normal operating
expenses, with the exception of interest, taxes, brokerage costs, distribution
expenses pursuant to the Plan of Distribution, and extraordinary expenses, if
any, as may be incurred in connection with any merger, reorganization, or
recapitalization, exceed the lesser of (i) 1-1/2% of the average value of the
fund's net assets for the fiscal year up to $30 million, plus 1% of the average
value of the fund's net assets for the fiscal year in excess of $30 million, or
(ii) 25% of the gross investment income of the fund. Only one state
(California) continues to impose expense limitations on funds registered for
sale therein. The California provision currently limits annual expenses to the
sum of 2-1/2% of the first $30 million of average net assets, 2% of the next
$70 million and 1-1/2% of the remaining average net assets. Rule 12b-1
distribution plan expenses would be excluded from this limit. Other expenses
which are not subject to this limitation are interest, taxes, and extraordinary
items such as litigation. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses.
During the years ended December 31, 1996, 1995, and 1994, Investment Adviser's
total fees amounted to $72,350,000, $58,981,000 and $50,698,000, respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares during the year ended
December 31, 1996 amounted to $16,461,000 after allowance of $88,318,000 to
dealers. During the years ended December 31, 1995 and 1994 the Principal
Underwriter retained $14,773,000 and $13,495,000, respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors, and separately by
a majority of the Directors who are not interested persons of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the fund. The
officers and directors who are interested persons of the fund may be considered
to have a direct or indirect financial interest in the operation of the Plan
due to present or past affiliations with the investment adviser and related
companies. Potential benefits of the Plan to the fund are improved shareholder
services, savings to the fund in transfer agency costs, savings to the fund in
advisory fees and other expenses, benefits to the investment process from
growth or stability of assets and maintenance of a financially healthy
management organization. The selection and nomination of Directors who are not
interested persons of the fund is committed to the discretion of the Directors
who are not interested persons during the existence of the Plan. The Plan is
reviewed quarterly and must be approved annually by the Board of Directors.
Under the Plan the fund may expend up to 0.25% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of fund shares, provided the fund's Board of Directors has approved the
category of expenses for which payment is being made. These include service
fees for qualified dealers and dealer commissions and wholesaler compensation
on sales of shares exceeding $1 million (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees). Only expenses incurred
during the preceding 12 months and accrued while the Plan is in effect may be
paid by the fund. During the year ended December 31, 1996, the fund paid or
accrued $59,604,000 under the Plan as compensation to dealers.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status
of a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the Code). Under Subchapter M, if the fund
distributes within specified times at least 90% of the sum of its investment
company taxable income it will be taxed only on that portion, if any, of the
investment company taxable income which it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities held for less than three
months; and (c) diversify its holdings so that at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and other securities which,
must be limited, in respect of any one issuer to an amount not greater than 5%
of the fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in
the securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or in two or more issuers
which the fund controls and which are engaged in the same or similar trades or
businesses or related trades or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
net capital gain income and (ii) any amount on which the fund pays income tax
during the periods described above. The fund intends, to the extent
practicable, to meet these distribution requirements to minimize or avoid the
excise tax liability.
Distributions of investment company taxable income, including short-term
capital gains, generally are taxable to the shareholders as ordinary income,
regardless of whether such distributions are paid in cash or invested in
additional shares of the fund. The fund also intends to continue distributing
to shareholders all of the excess of net long-term capital gain over net
short-term capital loss on sales of securities. A capital gain distribution,
whether paid in cash or re-invested in shares, is taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has
held the shares or whether such gain was realized by the fund before the
shareholder acquired such shares and was reflected in the price paid for the
shares. If the net asset value of shares of the fund should, by reason of a
distribution of realized capital gains, be reduced below a shareholder's cost,
such distribution would be a taxable dividend to the shareholder, even though
the distribution is economically a return of capital.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are therefore
taxable as of December 31, provided that the fund pays the dividend after
December 31 but during January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign
partnership (a foreign shareholder) will be subject to U.S. withholding tax (at
a rate of 30% or lower treaty rate). Withholding will not apply if a dividend
paid by the fund to a foreign shareholder is "effectively connected" with a
U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains not
effectively connected with a U.S. trade or business are not subject to tax
withholding, but in the case of a foreign shareholder who is a nonresident
alien individual, such distributions ordinarily will be subject to U.S. income
tax at a rate of 30% if the individual is physically present in the U.S. for
more than 182 days during the taxable year.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gain is 28%; and the maximum corporate tax applicable to ordinary
income and net capital gain is 35%. However, to eliminate the benefit of lower
marginal corporate income tax rates, corporations which have taxable income in
excess of $100,000 for a taxable year will be required to pay an additional
amount of tax of up to $11,750 and corporations which have taxable income in
excess of $15,000,000 for a taxable year will be required to pay an additional
amount of tax of up to $100,000. Naturally, the amount of tax payable by a
shareholder with respect to either distributions from the company or
disposition of company shares will be affected by a combination of tax law
rules covering, E.G., deductions, credits, deferrals, exemptions, sources of
income and other matters. Under the Code, an individual is entitled to
establish and contribute to an IRA each year (prior to the tax return filing
deadline for that year) whereby earnings on investments are tax-deferred. In
addition, in some cases, the IRA contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and distributions may also be subject to state or local
taxes. Shareholders should consult their own tax advisers for additional
details as to their particular tax status.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment $50 minimum (except where a lower
Minimums and Fund minimum is noted under "Investment
Numbers" for initial Minimums and Fund Numbers").
investment minimums.
By contacting Visit any investment Mail directly to your investment dealer's
your investment dealer who is address printed on your account statement.
dealer registered in the state
where the purchase is
made and who has a
sales agreement with
American Funds
Distributors.
By mail Make your check payable Fill out the account additions form at the
to the fund and mail to bottom of a recent account statement, make your
the address indicated check payable to the fund, write your account
on the account number on your check, and mail the check and
application. Please form in the envelope provided with your account
indicate an investment statement.
dealer on the account
application.
By telephone Please contact your Complete the "Investments by Phone"
investment dealer to section on the account application or
open account, then American FundsLink Authorization Form.
follow the procedures Once you establish the privilege, you, your
for additional financial advisor or any person with your
investments. account information can call American
FundsLine(r) and make investments by telephone
(subject to conditions noted in "Shareholder
Account Services and Privileges - Telephone
Redemptions and Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your additional
obtain your account investments in the same manner as
number(s), if described under "Initial Investment."
necessary. Please
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds Service
Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(r) (see
description below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) $1,000 02
American Balanced Fund(r) 500 11
American Mutual Fund(r) 250 03
Capital Income Builder(r) 1,000 12
Capital World Growth and Income Fund(sm) 1,000 33
EuroPacific Growth Fund(r) 250 16
Fundamental Investors(sm) 250 10
The Growth Fund of America(r) 1,000 05
The Income Fund of America(r) 1,000 06
The Investment Company of America(r) 250 04
The New Economy Fund(r) 1,000 14
New Perspective Fund(r) 250 07
SMALLCAP World Fund(r) 1,000 35
Washington Mutual Investors Fund(sm) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(r)
American High-Income Trust(sm) 1,000 21
The Bond Fund of America(sm) 1,000 08
Capital World Bond Fund(r) 1,000 31
Intermediate Bond Fund of America(sm) 1,000 23
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(sm)
The Tax-Exempt Bond Fund of America(r) 1,000 19
The Tax-Exempt Fund of California(r)* 1,000 20
The Tax-Exempt Fund of Maryland(r)* 1,000 24
The Tax-Exempt Fund of Virginia(r)* 1,000 25
U.S. Government Securities Fund(sm) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 2,500 09
The Tax-Exempt Money Fund of America(sm) 2,500 39
The U.S. Treasury Money Fund of 2,500 49
America(sm)
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
<S> <C> <C> <C>
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10% 5.75%
5.00%
$50,000 but less than $100,000 4.71 4.50
3.75
BOND FUNDS
Less than $25,000 4.99 4.75
4.00
$25,000 but less than $50,000 4.71 4.50
3.75
$50,000 but less than $100,000 4.17 4.00
3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 3.63 3.50
2.75
$250,000 but less than $500,000 2.56 2.50
2.00
$500,000 but less than $1,000,000 2.04 2.00
1.60
$1,000,000 or more none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1997, provide additional compensation
to dealers. Currently these payments are limited to the top one hundred dealers
who have sold shares of the fund or other funds in The American Funds Group.
These payments will be based on a pro rata share of a qualifying dealer's
sales. American Funds Distributors will, on an annual basis, determine the
advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified
under Section 401(a) of the Internal Revenue Code including a "401(k)" plan
with 200 or more eligible employees or any other purchaser investing at least
$1 million in shares of the fund (or in combination with shares of other funds
in The American Funds Group other than the money market funds) may purchase
shares at net asset value; however, a contingent deferred sales charge of 1% is
imposed on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.")
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans of organizations with retirement plan assets of $100
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $50,000 or more made within a
13-month period subject to a statement of intention (the "Statement"). The
Statement is not a binding obligation to purchase the indicated amount. When a
shareholder elects to utilize a Statement in order to qualify for a reduced
sales charge, shares equal to 5% of the dollar amount specified in the
Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total of such purchases had been made at a single
time. If the difference is not paid within 45 days after written request by
the Principal Underwriter or the securities dealer, the appropriate number of
shares held in escrow will be redeemed to pay such difference. If the proceeds
from this redemption are inadequate, the purchaser will be liable to the
Principal Underwriter for the balance still outstanding. The Statement may be
revised upward at any time during the 13-month period, and such a revision will
be treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In the case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day. The net asset
value per share is determined as follows:
1. Stocks, and convertible bonds and debentures, traded on 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.
Non-convertible bonds and debentures, and other long-term debt securities
normally 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.
U.S. Treasury bills, and other short-term obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, certificates of
deposit issued by banks, corporate short-term notes and other short-term
investments with original or remaining maturities in excess of 60 days are
valued at the mean of representative quoted bid and asked prices for such
securities or, if such prices are not available, for securities of comparable
maturity, quality and type. Short-term securities with 60 days or less to
maturity are amortized to maturity based on their cost to the fund if acquired
within 60 days of maturity or, if already held by the fund on the 60th day,
based on the value determined on the 61st day. Other securities are valued on
the basis of last sale or bid prices in what is, in the opinion of the
Investment Advisor, the broadest and most representative market, which may be
either a securities exchange or the over-the-counter market. Where quotations
are not readily available, securities are valued at fair value as determined in
good faith by the Valuation Committee of the Board of Directors. The fair
value of all other assets is added to the value of securities to arrive at the
total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including accruals of taxes and other expense items; and
3. The net assets so obtained are then divided by the total number of shares
outstanding (excluding treasury shares), and the result, rounded to the nearer
cent, is the net asset value per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The Principal Underwriter will not knowingly sell shares directly or
indirectly, or through a unit investment trust to any other investment company,
person or entity, where, after the sale, such investment company, person, or
entity would own beneficially directly, indirectly, or through an investment
trust more than 3% of the outstanding shares of the fund without the consent of
a majority of the fund's Directors.
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Funds Send a letter of instruction specifying the name of
Service Company (at the the fund, the number of shares or dollar amount to be
appropriate address indicated sold, your name and account number. You should also
under "Fund Organization and enclose any share certificates you wish to redeem.
Management - Principal For redemptions over $50,000 and for certain
Underwriter and Transfer Agent" redemptions of $50,000 or less (see below), your
in the prospectus) signature must be guaranteed by a bank, savings
association, credit union, or member firm of a
domestic stock exchange or the National Association
of Securities Dealers, Inc. that is an eligible
guarantor institution. You should verify with the
institution that it is an eligible guarantor prior to
signing. Additional documentation may be required
for redemption of shares held in corporate,
partnership or fiduciary accounts. Notarization by a
Notary Public is not an acceptable signature
guarantee.
By contacting your investment If you redeem shares through your investment dealer,
dealer you may be charged for this service. SHARES HELD FOR
YOU IN YOUR INVESTMENT DEALER'S STREET NAME MUST BE
REDEEMED THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is
check sent to you by using registered in the name of an individual(s), a
American FundsLine(r) or by UGMA/UTMA custodian, or a non-retirement plan trust.
telephoning, faxing, or These redemptions may not exceed $10,000 per day, per
telegraphing American Funds fund account and the check must be made payable to
Service Company (subject to the the shareholder(s) of record and be sent to the
conditions noted in this section address of record provided the address has been used
and in "Telephone Purchases, with the account for at least 10 days. See "Fund
Sales and Exchanges" in the Organization and Management - Principal Underwriter
prospectus) and Transfer Agent" in the prospectus and "Exchange
Privilege" below for the appropriate telephone or fax
number.
In the case of the money Upon request (use the account application for the
market funds, you may have money market funds) you may establish telephone
redemptions wired to your redemption privileges (which will enable you to have
bank by telephoning American a redemption sent to your bank account) and/or check
Funds Service Company ($1,000 or writing privileges. If you request check writing
more) or by writing a check privileges, you will be provided with checks that you
($250 or more) may use to draw against your account. These checks
may be made payable to anyone you designate and must
be signed by the authorized number of registered
shareholders exactly as indicated on your checking
account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF
$50,000 OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
REDEMPTIONS - The fund's Certificate of Incorporation permits the fund to
direct the Transfer Agent to redeem the Common shares owned by any holder of
capital stock of the fund if the value of such shares in the account of such
holder is less than the required minimum initial investment amount applicable
to that account as set forth in the fund's current registration statement under
the 1940 Act, and subject to such further terms and conditions as the Board of
Directors of the fund may from time to time adopt. Prior notice of at least 60
days will be given to a shareholder before the involuntary redemption provision
is made effective with respect to the shareholder's account. The shareholder
will have not less than 30 days from the date of such notice within which to
bring the account up to the minimum determined as set forth above.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables
shareholders to make regular monthly or quarterly investments in shares through
automatic charges to their bank accounts. With shareholder authorization and
bank approval, the Transfer Agent will automatically charge the bank account
for the amount specified ($50 minimum), which will be automatically invested in
shares at the offering price on or about the dates you select. Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement at least quarterly. Participation in the plan will
begin within 30 days after receipt of the account application. If the
shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or closing of the account, the plan may be terminated and
the related investment reversed. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestment of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The
American Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) (see "American FundsLine(r)" below), or by telephoning
800/421-0180 toll-free, faxing (see "Principal Underwriter and Transfer Agent"
in the prospectus for the appropriate fax numbers) or telegraphing American
Funds Service Company. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for which Capital Guardian Trust
Company serves as trustee may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of
$50 or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the company of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) - You may check your share balance, the price of your
shares, or your most recent account transaction, redeem shares (up to $10,000
per fund, per account each day), or exchange shares around the clock with
American FundsLine(r). To use this service, call 800/325-3590 from a TouchTonet
telephone. Redemptions and exchanges through American FundsLine(r) are subject
to the conditions noted above and in "Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of funds in The American
Funds Group under "Purchase of Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of your Social Security
number or other tax identification number associated with your account) and
account number.
TELEPHONE REDEMPTIONS AND EXCHANGES - By using the telephone (including
American FundsLine(r)), fax or telegraph redemption and/or exchange options,
you agree to hold the fund, American Funds Service Company, any of its
affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including attorney fees) which may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these options. However, you may
elect to opt out of these options by writing American Funds Service Company
(you may also reinstate them at any time by writing American Funds Service
Company). If American Funds Service Company does not employ reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine, the fund may be liable for losses
due to unauthorized or fraudulent instructions. In the event that shareholders
are unable to reach the fund by telephone because of technical difficulties,
market conditions, or a natural disaster, redemption and exchange requests may
be made in writing only.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker is in a position to obtain the
best price and execution, the order is placed with that broker. This may or may
not be a broker who has provided investment research, statistical, or other
related services to the Investment Adviser or has sold shares of the fund or
other funds served by the Investment Adviser. The fund does not consider that
it has an obligation to obtain the lowest available commission rate to the
exclusion of price, service and qualitative considerations. Subject to the
above policy, when two or more borkers are in a position to offer comparable
prices and executions, preference may be given to brokers who have sold shares
of the fund or have provided investment research, statistical, and other
related services for the benefit of the fund and/or other funds served by the
Investment Adviser.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
As of the end of the fund's most recent fiscal year, amounts held in certain
equity and debt securities of some of its regular brokers and dealers were as
follows:
(to be provided by amendment)
Brokerage commissions paid on portfolio transactions, excluding dealer
concessions on underwritings, for the years ended December 31, 1996, 1995, and
1994 amounted to $11,978,000, $11,505,000 and $8,244,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. Non-U.S. securities may be held by the Custodian,
pursuant to sub-custodial arrangements, in non-U.S. banks or non-U.S. branches
of U.S. banks.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary
of the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $21,426,000 for the fiscal year ended December 31, 1996.
INDEPENDENT ACCOUNTANTS - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the fund's independent accountant since its
inception, providing audit services, preparation of tax returns and review of
certain documents to be filed with the Securities and Exchange Commission. The
financial statements included in this Statement of Additional Information have
been so included in reliance on the report of the independent accountants given
on the authority of said firm as experts in auditing and accounting. The
selection of the fund's independent accountant is reviewed and determined
annually by the Board of Directors.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on December 31.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio and financial statements audited annually by the fund's
independent accountants, Price Waterhouse LLP.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions. You may obtain a summary of
the personal investing policy by contacting the Secretary of the fund.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors as
though the fund were a common-law trust. Accordingly, the Directors of the
fund shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
THE WARRANTS OF THE FUND - On December 31, 1996, there were outstanding
38,208 option warrants, unlimited in time, to purchase shares of the fund. As
originally issued in 1933 in exchange for shares of a predecessor trust, each
warrant permitted the purchase of one share of the fund at $115 per share. By
reason of adjustments for stock dividends and stock splits, each outstanding
warrant now represents an option to purchase approximately 21.940 shares at
approximately $5.242 per share, and, if all warrants were exercised,
approximately 838,283 shares would be issued. Whenever the offering price of
the fund's shares exceeds the price at which shares may be purchased by the
exercise of warrants, the holders of such warrants may, by exercising their
options, purchase shares at a price lower than the offering price of shares.
No warrants are currently owned by officers or directors of the fund.
The financial statements, including the investment portfolio and the report of
Independent Auditors, contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- DECEMBER 31, 1996
<S> <C>
Net asset value and redemption price per share . . . . . . . . . . . . . . . $24.23
(Net assets divided by shares outstanding)
Maximum offering price per share . . . . . . . . . . . . . . . . . . . . . . $25.71
(100/94.25 of net asset value per share, which
takes into account the fund's current maximum
sales charge)
</TABLE>
INVESTMENT RESULTS
The fund's yield is 1.90% based on a 30-day (or one month) period ended
December 31, 1996, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's total return over the past year and average annual total returns
for the five- and ten-year periods ending on December 31, 1996 were 12.48%,
11.93% and 13.23%, respectively. The average annual total return (T) is
computed by equating the value at the end of the period (ERV) with a
hypothetical initial investment of $1,000 (P) over a period of years (n)
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the periods. Total return may be calculated for the one-, five-,
ten-year and for other periods. The average annual total return over periods
greater than one year may also be computed by utilizing ending values as
determined above.
The fund may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. Total return for the
unmanaged indices will be calculated assuming reinvestment of dividends and
interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. In
addition, the company will provide lifetime average total return figures.
The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard & Poor's 500 Stock Composite
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also refer to results compiled by organizations such as CDA
Investment Technologies, Ibbotson Associates, Lipper Analytical Services,
Morningstar, Inc., Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the company may, from time to time,
refer to results published in various newspapers or periodicals, including
BARRON'S, FORBES, FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S PERSONAL FINANCE
MAGAZINE, MONEY, U.S. NEWS AND WORLD REPORT and THE WALL STREET JOURNAL.
The fund may from time to time compare its investment results with the
following:
(1) Average of Savings Institution deposits, which is a measure of all kinds
of savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions). Savings deposits offer a
guaranteed rate of return on principal, but no opportunity for capital growth.
The period shown may include periods during which the maximum rates paid on
some savings deposits were fixed by law.
(2) The Consumer Price Index, which is a measure of the average change in
prices over time in a fixed market basket of goods and services (E.G. food,
clothing, shelter, and fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
The fund may also from time to time illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management
Company manages nine common stock funds that are at least 10 years old. In
the rolling 10-year periods since January 1, 1967 (127 in all), those funds
have had better total returns than the Standard & Poor's 500 Composite Stock
Index in 91 of the 127 periods.
Note that past results are not an indication of future investment results.
Also, the company has different investment policies than some of the funds
mentioned above. These results are included solely for the purpose of
informing investors about the experience and history of Capital Research and
Management Company.
The investment results set forth below were calculated as described in the
fund's prospectus. The fund's results will vary from time to time depending
upon market conditions, the composition of the fund's portfolio and operating
expenses of the fund, so that any investment results reported by the fund
should not be considered representative of what an investment in the fund may
earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objectives and policies.
The investment results set forth below were calculated as described in the
fund's prospectus.
ICA VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
10-Year ICA DJIA/1/ S&P 500/2/ Average
Periods Savings
1/1 -12/31 Account/3/
<S> <C> <C> <C> <C>
1987 - 1996 +246% +366% +314% + 67%
1986 - 1995 +253 +360 +299 + 71
1985 - 1994 + 261 + 349 + 282 + 77
1984 - 1993 + 284 + 333 + 301 + 88
1983 - 1992 + 314 + 367 + 346 + 99
1982 - 1991 + 417 + 452 + 404 + 112
1981 - 1990 + 312 + 328 + 267 + 122
1980 - 1989 + 396 + 426 + 402 + 126
1979 - 1988 + 357 + 340 + 352 + 125
1978 - 1987 + 362 + 289 + 313 + 125
1977 - 1986 + 327 + 221 + 264 + 125
1976 - 1985 + 355 + 211 + 281 + 123
1975 - 1984 + 362 + 237 + 297 + 119
1974 - 1983 + 255 + 154 + 175 + 113
1973 - 1982 + 146 + 75 + 91 + 106
1972 - 1981 + 113 + 63 + 87 + 95
1971 - 1980 + 147 + 86 + 125 + 85
1970 - 1979 + 109 + 66 + 77 + 79
1969 - 1978 + 57 + 32 + 36 + 75
1968 - 1977 + 60 + 39 + 42 + 72
1967 - 1976 + 111 + 90 + 90 + 69
1966 - 1975 + 65 + 30 + 38 + 67
1965 - 1974 + 55 + 3 + 13 + 63
1964 - 1973 + 119 + 60 + 79 + 60
1963 - 1972 + 223 + 123 + 158 + 57
1962 - 1971 + 142 + 74 + 98 + 55
1961 - 1970 + 155 + 94 + 119 + 52
1960 - 1969 + 160 + 67 + 112 + 50
</TABLE>
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
/2/ The Standard & Poor's 500 Stock Composite Index is comprised of industrial,
transportation, public utilities and financial stocks and represents a large
portion of the value of issues traded on the New York Stock Exchange. Selected
issues traded on the American Stock Exchange are also included.
/3/ Based on figures supplied by the U.S. League of Savings Institutions and
the Federal Reserve Board which reflect all kinds of savings deposits,
including longer-term certificates. Savings accounts offer a guaranteed return
of principal, but no opportunity for capital growth. During a portion of the
period, the maximum rates paid on some savings deposits were fixed by law.
THE BENEFITS OF SYSTEMATIC INVESTING IN ICA..........
<TABLE>
<CAPTION>
An initial investment of $1,000 in ICA on January 1 would have grown to these amounts
over the past 10, 20, 30, and 40 years:
<S> <C> <C> <C>
10 years 20 years 30 years 40 years
(1/1/87 - 12/31/96) (1/1/77 - 12/31/96) (1/1/67 - 12/31/96) (1/1/57 -12/31/96)
$ 3,464 $ 15,696 $ 35,224 $ 104,862
</TABLE>
<TABLE>
<CAPTION>
$1,000 invested in ICA followed by annual $500 investments (all investments made on
January 1) would have grown to these amounts over the past 10, 20, 30, 40 years:
<S> <C> <C> <C>
10 years 20 years 30 years 40 years
(1/1/87 - 12/31/96) (1/1/77 - 12/31/96) (1/1/67 - 12/31/96) (1/1/57 - 12/31/96)
$ 12,518 $ 68,669 $ 202,951 $588,610
</TABLE>
<TABLE>
<CAPTION>
$2,000 invested in ICA on January 1 of each year would have grown to these amounts
over the past 5, 10, 20 and 30 years:
<S> <C> <C> <C>
5 years 10 years 20 years 30 years
(1/1/92 - 12/31/96) (1/1/87 - 12/31/96) (1/1/77 - 12/31/96) (1/1/67 - 12/31/96)
$ 14,931 $ 43,145 $ 243,989 $ 743,385
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM...
<TABLE>
<CAPTION>
If you had invested Periods ... and taken all
$10,000 in ICA 1/1-12/31 distributions in shares,
this many years ago... your investment would
Number have been worth this
of Years much at December 31, 1996
Value
<S> <C> <C>
1 1996 $ 11,248
2 1995 - 1996 14,692
3 1994 - 1996 14,718
4 1993 - 1996 16,428
5 1992 - 1996 17,571
6 1991 - 1996 22,233
7 1990 - 1996 22,390
8 1989 - 1996 28,973
9 1988 - 1996 32,837
10 1987 - 1996 34,635
11 1986 - 1996 42,162
12 1985 - 1996 56,229
13 1984 - 1996 59,959
14 1983 - 1996 72,079
15 1982 - 1996 96,377
16 1981 - 1996 97,242
17 1980 - 1996 117,886
18 1979 - 1996 140,542
19 1978 - 1996 161,104
20 1977 - 1996 156,967
21 1976 - 1996 203,418
22 1975 - 1996 275,611
23 1974 - 1996 226,070
24 1973 - 1996 188,079
25 1972 - 1996 217,887
26 1971 - 1996 255,017
27 1970 - 1996 261,539
28 1969 - 1996 233,672
29 1968 - 1996 273,301
30 1967 - 1996 352,256
</TABLE>
Results of a $10,000 investment in ICA/a/
with capital gain distributions taken in shares
(For the lifetime of the company January 1, 1934 through December 31, 1996)
<TABLE>
<CAPTION>
TOTAL VALUE ASSUMING CAPITAL VALUE ASSUMING
DIVIDENDS REINVESTED DIVIDENDS IN CASH
Year Dividends Value of Dividends Value of
Ended Reinvested Investment Taken in Investment
12/31 During Year at Year-End Cash at Year-End
<S> <C> <C> <C> <C>
1934 --- $11,822 --- $11,822
1935 --- 21,643 --- 21,643
1936 $398 31,560 $398 31,042
1937 1,006 19,424 976 18,339
1938 181 24,776 170 23,174
1939 536 24,986 498 22,860
1940 891 24,384 806 21,460
1941 1,262 22,590 1,089 18,816
1942 1,186 26,376 969 20,893
1943 1,101 35,019 861 26,861
1944 1,242 43,193 942 32,130
1945 1,191 59,091 878 42,948
1946 1,775 57,692 1,277 40,686
1947 2,409 58,217 1,672 39,332
1948 2,685 58,430 1,785 37,714
1949 2,661 63,941 1,689 39,436
1950 3,152 76,618 1,911 45,185
1951 3,391 90,274 1,970 51,159
1952 3,535 101,293 1,974 55,305
1953 3,927 101,747 2,113 53,362
1954 4,104 158,859 2,127 80,780
1955 5,124 199,215 2,579 98,530
1956 5,608 220,648 2,748 106,303
1957 6,228 194,432 2,969 90,911
1958 6,546 281,479 3,028 128,040
1959 7,013 321,419 3,161 142,882
1960 8,139 335,998 3,582 145,597
1961 8,383 413,552 3,603 175,370
1962 9,122 358,800 3,831 148,178
1963 9,620 440,900 3,936 177,833
1964 10,708 512,591 4,285 202,346
1965 12,112 650,689 4,742 251,553
1966 15,516 657,093 5,946 248,034
1967 18,359 846,941 6,869 312,473
1968 22,628 990,640 8,270 356,572
1969 25,318 884,824 9,024 309,611
1970 27,305 908,018 9,438 307,421
1971 28,565 1,062,651 9,569 349,727
1972 29,917 1,231,087 9,750 394,701
1973 33,353 1,024,067 10,569 317,911
</TABLE>
Results of a $10,000 investment in ICA (cont.)
<TABLE>
<CAPTION>
TOTAL VALUE ASSUMING CAPITAL VALUE ASSUMING
DIVIDENDS REINVESTED DIVIDENDS IN CASH
Year Dividends Value of Dividends Value of
Ended Reinvested Investment Taken in Investment
12/31 During Year at Year-End Cash at Year-End
<S> <C> <C> <C> <C>
1974 52,187 840,310 15,908 245,526
1975 49,800 1,137,660 14,318 317,655
1976 46,441 1,474,369 12,804 398,099
1977 49,838 1,436,402 13,279 374,307
1978 55,969 1,647,483 14,386 414,421
1979 69,960 1,963,310 17,347 475,669
1980 91,302 2,380,187 21,746 552,242
1981 115,901 2,401,091 26,420 530,864
1982 146,105 3,211,997 31,589 670,590
1983 147,156 3,859,712 30,264 774,518
1984 160,449 4,117,187 31,680 791,971
1985 174,890 5,491,890 33,152 1,017,904
1986 203,830 6,685,657 37,328 1,200,518
1987 267,489 7,049,178 47,452 1,220,928
1988 318,747 7,989,285 54,382 1,327,375
1989 370,835 10,338,589 60,741 1,652,751
1990 406,318 10,409,027 64,056 1,598,821
1991 320,422 13,171,892 48,721 1,969,876
1992 357,779 14,092,236 52,965 2,052,162
1993 374,395 15,729,365 54,005 2,234,153
1994 407,211 15,753,834 57,286 2,180,610
1995 450,124 20,578,696 61,704 2,779,658
1996 480,065 24,560,540/b/ 64,313 3,247,852/c/
</TABLE>
/a/ Results reflect payment of a sales charge of 5.75% on the $10,000
investment. Thus, the net amount invested was $9,425. There is no sales
charge on dividends reinvested or capital gain distributions taken in shares.
Results do not take into account income and capital gain taxes.
/b/ The total "cost" of this investment ($10,000 plus $5,443,410 in
reinvested dividends) was $5,453,410. Total value includes reinvested
dividends and capital gain distributions totaling $7,538,420 taken in shares in
the years 1936-1996.
/c/ Capital Value includes capital gain distributions taken in shares (total
$1,362,646) but does not include the amount of dividends received in cash
($997,850).
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
** TO BE PROVIDED BY AMENDMENT **
As of December 31, 1996:
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Per-Share Data and Ratios
Report of Independent Accountants
(b) Exhibits:
1. On file (see SEC files nos. 811-116 and 2-10811)
2. On file (see SEC files nos. 811-116 and 2-10811)
3. None.
4. On file (see SEC files nos. 811-116 and 2-10811)
5. On file (see SEC files nos. 811-116 and 2-10811)
6. On file (see SEC files nos. 811-116 and 2-10811)
7. None.
8. On file (see SEC files nos. 811-116 and 2-10811)
9. On file (see SEC files nos. 811-116 and 2-10811)
10. Not applicable to this filing.
11. Consent of Independent Accountants (to be provided by amendment)
12. None.
13. None.
14. On file (see SEC files nos. 811-116 and 2-10811)
15. On file (see SEC files nos. 811-116 and 2-10811)
16. On file (see SEC files nos. 811-116 and 2-10811)
17. EX-27 Financial data schedule (EDGAR)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of January 31, 1997
<TABLE>
<CAPTION>
Title of Class Number of Record-Holders
<S> <C>
Common Stock 1,479,346
($1.00 par value)
</TABLE>
ITEM 27. INDEMNIFICATION.
Registrant is a joint-insured under Investment Advisor/Mutual Fund Errors
and Omissions Policies written by American International Surplus Lines
Insurance Company, Chubb Custom Insurance Company, and ICI Mutual Insurance
Company which insures its officers and directors against certain liabilities.
However, in no event will Registrant maintain insurance to indemnify any such
person for any act for which Registrant itself is not permitted to indemnify
the individual.
The following are certain provisions of the Delaware Corporation Law
applicable to the Registrant:
Subsection (a) of Section 145 of the Delaware Corporation Law empowers a
corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that a court of equity
or the court in which such action or suit was brought shall determine upon
application that despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall
not be deemed exclusive of any other rights to which the indemnified party may
be entitled; that the scope of indemnification extends to directors, officers,
employees or agents of a constituent corporation absorbed in a consolidation or
merger and persons serving in that capacity at the request of the constituent
corporation for another; and empowers the corporation to purchase and maintain
insurance on behalf of a director or officer of the corporation against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.
The By-Laws of the Registrant state:
37A. The corporation shall indemnify its directors and officers, and may
indemnify its employees and agents to the full extent permitted by the law of
the State of Delaware; provided, however, that the corporation shall not
indemnify any of its directors or officers against any liability to the
corporation or to its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
as described in Section 17(h) of the Investment Company Act of 1940 ("disabling
conduct"). The corporation shall indemnify any of its directors or officers
against any liability to the corporation or to its stockholders if:
(1) a court or other body before whom a proceeding relating to liability was
brought renders a final decision on the merits finding such director or officer
not liable by reason of disabling conduct or
(2) in the absence of such a decision either:
(a) a majority of a quorum of directors, who are neither interested persons
of the corporation as defined in Section 2(a)(19) of the Investment Company Act
of 1940 nor parties to the proceeding, or
(b) independent legal counsel in a written opinion makes a reasonable
determination, based on a review of the facts, that such director or officers
is not liable by reason of disabling conduct.
The corporation may advance funds to cover expenses, including attorneys'
fees, incurred by any director or officer in connection with the defense of any
such proceeding, provided that such director or officer undertakes to repay any
advance unless a determination is made pursuant to the procedures set forth
herein that such indemnification is proper. As a condition to such an advance
(i) the director or officer shall provide security for his undertaking; (ii)
the corporation shall be insured against losses arising by reason of any lawful
advance; or (iii) a majority of a quorum of the directors, who are neither
'Interested persons' of the corporation as defined in Section 2(a)(19) of the
Investment Company Act of 1940 nor parties to the proceeding, or independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts, that there is reason to believe that such director or
officer will be found entitled to indemnification.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., The Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., SMALLCAP World Fund, Inc.,
The Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America and Washington Mutual
Investors Fund, Inc.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David A. Abzug Regional Vice President None
5657 Lemona Avenue
Van Nuys, CA 91411
John A. Agar Regional Vice President None
1501 N. University Drive
Suite 227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Brynwood Drive
Madison, WI 53711
% Richard Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
8000 Town Line Avenue So.
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Regional Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
3100 West End Avenue
Suite 870
Nashville, TN 37215
Mick L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Senior Vice President, None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MD 20895
Victor C. Cassato Vice President None
609 W. Littleton Blvd. - Suite 310
Littleton, CO 8012o
Christopher J. Cassin Senior Vice President None
111 West Chicago Avenue
Suite G3
Hinsdale, IL 60521
Denise M. Cassin Regional Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
* Larry P. Clemmensen Director None
* Kevin G. Clifford Director, Senior Vice President None
Ruth M. Collier Vice President None
145 W. 67th Street #12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Blvd.
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
4116 Woodbine Street
Chevy Chase, MD 20815
* Carl D. Cutting Vice President None
Dan J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 East Main Street
Jenks, OK 74037
Kirk D. Dodge Vice President None
3034 Parkridge Drive
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
& Lloyd G. Edwards Vice President None
* Paul H. Fieberg Senior Vice President None
John R. Fodor Regional Vice President None
15 Latisquana Road
Southborough, MA 01772
* Mark P. Freeman, Jr. President, Director None
Clyde E. Gardner Senior Vice President None
Rt. 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
David E. Harper Senior Vice President None
R.D. 1, Box 210, Rte. 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
* Robert L. Johansen Vice President, Controller None
Michael J. Johnston Chairman of the Board None
630 Fifth Avenue, 36th Floor
New York, NY 10111
V. John Kriss, Jr. Senior Vice President None
P.O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
1940 Blake Street, Suite 303
Denver, CO 80202
* Lorin E. Liesy Assistant Vice President None
* Susan G. Lindgren Vice President - Institutional
Investment Services Division None
% Stella Lopez Vice President None
+ Robert W. Lovelace Director None
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Director, Senior Vice President None
* E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
3500 West Camino de Urania
Tucson, AZ 85741
% John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Rd.
St. Louis, MO 63131
* R. William Melinat Vice President, Institutional None
Investment Services Division
David R. Murray Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President None
32 Ridge Avenue
Newton Centre, MA 02161
# Candance D. Pilgram Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, SE
Mercer Island, WA 98040
* John O. Post, Jr. Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
* James F. Rothenberg Director None
Douglas F. Rowe Regional Vice President None
30309 Oak Tree Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President None
31465 St. Andrews
Westlake, OH 44145
* Daniel B. Seivert Assistant Vice President None
* R. Michael Shanahan Director Senior Vice President
David W. Short Director, Senior Vice President None
1000 RIDC Plaza, Ste. 212
Pittsburgh, PA 15238
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Assistant Vice President, None
Institutional Investment
Services Division
* Mary E. Smith Assistant Vice President, None
Institutional Investment
Services Division
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
4 West 4th Avenue, Suite 406
San Mateo, CA 94402
Thomas A. Stout Regional Vice President None
12913 Kendale Lane
Bowie, MD 20715
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
* Drew Taylor Assistant Vice President None
% James P. Toomey Assistant Vice President None
& Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
* David M. Ward Assistant Vice President, None
Institutional Investment
Services Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34238
* J. Kelly Webb Senior Vice President, Treasurer None
Gregory J. Weimer Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
** N. Dexter Williams Vice President None
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
# Laura L. Wimberly Assistant Vice President None
* Marshall D. Wingo Director, Senior Vice President None
* Robert L. Winston Director, Senior Vice President None
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
209 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
_____________________
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
** Business Address, One Market Plaza, Steuart Tower, Suite 1800, San
Francisco, CA 94111
+ Business Address, 11100 Santa Monica Blvd., Los Angeles, CA 90025
# Business Address, 135 South State College Blvd., Brea, CA 92821
% Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
& Business Address, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, are maintained and held in the offices of the
company and its investment adviser, Capital Research and Management Company,
333 South Hope Street, Los Angeles, CA 90071. Certain accounting records are
maintained and kept in the offices of the fund's accounting department, 135
South State College Blvd., Brea, CA 92821.
Records covering shareholder accounts are maintained and kept by the fund's
transfer agent, American Funds Service Company, 135 South State College Blvd.,
Brea, CA 92821, 8000 IH-10, Suite 1400, San Antonio, TX 78230, 8332 Woodfield
Crossing Boulevard, Indianapolis, IN 46240, and 5300 Robin Hood Road, Norfolk,
VA 23513.
Records covering portfolio transactions are also maintained and kept by the
Custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, New
York, 10081.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(c) As reflected in the prospectus, the fund undertakes to provide each
person to whom a prospectus is delivered with a copy of the fund's latest
annual report to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, and State of California, on the 13th day of February, 1997.
THE INVESTMENT COMPANY OF AMERICA
By /s/ JON B. LOVELACE, JR.
(Jon B. Lovelace, Jr., Chairman of the Board)
Pursuant to the requirements of the Securities Act of 1933, this amendment
to Registration Statement has been signed below on February 13, 1997, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/ WILLIAM C. NEWTON
(William C. Newton) President and Director
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ STEVEN N. KEARSLEY
(Steven N. Kearsley) Treasurer
(3) Directors:
Charles H. Black* Director
Ann S. Bowers* Director
Malcolm R. Currie* Director
Jon B. Lovelace, Jr.* Chairman of the Board
John G. McDonald* Director
Bailey Morris-Eck* Director
Richard G. Newman Director
William C. Newton* President and Director
James W. Ratzlaff* Executive Vice President and Director
Olin C. Robison* Director
William J. Spencer Director
</TABLE>
*By /s/ VINCENT P. CORTI
(Vincent P. Corti, Attorney-in-Fact)
