-----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, STHRpEH958WdEtfeta2HsFfFqjj5bIrNfVMRNxTfZm9Xf5GVwI1xRdbt54DfmRj9 HZx/Sjb6D/tO9AUTyrpcCw== 0000051931-05-000007.txt : 20050311 0000051931-05-000007.hdr.sgml : 20050311 20050311130400 ACCESSION NUMBER: 0000051931-05-000007 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050311 DATE AS OF CHANGE: 20050311 EFFECTIVENESS DATE: 20050311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT CO OF AMERICA CENTRAL INDEX KEY: 0000051931 IRS NUMBER: 951426645 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-00116 FILM NUMBER: 05674730 BUSINESS ADDRESS: STREET 1: 333 S HOPE ST - 52ND FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134869200 N-CSR 1 icancsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR Certified Shareholder Report of Registered Management Investment Companies Investment Company Act File Number: 811-116 The Investment Company of America (Exact Name of Registrant as specified in charter) 333 South Hope Street Los Angeles, California 90071 (Address of principal executive offices) Registrant's telephone number, including area code: (213) 486-9200 Date of fiscal year end: December 31, 2004 Date of reporting period: December 31, 2004 Vincent P. Corti Capital Research and Management Company 333 South Hope Street Los Angeles, California 9007 (name and address of agent for service) Copies to: Eric A.S. Richards, Esq. O'Melveny & Myers LLP 400 South Hope Street Los Angeles, California 90071 (Counsel for the Registrant) ITEM 1 - Reports to Stockholders [logo - American Funds(R)] The right choice for the long term(R) ICA The Investment Company of America Understanding your investment in ICA [front cover - American flags hanging on old downtown office buildings] Annual report for the year ended December 31, 2004 ICA(SM) seeks long-term growth of capital and income, placing greater emphasis on future dividends than on current income. The Investment Company of America(R) is one of the 29 American Funds, the nation's third-largest mutual fund family. For more than seven decades, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk. Contents Letter to shareholders 1 The value of a long-term perspective 3 Understanding your investment in ICA 6 The portfolio counselors 9 Summary investment portfolio 12 Directors and officers 29 The American Funds family back cover FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS 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. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS WOULD HAVE BEEN LOWER. Please see page 4 for Class A share average annual total returns with relevant sales charges deducted. Other share class results and important information can be found on page 28. The fund's 30-day yield for Class A shares as of January 31, 2005, reflecting the 5.75% maximum sales charge and calculated in accordance with the Securities and Exchange Commission formula, was 1.73%, which reflects a fee waiver (1.72% without the fee waiver). Investments outside the United States involve special risks such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. Global diversification can help reduce these risks. [photo - American flag hanging on an old downtown office buildings] FELLOW SHAREHOLDERS: 2004 results at a glance Year ended December 31, 2004 (with dividends and capital gain distributions reinvested) Standard & Poor's 500 ICA Composite Index Income return +1.82% + 1.76% Capital return +7.96% + 9.11% Total return +9.78% +10.87% Dividends and capital gain distribution paid in 2004 Per share Payment date Income dividends $0.13 March 8 $0.13 June 7 $0.13 Sept. 7 $0.13 Dec. 14 $0.52 Capital gain distribution $0.355 Dec. 14 Expense ratios and portfolio turnover rates(1) Year ended December 31, 2004 ICA Industry average(2) Expense ratio(3) 0.57% 1.28% Portfolio turnover rate 19% 65% (1) 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. (2) Growth & Income Funds (with an initial sales charge), as measured by Lipper. (3) The fund's investment adviser is waiving a portion of management fees. Expense ratios shown reflect the waiver. Please see the Financial Highlights table on page 23 or in the fund's prospectus for details. In 2004, two distinct environments characterized the stock market. For the first three quarters, uncertainties about the U.S. presidential election, the war in Iraq, rising interest rates, difficulties in the job market and higher crude oil prices held back stock prices. In the fourth quarter, however, some of those concerns eased: the U.S. presidential election was over, crude oil prices had begun to decline, interest rates had not risen as much as anticipated and corporate earnings were strong. In this environment, both the stock market and The Investment Company of America finished the year with solid gains. For the 12 months ended December 31, 2004, ICA posted a total return of 9.8%. Its benchmark, the unmanaged Standard & Poor's 500 Composite Index, which tracks relatively large companies listed primarily on U.S. exchanges, gained 10.9%. ICA's return assumes reinvestment of quarterly dividends totaling 52 cents a share and a capital gain distribution of 35-1/2 cents a share, which was paid in December 2004. The fund's income return amounted to 1.8%, in line with the S&P 500. PUTTING THE YEAR IN PERSPECTIVE During the period, ICA's gains were broad: of the 172 stocks held throughout the entire fiscal year, 121 of them rose in price, including eight of the 10 largest holdings. Strong corporate earnings helped the fund's holdings in the financial sector, while the rise in crude oil prices helped holdings in the energy sector. The basic materials sector, which includes chemical, metal and paper companies, benefited from strong earnings and increased pricing power. Two sectors that lagged the broader market and hurt our results were technology and pharmaceuticals. Many companies in the technology sector, which enjoyed a strong recovery in 2003, gave back some of those gains in 2004. The pharmaceutical industry was hampered by a combination of issues, including the possibility of increased regulation and pricing pressure, individual product problems resulting in several blockbuster drugs being pulled off the market, and looming patent expirations. DIVIDENDS MAKE A COMEBACK ICA has always sought long-term growth of capital and income, placing greater emphasis on future dividends than on current income. Dividends are the most predictable part of total return. When the stock market is falling, dividend payments can be a hedge for investors. When the stock market is rising, they add to capital gains. Since the dividend tax cut was passed two years ago, a growing number of companies have increased or initiated dividend payouts for the first time. This renewed focus on dividends not only broadens the fund's universe of investment choices, but could eventually enhance the value of dividend-paying stocks. We believe the increased attention to dividends is a positive long-term trend that will ultimately benefit ICA shareholders. MAINTAINING A LONG-TERM PERSPECTIVE As we enter the next period, we remain cautiously optimistic. Although the U.S. economy remains strong, there are also underlying risks, including a continued rise in interest rates, growing U.S. budget and trade deficits, the ongoing hostilities in Iraq and geopolitical unrest. Any of these factors could have a negative effect on stock prices. Because it is impossible to predict the events that may cause short-term fluctuations in the stock market, we manage the fund with a long-term perspective, paying close attention to risk. We focus on buying companies at reasonable prices that we can hold for many years. As a result, ICA's turnover ratio, which indicates the percentage of the fund's assets that have changed over the course of a year, is 19%. That compares with an average 65% among other growth-and-income funds. Our value-oriented investment philosophy and long-term outlook have helped the fund produce solid returns over extended periods. During the past five-year period ended December 31, 2004, which encompasses the market high and subsequent downturn, ICA produced an average annual total return of 3.3%, compared with a - -2.3% return for the S&P 500. Over the past 10 years ended December 31, 2004, shareholders earned an average annual total return of 13.0%, compared with 12.1% for the S&P 500. For a better understanding of what distinguishes ICA from other growth-and-income funds, please see our feature starting on page 6. As always, we appreciate your continued support and welcome the many new shareholders who have joined the fund in the past year, helping to increase the fund's assets by 14% and the number of shareholder accounts by 13%. Sincerely, /s/ R. Michael Shanahan /s/ James F. Rothenberg R. Michael Shanahan James F. Rothenberg Chairman of the Board President February 7, 2005 For current information about the fund, visit americanfunds.com. THE VALUE OF A LONG-TERM PERSPECTIVE (1934-2004) Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com. Fund figures reflect deduction of the maximum sales charge of 5.75% on a $10,000 investment.* Thus, the net amount invested was $9,425.+ This chart illustrates a hypothetical $10,000 investment in The Investment Company of America over the past 71 years, from January 1, 1934, through December 31, 2004, 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. Over the entire period, a $10,000 investment in the fund, with all dividends reinvested, would have grown to $53,674,543, compared with $20,819,110 in Standard & Poor's 500 Composite Index. 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 1994. At that time, the value of the investment illustrated here was $15.8 million. Since then, it has more than tripled, to $53.7 million. Thus, in the same period, the value of your 1994 investment -- regardless of size -- has also more than tripled. * As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge for dividends or capital gain distributions that are reinvested in additional shares. + The maximum initial sales charge was 8.5% prior to July 1, 1988. Average annual total returns based on a $1,000 investment For periods ended December 31, 2004 CLASS A SHARES* 1 year +3.47% 5 years +2.06% 10 years +12.37% Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge. The fund's investment adviser is waiving a portion of management fees. Results shown reflect the waiver. Please see the Financial Highlights table on page 23 or in the fund's prospectus for details. * Results for other share classes can be found on page 28. AVERAGE ANNUAL RETURNS FOR 71 YEARS (1/1/34-12/31/04) Income return 3.2% Capital return 9.7% Total return 12.9% Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge. The fund's investment adviser is waiving a portion of management fees. Results shown reflect the waiver. Please see the Financial Highlights table on page 23 or in the fund's prospectus for details. [Begin Mountain Chart] ICA with dividends reinvested $53,674,543 (1) S&P 500 with dividends reinvested $20,819,110 ICA not including dividends $ 6,162,997 (2) original investment $ 10,000 Value added by reinvestment of dividends Year ended ICA with dividends ICA not including December 31,2003 reinvested(1) dividends (2) original investment $ 10,000 $10,000 1/1/1934 9,426 9,426 3/31/1934 12,022 12,022 9/30/1934 9,735 9,735 12/31/1934 11,822 11,822 3/31/1935 11,109 11,109 12/31/1935 21,643 21,643 4/30/1936 21,738 21,738 12/31/1936 31,560 31,042 3/31/1937 34,870 34,173 12/31/1937 19,424 18,339 3/31/1938 16,450 15,458 12/31/1938 24,776 23,174 5/17/1939 19,196 17,954 10/26/1939 26,380 24,439 12/31/1939 24,986 22,860 4/9/1940 26,104 23,788 5/22/1940 18,337 16,710 12/31/1940 24,384 21,460 4/22/1941 20,228 17,599 7/28/1941 25,516 21,886 12/31/1941 22,590 18,816 4/28/1942 20,675 17,070 11/17/1942 25,558 20,530 12/31/1942 26,376 20,893 1/6/1943 26,421 20,929 6/5/1943 34,560 27,239 12/31/1943 35,019 26,861 1/3/1944 34,911 26,778 12/11/1944 42,785 32,140 12/31/1944 43,193 32,130 12/1/1945 58,160 42,529 12/31/1945 59,091 42,949 5/28/1946 69,344 50,213 10/9/1946 51,668 37,011 12/31/1946 57,692 40,687 2/8/1947 59,739 42,131 5/19/1947 47,608 33,318 12/31/1947 58,217 39,332 2/11/1948 51,157 34,562 6/14/1948 64,466 43,169 12/31/1948 58,430 37,714 6/13/1949 51,933 33,172 12/31/1949 63,941 39,436 7/31/1950 61,544 37,284 11/24/1950 75,452 45,291 12/31/1950 76,618 45,185 1/31/1951 77,522 45,718 9/13/1951 90,575 52,493 12/31/1951 90,274 51,159 5/1/1952 87,738 49,312 11/26/1952 98,358 54,208 12/31/1952 101,293 55,306 1/5/1953 101,540 55,440 9/14/1953 90,546 47,981 12/31/1953 101,747 53,362 1/11/1954 102,187 53,593 11/26/1954 150,963 77,300 12/31/1954 158,859 80,780 1/6/1955 153,710 78,162 12/5/1955 197,380 98,416 12/31/1955 199,216 98,531 1/23/1956 188,642 93,301 8/2/1956 228,301 111,574 12/31/1956 220,648 106,303 7/10/1957 234,719 111,636 12/23/1957 191,223 89,401 12/31/1957 194,433 90,912 1/2/1958 196,485 91,871 12/31/1958 281,479 128,040 2/9/1959 276,271 125,672 8/3/1959 317,753 142,951 12/31/1959 321,419 142,883 1/5/1960 322,622 143,418 3/8/1960 294,359 130,051 12/31/1960 335,999 145,598 1/3/1961 333,381 144,463 11/29/1961 416,623 177,692 12/31/1961 413,553 175,370 1/3/1962 412,847 175,071 6/25/1962 302,234 126,569 12/31/1962 358,801 148,179 3/1/1963 362,959 148,959 11/13/1963 435,346 176,692 12/31/1963 440,900 177,834 1/2/1964 443,327 178,813 11/18/1964 524,007 208,216 12/31/1964 512,592 202,347 6/28/1965 515,302 201,387 11/30/1965 636,844 247,766 12/31/1965 650,691 251,554 2/11/1966 695,632 268,929 10/7/1966 554,914 211,085 12/31/1966 657,094 248,035 1/4/1967 653,924 246,838 9/25/1967 848,270 315,022 12/31/1967 846,942 312,474 3/5/1968 767,364 281,436 11/29/1968 1,016,106 368,877 12/31/1968 990,641 356,574 2/6/1969 997,966 359,210 12/17/1969 861,534 301,409 12/31/1969 884,825 309,612 1/5/1970 900,901 315,237 5/26/1970 671,567 232,836 12/31/1970 908,020 307,422 1/4/1971 899,324 304,478 4/28/1971 1,041,783 349,622 12/31/1971 1,062,653 349,729 1/3/1972 1,061,134 349,229 12/11/1972 1,236,416 399,226 12/31/1972 1,231,089 394,703 1/5/1973 1,240,738 397,797 12/13/1973 969,368 300,861 12/31/1973 1,024,069 317,912 3/13/1974 1,078,732 331,700 10/3/1974 753,595 227,497 12/31/1974 840,311 245,527 1/2/1975 860,275 251,360 7/15/1975 1,192,557 342,306 12/31/1975 1,137,662 317,656 1/2/1976 1,146,259 320,057 12/15/1976 1,445,050 393,403 12/31/1976 1,474,372 398,100 1/3/1977 1,468,350 396,474 10/25/1977 1,332,040 350,404 12/31/1977 1,436,404 374,309 3/1/1978 1,346,165 347,473 9/11/1978 1,868,543 475,286 12/31/1978 1,647,486 414,423 2/27/1979 1,616,223 406,559 9/21/1979 1,993,884 489,102 12/31/1979 1,963,313 475,671 4/21/1980 1,749,599 419,477 11/18/1989 2,440,065 573,991 12/31/1980 2,380,191 552,244 4/27/1981 2,540,345 583,092 9/25/1981 2,250,820 505,060 12/31/1981 2,401,095 530,866 8/12/1982 2,283,451 486,986 12/7/1982 3,273,730 683,755 12/31/1982 3,212,002 670,593 1/24/1983 3,149,704 657,586 10/10/1983 3,954,414 800,660 12/31/1983 3,859,718 774,521 1/5/1984 3,938,558 790,342 7/24/1984 3,487,720 684,698 12/31/1984 4,117,193 791,975 1/8/1985 4,042,335 777,575 12/31/1985 5,491,899 1,017,909 1/10/1986 5,378,077 996,812 8/26/1986 6,822,055 1,244,530 12/31/1986 6,685,668 1,200,523 8/25/1987 8,964,992 1,587,087 12/4/1987 6,490,173 1,124,110 12/31/1987 7,049,189 1,220,933 1/20/1988 6,898,255 1,194,791 10/20/1988 8,057,725 1,361,557 12/31/1988 7,989,297 1,327,380 1/3/1989 7,952,253 1,321,225 10/9/1989 10,570,716 1,717,619 12/31/1989 10,338,606 1,652,758 7/16/1990 11,034,382 1,738,645 9/24/1990 9,349,249 1,461,722 12/31/1990 10,409,044 1,598,827 1/9/1991 9,964,580 1,530,558 12/31/1991 13,171,913 1,969,884 4/8/1992 12,725,819 1,890,999 12/8/1992 14,053,663 2,062,293 12/31/1992 14,092,259 2,052,171 12/31/1993 15,729,390 2,234,162 2/2/1994 16,250,342 2,308,157 12/31/1994 15,753,859 2,180,619 12/13/1995 20,601,536 2,800,127 12/31/1995 20,578,729 2,779,669 1/10/1996 20,131,158 2,719,214 11/29/1996 24,948,962 3,317,338 12/31/1996 24,560,579 3,247,865 1/2/1997 24,449,079 3,233,121 10/7/1997 32,201,069 4,203,593 12/31/1997 31,881,159 4,142,665 1/9/1998 30,538,200 3,968,160 11/27/1998 38,263,637 4,911,956 12/31/1998 39,193,520 5,008,240 7/16/1999 44,986,534 5,706,524 12/14/1999 43,402,315 5,461,630 12/31/1999 45,682,203 5,748,525 6/2/2000 48,297,061 6,033,245 12/20/2000 45,816,353 5,674,950 12/31/2000 47,435,198 5,875,465 2/1/2001 48,641,695 6,024,905 9/21/2001 39,682,272 4,850,856 12/31/2001 45,258,581 5,507,475 3/19/2002 46,842,670 5,674,249 10/9/2002 34,116,968 4,090,963 12/31/2002 38,709,050 4,616,859 3/11/2003 35,518,986 4,211,803 12/31/2003 48,891,609 5,713,492 8/12/2004 47,651,727 5,519,344 12/1/2004 53,072,477 6,119,617 12/31/2004 53,674,543 6,162,997 Year ended S&P 500 with dividends December 31,2003 reinvested original investment $ 10,000 1/1/1934 10,000 2/6/1934 11,741 7/26/1934 8,454 12/31/1934 9,851 3/14/1935 8,427 11/19/1935 14,477 12/31/1935 14,555 11/9/1936 19,849 12/31/1936 19,479 3/6/1937 21,235 11/24/1937 11,991 12/31/1937 12,670 3/31/1938 10,259 11/9/1938 17,200 12/31/1938 16,604 4/8/1939 12,860 12/31/1939 16,542 1/3/1940 16,913 6/10/1940 12,166 12/31/1940 14,918 1/10/1941 15,313 12/31/1941 13,193 4/28/1942 11,422 12/31/1942 15,880 7/14/1943 21,055 12/31/1943 19,980 2/7/1944 19,830 12/31/1944 23,920 12/10/1945 33,103 12/31/1945 32,629 5/29/1946 36,538 10/9/1946 27,277 12/31/1946 29,994 2/8/1947 31,833 5/17/1947 27,243 12/31/1947 31,703 2/14/1948 28,756 6/15/1948 36,057 12/31/1948 33,420 6/13/1949 30,578 12/31/1949 39,688 1/14/1950 39,428 12/31/1950 52,266 10/15/1951 63,758 12/31/1951 64,813 2/20/1952 63,185 12/31/1952 76,702 9/14/1953 67,974 12/31/1953 75,955 12/31/1954 115,881 1/17/1955 111,372 11/14/1955 154,321 12/31/1955 152,428 1/23/1956 144,485 8/2/1956 170,376 12/31/1956 162,378 7/15/1957 174,227 10/22/1957 139,617 12/31/1957 144,887 12/31/1958 207,642 2/9/1959 201,972 8/3/1959 232,356 12/31/1959 232,467 10/25/1960 208,328 12/31/1960 233,601 12/12/1961 300,180 12/31/1961 296,461 6/26/1962 219,517 12/31/1962 270,656 1/2/1963 268,898 12/31/1963 332,369 11/20/1964 391,802 12/31/1964 387,133 6/28/1965 377,268 11/15/1965 433,749 12/31/1965 435,356 2/6/1966 444,115 10/7/1966 353,265 12/31/1966 391,500 9/25/1967 485,648 12/31/1967 485,272 3/5/1968 443,658 11/29/1968 560,886 12/31/1968 538,975 5/14/1969 556,520 12/31/1969 493,481 5/26/1970 375,967 12/31/1970 512,963 4/28/1971 587,707 11/23/1971 515,114 12/31/1971 586,320 12/11/1972 702,350 12/31/1972 697,692 1/11/1973 710,635 12/5/1973 560,537 12/31/1973 595,206 1/3/1974 608,935 10/3/1974 392,237 12/31/1974 437,674 7/15/1975 623,524 12/31/1975 600,610 9/21/1976 736,520 12/31/1976 744,318 11/2/1977 653,147 12/31/1977 691,044 3/6/1978 637,133 9/12/1978 804,939 12/31/1978 736,452 10/5/1979 887,816 12/31/1979 873,499 3/27/1980 801,694 11/28/1980 1,192,966 12/31/1980 1,156,970 1/6/1981 1,177,082 9/25/1981 993,719 12/31/1981 1,100,011 8/12/1982 952,442 11/9/1982 1,348,614 12/31/1982 1,337,025 1/3/1983 1,315,159 10/10/1983 1,696,711 12/31/1983 1,638,595 7/24/1984 1,503,740 11/6/1984 1,760,537 12/31/1984 1,741,395 1/4/1985 1,704,326 12/31/1985 2,293,883 1/22/1986 2,209,306 12/2/1986 2,846,898 12/31/1986 2,722,038 8/25/1987 3,851,956 12/4/1987 2,588,662 12/31/1987 2,864,962 1/20/1988 2,813,363 10/21/1988 3,379,672 12/31/1988 3,339,470 10/9/1989 4,438,664 12/31/1989 4,395,793 7/16/1990 4,669,466 10/11/1990 3,773,954 12/31/1990 4,259,140 1/9/1991 4,017,563 12/31/1991 5,553,915 4/8/1992 5,290,606 12/18/1992 6,039,956 12/31/1992 5,976,474 1/8/1993 5,885,121 12/31/1993 6,577,517 2/2/1994 6,806,430 4/4/1994 6,231,341 12/31/1994 6,664,017 12/13/1995 9,234,475 12/31/1995 9,165,271 1/10/1996 8,905,609 11/25/1996 11,473,195 12/31/1996 11,268,247 12/5/1997 15,211,783 12/31/1997 15,026,327 1/9/1998 14,364,532 12/29/1998 19,495,529 12/31/1998 19,320,168 1/14/1999 19,052,345 12/31/1999 23,384,822 3/24/2000 24,358,139 12/20/2000 20,344,921 12/31/2000 21,256,384 1/30/2001 22,116,924 9/21/2001 15,685,356 12/31/2001 18,731,955 1/4/2002 19,130,553 10/9/2002 12,823,508 12/31/2002 14,593,631 3/11/2003 13,325,833 12/31/2003 18,777,238 8/12/2004 18,124,599 12/30/2004 20,815,662 12/31/2004 20,819,110
[end mountain chart] Year ended December 31 1934 1935 1936 1937 1938 1939 1940 Year-by-year summary of results (dollars in thousands) Dividends reinvested -- -- $0.4 1.0 0.2 0.5 0.9 Value at year-end $11.8 21.6 31.6 19.4 24.8 25.0 24.4 Dividends in cash -- -- $0.4 1.0 0.2 0.5 0.8 Value at year-end $11.8 21.6 31.0 18.3 23.2 22.9 21.5 Annual percentage returns assuming dividends reinvested Income return 0.0 % 0.0 1.8 3.2 0.9 2.2 3.6 Capital return 18.2 % 83.1 44.0 (41.7) 26.7 (1.4) (6.0) ICA total return 18.2% 83.1 45.8 (38.5) 27.6 0.8 (2.4) Fund expenses (3) 0.94% 1.13 1.19 1.53 1.89 2.02 1.88 Year ended December 31 1941 1942 1943 1944 1945 1946 1947 Year-by-year summary of results (dollars in thousands) Dividends reinvested 1.3 1.2 1.1 1.2 1.2 1.8 2.4 Value at year-end 22.6 26.4 35.0 43.2 59.1 57.7 58.2 Dividends in cash 1.1 1.0 0.9 0.9 0.9 1.3 1.7 Value at year-end 18.8 20.9 26.9 32.1 42.9 40.7 39.3 Annual percentage returns assuming dividends reinvested Income return 5.2 5.3 4.2 3.5 2.8 3.0 4.2 Capital return (12.6) 11.5 28.6 19.8 34.0 (5.4) (3.3) ICA total return (7.4) 16.8 32.8 23.3 36.8 (2.4) 0.9 Fund expenses3 1.95 2.13 1.72 1.45 1.06 0.98 1.10 Year ended December 31 1948 1949 1950 1951 1952 1953 1954 Year-by-year summary of results (dollars in thousands) Dividends reinvested 2.7 2.7 3.2 3.4 3.5 3.9 4.1 Value at year-end 58.4 63.9 76.6 90.3 101.3 101.7 158.9 Dividends in cash 1.8 1.7 1.9 2.0 2.0 2.1 2.1 Value at year-end 37.7 39.4 45.2 51.2 55.3 53.4 80.8 Annual percentage returns assuming dividends reinvested Income return 4.6 4.6 4.9 4.4 3.9 3.9 4.0 Capital return (4.2) 4.8 14.9 13.4 8.3 (3.5) 52.1 ICA total return 0.4 9.4 19.8 17.8 12.2 0.4 56.1 Fund expenses3 1.08 0.96 1.01 0.93 0.81 0.85 0.88 Year ended December 31 1955 1956 1957 1958 1959 1960 1961 Year-by-year summary of results (dollars in thousands) Dividends reinvested 5.1 5.6 6.2 6.5 7.0 8.1 8.4 Value at year-end 199.2 220.6 194.4 281.5 321.4 336.0 413.6 Dividends in cash 2.6 2.7 3.0 3.0 3.2 3.6 3.6 Value at year-end 98.5 106.3 90.9 128.0 142.9 145.6 175.4 Annual percentage returns assuming dividends reinvested Income return 3.2 2.8 2.8 3.4 2.5 2.5 2.5 Capital return 22.2 8.0 (14.7) 41.4 11.7 2.0 20.6 ICA total return 25.4 10.8 (11.9) 44.8 14.2 4.5 23.1 Fund expenses3 0.86 0.80 0.76 0.68 0.64 0.62 0.59 Year ended December 31 1962 1963 1964 1965 1966 1967 1968 Year-by-year summary of results (dollars in thousands) Dividends reinvested 9.1 9.6 10.7 12.1 15.5 18.4 22.6 Value at year-end 358.8 440.9 512.6 650.7 657.1 846.9 990.6 Dividends in cash 3.8 3.9 4.3 4.7 5.9 6.9 8.3 Value at year-end 148.2 177.8 202.3 251.6 248.0 312.5 356.6 Annual percentage returns assuming dividends reinvested Income return 2.2 2.7 2.4 2.4 2.4 2.8 2.7 Capital return (15.4) 20.2 13.9 24.5 (1.4) 26.1 14.3 ICA total return (13.2) 22.9 16.3 26.9 1.0 28.9 17.0 Fund expenses3 0.61 0.59 0.58 0.57 0.52 0.50 0.49 Year ended December 31 1969 1970 1971 1972 1973 1974 1975 Year-by-year summary of results (dollars in thousands) Dividends reinvested 25.3 27.3 28.6 29.9 33.4 52.2 49.8 Value at year-end 884.8 908.0 1,062.7 1,231.1 1,024.1 840.3 1,137.7 Dividends in cash 9.0 9.4 9.6 9.7 10.6 15.9 14.3 Value at year-end 309.6 307.4 349.7 394.7 317.9 245.5 317.7 Annual percentage returns assuming dividends reinvested Income return 2.6 3.1 3.1 2.8 2.7 5.1 5.9 Capital return (13.3) (0.5) 13.9 13.1 (19.5) (23.0) 29.5 ICA total return (10.7) 2.6 17.0 15.9 (16.8) (17.9) 35.4 Fund expenses3 0.48 0.55 0.51 0.49 0.47 0.49 0.48 Year ended December 31 1976 1977 1978 1979 1980 1981 1982 Year-by-year summary of results (dollars in thousands) Dividends reinvested 46.4 49.8 56.0 70.0 91.3 115.9 146.1 Value at year-end 1,474.4 1,436.4 1,647.5 1,963.3 2,380.2 2,401.1 3,212.0 Dividends in cash 12.8 13.3 14.4 17.3 21.7 26.4 31.6 Value at year-end 398.1 374.3 414.4 475.7 552.2 530.9 670.6 Annual percentage returns assuming dividends reinvested Income return 4.1 3.4 3.9 4.2 4.7 4.9 6.1 Capital return 25.5 (6.0) 10.8 15.0 16.5 (4.0) 27.7 ICA total return 29.6 (2.6) 14.7 19.2 21.2 0.9 33.8 Fund expenses3 0.46 0.49 0.49 0.47 0.46 0.45 0.46 Year ended December 31 1983 1984 1985 1986 1987 1988 1989 Year-by-year summary of results (dollars in thousands) Dividends reinvested 147.2 160.4 174.9 203.8 267.5 318.7 370.8 Value at year-end 3,859.7 4,117.2 5,491.9 6,685.7 7,049.2 7,989.3 10,338.6 Dividends in cash 30.3 31.7 33.2 37.3 47.5 54.4 60.7 Value at year-end 774.5 792.0 1,017.9 1,200.5 1,220.9 1,327.4 1,652.8 Annual percentage returns assuming dividends reinvested Income return 4.6 4.2 4.2 3.7 4.0 4.5 4.6 Capital return 15.6 2.5 29.2 18.0 1.4 8.8 24.8 ICA total return 20.2 6.7 33.4 21.7 5.4 13.3 29.4 Fund expenses3 0.44 0.47 0.43 0.41 0.42 0.48 0.52 Year ended December 31 1990 1991 1992 1993 1994 1995 1996 Year-by-year summary of results (dollars in thousands) Dividends reinvested 406.3 320.4 357.8 374.4 407.2 450.1 480.1 Value at year-end 10,409.0 13,171.9 14,092.3 15,729.4 15,753.9 20,578.7 24,560.6 Dividends in cash 64.1 48.7 53.0 54.0 57.3 61.7 64.3 Value at year-end 1,598.8 1,969.9 2,052.2 2,234.2 2,180.6 2,779.7 3,247.9 Annual percentage returns assuming dividends reinvested Income return 3.9 3.1 2.7 2.7 2.6 2.9 2.3 Capital return (3.2) 23.4 4.3 8.9 (2.4) 27.7 17.0 ICA total return 0.7 26.5 7.0 11.6 0.2 30.6 19.3 Fund expenses3 0.55 0.59 0.58 0.59 0.60 0.60 0.59 Year ended December 31 1997 1998 1999 2000 2001 2002 2003 Year-by-year summary of results (dollars in thousands) Dividends reinvested 510.3 584.1 651.8 743.4 804.1 833.3 864.3 Value at year-end 31,881.2 39,193.5 45,682.2 47,435.2 45,258.6 38,709.1 48,891.6 Dividends in cash 67.0 75.4 82.8 93.0 99.0 100.7 102.2 Value at year-end 4,142.7 5,008.2 5,748.5 5,875.5 5,507.5 4,616.9 5,713.5 Annual percentage returns assuming dividends reinvested Income return 2.1 1.8 1.7 1.6 1.7 1.8 2.2 Capital return 27.7 21.1 14.9 2.2 (6.3) (16.3) 24.1 ICA total return 29.8 22.9 16.6 3.8 (4.6) (14.5) 26.3 Fund expenses3 0.56 0.55 0.55 0.56 0.57 0.59 0.59 Year ended December 31 2004 Year-by-year summary of results (dollars in thousands) Dividends reinvested 887.4 Value at year-end 53,674.5 (1) Dividends in cash 103.0 Value at year-end 6,163.0 (2) Annual percentage returns assuming dividends reinvested Income return 1.8 Capital return 8.0 ICA total return 9.8 Fund expenses3 0.57
Past results are not predictive of future results. The results shown are before taxes on fund distributions and sale of fund shares. All results are calculated with dividends reinvested or interest compounded. The S&P 500 is unmanaged and does not reflect the effects of sales charges, commissions or expenses. (1) Includes dividends of $11,322,154 and capital gain distributions of $23,098,618 reinvested in the years 1936-2004. (2) Includes reinvested capital gain distributions of $3,325,690, but does not reflect income dividends of $1,720,978 taken in cash. (3) 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. [photo: beach front with fenced-in walkway to the ocean] UNDERSTANDING YOUR LONG-TERM INVESTMENT IN ICA [photo: American flag hanging on the side a building] Since The Investment Company of America was formed more than 70 years ago, the world has experienced a number of sweeping social, political, economic, technological and cultural changes. Through them all, ICA's consistent investment approach has helped it to produce long-term results that have outpaced those of the broader market, as measured by the unmanaged Standard & Poor's 500 Composite Index, which tracks relatively large companies listed primarily on U.S. exchanges. While there are certainly periods where ICA has lagged the S&P 500, the fund has earned an average annual total return of 13.0% (at net asset value) from its inception on January 1, 1934, through December 31, 2004, surpassing the 11.4% annualized return of the S&P 500 for that same period. In this year's annual report, several of the fund's investment professionals discuss how the fund's unique management system, emphasis on research and focus on dividends have helped it to achieve superior long-term results. Included in the discussion are portfolio counselors Jim Lovelace, Don O'Neal, Gregg Ireland, Joyce Gordon and Dina Perry. [Begin Pull Quote] "Managing portfolios in today's market environment is a big job and we believe no one person or committee can do it all. In the system we use in ICA, each person brings a unique style and perspective to the job." [End Pull Quote] [photo: sun setting over a valley gorge] WHAT DISTINGUISHES ICA FROM OTHER GROWTH-AND-INCOME FUNDS? JIM: I would say ICA's 71-year heritage is a distinguishing characteristic. Maintaining that heritage drives some decisions in the portfolio in terms of focusing on long-term results and on earning and distributing substantial dividends. JOYCE: Two factors that differentiate ICA from growth-and-income funds outside the American Funds family are our long-term focus and our strong yield objective, which is higher than the average among other growth-and-income funds. GREGG: Another distinguishing trait is the multiple portfolio counselor system, which divides the portfolio's assets into portions -- currently, nine are managed by the portfolio counselors and a larger 10th slice is managed by research analysts. Managing portfolios in today's market environment is a big job and we believe no one person or committee can do it all. In the system we use in ICA, each person brings a unique style and perspective to the job, and is encouraged to pursue his or her best ideas. As a result, each counselor holds companies in the portfolio that he or she feels a high degree of enthusiasm for based on his or her own work and the support of the research analysts. Additionally, the culture is very supportive. Each portfolio counselor is responsible for his or her piece of the fund, but we spend most of our time sharing ideas and challenging and helping one another. The system combines the best qualities of individualism with teamwork. WHAT ARE OTHER KEY BENEFITS OF THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM? DON: In this system, no one person has to shoulder the entire burden. Instead, when cash comes in, we're able to divide it among all the different portfolio counselors and analysts, who also manage money in the research portfolio. It becomes a situation where "many hands make light work." JOYCE: I agree. As the fund grows, we can add a new portfolio counselor to the mix or we can spread the incoming assets among the current portfolio counselors. It allows each counselor to buy his or her best ideas without worrying about completely diversifying their slice of the pie. As a result, every stock that the portfolio counselor holds is a strong conviction, whereas if you had one person running the entire portfolio, it's unlikely he or she would have the large number of strong convictions needed to make up an entire diversified portfolio. WHAT IS THE VALUE OF HAVING A RESEARCH PORTION OF THE PORTFOLIO MANAGED BY THE ANALYSTS? JIM: Like the multiple portfolio counselor system itself, the benefits are multi-dimensional. One advantage is giving investment responsibility to the people -- the analysts -- who are most familiar with the individual companies. [Begin Pull Quote] "Two factors that differentiate ICA from growth-and-income funds outside the American Funds family are our long-term focus and our strong yield objective." [End Pull Quote] [photo: man jogging on a freeway overpass with fog and downtown buildings in the background] Secondly, research portfolios are excellent communication tools. Analysts can communicate their level of conviction to the portfolio counselors by how much -- and when -- they invest in a particular stock. It's also a great education for the analysts because they can learn what makes a good stock by actually experiencing the stock directly. And, it helps us to evaluate the investment talents of the analyst because we can tangibly measure their results. Finally, it provides us with a vast reservoir of people trained in portfolio management that we can tap into when we need to add portfolio counselors to any of our funds. Since we already know their investment styles and interests, we don't have to start from scratch. JOYCE: Because they are actually managing money, research analysts have a true career path where they're on equal footing with the counselors. That encourages analysts to stay analysts for a long period of time. As a result, we have analysts who have been covering the same industry for 10 to 20 years, which gives them much better insight than someone who's been covering a company for two years. It makes their recommendations more informed, more knowledgeable. That makes them better analysts and, in turn, makes us better counselors. HOW DO YOU CHOOSE COMPANIES FOR THE PORTFOLIO? JIM: The foundation for me, as it is for most of the portfolio counselors, is the research process -- what the analysts are finding attractive. Beyond that, I think you'll find we're all eclectic to a certain extent. Where I might have my own distinct style is the priority I place on dividends. ICA has a dual objective --capital appreciation and income -- with more focus on future dividends than present income. DON: I tend to be attracted to stocks at either end of the spectrum -- those that are high-quality, growth-oriented companies or those that are turnaround situations with low multiples. I tend to focus on the two ends more than companies in the middle, but I'm willing to listen to our analysts and consider any good investment idea. GREGG: I'm more of a deep-value investor. I like to buy companies that are out of favor when I believe the company is solid and can make a comeback in a reasonable amount of time. I tend to focus on cycles, and will often buy a stock when its economic or industry cycle is at its low and the market is not paying attention to the company's potential for rebound or its underlying true value. Compared with a lot of the other counselors, I'm probably more contrarian. JOYCE: I like to find well-established companies that not only have a good yield, but are also growing that dividend each year. The dividend helps me to determine how to value the stock. I believe that the long-term growth in the dividend is the long-term growth rate of the company. DINA: I tend to focus on unwanted and under-appreciated industries and companies. These could be economically sensitive industries like machinery or materials, or could be companies that are unaffected by economic cycles like those in the telecommunications or food industries. I analyze the valuation and growth prospects for such industries and companies, trying to determine if the market has ignored some of the positive factors. WHAT AFFECT DO YOU THINK RISING INTEREST RATES WILL HAVE ON THE FUND? DON: It partially depends on the reason behind the rising rates. If rates rise because of strong economic activity, I believe that will be good news for equities and the fund. If interest rates rise because of inflation and higher commodity prices across the board without accompanying economic growth, then we'll probably be stuck in a low return situation. [Begin Sidebar] A WEALTH OF EXPERIENCE ICA's portfolio counselors bring together 248 years of investment experience to managing your investment. Here are the years of experience* for these primary decision-makers for the fund: *As of March 1, 2005. [photo: Mike Shanahan] [photo: Jim Rothenberg] Mike Shanahan Jim Rothenberg 40 years 35 years [photo: Jim Drasdo [photo: Gregg Ireland] Jim Drasdo Gregg Ireland 33 years 32 years [photo: Dina Perry] [photo: Joyce Gordon] Dina Perry Joyce Gordon 27 years 25 years [photo: Jim Lovelace] [photo: Don O'Neal] Jim Lovelace Don O'Neal 23 years 20 years [photo: Ross Sappenfield] Ross Sappenfield 13 years [End Sidebar] [Begin Pull Quote] "The tax cut for dividends helped to change the psychology of corporations in which we invest. ... Now shareholders are asking corporations much more often about dividends." [End Pull Quote] DESCRIBE THE ROLE THAT DIVIDENDS PLAY IN THE FUND. DON: Dividends have played a major role in total return over long periods of time. I believe that dividends, in most cases, are more powerful for shareholder returns than share repurchases or acquisitions because they have a permanence to them that the stock market can capitalize into the long-run outlook. Share repurchases, by contrast, are by their nature more opportunistic and less permanent, and so they don't have as much of a long-term impact on the stock price as dividends do. JIM: Dividends are a crucial part of the growth-and-income philosophy. Income provides a level of stability on two different levels. First, the companies that pay dividends tend to be more mature and more secure in their financial stability. Companies that are not in a position to pay dividends tend to be in a more speculative position. Second, the income itself is a very stable part of your total return. Total return is a combination of changes in price and income. While prices can go up and down, the income is always positive. So the more of your return that comes from income, the more stable your return profile is over time. If you compare growth-and-income funds with growth funds, you'll find that long-term returns for both types of funds have been quite similar, but it's been much more stable with growth-and-income funds. HAVE THE TAX CUTS OF TWO YEARS AGO MADE IT EASIER TO FIND DIVIDENDS? DON: The tax cut for dividends helped to change the psychology of corporations in which we invest. It actually had become fashionable among corporations to not pay dividends or to keep them at a minimum. Part of the rationale behind that was that it wasn't tax efficient. Once that rationale was removed, there weren't as many arguments to hide behind, and so now shareholders are asking corporations much more often about dividends. [Begin Pull Quote] "Up until the 1990s, the U.S. market was one of the better yielding markets, but in the past 10 years that's changed. ... Having the flexibility to invest outside the U.S. is definitely helping ICA to provide the income that it does." [End Pull Quote] [photo: man leaning with his arms crossed on a fence post] JIM: It's interesting when you put it into a historical context. There's definitely been a change in the number of companies paying dividends, and the change in the tax law was a contributing factor. Yet, fewer companies in the S&P 500 pay dividends today than 10 or 20 years ago, and the payout ratio on the S&P 500 is lower today than 10 or 20 years ago. Even at this point, yields are still less than 2% for the S&P 500, much lower than the historical average. So it has reversed a major trend away from dividends, but it's still got a long way to come back. THE FUND INVESTS UP TO 15% OF ITS ASSETS IN NON-U.S. COMPANIES. WHAT IS THE BENEFIT OF INVESTING GLOBALLY FOR THIS TYPE OF FUND? GREGG: One benefit is that it expands our choices in certain sectors. There are some industries that are not very well represented in the U.S. For example, almost all the great luxury goods companies are located in Europe and some segments of the electronics market -- for example, flat panel TVs -- are mostly Japanese companies. So if you want to participate in those growth opportunities, then you need to be invested outside the U.S. There are also times when investments are more attractive overseas than here. Some of that is company-specific and some of that is industry-oriented. Right now, some of the best pharmaceutical opportunities are non-U.S. companies such as Novartis, based in Switzerland, and AstraZeneca, based in the United Kingdom. JIM: It's also helped us find dividends. Up until the 1990s, the U.S. market was one of the better yielding markets, but in the past 10 years that's changed. Now the U.S. market is one of the lower yielding markets. Having the flexibility to invest outside the U.S. is definitely helping ICA to provide the income that it does. SUMMARY INVESTMENT PORTFOLIO, December 31, 2004 Beginning with this report, a summary portfolio, approved under rules adopted by the Securities and Exchange Commission this year, will replace the complete listing of portfolio holdings used in previous shareholder reports. This summary portfolio is designed to streamline the report and help investors better focus on a fund's principal holdings. The schedule includes each of the fund's 50 largest holdings and investments of any issuer for which the total value of all holdings in that issuer exceeds 1% of the fund's net assets. A complete schedule of portfolio holdings is available upon request, free of charge, by calling American Funds Service Company at 800/421-0180 or accessing the U.S. Securities and Exchange Commission website at www.sec.gov. [begin pie chart] Percent of net INDUSTRY SECTOR DIVERSIFICATION assets Financials 12.12 % Industrials 11.39 Consumer discretionary 9.82 Information technology 9.42 Consumer staples 9.22 Other industries 31.70 Bonds & notes 2.63 Convertible securities .23 Cash & equivalents 13.47 [end pie chart] Shares Market Percent value of net COMMON STOCKS - 83.67% (000) assets ENERGY - 9.01% Burlington Resources Inc. 16,600,000 $ 722,100 .95% ChevronTexaco Corp. 15,260,000 801,303 1.06 ENI SpA 37,880,000 945,032 1.25 Royal Dutch Petroleum Co. (New York registered) 16,970,000 973,739 "Shell" Transport and Trading Co., PLC (ADR) (New York registered) 7,000,000 359,800 "Shell" Transport and Trading Co., PLC 2,900,000 24,674 1.79 Schlumberger Ltd. 8,000,000 535,600 .71 TOTAL SA 2,505,000 545,218 .72 Other securities 1,907,432 2.53 6,814,898 9.01 MATERIALS - 6.94% Alcoa Inc. 14,876,400 467,416 .62 Dow Chemical Co. 26,532,200 1,313,609 1.73 Other securities 3,482,172 4.59 5,263,197 6.94 INDUSTRIALS - 11.39% Boeing Co. 13,000,000 673,010 .89 Burlington Northern Santa Fe Corp. 9,200,000 435,252 .57 Caterpillar Inc. 12,170,000 1,186,697 1.56 Deere & Co. 8,200,000 610,080 .80 General Electric Co. 30,250,000 1,104,125 1.46 Lockheed Martin Corp. 8,560,000 475,508 .63 Raytheon Co. 11,946,000 463,863 .61 Tyco International Ltd. 28,100,000 1,004,294 1.32 Other securities 2,684,453 3.55 8,637,282 11.39 CONSUMER DISCRETIONARY - 9.82% Carnival Corp., units 8,000,000 461,040 .61 General Motors Corp. 15,450,000 618,927 .82 Lowe's Companies, Inc. 20,368,300 1,173,010 1.55 Target Corp. 21,100,000 1,095,723 1.44 Time Warner Inc. (1) 53,900,000 1,047,816 1.38 Other securities 3,042,247 4.02 7,438,763 9.82 CONSUMER STAPLES - 9.22% Altria Group, Inc. 56,000,000 3,421,600 4.51 PepsiCo, Inc. 11,000,000 574,200 .76 Other securities 3,002,020 3.95 6,997,820 9.22 HEALTH CARE - 5.13% AstraZeneca PLC (ADR) 4,534,500 165,010 AstraZeneca PLC (Sweden) 5,909,500 214,421 AstraZeneca PLC (United Kingdom) 5,393,900 195,253 .76 Bristol-Myers Squibb Co. 21,680,300 555,449 .73 Eli Lilly and Co. 11,860,000 673,055 .89 Other securities 2,100,720 2.75 3,903,908 5.13 FINANCIALS - 12.12% American International Group, Inc. 8,713,900 572,242 .75 Bank of America Corp. 25,010,600 1,175,248 1.55 Fannie Mae 20,360,000 1,449,836 1.91 Freddie Mac 3,150,000 232,155 .31 HSBC Holdings PLC 30,697,111 517,071 HSBC Holdings PLC (ADR) 1,079,588 91,916 .80 J.P. Morgan Chase & Co. 22,836,200 890,840 1.17 Lloyds TSB Group PLC 58,000,000 525,718 .69 Washington Mutual, Inc. 15,400,000 651,112 .86 Wells Fargo & Co. 7,630,000 474,205 .63 Other securities 2,618,435 3.45 9,198,778 12.12 INFORMATION TECHNOLOGY - 9.42% Cisco Systems, Inc. (1) 23,928,800 461,826 .61 Hewlett-Packard Co. 32,450,000 680,477 .90 International Business Machines Corp. 6,845,000 674,780 .89 Microsoft Corp. 40,480,000 1,081,221 1.43 Texas Instruments Inc. 32,320,200 795,723 1.05 Other securities 3,452,903 4.54 7,146,930 9.42 TELECOMMUNICATION SERVICES - 7.46% BellSouth Corp. 30,800,000 855,932 1.13 SBC Communications Inc. 61,450,000 1,583,567 2.09 Sprint Corp. - FON Group 20,885,000 518,992 .68 Verizon Communications Inc. 19,800,000 802,098 1.06 Vodafone Group PLC 73,500,000 198,948 Vodafone Group PLC (ADR) 17,000,000 465,460 .87 Other securities 1,236,539 1.63 5,661,536 7.46 UTILITIES - 2.44% Dominion Resources, Inc. 7,131,912 483,116 .63 Other securities 1,379,225 1.81 1,862,341 2.44 MISCELLANEOUS - 0.72% Other common stocks in initial period of acquisition 553,733 .72 TOTAL COMMON STOCKS (cost: $43,770,093,000) 63,479,186 83.67 Market Percent value of net CONVERTIBLE SECURITIES - 0.23% (000) assets TOTAL CONVERTIBLE SECURITIES (cost: $148,176,000) 166,611 .23 Principal Market Percent amount value of net BONDS AND NOTES - 2.63% (000) (000) assets CONSUMER DISCRETIONARY - 0.09% AOL Time Warner Inc. 5.625% 2005 $21,045 21,240 .03 General Motors Acceptance Corp. 6.875% 2011 50,000 51,308 .06 72,548 .09 TELECOMMUNICATION SERVICES - 1.09% Sprint Capital Corp. 7.90%- 8.375% 2005-2012 400,210 445,834 .59 Other securities 376,913 .50 822,747 1.09 MORTGAGE-BACKED OBLIGATIONS - 0.72% Fannie Mae 6.00%-6.50% 2017 518,074 545,523 .72 545,523 .72 U.S. TREASURY BONDS & NOTES - 0.73% U.S. Treasury 1.50% 2005 555,000 554,567 .73 554,567 .73 TOTAL BONDS AND NOTES (cost: $1,840,383,000) 1,995,385 2.63 Principal Market Percent amount value of net SHORT-TERM SECURITIES - 13.34% (000) (000) assets Bank of America Corp. 2.00%-2.24% due 1/5-3/14/2005 $210,000 $ 209,614 .28% BellSouth Corp. 2.16%-2.28% due 1/21-1/26/2005 (2) 140,400 140,188 .18 Caterpillar Financial Services Corp. 2.07%-2.25% due 1/10-1/19/2005 45,000 44,962 .06 Caterpillar Inc. 2.28% 1/18/2005 (2) 30,000 29,966 .04 Edison Asset Securitization LLC 2.13-2.34% due 1/14-2/18/2005 (2) 100,000 99,814 .13 General Electric Capital Corp. 2.11%-2.37% due 2/8-2/25/2005 84,900 84,642 .11 General Electric Capital Services Inc. 2.07% due 1/28/2005 50,000 49,913 .07 Eli Lilly and Co. 2.01%-2.27% due 1/11-2/1/2005 (2) 130,000 129,809 .17 Fannie Mae 2.15%-2.19% due 1/7-1/28/2005 98,900 98,792 .13 Federal Home Loan Bank 2.01%-2.407% due 1/5-3/28/2005 596,950 595,343 .78 Freddie Mac 2.04%-2.43% due 1/12-3/22/2005 576,424 574,542 .76 IBM Capital Inc. 1.955% due 1/6/2005 (2) 25,000 24,991 .03 International Business Machines Corp. 2.21%-2.27% due 1/28-2/25/2005 75,000 74,771 .10 International Bank for Reconstruction and Development 2.09%-2.24% due 1/14-3/1/2005 469,300 468,297 .62 J.P. Morgan Chase & Co. 2.12% due 1/24/2005 70,000 69,895 .09 Park Avenue Receivables Co. LLC 2.28%-2.34% due 1/12-1/28/2005 (2) 103,502 103,368 .14 Preferred Receivables Funding Corp. 2.30% due 1/20/2005 (2) 20,000 19,974 .03 New Center Asset Trust 2.30% due 1/19/2005 36,000 35,956 .05 New Center Asset Trust Plus 2.16%-2.39% due 1/21-2/18/2005 124,500 124,165 .16 SBC Communications Inc. 2.13%-2.36% due 1/24-2/15/2005 (2) 139,815 139,475 .18 U.S. Treasury Bills 1.70%-2.2675% due 1/6-4/14/2005 3,172,700 3,163,572 4.17 Other securities 3,842,198 5.06 TOTAL SHORT-TERM SECURITIES (cost: $10,123,975,000) 10,124,247 13.34 TOTAL INVESTMENT SECURITIES (cost: $55,882,627,000) 75,765,429 99.87 OTHER ASSETS LESS LIABILITIES 101,976 .13 NET ASSETS $75,867,405 100.00%
INVESTMENTS IN AFFILIATES A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. The market value of the fund's holdings in affiliated companies is included in "Other securities" under their respective industry sectors in the preceding summary investment portfolio. Further details on these holdings and related transactions during the year ended December 31, 2004 appear below. Dividend Market Company Beginning Purchases Sales Ending income value shares shares (000) (000) Limited Brands Inc. 20,749,400 - - 20,749,400 $35,481 $477,651
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. "Other securities" includes all issues that are not required to be disclosed in the summary investment portfolio. (1) Security did not produce income during the last 12 months. (2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those included in "Other securities" in the summary investment portfolio, was $2,812,711,000 which represented 3.70% of the net assets of the fund. ADR = American Depositary Receipts See Notes to Financial Statements FINANCIAL STATEMENTS Statement of assets and liabilities at December 31, 2004 (dollars and shares in thousands, except per-share amounts) ASSETS: Investment securities at market: Unaffiliated issuers (cost: $55,625,447) $75,287,778 Affiliated issuers (cost: $257,180) 477,651 $75,765,429 Cash denominated in non-U.S. currencies (cost: $9,182) 9,898 Cash 133 Receivables for: Sales of fund's shares 81,948 Dividends and interest 165,110 247,058 76,022,518 LIABILITIES: Payables for: Purchases of investments 47,143 Repurchases of fund's shares 65,176 Investment advisory services 14,284 Services provided by affiliates 25,036 Deferred Directors' and Advisory Board compensation 2,985 Other fees and expenses 489 155,113 NET ASSETS AT DECEMBER 31, 2004 $75,867,405 NET ASSETS CONSIST OF: Capital paid in on shares of capital stock $55,584,442 Undistributed net investment income 401,174 Distributions in excess of net realized gain (1,788) Net unrealized appreciation 19,883,577 NET ASSETS AT DECEMBER 31, 2004 $75,867,405
Authorized shares of capital stock Shares Net asset value - $.001 par value Net assets outstanding per share (1) Class A 2,500,000 $64,879,647 2,109,805 30.75 Class B 250,000 3,682,575 120,175 30.64 Class C 250,000 2,690,540 87,947 30.59 Class F 250,000 1,208,900 39,351 30.72 Class 529-A 325,000 625,244 20,347 30.73 Class 529-B 75,000 155,118 5,057 30.67 Class 529-C 150,000 188,417 6,141 30.68 Class 529-E 75,000 27,073 882 30.68 Class 529-F 75,000 5,121 167 30.71 Class R-1 75,000 23,202 756 30.67 Class R-2 100,000 361,381 11,783 30.67 Class R-3 300,000 493,243 16,062 30.71 Class R-4 75,000 119,176 3,880 30.72 Class R-5 150,000 1,407,768 45,783 30.75
(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for classes A and 529-A, for which the maximum offering prices per share were $32.63 and $32.60, respectively. See Notes to Financial Statements STATEMENT OF OPERATIONS for the year ended December 31, 2004 (dollars in thousands) INVESTMENT INCOME: Income: Dividends (net of non-U.S. withholding tax of $22,973; also includes $35,481 from affiliates) $1,495,975 Interest (net of non-U.S. withholding tax of $3) 345,847 $1,841,822 Fees and expenses: Investment advisory services 167,990 Distribution services 203,917 Transfer agent services 53,879 Administrative services 11,898 Reports to shareholders 3,427 Registration statement and prospectus 1,631 Postage, stationery and supplies 5,866 Directors' and Advisory Board compensation 1,150 Auditing and legal 307 Custodian 2,187 State and local taxes 571 Other 219 Total expenses before reimbursement/waiver 453,042 Reimbursement/waiver of expenses 3,464 449,578 Net investment income 1,392,244 NET REALIZED GAIN AND UNREALIZED APPRECIATION ON INVESTMENTS AND NON-U.S. CURRENCY: Net realized gain (loss) on: Investments 921,085 Non-U.S. currency transactions (2,708) 918,377 Net unrealized appreciation (depreciation) on: Investments 4,370,458 Non-U.S. currency translations (245) 4,370,213 Net realized gain and unrealized appreciation on investments and non-U.S. currency 5,288,590 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,680,834 See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Year ended December 31 2004 2003 OPERATIONS: Net investment income $1,392,244 $1,142,439 Net realized gain on investments and non-U.S. currency transactions 918,377 500,253 Net unrealized appreciation on investments and non-U.S. currency translations 4,370,213 11,791,841 Net increase in net assets resulting from operations 6,680,834 13,434,533 DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS: Dividends from net investment income and currency gains (1,194,353) (1,107,178) Distributions from net realized gain on investments (863,164) (477,739) Total dividends and distributions paid to shareholders (2,057,517) (1,584,917) CAPITAL SHARE TRANSACTIONS 4,709,994 4,923,852 TOTAL INCREASE IN NET ASSETS 9,333,311 16,773,468 NET ASSETS: Beginning of year 66,534,094 49,760,626 End of year (including undistributed net investment income: $401,174 and $195,455, respectively) $75,867,405 $66,534,094 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. The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica(R) savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund's share classes are described below: - --------------------------------------------------------------------------------------------------------- Contingent deferred sales Share class Initial sales charge charge upon redemption Conversion feature - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes A and 529-A Up to 5.75% None (except 1% for None certain redemptions within one year of purchase without an initial sales charge) - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes B and 529-B None Declines from 5% to zero Classes B and 529-B convert to for redemptions within classes A and 529-A, six years of purchase respectively, after eight years - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class C None 1% for redemptions within Class C converts to Class F one year of purchase after 10 years - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class 529-C None 1% for redemptions within None one year of purchase - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class 529-E None None None - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes F and 529-F None None None - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes R-1, R-2, R-3, None None None R-4 and R-5 - ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund: SECURITY VALUATION - Equity securities are valued at the official closing price of, or 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. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities are valued at prices obtained from an independent pricing service, when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities purchased with greater than 60 days to maturity with 60 days or less remaining to maturity is determined based on the market value on the 61st day. 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. Forward currency contracts are valued at the mean of representative quoted bid and asked prices. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's Board of Directors. Various factors may be reviewed in order to make a good faith determination of a security's fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. CollegeAmerica is a registered trademark of the Virginia College Savings Plan./SM/ SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security. CLASS ALLOCATIONS - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid to shareholders are recorded on the ex-dividend date. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect at the end of the reporting period. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets. TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid. 3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. DISTRIBUTIONS - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; deferred expenses; cost of investments sold and paydowns on investments. 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. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. As of December 31, 2004, the cost of investment securities for federal income tax purposes was $55,880,051,000. During the year ended December 31, 2004, the fund reclassified $7,958,000 from undistributed net realized gains to undistributed net investment income; and reclassified $130,000 from undistributed net investment income and $47,996,000 from undistributed net realized gains to additional paid-in capital to align financial reporting with tax reporting. As of December 31, 2004, the components of distributable earnings on a tax basis were as follows (dollars in thousands): Undistributed net investment income and currency gains $404,631 Loss deferrals related to non-U.S. currency that were realized during the period November 1, 2004 through December 31, 2004 (472) Gross unrealized appreciation on investment securities 20,548,358 Gross unrealized depreciation on investment securities (662,980) Net unrealized appreciation on investment securities 19,885,378
During the year ended December 31, 2004, the fund realized, on a tax basis, a net capital gain of $911,164,000. The tax character of distributions paid to shareholders was as follows (dollars in thousands): Year ended December 31, 2004 Distributions from Distributions from Total ordinary income long-term capital gains distributions paid Share class Class A $ 1,074,604 $ 738,649 $ 1,813,253 Class B 33,455 41,997 75,452 Class C 22,209 30,628 52,837 Class F 18,386 13,657 32,043 Class 529-A 8,408 6,944 15,352 Class 529-B 1,051 1,740 2,791 Class 529-C 1,270 2,100 3,370 Class 529-E 290 301 591 Class 529-F 61 56 117 Class R-1 172 255 427 Class R-2 2,737 4,069 6,806 Class R-3 5,165 5,511 10,676 Class R-4 1,396 1,295 2,691 Class R-5 25,149 15,962 41,111 Total $ 1,194,353 $ 863,164 $ 2,057,517 Year ended December 31, 2003 Distributions from Distributions from Total ordinary income long-term capital gains distributions paid Share class Class A $ 1,028,846 $ 419,520 $ 1,448,366 Class B 29,917 21,573 51,490 Class C 17,389 14,109 31,498 Class F 12,101 6,330 18,431 Class 529-A 5,082 2,625 7,707 Class 529-B 751 702 1,453 Class 529-C 843 794 1,637 Class 529-E 175 113 288 Class 529-F 26 18 44 Class R-1 106 100 206 Class R-2 1,323 1,334 2,657 Class R-3 1,981 1,596 3,577 Class R-4 493 294 787 Class R-5 8,145 8,631 16,776 Total $ 1,107,178 $ 477,739 $ 1,584,917
4. FEES AND TRANSACTIONS WITH RELATED PARTIES Capital Research and Management Company ("CRMC"), the fund's investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund's transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares. INVESTMENT ADVISORY SERVICES - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.390% on the first $1 billion of month-end net assets and decreasing to 0.222% on such assets in excess of $71 billion. During the year ended December 31, 2004, CRMC reduced investment advisory services fees by $2,898,000. As a result, the fee shown on the accompanying financial statements of $167,990,000, which was equivalent to an annualized rate of 0.240%, was reduced to $165,092,000, or 0.236% of month-end net assets. CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below: DISTRIBUTION SERVICES - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the Board of Directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares. The plans provide for annual expenses, based on a percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the Board of Directors has approved expense amounts lower than plan limits. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD for providing certain shareholder services. Expenses in excess of these amounts, up to approved limits, may be used to compensate dealers and wholesalers for shares sold. For classes A and 529-A, the Board of Directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. Each class reimburses AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of December 31, 2004, there were no unreimbursed expenses subject to reimbursement for classes A or 529-A. ------------------------------------------------ ----------------------------- ----------------------------- Share class Currently approved limits Plan limits ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Class A 0.25% 0.25% ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Class 529-A 0.25 0.50 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes B and 529-B 1.00 1.00 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes C, 529-C and R-1 1.00 1.00 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Class R-2 0.75 1.00 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes 529-E and R-3 0.50 0.75 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes F, 529-F and R-4 0.25 0.50 ------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with AFS for classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below. ADMINISTRATIVE SERVICES - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all classes of shares other than classes A and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. During the year ended December 31, 2004, CRMC agreed to pay a portion of these fees for classes R-1 and R-2. For the year ended December 31, 2004, the total fees paid by CRMC were $1,000 and $565,000 for Class R-1 and Class R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees in the accompanying financial statements, the Commonwealth of Virginia is not considered a related party. Expenses under the agreements described above for the year ended December 31, 2004, were as follows (dollars in thousands): -------------------------------------------------------------------------------------------------------------- Share class Distribution Transfer agent Administrative services services services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- CRMC Transfer agent Commonwealth of administrative services Virginia services administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class A $136,883 $50,723 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class B 33,071 3,156 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class C 23,350 Included $3,502 $498 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class F 2,676 Included 1,605 155 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-A 773 Included 738 64 $492 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-B 1,257 Included 189 55 126 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-C 1,496 Included 224 52 149 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-E 105 Included 32 3 21 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-F 9 Included 6 1 4 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-1 182 Included 27 11 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-2 2,081 Included 416 1,306 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-3 1,838 Included 551 287 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-4 196 Included 118 6 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-5 Not applicable Included 1,260 * Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Total $203,917 $53,879 $8,668 $2,438 $792 -------------------------------------------------------------------------------------------------------------- * Amount less than one thousand.
DEFERRED DIRECTORS' AND ADVISORY BOARD COMPENSATION - Since the adoption of the deferred compensation plan in 1993, Directors and Advisory Board members who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors' and Advisory Board compensation of $1,150,000, shown on the accompanying financial statements, includes $791,000 in current fees (either paid in cash or deferred) and a net increase of $359,000 in the value of the deferred amounts. AFFILIATED OFFICERS AND DIRECTORS/TRUSTEES - Officers and certain Directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or Directors received any compensation directly from the fund. 5. WARRANTS As of December 31, 2004, the fund had warrants outstanding which may be exercised at any time for the purchase of 821,806 Class A shares at approximately $5.24 per share. If these warrants had been exercised as of December 31, 2004, the net asset value of Class A shares would have been reduced by $0.01 per share. 6. CAPITAL SHARE TRANSACTIONS Capital share transactions in the fund were as follows (dollars and shares in thousands): Reinvestments of Share class Sales(1) dividends and distributions Amount Shares Amount Shares Year ended December 31, 2004 Class A $ 6,876,973 235,443 $ 1,692,780 56,793 Class B 663,196 22,803 72,958 2,443 Class C 778,916 26,808 50,567 1,695 Class F 506,063 17,338 29,160 979 Class 529-A 216,120 7,391 15,351 514 Class 529-B 46,827 1,607 2,790 93 Class 529-C 67,411 2,309 3,370 112 Class 529-E 9,407 323 591 20 Class 529-F 2,328 79 116 4 Class R-1 12,156 418 427 14 Class R-2 195,647 6,727 6,804 227 Class R-3 301,164 10,320 10,669 357 Class R-4 85,334 2,912 2,690 90 Class R-5 193,400 6,618 40,829 1,371 Total net increase (decrease) $ 9,954,942 341,096 $ 1,929,102 64,712 Year ended December 31, 2003 Class A $ 6,429,510 254,074 $ 1,345,897 51,626 Class B 827,539 32,970 49,796 1,889 Class C 799,522 31,497 30,207 1,142 Class F 464,775 18,386 16,747 633 Class 529-A 172,085 6,749 7,706 292 Class 529-B 44,857 1,779 1,453 55 Class 529-C 54,628 2,144 1,637 61 Class 529-E 8,128 322 288 11 Class 529-F 2,042 80 44 2 Class R-1 12,587 509 205 8 Class R-2 169,458 6,780 2,655 99 Class R-3 207,420 8,202 3,564 132 Class R-4 33,326 1,338 786 29 Class R-5 1,051,747 40,574 16,539 600 Total net increase (decrease) $ 10,277,624 405,404 $ 1,477,524 56,579 Share class Repurchases(1) Net increase Amount Shares Amount Shares Year ended December 31, 2004 Class A $ (6,018,495) (205,905) $ 2,551,258 86,331 Class B (285,338) (9,809) 450,816 15,437 Class C (282,310) (9,711) 547,173 18,792 Class F (294,487) (10,102) 240,736 8,215 Class 529-A (21,681) (738) 209,790 7,167 Class 529-B (3,475) (119) 46,142 1,581 Class 529-C (7,911) (269) 62,870 2,152 Class 529-E (687) (24) 9,311 319 Class 529-F (380) (13) 2,064 70 Class R-1 (4,841) (168) 7,742 264 Class R-2 (49,451) (1,697) 153,000 5,257 Class R-3 (77,001) (2,632) 234,832 8,045 Class R-4 (15,204) (520) 72,820 2,482 Class R-5 (112,789) (3,870) 121,440 4,119 Total net increase (decrease) $ (7,174,050) (245,577) $ 4,709,994 160,231 Year ended December 31, 2003 Class A $ (6,159,887) (246,645) $ 1,615,520 59,055 Class B (215,596) (8,756) 661,739 26,103 Class C (181,857) (7,314) 647,872 25,325 Class F (137,980) (5,568) 343,542 13,451 Class 529-A (9,943) (387) 169,848 6,654 Class 529-B (2,113) (83) 44,197 1,751 Class 529-C (3,569) (138) 52,696 2,067 Class 529-E (346) (13) 8,070 320 Class 529-F (16) (1) 2,070 81 Class R-1 (1,768) (69) 11,024 448 Class R-2 (34,537) (1,371) 137,576 5,508 Class R-3 (34,172) (1,356) 176,812 6,978 Class R-4 (8,547) (346) 25,565 1,021 Class R-5 (40,965) (1,547) 1,027,321 39,627 Total net increase (decrease) $ (6,831,296) (273,594) $ 4,923,852 188,389
(1) Includes exchanges between share classes of the fund. 7. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $12,431,394,000 and $11,193,543,000, respectively, during the year ended December 31, 2004. The fund receives a reduction in its custodian fee equal to the amount of interest calculated on certain cash balances held at the custodian bank. For the year ended December 31, 2004, the custodian fee of $2,187,000, shown on the accompanying financial statements, included $61,000 that was offset by this reduction, rather than paid in cash. FINANCIAL HIGHLIGHTS (1) Income (loss) from investment operations(2) Net Net asset gains (losses) value, Net on securities Total from beginning investment (both realized investment of period income and unrealized) operations Class A: Year ended 12/31/2004 $28.84 $.60 $2.19 $2.79 Year ended 12/31/2003 23.48 .54 5.55 6.09 Year ended 12/31/2002 28.53 .49 (4.56) (4.07) Year ended 12/31/2001 31.07 .44 (1.87) (1.43) Year ended 12/31/2000 32.46 .56 .65 1.21 Class B: Year ended 12/31/2004 28.74 .38 2.17 2.55 Year ended 12/31/2003 23.41 .34 5.53 5.87 Year ended 12/31/2002 28.47 .30 (4.57) (4.27) Year ended 12/31/2001 31.01 .19 (1.83) (1.64) Period from 3/15/2000 to 12/31/2000 31.13 .26 1.55 1.81 Class C: Year ended 12/31/2004 28.70 .36 2.16 2.52 Year ended 12/31/2003 23.38 .31 5.53 5.84 Year ended 12/31/2002 28.44 .30 (4.58) (4.28) Period from 3/15/2001 to 12/31/2001 29.05 .09 (.14) (.05) Class F: Year ended 12/31/2004 28.81 .58 2.18 2.76 Year ended 12/31/2003 23.46 .51 5.55 6.06 Year ended 12/31/2002 28.52 .49 (4.59) (4.10) Period from 3/15/2001 to 12/31/2001 29.10 .27 (.13) .14 Class 529-A: Year ended 12/31/2004 28.82 .59 2.17 2.76 Year ended 12/31/2003 23.48 .52 5.55 6.07 Period from 2/15/2002 to 12/31/2002 27.88 .46 (3.91) (3.45) Class 529-B: Year ended 12/31/2004 28.78 .33 2.16 2.49 Year ended 12/31/2003 23.45 .28 5.54 5.82 Period from 2/15/2002 to 12/31/2002 27.88 .28 (3.92) (3.64) Class 529-C: Year ended 12/31/2004 28.78 .33 2.17 2.50 Year ended 12/31/2003 23.45 .29 5.54 5.83 Period from 2/19/2002 to 12/31/2002 27.47 .28 (3.50) (3.22) Class 529-E: Year ended 12/31/2004 28.78 .48 2.17 2.65 Year ended 12/31/2003 23.45 .42 5.54 5.96 Period from 3/1/2002 to 12/31/2002 28.27 .38 (4.52) (4.14) Class 529-F: Year ended 12/31/2004 28.81 .56 2.16 2.72 Year ended 12/31/2003 23.47 .48 5.55 6.03 Period from 9/16/2002 to 12/31/2002 23.98 .16 (.19) (.03) Financial highlights (1) (continued) Income (loss) from investment operations(2) Net Net asset gains(losses) value, Net on securities Total from beginning investment (both realized investment of period income and unrealized) operations Class R-1: Year ended 12/31/2004 $28.77 $.36 $2.17 $2.53 Year ended 12/31/2003 23.46 .31 5.54 5.85 Period from 6/6/2002 to 12/31/2002 27.27 .20 (3.36) (3.16) Class R-2: Year ended 12/31/2004 28.77 .37 2.17 2.54 Year ended 12/31/2003 23.46 .31 5.54 5.85 Period from 5/21/2002 to 12/31/2002 28.23 .23 (4.34) (4.11) Class R-3: Year ended 12/31/2004 28.80 .50 2.17 2.67 Year ended 12/31/2003 23.47 .41 5.55 5.96 Period from 6/4/2002 to 12/31/2002 27.58 .27 (3.69) (3.42) Class R-4: Year ended 12/31/2004 28.82 .60 2.16 2.76 Year ended 12/31/2003 23.47 .51 5.55 6.06 Period from 5/28/2002 to 12/31/2002 28.22 .32 (4.33) (4.01) Class R-5: Year ended 12/31/2004 28.84 .67 2.18 2.85 Year ended 12/31/2003 23.48 .56 5.59 6.15 Period from 5/15/2002 to 12/31/2002 28.37 .39 (4.50) (4.11) FINANCIAL HIGHLIGHTS (1) Dividends and distributions Dividends (from net Distributions Total Net asset investment (from capital dividends and value, end income) gains) distributions of period Class A: Year ended 12/31/2004 $(.52) $(.36) $(.88) $30.75 Year ended 12/31/2003 (.52) (.21) (.73) 28.84 Year ended 12/31/2002 (.52) (.46) (.98) 23.48 Year ended 12/31/2001 (.52) (.59) (1.11) 28.53 Year ended 12/31/2000 (.52) (2.08) (2.60) 31.07 Class B: Year ended 12/31/2004 (.29) (.36) (.65) 30.64 Year ended 12/31/2003 (.33) (.21) (.54) 28.74 Year ended 12/31/2002 (.33) (.46) (.79) 23.41 Year ended 12/31/2001 (.31) (.59) (.90) 28.47 Period from 3/15/2000 to 12/31/2000 (.25) (1.68) (1.93) 31.01 Class C: Year ended 12/31/2004 (.27) (.36) (.63) 30.59 Year ended 12/31/2003 (.31) (.21) (.52) 28.70 Year ended 12/31/2002 (.32) (.46) (.78) 23.38 Period from 3/15/2001 to 12/31/2001 (.21) (.35) (.56) 28.44 Class F: Year ended 12/31/2004 (.49) (.36) (.85) 30.72 Year ended 12/31/2003 (.50) (.21) (.71) 28.81 Year ended 12/31/2002 (.50) (.46) (.96) 23.46 Period from 3/15/2001 to 12/31/2001 (.37) (.35) (.72) 28.52 Class 529-A: Year ended 12/31/2004 (.49) (.36) (.85) 30.73 Year ended 12/31/2003 (.52) (.21) (.73) 28.82 Period from 2/15/2002 to 12/31/2002 (.49) (.46) (.95) 23.48 Class 529-B: Year ended 12/31/2004 (.24) (.36) (.60) 30.67 Year ended 12/31/2003 (.28) (.21) (.49) 28.78 Period from 2/15/2002 to 12/31/2002 (.33) (.46) (.79) 23.45 Class 529-C: Year ended 12/31/2004 (.24) (.36) (.60) 30.68 Year ended 12/31/2003 (.29) (.21) (.50) 28.78 Period from 2/19/2002 to 12/31/2002 (.34) (.46) (.80) 23.45 Class 529-E: Year ended 12/31/2004 (.39) (.36) (.75) 30.68 Year ended 12/31/2003 (.42) (.21) (.63) 28.78 Period from 3/1/2002 to 12/31/2002 (.33) (.35) (.68) 23.45 Class 529-F: Year ended 12/31/2004 (.46) (.36) (.82) 30.71 Year ended 12/31/2003 (.48) (.21) (.69) 28.81 Period from 9/16/2002 to 12/31/2002 (.13) (.35) (.48) 23.47 Financial highlights (1) (continued) Dividends and distributions Dividends (from net Distributions Total Net asset investment (from capital dividends and value, end income) gains) distributions of period Class R-1: Year ended 12/31/2004 $(.27) $(.36) $(.63) $30.67 Year ended 12/31/2003 (.33) (.21) (.54) 28.77 Period from 6/6/2002 to 12/31/2002 (.30) (.35) (.65) 23.46 Class R-2: Year ended 12/31/2004 (.28) (.36) (.64) 30.67 Year ended 12/31/2003 (.33) (.21) (.54) 28.77 Period from 5/21/2002 to 12/31/2002 (.31) (.35) (.66) 23.46 Class R-3: Year ended 12/31/2004 (.40) (.36) (.76) 30.71 Year ended 12/31/2003 (.42) (.21) (.63) 28.80 Period from 6/4/2002 to 12/31/2002 (.34) (.35) (.69) 23.47 Class R-4: Year ended 12/31/2004 (.50) (.36) (.86) 30.72 Year ended 12/31/2003 (.50) (.21) (.71) 28.82 Period from 5/28/2002 to 12/31/2002 (.39) (.35) (.74) 23.47 Class R-5: Year ended 12/31/2004 (.58) (.36) (.94) 30.75 Year ended 12/31/2003 (.58) (.21) (.79) 28.84 Period from 5/15/2002 to 12/31/2002 (.43) (.35) (.78) 23.48
FINANCIAL HIGHLIGHTS (1) Ratio of expenses Ratio of expenses to average net to average net Ratio of Net assets, assets before assets after net income Total end of period reimbursement/ reimbursement/ to average return (3) (in millions) waiver waiver (4) net assets Class A: Year ended 12/31/2004 9.78% $64,880 .57% .57% 2.06% Year ended 12/31/2003 26.30 58,353 .59 .59 2.14 Year ended 12/31/2002 (14.47) 46,129 .59 .59 1.89 Year ended 12/31/2001 (4.59) 54,315 .57 .57 1.49 Year ended 12/31/2000 3.84 56,212 .56 .56 1.74 Class B: Year ended 12/31/2004 8.94 3,683 1.36 1.35 1.29 Year ended 12/31/2003 25.30 3,011 1.38 1.38 1.33 Year ended 12/31/2002 (15.18) 1,841 1.39 1.39 1.18 Year ended 12/31/2001 (5.30) 1,302 1.35 1.35 .66 Period from 3/15/2000 to 12/31/2000 5.87 439 1.34 (5) 1.34 (5) 1.06 (5) Class C: Year ended 12/31/2004 8.85 2,691 1.43 1.43 1.22 Year ended 12/31/2003 25.22 1,985 1.45 1.45 1.25 Year ended 12/31/2002 (15.20) 1,025 1.45 1.45 1.17 Period from 3/15/2001 to 12/31/2001 (.19) 480 1.52 (5) 1.52 (5) .38 (5) Class F: Year ended 12/31/2004 9.69 1,209 .67 .67 1.99 Year ended 12/31/2003 26.18 897 .69 .69 2.01 Year ended 12/31/2002 (14.59) 415 .70 .70 1.92 Period from 3/15/2001 to 12/31/2001 .48 190 .72 (5) .72 (5) 1.17 (5) Class 529-A: Year ended 12/31/2004 9.68 625 .68 .68 2.00 Year ended 12/31/2003 26.19 380 .64 .64 2.06 Period from 2/15/2002 to 12/31/2002 (12.57) 153 .71 (5) .71 (5) 2.17 (5) Class 529-B: Year ended 12/31/2004 8.69 155 1.56 1.55 1.12 Year ended 12/31/2003 25.05 100 1.58 1.58 1.12 Period from 2/15/2002 to 12/31/2002 (13.22) 41 1.58 (5) 1.58 (5) 1.30 (5) Class 529-C: Year ended 12/31/2004 8.74 188 1.55 1.54 1.13 Year ended 12/31/2003 25.07 115 1.57 1.57 1.13 Period from 2/19/2002 to 12/31/2002 (11.91) 45 1.57 (5) 1.57 (5) 1.32 (5) Class 529-E: Year ended 12/31/2004 9.29 27 1.03 1.02 1.65 Year ended 12/31/2003 25.70 16 1.04 1.04 1.65 Period from 3/1/2002 to 12/31/2002 (14.72) 6 1.03 (5) 1.03 (5) 1.90 (5) Class 529-F: Year ended 12/31/2004 9.55 5 .78 .77 1.91 Year ended 12/31/2003 26.05 3 .79 .79 1.88 Period from 9/16/2002 to 12/31/2002 (.14) - (6) .23 .23 .68 Financial highlights (1) (continued) Ratio of expenses Ratio of expenses to average net to average net Ratio of Net assets, assets before assets after net income Total end of period reimbursement/ reimbursement/ to average return (in millions) waiver waiver (4) net assets Class R-1: Year ended 12/31/2004 8.84% $23 1.47% 1.46% 1.21% Year ended 12/31/2003 25.18 14 1.51 1.47 1.18 Period from 6/6/2002 to 12/31/2002 (11.68) 1 2.43 (5) 1.47 (5) 1.49 (5) Class R-2: Year ended 12/31/2004 8.88 361 1.63 1.42 1.27 Year ended 12/31/2003 25.18 188 1.76 1.43 1.21 Period from 5/21/2002 to 12/31/2002 (14.64) 24 1.57 (5) 1.43 (5) 1.61 (5) Class R-3: Year ended 12/31/2004 9.34 493 .99 .98 1.72 Year ended 12/31/2003 25.70 231 1.06 1.05 1.60 Period from 6/4/2002 to 12/31/2002 (12.49) 24 1.11 (5) 1.05 (5) 2.00 (5) Class R-4: Year ended 12/31/2004 9.67 119 .67 .66 2.05 Year ended 12/31/2003 26.19 40 .68 .68 2.00 Period from 5/28/2002 to 12/31/2002 (14.31) 9 .73 (5) .69 (5) 2.25 (5) Class R-5: Year ended 12/31/2004 10.02 1,408 .36 .35 2.28 Year ended 12/31/2003 26.58 1,201 .36 .36 2.11 Period from 5/15/2002 to 12/31/2002 (14.59) 48 .37 (5) .37 (5) 2.56 (5)
Year ended December 31 2004 2003 2002 2001 2000 Portfolio turnover rate for all classes of shares 19% 24% 27% 22% 25%
(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. (2) Based on average shares outstanding. (3) Total returns exclude all sales charges, including contingent deferred sales charges. (4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During the year ended 12/31/2004, CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services. (5) Annualized. (6) Amount less than $1 million. See Notes to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 summary investment portfolio, and the related statements of operations and changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Investment Company of America (the "Fund") at December 31, 2004, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Los Angeles, California February 2, 2005 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 certain distributions received by shareholders during such fiscal year. The information below is provided for the fund's fiscal year ending December 31, 2004. During the fiscal year ended, the fund paid a long-term capital gain distribution of $868,858,000. A portion of this amount was distributed to shareholders in redemption of their shares. Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates $1,111,830,000 of the dividends paid by the fund as qualified dividend income. Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates $1,244,544,000 of dividends received as qualified dividend income. For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $71,285,000 as interest derived on direct U.S. government obligations. INDIVIDUAL SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION WHICH WAS MAILED IN JANUARY 2005 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR 2004 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS. EXPENSE EXAMPLE (unaudited) As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2004 through December 31, 2004). ACTUAL EXPENSES: The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.50% to 3.00% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES: The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain shareholders, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.50% to 3.00% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning account Ending account Expenses paid Annualized value 7/1/2004 value 12/31/2004 during period(1) expense ratio Class A -- actual return $ 1,000.00 $1,075.45 $2.92 .56% Class A -- assumed 5% return 1,000.00 1,022.32 2.85 .56 Class B -- actual return 1,000.00 1,070.81 7.03 1.35 Class B -- assumed 5% return 1,000.00 1,018.35 6.85 1.35 Class C -- actual return 1,000.00 1,070.56 7.39 1.42 Class C -- assumed 5% return 1,000.00 1,018.00 7.20 1.42 Class F -- actual return 1,000.00 1,074.65 3.44 .66 Class F -- assumed 5% return 1,000.00 1,021.82 3.35 .66 Class 529-A -- actual return 1,000.00 1,074.57 3.49 .67 Class 529-A -- assumed 5% return 1,000.00 1,021.77 3.40 .67 Class 529-B -- actual return 1,000.00 1,069.80 8.01 1.54 Class 529-B -- assumed 5% return 1,000.00 1,017.39 7.81 1.54 Class 529-C -- actual return 1,000.00 1,070.15 8.01 1.54 Class 529-C -- assumed 5% return 1,000.00 1,017.39 7.81 1.54 Class 529-E -- actual return 1,000.00 1,072.54 5.31 1.02 Class 529-E -- assumed 5% return 1,000.00 1,020.01 5.18 1.02 Class 529-F -- actual return 1,000.00 1,074.05 3.96 .76 Class 529-F -- assumed 5% return 1,000.00 1,021.32 3.86 .76 Class R-1 -- actual return 1,000.00 1,070.63 7.55 1.45 Class R-1 -- assumed 5% return 1,000.00 1,017.85 7.35 1.45 Class R-2 -- actual return 1,000.00 1,070.81 7.34 1.41 Class R-2 -- assumed 5% return 1,000.00 1,018.05 7.15 1.41 Class R-3 -- actual return 1,000.00 1,073.35 4.90 .94 Class R-3 -- assumed 5% return 1,000.00 1,020.41 4.77 .94 Class R-4 -- actual return 1,000.00 1,074.68 3.44 .66 Class R-4 -- assumed 5% return 1,000.00 1,021.82 3.35 .66 Class R-5 -- actual return 1,000.00 1,076.56 1.83 .35 Class R-5 -- assumed 5% return 1,000.00 1,023.38 1.78 .35
(1) Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (184), and divided by 366 (to reflect the one-half year period). OTHER SHARE CLASS RESULTS (unaudited) Class B, Class C, Class F and Class 529 Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com. RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR LIFE OF CLASS CLASS B SHARES Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold within six years of purchase +3.94% +2.79% (1) Not reflecting CDSC +8.94% +3.16% (1) CLASS C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +7.85% +3.83% (2) Not reflecting CDSC +8.85% +3.83% (2) CLASS F SHARES (3) Not reflecting annual asset-based fee charged by sponsoring firm +9.69% +4.64% (2) CLASS 529-A SHARES Reflecting 5.75% maximum sales charge +3.36% +4.68% (4) Not reflecting maximum sales charge +9.68% +6.86% (4) CLASS 529-B SHARES Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase +3.69% +4.65% (4) Not reflecting CDSC +8.69% +5.91% (4) CLASS 529-C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +7.74% +6.51% (5) Not reflecting CDSC +8.74% +6.51% (5) CLASS 529-E SHARES (3) +9.29% +5.74% (6) CLASS 529-F SHARES (3) Not reflecting annual asset-based fee charged by sponsoring firm +9.55% +15.06% (7)
The fund's investment adviser is waiving a portion of management fees. Results shown reflect the waiver. Please see the Financial Highlights table on page 23 or in the fund's prospectus for details. (1) Average annual total return from March 15, 2000, when Class B shares were first sold. (2) Average annual total return from March 15, 2001, when Class C and Class F shares were first sold. (3) These shares are sold without any initial or contingent deferred sales charge. (4) Average annual total return from February 15, 2002, when Class 529-A and Class 529-B shares were first sold. (5) Average annual total return from February 19, 2002, when Class 529-C shares were first sold. (6) Average annual total return from March 1, 2002, when Class 529-E shares were first sold. (7) Average annual total return from September 16, 2002, when Class 529-F shares were first sold. There are several ways to invest in The Investment Company of America. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.78 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge ("CDSC") of up to 5% that declines over time. Class C shares were subject to annual expenses 0.86 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annual expenses (by 0.10 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class. BOARD OF DIRECTORS, ADVISORY BOARD AND OFFICERS "Non-interested" Directors Year first elected a Director Name and age of the fund (1) Principal occupation(s) during past five years LOUISE H. BRYSON, 60 1999 Executive Vice President, Distribution and Business Development, Lifetime Television; Director and former Chairman of the Board, KCET - Los Angeles (public television station); former Senior Vice President, FX Networks LLC: Fox Inc. MARY ANNE DOLAN, 57 2000 Founder and President, M.A.D., Inc. (communications company); former Editor-in-Chief, The Los Angeles Herald Examiner MARTIN FENTON, 69 2000 Chairman of the Board and CEO, Senior Resource Group LLC (development and management of senior living communities) LEONARD R. FULLER, 58 2002 President and CEO, Fuller Consulting (financial management consulting firm) CLAUDIO X. GONZALEZ LAPORTE, 70 2001 Chairman of the Board and CEO, Kimberly-Clark de Mexico, S.A. JOHN G. MCDONALD, 67 1976 The Stanford Investors Professor, Graduate School of Business, Stanford University BAILEY MORRIS-ECK, 60 1993 Director and Programming Chair, WYPR Baltimore/Washington (public radio station); Senior Adviser (London), Financial News; Senior Fellow, Institute for International Economics RICHARD G. NEWMAN, 70 1996 Chairman of the Board and CEO, AECOM Technology Corporation (engineering, consulting and professional technical services) OLIN C. ROBISON, PH.D., 68 1987 President of the Salzburg Seminar; President Emeritus, Middlebury College WILLIAM J. SPENCER, PH.D., 74 1997 Chairman of the Board and CEO, SEMATECH (research and development consortium); Trustee, William Jewell College; Trustee, Associated Universities, Inc. "Non-interested" Directors Number of portfolios in fund complex (2) overseen by Name and age Director Other directorships (3) held by Director LOUISE H. BRYSON, 60 1 None MARY ANNE DOLAN, 57 3 None MARTIN FENTON, 69 16 None LEONARD R. FULLER, 58 14 None CLAUDIO X. GONZALEZ LAPORTE, 70 1 America Movil, S.A. de C.V.; General Electric Company; Grupo Alfa, S.A. de C.V.; Grupo Carso, S.A. de C.V.; Grupo Financiero Inbursa; Grupo Industrial Saltillo, S.A. de C.V.; Grupo Mexico, S.A. de C.V.; The Home Depot, Inc.; Kellogg Company; Kimberly-Clark Corporation; The Mexico Fund; Unilever N.V. JOHN G. MCDONALD, 67 8 iStar Financial, Inc.; Plum Creek Timber Co.; Scholastic Corporation; Varian, Inc. BAILEY MORRIS-ECK, 60 3 The Nevis Fund, Inc. RICHARD G. NEWMAN, 70 13 Sempra Energy; Southwest Water Company OLIN C. ROBISON, PH.D., 68 3 American Shared Hospital Services WILLIAM J. SPENCER, PH.D., 74 1 None
"Interested" Directors (4) Year first elected a Director or Principal occupation(s) during past five years and Name, age and officer of positions held with affiliated entities or the principal position with fund the fund (1) underwriter of the fund R. MICHAEL SHANAHAN, 66 1994 Chairman of the Board, Capital Research and Management Company; Chairman of the Board Director, American Funds Distributors, Inc.(5); Director, The Capital Group Companies, Inc. (5); Chairman of the Board, Capital Management Services, Inc. (5); Director, Capital Strategy Research, Inc. (5) JAMES F. ROTHENBERG, 58 2000 President and Director, Capital Research and Management Company; President Director, American Funds Distributors, Inc. (5); Director, The Capital Group Companies, Inc. (5); Director, Capital Group Research, Inc. (5) JAMES B. LOVELACE,6 48 1994 Senior Vice President and Director, Capital Research and Senior Vice President Management Company DONALD D. O'NEAL, 44 1994 Senior Vice President, Capital Research and Management Company Senior Vice President PAUL G. HAAGA, JR., 56 2002 Executive Vice President and Director, Capital Research and Management Company; Director, The Capital Group Companies, Inc. (5) "Interested" Directors4 Number of portfolios in fund complex (2) Name, age and overseen by position with fund Director Other directorships3 held by Director R. MICHAEL SHANAHAN, 66 2 None Chairman of the Board JAMES F. ROTHENBERG, 58 3 None President JAMES B. LOVELACE,6 48 2 None Senior Vice President DONALD D. O'NEAL, 44 2 None Senior Vice President PAUL G. HAAGA, JR., 56 17 None
Chairman Emeritus JON B. LOVELACE, JR., 78 Chairman Emeritus, Capital Research and Management Company
Advisory Board members Year first elected to Advisory Name and age Board (1) Principal occupation(s) during past five years THOMAS M. CROSBY, JR., 66 1995 Partner, Faegre & Benson (law firm) SAM L. GINN, 67 2003 Retired; former Chairman of the Board, Vodafone Group Plc.; former Chairman of the Board and CEO, AirTouch Communications ELLEN H. GOLDBERG, PH.D., 59 1998 President, Santa Fe Institute; Research Professor, University of New Mexico L. DANIEL JORNDT, 63 2003 Retired; former Chairman of the Board and CEO, Walgreen Company WILLIAM H. KLING, 62 1985 President, American Public Media Group LUIS G. NOGALES, 61 2003 President, Nogales Partners; Managing Director, Nogales Investors Management LLC (private equity fund) ROBERT J. O'NEILL, PH.D., 68 1988 Deputy Chairman of the Council and Chairman of the International Advisory Panel, Graduate School of Government, University of Sydney, Australia; Member of the Board of Directors, The Lowy Institute for International Policy Studies, Sydney, Australia; Chairman of the Council, Australian Strategic Policy Institute; former Chichele Professor of the History of War and Fellow, All Souls College, University of Oxford; former Chairman of the Council, International Institute for Strategic Studies NORMAN R. WELDON, PH.D., 70 1977 Managing Director, Partisan Management Group, Inc. (venture capital investor in medical device companies); former Chairman of the Board, Novoste Corporation; former President and Director, Corvita Corporation Advisory Board members Number of portfolios in fund complex (2) overseen by Advisory Board Name and age Member Other directorships held (3) THOMAS M. CROSBY, JR., 66 1 None SAM L. GINN, 67 1 Chevron Texaco Corporation; Fremont Group; Hewlett-Packard Company ELLEN H. GOLDBERG, PH.D., 59 1 None L. DANIEL JORNDT, 63 1 Kellogg Company WILLIAM H. KLING, 62 6 Irwin Financial Corporation; St. Paul Travelers Companies LUIS G. NOGALES, 61 1 Arbitron, Inc.; Edison International; K-B Home; Kaufman & Broad, S.A. ROBERT J. O'NEILL, PH.D., 68 3 None NORMAN R. WELDON, PH.D., 70 3 None
Other officers Year first elected Principal occupation(s) during past five years Name, age and an officer and positions held with affiliated entities or position with fund of the fund (1) the principal underwriter of the fund GREGG E. IRELAND, 55 1994 Senior Vice President, Capital Research and Management Company Senior Vice President JOYCE E. GORDON, 48 1998 Vice President and Director, Capital Research and Management Vice President Company; Senior Vice President, Capital Research Company (5) ANNE M. LLEWELLYN, 57 1984 Associate, Capital Research and Management Company Vice President VINCENT P. CORTI, 48 1994 Vice President -- Fund Business Management Group, Capital Secretary Research and Management Company THOMAS M. ROWLAND, 63 1998 Senior Vice President, Capital Research and Management Company; Treasurer Senior Vice President, The Capital Group Companies, Inc. (5); Director, American Funds Service Company (5) R. MARCIA GOULD, 50 1993 Vice President -- Fund Business Management Group, Capital Assistant Treasurer Research and Management Company
THE STATEMENT OF ADDITIONAL INFORMATION INCLUDES ADDITIONAL INFORMATION ABOUT FUND DIRECTORS AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY CALLING AMERICAN FUNDS SERVICE COMPANY AT 800/421-0180. THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET, LOS ANGELES, CA 90071, ATTENTION: FUND SECRETARY. (1) Directors and officers of the fund are elected on an annual basis. (2) Capital Research and Management Company manages the American Funds, consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series,(R) which serves as the underlying investment vehicle for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain nonprofit organizations. (3) This includes all directorships (other than those in the American Funds) that are held by each Director as a director of a public company or a registered investment company. (4) "Interested persons" within the meaning of the 1940 Act, on the basis of their affiliation with the fund's investment adviser, Capital Research and Management Company, or affiliated entities (including the fund's principal underwriter). (5) Company affiliated with Capital Research and Management Company. (6) James B. Lovelace is the son of Jon B. Lovelace, Jr. RESULTS OF MEETING OF SHAREHOLDERS held July 30, 2004 (unaudited) Shares outstanding (all classes) on record date (June 1, 2004) 2,387,645,378 Total shares voting on July 30, 2004 1,636,563,471 (68.5%)
Proposal 1: Election of Directors Percent Percent of shares of shares Director Votes for voting for Votes withheld withheld Louise H. Bryson 1,616,134,669 99 20,428,802 1 Mary Anne Dolan 1,616,191,907 99 20,371,564 1 Martin Fenton 1,614,225,777 99 22,337,694 1 Leonard R. Fuller 1,615,198,225 99 21,365,246 1 Claudio X. Gonzalez Laporte 1,611,812,908 98 24,750,563 2 Paul G. Haaga, Jr. 1,615,510,051 99 21,053,420 1 James B. Lovelace 1,616,361,334 99 20,202,137 1 John G. McDonald 1,613,114,670 99 23,448,801 1 Bailey Morris-Eck 1,615,836,515 99 20,726,956 1 Richard G. Newman 1,612,994,755 99 23,568,716 1 Donald D. O'Neal 1,616,612,441 99 19,951,030 1 Olin C. Robison 1,615,823,662 99 20,739,809 1 James F. Rothenberg 1,616,395,383 99 20,168,088 1 R. Michael Shanahan 1,614,727,506 99 21,835,965 1 William J. Spencer 1,615,202,200 99 21,361,271 1
Proposal 2: Ratification of independent public accountants Percent Percent Percent of shares of shares of shares Votes for voting for Votes against voting against Abstentions abstaining 1,607,433,955 98% 8,002,381 1% 21,127,135 1%
OFFICES OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER Capital Research and Management Company 333 South Hope Street Los Angeles, CA 90071-1406 135 South State College Boulevard Brea, CA 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 25065 Santa Ana, CA 92799-5065 P.O. Box 659522 San Antonio, TX 78265-9522 P.O. Box 6007 Indianapolis, IN 46206-6007 P.O. Box 2280 Norfolk, VA 23501-2280 CUSTODIAN OF ASSETS JPMorgan Chase Bank 270 Park Avenue New York, NY 10017-2070 COUNSEL O'Melveny & Myers LLP 400 South Hope Street Los Angeles, CA 90071-2899 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 350 South Grand Avenue Los Angeles, CA 90071-2889 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, CA 90071-1406 INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE AMERICAN FUNDS AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY (AFS) AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT AMERICANFUNDS.COM. "AMERICAN FUNDS PROXY VOTING GUIDELINES" -- WHICH DESCRIBES HOW WE VOTE PROXIES RELATING TO PORTFOLIO SECURITIES -- IS AVAILABLE FREE OF CHARGE ON THE U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) WEBSITE AT WWW.SEC.GOV, ON THE AMERICAN FUNDS WEBSITE OR UPON REQUEST BY CALLING AFS. THE FUND'S PROXY VOTING RECORD FOR THE 12 MONTHS ENDED JUNE 30, 2004, IS ALSO AVAILABLE ON THE SEC AND AMERICAN FUNDS WEBSITES. A complete portfolio of The Investment Company of America's investments is available free of charge on the SEC website or upon request by calling AFS. The Investment Company of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website or upon request by calling AFS. You may also review or, for a fee, copy the forms at the SEC's Public Reference Room in Washington, D.C. (800/SEC-0330). 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, 2005, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter. [logo - American Funds(R)] The right choice for the long term(R) What makes American Funds different? For more than 70 years, we have followed a consistent philosophy that we firmly believe is in our investors' best interests. The range of opportunities offered by our family of just 29 carefully conceived, broadly diversified funds has attracted over 30 million shareholder accounts. Our unique combination of strengths includes these five factors: o A long-term, value-oriented approach Rather than follow fads, we pursue a consistent strategy, focusing on each investment's long-term potential. o An unparalleled global research effort American Funds draws on one of the industry's most globally integrated research networks. o The multiple portfolio counselor system Every American Fund is divided among a number of portfolio counselors. Each takes responsibility for a portion independently, within each fund's objectives; in most cases, research analysts manage a portion as well. Over time this method has contributed to a consistency of results and continuity of management. o Experienced investment professionals The recent market decline was not the first for most of the portfolio counselors who serve the American Funds. More than half of them were in the investment business before the sharp market decline of 1987. o A commitment to low operating expenses American Funds' operating expenses are among the lowest in the mutual fund industry. Our portfolio turnover rates are low as well, keeping transaction costs and tax consequences contained. 29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS o 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 FundSM SMALLCAP World Fund(R) o GROWTH-AND-INCOME FUNDS Emphasis on long-term growth and dividends through stocks American Mutual Fund(R) Capital World Growth and Income FundSM Fundamental InvestorsSM > The Investment Company of America(R) Washington Mutual Investors FundSM o 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) o BALANCED FUND Emphasis on long-term growth and current income through stocks and bonds American Balanced Fund(R) o BOND FUNDS Emphasis on current income through bonds American High-Income TrustSM The Bond Fund of AmericaSM Capital World Bond Fund(R) Intermediate Bond Fund of America(R) U.S. Government Securities FundSM o TAX-EXEMPT BOND FUNDS Emphasis on tax-free current income through municipal bonds American High-Income Municipal Bond Fund(R) Limited Term Tax-Exempt Bond Fund of AmericaSM 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) o MONEY MARKET FUNDS The Cash Management Trust of America(R) The Tax-Exempt Money Fund of AmericaSM The U.S. Treasury Money Fund of AmericaSM THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust Lit. No. MFGEAR-904-0205P Litho in USA BBC/AL/8060-S1912 Printed on recycled paper ITEM 2 - Code of Ethics The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071. ITEM 3 - Audit Committee Financial Expert The Registrant's Board has determined that John G. McDonald, a member of the Registrant's Audit Committee, is an "audit committee financial expert" and "independent," as such terms are defined in this Item. This designation will not increase the designee's duties, obligations or liability as compared to his duties, obligations and liability as a member of the Audit Committee and of the Board; nor will it reduce the responsibility of the other Audit Committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the Board had designated them as such. Most importantly, the Board believes each member of the Audit Committee contributes significantly to the effective oversight of the Registrant's financial statements and condition. ITEM 4 - Principal Accountant Fees and Services Registrant: a) Audit Fees: 2003 $96,000 2004 $107,000 b) Audit- Related Fees: 2003 none 2004 none c) Tax Fees: 2003 $10,000 2004 $12,000 The tax fees consist of professional services relating to the preparation of the Registrant's tax returns including returns relating to the registrant's investments in non-U.S. jurisdictions. d) All Other Fees: 2003 none 2004 none Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): a) Not Applicable b) Audit- Related Fees: 2003 none 2004 none c) Tax Fees: 2003 none 2004 none d) All Other Fees: 2003 none 2004 none The Registrant's Audit Committee will pre-approve all audit and permissible non-audit services that the Committee considers compatible with maintaining the auditors' independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the registrant. The Committee will not delegate its responsibility to pre-approve these services to the investment adviser. The Committee may delegate to one or more Committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full Committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the services listed above under paragraphs b, c and d. Aggregate non-audit fees paid to the Registrant's auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $10,000 for fiscal year 2003 and $12,000 for fiscal year 2004. The non-audit services represented by these amounts were brought to the attention of the Committee and considered to be compatible with maintaining the auditors' independence. ITEM 5 - Audit Committee of Listed Registrants Not applicable. ITEM 6 - Schedule of Investments [logo - American Funds (r)] THE INVESTMENT COMPANY OF AMERICA Investment portfolio December 31, 2004 Market value COMMON STOCKS -- 83.67% Shares (000) ENERGY -- 9.01% Baker Hughes Inc. 10,125,000 $ 432,034 Burlington Resources Inc. 16,600,000 722,100 ChevronTexaco Corp. 15,260,000 801,303 ConocoPhillips 1,200,000 104,196 ENI SpA 37,880,000 945,032 Exxon Mobil Corp. 8,221,500 421,434 Marathon Oil Corp. 11,050,000 415,590 Murphy Oil Corp. 2,050,000 164,922 Occidental Petroleum Corp. 1,000,000 58,360 Royal Dutch Petroleum Co. (New York registered) 16,970,000 973,739 "Shell" Transport and Trading Co., PLC (ADR) (New York registered) 7,000,000 359,800 "Shell" Transport and Trading Co., PLC 2,900,000 24,674 Schlumberger Ltd. 8,000,000 535,600 TOTAL SA 2,505,000 545,218 Unocal Corp. 7,190,000 310,896 6,814,898 MATERIALS -- 6.94% Air Products and Chemicals, Inc. 700,000 40,579 Alcan Inc. 2,500,000 122,600 Alcoa Inc. 14,876,400 467,416 Alumina Ltd. 10,000,000 46,380 Barrick Gold Corp. 12,500,000 302,750 BHP Billiton Ltd. 9,412,655 112,740 Dow Chemical Co. 26,532,200 1,313,609 E.I. du Pont de Nemours and Co. 4,750,000 232,987 Georgia-Pacific Corp., Georgia-Pacific Group 8,599,298 322,302 International Paper Co. 8,997,235 377,884 MeadWestvaco Corp. 3,800,000 128,782 Newmont Mining Corp. 9,500,000 421,895 Phelps Dodge Corp. 800,000 79,136 Placer Dome Inc. 12,500,000 235,750 Placer Dome Inc. (Canada) 1,500,000 28,225 Rio Tinto PLC 12,000,000 352,523 Rohm and Haas Co. 7,000,000 309,610 Weyerhaeuser Co. 5,475,000 368,029 5,263,197 INDUSTRIALS -- 11.39% 3M Co. 3,500,000 287,245 Boeing Co. 13,000,000 673,010 Burlington Northern Santa Fe Corp. 9,200,000 435,252 Caterpillar Inc. 12,170,000 1,186,697 Cooper Industries, Ltd., Class A 2,500,000 169,725 Cummins Inc. 1,700,000 142,443 Deere & Co. 8,200,000 610,080 FedEx Corp. 2,870,000 282,666 Fluor Corp. 824,300 44,933 General Dynamics Corp. 3,372,900 352,805 General Electric Co. 30,250,000 1,104,125 Illinois Tool Works Inc. 2,500,000 231,700 Lockheed Martin Corp. 8,560,000 475,508 Northrop Grumman Corp. 4,680,000 254,405 Parker Hannifin Corp. 2,500,000 189,350 Pitney Bowes Inc. 1,000,000 46,280 Raytheon Co. 11,946,000 463,863 Siemens AG 1,000,000 84,487 Southwest Airlines Co. 9,000,000 146,520 Tyco International Ltd. 28,100,000 1,004,294 United Parcel Service, Inc., Class B 2,000,000 170,920 United Technologies Corp. 2,400,000 248,040 Waste Management, Inc. 1,100,000 32,934 8,637,282 CONSUMER DISCRETIONARY -- 9.82% Best Buy Co., Inc. 2,000,000 118,840 Carnival Corp., units 8,000,000 461,040 Comcast Corp., Class A(1) 9,357,900 311,431 Delphi Corp. 21,000,000 189,420 Dow Jones & Co., Inc. 1,887,000 81,254 eBay Inc.(1) 600,000 69,768 Ford Motor Co. 5,465,400 80,013 Gap, Inc. 3,100,000 65,472 General Motors Corp. 15,450,000 618,927 Honda Motor Co., Ltd. 1,825,000 94,323 Interpublic Group of Companies, Inc.(1) 8,100,000 108,540 Knight-Ridder, Inc. 550,500 36,850 Kohl's Corp.(1) 2,600,000 127,842 Koninklijke Philips Electronics NV 2,250,000 59,455 Liberty Media Corp., Class A(1) 16,280,000 178,754 Limited Brands, Inc.(2) 20,749,400 477,651 Lowe's Companies, Inc. 20,368,300 1,173,010 May Department Stores Co. 7,800,000 229,320 McDonald's Corp. 1,600,000 51,296 Newell Rubbermaid Inc. 2,000,000 48,380 Target Corp. 21,100,000 1,095,723 Time Warner Inc.(1) 53,900,000 1,047,816 TJX Companies, Inc. 5,750,000 144,497 Toyota Motor Corp. 6,750,000 273,968 Viacom Inc., Class A 600,000 22,248 Viacom Inc., Class B, nonvoting 7,500,000 272,925 7,438,763 CONSUMER STAPLES -- 9.22% Albertson's, Inc. 976,500 23,319 Altria Group, Inc. 56,000,000 3,421,600 Anheuser-Busch Companies, Inc. 3,500,000 177,555 Avon Products, Inc. 9,020,000 349,074 Coca-Cola Co. 5,320,000 221,472 General Mills, Inc. 6,035,000 300,000 H.J. Heinz Co. 7,950,000 309,971 Kimberly-Clark Corp. 500,000 32,905 Kraft Foods Inc., Class A 2,100,000 74,781 PepsiCo, Inc. 11,000,000 574,200 Procter & Gamble Co. 2,660,000 146,513 Reynolds American Inc. 4,461,666 350,687 Sara Lee Corp. 8,816,100 212,821 Unilever NV (New York registered) 5,650,000 376,912 UST Inc. 2,000,000 96,220 Walgreen Co. 8,595,000 329,790 6,997,820 HEALTH CARE -- 5.13% Abbott Laboratories 4,600,000 214,590 Aetna Inc. 3,000,000 374,250 Anthem, Inc.(1) 2,900,000 333,500 Applera Corp. - Applied Biosystems Group 5,170,500 108,115 AstraZeneca PLC (ADR) 4,534,500 165,010 AstraZeneca PLC (Sweden) 5,909,500 214,421 AstraZeneca PLC (United Kingdom) 5,393,900 195,253 Becton, Dickinson and Co. 1,500,000 85,200 Bristol-Myers Squibb Co. 21,680,300 555,449 Eli Lilly and Co. 11,860,000 673,055 Guidant Corp. 1,500,000 108,150 HCA Inc. 5,000,000 199,800 Merck & Co., Inc. 4,500,000 144,630 Novartis AG (ADR) 256,556 12,966 Pfizer Inc 11,422,480 307,150 Schering-Plough Corp. 7,111,300 148,484 Wyeth 1,500,000 63,885 3,903,908 FINANCIALS -- 12.12% Allstate Corp. 8,050,000 416,346 American International Group, Inc. 8,713,900 572,242 Aon Corp. 2,183,800 52,105 Bank of America Corp. 25,010,600 1,175,248 Capital One Financial Corp. 3,000,000 252,630 Chubb Corp. 5,100,000 392,190 Citigroup Inc. 4,725,000 227,651 Fannie Mae 20,360,000 1,449,836 Freddie Mac 3,150,000 232,155 Hartford Financial Services Group, Inc. 2,700,000 187,137 HSBC Holdings PLC 30,697,111 517,071 HSBC Holdings PLC (ADR) 1,079,588 91,916 J.P. Morgan Chase & Co. 22,836,200 890,840 Lincoln National Corp. 800,000 37,344 Lloyds TSB Group PLC 58,000,000 525,718 MBNA Corp. 4,800,000 135,312 SAFECO Corp. 3,650,000 190,676 St. Paul Travelers Companies, Inc. 3,300,000 122,331 U.S. Bancorp 11,250,000 352,350 Washington Mutual, Inc. 15,400,000 651,112 Wells Fargo & Co. 7,630,000 474,205 XL Capital Ltd., Class A 3,250,000 252,363 9,198,778 INFORMATION TECHNOLOGY -- 9.42% Agilent Technologies, Inc.(1) 4,000,000 96,400 Altera Corp.(1) 3,000,000 62,100 Analog Devices, Inc. 4,250,000 156,910 Applied Materials, Inc.(1) 15,550,000 265,905 Automatic Data Processing, Inc. 5,375,000 238,381 Cisco Systems, Inc.(1) 23,928,800 461,826 Electronic Data Systems Corp. 7,600,000 175,560 EMC Corp.(1) 3,500,000 52,045 First Data Corp. 2,100,000 89,334 Hewlett-Packard Co. 32,450,000 680,477 Hitachi, Ltd. 30,000,000 207,319 Intel Corp. 640,000 14,970 International Business Machines Corp. 6,845,000 674,780 KLA-Tencor Corp.(1) 2,275,000 105,970 Linear Technology Corp. 5,560,000 215,506 Maxim Integrated Products, Inc. 6,100,000 258,579 Micron Technology, Inc.(1) 10,000,000 123,500 Microsoft Corp. 40,480,000 1,081,221 Motorola, Inc. 12,436,480 213,907 Sabre Holdings Corp., Class A 6,009,680 133,175 Samsung Electronics Co., Ltd. 200,000 87,045 Sanmina-SCI Corp.(1) 7,000,000 59,290 Solectron Corp.(1) 13,000,000 69,290 Sun Microsystems, Inc.(1) 70,510,000 379,344 Taiwan Semiconductor Manufacturing Co. Ltd. 157,883,129 251,200 Texas Instruments Inc. 32,320,200 795,723 Xilinx, Inc. 6,650,000 197,173 7,146,930 TELECOMMUNICATION SERVICES -- 7.46% ALLTEL Corp. 5,254,900 308,778 AT&T Corp. 17,897,500 341,126 BellSouth Corp. 30,800,000 855,932 Deutsche Telekom AG(1) 10,523,000 237,302 SBC Communications Inc. 61,450,000 1,583,567 Sprint Corp. - FON Group 20,885,000 518,992 Telefonica, SA 18,609,261 349,333 Verizon Communications Inc. 19,800,000 802,098 Vodafone Group PLC 73,500,000 198,948 Vodafone Group PLC (ADR) 17,000,000 465,460 5,661,536 UTILITIES -- 2.44% Ameren Corp. 2,000,000 100,280 American Electric Power Co., Inc. 5,250,000 180,285 Dominion Resources, Inc. 7,131,912 483,116 Duke Energy Corp. 8,000,000 202,640 Exelon Corp. 4,826,000 212,682 FirstEnergy Corp. 3,238,500 127,953 FPL Group, Inc. 2,000,000 149,500 Public Service Enterprise Group Inc. 5,000,000 258,850 Southern Co. 4,386,500 147,035 1,862,341 MISCELLANEOUS -- 0.72% Other common stocks in initial period of acquisition 553,733 TOTAL COMMON STOCKS (cost: $43,770,093,000) 63,479,186 Shares or principal CONVERTIBLE SECURITIES -- 0.23% amount CONSUMER DISCRETIONARY -- 0.01% Interpublic Group of Companies, Inc., Series A, 5.375% convertible preferred 2006 115,300 5,650 FINANCIALS -- 0.16% Capital One Financial Corp. 6.25% Upper DECS 2005 1,450,000 units 81,838 Chubb Corp. 7.00% convertible preferred 2005 1,400,000 units 41,426 123,264 INFORMATION TECHNOLOGY -- 0.02% Agilent Technologies, Inc. 3.00% convertible debentures 2021(3) $6,655,000 6,746 Agilent Technologies, Inc. 3.00% convertible debentures 2021(3),(4) $4,445,000 4,506 11,252 TELECOMMUNICATION SERVICES -- 0.04% ALLTEL Corp. 7.75% convertible preferred 2005 500,000 units 26,445 TOTAL CONVERTIBLE SECURITIES (cost: $148,176,000) 166,611 Principal amount Market value BONDS & NOTES -- 2.63% (000) (000) CONSUMER DISCRETIONARY -- 0.09% AOL Time Warner Inc. 5.625% 2005 $ 21,045 $ 21,240 General Motors Acceptance Corp. 6.875% 2011 50,000 51,308 72,548 TELECOMMUNICATION SERVICES -- 1.09% AT&T Corp. 9.05% 2011 247,575 286,259 AT&T Wireless Services, Inc. 7.50% 2007 50,000 54,337 AT&T Wireless Services, Inc. 8.125% 2012 30,000 36,317 Sprint Capital Corp. 7.90% 2005 202,710 204,914 Sprint Capital Corp. 8.375% 2012 197,500 240,920 822,747 MORTGAGE-BACKED OBLIGATIONS -- 0.72% Fannie Mae 6.00% 2017(5) 368,376 386,621 Fannie Mae 6.50% 2017(5) 149,698 158,902 545,523 U.S. TREASURY BONDS & NOTES -- 0.73% U.S. Treasury 1.50% 2005 555,000 554,567 TOTAL BONDS & NOTES (cost: $1,840,383,000) 1,995,385 SHORT-TERM SECURITIES -- 13.34% 3M Co. 2.14% due 1/7/2005 15,000 14,994 Abbott Laboratories Inc. 2.07%-2.25% due 1/4-2/8/2005(4) 133,400 133,230 American General Finance 2.30% due 2/22/2005 75,000 74,746 American Express Credit Corp. 2.14%-2.15% due 1/7-1/10/2005 150,000 149,919 Anheuser-Busch Cos. Inc. 2.07%-2.30% due 2/1-2/16/2005(4) 86,700 86,483 Bank of America Corp. 2.00%-2.24% due 1/5-3/14/2005 210,000 209,614 BellSouth Corp. 2.16%-2.28% due 1/21-1/26/2005(4) 140,400 140,188 CAFCO LLC 1.97%-2.35% due 1/10-2/23/2005(4) 167,700 167,400 Ciesco LLC 2.03% due 1/7/2005(4) 17,400 17,393 Citicorp 2.05% due 1/5/2005 30,000 29,991 Caterpillar Financial Services Corp. 2.07%-2.25% due 1/10-1/19/2005 45,000 44,962 Caterpillar Inc. 2.28% due 1/18/2005(4) 30,000 29,966 Clipper Receivables Co. LLC 2.31%-2.36% due 1/25-2/25/2005(4) 184,100 183,543 Coca-Cola Co. 2.06%-2.23% due 1/11-2/18/2005 199,500 199,069 Colgate-Palmolive Co. 2.25% due 1/21/2005(4) 50,000 49,934 DuPont (E.I.) de Nemours & Co. 2.23% due 2/11/2005 25,000 24,935 Edison Asset Securitization LLC 2.13%-2.34% due 1/14-2/18/2005(4) 100,000 99,814 General Electric Capital Corp. 2.11%-2.37% due 2/8-2/25/2005 84,900 84,642 General Electric Capital Services Inc. 2.07% due 1/28/2005 50,000 49,913 Eli Lilly and Co. 2.01%-2.27% due 1/11-2/1/2005(4) 130,000 129,809 Exxon Asset Management Co. 2.18%-2.28% due 1/18-1/25/2005(4) 100,000 99,866 Fannie Mae 2.15%-2.19% due 1/7-1/28/2005 98,900 98,792 FCAR Owner Trust I 2.03%-2.27% due 1/11-2/7/2005 165,000 164,802 Federal Farm Credit Banks 1.87%-2.36% due 1/4-3/23/2005 435,000 433,706 Federal Home Loan Bank 2.01%-2.407% due 1/5-3/28/2005 596,950 595,343 Freddie Mac 2.04%-2.43% due 1/12-3/22/2005 576,424 574,542 Gannett Co. 2.06%-2.26% due 1/13-1/28/2005(4) 141,900 141,714 Harley-Davidson Funding Corp. 2.32% due 2/28/2005(4) 11,900 11,854 Harvard University 2.33% due 3/16/2005 25,000 24,875 Hershey Foods Corp. 2.27% due 2/11/2005(4) 35,000 34,907 Household Finance Corp. 2.26% due 2/9/2005 50,000 49,870 IBM Capital Inc. 1.955% due 1/6/2005(4) 25,000 24,991 International Business Machines Corp. 2.21%-2.27% due 1/28-2/25/2005 75,000 74,771 International Bank for Reconstruction and Development 2.09%-2.24% due 1/14-3/1/2005 469,300 468,297 J.P. Morgan Chase & Co. 2.12% due 1/24/2005 70,000 69,895 Park Avenue Receivables Co. LLC 2.28%-2.34% due 1/12-1/28/2005(4) 103,502 103,368 Preferred Receivables Funding Corp. 2.30% due 1/20/2005(4) 20,000 19,974 Kimberly-Clark Worldwide Inc. 2.26% due 1/12/2005(4) 20,100 20,085 Medtronic Inc. 2.26% due 1/4/2005(4) 30,000 29,992 NetJets Inc. 2.13%-2.32% due 1/21-2/28/2005(4) 65,000 64,788 New Center Asset Trust 2.30% due 1/19/2005 36,000 35,956 New Center Asset Trust Plus 2.16%-2.39% due 1/21-2/18/2005 124,500 124,165 PepsiCo Inc. 2.20%-2.25% due 1/7-1/18/2005(4) 75,100 75,050 Pfizer Inc 2.02%-2.31% due 1/18-2/18/2005(4) 199,900 199,502 Private Export Funding Corp. 2.20% due 2/14/2005(4) 30,000 29,913 Procter & Gamble Co. 2.14%-2.37% due 1/21-3/14/2005(4) 225,000 224,436 SBC Communications Inc. 2.13%-2.36% due 1/24-2/15/2005(4) 139,815 139,475 Scripps (E.W.) Co. 2.33% due 2/23/2005(4) 15,000 14,946 Tenessee Valley Authority 2.09%-2.32% due 1/13-3/17/2005 278,000 277,246 Three Pillars Funding, LLC 2.24%-2.35% due 1/3-1/20/2005(4) 143,333 143,192 Triple-A One Funding Corp. 2.26%-2.34% due 1/5-1/21/2005(4) 121,789 121,673 U.S. Treasury Bills 1.70%-2.27% due 1/6-4/14/2005 3,172,700 3,163,572 United Parcel Service Inc. 2.27% due 2/3/2005 44,800 44,704 USAA Capital Corp. 2.16% due 2/15/2005 25,000 24,926 Variable Funding Capital Corp. 2.10%-2.29% due 1/10-1/21/2005(4) 194,200 193,994 Wal-Mart Stores Inc. 2.09%-2.19% due 1/11-1/19/2005(4) 76,800 76,725 Wells Fargo & Co. 2.12%-2.31% due 1/14-2/8/2005 207,800 207,795 TOTAL SHORT-TERM SECURITIES (cost: $10,123,975,000) 10,124,247 TOTAL INVESTMENT SECURITIES (cost: $55,882,627,000) 75,765,429 OTHER ASSETS LESS LIABILITIES 101,976 NET ASSETS $75,867,405
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. (1) Security did not produce income during the last 12 months. (2) Represents an affiliated company as defined under the Investment Company Act of 1940. (3) Coupon rate may change periodically. (4) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $2,812,711,000, which represented 3.70% of the net assets of the fund. (5) Pass-through securities backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturities are shorter than the stated maturities. ADR = American Depositary Receipts Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of The Investment Company of America: We have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the financial statements of The Investment Company of America (the "Fund") as of December 31, 2004, and for the year then ended and have issued our unqualified report thereon dated February 2, 2005 (which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR). Our audit included an audit of the Fund's investment portfolio (the "Portfolio") as of December 31, 2004 appearing in Item 6 of this Form N-CSR. This Portfolio is the responsibility of the Fund's management. Our responsibility is to express an opinion on this Portfolio based on our audit. In our opinion, the Portfolio referred to above, when read in conjunction with the financial statements of the Fund referred to above, presents fairly, in all material respects, the information set forth therein. PricewaterhouseCoopers LLP Los Angeles, California February 2, 2005 ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 9 - Submission of Matters to a Vote of Security Holders There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating committee comprised solely of persons who are not considered "interested persons" of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the Board's composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board. Such suggestions must be sent in writing to the nominating committee of the Registrant, c/o the Registrant's Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating committee. ITEM 10 - Controls and Procedures (a) The Registrant's Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant's disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. (b) There were no changes in the Registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 11 - Exhibits (a) The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. (b) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE INVESTMENT COMPANY OF AMERICA By /s/ R. Michael Shanahan R. Michael Shanahan, Chairman and CEO Date: March 10, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ R. Michael Shanahan R. Michael Shanahan, Chairman and CEO Date: March 10, 2005 By /s/ Thomas M. Rowland Thomas M. Rowland, Treasurer and PFO Date: March 10, 2005 EX-99.CODE ETH 2 coe.txt Code of Ethics The following Code of Ethics is in effect for the Registrant: The Fund has adopted the following standards in accordance with the requirements of Form-CSR adopted by the Securities and Exchange Commission pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 for the purpose of deterring wrongdoing and promoting: 1) honest and ethical conduct, including handling of actual or apparent conflicts of interest between personal and professional relationships; 2) full, fair accurate, timely and understandable disclosure in reports and documents that a fund files with or submits to the Commission and in other public communications made by the fund; 3) compliance with applicable governmental laws, rules and regulations; 4) the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and 5) accountability for adherence to the Code. These provisions shall apply to the principal executive officer or chief executive officer and treasurer ("Covered Officers") of the Fund. 1. It is the responsibility of Covered Officers to foster, by their words and actions, a corporate culture that encourages honest and ethical conduct, including the ethical resolution of, and appropriate disclosure of conflicts of interest. Covered Officers should work to assure a working environment that is characterized by respect for law and compliance with applicable rules and regulations. 2. Each Covered Officer must act in an honest and ethical manner while conducting the affairs of the Fund, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Duties of Covered Officers include: o Acting with integrity; o Adhering to a high standard of business ethics; o Not using personal influence or personal relationships to improperly influence investment decisions or financial reporting whereby the Covered Officer would benefit personally to the detriment of the Fund; 3. Each Covered Officer should act to promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with or submits to, the Securities and Exchange Commission and in other public communications made by the Fund. o Covered Officers should familiarize themselves with disclosure requirements applicable to the Fund and disclosure controls and procedures in place to meet these requirements. o Covered Officers must not knowingly misrepresent, or cause others to misrepresent facts about the Fund to others, including the Fund's auditors, independent directors, governmental regulators and self-regulatory organizations. 4. Any existing or potential violations of this Code should be reported to The Capital Group Companies' Personal Investing Committee. The Personal Investing Committee is authorized to investigate any such violations and report their findings to the Chairman of the Audit Committee of the Fund. The Chairman of the Audit Committee may report violations of the Code to the Board of Directors or other appropriate entity including the Audit Committee, if he or she believes such a reporting is appropriate. The Personal Investing Committee may also determine the appropriate sanction for any violations of this Code, including removal from office, provided that removal from office shall only be carried out with the approval of the Board of Directors. 5. Application of this Code is the responsibility of the Personal Investing Committee, which shall report periodically to the Chairman of the Audit Committee of the Fund. 6. Material amendments to these provisions must be ratified by a majority vote of the Board of Directors. As required by applicable rules, substantive amendments to the Code must be filed or appropriately disclosed. EX-99.CERT 3 cert302.txt [logo - American Funds (r)] The Investment Company of America 333 South Hope Street Los Angeles, California 90071-1406 Phone (213) 486 9200 CERTIFICATION I, R. Michael Shanahan, certify that: 1. I have reviewed this report on Form N-CSR of The Investment Company of America; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 10, 2005 /s/ R. Michael Shanahan R. Michael Shanahan, Chairman and Chief Executive Officer The Investment Company of America [logo - American Funds (r)] The Investment Company of America 333 South Hope Street Los Angeles, California 90071-1406 Phone (213) 486 9200 CERTIFICATION I, Thomas M. Rowland, certify that: 1. I have reviewed this report on Form N-CSR of The Investment Company of America; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 10, 2005 /s/ Thomas M. Rowland Thomas M. Rowland, Treasurer and Principal Financial Officer The Investment Company of America EX-99.906 4 cert906.txt [logo - American Funds (r) ] The Investment Company of America 333 South Hope Street Los Angeles, California 90071-1406 Phone (213) 486 9200 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 R. MICHAEL SHANAHAN, Chairman and CEO, and THOMAS M. ROWLAND, Treasurer of The Investment Company of America, (the "Registrant"), each certify to the best of his knowledge that: 1) The Registrant's periodic report on Form N-CSR for the period ended December 31, 2004 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Principal Executive Officer Principal Financial Officer THE INVESTMENT COMPANY OF AMERICA THE INVESTMENT COMPANY OF AMERICA /s/ R. Michael Shanahan /s/ Thomas M. Rowland R. Michael Shanahan, Chairman Thomas M. Rowland, Treasurer Date: March 10, 2005 Date: March 10, 2005 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to THE INVESTMENT COMPANY OF AMERICA and will be retained by THE INVESTMENT COMPANY OF AMERICA and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----