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Investment Co of America – ‘N-CSR’ for 12/31/03

On:  Wednesday, 3/10/04, at 11:57am ET   ·   Effective:  3/10/04   ·   For:  12/31/03   ·   Accession #:  51931-4-6   ·   File #:  811-00116

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

 3/10/04  Investment Co of America          N-CSR      12/31/03    4:158K

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              72±   317K 
                          Management Investment Company                          
 4: EX-99.906   Miscellaneous Exhibit                                  1      7K 
 3: EX-99.CERT  Miscellaneous Exhibit                                  3±    16K 
 2: EX-99.CODE ETH  Miscellaneous Exhibit                              2±     9K 


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

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


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, 2003 Date of reporting period: December 31, 2003 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) ITEM 1 - Reports to Stockholders [logo - American Funds(R)] The right choice for the long term(R) ICA THE INVESTMENT COMPANY OF AMERICA ICA at 70: A look back at seven decades [black and white photo of a ticker tape parade] ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2003 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. [Download Table] Contents Letter to shareholders 1 Growth over time 3 ICA at 70: A look back at seven decades 6 The Lovelace legacy 14 The portfolio counselors 14 Investment portfolio 15 Directors and officers 33 The American Funds family back cover ABOUT THE COVER Even during the Great Depression, Americans took time to celebrate -- like this ticker-tape parade on New York's Broadway. Please see page 4 for Class A share average annual total returns with relevant sales charges deducted. Results for other share classes can be found on page 32. Please see the inside back cover for important information about other share classes. THE FUND'S 30-DAY YIELD FOR CLASS A SHARES AS OF JANUARY 31, 2004, REFLECTING THE 5.75% MAXIMUM SALES CHARGE AND CALCULATED IN ACCORDANCE WITH THE SECURITIES AND EXCHANGE COMMISSION FORMULA, WAS 1.49%. FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN. BECAUSE SHARE PRICES MAY DECLINE, THE VALUE OF YOUR HOLDINGS MAY DECREASE. 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. OF COURSE, 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. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT AMERICANFUNDS.COM. FELLOW SHAREHOLDERS: [small black and white photo of a ticker tape parade] This report marks the 70th anniversary of the Investment Company of America. When it began operations in December 1933, it had $4.7 million in assets. Today, ICA has 3.5 million shareholders and $66.5 billion in assets, making it the third-biggest mutual fund in the United States. The story of the fund's growth over the past seven decades is remarkable, we think, and beginning on page 6, we'll tell it. First though, we focus on a much shorter time frame -- the past 12 months. [Begin Sidebar] [Enlarge/Download Table] 2003 Results at a glance Year ended December 31, 2003 (with dividends and capital gain distributions reinvested) Standard & Poor's 500 ICA Composite Index Income return +2.23% +1.99% Capital return +24.07% +26.68% Total return +26.30% +28.67% Dividends and capital gain distribution paid in 2003 Per share Payment date Income dividends $0.13 Mar. 4 $0.13 June 9 $0.13 Sept. 8 $0.13 Dec. 17 $0.52 Capital gain distribution $0.21 Dec. 17 Expense ratios and portfolio turnover rates* Year ended December 31, 2003 ICA Industry average+ Expense ratio 0.59% 1.34% Portfolio turnover rate 24% 72% * The expense ratio is the annual percentage of net assets used to pay fund expenses. The portfolio turnover rate is a measure of how often securities are bought and sold by a fund. + Growth & Income Funds, as measured by Lipper Inc. [End Sidebar] For the year ending December 31, 2003, ICA posted a total return of 26.3%. Its benchmark, the unmanaged Standard & Poor's 500 Composite Index, gained 28.7%. ICA's return assumes reinvestment of quarterly dividends totaling 52 cents a share and a capital gain distribution of 21 cents a share, which was paid in December 2003. The fund's income return amounted to 2.2%, versus the S&P 500's 2.0%. ICA's gains were broad: of the 172 stocks held throughout the entire fiscal year, 156 of them rose in price, including nine of our ten biggest holdings. In short, it was a very strong year -- and following the worst stock market decline in several decades, a most welcome one. ICA is a conservative fund that pays close attention to risk. Thus, during the first few months of 2003, when war jitters and economic uncertainty dominated the headlines, we had sizable positions in cash and bonds. So we're not particularly surprised that we slightly trailed our benchmark last year, as we sometimes do during a stock market recovery. Even so, a broader time horizon shows the value of our cautious approach. During the bear market that lasted from March 24, 2000 to October 9, 2002, the S&P's total return was -47.4%; ICA's was -28.3%. The comparison is even more stark over a longer period of time. From the stock market low of August 31, 1998 to December 31, 2003 -- a period covering its dramatic rise, fall and subsequent recovery -- the S&P 500 generated a total return of 25.4%, while ICA gained 56.9%. ECONOMIC OUTLOOK The U.S. economy was robust in 2003, particularly between July and September, when it grew at an annualized rate of 8.2%, its strongest quarter in 20 years. Driving this expansion were several factors. Federal tax cuts and continued mortgage refinancing gave consumers money to spend; business spending grew at its fastest rate in several years; and corporate America was helped by the falling dollar, which is making U.S. exports more competitive. In fact, the dollar's drop -- 20% against the Euro and nearly 10% against the yen -- has been its most substantial since 1987. This has been a boon for companies that ICA typically invests in -- large U.S.-based multinationals that earn much of their revenue abroad. [begin sidebar] Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. Results shown are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. [end sidebar] [Begin Sidebar] [Enlarge/Download Table] Rise, fall and recovery: ICA vs. the S&P 500 Rise Fall Recovery Entire period 8/31/98-3/24/00 3/24/00-10/9/02 10/9/02-12/31/03 8/31/98-12/31/03 S&P 500 +62.7% -47.4% +46.4% +25.4% ICA +52.6% -28.3% +43.3% +56.9% [End Sidebar] With 2004 underway, the economy continues to expand. Demand for durable goods and capital goods is strong; closely watched indicators like business inventories, freight shipping and consumer confidence remain good. Although mortgage rates have generally moved higher off their June low, they remain quite attractive. However, since ICA is sensitive to risk as well as return, we feel compelled to mention several reasons for caution. With short-term interest rates at 1% -- the lowest level since 1958 -- and a growing budget deficit, the federal government is unlikely to do more to help the economy. Meanwhile, the U.S. Federal Reserve says consumer debt, mortgage foreclosures and personal bankruptcies stand at all-time highs; worrisome for anyone expecting consumer spending -- two-thirds of the U.S. economy -- to remain vigorous. THE IMPORTANCE OF DIVIDENDS Take a moment to unfold the "mountain chart" at the end of this letter. As you can see, since its inception seven decades ago (January 1, 1934 through December 31, 2003), ICA's average annual total return has been 12.9%, compared to the S&P's 11.4%. Take away the value of reinvested dividends and ICA's average annual return would be much lower: 9.5%. (Fund results in this example reflect payment of the 5.75% maximum sales charge on the original $10,000 investment.) Thus, reinvested dividends have helped us achieve superior long-term returns. This helps explain why we have always sought long-term growth of capital and income with a greater emphasis on future dividends than on current income. Meanwhile, the outlook for dividends seems brighter now than it has in many years. Once taxed as ordinary income, at levels as high as 38.6%, most dividends are now taxed at a maximum rate of 15%. In response, many companies are now returning more profits to investors. After falling for many years, Standard & Poor's says the number of companies in the S&P 500 that pay dividends is now increasing, with 21 companies initiating them in 2003 -- the highest number of new payers since 1979. Of all 370 companies in the S&P that distribute dividends, the average payout increased 26% last year. EMPHASIS ON RESEARCH, INSISTENCE ON INTEGRITY When Capital Research and Management Company -- today investment adviser to the 29 American Funds -- assumed management of ICA 70 years ago, its founder, Jonathan Bell Lovelace, had a simple philosophy: Conduct thorough investment research and buy securities at prices that are reasonable relative to the company's future prospects, and always be guided by honesty and integrity. Seven decades later, much has changed. There have been 12 U.S. presidents, several wars, countless recessions and many bull and bear markets. The country's population has doubled. We cross oceans in a matter of hours. We have witnessed breathtaking advances in science, medicine and technology. We live much longer -- though life itself is faster paced and increasingly complex. Yet some things, fortunately, remain the same. In an era tainted by financial scandal and impropriety, Jonathan Bell Lovelace's simple, uncomplicated ethos continues to act as a beacon, guiding us on our never-ending quest for the best long-term investments for ICA. Like him, we eschew trends in favor of good old-fashioned legwork: visiting companies, talking with management, carefully scrutinizing balance sheets and above all, putting the interests of our shareholders first. As our feature story explains, it has worked for 70 years. We're dedicated to making it work for 70 more. Thank you for your commitment to long-term investing. We will report to you again in six months. Cordially, /s/ r. Michael Shanahan /s/ James F. Rothenberg R. Michael Shanahan James F. Rothenberg Chairman of the Board President February 6, 2004 [end sidebar] Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. 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. [end sidebar] THE VALUE OF A LONG-TERM PERSPECTIVE (1934-2003) This chart illustrates a hypothetical $10,000 investment in The Investment Company of America over the past 70 years, from January 1, 1934 through December 31, 2003, showing the high, low and closing values for each year. Fund figures reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net amount invested was $9,425.* 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 $48,891,609, compared with $18,777,238 in the S&P 500. Over the same period, $10,000 in a savings account would have grown to $194,885 with all interest compounded.+ You can use this table to estimate how the value of your own holdings has grown. Let's say, for example, that you have been reinvesting all of your dividends and want to know how your investment has done since the end of 1993. At that time, the value of the investment illustrated here was $15.7 million. Since then, it has more than tripled, to $48.9 million. Thus, in the same period, the value of your 1993 investment -- regardless of size -- has also more than tripled. * The maximum initial sales charge was 8.5% prior to July 1, 1988. As outlined in the prospectus, the sales charge is reduced for investments of $25,000 or more. There is no sales charge for reinvested dividends or capital gain distributions. + Based on figures from the U.S. League of Savings Institutions and the Federal Reserve Board, reflecting all kinds of savings deposits (maximum allowable interest rates imposed by law until 1983). Savings accounts are guaranteed; the fund is not. AVERAGE ANNUAL TOTAL RETURNS For periods ended December 31, 2003 [Download Table] CLASS A SHARES* reflecting 5.75% maximum sales charge 1 year +19.1% 5 years +3.3% 10 years +11.3% *Results for other share classes can be found on page 32. AVERAGE ANNUAL RETURNS FOR 70 YEARS (1/1/34-12/31/03) reflecting 5.75% maximum sales charge: [Download Table] Income return 3.2% Capital return 9.7% Total return 12.9% Value added by reinvestment of dividends [Begin Mountain Chart] ICA with dividends reinvested $48,891,609(1) S&P 500 with dividends reinvested $18,777,238 ICA not including dividends $ 5,713,492(2) original investment $ 10,000 [Begin Mountain Chart] [Download Table] Year ended ICA with dividends ICA not including December 31,2003 reinvested(1) dividends (2) original investment $ 10,000 $10,000 1/1/1934 9,400 9,400 3/31/1934 12,000 12,000 9/30/1934 9,700 9,700 12/31/1934 11,800 11,800 3/31/1935 11,100 11,100 12/31/1935 21,600 21,600 4/30/1936 21,700 21,700 12/31/1936 31,600 31,000 3/31/1937 34,900 34,200 12/31/1937 19,400 18,300 3/31/1938 16,400 15,500 12/31/1938 24,800 23,200 5/17/1939 19,200 18,000 10/26/1939 26,400 24,400 12/31/1939 25,000 22,900 4/9/1940 26,100 23,800 5/22/1940 18,300 16,700 12/31/1940 24,400 21,500 4/22/1941 20,200 17,600 7/28/1941 25,500 21,900 12/31/1941 22,600 18,800 4/28/1942 20,700 17,100 11/17/1942 25,600 20,500 12/31/1942 26,400 20,900 1/6/1943 26,400 20,900 6/5/1943 34,600 27,200 12/31/1943 35,000 26,900 1/3/1944 34,900 26,800 12/11/1944 42,800 32,100 12/31/1944 43,200 32,100 12/1/1945 58,200 42,500 12/31/1945 59,100 42,900 5/28/1946 69,300 50,200 10/9/1946 51,700 37,000 12/31/1946 57,700 40,700 2/8/1947 59,700 42,100 5/19/1947 47,600 33,300 12/31/1947 58,200 39,300 2/11/1948 51,200 34,600 6/14/1948 64,500 43,200 12/31/1948 58,400 37,700 6/13/1949 51,900 33,200 12/31/1949 63,900 39,400 7/31/1950 61,500 37,300 11/24/1950 75,500 45,300 12/31/1950 76,600 45,200 1/31/1951 77,500 45,700 9/13/1951 90,600 52,500 12/31/1951 90,300 51,200 5/1/1952 87,700 49,300 11/26/1952 98,400 54,200 12/31/1952 101,300 55,300 1/5/1953 101,500 55,400 9/14/1953 90,500 48,000 12/31/1953 101,700 53,400 1/11/1954 102,200 53,600 11/26/1954 151,000 77,300 12/31/1954 158,900 80,800 1/6/1955 153,700 78,200 12/5/1955 197,400 98,400 12/31/1955 199,200 98,500 1/23/1956 188,600 93,300 8/2/1956 228,300 111,600 12/31/1956 220,600 106,300 7/10/1957 234,700 111,600 12/23/1957 191,200 89,400 12/31/1957 194,400 90,900 1/2/1958 196,500 91,900 12/31/1958 281,500 128,000 2/9/1959 276,300 125,700 8/3/1959 317,800 143,000 12/31/1959 321,400 142,900 1/5/1960 322,600 143,400 3/8/1960 294,400 130,100 12/31/1960 336,000 145,600 1/3/1961 333,400 144,500 11/29/1961 416,600 177,700 12/31/1961 413,600 175,400 1/3/1962 412,800 175,100 6/25/1962 302,200 126,600 12/31/1962 358,800 148,200 3/1/1963 363,000 149,000 11/13/1963 435,300 176,700 12/31/1963 440,900 177,800 1/2/1964 443,300 178,800 11/18/1964 524,000 208,200 12/31/1964 512,600 202,300 6/28/1965 515,300 201,400 11/30/1965 636,800 247,800 12/31/1965 650,700 251,600 2/11/1966 695,600 268,900 10/7/1966 554,900 211,100 12/31/1966 657,100 248,000 1/4/1967 653,900 246,800 9/25/1967 848,300 315,000 12/31/1967 846,900 312,500 3/5/1968 767,400 281,400 11/29/1968 1,016,100 368,900 12/31/1968 990,600 356,600 2/6/1969 998,000 359,200 12/17/1969 861,500 301,400 12/31/1969 884,800 309,600 1/5/1970 900,900 315,200 5/26/1970 671,600 232,800 12/31/1970 908,000 307,400 1/4/1971 899,300 304,500 4/28/1971 1,041,800 349,600 12/31/1971 1,062,700 349,700 1/3/1972 1,061,100 349,200 12/11/1972 1,236,400 399,200 12/31/1972 1,231,100 394,700 1/5/1973 1,240,700 397,800 12/13/1973 969,400 300,900 12/31/1973 1,024,100 317,900 3/13/1974 1,078,700 331,700 10/3/1974 753,600 227,500 12/31/1974 840,300 245,500 1/2/1975 860,300 251,400 7/15/1975 1,192,600 342,300 12/31/1975 1,137,700 317,700 1/2/1976 1,146,300 320,100 12/15/1976 1,445,000 393,400 12/31/1976 1,474,400 398,100 1/3/1977 1,468,300 396,500 10/25/1977 1,332,000 350,400 12/31/1977 1,436,400 374,300 3/1/1978 1,346,200 347,500 9/11/1978 1,868,500 475,300 12/31/1978 1,647,500 414,400 2/27/1979 1,616,200 406,600 9/21/1979 1,993,900 489,100 12/31/1979 1,963,300 475,700 4/21/1980 1,749,600 419,500 11/18/1989 2,440,100 574,000 12/31/1980 2,380,200 552,200 4/27/1981 2,540,300 583,100 9/25/1981 2,250,800 505,100 12/31/1981 2,401,100 530,900 8/12/1982 2,283,500 487,000 12/7/1982 3,273,700 683,800 12/31/1982 3,212,000 670,600 1/24/1983 3,149,700 657,600 10/10/1983 3,954,400 800,700 12/31/1983 3,859,700 774,500 1/5/1984 3,938,600 790,300 7/24/1984 3,487,700 684,700 12/31/1984 4,117,200 792,000 1/8/1985 4,042,300 777,600 12/31/1985 5,491,900 1,017,900 1/10/1986 5,378,100 996,800 8/26/1986 6,822,100 1,244,500 12/31/1986 6,685,700 1,200,500 8/25/1987 8,965,000 1,587,100 12/4/1987 6,490,200 1,124,100 12/31/1987 7,049,200 1,220,900 1/20/1988 6,898,300 1,194,800 10/20/1988 8,057,700 1,361,600 12/31/1988 7,898,300 1,327,400 1/3/1989 7,952,300 1,321,200 10/9/1989 10,570,700 1,717,600 12/31/1989 10,338,600 1,652,800 7/16/1990 11,034,400 1,738,600 9/24/1990 9,349,200 1,461,700 12/31/1990 10,409,000 1,598,800 1/9/1991 9,964,600 1,530,600 12/31/1991 13,171,900 1,969,900 4/8/1992 12,725,800 1,891,000 12/8/1992 14,053,700 2,062,300 12/31/1992 14,092,300 2,052,200 12/31/1993 15,729,400 2,234,200 2/2/1994 16,250,300 2,308,200 12/31/1994 15,753,900 2,180,600 12/13/1995 20,601,500 2,800,100 12/31/1995 20,578,700 2,779,700 1/10/1996 20,131,200 2,719,200 11/29/1996 24,949,000 3,317,300 12/31/1996 24,560,600 3,247,900 1/2/1997 24,449,100 3,233,100 10/7/1997 32,201,100 4,203,600 12/31/1997 31,881,200 4,142,700 1/9/1998 30,538,200 3,968,200 11/27/1998 38,263,600 4,912,000 12/31/1998 39,193,500 5,008,200 7/16/1999 44,986,500 5,706,500 12/14/1999 43,402,300 5,461,600 12/31/1999 45,682,200 5,748,500 6/2/2000 48,297,100 6,033,200 12/20/2000 45,816,400 5,674,900 12/31/2000 47,435,200 5,875,500 2/1/2001 48,641,700 6,024,900 9/21/2001 39,682,300 4,850,900 12/31/2001 45,258,600 5,507,500 3/19/2002 46,842,700 5,674,200 10/9/2002 34,117,000 4,091,000 12/31/2002 38,709,100 4,616,900 3/11/2003 35,519,000 4,211,800 12/31/2003 48,891,600 5,713,500 Year ended S&P 500 with dividends December 31,2003 reinvested original investment $ 10,000 1/1/1934 10,000 2/6/1934 11,700 7/26/1934 8,500 12/31/1934 9,900 3/14/1935 8,400 11/19/1935 14,500 12/31/1935 14,600 11/9/1936 19,800 12/31/1936 19,500 3/6/1937 21,200 11/24/1937 12,000 12/31/1937 12,700 3/31/1938 10,300 11/9/1938 17,200 12/31/1938 16,600 4/8/1939 12,900 12/31/1939 16,500 1/3/1940 16,900 6/10/1940 12,200 12/31/1940 14,900 1/10/1941 15,300 12/31/1941 13,200 4/28/1942 11,400 12/31/1942 15,900 7/14/1943 21,100 12/31/1943 20,000 2/7/1944 19,800 12/31/1944 23,900 12/10/1945 33,100 12/31/1945 32,600 5/29/1946 36,500 10/9/1946 27,300 12/31/1946 30,000 2/8/1947 31,800 5/17/1947 27,200 12/31/1947 31,700 2/14/1948 28,800 6/15/1948 36,100 12/31/1948 33,400 6/13/1949 30,600 12/31/1949 39,700 1/14/1950 39,400 12/31/1950 52,300 10/15/1951 63,800 12/31/1951 64,800 2/20/1952 63,200 12/31/1952 76,700 9/14/1953 68,000 12/31/1953 76,000 12/31/1954 115,900 1/17/1955 111,400 11/14/1955 154,300 12/31/1955 152,400 1/23/1956 144,500 8/2/1956 170,400 12/31/1956 162,400 7/15/1957 174,200 10/22/1957 139,600 12/31/1957 144,900 12/31/1958 207,600 2/9/1959 202,000 8/3/1959 232,400 12/31/1959 232,500 10/25/1960 208,300 12/31/1960 233,600 12/12/1961 300,200 12/31/1961 296,500 6/26/1962 219,500 12/31/1962 270,700 1/2/1963 268,900 12/31/1963 332,400 11/20/1964 391,800 12/31/1964 387,100 6/28/1965 377,300 11/15/1965 433,700 12/31/1965 435,400 2/6/1966 444,100 10/7/1966 353,300 12/31/1966 391,500 9/25/1967 485,600 12/31/1967 485,300 3/5/1968 443,700 11/29/1968 560,900 12/31/1968 539,000 5/14/1969 556,500 12/31/1969 493,500 5/26/1970 376,000 12/31/1970 513,000 4/28/1971 587,700 11/23/1971 515,100 12/31/1971 586,300 12/11/1972 702,300 12/31/1972 697,700 1/11/1973 710,600 12/5/1973 560,500 12/31/1973 595,200 1/3/1974 608,900 10/3/1974 392,200 12/31/1974 437,700 7/15/1975 623,500 12/31/1975 600,600 9/21/1976 736,500 12/31/1976 744,300 11/2/1977 653,100 12/31/1977 691,000 3/6/1978 637,100 9/12/1978 804,900 12/31/1978 736,500 10/5/1979 887,800 12/31/1979 873,500 3/27/1980 801,700 11/28/1980 1,193,000 12/31/1980 1,157,000 1/6/1981 1,177,100 9/25/1981 993,700 12/31/1981 1,100,000 8/12/1982 952,400 11/9/1982 1,348,600 12/31/1982 1,337,000 1/3/1983 1,315,200 10/10/1983 1,696,700 12/31/1983 1,638,600 7/24/1984 1,503,700 11/6/1984 1,760,500 12/31/1984 1,741,400 1/4/1985 1,704,300 12/31/1985 2,293,900 1/22/1986 2,209,300 12/2/1986 2,846,900 12/31/1986 2,722,000 8/25/1987 3,852,000 12/4/1987 2,588,700 12/31/1987 2,865,000 1/20/1988 2,813,400 10/21/1988 3,379,700 12/31/1988 3,339,500 10/9/1989 4,438,700 12/31/1989 4,395,800 7/16/1990 4,669,500 10/11/1990 3,774,000 12/31/1990 4,259,100 1/9/1991 4,017,600 12/31/1991 5,553,900 4/8/1992 5,290,600 12/18/1992 6,040,000 12/31/1992 5,976,500 1/8/1993 5,885,100 12/31/1993 6,577,500 2/2/1994 6,806,400 4/4/1994 6,231,300 12/31/1994 6,664,000 12/13/1995 9,234,500 12/31/1995 9,165,300 1/10/1996 8,905,600 11/25/1996 11,473,200 12/31/1996 11,268,200 12/5/1997 15,211,800 12/31/1997 15,026,300 1/9/1998 14,364,500 12/29/1998 19,495,500 12/31/1998 19,320,200 1/14/1999 19,052,300 12/31/1999 23,384,800 3/24/2000 24,358,100 12/20/2000 20,344,900 12/31/2000 21,256,400 1/30/2001 22,116,900 9/21/2001 15,685,400 12/31/2001 18,732,000 1/4/2002 19,130,600 10/9/2002 12,823,500 12/31/2002 14,593,600 3/11/2003 13,325,800 12/31/2003 18,777,200 [end mountain chart] [Enlarge/Download Table] 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 expenses(3) 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 expenses(3) 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 expenses(3) 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 expenses(3) 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 expenses(3) 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 expenses(3) 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 expenses(3) 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 expenses(3) 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(1) 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(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 expenses(3) 0.56 0.55 0.55 0.56 0.57 0.59 0.59 Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. The results shown are before taxes on fund distributions and sale of fund shares. The S&P 500 is unmanaged and does not reflect the effects of sales charges, commissions or expenses. (1) Includes dividends of $10,434,715 and capital gain distributions of $22,488,688 reinvested in the years 1936-2003. (2) Includes reinvested capital gain distributions of $3,255,361, but does not reflect income dividends of $1,617,961 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. [end mountain chart] [photo of a soup kitchen during the Great Depression] [Begin Photo Caption] Great Depression: An all too typical sight during the 1930s-- a soup kitchen. It was during this harsh economic era that ICA was born. [End Photo Caption] ICA AT 70: A LOOK BACK AT SEVEN DECADES It was, perhaps, America's darkest era: the Great Depression. At its worst point in the early 1930s, one in seven adults was unemployed. Factories and banks failed. There were record numbers of farm and home foreclosures. As poverty soared, bread lines and soup kitchens sprouted. A popular song reflected the grim era: "Brother, can you spare a dime?" Few could. To many Americans, the stock market crash of 1929 was to blame, and investing in equities was thought to be a fool's game. Against this gloomy backdrop, a young stock analyst, Jonathan Bell Lovelace, was asked to take control of a closed-end leveraged financial trust. Its name: The Investment Company of America. When he took over on December 6, 1933, ICA had net assets of $4.7 million. Now, as it marks its 70th year, The Investment Company of America is the third-largest mutual fund in the United States, with $66.5 billion in assets. On the next few pages, we'll look at ICA and chart its remarkable growth over seven decades and many stock market cycles. We'll also look at the legacy of Jonathan Bell Lovelace, and his impact on ICA and its investment adviser -- built by him -- Capital Research and Management Company. [Begin Sidebar] 1934-43 The early years [End Sidebar] Investors who think the stock market's rise and fall between 1998 and 2002 was dramatic should look at the 1930s. As the United States struggled to right itself during the Great Depression, the stock market was quite volatile. After delivering a total return of 25.4% in 1934, its first full year of operations, ICA soared in 1935 and 1936, gaining 83.1% and 45.8%, respectively. In 1937, however, the stock market fell sharply, and so did ICA, plunging 38.5% -- its worst year ever. By the end of the fund's first decade, the United States found itself in World War II. Unemployment dwindled as Americans went back to work. As the U.S. became the arsenal of democracy, its economy -- and ICA -- boomed. For its first ten years, the fund rose at a compound rate of 14.0% a year; its benchmark, the Standard & Poor's 500 Composite Index, delivered an average annual total return of 7.2%. In those days, the U.S. was a blue-collar nation, dominated by "smokestack" industries. ICA's investment holdings generally reflected this. But changes were afoot: the decade also saw the splitting of the atom, the first jet plane, and the first television broadcast. [begin mountain chart] Growth of a $10,000 investment (1934-43) with dividends reinvested [Download Table] ICA S&P 500 1933 $10,000 $10,000 1934 $12,542 $ 9,851 1935 $22,961 $14,555 1936 $33,481 $19,479 1937 $20,607 $12,670 1938 $26,285 $16,604 1939 $26,508 $16,542 1940 $25,868 $14,918 1941 $23,966 $13,193 1942 $27,982 $15,880 1943 $37,151 $19,980 Year ended December 31 [end mountain chart] [Begin Sidebar] FUND FACTS at December 31, 1943 $3,723,660 ASSETS UNDER MANAGEMENT 10 LARGEST EQUITY HOLDINGS Greyhound Paramount Pictures B.F. Goodrich National Supply Great Northern Railway American Home Products Standard Oil (New Jersey) Canada Dry Ginger Ale Philco Oliver Farm Equipment [End Sidebar] [photo of President Franklin D. Roosevelt] [Begin Photo Caption] Nothing to Fear: President Franklin D. Roosevelt gave Americans hope during the Great Depression. [End Photo Caption] [begin sidebar] Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. Results shown are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. [end sidebar] [Begin Sidebar] 1944-53 War and peace [End Sidebar] [Begin mountain chart] Growth of a $10,000 investment (1944-53) with dividends reinvested [Download Table] ICA S&P 500 1943 $10,000 $10,000 1944 $12,334 $11,972 1945 $16,874 $16,331 1946 $16,474 $15,012 1947 $16,624 $15,868 1948 $16,685 $16,727 1949 $18,259 $19,864 1950 $21,879 $26,160 1951 $25,778 $32,440 1952 $28,925 $38,390 1953 $29,055 $38,016 Year ended December 31 [End mountain chart] [Begin Sidebar] FUND FACTS at December 31, 1953 12,326 SHAREHOLDERS $26,727,549 ASSETS UNDER MANAGEMENT 10 LARGEST EQUITY HOLDINGS General Electric B.F. Goodrich Westinghouse Electric International Paper United Aircraft American Automobile Insurance Carrier Aluminum Company of America Texas Gulf Producing Sperry [End Sidebar] [photo of a woman on an airplane wing] [Begin Photo Caption] Rosie the Riveter: With millions of American men in the armed forces, women kept the defense industry running during World War II. [End Photo Caption] With America's wartime economy at full peak, ICA's second decade got off to a good start. The fund generated a total return of 23.3% in 1944; it did even better in 1945, surging 36.8%. But as the war ended, the nation demobilized and millions of servicemen came home. Defense spending -- which accounted for as much as 38.0% of the U.S. economy during the war -- was slashed. The stock market sagged. In 1946, ICA slipped 2.4%, and was essentially flat for the next two years. As the nation adjusted to peacetime, things began to pick up. Thanks to the GI bill, millions of veterans went to college; it was the beginning of America's gradual shift to a service-oriented, white-collar economy. Those veterans got married too, and the Baby Boom was on. After years of economic depression and wartime deprivation, the nation's standard of living began to rise. But peace soon gave way to new tensions. Just three years after the end of World War II, a U.S.-Soviet showdown over Berlin heralded the dawn of the Cold War. Communism swept China, and the U.S. found itself at war again, this time in Korea. During this decade of war and peace -- and war again -- the stock market did quite well. From 1944 to 1953, the S&P 500 Index grew at an average annual compound rate of 14.3%. ICA lagged, averaging an annual total return of 11.3%. In relative terms, it was ICA's poorest decade. But over the first two full decades of its existence, the fund, with dividends reinvested, still grew 48% more than its benchmark. [Begin Sidebar] 1954-63 Progress and prosperity [End Sidebar] Sandwiched between the end of the Korean War and the turbulence that defined much of the 1960s, the decade from 1954 to 1963 was one of quiet progress in America. From Southern California to New York's Long Island, suburbs grew quickly, connected by thousands of miles of freeways. This love affair with the road would spur the rapid growth of everything from shopping malls to motel chains to fast-food restaurants. Television asserted itself as the dominant form of entertainment. A vaccine for polio was developed. Alaska and Hawaii joined the union. Politically, the placid years of Dwight Eisenhower gave way to the excitement of John F. Kennedy's New Frontier. America set its sights on the moon, while deepening its involvement in Vietnam. The decade ended on a tragic note in November 1963, when Kennedy was assassinated. For investors, it was generally a prosperous time. Even accounting for three recessions and stock market declines in 1957 and 1962, the S&P 500 had an average annual total return of 15.9% for the decade. ICA essentially kept pace, at 15.8%. Although ICA continued to focus mostly on U.S. companies, the fund's investment adviser, Capital Research and Management Company, saw that many of those companies were beginning to derive more revenue from abroad. A new word entered the lexicon: "multinational," used to describe a company with business operations in many countries. With the world's economies and markets becoming increasingly intertwined, Capital Research opened its first research office overseas, in Geneva. Today, the fund invests up to 15% of its net assets in companies domiciled outside the United States and not included in the S&P 500 Index. In addition to its growing international focus, ICA underwent another important change. In April 1958, Capital began to manage its mutual funds with a method that, to this day, remains unique in the investment business: the "multiple portfolio counselor system." (Please see page 14.) [photo of a family watching television] [Begin Photo Caption] Prime Time: Television spread rapidly in the 1950s, quickly becoming the dominant mass-medium in the United States. [End Photo Caption] [Begin mountain chart] Growth of a $10,000 investment (1954-63) with dividends reinvested [Download Table] ICA S&P 500 1953 $10,000 $10,000 1954 $15,613 $15,257 1955 $19,579 $20,068 1956 $21,686 $21,378 1957 $19,109 $19,075 1958 $27,665 $27,337 1959 $31,590 $30,606 1960 $33,023 $30,755 1961 $40,645 $39,031 1962 $35,264 $35,634 1963 $43,333 $43,759 Year ended December 31 [End mountain chart] [Begin Sidebar] Fund facts at December 31, 1963 60,519 SHAREHOLDERS $300,583,368 ASSETS UNDER MANAGEMENT 10 LARGEST EQUITY HOLDINGS International Business Machines Xerox Burlington Industries Delta Air Lines Union Oil Company of California Royal Dutch Petroleum American Airlines Southern Pacific Northwest Airlines Ford Motor [End Sidebar] [begin sidebar] Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. Results shown are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. [end sidebar] [Begin Sidebar] 1964-73 Upheaval and achievement [End Sidebar] For investors, this ten-year period is sometimes known as the "go-go years" -- the term used to describe the stock market's general rise during the decade. In retrospect, however, the period wasn't as energetic as the phrase implies. The S&P 500 Index suffered three negative years and, for the decade as a whole, generated an average annual total return of 6.0%. Careful stock selection and close attention to risk helped ICA do better, averaging 8.8% per year. The latter part of the decade is rather famous for another term: the so-called "nifty fifty" -- a group of mostly blue-chip stocks that did quite well for a few years, but then plunged, leading to the sharp stock market downturn that began in 1973. ICA's investment team doesn't follow fads, and decided that the nifty fifty were significantly overvalued, so it generally avoided those stocks. The stock market's muted growth during the decade was also a reflection of the nation's growing economic difficulties, namely surging inflation and interest rates. There were other troubles. Americans were sharply divided over Vietnam, beset by social upheaval, and within the space of two months in 1968, the assassinations of Robert Kennedy and Martin Luther King. Near the end of the ten-year period came Watergate. But there were bright spots too, including the first heart transplant operation and the birth of the environmental movement. Intel introduced the world's first microprocessor and the Boeing 747 took to the skies, revolutionizing travel for millions. But the most notable journey was made by just two men who, in July 1969, walked on the moon. During this momentous decade, ICA continued to grow, gaining its 100,000th shareholder, while net assets climbed to more than $1.3 billion. It also saw three of ICA's current portfolio counselors enter the investment business. Together, the three of them now have more than a century's worth of investment experience. [Begin Photo Caption] [photo of a man walking on the moon] One Small Step: Arguably the most spectacular achievement of the 20th century, Apollo 11's landing on the moon reflected America's economic and technological prowess. [End Photo Caption] [Begin Sidebar] Growth of a $10,000 investment (1964-73) with dividends reinvested [Download Table] ICA S&P 500 1963 $10,000 $10,000 1964 $11,626 $11,648 1965 $14,758 $13,099 1966 $14,903 $11,779 1967 $19,209 $14,600 1968 $22,469 $16,216 1969 $20,069 $14,847 1970 $20,595 $15,434 1971 $24,102 $17,641 1972 $27,922 $20,991 1973 $23,227 $17,908 Year ended December 31 [End mountain chart] [Begin Sidebar] Fund facts at December 31, 1973 137,424 SHAREHOLDERS $1,322,210,288 ASSETS UNDER MANAGEMENT 10 LARGEST EQUITY HOLDINGS Philip Morris Atlantic Richfield Exxon Connecticut General Insurance Federal National Mortgage RCA Standard Oil Company of California Texaco American Telephone and Telegraph Sperry Rand [End Sidebar] [Begin Sidebar] 1974-83 Long-term growth [End Sidebar] [photo of a car at a gas station next to sign announcing a gas shortage] [Begin Photo Caption] Fill 'er Up: America's growing dependence on imported oil was driven home by an Arab oil embargo in 1973-1974. [End Photo Caption] [Begin mountain chart] Growth of a $10,000 investment (1974-83) with dividends reinvested [Download Table] ICA S&P 500 1973 $10,000 $10,000 1974 $ 8,206 $ 7,353 1975 $11,109 $10,091 1976 $14,397 $12,505 1977 $14,026 $11,610 1978 $16,088 $12,373 1979 $19,172 $14,676 1980 $23,242 $19,438 1981 $23,447 $18,481 1982 $31,365 $22,463 1983 $37,690 $27,530 Year ended December 31 [End mountain chart] [Begin Sidebar] Fund facts at December 31, 1983 128,983 SHAREHOLDERS $2,359,908,594 ASSETS UNDER MANAGEMENT 10 LARGEST EQUITY HOLDINGS International Business Machines Philip Morris American Telephone and Telegraph Capital Cities Communications General Electric Eastman Kodak NCR Boeing Time Times Mirror [End Sidebar] The decade picked up where the previous one left off: with bad news. Inflation and interest rates were at sky-high levels and the stock market was in the midst of its worst slump since the 1930s. Vietnam was finally over, but Watergate was about to force Richard Nixon from the presidency. The combination of scandal, war and economic turbulence took a toll, with many Americans losing faith in their government and financial institutions. But scientific, medical and technological breakthroughs continued, including the birth of the first test tube baby, the implantation of an artificial heart and the first space shuttle mission. Near the end of the decade, the United States suffered a severe recession, with the Federal Funds rate topping 19.0% in 1981 and an unemployment rate that reached 10.8%. Despite the gloomy headlines, patient investors were well rewarded over the decade. ICA generated an average annual total return of 14.2% over the ten-year period, well ahead of the S&P 500's 10.7%. As in decades past, the fund's investment results were based on a long-term perspective, thorough research and careful attention to risk. ICA's investment adviser, Capital Research and Management Company, significantly increased its investment research capability during this period. During the stock market decline that ended in 1974, when some investment firms were pruning staff, Capital made several key hires. Of ICA's current nine portfolio counselors, three entered the investment business in this decade. Thus, most of the men and women now managing ICA's portfolio have been on hand for many years. Capital also continued to emphasize its commitment to global investing by opening research offices in London, Tokyo and Hong Kong. With $1.3 billion in net assets at the beginning of 1974, ICA was already one of the biggest mutual funds in the United States. It would get bigger still: Ten years later, net assets had grown more than 78%, to nearly $2.4 billion. The decade also saw ICA embark on one of its best periods, on both an absolute and relative basis. After experiencing a negative total return of 2.6% in 1977, the fund would deliver positive total returns for each of the next 23 years. [begin sidebar] Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. Results shown are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. [end sidebar] [Begin Sidebar] 1984-93 Triumph of capitalism [End Sidebar] [photo of people standing onto of the Berlin Wall] [Begin Photo Caption] East Meets West: The fall of the Berlin Wall in 1989 heralded the end of the cold war, bringing democracy and the free market to Eastern Europe and most of the former Soviet Union. [End Photo Caption] [Begin mountain chart] Growth of a $10,000 investment (1984-93) with dividends reinvested [Download Table] ICA S&P 500 1983 $10,000 $10,000 1984 $10,667 $10,627 1985 $14,229 $13,999 1986 $17,322 $16,612 1987 $18,263 $17,484 1988 $20,699 $20,380 1989 $26,786 $26,827 1990 $26,968 $25,993 1991 $34,127 $33,894 1992 $36,511 $36,473 1993 $40,753 $40,141 Year ended December 31 [End mountain chart] [Begin Sidebar] Fund facts at December 31, 1993 1,147,629 SHAREHOLDERS $19,005,029,805 ASSETS UNDER MANAGEMENT 10 LARGEST EQUITY HOLDINGS Federal National Mortgage Royal Dutch Petroleum Time Warner Philip Morris Tele-Communications MCI Communications BankAmerica Caterpillar American Telephone and Telegraph International Business Machines [End Sidebar] As rapid as ICA's growth was between 1974 and 1983, it pales in comparison with the decade that followed. The fund welcomed more than a million new shareholders between 1984 and 1993 -- an increase of nearly 800%. Those shareholders were well rewarded during the decade. Despite a sharp stock market downturn in 1987 and a recession in the early 1990s, the fund produced a positive total return each year, achieving an average annual total return of 15.1%. This was slightly better than the S&P 500's 14.9%. Overall, the fund's net assets swelled from $2.4 billion to $19 billion. Many favorable developments helped lift the stock market higher. In the United States, inflation and interest rates declined steadily. Overseas, the Berlin Wall came down and the Soviet Union collapsed, ending the Cold War. The world seemed safer and U.S. defense spending began to decline in real terms. After the turbulence of the 1960s and 1970s, Americans became more optimistic about the future. From a business and investment standpoint, there were several notable events that would affect the U.S. economy and ICA. In 1984, AT&T's nationwide telephone monopoly was broken up; its divestiture signaled rapid growth and innovation in the telecommunications industry. Another important development during the decade was the lowering of many trade barriers. In 1992, the United States and its two biggest trading partners, Canada and Mexico, created the North American Free Trade Agreement. That same year, the Maastricht Treaty was signed, creating the European Union. The lowering of trade barriers has been significant for ICA, since it invests in big, well-established U.S. companies that typically have extensive business operations around the world. As global trade grew rapidly during the decade, Capital Research continued to expand its investment research, particularly in Europe and Asia. By the end of 1993, Capital's budget for investment research topped $50 million, and its investment professionals made more than 7,000 research visits in the United States and around the world. [Begin Sidebar] 1994-2003 The best-- and worst-- of times [End Sidebar] The stock market enjoyed one of its best periods during this decade. It also suffered through one of its worst. From 1995 through 1999, ICA's benchmark, the Standard & Poor's 500 Composite Index, averaged gains of more than 20% per year, an unprecedented feat. In March 2000, the S&P 500 began falling from its lofty perch; by October 2002, it had shed 47% of its value. For the entire ten-year period, ICA had an average annual total return of 12.0%, compared with the S&P's 11.1%. But it's the last few years of the decade -- from 1998 to the end of 2002 -- that exemplify much of what ICA has always tried to achieve: solid and consistent investment results for its shareholders over long periods of time, through many stock market cycles. From its low on August 31, 1998 to its high on March 24, 2000, the S&P 500's total return was 62.7%; ICA's was 52.6%. But from that high-water mark to the low of October 9, 2002, the value of the S&P -- as we mentioned -- was nearly cut in half. ICA's total return was -28.3%. Looking at the entire stock market cycle, from August 31, 1998 to October 9, 2002, the S&P lost 14.3%. ICA gained 9.5%. As it has so many times in the past, careful investment research and attention to risk helped ICA weather the storm. ICA's focus on dividends has also contributed to its long-term success. When the stock market is falling, dividend payments can cushion the blow for investors. When the stock market is rising, they're added to capital gains. And when dividends are reinvested, they produce still more dividends. Over ICA's first seven decades -- from January 1, 1934 to December 31, 2003 -- reinvested dividends accounted for 36% of its total return. Little wonder that Albert Einstein once called compounding "the eighth wonder of the world." [photo of the remains of the World Trade Centers in New York] [Begin Photo Caption] End of an Era: September 11, 2001 plunged America into a period of war and uncertainty -- yet ICA has remained resilient. [End Photo Caption] [Begin mountain chart] Growth of a $10,000 investment (1994-2003) with dividends reinvested [Download Table] ICA S&P 500 1993 $10,000 $10,000 1994 $10,016 $10,132 1995 $13,083 $13,934 1996 $15,615 $17,131 1997 $20,269 $22,845 1998 $24,917 $29,373 1999 $29,043 $35,553 2000 $30,157 $32,317 2001 $28,773 $28,479 2002 $24,609 $22,187 2003 $31,083 $28,548 Year ended December 31 [End mountain chart] [Begin Sidebar] Fund facts at December 31, 2003 3,456,507 SHAREHOLDERS $66,534,093,875 ASSETS UNDER MANAGMENT 10 LARGEST EQUITY HOLDINGS Altria Group Fannie Mae SBC Communications Dow Chemical Time Warner Lowe's Companies Caterpillar Eli Lilly Texas Instruments ChevronTexaco [End Sidebar] [begin sidebar] Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. Results shown are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. [end sidebar] THE LOVELACE LEGACY [photo of Jonathan Bell Lovelace] [Begin Photo Caption] The founder of Capital Research and Management Company: Jonathan Bell Lovelace. [End Photo Caption] [photo of Harleston (Hardy) Hall, Jules Hoffman, Jon Lovelace, Jr., Al Drasdo, Sr. and Jonathan Bell Lovelace] [Begin Photo Caption] Jonathan Bell Lovelace (right) presiding over a Capital Research investment meeting in the 1950s. From left: Harleston (Hardy) Hall, Jules Hoffman, Jon Lovelace, Jr. and Al Drasdo, Sr. [End Photo Caption] When he founded Capital Research and Management Company -- the investment adviser to ICA -- more than 70 years ago, Jonathan Bell Lovelace probably couldn't have imagined how big both were destined to become. In ICA's case, $4.7 million in assets have grown to $66.5 billion today, making it the third-biggest mutual fund in the United States. And with more than $750 billion under management, Capital itself is a true giant in the investment world. But one thing has stayed the same: Jonathan's stamp on the company. JBL (as he came to be known) believed in hard work, honesty and fairness -- simple virtues that would benefit investors while making Capital itself a good place to work. That ethic is his legacy, and it flourishes to this day. JBL's investment philosophy lives on too. He believed in thoroughly researching a company before purchasing shares of its stock. He wanted to know, among other things, the company's management, its future prospects, customers and competitors. Combining this scrutiny with a close examination of the company's books, JBL tried to ascertain whether its stock was overvalued or undervalued. It was an investment style that was somewhat of an anomaly to the time in which it was developed -- the 1920s -- but over the years, through wars, recessions and many stock market cycles, it would prove its mettle. JBL passed away in 1979. But he is fondly remembered by those fortunate enough to have known him. "When I think of Jonathan Bell Lovelace," says Mike Shanahan, an ICA portfolio counselor who joined Capital in 1965, "I think of three things: first and foremost was his insistence on integrity. This meant doing what's right, not what's expedient or popular. And live it every day. He was an honest man who believed in trust and fairness. Second, he encouraged people to seek unconventional opportunities and take risks. Not blind risks, but risks based on thorough, sensible research. Finally, he insisted that people work as a team and support one another, remembering always who they're working for: the shareholders." Gregg Ireland, now an ICA portfolio counselor, also had the privilege of meeting JBL. It was just after Gregg joined Capital more than 30 years ago. JBL made a lasting impression. "Everyone tried to live up to his high standards for excellence, through discipline and attention to detail in the investment process. But I was also impressed with his high ethical standards and compassion for others. He had impeccable manners and treated everyone from the receptionist and mail runner on up with great respect. Consequently, others tried to do the same. This was the Capital culture then and it is the Capital culture now. And it all started with the depth and quality of the man." [Begin Sidebar] A UNIQUE WAY OF MANAGING MONEY In the 1950s, a period of rapid growth for ICA, Capital Research began to examine the way in which its investment portfolios were managed. Typically, mutual funds are managed by an individual or by committee. Each way -- individualism and teamwork -- has both advantages and drawbacks. In 1958, an alternative was proposed: Why not create a third way that blends the best attributes of both? Capital's founder, Jonathan Bell Lovelace, approved the idea, and the multiple portfolio counselor system was born. Today, all 29 of the American Funds are managed in this unique way. How does it work? An investment portfolio is divided into portions. In ICA's case, ten portions. Nine are managed by each of the fund's portfolio counselors. The tenth is managed by the fund's research analysts -- an opportunity for them to invest directly in the companies they know so well. Each portion is run independently, subject to the fund's overall guidelines. A WEALTH OF INVESTMENT EXPERIENCE ICA's nine portfolio counselors bring together 238 years of investment experience to managing your investment. Here are the years of experience for these primary decision-makers for the fund: [Download Table] Years of investment experience Mike Shanahan 39 Jim Rothenberg 34 Jim Drasdo 32 Gregg Ireland 31 Dina Perry 26 Joyce Gordon 24 Jim Lovelace 22 Don O'Neal 18 Ross Sappenfield 12 [End Sidebar] INVESTMENT PORTFOLIO DECEMBER 31, 2003 [Download Table] Percent of LARGEST INVESTMENT CATEGORIES net assets CAPITAL GOODS 8.75 % FOOD, BEVERAGE & TOBACCO 8.58 MATERIALS 7.24 Percent of LARGEST INDUSTRY HOLDINGS Net Assets Beverages & Tobacco 6.29% Oil & Gas 5.93 Diversified Telecommunication Services 5.20 Pharmaceuticals 4.98 Commercial Banks 3.93 Percent of LARGEST EQUITY HOLDINGS net assets Altria Group 4.58 % Fannie Mae 2.01 SBC Communications 1.78 Dow Chemical 1.73 Time Warner 1.73 Lowe's Companies 1.70 Caterpillar 1.53 Eli Lilly 1.43 Texas Instruments 1.28 ChevronTexaco 1.27 [Enlarge/Download Table] Shares or Market value EQUITY SECURITIES (COMMON AND PREFERRED STOCKS AND CONVERTIBLE DEBENTURES) - 82.50% principal amount (000) ENERGY ENERGY EQUIPMENT & SERVICES - 0.82% Baker Hughes Inc. 8,225,000 $ 264,516 Schlumberger Ltd. 5,100,000 279,072 OIL & GAS - 5.93% Burlington Resources Inc. 9,050,000 501,189 ChevronTexaco Corp. 9,745,500 841,914 ConocoPhillips 2,200,000 144,254 ENI SpA 26,000,000 488,223 Exxon Mobil Corp. 8,221,500 337,082 Marathon Oil Corp. 10,550,000 349,099 Murphy Oil Corp. 2,050,000 133,885 Royal Dutch Petroleum Co. (New York registered) 7,620,000 399,212 "Shell" Transport and Trading Co., PLC (ADR) (New York registered) 5,500,000 247,665 "Shell" Transport and Trading Co., PLC 2,900,000 21,489 TOTAL SA 900,000 166,515 Unocal Corp. 8,690,000 320,053 4,494,168 MATERIALS CHEMICALS - 1.98% Air Products and Chemicals, Inc. 200,000 10,566 Dow Chemical Co. 27,700,000 1,151,489 Rohm and Haas Co. 3,600,000 153,756 METALS & MINING - 3.60% Alcan Inc. 5,800,000 272,310 Alcoa Inc. 11,846,400 450,163 Alumina Ltd. 19,804,346 97,846 Barrick Gold Corp. 9,250,000 210,067 BHP Billiton Ltd. 9,412,655 86,285 Inco Ltd. (1) 5,253,000 209,174 Newmont Mining Corp. 9,500,000 461,795 Phelps Dodge Corp. (1) 1,345,000 102,341 Placer Dome Inc. 10,000,000 179,100 Rio Tinto PLC 12,000,000 330,214 PAPER & FOREST PRODUCTS - 1.66% Georgia-Pacific Corp., Georgia-Pacific Group 10,599,298 325,080 International Paper Co. 7,297,235 314,584 MeadWestvaco Corp. 3,800,000 113,050 Weyerhaeuser Co. 5,475,000 350,400 4,818,220 CAPITAL GOODS AEROSPACE & DEFENSE - 3.08% Boeing Co. 13,000,000 547,820 General Dynamics Corp. 3,372,900 304,876 Honeywell International Inc. 4,000,000 133,720 Lockheed Martin Corp. 5,300,000 272,420 Northrop Grumman Corp. 2,340,000 223,704 Raytheon Co. 14,446,000 433,958 United Technologies Corp. 1,400,000 132,678 CONSTRUCTION & ENGINEERING - 0.05% Fluor Corp. 824,300 32,675 ELECTRICAL EQUIPMENT - 0.17% Cooper Industries, Inc., Class A 2,000,000 115,860 INDUSTRIAL CONGLOMERATES - 2.47% 3M Co. 1,200,000 102,036 General Electric Co. 21,750,000 673,815 Siemens AG 875,000 69,742 Tyco International Ltd. 30,400,000 805,600 MACHINERY - 2.98% Caterpillar Inc. 12,300,000 1,021,146 Cummins Inc. 1,700,000 83,198 Deere & Co. 8,000,000 520,400 Illinois Tool Works Inc. 2,500,000 209,775 Parker Hannifin Corp. 2,500,000 148,750 5,832,173 COMMERCIAL SERVICES & SUPPLIES COMMERCIAL SERVICES & SUPPLIES - 0.11% Pitney Bowes Inc. 1,000,000 40,620 Waste Management, Inc. 1,100,000 32,560 73,180 TRANSPORTATION AIR FREIGHT & LOGISTICS - 0.39% FedEx Corp. 3,870,000 261,225 AIRLINES - 0.24% Delta Air Lines, Inc. 942,100 11,126 Southwest Airlines Co. 9,000,000 145,260 ROAD & RAIL - 0.44% Burlington Northern Santa Fe Corp. 8,300,000 268,505 Norfolk Southern Corp. 1,211,200 28,645 714,761 AUTOMOBILES & COMPONENTS AUTO COMPONENTS - 0.23% Delphi Corp. 15,000,000 153,150 AUTOMOBILES - 1.61% Ford Motor Co. 2,500,000 40,000 General Motors Corp. 15,450,000 825,030 Honda Motor Co., Ltd. 1,825,000 80,877 Toyota Motor Corp. 3,750,000 126,385 1,225,442 CONSUMER DURABLES & APPAREL HOUSEHOLD DURABLES - 0.07% Newell Rubbermaid Inc. 2,000,000 45,540 TEXTILES, APPAREL & LUXURY GOODS - 0.01% NIKE, Inc., Class B 127,700 8,742 54,282 HOTELS, RESTAURANTS & LEISURE HOTELS, RESTAURANTS & LEISURE - 0.60% Carnival Corp., units 8,997,100 357,455 McDonald's Corp. 1,600,000 39,728 397,183 MEDIA MEDIA - 3.76% Antena 3 Television, SA (1) 28,517 1,251 Comcast Corp., Class A (1) 11,345,800 372,936 Comcast Corp., Class A, special nonvoting stock (1) 3,000,000 93,840 Dow Jones & Co., Inc. 1,887,000 94,067 Hughes Electronics Corp. (1) 1,811,075 29,973 Interpublic Group of Companies, Inc. (1) 10,975,000 171,210 Knight-Ridder, Inc. 550,500 42,592 Liberty Media Corp., Class A (1) 16,280,000 193,569 News Corp. Ltd., preferred (ADR) 202,563 6,128 Time Warner Inc. (formerly AOL Time Warner Inc.) (1) 63,800,000 1,147,762 Viacom Inc., Class A 600,000 26,562 Viacom Inc., Class B, nonvoting 7,300,000 323,974 2,503,864 RETAILING INTERNET & CATALOG RETAIL - 0.13% eBay Inc. (1) 1,300,000 83,967 MULTILINE RETAIL - 1.66% Dollar General Corp. 2,750,000 57,722 Kohl's Corp. (1) 3,000,000 134,820 May Department Stores Co. 4,800,000 139,536 Target Corp. 20,100,000 771,840 SPECIALTY RETAIL - 2.26% Limited Brands, Inc. 20,749,400 374,112 Lowe's Companies, Inc. 20,368,300 1,128,200 2,690,197 FOOD & STAPLES RETAILING FOOD & STAPLES RETAILING - 0.51% Albertson's, Inc. 2,726,500 61,755 Walgreen Co. 7,595,000 276,306 338,061 FOOD, BEVERAGE & TOBACCO BEVERAGES & TOBACCO - 6.29% Altria Group, Inc. 56,000,000 3,047,520 Anheuser-Busch Companies, Inc. 3,250,000 171,210 Coca-Cola Co. 3,750,000 190,312 PepsiCo, Inc. 9,600,000 447,552 R.J. Reynolds Tobacco Holdings, Inc. (2) 4,461,666 259,446 UST Inc. 2,000,000 71,380 FOOD PRODUCTS - 2.29% General Mills, Inc. 6,035,000 273,385 H.J. Heinz Co. 7,950,000 289,619 Sara Lee Corp. 9,816,100 213,108 Unilever NV (New York registered) 11,500,000 746,350 5,709,882 HOUSEHOLD & PERSONAL PRODUCTS HOUSEHOLD PRODUCTS - 0.04% Kimberly-Clark Corp. 500,000 29,545 PERSONAL PRODUCTS - 0.47% Avon Products, Inc. 4,635,000 312,816 342,361 HEALTH CARE EQUIPMENT & SERVICES HEALTH CARE EQUIPMENT & SUPPLIES - 0.25% Applera Corp. - Applied Biosystems Group 5,170,500 107,081 Becton, Dickinson and Co. 1,500,000 61,710 HEALTH CARE PROVIDERS & SERVICES - 0.87% Aetna Inc. 2,000,000 135,160 CIGNA Corp. 1,700,000 97,750 HCA Inc. 8,020,000 344,539 746,240 PHARMACEUTICALS & BIOTECHNOLOGY PHARMACEUTICALS - 4.98% Abbott Laboratories 1,500,000 69,900 AstraZeneca PLC (Sweden) 6,127,000 298,055 AstraZeneca PLC (United Kingdom) 5,800,900 277,255 AstraZeneca PLC (ADR) 5,444,200 263,390 Bristol-Myers Squibb Co. 21,657,600 619,407 Eli Lilly and Co. 13,510,000 950,158 Merck & Co., Inc. 2,200,000 101,640 Novartis AG 1,000,000 45,220 Novartis AG (ADR) 256,556 11,773 Pfizer Inc 13,772,480 486,582 Schering-Plough Corp. 3,611,300 62,801 Wyeth 3,000,000 127,350 3,313,531 BANKS COMMERCIAL BANKS - 3.93% Bank of America Corp. 10,228,240 822,657 BANK ONE CORP. 2,035,000 92,776 FleetBoston Financial Corp. 15,436,300 673,794 HSBC Holdings PLC 29,678,750 464,717 HSBC Holdings PLC (ADR) 1,070,000 84,337 Wachovia Corp. 529,400 24,665 Wells Fargo & Co. 7,630,000 449,331 THRIFTS & MORTGAGE FINANCE - 2.47% Fannie Mae 17,860,000 1,340,572 Freddie Mac 3,150,000 183,708 Washington Mutual, Inc. 3,000,000 120,360 4,256,917 DIVERSIFIED FINANCIALS DIVERSIFIED FINANCIAL SERVICES - 0.11% Citigroup Inc. 1,500,000 72,810 CAPITAL MARKETS - 1.21% J.P. Morgan Chase & Co. 21,900,000 804,387 CONSUMER FINANCE - 0.56% Capital One Financial Corp. 3,000,000 183,870 Capital One Financial Corp. 6.25% Upper DECS 2005 1,450,000 units 69,513 MBNA Corp. 4,800,000 119,280 1,249,860 INSURANCE INSURANCE - 3.53% Allstate Corp. 10,493,300 451,422 American International Group, Inc. 10,663,900 706,803 Aon Corp. 2,183,800 52,280 Chubb Corp. 5,075,000 345,608 Chubb Corp. 7.00% convertible preferred 2005 1,400,000 units 39,984 Hartford Financial Services Group, Inc. 2,700,000 159,381 Lincoln National Corp. 1,700,000 68,629 SAFECO Corp. 3,650,000 142,095 St. Paul Companies, Inc. 3,300,000 130,845 XL Capital Ltd., Class A 3,250,000 252,038 2,349,085 SOFTWARE & SERVICES IT SERVICES - 1.05% Automatic Data Processing, Inc. 5,475,000 216,865 Computer Sciences Corp. (1) 1,440,300 63,704 Electronic Data Systems Corp. 11,350,000 278,529 Sabre Holdings Corp., Class A 6,009,680 129,749 SOFTWARE - 0.82% Microsoft Corp. 19,880,000 547,495 1,236,342 TECHNOLOGY HARDWARE & EQUIPMENT COMMUNICATIONS EQUIPMENT - 1.36% Cisco Systems, Inc. (1) 28,800,000 699,552 Motorola, Inc. 5,500,000 77,385 Motorola, Inc. 7.00% convertible preferred 2004 2,400,000 units 104,232 Nokia Corp. (ADR) 1,500,000 25,500 COMPUTERS & PERIPHERALS - 2.42% EMC Corp. (1) 3,500,000 45,220 Hewlett-Packard Co. 23,850,000 547,835 International Business Machines Corp. 7,095,000 657,565 Sun Microsystems, Inc. (1) 79,500,000 356,955 ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.02% Agilent Technologies, Inc. (1) 6,000,000 175,440 Agilent Technologies, Inc. 3.00% convertible debentures 2021 (3) $ 6,655,000 7,304 Agilent Technologies, Inc. 3.00% convertible debentures 2021 (3) (4) $ 4,445,000 4,878 Hitachi, Ltd. 23,000,000 138,330 Sanmina-SCI Corp. (1) 11,850,000 149,429 Solectron Corp. (1) 23,500,000 138,885 Solectron Corp. 7.25% ACES convertible preferred 2004 4,000,000 units 66,720 3,195,230 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.53% Altera Corp. (1) 2,250,000 51,075 Applied Materials, Inc. (1) 11,750,000 263,788 Intel Corp. 2,140,000 68,908 KLA-Tencor Corp. (1) 1,325,000 77,738 Linear Technology Corp. 4,965,700 208,907 Maxim Integrated Products, Inc. 2,528,200 125,904 Micron Technology, Inc. (1) 12,500,000 168,375 Samsung Electronics Co., Ltd. 485,000 183,657 Taiwan Semiconductor Manufacturing Co. Ltd. (1) 115,500,000 216,286 Texas Instruments Inc. 29,067,700 854,009 Xilinx, Inc. (1) 3,250,000 125,905 2,344,552 TELECOMMUNICATION SERVICES DIVERSIFIED TELECOMMUNICATION SERVICES - 5.20% ALLTEL Corp. 3,500,000 163,030 ALLTEL Corp. 7.75% 2005 500,000 units 24,850 AT&T Corp. 17,897,500 363,319 BT Group PLC 35,000,000 117,504 Deutsche Telekom AG (1) 15,046,000 274,032 SBC Communications Inc. 45,450,000 1,184,882 Sprint Corp. - FON Group 29,635,000 486,607 Telefonica, SA (1) 16,794,261 245,373 Telefonos de Mexico, SA de CV, Class L (ADR) 3,000,000 99,090 Verizon Communications Inc. 14,250,000 499,890 WIRELESS TELECOMMUNICATION SERVICES - 1.27% AT&T Wireless Services, Inc. (1) 58,541,000 467,743 Sprint Corp. 7.125% convertible preferred 2004 5,400,000 units 38,340 Vodafone Group PLC 40,000,000 98,800 Vodafone Group PLC (ADR) 9,500,000 237,880 4,301,340 UTILITIES ELECTRIC UTILITIES - 1.48% Ameren Corp. 2,307,000 106,122 American Electric Power Co., Inc. 5,544,200 169,154 Dominion Resources, Inc. 7,131,912 455,230 FPL Group, Inc. 1,000,000 65,420 Southern Co. 4,386,500 132,692 TXU Corp. 2,400,000 56,928 MULTI-UTILITIES & UNREGULATED POWER - 1.20% Duke Energy Corp. 24,075,000 492,334 El Paso Corp. 7,194,000 58,919 Public Service Enterprise Group Inc. 5,000,000 219,000 Williams Companies, Inc. 9.00% FELINE PACS convertible preferred 2005 2,000,000 units 26,220 1,782,019 MISCELLANEOUS - 1.39% Other equity securities in initial period of acquisition 923,861 TOTAL EQUITY SECURITIES (cost: $39,638,406,000) 54,892,751 Principal amount Market value CORPORATE BONDS & NOTES - 1.68% (000) (000) AUTOMOBILES & COMPONENTS AUTOMOBILES - 0.08% General Motors Acceptance Corp. 6.875% 2011 $ 50,000 53,937 MEDIA MEDIA - 0.03% AOL Time Warner Inc. 5.625% 2005 21,045 22,038 TELECOMMUNICATION SERVICES TELECOMMUNICATION SERVICES - 1.33% AT&T Corp.: (3) 6.50% 2006 (4) Euro 9,815 13,213 7.00% 2006 $ 80,065 88,608 7.80% 2011 247,575 285,463 Deutsche Telekom International Finance BV 8.125% 2012 (3) Euro 30,000 46,281 Sprint Capital Corp.: 7.90% 2005 $ 202,710 216,015 8.375% 2012 197,500 231,106 WIRELESS TELECOMMUNICATION SERVICES - 0.22% AT&T Wireless Services, Inc.: 7.35% 2006 26,250 28,722 7.50% 2007 74,500 83,591 8.125% 2012 30,000 35,344 1,028,343 UTILITIES MULTI-UTILITIES & UNREGULATED POWER - 0.02% Williams Companies, Inc. 6.625% 2004 3,550 3,657 Williams Holdings of Delaware, Inc. 6.50% 2008 11,000 11,426 15,083 TOTAL CORPORATE BONDS & NOTES (cost: $932,396,000) 1,119,401 U.S. TREASURY & AGENCY OBLIGATIONS - 4.62% FEDERAL AGENCY PASS-THROUGH OBLIGATIONS - 1.86% Fannie Mae: (5) 6.00% 2017 564,253 594,431 6.50% 2017 563,782 599,535 6.50% 2032 43,977 46,077 NON-PASS-THROUGH OBLIGATIONS - 0.16% Fannie Mae: 5.25% 2007 99,000 106,458 1,346,501 U.S. TREASURY NOTES AND BONDS U.S. TREASURY NOTES & BONDS - 2.60% 3.00% February 2004 600,000 601,968 1.875% September 2004 565,000 568,175 1.50% February 2005 555,000 556,299 1,726,442 TOTAL U.S. TREASURY & AGENCY OBLIGATIONS (cost: $3,002,029,000) 3,072,943 Principal amount Market value SHORT-TERM SECURITIES - 10.96% (000) (000) U.S. TREASURIES - 5.88% U.S. Treasury Bills 0.840%-1.035% due 1/2-6/24/2004 3,920,433 3,912,880 CORPORATE SHORT-TERM NOTES - 3.66% Abbott Laboratories Inc. 1.00% due 1/6-1/13/2004 (4) 25,000 24,992 AIG Funding, Inc. 1.01%-1.02% due 1/9/2004 20,000 19,995 American General Finance Corp. 1.04%-1.06% due 1/12-2/18/2004 77,000 76,943 American Express Credit Corp. 1.04%-1.06% due 2/2-2/25/2004 120,000 119,840 Anheuser-Busch Cos. Inc. 1.00% due 2/6-3/12/2004 (4) 54,400 54,328 Archer Daniels Midland Co. 1.08% due 1/20/2004 (4) 28,500 28,483 Bank of America Corp. 1.09%-1.10% due 3/15-4/13/2004 146,700 146,302 BellSouth Corp. 1.01%-1.03% due 1/6-1/21/2004 (4) 100,000 99,968 Caterpillar Financial Serivces Corp. 1.02%-1.03% due 1/20-3/18/2004 50,000 49,907 ChevronTexaco Corp. 1.01% due 1/7/2004 21,000 20,996 Citicorp 1.04%-1.07% due 1/9-2/24/2004 145,000 144,847 Clorox Co. 1.01%-1.02% due 1/16-1/29/2004 64,670 64,625 Coca-Cola Co. 1.02%-1.03% due 1/5-3/5/2004 150,000 149,895 E.I. DuPont de Nemours & Co. 1.03%-1.05% due 1/23-3/2/2004 130,300 130,144 Exxon Asset Management Co. 1.00% due 1/8/2004 (4) 50,000 49,989 Exxon Project Investment Corp. 1.00% due 1/20-1/21/2004 (4) 44,000 43,975 Gannett Co. 1.02%-1.06% due 1/8-1/23/2004 (4) 121,295 121,250 General Electric Capital Services, Inc. 1.08%-1.09% due 1/21-3/10/2004 130,000 129,853 Harley-Davidson Funding Corp. 1.02% due 1/26-2/13/2004 (4) 25,000 24,973 Household Finance Corp. 1.07%-1.08% due 1/14-2/9/2004 130,000 129,904 IBM Credit Corp. 1.00%-1.02% due 1/9-1/16/2004 100,000 99,964 Johnson & Johnson 1.00% due 1/9-1/29/2004 (4) 61,000 60,962 J.P. Morgan Chase & Co. 1.07%-1.08% due 2/2-2/3/2004 80,000 79,919 Kimberly-Clark Worldwide Inc. 1.00% due 1/23-2/13/2004 (4) 54,000 53,944 Medtronic Inc. 1.01%-1.02% due 1/27-1/28/2004 (4) 30,000 29,976 Merck & Co. Inc. 1.01%-1.02% due 1/15-1/23/2004 55,000 54,967 Minnesota Mining and Manufacturing Co. 1.02% due 1/22/2004 25,000 24,984 Pfizer Inc 1.01%-1.05% due 1/5-1/29/2004 (4) 150,417 150,356 Procter & Gamble Co. 1.01%-1.05% due 1/16-2/9/2004 (4) 145,000 144,910 SBC International Inc. 1.02%-1.04% due 1/13-2/10/2004 (4) 46,695 46,647 United Parcel Service Inc. 0.93% due 1/30/2004 20,800 20,781 Verizon Network Funding Corp. 1.03% due 2/11-2/20/2004 35,000 34,954 FEDERAL AGENCY DISCOUNT NOTES - 1.04% Fannie Mae 0.99%-1.04% due 1/6-2/2/2004 91,200 91,149 Federal Farm Credit Banks 1.00%-1.08% due 2/20-5/14/2004 150,000 149,706 Federal Home Loan Bank 1.01%-1.04% due 1/7-1/22/2004 71,507 71,484 Freddie Mac 1.03% due 1/15/2004 25,000 24,989 International Bank for Reconstruction and Development 0.97%-1.01% 250,800 250,618 due 1/13-2/6/2004 Student Loan Marketing Assn. 1.01% due 1/7/2004 40,000 39,992 Student Loan Marketing Assn. 1.00% due 1/13-5/20/2004 28,700 28,690 Student Loan Marketing Assn. 0.963%-1.001% due 5/20-6/17/2004 (3) 35,000 34,965 CERTIFICATES OF DEPOSIT - 0.38% BANK ONE CORP. 1.03% due 1/26/2004 50,000 49,999 State Street Bank & Trust 1.05% due 2/17/2004 50,000 49,999 Wells Fargo & Co. 1.04%-1.06% due 1/13-3/30/2004 150,000 149,997 TOTAL SHORT-TERM SECURITIES (cost: $7,287,349,000) 7,288,041 TOTAL INVESTMENT SECURITIES (cost: $50,860,180,000) 66,373,136 NEW TAIWANESE DOLLAR (cost: $7,289,000) NT$250,707 7,393 OTHER ASSETS LESS LIABILITIES 153,565 NET ASSETS $66,534,094 (1) Security did not produce income during the last 12 months. (2) The fund owns 5.27% 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 JUNE 30, 2003 Alcan Antena 3 Television BT Group Chubb Citigroup Cooper Industries Delphi Freddie Mac General Dynamics Hitachi Hughes Electronics Inco Lockheed Martin News Corp. Public Service Enterprise Group Telefonica Toyota Motor EQUITY SECURITIES ELIMINATED FROM THE PORTFOLIO SINCE JUNE 30, 2003 Cendant Concord EFS Consolidated Edison Dell Eastman Kodak LSI Logic Sallie Mae FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (dollars and shares in thousands, at December 31, 2003 except per-share amounts) [Download Table] ASSETS: Investment securities at market: Unaffiliated issuers (cost: $50,723,529) $66,113,690 Affiliated issuer (cost: $136,651) 259,446 $66,373,136 Cash denominated in non-U.S. currencies (cost: $7,289) 7,393 Cash 194 Receivables for: Sales of fund's shares 108,923 Dividends and interest 153,231 262,154 66,642,877 LIABILITIES: Payables for: Purchases of investments 17,875 Repurchases of fund's shares 55,109 Investment advisory services 13,298 Services provided by affiliates 19,733 Deferred Directors' and Advisory Board compensation 2,457 Other fees and expenses 311 108,783 NET ASSETS AT DECEMBER 31, 2003 $66,534,094 NET ASSETS CONSIST OF: Capital paid in on shares of capital stock $50,826,322 Undistributed net investment income 195,455 Distributions in excess of net realized gain (1,047) Net unrealized appreciation 15,513,364 NET ASSETS AT DECEMBER 31, 2003 $66,534,094 [Download Table] Authorized shares of capital stock - Net Shares Net asset value $.001 par value assets outstanding per share(1) Class A 2,500,000 $58,353,415 2,023,474 $28.84 Class B 250,000 3,010,555 104,738 28.74 Class C 250,000 1,984,779 69,155 28.70 Class F 250,000 897,109 31,136 28.81 Class 529-A 325,000 379,858 13,180 28.82 Class 529-B 75,000 100,019 3,476 28.78 Class 529-C 150,000 114,807 3,989 28.78 Class 529-E 75,000 16,217 563 28.78 Class 529-F 75,000 2,781 97 28.81 Class R-1 75,000 14,155 492 28.77 Class R-2 100,000 187,782 6,526 28.77 Class R-3 300,000 230,908 8,017 28.80 Class R-4 75,000 40,287 1,398 28.82 Class R-5 150,000 1,201,422 41,664 28.84 (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 $30.60 and $30.58, respectively. See Notes to Financial Statements STATEMENT OF OPERATIONS for the year ended December 31, 2003 (dollars in thousands) [Enlarge/Download Table] INVESTMENT INCOME: Income: Dividends (net of non-U.S. withholding tax of $13,173; also includes $16,954 from affiliate) $1,092,138 Interest (net of non-U.S. withholding tax of $5) 409,338 $1,501,476 Fees and expenses: Investment advisory services 134,807 Distribution services 156,293 Transfer agent services 47,349 Administrative services 6,111 Reports to shareholders 3,590 Registration statement and prospectus 1,336 Postage, stationery and supplies 6,148 Directors' and Advisory Board compensation 1,085 Auditing and legal 164 Custodian 1,744 State and local taxes 533 Other 222 Total expenses before reimbursement 359,382 Reimbursement of expenses 345 359,037 Net investment income 1,142,439 NET REALIZED GAIN AND UNREALIZED APPRECIATION ON INVESTMENTS AND NON-U.S. CURRENCY: Net realized gain (loss) on: Investments 503,438 Non-U.S. currency transactions (3,185) 500,253 Net unrealized appreciation on: Investments 11,791,706 Non-U.S. currency translations 135 11,791,841 Net realized gain and unrealized appreciation on investments and non-U.S. currency 12,292,094 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,434,533 STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Year ended December 31 2003 2002 OPERATIONS: Net investment income $1,142,439 $991,657 Net realized gain on investments and non-U.S. currency transactions 500,253 836,731 Net unrealized appreciation (depreciation) on investments and non-U.S. currency translations 11,791,841 (10,409,465) Net increase (decrease) in net assets resulting from operations 13,434,533 (8,581,077) DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS: Dividends from net investment income (1,107,178) (1,050,322) Distributions from net realized gain on investments (477,739) (948,702) Total dividends and distributions paid to shareholders (1,584,917) (1,999,024) CAPITAL SHARE TRANSACTIONS 4,923,852 4,053,315 TOTAL INCREASE (DECREASE) IN NET ASSETS 16,773,468 (6,526,786) NET ASSETS: Beginning of year 49,760,626 56,287,412 End of year (including undistributed net investment income: $195,455 and $161,948, respectively) $66,534,094 $49,760,626 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 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. 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. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. 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. SECURITIES LENDING - The fund may lend portfolio securities from time to time in order to earn additional income; however, it does not currently intend to engage in an ongoing or regular securities lending program. When the fund lends securities, it receives collateral in an amount not less than 100% of the market value of the loaned securities throughout the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered on the next business day. If the borrower defaults on its obligation to return the securities loaned, the fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Income earned is included in interest income in the accompanying financial statements. There were no securities on loan as of December 31, 2003. 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. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. As of December 31, 2003, the cost of investment securities and cash denominated in non-U.S. currencies, for federal income tax purposes was $50,864,147,000. During the year ended December 31, 2003, the fund reclassified $1,754,000 from undistributed net investment income to undistributed net realized gains; and reclassified $23,558,000 from undistributed net realized gains to additional paid-in capital to align financial reporting with tax reporting. As of December 31, 2003, the components of distributable earnings on a tax basis were as follows: [Download Table] (dollars in thousands) Undistributed net investment income and currency gains $ 197,913 Gross unrealized appreciation on investment securities 16,470,459 Gross unrealized depreciation on investment securities (954,077) The tax character of distributions paid to shareholders was as follows (dollars in thousands): [Enlarge/Download Table] 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 YEAR ENDED DECEMBER 31, 2002(1) Distributions from Distributions from Total ordinary income long-term capital gains distribution Share class Class A $ 1,008,396 $ 887,548 $ 1,895,944 Class B 21,641 32,496 54,137 Class C 10,712 17,283 27,995 Class F 6,321 6,593 12,914 Class 529-A 1,613 2,082 3,695 Class 529-B 269 555 824 Class 529-C 303 611 914 Class 529-E 47 74 121 Class 529-F 2 4 6 Class R-1 5 15 20 Class R-2 114 321 435 Class R-3 112 309 421 Class R-4 46 112 158 Class R-5 741 699 1,440 Total $ 1,050,322 $ 948,702 $ 1,999,024 (1) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered beginning May 15, 2002. 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 year ended December 31, 2003, the investment advisory services fee was $134,807,000, which was equivalent to an annualized rate of 0.245% 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 below. In some cases, the Board of Directors has approved expense amounts lower than plan limits. [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 ------------------------------------------------ ----------------------------- ----------------------------- 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, 2003, there were no unreimbursed expenses subject to reimbursement for classes A or 529-A. 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 start-up period for classes R-1, R-2, R-3 and R-4, CRMC has voluntarily agreed to pay a portion of these fees. 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 above for the year ended December 31, 2003, 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 $115,045 $44,840 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class B 22,876 2,509 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class C 13,761 Included $2,064 $426 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class F 1,490 Included 894 127 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-A 241 Included 363 36 $ 242 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-B 655 Included 98 37 66 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-C 723 Included 108 31 72 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-E 51 Included 15 2 10 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-F 3 Included 2 -* 1 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-1 80 Included 12 7 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-2 743 Included 149 599 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-3 566 Included 170 160 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-4 59 Included 36 4 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-5 Not applicable Included 374 6 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Total $156,293 $47,349 $4,285 $1,435 $391 -------------------------------------------------------------------------------------------------------------- * 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 $767,000 in current fees (either paid in cash or deferred) and a net increase of $318,000 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 December 31, 2003, 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, 2003, 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): [Enlarge/Download Table] Reinvestments of Share class Sales(1) dividends and distributions Amount Shares Amount Shares 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 Year ended December 31, 2002(2) Class A $ 6,693,985 255,431 $ 1,756,908 69,477 Class B 1,057,376 40,132 52,386 2,107 Class C 837,810 31,926 26,931 1,092 Class F 381,789 14,772 11,110 448 Class 529-A 168,803 6,496 3,695 152 Class 529-B 44,496 1,722 824 34 Class 529-C 50,297 1,938 913 38 Class 529-E 6,158 243 121 5 Class 529-F 385 16 6 -* Class R-1 1,100 46 20 1 Class R-2 28,401 1,199 434 18 Class R-3 27,920 1,172 419 17 Class R-4 9,005 390 157 7 Class R-5 57,752 2,155 1,273 52 Total net increase (decrease) $ 9,365,277 357,638 $ 1,855,197 73,448 Share class Repurchases(1) Net increase Amount Shares Amount Shares 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 Year ended December 31, 2002(2) Class A $ (6,665,696) (264,017) $ 1,785,197 60,891 Class B (230,619) (9,342) 879,143 32,897 Class C (148,918) (6,075) 715,823 26,943 Class F (103,788) (4,193) 289,111 11,027 Class 529-A (2,983) (122) 169,515 6,526 Class 529-B (737) (31) 44,583 1,725 Class 529-C (1,301) (54) 49,909 1,922 Class 529-E (112) (5) 6,167 243 Class 529-F (1) -* 390 16 Class R-1 (77) (3) 1,043 44 Class R-2 (4,693) (199) 24,142 1,018 Class R-3 (3,568) (150) 24,771 1,039 Class R-4 (451) (20) 8,711 377 Class R-5 (4,215) (170) 54,810 2,037 Total net increase (decrease) $ (7,167,159) (284,381) $ 4,053,315 146,705 * Amount less than one thousand. (1) Includes exchanges between share classes of the fund. (2) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered beginning May 15, 2002. 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 December 31, 2003, the total value of restricted securities was $952,844,000, which represented 1.43% 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 $13,380,815,000 and $11,676,344,000, respectively, during the year ended December 31, 2003. 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, 2003, the custodian fee of $1,744,000 included $78,000 that was offset by this reduction, rather than paid in cash. FINANCIAL HIGHLIGHTS (1) [Enlarge/Download Table] 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 12/31/2003 $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: 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 12/31/2003 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 12/31/2003 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 12/31/2003 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 12/31/2003 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 12/31/2003 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 12/31/2003 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 12/31/2003 23.47 .48 5.55 6.03 Period from 9/16/2002 to 12/31/2002 23.98 .16 (.19) (.03) Class R-1: 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 12/31/2003 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 12/31/2003 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 12/31/2003 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 12/31/2003 23.48 .56 5.59 6.15 Period from 5/15/2002 to 12/31/2002 28.37 .39 (4.50) (4.11) 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 12/31/2003 $(.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: 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 12/31/2003 (.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 12/31/2003 (.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 12/31/2003 (.52) (.21) (.73) 28.82 Period from 2/15/2002 to 12/31/2002 (.49) (.46) (.95) 23.48 Class 529-B: Year ended 12/31/2003 (.28) (.21) (.49) 28.78 Period from 2/15/2002 to 12/31/2002 (.33) (.46) (.79) 23.45 Class 529-C: Year ended 12/31/2003 (.29) (.21) (.50) 28.78 Period from 2/19/2002 to 12/31/2002 (.34) (.46) (.80) 23.45 Class 529-E: Year ended 12/31/2003 (.42) (.21) (.63) 28.78 Period from 3/1/2002 to 12/31/2002 (.33) (.35) (.68) 23.45 Class 529-F: Year ended 12/31/2003 (.48) (.21) (.69) 28.81 Period from 9/16/2002 to 12/31/2002 (.13) (.35) (.48) 23.47 Class R-1: 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 12/31/2003 (.33) (.21) (.54) 28.77 Period from 5/21/2002 to 12/31/2002 (.31) (.35) (.66) 23.46 Class R-3: Year ended 12/31/2003 (.42) (.21) (.63) 28.80 Period from 6/4/2002 to 12/31/2002 (.34) (.35) (.69) 23.47 Class R-4: Year ended 12/31/2003 (.50) (.21) (.71) 28.82 Period from 5/28/2002 to 12/31/2002 (.39) (.35) (.74) 23.47 Class R-5: Year ended 12/31/2003 (.58) (.21) (.79) 28.84 Period from 5/15/2002 to 12/31/2002 (.43) (.35) (.78) 23.48 Ratio of Ratio of Net assets, expenses net income Total end of period to average to average return(3) (in millions) net assets net assets Class A: Year ended 12/31/2003 26.30% $58,353 .59% 2.14% Year ended 12/31/2002 (14.47) 46,129 .59 1.89 Year ended 12/31/2001 (4.59) 54,315 .57 1.49 Year ended 12/31/2000 3.84 56,212 .56 1.74 Year ended 12/31/1999 16.55 56,095 .55 1.54 Class B: Year ended 12/31/2003 25.30 3,011 1.38 1.33 Year ended 12/31/2002 (15.18) 1,841 1.39 1.18 Year ended 12/31/2001 (5.30) 1,302 1.35 .66 Period from 3/15/2000 to 12/31/2000 5.87 439 1.34 (5) 1.06 (5) Class C: Year ended 12/31/2003 25.22 1,985 1.45 1.25 Year ended 12/31/2002 (15.20) 1,025 1.45 1.17 Period from 3/15/2001 to 12/31/2001 (.19) 480 1.52 (5) .38 (5) Class F: Year ended 12/31/2003 26.18 897 .69 2.01 Year ended 12/31/2002 (14.59) 415 .70 1.92 Period from 3/15/2001 to 12/31/2001 .48 190 .72 (5) 1.17 (5) Class 529-A: Year ended 12/31/2003 26.19 380 .64 2.06 Period from 2/15/2002 to 12/31/2002 (12.57) 153 .71 (5) 2.17 (5) Class 529-B: Year ended 12/31/2003 25.05 100 1.58 1.12 Period from 2/15/2002 to 12/31/2002 (13.22) 41 1.58 (5) 1.30 (5) Class 529-C: Year ended 12/31/2003 25.07 115 1.57 1.13 Period from 2/19/2002 to 12/31/2002 (11.91) 45 1.57 (5) 1.32 (5) Class 529-E: Year ended 12/31/2003 25.70 16 1.04 1.65 Period from 3/1/2002 to 12/31/2002 (14.72) 6 1.03 (5) 1.90 (5) Class 529-F: Year ended 12/31/2003 26.05 3 .79 1.88 Period from 9/16/2002 to 12/31/2002 (.14) - (4) .23 .68 Class R-1: Year ended 12/31/2003 25.18 14 1.47 (6) 1.18 Period from 6/6/2002 to 12/31/2002 (11.68) 1 1.47 (5)(6) 1.49 (5) Class R-2: Year ended 12/31/2003 25.18 188 1.43 (6) 1.21 Period from 5/21/2002 to 12/31/2002 (14.64) 24 1.43 (5)(6) 1.61 (5) Class R-3: Year ended 12/31/2003 25.70 231 1.05 (6) 1.60 Period from 6/4/2002 to 12/31/2002 (12.49) 24 1.05 (5)(6) 2.00 (5) Class R-4: Year ended 12/31/2003 26.19 40 .68 (6) 2.00 Period from 5/28/2002 to 12/31/2002 (14.31) 9 .69 (5)(6) 2.25 (5) Class R-5: Year ended 12/31/2003 26.58 1,201 .36 2.11 Period from 5/15/2002 to 12/31/2002 (14.59) 48 .37 (5) 2.56 (5) [Enlarge/Download Table] Year ended December 31 2003 2002 2001 2000 1999 Portfolio turnover rate for all classes of shares 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) Amount less than 1 million. (5) Annualized. (6) During the start-up period for this class, CRMC voluntarily agreed to pay a portion of the fees relating to transfer agent services. Had CRMC not paid such fees, expense ratios would have been 1.51%, 1.76% and 1.06% for classes R-1, R-2 and R-3, respectively, during the year ended December 31, 2003, and 2.43%, 1.57%, 1.11% and .73% for classes R-1, R-2, R-3 and R-4, respectively, during the period ended December 31, 2002. The expense ratio for class R-4 was not affected by any payments made by CRMC during the year ended December 31, 2003. REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE INVESTMENT COMPANY OF AMERICA: In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and 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, 2003, and the results of its operations, the changes in its net assets 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 auditing standards generally accepted in the United States of America, which require that we plan and perform the audits 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 owned at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP Los Angeles, California January 26, 2004 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. During the fiscal year ended December 31, 2003, the fund paid a long-term capital gain distribution of $477,739,000. The fund also designated as a capital gain distribution a portion of earnings and profits paid to shareholders in redemption of their shares. As a result of recent tax legislation, individual shareholders are now eligible for reduced tax rates on qualified dividend income received during the year. For purposes of computing the dividends eligible for reduced tax rates, 85% of the dividends paid by the fund from net investment income are considered qualified dividend income. Corporate shareholders may exclude up to 70% of qualifying dividends received during the year. For purposes of computing this exclusion, 82% of the dividends paid by the fund from net investment income represent qualifying dividends. Certain states may exempt from income taxation that portion of the dividends paid from net investment income that was derived from direct U.S. government obligations. For purposes of computing this exclusion, 4% of the dividends paid by the fund from net investment income were derived from interest on direct U.S. government obligations. Dividends and distributions received by retirement plans such as IRAs, Keogh-type plans and 403(b) plans need not be reported as taxable income. However, many retirement plan trusts may need this information for their annual information reporting. SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION WHICH WILL BE MAILED IN JANUARY 2004 TO DETERMINE THE AMOUNTS TO BE INCLUDED ON THEIR 2003 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS. OTHER SHARE CLASS RESULTS (UNAUDITED) [Enlarge/Download Table] Class B, Class C, Class F and Class 529 Returns for periods ended December 31, 2003: 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 +20.30% +0.98%(1) Not reflecting CDSC +25.30% +1.68%(1) CLASS C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +24.22% +2.10%(2) Not reflecting CDSC +25.22% +2.10%(2) CLASS F SHARES(3) Not reflecting annual asset-based fee charged by sponsoring firm +26.18% +2.89%(2) CLASS 529-A SHARES Reflecting 5.75% maximum sales charge +18.95% +2.11%(4) Not reflecting maximum sales charge +26.19% +5.39%(4) CLASS 529-B SHARES Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase +20.05% +2.38%(4) Not reflecting CDSC +25.05% +4.46%(4) CLASS 529-C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +24.07% +5.34%(5) Not reflecting CDSC +25.07% +5.34%(5) CLASS 529-E SHARES(3) +25.70% +3.86%(6) CLASS 529-F SHARES(3) Not reflecting annual asset-based fee charged by sponsoring firm +26.05% +19.51%(7) Figures shown are past results and are not predictive of future periods. Current and future results may be lower or higher than those shown. Because share prices may decline, the value of your holdings may decrease. For the most current information and month-end results, visit americanfunds.com. (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. BOARD OF DIRECTORS, ADVISORY BOARD AND OFFICERS [Enlarge/Download Table] "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, 59 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, Inc: Fox Inc. MARY ANNE DOLAN, 56 2000 Founder and President, M.A.D., Inc. (communications company); former Editor-in-Chief, The Los Angeles Herald Examiner MARTIN FENTON, 68 2000 Chairman of the Board and CEO, Senior Resource Group LLC (development and management of senior living communities) LEONARD R. FULLER, 57 2002 President and CEO, Fuller Consulting (financial management consulting firm) CLAUDIO X. GONZALEZ LAPORTE, 69 2001 Chairman of the Board and CEO, Kimberly-Clark de Mexico, S.A. JOHN G. MCDONALD, 66 1976 The IBJ Professor of Finance, Graduate School of Business, Stanford University BAILEY MORRIS-ECK, 59 1993 Director and Programming Chair, WYPR Baltimore/ Washington (public radio station); Senior Associate, Financial News (London); Senior Associate, Reuters Foundation; Senior Fellow, Institute for International Economics; Consultant, The Independent of London RICHARD G. NEWMAN, 69 1996 Chairman of the Board and CEO, AECOM Technology Corporation (engineering, consulting and professional services OLIN C. ROBISON, PH.D., 67 1987 President of the Salzburg Seminar; President Emeritus, Middlebury College WILLIAM J. SPENCER, PH.D., 73 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 BOARDS WITHIN THE FUND COMPLEX(2) ON WHICH NAME AND AGE DIRECTOR SERVES OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR LOUISE H. BRYSON, 59 1 None MARY ANNE DOLAN, 56 3 None MARTIN FENTON, 68 16 None LEONARD R. FULLER, 57 14 None CLAUDIO X. GONZALEZ LAPORTE, 69 1 America Movil S.A.; General Electric Company; Grupo Alfa; Grupo Carso; The Home Depot; Kellogg Company; Kimberly-Clark Corp.; The Mexico Fund JOHN G. MCDONALD, 66 8 iStar Financial, Inc.; Plum Creek Timber Co.; Scholastic Corporation; Varian, Inc. BAILEY MORRIS-ECK, 59 3 The Nevis Fund, Inc. RICHARD G. NEWMAN, 69 13 Sempra Energy; Southwest Water Company OLIN C. ROBISON, PH.D., 67 3 None WILLIAM J. SPENCER, PH.D., 73 1 None "INTERESTED" DIRECTORS(4) YEAR FIRST ELECTED A DIRECTOR OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS NAME, AGE AND OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR THE POSITION WITH FUND OF THE FUND(1) PRINCIPAL UNDERWRITER OF THE FUND R. MICHAEL SHANAHAN, 65 1994 Chairman of the Board and Principal Executive Chairman of the Board Officer, Capital Research and Management Company; 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, 57 2000 President and Director, Capital Research and President Management Company; Director, American Funds Distributors, Inc.; (5) Director, American Funds Service Company; (5) Director, The Capital Group Companies, Inc.; (5) Director, Capital Group Research, Inc. (5) JAMES B. LOVELACE,(6) 47 1994 Senior Vice President and Director, Capital Senior Vice President Research and Management Company DONALD D. O'NEAL, 43 1994 Senior Vice President, Capital Research and Senior Vice President Management Company PAUL G. HAAGA, JR., 55 2002 Executive Vice President and Director, Capital Research and Management Company; Director, The Capital Group Companies, Inc.;(5) Director, American Funds Distributors, Inc.(5) "INTERESTED" DIRECTORS(4) NUMBER OF BOARDS WITHIN THE FUND COMPLEX(2) NAME, AGE AND ON WHICH POSITION WITH FUND DIRECTOR SERVES OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR R. MICHAEL SHANAHAN, 65 2 None Chairman of the Board JAMES F. ROTHENBERG, 57 3 None President JAMES B. LOVELACE,(6) 47 2 None Senior Vice President DONALD D. O'NEAL, 43 2 None Senior Vice President PAUL G. HAAGA, JR., 55 17 None Chairman Emeritus JON B. LOVELACE, JR., 77 Chairman Emeritus, Capital Research and Management Company ADVISORY BOARD MEMBERS YEAR FIRST ELECTED TO ADVISORY PRINCIPAL OCCUPATION(S) NAME AND AGE BOARD(1) DURING PAST FIVE YEARS THOMAS M. CROSBY, JR., 65 1995 Partner, Faegre & Benson (law firm) SAM L. GINN, 66 2003 Retired; former Chairman of the Board, Vodafone Group Plc.; former Chairman of the Board and CEO, AirTouch Communications ELLEN H. GOLDBERG, PH.D., 58 1998 President, Santa Fe Institute; Research Professor, University of New Mexico L. DANIEL JORNDT, 62 2003 Retired; former Chairman of the Board and CEO, Walgreen Company WILLIAM H. KLING, 61 1985 President, American Public Media Group LUIS G. NOGALES, 60 2003 President, Nogales Partners; Managing Director, Nogales Investors Management LLC (private equity fund) ROBERT J. O'NEILL, PH.D., 67 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., 69 1977 Managing Director, Partisan Management Group, Inc.; former Chairman of the Board, Novoste Corporation; former President and Director, Corvita Corporation ADVISORY BOARD MEMBERS NUMBER OF BOARDS WITHIN THE FUND COMPLEX(2) ON WHICH ADVISORY BOARD NAME AND AGE MEMBER SERVES OTHER DIRECTORSHIPS HELD(3) THOMAS M. CROSBY, JR., 65 1 None SAM L. GINN, 66 1 Chevron Texaco Corporation; Fremont Group; Hewlett-Packard Company ELLEN H. GOLDBERG, PH.D., 58 1 None L. DANIEL JORNDT, 62 1 Kellogg Company WILLIAM H. KLING, 61 6 Irwin Financial Corporation; St. Paul Companies LUIS G. NOGALES, 60 1 Arbitron, Inc.; Edison International; K-B Home; Kaufman & Broad, S.A. ROBERT J. O'NEILL, PH.D., 67 3 None NORMAN R. WELDON, PH.D., 69 3 Novoste Corporation 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, 54 1994 Senior Vice President, Capital Research and Senior Vice President Management Company JOYCE E. GORDON, 47 1998 Senior Vice President, Capital Research Company(5) Vice President ANNE M. LLEWELLYN, 56 1984 Associate, Capital Research and Management Vice President Company VINCENT P. CORTI, 47 1994 Vice President-- Fund Business Management Secretary Group, Capital Research and Management Company THOMAS M. ROWLAND, 62 1998 Senior Vice President, Capital Research and Treasurer Management Company; Director, American Funds Service Company(5) R. MARCIA GOULD, 49 1993 Vice President -- Fund Business Management Assistant Treasurer Group, Capital 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 AUGUST 11, 2003 (UNAUDITED) [Enlarge/Download Table] Shares outstanding (all classes) on record date (June 13, 2003) 2,170,491,631 Total shares voting on August 11, 2003 1,448,023,027 (66.7%) [Enlarge/Download Table] PROPOSAL 1: ELECTION OF DIRECTORS Percent Percent of shares of shares Director Votes for voting for Votes withheld withheld Louise H. Bryson 1,430,279,755 99% 17,743,272 1% Mary Anne Dolan 1,430,599,250 99 17,423,777 1 Martin Fenton 1,429,327,237 99 18,695,790 1 Leonard R. Fuller 1,430,165,275 99 17,857,752 1 Claudio X. Gonzalez Laporte 1,428,268,450 99 19,754,577 1 Paul G. Haaga, Jr. 1,430,267,886 99 17,755,141 1 James B. Lovelace 1,430,859,121 99 17,163,906 1 John G. McDonald 1,428,943,723 99 19,079,304 1 Bailey Morris-Eck 1,430,515,935 99 17,507,092 1 Richard G. Newman 1,429,340,877 99 18,682,150 1 Donald D. O'Neal 1,431,066,317 99 16,956,710 1 Olin C. Robison 1,430,496,294 99 17,526,733 1 James F. Rothenberg 1,430,949,449 99 17,073,578 1 R. Michael Shanahan 1,431,065,185 99 16,957,842 1 William J. Spencer 1,429,618,082 99 18,404,945 1 [Enlarge/Download Table] PROPOSAL 2: RATIFICATION OF ACCOUNTANTS Percent Percent Percent of shares of shares of shares Votes for voting for Votes against voting against Abstentions abstaining 1,420,846,347 98% 8,414,915 1% 18,761,765 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 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. Annual expenses for Class B shares were 0.79 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. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE INVESTMENT COMPANY OF AMERICA AND COLLEGEAMERICA CAREFULLY. THIS AND OTHER IMPORTANT INFORMATION IS CONTAINED IN THE 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 March 31, 2004, 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 25 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. Nearly 70% 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 Fund(SM) 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 Fund(SM) Fundamental Investors(SM) > The Investment Company of America(R) Washington Mutual Investors Fund(SM) 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 Trust(SM) The Bond Fund of America(SM) Capital World Bond Fund(R) Intermediate Bond Fund of America(R) U.S. Government Securities Fund(SM) 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 America(SM) The Tax-Exempt Bond Fund of America(R) STATE-SPECIFIC TAX-EXEMPT FUNDS The Tax-Exempt Fund of California(R) The Tax-Exempt Fund of Maryland(R) The Tax-Exempt Fund of Virginia(R) o MONEY MARKET FUNDS The Cash Management Trust of America(R) The Tax-Exempt Money Fund of America(SM) The U.S. Treasury Money Fund of America(SM) THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust Lit. No. MFGEAR-904-0204 Litho in USA BDC/L/8060 Printed on recycled paper ITEM 2 - Code of Ethics This 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 Fees billed by the registrant's auditors for each of the last two fiscal years, including 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 a description of the nature of the services comprising the fees, are listed below: Registrant: a) Audit Fees: 2002 $87,000 2003 $97,000 b) Audit- Related Fees: 2002 $1,500 2003 none The audit-related fees consist of assurance and related services relating to the fund's investments in a non-U.S. jurisdiction. c) Tax Fees: 2002 $ 8,000 2003 $10,000 The tax fees consist of professional services relating to the preparation of the fund's tax returns including returns relating to the fund's investments in a non-U.S. jurisdiction. d) All Other Fees: 2002 none 2003 none ITEM 4 - Principal Accountant Fees and Services (continued) 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): b) Audit- Related Fees: 2002 none 2003 none c) Tax Fees: 2002 none 2003 none d) All Other Fees: 2002 none 2003 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 adviser and affiliates were $2,086,000 for fiscal year 2002 and $10,000 for fiscal year 2003. 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 Disclosure for Listed Companies 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 ITEM 9 - 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 10 - 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 8, 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: March 8, 2004 By /s/ Thomas M. Rowland Thomas M. Rowland, Treasurer Date: March 8, 2004

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-CSR’ Filing    Date    Other Filings
3/31/04
Filed on / Effective on:3/10/04
3/8/04
2/6/04
1/31/04
1/26/04
For Period End:12/31/0324F-2NT,  NSAR-B
8/11/03DEF 14A
6/30/03N-CSR,  NSAR-A
6/13/03
12/31/0224F-2NT,  N-30D,  NSAR-B
10/9/02
9/16/02
5/15/02485BPOS
3/1/02
2/19/02
2/15/02485BPOS
9/11/01DEF 14A
3/15/01485BPOS
3/24/00
3/15/00
8/31/98N-30D
12/31/93
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