UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-00116
The Investment Company of America
(Exact Name of Registrant as Specified in Charter)
333 South Hope Street
Los Angeles, California 90071
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (213) 486-9200
Date of fiscal year end: December 31
Date of reporting period: June 30, 2011
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(Name and Address of Agent for Service)
Copies to:
Eric A. S. Richards
O’Melveny & Myers LLP
400 South Hope Street, 10th Floor
Los Angeles, California 90071
(Counsel for the Registrant)
ITEM 1 – Reports to Stockholders
 |  |
ICA The Investment Company of America®
[photo of trees in a forest]
Semi-annual report for the six months ended June 30, 2011
ICA seeks long-term growth of capital and income, placing greater emphasis on the potential for capital appreciation and future dividends than on current yield.
The Investment Company of America is one of the 33 American Funds. American Funds is one of the nation’s largest mutual fund families. For 80 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.
Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. For current information and month-end results, visit americanfunds.com.
| Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2011: | ||||||||||||
| 1 year | 5 years | 10 years | ||||||||||
| Class A shares | ||||||||||||
| Reflecting 5.75% maximum sales charge | 18.90 | % | 0.92 | % | 3.10 | % | ||||||
The total annual fund operating expense ratio was 0.61% for Class A shares as of the most recent fiscal year-end.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 20 to 23 for details.
The fund’s 30-day yield for Class A shares as of July 31, 2011, reflecting the 5.75% maximum sales charge and calculated in accordance with the U.S. Securities and Exchange Commission formula, was 1.97%.
Results for other share classes can be found on page 28.
Investing outside the United States may be subject to risks such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity. Global diversification can help reduce these risks. See the prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.
Fellow shareholders:
[photo of trees in a forest]
The U.S. economy displayed muted growth during the first six months of the year. Markets were affected by the slowdown, as well as worries over U.S. government deficit issues, still-high unemployment rates, European sovereign debt crises and decreasing growth in China. These macroeconomic concerns kept stock markets in a period of turbulence, at times lifted by general confidence and at times retreating sharply.
The Investment Company of America gained 3.9% for the six-month period ended June 30, 2011, with dividends reinvested. In contrast, the unmanaged Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market, returned 6.0% during the same time period.
In June, the Federal Reserve decided to hold interest rates at historic low levels of near zero because of the weak recovery, and it hinted that more government relief could come if growth were to stall. Unemployment remained a thorny problem, with the jobless rate increasing to 9.2% in June from 8.8% in March, and consumer confidence measures indicated shoppers were wary.
Portfolio review
During the six months, many large capitalization stocks did not do as well as some medium- and small-cap companies. ICA’s portfolio has tended to focus on some of the largest U.S. companies and thus during the period it lagged the S&P 500, which has a broader mixture of company sizes. In particular, ICA held many of the largest U.S. financial companies, which hurt the fund. JPMorgan Chase, the fund’s ninth-largest holding, fell 3.5%. Other big U.S. banks detracted from ICA’s result, including Wells Fargo (–9.5%), Bank of America (–17.8%) and Citigroup (–12.0%). Some of the recently beleaguered European banks, however, contributed to the fund’s positive return, with Spain-based Banco Santander up 8.8% and France-based Société Générale up 10.3% during the period.
[Begin Sidebar]
| Results at a glance | ||||||||||||
| For the six months ended June 30, 2011, with dividends reinvested | ||||||||||||
| Standard & | Lipper | |||||||||||
| ICA | Poor’s 500 | Growth & Income | ||||||||||
| (Class A shares) | Composite Index* | Funds Index† | ||||||||||
| Income return | 0.93 | % | 1.01 | % | n/a | |||||||
| Capital return | 2.96 | % | 5.00 | % | n/a | |||||||
| Total return | 3.89 | % | 6.01 | % | 5.29 | % | ||||||
*The S&P 500 is unmanaged and its results do not reflect the effect of sales charges, commissions, account fees, expenses or taxes. | ||||||||||||
† Results of the Lipper index do not reflect the effect of sales charges, account fees or taxes. | ||||||||||||
[End Sidebar]
Large information technology companies were a significant portion of the fund, and some fared poorly during the half-year, although not all. Microsoft, the fund’s second-largest holding, fell 6.9%. Tenth-largest Oracle, however, rose 5.1%. Internet search conglomerate Google fell 14.8% and Internet router maker Cisco Systems was down 22.8%.
Another of ICA’s significant industry concentrations was energy, a relative bright spot. Royal Dutch Shell, the fourth-largest holding, was up 7.0%; ConocoPhillips, the fifth-largest holding, rose 10.4%.
Industrial and materials companies in general helped the fund, including CSX (+21.8%), Union Pacific (+12.7%), United Technologies (+12.4%) and Siemens (+10.8%). Several large media companies such as Comcast (+15.5%) and Time Warner (+13.1%) also helped the fund’s result. Consumer staples companies, often considered “defensive stocks” in a recession, buoyed the fund, such as third-largest holding Philip Morris International (+14.1%), Kraft Foods (+11.8%) and PepsiCo (+7.8%).
Most of the fund, 82.0% of net assets, was invested in U.S. stocks as of the end of the period, roughly the same as the 82.1% six months ago. Portfolio counselors may invest up to 15% in companies domiciled outside the U.S., and they held 11.7% as of the end of the period. ICA had a total of 93.7% of its investments in equity securities (including convertibles), with 0.6% in fixed income and 5.7% in cash and short-term securities.
A look ahead
We remain in an uncertain period, and we are carefully monitoring the difficult macroeconomic issues facing the U.S. and global economies. Stock prices have been swinging dramatically and we expect the market to stay volatile for some time. However, we keep our eyes on individual companies’ long-term business prospects and believe that stock prices will reflect those prospects over time. Despite the market’s gyrations, we think the companies ICA invests in have solid underlying fundamentals, with strong balance sheets and attractive valuations.
We thank you for your continued confidence in our long-term investment philosophy.
Sincerely,
/s/ James B. Lovelace
James B. Lovelace
Vice Chairman
/s/ Donald D. O’Neal
Donald D. O’Neal
President
August 11, 2011
For current information about the fund, visit americanfunds.com.
Summary investment portfolio June 30, 2011
unaudited
The following summary investment portfolio is designed to streamline the report and help investors better focus on the fund’s principal holdings. See the inside back cover for details on how to obtain a complete schedule of portfolio holdings.
[begin pie chart]
| Industry sector diversification | (percent of net assets) | |||
| Information technology | 19.06 | % | ||
| Energy | 12.12 | |||
| Industrials | 11.19 | |||
| Consumer discretionary | 10.94 | |||
| Consumer staples | 10.72 | |||
| Other industries | 28.80 | |||
| Other securities | 1.50 | |||
| Short-term securities & other assets less liabilities | 5.67 | |||
[begin pie chart]
| Percent | ||||||||||||
| Value | of net | |||||||||||
| Common stocks - 92.83% | Shares | (000 | ) | assets | ||||||||
| Energy - 12.12% | ||||||||||||
| BP PLC (1) | 57,790,850 | $ | 425,803 | |||||||||
| BP PLC (ADR) | 3,146,953 | 139,379 | .92 | % | ||||||||
| Chevron Corp. | 6,480,000 | 666,403 | 1.08 | |||||||||
| ConocoPhillips | 18,129,140 | 1,363,130 | 2.21 | |||||||||
| EOG Resources, Inc. | 3,932,200 | 411,112 | .67 | |||||||||
| Royal Dutch Shell PLC, Class A (ADR) | 16,470,000 | 1,171,511 | ||||||||||
| Royal Dutch Shell PLC, Class B (1) | 13,068,265 | 466,488 | ||||||||||
| Royal Dutch Shell PLC, Class B (ADR) | 2,925,498 | 209,904 | 3.00 | |||||||||
| Schlumberger Ltd. | 12,724,999 | 1,099,440 | 1.78 | |||||||||
| Other securities | 1,518,966 | 2.46 | ||||||||||
| 7,472,136 | 12.12 | |||||||||||
| Materials - 3.54% | ||||||||||||
| Dow Chemical Co. | 32,642,500 | 1,175,130 | 1.91 | |||||||||
| Other securities | 1,009,505 | 1.63 | ||||||||||
| 2,184,635 | 3.54 | |||||||||||
| Industrials - 11.19% | ||||||||||||
| 3M Co. | 4,834,265 | 458,530 | .74 | |||||||||
| CSX Corp. | 29,493,000 | 773,306 | 1.25 | |||||||||
| General Dynamics Corp. | 11,438,300 | 852,382 | 1.38 | |||||||||
| Siemens AG (1) | 3,370,000 | 462,718 | .75 | |||||||||
| Union Pacific Corp. | 9,357,500 | 976,923 | 1.59 | |||||||||
| United Technologies Corp. | 9,401,852 | 832,158 | 1.35 | |||||||||
| Other securities | 2,542,542 | 4.13 | ||||||||||
| 6,898,559 | 11.19 | |||||||||||
| Consumer discretionary - 10.94% | ||||||||||||
| Comcast Corp., Class A | 23,175,271 | 587,261 | ||||||||||
| Comcast Corp., Class A, special nonvoting shares | 3,000,000 | 72,690 | 1.07 | |||||||||
| General Motors Co. (2) | 18,309,900 | 555,889 | .90 | |||||||||
| Home Depot, Inc. | 25,300,000 | 916,366 | 1.49 | |||||||||
| McDonald's Corp. | 7,465,000 | 629,449 | 1.02 | |||||||||
| Time Warner Inc. | 12,799,000 | 465,500 | .76 | |||||||||
| Other securities | 3,515,720 | 5.70 | ||||||||||
| 6,742,875 | 10.94 | |||||||||||
| Consumer staples - 10.72% | ||||||||||||
| Altria Group, Inc. | 19,925,000 | 526,219 | .85 | |||||||||
| CVS/Caremark Corp. | 11,000,000 | 413,380 | .67 | |||||||||
| Kraft Foods Inc., Class A | 22,415,868 | 789,711 | 1.28 | |||||||||
| PepsiCo, Inc. | 10,641,500 | 749,481 | 1.22 | |||||||||
| Philip Morris International Inc. | 32,831,000 | 2,192,126 | 3.56 | |||||||||
| Other securities | 1,937,772 | 3.14 | ||||||||||
| 6,608,689 | 10.72 | |||||||||||
| Health care - 6.60% | ||||||||||||
| Abbott Laboratories | 17,335,000 | 912,168 | 1.48 | |||||||||
| Amgen Inc. (2) | 7,870,792 | 459,261 | .75 | |||||||||
| Merck & Co., Inc. | 36,771,429 | 1,297,664 | 2.10 | |||||||||
| Other securities | 1,400,434 | 2.27 | ||||||||||
| 4,069,527 | 6.60 | |||||||||||
| Financials - 7.46% | ||||||||||||
| Bank of America Corp. | 66,440,935 | 728,193 | 1.18 | |||||||||
| Citigroup Inc. | 13,880,000 | 577,963 | .94 | |||||||||
| JPMorgan Chase & Co. | 26,065,000 | 1,067,101 | 1.73 | |||||||||
| Wells Fargo & Co. | 23,910,000 | 670,915 | 1.09 | |||||||||
| Other securities | 1,555,074 | 2.52 | ||||||||||
| 4,599,246 | 7.46 | |||||||||||
| Information technology - 19.06% | ||||||||||||
| Apple Inc. (2) | 2,080,000 | 698,194 | 1.13 | |||||||||
| Corning Inc. | 25,944,820 | 470,898 | .76 | |||||||||
| Google Inc., Class A (2) | 1,107,030 | 560,578 | .91 | |||||||||
| Hewlett-Packard Co. | 22,040,000 | 802,256 | 1.30 | |||||||||
| Intel Corp. | 38,629,399 | 856,027 | 1.39 | |||||||||
| International Business Machines Corp. | 3,235,000 | 554,964 | .90 | |||||||||
| Microsoft Corp. | 91,435,800 | 2,377,331 | 3.86 | |||||||||
| Nokia Corp. (1) | 63,233,329 | 408,399 | ||||||||||
| Nokia Corp. (ADR) | 5,652,400 | 36,288 | .72 | |||||||||
| Oracle Corp. | 30,315,000 | 997,667 | 1.62 | |||||||||
| QUALCOMM Inc. | 9,612,000 | 545,865 | .89 | |||||||||
| Texas Instruments Inc. | 22,825,000 | 749,345 | 1.22 | |||||||||
| Yahoo! Inc. (2) | 28,491,520 | 428,512 | .70 | |||||||||
| Other securities | 2,262,940 | 3.66 | ||||||||||
| 11,749,264 | 19.06 | |||||||||||
| Telecommunication services - 5.43% | ||||||||||||
| AT&T Inc. | 90,216,900 | 2,833,713 | 4.60 | |||||||||
| Other securities | 513,890 | .83 | ||||||||||
| 3,347,603 | 5.43 | |||||||||||
| Utilities - 3.22% | ||||||||||||
| Dominion Resources, Inc. | 10,623,824 | 512,812 | .83 | |||||||||
| GDF SUEZ (1) | 16,595,324 | 607,337 | .99 | |||||||||
| Other securities | 865,857 | 1.40 | ||||||||||
| 1,986,006 | 3.22 | |||||||||||
| Miscellaneous - 2.55% | ||||||||||||
| Other common stocks in initial period of acquisition | 1,573,290 | 2.55 | ||||||||||
| Total common stocks (cost: $45,096,335,000) | 57,231,830 | 92.83 | ||||||||||
| Principal | Percent | |||||||||||
| amount | Value | of net | ||||||||||
| Preferred securities - 0.19% | (000 | ) | (000 | ) | assets | |||||||
| Financials - 0.19% | ||||||||||||
| JPMorgan Chase & Co., Series I, 7.90% (3) | $ | 62,936 | $ | 67,829 | .11 | |||||||
| Wells Fargo & Co., Series K, 7.98% (3) | 23,667 | 25,679 | .04 | |||||||||
| Other securities | 21,611 | .04 | ||||||||||
| Total preferred securities (cost: $100,197,000) | 115,119 | .19 | ||||||||||
| Percent | ||||||||||||
| Value | of net | |||||||||||
| Warrants - 0.00% | (000 | ) | assets | |||||||||
| Financials - 0.00% | ||||||||||||
| Other securities | - | .00 | ||||||||||
| Miscellaneous - 0.00% | ||||||||||||
| Other warrants in initial period of acquisition | 773 | .00 | ||||||||||
| Total warrants (cost: $13,004,000) | 773 | .00 | ||||||||||
| Percent | ||||||||||||
| Value | of net | |||||||||||
| Convertible securities - 0.68% | Shares | (000 | ) | assets | ||||||||
| Consumer discretionary - 0.42% | ||||||||||||
| General Motors Co., Series B, 4.75% convertible preferred 2013 | 5,188,150 | 252,870 | .41 | |||||||||
| Other securities | 7,083 | .01 | ||||||||||
| 259,953 | .42 | |||||||||||
| Financials - 0.02% | ||||||||||||
| Fannie Mae 5.375% convertible preferred 2032 (2) | 820 | 5,740 | .01 | |||||||||
| Other securities | 7,329 | .01 | ||||||||||
| 13,069 | .02 | |||||||||||
| Other - 0.24% | ||||||||||||
| Other securities | 149,092 | .24 | ||||||||||
| Total convertible securities (cost: $595,424,000) | 422,114 | .68 | ||||||||||
| Principal | Percent | |||||||||||
| amount | Value | of net | ||||||||||
| Bonds & notes - 0.63% | (000 | ) | (000 | ) | assets | |||||||
| Energy - 0.01% | ||||||||||||
| Chevron Corp. 4.95% 2019 | $ | 5,000 | $ | 5,596 | .01 | |||||||
| Industrials - 0.06% | ||||||||||||
| CSX Corp. 6.25% 2015 | 5,000 | 5,730 | .01 | |||||||||
| Union Pacific Corp. 6.125% 2020 | 5,000 | 5,867 | .01 | |||||||||
| United Technologies Corp. 4.50% 2020 | 5,475 | 5,807 | .01 | |||||||||
| Other securities | 16,182 | .03 | ||||||||||
| 33,586 | .06 | |||||||||||
| Consumer discretionary - 0.03% | ||||||||||||
| Comcast Corp. 6.30% 2017 | 5,120 | 5,943 | .01 | |||||||||
| Other securities | 9,940 | .02 | ||||||||||
| 15,883 | .03 | |||||||||||
| Consumer staples - 0.02% | ||||||||||||
| Kraft Foods Inc. 2.625% 2013 | 2,555 | 2,630 | .00 | |||||||||
| PepsiCo, Inc. 2.50% 2016 | 2,500 | 2,529 | .00 | |||||||||
| Other securities | 9,537 | .02 | ||||||||||
| 14,696 | .02 | |||||||||||
| Health care - 0.03% | ||||||||||||
| Abbott Laboratories 5.125% 2019 | 2,500 | 2,755 | .00 | |||||||||
| Other securities | 18,506 | .03 | ||||||||||
| 21,261 | .03 | |||||||||||
| Financials - 0.09% | ||||||||||||
| Citigroup Inc. 4.587% 2015 | 1,387 | 1,460 | .00 | |||||||||
| Other securities | 54,658 | .09 | ||||||||||
| 56,118 | .09 | |||||||||||
| Telecommunication services - 0.01% | ||||||||||||
| AT&T Inc. 4.85% 2014 | 5,000 | 5,434 | .01 | |||||||||
| Other securities | 2,805 | .00 | ||||||||||
| 8,239 | .01 | |||||||||||
| Mortgage-backed obligations (4) - 0.08% | ||||||||||||
| Fannie Mae 3.50%-6.00% 2025-2041 | 45,776 | 47,441 | .08 | |||||||||
| Bonds & notes of U.S. government & government agencies - 0.28% | ||||||||||||
| Freddie Mac 2.125%-5.00% 2012-2014 | 20,000 | 21,384 | .03 | |||||||||
| Other securities | 151,197 | .25 | ||||||||||
| 172,581 | .28 | |||||||||||
| Other - 0.02% | ||||||||||||
| Other securities | 10,454 | .02 | ||||||||||
| Total bonds & notes (cost: $363,278,000) | 385,855 | .63 | ||||||||||
| Principal | Percent | |||||||||||
| amount | Value | of net | ||||||||||
| Short-term securities - 5.80% | (000 | ) | (000 | ) | assets | |||||||
| Abbott Laboratories 0.13% due 8/9/2011 (5) | $ | 40,000 | $ | 39,996 | .06 | |||||||
| Ciesco LLC 0.19%-0.20% due 8/15-8/23/2011 | 52,800 | 52,791 | .09 | |||||||||
| Fannie Mae 0.102%-0.321% due 8/1/2011-1/9/2012 | 772,886 | 772,713 | 1.25 | |||||||||
| Federal Home Loan Bank 0.045%-0.331% due 8/4/2011-2/23/2012 | 500,900 | 500,687 | .81 | |||||||||
| Freddie Mac 0.10%-0.301% due 7/19-12/19/2011 | 663,493 | 663,360 | 1.08 | |||||||||
| Hewlett-Packard Co. 0.09% due 7/18/2011 (5) | 50,000 | 49,998 | .08 | |||||||||
| Jupiter Securitization Co., LLC 0.13%-0.20% due 7/8-7/28/2011 (5) | 139,100 | 139,091 | .23 | |||||||||
| PepsiCo Inc. 0.09%-0.11% due 7/18-9/2/2011 (5) | 52,000 | 51,995 | .08 | |||||||||
| U.S. Treasury Bills 0.153%-0.278% due 7/7/2011-1/12/2012 | 456,500 | 456,452 | .74 | |||||||||
| Variable Funding Capital Company LLC 0.15% due 7/22/2011 (5) | 30,000 | 29,997 | .05 | |||||||||
| Other securities | 818,829 | 1.33 | ||||||||||
| Total short-term securities (cost: $3,575,150,000) | 3,575,909 | 5.80 | ||||||||||
| Total investment securities (cost: $49,743,388,000) | 61,731,600 | 100.13 | ||||||||||
| Other assets less liabilities | (78,260 | ) | (.13 | ) | ||||||||
| Net assets | $ | 61,653,340 | 100.00 | % | ||||||||
| As permitted by U.S. Securities and Exchange Commission regulations, "Miscellaneous" securities include holdings in their first year of acquisition that have not previously been publicly disclosed. |
| "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. |
| 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 trustees. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $5,068,257,000, which represented 8.22% of the net assets of the fund. This amount includes $5,061,174,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. |
| (2) Security did not produce income during the last 12 months. |
| (3) Coupon rate may change periodically. |
| (4) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
| (5) Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $898,174,000, which represented 1.46% of the net assets of the fund. |
| Key to abbreviation |
| ADR = American Depositary Receipts |
| See Notes to Financial Statements |
Financial statements
| Statement of assets and liabilities | unaudited | |||||||
| at June 30, 2011 | (dollars in thousands) | |||||||
| Assets: | ||||||||
| Investment securities, at value (cost: $49,743,388) | $ | 61,731,600 | ||||||
| Cash denominated in currencies other than U.S. dollars | ||||||||
| (cost: $78) | 78 | |||||||
| Cash | 135 | |||||||
| Receivables for: | ||||||||
| Sales of investments | $ | 214,969 | ||||||
| Sales of fund's shares | 35,814 | |||||||
| Dividends and interest | 116,409 | 367,192 | ||||||
| 62,099,005 | ||||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Purchases of investments | 250,409 | |||||||
| Repurchases of fund's shares | 155,597 | |||||||
| Investment advisory services | 12,000 | |||||||
| Services provided by related parties | 20,835 | |||||||
| Trustees' deferred compensation | 6,246 | |||||||
| Other | 578 | 445,665 | ||||||
| Net assets at June 30, 2011 | $ | 61,653,340 | ||||||
| Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 49,512,217 | ||||||
| Undistributed net investment income | 229,648 | |||||||
| Accumulated net realized loss | (76,935 | ) | ||||||
| Net unrealized appreciation | 11,988,410 | |||||||
| Net assets at June 30, 2011 | $ | 61,653,340 | ||||||
| (dollars and shares in thousands, except per-share amounts) | ||||||||||||
| Shares of beneficial interest issued and outstanding (no stated par value) - | ||||||||||||
| unlimited shares authorized (2,127,845 total shares outstanding) | ||||||||||||
| Net assets | Shares outstanding | Net asset value per share | ||||||||||
| Class A | $ | 48,030,997 | 1,656,827 | $ | 28.99 | |||||||
| Class B | 1,160,308 | 40,180 | 28.88 | |||||||||
| Class C | 2,113,751 | 73,407 | 28.80 | |||||||||
| Class F-1 | 1,788,117 | 61,772 | 28.95 | |||||||||
| Class F-2 | 693,838 | 23,939 | 28.98 | |||||||||
| Class 529-A | 1,445,851 | 49,943 | 28.95 | |||||||||
| Class 529-B | 144,665 | 5,007 | 28.89 | |||||||||
| Class 529-C | 365,842 | 12,665 | 28.89 | |||||||||
| Class 529-E | 59,126 | 2,046 | 28.89 | |||||||||
| Class 529-F-1 | 32,112 | 1,110 | 28.93 | |||||||||
| Class R-1 | 80,082 | 2,776 | 28.85 | |||||||||
| Class R-2 | 650,997 | 22,545 | 28.88 | |||||||||
| Class R-3 | 837,665 | 28,959 | 28.93 | |||||||||
| Class R-4 | 706,470 | 24,408 | 28.94 | |||||||||
| Class R-5 | 936,796 | 32,325 | 28.98 | |||||||||
| Class R-6 | 2,606,723 | 89,936 | 28.98 | |||||||||
| See Notes to Financial Statements | ||||||||||||
| Statement of operations | unaudited | |||||||
| for the six months ended June 30, 2011 | (dollars in thousands) | |||||||
| Investment income: | ||||||||
| Income: | ||||||||
| Dividends (net of non-U.S. taxes of $24,460) | $ | 807,246 | ||||||
| Interest | 22,082 | $ | 829,328 | |||||
| Fees and expenses*: | ||||||||
| Investment advisory services | 75,052 | |||||||
| Distribution services | 86,190 | |||||||
| Transfer agent services | 29,307 | |||||||
| Administrative services | 9,759 | |||||||
| Reports to shareholders | 1,158 | |||||||
| Registration statement and prospectus | 417 | |||||||
| Trustees' compensation | 921 | |||||||
| Auditing and legal | 31 | |||||||
| Custodian | 464 | |||||||
| State and local taxes | 441 | |||||||
| Other | 1,404 | 205,144 | ||||||
| Net investment income | 624,184 | |||||||
| Net realized gain and unrealized appreciation | ||||||||
| on investments and currency: | ||||||||
| Net realized gain (loss) on: | ||||||||
| Investments | 1,614,339 | |||||||
| Currency transactions | (3,528 | ) | 1,610,811 | |||||
| Net unrealized appreciation (depreciation) on: | ||||||||
| Investments | 150,235 | |||||||
| Currency translations | (420 | ) | 149,815 | |||||
| Net realized gain and unrealized appreciation | ||||||||
| on investments and currency | 1,760,626 | |||||||
| Net increase in net assets resulting | ||||||||
| from operations | $ | 2,384,810 | ||||||
| (*) Additional information related to class-specific fees and expenses is included | ||||||||
| in the Notes to Financial Statements. | ||||||||
| See Notes to Financial Statements | ||||||||
| Statements of changes in net assets | ||||||||
| (dollars in thousands) | ||||||||
| Six months | Year ended | |||||||
| ended June 30, | December 31, | |||||||
| 2011† | 2010 | |||||||
| Operations: | ||||||||
| Net investment income | $ | 624,184 | $ | 1,228,129 | ||||
| Net realized gain on investments and currency transactions | 1,610,811 | 1,762,196 | ||||||
| Net unrealized appreciation on investments and currency translations | 149,815 | 3,079,556 | ||||||
| Net increase in net assets resulting from operations | 2,384,810 | 6,069,881 | ||||||
| Dividends paid to shareholders from net investment income | (544,781 | ) | (1,235,556 | ) | ||||
| Net capital share transactions | (2,274,531 | ) | (4,388,099 | ) | ||||
| Total (decrease) increase in net assets | (434,502 | ) | 446,226 | |||||
| Net assets: | ||||||||
| Beginning of period | 62,087,842 | 61,641,616 | ||||||
| End of period (including undistributed | ||||||||
| net investment income: $229,648 and $150,245, respectively) | $ | 61,653,340 | $ | 62,087,842 | ||||
| †Unaudited. | ||||||||
| See Notes to Financial Statements | ||||||||
Notes to financial statements
unaudited
| 1. | 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 the potential for capital appreciation and future dividends than on current yield.
The fund has 16 share classes consisting of five retail share classes, five 529 college savings plan share classes and six retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F-1) can be used to save for college education. The six retirement plan share classes (R-1, R-2, R-3, R-4, R-5 and R-6) are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described below:
| Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature |
| Classes 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 |
| Classes B and 529-B* | None | Declines from 5% to 0% for redemptions within six years of purchase | Classes B and 529-B convert to Classes 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-1 after 10 years |
| Class 529-C | None | 1% for redemptions within one year of purchase | None |
| Class 529-E | None | None | None |
| Classes F-1, F-2 and 529-F-1 | None | None | None |
| Classes R-1, R-2, R-3, R-4, R-5 and R-6 | None | None | None |
*Class B and 529-B shares of the fund are not available for purchase.
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.
| 2. | 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 fund follows the significant accounting policies described below, as well as the valuation policies described in the next section on valuation.
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. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. 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.
| 3. | Valuation |
The fund’s investments are reported at fair value as defined by accounting principles generally accepted in the United States of America. The fund generally determines the net asset value of each share class as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.
Methods and inputs – The fund uses the following methods and inputs to establish the fair value of its assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.
Equity securities are generally 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 on which the security trades.
Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are generally valued at prices obtained as of approximately 3:00 p.m. New York time, or relevant local time for securities trading outside U.S. time zones, from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.
| Fixed-income class | Examples of standard inputs |
| All | Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”) |
| Corporate bonds & notes; convertible securities | Standard inputs and underlying equity of the issuer |
| Bonds & notes of governments & government agencies | Standard inputs and interest rate volatilities |
| Mortgage-backed; asset-backed obligations | Standard inputs and cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information |
Where the investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or not deemed to be representative), fixed-income securities will be valued in good faith at the mean quoted bid and asked prices that are reasonably and timely available (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 generally 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 fair 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.
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 guidelines adopted by authority of the fund's board of trustees. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly equity securities trading 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 inputs may be reviewed in order to make a good faith determination of a security’s fair value. These inputs 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. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.
Classifications - The fund classifies its assets and liabilities into three levels based on the inputs used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following table presents the fund’s valuation levels as of June 30, 2011 (dollars in thousands):
| Investment securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common stocks: | ||||||||||||||||
| Energy | $ | 6,254,352 | $ | 1,217,784 | * | $ | - | $ | 7,472,136 | |||||||
| Materials | 1,836,381 | 348,254 | * | - | 2,184,635 | |||||||||||
| Industrials | 6,435,841 | 462,718 | * | - | 6,898,559 | |||||||||||
| Consumer discretionary | 6,425,131 | 317,744 | * | - | 6,742,875 | |||||||||||
| Consumer staples | 6,608,689 | - | - | 6,608,689 | ||||||||||||
| Health care | 3,825,390 | 244,137 | * | - | 4,069,527 | |||||||||||
| Financials | 4,100,079 | 499,167 | * | - | 4,599,246 | |||||||||||
| Information technology | 11,120,769 | 628,495 | * | - | 11,749,264 | |||||||||||
| Telecommunication services | 3,215,283 | 132,320 | * | - | 3,347,603 | |||||||||||
| Utilites | 1,378,669 | 607,337 | * | - | 1,986,006 | |||||||||||
| Miscellaneous | 970,072 | 603,218 | * | - | 1,573,290 | |||||||||||
| Preferred stocks | - | 115,119 | - | 115,119 | ||||||||||||
| Warrants | 773 | - | - | 773 | ||||||||||||
| Convertible securities | 341,891 | 80,223 | - | 422,114 | ||||||||||||
| Bonds & notes | - | 385,855 | - | 385,855 | ||||||||||||
| Short-term securities | - | 3,575,909 | - | 3,575,909 | ||||||||||||
| Total | $ | 52,513,320 | $ | 9,218,280 | $ | - | $ | 61,731,600 | ||||||||
(*) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading; therefore, $5,061,174,000 of investment securities were classified as Level 2 instead of Level 1. | ||||||||||||||||
| 4. | Risk factors |
Investing in the fund may involve certain risks including, but not limited to, those described below.
Market conditions — The prices of, and the income generated by, the common stocks and other securities held by the fund may decline due to market conditions and other factors, including those directly involving the issuers of securities held by the fund.
Investing in income-oriented stocks — Income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available at, the companies in which the fund invests.
Investing in growth-oriented stocks — Growth-oriented stocks may involve larger price swings and greater potential for loss than other types of investments.
Investing outside the U.S. — Securities of issuers domiciled outside the U.S., or with significant operations outside the U.S., may lose value because of political, social or economic developments in the country or region in which the issuer operates. These securities may also lose value due to changes in the exchange rate of the country’s currency against the U.S. dollar. Securities markets in certain countries may be more volatile and/or less liquid than those in the U.S. Investments outside the U.S. may also be subject to different settlement and accounting practices and different regulatory, legal and reporting standards than those in the U.S.
Management — The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses employed by the investment adviser in this process may not produce the desired results. This could cause the fund to lose value or its results to lag relevant benchmarks or other funds with similar objectives.
| 5. | Taxation and distributions |
Federal income taxation – The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.
As of and during the period ended June 30, 2011, 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 or state tax authorities for tax years before 2007.
Non-U.S. taxation – Dividend and interest income are recorded net of non-U.S. taxes paid.
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 different treatment for items such as currency gains and losses; short-term capital gains and losses; deferred expenses; cost of investments sold; net capital losses; 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 components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of December 31, 2010, the components of distributable earnings on a tax basis were as follows:
| (dollars in thousands) | ||||
| Undistributed ordinary income | $ | 307,318 | ||
| Post-October currency loss deferrals (realized during the period November 1, 2010, through December 31, 2010)* | (378 | ) | ||
| Capital loss carryforward expiring 2017† | (1,855,257 | ) | ||
| *These deferrals are considered incurred in the subsequent year. | ||||
| †The capital loss carryforward will be used to offset any capital gains realized by the fund in the current year or in subsequent years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains. | ||||
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
As of June 30, 2011, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows:
| (dollars in thousands) | ||||
| Gross unrealized appreciation on investment securities | $ | 15,879,149 | ||
| Gross unrealized depreciation on investment securities | (3,907,119 | ) | ||
| Net unrealized appreciation on investment securities | 11,972,030 | |||
| Cost of investment securities | 49,759,570 | |||
Tax-basis distributions paid to shareholders from ordinary income were as follows (dollars in thousands):
Share class | Six months ended June 30, 2011 | Year ended December 31, 2010 | ||||||
| Class A | $ | 438,081 | $ | 1,005,853 | ||||
| Class B | 6,606 | 21,001 | ||||||
| Class C | 10,902 | 28,562 | ||||||
| Class F-1 | 14,904 | 28,517 | ||||||
| Class F-2 | 6,942 | 13,921 | ||||||
| Class 529-A | 12,281 | 25,697 | ||||||
| Class 529-B | 717 | 2,163 | ||||||
| Class 529-C | 1,745 | 4,217 | ||||||
| Class 529-E | 427 | 934 | ||||||
| Class 529-F-1 | 297 | 554 | ||||||
| Class R-1 | 405 | 982 | ||||||
| Class R-2 | 3,386 | 8,218 | ||||||
| Class R-3 | 6,149 | 13,829 | ||||||
| Class R-4 | 6,175 | 13,162 | ||||||
| Class R-5 | 9,569 | 20,363 | ||||||
| Class R-6 | 26,195 | 47,583 | ||||||
| Total | $ | 544,781 | $ | 1,235,556 | ||||
| 6. | Fees and transactions with related parties |
Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Distributors,® Inc. ("AFD"), the principal underwriter of the fund’s shares, and American Funds Service Company® ("AFS"), the fund’s transfer agent.
Investment advisory services – The fund has an investment advisory and service agreement with CRMC that provides for monthly fees accrued daily. These fees are based on a series of decreasing annual rates beginning with 0.390% on the first $1 billion of daily net assets and decreasing to 0.219% on such assets in excess of $89 billion. For the six months ended June 30, 2011, the investment advisory services fee was $75,052,000, which was equivalent to an annualized rate of 0.241% of average daily 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 plans of distribution for all share classes, except Classes F-2, R-5 and R-6. Under the plans, the board of trustees 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 trustees has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes with a plan 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 Classes A and 529-A, distribution-related expenses include the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of June 30, 2011, there were no unreimbursed expenses subject to reimbursement for Classes A or 529-A.
| Share class | Currently approved limits | Plan limits |
| Class A | 0.25% | 0.25% |
| Class 529-A | 0.25 | 0.50 |
| Classes B and 529-B | 1.00 | 1.00 |
| Classes C, 529-C and R-1 | 1.00 | 1.00 |
| Class R-2 | 0.75 | 1.00 |
| Classes 529-E and R-3 | 0.50 | 0.75 |
| Classes F-1, 529-F-1 and R-4 | 0.25 | 0.50 |
Transfer agent services – The fund has a transfer agent agreement with AFS for Classes 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 as described below.
Administrative services – The fund has an administrative services agreement with CRMC for all share classes, except Classes A and B, to provide certain services, including transfer agent and recordkeeping services; coordinating, monitoring, assisting and overseeing third-party service providers; and educating advisers and shareholders about the impact of market-related events, tax laws affecting investments, retirement plan restrictions, exchange limitations and other related matters. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) 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.
Each 529 share class is subject to an additional administrative services fee payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan. The quarterly fee is based on a series of decreasing annual rates beginning with 0.10% on the first $30 billion of the net assets invested in Class 529 shares of the American Funds and decreasing to 0.06% on such assets between $120 billion and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 shares of the American Funds for the last month of the prior calendar quarter. 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 on the previous page for the six months ended June 30, 2011, were as follows (dollars in thousands):
| Administrative services | ||||||||||||||||||||
| Share class | Distribution services | Transfer agent services | CRMC administrative services | Transfer agent services | Commonwealth of Virginia administrative services | |||||||||||||||
| Class A | $ | 56,569 | $ | 28,530 | Not applicable | Not applicable | Not applicable | |||||||||||||
| Class B | 6,490 | 777 | Not applicable | Not applicable | Not applicable | |||||||||||||||
| Class C | 10,925 | Included in administrative services | $ | 1,603 | $ | 237 | Not applicable | |||||||||||||
| Class F-1 | 2,083 | 1,253 | 63 | Not applicable | ||||||||||||||||
| Class F-2 | Not applicable | 518 | 11 | Not applicable | ||||||||||||||||
| Class 529-A | 1,549 | 702 | 114 | $ | 707 | |||||||||||||||
| Class 529-B | 772 | 76 | 24 | 77 | ||||||||||||||||
| Class 529-C | 1,801 | 179 | 46 | 181 | ||||||||||||||||
| Class 529-E | 146 | 28 | 5 | 29 | ||||||||||||||||
| Class 529-F-1 | - | 15 | 2 | 15 | ||||||||||||||||
| Class R-1 | 396 | 53 | 9 | Not applicable | ||||||||||||||||
| Class R-2 | 2,473 | 486 | 837 | Not applicable | ||||||||||||||||
| Class R-3 | 2,113 | 615 | 271 | Not applicable | ||||||||||||||||
| Class R-4 | 873 | 506 | 11 | Not applicable | ||||||||||||||||
| Class R-5 | Not applicable | 456 | 4 | Not applicable | ||||||||||||||||
| Class R-6 | Not applicable | 625 | 1 | Not applicable | ||||||||||||||||
| Total | $ | 86,190 | $ | 29,307 | $ | 7,115 | $ | 1,635 | $ | 1,009 | ||||||||||
Trustees’ deferred compensation – Trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $921,000, shown on the accompanying financial statements, includes $275,000 in current fees (either paid in cash or deferred) and a net increase of $646,000 in the value of the deferred amounts.
Affiliated officers and trustees – Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or trustees received any compensation directly from the fund.
| 7. | Warrants |
As of June 30, 2011, the fund had warrants outstanding which may be exercised at any time for the purchase of 818,780 Class A shares at approximately $5.24 per share. If these warrants had been exercised as of June 30, 2011, the net asset value of each share class would have been reduced by less than $0.01 per share. No warrants were exercised during the six months ended June 30, 2011.
| 8. | Capital share transactions |
Capital share transactions in the fund were as follows (dollars and shares in thousands):
Sales(*) | Reinvestments of dividends and distributions | Repurchases(*) | Net (decrease) increase | |||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Six months ended June 30, 2011 | ||||||||||||||||||||||||||||||||
| Class A | $ | 1,502,197 | 51,859 | $ | 415,981 | 14,555 | $ | (4,123,146 | ) | (142,233 | ) | $ | (2,204,968 | ) | (75,819 | ) | ||||||||||||||||
| Class B | 8,019 | 278 | 6,447 | 226 | (326,270 | ) | (11,325 | ) | (311,804 | ) | (10,821 | ) | ||||||||||||||||||||
| Class C | 92,802 | 3,223 | 10,455 | 368 | (266,815 | ) | (9,271 | ) | (163,558 | ) | (5,680 | ) | ||||||||||||||||||||
| Class F-1 | 391,651 | 13,515 | 14,130 | 495 | (221,686 | ) | (7,653 | ) | 184,095 | 6,357 | ||||||||||||||||||||||
| Class F-2 | 80,613 | 2,782 | 4,356 | 153 | (79,877 | ) | (2,765 | ) | 5,092 | 170 | ||||||||||||||||||||||
| Class 529-A | 103,205 | 3,571 | 12,278 | 430 | (71,529 | ) | (2,472 | ) | 43,954 | 1,529 | ||||||||||||||||||||||
| Class 529-B | 1,195 | 41 | 714 | 25 | (27,070 | ) | (941 | ) | (25,161 | ) | (875 | ) | ||||||||||||||||||||
| Class 529-C | 24,557 | 851 | 1,744 | 61 | (23,138 | ) | (802 | ) | 3,163 | 110 | ||||||||||||||||||||||
| Class 529-E | 3,580 | 124 | 427 | 15 | (3,516 | ) | (122 | ) | 491 | 17 | ||||||||||||||||||||||
| Class 529-F-1 | 5,662 | 194 | 297 | 11 | (2,091 | ) | (72 | ) | 3,868 | 133 | ||||||||||||||||||||||
| Class R-1 | 10,152 | 353 | 403 | 14 | (10,993 | ) | (382 | ) | (438 | ) | (15 | ) | ||||||||||||||||||||
| Class R-2 | 75,062 | 2,598 | 3,384 | 119 | (100,977 | ) | (3,497 | ) | (22,531 | ) | (780 | ) | ||||||||||||||||||||
| Class R-3 | 114,899 | 3,971 | 6,147 | 215 | (135,228 | ) | (4,657 | ) | (14,182 | ) | (471 | ) | ||||||||||||||||||||
| Class R-4 | 107,641 | 3,720 | 6,171 | 216 | (108,502 | ) | (3,742 | ) | 5,310 | 194 | ||||||||||||||||||||||
| Class R-5 | 94,871 | 3,278 | 9,556 | 335 | (89,778 | ) | (3,098 | ) | 14,649 | 515 | ||||||||||||||||||||||
| Class R-6 | 319,586 | 11,008 | 26,186 | 917 | (138,283 | ) | (4,767 | ) | 207,489 | 7,158 | ||||||||||||||||||||||
| Total net increase (decrease) | $ | 2,935,692 | 101,366 | $ | 518,676 | 18,155 | $ | (5,728,899 | ) | (197,799 | ) | $ | (2,274,531 | ) | (78,278 | ) | ||||||||||||||||
| Year ended December 31, 2010 | ||||||||||||||||||||||||||||||||
| Class A | $ | 3,024,163 | 115,953 | $ | 950,500 | 36,358 | $ | (8,132,665 | ) | (313,061 | ) | $ | (4,158,002 | ) | (160,750 | ) | ||||||||||||||||
| Class B | 20,991 | 810 | 20,489 | 787 | (742,985 | ) | (28,631 | ) | (701,505 | ) | (27,034 | ) | ||||||||||||||||||||
| Class C | 194,001 | 7,500 | 27,267 | 1,047 | (423,553 | ) | (16,460 | ) | (202,285 | ) | (7,913 | ) | ||||||||||||||||||||
| Class F-1 | 645,213 | 24,850 | 26,422 | 1,009 | (440,996 | ) | (17,109 | ) | 230,639 | 8,750 | ||||||||||||||||||||||
| Class F-2 | 188,724 | 7,288 | 8,483 | 324 | (114,003 | ) | (4,373 | ) | 83,204 | 3,239 | ||||||||||||||||||||||
| Class 529-A | 190,625 | 7,307 | 25,691 | 982 | (133,020 | ) | (5,132 | ) | 83,296 | 3,157 | ||||||||||||||||||||||
| Class 529-B | 3,130 | 121 | 2,162 | 83 | (54,629 | ) | (2,101 | ) | (49,337 | ) | (1,897 | ) | ||||||||||||||||||||
| Class 529-C | 43,489 | 1,673 | 4,216 | 162 | (43,434 | ) | (1,681 | ) | 4,271 | 154 | ||||||||||||||||||||||
| Class 529-E | 6,922 | 267 | 934 | 36 | (6,078 | ) | (235 | ) | 1,778 | 68 | ||||||||||||||||||||||
| Class 529-F-1 | 6,732 | 259 | 553 | 21 | (3,786 | ) | (144 | ) | 3,499 | 136 | ||||||||||||||||||||||
| Class R-1 | 21,944 | 847 | 980 | 37 | (16,667 | ) | (645 | ) | 6,257 | 239 | ||||||||||||||||||||||
| Class R-2 | 151,069 | 5,829 | 8,213 | 314 | (176,798 | ) | (6,843 | ) | (17,516 | ) | (700 | ) | ||||||||||||||||||||
| Class R-3 | 204,939 | 7,917 | 13,825 | 529 | (224,863 | ) | (8,682 | ) | (6,099 | ) | (236 | ) | ||||||||||||||||||||
| Class R-4 | 179,309 | 7,037 | 13,153 | 503 | (190,929 | ) | (7,405 | ) | 1,533 | 135 | ||||||||||||||||||||||
| Class R-5 | 135,775 | 5,217 | 20,244 | 775 | (1,463,855 | ) | (56,008 | ) | (1,307,836 | ) | (50,016 | ) | ||||||||||||||||||||
| Class R-6 | 1,764,498 | 67,113 | 47,582 | 1,820 | (172,076 | ) | (6,723 | ) | 1,640,004 | 62,210 | ||||||||||||||||||||||
| Total net increase (decrease) | $ | 6,781,524 | 259,988 | $ | 1,170,714 | 44,787 | $ | (12,340,337 | ) | (475,233 | ) | $ | (4,388,099 | ) | (170,458 | ) | ||||||||||||||||
| * Includes exchanges between share classes of the fund. | ||||||||||||||||||||||||||||||||
| 9. | Investment transactions |
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $7,751,312,000 and $10,100,111,000, respectively, during the six months ended June 30, 2011.
Financial highlights(1)
Income (loss) from investment operations(2) | Dividends and distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | Net investment income | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Distributions (from capital gains) | Total dividends and distributions | Net asset value, end of period | Total return(3)(4) | Net assets, end of period (in millions) | Ratio of expenses to average net assets before reimbursements/ waivers | Ratio of expenses to average net assets after reimbursements/ waivers(4) | Ratio of net income to average net assets(4) | |||||||||||||||||||||||||||||||||||||||||
| Class A: | Six months ended 6/30/2011(5) | $ | 28.16 | $ | .30 | $ | .79 | $ | 1.09 | $ | (.26 | ) | $ | - | $ | (.26 | ) | $ | 28.99 | 3.89 | % | $ | 48,031 | .61 | %(6) | .61 | %(6) | 2.05 | %(6) | ||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.95 | .55 | 2.22 | 2.77 | (.56 | ) | - | (.56 | ) | 28.16 | 10.86 | 48,789 | .61 | .61 | 2.12 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.96 | .52 | 5.04 | 5.56 | (.57 | ) | - | (.57 | ) | 25.95 | 27.18 | 49,136 | .66 | .66 | 2.32 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.95 | .63 | (11.94 | ) | (11.31 | ) | (.68 | ) | - | (.68 | ) | 20.96 | (34.74 | ) | 43,244 | .59 | .57 | 2.25 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class B: | Six months ended 6/30/2011(5) | 28.05 | .18 | .80 | .98 | (.15 | ) | - | (.15 | ) | 28.88 | 3.50 | 1,160 | 1.38 | (6) | 1.38 | (6) | 1.26 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.84 | .35 | 2.21 | 2.56 | (.35 | ) | - | (.35 | ) | 28.05 | 10.03 | 1,431 | 1.38 | 1.38 | 1.36 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.87 | .35 | 5.02 | 5.37 | (.40 | ) | - | (.40 | ) | 25.84 | 26.19 | 2,017 | 1.43 | 1.43 | 1.57 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.81 | .41 | (11.89 | ) | (11.48 | ) | (.46 | ) | - | (.46 | ) | 20.87 | (35.25 | ) | 2,191 | 1.36 | 1.34 | 1.48 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class C: | Six months ended 6/30/2011(5) | 27.97 | .17 | .80 | .97 | (.14 | ) | - | (.14 | ) | 28.80 | 3.49 | 2,114 | 1.42 | (6) | 1.42 | (6) | 1.23 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.78 | .34 | 2.20 | 2.54 | (.35 | ) | - | (.35 | ) | 27.97 | 9.95 | 2,212 | 1.43 | 1.43 | 1.31 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.82 | .34 | 5.01 | 5.35 | (.39 | ) | - | (.39 | ) | 25.78 | 26.20 | 2,243 | 1.46 | 1.46 | 1.53 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.74 | .40 | (11.86 | ) | (11.46 | ) | (.46 | ) | - | (.46 | ) | 20.82 | (35.29 | ) | 1,974 | 1.41 | 1.38 | 1.44 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class F-1: | Six months ended 6/30/2011(5) | 28.12 | .29 | .79 | 1.08 | (.25 | ) | - | (.25 | ) | 28.95 | 3.87 | 1,788 | .66 | (6) | .66 | (6) | 2.01 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.92 | .54 | 2.21 | 2.75 | (.55 | ) | - | (.55 | ) | 28.12 | 10.78 | 1,558 | .66 | .66 | 2.07 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.93 | .51 | 5.05 | 5.56 | (.57 | ) | - | (.57 | ) | 25.92 | 27.21 | 1,209 | .68 | .68 | 2.31 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.91 | .62 | (11.93 | ) | (11.31 | ) | (.67 | ) | - | (.67 | ) | 20.93 | (34.77 | ) | 1,009 | .62 | .60 | 2.23 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| �� | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class F-2: | Six months ended 6/30/2011(5) | 28.15 | .33 | .79 | 1.12 | (.29 | ) | - | (.29 | ) | 28.98 | 3.99 | 694 | .41 | (6) | .41 | (6) | 2.26 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.95 | .61 | 2.21 | 2.82 | (.62 | ) | - | (.62 | ) | 28.15 | 11.07 | 669 | .39 | .39 | 2.34 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.96 | .56 | 5.06 | 5.62 | (.63 | ) | - | (.63 | ) | 25.95 | 27.50 | 533 | .42 | .42 | 2.37 | ||||||||||||||||||||||||||||||||||||||
| Period from 8/1/2008 to 12/31/2008 | 28.53 | .26 | (7.47 | ) | (7.21 | ) | (.36 | ) | - | (.36 | ) | 20.96 | (25.39 | ) | 83 | .17 | .16 | 1.24 | |||||||||||||||||||||||||||||||||||
| Class 529-A: | Six months ended 6/30/2011(5) | 28.12 | .28 | .80 | 1.08 | (.25 | ) | - | (.25 | ) | 28.95 | 3.85 | 1,446 | .69 | (6) | .69 | (6) | 1.98 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.92 | .53 | 2.22 | 2.75 | (.55 | ) | - | (.55 | ) | 28.12 | 10.77 | 1,362 | .68 | .68 | 2.05 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.93 | .50 | 5.04 | 5.54 | (.55 | ) | - | (.55 | ) | 25.92 | 27.12 | 1,173 | .73 | .73 | 2.24 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.91 | .60 | (11.92 | ) | (11.32 | ) | (.66 | ) | - | (.66 | ) | 20.93 | (34.79 | ) | 898 | .67 | .65 | 2.19 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-B: | Six months ended 6/30/2011(5) | 28.06 | .16 | .80 | .96 | (.13 | ) | - | (.13 | ) | 28.89 | 3.45 | 145 | 1.48 | (6) | 1.48 | (6) | 1.16 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.86 | .33 | 2.20 | 2.53 | (.33 | ) | - | (.33 | ) | 28.06 | 9.87 | 165 | 1.48 | 1.48 | 1.26 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.89 | .32 | 5.03 | 5.35 | (.38 | ) | - | (.38 | ) | 25.86 | 26.07 | 201 | 1.53 | 1.53 | 1.45 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.83 | .38 | (11.88 | ) | (11.50 | ) | (.44 | ) | - | (.44 | ) | 20.89 | (35.29 | ) | 169 | 1.47 | 1.45 | 1.38 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-C: | Six months ended 6/30/2011(5) | 28.06 | .17 | .80 | .97 | (.14 | ) | - | (.14 | ) | 28.89 | 3.46 | 366 | 1.48 | (6) | 1.48 | (6) | 1.19 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.86 | .33 | 2.21 | 2.54 | (.34 | ) | - | (.34 | ) | 28.06 | 9.91 | 352 | 1.47 | 1.47 | 1.26 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.89 | .32 | 5.03 | 5.35 | (.38 | ) | - | (.38 | ) | 25.86 | 26.09 | 321 | 1.52 | 1.52 | 1.45 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.84 | .38 | (11.89 | ) | (11.51 | ) | (.44 | ) | - | (.44 | ) | 20.89 | (35.31 | ) | 249 | 1.46 | 1.44 | 1.39 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-E: | Six months ended 6/30/2011(5) | $ | 28.07 | $ | .24 | $ | .79 | $ | 1.03 | $ | (.21 | ) | $ | - | $ | (.21 | ) | $ | 28.89 | 3.68 | % | $ | 59 | .97 | %(6) | .97 | %(6) | 1.70 | %(6) | ||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.87 | .46 | 2.21 | 2.67 | (.47 | ) | - | (.47 | ) | 28.07 | 10.46 | 57 | .97 | .97 | 1.76 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.89 | .43 | 5.04 | 5.47 | (.49 | ) | - | (.49 | ) | 25.87 | 26.77 | 51 | 1.02 | 1.02 | 1.96 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.85 | .52 | (11.90 | ) | (11.38 | ) | (.58 | ) | - | (.58 | ) | 20.89 | (34.98 | ) | 38 | .96 | .94 | 1.90 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-F-1: | Six months ended 6/30/2011(5) | 28.10 | .32 | .79 | �� | 1.11 | (.28 | ) | - | (.28 | ) | 28.93 | 3.97 | 32 | .47 | (6) | .47 | (6) | 2.21 | (6) | |||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.90 | .59 | 2.21 | 2.80 | (.60 | ) | - | (.60 | ) | 28.10 | 11.00 | 28 | .47 | .47 | 2.26 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.92 | .55 | 5.03 | 5.58 | (.60 | ) | - | (.60 | ) | 25.90 | 27.37 | 22 | .52 | .52 | 2.44 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.90 | .66 | (11.92 | ) | (11.26 | ) | (.72 | ) | - | (.72 | ) | 20.92 | (34.66 | ) | 15 | .46 | .44 | 2.40 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-1: | Six months ended 6/30/2011(5) | 28.02 | .18 | .80 | .98 | (.15 | ) | - | (.15 | ) | 28.85 | 3.49 | 80 | 1.41 | (6) | 1.41 | (6) | 1.25 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.83 | .35 | 2.20 | 2.55 | (.36 | ) | - | (.36 | ) | 28.02 | 9.96 | 78 | 1.41 | 1.41 | 1.32 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.87 | .34 | 5.02 | 5.36 | (.40 | ) | - | (.40 | ) | 25.83 | 26.18 | 66 | 1.44 | 1.44 | 1.52 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.81 | .40 | (11.88 | ) | (11.48 | ) | (.46 | ) | - | (.46 | ) | 20.87 | (35.25 | ) | 45 | 1.39 | 1.36 | 1.48 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-2: | Six months ended 6/30/2011(5) | 28.05 | .18 | .80 | .98 | (.15 | ) | - | (.15 | ) | 28.88 | 3.49 | 651 | 1.40 | (6) | 1.40 | (6) | 1.26 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.85 | .34 | 2.21 | 2.55 | (.35 | ) | - | (.35 | ) | 28.05 | 9.96 | 654 | 1.44 | 1.44 | 1.30 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.88 | .32 | 5.03 | 5.35 | (.38 | ) | - | (.38 | ) | 25.85 | 26.08 | 621 | 1.52 | 1.52 | 1.45 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.83 | .38 | (11.89 | ) | (11.51 | ) | (.44 | ) | - | (.44 | ) | 20.88 | (35.33 | ) | 468 | 1.48 | 1.46 | 1.37 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-3: | Six months ended 6/30/2011(5) | 28.10 | .24 | .80 | 1.04 | (.21 | ) | - | (.21 | ) | 28.93 | 3.71 | 837 | .96 | (6) | .96 | (6) | 1.70 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.90 | .46 | 2.21 | 2.67 | (.47 | ) | - | (.47 | ) | 28.10 | 10.45 | 827 | .97 | .97 | 1.77 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.92 | .44 | 5.04 | 5.48 | (.50 | ) | - | (.50 | ) | 25.90 | 26.76 | 768 | 1.00 | 1.00 | 1.97 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.88 | .53 | (11.90 | ) | (11.37 | ) | (.59 | ) | - | (.59 | ) | 20.92 | (34.94 | ) | 568 | .92 | .90 | 1.91 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-4: | Six months ended 6/30/2011(5) | 28.12 | .28 | .79 | 1.07 | (.25 | ) | - | (.25 | ) | 28.94 | 3.84 | 706 | .65 | (6) | .65 | (6) | 2.01 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.91 | .54 | 2.22 | 2.76 | (.55 | ) | - | (.55 | ) | 28.12 | 10.82 | 681 | .65 | .65 | 2.08 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.93 | .50 | 5.05 | 5.55 | (.57 | ) | - | (.57 | ) | 25.91 | 27.16 | 624 | .68 | .68 | 2.21 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.90 | .61 | (11.91 | ) | (11.30 | ) | (.67 | ) | - | (.67 | ) | 20.93 | (34.78 | ) | 304 | .65 | .62 | 2.21 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-5: | Six months ended 6/30/2011(5) | 28.15 | .34 | .79 | 1.13 | (.30 | ) | - | (.30 | ) | 28.98 | 4.02 | 937 | .35 | (6) | .35 | (6) | 2.31 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.94 | .61 | 2.23 | 2.84 | (.63 | ) | - | (.63 | ) | 28.15 | 11.14 | 895 | .35 | .35 | 2.33 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2009 | 20.95 | .58 | 5.04 | 5.62 | (.63 | ) | - | (.63 | ) | 25.94 | 27.57 | 2,123 | .38 | .38 | 2.62 | ||||||||||||||||||||||||||||||||||||||
| Year ended 12/31/2008 | 32.95 | .69 | (11.94 | ) | (11.25 | ) | (.75 | ) | - | (.75 | ) | 20.95 | (34.60 | ) | 1,861 | .35 | .33 | 2.52 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-6: | Six months ended 6/30/2011(5) | 28.15 | .34 | .79 | 1.13 | (.30 | ) | - | (.30 | ) | 28.98 | 4.05 | 2,607 | .30 | (6) | .30 | (6) | 2.37 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2010 | 25.95 | .63 | 2.21 | 2.84 | (.64 | ) | - | (.64 | ) | 28.15 | 11.16 | 2,330 | .30 | .30 | 2.45 | ||||||||||||||||||||||||||||||||||||||
| Period from 5/1/2009 to 12/31/2009 | 20.70 | .40 | 5.30 | 5.70 | (.45 | ) | - | (.45 | ) | 25.95 | 27.76 | 534 | .33 | (6) | .33 | (6) | 2.52 | (6) | |||||||||||||||||||||||||||||||||||
Six months ended June 30, | Year ended December 31 | |||||||||||||||||||||||
2011(5) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
| Portfolio turnover rate for all share classes | 13 | % | 23 | % | 28 | % | 31 | % | 22 | % | 20 | % | ||||||||||||
(1)Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year. | |||||||||||||
(2)Based on average shares outstanding. | |||||||||||||
(3)Total returns exclude any applicable sales charges, including contingent deferred sales charges. | |||||||||||||
(4)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes. | |||||||||||||
(5)Unaudited. | |||||||||||||
(6)Annualized. | |||||||||||||
| See Notes to Financial Statements | |||||||||||||
Expense example
unaudited
As a shareholder of the fund, you incur two types of costs: (1) transaction costs, such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads), and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period (January 1, 2011, through June 30, 2011).
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Notes:
There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually), that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2 and 529-F-1 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated <above/on the previous page>. In addition, your ending account value would be lower by the amount of these fees.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 1/1/2011 | Ending account value 6/30/2011 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
| Class A -- actual return | $ | 1,000.00 | $ | 1,038.86 | $ | 3.08 | .61 | % | ||||||||
| Class A -- assumed 5% return | 1,000.00 | 1,021.77 | 3.06 | .61 | ||||||||||||
| Class B -- actual return | 1,000.00 | 1,034.97 | 6.96 | 1.38 | ||||||||||||
| Class B -- assumed 5% return | 1,000.00 | 1,017.95 | 6.90 | 1.38 | ||||||||||||
| Class C -- actual return | 1,000.00 | 1,034.90 | 7.16 | 1.42 | ||||||||||||
| Class C -- assumed 5% return | 1,000.00 | 1,017.75 | 7.10 | 1.42 | ||||||||||||
| Class F-1 -- actual return | 1,000.00 | 1,038.67 | 3.34 | .66 | ||||||||||||
| Class F-1 -- assumed 5% return | 1,000.00 | 1,021.52 | 3.31 | .66 | ||||||||||||
| Class F-2 -- actual return | 1,000.00 | 1,039.95 | 2.07 | .41 | ||||||||||||
| Class F-2 -- assumed 5% return | 1,000.00 | 1,022.76 | 2.06 | .41 | ||||||||||||
| Class 529-A -- actual return | 1,000.00 | 1,038.52 | 3.49 | .69 | ||||||||||||
| Class 529-A -- assumed 5% return | 1,000.00 | 1,021.37 | 3.46 | .69 | ||||||||||||
| Class 529-B -- actual return | 1,000.00 | 1,034.46 | 7.47 | 1.48 | ||||||||||||
| Class 529-B -- assumed 5% return | 1,000.00 | 1,017.46 | 7.40 | 1.48 | ||||||||||||
| Class 529-C -- actual return | 1,000.00 | 1,034.55 | 7.47 | 1.48 | ||||||||||||
| Class 529-C -- assumed 5% return | 1,000.00 | 1,017.46 | 7.40 | 1.48 | ||||||||||||
| Class 529-E -- actual return | 1,000.00 | 1,036.78 | 4.90 | .97 | ||||||||||||
| Class 529-E -- assumed 5% return | 1,000.00 | 1,019.98 | 4.86 | .97 | ||||||||||||
| Class 529-F-1 -- actual return | 1,000.00 | 1,039.72 | 2.38 | .47 | ||||||||||||
| Class 529-F-1 -- assumed 5% return | 1,000.00 | 1,022.46 | 2.36 | .47 | ||||||||||||
| Class R-1 -- actual return | 1,000.00 | 1,034.91 | 7.11 | 1.41 | ||||||||||||
| Class R-1 -- assumed 5% return | 1,000.00 | 1,017.80 | 7.05 | 1.41 | ||||||||||||
| Class R-2 -- actual return | 1,000.00 | 1,034.94 | 7.06 | 1.40 | ||||||||||||
| Class R-2 -- assumed 5% return | 1,000.00 | 1,017.85 | 7.00 | 1.40 | ||||||||||||
| Class R-3 -- actual return | 1,000.00 | 1,037.11 | 4.85 | .96 | ||||||||||||
| Class R-3 -- assumed 5% return | 1,000.00 | 1,020.03 | 4.81 | .96 | ||||||||||||
| Class R-4 -- actual return | 1,000.00 | 1,038.37 | 3.29 | .65 | ||||||||||||
| Class R-4 -- assumed 5% return | 1,000.00 | 1,021.57 | 3.26 | .65 | ||||||||||||
| Class R-5 -- actual return | 1,000.00 | 1,040.18 | 1.77 | .35 | ||||||||||||
| Class R-5 -- assumed 5% return | 1,000.00 | 1,023.06 | 1.76 | .35 | ||||||||||||
| Class R-6 -- actual return | 1,000.00 | 1,040.47 | 1.52 | .30 | ||||||||||||
| Class R-6 -- assumed 5% return | 1,000.00 | 1,023.31 | 1.51 | .30 | ||||||||||||
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period). | ||||||||||||||||
Approval of Investment Advisory and Service Agreement
The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through March 31, 2012. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.
In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.
1. Nature, extent and quality of services
The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.
2. Investment results
The board and the committee considered the investment results of the fund in light of its objective of pursuing long-term growth of capital and income. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices, in each case as available at the time of the related board and committee meetings. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.
3. Advisory fees and total expenses
The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by clients of an affiliate of CRMC. They noted that, to the extent there were differences between the advisory fees paid by the fund and the advisory fees paid by those clients, the differences appropriately reflected the investment, operational and regulatory differences between advising the fund and the other clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.
4. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.
Other share class results
unaudited
Classes B, C, F and 529
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.
| Average annual total returns for periods ended June 30, 2011: | ||||||||||||
| 1 year | 5 years | 10 years1/ Life of class | ||||||||||
Class B shares2 | ||||||||||||
| Reflecting applicable contingent deferred sales charge | ||||||||||||
| (CDSC), maximum of 5%, payable only if shares | ||||||||||||
| are sold within six years of purchase | 20.23 | % | 1.00 | % | 3.07 | % | ||||||
| Not reflecting CDSC | 25.23 | 1.33 | 3.07 | |||||||||
| Class C shares | ||||||||||||
| Reflecting CDSC, maximum of 1%, payable only if shares | ||||||||||||
| are sold within one year of purchase | 24.18 | 1.29 | 2.85 | |||||||||
| Not reflecting CDSC | 25.18 | 1.29 | 2.85 | |||||||||
Class F-1 shares3 | ||||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||||
| sponsoring firm | 26.14 | 2.09 | 3.65 | |||||||||
Class F-2 shares3 — first sold 8/1/08 | ||||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||||
| sponsoring firm | 26.42 | — | 3.28 | |||||||||
Class 529-A shares4 — first sold 2/15/02 | ||||||||||||
| Reflecting 5.75% maximum sales charge | 18.79 | 0.84 | 3.84 | |||||||||
| Not reflecting maximum sales charge | 26.04 | 2.04 | 4.50 | |||||||||
Class 529-B shares2,4 — first sold 2/15/02 | ||||||||||||
| Reflecting applicable CDSC, maximum of 5%, payable | ||||||||||||
| only if shares are sold within six years of purchase | 20.03 | 0.88 | 3.75 | |||||||||
| Not reflecting CDSC | 25.03 | 1.22 | 3.75 | |||||||||
Class 529-C shares4 — first sold 2/19/02 | ||||||||||||
| Reflecting CDSC, maximum of 1%, payable only if shares | ||||||||||||
| are sold within one year of purchase | 24.08 | 1.23 | 3.81 | |||||||||
| Not reflecting CDSC | 25.08 | 1.23 | 3.81 | |||||||||
Class 529-E shares3,4 — first sold 3/1/02 | 25.71 | 1.74 | 3.94 | |||||||||
Class 529-F-1 shares3,4 — first sold 9/16/02 | ||||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||||
| sponsoring firm | 26.34 | 2.25 | 6.53 | |||||||||
1Applicable to Classes B, C and F-1 shares only. All other share classes reflect results for the life of the class. |
2These shares are not available for purchase. |
3These shares are sold without any initial or contingent deferred sales charge. |
4Results shown do not reflect the $10 account setup fee and an annual $10 account maintenance fee. |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 20 to 23 for details that include expense ratios for all share classes.
For information regarding the differences among the various share classes, refer to the fund’s prospectus.
Offices
Offices of the fund and of the investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
6455 Irvine Center Drive
Irvine, CA 92618
Transfer agent for shareholder accounts
American Funds Service Company
(Write to the address near you.)
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Counsel
O’Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
Independent registered public accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on the American Funds website.
A complete June 30, 2011, portfolio of The Investment Company of America’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
The Investment Company of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. Additional information regarding the operation of the Public Reference Room may be obtained by calling the SEC’s Office of Investor Education and Advocacy at 800/SEC-0330. Additionally, the list of portfolio holdings is available by calling AFS.
This report is for the information of shareholders of The Investment Company of America, but it also may be used as sales literature when preceded or accompanied by the current prospectus or summary prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2011, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
| | |
What makes American Funds different?
For 80 years, we have followed a consistent philosophy to benefit our investors. Our 33 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have attracted over 50 million shareholder accounts.
Our unique combination of strengths includes these five factors:
| •A long-term, value-oriented approach |
We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.
| •An extensive global research effort |
Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.
| •The multiple portfolio counselor system |
Our unique approach to portfolio management, developed more than 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.
| •Experienced investment professionals |
American Funds portfolio counselors have an average of 27 years of investment experience, providing a depth of knowledge and broad perspective that few organizations have.
| •A commitment to low management fees |
The American Funds provide exceptional value for shareholders, with management fees that are among the lowest in the mutual fund industry.
American Funds span a range of investment objectives
| •Growth funds |
AMCAP Fund® |
EuroPacific Growth Fund® |
The Growth Fund of America® |
The New Economy Fund® |
New Perspective Fund® |
New World Fund® |
SMALLCAP World Fund® |
| •Growth-and-income funds |
American Mutual Fund® |
Capital World Growth and Income FundSM |
Fundamental InvestorsSM |
International Growth and Income FundSM |
>The Investment Company of America® |
Washington Mutual Investors FundSM |
| •Equity-income funds |
Capital Income Builder® |
The Income Fund of America® |
| •Balanced funds |
American Balanced Fund® |
American Funds Global Balanced FundSM |
| •Bond funds |
American Funds Mortgage FundSM |
American High-Income TrustSM |
The Bond Fund of AmericaSM |
Capital World Bond Fund® |
Intermediate Bond Fund of America® |
Short-Term Bond Fund of AmericaSM |
U.S. Government Securities FundSM |
| •Tax-exempt bond funds |
American Funds Short-Term Tax-Exempt Bond FundSM |
American High-Income Municipal Bond Fund® |
Limited Term Tax-Exempt Bond Fund of AmericaSM |
The Tax-Exempt Bond Fund of America® |
| State-specific tax-exempt funds |
American Funds Tax-Exempt Fund of New YorkSM |
The Tax-Exempt Fund of California® |
The Tax-Exempt Fund of Maryland® |
The Tax-Exempt Fund of Virginia® |
| •Money market fund |
American Funds Money Market Fund® |
•American Funds Target Date Retirement Series® |
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGESR-904-0811P
Litho in USA BBC/RRD/8087-S28725
Printed on paper containing 10% post-consumer waste
Printed with inks containing soy and/or vegetable oil
ITEM 2 – Code of Ethics
Not applicable for filing of semi-annual reports to shareholders.
ITEM 3 – Audit Committee Financial Expert
Not applicable for filing of semi-annual reports to shareholders.
ITEM 4 – Principal Accountant Fees and Services
Not applicable for filing of semi-annual reports to shareholders.
ITEM 5 – Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 – Schedule of Investments
The Investment Company of America®
Investment portfolio
June 30, 2011
unaudited
| Common stocks — 92.83% | Shares | Value (000) | ||||||
| ENERGY — 12.12% | ||||||||
| Apache Corp. | 2,740,000 | $ | 338,089 | |||||
| Baker Hughes Inc. | 5,135,000 | 372,596 | ||||||
BG Group PLC1 | 1,850,000 | 41,987 | ||||||
BP PLC1 | 57,790,850 | 425,803 | ||||||
| BP PLC (ADR) | 3,146,953 | 139,379 | ||||||
| Canadian Natural Resources, Ltd. | 2,185,000 | 91,596 | ||||||
| Chevron Corp. | 6,480,000 | 666,403 | ||||||
| ConocoPhillips | 18,129,140 | 1,363,130 | ||||||
| Devon Energy Corp. | 2,690,000 | 211,999 | ||||||
| Diamond Offshore Drilling, Inc. | 2,025,000 | 142,580 | ||||||
Eni SpA1 | 4,640,000 | 109,998 | ||||||
| Eni SpA (ADR) | 770,000 | 36,613 | ||||||
| EOG Resources, Inc. | 3,932,200 | 411,112 | ||||||
| Royal Dutch Shell PLC, Class A (ADR) | 16,470,000 | 1,171,511 | ||||||
Royal Dutch Shell PLC, Class B1 | 13,068,265 | 466,488 | ||||||
| Royal Dutch Shell PLC, Class B (ADR) | 2,925,498 | 209,904 | ||||||
| Schlumberger Ltd. | 12,724,999 | 1,099,440 | ||||||
TOTAL SA1 | 3,000,000 | 173,508 | ||||||
| 7,472,136 | ||||||||
| MATERIALS — 3.54% | ||||||||
Akzo Nobel NV1 | 425,000 | 26,810 | ||||||
ArcelorMittal1 | 7,540,000 | 262,371 | ||||||
| Barrick Gold Corp. | 4,975,000 | 225,318 | ||||||
| Dow Chemical Co. | 32,642,500 | 1,175,130 | ||||||
| MeadWestvaco Corp. | 4,085,000 | 136,071 | ||||||
POSCO1 | 136,000 | 59,073 | ||||||
| Praxair, Inc. | 999,500 | 108,336 | ||||||
| United States Steel Corp. | 4,160,000 | 191,526 | ||||||
| 2,184,635 | ||||||||
| INDUSTRIALS — 11.19% | ||||||||
| 3M Co. | 4,834,265 | 458,530 | ||||||
| CSX Corp. | 29,493,000 | 773,306 | ||||||
| Danaher Corp. | 1,730,000 | 91,673 | ||||||
| Deere & Co. | 2,800,000 | 230,860 | ||||||
| General Dynamics Corp. | 11,438,300 | 852,382 | ||||||
| General Electric Co. | 13,875,000 | 261,683 | ||||||
| Illinois Tool Works Inc. | 6,400,000 | 361,536 | ||||||
| Lockheed Martin Corp. | 2,790,820 | 225,973 | ||||||
| Masco Corp. | 14,358,069 | 172,728 | ||||||
| Norfolk Southern Corp. | 580,000 | 43,459 | ||||||
| Pitney Bowes Inc. | 350,551 | 8,059 | ||||||
| R.R. Donnelley & Sons Co. | 6,100,000 | 119,621 | ||||||
| Raytheon Co. | 2,399,800 | 119,630 | ||||||
| Republic Services, Inc. | 5,500,000 | 169,675 | ||||||
Siemens AG1 | 3,370,000 | 462,718 | ||||||
| Southwest Airlines Co. | 13,000,000 | 148,460 | ||||||
| Tyco International Ltd. | 2,115,000 | 104,544 | ||||||
| Union Pacific Corp. | 9,357,500 | 976,923 | ||||||
| United Parcel Service, Inc., Class B | 2,250,000 | 164,093 | ||||||
| United Technologies Corp. | 9,401,852 | 832,158 | ||||||
| Waste Management, Inc. | 8,600,700 | 320,548 | ||||||
| 6,898,559 | ||||||||
| CONSUMER DISCRETIONARY — 10.94% | ||||||||
| Best Buy Co., Inc. | 4,500,000 | 141,345 | ||||||
| Carnival Corp., units | 3,600,000 | 135,468 | ||||||
| Comcast Corp., Class A | 23,175,271 | 587,261 | ||||||
| Comcast Corp., Class A, special nonvoting shares | 3,000,000 | 72,690 | ||||||
Daimler AG1 | 960,000 | 72,250 | ||||||
DIRECTV, Class A2 | 6,500,000 | 330,330 | ||||||
General Motors Co.2 | 18,309,900 | 555,889 | ||||||
| Harley-Davidson, Inc. | 3,620,000 | 148,311 | ||||||
| Home Depot, Inc. | 25,300,000 | 916,366 | ||||||
Honda Motor Co., Ltd.1 | 5,550,000 | 213,917 | ||||||
| Johnson Controls, Inc. | 7,422,400 | 309,217 | ||||||
| Kohl’s Corp. | 6,744,000 | 337,267 | ||||||
| Limited Brands, Inc. | 5,042,743 | 193,893 | ||||||
| Lowe’s Companies, Inc. | 10,500,000 | 244,755 | ||||||
| McDonald’s Corp. | 7,465,000 | 629,449 | ||||||
| News Corp., Class A | 14,440,000 | 255,588 | ||||||
| NIKE, Inc., Class B | 3,578,100 | 321,957 | ||||||
| Staples, Inc. | 17,272,900 | 272,912 | ||||||
| Target Corp. | 2,800,000 | 131,348 | ||||||
| Time Warner Cable Inc. | 4,812,727 | 375,585 | ||||||
| Time Warner Inc. | 12,799,000 | 465,500 | ||||||
Toyota Motor Corp.1 | 750,000 | 31,577 | ||||||
| 6,742,875 | ||||||||
| CONSUMER STAPLES — 10.72% | ||||||||
| Altria Group, Inc. | 19,925,000 | 526,219 | ||||||
| Avon Products, Inc. | 14,082,000 | 394,296 | ||||||
| Coca-Cola Co. | 5,303,300 | 356,859 | ||||||
| Colgate-Palmolive Co. | 1,500,000 | 131,115 | ||||||
| ConAgra Foods, Inc. | 5,521,100 | 142,500 | ||||||
| CVS/Caremark Corp. | 11,000,000 | 413,380 | ||||||
| General Mills, Inc. | 3,920,000 | 145,902 | ||||||
| H.J. Heinz Co. | 2,750,000 | 146,520 | ||||||
| Kellogg Co. | 1,000,000 | 55,320 | ||||||
| Kimberly-Clark Corp. | 1,500,000 | 99,840 | ||||||
| Kraft Foods Inc., Class A | 22,415,868 | 789,711 | ||||||
| Molson Coors Brewing Co., Class B | 7,176,344 | 321,070 | ||||||
| PepsiCo, Inc. | 10,641,500 | 749,481 | ||||||
| Philip Morris International Inc. | 32,831,000 | 2,192,126 | ||||||
| Reynolds American Inc. | 1,333,332 | 49,400 | ||||||
| Sara Lee Corp. | 5,000,000 | 94,950 | ||||||
| 6,608,689 | ||||||||
| HEALTH CARE — 6.60% | ||||||||
| Abbott Laboratories | 17,335,000 | 912,168 | ||||||
Amgen Inc.2 | 7,870,792 | 459,261 | ||||||
Bayer AG1 | 950,000 | 76,376 | ||||||
Boston Scientific Corp.2 | 47,632,724 | 329,142 | ||||||
| Eli Lilly and Co. | 5,070,000 | 190,277 | ||||||
| Johnson & Johnson | 600,000 | 39,912 | ||||||
Medco Health Solutions, Inc.2 | 3,250,000 | 183,690 | ||||||
| Medtronic, Inc. | 7,112,500 | 274,045 | ||||||
| Merck & Co., Inc. | 36,771,429 | 1,297,664 | ||||||
Novartis AG1 | 663,000 | 40,614 | ||||||
| Novartis AG (ADR) | 921,556 | 56,316 | ||||||
| Pfizer Inc | 4,025,000 | 82,915 | ||||||
Roche Holding AG1 | 760,000 | 127,147 | ||||||
| 4,069,527 | ||||||||
| FINANCIALS — 7.46% | ||||||||
American International Group, Inc.2 | 316,998 | 9,294 | ||||||
Banco Santander, SA1 | 25,549,941 | 294,807 | ||||||
| Banco Santander, SA (ADR) | 3,805,087 | 43,797 | ||||||
| Bank of America Corp. | 66,440,935 | 728,193 | ||||||
| Bank of New York Mellon Corp. | 8,275,012 | 212,006 | ||||||
| BB&T Corp. | 4,825,000 | 129,503 | ||||||
| Capital One Financial Corp. | 6,000,000 | 310,020 | ||||||
| Citigroup Inc. | 13,880,000 | 577,963 | ||||||
| Discover Financial Services | 1,973,400 | 52,788 | ||||||
Genworth Financial, Inc., Class A2 | 12,844,101 | 132,037 | ||||||
| HSBC Holdings PLC (ADR) | 1,529,416 | 75,890 | ||||||
HSBC Holdings PLC (United Kingdom)1 | 4,869,240 | 48,305 | ||||||
| JPMorgan Chase & Co. | 26,065,000 | 1,067,101 | ||||||
Société Générale1 | 2,632,877 | 156,055 | ||||||
| State Street Corp. | 2,008,700 | 90,572 | ||||||
| Wells Fargo & Co. | 23,910,000 | 670,915 | ||||||
| 4,599,246 | ||||||||
| INFORMATION TECHNOLOGY — 19.06% | ||||||||
| Accenture PLC, Class A | 3,381,200 | 204,292 | ||||||
| Analog Devices, Inc. | 3,846,100 | 150,536 | ||||||
Apple Inc.2 | 2,080,000 | 698,194 | ||||||
| Applied Materials, Inc. | 12,495,000 | 162,560 | ||||||
| Automatic Data Processing, Inc. | 4,023,043 | 211,934 | ||||||
Canon, Inc.1 | 770,000 | 36,719 | ||||||
| Cisco Systems, Inc. | 11,420,400 | 178,272 | ||||||
| Corning Inc. | 25,944,820 | 470,898 | ||||||
Flextronics International Ltd.2 | 14,000,000 | 89,880 | ||||||
Google Inc., Class A2 | 1,107,030 | 560,578 | ||||||
| Hewlett-Packard Co. | 22,040,000 | 802,256 | ||||||
| Intel Corp. | 38,629,399 | 856,027 | ||||||
| International Business Machines Corp. | 3,235,000 | 554,964 | ||||||
| KLA-Tencor Corp. | 6,726,900 | 272,305 | ||||||
| Linear Technology Corp. | 8,320,000 | 274,726 | ||||||
| MasterCard Inc., Class A | 783,900 | 236,220 | ||||||
| Maxim Integrated Products, Inc. | 2,757,700 | 70,487 | ||||||
| Microsoft Corp. | 91,435,800 | 2,377,331 | ||||||
Nokia Corp.1 | 63,233,329 | 408,399 | ||||||
| Nokia Corp. (ADR) | 5,652,400 | 36,288 | ||||||
| Oracle Corp. | 30,315,000 | 997,667 | ||||||
| QUALCOMM Inc. | 9,612,000 | 545,865 | ||||||
Telefonaktiebolaget LM Ericsson, Class B1 | 12,750,000 | 183,377 | ||||||
| Texas Instruments Inc. | 22,825,000 | 749,345 | ||||||
| Xilinx, Inc. | 5,254,500 | 191,632 | ||||||
Yahoo! Inc.2 | 28,491,520 | 428,512 | ||||||
| 11,749,264 | ||||||||
| TELECOMMUNICATION SERVICES — 5.43% | ||||||||
| AT&T Inc. | 90,216,900 | 2,833,713 | ||||||
| CenturyLink, Inc. | 8,286,720 | 335,032 | ||||||
France Télécom SA1 | 6,220,000 | 132,320 | ||||||
| Verizon Communications Inc. | 1,250,000 | 46,538 | ||||||
| 3,347,603 | ||||||||
| UTILITIES — 3.22% | ||||||||
| Dominion Resources, Inc. | 10,623,824 | 512,812 | ||||||
| Exelon Corp. | 7,610,600 | 326,038 | ||||||
| FirstEnergy Corp. | 4,443,500 | 196,181 | ||||||
GDF SUEZ1 | 16,595,324 | 607,337 | ||||||
| NextEra Energy, Inc. | 300,000 | 17,238 | ||||||
| Public Service Enterprise Group Inc. | 10,000,000 | 326,400 | ||||||
| 1,986,006 | ||||||||
| MISCELLANEOUS — 2.55% | ||||||||
| Other common stocks in initial period of acquisition | 1,573,290 | |||||||
| Total common stocks (cost: $45,096,335,000) | 57,231,830 | |||||||
| Principal amount | ||||||||
| Preferred securities — 0.19% | (000 | ) | ||||||
| FINANCIALS — 0.19% | ||||||||
JPMorgan Chase & Co., Series I, 7.90%3 | $ | 62,936 | 67,829 | |||||
Société Générale 5.922%3,4 | 24,955 | 21,611 | ||||||
Wells Fargo & Co., Series K, 7.98%3 | 23,667 | 25,679 | ||||||
| Total preferred securities (cost: $100,197,000) | 115,119 | |||||||
| Warrants — 0.00% | Shares | |||||||
| FINANCIALS — 0.00% | ||||||||
Washington Mutual, Inc., warrants, expire 20131,2 | 3,071,428 | — | ||||||
| MISCELLANEOUS — 0.00% | ||||||||
| Other warrants in initial period of acquisition | 773 | |||||||
| Total warrants (cost: $13,004,000) | 773 | |||||||
| Shares or | ||||||||
| Convertible securities — 0.68% | principal amount | |||||||
| MATERIALS — 0.11% | ||||||||
| ArcelorMittal 5.00% convertible debenture 2014 | $ | 48,620,000 | 67,400 | |||||
| CONSUMER DISCRETIONARY — 0.42% | ||||||||
| General Motors Co., Series B, 4.75% convertible preferred 2013 | 5,188,150 | 252,870 | ||||||
Johnson Controls, Inc. 11.50% convertible preferred 2012, units1 | 35,000 | 7,083 | ||||||
| 259,953 | ||||||||
| FINANCIALS — 0.02% | ||||||||
| American International Group, Inc. 8.50% convertible preferred 2011, units | 4,211,826 | 7,329 | ||||||
Fannie Mae 5.375% convertible preferred 20322 | 820 | 5,740 | ||||||
| 13,069 | ||||||||
| UTILITIES — 0.13% | ||||||||
| PPL Corp. 9.50% convertible preferred 2013, units | 1,461,400 | 81,692 | ||||||
| Total convertible securities (cost: $595,424,000) | 422,114 | |||||||
| Principal amount | ||||||||
| Bonds & notes — 0.63% | (000 | ) | ||||||
| ENERGY — 0.01% | ||||||||
| Chevron Corp. 4.95% 2019 | $ | 5,000 | 5,596 | |||||
| MATERIALS — 0.01% | ||||||||
| Rio Tinto Finance (USA) Ltd. 9.00% 2019 | 3,780 | 5,016 | ||||||
| INDUSTRIALS — 0.06% | ||||||||
| Burlington Northern Santa Fe LLC 5.75% 2018 | 5,000 | 5,677 | ||||||
| CSX Corp. 6.25% 2015 | 5,000 | 5,730 | ||||||
| Honeywell International Inc. 5.00% 2019 | 4,090 | 4,504 | ||||||
| Norfolk Southern Corp. 5.75% 2018 | 2,500 | 2,834 | ||||||
| Raytheon Co. 4.40% 2020 | 3,055 | 3,167 | ||||||
| Union Pacific Corp. 6.125% 2020 | 5,000 | 5,867 | ||||||
| United Technologies Corp. 4.50% 2020 | 5,475 | 5,807 | ||||||
| 33,586 | ||||||||
| CONSUMER DISCRETIONARY — 0.03% | ||||||||
| Comcast Corp. 6.30% 2017 | 5,120 | 5,943 | ||||||
| Kohl’s Corp. 6.25% 2017 | 3,500 | 4,112 | ||||||
| News America Inc. 6.90% 2019 | 5,000 | 5,828 | ||||||
| 15,883 | ||||||||
| CONSUMER STAPLES — 0.02% | ||||||||
British American Tobacco International Finance PLC 9.50% 20184 | 5,000 | 6,699 | ||||||
| Kraft Foods Inc. 2.625% 2013 | 2,555 | 2,630 | ||||||
| PepsiCo, Inc. 2.50% 2016 | 2,500 | 2,529 | ||||||
Tesco PLC 5.50% 20174 | 2,506 | 2,838 | ||||||
| 14,696 | ||||||||
| HEALTH CARE — 0.03% | ||||||||
| Abbott Laboratories 5.125% 2019 | 2,500 | 2,755 | ||||||
| Boston Scientific Corp. 5.125% 2017 | 1,250 | 1,323 | ||||||
| Boston Scientific Corp. 6.00% 2020 | 250 | 271 | ||||||
| Cardinal Health, Inc. 5.80% 2016 | 2,905 | 3,293 | ||||||
| Novartis Securities Investment Ltd. 5.125% 2019 | 2,500 | 2,781 | ||||||
| Pfizer Inc 6.20% 2019 | 2,500 | 2,929 | ||||||
Roche Holdings Inc. 6.00% 20194 | 2,500 | 2,885 | ||||||
| WellPoint, Inc. 7.00% 2019 | 4,200 | 5,024 | ||||||
| 21,261 | ||||||||
| FINANCIALS — 0.09% | ||||||||
| Boston Properties, Inc. 5.875% 2019 | 5,000 | 5,487 | ||||||
| Citigroup Inc. 4.587% 2015 | 1,387 | 1,460 | ||||||
| Northern Trust Corp. 4.625% 2014 | 2,650 | 2,896 | ||||||
| Regions Bank 7.50% 2018 | 4,350 | 4,555 | ||||||
| Regions Financial Corp. 6.375% 2012 | 23,540 | 24,055 | ||||||
| Regions Financial Corp. 7.75% 2014 | 13,082 | 13,871 | ||||||
| Simon Property Group, LP 4.20% 2015 | 2,600 | 2,768 | ||||||
| SLM Corp., Series A, 5.125% 2012 | 1,000 | 1,026 | ||||||
| 56,118 | ||||||||
| INFORMATION TECHNOLOGY — 0.01% | ||||||||
| Cisco Systems, Inc. 4.95% 2019 | 5,000 | 5,438 | ||||||
| TELECOMMUNICATION SERVICES — 0.01% | ||||||||
| AT&T Inc. 4.85% 2014 | 5,000 | 5,434 | ||||||
| Vodafone Group PLC 5.625% 2017 | 2,500 | 2,805 | ||||||
| 8,239 | ||||||||
MORTGAGE-BACKED OBLIGATIONS5 — 0.08% | ||||||||
| Fannie Mae 3.50% 2025 | 5,679 | 5,793 | ||||||
| Fannie Mae 4.00% 2041 | 14,797 | 14,837 | ||||||
| Fannie Mae 4.50% 2041 | 10,076 | 10,444 | ||||||
| Fannie Mae 5.00% 2041 | 10,000 | 10,627 | ||||||
| Fannie Mae 6.00% 2038 | 5,224 | 5,740 | ||||||
| 47,441 | ||||||||
| BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 0.28% | ||||||||
| Federal Home Loan Bank 3.625% 2013 | 50,000 | 53,330 | ||||||
| Freddie Mac 2.125% 2012 | 10,000 | 10,199 | ||||||
| Freddie Mac 5.00% 2014 | 10,000 | 11,185 | ||||||
| U.S. Treasury 1.25% 2014 | 10,000 | 10,148 | ||||||
| U.S. Treasury 1.25% 2015 | 8,000 | 7,949 | ||||||
| U.S. Treasury 4.00% 2018 | 10,000 | 11,021 | ||||||
| U.S. Treasury 4.125% 2015 | 10,000 | 11,098 | ||||||
| U.S. Treasury 4.625% 2016 | 20,000 | 22,829 | ||||||
| U.S. Treasury 6.125% 2027 | 5,000 | 6,324 | ||||||
| U.S. Treasury 8.00% 2021 | 20,000 | 28,498 | ||||||
| 172,581 | ||||||||
| Total bonds & notes (cost: $363,278,000) | 385,855 | |||||||
| Short-term securities — 5.80% | ||||||||
Abbott Laboratories 0.13% due 8/9/20114 | 40,000 | 39,996 | ||||||
| Ciesco LLC 0.19%–0.20% due 8/15–8/23/2011 | 52,800 | 52,791 | ||||||
Coca-Cola Co. 0.12%–0.24% due 7/8–9/14/20114 | 242,786 | 242,759 | ||||||
| Fannie Mae 0.102%–0.321% due 8/1/2011–1/9/2012 | 772,886 | 772,713 | ||||||
| Federal Farm Credit Banks 0.11%–0.24% due 8/18–11/8/2011 | 84,500 | 84,485 | ||||||
| Federal Home Loan Bank 0.045%–0.331% due 8/4/2011–2/23/2012 | 500,900 | 500,687 | ||||||
| Freddie Mac 0.10%–0.301% due 7/19–12/19/2011 | 663,493 | 663,360 | ||||||
| General Electric Capital Corp. 0.13% due 7/13/2011 | 57,500 | 57,497 | ||||||
| General Electric Capital Services, Inc. 0.16% due 8/10/2011 | 123,800 | 123,783 | ||||||
Hewlett-Packard Co. 0.09% due 7/18/20114 | 50,000 | 49,998 | ||||||
Johnson & Johnson 0.19% due 7/14/20114 | 46,000 | 45,997 | ||||||
Jupiter Securitization Co., LLC 0.13%–0.20% due 7/8–7/28/20114 | 139,100 | 139,091 | ||||||
NetJets Inc. 0.15% due 7/12/20114 | 54,800 | 54,797 | ||||||
PepsiCo Inc. 0.09%–0.11% due 7/18–9/2/20114 | 52,000 | 51,995 | ||||||
Private Export Funding Corp. 0.13%–0.18% due 8/15–11/15/20114 | 80,000 | 79,972 | ||||||
Procter & Gamble International Funding S.C.A. 0.08% due 7/15/20114 | 33,250 | 33,249 | ||||||
Straight-A Funding LLC 0.18% due 8/3/20114 | 50,000 | 49,993 | ||||||
| U.S. Treasury Bills 0.153%–0.278% due 7/7/2011–1/12/2012 | 456,500 | 456,452 | ||||||
Variable Funding Capital Company LLC 0.15% due 7/22/20114 | 30,000 | 29,997 | ||||||
Wal-Mart Stores, Inc. 0.08% due 7/26/20114 | 46,300 | 46,297 | ||||||
| Total short-term securities (cost: $3,575,150,000) | 3,575,909 | |||||||
| Total investment securities (cost: $49,743,388,000) | 61,731,600 | |||||||
| Other assets less liabilities | (78,260 | ) | ||||||
| Net assets | $ | 61,653,340 | ||||||
As permitted by U.S. Securities Exchange Commission regulations, “Miscellaneous” securities include holdings in their first year of acquisition that have not previously been publicly disclosed.
1Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $5,068,257,000, which represented 8.22% of the net assets of the fund. This amount includes $5,061,174,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading.
2Security did not produce income during the last 12 months.
3Coupon rate may change periodically.
4Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $898,174,000, which represented 1.46% of the net assets of the fund.
5Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
Key to abbreviation
ADR = American Depositary Receipts
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
MFGEFP-904-0811O-S29480
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 – Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of trustees. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating and governance committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating and governance committee.
ITEM 11 – Controls and Procedures
| (a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
| (b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 – Exhibits
| (a)(1) | Not applicable for filing of semi-annual reports to shareholders. |
| (a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| THE INVESTMENT COMPANY OF AMERICA | |
By /s/ James B. Lovelace | |
James B. Lovelace, Vice Chairman and Principal Executive Officer | |
| Date: August 31, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ James B. Lovelace |
James B. Lovelace, Vice Chairman and Principal Executive Officer |
| Date: August 31, 2011 |
By /s/ Brian D. Bullard |
Brian D. Bullard, Treasurer and Principal Financial Officer |
| Date: August 31, 2011 |