-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vesfb+mW56/jC2Bvd2DH5bMCGhOK0m/JODlFyg4fC0eEXFO1W+sUnoocSc48XRP7 UVsjCZQBgsv8cfZuS/5lyA== 0000051931-00-000002.txt : 20000308 0000051931-00-000002.hdr.sgml : 20000308 ACCESSION NUMBER: 0000051931-00-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT CO OF AMERICA CENTRAL INDEX KEY: 0000051931 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 951426645 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00116 FILM NUMBER: 562585 BUSINESS ADDRESS: STREET 1: 333 S HOPE ST - 52ND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134869200 N-30D 1 [The American Funds Group(r)] ICA THE INVESTMENT COMPANY OF AMERICA 1999 Annual Report For the year ended December 31 [cover: various photographs of people doing business] BACKSTAGE AT YOUR MUTUAL FUND ICA(SM) The Investment Company of America(r) seeks long-term growth of capital and income, placing greater emphasis on future dividends than on current income. ICA is one of the 29 mutual funds in The American Funds Group,(r) the nation's third-largest mutual fund family. For nearly seven decades, Capital Research and Management Company, the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk. Fund results in this report were computed without a sales charge unless otherwise indicated. The fund's 30-day yield as of January 31, 2000, calculated in accordance with the Securities and Exchange Commission formula, was 1.39%. FIGURES SHOWN ARE PAST RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. 1999 RESULTS AT A GLANCE Year ended December 31, 1999 (with dividends and capital gain distributions reinvested)
Standard & Poor's 500 ICA Composite Index Income Return 1.66% 1.36% Capital Return 14.90% 19.65% Total Return 16.56% 21.01%
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS PAID IN 1999
Per Share Payment Date Income Dividends $0.12 March 8 $0.12 June 7 $0.12 Sept. 7 $0.12 + $0.03 Dec. 14 $0.51 Capital Gain Distributions $0.30 March 8 $2.74 Dec. 14 $3.04
EXPENSE RATIOS AND PORTFOLIO TURNOVER RATES* Year ended December 31, 1999
Expense Ratio 0.55% 1.21% Portfolio Turnover Rate 28% 68%
*The expense ratio is the annual percentage of net assets used to pay fund expenses. The portfolio turnover rate is a measure of how often securities are bought and sold by a fund. /#/Growth & Income Funds, as measured by Lipper, Inc. FELLOW SHAREHOLDERS In a year when most U.S. stocks declined in price, ICA achieved its fifth consecutive year of double-digit total returns. Maintaining the long-term, research-intensive approach it has followed throughout its 66 years, the fund produced a gain of 16.6%, exceeding its lifetime average of 13.7%. The 1999 figure, which includes reinvested dividends and capital gain distributions, was well above the 11.9% gain for ICA's peer group as measured by the Lipper Growth & Income Funds Index. It did not, however, reach the 21.0% total return for the unmanaged Standard & Poor's 500 Composite Index. That index is heavily weighted toward a few large companies, several of which showed astonishing gains last year and paid no dividends, currently making the index a misleading reflection of the broad market. In fact, a majority of stocks that were in the S&P 500 for the full year were down. On the New York Stock Exchange, losers outnumbered winners by nearly two to one. ICA did better, with more holdings up than down. THE LONG-TERM VALUE OF DIVIDENDS The stock market rewarded non-dividend-paying stocks far more than dividend-payers last year. This dichotomy isn't surprising in a bull market of such long duration. It is, however, at odds with longer term trends. Over the past 20 years, reinvested dividends, combined with the effect of compounding, have accounted for slightly more than half of the total return for the S&P 500 Index. Focusing just on ICA, shareholders who reinvested their dividends over the past decade added 27% more in value to their accounts than those who took their dividends in cash. We cite such numbers as a reminder that ICA's goals and probably yours as an ICA investor include looking beyond the trends of the moment, no matter how pervasive, and continuing to place some importance on dividend income while seeking price appreciation. Dividends also tend to have a buffering effect in a falling market. NEW TECHNOLOGY AND ICA The most publicized segment of the market was the rocket-propelled rise in stocks of Internet companies. You won't find the hottest of the new Internet offerings in ICA's portfolio. Instead, your fund's search for value has led it to participate broadly in the new technologies driving today's economic growth. In fact, data processing and telecommunications were among the five largest industry holdings in 1990 and stood first and third at the end of 1999. Large holdings acquired before last year's run-up in prices include companies such as Nortel Networks, the fund's biggest gainer for the year (+303%), Oracle (+290%) and Cisco Systems (+131%), which provide equipment and systems to the Internet. Other large holdings were in data processing, such as Microsoft (+68%) and Computer Associates International (+64%). We have lightened our holdings in several technology stocks recently as a result of their high valuations relative to realistic prospects. A BRIEF LOOK BACK If we stand back and look at the past decade, we can see the ability of the fund's adviser, Capital Research and Management Company, to find and stay with opportunities. Most of the largest holdings early in the past decade are still in the portfolio today, although the size of those holdings have changed as Capital's investment professionals actively followed the shifting fortunes of individual companies. Last year's results proved once again a basic principle of investing: Individual stocks often fluctuate year-by-year, but longer periods are a far better gauge of their value. For example, Fannie Mae, the fourth-largest holding at the start of the decade as well as at its end, slipped 16% last year as interest rates rose but still was up 614% for the ten years. Time Warner, already a significant holding in 1989, slumped in mid-decade but was up 367% for the decade, including 17% last year. It rose further in January of this year after announcing plans to merge with America Online. Alcoa, a holding for much of the decade, was up 123% last year, more than it gained over the previous five. A 22-YEAR STREAK The 1980s and 1990s have been particularly strong decades for ICA. In fact, the fund has had positive total returns for the past 22 calendar years, the longest positive string in the mutual fund industry, according to Lipper, Inc. Here are average annual compound returns for both decades: ICA VS. ITS BENCHMARKS
1/1/80 - 1/1/90 - 12/31/89 12/31/99 ICA 18.1% 16.0% S&P 500 17.5% 18.2% Lipper* 16.4% 14.4%
*Lipper Growth & Income Funds Index MANAGING EXPECTATIONS After so long a period of high returns, keeping expectations realistic can be difficult. Last year's U.S. stock market helped in that regard, considering the range of results even among ICA's 20 largest holdings. In addition to Oracle's huge gain, Viacom, atop the fund's list, gained 63%, while Texas Instruments rose 126%, Fujitsu 244% and Corning 187%. On the other hand, Philip Morris dropped 57% (but still was up 61% for the decade) and Monsanto lost 25% in 1999. Among bank holdings, Washington Mutual was down 32%. The not-so-remote possibility of getting caught on the wrong side of a market where a majority of the stocks were down illustrates the value of a diversified, research-based and fully managed portfolio such as you have with ICA. Moreover, there is a lot more to managing the fund than selecting stocks. There are many other important parts of the process. We offer you a broad look at them in the article beginning on page 6. ICA is the third-largest equity mutual fund and has been among the nation's dozen largest for 30 years. Perhaps more significantly, it is the only one of the 12 largest funds in 1969 to remain on the list every year since. The fund's lifetime average annual compound return of 13.7% exceeds the 12.4% produced by the S&P 500 Index. Flip this page and you will see how much extra growth this margin has meant for a $10,000 investment in ICA. ICA has had positive total returns for the past 22 calendar years, the longest positive string in the industry. Contributing to the fund's success is its consistent long-term approach evidenced by a low portfolio turnover rate and expenses well below industry averages, as shown in the table on the inside front cover. We thank you for being part of ICA and hope you will join us in a look backstage. Sincerely, /s/Jon B. Lovelace, Jr. Jon B. Lovelace, Jr. Chairman of the Board /s/R. Michael Shanahan R. Michael Shanahan President February 14, 2000 THE VALUE OF A LONG-TERM PERSPECTIVE (1934-1999) This chart illustrates a hypothetical $10,000 investment in The Investment Company of America over the past 66 years, from January 1, 1934 through December 31, 1999, showing the high, low and closing values for each year. The figures in the table below the chart include the fund's total return for each of those years. As you look through the table, you will see that the fund's total return can fluctuate greatly from year to year. In some years it was well into double digits. In other years the fund had a negative return. During the entire period, a $10,000 investment in the fund, with all dividends reinvested, would have grown to $45,682,130 compared with $22,816,415 in the S&P 500 Index. Over the same period, $10,000 in a savings account would have grown to $169,649 with all interest compounded.* You can use this table to estimate how the value of your own holdings has grown. Let's say, for example, that you have been reinvesting all of your dividends and want to know how your investment has done since the end of 1989. At that time, the table shows the value of the investment illustrated here was $10,338,589. Since then, it has more than quadrupled to $45,682,130. Thus, in the same period, the value of your 1989 investment - regardless of size - has also more than quadrupled. *Based on figures from the U.S. League of Savings Institutions and the Federal Reserve Board, reflecting all kinds of savings deposits (maximum allowable interest rates imposed by law until 1983). Savings accounts are guaranteed; the fund is not. AVERAGE ANNUAL COMPOUND RETURNS/+/ For periods ended December 31, 1999 Ten Years +15.33% Five Years +22.27% One Year +9.84% /+/Based on the maximum sales charge of 5.75%. Sales charges are lower for investments of $25,000 or more. [begin mountain chart]
Year ended December 31 1934 1935 1936 1937 1938 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested - - $398 1,006 181 Value at Year-End/1/ $11,822 21,643 31,560 19,424 24,776 Dividends in Cash - - $398 976 170 Value at Year-End/1/ $11,822 21,643 31,042 18,339 23,174 S&P 500/Div. Reinvested $9,848 14,536 19,441 12,689 16,591 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 0.0% 0.0 1.8 3.2 0.9 Capital Return 18.2% 83.1 44.0 (41.7) 26.7 ICA TOTAL RETURN 18.2% 83.1 45.8 (38.5) 27.6 Fund Expenses/4/ 0.94% 1.13 1.19 1.53 1.89 Year ended December 31 1939 1940 1941 1942 1943 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 536 891 1,262 1,186 1,101 Value at Year-End/1/ 24,986 24,384 22,590 26,376 35,019 Dividends in Cash 498 806 1,089 969 861 Value at Year-End/1/ 22,860 21,460 18,816 20,893 26,861 S&P 500/Div. Reinvested 16,529 14,914 13,186 15,842 19,904 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 2.2 3.6 5.2 5.3 4.2 Capital Return (1.4) (6.0) (12.6) 11.5 28.6 ICA TOTAL RETURN 0.8 (2.4) (7.4) 16.8 32.8 Fund Expenses/4/ 2.02 1.88 1.95 2.13 1.72 Year ended December 31 1944 1945 1946 1947 1948 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 1,242 1,191 1,775 2,409 2,685 Value at Year-End/1/ 43,193 59,091 57,692 58,217 58,430 Dividends in Cash 942 878 1,277 1,672 1,785 Value at Year-End/1/ 32,130 42,948 40,686 39,332 37,714 S&P 500/Div. Reinvested 23,792 32,430 29,829 31,509 33,200 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 3.5 2.8 3.0 4.2 4.6 Capital Return 19.8 34.0 (5.4) (3.3) (4.2) ICA TOTAL RETURN 23.3 36.8 (2.4) 0.9 0.4 Fund Expenses/4/ 1.45 1.06 0.98 1.10 1.08
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Year ended December 31 1949 1950 1951 1952 1953 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 2,661 3,152 3,391 3,535 3,927 Value at Year-End/1/ 63,941 76,618 90,274 101,293 101,747 Dividends in Cash 1,689 1,911 1,970 1,974 2,113 Value at Year-End/1/ 39,436 45,185 51,159 55,305 53,362 39,376 51,763 64,169 75,825 75,109 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 4.6 4.9 4.4 3.9 3.9 Capital Return 4.8 14.9 13.4 8.3 (3.5) ICA TOTAL RETURN 9.4 19.8 17.8 12.2 0.4 Fund Expenses/4/ 0.96 1.01 0.93 0.81 0.85 Year ended December 31 1954 1955 1956 1957 1958 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 4,104 5,124 5,608 6,228 6,546 Value at Year-End/1/ 158,859 199,215 220,648 194,432 281,479 Dividends in Cash 2,127 2,579 2,748 2,969 3,028 Value at Year-End/1/ 80,780 98,530 106,303 90,911 128,040 S&P 500/Div. Reinvested 114,370 150,290 160,035 130,886 204,535 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 4.0 3.2 2.8 2.8 3.4 Capital Return 52.1 22.2 8.0 (14.7) 41.4 ICA TOTAL RETURN 56.1 25.4 10.8 (11.9) 44.8 Fund Expenses/4/ 0.88 0.86 0.80 0.76 0.68 Year ended December 31 1959 1960 1961 1962 1963 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 7,013 8,139 8,383 9,122 9,620 Value at Year-End/1/ 321,419 335,998 413,552 358,800 440,900 Dividends in Cash 3,161 3,582 3,603 3,831 3,936 Value at Year-End/1/ 142,882 145,597 175,370 148,178 177,833 S&P 500/Div. Reinvested 228,983 230,021 291,847 266,562 327,243 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 2.5 2.5 2.5 2.2 2.7 Capital Return 11.7 2.0 20.6 (15.4) 20.2 ICA TOTAL RETURN 14.2 4.5 23.1 (13.2) 22.9 Fund Expenses/4/ 0.64 0.62 0.59 0.61 0.59
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Year ended December 31 1964 1965 1966 1967 1968 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 10,708 12,112 15,516 18,359 22,628 Value at Year-End/1/ 512,591 650,689 657,093 846,941 990,640 Dividends in Cash 4,285 4,742 5,946 6,869 8,270 Value at Year-End/1/ 202,346 251,553 248,034 312,473 356,572 S&P 500/Div. Reinvested 381,015 428,493 385,546 477,643 530,376 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 2.4 2.4 2.4 2.8 2.7 Capital Return 13.9 24.5 (1.4) 26.1 14.3 ICA TOTAL RETURN 16.3 26.9 1.0 28.9 17.0 Fund Expenses/4/ 0.58 0.57 0.52 0.50 0.49 Year ended December 31 1969 1970 1971 1972 1973 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 25,318 27,305 28,565 29,917 33,353 Value at Year-End/1/ 884,824 908,018 1,062,651 1,231,087 1,024,067 Dividends in Cash 9,024 9,438 9,569 9,750 10,569 Value at Year-End/1/ 309,611 307,421 349,727 394,701 317,911 S&P 500/Div. Reinvested 485,806 504,725 576,517 685,814 585,221 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 2.6 3.1 3.1 2.8 2.7 Capital Return (13.3) (0.5) 13.9 13.1 (19.5) ICA TOTAL RETURN (10.7) 2.6 17.0 15.9 (16.8) Fund Expenses/4/ 0.48 0.55 0.51 0.49 0.47 Year ended December 31 1974 1975 1976 1977 1978 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 52,187 49,800 46,441 49,838 55,969 Value at Year-End/1/ 840,310 1,137,660 1,474,369 1,436,402 1,647,483 Dividends in Cash 15,908 14,318 12,804 13,279 14,386 Value at Year-End/1/ 245,526 317,655 398,099 374,307 414,421 S&P 500/Div. Reinvested 431,257 591,429 732,244 679,620 723,941 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 5.1 5.9 4.1 3.4 3.9 Capital Return (23.0) 29.5 25.5 (6.0) 10.8 ICA TOTAL RETURN (17.9) 35.4 29.6 (2.6) 14.7 Fund Expenses/4/ 0.49 0.48 0.46 0.49 0.49
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Year ended December 31 1979 1980 1981 1982 1983 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 69,960 91,302 115,901 146,105 147,156 Value at Year-End/1/ 1,963,310 2,380,187 2,401,091 3,211,997 3,859,712 Dividends in Cash 17,347 21,746 26,420 31,589 30,264 Value at Year-End/1/ 475,669 552,242 530,864 670,590 774,518 S&P 500/Div. Reinvested 857,494 1,135,716 1,080,290 1,312,586 1,607,373 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 4.2 4.7 4.9 6.1 4.6 Capital Return 15.0 16.5 (4.0) 27.7 15.6 ICA TOTAL RETURN 19.2 21.2 0.9 33.8 20.2 Fund Expenses/4/ 0.47 0.46 0.45 0.46 0.44 Year ended December 31 1984 1985 1986 1987 1988 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 160,449 174,890 203,830 267,489 318,747 Value at Year-End/1/ 4,117,187 5,491,890 6,685,657 7,049,178 7,989,285 Dividends in Cash 31,680 33,152 37,328 47,452 54,382 Value at Year-End/1/ 791,971 1,017,904 1,200,518 1,220,928 1,327,375 S&P 500/Div. Reinvested 1,707,344 2,247,607 2,666,026 2,804,108 3,266,701 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 4.2 4.2 3.7 4.0 4.5 Capital Return 2.5 29.2 18.0 1.4 8.8 ICA TOTAL RETURN 6.7 33.4 21.7 5.4 13.3 Fund Expenses/4/ 0.47 0.43 0.41 0.42 0.48 Year ended December 31 1989 1990 1991 1992 1993 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 370,835 406,318 320,422 357,779 374,395 Value at Year-End/1/ 10,338,589 10,409,027 13,171,892 14,092,236 15,729,365 Dividends in Cash 60,741 64,056 48,721 52,965 54,005 Value at Year-End/1/ 1,652,751 1,598,821 1,969,876 2,052,162 2,234,153 S&P 500/Div. Reinvested 4,564,914 4,164,749 5,428,149 5,841,123 6,427,233 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 4.6 3.9 3.1 2.7 2.7 Capital Return 24.8 (3.2) 23.4 4.3 8.9 ICA TOTAL RETURN 29.4 0.7 26.5 7.0 11.6 Fund Expenses/4/ 0.52 0.55 0.59 0.58 0.59 Year ended December 31 1994 1995 1996 1997 1998 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 407,211 450,124 480,065 510,312 584,125 Value at Year-End/1/ 15,753,834 20,578,696 24,560,540 31,881,108 39,193,457 Dividends in Cash 57,286 61,704 64,313 67,021 75,420 Value at Year-End/1/ 2,180,610 2,779,658 3,247,852 4,142,648 5,008,219 S&P 500/Div. Reinvested 6,514,488 8,953,818 11,004,232 14,670,341 18,854,419 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 2.6 2.9 2.3 2.1 1.8 Capital Return (2.4) 27.7 17.0 27.7 21.1 ICA TOTAL RETURN 0.2 30.6 19.3 29.8 22.9 Fund Expenses/4/ 0.60 0.60 0.59 0.56 0.55 Year ended December 31 1999 YEAR-BY-YEAR SUMMARY OF RESULTS Dividends Reinvested 651,791 Value at Year-End/1/ 45,682,130 Dividends in Cash 82,803 Value at Year-End/1/ 5,748,501 S&P 500/Div. Reinvested 22,816,415 ANNUAL PERCENTAGE RETURNS ASSUMING DIVIDENDS REINVESTED Income Return 107 Capital Return 14.9 ICA TOTAL RETURN 16.6 Fund Expenses/4/ 0.55
- --- [end chart] AVERAGE ANNUAL COMPOUND RETURN FOR 66 YEARS: INCOME RETURN 3.23% CAPITAL RETURN 10.39% ICA TOTAL RETURN 13.62%/1/ Past results are not predictive of future results. The S&P 500 Index is unmanaged and does not reflect sales charges, commissions or expenses. /1/These figures, unlike those shown earlier in this report, reflect payment of the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net amount invested was $9,425. As outlined in the prospectus, the sales charge is reduced for larger investments. There is no sales charge for dividends or capital gain distributions. The maximum initial sales charge was 8.5% prior to July 1, 1988. No adjustment has been made for income or capital gain taxes. /2/Includes dividends of $7,189,638 and capital gain distributions of $17,500,792 reinvested in the years 1936-1999. /3/Includes reinvested capital gain distributions of $2,640,717 but does not reflect income dividends of $1,223,094 taken in cash. /4/Fund expense percentages are provided as additional information. They should not be subtracted from any other figure on the table because all fund results already reflect their effect. BACKSTAGE AT YOUR MUTUAL FUND A year ago in these pages we introduced you to many of the experienced analysts and portfolio counselors who manage ICA's portfolio. This year, we will take you backstage so you can meet the talented associates who support your investment in The Investment Company of America across a range of disciplines. These are individuals who are there when you phone, who keep your account current, and who provide the technology to do that as swiftly and efficiently as possible. These are the people who watch securities markets minute-by-minute to buy the best securities at the best prices - important even for a fund that buys for the long term. Here also is the group that each market day races against a tight deadline to compute what your shares are worth and make it possible for you to keep tabs on those numbers in the daily press, American FundsLine(r) and our Web site. Along with the investment professionals who manage the portfolio, they are part of Capital Research and Management Company, which has been ICA's investment adviser for 66 years and is adviser to all 29 funds in The American Funds Group. In this era of exuberance over the long bull market, leading to such risky ventures as day trading on the Internet and other do-it-yourself forms of stock picking, we think you will be impressed with just how much expertise goes into managing a successful mutual fund. Rather than go it alone, you have chosen a capable base of professionals to shepherd your investment in ICA. [photographs of date stamp, service enter, telephone console] [Begin Caption] American Funds Service Team TEAMWORK IN RESPONDING One of the many teams available to answer your questions when you call the American Funds includes, from left, Carolyn Nakamoto, Antonio Gonzalez III, Rebecca Jimenez, Ron Morisaki, Jeannie Fractious, Leslie Bostrom, Allison Hosterman and team leader Denise Pasko. [End Caption] 17,000 CALLS, ANSWERED IN SECONDS Excellence of service is a top priority, so let's begin our tour in the area charged most directly with achieving that, American Funds Service Company. From four interconnected service centers across the nation - in Virginia, Indiana, Texas and California - associates service 11 million accounts for the American Funds family, ICA's 1.7 million among them. On average, the centers' service representatives field 17,000 calls a day. Many of those who serve you at the centers are organized into teams that provide the most effective possible responses to your questions or requests, simple or complex. The centers handle 70 million contacts annually with shareholders or their financial advisers. American FundsLine, our 24-hour automated telephone system, and the American Funds Web site (www.americanfunds.com) are also convenient sources of information and reduce the cost of servicing your account. NEW IMAGING TECHNOLOGY A sizable part of service center activity still involves nonelectronic mail. Recently introduced imaging technology has allowed the centers to "move the work to where the people are," says Gary Winsbury, an American Funds manager at the Brea, California, center. The result is a level workload, reducing such costs as overtime and heavier staffing. Each center feeds mail into a computer imaging system that allows it to be transferred from center to center instantaneously. In a typical month, 250,000 transactions are scanned and processed using imaging technology. [photographs of service center, mail processing equipment, cartons of mail] [Begin Caption] New Imaging Technology FROM PAPER TO COMPUTER Lourdes Villegas, above at the keyboard, Tonya Rodgers and Gary Winsbury route letters electronically to where they can be handled most effectively. Right, Sarah Molina and Dax Velasquez. [End Caption] [Begin Pull Quote] "move the work to where the people are" [End Pull Quote] [photographs of people at work] [Begin Caption] Information Technology and Shareholder Records SAFEGUARDING YOUR ACCOUNT RECORDS Much of Capital's technology is self-developed and tested. Mary Xavier, Marilyn Gravell and Scott Bruski, in the technology lab, discuss the system used to store and retrieve account records. [End Caption] Getting quarterly account statements out to you is an around-the-clock, seven-day-a-week operation at the turn of each calendar quarter. As the new millennium dawned, so did some 16 million pages of statements going to American Funds shareholders and their financial advisers. By January 9th, with all potential Y2K problems long since foreseen, the last of the year-end statements were in the mail. Protecting your records is another important operation. Marilyn Gravell and Mary Xavier are part of a team that works with an outside firm called DST to update and monitor account records. "We can access those records through our computers, and DST maintains a back-up location as well as a storage facility in a limestone cave in the Midwest," explains Mary. [photographs of service center] [Begin Caption] Share Pricing and Statistics MARKETING STATISTICS From left, Deborah Eppolito and Esther Paradero are two of the eight associates who calculate investment results for ICA and the other American Funds. NEW NUMBERS EVERY DAY Nida Murakawa, Jeanne Feybush and Shane Lawlor are part of the group that analyzes pricing data on ICA's individual securities holdings. [End Caption] ACCURATE DAILY SHARE PRICING Around 4 p.m. Pacific time of every stock market day, the updated value of a share of ICA magically appears on the American Funds Web site and our American FundsLine phone system. By morning it's in your local newspaper. Magic to you, perhaps, but a complex race against time for a number of American Funds people. The process begins early in the day as prices of individual securities are gathered from markets elsewhere in the world that have already closed. Then the real drama begins at l p.m. Los Angeles time (4 p.m. in New York) when the New York Stock Exchange closes. "Six of our associates go behind a closed door for 50 minutes to concentrate in almost total silence on gathering and checking prices," says Jeanne Feybush, a senior vice president who oversees the effort. They collect data on some 3,800 securities from a number of services reporting New York Stock Exchange, Nasdaq and other market results. "Our system goes through many edits," she adds, including intense crosschecking of any unusual price variations from the previous trading session. "We even have backup generators in case power goes down, and we go through quarterly drills on how to overcome a breakdown." The effort then shifts to a separate group headed by Marcia Gould, a Capital Research vice president and assistant treasurer of ICA. That group takes all those individual prices and, with only an hour to work, calculates the net asset value for an ICA share and for shares of the other American Funds. That involves more checking and rechecking to be certain the overall figure fairly reflects the price of an ICA share that day, based on the total value of all the investments in the portfolio. [photographs of Thomas Rowland, Kathleen Ries and Marcia Gould] [Begin Caption] Fund Accounting PRICING ICA Armed with accurate prices for the holdings, a group including Thomas Rowland, Kathleen Ries and Marcia Gould convert those individual prices into one price - the value of an ICA share. [End Caption] TRADING: THE SCIENCE AND THE ART [photograph of traders] Considering the long-term nature of ICA's investment approach, you may wonder whether our Securities Order department is like the Maytag repairman, always waiting for something to do. That's far from the case. For a fund like ICA, building a significant position in a stock - or winding down a major holding - is not something done by one press of a computer key. It is often a long process, with experienced associates watching bounces in the market, looking intently for opportunities, such as signs of who might be out there anxious to sell or buy a big block of stock. [Begin Pull Quote] "building a significant position is not something done by one press of a computer key" [End Pull Quote] [Begin Caption] Trading Room BUY LOW, SELL HIGH Nowhere is that guiding principle more relevant than in the trading room, where Doreen Gee oversees ICA's individual stock market transactions. At her side here is equity trader Matt Lyons. [End Caption] Doreen Gee, who heads Capital Research's Los Angeles equity trading department, explains, "We try to have as little impact on the market as possible. Say we want to build a holding of three or four million shares in a company. We may spend months on a strategy. We're very patient." The result is better prices for ICA than with a less well-organized and experienced approach. [photograph of Anne Llewellyn, Vincent Corti and Eric Richards] [Begin Caption] Administrative and Legal Coordination WORKING WITH THE FUND'S DIRECTORS From left, Vincent Corti, Anne Llewellyn and outside legal counsel Eric Richards help coordinate the activities of ICA's Board of Directors and Advisory Board, focusing on corporate governance, compliance and regulatory matters. [End Caption] [Begin Pull Quote] "we try to have as little impact on the market as possible" [End Pull Quote] The portfolio counselors and analysts who make the investment decisions naturally work closely with the trading room associates to set price parameters and other objectives to guide the buying or selling effort. Although ICA's turnover is exceedingly low by industry standards, a shift involving even 28% of ICA's $49-billion equity portfolio is a substantial movement of assets and potential for cost savings in any year. While the fund owns primarily U.S. securities, a number of international companies are in the portfolio. In some cases, that turns the search for the best prices into an around-the-clock affair. Doreen's group "passes the order book" electronically to our Hong Kong and London trading desks, to seek opportunities in Asian and European markets. [photograph of Catherine Ward and Patricia Pinney] [Begin Caption] Investment Supervision STICKING TO OBJECTIVES Catherine Ward, left, chairs Capital Research's Investment Committee, charged with making sure investments are within the fund's objectives. Here she is joined by ICA Vice President Patricia Pinney. [End Caption] OVERSEEING THE OBJECTIVES Another important activity involves oversight to ensure that the investment activity stays within fund objectives. While the fund's portfolio counselors make independent decisions about the portion of the portfolio they manage (more on this later), their decisions require coordination. Catherine Ward serves as chairman of Capital Research's investment committee, whose responsibility includes among other things recommending stocks eligible for ICA's portfolio. That list is reviewed and approved by the fund's Board of Directors. Investment Administration, headed by Cathy Michero, monitors the "eligible" list. Her group watches for various changes in a company's business activities that might affect its appropriateness for ICA's portfolio. "All orders to buy or sell go through our department to be certain they comply with the fund's prospectus," Cathy explains. Other ICA associates provide legal support and work with the fund's independent Directors and Advisory Board members. [photograph of Cathy Michero, Brandy Baker, Katelyn O'Burke and Susan Countess] [Begin Caption] Investment Administration MAINTAINING THE LIST Above, from left, Cathy Michero, Brandy Baker, Katelyn O'Burke and Susan Countess keep close tabs on mergers and other corporate actions that can affect which stocks fall within ICA's investment universe. [End Caption] [Begin Pull Quote] "all orders to buy or sell go through Investment Administration to be certain they comply with the fund's prospectus" [End Pull Quote] [photographs of law library and clocks] [photograph of Joe Blair in presentation and driving a car] [Begin Caption] Contacting The Brokers TELLING ICA'S STORY Joe Blair, a wholesaler for The American Funds Group, meets with a group of brokers in Hartford, Connecticut, to talk about ICA. He works closely with Area Sales Representative Wendy Johnson, pictured below, who can provide Joe with broker information and other data from the Hampton Roads, Virginia, service center. [End Caption] [photographs of computer terminal and customer service representative] FROM BACKSTAGE TO ONSTAGE You've had a fairly complete tour backstage; now let's move in front of the curtains to meet those somewhat more in the public eye. Joe Blair is a senior vice president of American Funds Distributors, the marketing arm of The American Funds Group. He is one of several dozen marketing executives who spend their time in the field, in his case southern New England. Their job is to provide information and support to brokers and financial planners through whom you most likely first came in contact with ICA. On the road four days a week, Joe calls on upwards of 750 brokerage or planners' offices in the course of a year. When it comes to ICA, he finds that the fund's strongest attraction is its long-term consistency. "It's the fact the fund has been around for 66 years," says Joe. "That allows you to see how well the American Funds' approach has worked over all those market cycles." As is the case with Joe's colleagues in the field, his efforts are supported by an area sales representative - in this case Wendy Johnson, based at the service center in Hampton Roads, Virginia. She can quickly provide information to any of the financial advisers in Joe's region, helping them assist American Funds' current and potential investors. FINDING THE INVESTMENTS Field work is by no means a marketing activity alone. It may be trite to say it, but Research is Capital's middle name. Like the rest of the American Funds, ICA draws on the services of more than 100 analysts and portfolio counselors. They make more than 7,500 visits a year to companies, their suppliers, customers and competitors around the world. Their goal is to be the best-informed investment professionals in the business about the companies in the ICA portfolio and those that might be included in the future. As we pointed out last year, they bring an average of a dozen years of experience to their efforts. As unusual as that tenure is in the mutual fund industry, there are other factors that equally set them apart. At Capital Research, analysts, who are specialists based on industry or geographic region, also have direct investment responsibility within their area of expertise. More than 30 of them participate in what's called ICA's research portfolio, accounting for about 30% of the fund's assets under management. That direct involvement promotes interaction between them and the portfolio counselors, who base many of their investment decisions on the convictions displayed by the analysts about stocks they have chosen for the research portfolio. For their part, the portfolio counselors, who are generalists with a broad view of the investment landscape, make up Capital's unique multiple portfolio counselor system, adopted more than 40 years ago. Each counselor has a portion of the portfolio to manage as a separate unit. That permits the counselors to follow their highest convictions, as well, rather than attempt to invest more broadly than they might prefer. Portfolio diversity is ensured by the diversity of opinions and convictions of the ICA counselors. The system provides a straightforward method for managing growth in the fund: The number of counselors can be increased as needed. It also provides a seamless way to introduce new individuals to succeed those approaching retirement. IT'S A COLLABORATIVE EFFORT Investment management is the most written-about aspect of the mutual fund business. As we've illustrated here, however, it by no means encompasses the whole cast of associates who support your investment in ICA and do so while helping to hold expenses far below industry standards. Each role is essential to commanding your confidence in the fund and the American Funds family. [Begin Pull Quote] "the goal is to be the best-informed investment professionals in the business" [End Pull Quote] [photographs of the interior of manufacturing plant] [Begin Caption] Investment Research SEEING IS OFTEN BELIEVING Kent Lucas, right, an auto, auto parts and machinery analyst for ICA, goes to where they're made - in this case a car and truck assembly plant jointly owned by Toyota and General Motors in Fremont, California. [End Caption] WHAT MAKES THE AMERICAN FUNDS DIFFERENT? [illustration of globe] As a shareholder in The Investment Company of America, you are also a member of The American Funds Group, the nation's third-largest mutual fund family. You won't find us advertised, yet thousands of financial advisers recommend the American Funds for their clients' serious money - money set aside for education, a home, retirement and other important dreams. What the 29 funds in our group have in common is a commitment to your best interests and the proven approach of our investment adviser, Capital Research and Management Company. In business since 1931, Capital's calling cards include: * A long-term, value-oriented approach Rather than follow short-term fads, we rely on our own intensive research to find well-managed companies with reasonably priced shares and solid, long-term potential. Despite our size, we offer relatively few funds compared with many large fund families, allowing us to maintain a careful focus on our objectives and enabling you to benefit from economies of scale. * A GLOBAL PERSPECTIVE We opened our first overseas office in 1962, well before most mutual funds began investing internationally. Today, the American Funds draw on one of the industry's most globally integrated research networks. Capital Research spends substantial resources getting to know companies and industries around the world. * A MULTIPLE PORTFOLIO COUNSELOR SYSTEM More than 40 years ago, we developed a unique strategy for managing investments that blends teamwork with individual accountability. Every American Fund is divided among a number of portfolio counselors, each of whom manages his or her portion independently, within each fund's objectives; in most cases, research analysts manage a portion as well. Over time, this method has contributed to consistency of results and continuity of management. * EXPERIENCED INVESTMENT PROFESSIONALS More than 75% of the portfolio counselors who serve the American Funds were in the investment business before the sharp stock market decline in October 1987. Long tenure and experience through a variety of market conditions mean we aren't "practicing" with your money. * A COMMITMENT TO LOW OPERATING EXPENSES You can't control market returns, but you can control what you invest in and how much you pay to own it. American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry. Our portfolio turnover rates are low as well, keeping transaction costs and tax consequences contained. A PORTFOLIO FOR EVERY INVESTOR Most financial advisers suggest that investors balance their portfolios by investing across several types of investments. Which mix is right for you? That depends on a number of things - including your risk tolerance, investment time horizon and financial goals. The American Funds Group offers 29 funds with an array of investment objectives to help you and your financial adviser build a portfolio specifically tailored to your needs. GROWTH FUNDS Emphasis on long-term growth through stocks AMCAP Fund(r) EuroPacific Growth Fund(r) The Growth Fund of America(r) The New Economy Fund(r) New Perspective Fund(r) New World Fund(SM) SMALLCAP World Fund(r) GROWTH-AND-INCOME FUNDS Emphasis on long-term growth and dividends through stocks American Mutual Fund(r) Capital World Growth and Income Fund(SM) Fundamental Investors(SM) The Investment Company of America(r) Washington Mutual Investors Fund(SM) EQUITY-INCOME FUNDS Emphasis on above-average income and growth through stocks and/or bonds Capital Income Builder(r) The Income Fund of America(r) BALANCED FUND Emphasis on long-term growth and current income through stocks and bonds American Balanced Fund(r) INCOME FUNDS Emphasis on current income through bonds American High-Income Trust(SM) The Bond Fund of America(SM) Capital World Bond Fund(r) Intermediate Bond Fund of America(r) U.S. Government Securities Fund(SM) TAX-EXEMPT INCOME FUNDS Emphasis on tax-free current income through municipal bonds American High-Income Municipal Bond Fund(r) Limited Term Tax-Exempt Bond Fund of America(SM) The Tax-Exempt Bond Fund of America(r) STATE-SPECIFIC TAX-EXEMPT FUNDS The Tax-Exempt Fund of California(r) The Tax-Exempt Fund of Maryland(r) The Tax-Exempt Fund of Virginia(r) MONEY MARKET FUNDS Seek stable monthly income through money market instruments The Cash Management Trust of America(r) The Tax-Exempt Money Fund of America(SM) The U.S. Treasury Money Fund of America(SM) We also offer a full line of retirement plans and variable annuities. FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISER, DOWNLOAD ONE FROM OUR WEB SITE AT WWW.AMERICANFUNDS.COM, OR PHONE THE FUNDS' TRANSFER AGENT, AMERICAN FUNDS SERVICE COMPANY AT 800/421-0180. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. FOR MORE INFORMATION, ASK YOUR FINANCIAL ADVISER FOR A COPY OF A PORTFOLIO FOR EVERY INVESTOR. INVESTMENT PORTFOLIO - December 31, 1999 - ------------------------------------------ ---------- 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 - ------------------------------------------ ----------
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 The Investment Company of America Investment Portfolio, December 31, 1999 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
The Investment Company of America Financial Statements - ----------------------------------------- ------------- ------------- Statement of Assets and Liabilities (dollars in at December 31, 1999 millions) - ---------------------------------------- ------------- ------------- 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
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. Per-Share Data and Ratios Year ended December 31 1999 1998 1997 1996 1995 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%.
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:
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 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
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
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
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
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%
THE INVESTMENT COMPANY OF AMERICA [The American Funds Group(r)] BOARD OF DIRECTORS CHARLES H. BLACK Pacific Palisades, California Private investor and consultant; former Executive Vice President and Director, KaiserSteel Corporation ANN S. BOWERS Palo Alto, California Senior Trustee, The Noyce Foundation LOUISE H. BRYSON Los Angeles, California Director and former Chairman of the Board, KCET Public Television MALCOLM R. CURRIE, PH.D. Agoura, California Chairman Emeritus, Hughes Aircraft Company JON B. LOVELACE, JR. Los Angeles, California Chairman of the Board of the fund Chairman Emeritus, Capital Research and Management Company JOHN G. MCDONALD Stanford, California The IBJ Professor of Finance, Graduate School of Business, Stanford University BAILEY MORRIS-ECK Washington, D.C. Vice President, The Brookings Institution; Senior Fellow, Institute for International Economics; Consultant, The Independent of London RICHARD G. NEWMAN Los Angeles, California Chairman of the Board, President and Chief Executive Officer, AECOM Technology Corporation (architectural engineering) WILLIAM C. NEWTON Los Angeles, California Senior Partner, The Capital Group Partners L.P. JAMES W. RATZLAFF San Francisco, California Vice Chairman of the Board of the fund Senior Partner, The Capital Group Partners L.P. OLIN C. ROBISON, PH.D. Middlebury, Vermont President of the Salzburg Seminar; President Emeritus, Middlebury College R. MICHAEL SHANAHAN Los Angeles, California President of the fund Chairman of the Board and Principal Executive Officer, Capital Research and Management Company WILLIAM J. SPENCER, PH.D. Austin, Texas Chairman of the Board and Chief Executive Officer, SEMATECH (research and development consortium) WILLIAM R. GRIMSLEY, an officer of ICA for 12 years and a Director for one, has retired. The Directors wish to thank him for his many contributions to the fund. ADVISORY BOARD MEMBERS THOMAS M. CROSBY, JR. Minneapolis, Minnesota Partner, Faegre & Benson (law firm) ELLEN H. GOLDBERG, PH.D. Santa Fe, New Mexico President, Santa Fe Institute ALLAN E. GOTLIEB Toronto, Ontario, Canada Former Canadian Ambassador to the United States WILLIAM H. KLING St. Paul, Minnesota President, Minnesota Public Radio; President, Greenspring Company; former President, American Public Radio (now Public Radio International) ROBERT J. O'NEILL, PH.D. Oxford, England Chichele Professor of the History of War; Fellow of All Souls College, University of Oxford NORMAN R. WELDON, PH.D. Evergreen, Colorado Managing Director, Partisan Management Group Inc.; former Chairman of the Board, Novoste Corporation OTHER OFFICERS GREGG E. IRELAND Washington, D.C. Senior Vice President of the fund Senior Vice President, Capital Research and Management Company JAMES B. LOVELACE Los Angeles, California Senior Vice President of the fund Senior Vice President, Capital Research and Management Company DONALD D. O'NEAL San Francisco, California Senior Vice President of the fund Vice President, Capital Research and Management Company JOYCE E. GORDON Los Angeles, California Vice President of the fund Senior Vice President and Director, Capital Research Company ANNE M. LLEWELLYN Los Angeles, California Vice President of the fund Associate, Capital Research and Management Company PATRICIA L. PINNEY Los Angeles, California Vice President of the fund Vice President, Capital Research Company VINCENT P. CORTI Los Angeles, California Secretary of the fund Vice President - Fund Business Management Group, Capital Research and Management Company THOMAS M. ROWLAND Brea, California Treasurer of the fund Senior Vice President - Fund Business Management Group, Capital Research and Management Company R. MARCIA GOULD Brea, California Assistant Treasurer of the fund Vice President - Fund Business Management Group, Capital Research and Management Company ANTHONY W. HYNES, JR. Brea, California Assistant Treasurer of the fund Vice President - Fund Business Management Group, Capital Research and Management Company OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND MANAGEMENT COMPANY 333 South Hope Street Los Angeles, California 90071-1443 135 South State College Boulevard Brea, California 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 2205 Brea, California 92822-2205 P.O. Box 659522 San Antonio, Texas 78265-9522 P.O. Box 6007 Indianapolis, Indiana 46206-6007 P.O. Box 2280 Norfolk, Virginia 23501-2280 CUSTODIAN OF ASSETS The Chase Manhattan Bank One Chase Manhattan Plaza New York, New York 10081-0001 COUNSEL O'Melveny & Myers LLP 400 South Hope Street Los Angeles, California 90071-2899 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP 400 South Hope Street Los Angeles, California 90071-2889 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, California 90071-1462 For information about your account or any of the fund's services, please contact your financial adviser. You may also call American Funds Service Company, toll-free, at 800/421-0180, or visit www.americanfunds.com on the World Wide Web. This report is for the information of shareholders of The Investment Company of America, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after March 31, 2000, this report must be accompanied by an American Funds Group Statistical Update for the most recently completed calendar quarter. Litho in USA BDC/GRS/4465 Lit. No. ICA-011-0200 Printed on recycled paper -----END PRIVACY-ENHANCED MESSAGE-----