N-CSRS 1 ica_ncsr.htm N-CSR Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies

Investment Company Act File Number: 811-00116



The Investment Company of America
(Exact name of registrant as specified in charter)

333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)




Registrant's telephone number, including area code: (213) 486-9200

Date of fiscal year end: December 31

Date of reporting period: June 30, 2007





Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(Name and address of agent for service)


Copies to:
Eric A.S. Richards
O’Melveny & Myers LLP
400 South Hope Street, 10th Floor
Los Angeles, California 90071
(Counsel for the registrant)



ITEM 1 – Reports to Stockholders

[logo - American Funds®]

The right choice for the long term®
 

ICA  The Investment Company of America
 
[photo - acorns on a tree branch]
Semi-annual report for the six months ended June 30, 2007
 

ICASM seeks long-term growth of capital and income, placing greater emphasis on future dividends than on current income.

The Investment Company of America® is one of the 30 American Funds. American Funds ranks among the nation’s three largest mutual fund families. For 75 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2007:
 
 
1 year
5 years
10 years
Class A shares
      
Reflecting 5.75% maximum sales charge
+11.68%
+10.03%
+8.85%

The total annual fund operating expense ratio for Class A shares as of the most recent fiscal year-end was 0.57%. This figure does not reflect a fee waiver currently in effect; therefore, the actual expense ratio is lower.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect actual expenses, with the waiver applied. Fund results would have been lower without the waiver. Please see the Financial Highlights table on pages 20 to 23 for details.

The fund’s 30-day yield for Class A shares as of July 31, 2007, reflecting the 5.75% maximum sales charge and calculated in accordance with the Securities and Exchange Commission formula, was 1.97% (1.95% without the fee waiver).

Results for other share classes can be found on page 3.

Investments outside the United States involve special risks such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. Global diversification can help reduce these risks.
 
 
 
Fellow shareholders:
 
[photo - acorns on a tree branch]

 
The Investment Company of America recorded a healthy total return of 8.0% for the six months ended June 30, 2007. That was ahead of the unmanaged Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market, which produced a 7.0% total return in the same period. ICA’s total return includes reinvestment of quarterly dividends, totaling 32 cents a share, paid in March and June; shareholders received a 0.96% income return in addition to capital appreciation.

Since its inception in 1934, ICA has generated an average annual total return of 12.9% with dividends reinvested, comparing favorably with the S&P 500’s 11.4% gain over the same time period, also with dividends reinvested.
 
Strong global markets

Equity markets around the globe made impressive gains in the six months, recovering quickly after each of a few brief downturns throughout the period. Fueling this was strong growth — occurring largely in developing countries such as China and India — supported by demand for materials and an optimism about the fundamental outlook. There was also an abundance of liquidity, and a boom in both merger-and-acquisition activity and the private equity business, which helped boost markets. About 10.5% of the fund’s net assets were invested in companies headquartered outside the United States at the end of the period, roughly the same as six months earlier. The fund’s investments in non-U.S. markets have been helpful to recent results. In the past six months, these investments included Japanese trading giant Mitsubishi Corp. (up 38.8%) and German electronics maker Siemens (up 45.1%).

[Begin Sidebar]
Class A share results at a glance

For the six months ended June 30, 2007 (with dividends reinvested)

         
 
    
 
  
         
 
    
 
  
   
ICA
 
 
Standard & Poor's 500 Composite Index
    
Lipper Growth & Income Funds Index
  
                   
Income return
     +0.96 %     +0.94 %    
n/a
  
Capital return
     +7.08 %     +6.02 %    
n/a
  
                         
Total return
     +8.04 %     +6.96 %     +7.86 %

[End Sidebar]

Many of the U.S.-based industrial companies in the fund benefited from connections to rapidly expanding markets. For example, machinery makers Caterpillar and Deere saw significant gains in the six months, up 27.7% and 27.0%, respectively. Other noteworthy gains came from a variety of sectors. The fund’s largest holding, telecommunications company AT&T, rose 16.1%, and software maker Oracle rose 15.0%. Our second-largest holding, Altria Group, which spun off its subsidiary Kraft Foods in the period, rose 15.0%.

A few of our top holdings did not do as well. Global banker Citigroup, our sixth-largest holding, dropped 7.9%; this was an example of weakness across the financial sector brought on by worries about fallout from subprime mortgage issues. Also, the pharmaceutical industry as a whole was hurt by failures of individual products and questions about possible heavier regulation. Some of our holdings included Amgen (–19.1%), Novartis (–2.4%) and Roche Holding (–1.1%).

A look ahead

Growth in U.S. gross domestic product eased during the first quarter of the year to its slowest pace since 2002, although the economy resumed its pace in the second quarter. Given the negative developments in subprime mortgages, it will be important to continue to monitor the housing market for any potential impact on the broader economy. Inflation appears to be in check, which is good news for interest rates and price-to-earnings multiples.

In this environment, as in all environments, we believe stock selection is paramount. This has been our philosophy for 73 years, since the fund began. We pick each holding based not on broad market conditions or prevailing sentiment but on our view of a company’s long-term fundamentals and the value of its stock. As we continue to focus on our growth and income goals, we are confident in our ability to find solid companies that will stand the test of time.

We appreciate your long-term commitment to investing in ICA and thank you for your support.

Sincerely,

/s/ R. Michael Shanahan
  /s/ James F. Rothenberg
R. Michael Shanahan
James F. Rothenberg
Vice Chairman
President

August 7, 2007

For current information about the fund, visit americanfunds.com.
 

Other share class results

Class B, Class C, Class F and Class 529

Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns
                  
for periods ended June 30, 2007:
  
1 year
    
5 years
    
Life of class
  
                   
Class B shares— first sold 3/15/00
                  
Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold within six years of purchase
     +12.55 %     +10.20 %     +5.95 %
Not reflecting CDSC
     +17.55 %     +10.47 %     +5.95 %
                         
Class C shares — first sold 3/15/01
                        
Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase
     +16.49 %     +10.40 %     +6.79 %
Not reflecting CDSC
     +17.49 %     +10.40 %     +6.79 %
                         
Class F shares*— first sold 3/15/01
                        
Not reflecting annual asset-based fee charged by sponsoring firm
     +18.43 %     +11.26 %     +7.63 %
Class 529-A shares†— first sold 2/15/02
                        
Reflecting 5.75% maximum sales charge
     +11.55 %     +9.93 %     +8.15 %
Not reflecting maximum sales charge
     +18.34 %     +11.24 %     +9.35 %
                         
Class 529-B shares†— first sold 2/15/02
                        
Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase
     +12.41 %     +10.01 %     +8.29 %
Not reflecting CDSC
     +17.41 %     +10.28 %     +8.42 %
                         
Class 529-C shares†— first sold 2/19/02
                        
Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase
     +16.41 %     +10.30 %     +8.75 %
Not reflecting CDSC
     +17.41 %     +10.30 %     +8.75 %
                         
Class 529-E shares*†— first sold 3/1/02
     +18.03 %     +10.86 %     +8.61 %
                         
Class 529-F shares*†— first sold 9/16/02
                        
Not reflecting annual asset-based fee charged by sponsoring firm
     +18.59 %    
—
       +13.71 %
                         
                         
 
*These shares are sold without any initial or contingent deferred sales charge.
 
†Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 20 to 23 for details that include expense ratios for all share classes.

For information regarding the differences among the various share classes, please refer to the fund’s prospectus.
 
 
Summary investment portfolio
  June 30, 2007             
 
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.   
  
                   
               
unaudited
  
 [pie chart]                  
 Industry sector diversification (percent of net assets)                  
 Financials     11.54 %            
 Health care     10.28 %            
 Industrials     9.90 %            
 Energy     9.78 %            
 Convertible securities     .52 %            
 Bonds & notes     .02 %            
 Information technology     15.25 %            
 Other industries     28.14 %            
 Short-term securities & other assets less liabilities     14.57 %            
  [end pie chart]                    
                     
           
Market
    
Percent
  
           
value
    
of net
  
Common stocks  - 84.89%
  
Shares
       (000 )  
assets
  
                       
Energy - 9.78%
                      
Baker Hughes Inc.
    
7,625,000
     $
641,491
       .69 %
Chevron Corp.
    
19,702,278
      
1,659,720
      
1.77
  
ConocoPhillips
    
9,443,340
      
741,302
      
.79
  
Exxon Mobil Corp.
    
6,481,500
      
543,668
      
.58
  
Marathon Oil Corp.
    
10,600,000
      
635,576
      
.68
  
Royal Dutch Shell PLC, Class A (ADR)
    
17,970,000
      
1,459,164
          
Royal Dutch Shell PLC, Class B (1)
    
833,265
      
34,767
          
Royal Dutch Shell PLC, Class B (ADR)
    
2,370,498
      
197,581
      
1.81
  
Schlumberger Ltd.
    
21,950,000
      
1,864,433
      
1.99
  
Other securities
            
1,378,475
      
1.47
  
             
9,156,177
      
9.78
  
                         
Materials - 2.58%
                        
Barrick Gold Corp.
    
18,856,250
      
548,151
          
Barrick Gold Corp. (CAD denominated)
    
1,114,350
      
32,535
      
.62
  
Other securities
            
1,834,585
      
1.96
  
             
2,415,271
      
2.58
  
                         
Industrials - 9.90%
                        
Boeing Co.
    
7,300,000
      
701,968
      
.75
  
Caterpillar Inc.
    
7,050,000
      
552,015
      
.59
  
General Electric Co.
    
51,950,000
      
1,988,646
      
2.12
  
Tyco International Ltd.
    
46,160,100
      
1,559,750
      
1.66
  
United Technologies Corp.
    
10,240,000
      
726,323
      
.78
  
Other securities
            
3,747,579
      
4.00
  
             
9,276,281
      
9.90
  
                         
Consumer discretionary - 8.50%
                        
Best Buy Co., Inc.
    
14,059,300
      
656,148
      
.70
  
Carnival Corp., units
    
13,350,000
      
651,079
      
.70
  
Lowe's Companies, Inc.
    
54,123,900
      
1,661,062
      
1.77
  
Target Corp.
    
22,475,000
      
1,429,410
      
1.53
  
Time Warner Inc.
    
27,785,100
      
584,599
      
.62
  
Other securities
            
2,981,027
      
3.18
  
             
7,963,325
      
8.50
  
                         
Consumer staples - 7.69%
                        
Altria Group, Inc.
    
42,150,000
      
2,956,401
      
3.16
  
PepsiCo, Inc.
    
14,550,000
      
943,567
      
1.01
  
Walgreen Co.
    
12,595,000
      
548,386
      
.59
  
Other securities
            
2,758,175
      
2.93
  
             
7,206,529
      
7.69
  
                         
Health care - 10.28%
                        
Abbott Laboratories
    
18,161,900
      
972,570
      
1.04
  
Aetna Inc.
    
11,680,000
      
576,992
      
.62
  
Amgen Inc. (2)
    
12,690,000
      
701,630
      
.75
  
Bristol-Myers Squibb Co.
    
28,250,000
      
891,570
      
.95
  
Eli Lilly and Co.
    
14,985,000
      
837,362
      
.89
  
Medtronic, Inc.
    
10,400,000
      
539,344
      
.58
  
Merck & Co., Inc.
    
15,650,000
      
779,370
      
.83
  
Roche Holding AG (1)
    
5,955,000
      
1,056,378
      
1.13
  
Other securities
            
3,271,603
      
3.49
  
             
9,626,819
      
10.28
  
                         
Financials - 11.54%
                        
American International Group, Inc.
    
11,088,900
      
776,556
      
.83
  
Bank of America Corp.
    
16,175,000
      
790,796
      
.85
  
Citigroup Inc.
    
35,610,000
      
1,826,437
      
1.95
  
Fannie Mae
    
25,865,600
      
1,689,800
      
1.81
  
Freddie Mac
    
9,592,500
      
582,265
      
.62
  
JPMorgan Chase & Co.
    
14,750,001
      
714,637
      
.76
  
Wachovia Corp.
    
10,250,000
      
525,312
      
.56
  
Washington Mutual, Inc.
    
25,400,000
      
1,083,056
      
1.16
  
Other securities
            
2,814,704
      
3.00
  
             
10,803,563
      
11.54
  
                         
Information technology - 15.25%
                        
Cisco Systems, Inc. (2)
    
31,120,400
      
866,703
      
.93
  
Hewlett-Packard Co.
    
25,350,000
      
1,131,117
      
1.21
  
Intel Corp.
    
43,590,000
      
1,035,698
      
1.11
  
International Business Machines Corp.
    
11,775,000
      
1,239,319
      
1.32
  
Microsoft Corp.
    
62,222,100
      
1,833,685
      
1.96
  
Nokia Corp. (1)
    
35,327,550
      
993,180
          
Nokia Corp. (ADR)
    
12,839,750
      
360,925
      
1.45
  
Oracle Corp. (2)
    
92,195,100
      
1,817,165
      
1.94
  
Texas Instruments Inc.
    
29,900,000
      
1,125,137
      
1.20
  
Other securities
            
3,882,171
      
4.13
  
             
14,285,100
      
15.25
  
                         
Telecommunication services - 5.79%
                        
AT&T Inc.
    
88,874,461
      
3,688,290
      
3.94
  
Sprint Nextel Corp., Series 1
    
53,485,000
      
1,107,675
      
1.18
  
Other securities
            
626,127
      
.67
  
             
5,422,092
      
5.79
  
                         
Utilities - 2.28%
                        
Dominion Resources, Inc.
    
7,131,912
      
615,555
      
.66
  
Other securities
            
1,523,191
      
1.62
  
             
2,138,746
      
2.28
  
                         
Miscellaneous - 1.30%
                        
Other common stocks in initial period of acquisition
            
1,218,729
      
1.30
  
                         
Total common stocks (cost: $49,689,743,000)
            
79,512,632
      
84.89
  
                         
                         
Convertible securities - 0.52%
  
 
            
 
  
                         
Financials - 0.09%
                        
Fannie Mae, Series 2004-1, 5.375% convertible preferred
    
820
     $
81,385
       .09 %
                         
Other - 0.43%
                        
Other securities
            
405,222
      
.43
  
                         
Total convertible securities (cost: $376,011,000)
            
486,607
      
.52
  
                         
                         
                         
   
Principal
    
Market
    
Percent
  
   
amount
    
value
    
of net
  
Bonds & notes - 0.02%
     (000 )     (000 )  
assets
  
                         
Telecommunication services - 0.02%
                        
Sprint Capital Corp. 8.75% 2032
   $
13,500
     $
15,203
       .02 %
                         
                         
Total bonds & notes (cost: $14,992,000)
            
15,203
      
0.02
  
                         
                         
                         
   
Principal
    
Market
    
Percent
  
   
amount
    
value
    
of net
  
Short-term securities - 15.04%
     (000 )     (000 )  
assets
  
                         
Abbott Laboratories 5.22%-5.23% due 7/2-7/16/2007 (3)
   $
273,000
     $
272,608
       .29 %
AIG Funding, Inc. 5.18% due 7/16/2007
    
45,000
      
44,897
          
American General Finance Corp. 5.19%-5.20% due 7/26-10/3/2007
    
100,000
      
99,141
          
International Lease Finance Corp. 5.20%-5.22% due 7/27-9/26/2007
    
221,000
      
219,159
      
.39
  
AT&T Inc. 5.23%-5.27% due 7/24-8/23/2007 (3)
    
301,281
      
299,779
      
.32
  
Bank of America Corp. 5.175%-5.24% due 7/9-10/5/2007
    
524,500
      
520,240
      
.56
  
CAFCO, LLC 5.225%-5.245% due 7/12-9/18/2007 (3)
    
214,000
      
212,830
          
Ciesco LLC 5.22%-5.23% due 7/6-7/23/2007 (3)
    
150,000
      
149,720
          
Citigroup Funding Inc. 5.24% due 7/10-7/13/2007
    
150,000
      
149,762
      
.55
  
Chevron Funding Corp. 5.19%-5.21% due 7/26-9/12/2007
    
125,000
      
124,179
      
.13
  
Concentrate Manufacturing Co. of Ireland 5.24% due 7/11/2007 (3)
    
35,000
      
34,944
      
.04
  
Edison Asset Securitization LLC 5.22% due 8/7/2007 (3)
    
50,126
      
49,850
          
General Electric Capital Corp. 5.22% due 8/9/2007
    
100,000
      
99,445
          
General Electric Capital Services, Inc. 5.22% due 8/14/2007
    
100,000
      
99,355
          
General Electric Co. 5.23%-5.25% due 8/10-9/26/2007
    
200,000
      
198,095
      
.48
  
Fannie Mae 5.08%-5.15% due 7/6-12/5/2007
    
1,091,906
      
1,078,196
      
1.15
  
Federal Home Loan Bank 5.03%-5.16% due 7/5-11/2/2007
    
1,934,578
      
1,921,748
      
2.05
  
Freddie Mac 5.07%-5.155% due 7/9-11/26/2007
    
2,153,688
      
2,130,272
      
2.27
  
Hewlett-Packard Co. 5.25%-5.28% due 7/11-7/31/2007 (3)
    
99,200
      
98,999
      
.11
  
IBM Capital Inc. 5.19% due 9/10/2007 (3)
    
70,000
      
69,283
          
IBM Corp. 5.195%-5.23% due 8/2-9/25/2007 (3)
    
283,700
      
281,263
      
.37
  
JPMorgan Chase & Co. 5.20%-5.23% due 7/9-9/24/2007
    
255,000
      
253,305
          
Jupiter Securitization Co., LLC 5.23%-5.30% due 7/10-8/30/2007 (3)
    
162,700
      
162,186
          
Park Avenue Receivables Co., LLC 5.24%-5.25% due 8/31-9/4/2007 (3)
    
101,000
      
100,073
      
.55
  
Variable Funding Capital Corp. 5.22%-5.245% due 7/11-8/3/2007 (3)
    
420,800
      
419,590
      
.45
  
Other securities
            
4,997,340
      
5.33
  
                         
Total short-term securities (cost: $14,083,959,000)
            
14,086,259
      
15.04
  
                         
Total investment securities (cost: $64,164,705,000)
            
94,100,701
      
100.47
  
Other assets less liabilities
             (437,401 )     (.47 )
                         
Net assets
           $
93,663,300
       100.00 %
                         
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
  
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.
          
                         
 
 
Investments in affiliates
            
             
A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. Further details on such holdings and related transactions during the six months ended June 30, 2007, appear below.
             
           
Market value
         
Dividend
of affiliate
         
income
at 6/30/2007
Company
Beginning shares
Purchases
Sales
Ending shares
(000)
(000)
Limited Brands, Inc. (4)
             20,042,743
               -
1,000,000
                  19,042,743
$5,863
-
 
The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.
 
(1) Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in “Miscellaneous” and “Other securities,” was $6,618,656,000.
(2) Security did not produce income during the last 12 months.
(3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $5,333,125,000, which represented 5.69% of the net assets of the fund.
(4) Unaffiliated issuer at 6/30/2007
 
ADR = American Depositary Receipts
 
 
Financial statements
                        
                         
Statement of assets and liabilities at June 30, 2007
              
unaudited
        
 
   (dollars and shares in thousands, except per-share amounts)  
                         
Assets:
                        
 Investment securities at market (cost: $64,164,705)
               $
94,100,701
        
 Cash denominated in non-U.S. currencies (cost: $5)
                
5
        
 Cash
                
133
        
 Receivables for:
                          
  Sales of investments
         $
71,428
                
  Sales of fund's shares
          
65,295
                
  Dividends and interest
          
114,913
      
251,636
        
                   
94,352,475
        
Liabilities:
                            
 Payables for:
                            
  Purchases of investments
          
130,971
                
  Repurchases of fund's shares
          
504,988
                
  Investment advisory services
          
16,489
                
  Services provided by affiliates
          
30,781
                
  Deferred directors' and advisory board compensation
          
5,288
                
  Other
          
658
      
689,175
        
Net assets at June 30, 2007
                 $
93,663,300
        
                             
Net assets consist of:
                            
 Capital paid in on shares of capital stock
                 $
60,749,703
        
 Undistributed net investment income
                  
391,355
        
 Undistributed net realized gain
                  
2,586,058
        
 Net unrealized appreciation
                  
29,936,184
        
Net assets at June 30, 2007
                 $
93,663,300
        
                             
   
Authorized shares of capital stock - $.001 par value
    
Net assets
    
Shares outstanding
    
Net asset value per share*
  
                             
Class A
    
2,500,000
     $
77,606,032
      
2,163,342
     $
35.87
  
Class B
    
250,000
      
4,407,577
      
123,384
      
35.72
  
Class C
    
250,000
      
3,571,939
      
100,191
      
35.65
  
Class F
    
250,000
      
1,671,993
      
46,663
      
35.83
  
Class 529-A
    
325,000
      
1,288,138
      
35,947
      
35.83
  
Class 529-B
    
75,000
      
264,096
      
7,387
      
35.75
  
Class 529-C
    
150,000
      
371,034
      
10,376
      
35.76
  
Class 529-E
    
75,000
      
54,564
      
1,525
      
35.77
  
Class 529-F
    
75,000
      
17,058
      
476
      
35.82
  
Class R-1
    
75,000
      
58,489
      
1,637
      
35.73
  
Class R-2
    
100,000
      
704,045
      
19,696
      
35.75
  
Class R-3
    
300,000
      
1,033,702
      
28,873
      
35.80
  
Class R-4
    
75,000
      
389,497
      
10,871
      
35.83
  
Class R-5
    
150,000
      
2,225,136
      
62,034
      
35.87
  
Total
    
4,650,000
     $
93,663,300
      
2,612,402
          
 
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $38.06 and $38.02, respectively.
  
                                 
See Notes to Financial Statements
                                
                                 
Statement of operations for the six months ended June 30, 2007
                  
unaudited
          
 
          
(dollars in thousands)
          
                                 
Investment income:
                                
 Income:
                                
Dividends (net of non-U.S. taxes of $19,980; also includes
     $
866,911
                  
            $5,863 from affiliate)
                                
  Interest (net of non-U.S. taxes of $2)
            
362,685
     $
1,229,596
          
                                 
 Fees and expenses(*):
                                
  Investment advisory services
            
107,530
                  
  Distribution services
            
138,170
                  
  Transfer agent services
            
31,458
                  
  Administrative services
            
8,868
                  
  Reports to shareholders
            
1,302
                  
  Registration statement and prospectus
            
1,233
                  
  Postage, stationery and supplies
            
3,251
                  
  Directors' and advisory board compensation
            
958
                  
  Auditing and legal
            
70
                  
  Custodian
            
900
                  
  State and local taxes
            
684
                  
  Other
            
180
                  
  Total fees and expenses before reimbursements/waivers
            
294,604
                  
 Less reimbursements/waivers of fees and expenses:
                                
  Investment advisory services
            
10,753
                  
  Administrative services
            
96
                  
  Total fees and expenses after reimbursements/waivers
                    
283,755
          
 Net investment income
                    
945,841
          
                                 
Net realized gain and unrealized
                                
 appreciation on investments and non-U.S. currency:
                                
 Net realized gain on:
                                
  Investments (including $7,008 net gain from affiliate)
            
2,605,648
                  
  Non-U.S. currency transactions
            
70
      
2,605,718
          
 Net unrealized appreciation (depreciation) on:
                                
  Investments
            
3,498,914
                  
  Non-U.S. currency translations
             (24 )    
3,498,890
          
   Net realized gain and
                                
    unrealized appreciation
                                
    on investments and non-U.S. currency
                    
6,104,608
          
Net increase in net assets resulting
                                
 from operations
                   $
7,050,449
          
                                 
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.
  
                                 
See Notes to Financial Statements
                                
                                 
                                 
Statements of changes in net assets
          
(dollars in thousands)
          
                                 
           
Six months
    
Year ended
          
           
ended June 30, 2007*
    
December 31, 2006
          
Operations:
                                
 Net investment income
           $
945,841
     $
1,738,294
          
 Net realized gain on investments and
                                
  non-U.S. currency transactions
            
2,605,718
      
5,516,589
          
 Net unrealized appreciation
                                
  on investments and non-U.S. currency translations
            
3,498,890
      
5,134,920
          
  Net increase in net assets
                                
   resulting from operations
            
7,050,449
      
12,389,803
          
                                 
Dividends and distributions paid to
                                
 shareholders:
                                
Dividends from net investment income and non-U.S. currency
       (806,845 )     (1,784,654 )        
 Distributions from net realized gain
                                
  on investments
            
-
       (5,146,726 )        
  Total dividends and distributions paid
                                
   to shareholders
             (806,845 )     (6,931,380 )        
                                 
Net capital share transactions
             (1,634,405 )    
4,229,674
          
                                 
Total increase in net assets
            
4,609,199
      
9,688,097
          
                                 
Net assets:
                                
 Beginning of period
            
89,054,101
      
79,366,004
          
 End of period (including undistributed
                                
net investment income: $391,355 and $252,359, respectively)
     $
93,663,300
     $
89,054,101
          
                                 
*Unaudited.
                                
                                 
See Notes to Financial Statements
                                
 
 
Notes to financial statements
unaudited

1.  
Organization and significant accounting policies

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

The fund offers 14 share classes consisting of four retail share classes, five 529 college savings plan share classes and five retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:

Share class
Initial sales charge
Contingent deferred sales charge upon redemption
Conversion feature
Class A and 529-A
Up to 5.75%
None (except 1% for certain redemptions within one year of purchase without an initial sales charge)
None
Class B and 529-B
None
Declines from 5% to 0% for redemptions within six years of purchase
Class B and 529-B convert to Class A and 529-A, respectively, after eight years
Class C
None
1% for redemptions within one year of purchase
Class C converts to Class F after 10 years
Class 529-C
None
1% for redemptions within one year of purchase
None
Class 529-E
None
None
None
Class F and 529-F
None
None
None
Class R-1, R-2, R-3, R-4 and R-5
None
None
None
 

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies– The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation– Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of representative quoted bid and asked prices.

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.

Security transactions and related investment income– Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations – Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets.  Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders– Dividends and distributions paid to shareholders are recorded on the ex-dividend date.

Non-U.S. currency translation– Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.

2.  
Non-U.S. investments

Investment risk – The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.

Taxation– Dividend and interest income is recorded net of non-U.S. taxes paid.

3. Federal income taxation and distributions                                                                                                                                

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

The fund adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on June 29, 2007. The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net asset value of the fund.

As of and during the period ended June 30, 2007, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2003 and by state tax authorities for tax years before 2002.

Distributions– Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; deferred expenses; cost of investments sold; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of December 31, 2006, the fund had tax basis undistributed ordinary income of $270,414,000 and non-U.S. currency loss deferrals (realized during the period November 1, 2006, through December 31, 2006) of $1,089,000.

As of June 30, 2007, the tax basis unrealized appreciation (depreciation) and cost of investments were as follows:
(dollars in thousands)
Gross unrealized appreciation on investment securities
    
$30,297,472
Gross unrealized depreciation on investment securities
    
(391,263)
Net unrealized appreciation on investment securities
    
29,906,209
Cost of investment securities
    
64,194,492

The tax character of distributions paid to shareholders was as follows (dollars in thousands):
 
 
   
Six months ended June 30, 2007   
    
Year ended December 31, 2006   
  
   
Ordinary income
    
Long-term capital gains
    
Total distributions paid
    
Ordinary income
    
Long-term capital gains
    
Total distributions paid
  
Share class
                                    
Class A
   $
700,099
      
-
     $
700,099
     $
1,549,720
     $
4,286,757
     $
5,836,477
  
Class B
    
23,355
      
-
      
23,355
      
57,806
      
244,915
      
302,721
  
Class C
    
17,998
      
-
      
17,998
      
43,246
      
194,579
      
237,825
  
Class F
    
15,209
      
-
      
15,209
      
32,890
      
97,019
      
129,909
  
Class 529-A
    
10,686
      
-
      
10,686
      
21,169
      
63,983
      
85,152
  
Class 529-B
    
1,237
      
-
      
1,237
      
2,883
      
13,752
      
16,635
  
Class 529-C
    
1,723
      
-
      
1,723
      
3,885
      
18,648
      
22,533
  
Class 529-E
    
381
      
-
      
381
      
786
      
2,753
      
3,539
  
Class 529-F
    
150
      
-
      
150
      
236
      
713
      
949
  
Class R-1
    
284
      
-
      
284
      
572
      
2,836
      
3,408
  
Class R-2
    
3,415
      
-
      
3,415
      
7,776
      
36,010
      
43,786
  
Class R-3
    
7,340
      
-
      
7,340
      
14,853
      
52,450
      
67,303
  
Class R-4
    
3,164
      
-
      
3,164
      
6,052
      
18,571
      
24,623
  
Class R-5
    
21,804
      
-
      
21,804
      
42,780
      
113,740
      
156,520
  
Total
   $
806,845
      
-
     $
806,845
     $
1,784,654
     $
5,146,726
     $
6,931,380
  


4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company SM ("AFS"), the fund’s transfer agent, and American Funds Distributors, SM Inc. ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services– The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.390% on the first $1 billion of month-end net assets and decreasing to 0.219% on such assets in excess of $89 billion. CRMC is currently waiving 10% of investment advisory services fees. During the six months ended June 30, 2007, total investment advisory services fees waived by CRMC were $10,753,000. As a result, the fee shown on the accompanying financial statements of $107,530,000, which was equivalent to an annualized rate of 0.238%, was reduced to $96,777,000, or 0.214% of average month-end net assets.

Class-specific fees and expenses – Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services – The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of June 30, 2007, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.

Share class
Currently approved limits
Plan limits
Class A
0.25%
0.25%
Class 529-A
0.25
0.50
Class B and 529-B
1.00
1.00
Class C, 529-C and R-1
1.00
1.00
Class R-2
0.75
1.00
Class 529-E and R-3
0.50
0.75
Class F, 529-F and R-4
0.25
0.50

Transfer agent services– The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services – The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the six months ended June 30, 2007, the total administrative services fees paid by CRMC were $13 and $96,000 for Class R-1 and R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the six months ended June 30, 2007, were as follows (dollars in thousands):

Share class
Distribution services
Transfer agent services
Administrative services
CRMC administrative services
Transfer agent services
Commonwealth of Virginia administrative services
Class A
$87,681
$29,672
Not applicable
Not applicable
Not applicable
Class B
21,318
1,786
Not applicable
Not applicable
Not applicable
Class C
17,108
 
 
 
Included
in
administrative services
$2,178
$198
Not applicable
Class F
2,122
 795
95
Not applicable
Class 529-A
1,256
532
57
$596
Class 529-B
1,239
111
16
 124
Class 529-C
1,718
154
21
 172
Class 529-E
126
23
3
 25
Class 529-F
 -
6
1
 7
Class R-1
 266
32
12
Not applicable
Class R-2
 2,473
487
976
Not applicable
Class R-3
 2,424
701
237
Not applicable
Class R-4
 439
255
9
Not applicable
Class R-5
Not applicable
1,041
4
Not applicable
Total
$138,170
$31,458
$6,315
$1,629
$924

Deferred directors’ and advisory board compensation– Since the adoption of the deferred compensation plan in 1993, directors and advisory board members who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ and advisory board compensation of $958,000, shown on the accompanying financial statements, includes $567,000 in current fees (either paid in cash or deferred) and a net increase of $391,000 in the value of the deferred amounts.

Affiliated officers and directors – Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.

5. Warrants

As of June 30, 2007, the fund had warrants outstanding which may be exercised at any time for the purchase of 819,437 Class A shares at approximately $5.24 per share. If these warrants had been exercised as of June 30, 2007, the net asset value of Class A shares would have been reduced by $0.01 per share.

6. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):
 
 
Share class
  
Sales(*)
          
Reinvestments of dividends and distributions
    
Repurchases(*)
          
Net (decrease) increase
  
   
Amount
    
Shares
    
Amount
    
Shares
    
Amount
    
Shares
    
Amount
    
Shares
  
Six months ended June 30, 2007
                                            
Class A
   $
2,645,309
      
76,922
     $
651,274
      
18,904
     $ (5,052,547 )     (145,899 )   $ (1,755,964 )     (50,073 )
Class B
    
126,731
      
3,705
      
22,426
      
654
       (257,394 )     (7,485 )     (108,237 )     (3,126 )
Class C
    
231,021
      
6,768
      
17,060
      
499
       (261,701 )     (7,638 )     (13,620 )     (371 )
Class F
    
211,997
      
6,165
      
13,673
      
398
       (345,710 )     (9,892 )     (120,040 )     (3,329 )
Class 529-A
    
117,912
      
3,433
      
10,685
      
310
       (41,137 )     (1,191 )    
87,460
      
2,552
  
Class 529-B
    
14,572
      
425
      
1,236
      
36
       (6,945 )     (203 )    
8,863
      
258
  
Class 529-C
    
37,024
      
1,079
      
1,723
      
50
       (16,028 )     (467 )    
22,719
      
662
  
Class 529-E
    
5,188
      
151
      
381
      
11
       (2,424 )     (71 )    
3,145
      
91
  
Class 529-F
    
3,991
      
116
      
150
      
5
       (863 )     (25 )    
3,278
      
96
  
Class R-1
    
12,178
      
356
      
284
      
9
       (6,886 )     (202 )    
5,576
      
163
  
Class R-2
    
119,218
      
3,484
      
3,413
      
99
       (89,216 )     (2,596 )    
33,415
      
987
  
Class R-3
    
185,969
      
5,438
      
7,334
      
213
       (136,091 )     (3,967 )    
57,212
      
1,684
  
Class R-4
    
85,073
      
2,477
      
3,163
      
92
       (46,236 )     (1,344 )    
42,000
      
1,225
  
Class R-5
    
239,183
      
6,957
      
21,566
      
625
       (160,961 )     (4,636 )    
99,788
      
2,946
  
Total net increase
                                                                
   (decrease)
   $
4,035,366
      
117,476
     $
754,368
      
21,905
     $ (6,424,139 )     (185,616 )   $ (1,634,405 )     (46,235 )
                                                                 
Year ended December 31, 2006
                                                          
Class A
   $
5,290,882
      
159,177
     $
5,481,530
      
164,293
     $ (8,155,422 )     (245,460 )   $
2,616,990
      
78,010
  
Class B
    
271,904
      
8,230
      
291,674
      
8,769
       (458,225 )     (13,841 )    
105,353
      
3,158
  
Class C
    
455,460
      
13,780
      
227,586
      
6,853
       (462,026 )     (14,011 )    
221,020
      
6,622
  
Class F
    
424,643
      
12,741
      
118,930
      
3,567
       (297,324 )     (8,964 )    
246,249
      
7,344
  
Class 529-A
    
208,622
      
6,272
      
85,143
      
2,553
       (68,950 )     (2,072 )    
224,815
      
6,753
  
Class 529-B
    
28,898
      
873
      
16,630
      
499
       (11,480 )     (345 )    
34,048
      
1,027
  
Class 529-C
    
63,827
      
1,923
      
22,528
      
676
       (25,566 )     (770 )    
60,789
      
1,829
  
Class 529-E
    
9,172
      
276
      
3,537
      
106
       (3,598 )     (108 )    
9,111
      
274
  
Class 529-F
    
4,900
      
147
      
949
      
28
       (1,247 )     (38 )    
4,602
      
137
  
Class R-1
    
23,018
      
696
      
3,405
      
102
       (8,091 )     (243 )    
18,332
      
555
  
Class R-2
    
197,672
      
5,975
      
43,770
      
1,314
       (130,069 )     (3,904 )    
111,373
      
3,385
  
Class R-3
    
292,010
      
8,809
      
67,296
      
2,019
       (163,408 )     (4,926 )    
195,898
      
5,902
  
Class R-4
    
128,640
      
3,882
      
24,601
      
738
       (82,853 )     (2,513 )    
70,388
      
2,107
  
Class R-5
    
310,130
      
9,266
      
155,841
      
4,671
       (155,265 )     (4,677 )    
310,706
      
9,260
  
Total net increase
                                                                
   (decrease)
   $
7,709,778
      
232,047
     $
6,543,420
      
196,188
     $ (10,023,524 )     (301,872 )   $
4,229,674
      
126,363
  
                                                                 
(*) Includes exchanges between share classes of the fund.
                                          


7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $6,625,919,000 and $8,228,964,000, respectively, during the six months ended June 30, 2007.
 
 
Financial highlights(1) 
                              
                                     
     
Income (loss) from investment operations(2)
Dividends and distributions 
                    
                                     
   
Net asset value, beginning of period
Net investment income
Net gains (losses) on securities (both realized and unrealized)
Total from investment operations
Dividends (from net ivnestment income)
Distributions (from capital gains)
Total dividends and distributions
Net asset value, end of period
Total return(3)(4)
Net assets, end of period (in millions)
Ratio of
expenses to
average
net assets
before reimbursements/
waivers
Ratio of
expenses to
average
net assets
after reimbursements/
waivers(4)
Ratio of net income to average net assets(4)
                                     
                                     
                                     
Class A:
                                    
 Six months ended 6/30/2007
(5)
$33.51
$.37
$2.31
$2.68
$(.32)
 $       -
$(.32)
$35.87
8.04%
$77,606
  
.57%
(6)
.55%
(6)
2.17%
(6)
 Year ended 12/31/2006
31.36
.72
4.23
4.95
(.74)
(2.06)
(2.80)
33.51
15.94
74,181
  
.57
  
.54
  
2.16
  
 Year ended 12/31/2005
 30.75
.64
1.46
2.10
(.68)
(.81)
(1.49)
31.36
6.87
66,959
  
.57
  
.55
  
2.06
  
 Year ended 12/31/2004
 28.84
.60
2.19
2.79
(.52)
(.36)
(.88)
30.75
9.78
64,880
  
.57
  
.57
  
2.06
  
 Year ended 12/31/2003
 23.48
.54
5.55
6.09
(.52)
(.21)
(.73)
28.84
26.30
58,353
  
.59
  
.59
  
2.14
  
 Year ended 12/31/2002
 28.53
.49
(4.56)
(4.07)
(.52)
(.46)
(.98)
23.48
(14.47)
46,129
  
.59
  
.59
  
1.89
  
Class B:
                                    
 Six months ended 6/30/2007
(5)
33.37
.24
2.30
2.54
(.19)
         -
(.19)
35.72
7.63
4,408
  
1.34
(6)
1.32
(6)
1.40
(6)
 Year ended 12/31/2006
 31.24
.46
4.21
4.67
(.48)
(2.06)
(2.54)
33.37
15.04
4,222
  
1.34
  
1.32
  
1.38
  
 Year ended 12/31/2005
 30.64
.39
1.46
1.85
(.44)
(.81)
(1.25)
31.24
6.04
3,853
  
1.35
  
1.33
  
1.28
  
 Year ended 12/31/2004
 28.74
.38
2.17
2.55
(.29)
(.36)
(.65)
30.64
8.94
3,683
  
1.36
  
1.35
  
1.29
  
 Year ended 12/31/2003
 23.41
.34
5.53
5.87
(.33)
(.21)
(.54)
28.74
25.30
3,011
  
1.38
  
1.38
  
1.33
  
 Year ended 12/31/2002
 28.47
.30
(4.57)
(4.27)
(.33)
(.46)
(.79)
23.41
(15.18)
1,841
  
1.39
  
1.39
  
1.18
  
Class C:
                                    
 Six months ended 6/30/2007
(5)
33.31
.23
2.29
2.52
(.18)
         -
(.18)
35.65
7.58
3,572
  
1.40
(6)
1.37
(6)
1.34
(6)
 Year ended 12/31/2006
 31.18
.44
4.21
4.65
(.46)
(2.06)
(2.52)
33.31
15.00
3,350
  
1.41
  
1.38
  
1.32
  
 Year ended 12/31/2005
 30.59
.37
1.45
1.82
(.42)
(.81)
(1.23)
31.18
5.96
2,929
  
1.42
  
1.40
  
1.21
  
 Year ended 12/31/2004
 28.70
.36
2.16
2.52
(.27)
(.36)
(.63)
30.59
8.85
2,691
  
1.43
  
1.43
  
1.22
  
 Year ended 12/31/2003
 23.38
.31
5.53
5.84
(.31)
(.21)
(.52)
28.70
25.22
1,985
  
1.45
  
1.45
  
1.25
  
 Year ended 12/31/2002
 28.44
.30
(4.58)
(4.28)
(.32)
(.46)
(.78)
23.38
(15.20)
1,025
  
1.45
  
1.45
  
1.17
  
Class F:
                                    
 Six months ended 6/30/2007
(5)
33.48
.36
2.30
2.66
(.31)
         -
(.31)
35.83
8.00
1,672
  
.61
(6)
.58
(6)
2.13
(6)
 Year ended 12/31/2006
 31.32
.71
4.24
4.95
(.73)
(2.06)
(2.79)
33.48
15.95
1,673
  
.60
  
.58
  
2.12
  
 Year ended 12/31/2005
 30.72
.62
1.45
2.07
(.66)
(.81)
(1.47)
31.32
6.77
1,336
  
.64
  
.62
  
1.99
  
 Year ended 12/31/2004
 28.81
.58
2.18
2.76
(.49)
(.36)
(.85)
30.72
9.69
1,209
  
.67
  
.67
  
1.99
  
 Year ended 12/31/2003
 23.46
.51
5.55
6.06
(.50)
(.21)
(.71)
28.81
26.18
897
  
.69
  
.69
  
2.01
  
 Year ended 12/31/2002
 28.52
.49
(4.59)
(4.10)
(.50)
(.46)
(.96)
23.46
(14.59)
415
  
.70
  
.70
  
1.92
  
Class 529-A:
                                    
 Six months ended 6/30/2007
(5)
33.48
.36
2.30
2.66
(.31)
         -
(.31)
35.83
7.98
1,288
  
.67
(6)
.64
(6)
2.07
(6)
 Year ended 12/31/2006
 31.33
.69
4.24
4.93
(.72)
(2.06)
(2.78)
33.48
15.87
1,118
  
.64
  
.62
  
2.08
  
 Year ended 12/31/2005
 30.73
.61
1.45
2.06
(.65)
(.81)
(1.46)
31.33
6.74
835
  
.67
  
.65
  
1.96
  
 Year ended 12/31/2004
 28.82
.59
2.17
2.76
(.49)
(.36)
(.85)
30.73
9.68
625
  
.68
  
.68
  
2.00
  
 Year ended 12/31/2003
 23.48
.52
5.55
6.07
(.52)
(.21)
(.73)
28.82
26.19
380
  
.64
  
.64
  
2.06
  
 Period from 2/15/2002 to 12/31/2002
 27.88
.46
(3.91)
(3.45)
(.49)
(.46)
(.95)
23.48
(12.57)
153
  
.71
(6)
.71
(6)
2.17
(6)
Class 529-B:
                                    
 Six months ended 6/30/2007
(5)
33.40
.22
2.30
2.52
(.17)
         -
(.17)
35.75
7.57
264
  
1.46
(6)
1.44
(6)
1.28
(6)
 Year ended 12/31/2006
 31.27
.42
4.21
4.63
(.44)
(2.06)
(2.50)
33.40
14.90
238
  
1.47
  
1.45
  
1.25
  
 Year ended 12/31/2005
 30.67
.35
1.45
1.80
(.39)
(.81)
(1.20)
31.27
5.87
191
  
1.51
  
1.49
  
1.12
  
 Year ended 12/31/2004
 28.78
.33
2.16
2.49
(.24)
(.36)
(.60)
30.67
8.69
155
  
1.56
  
1.55
  
1.12
  
 Year ended 12/31/2003
 23.45
.28
5.54
5.82
(.28)
(.21)
(.49)
28.78
25.05
100
  
1.58
  
1.58
  
1.12
  
 Period from 2/15/2002 to 12/31/2002
 27.88
.28
(3.92)
(3.64)
(.33)
(.46)
(.79)
23.45
(13.22)
41
  
1.58
(6)
1.58
(6)
1.30
(6)
Class 529-C:
                                    
 Six months ended 6/30/2007
(5)
33.41
.22
2.30
2.52
(.17)
         -
(.17)
35.76
7.57
371
  
1.46
(6)
1.43
(6)
1.28
(6)
 Year ended 12/31/2006
 31.27
.42
4.23
4.65
(.45)
(2.06)
(2.51)
33.41
14.94
325
  
1.46
  
1.44
  
1.26
  
 Year ended 12/31/2005
 30.68
.35
1.45
1.80
(.40)
(.81)
(1.21)
31.27
5.85
247
  
1.50
  
1.48
  
1.13
  
 Year ended 12/31/2004
 28.78
.33
2.17
2.50
(.24)
(.36)
(.60)
30.68
8.74
188
  
1.55
  
1.54
  
1.13
  
 Year ended 12/31/2003
 23.45
.29
5.54
5.83
(.29)
(.21)
(.50)
28.78
25.07
115
  
1.57
  
1.57
  
1.13
  
 Period from 2/19/2002 to 12/31/2002
 27.47
.28
(3.50)
(3.22)
(.34)
(.46)
(.80)
23.45
(11.91)
45
  
1.57
(6)
1.57
(6)
1.32
(6)
Class 529-E:
                                    
 Six months ended 6/30/2007
(5)
33.42
.31
2.30
2.61
(.26)
         -
(.26)
35.77
7.83
55
  
.96
(6)
.93
(6)
1.78
(6)
 Year ended 12/31/2006
 31.28
.59
4.23
4.82
(.62)
(2.06)
(2.68)
33.42
15.52
48
  
.95
  
.92
  
1.78
  
 Year ended 12/31/2005
 30.68
.51
1.45
1.96
(.55)
(.81)
(1.36)
31.28
6.42
36
  
.99
  
.96
  
1.65
  
 Year ended 12/31/2004
 28.78
.48
2.17
2.65
(.39)
(.36)
(.75)
30.68
9.29
27
  
1.03
  
1.02
  
1.65
  
 Year ended 12/31/2003
 23.45
.42
5.54
5.96
(.42)
(.21)
(.63)
28.78
25.70
16
  
1.04
  
1.04
  
1.65
  
 Period from 3/1/2002 to 12/31/2002
 28.27
.38
(4.52)
(4.14)
(.33)
(.35)
(.68)
23.45
(14.72)
6
  
1.03
(6)
1.03
(6)
1.90
(6)
Class 529-F:
                                    
 Six months ended 6/30/2007
(5)
$33.47
$.39
$2.30
$2.69
$(.34)
 $       -
$(.34)
$35.82
8.09%
$17
  
.46%
(6)
.43%
(6)
2.28%
(6)
 Year ended 12/31/2006
 31.32
.76
4.23
4.99
(.78)
(2.06)
(2.84)
33.47
16.10
13
  
.45
  
.42
  
2.27
  
 Year ended 12/31/2005
 30.71
.64
1.46
2.10
(.68)
(.81)
(1.49)
31.32
6.87
8
  
.56
  
.54
  
2.07
  
 Year ended 12/31/2004
 28.81
.56
2.16
2.72
(.46)
(.36)
(.82)
30.71
9.55
5
  
.78
  
.77
  
1.91
  
 Year ended 12/31/2003
 23.47
.48
5.55
6.03
(.48)
(.21)
(.69)
28.81
26.05
3
  
.79
  
.79
  
1.88
  
 Period from 9/16/2002 to 12/31/2002
 23.98
.16
(.19)
(.03)
(.13)
(.35)
(.48)
23.47
(.14)
-
(7)
.23
  
.23
  
.68
  
Class R-1:
                                    
 Six months ended 6/30/2007
(5)
33.39
.23
2.29
2.52
(.18)
         -
(.18)
35.73
7.60
58
  
1.42
(6)
1.39
(6)
1.32
(6)
 Year ended 12/31/2006
31.25
.44
4.22
4.66
(.46)
(2.06)
(2.52)
33.39
14.96
49
  
1.42
  
1.39
  
1.31
  
 Year ended 12/31/2005
 30.67
.38
1.44
1.82
(.43)
(.81)
(1.24)
31.25
5.93
29
  
1.42
  
1.40
  
1.22
  
 Year ended 12/31/2004
 28.77
.36
2.17
2.53
(.27)
(.36)
(.63)
30.67
8.84
23
  
1.47
  
1.46
  
1.21
  
 Year ended 12/31/2003
 23.46
.31
5.54
5.85
(.33)
(.21)
(.54)
28.77
25.18
14
  
1.51
  
1.47
  
1.18
  
 Period from 6/6/2002 to 12/31/2002
 27.27
.20
(3.36)
(3.16)
(.30)
(.35)
(.65)
23.46
(11.68)
1
  
2.43
(6)
1.47
(6)
1.49
(6)
Class R-2:
                                    
 Six months ended 6/30/2007
(5)
33.40
.23
2.30
2.53
(.18)
         -
(.18)
35.75
7.59
704
  
1.45
(6)
1.39
(6)
1.32
(6)
 Year ended 12/31/2006
 31.26
.43
4.23
4.66
(.46)
(2.06)
(2.52)
33.40
14.99
625
  
1.50
  
1.39
  
1.31
  
 Year ended 12/31/2005
 30.67
.37
1.45
1.82
(.42)
(.81)
(1.23)
31.26
5.95
479
  
1.57
  
1.40
  
1.21
  
 Year ended 12/31/2004
 28.77
.37
2.17
2.54
(.28)
(.36)
(.64)
30.67
8.88
361
  
1.63
  
1.42
  
1.27
  
 Year ended 12/31/2003
 23.46
.31
5.54
5.85
(.33)
(.21)
(.54)
28.77
25.18
188
  
1.76
  
1.43
  
1.21
  
 Period from 5/21/2002 to 12/31/2002
 28.23
.23
(4.34)
(4.11)
(.31)
(.35)
(.66)
23.46
(14.64)
24
  
1.57
(6)
1.43
(6)
1.61
(6)
Class R-3:
                                    
 Six months ended 6/30/2007
(5)
33.45
.31
2.30
2.61
(.26)
         -
(.26)
35.80
7.83
1,034
  
.95
(6)
.92
(6)
1.80
(6)
 Year ended 12/31/2006
 31.30
.59
4.24
4.83
(.62)
(2.06)
(2.68)
33.45
15.54
909
  
.94
  
.92
  
1.78
  
 Year ended 12/31/2005
 30.71
.52
1.45
1.97
(.57)
(.81)
(1.38)
31.30
6.43
666
  
.95
  
.93
  
1.68
  
 Year ended 12/31/2004
 28.80
.50
2.17
2.67
(.40)
(.36)
(.76)
30.71
9.34
493
  
.99
  
.98
  
1.72
  
 Year ended 12/31/2003
 23.47
.41
5.55
5.96
(.42)
(.21)
(.63)
28.80
25.70
231
  
1.06
  
1.05
  
1.60
  
 Period from 6/4/2002 to 12/31/2002
 27.58
.27
(3.69)
(3.42)
(.34)
(.35)
(.69)
23.47
(12.49)
24
  
1.11
(6)
1.05
(6)
2.00
(6)
Class R-4:
                                    
 Six months ended 6/30/2007
(5)
33.48
.36
2.30
2.66
(.31)
         -
(.31)
35.83
7.98
389
  
.65
(6)
.63
(6)
2.09
(6)
 Year ended 12/31/2006
 31.32
.69
4.24
4.93
(.71)
(2.06)
(2.77)
33.48
15.90
323
  
.65
  
.62
  
2.07
  
 Year ended 12/31/2005
 30.72
.62
1.45
2.07
(.66)
(.81)
(1.47)
31.32
6.77
236
  
.65
  
.63
  
1.99
  
 Year ended 12/31/2004
 28.82
.60
2.16
2.76
(.50)
(.36)
(.86)
30.72
9.67
119
  
.67
  
.66
  
2.05
  
 Year ended 12/31/2003
 23.47
.51
5.55
6.06
(.50)
(.21)
(.71)
28.82
26.19
40
  
.68
  
.68
  
2.00
  
 Period from 5/28/2002 to 12/31/2002
 28.22
.32
(4.33)
(4.01)
(.39)
(.35)
(.74)
23.47
(14.31)
9
  
.73
(6)
.69
(6)
2.25
(6)
Class R-5:
                                    
 Six months ended 6/30/2007
(5)
33.51
.41
2.31
2.72
(.36)
         -
(.36)
35.87
8.16
2,225
  
.35
(6)
.33
(6)
2.39
(6)
 Year ended 12/31/2006
 31.35
.79
4.24
5.03
(.81)
(2.06)
(2.87)
33.51
16.22
1,980
  
.35
  
.33
  
2.37
  
 Year ended 12/31/2005
 30.75
.70
1.46
2.16
(.75)
(.81)
(1.56)
31.35
7.06
1,562
  
.36
  
.34
  
2.28
  
 Year ended 12/31/2004
 28.84
.67
2.18
2.85
(.58)
(.36)
(.94)
30.75
10.02
1,408
  
.36
  
.35
  
2.28
  
 Year ended 12/31/2003
 23.48
.56
5.59
6.15
(.58)
(.21)
(.79)
28.84
26.58
1,201
  
.36
  
.36
  
2.11
  
 Period from 5/15/2002 to 12/31/2002
 28.37
.39
(4.50)
(4.11)
(.43)
(.35)
(.78)
23.48
(14.59)
48
  
.37
(6)
.37
(6)
2.56
(6)
 
   
Six months ended
                                
   
June 30,
    
Year ended December 31      
  
   
2007(5)
    
2006
    
2005
    
2004
    
2003
    
2002
  
                                     
Portfolio turnover rate for all classes of shares
     9 %     20 %     19 %     19 %     24 %     27 %
                                                 
                                                 
(1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.    
  
(2) Based on average shares outstanding.   
                                          
(3) Total returns exclude all sales charges, including contingent deferred sales charges.            
                  
(4) This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes. In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes. 
(5) Unaudited.
                                                
(6) Annualized.
                                                
(7) Amount less than $1 million.
                                                
                                                 
                                                 
See Notes to Financial Statements
                                                
 
 
Expense example
unaudited
   
 
As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2007, through June 30, 2007).
 
Actual expenses:
 
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
 
Hypothetical example for comparison purposes:
 
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
 
Notes:
 
There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
 
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
 
   
Beginning account value 1/1/2007
 
Ending account value 6/30/2007
 
Expenses paid during period*
 
Annualized expense ratio
                 
Class A -- actual return
  
 $1,000.00
  
$1,080.40
  
      $2.84
  
   .55%
Class A -- assumed 5% return
 
         1,000.00
 
1,022.07
  
2.76
  
.55
Class B -- actual return
  
         1,000.00
  
1,076.28
  
6.80
  
1.32
Class B -- assumed 5% return
 
         1,000.00
 
1,018.25
  
6.61
  
1.32
Class C -- actual return
  
         1,000.00
  
1,075.85
  
7.05
  
1.37
Class C -- assumed 5% return
 
         1,000.00
 
1,018.00
  
6.85
  
1.37
Class F -- actual return
  
         1,000.00
  
1,079.99
  
2.99
  
.58
Class F -- assumed 5% return
 
         1,000.00
 
1,021.92
  
2.91
  
.58
Class 529-A -- actual return
  
         1,000.00
  
1,079.77
  
3.30
  
.64
Class 529-A -- assumed 5% return
 
         1,000.00
 
1,021.62
  
3.21
  
.64
Class 529-B -- actual return
  
         1,000.00
  
1,075.68
  
7.41
  
1.44
Class 529-B -- assumed 5% return
 
         1,000.00
 
1,017.65
  
7.20
  
1.44
Class 529-C -- actual return
  
         1,000.00
  
1,075.66
  
7.36
  
1.43
Class 529-C -- assumed 5% return
 
         1,000.00
 
1,017.70
  
7.15
  
1.43
Class 529-E -- actual return
  
         1,000.00
  
1,078.29
  
4.79
  
.93
Class 529-E -- assumed 5% return
 
         1,000.00
 
1,020.18
  
4.66
  
.93
Class 529-F -- actual return
  
         1,000.00
  
1,080.87
  
2.22
  
.43
Class 529-F -- assumed 5% return
 
         1,000.00
 
1,022.66
  
2.16
  
.43
Class R-1 -- actual return
  
         1,000.00
  
1,075.97
  
7.15
  
1.39
Class R-1 -- assumed 5% return
 
         1,000.00
 
1,017.90
  
6.95
  
1.39
Class R-2 -- actual return
  
         1,000.00
  
1,075.90
  
7.15
  
1.39
Class R-2 -- assumed 5% return
 
         1,000.00
 
1,017.90
  
6.95
  
1.39
Class R-3 -- actual return
  
         1,000.00
  
1,078.26
  
4.74
  
.92
Class R-3 -- assumed 5% return
 
         1,000.00
 
1,020.23
  
4.61
  
.92
Class R-4 -- actual return
  
         1,000.00
  
1,079.81
  
3.25
  
.63
Class R-4 -- assumed 5% return
  
         1,000.00
  
1,021.67
  
3.16
  
.63
Class R-5 -- actual return
  
         1,000.00
  
1,081.55
  
1.70
  
.33
Class R-5 -- assumed 5% return
 
         1,000.00
 
1,023.16
  
1.66
  
.33
 
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period (181), and divided by 365 (to reflect the one-half year period).
 

Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through April 30, 2008. The board approved the agreement following the recommendation of the fund’s Governance and Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and committee determined that approving the agreement was in the best interests of the fund and its shareholders.

In reaching this decision, the board and committee took into account information furnished throughout the year, as well as information prepared specifically in connection with their review of the agreement based on advice of independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.

1. Nature, extent and quality of services

The board and committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance, distribution and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and committee concluded that the nature, extent and quality of the services provided by CRMC has benefited and should continue to benefit the fund and its shareholders.

2. Investment results

The board and the committee considered the investment results of the fund in light of its objective to pursue long-term growth of capital and income. They compared the fund’s total returns with those of other relevant funds and market data. The letter to shareholders included in this report contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s short- and long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.

3. Advisory fees and total expenses

The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. The board and the committee observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure and the 10% advisory fee waiver in effect since April 2005. The board and the committee also reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with similar investment mandates. They noted that, although the fees paid by those clients generally were lower than those paid by American Funds, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.

4. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs relating to maintaining and expanding services and capabilities, responding to industry and regulatory developments and attracting and retaining qualified personnel. They noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets. The board and committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and committee noted the importance of CRMC’s profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase and the impact of CRMC’s current 10% advisory fee waiver. The board and the committee concluded that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.

Offices

Offices of the fund and of the
investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406

135 South State College Boulevard
Brea, CA 92821-5823

Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)

P.O. Box 25065
Santa Ana, CA 92799-5065

P.O. Box 659522
San Antonio, TX 78265-9522

P.O. Box 6007
Indianapolis, IN 46206-6007

P.O. Box 2280
Norfolk, VA 23501-2280

Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070

Counsel
O’Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899

Independent registered public
accounting firm
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 90071-2889

Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.

A complete June 30, 2007, portfolio of The Investment Company of America’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

The Investment Company of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.

This report is for the information of shareholders of The Investment Company of America, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2007, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

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The right choice for the long term®

What makes American Funds different?

For 75 years, we have followed a consistent philosophy to benefit our investors. Our 30 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have attracted over 40 million shareholder accounts.

Our unique combination of strengths includes these five factors:

•
A long-term, value-oriented approach
 
We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.

•
An extensive global research effort
 
Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.

•
The multiple portfolio counselor system
 
Our unique method of portfolio management, developed nearly 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.

•
Experienced investment professionals
 
American Funds portfolio counselors have an average of 24 years of investment experience, providing a wealth of knowledge and experience that few organizations have.

•
A commitment to low operating expenses
 
The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.

American Funds span a range of investment objectives

•
Growth funds
AMCAP Fund®
 
EuroPacific Growth Fund®
 
The Growth Fund of America®
 
The New Economy Fund®
 
New Perspective Fund®
 
New World FundSM
 
SMALLCAP World Fund®

•
Growth-and-income funds
 
American Mutual Fund®
 
Capital World Growth and Income FundSM
 
Fundamental InvestorsSM
>
The Investment Company of America®
 
Washington Mutual Investors FundSM

•
Equity-income funds
 
Capital Income Builder®
 
The Income Fund of America®

•
Balanced fund
 
American Balanced Fund®

•
Bond funds
 
American High-Income TrustSM
 
The Bond Fund of AmericaSM
 
Capital World Bond Fund®
 
Intermediate Bond Fund of America®
Short-Term Bond Fund of AmericaSM
 
U.S. Government Securities FundSM

•
Tax-exempt bond funds
 
American High-Income Municipal Bond Fund®
 
Limited Term Tax-Exempt Bond Fund of AmericaSM
 
The Tax-Exempt Bond Fund of America®
 
State-specific tax-exempt funds
 
The Tax-Exempt Fund of California®
 
The Tax-Exempt Fund of Maryland®
 
The Tax-Exempt Fund of Virginia®

•
Money market funds
 
The Cash Management Trust of America®
 
The Tax-Exempt Money Fund of AmericaSM
 
The U.S. Treasury Money Fund of AmericaSM

•
 
American Funds Target Date Retirement SeriesSM
 
 
The Capital Group Companies

 
American Funds   Capital Research and Management     Capital International     Capital Guardian     Capital Bank and Trust

Lit. No. MFGESR-904-0807P

Litho in USA BBC/HN/8087-S10065

Printed on recycled paper

 
ITEM 2 – Code of Ethics

Not applicable for filing of semi-annual reports to shareholders.


ITEM 3 – Audit Committee Financial Expert

Not applicable for filing of semi-annual reports to shareholders.


ITEM 4 – Principal Accountant Fees and Services

Not applicable for filing of semi-annual reports to shareholders.


ITEM 5 – Audit Committee of Listed Registrants

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.


ITEM 6 – Schedule of Investments

 
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The Investment Company of America®
Investment portfolio

 
June 30, 2007
 
unaudited


Common stocks — 84.89%
  
Shares
    
Market value
(000)
  
             
ENERGY — 9.78%
            
Baker Hughes Inc.
    
7,625,000
     $
641,491
  
Chevron Corp.
    
19,702,278
      
1,659,720
  
ConocoPhillips
    
9,443,340
      
741,302
  
Exxon Mobil Corp.
    
6,481,500
      
543,668
  
Halliburton Co.
    
9,900,000
      
341,550
  
Hess Corp.
    
3,546,300
      
209,090
  
Marathon Oil Corp.
    
10,600,000
      
635,576
  
Murphy Oil Corp.
    
4,100,000
      
243,704
  
Occidental Petroleum Corp.
    
2,000,000
      
115,760
  
Royal Dutch Shell PLC, Class A (ADR)
    
17,970,000
      
1,459,164
  
Royal Dutch Shell PLC, Class B1
    
833,265
      
34,767
  
Royal Dutch Shell PLC, Class B (ADR)
    
2,370,498
      
197,581
  
Schlumberger Ltd.
    
21,950,000
      
1,864,433
  
Spectra Energy Corp
    
2,000,000
      
51,920
  
TOTAL SA1
    
5,130,000
      
416,451
  
             
9,156,177
  
                 
MATERIALS — 2.58%
                
Air Products and Chemicals, Inc.
    
2,550,000
      
204,944
  
Alcoa Inc.
    
1,676,400
      
67,944
  
Barrick Gold Corp.
    
18,856,250
      
548,151
  
Barrick Gold Corp. (CAD denominated)
    
1,114,350
      
32,535
  
Dow Chemical Co.
    
1,500,000
      
66,330
  
International Paper Co.
    
6,997,235
      
273,242
  
MeadWestvaco Corp.
    
4,085,000
      
144,282
  
Newmont Mining Corp.
    
9,500,000
      
371,070
  
PPG Industries, Inc.
    
2,000,000
      
152,220
  
Rio Tinto PLC1
    
4,044,473
      
308,711
  
Rohm and Haas Co.
    
2,799,900
      
153,099
  
Weyerhaeuser Co.
    
1,175,000
      
92,743
  
             
2,415,271
  
                 
INDUSTRIALS — 9.90%
                
3M Co.
    
1,461,500
      
126,844
  
Boeing Co.
    
7,300,000
      
701,968
  
Burlington Northern Santa Fe Corp.
    
2,500,000
      
212,850
  
Caterpillar Inc.
    
7,050,000
      
552,015
  
Cummins Inc.
    
2,000,000
      
202,420
  
Deere & Co.
    
4,400,000
      
531,256
  
FedEx Corp.
    
1,500,000
      
166,455
  
General Dynamics Corp.
    
6,745,800
      
527,656
  
General Electric Co.
    
51,950,000
      
1,988,646
  
Illinois Tool Works Inc.
    
7,400,000
      
401,006
  
Mitsubishi Corp.1
    
4,035,000
      
105,391
  
Northrop Grumman Corp.
    
2,400,000
      
186,888
  
Raytheon Co.
    
3,399,800
      
183,215
  
Siemens AG1
    
2,180,000
      
313,643
  
Southwest Airlines Co.
    
13,000,000
      
193,830
  
Tyco International Ltd.
    
46,160,100
      
1,559,750
  
Union Pacific Corp.
    
1,500,000
      
172,725
  
United Parcel Service, Inc., Class B
    
5,800,000
      
423,400
  
United Technologies Corp.
    
10,240,000
      
726,323
  
             
9,276,281
  
                 
CONSUMER DISCRETIONARY — 8.50%
                
Best Buy Co., Inc.
    
14,059,300
      
656,148
  
Carnival Corp., units
    
13,350,000
      
651,079
  
CBS Corp., Class B
    
1,250,000
      
41,650
  
Comcast Corp., Class A2
    
4,500,000
      
126,540
  
Ford Motor Co.
    
2,500,000
      
23,550
  
General Motors Corp.
    
6,750,000
      
255,150
  
Harley-Davidson, Inc.
    
4,400,000
      
262,284
  
Honda Motor Co., Ltd.1
    
4,772,000
      
173,816
  
Kohl’s Corp.2
    
1,600,000
      
113,648
  
Liberty Media Holding Corp., Liberty Interactive, Series A2
    
7,352,000
      
164,170
  
Limited Brands, Inc.
    
19,042,743
      
522,723
  
Lowe’s Companies, Inc.
    
54,123,900
      
1,661,062
  
McDonald’s Corp.
    
2,850,000
      
144,666
  
Omnicom Group Inc.
    
4,700,000
      
248,724
  
Target Corp.
    
22,475,000
      
1,429,410
  
Time Warner Inc.
    
27,785,100
      
584,599
  
TJX Companies, Inc.
    
8,350,000
      
229,625
  
Toyota Motor Corp.1
    
8,555,000
      
539,184
  
Viacom Inc., Class B2
    
3,250,000
      
135,297
  
             
7,963,325
  
                 
CONSUMER STAPLES — 7.69%
                
Altria Group, Inc.
    
42,150,000
      
2,956,401
  
Anheuser-Busch Companies, Inc.
    
1,500,000
      
78,240
  
Avon Products, Inc.
    
6,605,000
      
242,734
  
ConAgra Foods, Inc.
    
7,568,091
      
203,279
  
General Mills, Inc.
    
1,960,000
      
114,503
  
H.J. Heinz Co.
    
4,475,700
      
212,461
  
Kraft Foods Inc., Class A
    
10,844,168
      
382,257
  
PepsiCo, Inc.
    
14,550,000
      
943,567
  
Procter & Gamble Co.
    
2,948,000
      
180,388
  
Reynolds American Inc.
    
6,966,666
      
454,227
  
Sara Lee Corp.
    
5,000,000
      
87,000
  
SYSCO Corp.
    
1,724,000
      
56,875
  
Unilever NV (New York registered)
    
6,450,000
      
200,079
  
UST Inc.
    
2,000,000
      
107,420
  
Walgreen Co.
    
12,595,000
      
548,386
  
Wal-Mart Stores, Inc.
    
9,118,930
      
438,712
  
             
7,206,529
  
                 
HEALTH CARE — 10.28%
                
Abbott Laboratories
    
18,161,900
     $
972,570
  
Aetna Inc.
    
11,680,000
      
576,992
  
Amgen Inc.2
    
12,690,000
      
701,630
  
AstraZeneca PLC (ADR)
    
4,924,200
      
263,346
  
AstraZeneca PLC (Sweden)1
    
3,709,500
      
197,943
  
AstraZeneca PLC (United Kingdom)1
    
1,435,000
      
76,839
  
Becton, Dickinson and Co.
    
1,500,000
      
111,750
  
Boston Scientific Corp.2
    
9,394,850
      
144,117
  
Bristol-Myers Squibb Co.
    
28,250,000
      
891,570
  
Cardinal Health, Inc.
    
2,400,000
      
169,536
  
Eli Lilly and Co.
    
14,985,000
      
837,362
  
Johnson & Johnson
    
600,000
      
36,972
  
McKesson Corp.
    
2,600,000
      
155,064
  
Medco Health Solutions, Inc.2
    
971,000
      
75,728
  
Medtronic, Inc.
    
10,400,000
      
539,344
  
Merck & Co., Inc.
    
15,650,000
      
779,370
  
Novartis AG (ADR)
    
256,556
      
14,385
  
Pfizer Inc
    
19,500,000
      
498,615
  
Roche Holding AG1
    
5,955,000
      
1,056,378
  
Schering-Plough Corp.
    
14,736,300
      
448,573
  
UnitedHealth Group Inc.
    
9,175,000
      
469,209
  
WellPoint, Inc.2
    
6,425,000
      
512,908
  
Wyeth
    
1,685,000
      
96,618
  
             
9,626,819
  
                 
FINANCIALS — 11.54%
                
American International Group, Inc.
    
11,088,900
      
776,556
  
Aon Corp.
    
1,300,000
      
55,393
  
Bank of America Corp.
    
16,175,000
      
790,796
  
Berkshire Hathaway Inc., Class A2
    
3,050
      
333,899
  
Capital One Financial Corp.
    
6,472,000
      
507,664
  
Citigroup Inc.
    
35,610,000
      
1,826,437
  
Fannie Mae
    
25,865,600
      
1,689,800
  
Freddie Mac
    
9,592,500
      
582,265
  
Hartford Financial Services Group, Inc.
    
2,250,000
      
221,647
  
HSBC Holdings PLC (ADR)
    
1,079,588
      
99,074
  
HSBC Holdings PLC (United Kingdom)1
    
17,037,111
      
311,912
  
JPMorgan Chase & Co.
    
14,750,001
      
714,637
  
Lloyds TSB Group PLC1
    
15,000,000
      
167,497
  
Marsh & McLennan Companies, Inc.
    
7,550,000
      
233,144
  
National City Corp.
    
7,600,000
      
253,232
  
U.S. Bancorp
    
8,000,000
      
263,600
  
Wachovia Corp.
    
10,250,000
      
525,312
  
Washington Mutual, Inc.
    
25,400,000
      
1,083,056
  
Wells Fargo & Co.
    
5,660,000
      
199,062
  
XL Capital Ltd., Class A
    
2,000,000
      
168,580
  
             
10,803,563
  
                 
INFORMATION TECHNOLOGY — 15.25%
                
Altera Corp.
    
6,000,000
      
132,780
  
Analog Devices, Inc.
    
8,050,000
      
303,002
  
Applied Materials, Inc.
    
17,650,000
      
350,706
  
Automatic Data Processing, Inc.
    
3,625,000
      
175,704
  
Canon, Inc.1
    
1,300,000
      
76,254
  
Cisco Systems, Inc.2
    
31,120,400
      
866,703
  
Corning Inc.2
    
3,000,000
      
76,650
  
Dell Inc.2
    
5,650,000
      
161,308
  
Google Inc., Class A2
    
668,100
      
349,670
  
Hewlett-Packard Co.
    
25,350,000
      
1,131,117
  
Intel Corp.
    
43,590,000
      
1,035,698
  
International Business Machines Corp.
    
11,775,000
      
1,239,319
  
KLA-Tencor Corp.
    
3,025,000
      
166,224
  
Linear Technology Corp.
    
7,600,000
      
274,968
  
Maxim Integrated Products, Inc.
    
13,195,000
      
440,845
  
Micron Technology, Inc.2
    
10,000,000
      
125,300
  
Microsoft Corp.
    
62,222,100
      
1,833,685
  
Motorola, Inc.
    
11,483,200
      
203,253
  
Nokia Corp.1
    
35,327,550
      
993,180
  
Nokia Corp. (ADR)
    
12,839,750
      
360,925
  
Oracle Corp.2
    
92,195,100
      
1,817,165
  
Samsung Electronics Co., Ltd.1
    
807,000
      
493,151
  
Taiwan Semiconductor Manufacturing Co. Ltd.1
    
160,542,065
      
347,565
  
Texas Instruments Inc.
    
29,900,000
      
1,125,137
  
Xilinx, Inc.
    
7,650,000
      
204,791
  
             
14,285,100
  
                 
TELECOMMUNICATION SERVICES — 5.79%
                
ALLTEL Corp.
    
2,000,000
      
135,100
  
AT&T Inc.
    
88,874,461
      
3,688,290
  
Qwest Communications International Inc.2
    
32,879,400
      
318,930
  
Sprint Nextel Corp., Series 1
    
53,485,000
      
1,107,675
  
Vodafone Group PLC1
    
51,187,500
      
172,097
  
             
5,422,092
  
                 
UTILITIES — 2.28%
                
American Electric Power Co., Inc.
    
1,000,000
      
45,040
  
Dominion Resources, Inc.
    
7,131,912
      
615,555
  
Duke Energy Corp.
    
4,000,000
      
73,200
  
E.ON AG
    
1,025,000
      
172,237
  
Exelon Corp.
    
5,275,500
      
383,001
  
FirstEnergy Corp.
    
1,138,500
      
73,695
  
FPL Group, Inc.
    
3,550,000
      
201,427
  
PPL Corp.
    
2,900,000
      
135,691
  
Public Service Enterprise Group Inc.
    
5,000,000
      
438,900
  
             
2,138,746
  
                 
MISCELLANEOUS — 1.30%
                
Other common stocks in initial period of acquisition
            
1,218,729
  
                 
                 
Total common stocks (cost: $49,689,743,000)
            
79,512,632
  
                 
                 
                 
   
Shares or
          
Convertible securities — 0.52%
  
principal amount
          
                 
CONSUMER DISCRETIONARY — 0.24%
                
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032
    
3,890,000
      
149,998
  
Ford Motor Co. 4.25% convertible notes 2036
   $
63,200,000
      
79,474
  
             
229,472
  
           
 
  
                 
   
Shares or
    
Market
 
Convertible securities
  
principal amount
      
value
(000
 )
                 
FINANCIALS — 0.09%
                
Fannie Mae, Series 2004-1, 5.375% convertible preferred
    
820
     $
81,385
  
                 
                 
TELECOMMUNICATION SERVICES — 0.19%
                
Qwest Communications International Inc. 3.50% convertible debenture 2025
   $
100,000,000
      
175,750
  
                 
                 
Total convertible securities (cost: $376,011,000)
            
486,607
  
                 
                 
                 
   
Principal amount
          
Bonds & notes  — 0.02%
     (000 )        
                 
TELECOMMUNICATION SERVICES — 0.02%
                
Sprint Capital Corp. 8.75% 2032
   $
13,500
      
15,203
  
                 
                 
Total bonds & notes (cost: $14,992,000)
            
15,203
  
                 
                 
                 
Short-term securities — 15.04%
                
                 
Abbott Laboratories 5.22%–5.23% due 7/2–7/16/20073
    
273,000
      
272,608
  
AIG Funding, Inc. 5.18% due 7/16/2007
    
45,000
      
44,897
  
American General Finance Corp. 5.19%–5.20% due 7/26–10/3/2007
    
100,000
      
99,141
  
International Lease Finance Corp. 5.20%–5.22% due 7/27–9/26/2007
    
221,000
      
219,159
  
American Express Credit Corp. 5.23% due 7/23–8/28/2007
    
80,000
      
79,474
  
AT&T Inc. 5.23%–5.27% due 7/24–8/23/20073
    
301,281
      
299,779
  
Atlantic Industries 5.20% due 7/10/20073
    
30,000
      
29,957
  
Coca-Cola Co. 5.15%–5.21% due 7/10–10/30/20073
    
456,200
      
451,583
  
Bank of America Corp. 5.175%–5.24% due 7/9–10/5/2007
    
524,500
      
520,240
  
Becton, Dickinson and Co. 5.21% due 8/7/2007
    
25,000
      
24,862
  
Brown-Forman Corp. 5.23% due 7/6/20073
    
25,000
      
24,978
  
CAFCO, LLC 5.225%–5.245% due 7/12­–9/18/20073
    
214,000
      
212,830
  
Ciesco LLC 5.22%–5.23% due 7/6–7/23/20073
    
150,000
      
149,720
  
Citigroup Funding Inc. 5.24% due 7/10–7/13/2007
    
150,000
      
149,762
  
Caterpillar Financial Services Corp. 5.22% due 8/9/2007
    
50,000
      
49,710
  
Chevron Funding Corp. 5.19%–5.21% due 7/26–9/12/2007
    
125,000
      
124,179
  
CIT Group, Inc. 5.22%–5.27% due 7/6–11/16/20073
    
282,975
      
279,985
  
Clipper Receivables Co., LLC 5.245%–5.255% due 7/13–8/3/20073
    
475,000
      
473,040
  
Concentrate Manufacturing Co. of Ireland 5.24% due 7/11/20073
    
35,000
      
34,944
  
E.I. duPont de Nemours and Co. 5.22% due 7/24/20073
    
79,700
      
79,422
  
Edison Asset Securitization LLC 5.22% due 8/7/20073
    
50,126
      
49,850
  
General Electric Capital Corp. 5.22% due 8/9/2007
    
100,000
      
99,445
  
General Electric Capital Services, Inc. 5.22% due 8/14/2007
    
100,000
      
99,355
  
General Electric Co. 5.23%–5.25% due 8/10–9/26/2007
    
200,000
      
198,095
  
Fannie Mae 5.08%–5.15% due 7/6–12/5/2007
    
1,091,906
      
1,078,196
  
FCAR Owner Trust I 5.24%–5.29% due 7/17–8/15/2007
    
200,000
      
199,292
  
Federal Farm Credit Banks 5.03%–5.14% due 7/16–11/8/2007
    
277,397
      
275,856
  
Federal Home Loan Bank 5.03%–5.16% due 7/5­–11/2/2007
    
1,934,578
      
1,921,748
  
Freddie Mac 5.07%–5.155% due 7/9–11/26/2007
    
2,153,688
      
2,130,272
  
Harley-Davidson Funding Corp. 5.23%–5.24% due 9/21–9/26/20073
    
32,400
      
32,003
  
Hershey Co. 5.20% due 8/21/20073
    
20,000
      
19,850
  
Hewlett-Packard Co. 5.25%–5.28% due 7/11–7/31/20073
    
99,200
      
98,999
  
Home Depot Inc. 5.19% due 7/24/20073
    
25,000
      
24,913
  
Honeywell International Inc. 5.20%–5.23% due 7/18–8/17/20073
    
190,000
      
188,981
  
HSBC Finance Corp. 5.20%–5.24% due 8/16–8/24/2007
    
150,000
      
148,931
  
IBM Capital Inc. 5.19% due 9/10/20073
    
70,000
      
69,283
  
IBM Corp. 5.195%–5.23% due 8/2–9/25/20073
    
283,700
      
281,263
  
Illinois Tool Works Inc. 5.22% due 7/13/2007
    
9,900
      
9,881
  
Johnson & Johnson 5.18%–5.22% due 8/8–9/20/20073
    
260,700
      
258,649
  
JPMorgan Chase & Co. 5.20%–5.23% due 7/9–9/24/2007
    
255,000
      
253,305
  
Jupiter Securitization Co., LLC 5.23%–5.30% due 7/10–8/30/20073
    
162,700
      
162,186
  
Park Avenue Receivables Co., LLC 5.24%–5.25% due 8/31–9/4/20073
    
101,000
      
100,073
  
McCormick & Co., Inc. 5.17% due 11/29/20073
    
30,000
      
29,344
  
Medtronic Inc. 5.23% due 7/16/20073
    
24,000
      
23,944
  
NetJets Inc. 5.20%–5.23% due 7/16–9/7/20073
    
79,900
      
79,600
  
Paccar Financial Corp. 5.20%–5.21% due 7/3–9/13/2007
    
198,800
      
197,844
  
Private Export Funding Corp. 5.18%–5.22% due 8/13–10/17/20073
    
151,000
      
149,229
  
Procter & Gamble International Funding S.C.A. 5.20%–5.23% due 7/20–9/21/20073
    
500,000
      
495,118
  
Prudential Funding, LLC 5.21% due 9/17/2007
    
72,700
      
71,885
  
SunTrust Banks, Inc. 5.29% due 11/19/20074
    
50,000
      
50,013
  
Three Pillars Funding, LLC 5.27%–5.30% due 7/2–7/27/20073
    
125,000
      
124,779
  
Tennessee Valley Authority 5.12%–5.14% due 7/26–8/9/2007
    
212,200
      
211,214
  
Triple-A One Funding Corp. 5.23% due 8/22/20073
    
15,000
      
14,888
  
U.S. Treasury Bills 4.70%–4.87% due 7/19–9/20/2007
    
349,150
      
346,401
  
Union Bank of California, N.A. 5.27%–5.30% due 9/4–10/16/2007
    
150,000
      
149,978
  
United Parcel Service Inc. 5.19% due 8/31/20073
    
48,000
      
47,581
  
Variable Funding Capital Corp. 5.22%–5.245% due 7/11–8/3/20073
    
420,800
      
419,590
  
Wal-Mart Stores, Inc. 5.18%–5.20% due 7/17–9/25/20073
    
357,300
      
354,155
  
                 
                 
Total short-term securities (cost: $14,083,959,000)
            
14,086,259
  
                 
                 
Total investment securities (cost: $64,164,705,000)
            
94,100,701
  
Other assets less liabilities
             (437,401 )
                 
Net assets
           $
93,663,300
  


“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

1Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in “Miscellaneous,” was $6,618,656,000.
2Security did not produce income during the last 12 months.
3Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration.  The total value of all such restricted securities was $5,333,124,000, which represented 5.69% of the net assets of the fund.
4Coupon rate may change periodically.

ADR = American Depositary Receipts
 

 

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus, which can be obtained from a financial adviser and should be read carefully before investing.
 
 
 
MFGEFP-904-0807O-S10941

 
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.


ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.


ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.


ITEM 10 – Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders.  The procedures are as follows.  The Registrant has a nominating committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating committee.


ITEM 11 – Controls and Procedures

(a)
The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
   
(b)
There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.


ITEM 12 – Exhibits

(a)(1)
Not applicable for filing of semi-annual reports to shareholders.
   
(a)(2)
The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
THE INVESTMENT COMPANY OF AMERICA
   
 
By /s/ Paul G. Haaga, Jr.
 
Paul G. Haaga, Jr., Executive Vice President and
Chief Executive Officer
   
 
Date: September 7, 2007



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


By /s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr., Executive Vice President and
Chief Executive Officer
 
Date: September 7, 2007



By /s/ Carmelo Spinella
Carmelo Spinella, Treasurer and
Principal Financial Officer
 
Date: September 7, 2007