N-CSRS 1 ica_ncsr.htm N-CSR ica_ncsr.htm
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, 2008





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 – baseball bats against a wall]


Semi-annual report for the six months ended June 30, 2008

 

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 is one of the nation’s largest mutual fund families. For more than 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.
 
Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for 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.

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2008:

 
1 year
5 years
10 years
Class A shares
      
Reflecting 5.75% maximum sales charge
–18.16%
6.79%
5.01%

The total annual fund operating expense ratio for Class A shares as of the most recent fiscal year-end was 0.56%. 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 the waiver 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, 2008, reflecting the 5.75% maximum sales charge and calculated in accordance with the Securities and Exchange Commission formula, was 2.04% (2.02% without the fee waiver).

Results for other share classes can be found on page 28.

Investments outside the United States may be subject to additional risks such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. Global diversification can help reduce these risks.

 

Fellow shareholders:

During the first six months of The Investment Company of America’s fiscal year, stock markets were battered by escalating market turmoil, increasing losses at many financial companies and fears of simultaneously rising inflation and a weakening economy.

In this thorny environment, the fund posted a negative 11.4% return for the six months ended June 30, 2008. The fund’s result for the period, while disappointing on an absolute basis, was slightly better than the 11.9% decline for the unmanaged Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market.

These are difficult times, and we pause for a moment to remind shareholders that The Investment Company of America, nearly 75 years old, has experienced several difficult periods over the decades. ICA’s strategy has been consistent in good times and bad: investing in solid companies with strong managements that we believe will succeed over the long run. As evidenced in the fiscal period, short-term results can sometimes suffer in volatile markets. As always, we have our eyes on the long-term horizon.

Since its inception in 1934, ICA has generated an average annual total return of 12.5% with dividends reinvested, comparing favorably with the S&P 500’s 11.0% gain over the same time period. For the 10-year period ended June 30, 2008 — a volatile time that included the technology boom and bust as well as the recent market troubles — ICA’s average annual total return was 5.6%, considerably better than the S&P 500’s 2.9% for the same period.

U.S. stocks fell during the first six months of 2008, despite unprecedented measures by the Federal Reserve and other agencies to keep markets functioning and to maintain investor confidence. These efforts included lowering the federal funds rate from 4.25% to 2.00% in a series of actions. Congress enacted several fiscal policy measures, including a $168 billion economic stimulus plan that gave many U.S. taxpayers a one-time rebate. The weak dollar, soaring commodity prices and high food costs spurred inflation fears and revived memories of the economic downturns of the 1970s.

Portfolio review

Amid the difficulties in the six-month period, many sectors and companies fared poorly. Most banks and other financial companies detracted from results, as seen in the returns of diversified financial companies Bank of America (–42.2%), Citigroup (–43.1%) and JPMorgan Chase (–21.4%). Government-sponsored mortgage giants Fannie Mae (–51.2%) and Freddie Mac (–51.9%) suffered as the credit crunch escalated. Financials as a broad industry group made up 7.5% of the fund at the end of the fiscal period, down from 10.1% six months before, and it continues to be the focus of media headlines.

[Begin Sidebar]
Results at a glance
                  
For the six months ended June 30, 2008, with dividends reinvested
  
                   
         
Standard &
    
Lipper
  
   
ICA
(Class A
    
Poor’s 500
Composite
    
Growth & Income
  
   
shares)
    
Index
    
Funds Index
  
                   
Income return
     1.03 %     0.97 %     n/a  
Capital return
     –12.48 %     –12.88 %     n/a  
Total return
     –11.45 %     –11.91 %     –11.42 %
[End Sidebar]

Only two of the fund’s top 10 holdings rose in the period, both energy-related: oil field services provider Schlumberger (+9.2%), the largest holding, and oil and gas producer Chevron (+6.2%), the fifth-largest holding. Others in the energy equipment and services sector, including Baker Hughes (+7.7%) and Halliburton (+40.0%), were bright spots. Oil and gas producer Royal Dutch Shell, the sixth-largest holding, fell 3.0%. Energy was the second-largest industry group in the fund at 11.0% of the portfolio, up slightly from 10.1% six months earlier, and it helped the fund’s results.

Information technology was the portfolio’s largest industry group as of June 30, 2008, making up 18.2% of the fund, up from 16.8% six months ago. Many of these companies’ stock prices had trouble in the period, including software producers Microsoft (–22.7%), the fund’s second-largest holding, and fourth-largest Oracle (–7.0%). Internet equipment maker Cisco Systems fell 14.1%. Internet services was also weak: Google was down 23.9% and Yahoo! fell 11.2%. On the positive side of the industry, semiconductor-related companies Applied Materials (+7.5%) and Taiwan Semiconductor Manufacturing (+12.4%) were up, as well as business machine makers Canon (+12.4%) and IBM (+9.7%).

Lowe’s, a home improvement retailer and the fund’s ninth-largest holding, fell 8.3%. Discount retailers had better results: Wal-Mart Stores was up 18.2% and TJX Companies rose 9.5%. Beverage and snack food maker PepsiCo, the 10th-largest holding, struggled (–16.2%), along with the seventh-largest holding, telephone giant AT&T (–18.9%), and the eighth-largest holding, conglomerate General Electric (–28.0%).

A look ahead

We are cautious in our approach to the immediate future. The U.S. economy continues to face numerous difficulties. It could perhaps see higher inflation, greater unemployment and a steeper decline in housing prices, which could further temper returns in the equity markets. On the other hand, we are also mindful that the market might have already factored in these fears, considering the recent deep plunge of many stock prices. Regardless, our investment professionals continue to study companies — thoroughly researching their balance sheets, cash flows, managements, competition, prospects for future business — working to find good values that will shine over time regardless of the current volatile environment.

We thank you for your continued support and your commitment to long-term investing during these turbulent times.

Sincerely,

/s/ R. Michael Shanahan
/s/ James B. Lovelace
R. Michael Shanahan
James B. Lovelace
Vice Chairman
President

August 6, 2008

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

 


Summary investment portfolio, June 30, 2008
      
unaudited
 
The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings.  For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.
 
[begin pie chart]
    
       
       
Industry sector diversification
  
(percent of net assets)
  
       
Information technology
     18.24 %
Energy
     11.04  
Consumer staples
     10.23  
Health care
     9.89  
Financials
     7.53  
Other industries
     28.65  
Convertible securities
     1.40  
Bonds & notes
     0.10  
Short-term securities & other assets less liabilities
     12.92  
         
[end pie chart]
        

       
     
 
       
   
Shares
Market value (000)
Percent of net assets
       
Common stocks  - 85.37%
 
    
Energy  - 11.04%
      
Baker Hughes Inc.
8,105,000
$707,891
.92%
Chevron Corp.
16,072,278
1,593,245
2.08
ConocoPhillips
8,770,972
827,892
1.08
Hess Corp.
3,546,300
447,508
.58
Marathon Oil Corp.
8,200,000
425,334
.56
Royal Dutch Shell PLC, Class A (ADR)
15,065,000
1,230,961
  
Royal Dutch Shell PLC, Class B (1)
833,265
33,501
  
Royal Dutch Shell PLC, Class B (ADR)
2,560,498
205,121
1.92
Schlumberger Ltd.
19,249,999
2,068,027
2.70
Other securities
  
919,960
1.20
   
8,459,440
11.04
       
Materials  - 3.80%
      
USX Corp.
3,125,614
577,551
.75
Other securities
  
2,336,136
3.05
   
2,913,687
3.80
       
Industrials  - 6.93%
      
General Dynamics Corp.
6,745,800
567,996
.74
General Electric Co.
50,575,000
1,349,847
1.76
United Technologies Corp.
10,965,000
676,540
.88
Other securities
  
2,711,913
3.55
   
5,306,296
6.93
       
Consumer discretionary  - 7.50%
      
Lowe's Companies, Inc.
63,196,600
1,311,329
1.71
Target Corp.
17,984,200
836,085
1.09
Time Warner Inc.
51,882,000
767,854
1.00
Toyota Motor Corp. (1)
10,025,000
472,377
.62
Other securities
  
2,358,304
3.08
   
5,745,949
7.50
       
Consumer staples  - 10.23%
      
Altria Group, Inc.
34,295,000
705,105
.92
PepsiCo, Inc.
19,820,000
1,260,354
1.65
Philip Morris International Inc.
38,415,000
1,897,317
2.48
Procter & Gamble Co.
6,518,000
396,360
.52
Walgreen Co.
25,484,200
828,491
1.08
Other securities
  
2,744,080
3.58
   
7,831,707
10.23
       
Health care  - 9.89%
      
Abbott Laboratories
12,738,200
674,742
.88
Bristol-Myers Squibb Co.
30,050,000
616,927
.81
Eli Lilly and Co.
10,055,000
464,139
.61
Medtronic, Inc.
12,900,000
667,575
.87
Merck & Co., Inc.
27,392,800
1,032,435
1.35
Roche Holding AG (1)
6,180,000
1,112,484
1.45
Other securities
  
3,003,405
3.92
   
7,571,707
9.89
       
Financials  - 7.53%
      
American International Group, Inc.
19,248,900
509,326
.66
Bank of America Corp.
36,700,800
876,048
1.14
Citigroup Inc.
58,068,300
973,225
1.27
Fannie Mae
29,151,100
568,738
.74
Freddie Mac
16,313,700
267,545
.35
JPMorgan Chase & Co.
12,230,000
419,611
.55
Other securities
  
2,156,232
2.82
   
5,770,725
7.53
       
Information technology  - 18.24%
      
Cisco Systems, Inc. (2)
39,083,400
909,080
1.19
Google Inc., Class A (2)
1,304,400
686,662
.90
Hewlett-Packard Co.
22,950,000
1,014,620
1.32
Intel Corp.
41,115,000
883,150
1.15
International Business Machines Corp.
7,635,000
904,977
1.18
Microsoft Corp.
71,467,100
1,966,060
2.57
Oracle Corp. (2)
87,195,100
1,831,097
2.39
SAP AG (1)
11,535,800
603,383
.79
Taiwan Semiconductor Manufacturing Co. Ltd. (1)  (2)
286,090,065
611,891
.80
Texas Instruments Inc.
23,650,000
665,984
.87
Yahoo! Inc. (2)
32,035,000
661,843
.86
Other securities
  
3,229,184
4.22
   
13,967,931
18.24
       
Telecommunication services  - 3.61%
      
AT&T Inc.
40,206,500
1,354,557
1.77
Sprint Nextel Corp., Series 1
79,958,400
759,605
.99
Other securities
  
653,274
.85
   
2,767,436
3.61
       
Utilities  - 3.65%
      
Dominion Resources, Inc.
13,513,824
641,772
.84
Exelon Corp.
10,175,200
915,361
1.20
Public Service Enterprise Group Inc.
10,000,000
459,300
.60
Other securities
  
778,345
1.01
   
2,794,778
3.65
       
Miscellaneous  -  2.95%
      
Other common stocks in initial period of acquisition
  
2,259,856
2.95
       
       
Total common stocks (cost: $59,940,541,000)
  
65,389,512
85.37
       
       
       
   
Shares
Market value (000)
Percent of net assets
       
Preferred stocks  - 0.21%
 
    
       
       
Financials - 0.02%
      
Other securities
  
14,365
.02
       
Miscellaneous  -  0.19%
      
Other preferred stocks in initial period of acquisition
  
144,120
.19
       
       
Total preferred stocks (cost: $164,822,000)
  
158,485
.21
       
       
       
   
Shares
Market value (000)
Percent of net assets
       
Warrants  - 0.00%
 
    
       
       
Financials - 0.00%
      
Other securities
  
1,160
.00
       
Total warrants (cost: $11,770,000)
  
1,160
.00
       
       
       
 
Shares
Market value (000)
Percent of net assets
       
Convertible securities  - 1.40%
      
       
       
Financials  - 0.61%
      
Citigroup Inc., Series D, 7.00% noncumulative convertible preferred (1) (3)
5,250,000
239,794
.31
Fannie Mae, Series 2004-1, 5.375% convertible preferred
820
49,200
.07
Other securities
  
173,545
.23
   
462,539
.61
       
Other  - 0.26%
      
Other securities
  
202,639
.26
       
Miscellaneous  -  0.53%
      
Other convertible securities in initial period of acquisition
  
408,699
.53
       
       
Total convertible securities (cost: $1,295,574,000)
  
1,073,877
1.40
       
       
       
 
Principal amount (000)
Market value (000)
Percent of net assets
       
Bonds & notes  - 0.10%
      
       
Other  - 0.10%
      
Sprint Capital Corp. 6.90%-8.75% 2019-2032
$68,415
63,726
  
Sprint Nextel Corp. 6.00% 2016
9,255
7,972
.09
Other securities
  
6,978
.01
       
Total bonds & notes (cost: $71,160,000)
  
78,676
.10
       
       
       
 
Principal amount (000)
Market value (000)
Percent of net assets
       
Short-term securities  - 12.96%
      
       
       
Abbott Laboratories 2.02%-2.16% due 7/25-7/31/2008 (4)
$139,850
139,596
.18%
AT&T Inc. 2.10%-2.41% due 7/10-9/17/2008 (4)
348,351
347,735
.45
Bank of America Corp. 2.585% due 7/28/2008
50,000
49,901
  
Enterprise Funding Corp. 2.60%-2.73% due 9/9-9/18/2008 (4)
122,521
121,743
  
Ranger Funding Co. LLC 2.75% due 9/18/2008 (4)
75,000
74,502
.32
CAFCO, LLC 2.55%-2.75% due 7/15-9/19/2008 (4)
132,000
131,423
  
Ciesco LLC 2.58%-2.68% due 8/6-9/3/2008 (4)
127,800
127,240
.34
Chevron Funding Corp. 2.05% due 7/2/2008
20,000
19,998
.03
Edison Asset Securitization LLC 2.43%-2.72% due 8/6-9/15/2008 (4)
185,000
184,222
  
General Electric Capital Corp. 2.47% due 7/24/2008
75,000
74,890
  
General Electric Capital Services, Inc. 2.45% due 8/4/2008
100,000
99,781
.47
Fannie Mae 1.70%-2.15% due 7/2-9/10/2008
587,510
586,586
.77
Federal Home Loan Bank 1.71%-2.78% due 7/18-12/29/2008
2,119,750
2,108,569
2.75
Freddie Mac 2.00%-2.77% due 7/1-12/8/2008
1,890,004
1,883,088
2.46
Medtronic Inc. 2.12%-2.18% due 8/11-8/12/2008 (4)
110,000
109,720
.14
Merck & Co. Inc. 2.17% due 7/22/2008
70,000
69,907
.09
Procter & Gamble International Funding S.C.A. 1.95%-2.29% due 7/8-9/24/2008 (4)
375,898
374,506
.49
U.S. Treasury Bills 1.50%-1.85% due 10/2-11/6/2008
536,400
533,045
.69
Other securities
  
2,893,313
3.78
       
       
Total short-term securities (cost: $9,933,118,000)
  
9,929,765
12.96
       
       
Total investment securities (cost: $66,416,985,000)
  
76,631,475
100.04
Other assets less liabilities
  
(32,838)
(.04)
       
Net assets
  
$76,598,637
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. The market value of the fund's holdings in affiliated companies is included in "Other securities" under their respective industry sector in the preceding summary investment portfolio. Further details on these holdings and related transactions during the six months ended June 30, 2008, appear below.
  
                                     
   
 
    
 
        
     
Beginning shares or principal amount
    
Additions
    
Reductions
      
Ending shares or principal amount
      
Dividend or interest income (000)
      
Market value of affiliates at 6/30/08 (000)
  
Limited Brands, Inc.
     18,289,943       -       -       18,289,943     $ 5,487     $ 308,185  
Countrywide Financial Corp. (5) (6)
     12,650,000       17,350,000       30,000,000       -       3,975       -  
Countrywide Financial Corp., Series A, 4.50% 2010 (6)
     910,000       -       910,000       -       6       -  
Countrywide Financial Corp., Series B, 5.80% 2012 (6)
     23,680,000       -       23,680,000       -       128       -  
                                    $ 9,596     $ 308,185  

       
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 $7,883,464,000, which represented 10.29% of the net assets of the fund.
(2) Security did not produce income during the last 12 months.
      
(3) Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired on 1/15/2008 at a cost of $262,500,000 ) may be subject to legal or contractual restrictions on resale. The total value of all such securities, including those in "Other securities," was $486,378,000, which represented .63% of the net assets of the fund.
(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities,"  was $3,588,092,000, which represented 4.68% of the net assets of the fund.
(5) This security was an unaffiliated issuer in its initial period of acquisition at 12/31/2007 and was not publicly disclosed.
(6) Unaffiliated issuer at 6/30/2008.
      
       
Key to abbreviation
      
       
ADR = American Depositary Receipts
      
       
See Notes to Financial Statements
      

 
 


Financial statements
            
             
Statement of assets and liabilities at June 30, 2008
        
unaudited
  
   
(dollars in thousands)
  
             
Assets:
            
 Investment securities at market:
            
  Unaffiliated issuers (cost: $66,210,950)
   $ 76,323,290        
  Affiliated issuer (cost: $206,035)
     308,185     $ 76,631,475  
 Cash
             306  
 Receivables for:
                
  Sales of investments
     70,776          
  Sales of fund's shares
     53,294          
  Dividends and interest
     111,181       235,251  
              76,867,032  
Liabilities:
                
 Payables for:
                
  Purchases of investments
     100,250          
  Repurchases of fund's shares
     120,730          
  Investment advisory services
     13,655          
  Services provided by affiliates
     27,403          
  Directors' and advisory board's deferred compensation
     5,679          
  Other
     678       268,395  
Net assets at June 30, 2008
           $ 76,598,637  
                 
Net assets consist of:
                
 Capital paid in on shares of capital stock
           $ 62,431,101  
 Undistributed net investment income
             388,215  
 Undistributed net realized gain
             3,564,545  
 Net unrealized appreciation
             10,214,776  
Net assets at June 30, 2008
           $ 76,598,637  



      (dollars and shares in thousands, except per-share amounts)  
                         
   
Authorized shares of capital stock- $.001 par value
    
Net assets
    
Shares outstanding
    
Net asset value per share*
  
 
                        
 
Class A
     2,500,000     $ 62,803,854       2,176,724     $ 28.85  
Class B
     250,000       3,380,063       117,655       28.73  
Class C
     250,000       2,890,759       100,842       28.67  
Class F
     250,000       1,491,614       51,761       28.82  
Class 529-A
     325,000       1,204,190       41,783       28.82  
Class 529-B
     75,000       233,123       8,108       28.75  
Class 529-C
     150,000       340,966       11,856       28.76  
Class 529-E
     75,000       51,197       1,780       28.77  
Class 529-F
     75,000       18,628       647       28.80  
Class R-1
     75,000       61,638       2,145       28.73  
Class R-2
     100,000       623,693       21,695       28.75  
Class R-3
     300,000       939,828       32,638       28.80  
Class R-4
     75,000       392,251       13,613       28.82  
Class R-5
     150,000       2,166,833       75,113       28.85  
Total
     4,650,000     $ 76,598,637       2,656,360          
* 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 $30.61 and $30.58, respectively.
  
                                 
See Notes to Financial Statements
                                

 


Statement of operations
        
unaudited
  
for the six months ended June 30, 2008
  
(dollars in thousands)
  
             
Investment income:
            
 Income:
            
  Dividends (net of non-U.S.
            
            taxes of $29,298; also includes
            
            $9,462 from affiliates )
   $ 927,944        
  Interest ( also includes $134
     181,486     $ 1,109,430  
             from affiliates)
                
 Fees and expenses*:
                
  Investment advisory services
     96,178          
  Distribution services
     124,028          
  Transfer agent services
     33,764          
  Administrative services
     8,663          
  Reports to shareholders
     2,201          
  Registration statement and prospectus
     780          
  Postage, stationery and supplies
     2,794          
  Directors' and advisory board's compensation
     356          
  Auditing and legal
     86          
  Custodian
     1,061          
  State and local taxes
     731          
  Other
     166          
  Total fees and expenses before waiver
     270,808          
 Less investment advisory services waiver
     9,618          
  Total fees and expenses after waiver
             261,190  
 Net investment income
             848,240  
                 
Net realized gain and unrealized
                
 depreciation on investments
                
 and currency:
                
 Net realized gain (loss) on:
                
  Investments (including $147,502 net loss from affiliates)
     3,575,266          
  Currency transactions
     (2,011 )     3,573,255  
 Net unrealized depreciation on:
                
  Investments
     (14,533,498 )        
  Currency translations
     (51 )     (14,533,549 )
   Net realized gain and
                
    unrealized depreciation
                
    on investments and currency
             (10,960,294 )
Net decrease in net assets resulting
                
 from operations
           $ (10,112,054 )
                 
* 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
ended June
30, 2008*
    
Year ended
December
31, 2007
  
                 
                 
Operations:
                
 Net investment income
   $ 848,240     $ 1,802,655  
 Net realized gain on investments and
                
  currency transactions
     3,573,255       5,106,803  
 Net unrealized (depreciation)
                
  on investments and currency translations
     (14,533,549 )     (1,688,969 )
  Net (decrease) increase in net assets
                
   resulting from operations
     (10,112,054 )     5,220,489  
                 
Dividends and distributions paid to shareholders:
                
 Dividends from net investment income and currency
     (872,476 )     (1,645,396 )
 Distributions from net realized gain
                
  on investments
     -       (4,764,009 )
   Total dividends and distributions paid
                
    to shareholders
     (872,476 )     (6,409,405 )
                 
Net capital share transactions
     (1,619,461 )     1,337,443  
                 
Total (decrease) increase in net assets
     (12,603,991 )     148,527  
                 
Net assets:
                
 Beginning of period
     89,202,628       89,054,101  
 End of period (including undistributed
                
  net investment income: $388,215 and $412,451, respectively)
   $ 76,598,637     $ 89,202,628  
                 
*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 used 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 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 securities outside the U.S.) 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.

Currency translation – Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars 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 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 currencies other than U.S. dollars are disclosed separately.

2. Investments outside the U.S.

Investment risk – The risks of investing in securities of issuers outside the U.S. 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.

As of and during the period ended June 30, 2008, 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 2004 and by state tax authorities for tax years before 2003.

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 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; 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, 2007, the fund had tax basis undistributed ordinary income of $430,435,000.

As of June 30, 2008, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows:

     
(dollars in thousands)
Gross unrealized appreciation on investment securities
    
$18,837,557
Gross unrealized depreciation on investment securities
    
(8,636,259)
Net unrealized appreciation on investment securities
    
10,201,298
Cost of investment securities
    
66,430,177

The tax character of distributions paid to shareholders was as follows (dollars in thousands):

 
   
Six months ended June 30, 2008
    
Year ended December 31, 2007
  
 
Share class
  
Ordinary income
    
Long-term capital gains
    
Total distributions paid
    
Ordinary income
    
Long-term capital gains
    
Total distributions paid
  
 
                                    
Class A
   $ 742,773     $ -     $ 742,773     $ 1,422,554     $ 3,922,272     $ 5,344,826  
Class B
     26,702       -       26,702       47,870       221,887       269,757  
Class C
     21,834       -       21,834       37,353       183,234       220,587  
Class F
     16,887       -       16,887       30,879       87,716       118,595  
Class 529-A
     13,439       -       13,439       22,603       69,337       91,940  
Class 529-B
     1,642       -       1,642       2,582       13,936       16,518  
Class 529-C
     2,400       -       2,400       3,644       19,888       23,532  
Class 529-E
     496       -       496       805       2,950       3,755  
Class 529-F
     224       -       224       336       984       1,320  
Class R-1
     460       -       460       617       3,281       3,898  
Class R-2
     4,393       -       4,393       7,147       36,974       44,121  
Class R-3
     9,238       -       9,238       15,301       54,847       70,148  
Class R-4
     4,493       -       4,493       6,957       21,999       28,956  
Class R-5
     27,495       -       27,495       46,748       124,704       171,452  
Total
   $ 872,476     $ -     $ 872,476     $ 1,645,396     $ 4,764,009     $ 6,409,405  

4. Fees and transactions with related parties

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

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.390% on the first $1 billion of month-end net assets and decreasing to 0.219% 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, 2008, total investment advisory services fees waived by CRMC were $9,618,000. As a result, the fee shown on the accompanying financial statements of $96,178,000, which was equivalent to an annualized rate of 0.235%, was reduced to $86,560,000, or 0.211% 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, 2008, 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. 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, 2008, 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
$78,044
$31,950
Not applicable
Not applicable
Not applicable
Class B
 18,523
 1,814
Not applicable
Not applicable
Not applicable
Class C
 15,467
 
 
 
 
Included
in
administrative services
$1,972
$243
Not applicable
Class F
 1,878
 871
 78
Not applicable
Class 529-A
 1,324
 537
 69
$622
Class 529-B
1,219
 106
 28
 122
Class 529-C
 1,763
 153
 35
 177
Class 529-E
 132
 23
 3
 26
Class 529-F
-
 8
 1
 9
Class R-1
 307
 21
 13
Not applicable
Class R-2
 2,429
 470
 1,012
Not applicable
Class R-3
2,434
 476
 255
Not applicable
Class R-4
 508
 272
 10
Not applicable
Class R-5
Not applicable
 1,046
 5
Not applicable
Total
$124,028
$33,764
$5,955
$1,752
$956

Directors’ and advisory board’s deferred 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’s compensation of $356,000, shown on the accompanying financial statements, includes $507,000 in current fees (either paid in cash or deferred) and a net decrease of $151,000 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, 2008, 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, 2008, the net asset value of Class A shares would have been reduced by $0.01 per share.

6. Disclosure of fair value measurements

The fund adopted the Statement of Financial Accounting Standards No. 157 (“FAS 157”), Fair Value Measurements, on January 1, 2008. FAS 157 requires the fund to classify its assets and liabilities based on valuation method using three levels. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are generally high quality and liquid; however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following table presents the fund’s valuation levels as of June 30, 2008 (dollars in thousands):

   
Investment securities
  
Level 1 – Quoted prices
   $ 58,580,923  
Level 2 – Other significant observable inputs
     17,946,425 *
Level 3 – Significant unobservable inputs
     104,127  
Total
   $ 76,631,475  

* Includes certain securities trading primarily outside the U.S. whose value the fund adjusted as a result of significant market movements following the close of local trading.

The following table reconciles the valuation of the fund’s Level 3 investment securities and related transactions during the six months ended June 30, 2008 (dollars in thousands):

Beginning value at 1/1/2008
   $ -  
Net purchases
     215,000  
Net unrealized depreciation †
     (110,873 )
Ending value at 6/30/2008
   $ 104,127  

Net unrealized depreciation during the period on Level 3 investment securities held at 6/30/2008 †
   $ (110,873 )

† Net unrealized depreciation is included in the related amounts from investments on the statement of operations.

7. 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, 2008
                                            
Class A
   $ 2,268,946       73,959     $ 693,731       23,135     $ (4,612,365 )     (150,376 )   $ (1,649,688 )     (53,282 )
Class B
     89,900       2,946       25,733       862       (374,169 )     (12,276 )     (258,536 )     (8,468 )
Class C
     167,207       5,488       20,748       696       (288,836 )     (9,485 )     (100,881 )     (3,301 )
Class F
     255,798       8,349       15,000       501       (213,348 )     (6,986 )     57,450       1,864  
Class 529-A
     97,043       3,161       13,438       448       (51,196 )     (1,669 )     59,285       1,940  
Class 529-B
     11,277       369       1,642       55       (8,187 )     (267 )     4,732       157  
Class 529-C
     29,406       961       2,399       80       (17,619 )     (574 )     14,186       467  
Class 529-E
     4,514       147       496       17       (2,451 )     (80 )     2,559       84  
Class 529-F
     3,041       99       224       7       (950 )     (31 )     2,315       75  
Class R-1
     15,160       495       459       15       (7,034 )     (229 )     8,585       281  
Class R-2
     102,098       3,339       4,392       147       (89,191 )     (2,919 )     17,299       567  
Class R-3
     146,381       4,768       9,231       308       (116,675 )     (3,815 )     38,937       1,261  
Class R-4
     99,019       3,226       4,491       150       (76,497 )     (2,509 )     27,013       867  
Class R-5
     284,456       9,249       27,282       910       (154,455 )     (5,067 )     157,283       5,092  
Total net increase
                                                                
   (decrease)
   $ 3,574,246       116,556     $ 819,266       27,331     $ (6,012,973 )     (196,283 )   $ (1,619,461 )     (52,396 )
                                                                 
Year ended December 31, 2007
                                                          
Class A
   $ 4,871,575       139,663     $ 5,016,468       152,359     $ (9,651,061 )     (275,431 )   $ 236,982       16,591  
Class B
     219,240       6,317       260,146       7,968       (511,605 )     (14,672 )     (32,219 )     (387 )
Class C
     411,276       11,870       210,801       6,474       (512,774 )     (14,763 )     109,303       3,581  
Class F
     415,814       11,910       107,417       3,268       (536,777 )     (15,273 )     (13,546 )     (95 )
Class 529-A
     224,065       6,441       91,930       2,799       (97,623 )     (2,792 )     218,372       6,448  
Class 529-B
     27,042       778       16,516       505       (16,070 )     (461 )     27,488       822  
Class 529-C
     70,845       2,038       23,529       720       (37,718 )     (1,083 )     56,656       1,675  
Class 529-E
     9,886       285       3,755       114       (4,771 )     (137 )     8,870       262  
Class 529-F
     7,055       203       1,320       41       (1,830 )     (52 )     6,545       192  
Class R-1
     22,228       640       3,895       120       (12,829 )     (370 )     13,294       390  
Class R-2
     214,688       6,182       44,084       1,350       (178,235 )     (5,113 )     80,537       2,419  
Class R-3
     325,007       9,352       70,083       2,138       (254,134 )     (7,302 )     140,956       4,188  
Class R-4
     184,808       5,296       28,946       882       (107,806 )     (3,078 )     105,948       3,100  
Class R-5
     544,356       15,474       170,684       5,183       (336,783 )     (9,724 )     378,257       10,933  
Total net increase
                                                                
   (decrease)
   $ 7,547,885       216,449     $ 6,049,574       183,921     $ (12,260,016 )     (350,251 )   $ 1,337,443       50,119  
                                                                 
* Includes exchanges between share classes of the fund.
                                          

8. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $11,601,478,000 and $12,123,620,000, respectively, during the six months ended June 30, 2008.



Financial highlights(1)


    (Loss) income from investment operations(2)   Dividends and distributions                  
 
Net asset value, beginning of period
Net investment income
    
Net (losses) gains on securities (both realized and unrealized)
Total from investment operations
Dividends (from net investment 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 reim-bursements/
waivers
Ratio of
expenses
to average
net assets
after reim-bursements/
waivers (4)
Ratio of net income to average net assets (4)
Class A:
                                      
 Six months ended 6/30/2008(5)
$32.95
$.33
   $
(4.09)
  
$(3.76)
$(.34)
 $                       -
$(.34)
$28.85
(11.45)%
$62,804
.58%
(6)
.56%
(6)
2.16%
(6)
 Year ended 12/31/2007
 33.51
.72
    
1.24
  
1.96
(.66)
(1.86)
(2.52)
32.95
5.94
73,480
.56
  
.54
  
2.05
  
 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
  
Class B:
                                      
 Six months ended 6/30/2008(5)
 32.81
.21
    
(4.07)
  
(3.86)
(.22)
                           -
(.22)
28.73
(11.78)
3,380
1.35
(6)
1.33
(6)
1.39
(6)
 Year ended 12/31/2007
 33.37
.45
    
1.24
  
1.69
(.39)
(1.86)
(2.25)
32.81
5.15
4,138
1.33
  
1.31
  
1.28
  
 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
  
Class C:
                                      
 Six months ended 6/30/2008(5)
 32.74
.20
    
(4.05)
  
(3.85)
(.22)
                           -
(.22)
28.67
(11.80)
2,891
1.40
(6)
1.37
(6)
1.34
(6)
 Year ended 12/31/2007
 33.31
.43
    
1.23
  
1.66
(.37)
(1.86)
(2.23)
32.74
5.08
3,409
1.38
  
1.36
  
1.23
  
 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
  
Class F:
                                      
 Six months ended 6/30/2008(5)
 32.91
.32
    
(4.08)
  
(3.76)
(.33)
                           -
(.33)
28.82
(11.45)
1,491
.62
(6)
.59
(6)
2.13
(6)
 Year ended 12/31/2007
 33.48
.70
    
1.24
  
1.94
(.65)
(1.86)
(2.51)
32.91
5.87
1,642
.60
  
.58
  
2.01
  
 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
  
Class 529-A:
                                      
 Six months ended 6/30/2008(5)
 32.91
.32
    
(4.08)
  
(3.76)
(.33)
                           -
(.33)
28.82
(11.46)
1,204
.67
(6)
.64
(6)
2.08
(6)
 Year ended 12/31/2007
 33.48
.68
    
1.24
  
1.92
(.63)
(1.86)
(2.49)
32.91
5.83
1,311
.65
  
.63
  
1.95
  
 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
  
Class 529-B:
                                      
 Six months ended 6/30/2008(5)
 32.83
.19
    
(4.07)
  
(3.88)
(.20)
                           -
(.20)
28.75
(11.82)
233
1.47
(6)
1.44
(6)
1.28
(6)
 Year ended 12/31/2007
 33.40
.40
    
1.24
  
1.64
(.35)
(1.86)
(2.21)
32.83
4.99
261
1.46
  
1.43
  
1.15
  
 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
  
Class 529-C:
                                      
 Six months ended 6/30/2008(5)
 32.84
.20
    
(4.07)
  
(3.87)
(.21)
                           -
(.21)
28.76
(11.82)
341
1.46
(6)
1.44
(6)
1.29
(6)
 Year ended 12/31/2007
 33.41
.40
    
1.24
  
1.64
(.35)
(1.86)
(2.21)
32.84
4.99
374
1.45
  
1.43
  
1.15
  
 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
  
Class 529-E:
                                      
 Six months ended 6/30/2008(5)
 32.85
.27
    
(4.07)
  
(3.80)
(.28)
                           -
(.28)
28.77
(11.59)
51
.95
(6)
.93
(6)
1.79
(6)
 Year ended 12/31/2007
 33.42
.58
    
1.24
  
1.82
(.53)
(1.86)
(2.39)
32.85
5.52
56
.95
  
.92
  
1.66
  
 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
  
                                       
Class 529-F:
                                      
 Six months ended 6/30/2008(5)
$32.90
$.35
   $
(4.09)
  
$(3.74)
$(.36)
 $                       -
$(.36)
$28.80
(11.40)%
$19
.45%
(6)
.43%
(6)
2.30%
(6)
 Year ended 12/31/2007
 33.47
.75
    
1.24
  
1.99
(.70)
(1.86)
(2.56)
32.90
6.05
19
.45
  
.42
  
2.15
  
 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
  
Class R-1:
                                      
 Six months ended 6/30/2008(5)
 32.81
.21
    
(4.07)
  
(3.86)
(.22)
                           -
(.22)
28.73
(11.78)
62
1.36
(6)
1.34
(6)
1.39
(6)
 Year ended 12/31/2007
 33.39
.42
    
1.23
  
1.65
(.37)
(1.86)
(2.23)
32.81
5.06
61
1.40
  
1.38
  
1.20
  
 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
  
Class R-2:
                                      
 Six months ended 6/30/2008(5)
 32.83
.20
    
(4.07)
  
(3.87)
(.21)
                           -
(.21)
28.75
(11.82)
624
1.46
(6)
1.43
(6)
1.28
(6)
 Year ended 12/31/2007
 33.40
.42
    
1.23
  
1.65
(.36)
(1.86)
(2.22)
32.83
5.04
694
1.44
  
1.39
  
1.19
  
 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
  
Class R-3:
                                      
 Six months ended 6/30/2008(5)
 32.88
.28
    
(4.07)
  
(3.79)
(.29)
                           -
(.29)
28.80
(11.56)
940
.90
(6)
.88
(6)
1.84
(6)
 Year ended 12/31/2007
 33.45
.58
    
1.24
  
1.82
(.53)
(1.86)
(2.39)
32.88
5.52
1,032
.94
  
.92
  
1.66
  
 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
  
Class R-4:
                                      
 Six months ended 6/30/2008(5)
 32.90
.32
    
(4.07)
  
(3.75)
(.33)
                           -
(.33)
28.82
(11.46)
392
.64
(6)
.61
(6)
2.11
(6)
 Year ended 12/31/2007
 33.48
.68
    
1.23
  
1.91
(.63)
(1.86)
(2.49)
32.90
5.85
419
.65
  
.63
  
1.95
  
 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
  
Class R-5:
                                      
 Six months ended 6/30/2008(5)
 32.95
.37
    
(4.09)
  
(3.72)
(.38)
                           -
(.38)
28.85
(11.34)
2,167
.35
(6)
.32
(6)
2.40
(6)
 Year ended 12/31/2007
 33.51
.79
    
1.25
  
2.04
(.74)
(1.86)
(2.60)
32.95
6.18
2,307
.35
  
.33
  
2.25
  
 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
  


   
 
                                
   
Six months ended
June 30,
    
Year ended December 31
  
   
2008(5)
    
2007
    
2006
    
2005
    
2004
    
2003
  
                                     
Portfolio turnover rate for all classes of shares
     16 %     22 %     20 %     19 %     19 %     24 %


(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 any applicable 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. 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.
 
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, 2008, through June 30, 2008).
 
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 1/1/2008
    
Ending account value 6/30/2008
    
Expenses paid during period*
    
Annualized expense ratio
  
                         
Class A -- actual return
   $ 1,000.00     $ 885.52     $ 2.63       .56 %
Class A -- assumed 5% return
     1,000.00       1,022.08       2.82       .56  
Class B -- actual return
     1,000.00       882.15       6.22       1.33  
Class B -- assumed 5% return
     1,000.00       1,018.25       6.67       1.33  
Class C -- actual return
     1,000.00       882.00       6.41       1.37  
Class C -- assumed 5% return
     1,000.00       1,018.05       6.87       1.37  
Class F -- actual return
     1,000.00       885.52       2.77       .59  
Class F -- assumed 5% return
     1,000.00       1,021.93       2.97       .59  
Class 529-A -- actual return
     1,000.00       885.35       3.00       .64  
Class 529-A -- assumed 5% return
     1,000.00       1,021.68       3.22       .64  
Class 529-B -- actual return
     1,000.00       881.76       6.74       1.44  
Class 529-B -- assumed 5% return
     1,000.00       1,017.70       7.22       1.44  
Class 529-C -- actual return
     1,000.00       881.81       6.74       1.44  
Class 529-C -- assumed 5% return
     1,000.00       1,017.70       7.22       1.44  
Class 529-E -- actual return
     1,000.00       884.13       4.36       .93  
Class 529-E -- assumed 5% return
     1,000.00       1,020.24       4.67       .93  
Class 529-F -- actual return
     1,000.00       886.00       2.02       .43  
Class 529-F -- assumed 5% return
     1,000.00       1,022.73       2.16       .43  
Class R-1 -- actual return
     1,000.00       882.18       6.27       1.34  
Class R-1 -- assumed 5% return
     1,000.00       1,018.20       6.72       1.34  
Class R-2 -- actual return
     1,000.00       881.76       6.69       1.43  
Class R-2 -- assumed 5% return
     1,000.00       1,017.75       7.17       1.43  
Class R-3 -- actual return
     1,000.00       884.39       4.12       .88  
Class R-3 -- assumed 5% return
     1,000.00       1,020.49       4.42       .88  
Class R-4 -- actual return
     1,000.00       885.41       2.86       .61  
Class R-4 -- assumed 5% return
     1,000.00       1,021.83       3.07       .61  
Class R-5 -- actual return
     1,000.00       886.59       1.50       .32  
Class R-5 -- assumed 5% return
     1,000.00       1,023.27       1.61       .32  
 
*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 (182), and divided by 366 (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, 2009. 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 the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.

In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their 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 the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the 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 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 the committee concluded that the nature, extent and quality of the services provided by CRMC have 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 of pursuing long-term growth of capital and income. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices. This report, including the letter to shareholders and related disclosures, 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. They 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 that reduce the level of fees charged by CRMC to the fund as fund assets increase, as well as the 10% advisory fee waiver in effect since April 2005. In addition, they reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with investment mandates similar to those of the fund. They noted that, although the fees paid by those clients generally were lower than those paid by the fund, 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 and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information previously received regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure and the impact of CRMC’s current 10% advisory fee waiver, reflecting benefits that may accrue from growth in assets. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.


Other share class results
unaudited

Class B, Class C, Class F and Class 529

Fund results shown are for past periods and are not predictive of results for 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, 2008:
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
  –17.84%
  6.92%
   3.37%
Not reflecting CDSC
–13.82
7.23
3.37
       
Class C shares — first sold 3/15/01
      
Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase
–14.66
7.16
3.69
Not reflecting CDSC
–13.86
7.16
3.69
       
Class F shares* — first sold 3/15/01
      
Not reflecting annual asset-based fee charged by sponsoring firm
–13.19
7.99
4.50
       
Class 529-A shares† — first sold 2/15/02
      
Reflecting 5.75% maximum sales charge
–18.23
6.69
4.48
Not reflecting maximum sales charge
–13.22
7.96
5.45
       
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
–17.96
6.75
4.56
Not reflecting CDSC
–13.94
7.05
4.56
       
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
–14.73
7.07
4.83
Not reflecting CDSC
–13.93
7.07
4.83
       
Class 529-E shares*† — first sold 3/1/02
–13.48
7.62
4.78
       
Class 529-F shares*† — first sold 9/16/02
      
Not reflecting annual asset-based fee charged by sponsoring firm
–13.07
8.05
8.55

*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 the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on 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.


Offices

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

6455 Irvine Center Drive
Irvine, CA 92618

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 professional 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, 2008, 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, 2008, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

 
 
[logo - American Funds®]

The right choice for the long term®
 
What makes American Funds different?
 
For more than 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 50 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 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 26 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 Series®



The Capital Group Companies
 
American Funds      Capital Research and Management      Capital International      Capital Guardian        Capital Bank and Trust
 
 

 
Lit. No. MFGESR-904-0808P
 
Litho in USA BBC/LPT/8087-S16774
Printed on paper containing 10% post-consumer waste
 
Printed with inks containing soy and/or vegetable oil
 
 
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

[logo – American Funds®]



The Investment Company of America®
Investment portfolio

June 30, 2008
unaudited

 
  Shares
Market value
Common stocks — 85.37%
 
(000)
     
ENERGY — 11.04%
    
Baker Hughes Inc.
8,105,000
$   707,891
Chevron Corp.
16,072,278
1,593,245
ConocoPhillips
8,770,972
827,892
Eni SpA1
4,225,000
157,423
Eni SpA (ADR)
420,000
31,177
Exxon Mobil Corp.
2,100,000
185,073
Halliburton Co.
3,800,000
201,666
Hess Corp.
3,546,300
447,508
Marathon Oil Corp.
8,200,000
425,334
Royal Dutch Shell PLC, Class A (ADR)
15,065,000
1,230,961
Royal Dutch Shell PLC, Class B1
833,265
33,501
Royal Dutch Shell PLC, Class B (ADR)
2,560,498
205,121
Schlumberger Ltd.
19,249,999
2,068,027
TOTAL SA1
4,040,000
344,621
   
8,459,440
     
MATERIALS — 3.80%
    
Air Products and Chemicals, Inc.
3,050,000
301,523
Alcoa Inc.
1,676,400
59,713
Barrick Gold Corp.
7,150,000
325,325
Dow Chemical Co.
4,450,000
155,350
International Paper Co.
6,366,635
148,343
MeadWestvaco Corp.
4,085,000
97,386
Monsanto Co.
2,506,000
316,859
Newmont Mining Corp.
4,790,000
249,846
Nucor Corp.
2,670,000
199,369
POSCO1
588,600
306,059
POSCO (ADR)
95,000
12,329
Rohm and Haas Co.
1,550,000
71,982
USX Corp.
3,125,614
577,551
Weyerhaeuser Co.
1,800,000
92,052
   
2,913,687
     
INDUSTRIALS — 6.93%
    
3M Co.
1,916,500
133,369
Boeing Co.
500,000
32,860
Burlington Northern Santa Fe Corp.
1,621,000
161,922
Cummins Inc.
3,000,000
196,560
Deere & Co.
5,300,000
382,289
FedEx Corp.
3,500,000
275,765
General Dynamics Corp.
6,745,800
567,996
General Electric Co.
50,575,000
1,349,847
Illinois Tool Works Inc.
6,400,000
304,064
Mitsubishi Corp.1
1,065,000
35,104
Raytheon Co.
2,399,800
135,061
Siemens AG1
1,563,550
173,244
Southwest Airlines Co.
13,000,000
169,520
Tyco International Ltd.
3,225,000
129,129
Union Pacific Corp.
3,000,000
226,500
United Parcel Service, Inc., Class B
5,800,000
356,526
United Technologies Corp.
10,965,000
676,540
   
5,306,296
     
CONSUMER DISCRETIONARY — 7.50%
    
Best Buy Co., Inc.
6,472,300
256,303
Carnival Corp., units
10,450,000
344,432
Comcast Corp., Class A
11,725,000
222,423
Ford Motor Co.2
2,500,000
12,025
Fortune Brands Inc.
3,217,700
200,817
General Motors Corp.
5,000,000
57,500
Harley-Davidson, Inc.
4,575,000
165,890
Honda Motor Co., Ltd.1
4,465,000
152,180
Johnson Controls, Inc.
5,900,000
169,212
Kohl’s Corp.2
1,200,000
48,048
Liberty Media Corp., Liberty Interactive, Series A2
1,820,000
26,863
Limited Brands, Inc.3
18,289,943
308,186
Lowe’s Companies, Inc.
63,196,600
1,311,329
McDonald’s Corp.
4,250,000
238,935
Target Corp.
17,984,200
836,085
Time Warner Inc.
51,882,000
767,854
TJX Companies, Inc.
3,000,000
94,410
Toyota Motor Corp.1
10,025,000
472,377
Viacom Inc., Class B2
2,000,000
61,080
   
5,745,949
     
CONSUMER STAPLES — 10.23%
    
Altria Group, Inc.
34,295,000
705,105
Anheuser-Busch Companies, Inc.
1,500,000
93,180
Avon Products, Inc.
8,795,000
316,796
ConAgra Foods, Inc.
13,000,000
250,640
General Mills, Inc.
1,960,000
119,109
H.J. Heinz Co.
4,406,200
210,837
Kellogg Co.
4,549,503
218,467
Kimberly-Clark Corp.
4,000,000
239,120
Kraft Foods Inc., Class A
9,644,168
274,377
Molson Coors Brewing Co., Class B
6,850,000
372,160
PepsiCo, Inc.
19,820,000
1,260,354
Philip Morris International Inc.
38,415,000
1,897,317
Procter & Gamble Co.
6,518,000
396,360
Reynolds American Inc.
2,666,666
124,453
Sara Lee Corp.
5,000,000
61,250
SYSCO Corp.
2,875,000
79,091
UST Inc.
2,000,000
109,220
Walgreen Co.
25,484,200
828,491
Wal-Mart Stores, Inc.
4,900,000
275,380
   
7,831,707
     
HEALTH CARE — 9.89%
    
Abbott Laboratories
12,738,200
$   674,742
Aetna Inc.
9,540,000
386,656
Amgen Inc.2
5,090,000
240,044
AstraZeneca PLC (ADR)
2,534,500
107,792
AstraZeneca PLC (Sweden)1
3,709,500
157,129
AstraZeneca PLC (United Kingdom)1
1,435,000
61,049
Becton, Dickinson and Co.
1,500,000
121,950
Boston Scientific Corp.2
9,394,850
115,463
Bristol-Myers Squibb Co.
30,050,000
616,927
Cardinal Health, Inc.
4,500,000
232,110
Eli Lilly and Co.
10,055,000
464,139
Johnson & Johnson
600,000
38,604
McKesson Corp.
2,500,000
139,775
Medtronic, Inc.
12,900,000
667,575
Merck & Co., Inc.
27,392,800
1,032,435
Novartis AG1
1,500,000
82,517
Novartis AG (ADR)
256,556
14,121
Pfizer Inc
16,620,000
290,351
Roche Holding AG1
6,180,000
1,112,484
Schering-Plough Corp.
18,736,300
368,918
UnitedHealth Group Inc.
14,205,000
372,881
WellPoint, Inc.2
5,750,000
274,045
   
7,571,707
     
FINANCIALS — 7.53%
    
American International Group, Inc.
19,248,900
509,326
Banco Santander, SA1
16,170,000
295,218
Bank of America Corp.
36,700,800
876,048
Berkshire Hathaway Inc., Class A2
2,600
313,950
Capital One Financial Corp.
7,037,000
267,476
Citigroup Inc.
58,068,300
973,225
Fannie Mae
29,151,100
568,738
Freddie Mac
16,313,700
267,545
Hartford Financial Services Group, Inc.
1,003,440
64,792
HSBC Holdings PLC (ADR)
1,079,588
82,805
HSBC Holdings PLC (Hong Kong)1
2,620,000
40,686
HSBC Holdings PLC (United Kingdom)1
14,617,111
225,450
JPMorgan Chase & Co.
12,230,000
419,611
National City Corp.
1,760,000
8,395
National City Corp.4
2,505,000
11,949
Wachovia Corp.
21,227,000
329,655
Washington Mutual, Inc.1,4
24,571,428
102,967
Washington Mutual, Inc.
29,400,000
144,942
Washington Mutual, Inc.4
6,857,143
33,806
Wells Fargo & Co.
5,660,000
134,425
XL Capital Ltd., Class A
4,850,000
99,716
   
5,770,725
     
INFORMATION TECHNOLOGY — 18.24%
    
Analog Devices, Inc.
8,050,000
                 255,749
Applied Materials, Inc.
6,450,000
123,130
Automatic Data Processing, Inc.
9,640,343
403,930
Canon, Inc.1
1,920,000
98,591
Cisco Systems, Inc.2
39,083,400
909,080
Google Inc., Class A2
1,304,400
686,662
Hewlett-Packard Co.
22,950,000
1,014,620
Intel Corp.
41,115,000
883,150
International Business Machines Corp.
7,635,000
904,977
KLA-Tencor Corp.
7,125,000
290,059
Linear Technology Corp.
7,600,000
247,532
Maxim Integrated Products, Inc.
14,795,000
312,914
Microsoft Corp.
71,467,100
1,966,060
Motorola, Inc.
20,920,800
153,559
Nokia Corp.1
12,000,000
294,131
Nokia Corp. (ADR)
5,652,400
138,484
Oracle Corp.2
87,195,100
1,831,097
QUALCOMM Inc.
5,245,000
232,721
Samsung Electronics Co., Ltd.1
684,000
409,113
SAP AG1
11,535,800
603,383
Taiwan Semiconductor Manufacturing Co. Ltd.1,2
286,090,065
611,891
Telefonaktiebolaget LM Ericsson, Class B1
7,366,200
76,109
Texas Instruments Inc.
23,650,000
665,984
Xilinx, Inc.
7,650,000
193,162
Yahoo! Inc.2
32,035,000
661,843
   
13,967,931
     
TELECOMMUNICATION SERVICES — 3.61%
    
AT&T Inc.
40,206,500
1,354,557
France Télécom SA1
13,065,000
383,755
Qwest Communications International Inc.
68,580,000
269,519
Sprint Nextel Corp., Series 1
79,958,400
759,605
   
2,767,436
     
UTILITIES — 3.65%
    
Dominion Resources, Inc.
13,513,824
641,772
E.ON AG1
1,412,500
284,617
Exelon Corp.
10,175,200
915,361
FirstEnergy Corp.
1,138,500
93,733
FPL Group, Inc.
1,800,000
118,044
PPL Corp.
3,100,000
162,037
Public Service Enterprise Group Inc.
10,000,000
459,300
RWE AG1
950,000
119,914
   
2,794,778
     
MISCELLANEOUS — 2.95%
    
Other common stocks in initial period of acquisition
  
2,259,856
     
     
Total common stocks (cost: $59,940,541,000)
  
65,389,512
     
     
     
     
Preferred stocks — 0.21%
    
     
FINANCIALS — 0.02%
    
XL Capital Ltd., Series E, 6.50%5
21,250,000
14,365
     
     
MISCELLANEOUS — 0.19%
    
Other preferred stocks in initial period of acquisition
  
144,120
     
     
Total preferred stocks (cost: $164,822,000)
  
158,485
   
unaudited
     
 
Shares
Market value
Warrants — 0.00%
 
(000)
     
FINANCIALS — 0.00%
    
Washington Mutual, Inc., warrants, expire 20131,2,4
3,071,428
$       1,160
     
     
Total warrants (cost: $11,770,000)
  
1,160
     
     
     
     
 
Shares or
  
Convertible securities — 1.40%
principal amount
  
     
CONSUMER DISCRETIONARY — 0.20%
    
Ford Motor Co. 4.25% convertible notes 2036
$62,311,000
45,643
Ford Motor Co. Capital Trust II 6.50% convertible preferred 2032
3,890,000
107,558
   
153,201
     
FINANCIALS — 0.61%
    
Citigroup Inc., Series D, 7.00% noncumulative convertible preferred1,4
5,250,000
239,794
Fannie Mae, Series 2004-1, 5.375% convertible preferred
820
49,200
National City Corp., Series G, 0% noncumulative convertible preferred1,4
1,067
96,702
Wachovia Corp., Class A, Series L, 7.50% noncumulative convertible preferred
50,000
44,069
Washington Mutual, Inc., Series R, 7.75% noncumulative convertible preferred
55,833
32,774
   
462,539
     
TELECOMMUNICATION SERVICES — 0.06%
    
Qwest Communications International Inc. 3.50% convertible debenture 2025
$50,000,000
49,438
     
     
MISCELLANEOUS — 0.53%
    
Other convertible securities in initial period of acquisition
  
408,699
     
     
Total convertible securities (cost: $1,295,574,000)
  
1,073,877
     
     
     
     
 
Principal amount
  
Bonds & notes  — 0.10%
(000)
  
     
FINANCIALS — 0.01%
    
National City Corp. 5.80% 2017
2,700
2,103
National City Corp. 6.875% 2019
6,600
4,875
   
6,978
     
TELECOMMUNICATION SERVICES — 0.09%
    
Sprint Capital Corp. 6.90% 2019
21,080
18,531
Sprint Capital Corp. 8.75% 2032
47,335
45,195
Sprint Nextel Corp. 6.00% 2016
9,255
7,972
   
71,698
     
Total bonds & notes (cost: $71,160,000)
  
78,676
     
   
unaudited
     
 
Principal amount
Market value
Short-term securities — 12.96%
(000)
(000)
     
3M Co. 2.13% due 8/4/2008
$     20,000
$       19,959
Abbott Laboratories 2.02%–2.16% due 7/25–7/31/20086
139,850
139,596
American Express Credit Corp. 3.00% due 11/14/2008
50,000
49,427
AT&T Inc. 2.10%–2.41% due 7/10–9/17/20086
348,351
347,735
Bank of America Corp. 2.585% due 7/28/2008
50,000
49,901
Enterprise Funding Corp. 2.60%–2.73% due 9/9–9/18/20086
122,521
121,743
Ranger Funding Co. LLC 2.75% due 9/18/20086
75,000
74,502
CAFCO, LLC 2.55%–2.75% due 7/15–9/19/20086
132,000
131,423
Ciesco LLC 2.58%–2.68% due 8/6–9/3/20086
127,800
127,240
Chevron Funding Corp. 2.05% due 7/2/2008
20,000
19,998
Coca-Cola Co. 2.06%–2.27% due 7/18–9/29/20086
323,500
322,092
Edison Asset Securitization LLC 2.43%–2.72% due 8/6–9/15/20086
185,000
184,222
General Electric Capital Corp. 2.47% due 7/24/2008
75,000
74,890
General Electric Capital Services, Inc. 2.45% due 8/4/2008
100,000
99,781
Fannie Mae 1.70%–2.15% due 7/2–9/10/2008
587,510
586,586
Federal Farm Credit Banks 2.04%–2.10% due 11/17/2008–2/13/2009
148,500
146,446
Federal Home Loan Bank 1.71%–2.78% due 7/18–12/29/2008
2,119,750
2,108,569
Freddie Mac 2.00%–2.77% due 7/1–12/8/2008
1,890,004
1,883,088
Harley-Davidson Funding Corp. 2.12%–2.33% due 7/8–8/7/20086
43,000
42,928
Harvard University 2.06% due 8/7/2008
25,000
24,925
Honeywell International Inc. 2.03%–2.07% due 7/10–7/22/20086
110,000
109,874
HSBC Finance Corp. 2.50% due 8/26/2008
50,000
49,782
Illinois Tool Works Inc. 2.24% due 7/30/2008
55,250
55,147
International Lease Finance Corp. 2.93% due 7/8/2008
42,600
42,575
John Deere Capital Corp. 2.14% due 7/2/20086
30,000
29,995
Johnson & Johnson 2.07%–2.15% due 8/11–10/16/20086
194,100
192,666
JPMorgan Chase & Co. 2.25% due 7/28/2008
50,000
49,901
Jupiter Securitization Co., LLC 2.60%–2.75% due 7/28–7/29/20086
196,700
196,282
Medtronic Inc. 2.12%–2.18% due 8/11–8/12/20086
110,000
109,720
Merck & Co. Inc. 2.17% due 7/22/2008
70,000
69,907
NetJets Inc. 2.05%–2.18% due 7/11–8/22/20086
47,500
47,390
Pfizer Inc 2.18%–2.70% due 7/7–9/26/20086
279,800
278,688
Private Export Funding Corp. 2.20%–2.24% due 7/9–8/18/20086
49,300
49,196
Procter & Gamble International Funding S.C.A. 1.95%–2.29% due 7/8–9/24/20086
375,898
374,506
U.S. Treasury Bills 1.50%–1.85% due 10/2–11/6/2008
536,400
533,045
Union Bank of California, N.A. 2.60%–2.80% due 7/9–7/14/2008
163,400
163,398
UnionBanCal Commercial Funding Corp. 2.63% due 8/20/2008
50,000
49,814
United Parcel Service Inc. 2.06%–2.15% due 8/28–10/31/20086
200,000
198,785
Variable Funding Capital Corp. 2.50%–2.74% due 8/5–9/11/20086
194,900
194,032
Wal-Mart Stores Inc. 1.90%–2.17% due 7/11–12/16/20086
317,350
315,477
Walt Disney Co. 2.02%–2.10% due 7/7–7/25/2008
75,000
74,930
Wells Fargo & Co. 2.14%–2.35% due 7/25–8/28/2008
165,100
164,674
Yale University 2.35% due 8/12/2008
25,000
24,930
     
     
Total short-term securities (cost: $9,933,118,000)
  
9,929,765
     
     
Total investment securities (cost: $66,416,985,000)
  
76,631,475
Other assets less liabilities
  
(32,838)
     
Net assets
  
$76,598,637
     

“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 $7,883,464,000, which represented 10.29% of the net assets of the fund.
2Security did not produce income during the last 12 months.
3Represents an affiliated company as defined under the Investment Company Act of 1940.
4Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below.

 
Acquisition
date(s)
Cost
(000)
Market value
(000)
Percent of
net assets
         
Citigroup Inc., Series D, 7.00% noncumulative convertible preferred
1/15/2008
$262,500
$239,794
.31%
Washington Mutual, Inc.
4/8/2008
203,230
102,967
.13
Washington Mutual, Inc.
4/8/2008
60,000
33,806
.04
National City Corp., Series G, 0% noncumulative convertible preferred
4/21/2008
106,700
96,702
.13
National City Corp.
4/21/2008
12,525
11,949
.02
Washington Mutual, Inc., warrants, expire 2013
4/8/2008
11,770
1,160
—
         
Total restricted securities
  
$656,725
$486,378
.63%

5Coupon rate may change periodically.
6Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $3,588,092,000, which represented 4.68% of the net assets of the fund.


Key to abbreviation

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 your financial professional and should be read carefully before investing.
 
 
MFGEFP-904-0808O-S15866
 
 
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/ James B. Lovelace
 
James B. Lovelace, President and
Chief Executive Officer
   
 
Date: September 5, 2008



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/ James B. Lovelace
James B. Lovelace, President and
Chief Executive Officer
 
Date: September 5, 2008



By /s/ Carmelo Spinella
Carmelo Spinella, Treasurer and
Principal Financial Officer
 
Date: September 5, 2008