<PAGE>


                     The Investment Company of America/(R)/

                                   Prospectus

<TABLE>
<CAPTION>
         TABLE OF CONTENTS
------------------------------------------------------
<S>      <S>
  1       Risk/Return Summary
------------------------------------------------------
  4       Fees and Expenses of the Fund
------------------------------------------------------
  5       Investment Objectives, Strategies and Risks
------------------------------------------------------
  8       Management and Organization
------------------------------------------------------
10        Shareholder Information
------------------------------------------------------
11        Choosing a Share Class
------------------------------------------------------
13        Purchase and Exchange of Shares
------------------------------------------------------
14        Sales Charges
------------------------------------------------------
16        Sales Charge Reductions and Waivers
------------------------------------------------------
17        Plans of Distribution
------------------------------------------------------
18        How to Sell Shares
------------------------------------------------------
19        Distributions and Taxes
------------------------------------------------------
20        Financial Highlights
------------------------------------------------------
</TABLE>


                                 MARCH 15, 2001


 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
 OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
 PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
 A CRIMINAL OFFENSE.

<PAGE>



<PAGE>

 RISK/RETURN SUMMARY

 The fund seeks to make your investment grow and provide you with income over
 time by investing primarily in common stocks that offer growth and dividend
 potential.

 The fund is designed for investors seeking both capital appreciation and
 income.  An investment in the fund is subject to risks, including the
 possibility that the fund's income and the value of its investments may
 fluctuate in response to economic, political or social events in the U.S. or
 abroad. The values of equity securities owned by the fund may be affected by
 events specifically involving the companies issuing those securities. The
 fund's equity investments are limited to securities included on its eligible
 list, which consists of securities that are deemed suitable by the fund's board
 of directors in light of the fund's investment objectives and policies.

 Your investment in the fund is not a bank deposit and is not insured or
 guaranteed by the Federal Deposit Insurance Corporation or any other government
 agency, entity or person.

 YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
 IF YOU INVEST FOR A SHORTER PERIOD OF TIME.


                                       1

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 HISTORICAL INVESTMENT RESULTS

 The following information provides some indication of the risks of investing in
 the fund by showing changes in the fund's investment results from year to year
 and by showing how the fund's average annual returns for various periods
 compare with those of a broad measure of market performance. Past results are
 not an indication of future results.


                 CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
   (Results do not include a sales charge; if one were included, results would
                                   be lower.)
 [bar chart]
 1991   26.54%
 1992    6.99%
 1993   11.62%
 1994    0.16%
 1995   30.63%
 1996   19.35%
 1997   29.81%
 1998   22.94%
 1999   16.56%
 2000    3.84%
 [end bar chart]


    The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
        <S>                        <C>     <C>
        HIGHEST                    17.34%  (quarter ended December 31, 1998)
        LOWEST                     -7.38%  (quarter ended September 30, 1998)
</TABLE>


                                       2

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>



 Unlike the bar chart on the previous page, the table below reflects the fund's
 results with the maximum initial or deferred sales charge imposed, as required
 by Securities and Exchange Commission rules. Class A share results reflect the
 maximum initial sales charge of 5.75%. Sales charges are reduced for purchases
 of $25,000 or more. Results would be higher if calculated without a sales
 charge. All fund results reflect the reinvestment of dividend and capital gain
 distributions.

 Since the fund's Class B shares began investment operations on March 15, 2000
 and Class C and F shares began investment operations on March 15, 2001,
 comparable results for those classes are not available for the 2000 calendar
 year.
<TABLE>
<CAPTION>
 AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 2000:
 ------------------------------------------------------------------------------
                                ONE YEAR   FIVE YEARS   TEN YEARS    LIFETIME
 <S>                            <C>        <C>          <C>         <C>
 Class A - began 1/1/34
 (with the maximum sales         -2.13%      16.78%       15.69%      13.47%
 charge imposed)
 ------------------------------------------------------------------------------
 S&P 500/1/                      -9.11%      18.29%       17.41%      12.07%
 ------------------------------------------------------------------------------
 Lipper Growth and Income         0.39%      14.32%       15.14%        N/A
 Index/2/
 ------------------------------------------------------------------------------
 Lipper Large-Cap Value           1.95%      15.74%       16.12%        N/A
 Index/3/
 ------------------------------------------------------------------------------
 Class A 30-day yield:  1.86%
 (For current yield information, please call American FundsLine at
  1-800-325-3590.)
 ------------------------------------------------------------------------------
</TABLE>

 1 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
  measurement of changes in stock market conditions based on the average
  weighted performance of 500 widely held common stocks. This index is unmanaged
  and does not reflect sales charges, commissions or expenses.
 2 The Lipper Growth and Income Fund Index is an equally weighted performance
  index that represents funds that combine a growth-of-earnings orientation and
  an income requirement for level and/or rising dividends.  The results of the
  underlying funds in the index include the reinvestment of dividend and capital
  gain distributions and brokerage commissions paid by the funds for portfolio
  transactions, but do not reflect sales charges. This index was not in
  existence as of the date the fund began investment operations in 1934,
  therefore, lifetime results are not available.
 3 The Lipper Large-Cap Value Fund Index is an equally weighted performance
  index that represents funds which, by practice, invest at least 75% of their
  equity assets in companies with large market capitalizations. Large-cap value
  funds seek long-term growth of capital by investing in companies that are
  considered to be undervalued relative to a major unmanaged stock index based
  on price-to-current earnings or other factors. The results of the underlying
  funds in the index include the reinvestment of dividend and capital gain
  distributions and brokerage commissions paid by the funds for portfolio
  transactions, but do not reflect sales charges. This index was not in
  existence as of the date the fund began investment operations in 1934,
  therefore, lifetime results are not available.


                                       3

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 FEES AND EXPENSES OF THE FUND

 SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<CAPTION>
                                                      CLASS A   CLASS B   CLASS C    CLASS F
 --------------------------------------------------------------------------------------------
 <S>                                                  <C>       <C>       <C>       <C>
 Maximum sales charge imposed on purchases (as a       5.75%/1/  none      none       none
 percentage of offering price)
 --------------------------------------------------------------------------------------------
 Maximum sales charge imposed on reinvested            none      none      none       none
 dividends
 --------------------------------------------------------------------------------------------
 Maximum deferred sales charge                        none/2/    5.00%/3/  1.00%/4/   none
 --------------------------------------------------------------------------------------------
 Redemption or exchange fees                           none      none      none       none
 --------------------------------------------------------------------------------------------
</TABLE>
 1 Sales charges are reduced or eliminated for purchases of $25,000 or more.
 2 A contingent deferred sales charge of 1% applies on certain redemptions made
  within 12 months following purchases of $1 million or more made without a
  sales charge.
 3 Deferred sales charges are reduced after 12 months and eliminated after six
  years.
 4 Deferred sales charge is eliminated after 12 months.

 ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
                                                           CLASS A  CLASS B/1/  CLASS C/2/   CLASS F/2/
 -------------------------------------------------------------------------------------------------------
 <S>                                                       <C>      <C>         <C>         <C>
 Management Fees                                            0.24%     0.24%       0.24%        0.24%
 -------------------------------------------------------------------------------------------------------
 Distribution and/or Service (12b-1) Fees/3/                0.23%     1.00%       1.00%        0.25%
 -------------------------------------------------------------------------------------------------------
 Other Expenses                                             0.09%     0.10%       0.19%        0.18%
 -------------------------------------------------------------------------------------------------------
 Total Annual Fund Operating Expenses                       0.56%     1.34%       1.43%        0.67%
 -------------------------------------------------------------------------------------------------------
</TABLE>

 1 Annualized.
 2 Based on estimated amounts for the current fiscal year.
 3 Class A and F 12b-1 fees may not exceed 0.25% and 0.50%, respectively, of the
  class' average net assets annually.

 EXAMPLE

 The examples below are intended to help you compare the cost of investing in
 the fund with the cost of investing in other mutual funds. The examples assume
 that you invest $10,000 in the fund for the time periods indicated, that your
 investment has a 5% return each year and that the fund's operating expenses
 remain the same as shown above.  The "Class A" example reflects the maximum
 initial sales charge in the first year. The "Class B- and Class C-assuming
 redemption" examples reflect applicable contingent deferred sales charges
 through six years and one year, respectively (after which times they are
 eliminated). The examples do not include fees charged by financial
 intermediaries, typically applicable mainly to Class F shares. Both Class B
 examples reflect Class A expenses for years 9 and 10 since Class B shares
 automatically convert to Class A after eight years. Although your actual costs
 may be higher or lower, based on these assumptions, your cumulative expenses
 would be:

<TABLE>
<CAPTION>
                                             ONE YEAR         THREE YEARS         FIVE YEARS         TEN YEARS
 <S>                                      <C>              <C>                 <C>                <C>
 Class A                                       $629               $744               $870              $1,236
 ----------------------------------------------------------------------------------------------------------------------------------
 Class B - assuming redemption                 $636               $825               $934              $1,398
 -------------------------------------------------------------------------------------------------------------------
 Class B - assuming no redemption              $136               $425               $734              $1,398
 -------------------------------------------------------------------------------------------------------------------
 Class C - assuming redemption                 $246               $452               $782              $1,713
 -------------------------------------------------------------------------------------------------------------------
 Class C - assuming no redemption              $146               $452               $782              $1,713
 -------------------------------------------------------------------------------------------------------------------
 Class F - excludes intermediary fees/*/       $ 68               $214               $373              $  835
 -------------------------------------------------------------------------------------------------------------------
 *Fees charged by financial intermediaries are independent of fund expenses and will increase the overall cost of
 your investment.  Intermediary fees typically range from 0.50% to 3.00% of assets annually depending on services
 offered.
</TABLE>



                                       4

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 INVESTMENT OBJECTIVES, STRATEGIES AND RISKS

 The fund's investment objectives are to achieve long-term growth of capital and
 income.  The fund strives to accomplish these objectives through extensive U.S.
 and global research, careful selection, and broad diversification.  In the
 selection of securities for investment, potential for capital appreciation and
 future dividends are given more weight than current yield.  The fund invests
 primarily in common stocks.  The fund's investments are limited to securities
 included on its eligible list, which consists of securities deemed suitable in
 light of the fund's investment objectives and policies.  Securities are added
 to, or deleted from, the eligible list by the board of directors, reviewing and
 acting upon the recommendations of the investment adviser.

 The values of equity securities held by the fund may decline in response to
 certain events, including those directly involving the companies whose
 securities are owned in the fund, adverse conditions affecting the general
 economy, overall market declines, world political, social and economic
 instability, and currency and interest rate fluctuations.

 The fund may also hold cash or money market instruments. The size of the fund's
 cash position will vary and will depend on various factors, including market
 conditions and purchases and redemptions of fund shares. A larger cash position
 could detract from the achievement of the fund's objectives, but it also would
 reduce the fund's exposure in the event of a market downturn and provide
 liquidity to make additional investments or to meet redemptions.

 The fund relies on the professional judgment of its investment adviser, Capital
 Research and Management Company, to make decisions about the fund's portfolio
 investments. The basic investment philosophy of the investment adviser is to
 seek undervalued securities that represent good long-term investment
 opportunities. Securities may be sold when the investment adviser believes they
 no longer represent good long-term value.

 OTHER IMPORTANT INVESTMENT PRACTICES

 In addition to the principal investment strategies described above, the fund
 has other investment practices that are described here and in the statement of
 additional information.

 The fund may invest in securities of issuers domiciled outside the U.S. and not
 included in the Standard & Poor's 500 Composite Index. Investments outside the
 U.S. may be subject to certain risks.  For example, the prices of non-U.S.
 securities can decline in response to currency fluctuations or political,
 social and economic instability.


                                       5

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 ADDITIONAL INVESTMENT RESULTS

 Unlike the investment results table shown on an earlier page, the table below
 reflects the fund's results calculated without a sales charge.


<TABLE>
<CAPTION>
 AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000:
                           ONE YEAR      FIVE YEARS      TEN YEARS       LIFETIME
 <S>                     <C>           <C>             <C>            <C>
 Class A - began 1/1/34
 (with no sales charge       3.84%         18.18%         16.38%          13.57%
 imposed)
 -----------------------------------------------------------------------------------
 S&P 500/1/                 -9.11%         18.29%         17.41%          12.07%
 -----------------------------------------------------------------------------------
 Lipper Growth and           0.39%         14.32%         15.14%            N/A
 Income Index/2/
 -----------------------------------------------------------------------------------
 Lipper Large-Cap Value      1.95%         15.74%         16.12%            N/A
 Index/3/
 -----------------------------------------------------------------------------------
 Class A distribution rate/4/: 1.57%
 (For current distribution rate information, please call American FundsLine at
  1-800-325-3590.)
 -----------------------------------------------------------------------------------
</TABLE>


 1 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
  measurement of changes in stock market conditions based on the average
  weighted performance of 500 widely held common stocks. This index is unmanaged
  and does not reflect sales charges, commissions or expenses.
 2 The Lipper Growth and Income Fund Index is an equally weighted performance
  index that represents funds that combine a growth-of-earnings orientation and
  an income requirement for level and/or rising dividends.  The results of the
  underlying funds in the index include the reinvestment of dividend and capital
  gain distributions and brokerage commissions paid by the funds for portfolio
  transactions, but do not reflect sales charges. This index was not in
  existence as of the date the fund began investment operations in 1934,
  therefore, lifetime results are not available.
 3 The Lipper Large-Cap Value Fund Index is an equally weighted performance
  index that represents funds which, by practice, invest at least 75% of their
  equity assets in companies with large market capitalizations. Large-cap value
  funds seek long-term growth of capital by investing in companies that are
  considered to be undervalued relative to a major unmanaged stock index based
  on price-to-current earnings or other factors. The results of the underlying
  funds in the index include the reinvestment of dividend and capital gain
  distributions and brokerage commissions paid by the funds for portfolio
  transactions, but do not reflect sales charges. This index was not in
  existence as of the date the fund began investment operations in 1934,
  therefore, lifetime results are not available.
 4 The distribution rate is based on actual distributions paid to shareholders
  over a 12-month interval. Capital gain distributions are added back to the net
  asset value to determine the rate.


                                       6

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>



 INVESTMENT PORTFOLIO AS OF DECEMBER 31, 2000:
<TABLE>
<CAPTION>

                                                       PERCENT OF
 LARGEST INVESTMENT CATEGORIES                         NET ASSETS
 ------------------------------------------------------------------
 <S>                                                  <C>
 Pharmaceuticals & Biotechnology                          9.19%
 ------------------------------------------------------------------
 Energy                                                   7.99
 ------------------------------------------------------------------
 Technology Hardware & Equipment                          7.35
 ------------------------------------------------------------------
 LARGEST INDUSTRY HOLDINGS
 ------------------------------------------------------------------
 Pharmaceuticals                                          9.19%
 ------------------------------------------------------------------
 Oil & Gas                                                6.65
 ------------------------------------------------------------------
 Media                                                    6.54
 ------------------------------------------------------------------
 Diversified Financials                                   5.94
 ------------------------------------------------------------------
 Banks                                                    4.68
 ------------------------------------------------------------------
 LARGEST INDIVIDUAL HOLDINGS
 ------------------------------------------------------------------
 Fannie Mae                                               2.91%
 ------------------------------------------------------------------
 Pfizer                                                   2.67
 ------------------------------------------------------------------
 Philip Morris                                            2.64
 ------------------------------------------------------------------
 Pharmacia                                                2.39
 ------------------------------------------------------------------
 Viacom                                                   2.32
 ------------------------------------------------------------------
 Royal Dutch Petroleum/"Shell" Transport and Trading      1.92
 ------------------------------------------------------------------
 Time Warner                                              1.79
 ------------------------------------------------------------------
 Texas Instruments                                        1.42
 ------------------------------------------------------------------
 AstraZeneca                                              1.35
 ------------------------------------------------------------------
 Bristol-Myers Squibb                                     1.30
</TABLE>




 Because the fund is actively managed, its holdings will change from time to
 time.


                                       7

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 MANAGEMENT AND ORGANIZATION

 INVESTMENT ADVISER

 Capital Research and Management Company, an experienced investment management
 organization founded in 1931, serves as investment adviser to the fund and
 other funds, including those in The American Funds Group. Capital Research and
 Management Company, a wholly owned subsidiary of The Capital Group Companies,
 Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
 Research and Management Company manages the investment portfolio and business
 affairs of the fund. The total management fee paid by the fund, as a percentage
 of average net assets, for the previous fiscal year appears earlier under "Fees
 and Expenses of the Fund."

 MULTIPLE PORTFOLIO COUNSELOR SYSTEM

 Capital Research and Management Company uses a system of multiple portfolio
 counselors in managing mutual fund assets. Under this approach the portfolio of
 a fund is divided into segments managed by individual counselors. Counselors
 decide how their respective segments will be invested, within the limits
 provided by a fund's objective(s) and policies and by Capital Research and
 Management Company's investment committee. In addition, Capital Research and
 Management Company's research professionals may make investment decisions with
 respect to a portion of a fund's portfolio. The primary individual portfolio
 counselors for The Investment Company of America are:


<TABLE>
<CAPTION>
 PORTFOLIO COUNSELOR/ FUND                           PRIMARY TITLE WITH INVESTMENT ADVISER
 TITLE (IF APPLICABLE)          COUNSELOR SINCE      (OR AFFILIATE) AND INVESTMENT EXPERIENCE
 --------------------------------------------------------------------------------------------------------
 <S>                         <C>                     <C>
 JON B. LOVELACE, JR.                 1958           Chairman Emeritus, Capital Research and Management
 Chairman of the Board                               Company
                                                     Investment professional with Capital Research and
                                                     Management Company or affiliate since 1951
 --------------------------------------------------------------------------------------------------------
 R. MICHAEL SHANAHAN           1991 (7 years as a    Chairman and Principal Executive Officer, Capital
 President and Director      research professional   Research and Management Company
                                 for the fund)       Investment professional with Capital Research and
                                                     Management Company or affiliate since 1965
 --------------------------------------------------------------------------------------------------------
 JAMES B. LOVELACE             1991 (3 years as a    Senior Vice President, Capital Research and
 Senior Vice President and   research professional   Management Company
 Director                        for the fund)       Investment professional with Capital Research and
                                                     Management Company or affiliate since 1982
 --------------------------------------------------------------------------------------------------------
 JAMES F. ROTHENBERG           1994 (9 years as a    President and Director, Capital Research and
 Executive Vice President    research professional   Management Company
 and Director                    for the fund)       Investment professional with Capital Research and
                                                     Management Company or affiliate since 1970
 --------------------------------------------------------------------------------------------------------
 GREGG E. IRELAND             1991 (10 years as a    Senior Vice President, Capital Research and
 Senior Vice President       research professional   Management Company
                                 for the fund)       Investment professional with Capital Research and
                                                     Management Company or affiliate since 1973
 --------------------------------------------------------------------------------------------------------
 DONALD D. O'NEAL              1991 (4 years as a    Senior Vice President, Capital Research and
 Senior Vice President       research professional   Management Company
                                 for the fund)       Investment professional with Capital Research and
                                                     Management Company or affiliate since 1985
 --------------------------------------------------------------------------------------------------------
 JAMES E. DRASDO               1987 (9 years as a    Senior Vice President, Capital Research and
                             research professional   Management Company
                                 for the fund)       Investment professional since 1972 and with Capital
                                                     Research and Management Company or affiliate since
                                                     1977
 --------------------------------------------------------------------------------------------------------
 DINA N. PERRY                 1994 (9 years as a    Senior Vice President, Capital Research and
                             research professional   Management Company
                                 for the fund)       Investment professional since 1978 and with Capital
                                                     Research and Management Company or affiliate since
                                                     1991
 --------------------------------------------------------------------------------------------------------
 C. ROSS SAPPENFIELD           1999 (6 years as a    Vice President, Capital Research Company
                             research professional   Investment professional with Capital Research and
                                 for the fund)       Management Company or affiliate since 1992
 --------------------------------------------------------------------------------------------------------
</TABLE>



                                       8

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>



                                       9

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 SHAREHOLDER INFORMATION

 SHAREHOLDER SERVICES

 American Funds Service Company, the fund's transfer agent, offers you a wide
 range of services you can use to alter your investment program should your
 needs and circumstances change. These services may be terminated or modified at
 any time upon 60 days' written notice. For your convenience, American Funds
 Service Company has four service centers across the country.

                  AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
                    Call toll-Free from anywhere in the U.S.
                               (8 a.m. to 8 p.m. ET):
                                   800/421-0180

                             [map of the United States]

<TABLE>
<CAPTION>
<S>                <C>                 <C>                    <C>
Western            Western Central     Eastern Central        Eastern
Service Center     Service Center      Service Center         Service Center
American Funds     American Funds      American Funds         American Funds
Service Company    Service Company     Service Company        Service Company
P.O. Box 2205      P.O. Box 659522     P.O. Box 6007          P.O. Box 2280
Brea, California   San Antonio, Texas  Indianapolis, Indiana  Norfolk, Virginia
92822-2205         78265-9522          46206-6007             23501-2280
Fax: 714/671-7080  Fax: 210/474-4050   Fax: 317/735-6620      Fax: 757/670-4773
</TABLE>



 A MORE DETAILED DESCRIPTION OF POLICIES AND SERVICES IS INCLUDED IN THE FUND'S
 STATEMENT OF ADDITIONAL INFORMATION AND THE OWNER'S GUIDE SENT TO NEW AMERICAN
 FUNDS SHAREHOLDERS TITLED "WELCOME TO THE FAMILY." Both are available by
 writing or calling American Funds Service Company.


                                       10

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 CHOOSING A SHARE CLASS

 The fund offers four different classes of shares.  Each share class represents
 investments in the same portfolio of securities, but each class has its own
 sales charge and expense structure, allowing you to choose the class that best
 meets your situation. WHEN YOU PURCHASE SHARES OF THE FUND, YOU MUST CHOOSE A
 SHARE CLASS.  IF NONE IS CHOSEN, YOUR INVESTMENT WILL BE MADE IN CLASS A
 SHARES.

 Shares of the fund may be purchased through various investment programs or
 accounts, including many types of retirement plans.  The services or share
 classes available to you may vary depending upon how you wish to purchase
 shares of the fund.

 Factors you should consider in choosing a class of shares include:

 . How long you expect to own the shares

 . How much you intend to invest

 . Total expenses associated with owning shares of each class

 . Whether you qualify for any reduction or waiver of sales charges (for
  example, Class A shares may be a less expensive option over time if you
  qualify for a sales charge reduction or waiver)

 . Class B and C shares generally are not available to certain retirement plans,
  including employer-sponsored retirement plans such as 401(k) plans,
  employer-sponsored 403(b) plans, and money purchase pension and profit sharing
  plans.

 . Class F shares are generally only available to fee-based programs of
  investment firms and registered investment advisers that have special
  agreements with the fund's distributor.

 EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT.  YOU SHOULD SPEAK WITH
 YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.


                                       11

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 SUMMARY OF THE PRIMARY DIFFERENCES AMONG SHARE CLASSES

<TABLE>
<CAPTION>
  CLASS A SHARES
 ------------------------------------------------------------------------------
 <S>                         <S>
  Initial sales charge        up to 5.75% (reduced or eliminated for purchases
                              of $25,000 or more)
  Contingent deferred sales   none (except on certain redemptions on purchases
  charge                      of $1 million or more bought without an initial
                              sales charge)
  12b-1 fees                  up to 0.25% annually
  Dividends                   higher than other classes due to lower annual
                              expenses
  Purchase maximum            none
  Conversion                  none
  CLASS B SHARES
 ------------------------------------------------------------------------------
  Initial sales charge        none
  Contingent deferred sales   starts at 5.00% and declines each year until it
  charge                      reaches 0% after six years
  12b-1 fees                  1.00% annually
  Dividends                   lower than Class A and F shares due to higher
                              distribution fees and other expenses
  Purchase maximum            $100,000
  Conversion                  automatic conversion to Class A shares after
                              eight years, reducing future annual expenses
  CLASS C SHARES
 ------------------------------------------------------------------------------
  Initial sales charge        none
  Contingent deferred sales   1.00% if shares are sold within one year after
  charge                      being purchased
  12b-1 fees                  1.00% annually
  Dividends                   lower than Class A and F shares due to higher
                              distribution fees and other expenses
  Purchase maximum            $500,000
  Conversion                  automatic conversion to Class F shares after ten
                              years, reducing future annual expenses
  CLASS F SHARES
 ------------------------------------------------------------------------------
  Initial sales charge        none
  Contingent deferred sales   none
  charge
  12b-1 fees                  currently 0.25% annually (may not exceed 0.50%
                              annually)
  Dividends                   higher than Class B and C shares due to lower
                              distribution fees, but typically lower than Class
                              A shares due to higher other expenses
  Purchase maximum            none
  Conversion                  none
 ------------------------------------------------------------------------------
</TABLE>



                                       12

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 PURCHASE AND EXCHANGE OF SHARES

 PURCHASE OF CLASS A, B AND C SHARES

 Generally, you may open an account and purchase Class A, B and C shares by
 contacting any investment dealer (who may impose transaction charges in
 addition to those described in this prospectus) authorized to sell the fund's
 shares. You may purchase additional shares in various ways, including through
 your investment dealer and by mail, telephone, the Internet and bank wire.

 PURCHASE OF CLASS F SHARES

 Generally, you may only open an account and purchase Class F shares through
 fee-based programs of investment firms and registered investment advisers with
 special agreements with the fund's distributor.  These firms and advisers
 typically charge ongoing fees for services they provide.

 EXCHANGE

 Generally, you may exchange your shares into shares of the same class of other
 funds in The American Funds Group without a sales charge. For purposes of
 computing the contingent deferred sales charge on Class B and C shares, the
 length of time you have owned your shares will be measured from the date of
 original purchase and will not be affected by any exchange.

 Exchanges of shares from the money market funds initially purchased without a
 sales charge generally will be subject to the appropriate sales charge.
 Exchanges have the same tax consequences as ordinary sales and purchases. See
 "Transactions by Telephone..." for information regarding electronic exchanges.

 THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S DISTRIBUTOR, RESERVE THE
 RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON, INCLUDING PURCHASES WHICH
 ARE PART OF EXCHANGE ACTIVITY THAT COULD INVOLVE ACTUAL OR POTENTIAL HARM TO
 THE FUND.


<TABLE>
<CAPTION>
 PURCHASE MINIMUMS FOR ALL CLASSES OF SHARES
 <S>                                                           <C>
 To establish an account (including retirement plan accounts)   $    250
   For a retirement plan account through payroll deduction      $     25
 To add to an account                                           $     50
   For a retirement plan account through payroll deduction      $     25
 ------------------------------------------------------------------------
 PURCHASE MAXIMUM FOR CLASS B SHARES                            $100,000
 ------------------------------------------------------------------------
 PURCHASE MAXIMUM FOR CLASS C SHARES                            $500,000
 ------------------------------------------------------------------------
</TABLE>



                                       13

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 SHARE PRICE

 The fund calculates its share price, also called net asset value, as of
 approximately 4:00 p.m. New York time, which is the normal close of trading on
 the New York Stock Exchange, every day the Exchange is open. In calculating net
 asset value, market prices are used when available. The fund has adopted
 procedures to make "fair value" determinations when reliable market prices for
 particular securities are not available.

 Your shares will be purchased at the net asset value (plus any applicable sales
 charge in the case of Class A shares), or sold at the net asset value next
 determined after American Funds Service Company receives and accepts your
 request. A contingent deferred sales charge may apply at the time you sell
 certain Class A, B and C shares.

 SALES CHARGES

 CLASS A

 The initial sales charge you pay when you buy Class A shares differs depending
 upon the amount you invest and may be reduced or eliminated for larger
 purchases as indicated below.


<TABLE>
<CAPTION>
                             SALES CHARGE AS A PERCENTAGE OF
                             ----------------------------------
                                                                    DEALER
                                                    NET           COMMISSION
                                OFFERING          AMOUNT           AS % OF
 INVESTMENT                       PRICE          INVESTED       OFFERING PRICE
 ------------------------------------------------------------------------------
 <S>                         <C>              <C>              <C>
 Less than $25,000                5.75%            6.10%            5.00%
 ------------------------------------------------------------------------------
 $25,000 but less than            5.00%            5.26%            4.25%
 $50,000
 ------------------------------------------------------------------------------
 $50,000 but less than            4.50%            4.71%            3.75%
 $100,000
 ------------------------------------------------------------------------------
 $100,000 but less than           3.50%            3.63%            2.75%
 $250,000
 ------------------------------------------------------------------------------
 $250,000 but less than           2.50%            2.56%            2.00%
 $500,000
 ------------------------------------------------------------------------------
 $500,000 but less than           2.00%            2.04%            1.60%
 $750,000
 ------------------------------------------------------------------------------
 $750,000 but less than $1        1.50%            1.52%            1.20%
 million
 ------------------------------------------------------------------------------
 $1 million or more and
 certain other investments        none             none             none
 described below
 ------------------------------------------------------------------------------
</TABLE>


 CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE

 INVESTMENTS OF $1 MILLION OR MORE MAY BE SUBJECT TO A 1% CONTINGENT DEFERRED
 SALES CHARGE IF SHARES ARE SOLD WITHIN ONE YEAR OF PURCHASE.
  Employer-sponsored defined contribution-type plans investing $1 million or
 more, or with 100 or more eligible employees, and Individual Retirement Account
 rollovers involving retirement plan assets invested in the American Funds, may
 invest with no sales charge and are not subject to a contingent deferred sales
 charge.  Also exempt are investments made through retirement plans, endowments
 or


                                       14

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 foundations with $50 million or more in assets, and investments made through
 accounts that purchased fund shares before March 15, 2001 and are part of
 certain qualified fee-based programs. The distributor may pay dealers up to 1%
 on investments made in Class A shares with no initial sales charge. The fund
 may reimburse the distributor for these payments through its Plan of
 Distribution (see below).

 CLASS B AND C

 Class B and C shares are sold without any initial sales charge.  American Funds
 Distributors pays 4% of the amount invested to dealers who sell Class B shares
 and 1% to dealers who sell Class C shares.

 For Class C shares, a contingent deferred sales charge of 1% applies if shares
 are sold within one year of purchase.  For Class B shares, a contingent
 deferred sales charge may be applied to shares you sell within six years of
 purchase, as shown in the table below.

<TABLE>
<CAPTION>
 <S>                                   <C>  <C>  <C>  <C>  <C>  <C>
 CLASS B SHARES SOLD WITHIN YEAR       1    2    3    4    5     6
 --------------------------------------------------------------------
 CONTINGENT DEFERRED SALES CHARGE      5%   4%   4%   3%   2%    1%
</TABLE>


 Shares acquired through reinvestment of dividends or capital gain distributions
 are not subject to a contingent deferred sales charge.  In addition, the
 contingent deferred sales charge may be waived in certain circumstances.  See
 "Contingent Deferred Sales Charge Waivers for Class B and C Shares" below.  The
 contingent deferred sales charge is based on the original purchase cost or the
 current market value of the shares being sold, whichever is less.  For purposes
 of determining the contingent deferred sales charge, if you sell only some of
 your shares, shares that are not subject to any contingent deferred sales
 charge will be sold first and then shares that you have owned the longest.

 CONVERSION OF CLASS B AND C SHARES

 Class B shares automatically convert to Class A shares in the month of the
 eight-year anniversary of the purchase date.  Class C shares automatically
 convert to Class F shares in the month of the ten-year anniversary of the
 purchase date.  The Internal Revenue Service currently takes the position that
 these automatic conversions are not taxable. Should their position change,
 shareholders would still have the option of converting but may face certain tax
 consequences.


                                       15

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 SALES CHARGE REDUCTIONS AND WAIVERS

 You must let your investment dealer or American Funds Service Company know if
 you qualify for a reduction in your Class A sales charge or waiver of your
 Class B or C contingent deferred sales charge.

 REDUCING YOUR CLASS A SALES CHARGE

 You and your "immediate family" (your spouse and your children under the age of
 21) may combine investments to reduce your Class A sales charge.

 AGGREGATING ACCOUNTS

 To receive a reduced Class A sales charge, investments made by you and your
 immediate family (see above) may be aggregated if made for your own account(s)
 and/or, for instance:

 . trust accounts established by the above individuals. However, if the
  person(s) who established the trust is deceased, the trust account may be
  aggregated with accounts of the person who is the primary beneficiary of the
  trust.

 . solely controlled business accounts.

 . single-participant retirement plans.

 CONCURRENT PURCHASES

 You may combine simultaneous purchases of any class of shares of two or more
 American Funds, as well as individual holdings in various American Legacy
 variable annuities or variable life insurance policies, to qualify for a
 reduced Class A sales charge.  Direct purchases of money market funds are
 excluded.

 RIGHTS OF ACCUMULATION

 You may take into account the current value (or if greater, the amount you
 invested less any withdrawals) of your existing holdings in any class of shares
 of the American Funds, as well as individual holdings in various American
 Legacy variable annuities or variable life insurance policies, to determine
 your Class A sales charge. Direct purchases of money market funds are excluded.

 STATEMENT OF INTENTION

 You can reduce the sales charge you pay on your Class A share purchases by
 establishing a Statement of Intention. A Statement of Intention allows you to
 combine all non-money market fund purchases of all share classes, as well as
 individual American Legacy variable annuity and life insurance policies you
 intend to make over a 13-month period, to determine the applicable sales
 charge. At your request, purchases made during the previous 90 days may be
 included; however, capital appreciation and reinvested dividends and capital
 gains do not apply toward these combined purchases. A portion of your account
 may be held in escrow to cover additional Class A sales charges which may be
 due if your total investments over the 13-month period do not qualify for the
 applicable sales charge reduction.


                                       16

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B AND C SHARES

 The contingent deferred sales charge on Class B and C shares may be waived in
 the following cases:

 . when receiving payments through systematic withdrawal plans (up to 12% of the
  value of each fund account);

 . when receiving required minimum distributions from retirement accounts upon
  reaching age 70 1/2; or

 . for redemptions due to death or post-purchase disability of the shareholder.

 PLANS OF DISTRIBUTION

 The fund has Plans of Distribution or "12b-1 Plans" under which it may finance
 activities primarily intended to sell shares, provided the categories of
 expenses are approved in advance by the fund's board of directors. The plans
 provide for annual expenses of up to 0.25% for Class A shares, 1.00% for Class
 B and C shares, and up to 0.50% for Class F shares. For all share classes, up
 to 0.25% of these expenses may be used to pay service fees to qualified dealers
 for providing certain shareholder services.  The remaining expense for each
 share class may be used for distribution expenses.

 The 12b-1 fees paid by the fund, as a percentage of average net assets, for the
 previous fiscal year are indicated earlier under "Fees and Expenses of the
 Fund." Since these fees are paid out of the fund's assets or income on an
 ongoing basis, over time they will increase the cost and reduce the return of
 an investment. The higher fees for Class B and C shares may cost you more over
 time than paying the initial sales charge for Class A shares.

 OTHER COMPENSATION TO DEALERS

 American Funds Distributors may pay, or sponsor informational meetings for,
 dealers as described in the statement of additional information.


                                       17

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

 HOW TO SELL SHARES

 Once a sufficient period of time has passed to reasonably assure that checks or
 drafts (including certified or cashiers' checks) for shares purchased have
 cleared (normally 15 calendar days), you may sell (redeem) those shares in any
 of the following ways:

 THROUGH YOUR DEALER OR FINANCIAL ADVISER (CERTAIN CHARGES MAY APPLY)

 . Shares held for you in your dealer's name must be sold through the dealer.

 . Class F shares must be sold through your dealer or financial adviser.

 WRITING TO AMERICAN FUNDS SERVICE COMPANY

 . Requests must be signed by the registered shareholder(s).

 . A signature guarantee is required if the redemption is:

     -- Over $50,000;

     -- Made payable to someone other than the registered shareholder(s); or

     -- Sent to an address other than the address of record, or an address of
      record which has been changed within the last 10 days.

 . American Funds Service Company reserves the right to require signature
  guarantee(s) on any redemptions.

 . Additional documentation may be required for sales of shares held in
  corporate, partnership or fiduciary accounts.

 TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
 FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:

 . Redemptions by telephone, fax, or computer (including American FundsLine and
  American FundsLine OnLine) are limited to $50,000 per shareholder each day.

 . Checks must be made payable to the registered shareholder.

 . Checks must be mailed to an address of record that has been used with the
  account for at least 10 days.

 TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE

 Generally, you are automatically eligible to use these services for redemptions
 and exchanges unless you notify us in writing that you do not want any or all
 of these services. You may reinstate these services at any time.

 Unless you decide not to have telephone, fax, or computer services on your
 account(s), you agree to hold the fund, American Funds Service Company, any of
 its affiliates or mutual funds managed by such affiliates, and each of their
 respective directors, trustees, officers, employees and agents harmless from
 any losses, expenses, costs or liabilities (including attorney fees) which may
 be incurred in connection with the exercise of these privileges, provided
 American Funds Service Company employs reasonable procedures to confirm that
 the instructions received from any person with appropriate account information
 are genuine. If reasonable procedures are not employed, it and/or the fund may
 be liable for losses due to unauthorized or fraudulent instructions.


                                       18

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 DISTRIBUTIONS AND TAXES

 DIVIDENDS AND DISTRIBUTIONS

 The fund intends to distribute dividends to you, usually in March, June,
 September and December. Capital gains, if any, are usually distributed in
 December. When a dividend or capital gain is distributed, the net asset value
 per share is reduced by the amount of the payment.

 You may elect to reinvest dividends and/or capital gain distributions to
 purchase additional shares of this fund or any other American Fund, or you may
 elect to receive them in cash. Most shareholders do not elect to take capital
 gain distributions in cash because these distributions reduce principal value.

 TAXES ON DISTRIBUTIONS

 Distributions you receive from the fund may be subject to income tax and may
 also be subject to state or local taxes - unless you are exempt from taxation.

 For federal tax purposes, any taxable dividends and distributions of short-term
 capital gains are treated as ordinary income. The fund's distributions of net
 long-term capital gains are taxable to you as long-term capital gains. Any
 taxable distributions you receive from the fund will normally be taxable to you
 when made, regardless of whether you reinvest distributions or receive them in
 cash.

 TAXES ON TRANSACTIONS

 Your redemptions, including exchanges, may result in a capital gain or loss for
 federal tax purposes. A capital gain or loss on your investment is the
 difference between the cost of your shares, including any sales charges, and
 the price you receive when you sell them.

 Please see your tax adviser for further information.


                                       19

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>

FINANCIAL HIGHLIGHTS/1/

The financial highlights table is intended to help you understand the fund's
results for the past five years and is currently only shown for Class A and B
shares.  A similar table will be shown for Class C and F shares beginning with
the fund's 2001 fiscal year end. Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, is included in the statement of additional information,
which is available upon request.

<TABLE>
<CAPTION>
                                       Net gains/(losses) on
              Net asset                     securities                    Dividends
                value,        Net         (both realized      Total from  (from net   Distributions                   Net asset
Year ended   beginning of  investment           and           investment  investment  (from capital      Total      value, end of
December 31      year        income         unrealized)       operations   income)       gains)      distributions      year
-----------------------------------------------------------------------------------------------------------------------------------
<S>          <C>           <C>         <C>                    <C>         <C>         <C>            <C>            <C>
 CLASS A:
   2000         $32.46       $.56/2/           $.65/2/          $1.21       $(.52)       $(2.08)        $(2.60)        $31.07
   1999          31.07        .49              4.45              4.94        (.51)        (3.04)         (3.55)         32.46
   1998          28.25        .48              5.79              6.27        (.51)        (2.94)         (3.45)         31.07
   1997          24.23        .51              6.61              7.12        (.50)        (2.60)         (3.10)         28.25
   1996          21.61        .49              3.66              4.15        (.50)        (1.03)         (1.53)         24.23
 CLASS B:
   2000          31.13        .26/2/           1.55/2/           1.81        (.25)        (1.68)         (1.93)         31.01
<CAPTION>

                                           Ratio of    Ratio of net
                            Net assets,   expenses to   income to
Year ended                  end of year   average net  average net      Portfolio
December 31  Total return  (in millions)    assets        assets      turnover rate
------------------------------------------------------------------------------------
<S>          <C>           <C>            <C>          <C>           <C>
 CLASS A:
   2000          3.84%        $56,212         .56%        1.74%          25.36%/4/
   1999         16.56          56,095         .55         1.54           27.85
   1998         22.94          48,498         .55         1.65           24.28
   1997         29.81          39,718         .56         1.90           26.02
   1996         19.35          30,875         .59         2.17           19.56
 CLASS B:
   2000          5.87             439        1.34/3/      1.06/3/        25.36/4/
</TABLE>


1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended
 December 31.  The period ended 2000 represents, for Class B shares, the 291-day
 period ended December 31, 2000.  Class B shares were not offered before March
 15, 2000.  Total return for Class B is based on activity during the period and
 thus is not representative of a full year.  Total returns exclude all sales
 charges, including contingent deferred sales charges.

2 Based on average shares outstanding.

3 Annualized.

4 Represents portfolio turnover rate (equivalent for all share classes) for the
 year ended December 31, 2000.


                                       20

THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS



<PAGE>

 ---------------------------------------------------------
 NOTES


                                       21

                                  THE INVESTMENT COMPANY OF AMERICA / PROSPECTUS

<PAGE>


<TABLE>
<CAPTION>
 <S>                           <C>
 FOR SHAREHOLDER SERVICES                  American Funds Service Company
                                                             800/421-0180
 FOR RETIREMENT PLAN SERVICES    Call your employer or plan administrator
 FOR DEALER SERVICES                          American Funds Distributors
                                                     800/421-9900 Ext. 11
 FOR 24-HOUR INFORMATION                            American FundsLine(R)
                                                             800/325-3590
                                             American FundsLine OnLine(R)
                                             http://www.americanfunds.com

</TABLE>

            Telephone conversations may be recorded or monitored for
          verification, recordkeeping and quality assurance purposes.

                            *     *     *     *     *

 MULTIPLE TRANSLATIONS  This prospectus may be translated into other languages.
 If there is any inconsistency or ambiguity as to the meaning of any word or
 phrase in a translation, the English text will prevail.

 ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS  Contains additional information
 about the fund including financial statements, investment results, portfolio
 holdings, a statement from portfolio management discussing market conditions
 and the fund's investment strategies, and the independent accountants' report
 (in the annual report).

 STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains
 more detailed information on all aspects of the fund, including the fund's
 financial statements and is incorporated by reference into this prospectus.
 The Codes of Ethics describe the personal investing policies adopted by the
 fund and the fund's investment adviser and its affiliated companies.

 The Codes of Ethics and current SAI have been filed with the Securities and
 Exchange Commission ("SEC"). These and other related materials about the fund
 are available for review or to be copied at the SEC's Public Reference Room in
 Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
 Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
 e-mail request to publicinfo@sec.gov or by writing the SEC's Public Reference
 Section, Washington, D.C. 20549-0102.

 HOUSEHOLD MAILINGS  Each year you are automatically sent an updated
 prospectus, annual and semi-annual report for the fund. You may also
 occasionally receive proxy statements for the fund. In order to reduce the
 volume of mail you receive, when possible, only one copy of these documents
 will be sent to shareholders that are part of the same family and share the
 same residential address.

 If you would like to receive individual copies of these documents, or a free
 copy of the SAI or Codes of Ethics, please call American Funds Service Company
 at 800/421-0180 or write to the Secretary of the fund at 333 South Hope
 Street, Los Angeles, California 90071.
 Investment Company File No. 811-116
                                                       Printed on recycled paper
                                                                  ICA-010-0301/B

<PAGE>


                       THE INVESTMENT COMPANY OF AMERICA

                                     Part B
                      Statement of Additional Information

                                 March 15, 2001


This document is not a prospectus but should be read in conjunction with the
current prospectus of The Investment Company of America (the "fund" or "ICA")
dated March 15, 2001. The prospectus may be obtained from your investment dealer
or financial planner or by writing to the fund at the following address:

                       The Investment Company of America
                              Attention: Secretary
                              333 South Hope Street
                          Los Angeles, California 90071
                                 (213) 486-9200

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.


                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
Item                                                                  Page No.
----                                                                  --------
<S>                                                                   <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . .        2
Description of Certain Securities and Investment Techniques . . . .        2
Fundamental Policies and Investment Restrictions. . . . . . . . . .        4
Fund Organization and Voting Rights . . . . . . . . . . . . . . . .        6
Fund Directors and Other Officers . . . . . . . . . . . . . . . . .        8
Advisory Board  . . . . . . . . . . . . . . . . . . . . . . . . . .       13
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       16
Taxes and Distributions . . . . . . . . . . . . . . . . . . . . . .       19
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . .       25
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . .       27
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . .       30
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . .       33
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . .       34
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .       35
Shareholder Account Services and Privileges . . . . . . . . . . . .       36
Execution of Portfolio Transactions . . . . . . . . . . . . . . . .       39
General Information . . . . . . . . . . . . . . . . . . . . . . . .       40
Class A Share Investment Results and Related Statistics . . . . . .       41
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       43
Financial Statements
</TABLE>




                   The Investment Company of America - Page 1

<PAGE>


                 CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.


GENERAL GUIDELINE

 .    The fund may only invest in securities included on its eligible list (does
     not apply to securities issued or guaranteed by the U.S. Government).

DEBT SECURITIES

 .    The fund's investments in straight debt securities must be rated A or above
     by Moody's Investors Service, Inc. or Standard & Poor's Corporation or
     unrated but determined to be of equivalent quality.

NON-U.S. SECURITIES

 .    The fund may invest up to 10% of its securities in issuers domiciled
     outside the U.S. and not included in the Standard & Poor's 500 Composite
     Index.

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.


          DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."


EQUITY SECURITIES - Equity securities represent an ownership position in a
company. These securities may include common stocks and securities with equity
conversion or purchase rights. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The fund's results will be related to the overall markets
for these securities.


DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality, and maturity. In general, their prices decline when
interest rates rise and vice versa.


SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS - The fund may invest in
securities that have a combination of equity and debt characteristics. These
securities may at times behave more like equity than debt and vice versa. Some
types of convertible bonds or preferred stock automatically convert into common
stock. The prices and yields of non-convertible preferred stock generally move
with changes in interest rates and the issuer's credit quality, similar to the
factors affecting debt securities.


                   The Investment Company of America - Page 2

<PAGE>


Convertible bonds, convertible preferred stock, and other securities may
sometimes be converted into common stock or other securities at a stated
conversion ratio. These securities, prior to conversion, pay a fixed rate of
interest or a dividend. Because convertible securities have both debt and equity
characteristics, their value varies in response to many factors, including the
value of the underlying equity, general market and economic conditions,
convertible market valuations, as well as changes in interest rates, credit
spreads, and the credit quality of the issuer.


U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include direct obligations of the U.S. Treasury, such as Treasury bills, notes
and bonds. For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. Government, and thus they are of the
highest possible credit quality. Such securities are subject to variations in
market value due to fluctuations in interest rates, but, if held to maturity,
will be paid in full.


Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but are
not limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Tennessee Valley Authority, and Federal
Farm Credit Bank System.


INVESTING IN VARIOUS COUNTRIES - Investing outside the U.S. involves special
risks, caused by, among other things: currency controls and fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; expropriation or confiscatory taxation; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of Capital Research
and Management Company, investing outside the U.S. also can reduce certain
portfolio risks due to greater diversification opportunities.


The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.


Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.


CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract


                   The Investment Company of America - Page 3

<PAGE>


agreed upon by the parties, at a price set at the time of the contract. Forward
currency contracts entered into by the fund will involve the purchase or sale of
one currency against the U.S. dollar. While entering into forward currency
transactions could minimize the risk of loss due to a decline in the value of
the hedged currency, it could also limit any potential gain which might result
from an increase in the value of the currency. The fund will not generally
attempt to protect against all potential changes in exchange rates. The fund
will segregate liquid assets which will be marked to market daily to meet its
forward contract commitments to the extent required by the Securities and
Exchange Commission.


Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.


RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. Securities not actively traded will be considered
illiquid unless they have been specifically determined to be liquid under
procedures which may be adopted by the fund's board of directors, taking into
account factors such as the frequency and volume of trading, the commitment of
dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.


CASH AND CASH EQUIVALENTS - These securities include: (i) commercial paper
(e.g., short-term notes up to 9 months in maturity issued by corporations,
governmental bodies or bank/ corporation sponsored conduits (asset-backed
commercial paper)), (ii) commercial bank obligations (e.g., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity)), (iii) savings
association and savings bank obligations (e.g., bank notes and certificates of
deposit issued by savings banks or savings associations), (iv) securities of the
U.S. Government, its agencies or instrumentalities that mature, or may be
redeemed, in one year or less, and (v) corporate bonds and notes that mature, or
that may be redeemed, in one year or less.


                FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.


These restrictions (which do not apply to the purchase of securities issued or
guaranteed by the U.S. Government) provide that the fund shall make no
investment:


Which involves promotion or business management by the fund;


                   The Investment Company of America - Page 4

<PAGE>


In any security about which reliable information is not available with respect
to the history, management, assets, earnings, and income of the issuer;


If the investment would cause more than 5% of the value of the total assets of
the fund, as they exist at the time of investment, to be invested in the
securities of any one issuer;


If the investment would cause more than 20% of the value of the total assets of
the fund to be invested in the securities in any one industry;


If the investment would cause the fund to own more than 10% of the outstanding
voting securities of any one issuer, provided that this restriction shall apply
as to 75% of the fund's total assets; or


In any security which has not been placed on the fund's Eligible List. (See the
prospectus).


The fund is not permitted to buy securities on margin, sell securities short,
borrow money, or to invest in real estate. (Although it has not been the
practice of the fund to make such investments (and it has no current intention
of doing so at least for the next 12 months), the fund may invest in the
securities of real estate investment trusts.)


The fund has also adopted other fundamental policies which cannot be changed
without shareholder approval. These policies require the fund not to:


Concentrate its investment in any particular industry or group of industries.
Some degree of concentration may occur from time to time (within the 20%
limitation of the Certificate of Incorporation) as certain industries appear to
present desirable fields for investment.


Engage generally in the making of loans. Although the fund has reserved the
right to make loans to unaffiliated persons subject to certain restrictions,
including requirements concerning collateral and amount of any loan, no loans
have been made since adoption of this fundamental policy more than 50 years ago.


Act as underwriter of securities issued by others, engage in distribution of
securities for others, engage in the purchase and sale of commodities or
commodity contracts, borrow money, invest in real estate, or make investments in
other companies for the purpose of exercising control or management.


Pledge, encumber or assign all or any part of its property and assets as
security for a debt.


Invest in the securities of other investment companies.


Notwithstanding the restriction on investing in the securities of other
investment companies, the fund may invest in securities of other investment
companies if deemed advisable by its officers in connection with the
administration of a deferred compensation plan adopted by Directors pursuant to
an exemptive order granted by the Securities and Exchange Commission.


                   The Investment Company of America - Page 5

<PAGE>


NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed without shareholder approval:


Purchase and sell securities for short-term profits; however, securities will be
sold without regard to the time that they have been held whenever investment
judgement makes such action seem advisable.


Purchase or retain the securities of any issuer if those officers and directors
of the fund or the Investment Adviser who own beneficially more than one half of
1% of such issuer together own more than 5% of the securities of such issuer.


Invest in securities of companies which, with their predecessors, have a record
of less than three years' continuous operations.


Invest in puts, calls, straddles, spreads or any combination thereof.


Purchase partnership interests in oil, gas or mineral exploration, drilling or
mining ventures.


Invest in excess of 10% of the market value of its total assets in securities
which may require registration under the Securities Act of 1933 prior to sale by
the fund (restricted securities), or other securities that are not readily
marketable.


                      FUND ORGANIZATION AND VOTING RIGHTS

The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation on August 28, 1933.


All fund operations are supervised by the fund's Board of Directors which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in "Directors and Director Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.


The fund has four classes of shares - Class A, B, C and F. The shares of each
class represent an interest in the same investment portfolio.  Each class has
equal rights as to voting, redemption, dividends and liquidation, except that
each class bears different distribution expenses and may bear different transfer
agent fees and other expenses properly attributable to the particular class as
approved by the Board of Directors and set forth in the fund's rule 18f-3 Plan.
Class A, B, C and F shareholders have exclusive voting rights with respect to
the respective class' rule 12b-1 Plans adopted in connection with the
distribution of shares and on other matters in which the interests of one class
are different from interests in another class.  Shares of all classes of the
fund vote together on matters that affect all classes in substantially the same
manner. Each class votes as a class on matters that affect that class alone.


The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least


                   The Investment Company of America - Page 6

<PAGE>


10% of the shares, the fund will hold a meeting at which any member of the board
could be removed by a majority vote.


                   The Investment Company of America - Page 7

<PAGE>



                          FUND DIRECTORS AND OFFICERS

                      Directors and Director Compensation


<TABLE>
<CAPTION>
                                                                                                AGGREGATE
                                                                                               COMPENSATION
                                                                                          (INCLUDING VOLUNTARILY
                                                                                                 DEFERRED
                                                                                             COMPENSATION/1/)
                                                                                              FROM THE FUND
                                  POSITION                                                  DURING FISCAL YEAR
                                    WITH             PRINCIPAL OCCUPATION(S) DURING               ENDED
   NAME, ADDRESS AND AGE         REGISTRANT                   PAST 5 YEARS                  DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>                                       <C>
 Charles H. Black              Director          Private investor and consultant;                $ 68,500
 525 Alma Real Drive                             former Executive Vice President and
 Pacific Palisades, CA                           Director, KaiserSteel Corporation
 90272
 Age: 74
------------------------------------------------------------------------------------------------------------------
 Louise H. Bryson              Director          Director and former Chairman of the             $ 60,000
 17877 Von Karman Ave.                           Board, KCET - Los Angeles Public
 Suite 500                                       Television Station; former Senior Vice
 Irvine, CA 92615                                President, fx Networks, Inc: Fox Inc.
 Age: 56
------------------------------------------------------------------------------------------------------------------
 Malcolm R. Currie             Director          Chairman Emeritus, Hughes Aircraft              $57,000/3/
 28780 Wagon Road                                Company
 Agoura, CA 91301
 Age: 74
------------------------------------------------------------------------------------------------------------------
 Mary Anne Dolan               Director          Founder and President, M.A.D., Inc. (a          $5,000/5/
 1033 Gayley Avenue                              communications company)
 Los Angeles, CA 90024
 Age: 53
------------------------------------------------------------------------------------------------------------------
 Martin Fenton                 Director          Managing Director, Senior Resource              $5,000/5/
 4660 La Jolla Village                           Group LLC (development and management
 Drive                                           of senior living communities)
 Suite 725
 San Diego, CA 92122
 Age: 65
------------------------------------------------------------------------------------------------------------------
 + James B. Lovelace           Senior Vice       Senior Vice President, Capital                   None/4/
 333 South Hope Street         President and     Research and Management Company
 Los Angeles, CA 90071         Director
 Age: 44
------------------------------------------------------------------------------------------------------------------
 + Jon B. Lovelace, Jr.        Chairman of       Chairman Emeritus, Capital Research              None/4/
 333 South Hope Street         the Board         and Management Company
 Los Angeles, CA 90071
 Age: 74
------------------------------------------------------------------------------------------------------------------
 John G. McDonald              Director          The IBJ Professor of Finance, Graduate          $75,000/3/
 Graduate School of                              School of Business, Stanford
 Business                                        University
 Stanford University
 Stanford, CA 94305
 Age: 63
------------------------------------------------------------------------------------------------------------------
 Bailey Morris-Eck              Director         Senior Associate, Reuters Foundation;           $ 57,000
 1333 H Street, NW                               Senior Fellow, Institute for
 Washington, D.C. 20005                          International Economics;  former Vice
 Age: 56                                         President, Brookings Institution;
                                                 Consultant, The Independent of London
                                                                                          ------------------------
------------------------------------------------------------------------------------------
 Richard G. Newman             Director          Chairman and CEO, AECOM Technology              $56,000/3/
 3250 Wilshire Blvd.                             Corporation (architectural
 Los Angeles, CA 90010                           engineering)
 Age: 66
------------------------------------------------------------------------------------------------------------------
 + James W. Ratzlaff           Vice Chairman     Retired Senior Partner, The Capital              None/4/
 P.O. Box 7650                 of the Board      Group Partners L.P.
 San Francisco, CA 94120       and Director
 Age: 64
------------------------------------------------------------------------------------------------------------------
 Olin C. Robison               Director          President of the Salzburg Seminar;              $63,000/3/
 The Marble Works                                President Emeritus, Middlebury College
 2 Maple Street
 Middlebury, VT 05753
 Age: 64
------------------------------------------------------------------------------------------------------------------
 + James F. Rothenberg         Executive Vice    President and Director, Capital                  None/4/
 333 South Hope Street         President and     Research and Management Company
 Los Angeles, CA 90071         Director
 Age: 54
------------------------------------------------------------------------------------------------------------------
 + R. Michael Shanahan         President and     Chairman and Principal Executive                 None/4/
 333 South Hope Street         Director          Officer, Capital Research and
 Los Angeles, CA 90071                           Management Company
 Age: 62
------------------------------------------------------------------------------------------------------------------
 William J. Spencer            Director          Chairman and Chief Executive Officer,           $71,500/3/
 2706 Montopolis Drive                           SEMATECH (research and development
 Austin, TX 78741                                consortium)
 Age: 70
------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                   TOTAL COMPENSATION
                                 (INCLUDING VOLUNTARILY
                                        DEFERRED
                                  COMPENSATION/1/) FROM      TOTAL NUMBER
                                  ALL FUNDS MANAGED BY         OF FUND
                                  CAPITAL RESEARCH AND          BOARDS
                                   MANAGEMENT COMPANY          ON WHICH
                              OR ITS AFFILIATES/2/ FOR THE     DIRECTOR
   NAME, ADDRESS AND AGE      YEAR ENDED DECEMBER 31, 2000    SERVES/2/
--------------------------------------------------------------------------
<S>                           <C>                           <C>
 Charles H. Black                      $  68,500                   1
 525 Alma Real Drive
 Pacific Palisades, CA
 90272
 Age: 74
--------------------------------------------------------------------------
 Louise H. Bryson                      $  60,000                   1
 17877 Von Karman Ave.
 Suite 500
 Irvine, CA 92615
 Age: 56
--------------------------------------------------------------------------
 Malcolm R. Currie                     $57,000/3/                  1
 28780 Wagon Road
 Agoura, CA 91301
 Age: 74
--------------------------------------------------------------------------
 Mary Anne Dolan                       $  42,500                   3
 1033 Gayley Avenue
 Los Angeles, CA 90024
 Age: 53
--------------------------------------------------------------------------
 Martin Fenton                         $ 127,800                  16
 4660 La Jolla Village
 Drive
 Suite 725
 San Diego, CA 92122
 Age: 65
--------------------------------------------------------------------------
 + James B. Lovelace                     None/4/                   2
 333 South Hope Street
 Los Angeles, CA 90071
 Age: 44
--------------------------------------------------------------------------
 + Jon B. Lovelace, Jr.                  None/4/                   3
 333 South Hope Street
 Los Angeles, CA 90071
 Age: 74
--------------------------------------------------------------------------
 John G. McDonald                      $241,500/3/                 8
 Graduate School of
 Business
 Stanford University
 Stanford, CA 94305
 Age: 63
--------------------------------------------------------------------------
 Bailey Morris-Eck                     $  95,000                   3
 1333 H Street, NW
 Washington, D.C. 20005
 Age: 56
--------------------------------------------------------------------------
 Richard G. Newman                     $110,000/3/                13
 3250 Wilshire Blvd.
 Los Angeles, CA 90010
 Age: 66
--------------------------------------------------------------------------
 + James W. Ratzlaff                     None/4/                   3
 P.O. Box 7650
 San Francisco, CA 94120
 Age: 64
--------------------------------------------------------------------------
 Olin C. Robison                       $102,000/3/                 3
 The Marble Works
 2 Maple Street
 Middlebury, VT 05753
 Age: 64
--------------------------------------------------------------------------
 + James F. Rothenberg                   None/4/                   4
 333 South Hope Street
 Los Angeles, CA 90071
 Age: 54
--------------------------------------------------------------------------
 + R. Michael Shanahan                   None/4/                   2
 333 South Hope Street
 Los Angeles, CA 90071
 Age: 62
--------------------------------------------------------------------------
 William J. Spencer                    $71,500/3/                  1
 2706 Montopolis Drive
 Austin, TX 78741
 Age: 70
--------------------------------------------------------------------------
</TABLE>




                   The Investment Company of America - Page 8


<PAGE>

 [This page is deliberately left blank for this filing.]

                   The Investment Company of America - Page 9


<PAGE>


 [This page is deliberately left blank for this filing.]
                  The Investment Company of America - Page 10


<PAGE>



+ "Interested persons" within the meaning of the 1940 Act on the basis of their
  affiliation with the fund's Investment Adviser, Capital Research and
  Management Company, or the parent company of the Investment Adviser, The
  Capital Group Companies, Inc.

1  Amounts may be deferred by eligible Directors under a non-qualified deferred
  compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
  an earnings rate determined by the total return of one or more funds in The
  American Funds Group as designated by the Directors.

2 Capital Research and Management Company manages The American Funds Group
  consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
  American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
  American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
  Management Trust of America, Capital Income Builder, Inc., Capital World
  Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
  Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
  The Income Fund of America, Inc., Intermediate Bond Fund of America, The
  Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
  The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
  SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
  Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
  Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
  Money Fund of America, U.S. Government Securities Fund and Washington Mutual
  Investors Fund, Inc. Capital Research and Management Company also manages
  American Variable Insurance Series and Anchor Pathway Fund, which serve as the
  underlying investment vehicle for certain variable insurance contracts; and
  Endowments, whose shareholders are limited to (i) any entity exempt from
  taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
  amended ("501(c)(3) organization");      (ii) any trust, the present or future
  beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
  formed for the primary purpose of benefiting a 501(c)(3) organization. An
  affiliate of Capital Research and Management Company, Capital International,
  Inc., manages Emerging Markets Growth Fund, Inc.

3 Since the deferred compensation plan's adoption, the total amount of deferred
  compensation accrued by the fund (plus earnings thereon) through the 2000
  fiscal year for participating Directors is as follows: Louise H. Bryson
  ($65,902), Malcolm R. Currie ($276,209), John G. McDonald ($572,447), Richard
  G. Newman ($216,680), Olin C. Robison ($74,958) and William J. Spencer
  ($313,841). Amounts deferred and accumulated earnings thereon are not funded
  and are general unsecured liabilities of the fund until paid to the Directors.

4 James B. Lovelace, Jon B. Lovelace, Jr., James W. Ratzlaff, James F.
  Rothenberg and R. Michael Shanahan are affiliated with the Investment Adviser
  and, accordingly, receive no compensation from the fund.

5 Mary Anne Dolan and Martin Fenton were elected Directors in October 2000,
  therefore, received only a portion of the annual compensation paid to
  Directors.


                  The Investment Company of America - Page 11


<PAGE>



                                 OTHER OFFICERS


<TABLE>
<CAPTION>
                               POSITION(S)     PRINCIPAL OCCUPATION(S) DURING
   NAME AND ADDRESS     AGE  WITH REGISTRANT            PAST 5 YEARS
-------------------------------------------------------------------------------
<S>                     <C>  <C>              <C>
Gregg E. Ireland        51   Senior Vice      Senior Vice President, Capital
3000 K Street, N.W.          President        Research and Management Company
Washington, DC 20007
-------------------------------------------------------------------------------
Donald D. O'Neal        40   Senior Vice      Senior Vice President, Capital
P.O. Box 7650                President        Research and Management Company
San Francisco, CA
94120
-------------------------------------------------------------------------------
Joyce E. Gordon         44   Vice President   Senior Vice President and
333 South Hope Street                         Director,
Los Angeles, CA 90071                         Capital Research Company*
-------------------------------------------------------------------------------
Anne M. Llewellyn       53   Vice President   Associate, Capital Research and
333 South Hope Street                         Management Company
Los Angeles, CA 90071
-------------------------------------------------------------------------------
Vincent P. Corti        44   Secretary        Vice President - Fund Business
333 South Hope Street                         Management Group, Capital
Los Angeles, CA 90071                         Research and Management Company
-------------------------------------------------------------------------------
Thomas M. Rowland       59   Treasurer        Senior Vice President - Fund
135 South State                               Business Management Group,
College Blvd.                                 Capital Research and Management
Brea, CA 92821                                Company
-------------------------------------------------------------------------------
R. Marcia Gould         46   Assistant        Vice President - Fund Business
135 South State              Treasurer        Management Group, Capital
College Blvd.                                 Research and Management Company
Brea, CA 92821
-------------------------------------------------------------------------------
Anthony W. Hynes, Jr.   38   Assistant        Vice President - Fund Business
135 South State              Treasurer        Management Group, Capital
College Blvd.                                 Research and Management Company
Brea, CA 92821
-------------------------------------------------------------------------------
</TABLE>


* Company affiliated with Capital Research and Management Company.

All of the officers listed are officers and/or directors/trustees of one or more
of the other funds for which Capital Research and Management Company serves as
Investment Adviser.


No compensation is paid by the fund to any officer or Director who is a
director, officer or employee of the Investment Adviser or affiliated companies.
The fund pays annual fees of $46,000 to Directors who are not affiliated with
the Investment Adviser, plus $2,000 for each Board of Directors meeting
attended, plus $1,000 for each meeting attended as a member of a committee of
the Board of Directors. In addition, members of the Proxy Committee receive an
annual retainer fee of $12,500. No pension or retirement benefits are accrued as
part of fund expenses. The Directors may elect, on a voluntary basis, to defer
all or a portion of their fees through a deferred compensation plan in effect
for the fund. The fund also reimburses certain expenses of the Directors who are
not affiliated with the Investment Adviser. As of February 15, 2000 the officers
and Directors of the fund and their families, as a group, owned beneficially or
of record less than 1% of the outstanding shares of the fund.


                  The Investment Company of America - Page 12

<PAGE>



                             ADVISORY BOARD MEMBERS

                       ADVISORY BOARD MEMBER COMPENSATION

The Board of Directors has established an Advisory Board whose members are, in
the judgment of the Directors, highly knowledgeable about world political and
economic matters. In addition to holding meetings with the Board of Directors,
members of the Advisory Board, while not participating in specific investment
decisions, consult from time to time with the Investment Adviser, primarily with
respect to world trade and business conditions. Members of the Advisory Board,
however, possess no authority or responsibility with respect to the fund's
investments or management. The fund pays fees of $5,000 per annum to Advisory
Board members who are not affiliated with the investment Adviser, plus $1,500
for each meeting attended in conjunction with meetings with the Board of
Directors. The members of the Advisory Board and their current or former
principal occupations are as follows:



<TABLE>
<CAPTION>
                                                                                          TOTAL COMPENSATION
                                                                                         (INCLUDING VOLUNTARILY
                                                                                               DEFERRED
                                                                      AGGREGATE            COMPENSATION/1/)
                                                                    COMPENSATION            FROM ALL FUNDS
                                                                     (INCLUDING           MANAGED BY CAPITAL
                                                                     VOLUNTARILY             RESEARCH AND
                                                                      DEFERRED             MANAGEMENTCOMPANY        TOTAL NUMBER
                                                                  COMPENSATION/1/)       OR ITS AFFILIATES/2/      OF FUND BOARDS
                          POSITION           PRINCIPAL              FROM THE FUND           FOR THE FISCAL            ON WHICH
                            WITH           OCCUPATION(S)         DURING FISCAL YEAR           YEAR ENDED           ADVISORY BOARD
NAME, ADDRESS AND AGE    REGISTRANT     DURING PAST 5 YEARS    ENDED DECEMBER 31, 2000     DECEMBER 31, 2000      MEMBER SERVES/2/
-----------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>           <C>                      <C>                      <C>                      <C>
 Thomas M. Crosby,       Advisory      Partner, Faegre &               $ 9,750                 $   9,750                 1
 Jr.                     Board         Benson (law firm)
 2200 Norwest Center     Member
 90 South Seventh
 Street
 Minneapolis, MN
 55402
 Age: 62
-----------------------------------------------------------------------------------------------------------------------------------
 Ellen H. Goldberg       Advisory      President, Santa Fe             $ 9,750                 $   9,750                 1
 1399 Hyde Park Road     Board         Institute; Research
 Santa Fe, NM 87501      Member        Professor, University
 Age: 55                               of New Mexico
-----------------------------------------------------------------------------------------------------------------------------------
 William H. Kling        Advisory      President, Minnesota            $8,250/3/               $118,000/3/               6
 45 East Seventh         Board         Public Radio;
 Street                  Member        President,
 St. Paul, MN 55101                    Greenspring Co.;
 Age: 58                               former President,
                                       American Public Radio
                                       (now Public Radio
                                       International)
-----------------------------------------------------------------------------------------------------------------------------------
 Farzad Nazem            Advisory      Chief Technology                $  0/4/                 $    0/4/                 1
 3420 Central            Board         Officer, Yahoo! Inc.
 Expressway              Member
 Santa Clara, CA
 95051
 Age: 39
-----------------------------------------------------------------------------------------------------------------------------------
 Robert J. O'Neill       Advisory      Chichele Professor of           $ 9,750                 $  51,000                 3
 Witney, OXON            Board         the History of War
 United Kingdom          Member        and Fellow of All
 Age: 64                               Souls College
-----------------------------------------------------------------------------------------------------------------------------------
 Norman R. Weldon        Advisory      Managing Director,              $ 9,750                 $  54,250                 3
 15600 N.W. 67th         Board         Partisan Management
 Avenue                  Member        Group; former
 Miami Lakes, FL                       Chairman of the
 33014                                 Board, Novoste
 Age: 66                               Corporation
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>




                  The Investment Company of America - Page 13


<PAGE>



1 Amounts may be deferred by eligible Advisory Board members under a
  non-qualified deferred compensation plan adopted by the fund in 1993. Deferred
  amounts accumulate at an earnings rate determined by the total return of one
  or more funds in The American Funds Group as designed by the Advisory Board
  member.

2 Capital Research and Management Company manages The American Funds Group
  consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
  American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
  American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
  Management Trust of America, Capital Income Builder, Inc., Capital World


                  The Investment Company of America - Page 14


<PAGE>

  Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
  Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
  The Income Fund of America, Inc., Intermediate Bond Fund of America, The
  Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
  The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
  SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
  Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
  Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
  Money Fund of America, U.S. Government Securities Fund and Washington Mutual
  Investors Fund, Inc. Capital Research and Management Company also manages
  American Variable Insurance Series and Anchor Pathway Fund, which serve as the
  underlying investment vehicle for certain variable insurance contracts; and
  Endowments, whose shareholders are limited to (i) any entity exempt from
  taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
  amended ("501(c)(3) organization");      (ii) any trust, the present or future
  beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
  formed for the primary purpose of benefiting a 501(c)(3) organization. An
  affiliate of Capital Research and Management Company, Capital International,
  Inc., manages Emerging Markets Growth Fund, Inc.

3 Since the deferred compensation plan's adoption, the total amount of deferred
  compensation accrued by the fund (plus earnings thereon) as of the fiscal year
  ended December 31, 2000 for participating Advisory Board members is as
  follows: William H. Kling ($46,742). Amounts deferred and accumulated earnings
  thereon are not funded and are general unsecured liabilities of the fund until
  paid to the Advisory Board member.

4 Farzad Nazem was elected to the Advisory Board effective January 1, 2001,
  therefore, received no compensation from the fund during fiscal 2000.


                  The Investment Company of America - Page 15


<PAGE>



                                   MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management
Company, founded in 1931, maintains research facilities in the U.S. and abroad
(Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong
Kong, Singapore and Tokyo), with a staff of professionals, many of whom have a
number of years of investment experience. The Investment Adviser is located at
333 South Hope Street, Los Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92821. The Investment Adviser's research professionals
travel several million miles a year, making more than 5,000 research visits in
more than 50 countries around the world. The Investment Adviser believes that it
is able to attract and retain quality personnel. The Investment Adviser is a
wholly owned subsidiary of The Capital Group Companies, Inc.


The Investment Adviser is responsible for managing more than $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts of all types throughout the world. These investors include
privately owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.


INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser will
continue in effect until April 30, 2002, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).


The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; shareholder recordkeeping and
administrative services; costs of the designing, printing and mailing of
reports, prospectuses, proxy statements, and notices to its shareholders; taxes;
expenses of the issuance and redemption of shares of the fund (including stock
certificates, registration and qualification fees and expenses); expenses
pursuant to the fund's Plans of Distribution (described below); legal and
auditing expenses; compensation, fees, and expenses paid to directors and
members of the advisory board unaffiliated with the Investment Adviser;
association dues; costs of stationery and forms prepared exclusively for the
fund; and costs of assembling and storing shareholder account data.


                  The Investment Company of America - Page 16

<PAGE>


As compensation for its services, the Investment Adviser receives a monthly fee
which is based on prior month-end net assets, calculated at the annual rate of
0.39% on the first $1 billion of net assets, plus 0.336% on net assets over $1
billion to $2 billion, plus 0.30% on net assets over $2 billion to $3 billion,
plus 0.276% on net assets over $3 billion to $5 billion, plus 0.258% on net
assets over $5 billion to $8 billion, plus 0.246% on net assets over $8 billion
to $13 billion, plus 0.24% on net assets over $13 billion to $21 billion, plus
0.234% on net assets over $21 billion to $34 billion, plus 0.231% on net assets
over $34 billion to $44 billion, plus 0.228% on net assets over $44 billion to
$55 billion, plus 0.225% on net assets over $55 billion to $71 billion, plus
0.222% on net assets in excess of $71 billion.


The Agreement provides for a management fee reduction to the extent that the
annual ordinary operating expenses of the fund's Class A shares exceed 1-1/2% of
the first $30 million of the net assets of the fund and 1% of the average net
assets in excess thereof. Expenses which are not subject to these limitations
are interest, taxes, and extraordinary expenses. Expenditures, including costs
incurred in connection with the purchase or sale of portfolio securities, which
are capitalized in accordance with generally accepted accounting principles
applicable to investment companies are accounted for as capital items and not as
expenses. To the extent the fund's management fee must be waived due to Class A
share expense ratios exceeding this limit, management fees will be reduced
similarly for all classes of shares of the fund or other Class A fees will be
waived in lieu of management fees.


For the fiscal years ended 2000, 1999, and 1998, the Investment Adviser received
advisory fees of $135,760,000, $127,846,000, and $108,430,000, respectively.


ADMINISTRATIVE SERVICES AGREEMENT - The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the Investment Adviser,
relating to the fund's Class C and F shares, will continue in effect until April
30, 2002, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by the vote of a majority of Directors who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval.  The Administrative Agreement provides that the fund may
terminate the agreement at any time by vote of a majority of Directors who are
not interested persons of the fund.  The Investment Adviser has the right to
terminate the Administrative Agreement upon 60 days' written notice to the fund.
 The Administrative Agreement automatically terminates in the event of its
assignment (as defined in the 1940 Act).


Under the Administrative Agreement, the Investment Adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares.  The Investment Adviser contracts with third parties, including
American Funds Service Company, the fund's Transfer Agent, to provide these
services.  Services include, but are not limited to, shareholder account
maintenance, transaction processing, tax information reporting, and shareholder
and fund communications. In addition, the Investment Adviser monitors,
coordinates and oversees the activities performed by third parties.


As compensation for its services, the Investment Adviser receives transfer agent
fees for transfer agent services provided to the fund's Class C and F shares.
 Transfer agent fees are paid monthly according to a fee schedule contained in a
Shareholder Services Agreement between the fund and American Funds Service
Company.  The fund's Class C and F shares pay only those transfer agent fees
that are attributed to accounts and activities generated by their


                  The Investment Company of America - Page 17

<PAGE>


respective share class.  The Investment Adviser also receives an administrative
services fee for administrative services provided to the fund's Class C and F
shares.  Administrative services fees are paid monthly, accrued daily and
calculated at the annual rate of 0.15% of the average net assets of the fund's
Class C and F shares.


PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION - American Funds Distributors,
Inc. (the "Principal Underwriter") is the principal underwriter of the fund's
shares. The Principal Underwriter is located at 333 South Hope Street, Los
Angeles, CA 90071, 135 South State College Boulevard, Brea, CA 92821, 3500
Wiseman Boulevard, San Antonio, TX 78251, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, and 5300 Robin Hood Road, Norfolk, VA 23513.


The fund has adopted Plans of Distribution (the "Plans"), pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). In addition, the Principal Underwriter receives
revenues from sales of the fund's shares. For Class A shares, the Principal
Underwriter receives commission revenue consisting of that portion of the Class
A sales charge remaining after the allowances by the Principal Underwriter to
investment dealers. For Class B shares, the Principal Underwriter sells the
rights to Class B 12b-1 fees paid by the fund for distribution expenses to a
third party and receives the revenue remaining after compensating investment
dealers for sales of Class B shares. The fund also pays the Principal
Underwriter for advancing the immediate service fees paid to qualified dealers
of Class B shares. For Class C shares, the Principal Underwriter receives any
contingent deferred sales charges that apply to Class C shares during the first
year after purchase. The fund pays the Principal Underwriter for advancing the
immediate service fees and commissions paid to qualified dealers of Class C
shares. For Class F shares, the fund pays the Principal Underwriter for
advancing the immediate service fees paid to qualified dealers and advisers of
Class F shares.


Commissions retained by the Principal Underwriter on sales of Class A shares
during the 2000 fiscal year amounted to $19,507,000 after an allowance of
$94,128,000 to dealers. During the fiscal years ended 1999 and 1998, the
Principal Underwriter retained $23,548,000 and $18,078,000, respectively, on
sales of Class A shares after an allowance of $118,979,000 and $93,515,000 to
dealers, respectively. Revenue retained and service fees received by the
Principal Underwriter on sales of Class B shares during the 2000 fiscal year
amounted to $2,854,000 after compensation of $17,424,000 to dealers.


As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have been approved by the full Board of
Directors and separately by a majority of the directors who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. Potential
benefits of the Plans to the fund include shareholder services, savings to the
fund in transfer agency costs, savings to the fund in advisory fees and other
expenses, benefits to the investment process from growth or stability of assets
and maintenance of a financially healthy management organization. The selection
and nomination of directors who are not "interested persons" of the fund are
committed to the discretion of the directors who are not "interested persons"
during the existence of the Plans. The Plans may not be amended to increase
materially the amount spent for distribution without shareholder approval. Plan
expenses are reviewed quarterly and the Plans must be renewed annually by the
Board of Directors.


Under the Plans, the fund may annually expend (i) for Class A shares, up to
0.25% of its net assets attributable to Class A shares, (ii) for Class B shares,
1.00% of its net assets attributable


                  The Investment Company of America - Page 18

<PAGE>


to Class B shares, (iii) for Class C shares, 1.00% of its net assets
attributable to Class C shares, and (iv) for Class F shares, up to 0.50% of its
net assets attributable to Class F shares, to finance any activity which is
primarily intended to result in the sale of fund shares, provided the fund's
Board of Directors has approved the category of expenses for which payment is
being made.


For Class A shares, (i) up to 0.25% is reimbursed to the Principal Underwriter
for paying service-related expenses, including service fees paid to qualified
dealers, and (ii) up to the amount allowable under the fund's Class A 12b-1
limit is reimbursed to the Principal Underwriter for paying distribution-related
expenses, including dealer commissions and wholesaler compensation paid on sales
of shares of $1 million or more purchased without a sales charge (including
purchases by employer-sponsored defined contribution-type retirement plans
investing $1 million or more or with 100 or more eligible employees, and
retirement plans, endowments and foundations with $50 million or more in assets)
("no load purchases"). Commissions on no load purchases of Class A shares in
excess of the Class A Plan limitation not reimbursed to the Principal
Underwriter during the most recent fiscal quarter are recoverable for five
quarters, provided that such commissions do not exceed the annual expense limit.
 After five quarters these commissions are not recoverable.


For Class B shares, (i) 0.25% is paid to the Principal Underwriter for paying
service-related expenses, including service fees paid to qualified dealers, and
(ii) 0.75% is paid to the Principal Underwrtier for distribution-related
expenses, including the financing of commissions paid to qualified dealers.


For Class C shares, (i) 0.25% is paid to the Principal Underwriter for paying
service-related expenses, including service fees paid to qualified dealers, and
(ii) 0.75% is paid to the Principal Underwriter for paying distribution-related
expenses, including commissions paid to qualfied dealers.


For Class F shares, 0.25% is paid to the Principal Underwriter for paying
service-related expenses, including service fees paid to qualified dealers or
advisers.  Currently, no compensation is paid under the fund's Class F Plan for
distribution-related expenses.


During the 2000 fiscal year, the fund paid or accrued $128,602,000 for
compensation to dealers or the Principal Underwriter under the Plan for Class A
shares and $1,731,000 under the Plan for Class B shares. As of December 31,
2000, accrued and unpaid distribution expenses for Class A and Class B shares
were $11,769,000 and $346,000 respectively.


OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.


                            TAXES AND DISTRIBUTIONS

FUND TAXATION - The fund has elected to be treated as a regulated investment
company under Subchapter M of the Code. A regulated investment company
qualifying under Subchapter M of the Code is required to distribute to its
shareholders at least 90% of its investment company taxable income (including
the excess of net short-term capital gain over net long-term capital


                  The Investment Company of America - Page 19

<PAGE>


losses) and generally is not subject to federal income tax to the extent that it
distributes annually 100% of its investment company taxable income and net
realized capital gains in the manner required under the Code. The fund intends
to distribute annually all of its investment company taxable income and net
realized capital gains and therefore does not expect to pay federal income tax,
although in certain circumstances the fund may determine that it is in the
interest of shareholders to distribute less than that amount.


To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to the business of investing in such securities
or currencies, and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and securities of other
regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the fund's assets and 10% of the
outstanding voting securities of such issuer) and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or two or more issuers which the fund controls and which are
determined to be engaged in the same or similar trades or businesses.


Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which the fund pays income tax during the periods
described above. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is the interest of shareholders to distribute a lesser amount.


DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS - Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus.


Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of that share on the reinvestment
date.


      DIVIDENDS - The fund intends to follow the practice of distributing
     substantially all of its investment company taxable income, which includes
     any excess of net realized short--


                  The Investment Company of America - Page 20

<PAGE>


     term gains over net realized long-term capital losses.  Investment company
     taxable income generally includes dividends, interest, net short-term
     capital gains in excess of net long-term capital losses, and certain
     foreign currency gains, if any, less expenses and certain foreign currency
     losses.

     Under the Code, gains or losses attributable to fluctuations in exchange
     rates which occur between the time the fund accrues receivables or
     liabilities denominated in a foreign currency and the time the fund
     actually collects such receivables, or pays such liabilities, generally are
     treated as ordinary income or ordinary loss. Similarly, on disposition of
     debt securities denominated in a foreign currency and on disposition of
     certain futures contracts, forward contracts and options, gains or losses
     attributable to fluctuations in the value of foreign currency  between the
     date of acquisition of the security or contract and the date of disposition
     are also treated as ordinary gain or loss. These gains or losses, referred
     to under the Code as "Section 988" gains or losses, may increase or
     decrease the amount of the fund's investment company taxable income to be
     distributed to its shareholders as ordinary income.


     If the fund invests in stock of certain passive foreign investment
     companies, the fund may be subject to U.S. federal income taxation on a
     portion of any "excess distribution" with respect to, or gain from the
     disposition of, such stock. The tax would be determined by allocating such
     distribution or gain ratably to each day of the fund's holding period for
     the stock. The distribution or gain so allocated to any taxable year of the
     fund, other than the taxable year of the excess distribution or
     disposition, would be taxed to the fund at the highest ordinary income rate
     in effect for such year, and the tax would be further increased by an
     interest charge to reflect the value of the tax deferral deemed to have
     resulted from the ownership of the foreign company's stock. Any amount of
     distribution or gain allocated to the taxable year of the distribution or
     disposition would be included in the fund's investment company taxable
     income and, accordingly, would not be taxable to the fund to the extent
     distributed by the fund as a dividend to its shareholders.


     To avoid such tax and interest, the fund intends to elect to treat these
     securities as sold on the last day of its fiscal year and recognize any
     gains for tax purposes at that time. Under this election, deductions for
     losses are allowable only to the extent of any prior recognized gains, and
     both gains and losses will be treated as ordinary income or loss. The fund
     will be required to distribute any resulting income, even though it has not
     sold the security and received cash to pay such distributions.  Upon
     disposition of these securities, any gain recognized is treated as ordinary
     income and loss is treated as ordinary loss to the extent of any prior
     recognized gain.


     Dividends from domestic corporations are expected to comprise some portion
     of the fund's gross income. To the extent that such dividends constitute
     any of the fund's gross income, a portion of the income distributions of
     the fund will be eligible for the deduction for dividends received by
     corporations. Shareholders will be informed of the portion of dividends
     which so qualify. The dividends-received deduction is reduced to the extent
     that either the fund shares, or the underlying shares of stock held by the
     fund, with respect to which dividends are received, are treated as
     debt-financed under federal income tax law and is eliminated if the shares
     are deemed to have been held by the shareholder or the fund, as the case
     may be, for less than 46 days during the 90-day period beginning on the
     date which is 45 days before the date on which the shares become
     ex-dividend. Capital gain distributions are not eligible for the
     dividends-received deduction.


                  The Investment Company of America - Page 21

<PAGE>


     A portion of the difference between the issue price of zero coupon
     securities and their face value ("original issue discount") is considered
     to be income to the fund each year, even though the fund will not receive
     cash interest payments from these securities.  This original issue discount
     (imputed income) will comprise a part of the investment company taxable
     income of the fund which must be distributed to shareholders in order to
     maintain the qualification of the fund as a regulated investment company
     and to avoid federal income taxation at the level of the fund.


     In addition, some of the bonds may be purchased by a fund at a discount
     that exceeds the original issue discount on such bonds, if any.  This
     additional discount represents market discount for federal income tax
     purposes.  The gain realized on the disposition of any bond having market
     discount generally will be treated as taxable ordinary income to the extent
     it does not exceed the accrued market discount on such bond (unless a fund
     elects to include market discount in income in tax years to which it is
     attributable).  Generally, market discount accrues on a daily basis for
     each day the bond is held by a fund on a straight-line basis over the time
     remaining to the bond's maturity.  In the case of any debt security having
     a fixed maturity date of not more than one year from its date of issue, the
     gain realized on disposition generally will be treated as short-term
     capital gain. In general, any gain realized on disposition of a security
     held less than one year is treated as short-term capital gain.


     Dividend and interest income received by the fund from sources outside the
     U.S. may be subject to withholding and other taxes imposed by such foreign
     jurisdictions. Tax conventions between certain countries and the U.S. may
     reduce or eliminate these foreign taxes, however. Most foreign countries do
     not impose taxes on capital gains in respect of investments by foreign
     investors.


     CAPITAL GAIN DISTRIBUTIONS - The fund also intends to follow the practice
     of distributing the entire excess of net realized long-term capital gains
     over net realized short-term capital losses. Net capital gains for a fiscal
     year are computed by taking into account any capital loss carry-forward of
     the fund.

     If any net long-term capital gains in excess of net short-term capital
     losses are retained by the fund for reinvestment, requiring federal income
     taxes to be paid thereon by the fund, the fund intends to elect to treat
     such capital gains as having been distributed to shareholders. As a result,
     each shareholder will report such capital gains as long-term capital gains
     taxable to individual shareholders at a maximum 20% capital gains rate,
     will be able to claim a pro rata share of federal income taxes paid by the
     fund on such gains as a credit against personal federal income tax
     liability, and will be entitled to increase the adjusted tax basis on fund
     shares by the difference between a pro rata share of the retained gains and
     their related tax credit.


SHAREHOLDER TAXATION - In January of each year individual shareholders of the
fund will receive a statement of the federal income tax status of all
distributions. Shareholders of the fund also may be subject to state and local
taxes on distributions received from the fund. Distributions of the excess of
net long-term capital gains over net short-term capital losses which the fund
properly designates as "capital gain dividends" generally will be taxable to
individual shareholders at a maximum 20% capital gains rate, regardless of the
length of time the shares of the fund have been held by such shareholders. Any
loss realized upon the redemption of shares held at the time of redemption for
six months or less from the date of their purchase will be


                  The Investment Company of America - Page 22

<PAGE>


treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain during such six-month period.


Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital.  For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.


Redemptions of shares, including exchanges for shares of another American Fund,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.  However, conversion from one class to another class in the same
fund should not be a taxable event.


If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other funds. Also,
any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.


The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of a regulated investment company may
be subject to withholding of federal income tax at the rate of 31% in the case
of non-exempt U.S. shareholders who fail to furnish the investment company with
their taxpayer identification numbers and with required certifications regarding
their status under the federal income tax law. Withholding may also be required
if the fund is notified by the IRS or a broker that the taxpayer identification
number furnished by the shareholder is incorrect or that the shareholder has
previously failed to report interest or dividend income. If the withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld.


The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or a lower rate under an
applicable income tax treaty) on dividend income received by the shareholder.


                  The Investment Company of America - Page 23

<PAGE>


Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.


                  The Investment Company of America - Page 24

<PAGE>


                               PURCHASE OF SHARES


<TABLE>
<CAPTION>
        METHOD            INITIAL INVESTMENT        ADDITIONAL INVESTMENTS
-------------------------------------------------------------------------------
<S>                     <C>                     <C>
                        See "Purchase           $50 minimum (except where a
                        Minimums" for initial   lower minimum is noted under
                        investment minimums.    "Purchase Minimums").
-------------------------------------------------------------------------------
By contacting           Visit any investment    Mail directly to your
your investment dealer  dealer who is           investment dealer's address
                        registered in the       printed on your account
                        state where the         statement.
                        purchase is made and
                        who has a sales
                        agreement with
                        American Funds
                        Distributors.
-------------------------------------------------------------------------------
By mail                 Make your check         Fill out the account additions
                        payable to the fund     form at the bottom of a recent
                        and mail to the         account statement, make your
                        address indicated on    check payable to the fund,
                        the account             write your account number on
                        application. Please     your check, and mail the check
                        indicate an investment  and form in the envelope
                        dealer on the account   provided with your account
                        application.            statement.
-------------------------------------------------------------------------------
By telephone            Please contact your     Complete the "Investments by
                        investment dealer to    Phone" section on the account
                        open account, then      application or American
                        follow the procedures   FundsLink Authorization Form.
                        for additional          Once you establish the
                        investments.            privilege, you, your financial
                                                advisor or any person with your
                                                account information can call
                                                American FundsLine(R) and make
                                                investments by telephone
                                                (subject to conditions noted in
                                                "Shareholder Account Services
                                                and Privileges - Telephone and
                                                Computer Purchases, Redemptions
                                                and Exchanges" below).
-------------------------------------------------------------------------------
By computer             Please contact your     Complete the American FundsLink
                        investment dealer to    Authorization Form. Once you
                        open account, then      established the privilege, you,
                        follow the procedures   your financial advisor or any
                        for additional          person with your account
                        investments.            information may access American
                                                FundsLine OnLine(R) on the
                                                Internet and make investments
                                                by computer (subject to
                                                conditions noted in
                                                "Shareholder Account Services
                                                and Privileges - Telephone and
                                                Computer Purchases, Redemptions
                                                and Exchanges" below).
-------------------------------------------------------------------------------
By wire                 Call 800/421-0180 to    Your bank should wire your
                        obtain your account     additional investments in the
                        number(s), if           same manner as described under
                        necessary. Please       "Initial Investment."
                        indicate an investment
                        dealer on the account.
                        Instruct your bank to
                        wire funds to:

                        Wells Fargo Bank
                        155 Fifth Street,
                        Sixth Floor
                        San Francisco, CA
                        94106
                        (ABA#121000248)

                        For credit to the
                        account of:
                        American Funds Service
                        Company a/c#
                        4600-076178
                        (fund name)
                        (your fund acct. no.)
-------------------------------------------------------------------------------
</TABLE>


The funds and the Principal Underwriter reserve the right to reject any purchase
order.  Generally, Class F shares may only be purchased through fee-based
programs of investment firms and registered investment advisers who have special
agreements with the fund's distributor.  Class B and C shares are generally not
available to certain employer-sponsored retirement plans, such as 401(k) plans,
employer-sponsored 403(b) plans, and money purchase


                  The Investment Company of America - Page 25

<PAGE>


pension and profit sharing plans.  In addition, the state tax-exempt funds are
only offered in certain states and tax-exempt funds in general should not serve
as retirement plan investments.


PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250.  The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax-Exempt Money Fund of America, and The U.S.
Treasury Money Fund of America) and the state tax-exempt funds (The Tax-Exempt
Fund of California, The Tax-Exempt Fund of Maryland, and The Tax-Exempt Fund of
Virginia) is $1,000. Purchase minimums are reduced to $50 for purchases through
"Automatic Investment Plans" (except for the money market funds) or to $25 for
purchases by retirement plans through payroll deductions and may be reduced or
waived for shareholders of other funds in The American Funds Group. The minimum
is $50 for additional investments (except for retirement plan payroll deductions
as noted above).


PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000, Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.


PURCHASE MAXIMUM FOR CLASS C SHARES - The maximum purchase order for Class C
shares for all American Funds is $500,000.


FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):

<TABLE>
<CAPTION>
                                                  FUND      FUND      FUND       FUND
                                                 NUMBER    NUMBER    NUMBER     NUMBER
FUND                                            CLASS A   CLASS B   CLASS C    CLASS F
----------------------------------------------------------------------------------------
<S>                                             <C>       <C>       <C>       <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . .      02       202       302        402
American Balanced Fund/(R)/ . . . . . . . . .      11       211       311        411
American Mutual Fund/(R)/ . . . . . . . . . .      03       203       303        403
Capital Income Builder/(R)/ . . . . . . . . .      12       212       312        412
Capital World Growth and Income Fund/SM/  . .      33       233       333        433
EuroPacific Growth Fund/(R)/  . . . . . . . .      16       216       316        416
Fundamental Investors/SM/ . . . . . . . . . .      10       210       310        410
The Growth Fund of America/(R)/ . . . . . . .      05       205       305        405
The Income Fund of America/(R)/ . . . . . . .      06       206       306        406
The Investment Company of America/(R)/  . . .      04       204       304        404
The New Economy Fund/(R)/ . . . . . . . . . .      14       214       314        414
New Perspective Fund/(R)/ . . . . . . . . . .      07       207       307        407
New World Fund/SM/  . . . . . . . . . . . . .      36       236       336        436
SMALLCAP World Fund/(R)/  . . . . . . . . . .      35       235       335        435
Washington Mutual Investors Fund/SM/  . . . .      01       201       301        401
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/      40       240       340        440
American High-Income Trust/SM/  . . . . . . .      21       221       321        421
The Bond Fund of America/SM/  . . . . . . . .      08       208       308        408
Capital World Bond Fund/(R)/  . . . . . . . .      31       231       331        431
Intermediate Bond Fund of America/SM/ . . . .      23       223       323        423
Limited Term Tax-Exempt Bond Fund of
America/SM/ . . . . . . . . . . . . . . . . .      43       243       343        443
The Tax-Exempt Bond Fund of America/(R)/  . .      19       219       319        419
The Tax-Exempt Fund of California/(R)/* . . .      20       220       320        420
The Tax-Exempt Fund of Maryland/(R)/* . . . .      24       224       324        424
The Tax-Exempt Fund of Virginia/(R)/* . . . .      25       225       325        425
U.S. Government Securities Fund/SM/ . . . . .      22       222       322        422
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . .      09       209       309        409
The Tax-Exempt Money Fund of America/SM/  . .      39       N/A       N/A        N/A
The U.S. Treasury Money Fund of America/SM/ .      49       N/A       N/A        N/A
___________
*Available only in certain states.
</TABLE>



                  The Investment Company of America - Page 26

<PAGE>


                                 SALES CHARGES

CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of stock, stock/bond, and bond funds of The American Funds Group are set forth
below. The money market funds of The American Funds Group are offered at net
asset value. (See "Fund Numbers" for a listing of the funds.)

<TABLE>
<CAPTION>
                                                                                       DEALER
                                                               SALES CHARGE AS       CONCESSION
                                                              PERCENTAGE OF THE:    AS PERCENTAGE
                                                              ------------------       OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE                                        NET AMOUNT  OFFERING     OFFERING
                                                             -INVESTED-   PRICE         PRICE
------------------------------------------------------------- --------    -----         -----
<S>                                                          <C>         <C>       <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000  . . . . . . . . . . . . . . . . . . . .     6.10%      5.75%         5.00%
$25,000 but less than $50,000  . . . . . . . . . . . . . .     5.26       5.00          4.25
$50,000 but less than $100,000. .                              4.71       4.50          3.75
BOND FUNDS
Less than $100,000 . . . . . . . .                             3.90       3.75          3.00
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 .                              3.63       3.50          2.75
$250,000 but less than $500,000 .                              2.56       2.50          2.00
$500,000 but less than $750,000 .                              2.04       2.00          1.60
$750,000 but less than $1 million                              1.52       1.50          1.20
$1 million or more . . . . . . . . . .        none     none    (see below)
-----------------------------------------------------------------------------
</TABLE>


CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge.  HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE


                  The Investment Company of America - Page 27

<PAGE>


IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored
defined contribution-type plans investing $1 million or more, or with 100 or
more eligible employees, and Individual Retirement Account rollovers from
retirement plans with assets invested in the American Funds (see "Individual
Retirement Account (IRA) Rollovers" below) may invest with no sales charge and
are not subject to a CDSC.  403(b) plans may be treated as employer-sponsored
plans for sales charge purposes if: (i) the American Funds are principal
investment options; (ii) the employer facilitates the enrollment process by, for
example, allowing for onsite group enrollment meetings held during working
hours; and (iii) there is only one dealer firm assigned to the plans.  403(b)
plans meeting these criteria may invest with no sales charge and are not subject
to a CDSC if investing $1 million or more or having 100 or more eligible
employees.


Investments made through accounts that purchased Class A shares of the fund
before March 15, 2001 and are part of certain qualified fee-based programs, and
retirement plans, endowments or foundations with $50 million or more in assets,
may also be made with no sales charge and are not subject to a CDSC.  A dealer
concession of up to 1% may be paid by the fund under its Class A Plan of
Distribution on investments made with no initial sales charge.


In addition, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:


(1)  current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to, the funds managed by Capital
Research and Management Company, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees of the above persons, and trusts or plans primarily for such persons;

(2)  current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;

(3)  companies exchanging securities with the fund through a merger, acquisition
or exchange offer;

(4)  insurance company separate accounts;

(5)  accounts managed by subsidiaries of The Capital Group Companies, Inc.;

(6)  The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation; and

(7)	wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts whose
underlying investments are managed by any affiliate of The Capital Group
Companies, Inc.


Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense.


                  The Investment Company of America - Page 28

<PAGE>


CONTINGENT DEFERRED SALES CHARGE ON CLASS A AND C SHARES -  Except as described
above, a CDSC of 1% applies to redemptions of Class A shares of the American
Funds, other than the money market funds, made within 12 months following the
purchase of Class A shares of $1 million or more made without an initial sales
charge.  A CDSC of 1% also applies to redemptions of Class C shares of the
American Funds made within 12 months following the purchase of the Class C
shares. The charge is 1% of the lesser of the value of the shares redeemed
(exclusive of reinvested dividends and capital gain distributions) or the total
cost of such shares.  Shares held the longest are assumed to be redeemed first
for purposes of calculating this CDSC. The CDSC may be waived in certain
circumstances.  See "CDSC Waivers for Class A and C Shares" below.


CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge.  However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:



<TABLE>
<CAPTION>
 CONTINGENT DEFERRED SALES CHARGE ON
       SHARES SOLD WITHIN YEAR               AS A % OF SHARES BEING SOLD
 ------------------------------------------------------------------------------
 <S>                                  <C>
                  1                                     5.00%
                  2                                     4.00%
                  3                                     4.00%
                  4                                     3.00%
                  5                                     2.00%
                  6                                     1.00%
</TABLE>



There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions.  In addition, the CDSC may be waived in certain circumstances.
 See "CDSC Waivers for Class B shares" below.  The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less.  In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first followed by shares that you have owned the
longest during the six-year period.


CLASS F SALES CHARGE - Class F shares are sold with no initial or contingent
deferred sales charge.


DEALER COMMISSIONS AND COMPENSATION - For Class A shares, commissions (up to 1%)
are paid to dealers who initiate and are responsible for purchases of $1 million
or more, for purchases by any employer-sponsored defined contribution-type plan
investing $1 million or more or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with assets of $50 million or more.
 Commissions on investments in Class A shares are paid at the following rates:
1.00% on amounts of $1 million to $4 million, 0.50% on amounts over $4 million
to $10 million, and 0.25% on amounts over $10 million. Commissions are based on
cumulative investments and are not annually reset.


For Class B shares, compensation equal to 4.00% of the amount invested is paid
by the Principal Underwriter to dealers who sell Class B shares.


                  The Investment Company of America - Page 29

<PAGE>


For Class C shares, compensation equal to 1.00% of the amount invested is paid
by the Principal Underwriter to dealers who sell Class C shares.


CONVERSION OF CLASS B AND C SHARES - Class B shares automatically convert to
Class A shares in the month of the eight-year anniversary of the purchase date.
 Class C shares automatically convert to Class F shares in the month of the
ten-year anniversary of the purchase date. The conversion of shares is subject
to the Internal Revenue Service's continued position that the conversions are
not subject to federal income tax.  In the event the Internal Revenue Service no
longer takes this position, the automatic conversion feature may be suspended,
in which event no further conversions of Class B or C shares would occur while
such suspension remained in effect.  In that event, at your option, Class B
shares could be exchanged for Class A shares and Class C shares for Class F
shares on the basis of the relative net asset values of the two classes, without
the imposition of a sales charge or fee; however, such an exchange could
constitute a taxable event for you. Absent such an exchange, Class B and C
shares would continue to be subject to higher expenses for longer than eight
years and ten years, respectively.


                      SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you qualify for a reduction in your sales charge
using one or any combination of the methods described below.


     STATEMENT OF INTENTION - You may enter into a non-binding commitment to
     purchase shares of a fund(s) over a 13-month period and receive the same
     sales charge as if all shares had been purchased at once. This includes
     purchases made during the previous 90 days, but does not include future
     appreciation of your investment or reinvested distributions. The reduced
     sales charges and offering prices set forth in the Prospectus apply to
     purchases of $25,000 or more for equity funds and $100,000 or more for bond
     funds made within a 13-month period subject to the following statement of
     intention (the "Statement"). The Statement is not a binding obligation to
     purchase the indicated amount.

(7)	wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts whose
underlying investments are managed by any affiliate of The Capital Group
Companies, Inc.


     When a shareholder elects to use a Statement in order to qualify for a
     reduced sales charge, shares equal to 5% of the dollar amount specified
     in the Statement will be held in escrow in the shareholder's account
     out of the initial purchase (or subsequent purchases, if necessary)
     by the Transfer Agent. All dividends and any capital gain distributions
     on shares held in escrow will be credited to the shareholder's account
     in shares (or paid in cash, if requested). If the intended investment
     is not completed within the specified 13-month period, the purchaser
     will remit to the Principal Underwriter the difference between the
     sales charge actually paid and the sales charge which would have been
     paid if the total of such purchases had been made at a single time.
     The dealer assigned to the account at the end of the period will
     receive an appropriate commission adjustment. If the difference is not
     paid by the close of the Statement period, the appropriate number of
     shares held in escrow will be redeemed to pay such difference. If the
     proceeds from this redemption are inadequate, the purchaser will be
     liable to the Principal Underwriter for the balance still outstanding.

     The Statement may be revised upward at any time during the 13-month period,
     and such a revision will be treated as a new Statement, except that the
     13-month period during which the purchase must be made will remain
     unchanged. Accordingly, upon your


                  The Investment Company of America - Page 30

<PAGE>


     request, the sales charge paid on investments made 90 days prior to the
     Statement revision will be adjusted to reflect the revised Statement.

     Existing holdings eligible for rights of accumulation (see below),
     including Class A shares held in a fee-based arrangement, other classes of
     shares of the American Funds, and any individual investments in American
     Legacy variable annuities and variable life insurance policies (American
     Legacy, American Legacy II and American Legacy III variable annuities,
     American Legacy Life, American Legacy Variable Life, and American Legacy
     Estate Builder) may be credited toward satisfying the Statement.

     During the Statement period reinvested dividends and capital gain
     distributions, investments in money market funds, and investments made
     under a right of reinstatement will not be credited toward satisfying the
     Statement. The Statement will be considered completed if the shareholder
     dies within the 13-month Statement period. Commissions will not be adjusted
     or paid on the difference between the Statement amount and the amount
     actually invested before the shareholder's death.

     When the trustees of certain retirement plans purchase shares by payroll
     deduction, the sales charge for the investments made during the 13-month
     period will be handled as follows: the regular monthly payroll deduction
     investment will be multiplied by 13 and then multiplied by 1.5. The current
     value of existing American Funds investments (other than money market fund
     investments) and any rollovers or transfers reasonably anticipated to be
     invested in non-money market American Funds during the 13-month period, and
     any individual investments in American Legacy variable annuities and
     variable life insurance policies are added to the figure determined above.
     The sum is the Statement amount and applicable breakpoint level. On the
     first investment and all other investments made pursuant to the Statement,
     a sales charge will be assessed according to the sales charge breakpoint
     thus determined. There will be no retroactive adjustments in sales charges
     on investments made during the 13-month period.

     Shareholders purchasing shares at a reduced sales charge under a Statement
     indicate their acceptance of these terms with their first purchase.

     AGGREGATION - Sales charge discounts are available for certain aggregated
     investments. Qualifying investments include those made by you and your
     immediate family (your spouse and your children under the age of 21), if
     all parties are purchasing shares for their own accounts and/or:

     .    individual-type employee benefit plan(s), such as an IRA, 403(b) plan
          (see exception below), or single-participant Keogh-type plan;

     .    business accounts solely controlled by you or your immediate family
          (for example, you own the entire business);

     .    trust accounts established by you or your immediate family.  However,
          if the person(s) who established the trust is deceased, the trust
          account may be aggregated with accounts of the person who is the
          primary beneficiary of the trust; or

     .    endowments or foundations established and controlled by you or your
          immediate family.


                  The Investment Company of America - Page 31

<PAGE>


     Individual purchases by a trustee(s) or other fiduciary(ies) may also be
     aggregated if the investments are:

     .    for a single trust estate or fiduciary account, excluding
          individual-type employee benefit plans described above;

     .    made for two or more employee benefit plans of a single employer or of
          affiliated employers as defined in the 1940 Act, again excluding
          individual-type employee benefit plans described above;

     .    for a diversified common trust fund or other diversified pooled
          account not specifically formed for the purpose of accumulating fund
          shares;

     .    for non-profit, charitable or educational organizations (or any
          employer-sponsored retirement plan for such an endowment or
          foundation) or any endowments or foundations established and
          controlled by the organization; or

     .    for participant accounts of a 403(b) plan that is treated as an
          employer-sponsored plan (see "Class A Purchases Not Subject to Sales
          Charges" above), or made for two or more 403(b) plans that are treated
          as employer-sponsored plans of a single employer or affiliated
          employers as defined in the 1940 Act.

     Purchases made for nominee or street name accounts (securities held in the
     name of an investment dealer or another nominee such as a bank trust
     department instead of the customer) may not be aggregated with those made
     for other accounts and may not be aggregated with other nominee or street
     name accounts unless otherwise qualified as described above.

     CONCURRENT PURCHASES - You may combine purchases of all classes of shares
     of two or more funds in The American Funds Group, as well as individual
     holdings in American Legacy variable annuities and variable life insurance
     policies.  Shares of money market funds purchased through an exchange,
     reinvestment or cross-reinvestment from a fund having a sales charge also
     qualify. However, direct purchases of the money market funds are excluded.

     RIGHTS OF ACCUMULATION - You may take into account the current value (or if
     greater, the amount you invested less any withdrawals) of your existing
     holdings in all share classes of The American Funds Group, as well as your
     holdings in Endowments (shares of which may be owned only by tax-exempt
     organizations), to determine your sales charge on investments in accounts
     eligible to be aggregated, or when making a gift to an individual or
     charity. When determining your sales charge, you may also take into account
     the value of your individual holdings, as of the end of the week prior to
     your investment, in various American Legacy variable annuities and variable
     life insurance policies. Direct purchases of the money market funds are
     excluded.

CDSC WAIVERS FOR CLASS A AND C SHARES -  Any CDSC on Class A and C shares may be
waived in the following cases:


(1)  Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).


                  The Investment Company of America - Page 32

<PAGE>


(2)  Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.

(3)  Tax-free returns of excess contributions to IRAs.

(4)  Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% each year of the lesser of the original
purchase cost or the current market value of the shares being sold that would
otherwise be subject to a CDSC.

CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:


(1)  Redemptions through systematic withdrawal plans ("SWPs") (see "Automatic
Withdrawals" below) not exceeding 12% each year of the lesser of the original
purchase cost or the current market value of the shares being sold that would
otherwise be subject to a CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be redeemed first and will
count toward the 12% limitation.  If there are insufficient shares not subject
to a CDSC, shares subject to the lowest CDSC will be redeemed next until the 12%
limit is reached.

The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment.  Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account.  This privilege may be revised
or terminated at any time.


(2)  Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.

(3)  Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.

                 INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS

Assets from a retirement plan (plan assets) may be invested in any class of
shares of the American Funds (except as described below) through an IRA
rollover plan. All such rollover investments will be subject to the terms
and conditions for Class A, B, C and F shares contained in the fund's
current prospectus and statement of additional information. An IRA rollover
involving plan assets that offered an investment option managed by any
affiliate of The Capital Group Companies, Inc., including any of the
American Funds, may be invested in Class A shares at net asset value and
will not be subject to a contingent deferred sales charge.  Dealers who
initiate and are responsible for such investments will be compensated
pursuant to the schedule applicable to Class A share investments of
$1 million or more (see "Dealers Commissions and Compensation" above).



                  The Investment Company of America - Page 33

<PAGE>


                                PRICE OF SHARES

Shares are purchased at the offering price next determined after the purchase
order is received and accepted by the fund or the Transfer Agent; this offering
price is effective for orders received prior to the time of determination of the
net asset value and, in the case of orders placed with dealers, accepted by the
Principal Underwriter, the Transfer Agent or either of their designees. In the
case of orders sent directly to the fund or the Transfer Agent, an investment
dealer MUST be indicated. The dealer is responsible for promptly transmitting
purchase orders to the Principal Underwriter.


Orders received by the investment dealer, the Transfer Agent, or the fund after
the time of the determination of the net asset value will be entered at the next
calculated offering price. Prices which appear in the newspaper do not always
indicate prices at which you will be purchasing and redeeming shares of the
fund, since such prices generally reflect the previous day's closing price
whereas purchases and redemptions are made at the next calculated price. The
price you pay for shares, the offering price, is based on the net asset value
per share which is calculated once daily as of approximately 4:00 p.m. New York
time, which is the normal close of trading on the New York Stock Exchange each
day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m., the
fund's share price would still be determined as of 4:00 p.m. New York time. The
New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.


All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:


1.    Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. Fixed-income securities are valued at prices obtained
from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.

Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.


Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.


Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;


2.   Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and


                  The Investment Company of America - Page 34

<PAGE>


3.   Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.

Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 3.0% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Directors.


                                 SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A, B and C
shares may be subject to a CDSC.  Generally, Class F shares may only be sold
through fee-based programs of investment firms and registered investment
advisers with special agreements with the fund's distributor.


You may sell (redeem) other classes of shares in your account in any of the
following ways:


     THROUGH YOUR DEALER (certain charges may apply)

     -     Shares held for you in your dealer's street name must be sold
           through the dealer.

     WRITING TO AMERICAN FUNDS SERVICE COMPANY

     -     Requests must be signed by the registered shareholder(s).

     -     A signature guarantee is required if the redemption is:

          -  Over $50,000;

          -  Made payable to someone other than the registered
             shareholder(s); or

          -  Sent to an address other than the address of record, or an address
            of record which has been changed within the last 10 days.

          Your signature may be guaranteed by a domestic stock exchange or the
          National Association of Securities Dealers, Inc., bank, savings
          association or credit union that is an eligible guarantor institution.
          The Transfer Agent reserves the right to require a signature guarantee
          on any redemptions.


     -    Additional documentation may be required for sales of shares held in
          corporate, partnership or fiduciary accounts.

     -    You must include any shares you wish to sell that are in
          certificate form.

     TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
     FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/

     -
          Redemptions by telephone or fax (including American FundsLine/(R)/ and
          American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder
          each day.


                  The Investment Company of America - Page 35

<PAGE>


     -     Checks must be made payable to the registered shareholder(s).

     -    Checks must be mailed to an address of record that has been used with
          the account for at least 10 days.

     MONEY MARKET FUNDS

     -  You may have redemptions of $1,000 or more wired to your bank by
          writing American Funds Service Company.

     -  You may establish check writing privileges (use the money market funds
          application).

          -  If you request check writing privileges, you will be provided with
            checks that you may use to draw against your account. These checks
            may be made payable to anyone you designate and must be signed by
            the authorized number or registered shareholders exactly as
            indicated on your checking account signature card.

          -  Check writing is not available for Class B, C or F shares of The
            Cash Management Trust.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, equals the dollar amount requested.


Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.


You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A, B, C or F shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any CDSC on Class A or C shares will be credited
to your account). In addition, proceeds from a redemption or a dividend or
capital gain distribution of Class C shares may be reinvested in Class C shares.
Redemption proceeds of shares representing direct purchases in the money market
funds that are reinvested in non-money market funds will be subject to a sales
charge. Proceeds will be reinvested at the next calculated net asset value after
your request is received and accepted by the Transfer Agent.


                  SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders.  However, certain services and privileges may not be available if
your account is held with an investment dealer.


                  The Investment Company of America - Page 36

<PAGE>


AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments in The American Funds through automatic debits
from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified.  For
example, if the date you specified falls on a weekend or holiday, your money
will be invested on the next business day.  If your bank account cannot be
debited due to insufficient funds, a stop-payment or the closing of the account,
the plan may be terminated and the related investment reversed. You may change
the amount of the investment or discontinue the plan at any time by writing to
the Transfer Agent.


AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares of the same class and fund at net asset value unless you
indicate otherwise on the account application. You also may elect to have
dividends and/or capital gain distributions paid in cash by informing the fund,
the Transfer Agent or your investment dealer.


If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.


CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") of the same share class into any
other fund in The American Funds Group at net asset value, subject to the
following conditions:


(a)  The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),

(b)  If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,

(c)  If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B or C
shares of any other American Fund for dollar cost averaging purposes. Exchange
purchases are subject to the minimum investment requirements of the fund
purchased and no sales charge generally applies. However, exchanges of shares
from the money market funds are subject to applicable sales charges on the fund
being purchased, unless the money market fund shares were acquired by an
exchange from a fund having a sales charge, or by reinvestment or
cross-reinvestment of dividends or capital gain distributions.


                  The Investment Company of America - Page 37

<PAGE>


Exchanges of Class F shares generally may only be done through fee-based
programs of investment firms and registered investment advisers with special
agreements with the fund's distributor. You may exchange shares of other classes
by writing to the Transfer Agent (see "Selling Shares"), by contacting your
investment dealer, by using American FundsLine and American FundsLine OnLine
(see "American FundsLine and American FundsLine OnLine" below), or by
telephoning 800/421-0180 toll-free, faxing (see "American Funds Service Company
Service Areas" -- "Principal Underwriter and Transfer Agent" in the prospectus
for the appropriate fax numbers) or telegraphing the Transfer Agent. (See
"Telephone and Computer Purchases, Redemptions and Exchanges" below.) Shares
held in corporate-type retirement plans for which Capital Bank and Trust Company
serves as trustee may not be exchanged by telephone, computer, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares"--"Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES
AS ORDINARY SALES AND PURCHASES.


AUTOMATIC EXCHANGES - You may automatically exchange shares of the same class in
amounts of $50 or more among any of the funds in The American Funds Group on any
day (or preceding business day if the day falls on a non-business day) of each
month you designate.


AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.


ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments, purchases through automatic investment
plans and certain retirement plans, as well as automatic exchanges and
withdrawals will be confirmed at least quarterly.


AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day) from non-retirement plan
accounts, or exchange shares around the clock with American FundsLine and
American FundsLine OnLine. To use these services, call 800/325-3590 from a
TouchTone(TM) telephone or access the American Funds Web site on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine and
American FundsLine OnLine are subject to the conditions noted above and in
"Telephone and Computer Purchases, Redemptions and Exchanges" below. You will
need your fund number (see the list of funds in The American Funds Group under
"Purchase of Shares - Purchase Minimums" and "Purchase of Shares - Fund
Numbers"), personal identification number (generally the last four digits of
your Social Security number or other tax identification number associated with
your account) and account number.


TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, any of its affiliates
or mutual funds managed by such affiliates, and each of their


                  The Investment Company of America - Page 38

<PAGE>


respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, costs or liability (including attorney fees) which may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these options. However, you may
elect to opt out of these options by writing the Transfer Agent (you may also
reinstate them at any time by writing the Transfer Agent). If the Transfer Agent
does not employ reasonable procedures to confirm that the instructions received
from any person with appropriate account information are genuine, it and/or the
fund may be liable for losses due to unauthorized or fraudulent instructions. In
the event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural disaster, redemption and
exchange requests may be made in writing only.


REDEMPTION OF SHARES - The fund's Articles of Incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder of record owns
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Directors of the fund may from time to time
adopt.


While payment of redemptions normally will be in cash, the fund's Articles of
Incorporation permits payment of the redemption price wholly or partly in
securities or other property included in the assets belonging to the fund when
in the opinion of the fund's Board of Directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.


SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.


                      EXECUTION OF PORTFOLIO TRANSACTIONS

The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.


There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment Adviser
believes that to do so is in the interest of the fund. When such concurrent
authorizations occur, the objective is to allocate the executions in an
equitable manner. The fund will not pay a mark-up for research in principal
transactions.


No dealer concessions were paid on underwriting transactions in fiscal 2000 and
dealer concessions paid on underwriting transactions for the fiscal years ended,
December 31, 1999 and 1998, amounted to $22,412,000 and $18,546,000,
respectively.


                  The Investment Company of America - Page 39

<PAGE>


The fund is required to disclose information regarding investments in the
securities of broker-dealers (or parents of broker-dealers that derive more than
15% of their revenue from broker-dealer activities) which have certain
relationships with the fund. During the last fiscal year, Lincoln National Life
Insurance Company and Marsh & McLennan Companies were among the top 10 dealers
that received the largest amount of brokerage commissions and that acted as
principals in portfolio transactions. The fund held equity securities of Lincoln
National Life Insurance Company and Marsh & McLennan Companies in the amount of
$188,379,900 as of the close of its most recent fiscal year.


                              GENERAL INFORMATION

CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
 10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S. banks
or non-U.S. branches of U.S. banks.


TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee of
$36,727,000 for Class A shares and $130,000 for Class B shares for the 2000
fiscal year.


INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 350 South Grand Avenue,
Los Angeles, CA 90071, serves as the fund's independent accountants providing
audit services, preparation of tax returns and review of certain documents to be
filed with the Securities and Exchange Commission. The financial statements
included in this Statement of Additional Information from the Annual Report have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing. The selection of the fund's independent accountants is
reviewed and determined annually by the Board of Directors.


PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS - The fund's fiscal
year ends on December 31. Shareholders are provided updated prospectuses
annually and at least semiannually with reports showing the investment
portfolio, financial statements and other information. The fund's annual
financial statements are audited by the fund's independent accountants,
PricewaterhouseCoopers LLP. In addition, shareholders may also receive proxy
statements for the fund. In an effort to reduce the volume of mail shareholders
receive from the fund when a household owns more than one account, the Transfer
Agent has taken steps to eliminate duplicate mailings of prospectuses,
shareholder reports and proxy statements. To receive additional copies of a
prospectus, report or proxy statement, shareholders should contact the Transfer
Agent.


                  The Investment Company of America - Page 40

<PAGE>


PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments, including
securities in which the fund may invest from time to time. This policy includes:
a ban on acquisitions of securities pursuant to an initial public offering;
restrictions on acquisitions of private placement securities; pre-clearance and
reporting requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.


OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Accountants contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:


             DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
    MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- DECEMBER 31, 2000

<TABLE>
<CAPTION>
<S>                                                               <C>
Net asset value and redemption price per share
  (Net assets divided by shares outstanding) . . . . . . . . .      $31.06
Maximum offering price per share
  (100/94.25 of net asset value per share,
  which takes into account the fund's current maximum
  sales charge). . . . . . . . . . . . . . . . . . . . . . . .      $32.95
</TABLE>


            CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS

The fund's yield was 1.86% based on a 30-day (or one month) period ended
December 31, 2000, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last day
of the period, according to the following formula:


     YIELD = 2[( a-b/cd + 1)/6/ -1]

     Where:  a   = dividends and interest earned during the period.

             b   = expenses accrued for the period (net of reimbursements).

             c   = the average daily number of shares outstanding during the
                   period that were entitled to receive dividends.

             d   = the maximum offering price per share on the last day of the
                   period.

The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.


The fund's one year total return and average annual total returns at the maximum
offering price for the five- and ten-year periods ended December 31, 2000 were
-2.13%, 16.78% and 15.69%,


                  The Investment Company of America - Page 41

<PAGE>


respectively.  The fund's one year total return and average annual total returns
at net asset value for the five- and ten-year periods ended on December 31, 2000
were 3.84%, 18.18% and 16.38%, respectively.


The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.


In calculating average annual total return at the maximum offering price, the
fund assumes: (1) deduction of the maximum sales load of 5.75% from the $1,000
initial investment; (2) reinvestment of dividends and distributions at net asset
value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated. In addition, the fund will
provide lifetime average total return figures. From time to time, the fund may
calculate investment results for Class B, C and F shares.


The fund may also, at times, calculate total return based on net asset value per
share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.


The fund may include information on its investment results and/or comparisons of
its investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.


The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.


The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.


The fund may compare its investment results with the Consumer Price Index, which
is a measure of the average change in prices over time in a fixed market basket
of goods and services (e.g. food, clothing, and fuels, transportation, and other
goods and services that people buy for day-to-day living).


                  The Investment Company of America - Page 42

<PAGE>




                                    APPENDIX
                          Description of Bond Ratings

BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate.  It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
 Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.


Moody's rates the long-term debt securities issued by various entities from
-------
"Aaa" to "C."  Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system.  The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.  Ratings are described as follows:


"Bonds which are rated Aaa are judged to be of the best quality.  They carry the
smallest degree of investment risk and are generally referred to as 'gilt edge.'
 Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure.  While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues."


"Bonds which are rated Aa are judged to be of high quality by all standards.
 Together with the Aaa group, they comprise what are generally known as
high-grade bonds.  They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."


"Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations.  Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."


"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured.  Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.  Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."


"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured.  Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future.  Uncertainty of position characterizes
bonds in this class."


"Bonds which are rated B generally lack characteristics of the desirable
investment.  Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."


                  The Investment Company of America - Page 43

<PAGE>


"Bonds which are rated Caa are of poor standing.  Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."


"Bonds which are rated Ca represent obligations which are speculative in a high
degree.  Such issues are often in default or have other marked shortcomings."


"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."


S & P rates the long-term securities debt of various entities in categories
-----
ranging from "AAA" to "D" according to quality.  The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories.  Ratings are described as follows:


"Debt rated 'AAA' has the highest rating assigned by S & P.  Capacity to pay
interest and repay principal is extremely strong."


"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."


"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."


"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal.  Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."


"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues.  However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.  The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.


"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments.  Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.  The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."


"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."


"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating.  The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."


"The rating 'C1' is reserved for income bonds on which no interest is being
paid."


                  The Investment Company of America - Page 44

<PAGE>


"Debt rated 'D' is in payment default.  The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.  The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."


                  The Investment Company of America - Page 45

INVESTMENT PORTFOLIO - DECEMBER 31, 2000

<TABLE>
<CAPTION>
<S>                                               <C>
LARGEST INVESTMENT CATEGORIES
                                                  Percent of Net Assets
Pharmaceuticals & Biotechnology                   9.19%
Energy                                            7.99
Technology Hardware & Equipment                   7.35
</TABLE>

<TABLE>
<CAPTION>
<S>                                               <C>
LARGEST INDUSTRY HOLDINGS
                                                  Percent of Net Assets
Pharmaceuticals                                   9.19%
Oil & Gas                                         6.65
Media                                             6.54
Diversified Financials                            5.94
Banks                                             4.68
</TABLE>


<TABLE>
<CAPTION>
<S>                                               <C>
LARGEST INDIVIDUAL HOLDINGS
                                                  Percent of Net Assets
Fannie Mae                                        2.91%
Pfizer                                            2.67
Philip Morris                                     2.64
Pharmacia                                         2.39
Viacom                                            2.32
Royal Dutch Petroleum/"Shell" Transport           1.92
 and Trading
Time Warner                                       1.79
Texas Instruments                                 1.42
AstraZeneca                                       1.35
Bristol-Myers Squibb                              1.30
</TABLE>


COMPANIES APPEARING IN THE PORTFOLIO SINCE JUNE 30, 2000

Agilent Technologies
Bayer
Burlington Northern Santa Fe
Burlington Resources
First Data
Gillette
Guidant
Halliburton
IMS Health
Linear Technology
Lockheed Martin
Marsh & McLennan Companies
OneSteel
Palm
Ralston Purina
Staples
Walgreen


COMPANIES ELIMINATED FROM THE PORTFOLIO SINCE JUNE 30, 2000

Archer Daniels Midland
Associates First Capital/Citigroup
Colgate-Palmolive
Dillard's
Eastman Kodak
E.I. du Pont de Nemours
Emerson Electric
Florida Progress
Freeport-McMoRan Coppers & Gold
GPU
Hasbro
J.C. Penney
Kerr-McGee
KeyCorp
New York Times
Nortel Networks
Seagram
Telefonica
3Com




<TABLE>
<S>                                                                 <C>          <C>          <C>
The Investment Company of America
Investment Portfolio, December 31, 2000

                                                                                       Market
                                                                       Number of        Value   Percent of
Equity Securitites                                                        Shares   (millions)   Net Assets


ENERGY
Energy Equipment & Services  -  1.34%
Baker Hughes Inc.                                                       6,525,000      271.195          .48
Halliburton Co.                                                         1,000,000       36.250          .06
Schlumberger Ltd.                                                       5,650,000      451.647          .80

Oil & Gas  -  6.65%
BP Amoco PLC (ADR)                                                      2,500,000      119.688          .21
Burlington Resources Inc.                                               1,556,500       78.603          .14
Chevron Corp.                                                           4,920,000      415.432          .73
Conoco Inc., Class A                                                    5,650,000      161.731
Conoco Inc., Class B                                                    4,975,000      143.964          .54
Exxon Mobil Corp.                                                       1,500,000      130.406          .23
Murphy Oil Corp.                                                        2,175,000      131.452          .23
Phillips Petroleum Co.                                                  7,186,600      408.738          .72
Royal Dutch Petroleum Co. (New York registered)                        16,300,000      987.169
"Shell" Transport and Trading Co., PLC (New                             2,000,000       98.750         1.92
 York registered)
Texaco Inc.                                                             5,600,000      347.900          .61
TOTAL FINA ELF SA (formerly TOTAL FINA SA),                             1,273,469      189.413
 Class B
TOTAL FINA ELF SA, Class B (ADR)                                        3,053,833      221.975          .73
Unocal Corp.                                                            6,586,000      254.796          .45
USX-Marathon Group                                                      2,800,000       77.700          .14
                                                                                     4,526.809         7.99

MATERIALS
Chemicals  -  1.52%
Air Products and Chemicals, Inc.                                        1,200,000       49.200          .09
Bayer AG                                                                  725,000       38.192          .07
Dow Chemical Co.                                                       16,050,000      587.831         1.04
Imperial Chemical Industries PLC (ADR)                                  5,300,000      178.544          .32

Metals & Mining  -  1.59%
Alcoa Inc.                                                             14,966,000      501.361          .88
Barrick Gold Corp.                                                      8,500,000      139.230          .25
BHP Ltd. (formerly Broken Hill Proprietary                              4,557,966       48.099          .08
 Co. Ltd.)
Massey Energy Co. (formerly Fluor Corp.)                                1,400,000       17.850          .03
Newmont Mining Corp.                                                    3,600,000       61.425          .11
OneSteel Ltd. (1)                                                       1,139,491         .603          .00
Phelps Dodge Corp.                                                      1,000,000       55.813          .10
Placer Dome Inc.                                                        5,600,000       53.900          .09
WMC Ltd.                                                                6,500,000       27.707          .05

Paper & Forest Products  -  1.29%
Georgia-Pacific Corp., Georgia-Pacific Group                            8,333,858      259.391          .46
 (merged with Fort James Corp.)
International Paper Co.                                                 4,497,235      183.543          .32
Louisiana-Pacific Corp.                                                 4,675,000       47.334          .08
Weyerhaeuser Co.                                                        4,850,000      246.138          .43
                                                                                     2,496.161         4.40

CAPITAL GOODS
Aerospace & Defense  -  1.48%
Boeing Co.                                                              1,550,000      102.300          .18
Honeywell International Inc.                                              800,000       37.850          .07
Lockheed Martin Corp.                                                   2,000,000       67.900          .12
Northrop Grumman Corp.                                                    800,000       66.400          .12
Raytheon Co., Class A                                                   3,536,335      102.554
Raytheon Co., Class B                                                   4,228,100      131.335          .41
United Technologies Corp.                                               4,200,000      330.225          .58

Construction & Engineering  -  0.08%
Fluor Corp. (1)                                                         1,400,000       46.288          .08

Electrical Equipment  -  0.26%
Thermo Electron Corp.  (1)                                              5,000,000      148.750          .26

Industrial Conglomerates  -  0.83%
Minnesota Mining and Manufacturing Co.                                  1,920,000      231.360          .41
Siemens AG                                                              1,800,000      235.360          .42

Machinery  -  1.49%
Caterpillar Inc.                                                        2,500,000      118.281          .21
Cummins Engine Co., Inc.                                                1,700,000       64.494          .12
Deere & Co.                                                             6,200,000      284.037          .50
Illinois Tool Works Inc.                                                3,400,000      202.513          .36
Ingersoll-Rand Co.                                                      1,800,000       75.375          .13
Parker Hannifin Corp.                                                   2,200,000       97.075          .17
                                                                                     2,342.097         4.14

COMMERCIAL SERVICES & SUPPLIES
Commercial Services & Supplies  -  1.75%
Cendant Corp.  (1)                                                     17,613,500      169.530          .30
First Data Corp.                                                        1,155,000       60.854          .11
IMS Health Inc.                                                         3,200,000       86.400          .15
Pitney Bowes Inc.                                                       3,515,100      116.438          .21
Sabre Holdings Corp., Class A  (1)                                      5,159,680      222.511          .39
Waste Management, Inc.                                                 12,030,000      333.832          .59
                                                                                       989.565         1.75

TRANSPORTATION
Air Freight & Couriers  -  0.20%
FedEx Corp.  (1)                                                        2,870,000      114.685          .20

Airlines  -  0.31%
AMR Corp.  (1)                                                          3,350,000      131.278          .23
Delta Air Lines, Inc.                                                     942,100       47.282          .08

Road & Rail  -  0.28%
Burlington Northern Santa Fe Corp.                                      2,900,000       82.106          .15
Canadian Pacific Ltd.                                                   2,600,000       74.263          .13
                                                                                       449.614          .79

AUTOMOBILES & COMPONENTS
Auto Components  -  0.17%
Dana Corp.                                                              2,121,500       32.485          .06
Delphi Automotive Systems Corp.                                         5,764,088       64.846          .11

Automobiles  -  0.54%
Ford Motor Co.                                                          3,573,358       83.751          .15
General Motors Corp.                                                    1,146,958       58.423          .10
Honda Motor Co., Ltd.                                                   4,360,000      161.932          .29
                                                                                       401.437          .71

CONSUMER DURABLES & APPAREL
Household Durables  -  0.21%
Newell Rubbermaid Inc.                                                  5,300,000      120.575          .21

Textiles & Apparel  -  0.70%
NIKE, Inc., Class B                                                     7,130,200      397.954          .70
                                                                                       518.529          .91

HOTELS, RESTAURANTS & LEISURE
Hotels, Restaurants & Leisure  -  0.39%
McDonald's Corp.                                                        6,500,000      221.000          .39

MEDIA
Media  -  6.54%
AT&T Corp. Liberty Media Group, Class A (1)                            23,000,000      311.938          .55
Dow Jones & Co., Inc.                                                   1,275,100       72.203          .13
General Motors Corp., Class H  (1)                                      1,207,842       27.780          .05
Infinity Broadcasting Corp.  (1)                                        7,000,000      195.563          .34
Interpublic Group of Companies, Inc.                                    7,400,000      314.962          .56
Knight-Ridder, Inc.                                                     3,550,500      201.935          .36
Time Warner Inc.                                                       19,400,000    1,013.456         1.79
Viacom Inc., Class A  (1)                                               2,392,800      112.462
Viacom Inc., Class B  (1)                                              25,770,000    1,204.747         2.32
Walt Disney Co.                                                         8,600,000      248.862          .44
                                                                                     3,703.908         6.54

RETAILING
Multiline Retail  -  0.67%
Dollar General Corp.                                                    5,561,200      104.968          .18
May Department Stores Co.                                               2,700,000       88.425          .16
Wal-Mart Stores, Inc.                                                   3,500,000      185.937          .33

Specialty Retail  -  2.03%
AutoZone, Inc.  (1)                                                     4,140,000      117.990          .21
Gap, Inc.                                                               6,000,000      153.000          .27
Limited Inc.                                                           15,800,000      269.588          .48
Lowe's Companies, Inc.                                                 12,350,000      549.575          .97
Staples, Inc.  (1)                                                      5,000,000       59.062          .10
                                                                                     1,528.545         2.70

FOOD & DRUG RETAILING
Food & Drug Retailing  -  0.56%
Albertson's, Inc.                                                       6,666,500      176.662          .31
Walgreen Co.                                                            3,375,100      141.122          .25
                                                                                       317.784          .56

FOOD, BEVERAGE & TOBACCO
Beverages  -  1.50%
Coca-Cola Co.                                                           3,250,000      198.047          .35
PepsiCo, Inc.                                                          13,100,000      649.269         1.15

Food Products  -  1.54%
General Mills, Inc.                                                     9,309,900      414.872          .73
H.J. Heinz Co.                                                          1,700,000       80.644          .14
Ralston Purina Co.                                                      1,000,000       26.125          .05
Sara Lee Corp.                                                         10,400,000      255.450          .45
Unilever NV (New York registered) (merged with                          1,500,000       94.406          .17
 Bestfoods)

Tobacco  -  3.02%
Philip Morris Companies Inc.                                           34,000,000    1,496.000         2.64
R.J. Reynolds Tobacco Holdings, Inc. (merged                            4,461,666      217.506          .38
 with Nabisco Group Holdings Corp.)
                                                                                     3,432.319         6.06

HOUSEHOLD & PERSONAL PRODUCTS
Household Products  -  0.30%
Kimberly-Clark Corp.                                                    1,772,000      125.263          .22
Procter & Gamble Co.                                                      600,000       47.062          .08

Personal Products  -  0.68%
Avon Products, Inc.                                                     6,239,800      298.730          .53
Gillette Co.                                                            2,300,000       83.088          .15
                                                                                       554.143          .98

HEALTH CARE EQUIPMENT & SERVICES
Health Care Equipment & Supplies  -  1.15%
Applera Corp. - Applied Biosystems Group (formerly                      2,893,800      272.198          .48
 PE Biosystems Group)
Becton, Dickinson and Co.                                               3,700,000      128.112          .23
Guidant Corp.  (1)                                                      4,617,300      249.046          .44

Health Care Providers & Services  -  1.47%
Aetna Inc.  (1)                                                         2,000,000       82.125          .14
Cardinal Health, Inc.                                                   4,350,000      433.369          .76
HCA - The Healthcare Co.                                                7,300,000      321.273          .57
                                                                                     1,486.123         2.62

PHARMACEUTICALS & BIOTECHNOLOGY
Pharmaceuticals  -  9.19%
Abbott Laboratories                                                     3,000,000      145.313          .26
American Home Products Corp.                                            3,000,000      190.650          .34
AstraZeneca PLC                                                        15,110,900      756.259
AstraZeneca PLC (ADR)                                                     199,000       10.249         1.35
Bristol-Myers Squibb Co.                                               10,007,600      739.937         1.30
Merck & Co., Inc.                                                       4,100,000      383.862          .68
Pfizer Inc                                                             32,892,725    1,513.065         2.67
Pharmacia Corp.                                                        22,200,000    1,354.200         2.39
Schering-Plough Corp.                                                   2,000,000      113.500          .20
                                                                                     5,207.035         9.19

BANKS
Banks  -  4.68%
Bank of America Corp.                                                  14,584,240      669.052         1.18
BANK ONE CORP.                                                          7,285,000      266.813          .47
Comerica Inc.                                                             750,000       44.531          .08
First Union Corp.                                                       5,760,000      160.200          .28
FleetBoston Financial Corp.                                               850,000       31.928          .06
Lloyds TSB Group PLC                                                    4,935,200       52.192          .09
National City Corp.                                                     2,000,000       57.500          .10
Toronto-Dominion Bank                                                   4,848,900      140.569          .25
U.S. Bancorp                                                            2,500,000       72.969          .13
Wachovia Corp.                                                          1,250,000       72.656          .13
Washington Mutual, Inc.                                                 7,934,900      421.046          .74
Wells Fargo & Co.                                                      11,925,000      664.073         1.17
                                                                                     2,653.529         4.68

DIVERSIFIED FINANCIALS
Diversified Financials  -  5.94%
Fannie Mae                                                             18,996,800    1,647.972         2.91
Freddie Mac                                                             5,500,000      378.813          .67
Household International, Inc.                                          10,360,000      569.800         1.01
MBNA Corp.                                                              1,850,000       68.334          .12
Moody's Corp. (formerly Dun & Bradstreet Corp.)                         1,748,700       44.920          .08
Providian Financial Corp.                                               4,050,000      232.875          .41
USA Education Inc. (formerly SLM Holding Corp.)                         6,182,000      420.376          .74
                                                                                     3,363.090         5.94

INSURANCE
Insurance  -  3.52%
Allstate Corp.                                                          8,550,000      372.459          .66
American General Corp.                                                  2,960,000      241.240          .43
American International Group, Inc.                                      5,062,500      498.973          .88
Aon Corp.                                                               2,050,000       70.213          .13
Berkshire Hathaway Inc., Class A  (1)                                       2,163      153.573          .27
Chubb Corp.                                                             1,000,000       86.500          .15
Jefferson-Pilot Corp.                                                   2,200,000      164.450          .29
Lincoln National Corp.                                                  1,800,000       85.163          .15
Marsh & McLennan Companies, Inc.                                          882,200      103.217          .18
SAFECO Corp.                                                            2,634,200       86.599          .15
St. Paul Companies, Inc.                                                2,400,000      130.350          .23
                                                                                     1,992.737         3.52

SOFTWARE & SERVICES
IT Consulting & Services  -  0.47%
Computer Sciences Corp.  (1)                                            1,282,700       77.122          .14
Electronic Data Systems Corp.                                           3,200,000      184.800          .33

Software  -  1.27%
Computer Associates International, Inc.                                 3,700,000       72.150          .13
Microsoft Corp.  (1)                                                    7,197,300      312.183          .55
Oracle Corp.  (1)                                                      11,600,000      337.125          .59
                                                                                       983.380         1.74

TECHNOLOGY HARDWARE & EQUIPMENT
Communications Equipment  -  2.81%
Cisco Systems, Inc.  (1)                                                9,000,000      344.250          .61
Corning Inc.                                                            6,931,000      366.043          .65
Lucent Technologies Inc.                                                1,150,000       15.525          .03
Motorola, Inc.                                                         10,400,000      210.600          .37
Nokia Corp., Class A (ADR)                                              9,820,000      427.170          .75
Telefonaktiebolaget LM Ericsson, Class B (ADR)                         20,500,000      229.344          .40

Computers & Peripherals  -  1.78%
Compaq Computer Corp.                                                   5,400,000       81.270          .14
Dell Computer Corp.  (1)                                                2,300,000       40.106          .07
Fujitsu Ltd.                                                            6,000,000       88.091          .16
Hewlett-Packard Co.                                                     7,333,200      231.454          .41
International Business Machines Corp.                                   6,000,000      510.000          .90
Palm, Inc.  (1)                                                         2,000,000       56.625          .10

Electronic Equipment & Instruments  -  0.31%
Agilent Technologies, Inc.  (1)                                         1,839,920      100.736          .18
Hitachi, Ltd.                                                           8,500,000       75.440          .13

Office Electronics  -  0.01%
Xerox Corp.                                                             1,625,900        7.520          .01

Semiconductor Equipment & Products  -  2.44%
Intel Corp.                                                             5,200,000      156.325          .28
Linear Technology Corp.                                                 1,518,500       70.231          .12
Micron Technology, Inc.  (1)                                            9,820,300      348.621          .62
Texas Instruments Inc.                                                 17,023,800      806.502         1.42
                                                                                     4,165.853         7.35

TELECOMMUNICATION SERVICES
Diversified Telecommunication Services  -  3.34%
AT&T Corp.                                                             30,530,000      528.551          .93
Deutsche Telekom AG                                                     3,600,000      108.511          .19
Qwest Communications International Inc. (merged                         3,900,000      159.900          .28
 with U S WEST, Inc.)  (1)
SBC Communications Inc.                                                 8,241,100      393.512          .70
Sprint FON Group                                                       12,135,000      246.492          .44
Telefonos de Mexico, SA de CV, Class L (ADR)                            1,800,000       81.225          .14
Verizon Communications (formed by the merger of                         4,740,800      237.633          .42
 GTE Corp. and Bell Atlantic Corp.)
WorldCom, Inc.  (1)                                                     9,505,000      133.664          .24

Wireless Telecommunication Services  -  0.70%
Vodafone Group PLC (formerly Vodafone Air                              11,115,000      398.056          .70
 Touch PLC) (ADR)
                                                                                     2,287.544         4.04

UTILITIES
Electric Utilities  -  1.11%
American Electric Power Co., Inc.                                       1,000,000       46.500          .08
Dominion Resources, Inc.                                                3,631,912      243.338          .43
Duke Energy Corp.                                                         650,000       55.412          .10
Pinnacle West Capital Corp.                                             3,229,800      153.819          .27
Southern Co.                                                            3,821,400      127.062          .23

Multi-Utilities  -  0.37%
Williams Companies, Inc.                                                5,250,000      209.672          .37
                                                                                       835.803         1.48

MISCELLANEOUS
Miscellaneous  -  2.39%
Equity securities in initial period of acquisition                                   1,354.391         2.39


Total Equity Securities                                                             45,811.396        80.87
   (cost: $27,228.496 million)




                                                                       Principal       Market      Percent
                                                                          Amount        Value       of Net
Short Term Securities                                                  (Million)    (Million)       Assets
U.S. Treasuries & Other Federal Agencies - 12.70%
Fannie Mae 5.995%-6.47% due 1/4-6/7/2001                                2,271.672    2,244.986         3.96
Federal Farm Credit Bank 6.20%-6.36%                                      351.000      345.891          .61
 due 3/2-4/18/2001
Federal Home Loan Banks 5.85%-6.45%                                     2,189.695    2,158.768         3.81
 due 1/3-5/30/2001
Freddie Mac 5.995%-6.44% due 1/4-5/30/2001                              1,422.748    1,405.945         2.48
Student Loan Marketing Assn. 6.164%-6.314%                                325.000      323.539          .57
 due 1/18-6/21/2001 (2)
United States Treasury Bills 5.835%-6.125%                                727.000      717.840         1.27
 due 2/1-5/31/2001

Corporate Short-Term Notes  -  5.94%
AIG Funding, Inc. 6.49%-6.50% due 1/16-1/22/2001                          100.000       99.666          .18
Alcoa Inc. 6.46%-6.50% due 1/9-2/8/2001                                   120.000      119.293          .21
American Express Credit Corp. 6.40%-6.47%                                 137.000      135.681          .24
 due 1/30-3/6/2001
American General Corp. 6.50% due 1/26-2/9/2001                             45.000       44.726
American General Finance Corp. 6.50%-6.53%                                 75.000       74.640          .21
 due 1/19-1/30/2001
Anheuser-Busch Companies, Inc. 6.48%-6.49%                                 70.000       69.453          .12
 due 2/12-2/13/2001
Archer Daniels Midland Co. 6.46%-6.50%                                     75.000       74.304          .13
 due 2/5-4/2/2001
Bank of America Corp. 6.40%-6.59%                                         109.000      108.506          .19
 due 1/11-2/21/2001
BellSouth Capital Funding Corp. 6.35%-6.50%                               150.000      148.714          .26
 due 1/9-3/13/2001 (3)
Chase Manhattan Corp. 6.48% due 2/6/2001                                   50.000       49.670          .09
Chevron Transport Corp. 6.50% due 2/20/2001 (3)                            20.000       19.819          .03
Coca-Cola Co. 6.46%-6.48% due 1/25-2/9/2001                               130.000      129.296          .23
Duke Energy Corp. 6.41%-6.48% due 1/12-2/14/2001                          100.000       99.590          .18
Eastman Kodak Co. 6.38%-6.50% due 1/12-2/20/2001                           79.000       78.593          .14
E.I. du Pont de Nemours and Co. 6.48%                                      50.000       49.657          .09
 due 2/6-2/9/2001
Emerson Electric Co. 6.35%-6.50%                                          120.000      119.050          .21
 due 1/17-3/6/2001 (3)
Ford Motor Credit Co. 6.32%-6.50%                                         145.000      143.798          .25
 due 1/31-3/5/2001
Gannett Co., Inc. 6.43%-6.49%                                             125.000      123.921          .22
 due 2/8-2/26/2001 (3)
General Dynamics Corp. 6.49%-6.53%                                         75.000       74.437          .13
 due 1/22-2/27/2001 (3)
General Electric Capital Corp. 6.33%-6.51%                                201.000      199.449          .35
 due 1/23-3/9/2001
General Motors Acceptance Corp. 6.37%-6.51%                               184.400      183.324          .32
 due 1/12-3/5/2001
Gillette Co. 6.33% due 3/12/2001 (3)                                       50.000       49.358          .09
Halliburton Co. 6.45% due 2/20-2/21/2001                                   50.000       49.544          .09
Household Finance Corp. 6.47%-6.53%                                       100.000       99.441          .18
 due 1/24-2/7/2001
IBM Credit Corp. 6.50%-6.54% due 1/2-1/29/2001                             75.000       74.728          .13
Kimberly-Clark Corp. 6.48%-6.51%                                           65.000       64.773          .11
 due 1/18-1/22/2001 (3)
Knight-Ridder, Inc. 6.42%-6.53% due 1/23-2/8/2001                          84.000       83.561          .15
Marsh USA Inc. 6.45% due 3/8/2001 (3)                                     111.000      109.653          .19
Merck & Co., Inc. 6.51%-6.52% due 1/18-1/31/2001                          100.000       99.556          .18
Minnesota Mining and Manufacturing Co. 6.27%                               80.000       78.885          .14
 due 3/19/2001
Motorola, Inc. 6.40%-6.50% due 2/21-2/26/2001                              80.000       79.223          .14
SBC Communications Inc. 6.44%-6.50%                                       110.000      109.336          .19
 due 1/9/2001 (3)
Tribune Co. 6.51%-6.54% due 1/19-2/12/2001 (3)                             60.000       59.665          .11
Verizon Global Funding Inc. 6.50%-6.51%                                   125.000      124.363          .22
 due 1/5-2/13/2001
Wal-Mart Stores, Inc. 6.51% due 1/30/2001 (3)                              50.000       49.728          .09
Wells Fargo & Co. 6.43%-6.49% due 1/31-2/23/2001                           84.500       83.891          .15

Certificates of Deposit  -  0.22%
Morgan Guaranty Trust Co. of New York 6.40%-6.60%                         125.000      125.010          .22
 due 2/5-3/20/2001
Total Short-Term Securities                                                         10,683.271        18.86
   (cost: $10,681.441 million)
Excess of cash and receivables over payables                                           156.202          .27
Total Short-Term Securities, Cash and                                               10,839.473        19.13
 Receivables, Net of Payables
NET ASSETS                                                                          56,650.869       100.00



(1) Non-income-producing security.
(2) Coupon rate may change periodically.
(3) Purchased in a private placement transaction;
    resale to the public may require registration
    or sale only to qualified institutional buyers.

ADR = American Depositary Receipts

See Notes to Financial Statements
</TABLE>

<TABLE>
<S>                                                                   <C>              <C>
The Investment Company of America
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
at December 31, 2000                                                       (dollars in  millions)
Assets:
Investment securities at market
 (cost: $27,228.496)                                                                         $  45,811.396
Short-term securities at market
 (cost: $10,681.441)                                                                            10,683.271
Receivables for--
 Sales of investments                                                      $   241.453
 Sales of fund's shares                                                         74.981
 Forward currency contracts - net                                                 0.000
 Dividends and interest                                                         60.389             376.823
                                                                                                56,871.490
Liabilities:
Payables for--
 Purchases of investments                                                      134.674
 Repurchases of fund's shares                                                   57.619
 Forward currency contracts - net                                                  -
 Dividends on fund's shares                                                        -
 Management services                                                            11.444
 Chase Manhattan Bank                                                              -
 Other expenses                                                                 16.884             220.621
Net Assets at December 31, 2000--
 (authorized capital stock--2,500,000,000 shares)                                            $  56,650.869

Class A shares, $.001 par value:
 Net assets                                                                                  $  56,211.993
 Shares outstanding                                                                          1,809,476,450
 Net asset value per share                                                                   $       31.07
Class B shares, $.001 par value:
 Net assets                                                                                  $     438.876
 Shares outstanding                                                                             14,150,530
 Net asset value per share                                                                   $       31.01

STATEMENT OF OPERATIONS
for the year ended December 31, 2000                                       (dollars in  millions)
Investment Income:
Income:
 Dividends                                                                 $   735.907
 Interest                                                                      554.904       $   1,290.811

Expenses:
 Management services fee                                                       135.760
 Distribution expenses - Class A                                               128.602
 Distribution expenses - Class B                                                 1.731
 Transfer agent fee - Class A                                                   36.727
 Transfer agent fee - Class B                                                     .130
 Reports to shareholders                                                          .887
 Registration statement and prospectus                                           2.398
 Postage, stationery and supplies                                                7.167
 Directors' fees                                                                  .614
 Auditing and legal fees                                                          .122
 Custodian fee                                                                   1.276
 Taxes other than federal income tax                                              .560
 Other expenses                                                                   .296             316.270
 Net investment income                                                                             974.541

Realized Gain and Change in Unrealized
 Appreciation on Investments:
Net realized gain                                                                                3,698.090
Net change in unrealized appreciation
 on investments                                                                                 (2,579.409)
 Open forward currency contracts                                                  0.000
 Net realized gain and change in
  unrealized appreciation
  on investments                                                                                 1,118.681
Net Increase in Net Assets Resulting
 from Operations                                                                             $   2,093.222



STATEMENT OF CHANGES IN NET ASSETS                                         (dollars in  millions)

                                                                            Year ended         December 31
                                                                                   2000               1999
Operations:
Net investment income                                                      $   974.541       $     799.307
Net realized gain on investments                                             3,698.090           5,292.279
Net change in unrealized appreciation
 on investments                                                             (2,579.409)          1,931.502
 Net increase in net assets
  resulting from operations                                                  2,093.222           8,023.088

Dividends and Distributions Paid to
 Shareholders:
Dividends from net investment income:
 Class A                                                                      (892.064)           (807.510)
 Class B                                                                        (2.107)                -
Distributions from net realized gains on investments:
 Class A                                                                    (3,563.960)         (4,829.809)
 Class B                                                                       (21.064)                -
  Total dividends and distributions                                         (4,479.195)         (5,637.319)

Capital Share Transactions:
Proceeds from shares sold                                                    6,216.625           5,697.501
Proceeds from shares issued in
 reinvestment of distributions                                               4,130.694           5,204.804
Cost of shares repurchased                                                  (7,405.706)         (5,690.428)
 Net increase in net assets resulting from
  capital share transactions                                                 2,941.613           5,211.877
Total Increase in Net Assets                                                   555.640           7,597.646

Net Assets:
Beginning of year                                                           56,095.229          48,497.583
End of year (including undistributed
 net investment income: $377.915 and
 $299.609, respectively)                                                   $56,650.869       $  56,095.229

See Notes to Financial Statements
</TABLE>

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Investment Company of America (the "fund") is registered
under the Investment Company Act of 1940 as an open-end diversified management
investment company. The fund seeks long-term growth of capital and income,
placing greater emphasis on future dividends than on current income.

The fund offers Class A and Class B shares. Class A shares are sold with an
initial sales charge of up to 5.75%. Class B shares are sold without an initial
sales charge but are subject to a contingent deferred sales charge paid upon
redemption. This charge declines from 5% to zero over a period of six years.
Class B shares have higher distribution expenses and transfer agent fees than
Class A shares. Class B shares are automatically converted to Class A shares
after eight years. Holders of both classes of shares have equal pro rata rights
to assets- , dividend, liquidation and other rights, except that each class
bears different distribution and transfer agent expenses, and each class shall
have identical voting except for  exclusive rights to vote on matters affecting
only their class.

SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with accounting principles generally accepted in the United
States of America which require management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary of
the significant accounting policies consistently followed by the fund in the
preparation of its financial statements:

SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. Short-term securities maturing within 60 days are valued at amortized
cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith by a committee appointed by the Board of
Directors. The ability of the issuers of the fixed-income securities held by
the fund to meet their obligations may be affected by economic developments in
a specific industry, state or region.

NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period.  Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are combined with the net realized and unrealized gain
or loss on investment securities for financial reporting purposes.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are
accounted for as of the trade date. Realized gains and losses from securities
transactions are determined based on specific identified cost. In the event
securities are purchased on a delayed delivery or "when-issued" basis, the fund
will instruct the custodian to segregate liquid assets sufficient to meet its
payment obligations in these transactions. Dividend income is recognized on the
ex-dividend date, and interest income is recognized on an accrual basis. Market
discounts, premiums, and original issue discounts on fixed-income securities
are amortized daily over the expected life of the security.

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.

ALLOCATIONS - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between Class A
and Class B shares based on their relative net asset values. Distribution
expenses, certain transfer agent fees and any other applicable class-specific
expenses are accrued daily and charged to the respective share class.


2. NON-U.S. INVESTMENTS

INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks 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 income is recorded net of non-U.S. taxes paid. For the year
ended December 31, 2000, non-U.S. taxes paid were $11,358,000.

CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends and other
receivables and payables were $1,747,000 for the year ended December 31, 2000.


3. FEDERAL INCOME TAXATION

The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year. As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made.  Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the year in which such amounts are distributed
may differ from the year in which the net investment income is earned and net
gains are realized by the fund.

As of December 31, 2000, the cost of investment securities for federal income
tax reporting purposes was $37,900,615,000. Net unrealized appreciation on
investments aggregated $18,594,052,000; $19,803,094,000 related to appreciated
securities and $1,209,042,000 related to depreciated securities. During the
year ended December 31, 2000, the fund realized, on a tax basis, a net capital
gain of $3,699,888,000 on the sale of securities. The tax basis net capital
gain exceeds the amount recorded for financial reporting purposes since
non-U.S. currency losses realized on the sale of securities are deducted from
ordinary income for tax purposes. In addition, a portion of such losses cannot
be recognized for tax purposes until the following year.


4. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $135,760,000 for management services was
incurred pursuant to an agreement with Capital Research and Management Company
(CRMC), with which certain officers and Directors of the fund are affiliated.
The Investment Advisory and Service Agreement provides for monthly fees accrued
daily, based on a series of rates beginning with 0.390% per annum of the first
$1 billion of month-end net assets decreasing to 0.222% of such assets in
excess of $71 billion. For the year ended December 31, 2000, the management
services fee was equivalent to an annualized rate of 0.243% of month-end net
assets.

DISTRIBUTION EXPENSES - American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $19,507,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
Class A shares during the year ended December 31, 2000. Such sales charges are
not an expense of the fund and, hence, are not reflected in the accompanying
Statement of Operations.

The fund has adopted plans of distribution under which it may finance
activities primarily intended to sell fund shares, provided the categories of
expense are approved in advance by the fund's Board of Directors. The plans
provide for aggregate annual expense limits of 0.25% of net assets for Class A
shares, and 1.00% of net assets for Class B shares.

For Class A shares, approved categories of expense include dealer service fees
of up to 0.25% of net assets. Also included are reimbursements to AFD for
commissions paid to dealers and wholesalers in respect of certain shares sold
without a sales charge. These reimbursements are permitted for amounts billed
to the fund within the prior 15 months but only to the extent that the fund's
overall 0.25% annual expense limit is not exceeded. For the year ended December
31, 2000, aggregate distribution expenses were $128,602,000, or 0.23% of net
assets attributable to Class A shares.

For Class B shares, approved categories of expense include fees of 0.75% per
annum payable to AFD. AFD sells the rights to receive such payments (as well as
any contingent deferred sales charges payable in respect of shares sold during
the period) in order to finance the payment of dealer commissions. Also
included are service fees of 0.25% per annum.  These fees are paid to AFD to
compensate AFD for paying service fees to qualified dealers.  For the year
ended December 31, 2000, aggregate distribution expenses were $1,731,000, or
1.00% of net assets attributable to Class B shares.

As of December 31, 2000, accrued and unpaid distribution expenses payable to
AFD for Class A and Class B shares were $11,769,000 and $346,000, respectively.

TRANSFER AGENT FEE - A fee of $36,857,000 was incurred during the year ended
December 31, 2000 pursuant to an agreement with American Funds Service Company
(AFS), the transfer agent for the fund.

DEFERRED DIRECTORS' FEES - Directors and Advisory Board members who are
unaffiliated with CRMC may elect to defer part or all of the fees earned for
services as members of the Board. Amounts deferred are not funded and are
general unsecured liabilities of the fund. As of December 31, 2000, aggregate
deferred amounts and earnings thereon since the deferred compensation plan's
adoption in 1993 net of any payments to Directors, were $1,574,000.

AFFILIATED DIRECTORS AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Officers of the fund and certain Directors are or may be considered to be
affiliated with CRMC, AFS and AFD. No such persons received any remuneration
directly from the fund.


5. WARRANTS

As of December 31, 2000, the fund had warrants outstanding which may be
exercised at any time for the purchase of 822,026 Class A shares at
approximately $5.24 per share. If such warrants had been exercised as of
December 31, 2000, the net asset value of Class A shares would have been
reduced by $0.02 per share. Warrants to purchase 219 shares were exercised
during the year.


6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES

The fund made purchases and sales of investment securities, excluding
short-term securities, of $11,967,230,000 and $16,308,033,000, respectively,
during the year ended December 31, 2000.

Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
During the year ended December 31, 2000, the custodian fee of $1,276,000
includes $146,000 that was paid by these credits rather than in cash.

During the year ended December 31, 2000, the fund reclassified $2,064,000 from
undistributed net investment income to undistributed net realized gains and
$342,378,000 from undistributed net realized gains to additional paid-in
capital  to reflect permanent differences between book and tax reporting.

As of December 31, 2000, net assets consisted of the following:
<TABLE>
<S>                                                     <C>
                                                             dollars in millions
Capital paid in on shares of capital stock                            37,229.663
Undistributed net investment income                                      377.915
Accumulated net realized gain                                            458.500
Net unrealized appreciation                                           18,584.791
Net assets                                                            56,650.869
</TABLE>


Capital share transactions in the fund were as follows:
<TABLE>
<S>                                                         <C>                        <C>

                                                                   Year ended December  31, 2000
                                                                  Amount (in millions)            Shares
Class A Shares:
  Sold                                                                       5,769.801       178,847,762
  Reinvestment of dividends and distributions                                4,108.241       132,121,263
  Repurchased                                                               (7,394.906)     (229,525,161)
   Net increase in Class A                                                   2,483.136        81,443,864
Class B Shares:*
  Sold                                                                         446.824        13,755,990
  Reinvestment of dividends and distributions                                   22.453           730,425
  Repurchased                                                                  (10.800)         (335,885)
   Net increase in Class B                                                     458.477        14,150,530
Total Net Increase in Fund                                                   2,941.613        95,594,394


                                                                   Year ended December  31, 1999
                                                                  Amount (in millions)            Shares
Class A Shares:
  Sold                                                                       5,697.501       174,371,241
  Reinvestment of dividends and distributions                                5,204.804       166,620,357
  Repurchased                                                               (5,690.428)     (174,052,877)
   Net increase in Class A                                                   5,211.877       166,938,721
Class B Shares:*
  Sold                                                                               -                 -
  Reinvestment of dividends and distributions                                        -                 -
  Repurchased                                                                        -                 -
   Net increase in Class B                                                           -                 -
Total Net Increase in Fund                                                   5,211.877       166,938,721

* Class B shares were not offered before
 March 15, 2000.

</TABLE>


<TABLE>
<S>                                   <C>              <C>          <C>
PER-SHARE DATA AND RATIOS (1)
                                                                                   Net
                                            Net asset                     gains(losses)
                                                value,         Net        on securities
                                             beginning   investment      (both realized
Year ended                                     of year       income     and unrealized)
Class A:
2000                                             $32.46    $.56 (2)            $.65 (2)
1999                                              31.07          .49                4.45
1998                                              28.25          .48                5.79
1997                                              24.23          .51                6.61
1996                                              21.61          .49                3.66

Class B:
2000                                              31.13     .26 (2)            1.55 (2)


                                                          Dividends
                                           Total from    (from net        Distributions
                                            investment   investment       (from capital
Year ended                                  operations      income)              gains)
Class A:
2000                                              $1.21       $(.52)             $(2.08)
1999                                              4.94         (.51)              (3.04)
1998                                              6.27         (.51)              (2.94)
1997                                              7.12         (.50)              (2.60)
1996                                              4.15         (.50)              (1.03)

Class B:
2000                                              1.81         (.25)              (1.68)


                                                         Net asset
                                                 Total   value, end              Total
Year ended                               distributions      of year              return
Class A:
2000                                            $(2.60)       $31.07               3.84%
1999                                             (3.55)        32.46               16.56
1998                                             (3.45)        31.07               22.94
1997                                             (3.10)        28.25               29.81
1996                                             (1.53)        24.23               19.35

Class B:
2000                                             (1.93)        31.01                5.87



                                                          Ratio of            Ratio of
                                           Net assets,     expenses          net income
                                           end of year   to average          to average
Year ended                               (in millions)   net assets          net assets
Class A:
2000                                           $56,212          .56%               1.74%
1999                                             56,095          .55                1.54
1998                                             48,498          .55                1.65
1997                                             39,718          .56                1.90
1996                                             30,875          .59                2.17

Class B:
2000                                                439    1.34 (3)            1.06 (3)


                                             Portfolio
                                              turnover
Year ended                                        rate
Class A:
2000                                        25.36% (4)
1999                                              27.85
1998                                              24.28
1997                                              26.02
1996                                              19.56

Class B:
2000                                         25.36 (4)

</TABLE>

(1) The periods 1996 through 2000 represent, for Class A shares, fiscal years
    ended December 31. The period ended 2000 represents, for Class B shares,
    the 291-day period ended December 31, 2000. Class B shares were not offered
    before March 15, 2000. Total return for Class B is based on activity during
    the period and thus is not representative of a full year. Total returns
    exclude all sales charges, including contingent deferred sales charges.
(2) Based on average shares outstanding.
(3) Annualized.
(4) Represents portfolio turnover rate (equivalent for all share classes) for
    the year ended December 31, 2000.


INSERT AUDITORS REPORT




2000 Tax Information (unaudited)

We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year.

During the fiscal year ended December 31, 2000, the fund paid a long-term
capital gain distribution of $3,585,024,000. The fund also designated as a
capital gain distribution a portion of earnings and profits paid to
shareholders in redemption of their shares.

Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 67% of the dividends
paid by the fund from net investment income represent qualifying dividends.

Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 1% of the dividends paid
by the fund from net investment income were derived from interest on direct
U.S. Treasury obligations.

Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.

SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION WHICH
WAS MAILED IN JANUARY 2001 TO DETERMINE THE AMOUNTS TO BE INCLUDED ON THEIR
2000 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.