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, 2005
Date of reporting period: June 30, 2005
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)
<Page>
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
ICA THE INVESTMENT COMPANY OF AMERICA
[front cover - American flags hanging on old downtown office buildings]
Semi-annual report for the six months ended June 30, 2005
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
organization ranks among the nation's three largest mutual fund families. For
more than seven decades, Capital Research and Management Company,(SM) the
American Funds adviser, has invested with a long-term focus based on thorough
research and attention to risk.
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT
AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET
ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS
WOULD HAVE BEEN LOWER.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended June 30, 2005:
1 year 5 years 10 years
Class A shares
Reflecting 5.75% maximum sales charge +1.52% +1.59% +10.71%
The fund's investment adviser waived 5% of its management fees from September 1,
2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005.
Fund results shown reflect the waiver, without which they would have been lower.
Please see the Financial Highlights table on page 20 for details.
The fund's 30-day yield for Class A shares as of July 31, 2005, reflecting the
5.75% maximum sales charge and calculated in accordance with the Securities and
Exchange Commission formula, was 1.84%, which reflects a fee waiver (1.82%
without the fee waiver).
Results for other share classes can be found on page 3. Please see the inside
back cover for important information about other share classes.
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.
FELLOW SHAREHOLDERS:
[photo of an American flag hanging on old downtown office building]
Both the U.S. stock market and the Investment Company of America posted
relatively flat returns for the first half of 2005, as strong corporate profit
margins were tempered by rising oil prices and an increase in short-term
interest rates.
For the six months ended June 30, 2005, ICA earned 0.2%, assuming the
reinvestment of dividends totaling 26 cents a share paid in March and June. The
unmanaged Standard & Poor's 500 Composite Index, which tracks relatively large
companies listed primarily on U.S. exchanges, posted a total return of -0.8%.
ICA's income return amounted to 0.9%, in line with that of the S&P 500.
THE SIX MONTHS IN REVIEW
Although six-month returns remained flat, there were strong crosscurrents
beneath the surface, including sharp increases in the price of crude oil, the
beginnings of a recovery in the U.S. dollar, tensions over trade with China and
fears of inflation. In addition, the Federal Reserve Board increased the federal
funds rate (the rate banks charge each other for overnight loans) four times
throughout the period, from 2.25% to 3.25%. Although short-term interest rates
rose as a result, long-term rates unexpectedly remained stable, in part due to
inflation remaining lower than anticipated.
Perhaps the biggest impact to the portfolio was the increase in oil prices. By
the end of June, crude oil prices had hit a new high, surpassing $60 a barrel.
The largest beneficiaries of this trend were energy companies, which constitute
10.7% of ICA's overall portfolio. Holdings include "Shell" Transport and
Trading, the second-largest position in the portfolio, which increased 13.1% for
the period, and Burlington Resources, an independent oil and gas producer, which
gained 27.0%.
[Begin Sidebar]
2005 RESULTS AT A GLANCE
For the six months ended June 30 (with dividends reinvested)
Standard & Lipper
Poor's 500 Growth & Income
ICA Composite Index Funds Average*
Income return +0.85% +0.89% n/a
Capital return -0.69% -1.70% n/a
Total return +0.16% - 0.81% - 0.24%
*Average of 1,264 growth-and-income funds (includes all share classes). Lipper
averages do not reflect the effects of sales charges.
[End Sidebar]
Other sectors of the market, particularly cyclical companies that had previously
done well, suffered from a combination of rising oil prices, higher short-term
interest rates and concerns about a slowing economy. Such holdings include
Alcoa, an aluminum producer, down 16.8%; and MeadWestvaco, a paper manufacturer,
down 17.3%.
For other industries, special situations dictated results. Insurance companies,
for example, enjoyed stronger pricing and stable business costs. Health care
companies, particularly hospitals and HMOs, also benefited from greater pricing
power.
A LONG-TERM PERSPECTIVE
As we enter the second half of 2005, we remain cautiously optimistic. The high
price of crude oil has raised concerns about inflation, the economy and
long-term interest rates, which could cause volatility in the stock market.
Although it is impossible to predict short-term market fluctuations, we are
confident in our ability to find fundamentally strong companies that we believe
will stand the test of time. Our in-depth research process, attention to risk
and long-term outlook have helped the fund to hold its value relatively well
during periods of declining stock prices and to produce competitive returns
during periods of market strength. Over the past 10-year period ended June 30,
2005, ICA has produced an average annual total return of 11.4%, surpassing the
9.9% return of the S&P 500 for the same period.
As always, we appreciate your long-term commitment to investing and thank you
for your support.
Sincerely,
/s/ R. Michael Shanahan /s/ James F. Rothenberg
R. Michael Shanahan James F. Rothenberg
Vice Chairman and President
Chief Executive Officer
August 8, 2005
Martin Fenton, an independent Director of the fund since 2000, has been elected
non-executive chairman of the Board. R. Michael Shanahan, the previous chairman,
has been elected vice chairman and will remain as chief executive officer. As
independent Board chair pursuant to recently adopted Securities and Exchange
Commission regulations, Mr. Fenton will chair Board meetings, including
executive sessions of the independent Directors, and will be responsible for
Board agendas, but will not have other executive or management responsibilities
with the fund. He will remain unaffiliated with Capital Research and Management
Company, the fund's investment adviser, and any of its affiliates.
For current information about the fund, visit americanfunds.com.
OTHER SHARE CLASS RESULTS unaudited
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future
periods. Current and future results may be lower or higher than those shown.
Share prices and returns will vary, so investors may lose money. For the most
current information and month-end results, visit americanfunds.com.
Average annual total returns
for periods ended June 30, 2005: 1 year 5 years 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 +1.84% +1.65% +2.65%(1)
Not reflecting CDSC +6.84% +2.00% +2.81%(1)
Class C shares
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase +5.78% -- +3.32%(2)
Not reflecting CDSC +6.78% -- +3.32%(2)
Class F shares(3)
Not reflecting annual asset-based fee charged by
sponsoring firm +7.58% -- +4.12%(2)
Class 529-A shares(4)
Reflecting 5.75% maximum sales charge +1.34% -- +4.00%(5)
Not reflecting maximum sales charge +7.53% -- +5.84%(5)
Class 529-B shares(4)
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase +1.64% -- +4.12%(5)
Not reflecting CDSC +6.64% -- +4.92%(5)
Class 529-C shares(4)
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase +5.65% -- +5.42%(6)
Not reflecting CDSC +6.65% -- +5.42%(6)
Class 529-E shares(3,4) +7.19% -- +4.85%(7)
Class 529-F shares(3,4)
Not reflecting annual asset-based fee charged by
sponsoring firm +7.51% -- +12.26%(8)
The fund's investment adviser waived 5% of its management fees from September 1,
2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005.
In addition, the fund's principal underwriter also waived fees related to
distribution services for Class 529-F. Fund results shown reflect these waivers,
without which they would have been lower. Please see the Financial Highlights
table on page 20 for details.
(1) From March 15, 2000, when Class B shares were first sold.
(2) 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) Results shown do not reflect the $10 initial account set up fee and an
annual $10 account maintenance fee.
(5) From February 15, 2002, when Class 529-A and Class 529-B shares were first
sold.
(6) From February 19, 2002, when Class 529-C shares were first sold.
(7) From March 1, 2002, when Class 529-E shares were first sold.
(8) From September 16, 2002, when Class 529-F shares were first sold.
SUMMARY INVESTMENT PORTFOLIO, June 30, 2005
unaudited
The following summary investment portfolio is designed to streamline the report
and help investors better focus on a fund's principal holdings. For details on
how to obtain a complete schedule of portfolio holdings, please see the inside
back cover.
[begin pie chart]
Industry sector diversification (percent of net assets)
Financials 11.39 %
Industrials 11.18
Energy 10.73
Consumer discretionary 10.03
Consumer staples 9.36
Bonds & notes 1.32
Convertible Securities .20
Cash & equivalents 14.76
Other industries 31.03
[end pie chart]
Shares Market Percent
value of net
Common stocks - 83.72% (000) assets
Energy - 10.73%
Baker Hughes Inc. 10,875,000 $ 556,365 0.73%
Burlington Resources Inc. 16,940,400 935,788 1.24
Chevron Corp. 17,185,000 960,985 1.27
ENI SpA 30,880,000 795,388 1.05
Marathon Oil Corp. 11,050,000 589,738 .78
Royal Dutch Petroleum Co. (New York registered) 17,470,000 1,133,803
"Shell" Transport and Trading Co., PLC 2,900,000 28,196
"Shell" Transport and Trading Co., PLC (ADR) (New York registered) 7,000,000 406,420 2.07
Schlumberger Ltd. 9,350,000 710,039 .94
TOTAL SA 2,505,000 588,300 .78
Other securities 1,415,953 1.87
8,120,975 10.73
Materials - 6.03%
Alcoa Inc. 19,326,400 504,999 .67
Dow Chemical Co. 23,232,200 1,034,530 1.37
Other securities 3,023,601 3.99
4,563,130 6.03
Industrials - 11.18%
Boeing Co. 13,000,000 858,000 1.13
Caterpillar Inc. 11,191,200 1,066,633 1.41
Deere & Co. 8,200,000 537,018 .71
General Electric Co. 31,250,000 1,082,813 1.43
Tyco International Ltd. 37,630,100 1,098,799 1.45
United Technologies Corp. 10,750,000 552,013 .73
Other securities 3,264,943 4.32
8,460,219 11.18
Consumer discretionary - 10.03%
Best Buy Co., Inc. 10,528,200 721,708 .95
General Motors Corp. 12,950,000 440,300 .58
Limited Brands, Inc. 20,749,400 444,452 .59
Lowe's Companies, Inc. 20,568,300 1,197,486 1.58
Target Corp. 20,850,000 1,134,449 1.50
Time Warner Inc. (1) 44,750,000 747,773 .99
Other securities 2,906,252 3.84
7,592,420 10.03
Consumer staples - 9.36%
Altria Group, Inc. 55,000,000 3,556,300 4.70
PepsiCo, Inc. 11,200,000 604,016 .80
Other securities 2,922,868 3.86
7,083,184 9.36
Health care - 5.69%
AstraZeneca PLC (ADR) 4,534,500 187,093
AstraZeneca PLC (Sweden) 4,609,500 191,563
AstraZeneca PLC (United Kingdom) 5,393,900 223,303 .80
Bristol-Myers Squibb Co. 21,680,300 541,574 .71
Eli Lilly and Co. 9,110,000 507,518 .67
Other securities 2,658,414 3.51
4,309,465 5.69
Financials - 11.39%
Allstate Corp. 8,050,000 480,988 .63
American International Group, Inc. 10,463,900 607,953 .80
Citigroup Inc. 13,725,000 634,507 .84
Fannie Mae 22,415,600 1,309,071 1.73
Freddie Mac 3,150,000 205,475 .27
HSBC Holdings PLC (ADR) 1,079,588 85,989
HSBC Holdings PLC (United Kingdom) 27,697,111 441,588 .70
J.P. Morgan Chase & Co. 18,836,200 665,295 .88
Lloyds TSB Group PLC 76,500,000 648,209 .86
Washington Mutual, Inc. 21,500,000 874,835 1.15
Wells Fargo & Co. 7,330,000 451,381 .60
Other securities 2,216,003 2.93
8,621,294 11.39
Information technology - 9.16%
Cisco Systems, Inc. (1) 25,728,800 491,677 .65
Hewlett-Packard Co. 33,700,000 792,287 1.05
International Business Machines Corp. 7,295,000 541,289 .71
Microsoft Corp. 42,280,000 1,050,235 1.39
Texas Instruments Inc. 32,320,200 907,228 1.20
Other securities 3,148,292 4.16
6,931,008 9.16
Telecommunication services - 7.06%
BellSouth Corp. 30,800,000 818,356 1.08
SBC Communications Inc. 61,450,000 1,459,438 1.93
Sprint Corp. 17,885,000 448,735 .59
Telefonica, SA 29,753,631 486,942 .65
Verizon Communications Inc. 20,800,000 718,640 .95
Vodafone Group PLC 113,500,000 276,521
Vodafone Group PLC (ADR) 22,000,000 535,040 1.07
Other securities 599,630 .79
5,343,302 7.06
Utilities - 2.33%
Dominion Resources, Inc. 7,131,912 523,411 .69
Other securities 1,245,308 1.64
1,768,719 2.33
Miscellaneous - 0.76%
Other common stocks in initial period of acquisition 575,177 .76
Total common stocks (cost: $45,685,559,000) 63,368,893 83.72
Shares Market Percent
value of net
Convertible securities - 0.20% (000) assets
Financials - 0.18%
Fannie Mae 5.375% convertible preferred 2049 970 94,284 .12
Other securities 44,422 .06
138,706 .18
Other - 0.02% 11,003 .02
Total convertible securities (cost: $136,658,000) 149,709 .20
Principal Market Percent
amount value of net
Bonds & notes - 1.32% (000) (000) assets
Consumer discretionary - 0.33%
General Motors Acceptance Corp. 6.875%-7.25% 2011-2012 $ 168,757 156,766
General Motors Corp. 7.125%-7.20% 2011-2013 103,393 95,387 .33
252,153 .33
Telecommunication services - 0.39%
SBC Communications Inc. 4.125%-5.10% 2009-2014 240,000 242,039 .32
Other securities 52,983 .07
295,022 .39
Mortgage-backed obligations - 0.60% (2)
Fannie Mae 6.00%-6.50% 2017 437,349 453,650 .60
Total bonds & notes (cost: $964,792,000) 1,000,825 1.32
Principal Market Percent
amount value of net
Short-term securities - 14.63% (000) (000) assets
BellSouth Corp. 3.00%-3.09% due 7/8-7/15/2005 (3) 128,000 127,850 .17
CAFCO, LLC 3.03%-3.32% due 7/11-9/12/2005 (3) 259,200 258,451
Citicorp 3.07% due 7/21/2005 35,000 34,940 .39
ChevronTexaco Funding Corp. 3.03%-3.05% due 7/13-7/22/2005 121,100 120,925 .16
Edison Asset Securitization LLC 3.11%-3.32% due 8/1-9/12/2005 (3) 136,802 136,249
General Electric Capital Corp. 3.04% due 7/12-7/13/2005 94,700 94,602
General Electric Capital Services, Inc. 3.03% due 7/11/2005 50,000 49,954 .37
Fannie Mae 3.21% due 8/10/2005 54,613 54,413 .07
Federal Home Loan Bank 2.92%-3.36% due 7/1-9/30/2005 1,603,302 1,595,040 2.11
Freddie Mac 2.93%-3.19% due 7/1-9/15/2005 942,579 939,910 1.24
Hewlett-Packard Co. 3.10%-3.26% due 7/25-7/29/2005 (3) 275,000 274,358 .36
New Center Asset Trust Plus 3.06%-3.25% due 7/6-7/29/2005 75,000 74,857 .10
Park Avenue Receivables Co., LLC 3.07%-3.27% due 7/8-8/18/2005 (3) 155,694 155,256
Preferred Receivables Funding Corp. 3.14%-3.34% due 7/18-9/20/2005 (3) 125,000 124,494 .37
PepsiCo Inc. 3.01%-3.22% due 7/6-8/2/2005 (3) 201,300 200,924 .27
SBC Communications Inc. 3.08%-3.11% due 7/8-7/19/2005 (3) 100,200 100,073 .13
U.S. Treasury Bills 2.695%-3.066% due 7/7-9/29/2005 1,394,350 1,390,251 1.84
Verizon Network Funding Corp. 3.08%-3.33% due 7/6-8/29/2005 121,000 120,650 .16
Other securities 5,218,526 6.89
Total short-term securities (cost: $11,071,776,000) 11,071,723 14.63
Total investment securities (cost: $57,858,785,000) 75,591,150 99.87
Other assets less liabilities 97,751 .13
Net assets $75,688,901 100.00%
"Miscellaneous" securities include holdings in their initial period of
acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the
summary investment portfolio.
INVESTMENTS IN AFFILIATES
A company is considered to be an affiliate of the fund under the Investment
Company Act of 1940 if the fund's holdings in that company represent 5% or more
of the outstanding voting shares of that company. Further details on these
holdings and related transactions during the six months ended June 30, 2005,
appear below.
Market value
Dividend of affiliates
Company Beginning Purchases Sales Ending income at 6/30/2005
shares shares (000) (000)
Limited Brands, Inc. 20,749,400 - - 20,749,400 $6,225 $444,452
(1) Security did not produce income during the last 12 months.
(2) 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.
(3) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities, including
those in "Other securities" in the summary investment portfolio, was
$4,095,945,000, which represented 5.41% of the net assets of the fund.
ADR = American Depositary Receipts
See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of assets and liabilities unaudited
at June 30, 2005 (dollars and shares in thousands,
except per-share amounts)
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $57,601,605) $75,146,698
Affiliated issuers (cost: $257,180) 444,452 $75,591,150
Cash denominated in non-U.S. currencies
(cost: $8,728) 9,426
Cash 28,478
Receivables for:
Sales of investments 82,009
Sales of fund's shares 67,155
Dividends and interest 154,714 303,878
75,932,932
Liabilities:
Payables for:
Purchases of investments 141,575
Repurchases of fund's shares 60,431
Investment advisory services 13,502
Services provided by affiliates 24,764
Deferred Directors' and Advisory Board compensation 3,279
Other fees and expenses 480 244,031
Net assets at June 30, 2005 $75,688,901
Net assets consist of:
Capital paid in on shares of capital stock $55,939,869
Undistributed net investment income 561,210
Undistributed net realized gain 1,455,008
Net unrealized appreciation 17,732,814
Net assets at June 30, 2005 $75,688,901
Authorized shares of
capital stock - $.001 par value Net assets Shares outstanding Net asset value per share
(1)
Class A 2,500,000 $64,225,205 2,103,177 $30.54
Class B 250,000 3,687,412 121,186 30.43
Class C 250,000 2,762,640 90,946 30.38
Class F 250,000 1,238,297 40,591 30.51
Class 529-A 325,000 712,742 23,359 30.51
Class 529-B 75,000 169,003 5,549 30.46
Class 529-C 150,000 212,732 6,983 30.46
Class 529-E 75,000 30,739 1,009 30.47
Class 529-F 75,000 6,263 205 30.50
Class R-1 75,000 27,660 909 30.44
Class R-2 100,000 414,130 13,600 30.45
Class R-3 300,000 577,396 18,937 30.49
Class R-4 75,000 198,180 6,495 30.51
Class R-5 150,000 1,426,502 46,717 30.53
Total 4,650,000 $ 75,688,901 2,479,663
(1) Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for classes A and
529-A, for which the maximum offering prices per share were $32.40 and
$32.37, respectively.
See Notes to Financial Statements
Statement of operations unaudited
for the six months ended June 30, 2005 (dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding
tax of $20,172; also includes
$6,225 from affiliates) $822,124
Interest (net of non-U.S. withholding
tax of $1) 188,558 $1,010,682
Fees and expenses:
Investment advisory services 89,296
Distribution services 110,653
Transfer agent services 28,282
Administrative services 7,138
Reports to shareholders 1,632
Registration statement and prospectus 1,440
Postage, stationery and supplies 4,196
Directors' and Advisory Board compensation 471
Auditing and legal 121
Custodian 1,201
State and local taxes 668
Other 186
Total expenses before reimbursements/waivers 245,284
Less reimbursement/waiver of expenses:
Investment advisory services 6,691
Distribution services 2
Administrative services 306
Total expenses after reimbursement/waiver of expenses 238,285
Net investment income 772,397
Net realized gain and unrealized
depreciation on investments
and non-U.S. currency:
Net realized gain (loss) on:
Investments 1,458,378
Non-U.S. currency transactions (1,582) 1,456,796
Net unrealized depreciation on:
Investments (2,150,455)
Non-U.S. currency translations (308) (2,150,763)
Net realized gain and
unrealized depreciation
on investments and non-U.S. currency (693,967)
Net increase in net assets resulting
from operations $78,430
See Notes to Financial Statements
Statements of changes in net assets (dollars in thousands)
Six months Year ended
ended June 30, December 31,
2005* 2004
Operations:
Net investment income $772,397 $1,392,244
Net realized gain on investments and
non-U.S. currency transactions 1,456,796 918,377
Net unrealized (depreciation) appreciation
on investments and non-U.S. currency translations (2,150,763) 4,370,213
Net increase in net assets
resulting from operations 78,430 6,680,834
Dividends and distributions paid to
shareholders:
Dividends from net investment income and non-U.S. currency gains (612,361) (1,194,353)
Distributions from net realized gain
on investments - (863,164)
Total dividends and distributions paid
to shareholders (612,361) (2,057,517)
Capital share transactions 355,427 4,709,994
Total (decrease) increase in net assets (178,504) 9,333,311
Net assets:
Beginning of period 75,867,405 66,534,094
End of period (including undistributed net investment income:
$561,210 and $401,174, respectively) $75,688,901 $75,867,405
*Unaudited
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Investment Company of America (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital and income,
placing greater emphasis on future dividends than on current income.
The fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica(R) savings plan share classes and five retirement plan share
classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C,
529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be
utilized to save for college education. The five retirement plan share classes
(R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry
any conversion rights. The fund's share classes are described below:
- ---------------------------------------------------------------------------------------------------------
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 0% 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
- ---------------------------------------------------------------------------------------------------------
CollegeAmerica is a registered trademark of the Virginia College Savings
Plan.(sm)
Holders of all share classes have equal pro rata rights to assets, dividends and
liquidation proceeds. Each share class has identical voting rights, except for
the exclusive right to vote on matters affecting only its class. Share classes
have different fees and expenses ("class-specific fees and expenses"), primarily
due to different arrangements for distribution, administrative and shareholder
services. Differences in class-specific fees and expenses will result in
differences in net investment income and, therefore, the payment of different
per-share dividends by each class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to
comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the fund:
SECURITY VALUATION - Equity securities are valued at the official
closing price of, or the last reported sale price on, the exchange or
market on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Prices for each security are
taken from the principal exchange or market in which the security
trades. Fixed-income securities, including short-term securities
purchased with more than 60 days left to maturity, are valued at
prices obtained from an independent pricing service when such prices
are available. However, where the investment adviser deems it
appropriate, such securities will be valued at the mean quoted bid and
asked prices (or bid prices, if asked prices are not available) or at
prices for securities of comparable maturity, quality and type.
Securities with both fixed-income and equity characteristics, or
equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by
the investment adviser. Short-term securities purchased within 60 days
to maturity are valued at amortized cost, which approximates market
value. The value of short-term securities originally purchased with
maturities greater than 60 days are determined based on an amortized
value to par when they reach 60 days or less remaining to maturity.
The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a
specific industry, state or region. Forward currency contracts are
valued at the mean of representative quoted bid and asked prices.
Securities and other assets for which representative market quotations
are not readily available are fair valued as determined in good faith
under procedures adopted by authority of the fund's Board of
Directors. Various factors may be reviewed in order to make a good
faith determination of a security's fair value. These factors include,
but are not limited to, the type and cost of the security; contractual
or legal restrictions on resale of the security; relevant financial or
business developments of the issuer; actively traded similar or
related securities; conversion or exchange rights on the security;
related corporate actions; significant events occurring after the
close of trading in the security; and changes in overall market
conditions.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. Dividend income is recognized on the ex-dividend date
and interest income is recognized on an accrual basis. Market
discounts, premiums and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) and realized and unrealized gains
and losses are allocated daily among the various share classes based
on their relative net assets. Class-specific fees and expenses, such
as distribution, administrative and shareholder services, are charged
directly to the respective share class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and
distributions paid to shareholders are recorded on the ex-dividend
date.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including
investment securities, denominated in non-U.S. currencies are
translated into U.S. dollars at the exchange rates in effect at the
end of the reporting period. Purchases and sales of investment
securities and income and expenses are translated into U.S. dollars at
the exchange rates on the dates of such transactions. In the
accompanying financial statements, the effects of changes in non-U.S.
exchange rates on investment securities are included with the net
realized gain or loss and net unrealized appreciation or depreciation
on investments. The realized gain or loss and unrealized appreciation
or depreciation resulting from all other transactions denominated in
non-U.S. currencies are disclosed separately.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may
include, but are not limited to, investment and repatriation restrictions;
revaluation of currencies; adverse political, social and economic developments;
government involvement in the private sector; limited and less reliable investor
information; lack of liquidity; certain local tax law considerations; and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. withholding
taxes paid.
3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intends to distribute substantially
all of its net taxable income and net capital gains each year. The fund is not
subject to income taxes to the extent such distributions are made.
DISTRIBUTIONS - Distributions paid to shareholders are based on net investment
income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized gains for financial reporting purposes.
These differences are due primarily to differing treatment for items such as
non-U.S. currency gains and losses; short-term capital gains and losses; capital
losses related to sales of certain securities within 30 days of purchase;
deferred expenses; cost of investments sold; and paydowns on investments. The
fiscal year in which amounts are distributed may differ from the year in which
the net investment income and net realized gains are recorded by the fund for
financial reporting purposes. As of June 30, 2005, the cost of investment
securities for federal income tax purposes was $57,856,175,000.
As of June 30, 2005, the components of distributable earnings on a tax basis
were as follows (dollars in thousands):
Undistributed net investment income and non-U.S. currency gains $562,926
Undistributed short-term capital gains 27,908
Undistributed long-term capital gains 1,430,417
Gross unrealized appreciation on investment securities 18,918,982
Gross unrealized depreciation on investment securities (1,184,007)
Net unrealized appreciation on investment securities 17,734,975
During the six months ended June 30, 2005, the fund realized, on a tax basis, a
net capital gain of $1,458,325,000.
The tax character of distributions paid to shareholders was as follows (dollars
in thousands):
Six months ended June 30, 2005
Distributions from Distributions from Total
ordinary income long-term capital gains distributions paid
Share class
Class A $ 546,190 - $ 546,190
Class B 17,102 - 17,102
Class C 11,814 - 11,814
Class F 9,779 - 9,779
Class 529-A 5,366 - 5,366
Class 529-B 610 - 610
Class 529-C 769 - 769
Class 529-E 185 - 185
Class 529-F 45 - 45
Class R-1 113 - 113
Class R-2 1,743 - 1,743
Class R-3 3,758 - 3,758
Class R-4 1,437 - 1,437
Class R-5 13,450 - 13,450
Total $ 612,361 - $ 612,361
Year ended December 31, 2004
Distributions from Distributions from Total
ordinary income long-term capital gains distributions paid
Share class
Class A $ 1,074,604 $ 738,649 $ 1,813,253
Class B 33,455 41,997 75,452
Class C 22,209 30,628 52,837
Class F 18,386 13,657 32,043
Class 529-A 8,408 6,944 15,352
Class 529-B 1,051 1,740 2,791
Class 529-C 1,270 2,100 3,370
Class 529-E 290 301 591
Class 529-F 61 56 117
Class R-1 172 255 427
Class R-2 2,737 4,069 6,806
Class R-3 5,165 5,511 10,676
Class R-4 1,396 1,295 2,691
Class R-5 25,149 15,962 41,111
Total $ 1,194,353 $ 863,164 $ 2,057,517
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. The Board of Directors approved an amended agreement effective February
16, 2005, lowering the rate to 0.219% on month-end net assets in excess of $89
billion. CRMC is currently waiving a portion of these fees. At the beginning of
the period, CRMC was waiving 5% of these fees and increased the waiver to 10% on
April 1, 2005. During the six months ended June 30, 2005, the total investment
advisory services fees waived by CRMC were $6,691,000. As a result, the fee
shown on the accompanying financial statements of $89,296,000, which was
equivalent to an annualized rate of 0.240%, was reduced to $82,605,000, or
0.222% of month-end net assets.
CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
DISTRIBUTION SERVICES - The fund has adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Directors approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily
net assets, ranging from 0.25% to 1.00% as noted below. In some cases,
the Board of Directors has approved expense amounts lower than plan
limits. All share classes may use up to 0.25% of average daily net
assets to pay service fees, or to compensate AFD for paying service
fees, to firms that have entered into agreements with AFD for
providing certain shareholder services. Expenses in excess of these
amounts, up to approved limits, may be used to compensate dealers and
wholesalers for shares sold. AFD is currently waiving a portion of
these fees to the extent the amounts paid to qualified dealers or
advisers was less than the approved limit. During the six months ended
June 30, 2005, the total distribution services fees waived by AFD were
$2,000, which related to Class 529-F.
For classes A and 529-A, the Board of Directors has also approved the
reimbursement of dealer and wholesaler commissions paid by AFD for
certain shares sold without a sales charge. Each class reimburses AFD
for amounts billed within the prior 15 months but only to the extent
that the overall annual expense limit of 0.25% is not exceeded. As of
June 30, 2005, there were no unreimbursed expenses subject to
reimbursement for classes A or 529-A.
------------------------------------------------ ----------------------------- -----------------------------
Share class Currently approved limits Plan limits
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.25% 0.25%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes B and 529-B 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes C, 529-C and R-1 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class R-2 0.75 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes 529-E and R-3 0.50 0.75
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes F, 529-F and R-4 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
AFS for classes A and B. Under this agreement, these share classes
compensate AFS for transfer agent services including shareholder
recordkeeping, communications and transaction processing. AFS is also
compensated for certain transfer agent services provided to all other
share classes from the administrative services fees paid to CRMC
described below.
ADMINISTRATIVE SERVICES - The fund has an administrative services
agreement with CRMC to provide transfer agent and other related
shareholder services for all classes of shares other than classes A
and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for
Class R-5) based on its respective average daily net assets. Each
relevant class also pays AFS additional amounts for certain transfer
agent services. CRMC and AFS may use these fees to compensate third
parties for performing these services. During the six months ended
June 30, 2005, CRMC agreed to pay AFS a portion of these fees for
classes R-1 and R-2. For the six months ended June 30, 2005, the total
administrative services fees paid by CRMC were $331 and $306,000 for
classes R-1 and R-2, respectively. Administrative services fees are
presented gross of any payments made by CRMC. Each 529 share class is
subject to an additional annual administrative services fee of 0.10%
of its respective average daily net assets; this fee is payable to the
Commonwealth of Virginia for the maintenance of the CollegeAmerica
plan. Although these amounts are included with administrative services
fees in the accompanying financial statements, the Commonwealth of
Virginia is not considered a related party.
Expenses under the agreements described above for the six months ended
June 30, 2005, were as follows (dollars in thousands):
--------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent Administrative services
services services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
CRMC Transfer agent Commonwealth of
administrative services Virginia
services administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class A $72,020 $26,553 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 18,110 1,729 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 13,435 Included $2,015 $277 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 1,503 Included 902 93 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 599 Included 495 43 $330
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 799 Included 120 33 80
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 988 Included 148 33 99
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 71 Included 21 2 14
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 7 Included 4 -* 3
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 133 Included 20 7 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 1,446 Included 289 821 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 1,341 Included 402 62 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 201 Included 121 6 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 695 3 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $110,653 $28,282 $5,232 $1,380 $526
--------------------------------------------------------------------------------------------------------------
* Amount less than one thousand.
DEFERRED DIRECTORS' AND ADVISORY BOARD COMPENSATION - Since the adoption of the
deferred compensation plan in 1993, Directors and Advisory Board members who are
unaffiliated with CRMC may elect to defer the cash payment of part or all of
their compensation. These deferred amounts, which remain as liabilities of the
fund, are treated as if invested in shares of the fund or other American Funds.
These amounts represent general, unsecured liabilities of the fund and vary
according to the total returns of the selected funds. Directors' and Advisory
Board compensation of $471,000, shown on the accompanying financial statements,
includes $396,000 in current fees (either paid in cash or deferred) and a net
increase of $75,000 in the value of the deferred amounts.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Directors received any compensation directly from the fund.
5. WARRANTS
As of June 30, 2005, the fund had warrants outstanding which may be exercised at
any time for the purchase of 819,437 Class A shares at approximately $5.24 per
share. If these warrants had been exercised as of June 30, 2005, the net asset
value of Class A shares would have been reduced by less than $0.01 per share.
6. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Reinvestments of
Share class Sales(1) dividends and distributions
Amount Shares Amount Shares
Six months ended June 30, 2005
Class A $ 2,888,073 95,162 $ 506,695 16,446
Class B 202,360 6,698 16,435 535
Class C 289,721 9,600 11,186 365
Class F 191,923 6,332 8,772 285
Class 529-A 102,644 3,387 5,365 174
Class 529-B 17,916 592 610 20
Class 529-C 31,620 1,045 769 25
Class 529-E 4,339 144 185 6
Class 529-F 1,497 49 45 1
Class R-1 10,225 337 112 4
Class R-2 96,855 3,200 1,742 57
Class R-3 142,504 4,699 3,756 122
Class R-4 94,061 3,098 1,437 47
Class R-5 92,126 3,025 13,300 432
Total net increase
(decrease) $ 4,165,864 137,368 $ 570,409 18,519
Year ended December 31, 2004
Class A $ 6,876,973 235,443 $ 1,692,780 56,793
Class B 663,196 22,803 72,958 2,443
Class C 778,916 26,808 50,567 1,695
Class F 506,063 17,338 29,160 979
Class 529-A 216,120 7,391 15,351 514
Class 529-B 46,827 1,607 2,790 93
Class 529-C 67,411 2,309 3,370 112
Class 529-E 9,407 323 591 20
Class 529-F 2,328 79 116 4
Class R-1 12,156 418 427 14
Class R-2 195,647 6,727 6,804 227
Class R-3 301,164 10,320 10,669 357
Class R-4 85,334 2,912 2,690 90
Class R-5 193,400 6,618 40,829 1,371
Total net increase
(decrease) $ 9,954,942 341,096 $ 1,929,102 64,712
Share class Repurchases(1) Net (decrease) increase
Amount Shares Amount Shares
Six months ended June 30, 2005
Class A $ (3,590,313) (118,236) $ (195,545) (6,628)
Class B (188,024) (6,222) 30,771 1,011
Class C (210,154) (6,966) 90,753 2,999
Class F (163,077) (5,377) 37,618 1,240
Class 529-A (16,622) (549) 91,387 3,012
Class 529-B (3,634) (120) 14,892 492
Class 529-C (6,894) (228) 25,495 842
Class 529-E (689) (23) 3,835 127
Class 529-F (367) (12) 1,175 38
Class R-1 (5,676) (188) 4,661 153
Class R-2 (43,542) (1,440) 55,055 1,817
Class R-3 (59,188) (1,946) 87,072 2,875
Class R-4 (16,056) (530) 79,442 2,615
Class R-5 (76,610) (2,523) 28,816 934
Total net increase
(decrease) $ (4,380,846) (144,360) $ 355,427 11,527
Year ended December 31, 2004
Class A $ (6,018,495) (205,905) $ 2,551,258 86,331
Class B (285,338) (9,809) 450,816 15,437
Class C (282,310) (9,711) 547,173 18,792
Class F (294,487) (10,102) 240,736 8,215
Class 529-A (21,681) (738) 209,790 7,167
Class 529-B (3,475) (119) 46,142 1,581
Class 529-C (7,911) (269) 62,870 2,152
Class 529-E (687) (24) 9,311 319
Class 529-F (380) (13) 2,064 70
Class R-1 (4,841) (168) 7,742 264
Class R-2 (49,451) (1,697) 153,000 5,257
Class R-3 (77,001) (2,632) 234,832 8,045
Class R-4 (15,204) (520) 72,820 2,482
Class R-5 (112,789) (3,870) 121,440 4,119
Total net increase
(decrease) $ (7,174,050) (245,577) $ 4,709,994 160,231
(1) Includes exchanges between share classes of the fund.
7. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $6,466,882,000 and $6,897,353,000, respectively, during the six
months ended June 30, 2005.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
six months ended June 30, 2005, the custodian fee of $1,201,000, shown on the
accompanying financial statements, includes $87,000 that was offset by this
reduction, rather than paid in cash.
Financial highlights (1)
Income (loss) from investment operations(2)
Net
Net asset (losses) gains
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class A:
Six months ended 6/30/2005 (5) $30.75 $.32 $(.27) $.05
Year ended 12/31/2004 28.84 .60 2.19 2.79
Year ended 12/31/2003 23.48 .54 5.55 6.09
Year ended 12/31/2002 28.53 .49 (4.56) (4.07)
Year ended 12/31/2001 31.07 .44 (1.87) (1.43)
Year ended 12/31/2000 32.46 .56 .65 1.21
Class B:
Six months ended 6/30/2005 (5) 30.64 .21 (.28) (.07)
Year ended 12/31/2004 28.74 .38 2.17 2.55
Year ended 12/31/2003 23.41 .34 5.53 5.87
Year ended 12/31/2002 28.47 .30 (4.57) (4.27)
Year ended 12/31/2001 31.01 .19 (1.83) (1.64)
Period from 3/15/2000 to 12/31/2000 31.13 .26 1.55 1.81
Class C:
Six months ended 6/30/2005 (5) 30.59 .19 (.27) (.08)
Year ended 12/31/2004 28.70 .36 2.16 2.52
Year ended 12/31/2003 23.38 .31 5.53 5.84
Year ended 12/31/2002 28.44 .30 (4.58) (4.28)
Period from 3/15/2001 to 12/31/2001 29.05 .09 (.14) (.05)
Class F:
Six months ended 6/30/2005 (5) 30.72 .31 (.28) .03
Year ended 12/31/2004 28.81 .58 2.18 2.76
Year ended 12/31/2003 23.46 .51 5.55 6.06
Year ended 12/31/2002 28.52 .49 (4.59) (4.10)
Period from 3/15/2001 to 12/31/2001 29.10 .27 (.13) .14
Class 529-A:
Six months ended 6/30/2005 (5) 30.73 .31 (.29) .02
Year ended 12/31/2004 28.82 .59 2.17 2.76
Year ended 12/31/2003 23.48 .52 5.55 6.07
Period from 2/15/2002 to 12/31/2002 27.88 .46 (3.91) (3.45)
Class 529-B:
Six months ended 6/30/2005 (5) 30.67 .18 (.28) (.10)
Year ended 12/31/2004 28.78 .33 2.16 2.49
Year ended 12/31/2003 23.45 .28 5.54 5.82
Period from 2/15/2002 to 12/31/2002 27.88 .28 (3.92) (3.64)
Class 529-C:
Six months ended 6/30/2005 (5) 30.68 .18 (.28) (.10)
Year ended 12/31/2004 28.78 .33 2.17 2.50
Year ended 12/31/2003 23.45 .29 5.54 5.83
Period from 2/19/2002 to 12/31/2002 27.47 .28 (3.50) (3.22)
Class 529-E:
Six months ended 6/30/2005 (5) 30.68 .26 (.28) (.02)
Year ended 12/31/2004 28.78 .48 2.17 2.65
Year ended 12/31/2003 23.45 .42 5.54 5.96
Period from 3/1/2002 to 12/31/2002 28.27 .38 (4.52) (4.14)
Class 529-F:
Six months ended 6/30/2005 (5) 30.71 .32 (.29) .03
Year ended 12/31/2004 28.81 .56 2.16 2.72
Year ended 12/31/2003 23.47 .48 5.55 6.03
Period from 9/16/2002 to 12/31/2002 23.98 .16 (.19) (.03)
Financial highlights (1) (continued)
Income (loss) from investment operations(2)
Net
Net asset (losses) gains
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class R-1:
Six months ended 6/30/2005 (5) $30.67 $.19 $(.29) $(.10)
Year ended 12/31/2004 28.77 .36 2.17 2.53
Year ended 12/31/2003 23.46 .31 5.54 5.85
Period from 6/6/2002 to 12/31/2002 27.27 .20 (3.36) (3.16)
Class R-2:
Six months ended 6/30/2005 (5) 30.67 .19 (.28) (.09)
Year ended 12/31/2004 28.77 .37 2.17 2.54
Year ended 12/31/2003 23.46 .31 5.54 5.85
Period from 5/21/2002 to 12/31/2002 28.23 .23 (4.34) (4.11)
Class R-3:
Six months ended 6/30/2005 (5) 30.71 .27 (.28) (.01)
Year ended 12/31/2004 28.80 .50 2.17 2.67
Year ended 12/31/2003 23.47 .41 5.55 5.96
Period from 6/4/2002 to 12/31/2002 27.58 .27 (3.69) (3.42)
Class R-4:
Six months ended 6/30/2005 (5) 30.72 .32 (.28) .04
Year ended 12/31/2004 28.82 .60 2.16 2.76
Year ended 12/31/2003 23.47 .51 5.55 6.06
Period from 5/28/2002 to 12/31/2002 28.22 .32 (4.33) (4.01)
Class R-5:
Six months ended 6/30/2005 (5) 30.75 .36 (.29) .07
Year ended 12/31/2004 28.84 .67 2.18 2.85
Year ended 12/31/2003 23.48 .56 5.59 6.15
Period from 5/15/2002 to 12/31/2002 28.37 .39 (4.50) (4.11)
Financial highlights (1)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class A:
Six months ended 6/30/2005 (5) $(.26) $- $(.26) $30.54
Year ended 12/31/2004 (.52) (.36) (.88) 30.75
Year ended 12/31/2003 (.52) (.21) (.73) 28.84
Year ended 12/31/2002 (.52) (.46) (.98) 23.48
Year ended 12/31/2001 (.52) (.59) (1.11) 28.53
Year ended 12/31/2000 (.52) (2.08) (2.60) 31.07
Class B:
Six months ended 6/30/2005 (5) (.14) - (.14) 30.43
Year ended 12/31/2004 (.29) (.36) (.65) 30.64
Year ended 12/31/2003 (.33) (.21) (.54) 28.74
Year ended 12/31/2002 (.33) (.46) (.79) 23.41
Year ended 12/31/2001 (.31) (.59) (.90) 28.47
Period from 3/15/2000 to 12/31/2000 (.25) (1.68) (1.93) 31.01
Class C:
Six months ended 6/30/2005 (5) (.13) - (.13) 30.38
Year ended 12/31/2004 (.27) (.36) (.63) 30.59
Year ended 12/31/2003 (.31) (.21) (.52) 28.70
Year ended 12/31/2002 (.32) (.46) (.78) 23.38
Period from 3/15/2001 to 12/31/2001 (.21) (.35) (.56) 28.44
Class F:
Six months ended 6/30/2005 (5) (.24) - (.24) 30.51
Year ended 12/31/2004 (.49) (.36) (.85) 30.72
Year ended 12/31/2003 (.50) (.21) (.71) 28.81
Year ended 12/31/2002 (.50) (.46) (.96) 23.46
Period from 3/15/2001 to 12/31/2001 (.37) (.35) (.72) 28.52
Class 529-A:
Six months ended 6/30/2005 (5) (.24) - (.24) 30.51
Year ended 12/31/2004 (.49) (.36) (.85) 30.73
Year ended 12/31/2003 (.52) (.21) (.73) 28.82
Period from 2/15/2002 to 12/31/2002 (.49) (.46) (.95) 23.48
Class 529-B:
Six months ended 6/30/2005 (5) (.11) - (.11) 30.46
Year ended 12/31/2004 (.24) (.36) (.60) 30.67
Year ended 12/31/2003 (.28) (.21) (.49) 28.78
Period from 2/15/2002 to 12/31/2002 (.33) (.46) (.79) 23.45
Class 529-C:
Six months ended 6/30/2005 (5) (.12) - (.12) 30.46
Year ended 12/31/2004 (.24) (.36) (.60) 30.68
Year ended 12/31/2003 (.29) (.21) (.50) 28.78
Period from 2/19/2002 to 12/31/2002 (.34) (.46) (.80) 23.45
Class 529-E:
Six months ended 6/30/2005 (5) (.19) - (.19) 30.47
Year ended 12/31/2004 (.39) (.36) (.75) 30.68
Year ended 12/31/2003 (.42) (.21) (.63) 28.78
Period from 3/1/2002 to 12/31/2002 (.33) (.35) (.68) 23.45
Class 529-F:
Six months ended 6/30/2005 (5) (.24) - (.24) 30.50
Year ended 12/31/2004 (.46) (.36) (.82) 30.71
Year ended 12/31/2003 (.48) (.21) (.69) 28.81
Period from 9/16/2002 to 12/31/2002 (.13) (.35) (.48) 23.47
Financial highlights (1) (continued)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class R-1:
Six months ended 6/30/2005 (5) $(.13) $- $(.13) $30.44
Year ended 12/31/2004 (.27) (.36) (.63) 30.67
Year ended 12/31/2003 (.33) (.21) (.54) 28.77
Period from 6/6/2002 to 12/31/2002 (.30) (.35) (.65) 23.46
Class R-2:
Six months ended 6/30/2005 (5) (.13) - (.13) 30.45
Year ended 12/31/2004 (.28) (.36) (.64) 30.67
Year ended 12/31/2003 (.33) (.21) (.54) 28.77
Period from 5/21/2002 to 12/31/2002 (.31) (.35) (.66) 23.46
Class R-3:
Six months ended 6/30/2005 (5) (.21) - (.21) 30.49
Year ended 12/31/2004 (.40) (.36) (.76) 30.71
Year ended 12/31/2003 (.42) (.21) (.63) 28.80
Period from 6/4/2002 to 12/31/2002 (.34) (.35) (.69) 23.47
Class R-4:
Six months ended 6/30/2005 (5) (.25) - (.25) 30.51
Year ended 12/31/2004 (.50) (.36) (.86) 30.72
Year ended 12/31/2003 (.50) (.21) (.71) 28.82
Period from 5/28/2002 to 12/31/2002 (.39) (.35) (.74) 23.47
Class R-5:
Six months ended 6/30/2005 (5) (.29) - (.29) 30.53
Year ended 12/31/2004 (.58) (.36) (.94) 30.75
Year ended 12/31/2003 (.58) (.21) (.79) 28.84
Period from 5/15/2002 to 12/31/2002 (.43) (.35) (.78) 23.48
Financial highlights (1)
Ratio of expenses Ratio of expenses
to average net to average net Ratio of
Net assets, assets before assets after net income
Total end of period reimbursements/ reimbursements/ to average
return (3) (in millions) waivers waivers (4) net assets
Class A:
Six months ended 6/30/2005 (5) .16% $64,225 .58% (6) .56% (6) 2.15% (6)
Year ended 12/31/2004 9.78 64,880 .57 .57 2.06
Year ended 12/31/2003 26.30 58,353 .59 .59 2.14
Year ended 12/31/2002 (14.47) 46,129 .59 .59 1.89
Year ended 12/31/2001 (4.59) 54,315 .57 .57 1.49
Year ended 12/31/2000 3.84 56,212 .56 .56 1.74
Class B:
Six months ended 6/30/2005 (5) (.23) 3,687 1.36 (6) 1.34 (6) 1.37 (6)
Year ended 12/31/2004 8.94 3,683 1.36 1.35 1.29
Year ended 12/31/2003 25.30 3,011 1.38 1.38 1.33
Year ended 12/31/2002 (15.18) 1,841 1.39 1.39 1.18
Year ended 12/31/2001 (5.30) 1,302 1.35 1.35 .66
Period from 3/15/2000 to 12/31/2000 5.87 439 1.34 (6) 1.34 (6) 1.06 (6)
Class C:
Six months ended 6/30/2005 (5) (.26) 2,763 1.44 (6) 1.42 (6) 1.30 (6)
Year ended 12/31/2004 8.85 2,691 1.43 1.43 1.22
Year ended 12/31/2003 25.22 1,985 1.45 1.45 1.25
Year ended 12/31/2002 (15.20) 1,025 1.45 1.45 1.17
Period from 3/15/2001 to 12/31/2001 (.19) 480 1.52 (6) 1.52 (6) .38 (6)
Class F:
Six months ended 6/30/2005 (5) .11 1,238 .68 (6) .66 (6) 2.06 (6)
Year ended 12/31/2004 9.69 1,209 .67 .67 1.99
Year ended 12/31/2003 26.18 897 .69 .69 2.01
Year ended 12/31/2002 (14.59) 415 .70 .70 1.92
Period from 3/15/2001 to 12/31/2001 .48 190 .72 (6) .72 (6) 1.17 (6)
Class 529-A:
Six months ended 6/30/2005 (5) .06 713 .71 (6) .69 (6) 2.03 (6)
Year ended 12/31/2004 9.68 625 .68 .68 2.00
Year ended 12/31/2003 26.19 380 .64 .64 2.06
Period from 2/15/2002 to 12/31/2002 (12.57) 153 .71 (6) .71 (6) 2.17 (6)
Class 529-B:
Six months ended 6/30/2005 (5) (.32) 169 1.56 (6) 1.54 (6) 1.18 (6)
Year ended 12/31/2004 8.69 155 1.56 1.55 1.12
Year ended 12/31/2003 25.05 100 1.58 1.58 1.12
Period from 2/15/2002 to 12/31/2002 (13.22) 41 1.58 (6) 1.58 (6) 1.30 (6)
Class 529-C:
Six months ended 6/30/2005 (5) (.34) 213 1.55 (6) 1.53 (6) 1.19 (6)
Year ended 12/31/2004 8.74 188 1.55 1.54 1.13
Year ended 12/31/2003 25.07 115 1.57 1.57 1.13
Period from 2/19/2002 to 12/31/2002 (11.91) 45 1.57 (6) 1.57 (6) 1.32 (6)
Class 529-E:
Six months ended 6/30/2005 (5) (.06) 31 1.03 (6) 1.01 (6) 1.71 (6)
Year ended 12/31/2004 9.29 27 1.03 1.02 1.65
Year ended 12/31/2003 25.70 16 1.04 1.04 1.65
Period from 3/1/2002 to 12/31/2002 (14.72) 6 1.03 (6) 1.03 (6) 1.90 (6)
Class 529-F:
Six months ended 6/30/2005 (5) .09 6 .78 (6) .60 (6) 2.13 (6)
Year ended 12/31/2004 9.55 5 .78 .77 1.91
Year ended 12/31/2003 26.05 3 .79 .79 1.88
Period from 9/16/2002 to 12/31/2002 (.14) - (7) .23 .23 .68
Financial highlights (1) (continued)
Ratio of expenses Ratio of expenses
to average net to average net Ratio of
Net assets, assets before assets after net income
Total end of period reimbursements/ reimbursements/ to average
return (in millions) waivers waivers (4) net assets
Class R-1:
Six months ended 6/30/2005 (5) (.34%) $28 1.46% (6) 1.44% (6) 1.28% (6)
Year ended 12/31/2004 8.84 23 1.47 1.46 1.21
Year ended 12/31/2003 25.18 14 1.51 1.47 1.18
Period from 6/6/2002 to 12/31/2002 (11.68) 1 2.43 (6) 1.47 (6) 1.49 (6)
Class R-2:
Six months ended 6/30/2005 (5) (.29) 414 1.59 (6) 1.41 (6) 1.31 (6)
Year ended 12/31/2004 8.88 361 1.63 1.42 1.27
Year ended 12/31/2003 25.18 188 1.76 1.43 1.21
Period from 5/21/2002 to 12/31/2002 (14.64) 24 1.57 (6) 1.43 (6) 1.61 (6)
Class R-3:
Six months ended 6/30/2005 (5) (.04) 577 .93 (6) .91 (6) 1.81 (6)
Year ended 12/31/2004 9.34 493 .99 .98 1.72
Year ended 12/31/2003 25.70 231 1.06 1.05 1.60
Period from 6/4/2002 to 12/31/2002 (12.49) 24 1.11 (6) 1.05 (6) 2.00 (6)
Class R-4:
Six months ended 6/30/2005 (5) .12 198 .67 (6) .65 (6) 2.11 (6)
Year ended 12/31/2004 9.67 119 .67 .66 2.05
Year ended 12/31/2003 26.19 40 .68 .68 2.00
Period from 5/28/2002 to 12/31/2002 (14.31) 9 .73 (6) .69 (6) 2.25 (6)
Class R-5:
Six months ended 6/30/2005 (5) .23 1,427 .36 (6) .34 (6) 2.37 (6)
Year ended 12/31/2004 10.02 1,408 .36 .35 2.28
Year ended 12/31/2003 26.58 1,201 .36 .36 2.11
Period from 5/15/2002 to 12/31/2002 (14.59) 48 .37 (6) .37 (6) 2.56 (6)
Six months ended
June 30, Year ended December 31
2005(5) 2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 10% 19% 24% 27% 22% 25%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent deferred
sales charges.
(4) The ratios in this column reflect the impact, if any, of certain
reimbursements/waivers. During some of the periods shown, CRMC reduced
fees for investment advisory services for all share classes. During the
start-up period for the retirement plan share classes (except Class R-5),
CRMC agreed to pay a portion of the fees related to transfer agent services.
In addition, during the six months ended 6/30/2005, AFD agreed to waive a
portion of the fees related to distribution services for Class 529-F.
(5) Unaudited.
(6) Annualized.
(7) Amount less than $1 million.
See Notes to Financial Statements
EXPENSE EXAMPLE unaudited
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (January
1, 2005 through June 30, 2005).
ACTUAL EXPENSES:
The first line of each share class in the table on the next page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses paid during period" to estimate the expenses you paid on your account
during this period. There are some account fees that are charged to certain
types of accounts, such as Individual Retirement Accounts and CollegeAmerica
accounts (generally, a $10 fee is charged to set up the account and an
additional $10 fee is charged to the account annually) that would increase the
amount of expenses paid on your account. In addition, retirement plan
participants may be subject to certain fees charged by the plan sponsor, and
Class F and Class 529-F shareholders may be subject to fees charged by financial
intermediaries, typically ranging from 0.75% to 1.50% of assets annually
depending on services offered. You can estimate the impact of these fees by
adding the amount of the fees to the total estimated expenses you paid on your
account during the period as calculated above. In addition, your ending account
value would also be lower by the amount of these fees.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of each share class in the table on the next page provides
information about hypothetical account values and hypothetical expenses based on
the actual expense ratio for the share class and an assumed rate of return of
5.00% per year before expenses, which is not the actual return of the share
class. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5.00% hypothetical example with the 5.00%
hypothetical examples that appear in the shareholder reports of the other funds.
There are some account fees that are charged to certain shareholders, such as
Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee
is charged to set up the account and an additional $10 fee is charged to the
account annually) that would increase the amount of expenses paid on your
account. In addition, retirement plan participants may be subject to certain
fees charged by the plan sponsor, and Class F and Class 529-F shareholders may
be subject to fees charged by financial intermediaries, typically ranging from
0.75% to 1.50% of assets annually depending on services offered. You can
estimate the impact of these fees by adding the amount of the fees to the total
estimated expenses you paid on your account during the period as calculated on
the previous page. In addition, your ending account value would also be lower by
the amount of these fees.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each share class in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
Beginning account Ending account Expenses paid Annualized
value 1/1/2005 value 6/30/2005 during period(1) expense ratio
Class A -- actual return $1,000.00 $1,001.56 $2.78 .56%
Class A -- assumed 5% return 1,000.00 1,022.02 2.81 .56
Class B -- actual return 1,000.00 997.74 6.64 1.34
Class B -- assumed 5% return 1,000.00 1,018.15 6.71 1.34
Class C -- actual return 1,000.00 997.38 7.03 1.42
Class C -- assumed 5% return 1,000.00 1,017.75 7.10 1.42
Class F -- actual return 1,000.00 1,001.09 3.27 .66
Class F -- assumed 5% return 1,000.00 1,021.52 3.31 .66
Class 529-A -- actual return 1,000.00 1,000.64 3.42 .69
Class 529-A -- assumed 5% return 1,000.00 1,021.37 3.46 .69
Class 529-B -- actual return 1,000.00 996.80 7.62 1.54
Class 529-B -- assumed 5% return 1,000.00 1,017.16 7.70 1.54
Class 529-C -- actual return 1,000.00 996.56 7.57 1.53
Class 529-C -- assumed 5% return 1,000.00 1,017.21 7.65 1.53
Class 529-E -- actual return 1,000.00 999.42 5.01 1.01
Class 529-E -- assumed 5% return 1,000.00 1,019.79 5.06 1.01
Class 529-F -- actual return 1,000.00 1,000.95 2.98 .60
Class 529-F -- assumed 5% return 1,000.00 1,021.82 3.01 .60
Class R-1 -- actual return 1,000.00 996.61 7.13 1.44
Class R-1 -- assumed 5% return 1,000.00 1,017.65 7.20 1.44
Class R-2 -- actual return 1,000.00 997.15 6.98 1.41
Class R-2 -- assumed 5% return 1,000.00 1,017.80 7.05 1.41
Class R-3 -- actual return 1,000.00 999.58 4.51 .91
Class R-3 -- assumed 5% return 1,000.00 1,020.28 4.56 .91
Class R-4 -- actual return 1,000.00 1,001.19 3.23 .65
Class R-4 -- assumed 5% return 1,000.00 1,021.57 3.26 .65
Class R-5 -- actual return 1,000.00 1,002.30 1.69 .34
Class R-5 -- assumed 5% return 1,000.00 1,023.11 1.71 .34
(1) Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
the period (181), and divided by 365 (to reflect the one-half year period).
APPROVAL OF RENEWAL OF INVESTMENT ADVISORY AND SERVICE AGREEMENT
The fund's Board of Directors has approved the renewal of the fund's Investment
Advisory and Service Agreement (the "agreement") with Capital Research and
Management Company (CRMC) for an additional one-year term through February 28,
2006. The renewal of the agreement was approved by the Board following the
recommendation of the fund's Contracts Committee (the "committee"), which is
composed of all the fund's independent Directors. The information, material
factors and conclusions that formed the basis for the committee's recommendation
and the Board's subsequent approval are described below.
1. INFORMATION RECEIVED
MATERIALS REVIEWED
During the course of each year, the independent Directors receive a wide variety
of materials relating to the services provided by CRMC, including reports on the
fund's investment results; portfolio composition; portfolio trading practices;
shareholder services; and other information relating to the nature, extent and
quality of services provided by CRMC to the fund. In addition, the committee
requests and reviews supplementary information that includes extensive materials
regarding the fund's investment results, advisory fee and expense comparisons
(including comparisons to advisory fees charged by an affiliate of CRMC to
institutional clients), financial and profitability information regarding CRMC,
descriptions of various functions such as compliance monitoring and portfolio
trading practices, and information about the personnel providing investment
management and administrative services to the fund.
REVIEW PROCESS
The committee received assistance and advice regarding legal and industry
standards from independent counsel to the independent Directors. The committee
discussed the renewal and amendment of the agreement with CRMC representatives
and in a private session with independent legal counsel at which no
representatives of CRMC were present. In deciding to recommend the renewal of
the agreement, the committee did not identify any single issue or particular
information that, in isolation, was the controlling factor. This summary
describes the most important, but not all, of the factors considered by the
Board and the committee.
2. NATURE, EXTENT AND QUALITY OF SERVICES
CRMC, ITS PERSONNEL AND ITS RESOURCES
The Board and the committee considered the depth and quality of CRMC's
investment management process, including its global research capabilities; the
experience, capability and integrity of its senior management and other
personnel; the low turnover rates of its key personnel; the overall financial
strength and stability of its organization; and the ability of its
organizational structure to address the recent growth in assets under
management. The Board and the committee also considered that CRMC made available
to its investment professionals a variety of resources and systems relating to
investment management, compliance, trading, performance and portfolio
accounting. They considered CRMC's commitment to investing in information
technology supporting investment management and compliance. They further
considered CRMC's continuing need to attract and retain qualified personnel and
to maintain and enhance its resources and systems.
OTHER SERVICES
The Board and the committee considered CRMC's policies, procedures and systems
to ensure compliance with applicable laws and regulations and its commitment to
these programs; its efforts to keep the Directors informed; and its attention to
matters that may involve conflicts of interest with the fund. The Board and the
committee also considered the nature, extent, quality and cost of
administrative, distribution and shareholder services provided by CRMC to the
fund under the agreement and other agreements, including the administrative,
legal and fund accounting and treasury functions.
The Board and the committee concluded that the nature, extent and quality of the
services provided by CRMC has benefited and will continue to benefit the fund
and its shareholders.
3. INVESTMENT PERFORMANCE
The Board and the committee considered the fund's investment objectives to
pursue growth of capital and income and the investment results of the fund in
light of these long-term objectives. They compared the fund's total returns with
the Lipper Large-Cap Value Funds Index (the Lipper category that includes the
fund) and the Lipper Growth & Income Funds Index (another relevant Lipper
category given the fund's investment objective). The Board and the committee
noted that the fund's investment results slightly trailed both indices for the
one-year period ended October 31, 2004, but substantially exceeded both indices
for the five- and 10-year periods ended October 31, 2004. The Board and the
committee ultimately concluded that CRMC's long-term performance record in
managing the fund indicates that its continued management will benefit the fund
and its shareholders.
4. ADVISORY FEES AND TOTAL EXPENSES
The Board and the committee reviewed the advisory fees and total expenses of the
fund (each as a percentage of average net assets) and compared such amounts with
the average fee and expense levels of other funds in the Lipper Large-Cap Value
Funds Index. The Board and the committee observed that the fund's advisory fees
and total expenses (each as a percentage of average net assets) were well below
the median fee and expense levels of the other funds in both indices. The Board
and the committee also noted the 5% voluntary advisory fee waiver that CRMC put
into effect complex-wide during 2004. The Board and the committee concluded that
the relatively low level of the fees charged by CRMC will benefit the fund and
its shareholders.
The Board and the committee also reviewed information regarding the advisory
fees paid by institutional clients of an affiliate of CRMC with similar
investment mandates. They concluded that although the fees paid by those clients
generally were lower than those paid by the American Funds, the differences
appropriately reflected CRMC's significantly greater responsibilities with
respect to the American Funds, and the more comprehensive regulatory regime
applicable to mutual funds.
5. ADVISER COSTS, LEVEL OF PROFITS AND ECONOMIES OF SCALE
The Board and the committee reviewed information regarding CRMC's costs of
providing services to the American Funds, as well as the resulting level of
profits to CRMC, noting that those results were comparable to the reported
results of several large publicly held investment management companies. The
committee also received information during the past year regarding the structure
and manner in which CRMC's investment professionals were compensated and CRMC's
view of the relationship of such compensation to the attraction and retention of
quality personnel. The Board and the committee considered CRMC's need to invest
in technology, infrastructure and staff to reinforce and offer new services and
to accommodate changing regulatory requirements. They further considered that
existing breakpoints in the fund's advisory fee structure provide for reductions
in the level of fees charged by CRMC to the fund as fund assets increase,
reflecting economies of scale in the cost of operations that are shared with
fund shareholders. The Board and the committee concluded that the fund's cost
structure was reasonable and that CRMC was sharing economies of scale with the
fund and its shareholders, to their benefit.
6. ANCILLARY BENEFITS
The Board and the committee considered a variety of other benefits received by
CRMC and its affiliates as a result of CRMC's relationship with the fund and the
other American Funds, including fees for administrative services provided to
certain share classes; fees paid to CRMC's affiliated transfer agent; sales
charges and distribution fees received and retained by the fund's principal
underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC's
institutional management affiliate. The Board and the committee reviewed CRMC's
portfolio trading practices, noting that while CRMC receives the benefit of
research provided by broker-dealers executing portfolio transactions on behalf
of the fund, it does not obtain third-party research or other services in return
for allocating brokerage to such broker-dealers.
7. CONCLUSIONS
Based on their review, including their consideration of each of the factors
referred to above, the Board and the committee concluded that the agreement is
fair and reasonable to the fund and its shareholders, that the fund's
shareholders have received reasonable value in return for the advisory fees and
other amounts paid to CRMC by the fund, and that the renewal of the agreement
was in the best interests of the fund and its shareholders.
There are several ways to invest in The Investment Company of America. Class A
shares are subject to a 5.75% maximum up-front sales charge that declines for
accounts (and aggregated investments) of $25,000 or more and is eliminated for
purchases of $1 million or more. Other share classes, which are generally not
available for certain employer-sponsored retirement plans, have no up-front
sales charges but are subject to additional annual expenses and fees. Annualized
expenses for Class B shares were 0.78 percentage points higher than for Class A
shares; Class B shares convert to Class A shares after eight years of ownership.
If redeemed within six years, Class B shares may also be subject to a contingent
deferred sales charge ("CDSC") of up to 5% that declines over time. Class C
shares were subject to annualized expenses 0.86 percentage points higher than
those for Class A shares and a 1% CDSC if redeemed within the first year after
purchase. Class C shares convert to Class F shares after 10 years. Class F
shares, which are available only through certain fee-based programs offered by
broker-dealer firms and registered investment advisers, had higher annualized
expenses (by 0.10 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 CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES
AND EXPENSES OF THE AMERICAN FUNDS AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT
INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM
DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY (AFS) AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT
AMERICANFUNDS.COM.
If you reside in a state other than Virginia, there may be an in-state plan that
offers additional tax benefits not available in CollegeAmerica. Talk to your tax
adviser. Interests in CollegeAmerica are sold through unaffiliated
intermediaries.
"American Funds Proxy Voting Guidelines" -- which describes how we vote proxies
relating to portfolio securities -- is available free of charge on the U.S.
Securities and Exchange Commission (SEC) website at www.sec.gov, on the American
Funds website or upon request by calling AFS. The fund files its proxy voting
record with the SEC for the 12 months ended June 30 by August 31. The report
also is available on the SEC and American Funds websites.
A complete June 30, 2005, portfolio of The Investment Company of America's
investments is available free of charge on the SEC website or upon request by
calling AFS.
The Investment Company of America files a complete list of its portfolio
holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. This form is available free of charge on the SEC website or upon
request by calling AFS. You may also review or, for a fee, copy the form at the
SEC's Public Reference Room in Washington, D.C. (800/SEC-0330).
This report is for the information of shareholders of The Investment Company of
America, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after September 30, 2005, this report must be accompanied by an
American Funds statistical update for the most recently completed calendar
quarter.
[logo - American Funds(R)]
CollegeAmerica is sponsored by
Virginia College Savings Plan(SM)
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGESR-904-0805P
Litho in USA BBC/LPT/8087-S4670
Printed on recycled paper
ITEM 2 - Code of Ethics
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 3 - Audit Committee Financial Expert
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 4 - Principal Accountant Fees and Services
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed
issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 - Schedule of Investments
[logo - American Funds (r)]
THE INVESTMENT COMPANY OF AMERICA(R)
Investment portfolio
June 30, 2005
unaudited
Market value
Common stocks -- 83.72% Shares (000)
ENERGY -- 10.73%
Baker Hughes Inc. 10,875,000 $ 556,365
Burlington Resources Inc. 16,940,400 935,788
Chevron Corp. 17,185,000 960,985
ConocoPhillips 2,400,000 137,976
ENI SpA 30,880,000 795,388
Exxon Mobil Corp. 6,721,500 386,285
Halliburton Co. 5,500,000 263,010
Marathon Oil Corp. 11,050,000 589,738
Murphy Oil Corp. 4,100,000 214,143
Occidental Petroleum Corp. 1,000,000 76,930
Royal Dutch Petroleum Co. (New York registered) 17,470,000 1,133,803
"Shell" Transport and Trading Co., PLC 2,900,000 28,196
"Shell" Transport and Trading Co., PLC (ADR) (New York registered) 7,000,000 406,420
Schlumberger Ltd. 9,350,000 710,039
TOTAL SA 2,505,000 588,300
Unocal Corp. 5,190,000 337,609
8,120,975
MATERIALS -- 6.03%
Air Products and Chemicals, Inc. 700,000 42,210
Alcan Inc. 2,241,600 67,248
Alcoa Inc. 19,326,400 504,999
Alumina Ltd. 10,000,000 42,382
Barrick Gold Corp. 12,500,000 312,875
BHP Billiton Ltd. 9,412,655 129,992
Dow Chemical Co. 23,232,200 1,034,530
E.I. du Pont de Nemours and Co. 4,750,000 204,297
Georgia-Pacific Corp., Georgia-Pacific Group 8,599,298 273,458
International Paper Co. 8,997,235 271,806
MeadWestvaco Corp. 4,085,000 114,543
Newmont Mining Corp. 9,500,000 370,785
Placer Dome Inc. 12,500,000 192,250
Placer Dome Inc. (Canada) 1,500,000 22,920
Rio Tinto PLC 10,000,000 305,971
Rohm and Haas Co. 7,000,000 324,380
Weyerhaeuser Co. 5,475,000 348,484
4,563,130
INDUSTRIALS -- 11.18%
3M Co. 3,500,000 253,050
Boeing Co. 13,000,000 858,000
Burlington Northern Santa Fe Corp. 7,200,000 338,976
Caterpillar Inc. 11,191,200 1,066,633
Cooper Industries, Ltd., Class A 2,500,000 159,750
Cummins Inc. 1,700,000 126,837
Deere & Co. 8,200,000 537,018
FedEx Corp. 2,870,000 232,499
General Dynamics Corp. 3,372,900 369,467
General Electric Co. 31,250,000 1,082,813
Illinois Tool Works Inc. 3,700,000 294,816
Lockheed Martin Corp. 1,798,600 116,675
Mitsubishi Corp. 4,035,000 54,887
Northrop Grumman Corp. 2,680,000 148,070
Parker Hannifin Corp. 2,500,000 155,025
Raytheon Co. 9,216,000 360,530
Southwest Airlines Co. 9,000,000 125,370
Tyco International Ltd. 37,630,100 1,098,799
Union Pacific Corp. 3,500,000 226,800
United Parcel Service, Inc., Class B 3,918,700 271,017
United Technologies Corp. 10,750,000 552,013
Waste Management, Inc. 1,100,000 31,174
8,460,219
CONSUMER DISCRETIONARY -- 10.03%
Best Buy Co., Inc. 10,528,200 721,708
Carnival Corp., units 7,600,000 414,580
Clear Channel Communications, Inc. 6,920,700 214,057
Comcast Corp., Class A(1) 9,357,900 287,288
Delphi Corp. 25,400,000 118,110
Dow Jones & Co., Inc. 1,887,000 66,894
Ford Motor Co. 15,500,000 158,720
Gap, Inc. 3,100,000 61,225
General Motors Corp. 12,950,000 440,300
Honda Motor Co., Ltd. 912,500 45,024
Interpublic Group of Companies, Inc.(1) 4,100,000 49,938
Knight-Ridder, Inc. 550,500 33,768
Kohl's Corp.(1) 1,600,000 89,456
Koninklijke Philips Electronics NV 2,250,000 56,839
Liberty Media Corp., Class A(1) 16,280,000 165,893
Limited Brands, Inc.(2) 20,749,400 444,452
Lowe's Companies, Inc. 20,568,300 1,197,486
May Department Stores Co. 4,000,000 160,640
McDonald's Corp. 1,600,000 44,400
Newell Rubbermaid Inc. 2,000,000 47,680
Target Corp. 20,850,000 1,134,449
Time Warner Inc.(1) 44,750,000 747,773
TJX Companies, Inc. 5,750,000 140,013
Toyota Motor Corp. 11,250,000 402,873
Viacom Inc., Class A 460,100 14,824
Viacom Inc., Class B, nonvoting 6,500,000 208,130
Walt Disney Co. 5,000,000 125,900
7,592,420
CONSUMER STAPLES -- 9.36%
Albertson's, Inc. 976,500 20,194
Altria Group, Inc. 55,000,000 3,556,300
Anheuser-Busch Companies, Inc. 3,500,000 160,125
Avon Products, Inc. 9,020,000 341,407
Coca-Cola Co. 5,320,000 222,110
General Mills, Inc. 4,535,000 212,193
H.J. Heinz Co. 7,950,000 281,589
Kimberly-Clark Corp. 500,000 31,295
Kraft Foods Inc., Class A 2,100,000 66,801
PepsiCo, Inc. 11,200,000 604,016
Procter & Gamble Co. 3,500,000 184,625
Reynolds American Inc. 4,461,666 351,579
Sara Lee Corp. 8,816,100 174,647
Unilever NV (New York registered) 5,650,000 366,290
UST Inc. 2,000,000 91,320
Walgreen Co. 9,104,000 418,693
7,083,184
HEALTH CARE -- 5.69%
Abbott Laboratories 5,805,200 284,513
Aetna Inc. 4,510,300 373,543
Applera Corp. - Applied Biosystems Group 5,170,500 101,704
AstraZeneca PLC (ADR) 4,534,500 187,093
AstraZeneca PLC (Sweden) 4,609,500 191,563
AstraZeneca PLC (United Kingdom) 5,393,900 223,303
Becton, Dickinson and Co. 1,500,000 78,705
Bristol-Myers Squibb Co. 21,680,300 541,574
Eli Lilly and Co. 9,110,000 507,518
Glaxo Wellcome PLC (ADR) 924,000 44,823
GlaxoSmithKline PLC 4,250,000 102,858
Guidant Corp. 1,500,000 100,950
HCA Inc. 3,805,700 215,669
Johnson & Johnson 3,500,000 227,500
Merck & Co., Inc. 11,750,000 361,900
Novartis AG (ADR) 256,556 12,171
Pfizer Inc 3,000,000 82,740
Schering-Plough Corp. 9,361,300 178,426
WellPoint, Inc.(1) 5,800,000 403,912
Wyeth 2,000,000 89,000
4,309,465
FINANCIALS -- 11.39%
Allstate Corp. 8,050,000 480,988
American International Group, Inc. 10,463,900 607,953
Aon Corp. 2,183,800 54,682
Bank of America Corp. 6,000,000 273,660
Capital One Financial Corp. 3,580,943 286,511
Chubb Corp. 5,100,000 436,611
Citigroup Inc. 13,725,000 634,507
Fannie Mae 22,415,600 1,309,071
Freddie Mac 3,150,000 205,475
Hartford Financial Services Group, Inc. 2,250,000 168,255
HSBC Holdings PLC (ADR) 1,079,588 85,989
HSBC Holdings PLC (United Kingdom) 27,697,111 441,588
J.P. Morgan Chase & Co. 18,836,200 665,295
Lincoln National Corp. 800,000 37,536
Lloyds TSB Group PLC 76,500,000 648,209
Marsh & McLennan Companies, Inc. 4,900,000 135,730
MBNA Corp. 4,800,000 125,568
SAFECO Corp. 1,650,000 89,661
St. Paul Travelers Companies, Inc. 3,300,000 130,449
U.S. Bancorp 11,250,000 328,500
Washington Mutual, Inc. 21,500,000 874,835
Wells Fargo & Co. 7,330,000 451,381
XL Capital Ltd., Class A 2,000,000 148,840
8,621,294
INFORMATION TECHNOLOGY -- 9.16%
Agilent Technologies, Inc.(1) 5,000,000 115,100
Altera Corp.(1) 3,500,000 69,370
Analog Devices, Inc. 4,250,000 158,568
Applied Materials, Inc. 15,550,000 251,599
Automatic Data Processing, Inc. 5,875,000 246,574
Cisco Systems, Inc.(1) 25,728,800 491,677
Electronic Data Systems Corp. 4,247,900 81,772
EMC Corp.(1) 3,500,000 47,985
First Data Corp. 2,100,000 84,294
Hewlett-Packard Co. 33,700,000 792,287
Hitachi, Ltd. 17,000,000 103,356
Intel Corp. 3,640,000 94,858
International Business Machines Corp. 7,295,000 541,289
KLA-Tencor Corp. 2,275,000 99,418
Linear Technology Corp. 5,560,000 203,996
Maxim Integrated Products, Inc. 6,300,000 240,723
Micron Technology, Inc.(1) 10,000,000 102,100
Microsoft Corp. 42,280,000 1,050,235
Motorola, Inc. 11,251,475 205,452
Sabre Holdings Corp., Class A 6,009,680 119,893
Samsung Electronics Co., Ltd. 200,000 95,551
Sanmina-SCI Corp.(1) 7,000,000 38,290
Solectron Corp.(1) 13,000,000 49,270
Sun Microsystems, Inc.(1) 70,510,000 263,002
Taiwan Semiconductor Manufacturing Co. Ltd. 165,776,827 288,421
Texas Instruments Inc. 32,320,200 907,228
Xilinx, Inc. 7,400,000 188,700
6,931,008
TELECOMMUNICATION SERVICES -- 7.06%
ALLTEL Corp. 3,942,750 245,554
AT&T Corp. 11,797,500 224,624
BellSouth Corp. 30,800,000 818,356
Deutsche Telekom AG 7,000,000 129,452
SBC Communications Inc. 61,450,000 1,459,438
Sprint Corp. 17,885,000 448,735
Telefonica, SA 29,753,631 486,942
Verizon Communications Inc. 20,800,000 718,640
Vodafone Group PLC 113,500,000 276,521
Vodafone Group PLC (ADR) 22,000,000 535,040
5,343,302
UTILITIES -- 2.33%
American Electric Power Co., Inc. 3,750,000 138,263
Dominion Resources, Inc. 7,131,912 523,411
Duke Energy Corp. 7,000,000 208,110
Exelon Corp. 5,275,500 270,791
FirstEnergy Corp. 3,238,500 155,804
FPL Group, Inc. 4,000,000 168,240
Public Service Enterprise Group Inc. 5,000,000 304,100
1,768,719
MISCELLANEOUS -- 0.76%
Other common stocks in initial period of acquisition 575,177
Total common stocks (cost: $45,685,559,000) 63,368,893
Shares or
Convertible securities -- 0.20% principal amount
FINANCIALS -- 0.18%
Chubb Corp. 7.00% convertible preferred 2005 1,400,000 units 44,422
Fannie Mae 5.375% convertible preferred 2049 970 94,284
138,706
INFORMATION TECHNOLOGY -- 0.02%
Agilent Technologies, Inc. 3.00% convertible debentures 2021(3) $6,655,000 6,597
Agilent Technologies, Inc. 3.00% convertible debentures 2021(3,4) $4,445,000 4,406
11,003
Total convertible securities (cost: $136,658,000) 149,709
Principal amount
Bonds & notes -- 1.32% (000)
CONSUMER DISCRETIONARY -- 0.33%
General Motors Acceptance Corp. 6.875% 2011 $ 74,800 69,131
General Motors Acceptance Corp. 7.25% 2011 62,052 58,250
General Motors Acceptance Corp. 6.875% 2012 9,995 9,162
General Motors Acceptance Corp. 7.00% 2012 21,910 20,223
General Motors Corp. 7.20% 2011 77,763 72,320
General Motors Corp. 7.125% 2013 25,630 23,067
252,153
TELECOMMUNICATION SERVICES -- 0.39%
AT&T Wireless Services, Inc. 7.50% 2007 50,000 52,983
SBC Communications Inc. 4.125% 2009 120,000 119,119
SBC Communications Inc. 5.10% 2014 120,000 122,920
295,022
MORTGAGE-BACKED OBLIGATIONS(5) -- 0.60%
Fannie Mae 6.00% 2017 140,046 144,965
Fannie Mae 6.00% 2017 173,087 179,165
Fannie Mae 6.50% 2017 124,216 129,520
453,650
Total bonds & notes (cost: $964,792,000) 1,000,825
Short-term securities -- 14.63%
Abbott Laboratories Inc. 3.00%-3.01% due 7/6-7/12/2005(4) 76,600 76,547
American Express Credit Corp. 3.12%-3.22% due 7/25-8/22/2005 125,000 124,527
Anheuser-Busch Cos. Inc. 3.10%-3.16% due 8/3-8/22/2005(4) 100,000 99,659
Bank of America Corp. 2.99%-3.32% due 7/7-8/29/2005 275,000 274,090
Ranger Funding Co. LLC 3.19% due 7/21/2005(4) 43,797 43,715
Bank of New York Co., Inc. 3.00% due 7/5/2005 25,000 24,989
BellSouth Corp. 3.00%-3.09% due 7/8-7/15/2005(4) 128,000 127,850
CAFCO, LLC 3.03%-3.32% due 7/11-9/12/2005(4) 259,200 258,451
Citicorp 3.07% due 7/21/2005 35,000 34,940
ChevronTexaco Funding Corp. 3.03%-3.05% due 7/13-7/22/2005 121,100 120,925
Clipper Receivables Co., LLC 3.06%-3.32% due 7/6-8/18/2005(4) 281,400 280,839
Coca-Cola Co. 3.00%-3.28% due 7/8-9/7/2005 221,470 220,565
Colgate-Palmolive Co. 3.20%-3.21% due 7/28-7/29/2005(4) 72,600 72,415
DuPont (E.I.) de Nemours & Co. 3.15%-3.22% due 8/3-9/2/2005 215,000 214,158
Edison Asset Securitization LLC 3.11%-3.32% due 8/1-9/12/2005(4) 136,802 136,249
General Electric Capital Corp. 3.04% due 7/12-7/13/2005 94,700 94,602
General Electric Capital Services, Inc. 3.03% due 7/11/2005 50,000 49,954
Emerson Electric Co. 3.06% due 7/12/2005(4) 36,300 36,263
Estee Lauder Companies Inc. 3.15% due 7/20/2005(4) 15,700 15,673
Exxon Asset Management Co. 2.96%-2.98% due 7/5-7/11/2005(4) 125,000 124,923
Fannie Mae 3.21% due 8/10/2005 54,613 54,413
FCAR Owner Trust I 3.29% due 8/19/2005 50,000 49,771
Federal Farm Credit Banks 2.89%-3.26% due 7/5-10/7/2005 377,000 374,997
Federal Home Loan Bank 2.92%-3.36% due 7/1-9/30/2005 1,603,302 1,595,040
Freddie Mac 2.93%-3.19% due 7/1-9/15/2005 942,579 939,910
Gannett Co. 2.99%-3.20% due 7/8-8/23/2005(4) 226,200 225,593
Hershey Foods Corp. 3.11%-3.23% due 8/12-8/24/2005(4) 62,300 62,048
Hewlett-Packard Co. 3.10%-3.26% due 7/25-7/29/2005(4) 275,000 274,358
HSBC Finance Corp. 3.07%-3.11% due 7/20-8/11/2005 117,500 117,207
IBM Capital Inc. 3.21% due 7/25/2005(4) 30,000 29,933
International Business Machines Corp. 3.02%-3.03% due 7/19-7/20/2005 100,000 99,836
Illinois Tool Works Inc. 3.13%-3.17% due 7/20-7/26/2005 38,326 38,249
International Bank for Reconstruction and Development 2.89%-3.05% due 7/8-8/15/2005 276,300 275,486
International Lease Finance Corp. 3.08%-3.22% due 7/18-8/17/2005 99,500 99,184
Kimberly-Clark Worldwide Inc. 3.08%-3.09% due 7/12-7/13/2005(4) 40,000 39,957
Medtronic Inc. 3.20%-3.23% due 7/29-8/5/2005(4) 106,350 106,021
NetJets Inc. 2.98%-3.07% due 7/5-7/12/2005(4) 72,000 71,957
New Center Asset Trust Plus 3.06%-3.25% due 7/6-7/29/2005 75,000 74,857
Park Avenue Receivables Co., LLC 3.07%-3.27% due 7/8-8/18/2005(4) 155,694 155,256
Preferred Receivables Funding Corp. 3.14%-3.34% due 7/18-9/20/2005(4) 125,000 124,494
PepsiCo Inc. 3.01%-3.22% due 7/6-8/2/2005(4) 201,300 200,924
Private Export Funding Corp. 3.02%-3.21% due 7/15-9/21/2005(4) 167,500 166,848
Procter & Gamble Co. 3.00%-3.28% due 7/11-9/16/2005(4) 263,700 262,457
SBC Communications Inc. 3.08%-3.11% due 7/8-7/19/2005(4) 100,200 100,073
Scripps (E.W.) Co. 3.29% due 8/24/2005(4) 25,000 24,874
Sun Trust Banks Inc. 3.38% due 8/29/2005 50,000 50,000
Three Pillars Funding, LLC 3.06%-3.40% due 7/1-7/19/2005(4) 195,921 195,731
Tennessee Valley Authority 2.96%-3.22% due 7/7-9/15/2005 267,750 266,687
Triple-A One Funding Corp. 3.09%-3.20% due 7/11-8/25/2005(4) 191,291 190,831
U.S. Treasury Bills 2.695%-3.066% due 7/7-9/29/2005 1,394,350 1,390,251
USAA Capital Corp. 3.13% due 8/15/2005 25,000 24,898
Variable Funding Capital Corp. 3.08%-3.30% due 7/18-8/25/2005(4) 285,000 283,987
Verizon Network Funding Corp. 3.08%-3.33% due 7/6-8/29/2005 121,000 120,650
Wal-Mart Stores Inc. 3.09%-3.27% due 7/6-8/30/2005(4) 304,700 303,613
Wells Fargo & Co. 3.13%-3.27% due 7/25-8/16/2005 250,000 249,998
Total short-term securities (cost: $11,071,776,000) 11,071,723
Total investment securities (cost: $57,858,785,000) 75,591,150
Other assets less liabilities 97,751
Net assets $75,688,901
"Miscellaneous" securities include holdings in their initial period of
acquisition that have not previously been publicly disclosed.
(1) Security did not produce income during the last 12 months.
(2) Represents an affiliated company as defined under the Investment Company
Act of 1940.
(3) Coupon rate may change periodically.
(4) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities was
$4,095,945,000, which represented 5.41% of the net assets of the fund.
(5) Pass-through securities backed by a pool of mortgages or other loans on
which principal payments are periodically made. Therefore, the
effective maturities are shorter than the stated maturities.
ADR = American Depositary Receipts
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Directors since the Registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a Nominating Committee comprised solely of persons
who are not considered ``interested persons'' of the Registrant within the
meaning of the Investment Company Act of 1940, as amended. The committee
periodically reviews such issues as the Board's composition, responsibilities,
committees, compensation and other relevant issues, and recommends any
appropriate changes to the full Board of Directors. While the committee normally
is able to identify from its own resources an ample number of qualified
candidates, it will consider shareholder suggestions of persons to be considered
as nominees to fill future vacancies on the Nominating Committee of the
Registrant, c/o the Registrant's Secretary, and must be accompanied by complete
biographical and occupational data on the prospective nominee, along with a
written consent of the prospective nominee for consideration of his or her name
by the Nominating Committee.
ITEM 11 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's second fiscal quarter of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 12 - Exhibits
(a) (1) The Code of Ethics - not applicable for filing of Semiannual Reports to
Shareholders.
(a) (2) 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, Vice Chairman and CEO
Date: September 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ R. Michael Shanahan
- ------------------------------------------
R. Michael Shanahan, Vice Chairman and CEO
Date: September 7, 2005
By /s/ Thomas M. Rowland
- ------------------------------------
Thomas M. Rowland, Treasurer and PFO
Date: September 7, 2005