[Logo - American Funds®]

Prospectus Supplement

January 1, 2009

For the following funds with currently effective prospectuses, prospectus addenda and retirement plan prospectuses dated February 1, 2008 — January 1, 2009

AMCAP Fund,®Inc.

American Balanced Fund,®Inc.

American High-Income Municipal Bond Fund,®Inc.

American High-Income TrustSM

American Mutual Fund,®Inc.

The Bond Fund of America,SMInc.

Capital Income Builder,®Inc.

Capital World Bond Fund,®Inc.

Capital World Growth and Income Fund,SMInc.

The Cash Management Trust of America®

EuroPacific Growth Fund®

Fundamental Investors,SMInc.

The Growth Fund of America,®Inc.

The Income Fund of America,®Inc.

Intermediate Bond Fund of America®

International Growth and Income Fund,SMInc.

The Investment Company of America®

Limited Term Tax-Exempt Bond Fund of AmericaSM

The New Economy Fund®

New Perspective Fund,®Inc.

New World Fund,SMInc.

Short-Term Bond Fund of America,SMInc.

SMALLCAP World Fund,®Inc.

The Tax-Exempt Bond Fund of America,®Inc.

The Tax-Exempt Fund of California®

The Tax-Exempt Fund of Maryland®

The Tax-Exempt Fund of Virginia®

The Tax-Exempt Money Fund of America,SMInc.

U.S. Government Securities FundSM

The U.S. Treasury Money Fund of AmericaSM

Washington Mutual Investors Fund,SMInc.

Keep this supplement with your prospectus,

prospectus addendum and/or retirement plan prospectus

1. For each fund listed below, the indicated footnote to the Annual fund operating expenses table in the “Fees and expenses of the fund(s)” section of the Prospectus, Prospectus Addendum and/or Retirement Plan Prospectus, is amended in its entirety as follows:

(a)   The Prospectus for The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America and The Tax-Exempt Fund of California: Footnote 2

The Prospectus for AMCAP Fund, American Balanced Fund, The Bond Fund of America, Capital World Growth and Income Fund, EuroPacific Growth Fund, Fundamental Investors, The Investment Company of America and The New Economy Fund: Footnote 8

The Prospectus for American High-Income Trust, American Mutual Fund, Capital Income Builder, Capital World Bond Fund, The Growth Fund of America, The Income Fund of America, Intermediate Bond Fund of America, New Perspective Fund, New World Fund, SMALLCAP World Fund and U.S. Government Securities Fund: Footnote 9

The Prospectus Addendum for all the funds listed above in this subparagraph (a), and the Retirement Plan Prospectus for all the funds listed above in this subparagraph (a) except The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America and The Tax-Exempt Fund of California: Footnote 1

Prospectus and Prospectus Addendum

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004 through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waiver. Information regarding the effect of any waiver on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004 through December 31, 2008. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waiver and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

(b)    The Cash Management Trust of America, The U.S. Treasury Money Fund of America and The Tax-Exempt Money Fund of America

Prospectus (footnote 7) and Prospectus Addendum (footnote 1)

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004* through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waiver. Information regarding the effect of any waiver on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus (footnote 1 for The Cash Management Trust of America and The U.S. Treasury Money Fund of America)

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004* through December 31, 2008. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes and, due to lower short-term interest rates, agreed to pay a portion of the class-specific fees and expenses for some of the share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waivers and reimbursements on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

*October 1, 2005 in the case of The Cash Management Trust of America

(c)   International Growth and Income Fund

Prospectus (footnote 9) and Prospectus Addendum (footnote 2)

“The fund’s investment adviser waived a portion of its management fee from October 1, 2008 through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waiver.”

Retirement Plan Prospectus (footnote 2)

“The fund’s investment adviser waived a portion of its management fee from October 1, 2008 through December 31, 2008. Additionally, the fund’s investment adviser is reimbursing the fund a portion of other expenses so that other expenses do not exceed .22% for Class A shares, .28% for Class R-1 shares, .51% for Class R-2 shares, .33% for Class R-3 shares, .26% for Class R-4 shares and .20% for Class R-5 shares. Such reimbursements may be reduced or discontinued at any time as determined by the investment adviser. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement.”

(d)   Short-Term Bond Fund of America

Prospectus (footnote 9) and Prospectus Addendum (footnote 1)

“The fund’s investment adviser waived a portion of its management fee from October 2, 2006 through December 31, 2008. The fund’s investment adviser also reimbursed other fees and expenses. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waiver and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus (footnote 1)

“The fund’s investment adviser waived a portion of its management fee from October 2, 2006 through December 31, 2008. The fund’s investment adviser also reimbursed other fees and expenses. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waiver and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

(e)   Washington Mutual Investors Fund, The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia

Prospectus (footnote 8 for Washington Mutual Investors Fund and footnote 7 for both The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia) and Prospectus Addendum (footnote 1)

“The fund’s investment adviser and business manager each waived a portion of their management fees from September 1, 2004 through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waivers. Information regarding the effect of any waivers on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus (footnote 1 for Washington Mutual Investors Fund)

“The fund’s investment adviser and business manager each waived a portion of their management fees from September 1, 2004 through December 31, 2008. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waivers or reimbursement. Information regarding the effect of any waivers and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

2.   The following is added as the last paragraph to the “Investment adviser” subsection in the “Management and organization” section of the Prospectus and Retirement Plan Prospectus:

“Rather than remain as investment divisions, Capital World Investors and Capital Research Global Investors may be incorporated into wholly owned subsidiaries of Capital Research and Management Company. In that event, Capital Research and Management Company would continue to be the investment adviser, and day-to-day investment management of equity assets would continue to be carried out through one or both of these subsidiaries. Capital Research and Management Company and the funds it advises have applied to the Securities and Exchange Commission for an exemptive order that would give Capital Research and Management Company the authority to use, upon approval of the funds’ boards, its management subsidiaries and affiliates to provide day-to-day investment management services to the funds, including making changes to the management subsidiaries and affiliates providing such services. Approval by the funds’ shareholders would be required before any authority granted under an exemptive order could be exercised. There is no assurance that Capital Research and Management Company will incorporate its investment divisions or seek a shareholder vote to exercise any authority, if granted, under an exemptive order.”

3.   The following paragraph is added to the Prospectus and/or Retirement Plan Prospectus for each fund listed below as follows:

For The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America, The Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia — added as the last paragraph to the “Purchase of Class A, B and C shares” subsection in the “Purchase and exchange of shares” section of the Prospectus.

For The Cash Management Trust of America, The U.S. Treasury Money Fund of America and The Tax-Exempt Money Fund of America — added as the last paragraph to the “Purchase of Class A, B and C shares” subsection in the “Purchase and exchange of shares” section of the Prospectus, and for The Cash Management Trust of America and The U.S. Treasury Money Fund of America — added after the third paragraph in the “Purchases andexchanges” subsection in the “Purchase, exchange and sale of shares” section of the Retirement Plan Prospectus.

For AMCAP Fund, American Balanced Fund, American High-Income Trust, American Mutual Fund, The Bond Fund of America, Capital Income Builder, Capital World Bond Fund, Capital World Growth and Income Fund, EuroPacific Growth Fund, Fundamental Investors, The Growth Fund of America, The Income Fund of America, Intermediate Bond Fund of America, International Growth and Income Fund, The Investment Company of America, The New Economy Fund, New Perspective Fund, New World Fund, Short-Term Bond Fund of America, SMALLCAP World Fund, U.S. Government Securities Fund and Washington Mutual Investors Fund — added as the last paragraph to the “Employer-sponsored retirement plans” subsection in the “Sales charges” section of the Prospectus and the Retirement Plan Prospectus.

“A 403(b) plan may not invest in Class A, Class B or Class C shares on or after January 1, 2009 unless such plan was invested in Class A, Class B or Class C shares prior to that date.”

4.   Applicable to The Cash Management Trust of America, The U.S. Treasury Money Fund of America and The Tax-Exempt Money Fund of America only — The “Risk/Return summary” section of the Prospectus and Retirement Plan Prospectus is amended by replacing the third and fourth paragraphs with the following:

“Each of the funds paid a fee of 0.01% of its net assets as of September 19, 2008, in order to participate in the program for the initial three-month period, which expired on December 18, 2008.

The United States Treasury Department has extended the program through April 30, 2009. Each of the funds is participating in the program for this extension period and has paid a fee of 0.015% of its net assets as of September 19, 2008, in order to participate for the period from December 19, 2008 through April 30, 2009. The terms and conditions of the program and qualifications for insurance coverage under the program remain the same as for the initial period.

The term of the program may be further extended by the Secretary of the Treasury through September 18, 2009. The duration and terms of any such extension have not been determined. The funds and their boards will evaluate the terms of any extension after they are announced; however, the funds are not required to participate in any further extension.”

5.   Applicable to Capital Income Builder only.

The first paragraph under the heading “Dividends and distributions” in the “Distributions and taxes” section of the Prospectus is amended in its entirety to read as follows:

“The fund intends to distribute dividends to you, usually in March, June, September and December.”

The first paragraph under the heading “Dividends and distributions” in the “Distributions and taxes” section of the Retirement Plan Prospectus is amended in its entirety to read as follows:

“The fund intends to distribute dividends to shareholders, usually in March, June, September and December.”

MFGEBS-018-1208P Litho in USA CGD/LPT/9908-S19416

THE FUND PROVIDES SPANISH TRANSLATION IN CONNECTION WITH THE PUBLIC OFFERING AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.

/s/	VINCENT P. CORTI
	VINCENT P. CORTI
	SECRETARY

[Logo - American Funds®]

Prospectus Supplement

January 1, 2009

For the following funds with currently effective prospectuses, prospectus addenda and retirement plan prospectuses dated February 1, 2008 — January 1, 2009

AMCAP Fund,®Inc.

American Balanced Fund,®Inc.

American High-Income Municipal Bond Fund,®Inc.

American High-Income TrustSM

American Mutual Fund,®Inc.

The Bond Fund of America,SMInc.

Capital Income Builder,®Inc.

Capital World Bond Fund,®Inc.

Capital World Growth and Income Fund,SMInc.

The Cash Management Trust of America®

EuroPacific Growth Fund®

Fundamental Investors,SMInc.

The Growth Fund of America,®Inc.

The Income Fund of America,®Inc.

Intermediate Bond Fund of America®

International Growth and Income Fund,SMInc.

The Investment Company of America®

Limited Term Tax-Exempt Bond Fund of AmericaSM

The New Economy Fund®

New Perspective Fund,®Inc.

New World Fund,SMInc.

Short-Term Bond Fund of America,SMInc.

SMALLCAP World Fund,®Inc.

The Tax-Exempt Bond Fund of America,®Inc.

The Tax-Exempt Fund of California®

The Tax-Exempt Fund of Maryland®

The Tax-Exempt Fund of Virginia®

The Tax-Exempt Money Fund of America,SMInc.

U.S. Government Securities FundSM

The U.S. Treasury Money Fund of AmericaSM

Washington Mutual Investors Fund,SMInc.

Keep this supplement with your prospectus,

prospectus addendum and/or retirement plan prospectus

1. For each fund listed below, the indicated footnote to the Annual fund operating expenses table in the “Fees and expenses of the fund(s)” section of the Prospectus, Prospectus Addendum and/or Retirement Plan Prospectus, is amended in its entirety as follows:

(a)   The Prospectus for The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America and The Tax-Exempt Fund of California: Footnote 2

The Prospectus for AMCAP Fund, American Balanced Fund, The Bond Fund of America, Capital World Growth and Income Fund, EuroPacific Growth Fund, Fundamental Investors, The Investment Company of America and The New Economy Fund: Footnote 8

The Prospectus for American High-Income Trust, American Mutual Fund, Capital Income Builder, Capital World Bond Fund, The Growth Fund of America, The Income Fund of America, Intermediate Bond Fund of America, New Perspective Fund, New World Fund, SMALLCAP World Fund and U.S. Government Securities Fund: Footnote 9

The Prospectus Addendum for all the funds listed above in this subparagraph (a), and the Retirement Plan Prospectus for all the funds listed above in this subparagraph (a) except The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America and The Tax-Exempt Fund of California: Footnote 1

Prospectus and Prospectus Addendum

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004 through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waiver. Information regarding the effect of any waiver on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004 through December 31, 2008. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waiver and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

(b)    The Cash Management Trust of America, The U.S. Treasury Money Fund of America and The Tax-Exempt Money Fund of America

Prospectus (footnote 7) and Prospectus Addendum (footnote 1)

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004* through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waiver. Information regarding the effect of any waiver on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus (footnote 1 for The Cash Management Trust of America and The U.S. Treasury Money Fund of America)

“The fund’s investment adviser waived a portion of its management fee from September 1, 2004* through December 31, 2008. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes and, due to lower short-term interest rates, agreed to pay a portion of the class-specific fees and expenses for some of the share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waivers and reimbursements on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

*October 1, 2005 in the case of The Cash Management Trust of America

(c)   International Growth and Income Fund

Prospectus (footnote 9) and Prospectus Addendum (footnote 2)

“The fund’s investment adviser waived a portion of its management fee from October 1, 2008 through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waiver.”

Retirement Plan Prospectus (footnote 2)

“The fund’s investment adviser waived a portion of its management fee from October 1, 2008 through December 31, 2008. Additionally, the fund’s investment adviser is reimbursing the fund a portion of other expenses so that other expenses do not exceed .22% for Class A shares, .28% for Class R-1 shares, .51% for Class R-2 shares, .33% for Class R-3 shares, .26% for Class R-4 shares and .20% for Class R-5 shares. Such reimbursements may be reduced or discontinued at any time as determined by the investment adviser. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement.”

(d)   Short-Term Bond Fund of America

Prospectus (footnote 9) and Prospectus Addendum (footnote 1)

“The fund’s investment adviser waived a portion of its management fee from October 2, 2006 through December 31, 2008. The fund’s investment adviser also reimbursed other fees and expenses. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waiver and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus (footnote 1)

“The fund’s investment adviser waived a portion of its management fee from October 2, 2006 through December 31, 2008. The fund’s investment adviser also reimbursed other fees and expenses. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waiver or reimbursement. Information regarding the effect of any waiver and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

(e)   Washington Mutual Investors Fund, The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia

Prospectus (footnote 8 for Washington Mutual Investors Fund and footnote 7 for both The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia) and Prospectus Addendum (footnote 1)

“The fund’s investment adviser and business manager each waived a portion of their management fees from September 1, 2004 through December 31, 2008. Management fees and total annual fund operating expenses in the table do not reflect any waivers. Information regarding the effect of any waivers on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus [addendum] and in the fund’s annual report.”

Retirement Plan Prospectus (footnote 1 for Washington Mutual Investors Fund)

“The fund’s investment adviser and business manager each waived a portion of their management fees from September 1, 2004 through December 31, 2008. In addition, the investment adviser paid a portion of the fund’s transfer agent fees for certain R share classes. Management fees, other expenses and total annual fund operating expenses in the table do not reflect any waivers or reimbursement. Information regarding the effect of any waivers and reimbursement on total annual fund operating expenses can be found in the Financial Highlights table in this prospectus and in the fund’s annual report.”

2.   The following is added as the last paragraph to the “Investment adviser” subsection in the “Management and organization” section of the Prospectus and Retirement Plan Prospectus:

“Rather than remain as investment divisions, Capital World Investors and Capital Research Global Investors may be incorporated into wholly owned subsidiaries of Capital Research and Management Company. In that event, Capital Research and Management Company would continue to be the investment adviser, and day-to-day investment management of equity assets would continue to be carried out through one or both of these subsidiaries. Capital Research and Management Company and the funds it advises have applied to the Securities and Exchange Commission for an exemptive order that would give Capital Research and Management Company the authority to use, upon approval of the funds’ boards, its management subsidiaries and affiliates to provide day-to-day investment management services to the funds, including making changes to the management subsidiaries and affiliates providing such services. Approval by the funds’ shareholders would be required before any authority granted under an exemptive order could be exercised. There is no assurance that Capital Research and Management Company will incorporate its investment divisions or seek a shareholder vote to exercise any authority, if granted, under an exemptive order.”

3.   The following paragraph is added to the Prospectus and/or Retirement Plan Prospectus for each fund listed below as follows:

For The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America, The Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia — added as the last paragraph to the “Purchase of Class A, B and C shares” subsection in the “Purchase and exchange of shares” section of the Prospectus.

For The Cash Management Trust of America, The U.S. Treasury Money Fund of America and The Tax-Exempt Money Fund of America — added as the last paragraph to the “Purchase of Class A, B and C shares” subsection in the “Purchase and exchange of shares” section of the Prospectus, and for The Cash Management Trust of America and The U.S. Treasury Money Fund of America — added after the third paragraph in the “Purchases andexchanges” subsection in the “Purchase, exchange and sale of shares” section of the Retirement Plan Prospectus.

For AMCAP Fund, American Balanced Fund, American High-Income Trust, American Mutual Fund, The Bond Fund of America, Capital Income Builder, Capital World Bond Fund, Capital World Growth and Income Fund, EuroPacific Growth Fund, Fundamental Investors, The Growth Fund of America, The Income Fund of America, Intermediate Bond Fund of America, International Growth and Income Fund, The Investment Company of America, The New Economy Fund, New Perspective Fund, New World Fund, Short-Term Bond Fund of America, SMALLCAP World Fund, U.S. Government Securities Fund and Washington Mutual Investors Fund — added as the last paragraph to the “Employer-sponsored retirement plans” subsection in the “Sales charges” section of the Prospectus and the Retirement Plan Prospectus.

“A 403(b) plan may not invest in Class A, Class B or Class C shares on or after January 1, 2009 unless such plan was invested in Class A, Class B or Class C shares prior to that date.”

4.   Applicable to The Cash Management Trust of America, The U.S. Treasury Money Fund of America and The Tax-Exempt Money Fund of America only — The “Risk/Return summary” section of the Prospectus and Retirement Plan Prospectus is amended by replacing the third and fourth paragraphs with the following:

“Each of the funds paid a fee of 0.01% of its net assets as of September 19, 2008, in order to participate in the program for the initial three-month period, which expired on December 18, 2008.

The United States Treasury Department has extended the program through April 30, 2009. Each of the funds is participating in the program for this extension period and has paid a fee of 0.015% of its net assets as of September 19, 2008, in order to participate for the period from December 19, 2008 through April 30, 2009. The terms and conditions of the program and qualifications for insurance coverage under the program remain the same as for the initial period.

The term of the program may be further extended by the Secretary of the Treasury through September 18, 2009. The duration and terms of any such extension have not been determined. The funds and their boards will evaluate the terms of any extension after they are announced; however, the funds are not required to participate in any further extension.”

5.   Applicable to Capital Income Builder only.

The first paragraph under the heading “Dividends and distributions” in the “Distributions and taxes” section of the Prospectus is amended in its entirety to read as follows:

“The fund intends to distribute dividends to you, usually in March, June, September and December.”

The first paragraph under the heading “Dividends and distributions” in the “Distributions and taxes” section of the Retirement Plan Prospectus is amended in its entirety to read as follows:

“The fund intends to distribute dividends to shareholders, usually in March, June, September and December.”

MFGEBS-018-1208P Litho in USA CGD/LPT/9908-S19416

...

<PAGE>


                       THE INVESTMENT COMPANY OF AMERICA

                                     Part B
                      Statement of Additional Information

                                 July 30, 2008

                     (as supplemented January 1, 2009)

This document is not a prospectus but should be read in conjunction with the
current prospectus of The Investment Company of America (the "fund" or "ICA")
dated July 30, 2008 or retirement plan prospectus of the fund dated March 1,
2008. You may obtain a prospectus from your financial adviser or by writing to
the fund at the following address:

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

Certain privileges and/or services described below may not be available to all
shareholders (including shareholders who purchase shares at net asset value
through eligible retirement plans) depending on the shareholder's investment
dealer or retirement plan recordkeeper. Please see your financial adviser,
investment dealer, plan recordkeeper or employer for more information.


                               TABLE OF CONTENTS

Item                                                                  Page no.
- ----                                                                  --------

Certain investment limitations and guidelines . . . . . . . . . . .        2
Description of certain securities and investment techniques . . . .        2
Fundamental policies and investment restrictions. . . . . . . . . .        6
Management of the fund. . . . . . . . . . . . . . . . . . . . . . .        9
Execution of portfolio transactions . . . . . . . . . . . . . . . .       32
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . .       35
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . .       36
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . .       38
Purchase and exchange of shares . . . . . . . . . . . . . . . . . .       43
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . .       47
Sales charge reductions and waivers . . . . . . . . . . . . . . . .       50
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . .       54
Shareholder account services and privileges . . . . . . . . . . . .       55
General information . . . . . . . . . . . . . . . . . . . . . . . .       58
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       65
Financial statements





                  The Investment Company of America -- Page 1
<PAGE>


                 CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

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


GENERAL GUIDELINE

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

DEBT SECURITIES

..    The fund's investments in straight debt securities (i.e., not convertible
     into equity) will generally consist of investment grade securities. The
     fund may, however, invest up to 5% of its assets in straight debt
     securities rated Ba1 or below by Moody's Investors Service and BB+ or below
     by Standard & Poor's Corporation or unrated but determined by the fund's
     investment adviser to be of equivalent quality.

INVESTING OUTSIDE THE U.S.

..    The fund may invest up to 15% of its assets in issuers domiciled outside
     the United States and not included in the Standard & Poor's 500 Composite
     Index. In determining the domicile of an issuer, the fund's investment
     adviser will consider the domicile determination of a leading provider of
     global indexes, such as Morgan Stanley Capital International, and may also
     take into account such factors as where the company is legally organized,
     maintains principal corporate offices and/or conducts its principal
     operations.

                        *     *     *     *     *     *

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


          DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment objectives, strategies and risks."


EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. Equity securities held by the fund typically consist of common stocks.
The prices of equity securities fluctuate based on, among other things, events
specific to their issuers and market, economic and other conditions. For
example, prices of these securities can be affected by financial contracts held
by the issuer or third parties (such as derivatives) relating to the security or
other assets or indices.


There may be little trading in the secondary market for particular equity
securities, which may adversely affect the fund's ability to value accurately or
dispose of such equity securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and/or
liquidity of equity securities.


                  The Investment Company of America -- Page 2
<PAGE>


DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and their values accrete over
time to face value at maturity. The market prices of debt securities fluctuate
depending on such factors as interest rates, credit quality and maturity. In
general, market prices of debt securities decline when interest rates rise and
increase when interest rates fall.


Lower rated debt securities, rated Ba1 or below by Moody's and/or BB+ or below
by S&P or unrated but determined by the fund's invesment adviser to be of
equivalent quality, are described by the rating agencies as speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness than higher rated debt securities, or they may already be in
default. The market prices of these securities may fluctuate more than higher
quality securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, and to determine the value
of, lower rated debt securities.


Certain additional risk factors relating to debt securities are discussed below:


     SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
     sensitive to economic changes, political and corporate developments, and
     interest rate changes. In addition, during an economic downturn or
     substantial period of rising interest rates, issuers that are highly
     leveraged may experience increased financial stress that could adversely
     affect their ability to meet projected business goals, to obtain additional
     financing and to service their principal and interest payment obligations.
     Periods of economic change and uncertainty also can be expected to result
     in increased volatility of market prices and yields of certain debt
     securities. For example, prices of these securities can be affected by
     financial contracts held by the issuer or third parties (such as
     derivatives) relating to the security or other assets or indices.

     PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
     provisions. If an issuer exercises these provisions in a lower interest
     rate market, the fund would have to replace the security with a lower
     yielding security, resulting in decreased income to investors. If the
     issuer of a debt security defaults on its obligations to pay interest or
     principal or is the subject of bankruptcy proceedings, the fund may incur
     losses or expenses in seeking recovery of amounts owed to it.

     LIQUIDITY AND VALUATION -- There may be little trading in the secondary
     market for particular debt securities, which may affect adversely the
     fund's ability to value accurately or dispose of such debt securities.
     Adverse publicity and investor perceptions, whether or not based on
     fundamental analysis, may decrease the value and/or liquidity of debt
     securities.

The investment adviser attempts to reduce the risks described above through
diversification of the fund's portfolio and by credit analysis of each issuer,
as well as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.


Credit ratings for debt securities provided by rating agencies reflect an
evaluation of the safety of principal and interest payments, not market value
risk. The rating of an issuer is a rating agency's view of past and future
potential developments related to the issuer and may not necessarily


                  The Investment Company of America -- Page 3
<PAGE>


reflect actual outcomes. There can be a lag between the time of developments
relating to an issuer and the time a rating is assigned and updated.


Bond rating agencies may assign modifiers (such as +/-) to ratings categories to
signify the relative position of a credit within the rating category. Investment
policies that are based on ratings categories should be read to include any
security within that category, without giving consideration to the modifier
except where otherwise provided. See the Appendix for more information about
credit ratings.


SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The fund may invest in
securities that have a combination of equity and debt characteristics. These
securities may at times behave more like equity than debt or vice versa. Some
types of convertible bonds, preferred stocks or other preferred securities
automatically convert into common stocks or other securities at a stated
conversion ratio and some may be subject to redemption at the option of the
issuer at a predetermined price. These securities, prior to conversion, may pay
a fixed rate of interest or a dividend. Because convertible securities have both
debt and equity characteristics, their values vary in response to many factors,
including the values of the securities into which they are convertible, general
market and economic conditions, and convertible market valuations, as well as
changes in interest rates, credit spreads and the credit quality of the issuer.


The prices and yields of nonconvertible preferred securities or preferred stocks
generally move with changes in interest rates and the issuer's credit quality,
similar to the factors affecting debt securities. Nonconvertible preferred
securities will be treated as debt for fund investment limit purposes.


U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:


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

     FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
     securities of certain U.S. government agencies and government-sponsored
     entities are guaranteed as to the timely payment of principal and interest
     by the full faith and credit of the U.S. government. Such agencies and
     entities include the Government National Mortgage Association (Ginnie Mae),
     the Veterans Administration (VA), the Federal Housing Administration (FHA),
     the Export-Import Bank (Exim Bank), the Overseas Private Investment
     Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
     Business Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government


                  The Investment Company of America -- Page 4
<PAGE>


agency or entity. These agencies and entities include, but are not limited to:
Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (Freddie Mac),
Federal National Mortgage Association (Fannie Mae), Tennessee Valley Authority
and Federal Farm Credit Bank System.


On September 7, 2008, Freddie Mac and Fannie Mae were placed into
conservatorship by their new regulator, the Federal Housing Finance Agency.
Simultaneously, the U.S. Treasury made a commitment of indefinite duration to
maintain the positive net worth of both firms.


INVESTING IN VARIOUS COUNTRIES -- Investing outside the United States may
involve additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial reporting
and legal standards and practices in some countries; changing local, regional
and global economic, political and social conditions; expropriation; changes in
tax policy; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment
of dividends.


The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing countries
only to a limited extent.


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


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


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


RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities may only be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or in a registered public offering. Where registration is required, the holder
of a registered security may be obligated to pay all or part of the registration


                  The Investment Company of America -- Page 5
<PAGE>


expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. Difficulty in selling such securities may
result in a loss to the fund or cause it to incur additional administrative
costs.


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


CASH AND CASH EQUIVALENTS -- The fund may hold cash or invest in cash
equivalents. Cash equivalents include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

                        *     *     *     *     *     *

PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. Short-term trading
profits are not the fund's objective, and changes in its investments are
generally accomplished gradually, though short-term transactions may
occasionally be made. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.


The fund's portfolio turnover rates for the fiscal years ended December 31, 2007
and 2006 were 22% and 20%, respectively. The portfolio turnover rate would equal
100% if each security in a fund's portfolio were replaced once per year. See
"Financial highlights" in the prospectus for the fund's annual portfolio
turnover rate for each of the last five fiscal years.


                FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

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


                  The Investment Company of America -- Page 6
<PAGE>


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


Which involves promotion or business management by the fund;


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


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


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


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


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


The fund is not permitted to buy securities on margin, sell securities short,
borrow money, or to invest in real estate. The fund may invest in the securities
of real estate investment trusts.


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


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


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


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


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


Invest in the securities of other investment companies.


Notwithstanding the restriction on making loans, the fund may lend portfolio
securities; however, it does not currently intend to engage in an ongoing or
regular securities lending program.


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


                  The Investment Company of America -- Page 7
<PAGE>


NONFUNDAMENTAL POLICIES -- The following policies may be changed without
shareholder approval:


The fund will not:


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


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


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


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


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


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


Issue senior securities, except as permitted by the 1940 Act.


                  The Investment Company of America -- Page 8
<PAGE>


                             MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS


"INDEPENDENT" DIRECTORS/1/

 NAME, AGE AND                                                  NUMBER OF
 POSITION WITH FUND                                           PORTFOLIOS/3/
 (YEAR FIRST ELECTED             PRINCIPAL OCCUPATION(S)        OVERSEEN         OTHER DIRECTORSHIPS/4/ HELD
 AS A DIRECTOR/2/)               DURING PAST FIVE YEARS        BY DIRECTOR               BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------

 Louise H. Bryson, 64         Chair of the Board of                 3         None
 Director (1999)              Trustees, J. Paul Getty
                              Trust; President,
                              Distribution, Lifetime
                              Entertainment Network;
                              General Manager, Lifetime
                              Movie Network
- ----------------------------------------------------------------------------------------------------------------
 Mary Anne Dolan, 61          Founder and President,                5         None
 Director (2000)              M.A.D., Inc. (communications
                              company); former
                              Editor-in-Chief, The Los
                              Angeles Herald Examiner

- ----------------------------------------------------------------------------------------------------------------
 James G. Ellis, 61           Dean and Professor of                13         None
 Director (2008)              Marketing, University of
                              Southern California
- ----------------------------------------------------------------------------------------------------------------
 Martin Fenton, 73            Chairman of the Board, Senior        18         None
 Chairman of the Board        Resource Group LLC
 (Independent and             (development and management
 Non-Executive) (2000)        of senior living communities)

- ----------------------------------------------------------------------------------------------------------------
 Leonard R. Fuller, 62        President and CEO, Fuller            16         None
 Director (2002)              Consulting (financial
                              management consulting firm)

- ----------------------------------------------------------------------------------------------------------------
 Claudio X. Gonzalez          Chairman of the Board,                1         General Electric Company; Grupo
 Laporte, 74                  Kimberly-Clark de Mexico,                       Alfa, S.A. de C.V.; Grupo Carso,
 Director (2001)              S.A. (household products)                       S.A. de C.V.; Grupo Financiero
                                                                              Inbursa; Grupo Industrial
                                                                              Saltillo, S.A. de C.V.; Grupo
                                                                              Mexico, S.A. de C.V.; Grupo
                                                                              Televisa, S.A.B; The Mexico Fund
- ----------------------------------------------------------------------------------------------------------------
 L. Daniel Jorndt, 67         Retired; former Chairman of           1         None
 Director (2006)              the Board and CEO, Walgreen
                              Company (drug store chain)

- ----------------------------------------------------------------------------------------------------------------
 John G. McDonald, 71         Stanford Investors Professor,         9         iStar Financial, Inc.;
 Director (1976)              Graduate School of Business,                    Plum Creek Timber Co.;
                              Stanford University                             Scholastic Corporation;
                                                                              Varian, Inc.
- ----------------------------------------------------------------------------------------------------------------
 Bailey Morris-Eck, 64        Director and Programming              3         None
 Director (1993)              Chair, WYPR Baltimore/
                              Washington (public radio
                              station); Senior Adviser,
                              Financial News (London);
                              Senior Fellow, Institute for
                              International Economics;
                              former Senior Associate and
                              head of the Global Policy
                              Initiative, Reuters
                              Foundation
- ----------------------------------------------------------------------------------------------------------------
 Richard G. Newman,/5/ 74     Chairman of the Board, AECOM         14         Sempra Energy;
 Director (1996)              Technology Corporation                          SouthWest Water Company
                              (engineering, consulting and
                              professional technical
                              services)
- ----------------------------------------------------------------------------------------------------------------
 Olin C. Robison, Ph.D.,      Fellow, The Oxford Centre for         3         American Shared Hospital Services
 72                           the Study of Christianity and
 Director (1987)              Culture; Director, The Oxford
                              Project on Religion and
                              Public Policy; President
                              Emeritus of the Salzburg
                              Seminar; President Emeritus,
                              Middlebury College
- ----------------------------------------------------------------------------------------------------------------





                  The Investment Company of America -- Page 9
<PAGE>

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


                  The Investment Company of America -- Page 10
<PAGE>


"INTERESTED" DIRECTORS/6,7/

                                   PRINCIPAL OCCUPATION(S)
                                   DURING PAST FIVE YEARS
 NAME, AGE AND                          AND POSITIONS              NUMBER OF
 POSITION WITH FUND             HELD WITH AFFILIATED ENTITIES    PORTFOLIOS/3/
 (YEAR FIRST ELECTED            OR THE PRINCIPAL UNDERWRITER       OVERSEEN      OTHER DIRECTORSHIPS/4/ HELD
 AS A DIRECTOR/OFFICER/2/)               OF THE FUND              BY DIRECTOR            BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------

 R. Michael Shanahan, 69       Director and Chairman Emeritus,         2         None
 Vice Chairman of the Board    Capital Research and Management
 (1994)                        Company; Director, American
                               Funds Distributors, Inc.*;
                               Chairman of the Executive
                               Committee, The Capital Group
                               Companies, Inc.*; Chairman of
                               the Board, Capital Management
                               Services, Inc.*; Director,
                               Capital Strategy Research,
                               Inc.*

- -------------------------------------------------------------------------------------------------------------
 James B. Lovelace, 52         Senior Vice President - Capital         3         None
 President (1994)              Research Global Investors,
                               Capital Research and Management
                               Company; Director, Capital
                               Research and Management
                               Company; Director, The Capital
                               Group Companies, Inc.*

- -------------------------------------------------------------------------------------------------------------
 Donald D. O'Neal, 48          Senior Vice President - Capital         3         None
 Senior Vice President         Research Global Investors,
 (1994)                        Capital Research and Management
                               Company; Director, The Capital
                               Group Companies, Inc.*

- -------------------------------------------------------------------------------------------------------------




OTHER OFFICERS/7/

 NAME, AGE AND
 POSITION WITH FUND         PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
 (YEAR FIRST ELECTED          AND POSITIONS HELD WITH AFFILIATED ENTITIES
 AS AN OFFICER/2/)             OR THE PRINCIPAL UNDERWRITER OF THE FUND
- -------------------------------------------------------------------------------

 Paul G. Haaga, Jr.,    Vice Chairman of the Board, Capital Research and
 60                     Management Company; Senior Vice President - Fixed
 Executive Vice         Income, Capital Research and Management Company
 President (2007)
- -------------------------------------------------------------------------------
 Joyce E. Gordon, 52    Senior Vice President - Capital Research Global
 Senior Vice            Investors, Capital Research and Management Company;
 President (1998)       Director, Capital Research and Management Company
- -------------------------------------------------------------------------------
 Anne M. Llewellyn,     Senior Vice President - Fund Business Management Group,
 61                     Capital Research and Management Company
 Vice President
 (1984)
- -------------------------------------------------------------------------------
 Paul F. Roye, 55       Senior Vice President - Fund Business Management Group,
 Vice President         Capital Research and Management Company; Director,
 (2008)                 American Funds Service Company*; former Director of
                        Investment Management, United States Securities and
                        Exchange Commission
- -------------------------------------------------------------------------------
 Vincent P. Corti, 52   Vice President - Fund Business Management Group,
 Secretary (1994)       Capital Research and Management Company
- -------------------------------------------------------------------------------
 Carmelo Spinella, 45   Senior Vice President - Fund Business Management Group,
 Treasurer (2006)       Capital Research and Management Company; Director,
                        American Funds Service Company*
- -------------------------------------------------------------------------------
 Raymond F. Sullivan,   Vice President - Fund Business Management Group,
 Jr., 51                Capital Research and Management Company
 Assistant Secretary
 (2008)
- -------------------------------------------------------------------------------
 Brian D. Bullard, 39   Vice President - Fund Business Management Group,
 Assistant Treasurer    Capital Research and Management Company; former Chief
 (2008)                 Accountant, Division of Investment Management, United
                        States Securities and Exchange Commission
- -------------------------------------------------------------------------------
 R. Marcia Gould, 54    Vice President - Fund Business Management Group,
 Assistant Treasurer    Capital Research and Management Company
 (1993)
- -------------------------------------------------------------------------------





                  The Investment Company of America -- Page 11
<PAGE>


*  Company affiliated with Capital Research and Management Company.

1  The term "independent" director refers to a director who is not an "interested
   person" of the fund within the meaning of the 1940 Act.
2  Directors and officers of the fund are elected annually and serve until
   earlier resignation, removal or retirement.
3  Funds managed by Capital Research and Management Company, including the
   American Funds; American Funds Insurance Series,(R) which is composed of 16
   funds and serves as the underlying investment vehicle for certain variable
   insurance contracts; American Funds Target Date Retirement Series,(R) Inc.,
   which is composed of nine funds and is available through tax-deferred
   retirement plans and IRAs; and Endowments, which is composed of two portfolios
   and is available to certain nonprofit organizations.
4  This includes all directorships (other than those in the American Funds or
   other funds managed by Capital Research and Management Company) that are held
   by each director as a director of a public company or a registered investment
   company.
5  The investment adviser and its affiliates use a subsidiary of AECOM, Inc. to
   perform architectural and space management services. The investment adviser's
   business relationship with the subsidiary preceded its acquisition by AECOM in
   1994. The total fees relating to this engagement for the last two years
   represent less than 0.1% of AECOM, Inc.'s 2007 gross revenues.
6  "Interested persons" of the fund within the meaning of the 1940 Act, on the
   basis of their affiliation with the fund's investment adviser, Capital Research
   and Management Company, or affiliated entities (including the fund's principal
   underwriter).
7  All of the officers listed, with the exception of Anne M. Llewellyn and
   Carmelo Spinella, are officers and/or directors/trustees of one or more of the
   other funds for which Capital Research and Management Company serves as
   investment adviser.

THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: SECRETARY.


                  The Investment Company of America -- Page 12
<PAGE>


FUND SHARES OWNED BY DIRECTOR AS OF DECEMBER 31, 2007

                                                     AGGREGATE DOLLAR RANGE/1/
                                                             OF SHARES
                                                         OWNED IN ALL FUNDS
                                                       IN THE AMERICAN FUNDS
                            DOLLAR RANGE/1/ OF FUND       FAMILY OVERSEEN
           NAME                 SHARES OWNED/2/             BY DIRECTOR
- -------------------------------------------------------------------------------

 "INDEPENDENT" DIRECTORS
- -------------------------------------------------------------------------------
 Louise H. Bryson                Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 Mary Anne Dolan                 Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 James G. Ellis/3/                   None                $10,001 - $50,000
- -------------------------------------------------------------------------------
 Martin Fenton                   Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 Leonard R. Fuller             $10,001 - $50,000         $50,001 - $100,000
- -------------------------------------------------------------------------------
 Claudio X. Gonzalez             Over $100,000             Over $100,000
 Laporte
- -------------------------------------------------------------------------------
 L. Daniel Jorndt                Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 John G. McDonald                Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 Bailey Morris-Eck               Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 Richard G. Newman               Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 Olin C. Robison                 Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 "INTERESTED" DIRECTORS
- -------------------------------------------------------------------------------
 James B. Lovelace               Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 Donald D. O'Neal                Over $100,000             Over $100,000
- -------------------------------------------------------------------------------
 R. Michael Shanahan             Over $100,000             Over $100,000
- -------------------------------------------------------------------------------

1  Ownership disclosure is made using the following ranges: None; $1 - $10,000;
   $10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
   for "interested" directors include shares owned through The Capital Group
   Companies, Inc. retirement plan and 401(k) plan.
2  An independent director also may have exposure to the fund through an
   allocation of some or all of his or her nonqualified deferred compensation
   account.
3  Mr. Ellis was elected as a director on December 10, 2008.


DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
director who is a director, officer or employee of the investment adviser or its
affiliates. The boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The fund typically pays each independent director an annual
fee, which ranges from $50,000 to $87,000, based primarily on the total number
of board clusters on which that independent director serves.


In addition, the fund generally pays independent directors attendance and other
fees for meetings of the board and its committees. Board and committee chairs
receive additional fees for their services.


                  The Investment Company of America -- Page 13
<PAGE>


Independent directors also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The fund and the other funds served
by each independent director each pay an equal portion of these attendance fees.


No pension or retirement benefits are accrued as part of fund expenses.
Independent directors may elect, on a voluntary basis, to defer all or a portion
of their fees through a deferred compensation plan in effect for the fund. The
fund also reimburses certain expenses of the independent directors.


DIRECTOR COMPENSATION EARNED DURING THE FISCAL YEAR ENDED DECEMBER 31, 2007

                                                                                     TOTAL COMPENSATION
                                                                                         (INCLUDING
                                                                                    VOLUNTARILY DEFERRED
                                                                                      COMPENSATION/1/)
                                                                                 FROM ALL FUNDS MANAGED BY
                                                       AGGREGATE COMPENSATION       CAPITAL RESEARCH AND
                                                       (INCLUDING VOLUNTARILY            MANAGEMENT
                                                      DEFERRED COMPENSATION/1/)        COMPANY OR ITS
           NAME                                             FROM THE FUND              AFFILIATES/2/
- -----------------------------------------------------------------------------------------------------------

 Louise H. Bryson/3/                                         $106,000                    $106,000
- -----------------------------------------------------------------------------------------------------------
 Mary Anne Dolan                                               98,668                     204,375
- -----------------------------------------------------------------------------------------------------------
 James G. Ellis/4/                                               None                     116,362
- -----------------------------------------------------------------------------------------------------------
 Martin Fenton/3/                                             103,158                     389,742
- -----------------------------------------------------------------------------------------------------------
 Leonard R. Fuller/3/                                          97,646                     322,924
- -----------------------------------------------------------------------------------------------------------
 Claudio X. Gonzalez Laporte/3/                               108,000                     108,000
- -----------------------------------------------------------------------------------------------------------
 L. Daniel Jorndt/3/                                          105,500                     105,500
- -----------------------------------------------------------------------------------------------------------
 John G. McDonald/3/                                           97,188                     368,500
- -----------------------------------------------------------------------------------------------------------
 Bailey Morris-Eck                                             90,168                     188,875
- -----------------------------------------------------------------------------------------------------------
 Richard G. Newman                                            107,234                     222,926
- -----------------------------------------------------------------------------------------------------------
 Olin C. Robison/3/                                           102,168                     200,875
- -----------------------------------------------------------------------------------------------------------

1  Amounts may be deferred by eligible directors under a nonqualified deferred
   compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
   an earnings rate determined by the total return of one or more American Funds
   as designated by the directors. Compensation shown in this table for the fiscal
   year ended December 31, 2007 does not include earnings on amounts deferred in
   previous fiscal years. See footnote 3 to this table for more information.
2  Funds managed by Capital Research and Management Company, including the
   American Funds; American Funds Insurance Series,(R) which is composed of 16
   funds and serves as the underlying investment vehicle for certain variable
   insurance contracts; American Funds Target Date Retirement Series,(R) Inc.,
   which is composed of nine funds and is available through tax-deferred
   retirement plans and IRAs; and Endowments, which is composed of two portfolios
   and is available to certain nonprofit organizations.
3  Since the deferred compensation plan's adoption, the total amount of deferred
   compensation accrued by the fund (plus earnings thereon) through the 2007
   fiscal year for participating directors is as follows: Louise H. Bryson
   ($822,924), Martin Fenton ($272,530), Leonard R. Fuller ($11,820), Claudio X.
   Gonzalez Laporte ($696,020), L. Daniel Jorndt ($166,101), John G. McDonald
   ($1,639,880) and Olin C. Robison ($849,255). Amounts deferred and accumulated
   earnings thereon are not funded and are general unsecured liabilities of the
   fund until paid to the directors.
4  Mr. Ellis was elected as a director on December 10, 2008.

As of June 1, 2008, the officers and directors of the fund and their families,
as a group, owned beneficially or of record less than 1% of the outstanding
shares of the fund.


                  The Investment Company of America -- Page 14
<PAGE>


FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end,
diversified management investment company, was organized as a Delaware
corporation on August 28, 1933. Although the board of directors has delegated
day-to-day oversight to the investment adviser, all fund operations are
supervised by the fund's board, which meets periodically and performs duties
required by applicable state and federal laws.


Delaware law provides that the business and affairs of the fund are managed by
or under the direction of the board of directors. Directors are charged with
fiduciary duties of care and loyalty to the fund and its shareholders.
Generally, a director will satisfy his or her duties if he or she acts with the
care of an ordinarily prudent person under similar circumstances and refrains
from self-dealing.


Independent board members are paid certain fees for services rendered to the
fund as described above. They may elect to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund.


The fund has several different classes of shares. Shares of each class represent
an interest in the same investment portfolio. Each class has pro rata rights as
to voting, redemption, dividends and liquidation, except that each class bears
different distribution expenses and may bear different transfer agent fees and
other expenses properly attributable to the particular class as approved by the
board of directors and set forth in the fund's rule 18f-3 Plan. Each class'
shareholders have exclusive voting rights with respect to the respective class'
rule 12b-1 plans adopted in connection with the distribution of shares and on
other matters in which the interests of one class are different from interests
in another class. Shares of all classes of the fund vote together on matters
that affect all classes in substantially the same manner. Each class votes as a
class on matters that affect that class alone. Note that 529 college savings
plan account owners invested in Class 529 shares are not shareholders of the
fund and, accordingly, do not have the rights of a shareholder, such as the
right to vote proxies relating to fund shares. As the legal owner of the fund's
Class 529 shares, the Virginia College Savings Plan/SM/ will vote any proxies
relating to such fund shares.


The fund holds annual meetings of shareholders for the purpose of electing
directors. Significant matters that require shareholder approval, such as a
change in a fundamental investment policy, will be presented to shareholders at
a meeting called for such purpose. Shareholders have one vote per share owned.
At the request of the holders of at least 10% of the shares, the fund will hold
a meeting at which any member of the board could be removed by a majority vote.


The fund's certificate of incorporation and by-laws as well as separate
indemnification agreements that the fund has entered into with independent
directors provide in effect that, subject to certain conditions, the fund will
indemnify its officers and directors against liabilities or expenses actually
and reasonably incurred by them relating to their service to the fund. However,
directors are not protected from liability by reason of their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.


                  The Investment Company of America -- Page 15
<PAGE>



COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an audit committee
comprised of Louise H. Bryson, Mary Anne Dolan, James G. Ellis, Martin Fenton,
Leonard R. Fuller, Claudio X. Gonzalez Laporte, L. Daniel Jorndt, John G.
McDonald, Bailey Morris-Eck, Richard G. Newman and Olin C. Robison, none of whom
is an "interested person" of the fund within the meaning of the 1940 Act. The
committee provides oversight regarding the fund's accounting and financial
reporting policies and practices, its internal controls and the internal
controls of the fund's principal service providers. The committee acts as a
liaison between the fund's independent registered public accounting firm and the
full board of directors. Five audit committee meetings were held during the 2008
fiscal year.


The fund has a governance and contracts committee comprised of Louise H. Bryson,
Mary Anne Dolan, James G. Ellis, Martin Fenton, Leonard R. Fuller, Claudio X.
Gonzalez Laporte, L. Daniel Jorndt, John G. McDonald, Bailey Morris-Eck, Richard
G. Newman and Olin C. Robison, none of whom is an "interested person" of the
fund within the meaning of the 1940 Act. The committee's principal function is
to request, review and consider the information deemed necessary to evaluate the
terms of certain agreements between the fund and its investment adviser or the
investment adviser's affiliates, such as the Investment Advisory and Service
Agreement, Principal Underwriting Agreement, Administrative Services Agreement
and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act,
that the fund may enter into, renew or continue, and to make its recommendations
to the full board of directors on these matters. One governance and contracts
committee meeting was held during the 2008 fiscal year.


The fund has a nominating committee comprised of Louise H. Bryson, Mary Anne
Dolan, John G. McDonald and Olin C. Robison, none of whom is an "interested
person" of the fund within the meaning of the 1940 Act. 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. The committee also
evaluates, selects and nominates independent director and advisory board member
candidates to the full board of directors. While the committee normally is able
to identify from its own and other 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 fund, addressed to the fund'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 committee. Three nominating
committee meetings were held during the 2008 fiscal year.


The fund has a proxy committee comprised of Leonard R. Fuller, John G. McDonald
and Richard G. Newman, none of whom is an "interested person" of the fund within
the meaning of the 1940 Act. The committee's functions include establishing and
reviewing procedures and policies for voting proxies of companies held in the
fund's portfolio, making determinations with regard to certain contested proxy
voting issues, and discussing related current issues. Four proxy committee
meetings were held during the 2008 fiscal year.


                  The Investment Company of America -- Page 16
<PAGE>


ADVISORY BOARD MEMBERS

The board of directors has established an advisory board whose members are, in
the judgment of the directors, highly knowledgeable about world political and
economic matters. In addition to holding meetings with the board of directors,
members of the advisory board, while not participating in specific investment
decisions, consult from time to time with the investment adviser, primarily with
respect to world trade and business conditions. Members of the advisory board,
however, possess no authority or responsibility with respect to the fund's
investments or management. The chart below sets out additional information about
the advisory board members.

                                                                         NUMBER OF
                                                                         BOARDS/1/
                                                                        WITHIN THE
                                                                           FUND
                                                                        COMPLEX ON
                                                                           WHICH
 NAME AND AGE                          PRINCIPAL OCCUPATION(S)            MEMBER
 (YEAR FIRST ELECTED)                  DURING PAST FIVE YEARS             SERVES      OTHER DIRECTORSHIPS/2/ HELD
- ------------------------------------------------------------------------------------------------------------------

 Thomas M. Crosby, Jr., 70      Partner, Faegre & Benson (law firm)          1        None
 (1995)
- ------------------------------------------------------------------------------------------------------------------
 Daniel R. Fung, 55             Chairman, Des Voeux Chambers (law            1        None
 (2008)                         firm)
- ------------------------------------------------------------------------------------------------------------------
 Ellen H. Goldberg, Ph.D.,      Consultant; Professor Emeritus,              1        None
 63                             University of New Mexico; former
 (1998)                         Interim President, Santa Fe Institute
                                (former President)
- ------------------------------------------------------------------------------------------------------------------
 William H. Kling, 66           President and CEO, American Public           8        Irwin Financial Corporation
 (1985)                         Media Group
- ------------------------------------------------------------------------------------------------------------------
 John C. Mazziotta, M.D.,       Chair, Department of Neurology, UCLA;        1        None
 Ph.D., 59                      Associate Director, Semel Institute,
 (2007)                         UCLA; Director, Brain Mapping Center,
                                UCLA
- ------------------------------------------------------------------------------------------------------------------
 Robert J. O'Neill, Ph.D.,      Chairman, Academic Advisory                  3        None
 72                             Committee, United States Studies
 (1988)                         Centre, University of Sydney;
                                Chairman of Directors, Forty Seven
                                Friends Pty Ltd (a not-for-profit
                                supporting a local art and craft
                                centre in Australia); Member of the
                                Board of Directors, The Lowy
                                Institute for International Policy
                                Studies, Sydney, Australia; former
                                Planning Director and acting CEO,
                                United States Studies Centre,
                                University of Sydney, Australia;
                                former Deputy Chairman of the Council
                                and Chairman of the International
                                Advisory Panel, Graduate School of
                                Government, University of Sydney,
                                Australia; former Chairman of the
                                Council, Australian Strategic Policy
                                Institute; former Chichele Professor
                                of the History of War and Fellow, All
                                Souls College, University of Oxford;
                                former Chairman of the Council,
                                International Institute for Strategic
                                Studies
- ------------------------------------------------------------------------------------------------------------------
 Norman R. Weldon, Ph.D., 74    Managing Director, Partisan                  1        None
 (1977)                         Management Group, Inc. (venture
                                capital investor in medical device
                                companies); former Chairman of the
                                Board, AtriCure, Inc.; former
                                Chairman of the Board, Novoste
                                Corporation
- ------------------------------------------------------------------------------------------------------------------






                  The Investment Company of America -- Page 17
<PAGE>


1  Funds managed by Capital Research and Management Company, including the
   American Funds; American Funds Insurance Series,(R) which is composed of 16
   funds and serves as the underlying investment vehicle for certain variable
   insurance contracts; American Funds Target Date Retirement Series,(R) Inc.,
   which is composed of nine funds and is available through tax-deferred
   retirement plans and IRAs; and Endowments, which is composed of two portfolios
   and is available to certain nonprofit organizations. Includes advisory board
   and, where applicable, director service.
2  This includes all directorships (other than those of the American Funds or
   other funds managed by Capital Research and Management Company) that are held
   by each advisory board member as a director of a public company or a registered
   investment company.

THE ADDRESS FOR ALL ADVISORY BOARD MEMBERS OF THE FUND IS 333 SOUTH HOPE STREET
- - 55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: SECRETARY.


                  The Investment Company of America -- Page 18
<PAGE>


ADVISORY BOARD MEMBER COMPENSATION -- The fund pays fees of $10,000 per annum to
advisory board members who are not affiliated with the investment adviser.


No pension or retirement benefits are accrued as part of fund expenses. The
advisory board members may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the advisory board members
who are not affiliated with the fund.


ADVISORY BOARD MEMBER COMPENSATION EARNED DURING THE FISCAL YEAR ENDED DECEMBER 31, 2007

                                                        TOTAL COMPENSATION (INCLUDING
                         AGGREGATE COMPENSATION     VOLUNTARILY DEFERRED COMPENSATION/1/)
                         (INCLUDING VOLUNTARILY           FROM ALL FUNDS MANAGED BY
                        DEFERRED COMPENSATION/1/)      CAPITAL RESEARCH AND MANAGEMENT
         NAME                 FROM THE FUND             COMPANY OR ITS AFFILIATES/2/
- ------------------------------------------------------------------------------------------

 Thomas M. Crosby, Jr.           $8,500                           $  8,500
- ------------------------------------------------------------------------------------------
 Daniel R. Fung/3/                 None                               None
- ------------------------------------------------------------------------------------------
 Ellen H. Goldberg                8,500                              8,500
- ------------------------------------------------------------------------------------------
 William H. Kling                 7,000                            331,250
- ------------------------------------------------------------------------------------------
 John C. Mazziotta                4,250                              4,250
- ------------------------------------------------------------------------------------------
 Robert J. O'Neill                7,000                            124,684
- ------------------------------------------------------------------------------------------
 Norman R. Weldon                 8,500                              8,500
- ------------------------------------------------------------------------------------------

1  Amounts may be deferred by eligible advisory board members under a
   non-qualified deferred compensation plan adopted by the fund in 1993. Deferred
   amounts accumulate at an earnings rate determined by the total return of one or
   more American Funds as designated by the advisory board member. Compensation
   for the fiscal year ended December 31, 2007 does not include earnings on
   amounts deferred in previous years.
2  Funds managed by Capital Research and Management Company, including the
   American Funds; American Funds Insurance Series,(R) which is composed of 16
   funds and serves as the underlying investment vehicle for certain variable
   insurance contracts; American Funds Target Date Retirement Series,(R) Inc.,
   which is composed of nine funds and is available through tax-deferred
   retirement plans and IRAs; and Endowments, which is composed of two portfolios
   and is available to certain nonprofit organizations.
3  Mr. Fung was elected to the Advisory Board on August 13, 2008.


PROXY VOTING PROCEDURES AND PRINCIPLES -- The fund and its investment adviser
have adopted Proxy Voting Procedures and Principles (the "Principles") with
respect to voting proxies of securities held by the fund, other American Funds,
Endowments and American Funds Insurance Series. The complete text of these
principles is available on the American Funds website at americanfunds.com.
Certain American Funds, including the fund, have established separate proxy
voting committees that vote proxies or delegate to a voting officer the
authority to vote on behalf of those funds. Proxies for all other funds are
voted by a committee of the appropriate equity investment division of the
investment adviser under authority delegated by those funds' boards. Therefore,
if more than one fund invests in the same company, they may vote differently on
the same proposal.


                  The Investment Company of America -- Page 19
<PAGE>


All U.S. proxies are voted. Proxies for companies outside the U.S. also are
voted, provided there is sufficient time and information available. After a
proxy statement is received, the investment adviser prepares a summary of the
proposals contained in the proxy statement. A discussion of any potential
conflicts of interest also is included in the summary. For proxies of securities
managed by a particular investment division of the investment adviser, the
initial voting recommendation is made by one or more of the division's
investment analysts familiar with the company and industry. A second
recommendation is made by a proxy coordinator (an investment analyst with
experience in corporate governance and proxy voting matters) within the
appropriate investment division, based on knowledge of these Principles and
familiarity with proxy-related issues. The proxy summary and voting
recommendations are made available to the appropriate proxy voting committee for
a final voting decision.


The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy voting committee members
are alerted to the potential conflict. The proxy voting committee may then elect
to vote the proxy or seek a third-party recommendation or vote of an ad hoc
group of committee members.


The Principles, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Principles provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.


Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website and (c) on the SEC's website at sec.gov.


The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Principles is available upon request, free
of charge, by calling American Funds Service Company or visiting the American
Funds website.


     DIRECTOR MATTERS -- The election of a company's slate of nominees for
     director generally is supported. Votes may be withheld for some or all of
     the nominees if this is determined to be in the best interest of
     shareholders. Separation of the chairman and CEO positions also may be
     supported.

     GOVERNANCE PROVISIONS -- Typically, proposals to declassify a board (elect
     all directors annually) are supported based on the belief that this
     increases the directors' sense of accountability to shareholders. Proposals
     for cumulative voting generally are supported in order to promote
     management and board accountability and an opportunity for leadership
     change. Proposals designed to make director elections more meaningful,
     either by requiring a majority vote or by requiring any director receiving
     more withhold votes than affirmative votes to tender his or her
     resignation, generally are supported.


                  The Investment Company of America -- Page 20
<PAGE>


     SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill generally
     are supported. (There may be certain circumstances, however, when a proxy
     voting committee of a fund or an investment division of the investment
     adviser believes that a company needs to maintain anti-takeover
     protection.) Proposals to eliminate the right of shareholders to act by
     written consent or to take away a shareholder's right to call a special
     meeting typically are not supported.

     COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
     factors are considered in evaluating a plan. Each plan is evaluated based
     on protecting shareholder interests and a knowledge of the company and its
     management. Considerations include the pricing (or repricing) of options
     awarded under the plan and the impact of dilution on existing shareholders
     from past and future equity awards. Compensation packages should be
     structured to attract, motivate and retain existing employees and qualified
     directors; however, they should not be excessive.

     ROUTINE MATTERS -- The ratification of auditors, procedural matters
     relating to the annual meeting and changes to company name are examples of
     items considered routine. Such items generally are voted in favor of
     management's recommendations unless circumstances indicate otherwise.

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on June 1, 2008. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.


                 NAME AND ADDRESS                    OWNERSHIP PERCENTAGE
- ----------------------------------------------------------------------------

 Edward D. Jones & Co.                               Class A        20.08%
 Maryland Heights, MO                                Class B        12.33
- ----------------------------------------------------------------------------
 Citigroup Global Markets, Inc.                      Class B         5.99
 New York, NY                                        Class C        16.06
- ----------------------------------------------------------------------------
 First Clearing LLC                                  Class B         5.68
 Glen Allen, VA                                      Class C         6.26
- ----------------------------------------------------------------------------
 Merrill Lynch                                       Class C        15.09
 Jacksonville, FL
- ----------------------------------------------------------------------------
 A G Edwards & Sons Inc.                             Class C         5.55
 Saint Louis, MO                                     Class F-1       8.89
- ----------------------------------------------------------------------------
 Charles Schwab & Co., Inc.                          Class F-1       9.50
 San Francisco, CA
- ----------------------------------------------------------------------------
 Hartford Life Insurance Co.                         Class R-1      36.59
 Hartford, CT                                        Class R-3      12.34
- ----------------------------------------------------------------------------
 John Hancock Life Insurance Co. USA                 Class R-3      17.58
 Boston, MA
- ----------------------------------------------------------------------------
 Saxon & Co.                                         Class R-4       6.52
 Philadelphia, PA
- ----------------------------------------------------------------------------
 Principal Financial Group                           Class R-4       5.30
 Des Moines, IA
- ----------------------------------------------------------------------------
 Lockheed Martin Corporation                         Class R-5      53.76
 Quincy, MA
- ----------------------------------------------------------------------------
 Mercer Trust Company                                Class R-5       5.47
 Norwood, MA
- ----------------------------------------------------------------------------




                  The Investment Company of America -- Page 21
<PAGE>


UNLESS OTHERWISE NOTED, REFERENCES IN THIS STATEMENT OF ADDITIONAL INFORMATION
TO CLASS F SHARES, CLASS R SHARES OR CLASS 529 SHARES REFER TO BOTH F SHARE
CLASSES, ALL R SHARE CLASSES OR ALL 529 SHARE CLASSES, RESPECTIVELY.

INVESTMENT ADVISER -- Capital Research and Management Company, the fund's
investment adviser, founded in 1931, maintains research facilities in the United
States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London,
Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 6455 Irvine Center Drive, Irvine,
CA 92618. It is a wholly owned subsidiary of The Capital Group Companies, Inc.,
a holding company for several investment management subsidiaries. Capital
Research and Management Company manages equity assets through two investment
divisions, Capital World Investors and Capital Research Global Investors, and
manages fixed-income assets through its Fixed Income division. Capital World
Investors and Capital Research Global Investors make investment decisions on an
independent basis.


The investment adviser has adopted policies and procedures that address issues
that may arise as a result of an investment professional's management of the
fund and other funds and accounts. Potential issues could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, investment professional compensation and
voting relating to portfolio securities. The investment adviser believes that
its policies and procedures are reasonably designed to address these issues.


COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage.


Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing plans will vary depending on
the individual's portfolio results, contributions to the organization and other
factors.


To encourage a long-term focus, bonuses based on investment results are
calculated by comparing pretax total investment returns to relevant benchmarks
over the most recent year, a four-year rolling average and an eight-year rolling
average with greater weight placed on the four-year and eight-year rolling
averages. For portfolio counselors, benchmarks may include measures of the
marketplaces in which the fund invests and measures of the results of comparable
mutual funds. For investment analysts, benchmarks may include relevant market


                  The Investment Company of America -- Page 22
<PAGE>


measures and appropriate industry or sector indexes reflecting their areas of
expertise. Capital Research and Management Company makes periodic subjective
assessments of analysts' contributions to the investment process and this is an
element of their overall compensation. The investment results of each of the
fund's portfolio counselors may be measured against one or more of the following
benchmarks, depending on his or her investment focus: S&P 500, the securities
that are eligible to be purchased by the fund and Lipper Growth & Income Funds
Index.


PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage portions of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.


THE FOLLOWING TABLE REFLECTS INFORMATION AS OF DECEMBER 31, 2007:

                                             NUMBER             NUMBER             NUMBER
                                            OF OTHER           OF OTHER           OF OTHER
                                           REGISTERED           POOLED            ACCOUNTS
                                           INVESTMENT         INVESTMENT         FOR WHICH
                                        COMPANIES (RICS)    VEHICLES (PIVS)      PORTFOLIO
                                            FOR WHICH          FOR WHICH         COUNSELOR
                                            PORTFOLIO          PORTFOLIO        IS A MANAGER
                        DOLLAR RANGE        COUNSELOR          COUNSELOR         (ASSETS OF
                          OF FUND         IS A MANAGER       IS A MANAGER      OTHER ACCOUNTS
     PORTFOLIO             SHARES        (ASSETS OF RICS    (ASSETS OF PIVS   IN BILLIONS)/4/
     COUNSELOR            OWNED/1/       IN BILLIONS)/2/    IN BILLIONS)/3/
- ------------------------------------------------------------------------------------------------

 R. Michael                 Over           3      $240.8         None               None
 Shanahan                $1,000,000
- -------------------------------------------------------------------------------------------------
 James B. Lovelace      $100,001 --        4      $241.1         None               None
                          $500,000
- -------------------------------------------------------------------------------------------------
 Donald D. O'Neal       $500,001 --        2      $301.7      1       $0.06         None
                         $1,000,000
- -------------------------------------------------------------------------------------------------
 Joyce E. Gordon            Over           3      $132.9         None               None
                         $1,000,000
- -------------------------------------------------------------------------------------------------
 C. Ross                $100,001 --        2      $135.5      1       $0.06         None
 Sappenfield              $500,000
- -------------------------------------------------------------------------------------------------

1  Ownership disclosure is made using the following ranges: None; $1 - $10,000;
   $10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
   $1,000,000; and Over $1,000,000. The amounts listed include shares owned
   through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
2  Indicates fund(s) where the portfolio counselor also has significant
   responsibilities for the day to day management of the fund(s). Assets noted are
   the total net assets of the registered investment companies and are not the
   total assets managed by the individual, which is a substantially lower amount.
   No fund has an advisory fee that is based on the performance of the fund.
3  Represents funds advised or sub-advised by Capital Research and Management
   Company and sold outside the United States and/ or fixed-income assets in
   institutional accounts managed by investment adviser subsidiaries of Capital
   Group International, Inc., an affiliate of Capital Research and Management
   Company. Assets noted are the total net assets of the funds or accounts and are
   not the total assets managed by the individual, which is a substantially lower
   amount. No fund or account has an advisory fee that is based on the performance
   of the fund or account.
4  Reflects other professionally managed accounts held at companies affiliated
   with Capital Research and Management Company. Personal brokerage accounts of
   portfolio counselors and their families are not reflected.


                  The Investment Company of America -- Page 23
<PAGE>


INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until April 30, 2009, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (a) the board of directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (b) the vote of a majority of directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the investment adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).


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


As compensation for its services, the investment adviser receives a monthly fee
that is based on prior month-end net assets, calculated at the annual rate of
0.39% on the first $1 billion of net assets, plus 0.336% on net assets over $1
billion to $2 billion, plus 0.30% on net assets over $2 billion to $3 billion,
plus 0.276% on net assets over $3 billion to $5 billion, plus 0.258% on net
assets over $5 billion to $8 billion, plus 0.246% on net assets over $8 billion
to $13 billion, plus 0.24% on net assets over $13 billion to $21 billion, plus
0.234% on net assets over $21 billion to $34 billion, plus 0.231% on net assets
over $34 billion to $44 billion, plus 0.228% on net assets over $44 billion to
$55 billion, plus 0.225% on net assets over $55 billion to $71 billion, plus
0.222% on net assets over $71 billion to $89 billion, plus 0.219% on net assets
in excess of $89 billion.


The Agreement provides that if the normal operating expenses of the fund,
including the management fee paid to the investment adviser, and certain
expenses of the fund, for any fiscal year during which the Agreement is in
effect, exceed the expense limitations applicable to the fund imposed by state
securities laws or any regulations thereunder, the investment adviser will
reduce its fee by the extent of such excess and, if required pursuant to any
such laws or regulations, will reimburse the fund in the amount of such excess.
Expenses that are not subject to these limitations are interest, taxes,
brokerage costs, distribution expenses pursuant to a plan under rule 12b-1 and
extraordinary expenses such as litigation and acquisitions. Under the most
restrictive state regulations, as of the effective date of the Agreement, the
investment adviser


                  The Investment Company of America -- Page 24
<PAGE>


would be required to reimburse the fund if the normal operating expenses exceed
the lesser of: (i) 1 1/2% of the average value of the fund's net assets for the
fiscal year up to $30 million, plus 1% of the average value of the fund's net
assets for the fiscal year in excess of $30 million or (ii) 25% of the gross
investment income of the fund.


To the extent the investment adviser is required to reduce its management fee
pursuant to the expense limitations described above due to the expenses of the
Class A shares exceeding the stated limit, the investment adviser will either:
(i) reduce its management fee similarly for other classes of shares or (ii)
reimburse the fund for other expenses to the extent necessary to result in an
expense reduction only for Class A shares of the fund.


For the fiscal years ended December 31, 2007, 2006 and 2005, the investment
adviser was entitled to receive from the fund management fees of $215,810,000,
$198,992,000 and $182,140,000, respectively. After giving effect to the
management fee waiver described below, the fund paid the investment adviser
management fees of $194,229,000 (a reduction of $21,581,000), $179,093,000 (a
reduction of $19,899,000) and $166,165,000 (a reduction of $15,975,000) for the
fiscal years ended December 31, 2007, 2006 and 2005, respectively.


For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. From April 1, 2005 through December 31, 2008,
this waiver increased to 10% of the management fees that the investment adviser
was otherwise entitled to receive. The waiver was discontinued effective January
1, 2009.


ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until April
30, 2009, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by the vote of a majority of directors who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The fund may terminate the Administrative Agreement at any time
by vote of a majority of independent directors. The investment adviser has the
right to terminate the Administrative Agreement upon 60 days' written notice to
the fund. The Administrative Agreement automatically terminates in the event of
its assignment (as defined in the 1940 Act).


Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and Class R and 529 shares. The investment adviser may contract
with third parties, including American Funds Service Company,/(R)/ the fund's
Transfer Agent, to provide some of these services. Services include, but are not
limited to, shareholder account maintenance, transaction processing, tax
information reporting and shareholder and fund communications. In addition, the
investment adviser monitors, coordinates, oversees and assists with the
activities performed by third parties providing such services. For Class R-1 and
R-2 shares, the investment adviser has agreed to pay a portion of the fees
payable under the Administrative Agreement that would otherwise have been paid
by the fund. For the year ended December 31, 2007, the total fees paid by the
investment adviser were $160,000.


                  The Investment Company of America -- Page 25
<PAGE>


The investment adviser receives an administrative services fee at the annual
rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding
Class R-5 shares) and 529 shares for administrative services provided to these
share classes. Administrative services fees are paid monthly and accrued daily.
The investment adviser uses a portion of this fee to compensate third parties
for administrative services provided to the fund. Of the remainder, the
investment adviser does not retain more than 0.05% of the average daily net
assets for each applicable share class. For Class R-5 shares, the administrative
services fee is calculated at the annual rate of up to 0.10% of the average
daily net assets. The administrative services fee includes compensation for
transfer agent and shareholder services provided to the fund's Class C, F, R and
529 shares. In addition to making administrative service fee payments to
unaffiliated third parties, the investment adviser also makes payments from the
administrative services fee to American Funds Service Company according to a fee
schedule, based principally on the number of accounts serviced, contained in a
Shareholder Services Agreement between the fund and American Funds Service
Company.


During the 2007 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

                                             ADMINISTRATIVE SERVICES FEE
- ------------------------------------------------------------------------------

               CLASS C                               $4,507,000
- ------------------------------------------------------------------------------
              CLASS F-1                               1,760,000
- ------------------------------------------------------------------------------
              CLASS F-2                                      --
- ------------------------------------------------------------------------------
             CLASS 529-A                              1,182,000
- ------------------------------------------------------------------------------
             CLASS 529-B                                263,000
- ------------------------------------------------------------------------------
             CLASS 529-C                                361,000
- ------------------------------------------------------------------------------
             CLASS 529-E                                 50,000
- ------------------------------------------------------------------------------
            CLASS 529-F-1                                16,000
- ------------------------------------------------------------------------------
              CLASS R-1                                  89,000
- ------------------------------------------------------------------------------
              CLASS R-2                               3,009,000
- ------------------------------------------------------------------------------
              CLASS R-3                               1,934,000
- ------------------------------------------------------------------------------
              CLASS R-4                                 577,000
- ------------------------------------------------------------------------------
              CLASS R-5                               2,226,000
- ------------------------------------------------------------------------------




PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds
Distributors,/(R)/ Inc. (the "Principal Underwriter") is the principal
underwriter of the fund's shares. The Principal Underwriter is located at 333
South Hope Street, Los Angeles, CA 90071; 6455 Irvine Center Drive, Irvine, CA
92618; 3500 Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.


The Principal Underwriter receives revenues relating to sales of the fund's
shares, as follows:


                  The Investment Company of America -- Page 26
<PAGE>


     .    For Class A and 529-A shares, the Principal Underwriter receives
          commission revenue consisting of the balance of the Class A and 529-A
          sales charge remaining after the allowances by the Principal
          Underwriter to investment dealers.

     .    For Class B and 529-B shares, the Principal Underwriter sells its
          rights to the 0.75% distribution-related portion of the 12b-1 fees
          paid by the fund, as well as any contingent deferred sales charges, to
          a third party. The Principal Underwriter compensates investment
          dealers for sales of Class B and 529-B shares out of the proceeds of
          this sale and keeps any amounts remaining after this compensation is
          paid.

     .    For Class C and 529-C shares, the Principal Underwriter receives any
          contingent deferred sales charges that apply during the first year
          after purchase.

In addition, the fund reimburses the Principal Underwriter for advancing
immediate service fees to qualified dealers and advisers upon the sale of Class
B, 529-B, C and 529-C shares. The fund also reimburses the Principal Underwriter
for service fees (and, in the case of Class 529-E shares, commissions) paid on a
quarterly basis to qualified dealers and advisers in connection with investments
in Class F-1, 529-F-1, 529-E, R-1, R-2, R-3 and R-4 shares.


Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

                                                                 COMMISSIONS,        ALLOWANCE OR
                                                                    REVENUE          COMPENSATION
                                           FISCAL YEAR/PERIOD  OR FEES RETAINED       TO DEALERS
- -----------------------------------------------------------------------------------------------------

                 CLASS A                          2007            $19,516,000        $ 87,565,000
                                                  2006             21,449,000          97,597,000
                                                  2005             23,259,000         107,667,000
- -----------------------------------------------------------------------------------------------------
                 CLASS B                          2007              1,265,000           7,808,000
                                                  2006              1,472,000           9,507,000
                                                  2005              1,908,000          12,381,000
- -----------------------------------------------------------------------------------------------------
                 CLASS C                          2007                934,000           3,881,000
                                                  2006                598,000           4,228,000
                                                  2005              1,103,000           4,765,000
- -----------------------------------------------------------------------------------------------------
               CLASS 529-A                        2007              1,209,000           5,764,000
                                                  2006              1,196,000           5,796,000
                                                  2005              1,230,000           6,073,000
- -----------------------------------------------------------------------------------------------------
               CLASS 529-B                        2007                125,000             833,000
                                                  2006                142,000             894,000
                                                  2005                189,000           1,148,000
- -----------------------------------------------------------------------------------------------------
               CLASS 529-C                        2007                  9,000             639,000
                                                  2006                  9,000             582,000
                                                  2005                 23,000             577,000
- -----------------------------------------------------------------------------------------------------




                  The Investment Company of America -- Page 27
<PAGE>


Plans of distribution -- The fund has adopted plans of distribution (the
"Plans") pursuant to rule 12b-1 under the 1940 Act. The Plans permit the fund to
expend amounts to finance any activity primarily intended to result in the sale
of fund shares, provided the fund's board of directors has approved the category
of expenses for which payment is being made.


Each Plan is specific to a particular share class of the fund. As the fund has
not adopted a Plan for Class F-2 or Class R-5, no 12b-1 fees are paid from Class
F-2 or Class R-5 share assets and the following disclosure is not applicable to
these share classes.


Payments under the Plans may be made for service-related and/or
distribution-related expenses. Service-related expenses include paying service
fees to qualified dealers. Distribution-related expenses include commissions
paid to qualified dealers. The amounts actually paid under the Plans for the
past fiscal year, expressed as a percentage of the fund's average daily net
assets attributable to the applicable share class, are disclosed in the
prospectus under "Fees and expenses of the fund." Further information regarding
the amounts available under each Plan is in the "Plans of Distribution" section
of the prospectus.


Following is a brief description of the Plans:


     CLASS A AND 529-A -- For Class A and 529-A shares, up to 0.25% of the
     fund's average daily net assets attributable to such shares is reimbursed
     to the Principal Underwriter for paying service-related expenses, and the
     balance available under the applicable Plan may be paid to the Principal
     Underwriter for distribution-related expenses. The fund may annually expend
     up to 0.25% for Class A shares and up to 0.50% for Class 529-A shares under
     the applicable Plan.

     Distribution-related expenses for Class A and 529-A shares include dealer
     commissions and wholesaler compensation paid on sales of shares of $1
     million or more purchased without a sales charge. Commissions on these "no
     load" purchases (which are described in further detail under the "Sales
     Charges" section of this statement of additional information) in excess of
     the Class A and 529-A Plan limitations and not reimbursed to the Principal
     Underwriter during the most recent fiscal quarter are recoverable for five
     quarters, provided that the reimbursement of such commissions does not
     cause the fund


                  The Investment Company of America -- Page 28
<PAGE>


     to exceed the annual expense limit. After five quarters, these commissions
     are not recoverable.

     CLASS B AND 529-B -- The Plans for Class B and 529-B shares provide for
     payments to the Principal Underwriter of up to 0.25% of the fund's average
     daily net assets attributable to such shares for paying service-related
     expenses and 0.75% for distribution-related expenses, which include the
     financing of commissions paid to qualified dealers.

     OTHER SHARE CLASSES (CLASS C, 529-C, F-1, 529-F-1, 529-E, R-1, R-2, R-3 AND
     R-4) -- The Plans for each of the other share classes that have adopted
     Plans provide for payments to the Principal Underwriter for paying
     service-related and distribution-related expenses of up to the following
     amounts of the fund's average daily net assets attributable to such shares:

                                                                        TOTAL
                                           SERVICE    DISTRIBUTION    ALLOWABLE
                                           RELATED      RELATED         UNDER
                  SHARE CLASS            PAYMENTS/1/  PAYMENTS/1/    THE PLANS/2/
- ----------------------------------------------------------------------------------

          Class C                           0.25%        0.75%          1.00%
         -------------------------------------------------------------------------
          Class 529-C                       0.25         0.75           1.00
         -------------------------------------------------------------------------
          Class F-1                         0.25           --           0.50
         -------------------------------------------------------------------------
          Class 529-F-1                     0.25           --           0.50
         -------------------------------------------------------------------------
          Class 529-E                       0.25         0.25           0.75
         -------------------------------------------------------------------------
          Class R-1                         0.25         0.75           1.00
         -------------------------------------------------------------------------
          Class R-2                         0.25         0.50           1.00
         -------------------------------------------------------------------------
          Class R-3                         0.25         0.25           0.75
         -------------------------------------------------------------------------
          Class R-4                         0.25           --           0.50
- ----------------------------------------------------------------------------------

          1  Amounts in these columns represent the amounts approved by the board of
             directors under the applicable Plan.
          2  The fund may annually expend the amounts set forth in this column under
             the current Plans with the approval of the board of directors.


                  The Investment Company of America -- Page 29
<PAGE>


During the 2007 fiscal year, 12b-1 expenses accrued and paid, and if applicable,
unpaid, were:

                                                      12B-1 UNPAID LIABILITY
                               12B-1 EXPENSES              OUTSTANDING
- ------------------------------------------------------------------------------

        CLASS A                 $175,798,000               $14,202,000
- ------------------------------------------------------------------------------
        CLASS B                   43,051,000                 3,589,000
- ------------------------------------------------------------------------------
        CLASS C                   34,873,000                 2,985,000
- ------------------------------------------------------------------------------
       CLASS F-1                   4,233,000                   539,000
- ------------------------------------------------------------------------------
      CLASS 529-A                  2,596,000                   225,000
- ------------------------------------------------------------------------------
      CLASS 529-B                  2,574,000                   229,000
- ------------------------------------------------------------------------------
      CLASS 529-C                  3,605,000                   358,000
- ------------------------------------------------------------------------------
      CLASS 529-E                    266,000                    24,000
- ------------------------------------------------------------------------------
     CLASS 529-F-1                         0                         0
- ------------------------------------------------------------------------------
       CLASS R-1                     573,000                    60,000
- ------------------------------------------------------------------------------
       CLASS R-2                   5,143,000                   459,000
- ------------------------------------------------------------------------------
       CLASS R-3                   5,053,000                   447,000
- ------------------------------------------------------------------------------
       CLASS R-4                     956,000                    95,000
- ------------------------------------------------------------------------------



Approval of the Plans -- As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full board of directors and separately by a majority of the independent
directors of the fund who have no direct or indirect financial interest in the
operation of the Plans or the Principal Underwriting Agreement. In addition, the
selection and nomination of independent directors of the fund are committed to
the discretion of the independent directors during the existence of the Plans.


Potential benefits of the Plans to the fund include quality shareholder
services, savings to the fund in transfer agency costs, and benefits to the
investment process from growth or stability of assets. The Plans may not be
amended to materially increase the amount spent for distribution without
shareholder approval. Plan expenses are reviewed quarterly by the board of
directors and the Plans must be renewed annually by the board of directors.


FEE TO VIRGINIA COLLEGE SAVINGS PLAN -- With respect to Class 529 Shares, as
compensation for its oversight and administration, Virginia College Savings Plan
receives a quarterly fee accrued daily and calculated at the annual rate of
0.10% on the first $30 billion of the net assets invested in Class 529 Shares of
the American Funds, 0.09% on net assets between $30 billion and $60 billion,
0.08% on net assets between $60 billion and $90 billion, 0.07% on net assets
between $90 billion and $120 billion, and 0.06% on net assets between $120
billion and $150 billion. The fee for any given calendar quarter is accrued and
calculated on the basis of average net assets of Class 529 Shares of the
American Funds for the last month of the prior calendar quarter.


                  The Investment Company of America -- Page 30
<PAGE>



OTHER COMPENSATION TO DEALERS -- As of October 2008, the top dealers (or their
affiliates) that American Funds Distributors anticipates will receive additional
compensation (as described in the prospectus) include:

     AIG Advisors Group
          Advantage Capital Corporation
          AIG Financial Advisors, Inc.
          American General Securities Incorporated
          FSC Securities Corporation
          Royal Alliance Associates, Inc.
     AXA Advisors, LLC
     Cadaret, Grant & Co., Inc.
     Cambridge Investment Research, Inc.
     Commonwealth Financial Network
     Cuna Brokerage Services, Inc.
     Deutsche Bank Securities Inc.
     Edward Jones
     Genworth Financial Securities Corporation
     Hefren-Tillotson, Inc.
     HTK / Janney Montgomery Group
          Hornor, Townsend & Kent, Inc.
          Janney Montgomery Scott LLC
     ING Advisors Network Inc.
          Bancnorth Investment Group, Inc.
          Financial Network Investment Corporation
          Guaranty Brokerage Services, Inc.
          ING Financial Partners, Inc.
          Multi-Financial Securities Corporation
          Primevest Financial Services, Inc.
     Intersecurities / Transamerica
          InterSecurities, Inc.
          Transamerica Financial Advisors, Inc.
     JJB Hilliard/PNC Bank
          J.J.B. Hilliard, W.L. Lyons, Inc.
          PNC Bank, National Association
          PNC Investments LLC
     Lincoln Financial Advisors Corporation
     LPL Group
          Associated Securities Corp.
          LPL Financial Corporation
          Mutual Service Corporation
          Uvest Investment Services
          Waterstone Financial Group, Inc.
     Merrill Lynch, Pierce, Fenner & Smith Incorporated
     Metlife Enterprises
          Metlife Securities Inc.
          New England Securities
          Tower Square Securities
          Walnut Street Securities, Inc.
     MML Investors Services, Inc.


                  The Investment Company of America -- Page 31
<PAGE>


     Morgan Keegan & Company, Inc.
     Morgan Stanley & Co., Incorporated
     National Planning Holdings Inc.
          Invest Financial Corporation
          Investment Centers of America, Inc.
          National Planning Corporation
          SII Investments, Inc.
     NFP Securities, Inc.
     Northwestern Mutual Investment Services, LLC
     Park Avenue Securities LLC
     Princor Financial Services Corporation
     Raymond James Group
          Raymond James & Associates, Inc.
          Raymond James Financial Services Inc.
     RBC Dain Rauscher Inc.
     Robert W. Baird & Co. Incorporated
     Securian / C.R.I.
          CRI Securities, LLC
          Securian Financial Services, Inc.
     Smith Barney
          Legg Mason
          Primerica Financial Services
     U.S. Bancorp Investments, Inc.
     UBS Financial Services Inc.
     Wachovia Group
          A. G. Edwards, a Division of Wachovia Securities, LLC
          First Clearing LLC
          Wachovia Securities Financial Network, LLC
          Wachovia Securities Investment Services Group
          Wachovia Securities Latin American Channel
          Wachovia Securities Private Client Group
     Wells Fargo Investments, LLC

                      EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the fund's
portfolio transactions. Purchases and sales of equity securities on a securities
exchange or an over-the-counter market are effected through broker-dealers who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions relating
to securities traded on U.S. exchanges and may not be subject to negotiation.
Equity securities may also be purchased from underwriters at prices that include
underwriting fees. Purchases and sales of fixed-income securities are generally
made with an issuer or a primary market-maker acting as principal with no stated
brokerage commission. The price paid to an underwriter for fixed-income
securities includes underwriting fees. Prices for fixed-income securities in
secondary trades usually include undisclosed compensation to the market-maker
reflecting the spread between the bid and ask prices for the securities.


In selecting broker-dealers, the investment adviser strives to obtain "best
execution" (the most favorable total price reasonably attainable under the
circumstances) for the fund's portfolio transactions, taking into account a
variety of factors. These factors include the size and type of


                  The Investment Company of America -- Page 32
<PAGE>


transaction, the nature and character of the markets for the security to be
purchased or sold, the cost, quality and reliability of the executions and the
broker-dealer's ability to offer liquidity and anonymity. The investment adviser
considers these factors, which involve qualitative judgments, when selecting
broker-dealers and execution venues for fund portfolio transactions. The
investment adviser views best execution as a process that should be evaluated
over time as part of an overall relationship with particular broker-dealer firms
rather than on a trade-by-trade basis. The fund does not consider the investment
adviser as having an obligation to obtain the lowest commission rate available
for a portfolio transaction to the exclusion of price, service and qualitative
considerations.


The investment adviser may execute portfolio transactions with broker-dealers
who provide certain brokerage and/or investment research services to it, but
only when in the investment adviser's judgment the broker-dealer is capable of
providing best execution for that transaction. The receipt of these services
permits the investment adviser to supplement its own research and analysis and
makes available the views of, and information from, individuals and the research
staffs of other firms. Such views and information may be provided in the form of
written reports, telephone contacts and meetings with securities analysts. These
services may include, among other things, reports and other communications with
respect to individual companies, industries, countries and regions, economic,
political and legal developments, as well as scheduling meetings with corporate
executives and seminars and conferences related to relevant subject matters. The
investment adviser considers these services to be supplemental to its own
internal research efforts and therefore the receipt of investment research from
broker-dealers does not tend to reduce the expenses involved in the investment
adviser's research efforts. If broker-dealers were to discontinue providing such
services it is unlikely the investment adviser would attempt to replicate them
on its own, in part because they would then no longer provide an independent,
supplemental viewpoint. Nonetheless, if it were to attempt to do so, the
investment adviser would incur substantial additional costs. Research services
that the investment adviser receives from broker-dealers may be used by the
investment adviser in servicing the fund and other funds and accounts that it
advises; however, not all such services will necessarily benefit the fund.


The investment adviser may pay commissions in excess of what other
broker-dealers might have charged - including on an execution-only basis - for
certain portfolio transactions in recognition of brokerage and/or investment
research services provided by a broker-dealer. In this regard, the investment
adviser has adopted a brokerage allocation procedure consistent with the
requirements of Section 28(e) of the U.S. Securities Exchange Act of 1934.
Section 28(e) permits an investment adviser to cause an account to pay a higher
commission to a broker-dealer that provides certain brokerage and/or investment
research services to the investment adviser, if the investment adviser makes a
good faith determination that such commissions are reasonable in relation to the
value of the services provided by such broker-dealer to the investment adviser
in terms of that particular transaction or the investment adviser's overall
responsibility to the fund and other accounts that it advises. Certain brokerage
and/or investment research services may not necessarily benefit all accounts
paying commissions to each such broker-dealer; therefore, the investment adviser
assesses the reasonableness of commissions in light of the total brokerage and
investment research services provided by each particular broker-dealer.


In accordance with its internal brokerage allocation procedure, each equity
investment division of the investment adviser periodically assesses the
brokerage and investment research services provided by each broker-dealer from
which it receives such services. Using its judgment, each equity investment
division of the investment adviser then creates lists with suggested levels of


                  The Investment Company of America -- Page 33
<PAGE>


commissions for particular broker-dealers and provides those lists to its
trading desks. Neither the investment adviser nor the fund incurs any obligation
to any broker-dealer to pay for research by generating trading commissions. The
actual level of business received by any broker-dealer may be less than the
suggested level of commissions and can, and often does, exceed the suggested
level in the normal course of business. As part of its ongoing relationships
with broker-dealers, the investment adviser routinely meets with firms,
typically at the firm's request, to discuss the level and quality of the
brokerage and research services provided, as well as the perceived value and
cost of such services. In valuing the brokerage and investment research services
the investment adviser receives from broker-dealers in connection with its good
faith determination of reasonableness, the investment adviser does not attribute
a dollar value to such services, but rather takes various factors into
consideration, including the quantity, quality and usefulness of the services to
the investment adviser.


The investment adviser seeks, on an ongoing basis, to determine what the
reasonable levels of commission rates are in the marketplace. The investment
adviser takes various considerations into account when evaluating such
reasonableness, including, (a) rates quoted by broker-dealers, (b) the size of a
particular transaction in terms of the number of shares and dollar amount, (c)
the complexity of a particular transaction, (d) the nature and character of the
markets on which a particular trade takes place, (e) the ability of a
broker-dealer to provide anonymity while executing trades, (f) the ability of a
broker-dealer to execute large trades while minimizing market impact, (g) the
extent to which a broker-dealer has put its own capital at risk, (h) the level
and type of business done with a particular broker-dealer over a period of time,
(i) historical commission rates, and (j) commission rates that other
institutional investors are paying.


When executing portfolio transactions in the same equity security for the funds
and accounts, or portions of funds and accounts, over which the investment
adviser, through its equity investment divisions, has investment discretion,
each of the investment divisions will normally aggregate its respective
purchases or sales and execute them as part of the same transaction or series of
transactions. When executing portfolio transactions in the same fixed-income
security for the fund and the other funds or accounts over which it or one of
its affiliated companies has investment discretion, the investment adviser will
normally aggregate such purchases or sales and execute them as part of the same
transaction or series of transactions. The objective of aggregating purchases
and sales of a security is to allocate executions in an equitable manner among
the funds and other accounts that have concurrently authorized a transaction in
such security.


The investment adviser may place orders for the fund's portfolio transactions
with broker-dealers who have sold shares in the funds managed by the investment
adviser or its affiliated companies; however, it does not consider whether a
broker-dealer has sold shares of the funds managed by the investment adviser or
its affiliated companies when placing any such orders for the fund's portfolio
transactions.


Brokerage commissions paid on portfolio transactions for the fiscal years ended
December 31, 2007, 2006 and 2005 amounted to $27,273,000, $26,095,000 and
$22,643,000, respectively. The volume of trading activity increased from 2006 to
2007 resulting in an increase in brokerage commissions paid on portfolio
transactions.


The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker--


                  The Investment Company of America -- Page 34
<PAGE>


dealer is (a) one of the 10 broker-dealers that received from the fund the
largest amount of brokerage commissions by participating, directly or
indirectly, in the fund's portfolio transactions during the fund's most recent
fiscal year; (b) one of the 10 broker-dealers that engaged as principal in the
largest dollar amount of portfolio transactions of the fund during the fund's
most recent fiscal year; or (c) one of the 10 broker-dealers that sold the
largest amount of securities of the fund during the fund's most recent fiscal
year.


At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Citigroup Global Markets Inc., J.P. Morgan Securities
Inc. and Wachovia Securities Private Client Group. As of the fund's most recent
fiscal year-end, the fund held equity securities of Citigroup Inc. in the amount
of $1,369,292,000, JPMorgan Chase & Co. in the amount of $698,400,000 and
Wachovia Corporation in the amount of $427,837,000. As of the fund's most recent
fiscal year-end, the fund held debt securities of Citigroup Funding Inc. in the
amount of $49,711,000 and JPMorgan Chase & Co. in the amount of $313,629,000.


                        DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's board
of directors and compliance will be periodically assessed by the board in
connection with reporting from the fund's Chief Compliance Officer.


Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. In addition, the fund's list of top 10 equity portfolio
holdings measured by percentage of net assets invested, dated as of the end of
each calendar month, is permitted to be posted on the American Funds website no
earlier than the tenth day after such month. Such portfolio holdings information
may then be disclosed to any person pursuant to an ongoing arrangement to
disclose portfolio holdings information to such person no earlier than one day
after the day on which the information is posted on the American Funds website.
The fund's custodian, outside counsel and auditor, each of which requires
portfolio holdings information for legitimate business and fund oversight
purposes, may receive the information earlier.


Affiliated persons of the fund, including officers of the fund and employees of
the investment adviser and its affiliates, who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements not to trade in securities based on confidential and proprietary
investment information, to maintain the confidentiality of such information, and
to preclear securities trades and report securities transactions activity, as
applicable. For more information on these restrictions and limitations, please
see the "Code of Ethics" section in this statement of additional information and
the Code of Ethics. Third party service providers of the fund, as described in
this statement of additional information, receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons will be bound by agreements (including confidentiality agreements)
or fiduciary obligations that restrict and limit their use of the information to
legitimate


                  The Investment Company of America -- Page 35
<PAGE>



business uses only. Neither the fund nor its investment adviser or any affiliate
thereof receives compensation or other consideration in connection with the
disclosure of information about portfolio securities.


Subject to board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the appropriate investment-related committees of the fund's investment
adviser. In exercising their authority, the committees determine whether
disclosure of information about the fund's portfolio securities is appropriate
and in the best interest of fund shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the investment
adviser's code of ethics specifically requires, among other things, the
safeguarding of information about fund holdings and contains prohibitions
designed to prevent the personal use of confidential, proprietary investment
information in a way that would conflict with fund transactions. In addition,
the investment adviser believes that its current policy of not selling portfolio
holdings information and not disclosing such information to unaffiliated third
parties until such holdings have been made public on the American Funds website
(other than to certain fund service providers for legitimate business and fund
oversight purposes) helps reduce potential conflicts of interest between fund
shareholders and the investment adviser and its affiliates.

                                PRICE OF SHARES

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


Orders received by the investment dealer or authorized designee, the Transfer
Agent or the fund after the time of the determination of the net asset value
will be entered at the next calculated offering price. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.


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


                  The Investment Company of America -- Page 36
<PAGE>


All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset values per
share for each share class are determined, as indicated below. The fund follows
standard industry practice by typically reflecting changes in its holdings of
portfolio securities on the first business day following a portfolio trade.


1.    Equity securities, including depositary receipts, 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 are valued at
prices obtained from an independent pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices (or bid prices, if asked prices are not available) or at prices for
securities of comparable maturity, quality and type. The pricing services base
bond prices on, among other things, an evaluation of the yield curve as of
approximately 3 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to calculation of the fund's net asset
value.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), 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.

Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity, or if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.


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


Securities and assets for which market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's board. Subject to board oversight, the
fund's board has delegated the obligation to make fair valuation determinations
to a valuation committee established by the fund's investment adviser. The board
receives regular reports describing fair-valued securities and the valuation
methods used.


The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable by the investment adviser, are valued in good
faith by the valuation committee based upon what the fund might reasonably
expect to receive upon their current sale. The valuation committee considers all
indications of value available to it in determining the fair value to be
assigned to a particular security, including, without limitation, 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


                  The Investment Company of America -- Page 37
<PAGE>


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. The valuation committee
employs additional fair value procedures to address issues related to investing
substantial portions of applicable fund portfolios outside the United States.
Securities owned by these funds trade in markets that open and close at
different times, reflecting time zone differences. If significant events occur
after the close of a market (and before these fund's net asset values are next
determined) which affect the value of portfolio securities, appropriate
adjustments from closing market prices may be made to reflect these events.
Events of this type could include, for example, earthquakes and other natural
disasters or significant price changes in other markets (e.g., U.S. stock
markets).


2.   Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to the fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other expense
items attributable to particular share classes, are deducted from total assets
attributable to such share classes.

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

                            TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. The fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances, the fund may
determine that it is in the interest of shareholders to distribute less than
that amount.


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


                  The Investment Company of America -- Page 38
<PAGE>


regulated investment companies) any one issuer; two or more issuers which the
fund controls and which are determined to be engaged in the same or similar
trades or businesses; or the securities of certain publicly traded partnerships.


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


The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.


DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.


Distributions of investment company taxable income and net realized capital
gains to  shareholders will be taxable whether received in shares or in cash,
unless such shareholders are exempt from taxation. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of that share on the reinvestment date. Dividends and capital gain
distributions by the fund to a tax-deferred retirement plan account are not
taxable currently.


     DIVIDENDS -- The fund intends to follow the practice of distributing
     substantially all of its investment company taxable income. Investment
     company taxable income generally includes dividends, interest, net
     short-term capital gains in excess of net long-term capital losses, and
     certain foreign currency gains, if any, less expenses and certain foreign
     currency losses. To the extent the fund invests in stock of domestic and
     certain foreign corporations and meets the applicable holding period
     requirement, it may receive "qualified dividends". The fund will designate
     the amount of "qualified dividends" to its shareholders in a notice sent
     within 60 days of the close of its fiscal year and will report "qualified
     dividends" to shareholders on Form 1099-DIV.

     Under the Code, gains or losses attributable to fluctuations in exchange
     rates that occur between the time the fund accrues receivables or
     liabilities denominated in a foreign currency and the time the fund
     actually collects such receivables, or pays such liabilities, generally are
     treated as ordinary income or ordinary loss. Similarly, on disposition of
     debt


                  The Investment Company of America -- Page 39
<PAGE>


     securities denominated in a foreign currency and on disposition of certain
     futures contracts, forward contracts and options, gains or losses
     attributable to fluctuations in the value of foreign currency between the
     date of acquisition of the security or contract and the date of disposition
     are also treated as ordinary gain or loss. These gains or losses, referred
     to under the Code as Section 988 gains or losses, may increase or decrease
     the amount of the fund's investment company taxable income to be
     distributed to its shareholders as ordinary income.


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


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


     Dividends from domestic corporations are expected to comprise some portion
     of the fund's gross income. To the extent that such dividends constitute
     any of the fund's gross income, a portion of the income distributions of
     the fund may be eligible for the deduction for dividends received by
     corporations. Corporate shareholders will be informed of the portion of
     dividends that so qualifies. The dividends-received deduction is reduced to
     the extent that either the fund shares, or the underlying shares of stock
     held by the fund, with respect to which dividends are received, are treated
     as debt-financed under federal income tax law, and is eliminated if the
     shares are deemed to have been held by the shareholder or the fund, as the
     case may be, for less than 46 days during the 91-day period beginning on
     the date that is 45 days before the date on which the shares become
     ex-dividend. Capital gain distributions are not eligible for the
     dividends-received deduction.


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


                  The Investment Company of America -- Page 40
<PAGE>


     The price of a bond purchased after its original issuance may reflect
     market discount which, depending on the particular circumstances, may
     affect the tax character and amount of income required to be recognized by
     a fund holding the bond. In determining whether a bond is purchased with
     market discount, certain de minimis rules apply.


     Dividend and interest income received by the fund from sources outside the
     United States may be subject to withholding and other taxes imposed by such
     foreign jurisdictions. Tax conventions between certain countries and the
     United States, however, may reduce or eliminate these foreign taxes. Some
     foreign countries impose taxes on capital gains with respect to investments
     by foreign investors.


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

     If any net long-term capital gains in excess of net short-term capital
     losses are retained by the fund for reinvestment, requiring federal income
     taxes to be paid thereon by the fund, the fund intends to elect to treat
     such capital gains as having been distributed to shareholders. As a result,
     each shareholder will report such capital gains as long-term capital gains
     taxable to individual shareholders at a maximum 15% capital gains rate will
     be able to claim a pro rata share of federal income taxes paid by the fund
     on such gains as a credit against personal federal income tax liability,
     and will be entitled to increase the adjusted tax basis on fund shares by
     the difference between a pro rata share of the retained gains and such
     shareholder's related tax credit.


SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.


     DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
     All or a portion of a fund's dividend distribution may be a "qualified
     dividend." If the fund meets the applicable holding period requirement, it
     will distribute dividends derived from qualified corporation dividends to
     shareholders as qualified dividends. Interest income from bonds and money
     market instruments and nonqualified foreign dividends will be distributed
     to shareholders as nonqualified fund dividends. The fund will report on
     Form 1099-DIV the amount of each shareholder's dividend that may be treated
     as a qualified dividend. If a shareholder other than a corporation meets
     the requisite holding period requirement, qualified dividends are taxable
     at a maximum rate of 15%.

     CAPITAL GAINS -- Distributions of the excess of net long-term capital gains
     over net short-term capital losses that the fund properly designates as
     "capital gain dividends" generally will be taxable as long-term capital
     gain. Regardless of the length of time the shares of the fund have been
     held by a shareholder, a capital gain distribution by the fund is subject
     to a maximum tax rate of 15%. Any loss realized upon the redemption of
     shares held at the time of redemption for six months or less from the date
     of their purchase will be treated as a long-term capital loss to the extent
     of any amounts treated as distributions of long-term capital gains during
     such six-month period.


                  The Investment Company of America -- Page 41
<PAGE>


Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Investors should consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.


Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.


If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).


Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.


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


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


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


                  The Investment Company of America -- Page 42
<PAGE>


UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F-1 SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR
529-F-1 SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE APPLICABLE
PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY
RELATING TO THESE ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE
RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR
INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES.

                        PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:


     CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
     financial adviser.

     BY MAIL -- for initial investments, you may mail a check, made payable to
     the fund, directly to the address indicated on the account application.
     Please indicate an investment dealer on the account application. You may
     make additional investments by filling out the "Account Additions" form at
     the bottom of a recent account statement and mailing the form, along with a
     check made payable to the fund, using the envelope provided with your
     account statement.

     The amount of time it takes for us to receive regular U.S. postal mail may
     vary and there is no assurance that we will receive such mail on the day
     you expect. Mailing addresses for regular U.S. postal mail can be found in
     the prospectus. To send investments or correspondence to us via overnight
     mail or courier service, use either of the following addresses:

           American Funds
           8332 Woodfield Crossing Blvd.
           Indianapolis, IN 46240-2482

           American Funds
           5300 Robin Hood Rd.
           Norfolk, VA  23513-2407

     BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder
     account services and privileges" section of this statement of additional
     information for more information regarding this service.

     BY INTERNET -- using americanfunds.com. Please see the "Shareholder account
     services and privileges" section of this statement of additional
     information for more information regarding this service.

     BY WIRE -- If you are making a wire transfer, instruct your bank to wire
     funds to:

           Wells Fargo Bank
           ABA Routing No. 121000248
           Account No. 4600-076178


                  The Investment Company of America -- Page 43
<PAGE>


           Your bank should include the following information when wiring funds:

           For credit to the account of:
           American Funds Service Company
           (fund's name)

           For further credit to:
           (shareholder's fund account number)
           (shareholder's name)

     You may contact American Funds Service Company at 800/421-0180 if you have
     questions about making wire transfers.

OTHER PURCHASE INFORMATION -- The Principal Underwriter will not knowingly sell
shares of the fund directly or indirectly to any person or entity, where, after
the sale, such person or entity would own beneficially directly or indirectly
more than 3.0% of the outstanding shares of the fund without the consent of a
majority of the fund's board.


Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. Class R-5 shares are also available to clients of the
Personal Investment Management group of Capital Guardian Trust Company who do
not have an intermediary associated with their accounts and without regard to
the $1 million purchase minimum. In addition, the American Funds state
tax-exempt funds are qualified for sale only in certain jurisdictions, and
tax-exempt funds in general should not serve as retirement plan investments. The
fund and the Principal Underwriter reserve the right to reject any purchase
order.


PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases.


In the case of American Funds non-tax-exempt funds, the initial purchase minimum
of $25 may be waived for the following account types:


     .    Payroll deduction retirement plan accounts (such as, but not limited
          to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
          accounts); and

     .    Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:


     .    Retirement accounts that are funded with employer contributions; and

     .    Accounts that are funded with monies set by court decree.

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:


                  The Investment Company of America -- Page 44
<PAGE>


     .    Accounts that are funded with (a) transfers of assets, (b) rollovers
          from retirement plans, (c) rollovers from 529 college savings plans or
          (d) required minimum distribution automatic exchanges; and

     .    American Funds money market fund accounts registered in the name of
          clients of Capital Guardian Trust Company's Personal Investment
          Management group.

Certain accounts held on the fund's books, known as omnibus accounts, contain
multiple underlying accounts that are invested in shares of the fund. These
underlying accounts are maintained by entities such as financial intermediaries
and are subject to the applicable initial purchase minimums as described in the
prospectus and this statement of additional information. However, in the case
where the entity maintaining these accounts aggregates the accounts' purchase
orders for fund shares, such accounts are not required to meet the fund's
minimum amount for subsequent purchases.


EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchanges are not permitted from Class A shares
of The Cash Management Trust of America to Class B or C shares of Intermediate
Bond Fund of America, Limited Term Tax-Exempt Bond Fund of America and
Short-Term Bond Fund of America. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds money market funds are
subject to applicable sales charges on the fund being purchased, unless the
money market fund shares were acquired by an exchange from a fund having a sales
charge, or by reinvestment or cross-reinvestment of dividends or capital gain
distributions. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.


You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" in this statement of additional
information. THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.


Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" in this
statement of additional information).


FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for
example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.


                  The Investment Company of America -- Page 45
<PAGE>


OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.


MOVING BETWEEN SHARE CLASSES

     If you wish to "move" your investment between share classes (within the
     same fund or between different funds), we generally will process your
     request as an exchange of the shares you currently hold for shares in the
     new class or fund. Below is more information about how sales charges are
     handled for various scenarios.

     EXCHANGING CLASS B SHARES FOR CLASS A SHARES -- If you exchange Class B
     shares for Class A shares during the contingent deferred sales charge
     period you are responsible for paying any applicable deferred sales charges
     attributable to those Class B shares, but you will not be required to pay a
     Class A sales charge. If, however, you exchange your Class B shares for
     Class A shares after the contingent deferred sales charge period, you are
     responsible for paying any applicable Class A sales charges.

     EXCHANGING CLASS C SHARES FOR CLASS A SHARES -- If you exchange Class C
     shares for Class A shares, you are still responsible for paying any Class C
     contingent deferred sales charges and applicable Class A sales charges.

     EXCHANGING CLASS C SHARES FOR CLASS F SHARES -- If you are part of a
     qualified fee-based program and you wish to exchange your Class C shares
     for Class F shares to be held in the program, you are still responsible for
     paying any applicable Class C contingent deferred sales charges.

     EXCHANGING CLASS F SHARES FOR CLASS A SHARES -- You can exchange Class F
     shares held in a qualified fee-based program for Class A shares without
     paying an initial Class A sales charge if all of the following requirements
     are met: (a) you are leaving or have left the fee-based program, (b) you
     have held the Class F shares in the program for at least one year, and (c)
     you notify American Funds Service Company of your request. If you have
     already redeemed your Class F shares, the foregoing requirements apply and
     you must purchase Class A shares within 90 days after redeeming your Class
     F shares to receive the Class A shares without paying an initial Class A
     sales charge.

     EXCHANGING CLASS A SHARES FOR CLASS F SHARES -- If you are part of a
     qualified fee-based program and you wish to exchange your Class A shares
     for Class F shares to be held in the program, any Class A sales charges
     (including contingent deferred sales charges) that you paid or are payable
     will not be credited back to your account.

     EXCHANGING CLASS A SHARES FOR CLASS R SHARES -- Provided it is eligible to
     invest in Class R shares, a retirement plan currently invested in Class A
     shares may exchange its shares for Class R shares. Any Class A sales
     charges that the retirement plan previously paid will not be credited back
     to the plan's account.


                  The Investment Company of America -- Page 46
<PAGE>


     EXCHANGING CLASS F-1 SHARES FOR CLASS F-2 SHARES -- If you are part of a
     qualified fee-based program that offers Class F-2 shares, you may exchange
     your Class F-1 shares for Class F-2 shares to be held in the program.

     MOVING BETWEEN OTHER SHARE CLASSES -- If you desire to move your investment
     between share classes and the particular scenario is not described in this
     statement of additional information, please contact American Funds Service
     Company at 800/421-0180 for more information.

     NON-REPORTABLE TRANSACTIONS -- Automatic conversions described in the
     prospectus will be non-reportable for tax purposes. In addition, except in
     the case of a movement between a 529 share class and a non-529 share class,
     an exchange of shares from one share class of a fund to another share class
     of the same fund will be treated as a non-reportable exchange for tax
     purposes, provided that the exchange request is received in writing by
     American Funds Service Company and processed as a single transaction.

                                 SALES CHARGES

CLASS A PURCHASES


     PURCHASES BY CERTAIN 403(B) PLANS


     A 403(b) plan may not invest in Class A, Class B or Class C shares on or
     after January 1, 2009 unless such plan was invested in Class A, Class B or
     Class C shares prior to that date.

     Participant accounts of a 403(b) plan that was treated as an individual-type
     plan for sales charge purposes prior to January 1, 2009, may continue to be
     treated as accounts of an individual-type plan for sales charge purposes.
     Participant accounts of a 403(b) plan that was treated as an employer-sponsored
     plan for sales charge purposes prior to January 1, 2009, may continue to be
     treated as accounts of an employer-sponsored plan for sales charge purposes.
     Participant accounts of a 403(b) plan that is established on or after January 1,
     2009 are treated as accounts of an employer-sponsored plan for sales charge
     purposes.


     PURCHASES BY SEP PLANS AND SIMPLE IRA PLANS

     Participant accounts in a Simplified Employee Pension (SEP) plan or a
     Savings Incentive Match Plan for Employees of Small Employers IRA (SIMPLE
     IRA) plan will be aggregated together for Class A sales charge purposes if
     the SEP plan or SIMPLE IRA plan was established after November 15, 2004 by
     an employer adopting a prototype plan produced by American Funds
     Distributors, Inc. In the case where the employer adopts any other plan
     (including, but not limited to, an IRS model agreement), each participant's
     account in the plan will be aggregated with the participant's own personal
     investments that qualify under the aggregation policy. A SEP plan or SIMPLE
     IRA plan with a certain method of aggregating participant accounts as of
     November 15, 2004 may continue with that method so long as the employer has
     not modified the plan document since that date.

     OTHER PURCHASES

     Pursuant to a determination of eligibility by a vice president or more
     senior officer of the Capital Research and Management Company Fund
     Administration Unit, or by his or her designee, Class A shares of the
     American Funds stock, stock/bond and bond funds may be sold at net asset
     value to:


                  The Investment Company of America -- Page 47
<PAGE>


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

     (2)  currently registered representatives and assistants directly employed
          by such representatives, retired registered representatives with
          respect to accounts established while active, or full-time employees
          (collectively, "Eligible Persons") (and their (a) spouses or
          equivalents if recognized under local law, (b) parents and children,
          including parents and children in step and adoptive relationships,
          sons-in-law and daughters-in-law, and (c) parents-in-law, if the
          Eligible Persons or the spouses, children or parents of the Eligible
          Persons are listed in the account registration with the
          parents-in-law) of dealers who have sales agreements with the
          Principal Underwriter (or who clear transactions through such
          dealers), plans for the dealers, and plans that include as
          participants only the Eligible Persons, their spouses, parents and/or
          children;

     (3)  currently registered investment advisers ("RIAs") and assistants
          directly employed by such RIAs, retired RIAs with respect to accounts
          established while active, or full-time employees (collectively,
          "Eligible Persons") (and their (a) spouses or equivalents if
          recognized under local law, (b) parents and children, including
          parents and children in step and adoptive relationships, sons-in-law
          and daughters-in-law and (c) parents-in-law, if the Eligible Persons
          or the spouses, children or parents of the Eligible Persons are listed
          in the account registration with the parents-in-law) of RIA firms that
          are authorized to sell shares of the funds, plans for the RIA firms,
          and plans that include as participants only the Eligible Persons,
          their spouses, parents and/or children;

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

     (5)  insurance company separate accounts;

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

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

     (8)  an individual or entity with a substantial business relationship with
          The Capital Group Companies, Inc. or its affiliates, or an individual
          or entity related or relating to such individual or entity;

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

     (10) full-time employees of banks that have sales agreements with the
          Principal Underwriter, who are solely dedicated to directly supporting
          the sale of mutual funds.


                  The Investment Company of America -- Page 48
<PAGE>


     Shares are offered at net asset value to these persons and organizations
     due to anticipated economies in sales effort and expense. Once an account
     is established under this net asset value privilege, additional investments
     can be made at net asset value for the life of the account.

     TRANSFERS TO COLLEGEAMERICA -- A transfer from the Virginia Prepaid
     Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a
     CollegeAmerica account will be made with no sales charge. No commission
     will be paid to the dealer on such a transfer.

MOVING BETWEEN ACCOUNTS -- Investments in certain account types may be moved to
other account types without incurring additional Class A sales charges. These
transactions include, for example:


     .    redemption proceeds from a non-retirement account (for example, a
          joint tenant account) used to purchase fund shares in an IRA or other
          individual-type retirement account;

     .    required minimum distributions from an IRA or other individual-type
          retirement account used to purchase fund shares in a non-retirement
          account; and

     .    death distributions paid to a beneficiary's account that are used by
          the beneficiary to purchase fund shares in a different account.

LOAN REPAYMENTS -- Repayments on loans taken from a retirement plan or an
individual-type retirement account are not subject to sales charges if American
Funds Service Company is notified of the repayment.


DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to initial sales charges. These purchases consist of purchases of $1
million or more, purchases by employer-sponsored defined contribution-type
retirement plans investing $1 million or more or with 100 or more eligible
employees, and purchases made at net asset value by certain retirement plans,
endowments and foundations with assets of $50 million or more. Commissions on
such investments (other than IRA rollover assets that roll over at no sales
charge under the fund's IRA rollover policy as described in the prospectus) are
paid to dealers at the following rates: 1.00% on amounts of less than $4
million, 0.50% on amounts of at least $4 million but less than $10 million and
0.25% on amounts of at least $10 million. Commissions are based on cumulative
investments over the life of the account with no adjustment for redemptions,
transfers, or market declines. For example, if a shareholder has accumulated
investments in excess of $4 million (but less than $10 million) and subsequently
redeems all or a portion of the account(s), purchases following the redemption
will generate a dealer commission of 0.50%.A dealer concession of up to 1% may
be paid by the fund under its Class A plan of distribution to reimburse the
Principal Underwriter in connection with dealer and wholesaler compensation paid
by it with respect to investments made with no initial sales charge.


                  The Investment Company of America -- Page 49
<PAGE>


                      SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.


     STATEMENT OF INTENTION -- By establishing a statement of intention (the
     "Statement"), you enter into a nonbinding commitment to purchase shares of
     the American Funds (excluding money market funds) over a 13-month period
     and receive the same sales charge (expressed as a percentage of your
     purchases) as if all shares had been purchased at once.

     The Statement period starts on the date on which your first purchase made
     toward satisfying the Statement is processed. The market value of your
     existing holdings eligible to be aggregated (see below) as of the day
     immediately before the start of the Statement period may be credited toward
     satisfying the Statement.

     You may revise the commitment you have made in your Statement upward at any
     time during the Statement period. If your prior commitment has not been met
     by the time of the revision, the Statement period during which purchases
     must be made will remain unchanged. Purchases made from the date of the
     revision will receive the reduced sales charge, if any, resulting from the
     revised Statement. If your prior commitment has been met by the time of the
     revision, your original Statement will be considered met and a new
     Statement will be established.

     The Statement will be considered completed if the shareholder dies within
     the 13-month Statement period. Commissions to dealers will not be adjusted
     or paid on the difference between the Statement amount and the amount
     actually invested before the shareholder's death.

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

     Certain payroll deduction retirement plans purchasing Class A shares under
     a Statement on or before November 12, 2006, may continue to purchase Class
     A shares at the sales charge determined by that particular Statement until
     the plans' values reach the amounts specified in their Statements. Upon
     reaching such amounts, the Statements for these plans will be deemed
     completed and will terminate. After such termination, these plans


                  The Investment Company of America -- Page 50
<PAGE>


     are eligible for additional sales charge reductions by meeting the criteria
     under the fund's rights of accumulation policy.

     In addition, if you currently have individual holdings in American Legacy
     variable annuity contracts or variable life insurance policies that were
     established on or before March 31, 2007, you may continue to apply
     purchases under such contracts and policies to a Statement.

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

     AGGREGATION -- Qualifying investments for aggregation include those made by
     you and your "immediate family" as defined in the prospectus, if all
     parties are purchasing shares for their own accounts and/or:


     .    individual-type employee benefit plans, such as an IRA, single-
          participant Keogh-type plan, or a participant account of a 403(b) plan
          that is treated as an individual-type plan for sales charge purposes
          (see "Purchases by certain 403(b) plans" under "Sales charges" above);


     .    SEP plans and SIMPLE IRA plans established after November 15, 2004 by
          an employer adopting any plan document other than a prototype plan
          produced by American Funds Distributors, Inc.;

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

     .    trust accounts established by you or your immediate family (for trusts
          with only one primary beneficiary, upon the trustor's death the trust
          account may be aggregated with such beneficiary's own accounts; for
          trusts with multiple primary beneficiaries, upon the trustor's death
          the trustees of the trust may instruct American Funds Service Company
          to establish separate trust accounts for each primary beneficiary;
          each primary beneficiary's separate trust account may then be
          aggregated with such beneficiary's own accounts);

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

     .    529 accounts, which will be aggregated at the account owner level
          (Class 529-E accounts may only be aggregated with an eligible employer
          plan).

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

     .    for a single trust estate or fiduciary account, including employee
          benefit plans other than the individual-type employee benefit plans
          described above;

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

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


                  The Investment Company of America -- Page 51
<PAGE>


     .    for nonprofit, charitable or educational organizations, or any
          endowments or foundations established and controlled by such
          organizations, or any employer-sponsored retirement plans established
          for the benefit of the employees of such organizations, their
          endowments, or their foundations;


     .    for participant accounts of a 403(b) plan that is treated as an employer-
          sponsored plan for sales charge purposes (see "Purchases by certain 403(b)
          plans" under "Sales charges" above), or made for participant accounts of
          two or more such plans, in each case of a single employer or affiliated
          employers as defined in the 1940 Act; or


     .    for a SEP or SIMPLE IRA plan established after November 15, 2004 by an
          employer adopting a prototype plan produced by American Funds
          Distributors, Inc.

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

     CONCURRENT PURCHASES -- As described in the prospectus, you may reduce your
     Class A sales charge by combining purchases of all classes of shares in the
     American Funds, as well as holdings in Endowments and applicable holdings
     in the American Funds Target Date Retirement Series. Shares of money market
     funds purchased through an exchange, reinvestment or cross-reinvestment
     from a fund having a sales charge also qualify. However, direct purchases
     of American Funds money market funds are excluded. If you currently have
     individual holdings in American Legacy variable annuity contracts or
     variable life insurance policies that were established on or before March
     31, 2007, you may continue to combine purchases made under such contracts
     and policies to reduce your Class A sales charge.

     RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
     aggregation policy, you may take into account your accumulated holdings in
     all share classes of the American Funds, as well as your holdings in
     Endowments and applicable holdings in the American Funds Target Date
     Retirement Series, to determine your sales charge on investments in
     accounts eligible to be aggregated. Direct purchases of American Funds
     money market funds are excluded. Subject to your investment dealer's or
     recordkeeper's capabilities, your accumulated holdings will be calculated
     as the higher of (a) the current value of your existing holdings (the
     "market value") or (b) the amount you invested (including reinvested
     dividends and capital gains, but excluding capital appreciation) less any
     withdrawals (the "cost value"). Depending on the entity on whose books your
     account is held, the value of your holdings in that account may not be
     eligible for calculation at cost value. For example, accounts held in
     nominee or street name may not be eligible for calculation at cost value
     and instead may be calculated at market value for purposes of rights of
     accumulation.

     The value of all of your holdings in accounts established in calendar year
     2005 or earlier will be assigned an initial cost value equal to the market
     value of those holdings as of the last business day of 2005. Thereafter,
     the cost value of such accounts will increase or


                  The Investment Company of America -- Page 52
<PAGE>


     decrease according to actual investments or withdrawals. You must contact
     your financial adviser or American Funds Service Company if you have
     additional information that is relevant to the calculation of the value of
     your holdings.

     When determining your American Funds Class A sales charge, if your
     investment is not in an employer-sponsored retirement plan, you may also
     continue to take into account the market value (as of the day prior to your
     American Funds investment) of your individual holdings in various American
     Legacy variable annuity contracts and variable life insurance policies that
     were established on or before March 31, 2007. An employer-sponsored
     retirement plan may also continue to take into account the market value of
     its investments in American Legacy Retirement Investment Plans that were
     established on or before March 31, 2007.

     You may not purchase Class B or 529-B shares if your combined American
     Funds and applicable American Legacy holdings cause you to be eligible to
     purchase Class A or 529-A shares at the $100,000 or higher sales charge
     discount rate. In addition, you may not purchase Class C or 529-C shares if
     such combined holdings cause you to be eligible to purchase Class A or
     529-A shares at the $1 million or more sales charge discount rate (i.e. at
     net asset value).

     If you make a gift of American Funds Class A shares, upon your request, you
     may purchase the shares at the sales charge discount allowed under rights
     of accumulation of all of your American Funds and applicable American
     Legacy accounts.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or postpurchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions made after the Transfer Agent is
notified of the death of a joint tenant will be subject to a CDSC.


In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):


     .    Required minimum distributions taken from retirement accounts upon the
          shareholder's attainment of age 70-1/2 (required minimum distributions
          that continue to be taken by the beneficiary(ies) after the account
          owner is deceased also qualify for a waiver).

     .    Redemptions through an automatic withdrawal plan ("AWP") (see
          "Automatic withdrawals" under "Shareholder account services and
          privileges" in this statement of additional information). For each AWP
          payment, assets that are not subject to a CDSC, such as appreciation
          on shares and shares acquired through reinvestment of dividends and/or
          capital gain distributions, will be redeemed first and will count
          toward the 12% limit. If there is an insufficient amount of assets not
          subject to a CDSC to cover a particular AWP payment, shares subject to
          the lowest CDSC will be redeemed next until the 12% limit is reached.
          Any dividends and/or capital gain distributions taken in cash by a
          shareholder who receives


                  The Investment Company of America -- Page 53
<PAGE>


          payments through an AWP will also count toward the 12% limit. In the
          case of an AWP, the 12% limit is calculated at the time an automatic
          redemption is first made, and is recalculated at the time each
          additional automatic redemption is made. Shareholders who establish an
          AWP should be aware that the amount of a payment not subject to a CDSC
          may vary over time depending on fluctuations in the value of their
          accounts. This privilege may be revised or terminated at any time.

     For purposes of this paragraph, "account" means:

     .    in the case of Class A shares, your investment in Class A shares of
          all American Funds (investments representing direct purchases of
          American Funds money market funds are excluded);

     .    in the case of Class B shares, your investment in Class B shares of
          the particular fund from which you are making the redemption; and

     .    in the case of Class C shares, your investment in Class C shares of
          the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or elimination of the fund by
the Virginia College Savings Plan as an option for additional investment within
CollegeAmerica.

                                 SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders. To contact American Funds Service Company via overnight mail or
courier service, see "Purchase and exchange of shares."


A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the Financial
Industry Regulatory Authority, bank, savings association or credit union that is
an eligible guarantor institution. The Transfer Agent reserves the right to
require a signature guarantee on any redemptions.


Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.


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


Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 10
business days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as


                  The Investment Company of America -- Page 54
<PAGE>


permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.


You may request that redemption proceeds of $1,000 or more from money market
funds be wired to your bank by writing American Funds Service Company. A
signature guarantee is required on all requests to wire funds.


                  SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.


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


AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
unless you indicate otherwise on the account application. You also may elect to
have dividends and/or capital gain distributions paid in cash by informing the
fund, the Transfer Agent or your investment dealer. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.


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


CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:


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


                  The Investment Company of America -- Page 55
<PAGE>


(2)  if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

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

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.


AUTOMATIC WITHDRAWALS -- Depending on the type of account, for all share classes
except R shares, you may automatically withdraw shares from any of the American
Funds. You can make automatic withdrawals of $50 or more. You can designate the
day of each period for withdrawals and request that checks be sent to you or
someone else. Withdrawals may also be electronically deposited to your bank
account. The Transfer Agent will withdraw your money from the fund you specify
on or around the date you specify. If the date you specified falls on a weekend
or holiday, the redemption will take place on the previous business day.
However, if the previous business day falls in the preceding month, the
redemption will take place on the following business day after the weekend or
holiday. You should consult with your adviser or intermediary to determine if
your account is eligible for automatic withdrawals.


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


Redemption proceeds from an automatic withdrawal plan are not eligible for
reinvestment without a sales charge.


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


AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.


                  The Investment Company of America -- Page 56
<PAGE>


Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.


TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liabilities (including attorney fees) that may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these services. However, you may elect to opt
out of these services by writing the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, it and/or the fund may
be liable for losses due to unauthorized or fraudulent instructions. In the
event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions or a natural disaster, redemption and
exchange requests may be made in writing only.


CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds upon meeting
the fund's initial purchase minimum of $1,000. This can be done by using an
account application. If you request check writing privileges, you will be
provided with checks that you may use to draw against your account. These checks
may be made payable to anyone you designate and must be signed by the authorized
number of registered shareholders exactly as indicated on your account
application.


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


While payment of redemptions normally will be in cash, the fund's certificate of
incorporation permits payment of the redemption price wholly or partly with
portfolio securities or other fund assets under conditions and circumstances
determined by the fund's board of directors. For example, redemptions could be
made in this manner if the board determined that making payments wholly in cash
over a particular period would be unfair and/or harmful to other fund
shareholders.


SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.


                  The Investment Company of America -- Page 57
<PAGE>


                              GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds securities of issuers outside the U.S., the
Custodian may hold these securities pursuant to subcustodial arrangements in
banks outside the U.S. or branches of U.S. banks outside the U.S.


TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, processes
purchases and redemptions of the fund's shares, acts as dividend and capital
gain distribution disbursing agent, and performs other related shareholder
service functions. The principal office of American Funds Service Company is
located at 6455 Irvine Center Drive, Irvine, CA 92618. American Funds Service
Company was paid a fee of $59,848,000 for Class A shares and $3,388,000 for
Class B shares for the 2007 fiscal year. American Funds Service Company is also
compensated for certain transfer agency services provided to all other share
classes from the administrative services fees paid to Capital Research and
Management Company, as described under "Administrative services agreement."


In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- PricewaterhouseCoopers LLP, 350
South Grand Avenue, Los Angeles, CA 90071, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report appearing herein. Such financial statements have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing. The selection of the fund's independent
registered public accounting firm is reviewed and determined annually by the
board of directors.


INDEPENDENT LEGAL COUNSEL -- O'Melveny & Myers LLP, 400 South Hope Street, Los
Angeles, CA 90071, serves as independent legal counsel ("counsel") for the fund
and for independent directors in their capacities as such. Certain legal matters
in connection with the capital shares offered by the prospectus have been passed
upon for the fund by O'Melveny & Myers LLP. Counsel does not provide legal
services to the fund's investment adviser or any of its affiliated companies or
control persons. A determination with respect to the independence of the fund's
counsel will be made at least annually by the independent directors of the fund,
as prescribed by the 1940 Act and related rules.


                  The Investment Company of America -- Page 58
<PAGE>


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


Shareholders may also elect to receive updated prospectuses, annual reports and
semi-annual reports electronically by signing up for electronic delivery on our
website, americanfunds.com. Upon electing the electronic delivery of updated
prospectuses and other reports, a shareholder will no longer automatically
receive such documents in paper form by mail. A shareholder who elects
electronic delivery is able to cancel this service at any time and return to
receiving updated prospectuses and other reports in paper form by mail.


Prospectuses, annual reports and semi-annual reports that are mailed to
shareholders by the American Funds organization are printed with ink containing
soy and/or vegetable oil on paper containing recycled fibers.


CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.


LEGAL PROCEEDINGS -- On February 16, 2005, the NASD (now the Financial Industry
Regulatory Authority, or FINRA) filed an administrative complaint against the
Principal Underwriter. The complaint alleges violations of certain NASD rules by
the Principal Underwriter with respect to the selection of broker-dealer firms
that buy and sell securities for mutual fund investment portfolios. The
complaint seeks sanctions, restitution and disgorgement. On August 30, 2006, a
FINRA Hearing Panel ruled against the Principal Underwriter and imposed a $5
million fine. On April 30, 2008, FINRA's National Adjudicatory Council affirmed
the decision by FINRA's Hearing Panel. The Principal Underwriter has appealed
this decision to the Securities and Exchange Commission.


The investment adviser and Principal Underwriter believe that the likelihood
that this matter could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. In addition, class action lawsuits have been
filed in the U.S. District Court, Central District of California, relating to
this and other matters. The investment adviser believes that these suits are
without merit and will defend itself vigorously.


                  The Investment Company of America -- Page 59
<PAGE>


DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- DECEMBER 31, 2007

Net asset value and redemption price per share
  (Net assets divided by shares outstanding). .                     $32.95
Maximum offering price per share
  (100/94.25 of net asset value per share,
  which takes into account the fund's current maximum
  sales charge). . . . . . . . . . . . . . . .                      $34.96



OTHER INFORMATION -- The fund reserves the right to modify the privileges
described in this statement of additional information at any time.


The financial statements, including the investment portfolio and the report of
the fund's independent registered public accounting firm contained in the annual
report, are included in this statement of additional information. The following
information on fund numbers is not included in the annual report:


                  The Investment Company of America -- Page 60
<PAGE>


FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

                                               FUND NUMBERS
                              -------------------------------------------------
FUND                          CLASS A  CLASS B  CLASS C  CLASS F-1   CLASS F-2
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . .     002      202      302       402         602
American Balanced Fund/(R)/     011      211      311       411         611
American Mutual Fund/(R)/ .     003      203      303       403         603
Capital Income Builder/(R)/     012      212      312       412         612
Capital World Growth and
Income Fund/SM/ . . . . . .     033      233      333       433         633
EuroPacific Growth Fund/(R)/    016      216      316       416         616
Fundamental Investors/SM/ .     010      210      310       410         610
The Growth Fund of
America/(R)/. . . . . . . .     005      205      305       405         605
The Income Fund of
America/(R)/. . . . . . . .     006      206      306       406         606
International Growth and
Income Fund/SM/ . . . . . .     034      234      334       434         634
The Investment Company of
America/(R)/. . . . . . . .     004      204      304       404         604
The New Economy Fund/(R)/ .     014      214      314       414         614
New Perspective Fund/(R)/ .     007      207      307       407         607
New World Fund/SM/  . . . .     036      236      336       436         636
SMALLCAP World Fund/(R)/  .     035      235      335       435         635
Washington Mutual Investors
Fund/SM/  . . . . . . . . .     001      201      301       401         601
BOND FUNDS
American High-Income
Municipal Bond Fund/(R)/  .     040      240      340       440         640
American High-Income
Trust/SM/ . . . . . . . . .     021      221      321       421         621
The Bond Fund of America/SM/    008      208      308       408         608
Capital World Bond Fund/(R)/    031      231      331       431         631
Intermediate Bond Fund of
America/SM/ . . . . . . . .     023      223      323       423         623
Limited Term Tax-Exempt Bond
Fund of America/SM/ . . . .     043      243      343       443         643
Short-Term Bond Fund of
America/SM/ . . . . . . . .     048      248      348       448         648
The Tax-Exempt Bond Fund of
America/(R)/. . . . . . . .     019      219      319       419         619
The Tax-Exempt Fund of
California/(R)/*. . . . . .     020      220      320       420         620
The Tax-Exempt Fund of
Maryland/(R)/*. . . . . . .     024      224      324       424         624
The Tax-Exempt Fund of
Virginia/(R)/*. . . . . . .     025      225      325       425         625
U.S. Government Securities
Fund/SM/. . . . . . . . . .     022      222      322       422         622
MONEY MARKET FUNDS
The Cash Management Trust of
America/(R)/. . . . . . . .     009      209      309       409         609
The Tax-Exempt Money Fund of
America/SM/ . . . . . . . .     039      N/A      N/A       N/A         N/A
The U.S. Treasury Money Fund
of America/SM/  . . . . . .     049      N/A      N/A       N/A         N/A
___________
*Qualified for sale only in certain jurisdictions.



                  The Investment Company of America -- Page 61
<PAGE>

                                                 FUND NUMBERS
                                 ----------------------------------------------
                                  CLASS    CLASS    CLASS    CLASS     CLASS
FUND                              529-A    529-B    529-C    529-E    529-F-1
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . .    1002     1202     1302     1502       1402
American Balanced Fund . . . .    1011     1211     1311     1511       1411
American Mutual Fund . . . . .    1003     1203     1303     1503       1403
Capital Income Builder . . . .    1012     1212     1312     1512       1412
Capital World Growth and Income
Fund . . . . . . . . . . . . .    1033     1233     1333     1533       1433
EuroPacific Growth Fund  . . .    1016     1216     1316     1516       1416
Fundamental Investors  . . . .    1010     1210     1310     1510       1410
The Growth Fund of America . .    1005     1205     1305     1505       1405
The Income Fund of America . .    1006     1206     1306     1506       1406
International Growth and Income
Fund . . . . . . . . . . . . .    1034     1234     1334     1534       1434
The Investment Company of
America. . . . . . . . . . . .    1004     1204     1304     1504       1404
The New Economy Fund . . . . .    1014     1214     1314     1514       1414
New Perspective Fund . . . . .    1007     1207     1307     1507       1407
New World Fund . . . . . . . .    1036     1236     1336     1536       1436
SMALLCAP World Fund  . . . . .    1035     1235     1335     1535       1435
Washington Mutual Investors
Fund . . . . . . . . . . . . .    1001     1201     1301     1501       1401
BOND FUNDS
American High-Income Trust . .    1021     1221     1321     1521       1421
The Bond Fund of America . . .    1008     1208     1308     1508       1408
Capital World Bond Fund  . . .    1031     1231     1331     1531       1431
Intermediate Bond Fund of
America. . . . . . . . . . . .    1023     1223     1323     1523       1423
Short-Term Bond Fund of America   1048     1248     1348     1548       1448
U.S. Government Securities Fund   1022     1222     1322     1522       1422
MONEY MARKET FUND
The Cash Management Trust of
America. . . . . . . . . . . .    1009     1209     1309     1509       1409





                  The Investment Company of America -- Page 62
<PAGE>

                                                    FUND NUMBERS
                                       ----------------------------------------
                                       CLASS   CLASS   CLASS   CLASS    CLASS
FUND                                    R-1     R-2     R-3     R-4      R-5
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . .    2102    2202    2302    2402     2502
American Balanced Fund . . . . . . .    2111    2211    2311    2411     2511
American Mutual Fund . . . . . . . .    2103    2203    2303    2403     2503
Capital Income Builder . . . . . . .    2112    2212    2312    2412     2512
Capital World Growth and Income Fund    2133    2233    2333    2433     2533
EuroPacific Growth Fund  . . . . . .    2116    2216    2316    2416     2516
Fundamental Investors  . . . . . . .    2110    2210    2310    2410     2510
The Growth Fund of America . . . . .    2105    2205    2305    2405     2505
The Income Fund of America . . . . .    2106    2206    2306    2406     2506
International Growth and Income Fund    2134    2234    2334    2434     2534
The Investment Company of America  .    2104    2204    2304    2404     2504
The New Economy Fund . . . . . . . .    2114    2214    2314    2414     2514
New Perspective Fund . . . . . . . .    2107    2207    2307    2407     2507
New World Fund . . . . . . . . . . .    2136    2236    2336    2436     2536
SMALLCAP World Fund  . . . . . . . .    2135    2235    2335    2435     2535
Washington Mutual Investors Fund . .    2101    2201    2301    2401     2501
BOND FUNDS
American High-Income Municipal Bond
Fund . . . . . . . . . . . . . . . .     N/A     N/A     N/A     N/A     2540
American High-Income Trust . . . . .    2121    2221    2321    2421     2521
The Bond Fund of America . . . . . .    2108    2208    2308    2408     2508
Capital World Bond Fund  . . . . . .    2131    2231    2331    2431     2531
Intermediate Bond Fund of America  .    2123    2223    2323    2423     2523
Limited Term Tax-Exempt Bond Fund of
America. . . . . . . . . . . . . . .     N/A     N/A     N/A     N/A     2543
Short-Term Bond Fund of America. . .    2148    2248    2348    2448     2548
The Tax-Exempt Bond Fund of America      N/A     N/A     N/A     N/A     2519
The Tax-Exempt Fund of California* .     N/A     N/A     N/A     N/A     2520
The Tax-Exempt Fund of Maryland* . .     N/A     N/A     N/A     N/A     2524
The Tax-Exempt Fund of Virginia* . .     N/A     N/A     N/A     N/A     2525
U.S. Government Securities Fund  . .    2122    2222    2322    2422     2522
MONEY MARKET FUNDS
The Cash Management Trust of America    2109    2209    2309    2409     2509
The Tax-Exempt Money Fund of America     N/A     N/A     N/A     N/A     2539
The U.S. Treasury Money Fund of
America  . . . . . . . . . . . . . .    2149    2249    2349    2449     2549
___________
*Qualified for sale only in certain
jurisdictions.





                  The Investment Company of America -- Page 63
<PAGE>

                                                  FUND NUMBERS
                                   --------------------------------------------
                                            CLASS  CLASS  CLASS  CLASS   CLASS
FUND                               CLASS A   R-1    R-2    R-3    R-4     R-5
- -------------------------------------------------------------------------------

AMERICAN FUNDS TARGET DATE RETIREMENT SERIES/(R)/
American Funds 2050 Target Date
Retirement Fund/(R)/ . . . . . .     069    2169   2269   2369   2469    2569
American Funds 2045 Target Date
Retirement Fund/(R)/ . . . . . .     068    2168   2268   2368   2468    2568
American Funds 2040 Target Date
Retirement Fund/(R)/ . . . . . .     067    2167   2267   2367   2467    2567
American Funds 2035 Target Date
Retirement Fund/(R)/ . . . . . .     066    2166   2266   2366   2466    2566
American Funds 2030 Target Date
Retirement Fund/(R)/ . . . . . .     065    2165   2265   2365   2465    2565
American Funds 2025 Target Date
Retirement Fund/(R)/ . . . . . .     064    2164   2264   2364   2464    2564
American Funds 2020 Target Date
Retirement Fund/(R)/ . . . . . .     063    2163   2263   2363   2463    2563
American Funds 2015 Target Date
Retirement Fund/(R)/ . . . . . .     062    2162   2262   2362   2462    2562
American Funds 2010 Target Date
Retirement Fund/(R)/ . . . . . .     061    2161   2261   2361   2461    2561





                  The Investment Company of America -- Page 64
<PAGE>


                                    APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.


                          DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.


Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.


A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.


Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.


Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.


B
Obligations rated B are considered speculative and are subject to high credit
risk.


Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.


Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.


C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.


NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.


                  The Investment Company of America -- Page 65
<PAGE>


STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.


AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.


A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.


BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.


BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.


BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.


B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.


CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.


CC
An obligation rated CC is currently highly vulnerable to nonpayment.


                  The Investment Company of America -- Page 66
<PAGE>


C

A C rating is assigned to obligations that are currently highly vulnerable to
nonpayment, obligations that have payment arrearages allowed by the terms of the
documents, or obligations of an issuer that is the subject of a bankruptcy
petition or similar action which have not experienced a payment default. Among
others, the C rating may be assigned to subordinated debt, preferred stock or
other obligations on which cash payments have been suspended in accordance with
the instrument's terms.


D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.


PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.


                  The Investment Company of America -- Page 67

        

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The Investment Company of America®

Investment portfolio

December 31, 2007

Common stocks — 87.00%	Shares			Market value (000)
ENERGY — 10.06%
Baker Hughes Inc.		7,675,000		$	622,443
Chevron Corp.		18,352,278			1,712,818
ConocoPhillips		8,093,340			714,642
Exxon Mobil Corp.		5,621,500			526,678
Halliburton Co.		9,900,000			375,309
Hess Corp.		3,546,300			357,680
Marathon Oil Corp.		4,600,000			279,956
Murphy Oil Corp.		4,100,000			347,844
Occidental Petroleum Corp.		2,000,000			153,980
Royal Dutch Shell PLC, Class A (ADR)		17,470,000			1,470,974
Royal Dutch Shell PLC, Class B1		833,265			34,733
Royal Dutch Shell PLC, Class B (ADR)		2,370,498			196,751
Schlumberger Ltd.		18,750,000			1,844,437
TOTAL SA1		4,040,000			334,785
					8,973,030
MATERIALS — 3.54%
Air Products and Chemicals, Inc.		2,550,000			251,507
Alcoa Inc.		1,676,400			61,272
Barrick Gold Corp.		18,156,250			763,470
Dow Chemical Co.		9,700,000			382,374
International Paper Co.		6,997,235			226,570
MeadWestvaco Corp.		4,085,000			127,860
Newmont Mining Corp.		10,050,000			490,742
PPG Industries, Inc.		2,000,000			140,460
Rio Tinto PLC1		4,044,473			422,304
Rohm and Haas Co.		2,987,300			158,536
Weyerhaeuser Co.		1,800,000			132,732
					3,157,827
INDUSTRIALS — 8.52%
3M Co.		1,511,500			127,450
Boeing Co.		3,521,960			308,031
Burlington Northern Santa Fe Corp.		2,500,000			208,075
Caterpillar Inc.		6,500,000			471,640
Cummins Inc.		1,500,000			191,055
Deere & Co.		8,800,000			819,456
FedEx Corp.		2,925,000			260,822
General Dynamics Corp.		6,745,800			600,309
General Electric Co.		51,150,000			1,896,130
Illinois Tool Works Inc.		7,400,000			396,196
Mitsubishi Corp.1		4,035,000			109,924
Raytheon Co.		3,399,800			206,368
Siemens AG1		1,365,000			213,975
Southwest Airlines Co.		13,000,000			158,600
Tyco International Ltd.		6,082,225			241,160
Union Pacific Corp.		1,500,000			188,430
United Parcel Service, Inc., Class B		5,800,000			410,176
United Technologies Corp.		10,340,000			791,424
					7,599,221
CONSUMER DISCRETIONARY — 7.25%
Best Buy Co., Inc.		12,534,300			659,931
Carnival Corp., units		12,450,000			553,901
Comcast Corp., Class A2		13,675,000			249,705
Ford Motor Co.2		6,500,000			43,745
General Motors Corp.		7,750,000			192,897
Harley-Davidson, Inc.		4,575,000			213,698
Honda Motor Co., Ltd.1		4,772,000			157,790
Liberty Media Holding Corp., Liberty Interactive, Series A2		7,352,000			140,276
Limited Brands, Inc.3		18,289,943			346,229
Lowe’s Companies, Inc.		60,936,600			1,378,386
McDonald’s Corp.		4,250,000			250,368
Target Corp.		18,334,200			916,710
Time Warner Inc.		45,457,000			750,495
TJX Companies, Inc.		3,000,000			86,190
Toyota Motor Corp.1		8,230,000			443,040
Viacom Inc., Class B2		2,000,000			87,840
					6,471,201
CONSUMER STAPLES — 9.07%
Altria Group, Inc.		38,550,000			2,913,609
Anheuser-Busch Companies, Inc.		1,500,000			78,510
Avon Products, Inc.		6,605,000			261,096
ConAgra Foods, Inc.		13,000,000			309,270
General Mills, Inc.		1,960,000			111,720
H.J. Heinz Co.		4,406,200			205,681
Kraft Foods Inc., Class A		10,844,168			353,845
PepsiCo, Inc.		18,820,000			1,428,438
Procter & Gamble Co.		3,518,000			258,292
Reynolds American Inc.		6,966,666			459,521
Sara Lee Corp.		5,000,000			80,300
SYSCO Corp.		2,300,000			71,783
Unilever NV (New York registered)		6,450,000			235,167
UST Inc.		2,000,000			109,600
Walgreen Co.		18,144,500			690,943
Wal-Mart Stores, Inc.		11,000,000			522,830
					8,090,605
HEALTH CARE — 10.38%
Abbott Laboratories		19,511,900			1,095,593
Aetna Inc.		11,546,565			666,583
Amgen Inc.2		10,015,000			465,097
AstraZeneca PLC (ADR)		2,534,500			108,527
AstraZeneca PLC (Sweden)1		3,709,500			158,311
AstraZeneca PLC (United Kingdom)1		1,435,000			61,452
Becton, Dickinson and Co.		1,500,000			125,370
Boston Scientific Corp.2		9,394,850			109,262
Bristol-Myers Squibb Co.		25,050,000			664,326
Cardinal Health, Inc.		2,650,000			153,038
Eli Lilly and Co.		11,985,000			639,879
Johnson & Johnson		600,000			40,020
McKesson Corp.		2,950,000			193,255
Medco Health Solutions, Inc.2		971,000			98,459
Medtronic, Inc.		12,900,000			648,483
Merck & Co., Inc.		15,150,000			880,366
Novartis AG (ADR)		256,556			13,934
Pfizer Inc		19,100,000			434,143
Roche Holding AG1		6,145,000			1,057,131
Schering-Plough Corp.		8,486,300			226,075
UnitedHealth Group Inc.		14,205,000			826,731
WellPoint, Inc.2		5,750,000			504,448
Wyeth		2,110,000			93,241
					9,263,724
FINANCIALS — 10.11%
American International Group, Inc.		12,923,900			753,463
Aon Corp.		1,000,000			47,690
Banco Santander, SA1		29,900,000			645,016
Bank of America Corp.		33,326,800			1,375,064
Berkshire Hathaway Inc., Class A2		3,050			431,880
Capital One Financial Corp.		6,937,000			327,843
Citigroup Inc.		46,511,297			1,369,292
Fannie Mae		28,796,100			1,151,268
Freddie Mac		15,413,700			525,145
Hartford Financial Services Group, Inc.		1,625,000			141,684
HSBC Holdings PLC (ADR)		1,079,588			90,372
HSBC Holdings PLC (United Kingdom)1		14,037,111			234,674
JPMorgan Chase & Co.		16,000,001			698,400
Lloyds TSB Group PLC1		15,000,000			139,395
Marsh & McLennan Companies, Inc.		1,125,000			29,779
Mizuho Financial Group, Inc.1		5,500			26,096
Wachovia Corp.		11,250,000			427,837
Washington Mutual, Inc.		25,400,000			345,694
Wells Fargo & Co.		5,660,000			170,875
XL Capital Ltd., Class A		1,775,000			89,300
					9,020,767
INFORMATION TECHNOLOGY — 16.75%
Altera Corp.		6,000,000			115,920
Analog Devices, Inc.		8,050,000			255,185
Applied Materials, Inc.		17,650,000			313,464
Automatic Data Processing, Inc.		6,798,043			302,717
Canon, Inc.1		2,250,000			102,817
Cisco Systems, Inc.2		32,370,400			876,267
Google Inc., Class A2		882,000			609,885
Hewlett-Packard Co.		20,325,000			1,026,006
Intel Corp.		39,890,000			1,063,467
International Business Machines Corp.		11,775,000			1,272,878
KLA-Tencor Corp.		4,525,000			217,924
Linear Technology Corp.		7,600,000			241,908
Maxim Integrated Products, Inc.		14,206,000			376,175
Micron Technology, Inc.2		10,965,000			79,496
Microsoft Corp.		64,847,100			2,308,557
Motorola, Inc.		14,920,800			239,330
Nokia Corp.1		29,512,550			1,134,693
Nokia Corp. (ADR)		10,289,750			395,024
Oracle Corp.2		90,295,100			2,038,863
Samsung Electronics Co., Ltd.1		854,000			502,082
Taiwan Semiconductor Manufacturing Co. Ltd.1		240,542,065			457,685
Texas Instruments Inc.		25,350,000			846,690
Xilinx, Inc.		7,650,000			167,305
					14,944,338
TELECOMMUNICATION SERVICES — 4.07%
AT&T Inc.		54,948,414			2,283,656
Qwest Communications International Inc.2		65,893,200			461,911
Sprint Nextel Corp., Series 1		67,335,000			884,109
					3,629,676
UTILITIES — 2.97%
Dominion Resources, Inc.		14,263,824			676,819
E.ON AG1		1,150,000			243,816
Exelon Corp.		9,410,600			768,281
FirstEnergy Corp.		1,138,500			82,359
FPL Group, Inc.		3,550,000			240,619
PPL Corp.		2,900,000			151,061
Public Service Enterprise Group Inc.		5,000,000			491,200
					2,654,155
MISCELLANEOUS — 4.28%
Other common stocks in initial period of acquisition					3,803,756
Total common stocks (cost: $52,854,570,000)					77,608,300
	Shares or
Convertible securities — 0.61%	principal amount
CONSUMER DISCRETIONARY — 0.30%
Ford Motor Co. 4.25% convertible notes 2036	$	145,000,000			144,819
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		3,890,000			126,425
					271,244
FINANCIALS — 0.07%
Fannie Mae, Series 2004-1, 5.375% convertible preferred		820			67,650
INFORMATION TECHNOLOGY — 0.02%
Advanced Micro Devices, Inc. 5.75% convertible notes 20124	$	20,000,000			16,000
TELECOMMUNICATION SERVICES — 0.15%
Qwest Communications International Inc. 3.50% convertible debenture 2025	$	100,000,000			133,875
MISCELLANEOUS — 0.07%
Other convertible securities in initial period of acquisition					58,023
Total convertible securities (cost: $553,647,000)					546,792
	Principal amount
Bonds & notes  — 0.04%		(000	)
FINANCIALS — 0.02%
Countrywide Financial Corp., Series A, 4.50% 2010	$	910			662
Countrywide Financial Corp., Series B, 5.80% 2012		23,680			17,314
					17,976
TELECOMMUNICATION SERVICES — 0.02%
Sprint Capital Corp. 8.75% 2032		13,500			15,258
Total bonds & notes (cost: $36,541,000)					33,234
Short-term securities — 12.35%
American Express Credit Corp. 4.55%–4.57% due 1/22–1/30/2008		80,000			79,719
Anheuser-Busch Cos. Inc. 4.19% due 2/8/20084		50,000			49,773
AT&T Inc. 4.24% due 1/30/20084		35,000			34,876
Bank of America Corp. 4.595%–5.035% due 1/10–4/2/2008		374,450			372,133
Ranger Funding Co. LLC 5.02% due 2/27/20084		50,000			49,542
CAFCO, LLC 4.68%–5.11% due 1/15–2/5/20084		130,000			129,427
Ciesco LLC 4.90%–5.00% due 1/17–1/18/20084		99,000			98,752
Citigroup Funding Inc. 4.95% due 2/11/2008		50,000			49,711
Caterpillar Financial Services Corp. 4.22%–4.47% due 1/14–1/24/2008		70,300			70,088
Chevron Funding Corp. 4.41% due 1/3/2008		25,000			24,991
Coca-Cola Co. 4.18%–4.69% due 1/10–3/5/20084		331,600			329,930
Eaton Corp. 4.75% due 1/23/20084		50,000			49,842
Edison Asset Securitization LLC 4.56%–4.91% due 1/2–2/26/20084		286,500			285,098
Estée Lauder Companies Inc. 4.35% due 1/15/20084		20,000			19,964
Fannie Mae 4.13%–4.65% due 1/4–4/1/2008		598,544			595,696
FCAR Owner Trust I 5.90% due 2/1/2008		50,000			49,737
Federal Farm Credit Banks 4.25%–4.42% due 2/14–5/2/2008		184,700			183,176
Federal Home Loan Bank 4.14%–4.95% due 1/2–5/28/2008		2,861,830			2,844,635
Freddie Mac 4.15%–4.638% due 1/22–5/5/2008		1,495,162			1,482,395
General Electric Capital Corp. 4.78%–4.85% due 1/23–1/30/2008		134,100			133,641
General Electric Co. 4.51% due 3/31/2008		75,000			74,101
Harley-Davidson Funding Corp. 4.25%–4.75% due 1/15–3/12/20084		67,825			67,517
Harvard University 4.40%–4.47% due 1/7–2/13/2008		50,000			49,817
Hewlett-Packard Co. 4.25%–4.55% due 1/7–1/17/20084		213,600			213,346
Honeywell International Inc. 4.16%–4.45% due 1/16–2/27/20084		65,316			65,097
IBM Corp. 4.21% due 1/15/20084		25,000			24,956
IBM International Group Capital LLC 4.23%–4.52% due 1/14–2/26/20084		167,800			167,010
International Bank for Reconstruction and Development 4.33% due 1/22/2008		74,000			73,830
International Lease Finance Corp. 4.23%–4.87% due 1/4–4/8/2008		265,900			264,326
John Deere Capital Corp. 4.50% due 1/4–1/8/20084		38,600			38,564
Johnson & Johnson 4.20% due 1/9/20084		50,000			49,947
JPMorgan Chase & Co. 4.85%–5.06% due 1/15–2/15/2008		315,000			313,629
Jupiter Securitization Co., LLC 4.65% due 3/20/20084		44,673			44,144
Park Avenue Receivables Co., LLC 4.73% due 1/10/20084		36,500			36,448
Medtronic Inc. 4.58% due 1/22–1/23/20084		85,000			84,737
NetJets Inc. 4.19%–4.23% due 2/25/20084		60,000			59,557
Paccar Financial Corp. 4.10%–4.49% due 2/7–4/1/2008		77,100			76,603
Pfizer Inc 4.33% due 5/5/20084		24,200			23,791
Private Export Funding Corp. 4.20%–4.72% due 2/6–3/26/20084		112,000			111,100
Procter & Gamble International Funding S.C.A. 4.20%–4.78% due 1/4–3/18/20084		207,645			206,234
Prudential Funding, LLC 4.30% due 2/5/2008		25,000			24,892
U.S. Treasury Bills 3.245%–4.1425% due 2/14–6/19/2008		1,106,200			1,096,775
Union Bank of California, N.A. 5.00% due 1/23/2008		50,000			50,000
United Parcel Service Inc. 4.17%–4.53% due 1/3–3/31/20084		351,500			348,873
Variable Funding Capital Corp. 4.65%–5.42% due 1/4–2/20/20084		244,559			244,044
Wal-Mart Stores Inc. 4.46%–4.72% due 1/8–2/11/20084		247,650			246,575
Wells Fargo & Co. 4.30% due 1/18/2008		21,900			21,853
Total short-term securities (cost: $11,006,472,000)					11,010,892
Total investment securities (cost: $64,451,230,000)					89,199,218
Other assets less liabilities					3,410
Net assets				$	89,202,628

 “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 $7,558,926,000.

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 resold in the United States in transactions exempt from

 registration, normally to qualified institutional buyers. The total value of all such securities was $3,095,144,000, which represented 3.47% of the net

 assets of the fund.

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-904-0208O-S10888

Summary investment portfolio, December 31, 2007

The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings.  For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.

[begin pie chart]

Industry sector diversification (percent of net assets)
Information technology	16.75	%
Health care	10.38
Financials	10.11
Energy	10.06
Consumer staples	9.07
Other industries	30.63
Convertible securities	0.61
Bonds & notes	0.04
Short-term securities & other assets less liabilities	12.35

[end pie chart]

Common stocks  - 87.00%	Shares		Market value (000)		Percent of net assets
Energy  - 10.06%
Baker Hughes Inc.		7,675,000	$	622,443		.70	%
Chevron Corp.		18,352,278		1,712,818		1.92
ConocoPhillips		8,093,340		714,642		.80
Exxon Mobil Corp.		5,621,500		526,678		.59
Royal Dutch Shell PLC, Class A (ADR)		17,470,000		1,470,974
Royal Dutch Shell PLC, Class B (1)		833,265		34,733
Royal Dutch Shell PLC, Class B (ADR)		2,370,498		196,751		1.91
Schlumberger Ltd.		18,750,000		1,844,437		2.07
Other securities				1,849,554		2.07
				8,973,030		10.06
Materials  - 3.54%
Barrick Gold Corp.		18,156,250		763,470		.86
Other securities				2,394,357		2.68
				3,157,827		3.54
Industrials  - 8.52%
Deere & Co.		8,800,000		819,456		.92
General Dynamics Corp.		6,745,800		600,309		.67
General Electric Co.		51,150,000		1,896,130		2.13
United Technologies Corp.		10,340,000		791,424		.89
Other securities				3,491,902		3.91
				7,599,221		8.52
Consumer discretionary  - 7.25%
Best Buy Co., Inc.		12,534,300		659,931		.74
Carnival Corp., units		12,450,000		553,901		.62
Lowe's Companies, Inc.		60,936,600		1,378,386		1.54
Target Corp.		18,334,200		916,710		1.03
Time Warner Inc.		45,457,000		750,495		.84
Other securities				2,211,778		2.48
				6,471,201		7.25
Consumer staples  - 9.07%
Altria Group, Inc.		38,550,000		2,913,609		3.27
PepsiCo, Inc.		18,820,000		1,428,438		1.60
Walgreen Co.		18,144,500		690,943		.77
Other securities				3,057,615		3.43
				8,090,605		9.07
Health care  - 10.38%
Abbott Laboratories		19,511,900		1,095,593		1.23
Aetna Inc.		11,546,565		666,583		.75
Bristol-Myers Squibb Co.		25,050,000		664,326		.74
Eli Lilly and Co.		11,985,000		639,879		.72
Medtronic, Inc.		12,900,000		648,483		.73
Merck & Co., Inc.		15,150,000		880,366		.99
Roche Holding AG (1)		6,145,000		1,057,131		1.18
UnitedHealth Group Inc.		14,205,000		826,731		.93
Other securities				2,784,632		3.11
				9,263,724		10.38
Financials  - 10.11%
American International Group, Inc.		12,923,900		753,463		.85
Banco Santander, SA (1)		29,900,000		645,016		.72
Bank of America Corp.		33,326,800		1,375,064		1.54
Citigroup Inc.		46,511,297		1,369,292		1.54
Fannie Mae		28,796,100		1,151,268		1.29
Freddie Mac		15,413,700		525,145		.59
JPMorgan Chase & Co.		16,000,001		698,400		.78
Other securities				2,503,119		2.80
				9,020,767		10.11
Information technology  - 16.75%
Cisco Systems, Inc. (2)		32,370,400		876,267		.98
Google Inc., Class A (2)		882,000		609,885		.68
Hewlett-Packard Co.		20,325,000		1,026,006		1.15
Intel Corp.		39,890,000		1,063,467		1.19
International Business Machines Corp.		11,775,000		1,272,878		1.43
Microsoft Corp.		64,847,100		2,308,557		2.59
Nokia Corp. (1)		29,512,550		1,134,693
Nokia Corp. (ADR)		10,289,750		395,024		1.71
Oracle Corp. (2)		90,295,100		2,038,863		2.29
Texas Instruments Inc.		25,350,000		846,690		.95
Other securities				3,372,008		3.78
				14,944,338		16.75
Telecommunication services  - 4.07%
AT&T Inc.		54,948,414		2,283,656		2.56
Sprint Nextel Corp., Series 1		67,335,000		884,109		.99
Other securities				461,911		.52
				3,629,676		4.07
Utilities  - 2.97%
Dominion Resources, Inc.		14,263,824		676,819		.76
Exelon Corp.		9,410,600		768,281		.86
Other securities				1,209,055		1.35
				2,654,155		2.97
Miscellaneous  -  4.28%
Other common stocks in initial period of acquisition				3,803,756		4.28
Total common stocks (cost: $52,854,570,000)				77,608,300		87.00
Convertible securities  - 0.61%	Shares			Market value (000)		Percent of net assets
Other - 0.54%
Fannie Mae, Series 2004-1, 5.375% convertible preferred		820	$	67,650		.07	%
Other securities				421,119		.47
				488,769		.54
Miscellaneous  -  0.07%
Other convertible securities in initial period of acquisition				58,023		.07
Total convertible securities (cost: $553,647,000)				546,792		.61
	Principal amount (000)
Bonds & notes  - 0.04%
Other - 0.04%
Sprint Capital Corp. 8.75% 2032	$	13,500	$	15,258		.02
Other securities				17,976		.02
Total bonds & notes (cost: $36,541,000)				33,234		.04
	Principal amount (000)		Market value (000)		Percent of net assets
Short-term securities  - 12.35%
AT&T Inc. 4.24% due 1/30/2008 (3)	$	35,000	$	34,876		.04	%
Bank of America Corp. 4.595%-5.035% due 1/10- 4/2/2008		374,450		372,133
Ranger Funding Co. LLC 5.02% due 2/27/2008 (3)		50,000		49,542		.47
CAFCO, LLC 4.68%-5.11% due 1/15-2/5/2008 (3)		130,000		129,427
Ciesco LLC 4.90%-5.00% due 1/17-1/18/2008 (3)		99,000		98,752
Citigroup Funding Inc. 4.95% due 2/11/2008		50,000		49,711		.31
Chevron Funding Corp. 4.41% due 1/3/2008		25,000		24,991		.03
Edison Asset Securitization LLC 4.56%-4.91% due 1/2-2/26/2008 (3)		286,500		285,098
General Electric Capital Corp. 4.78%-4.85% due 1/23-1/30/2008		134,100		133,641
General Electric Co. 4.51% due 3/31/2008		75,000		74,101		.55
Fannie Mae 4.13%-4.65% due 1/4-4/1/2008		598,544		595,696		.67
Federal Home Loan Bank 4.14%-4.95% due 1/2-5/28/2008		2,861,830		2,844,635		3.19
Freddie Mac 4.15%-4.638% due 1/22- 5/5/2008		1,495,162		1,482,395		1.66
Hewlett-Packard Co. 4.25%-4.55% due 1/7-1/17/2008 (3)		213,600		213,346		.24
IBM Corp. 4.21% due 1/15/2008 (3)		25,000		24,956
IBM International Group Capital LLC 4.23%-4.52% due 1/14-2/26/2008 (3)		167,800		167,010		.21
International Lease Finance Corp. 4.23%-4.87% due 1/4-4/8/2008		265,900		264,326		.30
JPMorgan Chase & Co. 4.85%-5.06% due 1/15-2/15/2008		315,000		313,629
Jupiter Securitization Co., LLC 4.65% due 3/20/2008 (3)		44,673		44,144
Park Avenue Receivables Co., LLC 4.73% due 1/10/2008 (3)		36,500		36,448		.44
U.S. Treasury Bills 3.245%-4.1425% due 2/14-6/19/2008		1,106,200		1,096,775		1.23
Other securities				2,675,260		3.01
Total short-term securities (cost: $11,006,472,000)				11,010,892		12.35
Total investment securities (cost: $64,451,230,000)				89,199,218		100.00
Other assets less liabilities				3,410		.00
Net assets			$	89,202,628		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 fund's affiliated holding listed below is included in the market value of "Other securities" under its

respective industry sector. Further details on this holding and related transactions during the year ended

December 31, 2007, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income  (000)		Market value of affiliate at 12/31/07 (000)
Limited Brands, Inc.		20,042,743		-		1,752,800		18,289,943	$	11,350	$	346,229

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 $7,558,926,000.

(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. 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 $3,095,144,000, which represented 3.47% of the net assets of the fund.

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at December 31, 2007	(dollars and shares in thousands, except per-share amounts)
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $64,245,194)	$	88,852,989
Affiliated issuer (cost: $206,036)		346,229	$	89,199,218
Receivables for:
Sales of investments		9,956
Sales of fund's shares		104,534
Dividends and interest		118,712		233,202
				89,432,420
Liabilities:
Payables for:
Purchases of investments		18,937
Repurchases of fund's shares		157,473
Investment advisory services		15,760
Services provided by affiliates		30,518
Directors' and advisory board deferred compensation		5,608
Other		1,496		229,792
Net assets at December 31, 2007			$	89,202,628
Net assets consist of:
Capital paid in on shares of capital stock			$	64,050,562
Undistributed net investment income				412,451
Distributions in excess of net realized gain				(8,710	)
Net unrealized appreciation				24,748,325
Net assets at December 31, 2007			$	89,202,628

	Authorized shares of capital stock- $.001 par value		Net assets		Shares outstanding		Net asset value per share*
Class A		2,500,000	$	73,479,875		2,230,006	$	32.95
Class B		250,000		4,137,541		126,123		32.81
Class C		250,000		3,409,261		104,143		32.74
Class F		250,000		1,642,122		49,897		32.91
Class 529-A		325,000		1,311,388		39,843		32.91
Class 529-B		75,000		261,072		7,951		32.83
Class 529-C		150,000		374,048		11,389		32.84
Class 529-E		75,000		55,712		1,696		32.85
Class 529-F		75,000		18,803		572		32.90
Class R-1		75,000		61,158		1,864		32.81
Class R-2		100,000		693,592		21,128		32.83
Class R-3		300,000		1,031,747		31,377		32.88
Class R-4		75,000		419,402		12,746		32.90
Class R-5		150,000		2,306,907		70,021		32.95
Total		4,650,000	$	89,202,628		2,708,756
(*) 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 $34.96 and $34.92, respectively.
See Notes to Financial Statements

Statement of operations
for the year ended December 31, 2007	(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $28,277; also includes $11,350 from affiliate)	$	1,699,570
Interest	$	673,955		$	2,373,525
Fees and expenses(*):
Investment advisory services		215,810
Distribution services		278,721
Transfer agent services		63,236
Administrative services		17,916
Reports to shareholders		4,122
Registration statement and prospectus		1,812
Postage, stationery and supplies		6,467
Directors' and advisory board compensation		1,485
Auditing and legal		228
Custodian		1,823
State and local taxes		714
Other		277
Total fees and expenses before reimbursements/waivers		592,611
Less reimbursements/waivers of fees and expenses:
Investment advisory services		21,581
Administrative services		160
Total fees and expenses after reimbursements/waivers					570,870
Net investment income					1,802,655
Net realized gain and unrealized
depreciation on investments
and currency:
Net realized gain on:
Investments (including $11,981 net gain from affiliate)		5,103,778
Currency transactions		3,025			5,106,803
Net unrealized appreciation (depreciation) on:
Investments		(1,689,094	)
Currency translations		125			(1,688,969	)
Net realized gain and unrealized depreciation
on investments and currency					3,417,834
Net increase in net assets resulting
from operations				$	5,220,489
(*) 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)
	Year ended December 31
	2007			2006
Operations:
Net investment income	$	1,802,655		$	1,738,294
Net realized gain on investments and
currency transactions		5,106,803			5,516,589
Net unrealized appreciation (depreciation)
on investments and currency translations		(1,688,969	)		5,134,920
Net increase in net assets
resulting from operations		5,220,489			12,389,803
Dividends and distributions paid to
shareholders:
Dividends from net investment income and currency gain		(1,645,396	)		(1,784,654	)
Distributions from net realized gain
on investments		(4,764,009	)		(5,146,726	)
Total dividends and distributions paid
to shareholders		(6,409,405	)		(6,931,380	)
Net capital share transactions		1,337,443			4,229,674
Total increase in net assets		148,527			9,688,097
Net assets:
Beginning of year		89,054,101			79,366,004
End of year (including undistributed
net investment income: $412,451 and $252,359, respectively)	$	89,202,628		$	89,054,101
See Notes to Financial Statements

Notes to financial statements

1.   Organization and significant accounting policies

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

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

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

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

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

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

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly 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.

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

As of and during the period ended December 31, 2007, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

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

During the year ended December 31, 2007, the fund reclassified $3,025,000 from distribution in excess of net realized gain to undistributed net investment income; and reclassified $192,000 from undistributed net investment income and $328,819,000 from distribution in excess of net realized gain to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of December 31, 2007, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:

	(dollars in thousands)
Undistributed ordinary income	$	430,435
Gross unrealized appreciation on investment securities		27,813,101
Gross unrealized depreciation on investment securities		(3,084,112	)
Net unrealized appreciation on investment securities		24,728,989
Cost of investment securities		64,470,229

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

	Year ended December 31, 2007						Year ended December 31, 2006
	Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income		Long-term capital gains		Total distributions paid
Share class
Class A	$	1,422,554	$	3,922,272	$	5,344,826	$	1,549,720	$	4,286,757	$	5,836,477
Class B		47,870		221,887		269,757		57,806		244,915		302,721
Class C		37,353		183,234		220,587		43,246		194,579		237,825
Class F		30,879		87,716		118,595		32,890		97,019		129,909
Class 529-A		22,603		69,337		91,940		21,169		63,983		85,152
Class 529-B		2,582		13,936		16,518		2,883		13,752		16,635
Class 529-C		3,644		19,888		23,532		3,885		18,648		22,533
Class 529-E		805		2,950		3,755		786		2,753		3,539
Class 529-F		336		984		1,320		236		713		949
Class R-1		617		3,281		3,898		572		2,836		3,408
Class R-2		7,147		36,974		44,121		7,776		36,010		43,786
Class R-3		15,301		54,847		70,148		14,853		52,450		67,303
Class R-4		6,957		21,999		28,956		6,052		18,571		24,623
Class R-5		46,748		124,704		171,452		42,780		113,740		156,520
Total	$	1,645,396	$	4,764,009	$	6,409,405	$	1,784,654	$	5,146,726	$	6,931,380

4. Fees and transactions with related parties

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

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.390% on the first $1 billion of month-end net assets and decreasing to 0.219% on such assets in excess of $89 billion. CRMC is currently waiving 10% of investment advisory services fees. During the year ended December 31, 2007, total investment advisory services fees waived by CRMC were $21,581,000. As a result, the fee shown on the accompanying financial statements of $215,810,000, which was equivalent to an annualized rate of 0.235%, was reduced to $194,229,000, or 0.212% 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 on the following page. 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 December 31, 2007, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.

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

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

Administrative services – The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended December 31, 2007, the total administrative services fees paid by CRMC were $13 and $160,000 for Class R-1 and R-2, respectively.Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan.Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the year ended December 31, 2007, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
			CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$175,798	$59,848	Not applicable	Not applicable	Not applicable
Class B	43,051	3,388	Not applicable	Not applicable	Not applicable
Class C	34,873	Included in administrative services	$4,063	$444	Not applicable
Class F	4,233		1,563	197	Not applicable
Class 529-A	2,596		1,060	122	$ 1,254
Class 529-B	2,574		219	44	257
Class 529-C	3,605		305	56	361
Class 529-E	266		45	5	53
Class 529-F	-		14	2	17
Class R-1	573		64	25	Not applicable
Class R-2	5,143		1,018	1,991	Not applicable
Class R-3	5,053		1,434	500	Not applicable
Class R-4	956		557	20	Not applicable
Class R-5	Not applicable		2,217	9	Not applicable
Total	$278,721	$63,236	$12,559	$3,415	$1,942

Directors’ and advisory board deferred compensation– Since the adoption of the deferred compensation plan in 1993, directors and advisory board members who are unaffiliated with CRMCmay elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ and advisory board compensation of $1,485,000, shown on the accompanying financial statements, includes $1,066,000 in current fees (either paid in cash or deferred) and a net increase of $419,000 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 December 31, 2007, the fund had warrants outstanding which may be exercised at any time for the purchase of 819,437 Class A shares at approximately $5.24 per share. If these warrants had been exercised as of December 31, 2007, the net asset value of Class A shares would have been reduced by $0.01 per share.

6. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class	Sales(*)				Reinvestments of dividends and distributions				Repurchases(*)						Net increase (decrease)
	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
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
Year ended December 31, 2006
Class A	$	5,290,882		159,177	$	5,481,530		164,293	$	(8,155,422	)		(245,460	)	$	2,616,990			78,010
Class B		271,904		8,230		291,674		8,769		(458,225	)		(13,841	)		105,353			3,158
Class C		455,460		13,780		227,586		6,853		(462,026	)		(14,011	)		221,020			6,622
Class F		424,643		12,741		118,930		3,567		(297,324	)		(8,964	)		246,249			7,344
Class 529-A		208,622		6,272		85,143		2,553		(68,950	)		(2,072	)		224,815			6,753
Class 529-B		28,898		873		16,630		499		(11,480	)		(345	)		34,048			1,027
Class 529-C		63,827		1,923		22,528		676		(25,566	)		(770	)		60,789			1,829
Class 529-E		9,172		276		3,537		106		(3,598	)		(108	)		9,111			274
Class 529-F		4,900		147		949		28		(1,247	)		(38	)		4,602			137
Class R-1		23,018		696		3,405		102		(8,091	)		(243	)		18,332			555
Class R-2		197,672		5,975		43,770		1,314		(130,069	)		(3,904	)		111,373			3,385
Class R-3		292,010		8,809		67,296		2,019		(163,408	)		(4,926	)		195,898			5,902
Class R-4		128,640		3,882		24,601		738		(82,853	)		(2,513	)		70,388			2,107
Class R-5		310,130		9,266		155,841		4,671		(155,265	)		(4,677	)		310,706			9,260
Total net increase
(decrease)	$	7,709,778		232,047	$	6,543,420		196,188	$	(10,023,524	)		(301,872	)	$	4,229,674			126,363
* Includes exchanges between share classes of the fund.

7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $16,941,263,000 and $17,523,778,000, respectively, during the year ended December 31, 2007.

Financial highlights

			Income from investment operations(1)						Dividends and distributions
	Net asset value, beginning of year		Net investment income		Net 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 year		Total return (2) (3)			Net assets, end of year (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers			Ratio of expenses to average net assets after reimbursements/ waivers (3)			Ratio of net income to average net assets (3)
Class A:
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:
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:
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:
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:
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:
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:
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:
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:
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:
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:
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:
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:
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:
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

	Year ended December 31
	2007			2006			2005			2004			2003
Portfolio turnover rate for all classes of shares		22	%		20	%		19	%		19	%		24	%

(1) Based on average shares outstanding.

(2) Total returns exclude any applicable sales charges, including contingent deferred sales charges.

(3) This column reflects the impact, if any, of certain reimbursements/waivers from CRMC.

    During some of the years shown, CRMC reduced fees for investment advisory services.

    In addition, during some of the years shown, CRMC paid a portion of the fund's transfer agent fees

    for certain retirement plan share classes.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of The Investment Company of America:

In our opinion, the accompanying statement of assets and liabilities, including the summary investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Investment Company of America (the "Fund") at December 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at December 31, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California

February 8, 2008

Tax information                                                                                    

                                            unaudited

We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended December 31, 2007:

Long-term capital gains	$	5,040,185,000
Qualified dividend income		1,715,206,000
Corporate dividends received deduction		1,398,356,000
U.S. government income that may be exempt from state taxation		123,773,000

Individual shareholders should refer to their Form 1099 or other tax information, which was mailed in January 2008, to determine the calendar year amounts to be included on their 2007 tax returns. Shareholders should consult their tax advisers.