[THE AMERICAN FUNDS GROUP(R)]
ICA
THE INVESTMENT COMPANY OF AMERICA
1998 SEMI-ANNUAL REPORT
For the six months ended June 30
[cover: a yellow table graph depicting S&P 500 from year 1968 to 1982.
A turquoise table graph depicting S&P 500 from year 1983 to 1997.]
ICA(SM)
The Investment Company of America(R) seeks long-term growth of capital and
income, placing greater emphasis on future dividends than on current income.
ICA is one of the 28 mutual funds in The American Funds Group,(R) managed by
Capital Research and Management Company. Since 1931, Capital has invested with
a long-term focus based on thorough research and attention to risk.
About Our Cover:
Charting Standard & Poor's 500 Composite Index shows the contrasting markets of
the first and last half of the 30-year period from the beginning of 1968 to the
end of 1997. (From the 1997 ICA annual report.)
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended June 30, 1998,
assuming payment of the 5.75% maximum sales charge at the beginning of the
stated periods - 10 years: 337.51%, or 15.90% a year; 5 years: 130.41%, or
18.17% a year; 12 months: 17.22%. The fund's 30-day yield as of July 31, 1998,
calculated in accordance with the Securities and Exchange Commission formula,
was 1.49%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY BY
INVESTING IN THE FUND. THE SHORTER THE TIME PERIOD OF YOUR INVESTMENT, THE
GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR INSURED OR GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL
INSTITUTION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY,
ENTITY OR PERSON.
FELLOW SHAREHOLDERS
Once again ICA's first-half gain reached double-digit proportions, reflecting
continuation of the phenomenal stock market trend of the previous three years.
In the six months ended June 30, 1998, the value of your investment in the fund
rose 13.12%, assuming reinvestment of the capital gain distribution of 33 cents
a share paid in March and income dividends of 12 cents each paid in March and
June. If you took the income dividends in cash, they represented an income
return of .85% and your investment increased 12.24%.
Both the fund and the overall stock market as measured by the unmanaged
Standard & Poor's 500 Composite Index posted most of their gains in the first
three months of the year. The S&P 500 Index returned 17.67% for the half year.
The Lipper Growth & Income Fund Index gained 11.62%.
The gain for the S&P 500 reflected the popularity of a short list of big
company stocks. A recent Wall Street Journal article pointed out that through
July 9, the 50 largest companies in the S&P 500 had risen 29.9% this year while
the other 450 were up just 10.4%. ICA has continued to pursue its long-term
investment approach, identifying values rather than following the crowd. That
approach has served the fund well over its nearly 65 years, producing a
lifetime annualized compound total return of 13.64%* against 12.29% for the S&P
500. It has also moderated the fund's declines during most periods when overall
stock prices have fallen. It is good to remember that markets do fall, and that
ICA's first-half return is close to its long-term average for a full year.
Focusing on value resulted in some significant gains during the six months,
particularly as a result of merger activity. ICA added to its already large
holding in Chrysler in 1997. With the announced merger into Daimler-Benz,
Chrysler's stock was up 60.2% for the 1998 first half.
Early this year, William C. Newton expressed his desire to step aside as
president, a position he has held since 1985. Bill was only the fifth senior
officer (chairman or president) in ICA's history. He will continue as a
director and as a portfolio counselor, a role he first assumed in 1965.
ICA's directors elected R. Michael Shanahan president. Mike has been with
Capital Research and Management Company, the fund's investment adviser, since
1965 and is its chairman. James W. Ratzlaff, executive vice president, was
elected vice chairman. He has been with Capital for 29 years.
Sincerely,
/S/ Jon B. Lovelace, Jr.
Jon B. Lovelace, Jr.
Chairman of the Board
August 14, 1998
*From 1/1/34
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INVESTMENT PORTFOLIO - June 30, 1998
- ------------------------------------ ----------
Percent of
Largest Investment Categories Net Assets
- ------------------------------------ ----------
Services 21.91%
Finance 17.31
Consumer Goods 15.50
- ------------------------------------ ----------
Percent of
Largest Individual Holdings Net Assets
- ------------------------------------ ----------
Philip Morris 2.67%
Fannie Mae 2.64
Time Warner 2.31
Pfizer 2.19
Viacom 1.74
Warner-Lambert 1.51
Royal Dutch Petroleum 1.49
AT&T 1.41
Chrysler 1.21
DuPont 1.21
- ------------------------------------ ----------
Percent of
Largest Industry Holdings Net Assets
- ------------------------------------ ----------
Banking 8.53%
Health & Personal Care 7.78
Telecommunications 7.23
Broadcasting & Publishing 6.42
Energy Sources 6.39
COMPANIES WHOSE EQUITY SECURITIES WERE
ADDED TO OR ELIMINATED FROM THE PORTFOLIO LISTING
- ------------------------------------
Companies appearing in the portfolio listing
since December 31, 1997
- ------------------------------------
Ameren
Amgen
Ascend Communications
Associates First Capital
Bay Networks
Boston Scientific
Comcast
Ericsson
Microsoft
Praxair
Rio Tinto
Solutia
UNOVA
Wells Fargo
- ------------------------------------------
Companies eliminated from the portfolio listing
since December 31, 1997
- ------------------------------------------
Anheuser-Busch
Bank of New York
Digital Equipment
Dresser Industries
Eastman Chemical
Gillette
Hoechst
Honda Motor
Humana
Johnson & Johnson
J.P. Morgan
Kellogg
Mattel
New York Times
Pennzoil
SmithKline Beecham
Tenneco
Tribune
Union Electric
Union Pacific Resources Group
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THE INVESTMENT COMPANY OF AMERICA
INVESTMENT PORTFOLIO, June 30, 1998
- ------------------------------------------ Unaudited
Equity Securities Market Percent
- ------------------------------------------ Number of Value of Net
Energy Shares (millions) Assets
- ------------------------------------------ ---------- ---------- ----------
Energy Sources-6.39%
Amoco Corp. 4,600,000 $ 191.475 0.42%
Atlantic Richfield Co. 2,350,000 183.594 .40
British Petroleum Co. PLC (ADR) 900,000 79.425 .17
Broken Hill Proprietary Co. Ltd. 3,857,507 32.662 .07
Chevron Corp. 3,450,000 286.566 .63
Elf Aquitaine (ADR) 3,000,000 213.000 .47
Exxon Corp. 800,000 57.050 .13
Kerr-McGee Corp. 860,600 49.807 .11
Mobil Corp. 1,600,000 122.600 .27
Murphy Oil Corp. 2,175,000 110.245 .24
Phillips Petroleum Co. 3,900,000 187.931 .41
Royal Dutch Petroleum Co.
(New York Registered Shares) 12,400,000 679.675 1.49
Texaco Inc. 4,000,000 238.750 .52
TOTAL, Class B 1,359,340 176.616
TOTAL, Class B (ADR) 2,133,520 139.479 .70
Unocal Corp. 2,200,000 78.650 .17
USX-Marathon Group 2,500,000 85.781 .19
Utilities: Electric & Gas-0.88%
Ameren Corp. 600,000 23.850 .05
American Electric Power Co., Inc. 1,500,000 68.063 .15
Duke Energy Corp. 828,140 49.067 .11
Florida Progress Corp. 400,000 16.450 .04
GPU, Inc. 2,000,000 75.625 .17
MarketSpan Corp. (formerly Long Island Lighting Co.) 2,816,000 84.304 .18
Southern Co. 3,000,000 83.063 .18
--------- ---------
3,313.728 7.27
--------- ---------
- ------------------------------------------
Materials
- ------------------------------------------
Chemicals-2.94%
Air Products and Chemicals, Inc. 3,870,000 154.800 .34
E.I. du Pont de Nemours and Co. 7,385,200 551.121 1.21
Imperial Chemical Industries PLC (ADR) 1,800,000 116.100 .25
Monsanto Co. 7,124,300 398.070 .87
Praxair, Inc. 2,485,900 116.371 .25
Solutia Inc. 210,000 6.024 .02
Forest Products & Paper-2.51%
Champion International Corp. 1,950,000 95.916 .21
Fort James Corp. 5,800,000 258.100 .57
Georgia-Pacific Corp., Georgia-Pacific Group 4,575,000 269.639 .59
Georgia-Pacific Corp., Timber Group 3,250,000 74.953 .16
International Paper Co. 1,500,000 64.500 .14
Louisiana-Pacific Corp. 2,900,000 52.925 .12
Union Camp Corp. 1,530,000 75.926 .17
Weyerhaeuser Co. 5,450,000 251.722 .55
Metals: Nonferrous-0.71%
Aluminum Co. of America 1,800,000 118.688 .26
Freeport-McMoRan Copper & Gold Inc., Class B 2,200,000 33.413 .07
Inco Ltd. 2,300,000 31.338 .07
Phelps Dodge Corp. 1,496,300 85.570 .19
Rio Tinto PLC 1,652,835 18.629 .04
WMC Ltd. 11,500,000 34.667 .08
Metals: Steel-0.07%
USX-U.S. Steel Group 1,000,000 33.000 .07
--------- ------
2,841.472 6.23
--------- ------
- ------------------------------------------
Capital Equipment
- ------------------------------------------
Aerospace & Military Technology-1.33%
Boeing Co. 2,520,000 112.298 .25
General Motors Corp., Class H (1) 2,653,600 125.051 .27
Raytheon Co., Class A 2,310,305 133.131
Raytheon Co., Class B 1,700,000 100.513 .51
Sundstrand Corp. 1,212,600 69.421 .15
United Technologies Corp. 720,000 66.599 .15
Data Processing & Reproduction-4.65%
Ascend Communications, Inc. (1) 2,366,200 117.273 .26
Cisco Systems, Inc. (1) 1,800,000 165.713 .36
Computer Associates International, Inc. 1,795,000 99.735 .22
Fujitsu Ltd. 6,223,000 65.789 .14
Hewlett-Packard Co. 3,800,000 227.525 .50
International Business Machines Corp. 4,434,600 509.148 1.12
Microsoft Corp. (1) 2,000,000 216.750 .48
Oracle Corp. (1) 20,643,750 507.062 1.11
3Com Corp. (1) 2,600,000 79.788 .17
Xerox Corp. 1,300,000 132.113 .29
Electrical & Electronic-0.94%
Emerson Electric Co. 335,000 20.226 .04
Lucent Technologies Inc. 1,200,000 99.825 .22
Siemens AG 1,800,000 109.906 .24
Telefonaktiebolaget LM Ericsson, Class B (ADR) 7,000,000 200.375 .44
Electronic Components-2.47%
AMP Inc. 600,000 20.625 .05
Bay Networks, Inc. (1) 7,536,200 243.042 .53
Intel Corp. 4,250,000 315.031 .69
Micron Technology, Inc. (1) 8,300,000 205.944 .45
Texas Instruments Inc. 5,940,000 346.376 .75
Energy Equipment-1.16%
Halliburton Co. 654,600 29.171 .06
Schlumberger Ltd. 6,400,000 437.199 .96
Western Atlas Inc. (1) 750,000 63.656 .14
Industrial Components-0.52%
Dana Corp. 1,821,500 97.450 .21
Genuine Parts Co. 750,000 25.922 .07
Goodyear Tire & Rubber Co. 650,000 41.884 .09
Rockwell International Corp. 1,460,000 70.172 .15
Machinery & Engineering-2.06%
Caterpillar Inc. 6,460,000 341.572 .75
Cummins Engine Co., Inc. (2) 1,041,800 53.392
Cummins Engine Co., Inc. (2,3) 958,200 49.108 .23
Deere & Co. 5,050,000 267.019 .59
Ingersoll-Rand Co. 2,100,000 92.531 .20
Parker Hannifin Corp. 2,210,000 84.256 .18
UNOVA Inc. (1) 2,100,000 45.151 .11
--------- ------
5,987.742 13.13
--------- ------
- ------------------------------------------
Consumer Goods
- ------------------------------------------
Appliances & Household Durables-0.23%
Newell Co. 2,106,600 104.935 .23
Automobiles-2.24%
Chrysler Corp. 9,800,000 552.475 1.21
Ford Motor Co. 4,100,000 241.900 .53
General Motors Corp. 3,413,000 228.031 .50
Beverages & Tobacco-3.90%
PepsiCo, Inc. 4,407,100 181.517 .40
Philip Morris Companies Inc. 30,900,000 1,216.687 2.67
RJR Nabisco Holdings Corp. 11,135,000 264.456 .58
Seagram Co. Ltd. 2,800,000 114.625 .25
Food & Household Products-1.18%
Archer Daniels Midland Co. 3,150,000 61.031 .13
Bestfoods 1,950,000 113.222 .25
General Mills, Inc. 1,600,000 109.400 .24
Nestle SA 40,000 85.692 .19
Procter & Gamble Co. 900,000 81.956 .18
Unilever NV (New York Registered Shares) 1,114,400 87.968 .19
Health & Personal Care-7.78%
Abbott Laboratories 3,000,000 122.625 .27
Amgen Inc. (1) 900,000 58.838 .13
Avon Products, Inc. 1,345,200 104.253 .23
Boston Scientific Corp. (1) 851,700 61.003 .13
Bristol-Myers Squibb Co. 1,600,000 183.900 .40
Eli Lilly and Co. 4,402,600 290.847 .64
Merck & Co., Inc. 3,000,000 401.250 .88
Pfizer Inc 9,200,000 999.925 2.19
Pharmacia & Upjohn, Inc. 3,247,500 149.791 .33
Schering-Plough Corp. 3,175,600 290.964 .64
Warner-Lambert Co. 9,900,000 686.812 1.51
Zeneca Group PLC 4,450,900 191.154
Zeneca Group PLC (ADR) 99,000 4.344 .43
Recreation & Other Consumer Products-0.17%
Eastman Kodak Co. 1,100,000 80.369 .17
--------- ------
7,069.970 15.50
--------- ------
- ------------------------------------------
Services
- ------------------------------------------
Broadcasting & Publishing-6.42%
Comcast Corp., Class A, special stock 840,000 34.099 .07
Dow Jones & Co., Inc. 2,500,000 139.375 .31
Houston Industries Inc., 7.00% ACES convertible prefer 500,000 37.250 .08
Tele-Communications, Inc., Series A,
Liberty Media Group (1) 12,417,187 481.942 1.06
Tele-Communications, Inc., Series A,
TCI Group (1) 10,050,000 386.297 .85
Time Warner Inc. 12,350,000 1,055.153 2.31
Viacom Inc., Class A (1) 1,134,100 66.345
Viacom Inc., Class B (1) 12,450,000 725.213 1.74
Business & Public Services-2.92%
Browning-Ferris Industries, Inc. 900,000 31.275 .07
Cendant Corp. (1) 19,182,100 400.426 .88
Columbia/HCA Healthcare Corp. 7,518,700 218.982 .48
Electronic Data Systems Corp. 2,415,000 96.600 .21
FDX Corp. (formerly Federal Express Corp.) (1) 1,435,000 90.046 .20
Interpublic Group of Companies, Inc. 2,619,750 158.986 .35
United HealthCare Corp. 1,000,000 63.500 .14
Waste Management, Inc. 7,700,000 269.500 .59
Leisure & Tourism-1.23%
Walt Disney Co. 4,200,000 441.263 .97
McDonald's Corp. 1,722,300 118.839 .26
Merchandising-3.31%
AutoZone, Inc. (1) 2,640,000 84.315 .18
Dillard's Inc. 2,100,000 87.019 .19
Limited Inc. 7,164,700 237.331 .52
Lowe's Companies, Inc. 7,000,000 283.938 .62
May Department Stores Co. 1,800,000 117.900 .26
J.C. Penney Co., Inc. 2,399,700 173.528 .38
Venator Group Inc. (formerly Woolworth Corp.) (1) 5,800,000 110.925 .24
Wal-Mart Stores, Inc. 6,800,000 413.100 .92
Telecommunications-7.23%
AirTouch Communications (1) 5,560,600 324.947 .71
Ameritech Corp. 8,544,600 383.439 .84
AT&T Corp. 11,226,600 641.320 1.41
MCI Communications Corp. 6,975,000 405.422 .89
SBC Communications Inc. 1,800,000 72.000 .16
Sprint Corp. 7,350,000 518.175 1.14
Tele-Communications, Inc., Series A,
TCI Ventures Group (1) 11,863,200 238.005 .52
Telefonica SA (ADR) 1,900,000 264.219 .58
Telefonos de Mexico, SA de CV, Class L (ADR) 3,057,400 146.946 .32
U S WEST, Inc. 3,100,000 145.700 .32
Vodafone Group PLC (ADR) 1,193,000 156.065 .34
Transportation: Airlines-0.59%
AMR Corp. (1) 2,500,000 208.125 .46
Delta Air Lines, Inc. 471,050 60.883 .13
Transportation: Rail & Road-0.21%
Union Pacific Corp. 2,279,200 100.569 .21
--------- ------
9,988.962 21.91
--------- ------
- ------------------------------------------
Finance
- ------------------------------------------
Banking-8.53%
H.F. Ahmanson & Co. 2,400,000 170.399 .37
Banc One Corp. 3,520,000 196.459 .43
BankAmerica Corp. 6,200,000 535.913 1.18
Bankers Trust New York Corp. 1,077,400 125.046 .27
Chase Manhattan Corp. 7,200,000 543.600 1.19
Citicorp 500,000 74.625 .16
Comerica Inc. 1,100,000 72.875 .16
First Chicago NBD Corp. 800,000 70.899 .16
First Union Corp. 8,455,000 492.504 1.08
Fleet Financial Group, Inc. 600,000 50.100 .11
KeyCorp 5,500,000 195.938 .43
National City Corp. 1,000,000 71.000 .16
Norwest Corp. 2,500,000 93.438 .20
PNC Bank Corp. 1,200,000 64.575 .14
Toronto-Dominion Bank 3,580,000 162.118 .36
U.S. Bancorp 2,831,250 121.744 .27
Wachovia Corp. 900,000 76.050 .17
Washington Mutual, Inc. 10,525,000 457.180 1.00
Wells Fargo & Co. 850,000 313.650 .69
Financial Services-5.39%
Associates First Capital Corp., Class A 1,074,548 82.606 .18
Fannie Mae 19,796,800 1,202.656 2.64
Freddie Mac 7,700,000 362.381 .79
Household International, Inc. 9,000,000 447.750 .98
SLM Holding Corp. 7,357,000 360.493 .80
Insurance-3.39%
Aetna Inc. 1,620,000 123.323 .27
Allstate Corp. 2,113,000 193.472 .42
American General Corp. 1,710,000 121.731 .27
American International Group, Inc. 2,733,750 399.128 .88
CIGNA Corp. 600,000 41.400 .09
General Re Corp. 1,217,800 308.712 .68
Lincoln National Corp. 1,050,000 95.944 .21
SAFECO Corp. 1,600,000 72.700 .16
St. Paul Companies, Inc. 4,480,000 188.440 .41
--------- ------
7,888.849 17.31
--------- ------
- ------------------------------------------
Other
- ------------------------------------------
Multi-Industry-0.68%
AlliedSignal Inc. 2,700,000 119.812 .26
Canadian Pacific Ltd. (1) 2,300,000 65.262 .14
Minnesota Mining and Manufacturing Co. 120,000 9.862 .02
Textron Inc. 1,600,000 114.700 .26
Gold Mines -0.52%
Barrick Gold Corp. 4,400,000 84.425 .19
Newmont Mining Corp. 3,500,000 82.687 .18
Placer Dome Inc. 6,000,000 70.500 .15
Miscellaneous-3.48%
Equity securities in initial period of 1,591.630
acquisition 3.48
--------- ------
2,138.878 4.68
--------- ------
Total Equity Securities (cost: $21,116.534
million) 39,229.601 86.03
--------- ------
Principal
- ------------------------------------------ Amount
Bonds & Notes (millions)
- ------------------------------------------ ---------
U.S. Treasuries-2.23%
5.875% July 1999 $250.000 250.898 .55
6.00% August 1999 250.000 250.273 .55
5.625% October 1999 250.000 251.133 .55
5.875% November 1999 250.000 251.290 .55
11.625% November 2004 10.000 13.222 .03
--------- ------
Total Bonds & Notes (cost: $1,009.547 million) 1,016.816 2.23
--------- ------
Total Investment Securities (cost: $22,126.081
million) 40,246.417 88.26
--------- ------
- ------------------------------------------
Short-Term Securities
- ------------------------------------------
U.S. Treasuries and Other Federal Agencies-7.00%
Treasury Notes 4.75%-8.875% due 8/31-12/31/98 875.000 875.352 1.92
Treasury Bills 5.23% due 8/20/98 90.800 90.191 .20
Fannie Mae 5.33%-5.45% due 7/17-9/25/98 424.752 421.775 .92
Federal Home Loan Banks 5.37%-5.40%
due 7/17-9/25/98 755.714 749.111 1.64
Freddie Mac 5.38%-5.45% due 7/1-10/6/98 1,003.245 995.014 2.18
International Bank for Reconconstruction and Development
5.33% due 8/19/98 65.000 64.508 .14
Corporate Short-Term Notes-4.72%
American Express Credit Corp. 5.10%-5.50%
due 7/31-9/17/98 90.000 89.385 .20
American General Finance Corp. 5.10%-5.50%
due 7/21-8/5/98 60.800 60.573 .13
Ameritech Corp. 5.49% due 8/11-8/12/98 (3) 70.000 69.544 .15
Amoco Co. 5.44%-5.47% due 7/9-7/30/98 61.100 60.950 .13
Atlantic Richfield Co. 5.42%-5.48% due 7/9-7/13/98 95.000 94.842 .21
Bell Atlantic Financial Services, Inc. 5.48%-5.53%
due 7/7-7/27/98 84.500 84.343 .19
BellSouth Telecommunications, Inc. 5.46%-5.48%
due 7/23-9/11/98 92.000 91.301 .20
Campbell Soup Co. 5.48%-5.485% due 7/23-7/31/98 69.700 69.395 .15
Coca-Cola Co. 5.47%-5.50% due 7/21-9/15/98 121.500 120.636 .27
E.I. du Pont de Nemours and Co. 5.47%-5.50%
due 7/22-8/17/98 109.700 109.098 .24
Duke Energy Corp. 5.47%-5.48% due 7/14-8/27/98 84.000 83.515 .18
Emerson Electric Co. 5.46%-5.52% due 8/13-9/28/98 98.000 96.995 .21
Ford Motor Credit Co. 5.48%-5.51% due 7/8-9/11/98 119.700 118.826 .26
General Electric Capital Corp. 5.51%-5.53%
due 8/3-9/14/98 138.500 137.342 .30
Gillette Co. 5.47% due 8/24-8/25/98 (3) 60.000 59.488 .13
H.J. Heinz Co. 5.49%-5.52% due 7/7-8/11/98 102.800 102.476 .23
IBM Credit Corp. 5.47%-5.60% due 7/2-8/4/98 89.800 89.499 .20
Kimberly-Clark Corp. 5.48% due 7/28-7/30/98 (3) 41.600 41.416 .09
Lucent Technologies Inc. 5.46%-5.49% due 7/6-8/24/98 90.600 90.242 .20
Minnesota Mining and Manufacturing Co. 5.44%-5.48%
due 7/16-8/20/98 63.300 62.982 .14
Monsanto Co. 5.46%-5.49% due 7/7-7/23/98 33.900 33.802
Monsanto Co. 5.50%-5.52% due 7/16-8/24/98 (3) 30.000 29.807 .14
Motorola, Inc. 5.48%-5.50% due 7/14-9/25/98 83.300 82.616 .18
Procter & Gamble Co. 5.48%-5.50% due 7/22-8/21/98 108.400 107.846 .24
Shell Oil Co. 5.46%-5.47% due 7/16-7/29/98 74.200 73.933 .16
Xerox Corp. 5.47%-5.51% due 7/2-8/26/98 88.200 87.597 .19
Total Short-Term Securities
(cost: $5,346.301 million) 5,344.400 11.72
Excess of cash and receivables over payables 9.757 .02
--------- ------
Total Short-Term Securities, Cash and Receivables,
Net of Payables 5,354.157 11.74
----------- ---------
Net Assets $45,600.574 100.00%
============ =========
(1) Non-income-producing securities.
(2) The fund owns 5.21% of the outstanding voting
securities of Cummins Engine Co., which represents
investment in an affiliate as defined in the Investment
Company Act of 1940.
(3) Purchased in a private placement transaction;
resale to the public may require registration or
sale only to qualified institutional buyers.
ADR = American Depositary Receipts
See Notes to Financial Statements
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The Investment Company of America Unaudited
- ----------------------------------------- --------- ---------
Statement of Assets and Liabilities (dollars in
at June 30, 1998 millions)
- ---------------------------------------- --------- ---------
Assets:
Investment securities at market
(cost: $22,126.081) $40,246.417
Short-term securities at market
(cost: $5,346.301) 5,344.400
Cash .387
Receivables for-
Sales of investments $ 94.306
Sales of fund's shares 859.117
Dividends and accrued interest 81.836 1,035.259
--------- ---------
46,626.463
Liabilities:
Payables for-
Purchases of investments 906.782
Repurchases of fund's shares 101.240
Management services 9.362
Accrued expenses 8.505 1,025.889
--------- ---------
Net Assets at June 30, 1998-
Equivalent to $31.36 per share on
1,453,987,752 shares of $1 par value
capital stock outstanding (authorized
capital stock--2,000,000,000 shares) $45,600.574
=============
Unaudited
Statement of Operations (dollars in
for the six months ended June 30, 1998 millions)
- ----------------------------------------- --------- ---------
Investment Income:
Income:
Dividends $313.668
Interest 162.287 $ 475.955
---------
Expenses:
Management services fee 53.741
Distribution expenses 49.181
Transfer agent fee 11.272
Reports to shareholders 1.690
Registration statement and
prospectus 1.642
Postage, stationery and supplies 3.662
Directors' fees .207
Auditing and legal fees .096
Custodian fee .287
Taxes other than federal income tax .365
Other expenses .162 122.305
--------- ---------
Net investment income 353.650
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 2,075.817
Net increase in unrealized
appreciation on investments 2,787.687
---------
Net realized gain and increase in
unrealized appreciation on investments 4,863.504
---------
Net Increase in Net Assets Resulting
from Operations $ 5,217.154
============
- ---------------------------------------- -------------
(dollars in
millions)
Six months
ended Year ended
Statement of Changes in Net Assets 6/30/98* 12/31/97
- ----------------------------------------- ------------- -------------
Operations:
Net investment income $ 353.650 $ 678.160
Net realized gain on investments 2,075.817 3,800.223
Net increase in unrealized
appreciation on investments 2,787.687 4,685.662
------------ ------------
Net increase in net assets
resulting from operations 5,217.154 9,164.045
----------- ------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net investment income (340.223) (639.699)
Distributions from net realized
gain on investments (464.844) (3,345.342)
---------- ----------
Total dividends and distributions (805.067) (3,985.041)
---------- ----------
Capital Share Transactions:
Proceeds from shares sold: 103,920,406
and 142,732,538 shares, respectively 3,167.453 3,966.602
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 24,525,036 and 132,253,234
shares, respectively 738.754 3,660.294
Cost of shares repurchased: 80,361,655
and 143,511,101 shares, respectively (2,435.393) (3,963.699)
---------- ----------
Net increase in net assets resulting from
capital share transactions 1,470.814 3,663.197
---------- ----------
Total Increase in Net Assets 5,882.901 8,842.201
Net Assets:
Beginning of period 39,717.673 30,875.472
---------- ----------
End of period (including undistributed
net investment income: $333.717
and $320.290, respectively) $45,600.574 $39,717.673
============ ============
* Unaudited
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. THE INVESTMENT COMPANY OF AMERICA, INC. (THE "FUND") IS REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940 AS AN OPEN-END, DIVERSIFIED MANAGEMENT
INVESTMENT COMPANY. THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL AND INCOME,
PLACING GREATER EMPHASIS ON FUTURE DIVIDENDS THAN ON CURRENT INCOME. THE
FOLLOWING PARAGRAPHS SUMMARIZE THE SIGNIFICANT ACCOUNTING POLICIES CONSISTENTLY
FOLLOWED BY THE FUND IN THE PREPARATION OF ITS FINANCIAL STATEMENTS:
EQUITY SECURITIES, INCLUDING DEPOSITARY RECEIPTS, ARE VALUED AT THE LAST
REPORTED SALE PRICE ON THE EXCHANGE OR MARKET ON WHICH SUCH SECURITIES ARE
TRADED, AS OF THE CLOSE OF BUSINESS ON THE DAY THE SECURITIES ARE BEING VALUED
OR, LACKING ANY SALES, AT THE LAST AVAILABLE BID PRICE. IN CASES WHERE EQUITY
SECURITIES ARE TRADED ON MORE THAN ONE EXCHANGE, THE SECURITIES ARE VALUED ON
THE EXCHANGE OR MARKET DETERMINED BY THE INVESTMENT ADVISER TO BE THE BROADEST
AND MOST REPRESENTATIVE MARKET, WHICH MAY BE EITHER A SECURITIES EXCHANGE OR
THE OVER-THE-COUNTER MARKET. FIXED-INCOME SECURITIES ARE VALUED AT PRICES
OBTAINED FROM A PRICING SERVICE, 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 QUOTED BID AND ASKED PRICES OR AT PRICES
FOR SECURITIES OF COMPARABLE MATURITY, QUALITY AND TYPE. SECURITIES WITH
ORIGINAL MATURITIES OF ONE YEAR OR LESS HAVING 60 DAYS OR LESS TO MATURITY ARE
AMORTIZED TO MATURITY BASED ON THEIR COST IF ACQUIRED WITHIN 60 DAYS OF
MATURITY OR, IF ALREADY HELD ON THE 60TH DAY, BASED ON THE VALUE DETERMINED ON
THE 61ST DAY. ASSETS OR LIABILITIES INITIALLY EXPRESSED IN TERMS OF FOREIGN
CURRENCIES ARE TRANSLATED INTO U.S. DOLLARS AT THE PREVAILING MARKET RATES AT
THE END OF THE REPORTING PERIOD. PURCHASES AND SALES OF SECURITIES AND INCOME
AND EXPENSES ARE TRANSLATED INTO U.S. DOLLARS AT THE PREVAILING MARKET RATES ON
THE DATES OF SUCH TRANSACTIONS. THE EFFECTS OF CHANGES IN FOREIGN CURRENCY
EXCHANGE RATES ON INVESTMENT SECURITIES ARE INCLUDED WITH THE NET REALIZED AND
UNREALIZED GAIN OR LOSS ON INVESTMENT SECURITIES. SECURITIES AND ASSETS FOR
WHICH REPRESENTATIVE MARKET QUOTATIONS ARE NOT READILY AVAILABLE ARE VALUED AT
FAIR VALUE AS DETERMINED IN GOOD FAITH BY A COMMITTEE APPOINTED BY THE BOARD OF
DIRECTORS.
AS IS CUSTOMARY IN THE MUTUAL FUND INDUSTRY, SECURITIES TRANSACTIONS ARE
ACCOUNTED FOR ON THE DATE THE SECURITIES ARE PURCHASED OR SOLD. REALIZED GAINS
AND LOSSES FROM SECURITIES TRANSACTIONS ARE REPORTED ON AN IDENTIFIED COST
BASIS. DIVIDEND AND INTEREST INCOME IS REPORTED ON THE ACCRUAL BASIS. DISCOUNTS
ON SECURITIES PURCHASED ARE AMORTIZED. THE FUND DOES NOT AMORTIZE PREMIUMS ON
SECURITIES PURCHASED. DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS ARE
RECORDED ON THE EX-DIVIDEND DATE.
2. IT IS THE FUND'S POLICY TO CONTINUE TO COMPLY WITH THE REQUIREMENTS OF THE
INTERNAL REVENUE CODE APPLICABLE TO REGULATED INVESTMENT COMPANIES AND TO
DISTRIBUTE ALL OF ITS NET TAXABLE INCOME, INCLUDING ANY NET REALIZED GAIN ON
INVESTMENTS, TO ITS SHAREHOLDERS. THEREFORE, NO FEDERAL INCOME TAX PROVISION IS
REQUIRED.
AS OF JUNE 30, 1998, NET UNREALIZED APPRECIATION ON INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES AGGREGATED $18,128,625,000, OF WHICH $18,785,757,000
RELATED TO APPRECIATED SECURITIES AND $657,132,000 RELATED TO DEPRECIATED
SECURITIES. DURING THE SIX MONTHS ENDED JUNE 30, 1998, THE FUND REALIZED, ON A
TAX BASIS, A NET CAPITAL GAIN OF $2,075,910,000 ON SECURITIES TRANSACTIONS. NET
LOSSES RELATED TO NON-U.S. CURRENCY TRANSACTIONS OF $93,000 WERE TREATED AS AN
ADJUSTMENT TO ORDINARY INCOME FOR FEDERAL INCOME TAX PURPOSES. THE COST OF
PORTFOLIO SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS $27,462,192,000 AT
JUNE 30, 1998.
3. THE FEE OF $53,741,000 FOR MANAGEMENT SERVICES WAS INCURRED PURSUANT TO AN
AGREEMENT WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY (CRMC), WITH WHICH
CERTAIN OFFICERS AND DIRECTORS OF THE FUND ARE AFFILIATED. THE INVESTMENT
ADVISORY AND SERVICE AGREEMENT PROVIDES FOR MONTHLY FEES, ACCRUED DAILY, BASED
ON AN ANNUAL RATE OF 0.39% OF THE FIRST $1 BILLION OF NET ASSETS; 0.336% OF
SUCH ASSETS IN EXCESS OF $1 BILLION BUT NOT EXCEEDING $2 BILLION; 0.30% OF SUCH
ASSETS IN EXCESS OF $2 BILLION BUT NOT EXCEEDING $3 BILLION; 0.276% OF SUCH
ASSETS IN EXCESS OF $3 BILLION BUT NOT EXCEEDING $5 BILLION; 0.258% OF SUCH
ASSETS IN EXCESS OF $5 BILLION BUT NOT EXCEEDING $8 BILLION; 0.246% OF SUCH
ASSETS IN EXCESS OF $8 BILLION BUT NOT EXCEEDING $13 BILLION; 0.24% OF SUCH
ASSETS IN EXCESS OF $13 BILLION BUT NOT EXCEEDING $21 BILLION; 0.235% OF SUCH
ASSETS IN EXCESS OF $21 BILLION BUT NOT EXCEEDING $34 BILLION; AND 0.231% OF
SUCH ASSETS IN EXCESS OF $34 BILLION.
PURSUANT TO A PLAN OF DISTRIBUTION, THE FUND MAY EXPEND UP TO 0.25% OF ITS
AVERAGE NET ASSETS ANNUALLY FOR ANY ACTIVITIES PRIMARILY INTENDED TO RESULT IN
SALES OF FUND SHARES, PROVIDED THE CATEGORIES OF EXPENSES FOR WHICH
REIMBURSEMENT IS MADE ARE APPROVED BY THE FUND'S BOARD OF DIRECTORS. FUND
EXPENSES UNDER THE PLAN INCLUDE PAYMENTS TO DEALERS TO COMPENSATE THEM FOR
THEIR SELLING AND SERVICING EFFORTS. DURING THE SIX MONTHS ENDED JUNE 30, 1998,
DISTRIBUTION EXPENSES UNDER THE PLAN WERE $49,181,000. AS OF JUNE 30, 1998,
ACCRUED AND UNPAID DISTRIBUTION EXPENSES WERE $7,688,000.
AMERICAN FUNDS SERVICE COMPANY (AFS), THE TRANSFER AGENT FOR THE FUND, WAS
PAID A FEE OF $11,272,000. AMERICAN FUNDS DISTRIBUTORS, INC. (AFD), THE
PRINCIPAL UNDERWRITER OF THE FUND'S SHARES, RECEIVED $10,234,000 (AFTER
ALLOWANCES TO DEALERS) AS ITS PORTION OF THE SALES CHARGES PAID BY PURCHASERS
OF THE FUND'S SHARES. SUCH SALES CHARGES ARE NOT AN EXPENSE OF THE FUND AND,
HENCE, ARE NOT REFLECTED IN THE ACCOMPANYING STATEMENT OF OPERATIONS.
DIRECTORS AND ADVISORY BOARD MEMBERS WHO ARE UNAFFILIATED WITH CRMC MAY ELECT
TO DEFER PART OR ALL OF THE FEES EARNED FOR SERVICES AS MEMBERS OF THE BOARD.
AMOUNTS DEFERRED ARE NOT FUNDED AND ARE GENERAL UNSECURED LIABILITIES OF THE
FUND. AS OF JUNE 30, 1998, AGGREGATE AMOUNTS DEFERRED AND EARNINGS THEREON WERE
$711,000.
CRMC IS OWNED BY THE CAPITAL GROUP COMPANIES, INC. AFS AND AFD ARE BOTH WHOLLY
OWNED SUBSIDIARIES OF CRMC. CERTAIN DIRECTORS AND OFFICERS OF THE FUND ARE OR
MAY BE CONSIDERED TO BE AFFILIATED WITH CRMC, AFS AND AFD. NO SUCH PERSONS
RECEIVED ANY REMUNERATION DIRECTLY FROM THE FUND.
4. OPTION WARRANTS ARE OUTSTANDING, WHICH MAY BE EXERCISED AT ANY TIME FOR THE
PURCHASE OF 835,212 SHARES OF THE FUND AT APPROXIMATELY $5.242 PER SHARE. IF
ALL WARRANTS HAD BEEN EXERCISED ON JUNE 30, 1998, THE NET ASSETS OF THE FUND
WOULD HAVE BEEN $45,604,953,000; THE SHARES OUTSTANDING WOULD HAVE BEEN
1,454,823,000; AND THE NET ASSET VALUE WOULD HAVE BEEN EQUIVALENT TO $31.35 PER
SHARE. DURING THE SIX MONTHS ENDED JUNE 30, 1998, 125 WARRANTS WERE EXERCISED
FOR THE PURCHASE OF 2,742 SHARES.
5. AS OF JUNE 30, 1998, ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN ON
INVESTMENTS AND CURRENCY TRANSACTIONS WAS $2,065,978,000 AND ADDITIONAL PAID-IN
CAPITAL WAS $23,628,512,000.
THE FUND MADE PURCHASES AND SALES OF INVESTMENT SECURITIES, EXCLUDING
SHORT-TERM SECURITIES, OF $4,897,503,000 AND $4,433,600,000, RESPECTIVELY,
DURING THE SIX MONTHS ENDED JUNE 30, 1998.
PURSUANT TO THE CUSTODIAN AGREEMENT, THE FUND RECEIVES CREDITS AGAINST ITS
CUSTODIAN FEE FOR IMPUTED INTEREST ON CERTAIN BALANCES WITH THE CUSTODIAN BANK.
THE CUSTODIAN FEE OF $287,000 INCLUDES $26,000 THAT WAS PAID BY THESE CREDITS
RATHER THAN IN CASH.
DIVIDEND AND INTEREST INCOME IS RECORDED NET OF NON-U.S. TAXES PAID. FOR THE
SIX MONTHS ENDED JUNE 30, 1998, SUCH NON-U.S. TAXES WERE $5,483,000. NET
REALIZED CURRENCY LOSSES ON DIVIDENDS AND WITHHOLDING TAXES RECLAIMABLE, ON A
BOOK BASIS, WERE $93,000 FOR THE SIX MONTHS ENDED JUNE 30, 1998.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year
Per-Share Data and Ratios Six months ended
ended December
June 30, 31
1998 (1) 1997 1996 1995 1994 1993
---------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of
Period $28.25 $24.23 $21.61 $17.67 $18.72 $17.89
---------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income .24 .51 .49 .52 .51 .54
Net realized and unrealized
gain (loss) on investments 3.44 6.61 3.66 4.83 (.48) 1.51
---------- ------- ------- ------- ------- -------
Total income from
investment operations 3.68 7.12 4.15 5.35 .03 2.05
---------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.24) (.50) (.50) (.50) (.48) (.47)
Distributions from net
realized gains (.33) (2.60) (1.03) (.91) (.60) (.75)
---------- ------- ------- ------- ------- -------
Total distributions (.57) (3.10) (1.53) (1.41) (1.08) (1.22)
---------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $31.36 $28.25 $24.23 $21.61 $17.67 $18.72
========== ======= ======= ======= ======= =======
Total Return (2) 13.12% (3) 29.81% 19.35% 30.63% .16% 11.62%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $45,601 $39,718 $30,875 $25,678 $19,280 $19,005
Ratio of expenses to average
net assets .28% .56% .59% .60% .60% .59%
Ratio of net income to average
net assets .82% (3) 1.90% 2.17% 2.70% 2.83% 3.03%
Average commissions paid
per share (4) 4.67c 4.87c 5.79c 6.16c 5.11c 6.20c
Portfolio turnover -
common stocks 11.99% (3) 24.08% 17.46% 20.91% 17.94% 19.57%
Portfolio turnover -
investment securities 11.40% (3) 26.02% 19.56% 20.37% 31.08% 17.57%
(1) Unaudited
(2) Excludes maximum sales charge of 5.75%.
(3) Based on operations for the period shown and,
accordingly, not representative of a full year.
(4) Brokerage commissions paid on portfolio
transactions increase the cost of
securities purchased or reduce the
proceeds of securities sold and are
not separately reflected in the fund's statement
of operations. Shares traded on a
principal basis (without commissions), such as most
over-the-counter and fixed-income
transactions, are excluded.
Generally, non-U.S. commissions
are lower than U.S. commissions when
expressed as cents per share but higher when
expressed as a percentage of transaction amount
because of the lower per-share prices of many
non-U.S. securities.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
RESULT OF ANNUAL MEETING OF SHAREHOLDERS HELD APRIL 28, 1998
Shares Outstanding on March 2, 1998 (record date) 1,408,059,467
Shares Voting on April 28, 1998 902,621,206 (64.1%)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ELECTION OF DIRECTORS
Director Votes For Percent of Votes Shares
Shares Withheld Withheld
Voting For
Charles H. Black 872,737,876 97% 29,883,330 3%
Ann S. Bowers 873,382,722 97 29,238,484 3
Malcolm R. Currie 873,002,558 97 29,618,648 3
William R. Grimsley 873,612,544 97 29,008,662 3
Jon B. Lovelace, Jr. 872,982,254 97 29,638,952 3
John G. McDonald 873,143,646 97 29,477,560 3
Bailey Morris-Eck 872,880,106 97 29,741,100 3
Richard G. Newman 873,052,773 97 29,568,433 3
William C. Newton 873,370,603 97 29,250,603 3
James W. Ratzlaff 873,382,988 97 29,238,218 3
Olin C. Robison 872,940,445 97 29,680,761 3
R. Michael Shanahan 873,620,762 97 29,000,444 3
William J. Spencer 873,312,005 97 29,309,201 3
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
RATIFICATION OF AUDITORS
Votes For Percent of Votes Against Percent of Abstentions Percent of
Shares Shares Shares
Voting For Voting Against Abstaining
Price 874,995,697 97.0% 4,134,312 0.5% 23,491,197 2.5%
Waterhouse llp
[THE AMERICAN FUNDS GROUP(R)]
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH
AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers llp
400 South Hope Street
Los Angeles, California 90071-2899
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
This report is for the information of shareholders of The Investment Company of
America, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after September 30, 1998, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Printed on recycled paper
Litho in USA BDA/FS/3980
Lit. No. ICA-013-0898
45049/15047
</TABLE>
