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Investment Co of America – ‘N-CSR’ for 6/30/04

On:  Wednesday, 9/8/04, at 2:29pm ET   ·   Effective:  9/8/04   ·   For:  6/30/04   ·   Accession #:  51931-4-14   ·   File #:  811-00116

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  As Of                Filer                Filing    For·On·As Docs:Size

 9/08/04  Investment Co of America          N-CSR       6/30/04    3:85K

Certified Annual Shareholder Report of a Management Investment Company   —   Form N-CSR
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-CSR       Certified Annual Shareholder Report of a              36±   180K 
                          Management Investment Company                          
 3: EX-99.906   Miscellaneous Exhibit                                  1      7K 
 2: EX-99.CERT  Miscellaneous Exhibit                                  2     17K 


N-CSR   —   Certified Annual Shareholder Report of a Management Investment Company
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 1 -. Reports to Stockholders
"Item 2 -. Code of Ethics
"Item 3 -. Audit Committee Financial Expert
"Item 4 -. Principal Accountant Fees and Services
"Item 5 -. Audit Committee of Listed Registrants
"Item 6 -. Reserved
"Item 7 -. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
3Item 9 -. Submission of Matters to a Vote of Security Holders
"Item 10 -. Controls and Procedures
"Item 11 -. Exhibits
N-CSR1st “Page” of 4TOCTopPreviousNextBottomJust 1st
 

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: June 30, 2004 Vincent P. Corti Capital Research and Management Company 333 South Hope Street Los Angeles, California 90071 (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)
N-CSR2nd “Page” of 4TOC1stPreviousNextBottomJust 2nd
ITEM 1 - Reports to Stockholders [logo - American Funds(R)] The right choice for the long term(R) ICA THE INVESTMENT COMPANY OF AMERICA [black and white photo of a ticker-tape parade] Semi-annual report for the six months ended June 30, 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. 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 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. Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2004: [Download Table] 1 year 5 years 10 years Class A shares Reflecting 5.75% maximum sales charge +11.08% +1.34% +11.87% The fund's 30-day yield for Class A shares as of July 31, 2004, reflecting the 5.75% maximum sales charge and calculated in accordance with the Securities and Exchange Commission formula, was 1.66%. Results for other share classes can be found on page 3. Please see the back cover for important information about other share classes. 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. Investing outside the United States is subject to additional risks, such as currency fluctuations and political instability, which are detailed in the fund's prospectus. FELLOW SHAREHOLDERS: [black and white photo of a ticker-tape parade] The U.S. stock market experienced modest gains during the first half of 2004, as the effects of an economic rebound and strong corporate earnings were tempered by fears of inflation and rising interest rates. For the six months ended June 30, 2004, the Investment Company of America posted a return of 2.1%, assuming the reinvestment of dividends totaling 26 cents a share paid in March and June. Its benchmark, the unmanaged Standard & Poor's 500 Composite Index, which tracks relatively large companies listed primarily on U.S. exchanges, gained 3.4%. Over longer periods, the fund's returns generally have surpassed those of the overall U.S. stock market. During the past five-year period ended June 30, 2004, which encompasses the previous market high and subsequent downturn, ICA earned an average annual total return of 2.5%, compared with a -2.2% return for the S&P 500. Over the past 10-year period ending June 30, 2004, ICA earned an average annual total return of 12.5%, compared with 11.8% for the S&P 500. A RISING ECONOMIC TIDE LIFTS MANY BOATS The strength of the economic recovery, which follows several years of cost-cutting at many companies, has helped to boost corporate profit margins to their highest level in 30 years. The trend has helped a number of the fund's holdings. Also helping the fund were its significant holdings in oil companies, which benefited from tight supplies and rising prices. 2004 RESULTS AT A GLANCE For the six months ended June 30 (with dividends reinvested) [Enlarge/Download Table] Standard & Lipper Poor's 500 Growth & Income ICA Composite Index Funds Average* Income return +0.90% +0.83% n/a Capital return +1.18% +2.61% n/a Total return +2.08% +3.44% +3.08% *Average of 1,268 growth-and-income funds. Lipper averages do not reflect the effects of sales charges. Other industries struggled during the period. Technology companies enjoyed strong capital appreciation throughout much of 2003; however, valuations rose quicker than earnings warranted and the sector lagged the market for the past six months. Many pharmaceutical companies also lagged the market due to greater competition from generic drugs as patents begin to expire as well as broad pricing pressures. Despite these issues, we continue to remain optimistic about the long-term potential of selected companies in these industries. PROCEEDING WITH CAUTION While strong economic growth is certainly positive for investors, it has also created some headwinds for the stock market going forward. Inflationary pressures in some industries are becoming a concern, as prices for oil, food and other consumer goods rise. In addition, companies are likely to face increased labor costs as they add workers to their payrolls and confront demands for increases in wages. Fear of inflation has also prompted the Federal Reserve to raise the federal funds rate for the first time in four years with more increases expected. In this environment, we continue to focus on companies with strong fundamentals and reasonable valuations that are continuing to improve their earnings. Many of the fund's top 10 holdings, including Altria Group, SBC Communications and Dow Chemical, fit these criteria. A LONG-TERM OUTLOOK We remain cautiously optimistic as we enter the second half of 2004. The prospect of higher inflation and interest rates could cause short-term volatility in the stock market. In addition, the uncertainty of the coming U.S. presidential election, fears of potential terrorism and the hostilities in Iraq could add to the volatility. While there are always macro-economic and political concerns, ICA's long-term focus, intensive company-by-company research and attention to risk have produced solid long-term returns for shareholders with a similar long-term perspective. As always, we appreciate your continued support. Cordially, /s/ R. Michael Shanahan /s/ James F. Rothenberg R. Michael Shanahan James F. Rothenberg Chairman of the Board President August 9, 2004 For current information about the fund, visit americanfunds.com. 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. [Enlarge/Download Table] RETURNS FOR PERIODS ENDED JUNE 30, 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 +11.98% +1.48%(1) Not reflecting CDSC +16.98% +1.90%(1) CLASS C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +15.85% +2.30%(2) Not reflecting CDSC +16.85% +2.30%(2) CLASS F SHARES(3) Not reflecting annual asset-based fee charged by sponsoring firm +17.76% +3.09%(2) CLASS 529-A SHARES Reflecting 5.75% maximum sales charge +10.99% +2.55%(4) Not reflecting maximum sales charge +17.77% +5.14%(4) CLASS 529-B SHARES Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase +11.71% +2.60%(4) Not reflecting CDSC +16.71% +4.21%(4) CLASS 529-C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +15.73% +4.90%(5) Not reflecting CDSC +16.73% +4.90%(5) CLASS 529-E SHARES(3) +17.35% +3.86%(6) CLASS 529-F SHARES(3) Not reflecting annual asset-based fee charged by sponsoring firm +17.64% +15.01%(7) (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. INVESTMENT PORTFOLIO, June 30, 2004 unaudited [Download Table] Percent of net LARGEST INVESTMENT CATEGORIES assets Capital goods 8.95 % Energy 8.15 Food, beverage & Tobacco 7.94 Percent of net LARGEST INDUSTRY HOLDINGS assets Oil & Gas 6.98 % Beverages & tabacco 5.99 Diversified telecommunication service 5.14 Pharmaceuticals 4.65 Commercial banks 3.94 Percent of net LARGEST EQUITY HOLDINGS assets Altria Group 3.99 % SBC Communications 1.95 Bank of America 1.93 Fannie Mae 1.89 Dow Chemical 1.60 Lowe's Companies 1.53 Royal Dutch Petroleum 1.49 "Shell" Transport and Trading Time Warner 1.45 Tyco 1.42 Caterpillar 1.40 [Enlarge/Download Table] Market Shares or value EQUITY SECURITIES - 81.24% principal amount (000) (common and preferred stocks and convertible debentures) ENERGY ENERGY EQUIPMENT & SERVICES - 1.17% Baker Hughes Inc. 10,125,000 $381,206 Schlumberger Ltd. 6,936,600 440,543 OIL & GAS - 6.98% Burlington Resources Inc. 18,100,000 654,858 ChevronTexaco Corp. 8,581,600 807,614 ConocoPhillips 1,400,000 106,806 El Paso Corp. 6,740,900 53,118 ENI SpA 36,380,000 722,277 Exxon Mobil Corp. 8,221,500 365,117 Marathon Oil Corp. 11,050,000 418,132 Murphy Oil Corp. 2,050,000 151,085 Occidental Petroleum Corp. 1,000,000 48,410 Royal Dutch Petroleum Co. (New York registered) 13,970,000 721,830 "Shell" Transport and Trading Company, PLC 2,900,000 21,278 "Shell" Transport and Trading Company, PLC (ADR) (New York registered) 6,750,000 301,725 TOTAL SA 900,000 171,577 Unocal Corp. 8,690,000 330,220 Williams Companies, Inc. 9.00% FELINE PACS convertible preferred 2005 2,000,000 units 27,560 5,723,356 MATERIALS CHEMICALS - 2.21% Air Products and Chemicals, Inc. 700,000 36,715 Dow Chemical Co. 27,582,300 1,122,600 E.I. du Pont de Nemours and Co. 2,950,000 131,039 Rohm and Haas Co. 6,300,000 261,954 METALS & MINING - 2.41% Alcan Inc. 2,500,000 103,500 Alcoa Inc. 12,046,400 397,893 Alumina Ltd. 11,057,600 40,542 Barrick Gold Corp. 9,250,000 182,687 BHP Billiton Ltd. 9,412,655 81,898 Newmont Mining Corp. 9,500,000 368,220 Phelps Dodge Corp. (1) 800,000 62,008 Placer Dome Inc. 10,000,000 166,400 Rio Tinto PLC 12,000,000 288,628 PAPER & FOREST PRODUCTS - 1.60% Georgia-Pacific Corp., Georgia-Pacific Group 8,599,298 318,002 International Paper Co. 7,797,235 348,536 MeadWestvaco Corp. 3,800,000 111,682 Weyerhaeuser Co. 5,475,000 345,582 4,367,886 CAPITAL GOODS AEROSPACE & DEFENSE - 3.09% Boeing Co. 13,000,000 664,170 General Dynamics Corp. 3,372,900 334,929 Lockheed Martin Corp. 5,300,000 276,024 Northrop Grumman Corp. 4,680,000 251,316 Raytheon Co. 14,446,000 516,733 United Technologies Corp. 1,400,000 128,072 CONSTRUCTION & ENGINEERING - 0.06% Fluor Corp. 824,300 39,294 ELECTRICAL EQUIPMENT - 0.21% Cooper Industries, Ltd., Class A 2,500,000 148,525 INDUSTRIAL CONGLOMERATES - 2.67% 3M Co. 1,200,000 108,012 General Electric Co. 23,750,000 769,500 Tyco International Ltd. 30,100,000 997,514 MACHINERY - 2.92% Caterpillar Inc. 12,300,000 977,112 Cummins Inc. 1,700,000 106,250 Deere & Co. 8,200,000 575,148 Illinois Tool Works Inc. 2,500,000 239,725 Parker Hannifin Corp. 2,500,000 148,650 6,280,974 COMMERCIAL SERVICES & SUPPLIES COMMERCIAL SERVICES & SUPPLIES - 0.11% Pitney Bowes Inc. 1,000,000 44,250 Waste Management, Inc. 1,100,000 33,715 77,965 TRANSPORTATION AIR FREIGHT & LOGISTICS - 0.66% FedEx Corp. 5,670,000 463,182 AIRLINES - 0.22% Delta Air Lines, Inc. (1) 942,100 6,708 Southwest Airlines Co. 9,000,000 150,930 ROAD & RAIL - 0.50% Burlington Northern Santa Fe Corp. 9,200,000 322,644 Norfolk Southern Corp. 1,113,200 29,522 972,986 AUTOMOBILES & COMPONENTS AUTO COMPONENTS - 0.26% Delphi Corp. 17,000,000 181,560 AUTOMOBILES - 1.72% DaimlerChrysler AG 4,500,000 210,228 Ford Motor Co. 2,500,000 39,125 General Motors Corp. 15,450,000 719,816 Honda Motor Co., Ltd. 1,825,000 87,803 Toyota Motor Corp. 3,750,000 151,605 1,390,137 CONSUMER DURABLES & APPAREL HOUSEHOLD DURABLES - 0.07% Newell Rubbermaid Inc. 2,000,000 47,000 HOTELS, RESTAURANTS & LEISURE HOTELS, RESTAURANTS & LEISURE - 0.65% Carnival Corp., units 8,797,100 413,464 McDonald's Corp. 1,600,000 41,600 455,064 MEDIA MEDIA - 3.11% Comcast Corp., Class A (1) 14,107,650 395,437 Comcast Corp., Class A, special nonvoting stock (1) 3,000,000 82,830 Dow Jones & Co., Inc. 1,887,000 85,104 Interpublic Group of Companies, Inc. (1) 8,100,000 111,213 Interpublic Group of Companies, Inc., Series A, 5.375% convertible preferred 2006 115,300 5,884 Knight-Ridder, Inc. 550,500 39,636 Liberty Media Corp., Class A (1) 16,280,000 146,357 News Corp. Ltd., preferred (ADR) 202,563 6,660 Time Warner Inc. (1) 57,900,000 1,017,882 Viacom Inc., Class A 600,000 21,810 Viacom Inc., Class B, nonvoting 7,500,000 267,900 2,180,713 RETAILING INTERNET & CATALOG RETAIL - 0.13% eBay Inc. (1) 1,000,000 91,950 MULTILINE RETAIL - 1.68% Dollar General Corp. 2,250,000 44,010 Kohl's Corp. (1) 3,000,000 126,840 May Department Stores Co. 4,800,000 131,952 Target Corp. 20,600,000 874,882 SPECIALTY RETAIL - 2.08% Limited Brands, Inc. 20,749,400 388,014 Lowe's Companies, Inc. 20,368,300 1,070,354 2,728,002 FOOD & STAPLES RETAILING FOOD & STAPLES RETAILING - 0.50% Albertson's, Inc. 1,537,500 40,805 Walgreen Co. 8,595,000 311,225 352,030 FOOD, BEVERAGE & TOBACCO BEVERAGES & TOBACCO- 5.99% Altria Group, Inc. 56,000,000 2,802,800 Anheuser-Busch Companies, Inc. 3,500,000 189,000 Coca-Cola Co. 3,750,000 189,300 PepsiCo, Inc. 12,000,000 646,560 R.J. Reynolds Tobacco Holdings, Inc. (2) 4,461,666 301,564 UST Inc. 2,000,000 72,000 FOOD PRODUCTS - 1.95% General Mills, Inc. 6,035,000 286,844 H.J. Heinz Co. 7,950,000 311,640 Kraft Foods Inc., Class A 2,100,000 66,528 Sara Lee Corp. 9,816,100 225,672 Unilever NV (New York registered) 7,000,000 479,570 5,571,478 HOUSEHOLD & PERSONAL PRODUCTS HOUSEHOLD PRODUCTS - 0.25% Kimberly-Clark Corp. 500,000 32,940 Procter & Gamble Co. 2,660,000 144,810 PERSONAL PRODUCTS - 0.53% Avon Products, Inc. 8,020,000 370,043 547,793 HEALTH CARE EQUIPMENT & SERVICES HEALTH CARE EQUIPMENT & SUPPLIES - 0.27% Applera Corp. - Applied Biosystems Group 5,170,500 112,458 Becton, Dickinson and Co. 1,500,000 77,700 HEALTH CARE PROVIDERS & SERVICES - 1.02% Aetna Inc. 2,000,000 170,000 Cardinal Health, Inc. 3,050,000 213,653 HCA Inc. 8,037,700 334,288 908,099 PHARMACEUTICALS & BIOTECHNOLOGY PHARMACEUTICALS - 4.65% Abbott Laboratories 2,800,000 114,128 AstraZeneca PLC (ADR) 5,444,200 248,473 AstraZeneca PLC (Sweden) 6,127,000 278,419 AstraZeneca PLC (United Kingdom) 5,800,900 260,321 Bristol-Myers Squibb Co. 31,657,600 775,611 Eli Lilly and Co. 12,510,000 874,574 Merck & Co., Inc. 2,200,000 104,500 Novartis AG 1,000,000 44,115 Novartis AG (ADR) 256,556 11,417 Pfizer Inc 12,672,480 434,413 Schering-Plough Corp. 3,611,300 66,737 Wyeth 1,500,000 54,240 3,266,948 BANKS COMMERCIAL BANKS - 3.94% Bank of America Corp. (acquired FleetBoston Financial Corp.) 16,023,517 1,355,910 BANK ONE CORP. 2,535,000 129,285 HSBC Holdings PLC 30,697,111 456,588 HSBC Holdings PLC (ADR) 1,079,588 80,872 U.S. Bancorp 11,250,000 310,050 Wells Fargo & Co. 7,630,000 436,665 THRIFTS & MORTGAGE FINANCE - 2.69% Fannie Mae 18,610,000 1,328,010 Freddie Mac 3,150,000 199,395 Washington Mutual, Inc. 9,293,200 359,089 4,655,864 DIVERSIFIED FINANCIALS CAPITAL MARKETS - 1.15% J.P. Morgan Chase & Co. 20,900,000 810,293 CONSUMER FINANCE - 0.58% Capital One Financial Corp. 3,000,000 205,140 Capital One Financial Corp. 6.25% Upper DECS 2005 1,450,000 units 73,138 MBNA Corp. 4,800,000 123,792 DIVERSIFIED FINANCIAL SERVICES - 0.15% Citigroup Inc. 2,225,000 103,463 1,315,826 INSURANCE INSURANCE - 3.44% Allstate Corp. 8,050,000 374,728 American International Group, Inc. 11,063,900 788,635 Aon Corp. 2,183,800 62,173 Chubb Corp. 5,100,000 347,718 Chubb Corp. 7.00% convertible preferred 2005 1,400,000 units 38,780 Hartford Financial Services Group, Inc. 2,700,000 185,598 Lincoln National Corp. 1,700,000 80,325 SAFECO Corp. 3,650,000 160,600 St. Paul Travelers Companies, Inc. (formerly St. Paul Companies, Inc.) 3,300,000 133,782 XL Capital Ltd., Class A 3,250,000 245,245 2,417,584 SOFTWARE & SERVICES IT SERVICES - 0.86% Automatic Data Processing, Inc. 5,375,000 225,105 Electronic Data Systems Corp. 11,000,000 210,650 Sabre Holdings Corp., Class A 6,009,680 166,528 SOFTWARE - 1.09% Microsoft Corp. 26,830,000 766,265 1,368,548 TECHNOLOGY HARDWARE & EQUIPMENT COMMUNICATIONS EQUIPMENT - 1.37% Cisco Systems, Inc. (1) 27,928,800 661,913 Motorola, Inc. 9,850,000 179,763 Motorola, Inc. 7.00% convertible preferred 2004 2,400,000 units 118,512 COMPUTERS & PERIPHERALS - 2.25% EMC Corp. (1) 3,500,000 39,900 Hewlett-Packard Co. 26,950,000 568,645 International Business Machines Corp. 7,095,000 625,424 Sun Microsystems, Inc. (1) 79,500,000 345,030 ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.94% Agilent Technologies, Inc. (1) 4,000,000 117,120 Agilent Technologies, Inc. 3.00% convertible debentures 2021 (3) $ 6,655,000 7,038 Agilent Technologies, Inc. 3.00% convertible debentures 2021 (3) (4) $ 4,445,000 4,701 Hitachi, Ltd. 30,000,000 206,073 Sanmina-SCI Corp. (1) 11,850,000 107,835 Solectron Corp. (1) 33,328,408 215,635 3,197,589 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.83% Altera Corp. (1) 2,500,000 55,550 Applied Materials, Inc. (1) 11,350,000 222,687 Intel Corp. 640,000 17,664 KLA-Tencor Corp. (1) 1,200,000 59,256 Linear Technology Corp. 3,550,000 140,119 Maxim Integrated Products, Inc. 4,912,200 257,498 Micron Technology, Inc. (1) 12,500,000 191,375 Samsung Electronics Co., Ltd. 200,000 82,597 Taiwan Semiconductor Manufacturing Co. Ltd. 148,883,129 214,654 Texas Instruments Inc. 24,500,000 592,410 Xilinx, Inc. 4,423,600 147,350 1,981,160 TELECOMMUNICATION SERVICES DIVERSIFIED TELECOMMUNICATION SERVICES - 5.14% ALLTEL Corp. 5,300,000 268,286 ALLTEL Corp. 7.75% convertible preferred 2005 500,000 units 25,080 AT&T Corp. 17,897,500 261,840 BT Group PLC 35,000,000 126,021 Deutsche Telekom AG (1) 12,046,000 211,621 SBC Communications Inc. 56,450,000 1,368,913 Sprint Corp. - FON Group 29,635,000 521,576 Telefonica, SA 17,294,261 255,638 Verizon Communications Inc. 15,800,000 571,802 WIRELESS TELECOMMUNICATION SERVICES - 0.71% AT&T Wireless Services, Inc. (1) 10,482,700 150,112 Sprint Corp. 7.125% convertible preferred 2004 5,400,000 units 50,976 Vodafone Group PLC 40,000,000 87,611 Vodafone Group PLC (ADR) 9,500,000 209,950 4,109,426 UTILITIES ELECTRIC UTILITIES - 0.89% Ameren Corp. 2,307,000 99,109 American Electric Power Co., Inc. 5,250,000 168,000 Exelon Corp. 3,000,000 99,870 FPL Group, Inc. 2,000,000 127,900 Southern Co. 4,386,500 127,866 MULTI-UTILITIES & UNREGULATED POWER - 1.29% Dominion Resources, Inc. 7,131,912 449,881 Duke Energy Corp. 12,500,000 253,625 Public Service Enterprise Group Inc. 5,000,000 200,150 1,526,401 MISCELLANEOUS - 2.25% Other equity securities in initial period of acquisition 1,577,468 TOTAL EQUITY SECURITIES (cost: $41,495,333,000) 57,020,297 Market Principal amount value CORPORATE BONDS & NOTES - 1.21% (000) (000) AUTOMOBILES & COMPONENTS AUTOMOBILES - 0.07% General Motors Acceptance Corp. 6.875% 2011 $ 50,000 $51,337 MEDIA MEDIA - 0.03% AOL Time Warner Inc. 5.625% 2005 21,045 21,565 TELECOMMUNICATION SERVICES TELECOMMUNICATION SERVICES - 0.98% AT&T Corp. 8.05% 2011 (3) 247,575 254,542 Sprint Capital Corp.: 7.90% 2005 202,710 210,165 8.375% 2012 197,500 227,322 WIRELESS TELECOMMUNICATION SERVICES - 0.13% AT&T Wireless Services, Inc.: 7.50% 2007 50,000 54,858 8.125% 2012 30,000 34,736 781,623 TOTAL CORPORATE BONDS & NOTES (cost: $762,693,000) 854,525 Market Principal amount value U.S. TREASURY & AGENCY OBLIGATIONS - 2.53% (000) (000) FEDERAL AGENCY PASS-THROUGH OBLIGATIONS - 0.93% Fannie Mae: (5) 6.00% 2017 440,184 459,354 6.50% 2017 183,443 194,119 653,473 U.S. TREASURY NOTES & BONDS U.S. TREASURY NOTES & BONDS - 1.60% 1.875% September 2004 565,000 565,706 1.50% February 2005 555,000 553,873 1,119,579 TOTAL U.S. TREASURY & AGENCY OBLIGATIONS (cost: $1,746,934,000) 1,773,052 Market Principal amount value SHORT-TERM SECURITIES - 14.86% (000) (000) U.S. TREASURIES - 7.09% U.S. Treasury Bills 0.90%-1.43% due 7/1-10/21/2004 4,982,100 4,973,863 CORPORATE SHORT-TERM NOTES - 5.14% American Express Credit Corp. 1.02%-1.26% due 7/2-8/6/2004 125,000 124,906 American General Finance Corp. 1.12%-1.27% due 8/12-9/7/2004 80,000 79,824 Anheuser-Busch Cos. Inc. 1.03% due 7/7/2004 (4) 50,000 49,990 Bank of America Corp. 1.04%-1.36% due 7/12-8/30/2004 150,000 149,799 BellSouth Corp. 1.08% due 7/16/2004 (4) 50,000 49,976 Caterpillar Financial Services Corp. 1.11%-1.32% due 7/28-8/24/2004 100,000 99,851 ChevronTexaco Corp. 0.99%-1.20% due 7/9-8/17/2004 150,000 149,848 Citicorp 1.08%-1.23% due 7/20-8/4/2004 200,000 199,807 Clipper Receivables Company, LLC 1.09%-1.30% due 7/12-7/27/2004 (4) 100,000 99,920 Coca-Cola Co. 1.02%-1.30% due 7/6-8/27/2004 150,000 149,793 Colgate-Palmolive Co. 1.00% due 7/9/2004 (4) 25,000 24,994 DuPont (E.I.) de Nemours & Co. 1.03%-1.25% due 7/13-8/18/2004 150,000 149,837 Eli Lilly and Co. 1.50% due 10/8/2004 (4) 35,000 34,849 Exxon Asset Management Co. 1.00% due 7/6/2004 (4) 75,000 74,987 Exxon Project Investment Corp. 1.00% due 7/19/2004 (4) 50,000 49,974 FCAR Owner Trust I 1.10%-1.31% due 7/16-8/16/2004 100,000 99,892 Gannett Co. 1.13%-1.17% due 7/16-7/20/2004 (4) 100,000 99,941 General Electric Capital Corp. 1.07%-1.32% due 7/9-8/26/2004 200,000 199,797 Hershey Foods Corp. 1.15% due 7/30/2004 (4) 25,000 24,976 Household Finance Corp. 1.07%-1.10% due 7/6-7/7/2004 55,700 55,689 IBM Capital Inc. 1.20% due 8/5/2004 (4) 28,000 27,966 IBM Credit Corp. 1.04%-1.20% due 7/12-8/4/2004 110,000 109,915 J.P. Morgan Chase & Co. 1.04%-1.48% due 7/7-9/24/2004 200,000 199,658 Kimberly-Clark Worldwide Inc. 1.13% due 7/12/2004 (4) 30,000 29,989 Netjets Inc. 1.10%-1.29% due 7/12-8/24/2004 (4) 71,800 71,671 New Center Asset Trust 1.06%-1.12% due 7/9-7/27/2004 145,000 144,923 Pfizer Inc 1.04%-1.34% due 7/12-8/25/2004 (4) 200,000 199,778 Pitney Bowes Inc. 1.10% due 7/12/2004 (4) 45,000 44,983 Private Export Funding Corp. 1.53%-1.70% due 10/14-11/30/2004 (4) 41,000 40,752 Procter & Gamble Co. 1.05%-1.22% due 7/6-8/30/2004 (4) 113,000 112,871 Scripps (E.W.) Co. 1.37% due 9/1/2004 (4) 10,000 9,974 Three Pillars Funding, LLC 1.10%-1.22% due 7/9-7/19/2004 (4) 105,000 104,956 Triple-A One Funding Corp. 1.09%-1.20% due 7/9-7/23/2004 (4) 124,625 124,569 Variable Funding Capital Corp. 1.11%-1.17% due 7/12-7/20/2004 (4) 150,000 149,929 Verizon Network Funding Corp. 1.07%-1.27% due 7/7-8/11/2004 145,000 144,895 Wal-Mart Stores Inc. 1.19%-1.26% due 7/13-8/3/2004 (4) 125,000 124,896 FEDERAL AGENCY DISCOUNT NOTES - 2.20% Fannie Mae 1.06%-1.16% due 7/21-7/23/2004 101,000 100,932 Federal Farm Credit Banks 0.98%-1.39% due 7/13-9/23/2004 218,300 217,786 Federal Home Loan Bank 1.01%-1.30% due 7/9-8/27/2004 300,000 299,542 Freddie Mac 1.20%-1.28% due 8/20-8/31/2004 290,000 289,400 International Bank for Reconstruction and Development 1.00%-1.22% due 7/14-8/27/2004 330,000 329,627 Tenessee Valley Authority 1.07%-1.40% due 7/22-9/16/2004 310,500 309,619 CERTIFICATES OF DEPOSIT - 0.43% State Street Bank & Trust 1.04%-1.10% due 7/12-7/23/2004 100,000 99,999 Wells Fargo & Co. 1.26%-1.30% due 7/28-8/11/2004 200,000 200,000 TOTAL SHORT-TERM SECURITIES (cost: $10,431,907,000) 10,431,143 TOTAL INVESTMENT SECURITIES (cost: $54,436,867,000) 70,079,017 NEW TAIWANESE DOLLAR (cost: $7,296,000) NT$250,968 7,476 Other assets less liabilities 106,571 NET ASSETS $70,193,064 (1) Security did not produce income during the last 12 months. (2) The fund owns 5.23% of the outstanding voting securities of R.J. Reynolds Tobacco Holdings, Inc. and thus is considered an affiliate of this company 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. (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 See Notes to Financial Statements EQUITY SECURITIES APPEARING IN THE PORTFOLIO SINCE DECEMBER 31, 2003 Cardinal Health DaimlerChrysler DuPont Exelon Kraft Foods Occidental Petroleum Procter & Gamble U.S. Bancorp EQUITY SECURITIES ELIMINATED FROM THE PORTFOLIO SINCE DECEMBER 31, 2003 Antena 3 Television CIGNA Computer Sciences Honeywell International Hughes Electronics Inco NIKE Nokia Siemens Telefonos de Mexico TXU Wachovia FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES unaudited at June 30, 2004 (dollars and shares in thousands, except per-share amounts) [Download Table] ASSETS: Investment securities at market: Unaffiliated issuers (cost: $54,300,216) $69,777,453 Affiliated issuers (cost: $136,651) 301,564 $70,079,017 Cash denominated in non-U.S. currencies (cost: $7,296) 7,476 Cash 287 Receivables for: Sales of investments 84,288 Sales of fund's shares 91,467 Dividends and interest 133,750 309,505 70,396,285 LIABILITIES: Payables for: Purchases of investments 105,294 Repurchases of fund's shares 57,939 Investment advisory services 13,984 Services provided by affiliates 21,782 Deferred Directors' and Advisory Board compensation 2,765 Other fees and expenses 1,457 203,221 NET ASSETS AT JUNE 30, 2004 $70,193,064 NET ASSETS CONSIST OF: Capital paid in on shares of capital stock $53,688,119 Undistributed net investment income 190,090 Undistributed net realized gain 672,595 Net unrealized appreciation 15,642,260 NET ASSETS AT JUNE 30, 2004 $70,193,064 [Enlarge/Download Table] Authorized shares Net asset of capital stock - value per $.001 par value Net assets Shares outstanding share (1) Class A 2,500,000 $60,578,778 2,075,715 $29.18 Class B 250,000 3,339,357 114,811 29.09 Class C 250,000 2,366,837 81,502 29.04 Class F 250,000 1,112,040 38,139 29.16 Class 529-A 325,000 494,514 16,955 29.17 Class 529-B 75,000 126,677 4,351 29.12 Class 529-C 150,000 151,214 5,192 29.12 Class 529-E 75,000 20,992 721 29.13 Class 529-F 75,000 3,831 132 29.15 Class R-1 75,000 18,705 643 29.11 Class R-2 100,000 280,310 9,629 29.11 Class R-3 300,000 376,530 12,921 29.14 Class R-4 75,000 75,184 2,578 29.16 Class R-5 150,000 1,248,095 42,768 29.18 (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 $30.96 and $30.95, respectively. See Notes to Financial Statements STATEMENT OF OPERATIONS unaudited for the six months ended June 30, 2004 (dollars in thousands) [Download Table] INVESTMENT INCOME: Income: Dividends (net of non-U.S. withholding tax of $18,135; also includes $8,477 from affiliates) $678,460 Interest (net of non-U.S. withholding tax of $2) 129,782 $808,242 Fees and expenses: Investment advisory services 82,429 Distribution services 99,510 Transfer agent services 26,826 Administrative services 5,529 Reports to shareholders 1,266 Registration statement and prospectus 1,045 Postage, stationery and supplies 3,107 Directors' and Advisory Board compensation 506 Auditing and legal 122 Custodian 1,093 State and local taxes 541 Other 144 Total expenses before reimbursement 222,118 Reimbursement of expenses 254 221,864 Net investment income 586,378 NET REALIZED GAIN AND UNREALIZED APPRECIATION ON INVESTMENTS AND NON-U.S. CURRENCY: Net realized gain (loss) on: Investments 673,802 Non-U.S. currency transactions (160) 673,642 Net unrealized appreciation (depreciation) on: Investments 129,270 Non-U.S. currency translations (374) 128,896 Net realized gain and unrealized appreciation on investments and non-U.S. currency 802,538 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,388,916 See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) [Enlarge/Download Table] Six months Year ended ended June 30, December 31, 2004* 2003 OPERATIONS: Net investment income $586,378 $1,142,439 Net realized gain on investments and non-U.S. currency transactions 673,642 500,253 Net unrealized appreciation on investments and non-U.S. currency translations 128,896 11,791,841 Net increase in net assets resulting from operations 1,388,916 13,434,533 DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS: Dividends from net investment income and currency gains (591,743) (1,107,178) Distributions from net realized gain on investments - (477,739) Total dividends and distributions paid to shareholders (591,743) (1,584,917) CAPITAL SHARE TRANSACTIONS 2,861,797 4,923,852 TOTAL INCREASE IN NET ASSETS 3,658,970 16,773,468 NET ASSETS: Beginning of period 66,534,094 49,760,626 End of period (including undistributed net investment income: $190,090 and $195,455, respectively) $70,193,064 $66,534,094 *Unaudited See Notes to Financial Statements NOTES TO FINANCIAL STATEMENTS unaudited 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 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: [Enlarge/Download Table] --------------------------------------------------------------------------------------------------------- Share class Initial sales charge Contingent deferred sales Conversion feature charge upon redemption --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- 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 at prices for securities of comparable maturity, quality and type. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. 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 their 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 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. 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; deferred expenses; and cost of investments sold. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund. As of June 30, 2004, the cost of investment securities and cash denominated in non-U.S. currencies for federal income tax purposes was $54,440,766,000. As of June 30, 2004, the components of distributable earnings on a tax basis were as follows: [Download Table] (dollars in thousands) Undistributed net investment income and currency gains $ 202,500 Undistributed short-term capital gains 185,206 Undistributed long-term capital gains 478,715 Gross unrealized appreciation on investment securities 16,605,947 Gross unrealized depreciation on investment securities (960,220) The tax character of distributions paid to shareholders was as follows (dollars in thousands): [Enlarge/Download Table] Six months ended June 30, 2004 Distributions from Distributions from ordinary income long-term capital gains Total distributions paid Share class Class A $ 534,092 - $ 534,092 Class B 16,546 - 16,546 Class C 10,814 - 10,814 Class F 8,770 - 8,770 Class 529-A 3,818 - 3,818 Class 529-B 495 - 495 Class 529-C 595 - 595 Class 529-E 131 - 131 Class 529-F 28 - 28 Class R-1 80 - 80 Class R-2 1,235 - 1,235 Class R-3 2,207 - 2,207 Class R-4 567 - 567 Class R-5 12,365 - 12,365 Total $ 591,743 - $ 591,743 Year ended December 31, 2003 Distributions from Distributions from ordinary income long-term capital gains Total 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. For the six months ended June 30, 2004, the investment advisory services fee was $82,429,000, which was equivalent to an annualized rate of 0.242% of average 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 on the following page. 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 June 30, 2004, there were no unreimbursed expenses subject to reimbursement for classes A and 529-A. [Enlarge/Download Table] ------------------------------------------------ ----------------------------- ----------------------------- 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 six months ended June 30, 2004, CRMC voluntarily agreed to pay a portion of these fees for classes R-1 and R-2. 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. Administrative services fees are presented gross of any payments made by CRMC. Expenses under the agreements described on the previous page for the six months ended June 30, 2004, were as follows (dollars in thousands): [Enlarge/Download Table] -------------------------------------------------------------------------------------------------------------- Share class Distribution Transfer agent Administrative services services services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- CRMC Transfer agent Commonwealth of administrative services Virginia services administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class A $67,968 $25,300 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class B 15,872 1,526 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class C 10,955 Included $1,643 $249 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class F 1,259 Included 755 67 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-A 346 Included 329 28 $ 219 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-B 569 Included 85 26 57 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-C 670 Included 101 24 67 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-E 47 Included 14 1 9 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-F 4 Included 3 - * 2 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-1 82 Included 12 5 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-2 893 Included 179 572 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-3 767 Included 230 194 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-4 78 Included 47 2 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-5 Not applicable Included 611 (2) Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Total $99,510 $26,826 $4,009 $1,166 $354 -------------------------------------------------------------------------------------------------------------- * 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 in the accompanying financial statements includes $365,000 in current fees (either paid in cash or deferred) and a net increase of $141,000 in the value of the deferred amounts. AFFILIATED OFFICERS AND DIRECTORS - 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 June 30, 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 June 30, 2004, the net asset value of Class A shares would not have unchanged. 6. CAPITAL SHARE TRANSACTIONS Capital share transactions in the fund were as follows (dollars and shares in thousands): [Enlarge/Download Table] Reinvestments of Share class Sales(1) dividends and distributions Amount Shares Amount Shares SIX MONTHS ENDED JUNE 30, 2004 Class A $ 3,925,556 134,808 $ 494,831 16,948 Class B 409,451 14,108 15,950 548 Class C 477,746 16,484 10,292 354 Class F 290,166 9,973 7,946 273 Class 529-A 114,484 3,936 3,818 131 Class 529-B 26,405 910 495 17 Class 529-C 37,006 1,274 595 20 Class 529-E 4,686 162 131 5 Class 529-F 1,037 36 28 1 Class R-1 5,704 197 80 3 Class R-2 112,519 3,879 1,235 42 Class R-3 170,475 5,857 2,205 76 Class R-4 39,276 1,352 567 19 Class R-5 82,693 2,838 12,245 420 Total net increase (decrease) $ 5,697,204 195,814 $ 550,418 18,857 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 SIX MONTHS ENDED JUNE 30, 2004 Class A $ (2,893,296) (99,515) $ 1,527,091 52,241 Class B (132,677) (4,583) 292,724 10,073 Class C (129,759) (4,491) 358,279 12,347 Class F (94,207) (3,243) 203,905 7,003 Class 529-A (8,466) (292) 109,836 3,775 Class 529-B (1,502) (52) 25,398 875 Class 529-C (2,653) (91) 34,948 1,203 Class 529-E (252) (9) 4,565 158 Class 529-F (52) (2) 1,013 35 Class R-1 (1,428) (49) 4,356 151 Class R-2 (23,679) (818) 90,075 3,103 Class R-3 (29,938) (1,029) 142,742 4,904 Class R-4 (5,531) (191) 34,312 1,180 Class R-5 (62,385) (2,154) 32,553 1,104 Total net increase (decrease) $ (3,385,825) (116,519) $ 2,861,797 98,152 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. RESTRICTED SECURITIES The fund has invested in certain securities for which resale may be limited to qualified buyers or which are otherwise restricted. These securities are identified in the investment portfolio. As of June 30, 2004, the total value of restricted securities was $1,556,642,000, which represented 2.22% of the net assets of the fund. 8. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $5,600,177,000 and $5,842,199,000, respectively, during the six months ended June 30, 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 six months ended June 30, 2004, the custodian fee of $1,093,000 included $26,000 that was offset by this reduction, rather than paid in cash. [Enlarge/Download Table] 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: Six months ended 6/30/2004 (5) $28.84 $.26 $.34 $.60 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 Year ended 12/31/1999 31.07 .49 4.45 4.94 CLASS B: Six months ended 6/30/2004 (5) 28.74 .15 .35 .50 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: Six months ended 6/30/2004 (5) 28.70 .14 .34 .48 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: Six months ended 6/30/2004 (5) 28.81 .25 .35 .60 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: Six months ended 6/30/2004 (5) 28.82 .25 .35 .60 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: Six months ended 6/30/2004 (5) 28.78 .12 .34 .46 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: Six months ended 6/30/2004 (5) 28.78 .12 .34 .46 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: Six months ended 6/30/2004 (5) 28.78 .20 .35 .55 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: Six months ended 6/30/2004 (5) 28.81 .23 .34 .57 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: Six months ended 6/30/2004 (5) $28.77 $.14 $.34 $.48 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: Six months ended 6/30/2004 (5) 28.77 .14 .34 .48 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: Six months ended 6/30/2004 (5) 28.80 .20 .34 .54 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: Six months ended 6/30/2004 (5) 28.82 .25 .34 .59 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: Six months ended 6/30/2004 (5) 28.84 .29 .34 .63 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: Six months ended 6/30/2004 (5) $(.26) $ - $(.26) $29.18 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 Year ended 12/31/1999 (.51) (3.04) (3.55) 32.46 CLASS B: Six months ended 6/30/2004 (5) (.15) - (.15) 29.09 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: Six months ended 6/30/2004 (5) (.14) - (.14) 29.04 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: Six months ended 6/30/2004 (5) (.25) - (.25) 29.16 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: Six months ended 6/30/2004 (5) (.25) - (.25) 29.17 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: Six months ended 6/30/2004 (5) (.12) - (.12) 29.12 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: Six months ended 6/30/2004 (5) (.12) - (.12) 29.12 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: Six months ended 6/30/2004 (5) (.20) - (.20) 29.13 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: Six months ended 6/30/2004 (5) (.23) - (.23) 29.15 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 CLASS R-1: income) gains) distributions of period Six months ended 6/30/2004 (5) Year ended 12/31/2003 $(.14) $ - $(.14) $29.11 Period from 6/6/2002 to 12/31/2002 (.33) (.21) (.54) 28.77 CLASS R-2: (.30) (.35) (.65) 23.46 Six months ended 6/30/2004 (5) Year ended 12/31/2003 (.14) - (.14) 29.11 Period from 5/21/2002 to 12/31/2002 (.33) (.21) (.54) 28.77 CLASS R-3: (.31) (.35) (.66) 23.46 Six months ended 6/30/2004 (5) Year ended 12/31/2003 (.20) - (.20) 29.14 Period from 6/4/2002 to 12/31/2002 (.42) (.21) (.63) 28.80 CLASS R-4: (.34) (.35) (.69) 23.47 Six months ended 6/30/2004 (5) Year ended 12/31/2003 (.25) - (.25) 29.16 Period from 5/28/2002 to 12/31/2002 (.50) (.21) (.71) 28.82 CLASS R-5: (.39) (.35) (.74) 23.47 Six months ended 6/30/2004 (5) Year ended 12/31/2003 (.29) - (.29) 29.18 Period from 5/15/2002 to 12/31/2002 (.58) (.21) (.79) 28.84 (.43) (.35) (.78) 23.48 [Enlarge/Download Table] FINANCIAL HIGHLIGHTS (1) Ratio of expenses Ratio of expenses Ratio of Net assets, to average net to average net net income Total end of period assets before assets after to average return (3) (in millions) reimbursement reimbursement (4) net assets CLASS A: Six months ended 6/30/2004 (5) 2.08% $60,579 .58% (6) .58% (6) 1.79% (6) 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 Year ended 12/31/1999 16.55 56,095 .55 .55 1.54 CLASS B: Six months ended 6/30/2004 (5) 1.74 3,339 1.36 (6) 1.36 (6) 1.01 (6) 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 (6) 1.34 (6) 1.06 (6) CLASS C: Six months ended 6/30/2004 (5) 1.67 2,367 1.44 (6) 1.44 (6) .94 (6) 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 (6) 1.52 (6) .38 (6) CLASS F: Six months ended 6/30/2004 (5) 2.07 1,112 .67 (6) .67 (6) 1.71 (6) 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 (6) .72 (6) 1.17 (6) CLASS 529-A: Six months ended 6/30/2004 (5) 2.07 494 .69 (6) .69 (6) 1.70 (6) 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 (6) .71 (6) 2.17 (6) CLASS 529-B: Six months ended 6/30/2004 (5) 1.61 127 1.56 (6) 1.56 (6) .83 (6) 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 (6) 1.58 (6) 1.30 (6) CLASS 529-C: Six months ended 6/30/2004 (5) 1.61 151 1.55 (6) 1.55 (6) .84 (6) 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 (6) 1.57 (6) 1.32 (6) CLASS 529-E: Six months ended 6/30/2004 (5) 1.90 21 1.03 (6) 1.03 (6) 1.36 (6) 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 (6) 1.03 (6) 1.90 (6) CLASS 529-F: Six months ended 6/30/2004 (5) 1.99 4 .78 (6) .78 (6) 1.62 (6) Year ended 12/31/2003 26.05 3 .79 .79 1.88 Period from 9/16/2002 to 12/31/2002 (.14) - (7) .23 .23 .68 FINANCIAL HIGHLIGHTS (1) (continued) Ratio of expenses Ratio of expenses Ratio of Net assets, to average net to average net net income Total end of period assets before assets after to average return (in millions) reimbursement reimbursement (4) net assets CLASS R-1: Six months ended 6/30/2004 (5) 1.66% $19 1.47% (6) 1.46%(6) .93% (6) 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 (6) 1.47 (6) 1.49 (6) CLASS R-2: Six months ended 6/30/2004 (5) 1.68 280 1.64 (6) 1.43 (6) .98 (6) 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 (6) 1.43 (6) 1.61 (6) CLASS R-3: Six months ended 6/30/2004 (5) 1.86 377 1.04 (6) 1.04 (6) 1.37 (6) 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 (6) 1.05 (6) 2.00 (6) CLASS R-4: Six months ended 6/30/2004 (5) 2.05 75 .67 (6) .67 (6) 1.74 (6) 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 (6) .69 (6) 2.25 (6) CLASS R-5: Six months ended 6/30/2004 (5) 2.19 1,248 .36 (6) .36 (6) 2.01 (6) 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 (6) .37 (6) 2.56 (6) [Enlarge/Download Table] Six months ended June 30, Year ended December 31 2004(5) 2003 2002 2001 2000 1999 Portfolio turnover rate for all classes of shares 9% 24% 27% 22% 25% 28% (1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. (2) Year ended 1999 is based on shares outstanding on the last day of the year; all other periods are 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 and payments from CRMC. During the start-up period for the retirement plan share classes (except Class R-5), CRMC voluntarily agreed to pay a portion of the fees related to transfer agent services. (5) Unaudited. (6) Annualized. (7) Amount less than $1 million. See Notes to Financial Statements [logo - American Funds(R)] The right choice for the long term(R) 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 AUDITORS 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 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. 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. Annualized 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 annualized 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 annualized expenses (by 0.09 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. 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, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY 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 UPON REQUEST, FREE OF CHARGE, BY CALLING AMERICAN FUNDS SERVICE COMPANY, VISITING THE AMERICAN FUNDS WEBSITE OR ACCESSING THE U.S. SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV. This report is for the information of shareholders of The Investment Company of America, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2004, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter. THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust Lit. No. MFGESR-904-0804P Litho in USA BBC/L/8087-S1939 Printed on recycled paper ITEM 2 - Code of Ethics Not applicable for filing of Semiannual Reports to Shareholders. ITEM 3 - Audit Committee Financial Expert Not applicable for filing of Semiannual Reports to Shareholders. ITEM 4 - Principal Accountant Fees and Services Not applicable for filing of Semiannual Reports to Shareholders. ITEM 5 - Audit Committee of Listed Registrants Not applicable. ITEM 6 - Reserved 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 - Reserved
N-CSR3rd “Page” of 4TOC1stPreviousNextBottomJust 3rd
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. 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 officers providing the certifications in this report in accordance with rule 30a-2 under the Investment Company Act of 1940 have concluded, based on their evaluation of the Registrant's disclosure controls and procedures (as such term is defined in such rule), 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 last fiscal half-year (the Registrant's second fiscal half-year in the case of an annual 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 - not applicable for filing of Semiannual Reports to Shareholders. (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.
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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: September 7, 2004 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: September 7, 2004 By /s/ Thomas M. Rowland Thomas M. Rowland, Treasurer Date: September 7, 2004

Dates Referenced Herein   and   Documents Incorporated by Reference

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This ‘N-CSR’ Filing    Date First  Last      Other Filings
12/31/041224F-2NT,  N-CSR,  NSAR-B
9/30/042N-Q
Filed on / Effective on:9/8/04
9/7/044
8/9/042
7/31/042
For Period End:6/30/0412N-PX,  NSAR-A
12/31/03224F-2NT,  N-CSR,  NSAR-B
9/16/022
3/1/022
2/19/022
2/15/022485BPOS
3/15/012485BPOS
3/15/002
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