The ICA Guide

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Here’s what you would have As you can see, based on a hypothetical $1,000 investment over the 78-year period ended December 31, 2011, only one of the Dow companies would have outpaced an investment in ICA, even though some of them may have done better than ICA in some periods during their lifetimes.* Of course, in selecting these five stocks, you were precluded from changing your investments over the years. This example helps illustrate the importance of having a broadly diversified, actively managed portfolio. Procter & Gamble Market value (excluding dividends) $662,260 ICA 624,992 ExxonMobil 422,015 General Electric 264,517 Coca-Cola 205,222 McDonald's 181,634 Merck 91,611 Hewlett-Packard 89,907 Intel 70,654 Home Depot 70,260 United Technologies 65,175 DuPont 46,828 Bank of America 37,539 AT&T 36,840 Pfizer 34,713 Microsoft 30,450 Chevron 29,059 Walmart 26,127 3M 25,847 Alcoa 25,544 Disney 23,559 Boeing 21,858 American Express 14,881 IBM 14,015 Travelers Companies 11,267 Caterpillar 7,843 JPMorgan Chase 7,390 Johnson & Johnson 6,248 Verizon Communications 2,991 Cisco Systems 910 Kraft Foods 742 8 The ICA Guide Remember — you invested $1,000 in each of five stocks. Had you invested an equivalent $5,000 in ICA, it would have handily outpaced any five stocks you chose over the same period. The process of replacing stocks in the Dow would have often meant selling low (when a stock was being removed from the Dow) and buying high (when its replacement was being added to the Dow). ICA investors have benefited from the professional manage ment of a diversified portfolio. * It was assumed that the entire $1,000 was invested in each stock and that fractional shares were purchased where required to use up the full amount. No brokerage charges were included in the cost. Adjustments were made for all stock splits, stock dividends and spinoffs. In 2009, General Motors filed for protection under Chapter 11 of the U.S. Bankruptcy Code. It was delisted from the New York Stock Exchange and was replaced by Cisco Systems in the Dow Jones Industrial Average. Since no proceeds were realized from General Motors due to the bankruptcy proceedings, shares of Cisco were purchased with a new $1,000 in order to continue this illustration of investments in the 30 stocks comprising the Dow. Past results are not predictive of results in future periods.
How ICA is managed A fund’s long-term success depends largely on how it’s managed. For more than 50 years, American Funds has relied on the unique Multiple Portfolio Counselor System ® to provide broad diversification, continuity of management and a history of consistent long-term results. Inside the Multiple Portfolio Counselor System Each of the 33 American Funds, including ICA, is managed by more than one portfolio counselor. • The fund’s assets are divided into smaller portions, each of which is separately managed by an individual portfolio counselor making independent decisions monitored for consistency with the fund’s objectives and overall guidelines. • Portfolio counselors are able to buy stocks and bonds according to their strongest convictions and can focus on a manageable number of companies. • Blending the separate holdings creates a broadly diversified portfolio. Research is key Investment decisions are based on solid research. • One segment of the fund’s assets — typically 20% to 30% — is managed by a group of investment analysts. • Each analyst specializes in certain industries and invests only in those sectors that he or she follows. The Multiple Portfolio Counselor System: The Investment Company of America Chris Buchbinder | San Francisco Years of investment experience: 16 Joyce Gordon | Los Angeles Years of investment experience: 32 James Lovelace | Los Angeles Years of investment experience: 30 Donald O’Neal | San Francisco Years of investment experience: 27 * As of December 31, 2011. Holdings will change. The holdings of The Investment Company of America, which include approximately 130 stocks, * represent the individual investment ideas of seven portfolio counselors and 23 investment analysts. Investment analysts Portfolio counselors A sustainable approach Effective long-term managers must be able to adapt to changes: • Changes in assets — The Multiple Portfolio Counselor System allows for portfolio counselor lineups to be modified as assets fluctuate. This helps promote a balance of investment styles and diversity of new ideas. • Changes in management — If a portfolio counselor leaves the fund, only a relatively small portion of the portfolio changes hands. When we know a portfolio counselor is leaving, we gradually move his or her assets to another portfolio counselor. These smooth transitions have helped the funds maintain a consistent investment approach. Eric Richter | Washington, D.C. Years of investment experience: 20 Will Robbins | San Francisco Years of investment experience: 20 C. Ross Sappenfield | San Francisco Years of investment experience: 20 Sizes of portfolio segments shown do not reflect actual relative allocations. Portfolio counselor information is as of the fund’s prospectus dated March 1, 2012. The ICA Guide 9
Page 1 and 2: The ICA Guide 2012 edition Investor
Page 3 and 4: ICA: A 78-year history of success O
Page 5 and 6: The Klausens invested their $200,00
Page 7: Investing in stocks requires skill
Page 11 and 12: $100,000,000 70,000,000 50,000,000
Page 13 and 14: Oil embargo 0.6 7.9 .4 .1 Nixon res
Page 15 and 16: Time, not timing, is what matters D
Page 17 and 18: The benefit of time Long-term inves
Page 19 and 20: Growth over a wide variety of perio
Page 21 and 22: Customizing withdrawals Over time,
Page 23 and 24: A rare opportunity If The Investmen

The ICA Guide

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