|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: NTS PROPERTIES IV, 10-Q, 1995-08-10 |
Next: PUTNAM NEW YORK TAX EXEMPT INCOME TRUST, NSAR-A, 1995-08-10 |
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED MAY 31, 1995
THE NEW ECONOMY FUND
[THE AMERICAN FUNDS GROUP(R)]
<PAGE>
THE NEW ECONOMY FUND(R) is designed to help you participate in the many
investment opportunities that are being created as society continues to shift
from producing standardized goods to providing a wide array of services. The
fund has the flexibility to invest in industries ranging from broadcasting and
publishing to banking and insurance, gas and electric utilities to cable
television, cellular telephones to merchandising, entertainment to computer
software, and airlines to health care.
RESULTS AT A GLANCE
for periods ended May 31, 1995 (with all distributions reinvested)
<TABLE>
<CAPTION>
Total Return
Six Months Five Years
<S> <C> <C>
THE NEW ECONOMY FUND + 7.1% +74.6%
STANDARD & POOR'S 500
COMPOSITE INDEX +19.2 +71.8
LIFETIME RESULTS
since inception on Total Average Annual
December 1, 1983 Return Compound Return
THE NEW ECONOMY FUND +370.1% +14.4%
STANDARD & POOR'S 500
COMPOSITE INDEX +375.2 +14.5
</TABLE>
Fund results in this report were computed without a sales charge, unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested, assuming payment of the 5.75%
maximum sales charge at the beginning of the stated periods.
<TABLE>
<CAPTION>
Total Average Annual
Periods ended 6/30/95 Return Compound Return
<S> <C> <C>
TEN YEARS +265.21% +13.83%
FIVE YEARS +72.86 +11.57
ONE YEAR +8.42 -
</TABLE>
Sales charges are lower for accounts of $50,000 or more. Fund results through
August 1988 do not reflect service and distribution expenses now paid under its
Plan of Distribution. Such expenses may not exceed 0.25% of the fund's average
net assets per year and currently amount to approximately 0.21%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN
WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS OF PRINCIPAL WHEN YOU SELL YOUR
SHARES. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. All
investments are subject to certain risks. For example, those which include
common stocks are affected by fluctuating stock prices. Investments outside the
U.S. (especially those in developing countries) are subject to additional
risks, including currency fluctuations, political and social instability,
differing securities regulations and accounting standards, limited public
information, possible changes in taxation, and periods of illiquidity.
Accordingly, investors should maintain a long-term perspective.
<PAGE>
FELLOW SHAREHOLDERS:
The New Economy Fund recorded positive results in the first half of fiscal
1995. For the six months ended May 31, your holdings appreciated 7.1% if you
reinvested income dividends totaling 18 cents a share and a 68-cent-a-share
capital gain distribution that were paid during the period.
These results bring New Economy's total gain since operations began in
December 1983 to 370.1% with all distributions taken in shares. That's an
average compound growth rate of 14.4% a year.
NEF benefited during the six months from strong showings by its
communications and financial holdings, many of which lagged the market in 1994.
The fund's biggest gainer in the December-May period was America Online, which
rose 69.5%. America Online is a communications company that supplies computer
users with access to electronically transmitted information, including the
Internet.
[Pull Quote]
NEF benefited during the six months from strong showings by its communications
and financial holdings, many of which lagged the market in 1994.
[End Pull Quote]
The advances posted by the fund's investments in banking and other
financial stocks paralleled a rally in the bond market that began last
November. Following the U.S. elections, investor sentiment improved rather
dramatically, reflecting fresh hopes that the newly elected Congress would deal
effectively with the budget deficit and take other actions beneficial to
interest-rate-sensitive securities and to the financial markets in general.
Additionally, both the stock and bond markets were buoyed by evidence that
inflationary fears are subsiding, and the equity market demonstrated
considerable faith that a slowing economy can avoid a recession. Stock prices
moved upward throughout the fiscal half-year. From December through May, the
unmanaged Standard & Poor's 500 Composite Index rose 19.2% with reinvestment.
New Economy trailed the S&P 500 during this period by a sizable margin for
two major reasons. First, with the bull market in a mature phase by historical
standards, NEF's adviser maintained a cautious investment posture, with a cash
reserve of more than 20% of net assets throughout most of the period. It has
been more than four years since the S&P 500 experienced a drop of 10% or more.
Until now, the longest interval between such corrections was 45 months, and the
average is about 20 months. In retrospect, it's clear that we were more
conservative than we needed to be. That is often our tendency. If we are going
to err, we prefer doing so on the side of caution.
The second reason for the lag was a poor showing by NEF's investments in
the stocks of companies based outside the United States; they currently account
for a little over 20% of the fund's net assets. Many of those holdings were
adversely affected by currency swings and the devaluation of the Mexican peso.
Our weakest stocks during the period included Latin American issues that were
hit especially hard by the devaluation and its ripple effects. They were Nortel
Inversora (a holding company for Argentina's principal telephone utility) and
three Mexican firms: Telefonos de Mexico, Grupo Televisa and Grupo Financiero
Banamex Accival. All four of these stocks suffered double-digit losses for the
six months. (Telefonos de Mexico represented 1.3% of net assets on May 31; the
other three are smaller holdings.)
WHERE THE FUND'S
ASSETS ARE INVESTED
(as of 5/31/95)
<TABLE>
<CAPTION>
Percent of
Net Assets
<S> <C>
United States 59.90%
Sweden 2.07
Netherlands 1.80
United Kingdom 1.68
Mexico 1.63
Germany 1.54
Australia 1.41
New Zealand 1.18
France 1.13
Canada .99
Denmark .92
Spain .91
Japan .88
Italy .87
Malaysia .81
Hong Kong .75
Brazil .62
Ireland .28
Belgium .24
Argentina .16
Philippines .14
Pakistan .08
Indonesia .07
Thailand .04
Other 2.39
Cash and 17.51
Equivalents
Total 100.00%
</TABLE>
It is worth noting that, in the past, several of NEF's investments in
Latin American and other developing markets (including Telefonos de Mexico)
have made excellent contributions to the fund's results. Our experience with
investments in developing markets over the past half-year serves as a reminder
that they do carry above-average risk. However, we believe that many of them
also offer above-average long-term growth potential. For that reason, NEF
intends to continue exploring opportunities in these countries, drawing on our
adviser's extensive global research capabilities.
During the six months, we made a number of changes to the fund's
portfolio. We added several health care stocks that we felt offered good value,
including PacifiCare, Value Health and Vivra. We also took profits for our
shareholders in Microsoft - a stock that has done well for NEF in the past -
and invested the proceeds in several small, rapidly growing suppliers of
computer software, including Avid, Oracle and Symantec.
Recently there has been an increase in merger and acquisition activity. In
our view, this indicates that even in a rising stock market attractive values
can still be found. Two examples illustrating that point are Caesars World and
Lotus. Both of these NEF investments have been in the news as takeover targets.
Caesars World was acquired by ITT in November and eliminated from the fund's
portfolio; Lotus showed a decline for the six months but rose in price after
the close of the fiscal half-year, when the company was in the process of being
acquired by IBM.
We remain enthusiastic about the long-range prospects for the services and
information-oriented companies represented in New Economy's portfolio. By and
large, they are growing, well-managed firms that can look forward to increasing
prosperity in the years to come. Over time, we believe that prosperity should
be reflected in higher prices for their stocks.
Cordially,
Robert B. Egelston William R. Grimsley
Chairman of the Board President
July 14, 1995
<PAGE>
THE NEW ECONOMY FUND
INVESTMENT PORTFOLIO, MAY 31, 1995
<TABLE>
<CAPTION>
LARGEST HOLDINGS BY INDUSTRY
<S> <C>
Broadcasting and Publishing 14.15%
Telecommunications 11.08%
Banking 9.22%
Insurance 8.60%
Entertainment & Leisure 5.72%
All Other Industries 33.72%
Cash & Equivalents 17.51%
</TABLE>
********************
<TABLE>
<CAPTION>
PERCENT
OF
LARGEST INDIVIDUAL HOLDINGS NET ASSETS
<S> <C>
Tele-Communications 4.30%
Federal National Mortgage 2.51%
Time Warner 1.85%
Internationale Nederlanden 1.80%
Promus 1.33%
CKAG Colonia Konzern 1.32%
AirTouch Communications 1.31%
Telefonos de Mexico 1.27%
LIN Broadcasting 1.25%
Circus Circus 1.24%
</TABLE>
**********************************************************************
<TABLE>
<CAPTION>
Shares
EQUITY-TYPE SECURITIES or Market Percent
(COMMON AND PREFERRED STOCKS AND Principal Value of Net
CONVERTIBLE DEBENTURES) Amount (000) Assets
---------------------------------------- ------------- ------------ -----------
<S> <C> <C> <C>
BROADCASTING & PUBLISHING - 14.15%
Tele-Communications, Inc., Class A/1/ 6,077,067 $127,618 4.30
Time Warner Inc. 1,388,000 55,000 1.85
News Corp. Ltd. (Australia) 2,062,326 10,953
News Corp. Ltd. (American Depositary
Receipts) 470,000 10,164
News Corp. Ltd., preferred shares 1,035,789 4,988
News Corp. Ltd., preferred shares
(American Depositary Receipts) 235,000 4,612
News International PLC (United Kingdom) 1,300,000 6,255 1.25
Comcast Corp., Class A, special stock 2,050,000 35,619 1.20
Gaylord Entertainment Co., Class A 1,344,000 29,904 1.01
Capital Cities/ABC, Inc. 240,000 23,160 .78
International Family Entertainment, Inc.,
Class B/1/ 900,000 14,738 .50
Viacom Inc., Class B/1/ 295,000 13,754 .46
LIN Television Corp./1/ 381,550 13,640 .46
Arnoldo Mondadori Editore SPA (Italy) 1,950,000 13,083 .44
CANAL+ (France) 80,478 10,767 .36
Turner Broadcasting System, Inc., Class B 469,627 9,334 .31
TeleWest Communications PLC (American
Depositary Receipts) (United Kingdom)/1/ 332,000 8,508 .29
Western Publishing Group, Inc./1/ 500,000 5,375 .18
Grupo Televisa, SA (American Depositary
Receipts) (Mexico) 330,000 5,362 .18
Westcott Communications, Inc./1/ 300,000 4,500 .15
Le Groupe Videotron Ltee (Canada) 500,000 4,107 .14
Rogers Communications Inc., Class B
(Canada)/1/ 300,000 3,422 .12
New York Times Co., Class A 150,000 3,394 .11
Dow Jones & Co., Inc. 50,000 1,825 .06
TELECOMMUNICATIONS - 11.08%
AirTouch Communications/1/ 1,425,000 38,831 1.31
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) (Mexico) 1,341,960 37,743 1.27
LIN Broadcasting Corp./1/ 300,800 37,186 1.25
Telecom Corp. of New Zealand Ltd. (New
Zealand)/2/ 8,810,480 35,117 1.18
Tele Danmark AS, Class B (American Depositary
Receipts) (Denmark) 554,700 15,809
Tele Danmark AS, Class B 200,000 11,358 .92
Technology Resources Industries Bhd.
(Malaysia)/1/ 4,320,000 14,108
Technology Resources Industries Bhd.,
2.75% convertible debenture 2004/2/ $9,600,000 9,912 .81
Octel Communications Corp./1/ 800,000 18,600 .63
Vodafone Group PLC (American Depositary
Receipts) (United Kingdom) 510,000 17,149 .58
MCI Communications Corp. 720,000 14,490 .49
Telecomunicacoes Brasileiras SA, preferred
nominative (Brazil) 373,291,535 13,020
Telecomunicacoes Brasileiras SA, preferred
nominative, rights, expire 6/23/95/1/ 13,005,903 - .44
STET-Societa Finanziaria Telefonica p.a.
(Italy) 4,300,000 12,368
STET-Societa Finanziaria Telefonica p.a.,
preferred shares 150,000 343 .43
Telefonica de Espana, SA (American
Depositary Receipts) (Spain) 170,000 6,800
Telefonica de Espana, SA 400,000 5,268 .41
BCE Mobile Communications Inc. (Canada)/1/ 325,000 10,826 .36
ALLTEL Corp. 420,000 10,343 .35
AT&T Corp. 200,000 10,150 .34
Nortel Inversora SA, preferred shares,
Series B (American Depositary Receipts)
(Argentina)/2/ 284,000 4,828 .16
Pakistan Telecommunication Corp. (Global
Depositary Receipts)/1/,/2/ 21,800 2,398 .08
Perusahaan Perseroan (Persero) P.T. Indonesian
Satellite Corp. (American Depositary
Receipts) (Indonesia) 50,000 1,975 .07
BANKING - 9.22%
Svenska Handelsbanken Group, Class A (Sweden) 2,410,000 35,359 1.19
First Interstate Bancorp 335,000 28,140 .95
Banc One Corp. 800,000 27,800 .94
Golden West Financial Corp. 530,000 26,036 .88
Mercantile Bancorporation Inc. 510,000 20,336 .69
Norwest Corp. 630,000 17,876 .60
Washington Mutual Savings Bank 767,500 17,269 .58
Old Kent Financial Corp. 500,000 16,312 .55
Banco Popular Espanol, SA (Spain) 99,000 14,860 .50
Charter One Financial, Inc. 450,000 11,250 .38
Australia and New Zealand Banking Group Ltd.
(Australia) 3,112,600 11,185 .38
Canadian Imperial Bank of Commerce (Canada) 450,000 10,965 .37
Stadshypotek AB, Class A (Sweden)/2/ 500,000 7,438 .25
West One Bancorp 180,000 6,030 .20
Mercantile Bankshares Corp. 250,000 5,875 .20
BankAmerica Corp. 100,000 5,225 .18
Keystone Financial, Inc. 150,000 4,200 .14
Hibernia Corp., Class A 500,000 4,187 .14
Grupo Financiero Banamex Accival, SA de CV,
Series B (Mexico) 1,200,000 1,789
Grupo Financiero Banamex Accival, SA de CV,
Series L 310,000 458 .08
Thai Military Bank (Thailand) 125,600 499 .02
INSURANCE - 8.60%
Internationale Nederlanden Groep NV
(Netherlands) 620,052 33,651
Internationale Nederlanden Groep NV, warrants,
expire 2001/1/ 8,800,000 19,616 1.80
CKAG Colonia Konzern AG (Germany) 45,900 36,096
CKAG Colonia Konzern AG, preferred shares 5,330 2,945 1.32
EXEL Ltd. (Bermuda) 740,000 34,595 1.17
PartnerRe Holdings Ltd. 1,020,000 23,205 .78
PMI Group, Inc. 405,100 16,558 .56
AMBAC Inc. 350,000 14,000 .47
TIG Holdings, Inc. 525,000 12,338 .42
Dowa Fire and Marine Insurance Co., Ltd.
(Japan) 2,200,000 12,034 .41
American International Group, Inc. 100,000 11,375 .38
Irish Life PLC (Ireland) 2,470,565 8,180 .28
Nippon Fire and Marine Insurance Co., Ltd.
(Japan) 1,230,000 7,791 .26
Cincinnati Financial Corp. 126,000 6,898 .23
Munchener Ruckversicherungs-Gesellschaft
(Germany) 3,297 6,564 .22
Selective Insurance Group, Inc. 210,000 6,143 .21
Trenwick Group Inc. 60,000 2,610 .09
ENTERTAINMENT & LEISURE - 5.72%
Promus Companies Inc./1/ 940,000 39,363 1.33
Circus Circus Enterprises, Inc./1/ 1,100,000 36,712 1.24
Mirage Resorts, Inc./1/ 1,000,000 29,875 1.01
Walt Disney Co. 500,000 27,813 .94
Carnival Cruise Lines, Inc., Class A 960,000 22,320 .75
Station Casinos, Inc./1/ 725,000 10,422 .35
Nintendo Co., Ltd. (Japan) 50,000 3,013 .10
MISCELLANEOUS FINANCIAL SERVICES - 5.31%
Federal National Mortgage Assn. 800,000 74,400 2.51
ADVANTA Corp., Class A 400,000 15,500
ADVANTA Corp., Class B 300,000 10,650 .88
Capital One Financial Corp. 875,000 18,375 .62
Student Loan Marketing Assn. 380,000 18,050 .61
Federal Home Loan Mortgage Corp. 250,000 17,031 .57
Enhance Financial Services Group Inc. 200,000 3,575 .12
MERCHANDISING - 5.23%
Viking Office Products, Inc./1/ 1,210,000 32,670 1.10
Consolidated Stores Corp./1/ 1,400,000 26,250 .89
H&M Hennes & Mauritz AB, Class B (Sweden) 320,000 18,561 .63
Toys 'R' Us, Inc./1/ 525,000 13,256 .45
Giant Food Inc., Class A 350,000 10,062 .34
TJX Companies, Inc. 750,000 10,031 .34
Home Depot, Inc. 180,000 7,493 .25
Delhaize "Le Lion" SA (Belgium) 150,000 7,015 .24
Tesco PLC (United Kingdom) 1,400,000 6,558 .22
Duty Free International, Inc. 450,000 4,556 .15
Home Shopping Network, Inc./1/ 476,500 3,336 .11
Circuit City Stores, Inc. 120,000 3,300 .11
Ito-Yokado Co., Ltd. (Japan) 60,000 3,183 .11
Shoe Carnival, Inc./1/ 440,000 2,915 .10
Cifra, SA de CV, Class C (Mexico) 2,340,000 2,894 .10
Williams-Sonoma, Inc./1/ 150,000 2,719 .09
COMPUTER SERVICES & SOFTWARE - 3.44%
Electronic Arts/1/ 1,020,000 26,265 .89
Oracle Systems Corp./1/ 487,500 16,880 .57
Policy Management Systems Corp./1/ 300,000 13,800 .47
Lotus Development Corp./1/ 360,000 10,890 .37
Tech Data Corp./1/ 900,000 9,113 .31
General Motors Corp., Class E 200,000 8,500 .29
CUC International Inc./1/ 225,000 8,269 .28
MacNeal-Schwendler Corp. 200,000 2,750 .09
Avid Technology, Inc./1/ 70,000 2,572 .09
Symantec Corp./1/ 100,000 2,288 .08
HEALTH & PERSONAL CARE SERVICES - 2.62%
United HealthCare Corp. 735,000 27,379 .92
Columbia/HCA Healthcare Corp. 425,000 17,372 .59
Humana Inc./1/ 800,000 16,900 .57
FHP International Corp./1/ 305,400 6,719 .23
PacifiCare Health Systems, Inc., Class B/1/ 50,000 3,287 .11
Value Health, Inc./1/ 80,000 2,580 .09
Vivra, Inc./1/ 60,000 1,695 .06
Coram Healthcare Corp./1/ 80,000 1,440 .05
COMPUTER SYSTEMS - 2.41%
Silicon Graphics, Inc./1/ 900,000 34,987 1.18
Bay Networks Inc./1/ 450,000 16,369 .55
Digital Equipment Corp./1/ 200,000 8,925 .30
International Business Machines Corp. 77,000 7,180 .24
Apple Computer, Inc. 100,200 4,158 .14
ELECTRONIC DATA PRODUCTS - 1.52%
America Online, Inc./1/ 720,000 25,470 .86
Intel Corp. 175,000 19,622 .66
MISCELLANEOUS PUBLIC SERVICES - 1.45%
WMX Technologies, Inc. 695,000 18,939 .64
Waste Management International PLC (American
Depositary Receipts) (United Kingdom)/1/ 1,300,000 11,375 .38
Eurotunnel SA (France)/1/ 2,480,000 7,056 .24
ADT Ltd. (United Kingdom)/1/ 500,000 5,687 .19
ENERGY SERVICES - 1.14%
Helmerich & Payne, Inc. 500,000 14,937 .50
Schlumberger Ltd. (Netherlands Antilles) 200,000 13,000 .44
Landmark Graphics Corp./1/ 250,000 5,813 .20
ADVERTISING - 1.12%
Havas SA (France) 194,136 15,835 .53
Interpublic Group of Companies, Inc. 320,000 11,800 .40
Omnicom Group Inc. 100,000 5,762 .19
RESTAURANTS - 0.98%
McDonald's Corp. 270,000 10,226 .34
Foodmaker, Inc./1/ 1,900,000 9,737 .33
Au Bon Pain Co., Inc./1/ 400,000 4,600 .15
Outback Steakhouse, Inc./1/ 100,000 2,988 .10
Sizzler International, Inc. 300,000 1,725 .06
HOTELS & MOTELS - 0.86%
Marriott International, Inc. 755,000 25,576 .86
AIRLINES - 0.60%
Southwest Airlines Co. 500,000 11,062 .37
AMR Corp./1/ 100,000 6,825 .23
DELIVERY SERVICES - 0.52%
Federal Express Corp./1/ 260,000 15,567 .52
REAL ESTATE - 0.52%
Host Marriott Corp./1/ 1,450,000 15,406 .52
DIVERSIFIED SERVICES - 0.51%
First Pacific Co. Ltd. (Hong Kong) 11,556,080 10,832 .37
Benpres Holdings Corp. (Global Depositary
Receipts) (Philippines)/1/,/2/ 509,190 4,140 .14
ENGINEERING & CONSTRUCTION - 0.41%
Jacobs Engineering Group Inc./1/ 555,000 12,141 .41
ELECTRIC UTILITIES - 0.40%
China Light & Power Co., Ltd. (Hong Kong) 1,200,000 6,563 .22
CESP - Companhia Energetica de Sao Paulo,
preferred nominative (Brazil)/1/ 133,590,000 5,131
CESP - Companhia Energetica de Sao Paulo,
ordinary nominative/1/ 4,995,000 166
CESP - Companhia Energetica de Sao Paulo,
preferred nominative (American Depositary
Receipts)/1/ 2,000 23 .18
RAIL & ROAD SERVICES - 0.12%
Norfolk Southern Corp. 50,000 3,425 .12
ENVIRONMENTAL SERVICES - 0.03%
Ecolab Inc. 40,000 1,015 .03
MISCELLANEOUS
Other Equity-Type Securities in initial
period of acquisition 134,448 4.53
------------ ------------
TOTAL EQUITY-TYPE SECURITIES
(COST: $1,927,020,000) 2,445,500 82.49
------------ -----------
SHORT-TERM SECURITIES
---------------------------------------- ------------- ------------ -----------
CORPORATE SHORT-TERM NOTES- 17.47%
Ford Motor Credit Co. 5.95%-5.96% due
6/8-7/12/95 57,800 57,582 1.94
Raytheon Co. 5.94%-5.96% due 6/5-6/19/95 56,700 56,593 1.91
H.J. Heinz Co. 5.93%-5.95% due 6/7-7/12/95 51,200 50,990 1.72
PepsiCo, Inc. 5.92%-5.95% due 6/12-6/21/95 45,965 45,857 1.55
American Express Credit Co. 5.94%-5.99% due
6/19-6/29/95 43,300 43,130 1.45
Beneficial Corp. 5.93%-5.98% due 6/21-7/13/95 41,900 41,674 1.41
J.C. Penney Funding Corp. 5.93% due
6/13-7/12/95 38,070 37,902 1.28
Xerox Corp. 5.93%-5.94% due 6/15-7/7/95 33,100 32,989 1.11
Commercial Credit Co. 5.93%-5.94% due
6/6-7/11/95 32,000 31,882 1.07
U S WEST Communications, Inc. 5.92%-6.03% due
6/2-8/11/95 29,745 29,610 1.00
American General Corp. 5.93%-5.95% due
6/1-6/14/95 24,100 24,077 .81
Central and South West Corp. 5.97% due 6/9/95 23,200 23,165 .78
BellSouth Telecommunications Inc. 5.93%-5.96%
due 6/5-6/16/95 22,900 22,856 .77
John Deere Capital Corp. 5.90%-6.01% due
6/1-6/27/95 19,800 19,748 .67
------------ -----------
TOTAL SHORT-TERM SECURITIES
(COST: $518,055,000) 518,055 17.47
------------ -----------
TOTAL INVESTMENT SECURITIES
(COST: $2,445,075,000) 2,963,555 99.96
EXCESS OF CASH AND RECEIVABLES OVER PAYABLES 1,148 .04
------------ -----------
NET ASSETS $2,964,703 100.00
============ ===========
</TABLE>
/1/ Non-income-producing securities
/2/ Purchased in a private placement transaction; resale to the public may
require registration or may extend only to qualified institutional buyers.
See Notes to Financial Statements
<PAGE>
The New Economy Fund
Financial Statements
Statement of Assets and
Liabilities at May 31, 1995 (unaudited)
<TABLE>
<CAPTION>
(dollars in
thousands)
------------- -------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $2,445,075) $2,963,555
Cash 74
Receivables for-
Sales of investments $ 7,220
Sales of fund's shares 6,198
Dividends and accrued interest 3,954 17,372
------------- -------------
2,981,001
Liabilities:
Payables for-
Purchases of investments 10,331
Repurchases of fund's shares 3,583
Management services 1,125
Accrued expenses 1,259 16,298
Net Assets at May 31, 1995- ------------- -------------
Equivalent to $14.76 per share on
200,845,716 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $2,964,703
=============
(Unaudited)
Statement of Operations (dollars in
for the six months ended May 31, 1995 thousands)
---------------------------------------- ------------- -------------
Investment Income:
Income:
Dividends $ 14,260
Interest 18,845 $ 33,105
-------------
Expenses:
Management services fee 6,184
Distribution expenses 2,776
Transfer agent fee 2,104
Reports to shareholders 276
Registration statement and prospectus 380
Postage, stationery and supplies 540
Trustees' fees 56
Auditing and legal fees 40
Custodian fee 321
Taxes other than federal income tax 46
Other expenses 33 12,756
------------- -------------
Net investment income 20,349
-------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 11,290
Net increase in unrealized
appreciation on investments:
Beginning of period 355,041
End of period 518,480
Net unrealized appreciation -------------
on investments 163,439
Net realized gain and unrealized -------------
appreciation on investments 174,729
Net Increase in Net Assets -------------
Resulting from Operations $195,078
=============
(dollars in
Statement of Changes in Net Assets thousands)
---------------------------------------- ------------- -------------
Six Months
Ended Year ended
5/31/95* 11/30/94
Operations: ------------- -------------
Net investment income $ 20,349 $ 28,986
Net realized gain on investments 11,290 120,824
Net unrealized appreciation
(depreciation) on investments 163,439 (225,519)
Net increase (decrease) in net assets ------------- -------------
resulting from operations 195,078 (75,709)
------------- -------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (33,138) (15,140)
Distributions from net realized
gain on investments (120,976) (151,346)
------------- -------------
Total dividends and distributions (154,114) (166,486)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
29,293,192 and 59,645,687
shares, respectively 412,990 1,301,162
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
10,606,640 and 5,227,221 shares,
respectively 145,052 154,809
Cost of shares repurchased:
16,006,453 and 24,316,506
shares, respectively (226,150) (534,094)
Net increase in net assets resulting ------------- -------------
from capital share transactions 331,892 921,877
------------- -------------
Total Increase in Net Assets 372,856 679,682
Net Assets:
Beginning of period 2,591,847 1,912,165
End of period (including undistributed ------------- -------------
net investment income: $8,421 and
$21,210, respectively) $2,964,703 $2,591,847
============= =============
</TABLE>
*Unaudited
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. The New Economy Fund (the "fund") is registered under the Investment Company
Act of 1940 as an open-end, diversified management investment company. The
following paragraphs summarize the significant accounting policies consistently
followed by the fund in the preparation of its financial statements:
Equity-type securities are stated at market value based upon closing sales
prices reported on recognized securities exchanges on the last business day of
the period or, for listed securities having no sales reported and for unlisted
securities, upon last-reported bid prices on that date. Short-term securities
with original or remaining maturities in excess of 60 days are valued at the
mean of their quoted bid and asked prices. Short-term securities with 60 days
or less to maturity are valued at amortized cost, which approximates market
value. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by the Valuation Committee of
the Board of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in
non-U.S. currencies are recorded in the financial statements after translation
into U.S. dollars utilizing rates of exchange on the last business day of the
period. Purchases and sales of investment securities, income, and expenses are
calculated using the prevailing exchange rate as accrued. The fund does not
identify the portion of each amount shown in the fund's statement of operations
under the caption "Realized Gain and Unrealized Appreciation on Investments"
that arises from changes in non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $321,000 includes $6,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of May 31, 1995 net unrealized appreciation on investments for book and
federal income tax purposes aggregated $518,480,000, of which $635,908,000
related to appreciated securities and $117,428,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the six months ended May 31, 1995. The cost of
portfolio securities for book and federal income tax purposes was
$2,445,075,000 at May 31, 1995.
3. The fee of $6,184,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily,
calculated on the annual rate of 0.58% on the first $500 million of the fund's
net assets; 0.48% on assets from $500 million to $1 billion; 0.44% on assets
from $1 billion to $1.5 billion; 0.41% on assets from $1.5 billion to $2.5
billion; 0.39% on assets from $2.5 billion to $4 billion; 0.38% on assets from
$4 billion to $6.5 billion; and 0.375% on assets over $6.5 billion. The new
Agreement would not result in a reduction in fees until net asset levels exceed
$3 billion. The Investment Adviser will waive any fees under the current
agreement which would exceed a monthly fee, accrued daily, based on an annual
rate of 0.60% of the first $300 million of average net assets; 0.48% of such
assets in excess of $300 million but not exceeding $750 million; 0.45% of such
assets in excess of $750 million but not exceeding $1.25 billion; and 0.42% of
such assets in excess of $1.25 billion. Fees waived were $5,00 for the six
months ended May 31, 1995.
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 Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the six months ended May 31, 1995,
distribution expenses under the Plan were $2,776,000. As of May 31, 1995,
accrued and unpaid distribution expenses were $1,129,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $2,104,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $1,487,000 (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.
Trustees of the fund who are unaffiliated with CRMC may elect to defer part
or all of the fees earned for services as members of the Board. Amounts
deferred are not funded and are general unsecured liabilities of the fund. As
of May 31, 1995, aggregate amounts deferred were $16,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Trustees and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. As of May 31, 1995, accumulated undistributed net realized gain on
investments was $8,119,000 and additional paid-in capital was $2,429,683,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $508,233,000 and $227,223,000, respectively, during
the six months ended May 31, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
six months ended May 31, 1995, such non-U.S. taxes were $827,000. Net realized
currency gains on dividends, interest, withholding taxes reclaimable, and sales
of non-U.S. bonds and notes were $3,000 for the six months ended May 31, 1995.
<PAGE>
<TABLE>
<CAPTION>
PER-SHARE DATA AND RATIOS /1/
Six
Months
Ended Year ended November 30
--------- -------- -------- -------- ---------- --------
5/31/95 /2/ 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
--------- -------- -------- -------- -------- --------
Net Asset Value, Beginning
of Period $14.65 $16.47 $13.17 $10.98 $9.80 $13.22
--------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income .10 .17 .11 .08 .15 .27
Net realized and unrealized
gain (loss) on investments .87 (.59) 3.75 2.45 1.76 (1.79)
Total income (loss) from --------- -------- -------- -------- -------- --------
investment operations .97 (.42) 3.86 2.53 1.91 (1.52)
--------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment
income (.18) (.12) (.07) (.14) (.26) (.29)
Distributions from net realized
gains (.68) (1.28) (.49) (.20) (.47) (1.61)
--------- -------- -------- -------- -------- --------
Total distributions (.86) (1.40) (.56) (.34) (.73) (1.90)
--------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $14.76 $14.65 $16.47 $13.17 $10.98 $9.80
========= ======== ======== ======== ======== =======
Total Return /3/ 7.11% /4/ (2.94)% 30.60% 23.58% 20.68%
(13.39)%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $2,965 $2,592 $1,912 $1,115 $908 $783
Ratio of expenses to average
net assets .47% /4/ .85% .85% .89% .92% .92%
Ratio of net income to
average net assets .74% /4/ 1.25% .76% .67% 1.33% 2.50%
Portfolio turnover rate 19.7 % /4/ 25.5 % 27.0 % 19.0 % 18.5 % 17.2 %
</TABLE>
/1/ Adjusted to reflect the 100% share dividend effective May 26, 1994.
/2/ Unaudited
/3/ This was calculated without deducting a sales charge. The maximum sales
charge is 5.75% of the fund's offering price.
/4/ Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
<PAGE>
THE NEW ECONOMY FUND
===============================
BOARD OF TRUSTEES
-------------------------------
Ambassador Richard G. Capen, Jr.
Rancho Santa Fe, California
Corporate Director and author; former United States Ambassador to Spain; former
Vice Chairman of the Board, Knight-Ridder, Inc.; former Chairman and Publisher,
The Miami Herald
H. Frederick Christie
Palos Verdes Estates, California
Private investor; former President and Chief Executive Officer, The Mission
Group; former President, Southern California Edison Company
Alan W. Clements
London, England
Private investor; former Executive Director-Finance, Imperial Chemical
Industries PLC
Robert B. Egelston
Los Angeles, California
Chairman of the Board of the fund
Former Chairman of the Board, The Capital Group Companies, Inc.
Alan Greenway
La Jolla, California
President, Greenway
Associates, Inc. (management consulting services); former Chairman, Australian
Tourist Commission
William R. Grimsley
San Francisco, California
President of the fund
Senior Vice President and Director, Capital Research and Management Company
Graham Holloway
Los Angeles, California
Former Chairman of the Board, American Funds Distributors, Inc.
Leonade D. Jones
Washington, D.C.
Treasurer, The Washington Post Company
William H. Kling
St. Paul, Minnesota
President, Minnesota Puhlic Radio; President, Greenspring Co.; former
President, American Public Radio (now Public Radio International)
Norman R. Weldon, Ph.D.
Miami, Florida
President and Director, Corvita Corporation; former President and Director,
Cordis Corporation
Patricia K. Woolf
Princeton, New Jersey
Private investor; lecturer, Department of Molecular Biology, Princeton
University
OTHER OFFICERS
--------------------------------
Timothy D. Armour
Los Angeles, California
Vice President of the fund
Executive Vice President, Capital Research Company
Vincent P. Corti
Los Angeles, California
Vice President of the fund
Vice President - Fund Business Management Group, Capital Research and
Management Company
Steven N. Kearsley
Los Angeles, California
Vice President and Treasurer of the fund
Vice President and Treasurer, Capital Research and Management Company
James B. Lovelace
Los Angeles, California
Vice President of the fund
Vice President, Capital Research and Management Company
Chad L. Norton
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group, Capital Research and
Management Company
Mary C. Cremin
Los Angeles, California
Assistant Treasurer of the fund
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company
Robert P. Simmer
Los Angeles, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group, Capital Research and
Management Company
Graham Holloway and Leonade Jones were elected to the Board of Trustees on
April 5, 1995.
<PAGE>
THE NEW ECONOMY FUND
FUND SERVICES
These handy services can add convenience and flexibility to your American Funds
investments.*
ADDING TO YOUR INVESTMENT
-------------------------
There are three ways you can group your American Funds purchases to qualify for
a quantity discount:
- RIGHT OF ACCUMULATION: You can combine the value of your existing shares
with those you are purchasing to qualify for a discount.
- STATEMENT OF INTENTION: You can, without obligation, use a Statement of
Intention that allows you to combine the value of your existing shares and the
purchases you intend to make over a 13-month period so you can take immediate
advantage of the maximum quantity discount available.
- CONCURRENT PURCHASES: By purchasing shares in more than one American Fund
simultaneously, you may qualify for a quantity discount. (Shares of money
market funds purchased directly do not apply to quantity discounts.
Additionally, certain accounts may not be eligible to be grouped. See the
fund's prospectus or your investment professional for more details.)
SUBSEQUENT INVESTMENTS BY MAIL: Once your account has been established and
you've selected a broker/dealer, simply send a check for $50 or more, along
with the bottom portion of your account statement, to American Funds Service
Company.
PUTTING YOUR INVESTMENTS ON AUTOPILOT
--------------------------------------
AUTOMATIC INVESTMENT PLAN: You can make automatic investments regularly by
authorizing American Funds Service Company to deduct a specified sum from your
bank account.
AUTOMATIC EXCHANGE PLAN: You can automatically exchange $50 or more between
funds on a regular basis.
AUTOMATIC WITHDRAWAL PLAN: You can arrange to have regular checks for specified
amounts sent to you or to anyone you designate in any month(s) you choose.
CHOOSING THE PAYOUT SYSTEM THAT'S RIGHT FOR YOU
------------------------------------------------
AUTOMATIC REINVESTMENT: All dividends and capital gain distributions can be
automatically reinvested in additional fund shares without a
sales charge.
CROSS-REINVESTMENT: You can reinvest dividends and/or capital gains from one
fund to another fund at no charge if you have a balance of at least $5,000 in
the originating fund or meet the minimum initial investment for the receiving
fund.
DIVIDENDS IN CASH: You can elect to take dividends in cash.
REPORTS YOU'LL RECEIVE FROM US
------------------------------
CONFIRMATIONS OF TRANSACTIONS: You receive account statements reflecting the
transactions in your account.
CONSOLIDATED QUARTERLY STATEMENTS: If you have more than one account with the
American Funds, you can request a quarterly statement combining certain
accounts registered to the same individual.
YEAR-END TAX REPORTS: At the end of each year, you will receive an individual
report which shows the tax status of the distributions paid to you during the
year. In many instances, these reports can help you calculate taxes due on
shares sold by reporting average cost.
SPECIAL SERVICES
----------------
EXCHANGE PRIVILEGES: You can transfer some or all of your holdings into other
American Funds by mail or by phone. Certain restrictions apply (a sales charge
may apply if one has not already been paid), and it's important to remember
that an exchange constitutes a sale and purchase for tax purposes.
TELEPHONE INFORMATION SERVICE: American FundsLineR is a toll-free service which
gives you account information as well as current prices for all American Funds.
Just call 800/325-3590.
<PAGE>
THE NEW ECONOMY FUND
RESULTS OF SHAREHOLDER MEETING HELD APRIL 5, 1995
Shares Outstanding on January 6, 1995 (record date) 189,141,222
Shares Voting on April 5, 1995 95,056,029 (50.3%)
<TABLE>
<CAPTION>
Percent of Percent of Percent of
Votes Shares Votes Shares Shares
Election of Trustees For Voting For Withheld Withheld Abstentions Abstaining
<S> <C> <C> <C> <C> <C> <C>
Richard G. Capen, Jr. 92,238,275 97.1% 2,817,754 2.9% none 0.0%
H. Frederick Christie 92,026,776 96.8 3,029,253 3.2 none 0.0
Alan W. Clements 92,211,624 97.0 2,844,405 3.0 none 0.0
Robert B. Egelston 92,271,215 97.1 2,784,814 2.9 none 0.0
Alan Greenway 92,153,216 96.9 2,902,813 3.1 none 0.0
William R. Grimsley 92,280,629 97.1 2,775,400 2.9 none 0.0
Graham Holloway 92,260,695 97.1 2,795,334 2.9 none 0.0
Leonade D. Jones 91,933,227 96.7 3,122,802 3.3 none 0.0
William H. Kling 92,259,735 97.1 2,796,294 2.9 none 0.0
Norman R. Weldon 92,284,922 97.1 2,771,107 2.9 none 0.0
Patricia K. Woolf 92,084,313 96.9 2,971,716 3.1 none 0.0
</TABLE>
<TABLE>
<CAPTION>
Percent of Percent Percent of
of
Votes Shares Votes Shares Shares Shares
Proposals For Voting For Against Voting Abstentions Abstaining Not Voted
Against
<S> <C> <C> <C> <C> <C> <C> <C>
Amendment to clarify a
fundamental investment
policy regarding investments
in a single industry 72,455,944 76.2% 1,223,359 1.3% 4,203,447 4.4% 17,173,279
Amendment to clarify a
fundamental investment
policy regarding the
purchase or sale of
commodities or commodity
contracts 69,979,556 73.6 3,057,028 3.2 4,845,665 5.1 17,173,780
Amendment to a fundamental
investment policy regarding
investments in restricted and
illiquid securities 68,184,454 71.7 4,038,453 4.2 5,659,342 6.0 17,173,780
</TABLE>
<TABLE>
<CAPTION>
Percent of Percent of Percent of
Votes Shares Votes Shares Shares
Ratification of For Voting For Against Voting Abstentions Abstaining
Auditors Against
<S> <C> <C> <C> <C> <C> <C>
Deloitte & Touche 89,877,25 94.6% 859,594 0.9% 4,319,181 4.5%
LLP 4
</TABLE>
*FOR MORE COMPLETE INFORMATION ABOUT THE FUND'S SERVICES OR ABOUT ANY OF THE
AMERICAN FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM
YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR PHONE THE FUND'S TRANSFER
AGENT, AMERICAN FUNDS SERVICE COMPANY, AT 800/421-0180. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THESE SERVICES ARE
SUBJECT TO CHANGE OR TERMINATION.
<PAGE>
THE NEW ECONOMY FUND
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
AMERICAN FUNDS SERVICE COMPANY
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02105-1713
COUNSEL
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071-2899
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of The New Economy Fund, but
it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
September 30, 1995, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA BDA/CG/2673
Lit. No. NEF-013-0795
Printed on recycled paper
[The American Funds Group(R)]
|
|