<PAGE>
The Investment Company of America/(R)/
Prospectus
MARCH 15, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
---------------------------------------------------------
THE INVESTMENT COMPANY OF AMERICA
333 South Hope Street
Los Angeles, California 90071
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Fund 5
-------------------------------------------------------
Investment Objectives, Strategies and Risks 6
-------------------------------------------------------
Management and Organization 9
-------------------------------------------------------
Shareholder Information 12
-------------------------------------------------------
Choosing a Share Class 13
-------------------------------------------------------
Purchase and Exchange of Shares 14
-------------------------------------------------------
Sales Charges 15
-------------------------------------------------------
Sales Charge Reductions and Waivers 17
-------------------------------------------------------
Plans of Distribution 18
-------------------------------------------------------
How to Sell Shares 19
-------------------------------------------------------
Distributions and Taxes 20
-------------------------------------------------------
Financial Highlights 21
-------------------------------------------------------
</TABLE>
1
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
ICA-010-0300/B
<PAGE>
---------------------------------------------------------
RISK/RETURN SUMMARY
The fund seeks to make your investment grow and provide you with income over
time by investing primarily in common stocks that offer growth and dividend
potential.
The fund is designed for investors seeking both capital appreciation and
income. An investment in the fund is subject to risks, including the
possibility that the fund may decline in value in response to economic,
political or social events in the U.S. or abroad. The prices of equity
securities owned by the fund may be affected by events specifically involving
the companies issuing those securities. The fund's equity investments are
limited to securities included on its eligible list, which consists of
securities that are deemed suitable by the fund's board of directors in light
of the fund's investment objectives and policies.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.
2
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
INVESTMENT RESULTS
The following information provides some indication of the risks of investing in
the fund by showing changes in the fund's investment results from year to year
and by showing how the fund's average annual returns for various periods
compare with those of a broad measure of market performance. Past results are
not an indication of future results.
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
(Results do not include a sales charge; if one were included, results would
be lower.)
------------------------------------------------------------------------------
[bar chart]
1990 0.68%
1991 26.54%
1992 6.99%
1993 11.62%
1994 0.16%
1995 30.63%
1996 19.35%
1997 29.81%
1998 23.94%
1999 16.56%
[end bar chart]
The fund's highest/lowest quarterly results during this time period were:
<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 17.34% (quarter ended December 31, 1998)
LOWEST -10.84% (quarter ended September 30, 1990)
</TABLE>
3
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
Class A/1/
(with the maximum sales charge 9.84% 22.27% 15.33% 13.62%
deducted)
------------------------------------------------------------------------------
Class B/2/ N/A N/A N/A N/A
------------------------------------------------------------------------------
S&P 500/3/ 21.01% 28.49% 18.17% 12.43%
------------------------------------------------------------------------------
Lipper Growth and Income Index/4/ 11.86% 20.60% 14.38% N/A
------------------------------------------------------------------------------
Lipper Large-Cap Value Index/5/ 10.78% 22.11% 15.42% N/A
------------------------------------------------------------------------------
</TABLE>
Class A yield: 1.45%
(For current yield information, please call American FundsLine/r/ at
1-800-325-3590)
1 The fund began investment operations for Class A shares on January 1, 1934
(its first full month of investment operations).
2 The fund is beginning investment operations for Class B shares on March 15,
2000.
3 The Standard & Poor's 500 Composite Index is an asset-weighted, broad-based
measurement of changes in stock market conditions based on the average
performance of 500 widely held common stocks. This index is unmanaged and does
not reflect sales charges, commissions or expenses. The lifetime figure is
from the date the fund's Class A shares began investment operations.
4 The Lipper Growth and Income Funds Index is an equally weighted performance
index that represents funds that combine a growth-of-earnings orientation and
an income requirement for level and/or rising dividends. The results of the
underlying funds in the index include the reinvestment of dividend and capital
gain distributions but do not reflect sales charges and commissions. This
index was not in existence as of the date the fund began investment operations
in 1934, therefore, lifetime results are not available.
5 The Lipper Large-Cap Value Funds Index is an equally weighted performance
index that represents funds which, by practice, invest at least 75% of their
equity assets in companies with large market capitalizations. Large-cap value
funds seek long-term growth of capital by investing in companies that are
considered to be undervalued relative to a major unmanaged stock index based
on price-to-current earnings or other factors. The results of the underlying
funds in the index include the reinvestment of dividend and capital gain
contributions, but do not reflect sales charges and commissions. This index
was not in existence as of the date the fund began investment operations in
1934, therefore, lifetime results are not available.
Unlike the bar chart on the previous page, this table reflects the fund's
investment results with the maximum initial or deferred sales charge deducted,
as required by Securities and Exchange Commission rules. Class A share results
are shown with the maximum initial sales charge of 5.75% deducted. Sales
charges are reduced for purchases of $25,000 or more. Results would be higher
if they were calculated at net asset value. All fund results reflect the
reinvestment of dividend and capital gain distributions.
Class B shares are subject to a maximum deferred sales charge of 5.00% if
shares are redeemed within the first year of purchasing them. The deferred
sales charge declines thereafter until it reaches 0% after six years. Class B
shares convert to Class A shares after eight years. Since the fund's Class B
shares begin investment operations on March 15, 2000, no results are available
as of the date of this prospectus.
4
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
FEES AND EXPENSES OF THE FUND
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases 5.75%/1/ 0.00%
(as a percentage of offering price)
--------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00% 0.00%
--------------------------------------------------------------------------
Maximum deferred sales charge 0.00%/2/ 5.00%/3/
--------------------------------------------------------------------------
Redemption or exchange fees 0.00% 0.00%
</TABLE>
1 Sales charges are reduced or eliminated for purchases of $25,000 or more.
2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases of $1 million or more made without a
sales charge.
3 Deferred sales charges are reduced after 12 months and eliminated after six
years.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets) CLASS A CLASS B/1/
-----------------------------------------------
<S> <C> <C>
Management Fees 0.24% 0.24%
Distribution and/or Service (12b-1) Fees 0.23%/2/ 1.00%/3/
Other Expenses 0.08% 0.08%
Total Annual Fund Operating Expenses 0.55% 1.32%
</TABLE>
1 Based on estimated amounts for the current fiscal year.
2 Class A 12b-1 expenses may not exceed 0.25% of the fund's average net assets
annually.
3 Class B 12b-1 expenses may not exceed 1.00% of the fund's average net assets
annually.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated, that your investment
has a 5% return each year and that the fund's operating expenses remain the
same as shown above. The Class A example reflects the maximum initial sales
charge in Year One. The Class B-assuming redemption example reflects applicable
contingent deferred sales charges through Year Six (after which time they are
eliminated). Both Class B examples reflect Class A expenses for Years 9 and 10
since Class B shares automatically convert to Class A after eight years.
Although your actual costs may be higher or lower, based on these assumptions
your cumulative expenses would be:
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
<S> <C> <C> <C> <C>
Class A $628 $741 $865 $1,225
----------------------------------------------------------------------------
Class B - assuming redemption $634 $818 $923 $1,378
Class B - assuming no redemption $134 $418 $723 $1,378
</TABLE>
5
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund's investment objectives are to achieve long-term growth of capital and
income. The fund strives to accomplish these objectives through extensive
global research, careful selection, and broad diversification. In the
selection of securities for investment, potential for capital appreciation and
future dividends are given more weight than current yield. The fund invests
primarily in common stocks. The fund's investments are limited to securities
included on its eligible list, which consists of securities deemed suitable 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 the investment adviser.
The values of equity securities held by the fund may decline in response to
certain events, including those directly involving the companies whose
securities are owned in the fund, adverse conditions affecting the general
economy, overall market declines, world political, social and economic
instability, and currency fluctuations.
The fund may also hold cash or money market instruments. The size of the fund's
cash position will vary and will depend on various factors, including market
conditions and purchases and redemptions of fund shares. A larger cash position
could detract from the achievement of the fund's objectives, but it also would
reduce the fund's exposure in the event of a market downturn and provide
liquidity to make additional investments or to meet redemptions.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of the investment adviser is to
seek undervalued securities that represent good long-term investment
opportunities. Securities may be sold when the investment adviser believes they
no longer represent good long-term value.
OTHER IMPORTANT INVESTMENT PRACTICES
In addition to the principal investment strategies described above, the fund
has other investment practices that are described here and in the statement of
additional information.
The fund may invest in securities of issuers domiciled outside the U.S. and not
included in the Standard & Poor's 500 Composite Index. Investments outside the
U.S. may be subject to certain risks. For example, the prices of non-U.S.
securities can decline in response to currency fluctuations or political,
social and economic instability.
6
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
ADDITIONAL INVESTMENT RESULTS
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN/1/ ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
Class A/2/ 16.56% 23.73% 16.02% 13.72%
(with no sales charge deducted)
------------------------------------------------------------------------------
Class B/3/ N/A N/A N/A N/A
------------------------------------------------------------------------------
Lipper Growth and Income Index/4/ 11.86% 20.60% 14.38% N/A
------------------------------------------------------------------------------
Lipper Large-Cap Value Index/5/ 10.78% 22.11% 15.42% N/A
------------------------------------------------------------------------------
</TABLE>
1 These fund results were calculated at net asset value according to a formula
that is required for all stock and bond funds and include the reinvestment of
dividend and capital gain distributions.
2 The fund began investment operations for Class A shares on January 1, 1934
(its first full month of investment operations).
3 The fund is beginning investment operations for Class B shares on March 15,
2000.
4 The Lipper Growth and Income Funds Index is an equally weighted performance
index that represents funds that combine a growth-of-earnings orientation and
an income requirement for level and/or rising dividends. The results of the
underlying funds in the index include the reinvestment of dividend and capital
gain distributions but do not reflect sales charges and commissions. This
index was not in existence as of the date the fund began investment operations
in 1934, therefore, lifetime results are not available.
5 The Lipper Large-Cap Value Funds Index is an equally weighted performance
index that represents funds which, by practice, invest at least 75% of their
equity assets in companies with large market capitalizations. Large-cap value
funds seek long-term growth of capital by investing in companies that are
considered to be undervalued relative to a major unmanaged stock index based
on price-to-current earnings or other factors. The results of the underlying
funds in the index include the reinvestment of dividend and capital gain
contributions, but do not reflect sales charges and commissions. This index
was not in existence as of the date the fund began investment operations in
1934, therefore, lifetime results are not available.
7
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
The following chart illustrates the asset mix of the fund's investment
portfolio as of the end of the fund's fiscal year, December 31, 1999.
<TABLE>
<CAPTION>
PERCENT OF
LARGEST INVESTMENT CATEGORIES NET ASSETS
----------------------------------------------------------------------------------
<S> <C>
Services 26.25%
----------------------------------------------------------------------------------
Capital Equipment 21.02
----------------------------------------------------------------------------------
Consumer Goods 12.44
----------------------------------------------------------------------------------
LARGEST INDUSTRY HOLDINGS
----------------------------------------------------------------------------------
Data Processing & Reproduction 10.43%
----------------------------------------------------------------------------------
Broadcasting & Publishing 8.64
----------------------------------------------------------------------------------
Diversified Telecommunication Services 7.68
----------------------------------------------------------------------------------
Health & Personal Care 6.53
----------------------------------------------------------------------------------
Energy Sources 5.26
----------------------------------------------------------------------------------
LARGEST INDIVIDUAL HOLDINGS
----------------------------------------------------------------------------------
Viacom 2.94%
----------------------------------------------------------------------------------
Time Warner 2.40
----------------------------------------------------------------------------------
Oracle 2.15
----------------------------------------------------------------------------------
Fannie Mae 2.11
----------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group 2.07
----------------------------------------------------------------------------------
Microsoft 1.87
----------------------------------------------------------------------------------
Cendant 1.81
----------------------------------------------------------------------------------
AT&T 1.78
----------------------------------------------------------------------------------
Sprint FON Group 1.78
----------------------------------------------------------------------------------
Philip Morris 1.61
</TABLE>
Because the fund is actively managed, its holdings will change from time to
time.
8
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as 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 total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is discussed earlier under
"Fees and Expenses of the Fund."
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.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a 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 a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for The Investment Company of America are listed on the
following page.
9
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
YEARS OF EXPERIENCE AS AN INVESTMENT PROFESSIONAL
AS PORTFOLIO COUNSELOR (INCLUDING THE LAST FIVE YEARS)
PORTFOLIO COUNSELORS (AND RESEARCH PROFESSIONAL, -----------------------------------
FOR IF APPLICABLE) FOR WITH CAPITAL
THE INVESTMENT THE INVESTMENT COMPANY RESEARCH AND
COMPANY OF AMERICA MANAGEMENT
OF AMERICA PRIMARY TITLE(S) (APPROXIMATE) COMPANY
---------------------------------------------------------------------------------- OR AFFILIATES TOTAL YEARS
-----------------------------------
<S> <C> <C> <C> <C>
JON B. Chairman of the Board of 42 years (plus 5 years as a 48 years 48 years
LOVELACE, JR. the fund. Chairman research professional prior
Emeritus, Capital Research to becoming a portfolio
and Management Company counselor for the fund)
-----------------------------------
----------------------------------------------------------------------------------
R. MICHAEL President and Director of 9 years (plus 13 years as a 35 years 35 years
SHANAHAN the fund. Chairman of the research professional prior
Board and Principal to becoming a portfolio
Executive Officer, Capital counselor for the fund)
Research and Management
Company
---------------------------------------------------------------------------------------------------------------------
WILLIAM C. Director of the fund. 38 years 41 years 47 years
NEWTON Senior Partner, The Capital
Group Partners L.P.*
-----------------------------------------------------------------
----------------------------------------------------
GREGG E. Senior Vice President of 8 years (plus 10 years as a 27 years 27 years
IRELAND the fund. Senior Vice research professional prior
President, Capital Research to becoming a portfolio
and Management Company counselor for the fund)
-----------------------------------
----------------------------------------------------------------------------------
JAMES B. Senior Vice President of 8 years (plus 4 years as a 18 years 18 years
LOVELACE the fund. Senior Vice research professional prior
President, Capital Research to becoming a portfolio
and Management Company counselor for the fund)
-----------------------------------
----------------------------------------------------------------------------------
DONALD D. Senior Vice President of 8 years (plus 4 years as a 15 years 15 years
O'NEAL the fund. Vice President, research professional prior
Capital Research and to becoming a portfolio
Management Company counselor for the fund)
-----------------------------------
----------------------------------------------------------------------------------
JAMES E. Senior Vice President, 13 years (plus 9 years as a 23 years 28 years
DRASDO Capital Research and research professional prior
Management Company to becoming a portfolio
counselor for the fund)
- ---------------------------------------------------------------------------------------------------------------------------------
DINA N. Senior Vice President, 6 years (plus 2 years as a 8 years 22 years
PERRY Capital Research and research professional prior
Management Company to becoming a portfolio
counselor for the fund)
-----------------------------------
----------------------------------------------------------------------------------
JAMES F. President and Director, 6 years (plus 9 years as a 30 years 30 years
ROTHENBERG Capital Research and research professional prior
Management Company to becoming a portfolio
counselor for the fund)
The fund began its first full month of investment operations on January 1, 1934.
* Company affiliated with Capital Research and Management Company
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
11
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services may be terminated or modified at
any time upon 60 days' written notice. For your convenience, American Funds
Service Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
Call toll-Free from anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
[map of the United States]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED 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.
You may invest in the fund through various retirement plans. However, Class B
shares generally are not available to certain retirement plans (for example,
group retirement plans such as 401(k) plans, employer-sponsored 403(b) plans,
and money purchase pension and profit sharing plans). Some retirement plans or
accounts held by investment dealers may not offer certain services. If you
have any questions, please contact American Funds Service Company, your plan
administrator/trustee or dealer.
12
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
CHOOSING A SHARE CLASS
The fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.
Factors you should consider in choosing a class of shares include:
- How long you expect to own the shares
- How much you intend to invest
- The expenses associated with owning shares of each class
- Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)
EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.
Differences between Class A and Class B shares include:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
<S> <S>
Initial sales charge of up to No initial sales charge.
5.75%. Sales charges are reduced
for purchases of $25,000 or more
(see "Sales Charges - Class A").
------------------------------------------------------------------------------
Distribution and service (12b-1) Distribution and service (12b-1) fees
fees of up to 0.25% annually. of up to 1.00% annually.
------------------------------------------------------------------------------
Higher dividends than Class B Lower dividends than Class A shares due
shares due to lower annual to higher distribution fees and other
expenses. expenses.
------------------------------------------------------------------------------
No contingent deferred sales charge A contingent deferred sales charge if
(except on certain redemptions on you sell shares within six years of
purchases of $1 million or more buying them. The charge starts at 5%
bought without an initial sales and declines thereafter until it
charge). reaches 0% after six years. (see "Sales
Charges - Class B").
------------------------------------------------------------------------------
No purchase maximum. Maximum purchase of $100,000.
------------------------------------------------------------------------------
Automatic conversion to Class A shares
after eight years, reducing future
annual expenses.
------------------------------------------------------------------------------
</TABLE>
13
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer (who may
impose transaction charges in addition to those described in this prospectus)
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into shares of the same class of other funds in
The American Funds Group generally without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B shares, the length of
time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<S> <C>
To establish an account (including retirement plan accounts) $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
PURCHASE MAXIMUM FOR CLASS B SHARES $100,000
</TABLE>
14
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
SHARE PRICE
The fund calculates its share price, also called net asset value, as of
approximately 4:00 p.m. New York time, which is the normal close of trading on
the New York Stock Exchange, every day the Exchange is open. In calculating net
asset value, market prices are used when available. If a market price for a
particular security is not available, the fund will determine the appropriate
price for the security.
Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of certain Class A and B shares may be subject to contingent
deferred sales charges.
---------------------------------------------------------
SALES CHARGES
CLASS A
The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced for larger purchases as indicated
below.
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
----------------------------------
DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%
------------------------------------------------------------------------------
$25,000 but less than 5.00% 5.26% 4.25%
$50,000
------------------------------------------------------------------------------
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.60%
$750,000
------------------------------------------------------------------------------
$750,000 but less than $1
million 1.50% 1.52% 1.20%
------------------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS
ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution--
15
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
type plans investing $1 million or more, or with 100 or more eligible
employees, and Individual Retirement Account rollovers involving retirement
plan assets invested in the American Funds, may invest with no sales charge and
are not subject to a contingent deferred sales charge. Investments made
through retirement plans, endowments or foundations with $50 million or more in
assets, or through certain qualified fee-based programs may also be made with
no sales charge and are not subject to a contingent deferred sales charge. The
fund may pay a dealer concession of up to 1% under its Plan of Distribution on
investments made with no initial sales charge.
CLASS B
Class B shares are sold without any initial sales charge. However, a
contingent deferred sales charge may be applied to shares you redeem within six
years of purchase, as shown in the table below.
<TABLE>
<CAPTION>
Contingent deferred sales charge
on shares sold within year as a % of shares being sold
---------------------------------------------------------------
<S> <S>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B Shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales
charge will be sold first and then shares that you have owned the longest.
CLASS B CONVERSION TO A SHARES
Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. The Internal Revenue Service
currently takes the position that this automatic conversion is not taxable.
Should their position change, shareholders would still have the option of
converting but may face certain tax consequences. Please see the statement of
additional information for more information.
16
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your
Class B contingent deferred sales charge using one or any combination of the
methods described below, in the statement of additional information and
"Welcome to the Family."
REDUCING YOUR CLASS A SALES CHARGES
You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.
AGGREGATING ACCOUNTS
To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:
- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.
- solely controlled business accounts.
- single-participant retirement plans.
Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.
CONCURRENT PURCHASES
You may combine simultaneous purchases of Class A and/or B shares of two or
more American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to qualify for a
reduced Class A sales charge. Direct purchases of money market funds are
excluded.
RIGHTS OF ACCUMULATION
You may take into account the current value of your existing Class A and B
holdings in the American Funds, as well as individual holdings in various
American Legacy variable annuities or variable life insurance policies, to
determine your Class A sales charge. Direct purchases of money market funds are
excluded.
STATEMENT OF INTENTION
You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
17
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
intend to make over a 13-month period, to determine the applicable sales
charge. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and capital
gains do not apply toward these combined purchases. A portion of your account
may be held in escrow to cover additional Class A sales charges which may be
due if your total investments over the 13-month period do not qualify for the
applicable sales charge reduction.
CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES
The contingent deferred sales charge on Class B shares may be waived in the
following cases:
- to receive payments through systematic withdrawal plans (up to 12% of the
value of your account);
- to receive certain distributions, such as required minimum distributions,
from retirement accounts; or
- for redemptions due to death or post-purchase disability of the
shareholder.
For more information, please consult your financial adviser, the statement of
additional information or "Welcome to the Family."
---------------------------------------------------------
PLANS OF DISTRIBUTION
The fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. The plans
provide for annual expenses of up to 0.25% for Class A shares and up to 1.00%
for Class B shares. Up to 0.25% of these payments are used to pay service fees
to qualified dealers for providing certain shareholder services. The remaining
0.75% expense for Class B shares is used for financing commissions paid to your
dealer. The 12b-1 fees paid by the fund, as a percentage of average net assets,
for the previous fiscal year is indicated above under "Fees and Expenses of the
Fund." Since these fees are paid out of the fund's assets or income on an
ongoing basis, over time they will increase the cost and reduce the return of
an investment. The higher fees for Class B shares may cost you more over time
than paying the initial sales charge for Class A shares.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.
18
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
- Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s).
- A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:
- Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day.
- Checks must be made payable to the registered shareholder.
- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), 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 liabilities (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.
19
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund intends to distribute dividends to you, if any, usually in March,
June, September and December. Capital gains, if any, are usually distributed in
December. When a dividend or capital gain is distrib
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash. Most shareholders do not elect
to take capital gain distributions in cash because these distributions reduce
principal value.
TAXES ON DISTRIBUTIONS
Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation.
For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the fund will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.
TAXES ON TRANSACTIONS
Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.
Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.
20
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
results for the past five years and is currently only shown for Class A shares.
A similar table will be shown for Class B shares beginning with the fund's
2000 fiscal year end. Certain information reflects financial results for a
single fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, is included in the statement of additional information,
which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, $31.07 $28.25 $24.23 $21.61 $17.67
Beginning of Year
------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .49 .48 .51 .49 .52
Net gains or losses on
securities (both 4.45 5.79 6.61 3.66 4.83
realized and unrealized)
------------------------------------------------------------------------------
Total from investment 4.94 6.27 7.12 4.15 5.35
operations
------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net
investment income) (.51) (.51) (.50) (.50) (.50)
Distributions (from (3.04) (2.94) (2.60) (1.03) (.91)
capital gains)
------------------------------------------------------------------------------
Total distributions (3.55) (3.45) (3.10) (1.53) (1.41)
------------------------------------------------------------------------------
Net Asset Value, $32.46 $31.07 $28.25 $24.23 $21.61
End of Year
------------------------------------------------------------------------------
Total return* 16.56% 22.94% 29.81% 19.35% 30.63%
------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $56,095 $48,498 $39,718 $30,875 $25,678
(in millions)
------------------------------------------------------------------------------
Ratio of expenses to .55% .55% .56% .59% .60%
average net assets
------------------------------------------------------------------------------
Ratio of net income 1.54% 1.65% 1.90% 2.17% 2.70%
to average net assets
------------------------------------------------------------------------------
Portfolio turnover rate 27.85% 24.28% 26.02% 19.56% 20.37%
* Excludes maximum sales charge.
</TABLE>
21
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
---------------------------------------------------------
NOTES
22
THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext. 11
FOR 24-HOUR INFORMATION American FundsLine(R)
800/325-3590
American FundsLine OnLine(R)
http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
* * * * *
MULTIPLE TRANSLATIONS This prospectus may be translated into other languages.
If there is any inconsistency or ambiguity as to the meaning of any word or
phrase in a translation, the English text will prevail.
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information
about the fund including financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing market conditions
and the fund's investment strategies, and the independent accountants' report
(in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains
more detailed information on all aspects of the fund, including the fund's
financial statements and is incorporated by reference into this prospectus.
The codes of ethics describe the personal investing policies adopted by the
fund and the fund's investment adviser and its affiliated companies.
The codes of ethics and current SAI have been filed with the Securities and
Exchange Commission ("SEC"). These and other related materials about the fund
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.
HOUSEHOLD MAILINGS Each year you are automatically sent an updated
prospectus, annual and semi-annual report for the fund. In order to reduce the
volume of mail you receive, when possible, only one copy of these documents
will be sent to shareholders that are part of the same family and share the
same residential address.
If you would like to receive individual copies of these documents, or a free
copy of the SAI or Codes of Ethics, please call American Funds Service Company
at 800/421-0180 or write to the Secretary of the fund at 333 South Hope
Street, Los Angeles, California 90071.
Investment Company File No. 811-116
Printed on recycled paper
<PAGE>
THE INVESTMENT COMPANY OF AMERICA
Part B
Statement of Additional Information
March 15, 2000
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 15, 2000. 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, California 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 OF CONTENTS
<TABLE>
<CAPTION>
Item Page No.
- ---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 4
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 6
Fund Directors and Officers . . . . . . . . . . . . . . . . . . . . 7
Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 16
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 23
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 27
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 30
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Shareholder Account Services and Privileges . . . . . . . . . . . . 33
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 36
General Information . . . . . . . . . . . . . . . . . . . . . . . . 37
Class A Share Investment Results and Related Statistics . . . . . . 38
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Financial Statements
</TABLE>
The Investment Company of America - Page 1
<PAGE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.
GENERAL GUIDELINE
. The fund may only invest in securities included on its eligible list (does
not apply to securities issued or guaranteed by the U.S. Government).
DEBT SECURITIES
. The fund's investments in straight debt securities must be rated A or above
by Moody's Investors Service, Inc. or Standard & Poor's Corporation or
unrated but determined to be of equivalent quality.
NON-U.S. SECURITIES
. The fund may invest up to 10% of its securities in issuers domiciled
outside the U.S. and not included in the Standard & Poor's 500 Composite
Index.
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."
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 markets
for these securities.
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.
SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS - The fund may invest in
securities that have a combination of equity and debt characteristics such as
non-convertible preferred stocks and convertible securities. These securities
may at times resemble equity more than debt and vice versa. The risks of
convertible preferred stock may be similar to those of equity securities. Some
types of convertible preferred stock automatically convert into common stock.
Non-convertible preferred stock with stated redemption rates are similar to debt
in that they have a stated dividend rate akin to the coupon of a bond or note
even though they are often classified as equity
The Investment Company of America - Page 2
<PAGE>
securities. The prices and yields of non-convertible preferred stock generally
move with changes in interest rates and the issuer's credit quality, similar to
the factors affecting debt securities.
Bonds, convertible preferred stock, and other securities may sometimes be
converted into common stock or other securities at a stated conversion ratio.
These securities prior to conversion pay a fixed rate of interest or a dividend.
Because convertible securities have both debt and equity characteristics, their
value varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the credit quality of
the issuer.
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include direct obligations of the U.S. Treasury (such as Treasury bills, notes
and bonds). For 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, Farmers Home Administration, Federal Home Loan Bank, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee
Valley Authority, and Federal Farm Credit Bank System.
INVESTING IN VARIOUS COUNTRIES - Investing outside the U.S. involves special
risks, caused by, among other things: currency controls, fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; expropriation or confiscatory taxation; 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.
The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. 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.
The Investment Company of America - Page 3
<PAGE>
CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate
securities transactions and 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, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
entered into by the fund will involve the purchase or sale of one currency
against the U.S. dollar. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain which might result from an increase in
the value of the currency. The fund will not generally attempt to protect
against all potential changes in exchange rates. 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.
RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures which may be adopted by the fund's board of directors, taking
into account factors such as the frequency and volume of trading, the commitment
of dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.
CASH AND CASH EQUIVALENTS - These securities include (i) commercial paper (e.g.,
short-term notes up to 9 months in maturity issued by corporations, governmental
bodies or bank/ corporation sponsored conduits (asset backed commercial paper)),
(ii) commercial bank obligations (e.g., certificates of deposit, bankers'
acceptances (time drafts on a commercial bank where the bank accepts an
irrevocable obligation to pay at maturity)), (iii) savings association and
savings bank obligations (e.g., bank notes and certificates of deposit issued by
savings banks or savings associations), (iv) securities of the U.S. Government,
its agencies or instrumentalities that mature, or may be redeemed, in one year
or less, and (v) corporate bonds and notes that mature, or that may be redeemed,
in one year or less.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("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.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.
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:
The Investment Company of America - Page 4
<PAGE>
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.
NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed without shareholder approval:
The Investment Company of America - Page 5
<PAGE>
Purchase and sell securities for short-term profits; however, securities will be
sold without regard to the time that they have been held whenever investment
judgement makes such action seem advisable.
Purchase or retain the securities of any issuer if those officers and directors
of the 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 ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation on August 28, 1933.
All fund operations are supervised by the fund's Board of Directors which meets
periodically and performs 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 "Directors and Director Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.
The fund has two classes of shares - Class A and Class B. The shares of each
class represent an interest in the same investment portfolio. Each class has
equal rights as to voting, redemption, dividends and liquidation, except that
each class bears different distribution expenses and may bear different transfer
agent fees and other expenses properly attributable to the particular class as
approved by the Board of Directors. Class A and Class B shareholders have
exclusive voting rights with respect to the rule 12b-1 Plans adopted in
connection with the distribution of shares and on other matters in which the
interests of one class are different from interests in another class. Shares of
all classes of the fund vote together on matters that affect all classes in
substantially the same manner. Each class votes as a class on matters that
affect that class alone.
The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. 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 Company of America - Page 6
<PAGE>
FUND DIRECTORS AND OFFICERS
Directors and Director Compensation
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
FROM THE FUND
POSITION DURING FISCAL YEAR
WITH PRINCIPAL OCCUPATION(S) DURING ENDED
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles H. Black Director Private investor and consultant; $ 65,500
525 Alma Real Drive former Executive Vice President and
Pacific Palisades, CA Director, KaiserSteel Corporation
90272
Age: 73
- -----------------------------------------------------------------------------------------------------------------
Ann S. Bowers Director Senior Trustee, The Noyce Foundation $ 65,500
The Noyce Foundation
450 Sheridan Avenue
Palo Alto, CA 94306
Age: 62
- -----------------------------------------------------------------------------------------------------------------
Louise H. Bryson Director Director and former Chairman of the $51,000/3/
17877 Von Karman Ave. Board, KCET - Los Angeles Public
Suite 500 Television Station; former Senior Vice
Irvine, CA 92615 President, fx Networks, Inc: Fox Inc.
Age: 55
- -----------------------------------------------------------------------------------------------------------------
Malcolm R. Currie Director Chairman Emeritus, Hughes Aircraft $51,000/3/
28780 Wagon Road Company
Agoura, CA 91301
Age: 73
- -----------------------------------------------------------------------------------------------------------------
+ Jon B. Lovelace, Jr. Chairman of Chairman Emeritus, Capital Research None/4/
333 South Hope Street the Board and Management Company
Los Angeles, CA 90071
Age: 73
- -----------------------------------------------------------------------------------------------------------------
John G. McDonald Director The IBJ Professor of Finance, Graduate $69,500/3/
Graduate School of School of Business, Stanford
Business University
Stanford University
Stanford, CA 94305
Age: 62
- -----------------------------------------------------------------------------------------------------------------
Bailey Morris-Eck Director Senior Associate, Reuters Foundation; $ 53,000
1333 H Street, NW Senior Fellow, Institute for
Washington, D.C. 20005 International Economics; former Vice
Age: 55 President, Brookings Institution;
Consultant, The Independent of London
------------------------
- -----------------------------------------------------------------------------------------
Richard G. Newman Director Chairman, President and CEO, AECOM $53,000/3/
3250 Wilshire Blvd. Technology Corporation (architectural
Los Angeles, CA 90010 engineering)
Age: 65
- -----------------------------------------------------------------------------------------------------------------
+ William C. Newton Director Senior Partner, The Capital Group None/4/
333 South Hope Street Partners L.P.*
Los Angeles, CA 90071
Age: 69
- -----------------------------------------------------------------------------------------------------------------
+ James W. Ratzlaff Vice Chairman Senior Partner, The Capital Group None/4/
P.O. Box 7650 of the Board Partners L.P.
San Francisco, CA 94120 and Director
Age: 63
- -----------------------------------------------------------------------------------------------------------------
Olin C. Robison Director President of the Salzburg Seminar; $57,000/3/
The Marble Works President Emeritus, Middlebury College
2 Maple Street
Middlebury, VT 05753
Age: 63
- -----------------------------------------------------------------------------------------------------------------
+ R. Michael Shanahan President and Chairman of the Board and Principal None/4/
333 South Hope Street Director Executive Officer, Capital Research
Los Angeles, CA 90071 and Management Company
Age: 61
- -----------------------------------------------------------------------------------------------------------------
William J. Spencer Director Chairman and Chief Executive Officer, $65,500/3/
2706 Montopolis Drive SEMATECH (research and development
Austin, TX 78741 consortium)
Age: 69
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/2/ FOR THE DIRECTOR
NAME, ADDRESS AND AGE YEAR ENDED DECEMBER 31, 1999 SERVES/2/
- --------------------------------------------------------------------------
<S> <C> <C>
Charles H. Black $ 95,333 1
525 Alma Real Drive
Pacific Palisades, CA
90272
Age: 73
- --------------------------------------------------------------------------
Ann S. Bowers $ 65,500 1
The Noyce Foundation
450 Sheridan Avenue
Palo Alto, CA 94306
Age: 62
- --------------------------------------------------------------------------
Louise H. Bryson $51,000/3/ 1
17877 Von Karman Ave.
Suite 500
Irvine, CA 92615
Age: 55
- --------------------------------------------------------------------------
Malcolm R. Currie $51,000/3/ 1
28780 Wagon Road
Agoura, CA 91301 --------------
Age: 73
- ------------------------------------------------------------
+ Jon B. Lovelace, Jr. None/4/ 3
333 South Hope Street
Los Angeles, CA 90071
Age: 73
- --------------------------------------------------------------------------
John G. McDonald $229,500/3/ 8
Graduate School of
Business
Stanford University
Stanford, CA 94305
Age: 62
- --------------------------------------------------------------------------
Bailey Morris-Eck $ 64,000 3
1333 H Street, NW
Washington, D.C. 20005
Age: 55
- --------------------------------------------------------------------------
Richard G. Newman $99,800/3/ 13
3250 Wilshire Blvd.
Los Angeles, CA 90010
Age: 65
- --------------------------------------------------------------------------
+ William C. Newton None/4/ 1
333 South Hope Street
Los Angeles, CA 90071
Age: 69
- --------------------------------------------------------------------------
+ James W. Ratzlaff None/4/ 7
P.O. Box 7650
San Francisco, CA 94120
Age: 63
- --------------------------------------------------------------------------
Olin C. Robison $96,000/3/ 3
The Marble Works
2 Maple Street
Middlebury, VT 05753
Age: 63
- --------------------------------------------------------------------------
+ R. Michael Shanahan None/4/ 2
333 South Hope Street
Los Angeles, CA 90071
Age: 61
- --------------------------------------------------------------------------
William J. Spencer $65,500/3/ 1
2706 Montopolis Drive
Austin, TX 78741 --------------
Age: 69
- ------------------------------------------------------------
</TABLE>
The Investment Company of America - Page 7
<PAGE>
The Investment Company of America - Page 8
<PAGE>
+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and
Management Company, or the parent company of the Investment Adviser, The
Capital Group Companies, Inc.
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 Directors.
2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., 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., New World 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 Investment Company of America - Page 9
<PAGE>
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. Capital Research and Management Company also manages American Variable
Insurance Series and Anchor Pathway Fund, which serve as the underlying
investment vehicle for certain variable insurance contracts; and Endowments,
whose shareholders are limited to (i) any entity exempt from taxation under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("501(c)(3)
organization"); (ii) any trust, the present or future beneficiary of
which is a 501(c)(3) organization, and (iii) any other entity formed for the
primary purpose of benefiting a 501(c)(3) organization. An affiliate of
Capital Research and Management Company, Capital International, Inc., manages
Emerging Markets Growth Fund, Inc.
3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) during the 1999
fiscal year for participating Directors is as follows: Louise H. Bryson
($7,817), Malcolm R. Currie ($264,411), John G. McDonald ($490,066), Richard
G. Newman ($232,544), Olin C. Robison ($46,357) and William J. Spencer
($231,504). Amounts deferred and accumulated earnings thereon are not funded
and are general unsecured liabilities of the fund until paid to the Directors.
4 Jon B. Lovelace, Jr., William C. Newton, James W. Ratzlaff, and R. Michael
Shanahan are affiliated with the Investment Adviser and, accordingly, receive
no compensation from the fund.
The Investment Company of America - Page 10
<PAGE>
OFFICERS
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Gregg E. Ireland 50 Senior Vice Senior Vice President, Capital
3000 K Street, N.W. President Research and Management Company
Washington, DC 20007
- -------------------------------------------------------------------------------
James B. Lovelace 43 Senior Vice Senior Vice President, Capital
333 South Hope Street President Research and Management Company
Los Angeles, CA 90071
- -------------------------------------------------------------------------------
Donald D. O'Neal 39 Senior Vice Vice President, Capital Research
P.O. Box 7650 President and Management Company
San Francisco, CA
94120
- -------------------------------------------------------------------------------
Joyce E. Gordon 43 Vice President Senior Vice President and
333 South Hope Street Director,
Los Angeles, CA 90071 Capital Research Company*
- -------------------------------------------------------------------------------
Anne M. Llewellyn 52 Vice President Associate, Capital Research and
333 South Hope Street Management Company
Los Angeles, CA 90071
- -------------------------------------------------------------------------------
Patricia L. Pinney 43 Vice President Vice President, Capital Research
333 South Hope Street Company*
Los Angeles, CA 90071
- -------------------------------------------------------------------------------
Vincent P. Corti 43 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
- -------------------------------------------------------------------------------
Thomas M. Rowland 58 Treasurer Senior Vice President - Fund
135 South State Business Management Group,
College Blvd. Capital Research and Management
Brea, CA 92821 Company
- -------------------------------------------------------------------------------
R. Marcia Gould 45 Assistant Vice President - Fund Business
135 South State Treasurer Management Group, Capital
College Blvd. Research and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
Anthony W. Hynes, Jr. 37 Assistant Vice President - Fund Business
135 South State Treasurer Management Group, Capital
College Blvd. Research and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
</TABLE>
* Company affiliated with Capital Research and Management Company.
All of the officers listed are officers, and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company serves
as Investment Adviser.
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.
The fund pays annual fees of $40,000 to Directors who are not affiliated with
the Investment Adviser, plus $2,000 for each Board of Directors meeting
attended, plus $1,000 for each meeting attended as a member of a
The Investment Company of America - Page 11
<PAGE>
committee of the Board of Directors. In addition, members of the Proxy Committee
receive an annual retainer fee of $12,500.
No pension or retirement benefits are accrued as part of fund expenses. The
Directors 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. The fund also
reimburses certain expenses of the Directors who are not affiliated with the
Investment Adviser. As of February 15, 2000 the officers and Directors of the
fund and their families, as a group, owned beneficially or of record less than
1% of the outstanding shares of the fund.
The Investment Company of America - Page 12
<PAGE>
ADVISORY BOARD MEMBERS
ADVISORY BOARD MEMBER COMPENSATION
The Board of Directors has established an Advisory Board whose members are, in
the judgment of the Directors, highly knowledgeable about world 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 world 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 fund pays fees of $5,000 per annum to Advisory
Board members who are not affiliated with the Investment Adviser, plus $1,500
for each meeting attended in conjunction with meetings with the Board of
Directors. The members of the Advisory Board and their current or former
principal occupations are as follows:
<TABLE>
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
AGGREGATE COMPENSATION/1/)
COMPENSATION FROM ALL FUNDS
(INCLUDING MANAGED BY CAPITAL
VOLUNTARILY RESEARCH AND
DEFERRED MANAGEMENTCOMPANY TOTAL NUMBER
COMPENSATION/1/) OR ITS AFFILIATES/2/ OF FUND BOARDS
POSITION PRINCIPAL FROM THE FUND FOR THE FISCAL ON WHICH
WITH OCCUPATION(S) DURING FISCAL YEAR YEAR ENDED ADVISORY BOARD
NAME, ADDRESS AND AGE REGISTRANT DURING PAST 5 YEARS ENDED DECEMBER 31, 1999 DECEMBER 31, 1999 MEMBER SERVES/2/
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thomas M. Crosby, Advisory Partner, Faegre & $ 8,250 $ 8,250 1
Jr. Board Benson (law firm)
2200 Norwest Center Member
90 South Seventh
Street
Minneapolis, MN
55402
Age: 61
- -----------------------------------------------------------------------------------------------------------------------------------
Ellen H. Goldberg Advisory President, Santa Fe $ 8,250 $ 8,250 1
1399 Hyde Park Road Board Institute; Research
Santa Fe, NM 87501 Member Professor, University
Age: 54 of New Mexico
- -----------------------------------------------------------------------------------------------------------------------------------
Allan E. Gotlieb Advisory Former Canadian $ 4,750 $ 4,750 1
P.O. Box 85 Board Ambassador to the
Toronto, Ontario M5L Member United States
1B9
Canada
Age: 72
- -----------------------------------------------------------------------------------------------------------------------------------
William H. Kling Advisory President, Minnesota $8,250/3/ $105,750/3/ 6
45 East Seventh Board Public Radio;
Street Member President,
St. Paul, MN 55101 Greenspring Co.;
Age: 57 former President,
American Public Radio
(now Public Radio
International)
- -----------------------------------------------------------------------------------------------------------------------------------
Robert J. O'Neill Advisory Chichele Professor of $ 8,250 $ 51,250 3
Witney, OXON Board the History of War
United Kingdom Member and Fellow of All
Age: 63 Souls College
- -----------------------------------------------------------------------------------------------------------------------------------
Norman R. Weldon Advisory Managing Director, $ 8,250 $ 43,250 3
15600 N.W. 67th Board Partisan Management
Avenue Member Group; former
Miami Lakes, FL Chairman of the
33014 Board, Novoste
Age: 65 Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Investment Company of America - Page 13
<PAGE>
The Investment Company of America - Page 14
<PAGE>
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 designed by the Advisory Board
member.
2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., 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., New World 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. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.
3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) as of the fiscal year
ended December 31, 1999 for participating Advisory Board members is as
follows: William H. Kling ($46,742). Amounts deferred and accumulated earnings
thereon are not funded and are general unsecured liabilities of the fund until
paid to the Advisory Board member.
The Investment Company of America - Page 15
<PAGE>
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, Hong Kong, Singapore 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 research 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.
The Investment Adviser is responsible for managing more than $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts of all types throughout the world. These investors include
privately owned businesses 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 in effect until April 30, 2001, 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 of the fund, and (ii) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 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 the 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 the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plans of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors and members of the advisory board unaffiliated with the Investment
Adviser; association dues; costs of stationery and forms prepared exclusively
for the fund; and costs of assembling and storing shareholder account data.
The Investment Company of America - Page 16
<PAGE>
As compensation for its services, the Investment Adviser receives a monthly fee
which is based on prior month-end net assets, calculated at the annual rate of
0.39% on the first $1 billion of net assets, plus 0.336% on net assets over
$1 billion to $2 billion, plus 0.30% on net assets over $2 billion to $3
billion, plus 0.276% on net assets over $3 billion to $5 billion, plus
0.258% on net assets over $5 billion to $8 billion, plus 0.246% on net
assets over $8 billion to $13 billion, plus 0.24% on net assets over $13
billion to $21 billion, plus 0.234% on net assets over $21 billion to $34
billion, plus 0.231% on net assets over $34 billion to $44 billion, plus
0.228% on net assets over $44 billion to $55 billion, plus 0.225% on net
assets over $55 billion to $71 billion, plus 0.222% on net assets in
excess of $71 billion.
The Agreement provides for a management fee reduction to the extent that the
annual ordinary operating expenses of the fund's Class A shares exceed 1-1/2% of
the first $30 million of the net assets of the fund and 1% of the average net
assets in excess thereof. Expenses which are not subject to these limitations
are interest, taxes, and extraordinary expenses. 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. To the extent the fund's management fee must be waived due to Class A
share expense ratios exceeding this limit, management fees will be reduced
similarly for all classes of shares of the fund or other Class A fees will be
waived in lieu of management fees.
For the fiscal years ended December 31, 1999, 1998, and 1997, the Investment
Adviser received advisory fees of $127,846,000, $108,430,000, and $90,386,000,
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, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted Plans of
Distribution (the Plans), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plans (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 Class A shares during the 1999 fiscal year
amounted to $23,548,000 after allowance of $118,979,000 to dealers.
During the fiscal years ended 1998 and 1997 the Principal Underwriter retained
$18,078,000 and $16,839,000, respectively on sales of Class A shares after an
allowance of $93,515,000 and $88,584,000 to dealers, respectively.
As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have 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 Plans or the Principal Underwriting Agreement. 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 Plans due to
present or past affiliations with the Investment Adviser and related companies.
Potential benefits of the Plans to the fund include 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 are committed to the discretion of the directors who are
not "interested persons" during the existence of the Plans.
The Investment Company of America - Page 17
<PAGE>
Plan expenses are reviewed quarterly and the Plans must be renewed annually by
the Board of Directors.
Under the Plans the fund may expend up to 0.25% of its net assets annually for
Class A shares and up to 1.00% of its net assets annually for Class B shares 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.
For Class A shares these include up to 0.25% in service fees for qualified
dealers and dealer commissions and wholesaler compensation on sales of shares
exceeding $1 million purchased without a sales charge (including purchases by
employer-sponsored defined contribution-type retirement plans investing $1
million or more or with 100 or more eligible employees, rollover IRA accounts as
described in "Individual Retirement Account (IRA) Rollovers" below, and
retirement plans, endowments or foundations with $50 million or more in assets).
For Class B shares these include 0.25% in service fees for qualified dealers and
0.75% in payments to the Principal Underwriter for financing commissions paid to
qualified dealers selling Class B shares.
Commissions on sales of Class A 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 any
"401(k)" plan with 100 or more eligible employees) in excess of the Class A Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, these commissions are not recoverable.
During the 1999 fiscal year, the fund paid or accrued $118,280,000 for
compensation to dealers or the Principal Underwriter under the Plan for Class A
shares. As of December 31, 1999, accrued and unpaid distribution expenses were
$8,873,000.
OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS - The fund intends to follow the practice of distributing
substantially all of its investment company taxable income which includes any
excess of net realized short-term gains over net realized long-term capital
losses. Additional distributions may be made, if necessary. The fund also
intends to follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However,
the fund may retain all or part of such gain for reinvestment, after paying the
related federal taxes for which shareholders may then be able to claim a credit
against their federal tax liability. If the fund does not distribute the amount
of capital gain and/or net investment income required to be distributed by an
excise tax provision of the Code, the fund may be subject to that excise tax. In
certain circumstances, the fund may determine that it is in the interest of
shareholders to distribute less than the required amount. In this case, the fund
will pay any income or excise taxes due.
The Investment Company of America - Page 18
<PAGE>
Dividends will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other American
Funds, as provided in the prospectus.
TAXES - The fund has elected to be treated as a regulated investment company
under Subchapter M of the Code. A regulated investment company qualifying under
Subchapter M of the Code is required to distribute to its shareholders at least
90% of its investment company taxable income (including the excess of net
short-term capital gain over net long-term capital losses) and generally is not
subject to federal income tax to the extent that it distributes annually 100% of
its investment company taxable income and net realized capital gains in the
manner required under the Code. The fund intends to distribute annually all of
its investment company taxable income and net realized capital gains and
therefore does not expect to pay federal income tax, although in certain
circumstances the fund may determine that it is in the interest of shareholders
to distribute less than that amount.
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 gain (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 capital gain net income
and (ii) any amount on which the fund pays income tax during the periods
described above. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking into
account any capital loss carry-forward of the fund.
If any net long-term capital gains in excess of net short-term capital losses
are retained by the fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund have been
held by such shareholders. Such distributions are not eligible for the
The Investment Company of America - Page 19
<PAGE>
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.
Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable as described above, whether
received in shares or in cash. Shareholders electing to receive distributions in
the form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share on
the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another American
Fund, may result in tax consequences (gain or loss) to the shareholder and must
also be reported on the shareholder's federal income tax return.
Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of the
fund's gross income, a portion of the income distributions of the fund will be
eligible for the deduction for dividends received by corporations. Shareholders
will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days.
Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.
A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the fund which must
be distributed to shareholders in order to maintain the qualification of the
fund as a regulated investment company and to avoid federal income tax at the
level of the fund. Shareholders will be subject to income tax on such original
issue discount, whether or not they elect to receive their distributions in
cash.
The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund
The Investment Company of America - Page 20
<PAGE>
shares, except in the case of certain exempt shareholders. Under the backup
withholding provisions of Section 3406 of the Code, distributions of investment
company taxable income and capital gains and proceeds from the redemption or
exchange of the shares of a regulated investment company may be subject to
withholding of federal income tax at the rate of 31% in the case of non-exempt
U.S. shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. Withholding may also be required if the fund
is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year fund shareholders will
receive a statement of the federal income tax status of all distributions.
Dividend and interest income received by the fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however. Most foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.
The fund may make the election permitted under Section 853 of the Code so that
shareholders may (subject to limitations) be able to claim a credit or deduction
on their federal income tax returns for, and will be required to treat as part
of the amounts distributed to them, their pro rata portion of qualified taxes
paid by the Fund to foreign countries (which taxes relate primarily to
investment income). The fund may make an election under Section 853 of the Code,
provided that more than 50% of the value of the total assets of the fund at the
close of the taxable year consists of securities in foreign corporations. The
foreign tax credit available to shareholders is subject to certain limitations
imposed by the Code.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the fund accrues receivables or liabilities
denominated in a foreign currency and the time the fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts, forward
contracts and options, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of the fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
If the fund invests in stock of certain passive foreign investment companies,
the fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the fund, other than the taxable
year of the excess
The Investment Company of America - Page 21
<PAGE>
distribution or disposition, would be taxed to the fund at the highest ordinary
income rate in effect for such year, and the tax would be further increased by
an interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the fund's investment company taxable income
and, accordingly, would not be taxable to the fund to the extent distributed by
the fund as a dividend to its shareholders.
To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any gains
for tax purposes at that time. Under this election, deductions for losses are
allowable only to the extent of any prior recognized gains, and both gains and
losses will be treated as ordinary income or loss. The fund will be required to
distribute any resulting income, even though it has not sold the security and
received cash to pay such distributions.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on dividend income received by him or her.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
The Investment Company of America - Page 22
<PAGE>
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
See "Purchase $50 minimum (except where a
Minimums" for initial lower minimum is noted under
investment minimums. "Purchase Minimums").
- -------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
- -------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
- -------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
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>
PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250. The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax--
The Investment Company of America - Page 23
<PAGE>
Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and
the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt
Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase
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).
PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.
FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):
<TABLE>
<CAPTION>
FUND FUND
NUMBER NUMBER
FUND CLASS A CLASS B
---- ------- -------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . 02 202
American Balanced Fund/(R)/ . . . . . . . . . . . . . . 11 211
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . 03 203
Capital Income Builder/(R)/ . . . . . . . . . . . . . . 12 212
Capital World Growth and Income Fund/SM/ . . . . . . . 33 233
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . 16 216
Fundamental Investors/SM/ . . . . . . . . . . . . . . . 10 210
The Growth Fund of America/(R)/ . . . . . . . . . . . . 05 205
The Income Fund of America/(R)/ . . . . . . . . . . . . 06 206
The Investment Company of America/(R)/ . . . . . . . . 04 204
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . 14 214
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . 07 207
New World Fund/SM/ . . . . . . . . . . . . . . . . . . 36 236
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . 35 235
Washington Mutual Investors Fund/SM/ . . . . . . . . . 01 201
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . 40 240
American High-Income Trust/SM/ . . . . . . . . . . . . 21 221
The Bond Fund of America/SM/ . . . . . . . . . . . . . 08 208
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . 31 231
Intermediate Bond Fund of America/SM/ . . . . . . . . . 23 223
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . 43 243
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . 19 219
The Tax-Exempt Fund of California/(R)/* . . . . . . . . 20 220
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . 24 224
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . 25 225
U.S. Government Securities Fund/SM/ . . . . . . . . . . 22 222
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . 09 209
The Tax-Exempt Money Fund of America/SM/ . . . . . . . 39 N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . 49 N/A
___________
*Available only in certain states.
</TABLE>
The Investment Company of America - Page 24
<PAGE>
SALES CHARGES
CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of 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 "Fund Numbers" for a listing of the funds.)
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE PRICE
- ------------------------------------------ -------- ----- -----
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000 . . . . . . . . . 6.10% 5.75% 5.00%
$25,000 but less than $50,000 . . . 5.26 5.00 4.25
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $100,000 . . . . . . . . 3.90 3.75 3.00
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 $750,000 . 2.04 2.00 1.60
$750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more . . . . . . . . . . none none (see below)
- -----------------------------------------------------------------------------
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF
PURCHASE. Employer-sponsored defined contribution-type plans investing $1
million or more, or with 100 or more eligible employees, and Individual
Retirement Account rollovers from retirement plan assets invested in the
American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by
The Investment Company of America - Page 25
<PAGE>
investors in certain qualified fee-based programs, and retirement plans,
endowments or foundations with $50 million or more in assets may also be made
with no sales charge and are not subject to a CDSC. A dealer concession of up
to 1% may be paid by the fund under its Plan of Distribution on investments made
with no initial sales charge.
In addition, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:
(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to, the funds managed by Capital
Research and Management Company, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees 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 the
Principal Underwriter (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 $50 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.
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES - A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. 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 the longest
are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC
may be waived in certain circumstances. See "CDSC Waivers for Class A Shares"
below.
DEALER COMMISSIONS ON CLASS A SHARES - The following commissions (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 defined contribution plan
investing $1 million or more, or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with collective assets of $50
million or more: 1.00% on amounts of $1 million to $4 million, 0.50% on amounts
over $4 million to $10 million, and 0.25% on amounts over $10 million.
The Investment Company of America - Page 26
<PAGE>
CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge. However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
------------------------------------------------------------------------------
<S> <C>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances.
See "CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first and then shares that you have owned the
longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO CERTAIN
RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K) PLANS,
EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT SHARING
PLANS.
Compensation equal to 4% of the amount invested is paid by the Principal
Underwriter to dealers who sell Class B shares.
CONVERSION OF CLASS B SHARES TO CLASS A SHARES - Class B shares automatically
convert to Class A shares in the month of the eight-year anniversary of the
purchase date. The conversion of Class B shares to Class A shares after eight
years is subject to the Internal Revenue Service's continued position that the
conversion of Class B shares is not subject to federal income tax. In the event
the Internal Revenue Service no longer takes this position, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee; HOWEVER, SUCH AN EXCHANGE COULD CONSTITUTE A TAXABLE EVENT FOR
YOU, AND ABSENT SUCH AN EXCHANGE, CLASS B SHARES WOULD CONTINUE TO BE SUBJECT TO
HIGHER EXPENSES FOR LONGER THAN EIGHT YEARS.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you qualify for a reduction in your sales charge
using one or any combination of the methods described below.
The Investment Company of America - Page 27
<PAGE>
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. This includes
purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to use 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 by the close of
the period, 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. Existing holdings eligible for rights
of accumulation (see below), as well as purchases of Class B shares, and
any individual investments in American Legacy variable annuities and
variable life insurance policies (American Legacy, American Legacy II and
American Legacy III variable annuities, American Legacy Life, American
Legacy Variable Life, and American Legacy Estate Builder) 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.
When the trustees of certain retirement plans purchase shares 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, and
any individual investments in American Legacy variable annuities and
variable life insurance policies 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 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 accounts and/or:
The Investment Company of America - Page 28
<PAGE>
. employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;
. business accounts solely controlled by these individuals (for example,
the individuals own the entire business);
. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.
Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:
. for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;
. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or
. 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.
CONCURRENT PURCHASES - You may combine purchases of Class A and/or B shares
of two or more funds in The American Funds Group, as well as individual
holdings in American Legacy variable annuities and variable life insurance
policies. Direct purchases of the money market funds are excluded. Shares
of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHTS OF ACCUMULATION - You may take into account the current value of
your existing Class A and B holdings in The American Funds Group, as well
as your holdings in Endowments (shares of which may be owned only by
tax-exempt organizations), to determine your sales charge on investments in
accounts eligible to be aggregated, or when making a gift to an individual
or charity. When determining your sales charge, you may also take into
account the value of your individual holdings, as of the end of the week
prior to your investment, in various American Legacy variable annuities and
variable life insurance policies. Direct purchases of the money market
funds are excluded.
CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in
the following cases:
(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).
The Investment Company of America - Page 29
<PAGE>
(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.
(3) Tax-free returns of excess contributions to IRAs.
(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% of the net asset value of the account
each year.
CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:
(1) Systematic withdrawal plans (SWPs) - investors who set up a SWP (see
"Automatic Withdrawals" below) may withdraw up to 12% of the net asset value of
their account each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions) will be
redeemed first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the lowest CDSC
will be redeemed next until the 12% limit is reached.
The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment. Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account. This privilege may be revised
or terminated at any time.
(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.
(3) Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.
INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS
Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below) through
an IRA rollover plan. All such rollover investments will be subject to the terms
and conditions for Class A and B shares contained in the fund's current
prospectus and statement of additional information. In the case of an IRA
rollover involving plan assets from a plan that offered the American Funds, the
assets may only be invested in Class A shares of the American Funds. Such
investments will be at net asset value and will not be subject to a contingent
deferred sales charge. Dealers who initiate and are responsible for such
investments will be compensated pursuant to the schedule applicable to
investments of $1 million or more (see "Dealer Commissions on Class A Shares"
above).
The Investment Company of America - Page 30
<PAGE>
PRICE OF SHARES
Shares are purchased at the offering price next determined after the purchase
order is received and accepted by the fund or the Transfer Agent; this offering
price is effective for orders received prior to the time of determination of the
net asset value and, in the case of orders placed with dealers, accepted by the
Principal Underwriter prior to its close of business. In the case of orders sent
directly to the fund or the Transfer Agent, 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 do not always indicate 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 as of approximately 4:00 p.m. New
York time, which is the normal close of trading on the New York Stock Exchange
each day the Exchange is open. If, for example, the Exchange closes at 1:00
p.m., the fund's share price would still be determined as of 4:00 p.m. New York
time. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:
1. 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.
Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.
Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
The Investment Company of America - Page 31
<PAGE>
3. Net assets so obtained are then divided by the total number of shares
outstanding, 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 of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 3.0% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. You may sell (redeem) shares
in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- Shares held for you in your dealer's street name must be
sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s)
- A signature guarantee is required if the redemption is:
- Over $50,000;
- Made payable to someone other than the registered
shareholder(s); or
- Sent to an address other than the address of record,
or an address of record which has been changed within
the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- You must include any shares you wish to sell that are in
certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/
- Redemptions by telephone or fax (including American FundsLine/(R)/ and
American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each
day.
- Checks must be made payable to the registered shareholder(s).
The Investment Company of America - Page 32
<PAGE>
- Checks must be mailed to an address of record that has been
used with the account for at least 10 days.
MONEY MARKET FUNDS
- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- You may establish check writing privileges (use the money market funds
application).
- If you request check writing privileges, you will be provided with
checks that you 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 or registered shareholders exactly as indicated on
your checking account signature card.
- Check writing is not available for Class B shares of The Cash
Management Trust.
If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge on Class A
shares will be credited to your account). Redemption proceeds of shares
representing direct purchases in the money market funds are excluded. Proceeds
will be reinvested at the next calculated net asset value after your request is
received and accepted by the Transfer Agent.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments into The American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. For
example, if the date you specified falls on a
The Investment Company of America - Page 33
<PAGE>
weekend or holiday, your money will be invested on the next business day. If
your bank account cannot be debited due to insufficient funds, a stop-payment or
the closing of the account, the plan may be terminated and the related
investment reversed. You 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 of the same class 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, the
Transfer Agent or your investment dealer.
If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") of the same share class into any
other fund in The American Funds Group at net asset value, subject to the
following conditions:
(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B shares of
any other American Fund for dollar cost averaging purposes. 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 the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine and
American FundsLine OnLine (see "American FundsLine and American FundsLine
OnLine" 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 the Transfer Agent. (See "Telephone and Computer
Purchases, 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, computer, fax or telegraph. Exchange redemptions
and purchases are
The Investment Company of America - Page 34
<PAGE>
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 of the same class 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.
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 fund 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 will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.
AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Shareholder Account Services and
Privileges - Telephone and Computer Purchases, Redemptions and Exchanges" below.
You will need your fund number (see the list of funds in The American Funds
Group under "Purchase of Shares - Purchase Minimums" and "Purchase of Shares -
Fund Numbers"), personal identification number (generally the last four digits
of your Social Security number or other tax identification number associated
with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, 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 the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent 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.
The Investment Company of America - Page 35
<PAGE>
REDEMPTION OF SHARES - The fund's Articles of Incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder owns of record
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders 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.
While payment of redemptions normally will be in cash, the fund's articles of
incorporatoin permit payment of the redemption price wholly or partly in
securities or other property included in the assets belonging to the fund when
in the opinion of the fund's Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.
SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to 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.
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.
Brokerage commissions paid on portfolio transactions for the fiscal years ended
December 31, 1999, 1998 and 1997, amounted to $22,412,000, $18,546,000 and
$16,553,000, respectively.
The fund is required to disclose information regarding investments in the
securities of broker-dealers (or parents of broker-dealers that derive more than
15% of their revenue from broker-dealer activities) which have certain
relationships with the fund. During the last fiscal year, Lincoln National Life
Insurance Company was among the top 10 dealers that received the largest amount
of brokerage commissions and that acted as principals in portfolio transactions.
The fund held equity securities of Lincoln National Life Insurance Company in
the amount of $72,000,000 as of the close of its most recent fiscal year.
The Investment Company of America - Page 36
<PAGE>
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. If the fund holds non-U.S. securities, the Custodian may
hold these securities 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
$29,652,000 for the 1999 fiscal year.
INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 400 South Hope Street, Los
Angeles, CA 90071, serves as the fund's independent accountants 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 from the Annual Report have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing. The selection of the fund's independent accountants is reviewed and
determined annually by the Board of Directors.
PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on
December 31. Shareholders are provided updated prospectuses annually. In
addition, shareholders are provided at least semiannually with reports showing
the investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent accountants,
PricewaterhouseCoopers LLP. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
prospectuses and shareholder reports. To receive additional copies of a
prospectus or report, shareholders should contact the Transfer Agent.
PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments. The personal
investing policy is 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; 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.
OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Accountants contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:
The Investment Company of America - Page 37
<PAGE>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $32.46
Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $34.44
</TABLE>
CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield was 1.45% based on a 30-day (or one month) period ended
December 31, 1999, 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 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's one year total return and average annual total return for the five-
and ten-year periods ended December 31, 1999 were 9.84%, 22.27% and 15.33%,
respectively. The fund's average annual total return at net asset value for the
one-, five- and ten-year periods ended on December 31, 1999 were 16.56%, 23.73%
and 16.02%, respectively.
The average 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.
In calculating average annual total return, the fund assumes: (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 fund will provide lifetime
average total return figures. From time to time, the fund may calculate
investment results for Class B shares.
The Investment Company of America - Page 38
<PAGE>
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. These total returns may
be calculated over periods in addition to those described above. 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 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 and Poor's 500 Composite Stock
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, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.
The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and 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 illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.
The fund may compare its investment results with 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, and fuels, transportation, and other
goods and services that people buy for day-to-day living).
The Investment Company of America - Page 39
<PAGE>
APPENDIX
Description of Bond Ratings
BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.
Moody's rates the long-term debt securities issued by various entities from
- -------
"Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Ratings are described as follows:
"Bonds which are 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 which are 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 which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. 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."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."
"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class."
"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
The Investment Company of America - Page 40
<PAGE>
"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."
"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
S & P rates the long-term securities debt of various entities in categories
- -----
ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Ratings are described as follows:
"Debt rated 'AAA' has the highest rating assigned by S & P. 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 it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."
"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.
"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."
"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."
"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
The Investment Company of America - Page 41
<PAGE>
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."
The Investment Company of America - Page 42
<TABLE>
INVESTMENT PORTFOLIO - December 31, 1999
- ------------------------------------------ ----------
<S> <C>
Percent of
Largest Individual Equity Holdings Net Assets
- ------------------------------------------ ----------
Viacom 2.94%
Time Warner 2.40
Oracle 2.15
Fannie Mae 2.11
AT&T Corp.-Liberty Media Group 2.07
Microsoft 1.87
Cendant 1.81
AT&T 1.78
Sprint FON Group 1.78
Philip Morris 1.61
- ------------------------------------------ ----------
Percent of
Largest Industry Holdings Net Assets
- ------------------------------------------ ----------
Data Processing & Reproduction 10.43%
Broadcasting & Publishing 8.64
Diversified Telecommunication Services 7.68
Health & Personal Care 6.53
Energy Sources 5.26
- ------------------------------------------ ----------
Percent of
Largest Investment Categories Net Assets
- ------------------------------------------ ----------
Services 26.25%
Capital Equipment 21.02
Consumer Goods 12.44
- ------------------------------------------ ----------
</TABLE>
Companies appearing in the portfolio listing
since June 30, 1999
- ------------------------------------------
Becton, Dickinson
Berkshire Hathaway
Chubb
Conoco
Delphi Automotive Systems
Dollar General
Dow Chemical
Fluor
Hitachi
Infinity Broadcasting
Knight-Ridder
MBNA
MediaOne Group
NEC
New York Times
PE
Pinnacle West Capital
Providian Financial
Qwest Communications International
R.J. Reynolds Tobacco Holdings
Williams Companies
- ------------------------------------------
Companies eliminated from the portfolio listing
since June 30, 1999
- ------------------------------------------
Ameritech
Atlantic Richfield
Baxter International
Bayer AG
Browning-Ferris Industries
Chase Manhattan
Comcast
DaimlerChrysler
Genuine Parts
Georgia-Pacific Timber Group
KeySpan
LifePoint Hospitals
Nestle
Nissan Motor
Praxair
SunTrust Banks
Triad Hospitals
Tribune
<TABLE>
The Investment Company of America
Investment Portfolio, December 31, 1999
<S> <C> <C> <C>
Market
Number of Value Percent of
Equity Securities Shares (millions) Net Assets
- -------------------------------------------- -------- -------- --------
ENERGY
ENERGY SOURCES - 5.26%
BP Amoco PLC (ADR) 2,500,000 $148.281 .26
Broken Hill Proprietary Co. Ltd. 4,057,166 53.273 .09
Chevron Corp. 3,170,000 274.601 .49
Conoco Inc., Class A 6,650,000 164.587
Conoco Inc., Class B 9,681,845 240.836 .72
Exxon Mobil Corp. 1,056,120 85.084 .15
Kerr-McGee Corp. 860,600 53.357 .10
Murphy Oil Corp. 2,175,000 124.790 .22
Phillips Petroleum Co. 7,400,000 347.800 .62
Royal Dutch Petroleum Co. (New York Registered Shares) 9,300,000 562.069
"Shell" Transport and Trading Co., PLC (New York Registered Shares) 1,000,000 49.250 1.09
Texaco Inc. 3,250,000 176.516 .31
TOTAL FINA SA, Class B 1,273,469 169.747
TOTAL FINA SA, Class B (ADR) 3,453,833 239.178 .73
Unocal Corp. 5,764,700 193.478 .36
USX-Marathon Group 2,800,000 69.125 .12
UTILITIES: ELECTRIC & GAS - 1.03%
Ameren Corp. 600,000 19.650 .04
American Electric Power Co., Inc. 3,000,000 96.375 .17
Duke Energy Corp. 1,375,000 68.922 .12
Florida Progress Corp. 400,000 16.925 .03
GPU, Inc. 2,579,900 77.236 .14
Pinnacle West Capital Corp. 2,900,000 88.631 .16
Southern Co. 3,400,000 79.900 .14
Williams Companies, Inc. 4,250,000 129.891 .23
---------- ----------
3,529.502 6.29
---------- ----------
MATERIALS
CHEMICALS - 2.80%
Air Products and Chemicals, Inc. 1,700,000 57.056 .10
Dow Chemical Co. 3,400,000 454.325 .81
E.I. du Pont de Nemours and Co. 1,899,500 125.129 .22
Imperial Chemical Industries PLC (ADR) 5,300,000 225.581 .40
International Flavors & Fragrances Inc. 1,527,000 57.644 .10
Monsanto Co. 18,243,500 649.925 1.17
FOREST PRODUCTS & PAPER - 2.29%
Champion International Corp. 1,950,000 120.778 .22
Fort James Corp. 10,700,000 292.912 .52
Georgia-Pacific Corp., Georgia-Pacific Group 8,225,000 417.419 .74
International Paper Co. 2,881,236 162.610 .29
Louisiana-Pacific Corp. 4,675,000 66.619 .12
Weyerhaeuser Co. 3,100,000 222.619 .40
METALS: NONFERROUS - 1.65%
Alcoa Inc. 8,776,700 728.466 1.30
Freeport-McMoRan Copper & Gold Inc., Class B (1) 2,200,000 46.475 .08
Phelps Dodge Corp. 1,696,300 113.864 .20
WMC Ltd. 7,500,000 41.360 .07
---------- ----------
3,782.782 6.74
---------- ----------
CAPITAL EQUIPMENT
AEROSPACE & MILITARY TECHNOLOGY - 0.64%
Boeing Co. 2,500,000 103.906 .19
Northrop Grumman Corp. 985,000 53.252 .09
Raytheon Co., Class A 2,536,335 62.933
Raytheon Co., Class B 1,700,000 45.156 .19
United Technologies Corp. 1,440,000 93.600 .17
DATA PROCESSING & REPRODUCTION - 10.43%
Cisco Systems, Inc. (1) 5,300,000 567.762 1.01
Compaq Computer Corp. 5,046,100 136.560 .24
Computer Associates International, Inc. 12,295,000 859.882 1.53
Fujitsu Ltd. 13,173,000 600.765 1.07
Hewlett-Packard Co. 3,800,000 432.963 .77
International Business Machines Corp. 6,000,000 648.000 1.16
Microsoft Corp. (1) 9,000,000 1,050.750 1.87
Oracle Corp. (1) 10,750,000 1,204.672 2.15
3Com Corp. (1) 5,100,000 239.700 .43
Xerox Corp. 5,000,000 113.438 .20
ELECTRICAL & ELECTRONIC - 2.12%
Hitachi, Ltd. 8,500,000 136.426 .24
Lucent Technologies Inc. 1,600,000 119.700 .21
NEC Corp. 5,000,000 119.152 .21
Nortel Networks Corp. 800,000 80.800 .14
Siemens AG 3,200,000 406.585 .73
Telefonaktiebolaget LM Ericsson, Class B (ADR) 5,000,000 328.437 .59
ELECTRONIC COMPONENTS - 4.55%
Corning Inc. 4,775,000 615.677 1.10
Intel Corp. 4,850,000 399.216 .71
Micron Technology, Inc. (1) 5,333,700 414.695 .74
Motorola, Inc. 1,960,000 288.610 .51
Texas Instruments Inc. 8,580,000 831.188 1.49
ELECTRONIC INSTRUMENTS - 0.67%
PE Corp. 3,111,900 374.400 .67
ENERGY EQUIPMENT - 0.81%
Baker Hughes Inc. 6,505,600 137.024 .24
Schlumberger Ltd. 5,650,000 317.813 .57
INDUSTRIAL COMPONENTS - 0.40%
Dana Corp. 2,121,500 63.512 .11
Delphi Automotive Systems Corp. 5,764,088 90.784 .16
Illinois Tool Works Inc. 1,000,000 67.563 .13
MACHINERY & ENGINEERING - 1.40%
Caterpillar Inc. 2,600,000 122.362 .22
Cummins Engine Co., Inc. 1,700,000 82.131 .15
Deere & Co. 5,700,000 247.238 .44
Fluor Corp. 1,400,000 64.225 .11
Ingersoll-Rand Co. 1,894,800 104.332 .19
Parker Hannifin Corp. 1,900,000 97.494 .17
Thermo Electron Corp. (1) 5,000,000 75.000 .12
---------- ----------
11,797.703 21.02
---------- ----------
CONSUMER GOODS
APPLIANCES & HOUSEHOLD DURABLES - 0.16%
Newell Rubbermaid Inc. 3,000,000 87.000 .16
AUTOMOBILES - 0.69%
Ford Motor Co. 3,250,000 173.672 .31
General Motors Corp. 800,000 58.150 .10
Honda Motor Co., Ltd. 4,246,000 157.906 .28
BEVERAGES & TOBACCO - 2.55%
PepsiCo, Inc. 12,600,000 444.150 .79
Philip Morris Companies Inc. 39,000,000 904.313 1.61
R.J. Reynolds Tobacco Holdings, Inc. 4,461,666 78.637 .15
FOOD & HOUSEHOLD PRODUCTS - 2.01%
Archer Daniels Midland Co. 8,280,000 100.912 .18
Bestfoods 1,200,000 63.075 .11
Colgate-Palmolive Co. 1,300,000 84.500 .15
General Mills, Inc. 8,300,000 296.725 .53
Nabisco Group Holdings Corp. 16,000,000 170.000 .30
Procter & Gamble Co. 850,000 93.128 .17
Sara Lee Corp. 11,500,000 253.719 .45
Unilever NV (New York Registered Shares) 1,200,000 65.325 .12
HEALTH & PERSONAL CARE - 6.53%
Abbott Laboratories 3,000,000 108.937 .19
American Home Products Corp. 1,000,000 39.438 .07
AstraZeneca PLC 13,350,900 560.574
AstraZeneca PLC (ADR) 199,000 8.308 1.01
Avon Products, Inc. 5,939,800 196.013 .35
Becton, Dickinson and Co. 3,100,000 82.925 .15
Bristol-Myers Squibb Co. 6,530,000 419.144 .75
Cardinal Health, Inc., Class A 4,225,000 202.272 .36
Eli Lilly and Co. 4,793,200 318.748 .57
Kimberly-Clark Corp. 2,975,000 194.119 .35
Merck & Co., Inc. 5,000,000 335.313 .60
Pfizer Inc 12,800,000 415.200 .74
Pharmacia & Upjohn, Inc. 3,000,000 135.000 .24
Schering-Plough Corp. 4,400,000 185.625 .33
Warner-Lambert Co. 5,625,000 460.898 .82
RECREATION & OTHER CONSUMER PRODUCTS - 0.19%
Eastman Kodak Co. 1,100,000 72.875 .13
Hasbro, Inc. 1,700,000 32.406 .06
TEXTILES & APPAREL - 0.31%
NIKE, Inc., Class B 3,487,200 172.834 .31
---------- ----------
6,971.841 12.44
---------- ----------
SERVICES
BROADCASTING & PUBLISHING - 8.64%
AT&T Corp. - Liberty Media Group (1) 20,503,806 1,163.591 2.07
CBS Corp. (1) 2,000,000 127.875 .23
Dow Jones & Co., Inc. 1,800,000 122.400 .22
Houston Industries, Inc. (converting to Time Warner Inc.) 7.00% ACES
convertible preferred 500,000 60.250 .11
Infinity Broadcasting Corp. (1) 1,424,100 51.535 .09
Knight-Ridder, Inc. 3,880,000 230.860 .41
MediaOne Group, Inc. (1) 600,000 46.087 .08
New York Times Co., Class A 1,000,000 49.125 .09
Time Warner Inc. 18,576,900 1,345.664 2.40
Viacom Inc., Class A (1) 2,392,800 144.615
Viacom Inc., Class B (1) 24,900,000 1,504.894 2.94
BUSINESS SERVICES - 3.04%
Cendant Corp. (1) 38,300,000 1,017.344 1.81
FDX Corp. (1) 2,870,000 117.491 .21
Interpublic Group of Companies, Inc. 5,349,700 308.611 .55
Waste Management, Inc. 15,030,000 258.328 .47
DIVERSIFIED TELECOMMUNICATION SERVICES - 7.68%
AT&T Corp. 19,697,650 999.656 1.78
Deutsche Telekom AG 9,900,000 704.129 1.26
GTE Corp. 2,000,000 141.125 .25
MCI WorlCom, Inc. (1) 6,075,000 322.355 .57
Qwest Communications International Inc. (1) 1,250,000 53.750 .10
SBC Communications Inc. 6,503,600 317.050 .57
Sprint FON Group 14,840,000 998.918 1.78
Telefonica, SA (ADR) (1) 2,397,305 188.938 .34
Telefonos de Mexico, SA de CV, Class L (ADR) 2,057,400 231.457 .41
U S WEST, Inc. 4,870,000 350.640 .62
HEALTH CARE PROVIDERS & SERVICES - 0.54%
Columbia/HCA Healthcare Corp. 7,600,000 222.775 .40
United HealthCare Corp. 1,550,000 82.344 .14
INFORMATION TECHNOLOGY CONSULTING & SERVICES - 0.14%
Electronic Data Systems Corp. 1,200,000 80.325 .14
LEISURE & TOURISM - 0.99%
McDonald's Corp. 2,400,000 96.750 .17
Seagram Co. Ltd. 9,385,000 421.738
Seagram Co. Ltd. 7.50% ACES convertible preferred 900,000 40.500 .82
MERCHANDISING - 3.40%
Albertson's, Inc. 11,740,800 378.641 .67
AutoZone, Inc. (1) 4,140,000 133.774 .24
Dillard's Inc., Class A 1,995,000 40.274 .07
Dollar General Corp. 1,000,000 22.750 .04
J.C. Penney Co., Inc. 4,200,000 83.737 .15
Limited Inc. 7,900,000 342.169 .61
Lowe's Companies, Inc. 8,368,500 500.018 .89
May Department Stores Co. 2,718,450 87.670 .16
Wal-Mart Stores, Inc. 4,600,000 317.975 .57
TRANSPORTATION: AIRLINES - 0.82%
AMR Corp. (1) 5,550,000 371.850 .66
Delta Air Lines, Inc. 1,742,100 86.778 .16
WIRELESS TELECOMMUNICATION SERVICES - 1.00%
Vodafone AirTouch PLC (ADR) 11,295,500 559.127 1.00
---------- ----------
14,725.883 26.25
---------- ----------
FINANCE
BANKING - 4.76%
Bank of America Corp. 13,477,100 676.382 1.21
BANK ONE CORP. 6,935,000 222.353 .40
Comerica Inc. 750,000 35.016 .06
First Union Corp. 9,500,000 311.719 .56
Fleet Boston Financial Corp. (formerly BankBoston Corp.) 3,079,440 107.203 .19
KeyCorp 5,200,000 115.050 .21
National City Corp. 2,000,000 47.375 .08
Toronto-Dominion Bank 4,848,900 129.941 .23
U.S. Bancorp 2,831,250 67.419 .12
Wachovia Corp. 900,000 61.200 .11
Washington Mutual, Inc. 18,250,000 474.500 .85
Wells Fargo & Co. 10,483,200 423.914 .74
FINANCIAL SERVICES - 4.14%
Associates First Capital Corp., Class A 2,000,000 54.875 .10
Fannie Mae 18,996,800 1,186.113 2.11
Freddie Mac 2,400,000 112.950 .20
Household International, Inc. 13,000,000 484.250 .86
MBNA Corp. 3,080,000 83.930 .15
Providian Financial Corp. 1,000,000 91.063 .16
SLM Holding Corp. 7,357,000 310.833 .56
INSURANCE - 2.42%
Aetna Inc. 1,000,000 55.813 .10
Allstate Corp. 7,150,000 171.600 .31
American General Corp. 2,010,000 152.509 .27
American International Group, Inc. 3,375,000 364.922 .65
Aon Corp. 4,000,000 160.000 .29
Chubb Corp. 1,842,600 103.761 .18
Jefferson-Pilot Corp. 2,200,000 150.150 .27
Lincoln National Corp. 1,800,000 72.000 .13
SAFECO Corp. 1,781,800 44.322 .08
St. Paul Companies, Inc. 2,400,000 80.850 .14
---------- ----------
6,352.013 11.32
---------- ----------
OTHER
MULTI-INDUSTRY - 0.59%
Berkshire Hathaway Inc., Class A (1) 1,488 83.477 .15
Canadian Pacific Ltd. 2,375,000 51.211 .09
Honeywell International Inc. (formerly AlliedSignal Inc.) 2,700,000 155.756 .28
Minnesota Mining and Manufacturing Co. 120,000 11.745 .02
Textron Inc. 400,000 30.675 .05
GOLD MINES - 0.62%
Barrick Gold Corp. 7,000,000 123.813 .22
Newmont Mining Corp. 5,600,000 137.200 .25
Placer Dome Inc. 8,000,000 86.000 .15
MISCELLANEOUS - 1.88%
Equity securities in initial period of acquisition 1,046.967 1.88
---------- ----------
1,726.844 3.09
---------- ----------
Total Equity Securities (cost: $27,721.177 million) 48,886.568 87.15
---------- ----------
Principal
Amount
Short Term Securities (millions)
- -------------------------------------------- -------- -------- --------
U.S. TREASURIES AND OTHER FEDERAL AGENCIES - 6.20%
Fannie Mae 5.20%-5.80% due 1/18-6/22/2000 $793.167 778.036 1.39
Federal Farm Credit Bank Notes 5.42% due 2/4/2000 20.800 20.686 .04
Federal Home Loan Banks 5.22%-5.63% due 1/21-5/24/2000 1,453.240 1,431.552 2.55
Freddie Mac 5.202%-5.54% due 1/10-3/30/2000 847.090 839.906 1.49
Student Loan Marketing Assn. 5.796%-5.869% due 4/20-5/18/2000 155.000 155.009 .28
Tennessee Valley Authority Discount Notes 5.51% due 3/3-3/13/2000 100.000 98.943 .18
World Bank Discount Notes 5.49%-5.55% due 1/24-1/25/2000 150.000 149.436 .27
CORPORATE SHORT-TERM NOTES - 6.48%
AIG Funding Inc. 5.84% due 1/20/2000 50.000 49.838 .09
Albertson's Inc. 5.85% due 1/20/2000 (2) 63.000 62.798 .11
American Express Credit Corp. 5.35%-6.38% due 1/4-2/1/2000 93.200 92.911 .17
American General Corp. 5.88% due 2/2/2000 25.000 24.866
American General Finance Corp. 5.69%-5.76% due 2/18/2000 50.000 49.592 .13
Anheuser-Busch Companies, Inc. 5.86% due 2/3/2000 30.000 29.834 .05
Archer Daniels Midland Co. 5.33%-5.80% due 1/26-4/3/2000 85.000 84.154 .15
Associates First Capital Corp. 4.00%-6.03% due 1/3-2/28/2000 124.800 123.976 .22
Bell Atlantic Network Funding Corp 5.82%-5.95% due 1/11-1/13/2000 103.000 102.797 .18
BellSouth Telecommunications, Inc. 5.50%-5.87% due 2/14-2/25/2000 148.000 146.783 .26
Campbell Soup Co. 5.92%-6.01% due 2/18-2/28/2000 48.400 47.968 .09
Chevron USA Inc. 5.80%-6.05% due 1/11-2/3/2000 91.700 91.472 .16
Coca-Cola Co. 5.30%-5.83% due 1/31-2/29/2000 139.900 138.980 .24
Colgate-Palmolive Co. 5.83% due 1/31/2000 (2) 25.000 24.874 .04
Walt Disney Co. 5.74%-5.88% due 2/18-4/7/2000 55.130 54.368 .09
Duke Energy Corp. 5.60%-5.66% due 2/4/2000 100.000 99.434 .18
E.I. du Pont de Nemours and Co. 5.30%-5.82% due 1/19-3/9/2000 137.400 136.541 .23
Eastman Kodak Co. 5.70%-5.71% due 2/8-2/15/2000 83.000 82.428 .15
Emerson Electric Co. 5.31%-5.60% due 1/18-2/23/2000 65.000 64.569 .11
Ford Motor Credit Co. 5.35%-5.81% due 1/5-2/4/2000 122.400 121.857 .22
Fortune Brands Inc. 5.40%-6.05% due 1/21-2/16/2000 (2) 64.000 63.663 .12
Gannett Co., Inc. 5.80%-5.85% due 1/14-1/20/2000 (2) 100.000 99.724 .18
General Electric Capital Corp. 5.71%-5.96% due 2/3-3/20/2000 172.500 170.687 .32
General Motors Acceptance Corp. 5.74%-6.12% due 1/24-3/6/2000 127.500 126.732 .23
Gillette Co. 5.90%-5.92% due 1/19/2000 (2) 80.000 79.751 .14
H.J. Heinz Co. 5.34%-5.95% due 1/19-1/28/2000 76.000 75.724 .13
Household Finance Corp. 5.69%-5.94% due 1/13-3/8/2000 144.050 142.830 .25
IBM Credit Corp. 5.70%-5.91% due 1/28-3/7/2000 125.000 123.974 .21
Johnson & Johnson 5.60%-5.81% due 1/25-4/14/2000 (2) 80.000 79.262 .14
Kellogg Co. 5.80% due 3/8/2000 (2) 35.000 34.630 .06
Lucent Technologies Inc. 5.33%-5.83% due 1/28-4/19/2000 135.000 133.258 .23
Merck & Co. Inc. 5.29%-5.72% due 2/1-2/11/2000 108.300 107.653 .20
Minnesota Mining and Manufacturing Co. 5.60% due 2/23/2000 50.000 49.552 .09
Mobil Corp. 5.90% due 1/26/2000 (2) 37.300 37.141 .07
Monsanto Co. 5.40%-5.87% due 1/31-2/28/2000 58.800 58.369 .10
Motorola Inc. 5.15%-5.81% due 1/21-1/27/2000 36.100 35.975 .06
Nordstrom, Inc. 5.85% due 2/14/2000 18.200 18.061 .03
Pfizer Inc. 5.60%-5.80% due 2/2-3/17/2000 (2) 155.800 154.376 .28
Procter & Gamble Co. 5.82%-5.90% due 1/10-1/26/2000 151.500 151.093 .27
Sara Lee Corp. 5.80%-5.87% due 1/18-1/27/2000 75.000 74.746 .13
SBC Communications Inc. 5.63%-5.90% due 1/19-3/24/2000 (2) 123.000 122.174 .22
Texaco Inc. 5.70%-5.83% due 1/26-2/11/2000 65.000 64.619 .15
CERTIFICATES OF DEPOSIT - 0.08%
Morgan Guaranty Trust Co. of New York 6.08% due 3/21/2000 50.000 50.018 .08
---------- ----------
Total Short-Term Securities (cost: $7,158.776 million) 7,157.620 12.76
---------- ----------
Excess of cash and receivables over payables 51.041 .09
---------- ----------
Total Short-Term Securities, Cash and Receivables, Net of Payables 7,208.661 12.85
---------- ----------
Net Assets 56,095.229 100.00
---------- ----------
(1) Non-income-producing security.
(2) 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
</TABLE>
<TABLE>
The Investment Company of America
Financial Statements
- ----------------------------------------- ------------- -------------
Statement of Assets and Liabilities (dollars in
at December 31, 1999 millions)
- ---------------------------------------- ------------- -------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $27,721.177) $48,886.568
Short-term securities at market
(cost: $7,158.776) 7,157.620
Cash .148
Receivables for-
Sales of investments $.000
Sales of fund's shares $51.324
Dividends and accrued interest 62.770 114.094
------------- -------------
56,158.430
Liabilities:
Payables for-
Purchases of investments .000
Repurchases of fund's shares 41.484
Management services 11.383
Accrued expenses 10.334 63.201
------------- -------------
Net Assets at December 31, 1999-
Equivalent to $32.46 per share on
1,728,032,586 shares of $1 par value
capital stock outstanding (authorized
capital stock--2,000,000,000 shares) $56,095.229
=============
Statement of Operations (dollars in
for the year ended December 31, 1999 millions)
- ----------------------------------------- ------------- -------------
Investment Income:
Income:
Dividends $680.619
Interest 406.393 $ 1,087.012
-------------
Expenses:
Management services fee 127.846
Distribution expenses 118.280
Transfer agent fee 29.652
Reports to shareholders .785
Registration statement and
prospectus 2.278
Postage, stationery and supplies 6.414
Directors' fees .577
Auditing and legal fees .112
Custodian fee 1.030
Taxes other than federal income tax .443
Other expenses .288 287.705
------------- -------------
Net investment income 799.307
-------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 5,292.279
Net increase in unrealized
appreciation on investments 1,931.502
-------------
Net realized gain and increase in
unrealized appreciation on investments 7,223.781
-------------
Net Increase in Net Assets Resulting
from Operations $ 8,023.088
=============
- ---------------------------------------- ------------- -------------
(dollars in
millions)
Year ended December 31
Statement of Changes in Net Assets 1999 1998
- ----------------------------------------- ------------- -------------
Operations:
Net investment income $ 799.307 $ 716.799
Net realized gain on investments 5,292.279 4,437.555
Net increase in unrealized
appreciation on investments 1,931.502 3,902.006
------------- -------------
Net increase in net assets
resulting from operations 8,023.088 9,056.360
------------- -------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net investment income (807.510) (729.026)
Distributions from net realized
gain on investments (4,829.809) (4,219.066)
------------- -------------
Total dividends and distributions (5,637.319) (4,948.092)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold: 174,371,241
and 175,861,192 shares, respectively 5,697.501 5,363.712
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 166,620,357 and 152,955,982
shares, respectively 5,204.804 4,569.218
Cost of shares repurchased: 174,052,877
and 173,627,274 shares, respectively (5,690.428) (5,261.288)
------------- -------------
Net increase in net assets resulting from
capital share transactions 5,211.877 4,671.642
------------- -------------
Total Increase in Net Assets 7,597.646 8,779.910
Net Assets:
Beginning of year 48,497.583 39,717.673
------------- -------------
End of year (including undistributed
net investment income: $299.609
and $307.707, respectively) $56,095.229 $48,497.583
============= =============
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Investment Company of America (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital and income,
placing greater emphasis on future dividends than on current income.
Effective January 3, 2000, the fund's par value changed from $1 to $0.001.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:
SECURITY VALUATION - 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. The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a specific
industry, state or region. Short-term securities maturing within 60 days are
valued at amortized cost, which approximates market value. 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.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in
terms of non-U.S. 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 non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are
accounted for as of the trade date. Realized gains and losses from securities
transactions are determined based on specific identified cost. In the event
securities are purchased on a delayed delivery or $$when-issued'' basis, the
fund will instruct the custodian to segregate liquid assets sufficient to meet
its payment obligations in these transactions. Dividend income is recognized
on the ex-dividend date, and interest income is recognized on an accrual basis.
Market discounts and original issue discounts on securities purchased are
amortized daily over the expected life of the security. The fund does not
amortize premiums on securities purchased.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
2. NON-U.S. INVESTMENT TAXATION
Dividend income is recorded net of non-U.S. taxes paid. For the year ended
December 31, 1999, such non-U.S. taxes were $10,762,000. Net realized currency
gains on dividends, withholding taxes reclaimable, and other receivables and
payables, on a book basis, were $105,000 for the year ended December 31, 1999.
3. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year. As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of December 31, 1999, net unrealized appreciation on investments for federal
income tax purposes aggregated $21,173,557,000, of which $22,759,715,000
related to appreciated securities and $1,586,158,000 related to depreciated
securities. During the year ended December 31, 1999, the fund realized, on a
tax basis, a net capital gain of $5,292,174,000 on securities transactions. Net
gains related to non-U.S. currency transactions of $105,000 were treated as an
increase to ordinary income for federal income tax purposes. The cost of
portfolio securities for federal income tax purposes was $34,870,631,000 at
December 31, 1999.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $127,846,000 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 in effect through December 31,
1999, 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.
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution, the fund may expend
up to 0.25% of its average net assets annually for any activities primarily
intended to result in sales of fund shares, provided the categories of expenses
for which reimbursement is made are approved by the fund's Board of Directors.
Fund expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended December 31, 1999,
distribution expenses under the Plan were $118,280,000. As of December 31,
1999, accrued and unpaid distribution expenses were $8,873,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $23,548,000 (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.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $29,652,000.
DEFERRED DIRECTORS' FEES - 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 December 31, 1999, aggregate
deferred amounts and earnings thereon since the deferred compensation plan's
adoption (1993), net of any payments to Directors, were $1,319,000.
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.
5. WARRANTS
Option warrants are outstanding, which may be exercised at any time for the
purchase of 822,245 shares of the fund at approximately $5.242 per share. If
all warrants had been exercised on December 31, 1999, the net assets of the
fund would have been $56,099,539,000; the shares outstanding would have been
1,728,855,000; and the net asset value would have been equivalent to $32.45 per
share. During the year ended December 31, 1999, 591 warrants were exercised for
the purchase of 12,966 shares.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $12,518,060,000 and $13,244,773,000, respectively,
during the year ended December 31, 1999.
As of December 31, 1999, accumulated undistributed net realized gain on
investments was $685,747,000 and additional paid-in capital was
$32,217,640,000. The fund reclassified $105,000 from undistributed net realized
currency gains to undistributed net investment income and $271,056,000 from
undistributed net realized gains to additional paid-in capital for the year
ended December 31, 1999 as a result of permanent differences between book and
tax.
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 $1,030,000 includes $91,000 that was paid by these credits
rather than in cash.
<TABLE>
Per-Share Data and Ratios Year ended
December 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $31.07 $28.25 $24.23 $21.61 $17.67
--------------------------------------------------------
Income From Investment Operations:
Net investment income .49 .48 .51 .49 .52
Net gains or losses on securities (both
realized and unrealized) 4.45 5.79 6.61 3.66 4.83
--------------------------------------------------------
Total from investment operations 4.94 6.27 7.12 4.15 5.35
----------- ----------- ----------- --------- -----------
Less Distributions:
Dividends (from net investment income) (.51) (.51) (.50) (.50) (.50)
Distributions (from capital gains) (3.04) (2.94) (2.60) (1.03) (.91)
----------- ----------- ----------- --------- -----------
Total distributions (3.55) (3.45) (3.10) (1.53) (1.41)
----------- ----------- ----------- --------- ----------
Net Asset Value, End of Year $32.46 $31.07 $28.25 $24.23 $21.61
========== ========== ========== ======== ========
Total Return (1) 16.56% 22.94% 29.81% 19.35% 30.63%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $56,095 $48,498 $39,718 $30,875 $25,678
Ratio of expenses to average net assets .55% .55% .56% .59% .60%
Ratio of net income to average net assets 1.54% 1.65% 1.90% 2.17% 2.70%
Portfolio turnover rate - common stocks 27.72% 25.43% 24.08% 17.46% 20.91%
Portfolio turnover rate - investment securi 27.85% 24.28% 26.02% 19.56% 20.37%
(1) Excludes maximum sales charge of 5.75%.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of The Investment Company of America
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of The Investment Company of America
(the "Fund") at December 31, 1999, the results of its operations, the changes
in its net assets and the per-share data and ratios for the years indicated, in
conformity with accounting principles generally accepted in the United States.
These financial statements and per-share data and ratios (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999, by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
January 28, 2000
1999 Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net From
of Record Investment Realized Short- Net Realized
Income Term Gains Long-Term Gains
<S> <C> <C> <C> <C>
March 5, 1999 March 8, 1999 $0.12 - $0.30
June 4, 1999 June 7, 1999 0.12 - -
September 3, 1999 September 7, 1999 0.12 - -
December 13, 1999 December 14, 1999 0.15 - 2.74
</TABLE>
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 75% of the dividends
paid by the fund from net investment income represent qualifying dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 4% of the dividends paid
by the fund from net investment income were derived from interest on direct
U.S. Treasury obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
RESULT OF MEETING OF SHAREHOLDERS HELD OCTOBER 19, 1999
(adjourned session November 16, 1999)
Shares Outstanding on August 20, 1999 1,591,374,904
Shares Voting on October 19, 1999 (proposals 1 and 4) 1,020,391,945 (64.1%)
Shares Voting on November 16, 1999
(adjourned session - proposals 2 and 3) 1,185,412,382 (74.5%)
PROPOSAL 1:
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percent of Percent of
Votes Shares Votes Shares
Director For Voting For Withheld Withheld
Charles H. Black 1,006,699,251 99% 13,692,694 1%
Ann S. Bowers 1,007,367,857 99 13,024,088 1
Louise H. Bryson 1,006,706,402 99 13,685,543 1
Malcolm R. Currie 1,006,807,629 99 13,584,316 1
Jon B. Lovelace, Jr. 1,006,738,908 99 13,653,037 1
John G. McDonald 1,007,179,556 99 13,212,389 1
Bailey Morris-Eck 1,006,923,342 99 13,468,603 1
Richard G. Newman 1,007,145,218 99 13,246,727 1
William C. Newton 1,007,273,416 99 13,118,529 1
James W. Ratzlaff 1,007,337,706 99 13,054,239 1
Olin C. Robison 1,006,852,752 99 13,539,193 1
R. Michael Shanahan 1,007,557,258 99 12,834,687 1
William J. Spencer 1,007,254,338 99 13,137,607 1
</TABLE>
PROPOSAL 2:
Amendments to Certificate of Incorporation (i) increasing the authorized shares
of capital stock, (ii) establishing a new class of common stock and (iii)
authorizing the Board to create additional series of shares within the new
class of common stock
PROPOSAL 3:
Amendment to Certificate of Incorporation reducing the par value per share of
capital stock
PROPOSAL 4:
Ratification of Accountants
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Percent of Percent of
Shares Shares Percent of
Votes Voting Votes Voting Shares
For For Against Against Abstentions Abstaining
Proposal 2 827,588,205 91% 38,273,476 4% 47,835,925 5%
(Broker nonvotes = 271,714,776)
Proposal 3 800,229,624 88% 54,877,058 6% 58,590,924 6%
(Broker nonvotes = 271,714,776)
Proposal 4 990,514,162 97% 5,750,141 1% 24,127,642 2%
</TABLE>
