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, 2012
Vincent P. Corti
The Investment Company of America
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 rolled hay bales in a field]
Semi-annual report for the six months ended June 30, 2012
Semi-annual report for the six months ended June 30, 2012
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 more than 40 funds offered by American Funds, which is one of the nation’s largest mutual fund families. For more than 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, 2012: | ||||||||||||
| 1 year | 5 years | 10 years | ||||||||||
| Class A shares | ||||||||||||
| Reflecting 5.75% maximum sales charge | –3.40 | % | –1.97 | % | 4.48 | % | ||||||
The total annual fund operating expense ratio was 0.61% for Class A shares as of the prospectus dated March 1, 2012.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect fee waivers, without which results would have been lower. Visit americanfunds.com for more information.
The fund’s 30-day yield for Class A shares as of July 31, 2012, reflecting the 5.75% maximum sales charge and calculated in accordance with the U.S. Securities and Exchange Commission formula, was 1.93%.
Results for other share classes can be found on page 3.
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. Refer to the fund prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.
Fellow investors:
[photo of rolled hay bales in a field]
The Investment Company of America experienced both strong and weak periods during the first six months of the year. Stock markets were alternately excited or concerned about prospects for fiscal issues in the U.S., the sovereign debt crisis in Europe and growth in China. Early in the year, these concerns were easing and corporate earnings reports were strong, fueling market gains. In the second quarter, the market corrected, as fears about these issues returned, and economic data remained sobering. It was easy to get caught up in short term trends, which we specifically endeavor to avoid.
Despite the challenging market landscape, The Investment Company of America gained 8.4% for the six-month period ended June 30, 2012, with dividends reinvested. In contrast, the unmanaged
Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market, returned 9.5% during the same time period.
Portfolio review
During the six months, several industry sectors were key contributors to solid fund returns. Notable among them was consumer staples, highlighted by the fund’s largest holding, Philip Morris International, which advanced 11.2%. Consumer discretionary also helped the fund as the fund’s fifth-largest holding, Home Depot, was up 26.1% and Comcast rose 34.7%.
Telecommunication services also was among the highest returns in absolute terms, exemplified by ICA’s second-largest holding, AT&T, which advanced 17.9%. Double digit gains were also realized in information technology, paced by Microsoft (+17.8%), the fourth-largest holding, and by Apple (+44.2%), which benefited from the projected sale of nearly 17 million iPads in the second quarter.
[Begin Sidebar]
| Results at a glance | ||||||||||||
| For the six months ended June 30, 2012, with dividends reinvested | ||||||||||||
| Standard & | Lipper | |||||||||||
| ICA | Poor’s 500 | Growth & Income | ||||||||||
| (Class A shares) | Composite Index* | Funds Index | ||||||||||
| Income return | 0.96 | % | 1.16 | % | n/a | |||||||
| Capital return | 7.42 | % | 8.32 | % | n/a | |||||||
| Total return | 8.38 | % | 9.48 | % | 7.89 | % | ||||||
| *The S&P 500 is unmanaged and, therefore, has no expenses. | ||||||||||||
[End Sidebar]
Another industry well represented in the portfolio is energy — which was not helpful this period — and ICA continues to hold some major energy companies. Royal Dutch Shell was the fund’s third-largest holding, and it dipped 8.0%; however, the loss may be partially attributable to the company being domiciled in Europe and the association with weakness in that region, compared to other U.S.-domiciled energy companies.
In the long run, international flexibility has been beneficial to ICA; however, this was not the case in the first six months. Holdings of non-U.S. based companies were a relative drag on results. Despite the fiscal issues hanging over Europe, we believe there are still high-quality companies with solid fundamentals in that region.
Other highlights were Dow Chemical (+9.5%), and the health care companies Abbott Laboratories (+14.7%) and Amgen (+13.8%).
Assets held in cash represented 7.6% of total net assets. It’s important to remember that cash holdings serve as a buffer in volatile times, and some of our portfolio counselors feel it is prudent to maintain some cash in this environment.
A look ahead
We are carefully monitoring the macroeconomic issues facing the U.S. and global economies, and we remain moderately constructive about the stock market in the long run. In the near term, we would not be surprised to see volatility as investors continue to grapple with the issues we initially discussed. Add the fact that it’s an election year, and additional trepidation or excitement may be piled on.
We believe this environment emphasizes the need to adhere to our core convictions and maintain a long-term time horizon, and not to try to “time the market.” Our durable approach recognizes that there will be good and bad quarters (and potentially years), but also that a short-term snapshot is a poor substitute for a long-term strategy and approach. ICA has the benefit of history to know that for all the market gyrations, the fund has achieved long-term successful outcomes because of stock-by-stock fundamental research and the Multiple Portfolio Counselor System.®
We remain focused and committed to this disciplined approach and are optimistic about continuing to identify solid companies at good valuations that we believe will prosper in the long run. We thank you for your continued confidence in our long-term philosophy.
Sincerely,
/s/ James B. Lovelace
James B. Lovelace
Vice Chairman
/s/ Donald D. O’Neal
Donald D. O’Neal
President
August 13, 2012
For current information about the fund, visit americanfunds.com.
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, 2012: | ||||||||||||
| 10 years/ | ||||||||||||
| 1 year | 5 years | Life of class1 | ||||||||||
Class B shares2 | ||||||||||||
| Reflecting applicable contingent deferred sales charge | ||||||||||||
| (CDSC), maximum of 5%, payable only if shares are | ||||||||||||
| sold within six years of purchase | –3.30 | % | –1.91 | % | 4.44 | % | ||||||
| Not reflecting CDSC | 1.70 | –1.56 | 4.44 | |||||||||
| Class C shares | ||||||||||||
| Reflecting CDSC, maximum of 1%, payable only if shares | ||||||||||||
| are sold within one year of purchase | 0.67 | –1.60 | 4.23 | |||||||||
| Not reflecting CDSC | 1.67 | –1.60 | 4.23 | |||||||||
Class F-1 shares3 | ||||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||||
| sponsoring firm | 2.46 | –0.83 | 5.04 | |||||||||
Class F-2 shares3 — first sold 8/1/08 | ||||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||||
| sponsoring firm | 2.73 | — | 3.14 | |||||||||
Class 529-A shares4 | ||||||||||||
| Reflecting 5.75% maximum sales charge | –3.49 | –2.04 | 4.39 | |||||||||
| Not reflecting maximum sales charge | 2.40 | –0.87 | 5.01 | |||||||||
Class 529-B shares2,4 | ||||||||||||
| Reflecting applicable CDSC, maximum of 5%, payable | ||||||||||||
| only if shares are sold within six years of purchase | –3.42 | –2.02 | 4.30 | |||||||||
| Not reflecting CDSC | 1.58 | –1.67 | 4.30 | |||||||||
Class 529-C shares4 | ||||||||||||
| Reflecting CDSC, maximum of 1%, payable only if shares | ||||||||||||
| are sold within one year of purchase | 0.57 | –1.66 | 4.15 | |||||||||
| Not reflecting CDSC | 1.57 | –1.66 | 4.15 | |||||||||
Class 529-E shares3,4 | 2.15 | –1.16 | 4.68 | |||||||||
Class 529-F-1 shares3,4 — first sold 9/16/02 | ||||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||||
| sponsoring firm | 2.63 | –0.67 | 6.12 | |||||||||
1Applicable to Class F-2 and 529-F-1 shares only. All other share classes reflect 10-year results.
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. When applicable, investment results reflect fee waivers, without which results would have been lower. Visit americanfunds.com for more information.
For information regarding the differences among the various share classes, refer to the fund prospectus.
Summary investment portfolio June 30, 2012
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]
| Percent | ||||
| of net | ||||
| Industry sector diversification | assets | |||
| Information technology | 14.13 | % | ||
| Energy | 12.76 | |||
| Consumer discretionary | 12.47 | |||
| Consumer staples | 11.62 | |||
| Industrials | 11.36 | |||
| Other industries | 28.24 | |||
| Other securities | 1.82 | |||
| Short-term securities & other assets less liabilities | 7.60 | |||
[end pie chart]
| Percent | ||||||||||||
| Value | of net | |||||||||||
| Common stocks - 90.58% | Shares | (000 | ) | assets | ||||||||
| Energy - 12.76% | ||||||||||||
| Apache Corp. | 4,310,000 | $ | 378,806 | .67 | % | |||||||
| Baker Hughes Inc. | 11,915,000 | 489,706 | .87 | |||||||||
| BP PLC (1) | 128,484,340 | 860,866 | ||||||||||
| BP PLC (ADR) | 3,676,953 | 149,064 | 1.79 | |||||||||
| Chevron Corp. | 9,480,000 | 1,000,140 | 1.77 | |||||||||
| ConocoPhillips | 10,675,000 | 596,519 | 1.06 | |||||||||
| EOG Resources, Inc. | 4,232,200 | 381,364 | .67 | |||||||||
| Royal Dutch Shell PLC, Class A (ADR) | 15,357,000 | 1,035,523 | ||||||||||
| Royal Dutch Shell PLC, Class B (1) | 12,365,265 | 431,550 | ||||||||||
| Royal Dutch Shell PLC, Class B (ADR) | 2,975,498 | 208,077 | 2.96 | |||||||||
| Schlumberger Ltd. | 15,674,999 | 1,017,464 | 1.80 | |||||||||
| Other securities | 659,428 | 1.17 | ||||||||||
| 7,208,507 | 12.76 | |||||||||||
| Materials - 3.87% | ||||||||||||
| Dow Chemical Co. | 42,502,000 | 1,338,813 | 2.37 | |||||||||
| Other securities | 848,664 | 1.50 | ||||||||||
| 2,187,477 | 3.87 | |||||||||||
| Industrials - 11.36% | ||||||||||||
| CSX Corp. | 31,422,748 | 702,613 | 1.24 | |||||||||
| General Dynamics Corp. | 13,059,800 | 861,424 | 1.53 | |||||||||
| General Electric Co. | 27,725,000 | 577,789 | 1.02 | |||||||||
| Union Pacific Corp. | 6,386,900 | 762,021 | 1.35 | |||||||||
| United Parcel Service, Inc., Class B | 4,750,000 | 374,110 | .66 | |||||||||
| United Technologies Corp. | 7,561,852 | 571,147 | 1.01 | |||||||||
| Other securities | 2,572,099 | 4.55 | ||||||||||
| 6,421,203 | 11.36 | |||||||||||
| Consumer discretionary - 12.47% | ||||||||||||
| Amazon.com, Inc. (2) | 3,100,000 | 707,885 | 1.26 | |||||||||
| Comcast Corp., Class A | 28,838,400 | 921,964 | ||||||||||
| Comcast Corp., Class A, special nonvoting shares | 7,000,000 | 219,800 | 2.02 | |||||||||
| General Motors Co. (2) | 35,490,500 | 699,873 | 1.24 | |||||||||
| Home Depot, Inc. | 25,700,000 | 1,361,843 | 2.41 | |||||||||
| News Corp., Class A | 31,725,000 | 707,150 | 1.25 | |||||||||
| Time Warner Cable Inc. | 4,812,727 | 395,125 | .70 | |||||||||
| Time Warner Inc. | 11,624,000 | 447,524 | .79 | |||||||||
| Other securities | 1,583,617 | 2.80 | ||||||||||
| 7,044,781 | 12.47 | |||||||||||
| Consumer staples - 11.62% | ||||||||||||
| Altria Group, Inc. | 30,125,000 | 1,040,819 | 1.84 | |||||||||
| Coca-Cola Co. | 6,803,300 | 531,950 | .94 | |||||||||
| CVS/Caremark Corp. | 11,000,000 | 514,030 | .91 | |||||||||
| Kraft Foods Inc., Class A | 18,374,168 | 709,610 | 1.26 | |||||||||
| PepsiCo, Inc. | 6,097,500 | 430,849 | .76 | |||||||||
| Philip Morris International Inc. | 27,991,072 | 2,442,501 | 4.32 | |||||||||
| Other securities | 895,187 | 1.59 | ||||||||||
| 6,564,946 | 11.62 | |||||||||||
| Health care - 7.95% | ||||||||||||
| Abbott Laboratories | 18,685,000 | 1,204,622 | 2.13 | |||||||||
| Amgen Inc. | 14,290,000 | 1,043,742 | 1.85 | |||||||||
| Gilead Sciences, Inc. (2) | 10,930,000 | 560,490 | .99 | |||||||||
| Other securities | 1,683,707 | 2.98 | ||||||||||
| 4,492,561 | 7.95 | |||||||||||
| Financials - 5.70% | ||||||||||||
| Aon PLC, Class A | 8,975,000 | 419,850 | .74 | |||||||||
| Citigroup Inc. | 20,110,455 | 551,228 | .98 | |||||||||
| JPMorgan Chase & Co. | 19,155,000 | 684,408 | 1.21 | |||||||||
| Other securities | 1,567,133 | 2.77 | ||||||||||
| 3,222,619 | 5.70 | |||||||||||
| Information technology - 14.13% | ||||||||||||
| Apple Inc. (2) | 2,155,000 | 1,258,520 | 2.23 | |||||||||
| Intel Corp. | 21,254,700 | 566,438 | 1.00 | |||||||||
| Microsoft Corp. | 52,650,500 | 1,610,579 | 2.85 | |||||||||
| Oracle Corp. | 33,385,000 | 991,535 | 1.75 | |||||||||
| Samsung Electronics Co. Ltd. (1) | 375,500 | 398,114 | .70 | |||||||||
| Texas Instruments Inc. | 22,825,000 | 654,849 | 1.16 | |||||||||
| Other securities | 2,506,579 | 4.44 | ||||||||||
| 7,986,614 | 14.13 | |||||||||||
| Telecommunication services - 5.46% | ||||||||||||
| AT&T Inc. | 49,300,000 | 1,758,038 | 3.11 | |||||||||
| Sprint Nextel Corp., Series 1 (2) | 143,380,000 | 467,419 | .83 | |||||||||
| Verizon Communications Inc. | 13,944,600 | 619,698 | 1.10 | |||||||||
| Other securities | 240,731 | .42 | ||||||||||
| 3,085,886 | 5.46 | |||||||||||
| Utilities - 3.20% | ||||||||||||
| Dominion Resources, Inc. | 9,403,824 | 507,806 | .90 | |||||||||
| GDF SUEZ (1) | 18,639,655 | 444,722 | .78 | |||||||||
| Other securities | 857,582 | 1.52 | ||||||||||
| 1,810,110 | 3.20 | |||||||||||
| Miscellaneous - 2.06% | ||||||||||||
| Other common stocks in initial period of acquisition | 1,162,571 | 2.06 | ||||||||||
| Total common stocks (cost: $38,608,150,000) | 51,187,275 | 90.58 | ||||||||||
| Percent | ||||||||||||
| Value | of net | |||||||||||
| Warrants - 0.00% | (000 | ) | assets | |||||||||
| Financials - 0.00% | ||||||||||||
| Other securities | - | .00 | ||||||||||
| Total warrants (cost: $11,770,000) | - | .00 | ||||||||||
| Percent | ||||||||||||
| Value | of net | |||||||||||
| Convertible securities - 0.59% | Shares | (000 | ) | assets | ||||||||
| Consumer discretionary - 0.50% | ||||||||||||
| General Motors Co., Series B, 4.75% convertible preferred 2013 | 8,611,850 | 285,913 | .50 | |||||||||
| Materials - 0.09% | ||||||||||||
| Other securities | 50,079 | .09 | ||||||||||
| Total convertible securities (cost: $462,252,000) | 335,992 | .59 | ||||||||||
| Principal | Percent | |||||||||||
| amount | Value | of net | ||||||||||
| Bonds & notes - 1.23% | (000 | ) | (000 | ) | assets | |||||||
| Energy - 0.01% | ||||||||||||
| Chevron Corp. 4.95% 2019 | $ | 5,000 | 6,038 | .01 | ||||||||
| Materials - 0.01% | ||||||||||||
| Dow Chemical Co. 4.125% 2021 | 500 | 538 | .00 | |||||||||
| Other securities | 5,178 | .01 | ||||||||||
| 5,716 | .01 | |||||||||||
| Industrials - 0.06% | ||||||||||||
| CSX Corp. 6.25% 2015 | 5,000 | 5,701 | .01 | |||||||||
| Union Pacific Corp. 6.125% 2020 | 5,000 | 6,187 | .01 | |||||||||
| United Technologies Corp. 4.50% 2020 | 5,475 | 6,360 | .01 | |||||||||
| Other securities | 17,734 | .03 | ||||||||||
| 35,982 | .06 | |||||||||||
| Consumer discretionary - 0.03% | ||||||||||||
| Comcast Corp. 6.30% 2017 | 5,120 | 6,166 | .01 | |||||||||
| News America Inc. 6.90% 2019 | 5,000 | 6,160 | .01 | |||||||||
| Other securities | 4,206 | .01 | ||||||||||
| 16,532 | .03 | |||||||||||
| Consumer staples - 0.03% | ||||||||||||
| Kraft Foods Inc. 2.625% 2013 | 2,555 | 2,594 | .01 | |||||||||
| Other securities | 12,361 | .02 | ||||||||||
| 14,955 | .03 | |||||||||||
| Financials - 0.22% | ||||||||||||
| JPMorgan Chase & Co., Series I, junior subordinated 7.90% (undated) (3) | 62,936 | 69,236 | .12 | |||||||||
| Other securities | 55,278 | .10 | ||||||||||
| 124,514 | .22 | |||||||||||
| Telecommunication services - 0.41% | ||||||||||||
| AT&T Inc. 4.85% 2014 | 5,000 | 5,329 | .01 | |||||||||
| Sprint Capital Corp. 6.90% 2019 | 17,200 | 16,254 | ||||||||||
| Sprint Nextel Corp. 8.375%-11.50% 2017-2021 (4) | 190,475 | 206,971 | .40 | |||||||||
| Other securities | 2,344 | .00 | ||||||||||
| 230,898 | .41 | |||||||||||
| Mortgage-backed obligations (5) - 0.10% | ||||||||||||
| Fannie Mae 3.00%-6.00% 2025-2042 | 52,023 | 56,493 | .10 | |||||||||
| Bonds & notes of U.S. government & government agencies - 0.32% | ||||||||||||
| Federal Home Loan Bank 3.625% 2013 | 50,000 | 52,159 | .09 | |||||||||
| Freddie Mac 2.125%-5.00% 2012-2014 | 20,000 | 20,975 | .04 | |||||||||
| U.S. Treasury 0.125%-8.00% 2014-2022 (6) | 87,718 | 106,069 | .19 | |||||||||
| 179,203 | .32 | |||||||||||
| Other - 0.04% | ||||||||||||
| Other securities | 23,042 | .04 | ||||||||||
| Total bonds & notes (cost: $636,515,000) | 693,373 | 1.23 | ||||||||||
| Principal | Percent | |||||||||||
| amount | Value | of net | ||||||||||
| Short-term securities - 7.32% | (000 | ) | (000 | ) | assets | |||||||
| Abbott Laboratories 0.14%-0.16% due 7/31-9/10/2012 (4) | $ | 117,200 | 117,178 | .21 | ||||||||
| Chariot Funding, LLC 0.18% due 7/19/2012 (4) | 50,000 | 49,995 | .09 | |||||||||
| Coca-Cola Co. 0.17%-0.23% due 8/22-10/15/2012 (4) | 83,800 | 83,770 | .15 | |||||||||
| Fannie Mae 0.07%-0.23% due 7/16/2012-1/7/2013 | 1,053,707 | 1,053,281 | 1.86 | |||||||||
| Federal Home Loan Bank 0.10%-0.21% due 7/13/2012-6/14/2013 | 646,162 | 645,723 | 1.14 | |||||||||
| Freddie Mac 0.07%-0.18% due 7/11/2012-1/23/2013 | 719,442 | 719,155 | 1.27 | |||||||||
| U.S. Treasury Bills 0.082%-0.147% due 7/19-10/25/2012 | 682,800 | 682,729 | 1.21 | |||||||||
| Other securities | 786,942 | 1.39 | ||||||||||
| Total short-term securities (cost: $4,138,728,000) | 4,138,773 | 7.32 | ||||||||||
| Total investment securities (cost: $43,857,415,000) | 56,355,413 | 99.72 | ||||||||||
| Other assets less liabilities | 157,521 | .28 | ||||||||||
| Net assets | $ | 56,512,934 | 100.00 | % | ||||||||
| As permitted by U.S. Securities and Exchange Commission ("SEC") 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. | ||||||||||||
| Investments in affiliates | ||||||
| A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares. The value of the fund's holdings in affiliated companies is included in "Other securities" under the respective industry sectors in the summary investment portfolio. Further details on these holdings and related transactions during the six months ended June 30, 2012, appear below. | ||||||
Beginning shares | Additions | Reductions | Ending shares | Dividend income (000) | Value of affiliates at 6/30/2012 (000) | |||||||||||||||||||
| Masco Corp. | 23,258,069 | - | - | 23,258,069 | $ | 3,489 | $ | 322,589 | ||||||||||||||||
| R.R. Donnelley & Sons Co. | 8,935,000 | 1,200,000 | - | 10,135,000 | 5,159 | 119,289 | ||||||||||||||||||
| $ | 8,648 | $ | 441,878 | |||||||||||||||||||||
| 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 $3,937,581,000, which represented 6.97% of the net assets of the fund. This entire amount relates 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) Acquired in a transaction exempt from registration under Rule 144A or section 4(2) of 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 $803,809,000, which represented 1.42% of the net assets of the fund. | ||||||||||||
| (5) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. | ||||||||||||
| (6) Index-linked bond whose principal amount moves with a government price index. | ||||||||||||
| Key to abbreviation | ||||||||||||
| ADR = American Depositary Receipts | ||||||||||||
| See Notes to Financial Statements | ||||||||||||
Financial statements
| Statement of assets and liabilities | unaudited | |||||||
| at June 30, 2012 | (dollars in thousands) | |||||||
| Assets: | ||||||||
| Investment securities, at value: | ||||||||
| Unaffiliated issuers (cost: $43,451,487) | $ | 55,913,535 | ||||||
| Affiliated issuers (cost: $405,928) | 441,878 | $ | 56,355,413 | |||||
| Cash | 15,094 | |||||||
| Receivables for: | ||||||||
| Sales of investments | 215,642 | |||||||
| Sales of fund's shares | 27,080 | |||||||
| Dividends and interest | 116,017 | 358,739 | ||||||
| 56,729,246 | ||||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Purchases of investments | 111,208 | |||||||
| Repurchases of fund's shares | 66,966 | |||||||
| Investment advisory services | 10,972 | |||||||
| Services provided by related parties | 20,669 | |||||||
| Trustees' deferred compensation | 5,944 | |||||||
| Other | 553 | 216,312 | ||||||
| Net assets at June 30, 2012 | $ | 56,512,934 | ||||||
| Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 44,398,738 | ||||||
| Undistributed net investment income | 379,015 | |||||||
| Accumulated net realized loss | (762,580 | ) | ||||||
| Net unrealized appreciation | 12,497,761 | |||||||
| Net assets at June 30, 2012 | $ | 56,512,934 | ||||||
| (dollars and shares in thousands, except per-share amounts) | ||||||||||||
| Shares of beneficial interest issued and outstanding (no stated par value) - | ||||||||||||
| unlimited shares authorized (1,943,004 total shares outstanding) | ||||||||||||
| Net assets | Shares outstanding | Net asset value per share | ||||||||||
| Class A | $ | 44,155,547 | 1,517,416 | $ | 29.10 | |||||||
| Class B | 668,893 | 23,064 | 29.00 | |||||||||
| Class C | 1,700,465 | 58,829 | 28.91 | |||||||||
| Class F-1 | 1,856,181 | 63,885 | 29.06 | |||||||||
| Class F-2 | 631,156 | 21,694 | 29.09 | |||||||||
| Class 529-A | 1,493,920 | 51,412 | 29.06 | |||||||||
| Class 529-B | 96,105 | 3,312 | 29.01 | |||||||||
| Class 529-C | 362,568 | 12,505 | 28.99 | |||||||||
| Class 529-E | 59,321 | 2,045 | 29.00 | |||||||||
| Class 529-F-1 | 34,109 | 1,175 | 29.04 | |||||||||
| Class R-1 | 79,107 | 2,732 | 28.96 | |||||||||
| Class R-2 | 585,096 | 20,187 | 28.98 | |||||||||
| Class R-3 | 764,827 | 26,342 | 29.03 | |||||||||
| Class R-4 | 682,654 | 23,497 | 29.05 | |||||||||
| Class R-5 | 726,284 | 24,967 | 29.09 | |||||||||
| Class R-6 | 2,616,701 | 89,942 | 29.09 | |||||||||
| See Notes to Financial Statements | ||||||||||||
| Statement of operations | unaudited | |||||||
| for the six months ended June 30, 2012 | (dollars in thousands) | |||||||
| Investment income: | ||||||||
| Income: | ||||||||
| Dividends (net of non-U.S. taxes of $14,764; | ||||||||
| also includes $8,648 from affiliates) | $ | 749,422 | ||||||
| Interest | 23,258 | $ | 772,680 | |||||
| Fees and expenses*: | ||||||||
| Investment advisory services | 68,894 | |||||||
| Distribution services | 75,711 | |||||||
| Transfer agent services | 37,119 | |||||||
| Administrative services | 5,164 | |||||||
| Reports to shareholders | 1,677 | |||||||
| Registration statement and prospectus | 419 | |||||||
| Trustees' compensation | 500 | |||||||
| Auditing and legal | 38 | |||||||
| Custodian | 395 | |||||||
| State and local taxes | 287 | |||||||
| Other | 1,164 | 191,368 | ||||||
| Net investment income | 581,312 | |||||||
| Net realized loss and unrealized appreciation | ||||||||
| on investments and currency: | ||||||||
| Net realized loss on: | ||||||||
| Investments | (276,591 | ) | ||||||
| Currency transactions | (3,061 | ) | (279,652 | ) | ||||
| Net unrealized appreciation on: | ||||||||
| Investments | 4,247,541 | |||||||
| Currency translations | 27 | 4,247,568 | ||||||
| Net realized loss and unrealized appreciation | ||||||||
| on investments and currency | 3,967,916 | |||||||
| Net increase in net assets resulting from operations | $ | 4,549,228 | ||||||
| (*) 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, | |||||||
| 2012† | 2011 | |||||||
| Operations: | ||||||||
| Net investment income | $ | 581,312 | $ | 1,184,346 | ||||
| Net realized (loss) gain on investments and currency transactions | (279,652 | ) | 1,354,309 | |||||
| Net unrealized appreciation (depreciation) on investments and currency translations | 4,247,568 | (3,588,402 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 4,549,228 | (1,049,747 | ) | |||||
| Dividends paid to shareholders from net investment income | (499,446 | ) | (1,183,860 | ) | ||||
| Net capital share transactions | (2,292,842 | ) | (5,098,241 | ) | ||||
| Total increase (decrease) in net assets | 1,756,940 | (7,331,848 | ) | |||||
| Net assets: | ||||||||
| Beginning of period | 54,755,994 | 62,087,842 | ||||||
| End of period (including undistributed | ||||||||
| net investment income: $379,015 and $297,149, respectively) | $ | 56,512,934 | $ | 54,755,994 | ||||
| †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 (Classes A, B and C, as well as two F share classes, F-1 and F-2), five 529 college savings plan share classes (Classes 529-A, 529-B, 529-C, 529-E and 529-F-1) and six retirement plan share classes (Classes R-1, R-2, R-3, R-4, R-5 and R-6). The 529 college savings plan share classes can be used to save for college education. The retirement plan share classes 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 supplied by one or more pricing vendors 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 |
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by accounting principles generally accepted in the United States of America. The net asset value of each share class of the fund is generally determined as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.
Methods and inputs – The fund’s investment adviser uses the following methods and inputs to establish the fair value of the fund’s 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 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 |
When the fund’s 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 ask prices that are reasonably and timely available (or bid prices, if ask 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 fund’s investment adviser are fair valued as determined in good faith under fair value guidelines adopted by authority of the fund’s board of trustees as further described on the following page. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission (“SEC”) rules and guidance, to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as 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. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of each share class of the fund is determined. 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.
Processes and structure – The fund’s board of trustees has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”) to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues. The Fair Valuation Committee reports any changes to the fair valuation guidelines to the board of trustees with supplemental information to support the changes. The fund’s board and audit committee also regularly review reports that describe fair value determinations and methods.
The fund’s investment adviser has also established a Fixed-Income Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors. This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security valuation are also subject to additional internal reviews, including an annual control self-evaluation program facilitated by the investment adviser’s compliance group.
Classifications – The fund’s investment adviser classifies the fund’s 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. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. Level 3 values are based on significant unobservable inputs that reflect the investment adviser’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, 2012 (dollars in thousands):
| Investment securities | |||||||||||||||||
| Level 1 | Level 2(*) | Level 3 | Total | ||||||||||||||
| Assets: | |||||||||||||||||
| Common stocks: | |||||||||||||||||
| Energy | $ | 5,723,125 | $ | 1,485,382 | $ | - | $ | 7,208,507 | |||||||||
| Materials | 2,027,572 | 159,905 | - | 2,187,477 | |||||||||||||
| Industrials | 6,281,657 | 139,546 | - | 6,421,203 | |||||||||||||
| Consumer discretionary | 6,908,247 | 136,534 | - | 7,044,781 | |||||||||||||
| Consumer staples | 6,564,946 | - | - | 6,564,946 | |||||||||||||
| Health care | 4,178,179 | 314,382 | - | 4,492,561 | |||||||||||||
| Financials | 2,996,550 | 226,069 | - | 3,222,619 | |||||||||||||
| Information technology | 7,491,420 | 495,194 | - | 7,986,614 | |||||||||||||
| Telecommunication services | 3,085,886 | - | - | 3,085,886 | |||||||||||||
| Utilities | 1,365,388 | 444,722 | - | 1,810,110 | |||||||||||||
| Miscellaneous | 626,724 | 535,847 | - | 1,162,571 | |||||||||||||
| Convertible securities | 285,913 | 50,079 | - | 335,992 | |||||||||||||
| Bonds & notes | - | 693,373 | - | 693,373 | |||||||||||||
| Short-term securities | - | 4,138,773 | - | 4,138,773 | |||||||||||||
| Total | $ | 47,535,607 | $ | 8,819,806 | $ | - | $ | 56,355,413 | |||||||||
| (*) Securities with a market value of $3,046,758,000, which represented 5.39% of the net assets of the fund, transferred from Level 1 to Level 2 since the prior fiscal year-end, primarily due to significant market movements following the close of local trading. | |||||||||||||||||
| 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, economic or market developments or instability in the countries or regions in which the issuer operates. These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. 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, and may be more difficult to value, 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 investment 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, 2012, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.
The fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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, 2011, the components of distributable earnings on a tax basis were as follows:
| (dollars in thousands) | ||||
| Undistributed ordinary income | $ | 313,814 | ||
| Capital loss carryforward expiring 2017* | (387,836 | ) | ||
Post-October capital loss deferral† | (94,079 | ) | ||
| *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. | ||||
| †This deferral is considered incurred in the subsequent year. | ||||
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, 2012, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows:
| (dollars in thousands) | ||||
| Gross unrealized appreciation on investment securities | $ | 15,417,856 | ||
| Gross unrealized depreciation on investment securities | (2,930,650 | ) | ||
| Net unrealized appreciation on investment securities | 12,487,206 | |||
| Cost of investment securities | 43,868,207 | |||
Tax-basis distributions paid to shareholders from ordinary income were as follows (dollars in thousands):
| Share class | Six months ended June 30, 2012 | Year ended December 31, 2011 | ||||||
| Class A | $ | 398,298 | $ | 945,530 | ||||
| Class B | 3,639 | 13,329 | ||||||
| Class C | 8,660 | 24,855 | ||||||
| Class F-1 | 16,420 | 35,112 | ||||||
| Class F-2 | 6,366 | 14,859 | ||||||
| Class 529-A | 12,511 | 27,601 | ||||||
| Class 529-B | 441 | 1,534 | ||||||
| Class 529-C | 1,663 | 4,236 | ||||||
| Class 529-E | 428 | 983 | ||||||
| Class 529-F-1 | 315 | 671 | ||||||
| Class R-1 | 416 | 988 | ||||||
| Class R-2 | 3,058 | 7,914 | ||||||
| Class R-3 | 5,625 | 13,622 | ||||||
| Class R-4 | 6,168 | 13,842 | ||||||
| Class R-5 | 7,825 | 19,777 | ||||||
| Class R-6 | 27,613 | 59,007 | ||||||
| Total | $ | 499,446 | $ | 1,183,860 | ||||
| 6. | Fees and transactions with related parties |
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, 2012, the investment advisory services fee was $68,894,000, which was equivalent to an annualized rate of 0.242% 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 below. 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, 2012, 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 shareholder services agreement with AFS under which the fund compensates AFS for providing transfer agent services to each of the fund’s share classes. These services include recordkeeping, shareholder communications and transaction processing. In addition, the fund reimburses AFS for amounts paid to third parties for performing transfer agent services on behalf of fund shareholders.
Administrative services – The board of trustees approved an amended administrative services agreement with CRMC effective January 1, 2012. Under this agreement, Class A shares pay an annual fee of 0.01% and Class C, F, R and 529 shares pay an annual fee of 0.05% of their respective average daily net assets to compensate CRMC for providing administrative services. These services include, but are not limited to, coordinating, monitoring, assisting and overseeing third parties that provide services to fund shareholders.
529 plan services – Each 529 share class is subject to service fees to compensate 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. The fee is included in other expenses on the accompanying financial statements. The Commonwealth of Virginia is not considered a related party.
Class-specific expenses under the agreements described above for the six months ended June 30, 2012, were as follows (dollars in thousands):
| Share class | Distribution services | Transfer agent services | Administrative services | 529 plan services | ||||||||||||
| Class A | $ | 51,343 | $ | 30,641 | $ | 2,216 | Not applicable | |||||||||
| Class B | 3,799 | 538 | Not applicable | Not applicable | ||||||||||||
| Class C | 8,796 | 1,181 | 442 | Not applicable | ||||||||||||
| Class F-1 | 2,363 | 1,081 | 474 | Not applicable | ||||||||||||
| Class F-2 | Not applicable | 316 | 157 | Not applicable | ||||||||||||
| Class 529-A | 1,607 | 763 | 365 | $ | 726 | |||||||||||
| Class 529-B | 521 | 66 | 26 | 52 | ||||||||||||
| Class 529-C | 1,768 | 203 | 89 | 178 | ||||||||||||
| Class 529-E | 146 | 21 | 15 | 29 | ||||||||||||
| Class 529-F-1 | - | 17 | 8 | 16 | ||||||||||||
| Class R-1 | 396 | 43 | 20 | Not applicable | ||||||||||||
| Class R-2 | 2,198 | 1,049 | 148 | Not applicable | ||||||||||||
| Class R-3 | 1,918 | 673 | 193 | Not applicable | ||||||||||||
| Class R-4 | 856 | 332 | 173 | Not applicable | ||||||||||||
| Class R-5 | Not applicable | 193 | 190 | Not applicable | ||||||||||||
| Class R-6 | Not applicable | 2 | 648 | Not applicable | ||||||||||||
| Total class-specific expenses | $ | 75,711 | $ | 37,119 | $ | 5,164 | $ | 1,001 | ||||||||
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 $500,000, shown on the accompanying financial statements, includes $214,000 in current fees (either paid in cash or deferred) and a net increase of $286,000 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, 2012, 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, 2012, the net asset value of each share class would have been reduced by $0.01 per share. No warrants were exercised during the six months ended June 30, 2012.
| 8. | Capital share transactions |
Capital share transactions in the fund were as follows (dollars and shares in thousands):
Sales(*) | Reinvestments of dividends | Repurchases(*) | Net (decrease) increase | |||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Six months ended June 30, 2012 | ||||||||||||||||||||||||||||||||
| Class A | $ | 1,169,515 | 40,455 | $ | 380,847 | 13,111 | $ | (3,197,341 | ) | (110,541 | ) | $ | (1,646,979 | ) | (56,975 | ) | ||||||||||||||||
| Class B | 4,964 | 172 | 3,595 | 124 | (236,960 | ) | (8,263 | ) | (228,401 | ) | (7,967 | ) | ||||||||||||||||||||
| Class C | 69,157 | 2,406 | 8,392 | 291 | (273,483 | ) | (9,549 | ) | (195,934 | ) | (6,852 | ) | ||||||||||||||||||||
| Class F-1 | 394,419 | 13,630 | 15,985 | 551 | (422,113 | ) | (14,797 | ) | (11,709 | ) | (616 | ) | ||||||||||||||||||||
| Class F-2 | 49,477 | 1,706 | 5,801 | 200 | (72,124 | ) | (2,496 | ) | (16,846 | ) | (590 | ) | ||||||||||||||||||||
| Class 529-A | 94,405 | 3,281 | 12,508 | 431 | (76,531 | ) | (2,660 | ) | 30,382 | 1,052 | ||||||||||||||||||||||
| Class 529-B | 848 | 29 | 441 | 15 | (24,309 | ) | (849 | ) | (23,020 | ) | (805 | ) | ||||||||||||||||||||
| Class 529-C | 23,014 | 801 | 1,663 | 58 | (23,422 | ) | (817 | ) | 1,255 | 42 | ||||||||||||||||||||||
| Class 529-E | 3,199 | 112 | 428 | 15 | (3,631 | ) | (127 | ) | (4 | ) | _ (†) | |||||||||||||||||||||
| Class 529-F-1 | 4,161 | 144 | 315 | 11 | (3,152 | ) | (110 | ) | 1,324 | 45 | ||||||||||||||||||||||
| Class R-1 | 9,178 | 319 | 416 | 14 | (10,283 | ) | (357 | ) | (689 | ) | (24 | ) | ||||||||||||||||||||
| Class R-2 | 65,282 | 2,266 | 3,053 | 106 | (102,460 | ) | (3,556 | ) | (34,125 | ) | (1,184 | ) | ||||||||||||||||||||
| Class R-3 | 89,898 | 3,126 | 5,622 | 194 | (122,531 | ) | (4,240 | ) | (27,011 | ) | (920 | ) | ||||||||||||||||||||
| Class R-4 | 72,895 | 2,525 | 6,165 | 212 | (105,883 | ) | (3,660 | ) | (26,823 | ) | (923 | ) | ||||||||||||||||||||
| Class R-5 | 41,269 | 1,431 | 7,815 | 269 | (139,340 | ) | (4,826 | ) | (90,256 | ) | (3,126 | ) | ||||||||||||||||||||
| Class R-6 | 217,773 | 7,514 | 27,612 | 951 | (269,391 | ) | (9,223 | ) | (24,006 | ) | (758 | ) | ||||||||||||||||||||
| Total net increase | ||||||||||||||||||||||||||||||||
| (decrease) | $ | 2,309,454 | 79,917 | $ | 480,658 | 16,553 | $ | (5,082,954 | ) | (176,071 | ) | $ | (2,292,842 | ) | (79,601 | ) | ||||||||||||||||
| Year ended December 31, 2011 | ||||||||||||||||||||||||||||||||
| Class A | $ | 2,591,052 | 92,718 | $ | 900,445 | 32,702 | $ | (7,911,508 | ) | (283,675 | ) | $ | (4,420,011 | ) | (158,255 | ) | ||||||||||||||||
| Class B | 13,395 | 481 | 13,081 | 475 | (580,423 | ) | (20,926 | ) | (553,947 | ) | (19,970 | ) | ||||||||||||||||||||
| Class C | 154,710 | 5,562 | 23,946 | 876 | (547,074 | ) | (19,844 | ) | (368,418 | ) | (13,406 | ) | ||||||||||||||||||||
| Class F-1 | 690,634 | 24,783 | 33,781 | 1,233 | (469,661 | ) | (16,930 | ) | 254,754 | 9,086 | ||||||||||||||||||||||
| Class F-2 | 123,467 | 4,385 | 11,412 | 417 | (175,136 | ) | (6,287 | ) | (40,257 | ) | (1,485 | ) | ||||||||||||||||||||
| Class 529-A | 190,204 | 6,835 | 27,593 | 1,005 | (163,462 | ) | (5,894 | ) | 54,335 | 1,946 | ||||||||||||||||||||||
| Class 529-B | 2,120 | 76 | 1,530 | 55 | (52,467 | ) | (1,896 | ) | (48,817 | ) | (1,765 | ) | ||||||||||||||||||||
| Class 529-C | 45,157 | 1,625 | 4,235 | 154 | (51,698 | ) | (1,871 | ) | (2,306 | ) | (92 | ) | ||||||||||||||||||||
| Class 529-E | 7,000 | 253 | 983 | 36 | (7,539 | ) | (273 | ) | 444 | 16 | ||||||||||||||||||||||
| Class 529-F-1 | 9,630 | 343 | 671 | 25 | (5,879 | ) | (215 | ) | 4,422 | 153 | ||||||||||||||||||||||
| Class R-1 | 17,478 | 629 | 985 | 36 | (19,456 | ) | (700 | ) | (993 | ) | (35 | ) | ||||||||||||||||||||
| Class R-2 | 135,837 | 4,886 | 7,908 | 289 | (197,884 | ) | (7,129 | ) | (54,139 | ) | (1,954 | ) | ||||||||||||||||||||
| Class R-3 | 196,980 | 7,044 | 13,617 | 496 | (269,855 | ) | (9,708 | ) | (59,258 | ) | (2,168 | ) | ||||||||||||||||||||
| Class R-4 | 178,597 | 6,386 | 13,835 | 504 | (187,204 | ) | (6,684 | ) | 5,228 | 206 | ||||||||||||||||||||||
| Class R-5 | 147,341 | 5,225 | 19,748 | 717 | (262,051 | ) | (9,659 | ) | (94,962 | ) | (3,717 | ) | ||||||||||||||||||||
| Class R-6 | 450,260 | 15,942 | 58,995 | 2,147 | (283,571 | ) | (10,167 | ) | 225,684 | 7,922 | ||||||||||||||||||||||
| Total net increase | ||||||||||||||||||||||||||||||||
| (decrease) | $ | 4,953,862 | 177,173 | $ | 1,132,765 | 41,167 | $ | (11,184,868 | ) | (401,858 | ) | $ | (5,098,241 | ) | (183,518 | ) | ||||||||||||||||
* Includes exchanges between share classes of the fund. | ||||||||||||||||||||||||||||||||
† Amount less than one thousand. | ||||||||||||||||||||||||||||||||
| 9. | Investment transactions |
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $5,003,435,000 and $7,858,933,000, respectively, during the six months ended June 30, 2012.
Financial highlights
Income (loss) from investment operations(1) | 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(2)(3) | 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(3) | Ratio of net income to average net assets(3) | |||||||||||||||||||||||||||||||||||||||||
| Class A: | Six months ended 6/30/2012(4)(5) | $ | 27.09 | $ | .30 | $ | 1.97 | $ | 2.27 | $ | (.26 | ) | $ | - | $ | (.26 | ) | $ | 29.10 | 8.38 | % | $ | 44,156 | .63 | %(6) | .63 | %(6) | 2.08 | %(6) | ||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.16 | .57 | (1.06 | ) | (.49 | ) | (.58 | ) | - | (.58 | ) | 27.09 | (1.76 | ) | 42,643 | .61 | .61 | 2.05 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class B: | Six months ended 6/30/2012(4)(5) | 26.99 | .19 | 1.96 | 2.15 | (.14 | ) | - | (.14 | ) | 29.00 | 7.98 | 669 | 1.39 | (6) | 1.39 | (6) | 1.30 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.05 | .35 | (1.06 | ) | (.71 | ) | (.35 | ) | - | (.35 | ) | 26.99 | (2.53 | ) | 838 | 1.38 | 1.38 | 1.27 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class C: | Six months ended 6/30/2012(4)(5) | 26.90 | .18 | 1.97 | 2.15 | (.14 | ) | - | (.14 | ) | 28.91 | 8.00 | 1,700 | 1.43 | (6) | 1.43 | (6) | 1.28 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 27.97 | .34 | (1.06 | ) | (.72 | ) | (.35 | ) | - | (.35 | ) | 26.90 | (2.58 | ) | 1,767 | 1.42 | 1.42 | 1.24 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class F-1: | Six months ended 6/30/2012(4)(5) | 27.04 | .29 | 1.98 | 2.27 | (.25 | ) | - | (.25 | ) | 29.06 | 8.41 | 1,856 | .67 | (6) | .67 | (6) | 2.05 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.12 | .56 | (1.07 | ) | (.51 | ) | (.57 | ) | - | (.57 | ) | 27.04 | (1.84 | ) | 1,744 | .66 | .66 | 2.01 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class F-2: | Six months ended 6/30/2012(4)(5) | 27.08 | .33 | 1.97 | 2.30 | (.29 | ) | - | (.29 | ) | 29.09 | 8.51 | 631 | .40 | (6) | .40 | (6) | 2.31 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.15 | .63 | (1.06 | ) | (.43 | ) | (.64 | ) | - | (.64 | ) | 27.08 | (1.54 | ) | 604 | .40 | .40 | 2.27 | |||||||||||||||||||||||||||||||||||
| 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(4) | 28.53 | .26 | (7.47 | ) | (7.21 | ) | (.36 | ) | - | (.36 | ) | 20.96 | (25.39 | ) | 83 | .17 | .16 | 1.24 | |||||||||||||||||||||||||||||||||||
| Class 529-A: | Six months ended 6/30/2012(4)(5) | 27.05 | .29 | 1.97 | 2.26 | (.25 | ) | - | (.25 | ) | 29.06 | 8.34 | 1,494 | .73 | (6) | .73 | (6) | 1.99 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.12 | .55 | (1.06 | ) | (.51 | ) | (.56 | ) | - | (.56 | ) | 27.05 | (1.84 | ) | 1,362 | .70 | .70 | 1.97 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-B: | Six months ended 6/30/2012(4)(5) | 27.00 | .17 | 1.96 | 2.13 | (.12 | ) | - | (.12 | ) | 29.01 | 7.91 | 96 | 1.53 | (6) | 1.53 | (6) | 1.18 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.06 | .32 | (1.05 | ) | (.73 | ) | (.33 | ) | - | (.33 | ) | 27.00 | (2.63 | ) | 111 | 1.50 | 1.50 | 1.16 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-C: | Six months ended 6/30/2012(4)(5) | 26.99 | .17 | 1.96 | 2.13 | (.13 | ) | - | (.13 | ) | 28.99 | 7.91 | 363 | 1.51 | (6) | 1.51 | (6) | 1.21 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.06 | .33 | (1.06 | ) | (.73 | ) | (.34 | ) | - | (.34 | ) | 26.99 | (2.62 | ) | 336 | 1.49 | 1.49 | 1.18 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-E: | Six months ended 6/30/2012(4)(5) | $ | 26.99 | $ | .25 | $ | 1.97 | $ | 2.22 | $ | (.21 | ) | $ | - | $ | (.21 | ) | $ | 29.00 | 8.23 | % | $ | 59 | .98 | %(6) | .98 | %(6) | 1.74 | %(6) | ||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.07 | .47 | (1.07 | ) | (.60 | ) | (.48 | ) | - | (.48 | ) | 26.99 | (2.15 | ) | 55 | .97 | .97 | 1.70 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class 529-F-1: | Six months ended 6/30/2012(4)(5) | 27.03 | .32 | 1.97 | 2.29 | (.28 | ) | - | (.28 | ) | 29.04 | 8.47 | 34 | .51 | (6) | .51 | (6) | 2.21 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.10 | .61 | (1.06 | ) | (.45 | ) | (.62 | ) | - | (.62 | ) | 27.03 | (1.62 | ) | 31 | .49 | .49 | 2.19 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-1: | Six months ended 6/30/2012(4)(5) | 26.95 | .19 | 1.97 | 2.16 | (.15 | ) | - | (.15 | ) | 28.96 | 8.02 | 79 | 1.41 | (6) | 1.41 | (6) | 1.31 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.02 | .35 | (1.06 | ) | (.71 | ) | (.36 | ) | - | (.36 | ) | 26.95 | (2.55 | ) | 74 | 1.41 | 1.41 | 1.25 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-2: | Six months ended 6/30/2012(4)(5) | 26.98 | .19 | 1.96 | 2.15 | (.15 | ) | - | (.15 | ) | 28.98 | 7.96 | 585 | 1.40 | (6) | 1.40 | (6) | 1.32 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.05 | .35 | (1.06 | ) | (.71 | ) | (.36 | ) | - | (.36 | ) | 26.98 | (2.55 | ) | 577 | 1.41 | 1.41 | 1.25 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-3: | Six months ended 6/30/2012(4)(5) | 27.03 | .25 | 1.96 | 2.21 | (.21 | ) | - | (.21 | ) | 29.03 | 8.18 | 765 | .98 | (6) | .98 | (6) | 1.74 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.10 | .47 | (1.06 | ) | (.59 | ) | (.48 | ) | - | (.48 | ) | 27.03 | (2.11 | ) | 737 | .97 | .97 | 1.70 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-4: | Six months ended 6/30/2012(4)(5) | 27.04 | .30 | 1.97 | 2.27 | (.26 | ) | - | (.26 | ) | 29.05 | 8.39 | 683 | .65 | (6) | .65 | (6) | 2.07 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.12 | .56 | (1.07 | ) | (.51 | ) | (.57 | ) | - | (.57 | ) | 27.04 | (1.83 | ) | 660 | .65 | .65 | 2.02 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-5: | Six months ended 6/30/2012(4)(5) | 27.08 | .34 | 1.97 | 2.31 | (.30 | ) | - | (.30 | ) | 29.09 | 8.53 | 726 | .35 | (6) | .35 | (6) | 2.35 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.15 | .65 | (1.07 | ) | (.42 | ) | (.65 | ) | - | (.65 | ) | 27.08 | (1.50 | ) | 761 | .35 | .35 | 2.31 | |||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Class R-6: | Six months ended 6/30/2012(4)(5) | 27.08 | .35 | 1.97 | 2.32 | (.31 | ) | - | (.31 | ) | 29.09 | 8.56 | 2,617 | .30 | (6) | .30 | (6) | 2.41 | (6) | ||||||||||||||||||||||||||||||||||
| Year ended 12/31/2011 | 28.15 | .66 | (1.06 | ) | (.40 | ) | (.67 | ) | - | (.67 | ) | 27.08 | (1.45 | ) | 2,456 | .30 | .30 | 2.37 | |||||||||||||||||||||||||||||||||||
| 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(4) | 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 | |||||||||||||||||||||||
2012(4)(5) | 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Portfolio turnover rate for all share classes | 9 | % | 28 | % | 23 | % | 28 | % | 31 | % | 22 | % | ||||||||||||
(1)Based on average shares outstanding. | |||||||||||||
(2)Total returns exclude any applicable sales charges, including contingent deferred sales charges. | |||||||||||||
(3)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the 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. | |||||||||||||
(4)Based on operations for the period shown and, accordingly, is not representative of a full year. | |||||||||||||
(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, 2012, through June 30, 2012).
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. 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 1/1/2012 | Ending account value 6/30/2012 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
| Class A -- actual return | $ | 1,000.00 | $ | 1,083.83 | $ | 3.26 | .63 | % | ||||||||
| Class A -- assumed 5% return | 1,000.00 | 1,021.73 | 3.17 | .63 | ||||||||||||
| Class B -- actual return | 1,000.00 | 1,079.82 | 7.19 | 1.39 | ||||||||||||
| Class B -- assumed 5% return | 1,000.00 | 1,017.95 | 6.97 | 1.39 | ||||||||||||
| Class C -- actual return | 1,000.00 | 1,080.05 | 7.40 | 1.43 | ||||||||||||
| Class C -- assumed 5% return | 1,000.00 | 1,017.75 | 7.17 | 1.43 | ||||||||||||
| Class F-1 -- actual return | 1,000.00 | 1,084.14 | 3.47 | .67 | ||||||||||||
| Class F-1 -- assumed 5% return | 1,000.00 | 1,021.53 | 3.37 | .67 | ||||||||||||
| Class F-2 -- actual return | 1,000.00 | 1,085.09 | 2.07 | .40 | ||||||||||||
| Class F-2 -- assumed 5% return | 1,000.00 | 1,022.87 | 2.01 | .40 | ||||||||||||
| Class 529-A -- actual return | 1,000.00 | 1,083.44 | 3.78 | .73 | ||||||||||||
| Class 529-A -- assumed 5% return | 1,000.00 | 1,021.23 | 3.67 | .73 | ||||||||||||
| Class 529-B -- actual return | 1,000.00 | 1,079.08 | 7.91 | 1.53 | ||||||||||||
| Class 529-B -- assumed 5% return | 1,000.00 | 1,017.26 | 7.67 | 1.53 | ||||||||||||
| Class 529-C -- actual return | 1,000.00 | 1,079.07 | 7.81 | 1.51 | ||||||||||||
| Class 529-C -- assumed 5% return | 1,000.00 | 1,017.35 | 7.57 | 1.51 | ||||||||||||
| Class 529-E -- actual return | 1,000.00 | 1,082.31 | 5.07 | .98 | ||||||||||||
| Class 529-E -- assumed 5% return | 1,000.00 | 1,019.99 | 4.92 | .98 | ||||||||||||
| Class 529-F-1 -- actual return | 1,000.00 | 1,084.67 | 2.64 | .51 | ||||||||||||
| Class 529-F-1 -- assumed 5% return | 1,000.00 | 1,022.33 | 2.56 | .51 | ||||||||||||
| Class R-1 -- actual return | 1,000.00 | 1,080.15 | 7.29 | 1.41 | ||||||||||||
| Class R-1 -- assumed 5% return | 1,000.00 | 1,017.85 | 7.07 | 1.41 | ||||||||||||
| Class R-2 -- actual return | 1,000.00 | 1,079.62 | 7.24 | 1.40 | ||||||||||||
| Class R-2 -- assumed 5% return | 1,000.00 | 1,017.90 | 7.02 | 1.40 | ||||||||||||
| Class R-3 -- actual return | 1,000.00 | 1,081.80 | 5.07 | .98 | ||||||||||||
| Class R-3 -- assumed 5% return | 1,000.00 | 1,019.99 | 4.92 | .98 | ||||||||||||
| Class R-4 -- actual return | 1,000.00 | 1,083.88 | 3.37 | .65 | ||||||||||||
| Class R-4 -- assumed 5% return | 1,000.00 | 1,021.63 | 3.27 | .65 | ||||||||||||
| Class R-5 -- actual return | 1,000.00 | 1,085.35 | 1.81 | .35 | ||||||||||||
| Class R-5 -- assumed 5% return | 1,000.00 | 1,023.12 | 1.76 | .35 | ||||||||||||
| Class R-6 -- actual return | 1,000.00 | 1,085.64 | 1.56 | .30 | ||||||||||||
| Class R-6 -- assumed 5% return | 1,000.00 | 1,023.37 | 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 366 (to reflect the one-half year period). | ||||||||||||||||
Approval of Investment Advisory and Service Agreement
The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through March 31, 2013. 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 objectives 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.
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 investment objectives, risks, charges and expenses. This and other important information is contained in the fund 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 800/421-4225 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, 2012, 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, 2012, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
Lit. No. MFGESR-904-0812P
Litho in USA BBC/RRD/8087-S33497
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, 2012
unaudited
| Common stocks — 90.58% | Shares | Value (000) | ||||||
| ENERGY — 12.76% | ||||||||
| Apache Corp. | 4,310,000 | $ | 378,806 | |||||
| Baker Hughes Inc. | 11,915,000 | 489,706 | ||||||
BP PLC1 | 128,484,340 | 860,866 | ||||||
| BP PLC (ADR) | 3,676,953 | 149,064 | ||||||
| Canadian Natural Resources, Ltd. | 5,540,000 | 148,608 | ||||||
| Chevron Corp. | 9,480,000 | 1,000,140 | ||||||
| ConocoPhillips | 10,675,000 | 596,519 | ||||||
| Devon Energy Corp. | 3,155,000 | 182,958 | ||||||
| Diamond Offshore Drilling, Inc. | 2,025,000 | 119,738 | ||||||
Eni SpA1 | 2,698,000 | 57,579 | ||||||
| EOG Resources, Inc. | 4,232,200 | 381,364 | ||||||
| Range Resources Corp. | 245,000 | 15,158 | ||||||
| Royal Dutch Shell PLC, Class A (ADR) | 15,357,000 | 1,035,523 | ||||||
Royal Dutch Shell PLC, Class B1 | 12,365,265 | 431,550 | ||||||
| Royal Dutch Shell PLC, Class B (ADR) | 2,975,498 | 208,077 | ||||||
| Schlumberger Ltd. | 15,674,999 | 1,017,464 | ||||||
TOTAL SA1 | 3,000,000 | 135,387 | ||||||
| 7,208,507 | ||||||||
| MATERIALS — 3.87% | ||||||||
ArcelorMittal1 | 7,540,000 | 116,479 | ||||||
| Barrick Gold Corp. | 3,325,000 | 124,920 | ||||||
| Dow Chemical Co. | 42,502,000 | 1,338,813 | ||||||
| International Flavors & Fragrances Inc. | 2,892,898 | 158,531 | ||||||
POSCO1 | 136,000 | 43,426 | ||||||
| Praxair, Inc. | 2,939,500 | 319,612 | ||||||
| United States Steel Corp. | 4,160,000 | 85,696 | ||||||
| 2,187,477 | ||||||||
| INDUSTRIALS — 11.36% | ||||||||
| 3M Co. | 1,435,000 | 128,576 | ||||||
| CSX Corp. | 31,422,748 | 702,613 | ||||||
| Danaher Corp. | 4,730,000 | 246,338 | ||||||
| Deere & Co. | 2,800,000 | 226,436 | ||||||
| Emerson Electric Co. | 2,130,000 | 99,215 | ||||||
European Aeronautic Defence and Space Co. EADS NV1 | 3,935,000 | 139,546 | ||||||
| General Dynamics Corp. | 13,059,800 | 861,424 | ||||||
| General Electric Co. | 27,725,000 | 577,789 | ||||||
| Illinois Tool Works Inc. | 6,400,000 | 338,496 | ||||||
| Lockheed Martin Corp. | 2,790,820 | 243,025 | ||||||
Masco Corp.2 | 23,258,069 | 322,589 | ||||||
R.R. Donnelley & Sons Co.2 | 10,135,000 | 119,289 | ||||||
| Republic Services, Inc. | 5,500,000 | 145,530 | ||||||
| Southwest Airlines Co. | 13,000,000 | 119,860 | ||||||
| Union Pacific Corp. | 6,386,900 | 762,021 | ||||||
United Continental Holdings, Inc.3 | 4,350,000 | 105,836 | ||||||
| United Parcel Service, Inc., Class B | 4,750,000 | 374,110 | ||||||
| United Technologies Corp. | 7,561,852 | 571,147 | ||||||
| Waste Management, Inc. | 10,100,700 | 337,363 | ||||||
| 6,421,203 | ||||||||
| CONSUMER DISCRETIONARY — 12.47% | ||||||||
Amazon.com, Inc.3 | 3,100,000 | 707,885 | ||||||
| Carnival Corp., units | 1,000,000 | 34,270 | ||||||
| Comcast Corp., Class A | 28,838,400 | 921,964 | ||||||
| Comcast Corp., Class A, special nonvoting shares | 7,000,000 | 219,800 | ||||||
Daimler AG1 | 2,164,475 | 97,345 | ||||||
DIRECTV, Class A3 | 2,500,000 | 122,050 | ||||||
General Motors Co.3 | 35,490,500 | 699,873 | ||||||
| Harley-Davidson, Inc. | 2,990,000 | 136,733 | ||||||
| Home Depot, Inc. | 25,700,000 | 1,361,843 | ||||||
Honda Motor Co., Ltd.1 | 1,125,000 | 39,189 | ||||||
| Johnson Controls, Inc. | 10,161,150 | 281,565 | ||||||
| Kohl’s Corp. | 6,744,000 | 306,784 | ||||||
| McDonald’s Corp. | 2,000,000 | 177,060 | ||||||
| News Corp., Class A | 31,725,000 | 707,150 | ||||||
| NIKE, Inc., Class B | 3,578,100 | 314,086 | ||||||
| Nordstrom, Inc. | 1,500,000 | 74,535 | ||||||
| Time Warner Cable Inc. | 4,812,727 | 395,125 | ||||||
| Time Warner Inc. | 11,624,000 | 447,524 | ||||||
| 7,044,781 | ||||||||
| CONSUMER STAPLES — 11.62% | ||||||||
| Altria Group, Inc. | 30,125,000 | 1,040,819 | ||||||
| Avon Products, Inc. | 3,083,300 | 49,980 | ||||||
| Coca-Cola Co. | 6,803,300 | 531,950 | ||||||
| ConAgra Foods, Inc. | 5,521,100 | 143,162 | ||||||
| CVS/Caremark Corp. | 11,000,000 | 514,030 | ||||||
| General Mills, Inc. | 3,920,000 | 151,077 | ||||||
| H.J. Heinz Co. | 2,750,000 | 149,545 | ||||||
| Hillshire Brands Co. | 1,000,000 | 28,990 | ||||||
| Kellogg Co. | 1,000,000 | 49,330 | ||||||
| Kimberly-Clark Corp. | 1,500,000 | 125,655 | ||||||
| Kraft Foods Inc., Class A | 18,374,168 | 709,610 | ||||||
| Molson Coors Brewing Co., Class B | 3,307,400 | 137,621 | ||||||
| PepsiCo, Inc. | 6,097,500 | 430,849 | ||||||
| Philip Morris International Inc. | 27,991,072 | 2,442,501 | ||||||
| Reynolds American Inc. | 1,333,332 | 59,827 | ||||||
| 6,564,946 | ||||||||
| HEALTH CARE — 7.95% | ||||||||
| Abbott Laboratories | 18,685,000 | 1,204,622 | ||||||
Alexion Pharmaceuticals, Inc.3 | 2,350,000 | 233,355 | ||||||
| Amgen Inc. | 14,290,000 | 1,043,742 | ||||||
Bayer AG1 | 1,500,000 | 108,163 | ||||||
Boston Scientific Corp.3 | 12,830,000 | 72,746 | ||||||
Express Scripts Holding Co.3 | 3,240,000 | 180,889 | ||||||
Gilead Sciences, Inc.3 | 10,930,000 | 560,490 | ||||||
| Johnson & Johnson | 600,000 | 40,536 | ||||||
| Medtronic, Inc. | 3,562,500 | 137,976 | ||||||
| Merck & Co., Inc. | 8,175,000 | 341,306 | ||||||
Novartis AG1 | 3,697,000 | 206,219 | ||||||
| Novartis AG (ADR) | 921,556 | 51,515 | ||||||
| Pfizer Inc | 4,025,000 | 92,575 | ||||||
| St. Jude Medical, Inc. | 5,473,000 | 218,427 | ||||||
| 4,492,561 | ||||||||
| FINANCIALS — 5.70% | ||||||||
| American Express Co. | 2,503,500 | 145,729 | ||||||
| Aon PLC, Class A | 8,975,000 | 419,850 | ||||||
| Bank of New York Mellon Corp. | 2,664,800 | 58,492 | ||||||
| Capital One Financial Corp. | 6,500,000 | 355,290 | ||||||
| Citigroup Inc. | 20,110,455 | 551,228 | ||||||
Credit Suisse Group AG1 | 6,239,400 | 113,986 | ||||||
| Fifth Third Bancorp | 1,357,700 | 18,193 | ||||||
Genworth Financial, Inc., Class A3 | 12,844,101 | 72,698 | ||||||
| HSBC Holdings PLC (ADR) | 1,529,416 | 67,493 | ||||||
HSBC Holdings PLC (United Kingdom)1 | 4,869,240 | 42,934 | ||||||
| JPMorgan Chase & Co. | 19,155,000 | 684,408 | ||||||
| Regions Financial Corp. | 13,400,000 | 90,450 | ||||||
Société Générale1,3 | 2,932,877 | 69,149 | ||||||
| State Street Corp. | 5,304,100 | 236,775 | ||||||
| Wells Fargo & Co. | 8,850,000 | 295,944 | ||||||
| 3,222,619 | ||||||||
| INFORMATION TECHNOLOGY — 14.13% | ||||||||
| Accenture PLC, Class A | 2,250,000 | 135,203 | ||||||
Adobe Systems Inc.3 | 5,305,000 | 171,723 | ||||||
Apple Inc.3 | 2,155,000 | 1,258,520 | ||||||
| Automatic Data Processing, Inc. | 4,023,043 | 223,923 | ||||||
| Cisco Systems, Inc. | 4,643,000 | 79,720 | ||||||
| Corning Inc. | 5,500,000 | 71,115 | ||||||
Flextronics International Ltd.3 | 8,176,500 | 50,694 | ||||||
| Hewlett-Packard Co. | 14,000,000 | 281,540 | ||||||
| Intel Corp. | 21,254,700 | 566,438 | ||||||
| International Business Machines Corp. | 1,624,741 | 317,767 | ||||||
| KLA-Tencor Corp. | 6,276,900 | 309,137 | ||||||
| Linear Technology Corp. | 4,450,000 | 139,418 | ||||||
| Maxim Integrated Products, Inc. | 2,757,700 | 70,707 | ||||||
| Microsoft Corp. | 52,650,500 | 1,610,579 | ||||||
Nokia Corp.1 | 47,125,000 | 97,080 | ||||||
| Nokia Corp. (ADR) | 5,652,400 | 11,700 | ||||||
| Oracle Corp. | 33,385,000 | 991,535 | ||||||
| QUALCOMM Inc. | 4,951,300 | 275,688 | ||||||
Samsung Electronics Co. Ltd.1 | 375,500 | 398,114 | ||||||
| Texas Instruments Inc. | 22,825,000 | 654,849 | ||||||
| Xilinx, Inc. | 4,254,500 | 142,824 | ||||||
Yahoo! Inc.3 | 8,107,420 | 128,340 | ||||||
| 7,986,614 | ||||||||
| TELECOMMUNICATION SERVICES — 5.46% | ||||||||
| AT&T Inc. | 49,300,000 | 1,758,038 | ||||||
| CenturyLink, Inc. | 6,096,000 | 240,731 | ||||||
Sprint Nextel Corp., Series 13 | 143,380,000 | 467,419 | ||||||
| Verizon Communications Inc. | 13,944,600 | 619,698 | ||||||
| 3,085,886 | ||||||||
| UTILITIES — 3.20% | ||||||||
| Dominion Resources, Inc. | 9,403,824 | 507,806 | ||||||
| Exelon Corp. | 5,120,600 | 192,637 | ||||||
| FirstEnergy Corp. | 4,443,500 | 218,576 | ||||||
GDF SUEZ1 | 18,639,655 | 444,722 | ||||||
| NextEra Energy, Inc. | 300,000 | 20,643 | ||||||
| PG&E Corp. | 2,225,000 | 100,726 | ||||||
| Public Service Enterprise Group Inc. | 10,000,000 | 325,000 | ||||||
| 1,810,110 | ||||||||
MISCELLANEOUS — 2.06% | ||||||||
| Other common stocks in initial period of acquisition | 1,162,571 | |||||||
| Total common stocks (cost: $38,608,150,000) | 51,187,275 | |||||||
| Warrants — 0.00% | ||||||||
| FINANCIALS — 0.00% | ||||||||
Washington Mutual, Inc., warrants, expire 20131,3 | 3,071,428 | — | ||||||
| Total warrants (cost: $11,770,000) | — | |||||||
| Shares or | ||||||||
| Convertible securities — 0.59% | principal amount | |||||||
| MATERIALS — 0.09% | ||||||||
| ArcelorMittal 5.00% convertible debenture 2014 | $ | 48,620,000 | 50,079 | |||||
| CONSUMER DISCRETIONARY — 0.50% | ||||||||
| General Motors Co., Series B, 4.75% convertible preferred 2013 | 8,611,850 | 285,913 | ||||||
| Total convertible securities (cost: $462,252,000) | 335,992 | |||||||
| Principal amount | ||||||||
| Bonds & notes — 1.23% | (000 | ) | ||||||
| ENERGY — 0.01% | ||||||||
| Chevron Corp. 4.95% 2019 | $ | 5,000 | 6,038 | |||||
| MATERIALS — 0.01% | ||||||||
| Dow Chemical Co. 4.125% 2021 | 500 | 538 | ||||||
| Rio Tinto Finance (USA) Ltd. 9.00% 2019 | 3,780 | 5,178 | ||||||
| 5,716 | ||||||||
| INDUSTRIALS — 0.06% | ||||||||
| Burlington Northern Santa Fe LLC 5.75% 2018 | 5,000 | 5,955 | ||||||
| CSX Corp. 6.25% 2015 | 5,000 | 5,701 | ||||||
| Honeywell International Inc. 5.00% 2019 | 4,090 | 4,875 | ||||||
| Norfolk Southern Corp. 5.75% 2018 | 2,500 | 2,971 | ||||||
| Raytheon Co. 4.40% 2020 | 3,055 | 3,476 | ||||||
| Union Pacific Corp. 6.125% 2020 | 5,000 | 6,187 | ||||||
| United Technologies Corp. 4.50% 2020 | 5,475 | 6,360 | ||||||
| Waste Management, Inc. 2.60% 2016 | 445 | 457 | ||||||
| 35,982 | ||||||||
| CONSUMER DISCRETIONARY — 0.03% | ||||||||
| Comcast Corp. 6.30% 2017 | 5,120 | 6,166 | ||||||
| Kohl’s Corp. 6.25% 2017 | 3,500 | 4,206 | ||||||
| News America Inc. 6.90% 2019 | 5,000 | 6,160 | ||||||
| 16,532 | ||||||||
| CONSUMER STAPLES — 0.03% | ||||||||
British American Tobacco International Finance PLC 9.50% 20184 | 5,000 | 6,819 | ||||||
| Kraft Foods Inc. 2.625% 2013 | 2,555 | 2,594 | ||||||
| PepsiCo, Inc. 2.50% 2016 | 2,500 | 2,628 | ||||||
Tesco PLC 5.50% 20174 | 2,506 | 2,914 | ||||||
| 14,955 | ||||||||
| HEALTH CARE — 0.03% | ||||||||
| Boston Scientific Corp. 6.00% 2020 | 1,250 | 1,494 | ||||||
| Cardinal Health, Inc. 5.80% 2016 | 2,905 | 3,367 | ||||||
| Novartis Securities Investment Ltd. 5.125% 2019 | 2,500 | 2,986 | ||||||
| Pfizer Inc 6.20% 2019 | 2,500 | 3,140 | ||||||
Roche Holdings Inc. 6.00% 20194 | 2,500 | 3,117 | ||||||
| WellPoint, Inc. 7.00% 2019 | 4,200 | 5,225 | ||||||
| 19,329 | ||||||||
| FINANCIALS — 0.22% | ||||||||
| Bank of America Corp. 3.75% 2016 | 225 | 227 | ||||||
Bank of America Corp., Series K, junior subordinated 8.00% noncumulative (undated)5 | 3,335 | 3,478 | ||||||
| Bank of America Corp., Series L, 3.625% 2016 | 250 | 252 | ||||||
Bank of America Corp., Series M, junior subordinated 8.125% noncumulative (undated)5 | 3,335 | 3,504 | ||||||
| Boston Properties, Inc. 5.875% 2019 | 5,000 | 5,776 | ||||||
Citigroup Capital XXI 8.30% 20775 | 687 | 690 | ||||||
| Citigroup Inc. 4.587% 2015 | 1,387 | 1,452 | ||||||
JPMorgan Chase & Co., Series I, junior subordinated 7.90% (undated)5 | 62,936 | 69,236 | ||||||
| Northern Trust Corp. 4.625% 2014 | 2,650 | 2,837 | ||||||
| Regions Bank, junior subordinated 7.50% 2018 | 4,350 | 4,905 | ||||||
| Regions Financial Corp. 7.75% 2014 | 13,082 | 14,161 | ||||||
| Simon Property Group, LP 4.20% 2015 | 2,600 | 2,743 | ||||||
| SLM Corp., Series A, 5.125% 2012 | 1,000 | 1,004 | ||||||
Société Générale, junior subordinated 5.922% (undated)4,5 | 20,955 | 14,249 | ||||||
| 124,514 | ||||||||
| INFORMATION TECHNOLOGY — 0.01% | ||||||||
| Cisco Systems, Inc. 4.95% 2019 | 2,500 | 2,954 | ||||||
| Xerox Corp. 2.95% 2017 | 750 | 759 | ||||||
| 3,713 | ||||||||
| TELECOMMUNICATION SERVICES — 0.41% | ||||||||
| AT&T Inc. 4.85% 2014 | 5,000 | 5,329 | ||||||
| Sprint Capital Corp. 6.90% 2019 | 17,200 | 16,254 | ||||||
Sprint Nextel Corp. 11.50% 20214 | 101,775 | 113,734 | ||||||
| Sprint Nextel Corp. 8.375% 2017 | 5,300 | 5,459 | ||||||
Sprint Nextel Corp. 9.125% 20174 | 83,400 | 87,778 | ||||||
| Vodafone Group PLC 5.625% 2017 | 2,000 | 2,344 | ||||||
| 230,898 | ||||||||
MORTGAGE-BACKED OBLIGATIONS6 — 0.10% | ||||||||
| Fannie Mae 3.00% 2027 | 5,000 | 5,241 | ||||||
| Fannie Mae 3.50% 2025 | 4,118 | 4,357 | ||||||
| Fannie Mae 3.50% 2042 | 3,000 | 3,172 | ||||||
| Fannie Mae 4.00% 2041 | 13,960 | 15,073 | ||||||
| Fannie Mae 4.50% 2041 | 9,119 | 10,041 | ||||||
| Fannie Mae 5.00% 2041 | 9,430 | 10,470 | ||||||
| Fannie Mae 6.00% 2038 | 333 | 368 | ||||||
| Fannie Mae 6.00% 2038 | 3,480 | 3,837 | ||||||
| Fannie Mae 6.00% 2038 | 3,583 | 3,934 | ||||||
| 56,493 | ||||||||
| BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 0.32% | ||||||||
| Federal Home Loan Bank 3.625% 2013 | 50,000 | 52,159 | ||||||
| Freddie Mac 2.125% 2012 | 10,000 | 10,045 | ||||||
| Freddie Mac 5.00% 2014 | 10,000 | 10,930 | ||||||
U.S. Treasury 0.125% 20167 | 4,169 | 4,345 | ||||||
U.S. Treasury 0.125% 20227 | 3,049 | 3,232 | ||||||
| U.S. Treasury 0.875% 2017 | 500 | 504 | ||||||
| U.S. Treasury 1.00% 2016 | 2,500 | 2,540 | ||||||
| U.S. Treasury 1.00% 2017 | 3,500 | 3,549 | ||||||
| U.S. Treasury 1.125% 2019 | 3,000 | 3,006 | ||||||
| U.S. Treasury 1.25% 2014 | 10,000 | 10,150 | ||||||
| U.S. Treasury 1.75% 2022 | 1,000 | 1,009 | ||||||
| U.S. Treasury 4.00% 2018 | 10,000 | 11,842 | ||||||
| U.S. Treasury 4.125% 2015 | 10,000 | 11,052 | ||||||
| U.S. Treasury 4.625% 2016 | 20,000 | 23,418 | ||||||
| U.S. Treasury 8.00% 2021 | 20,000 | 31,422 | ||||||
| 179,203 | ||||||||
| Total bonds & notes (cost: $636,515,000) | 693,373 | |||||||
| Short-term securities — 7.32% | ||||||||
Abbott Laboratories 0.14%–0.16% due 7/31–9/10/20124 | 117,200 | 117,178 | ||||||
Chariot Funding, LLC 0.18% due 7/19/20124 | 50,000 | 49,995 | ||||||
Coca-Cola Co. 0.17%–0.23% due 8/22–10/15/20124 | 83,800 | 83,770 | ||||||
| Fannie Mae 0.07%–0.23% due 7/16/2012–1/7/2013 | 1,053,707 | 1,053,281 | ||||||
| Federal Farm Credit Banks 0.07%–0.20% due 7/23/2012–4/30/2013 | 341,000 | 340,802 | ||||||
| Federal Home Loan Bank 0.10%–0.21% due 7/13/2012–6/14/2013 | 646,162 | 645,723 | ||||||
| Freddie Mac 0.07%–0.18% due 7/11/2012–1/23/2013 | 719,442 | 719,155 | ||||||
Google Inc. 0.14% due 8/10/20124 | 28,000 | 27,994 | ||||||
Medtronic Inc. 0.11% due 7/5/20124 | 50,000 | 49,999 | ||||||
Merck & Co. Inc. 0.13% due 8/22/20124 | 50,000 | 49,990 | ||||||
| National Rural Utilities Cooperative Finance Corp. 0.14% due 7/19/2012 | 45,300 | 45,297 | ||||||
NetJets Inc. 0.12% due 7/24/20124 | 6,000 | 6,000 | ||||||
| Regents of the University of California 0.22% due 10/22/2012 | 26,607 | 26,589 | ||||||
Straight-A Funding LLC 0.16%–0.18% due 7/19–8/8/20124 | 52,400 | 52,392 | ||||||
| U.S. Bank, N.A. 0.14% due 7/2/2012 | 50,000 | 49,999 | ||||||
| U.S. Treasury Bills 0.082%–0.147% due 7/19–10/25/2012 | 682,800 | 682,729 | ||||||
Variable Funding Capital Company LLC 0.16%–0.19% due 7/16–8/27/20124 | 113,409 | 113,382 | ||||||
Wal-Mart Stores, Inc. 0.13% due 7/27/20124 | 24,500 | 24,498 | ||||||
| Total short-term securities (cost: $4,138,728,000) | 4,138,773 | |||||||
| Total investment securities (cost: $43,857,415,000) | 56,355,413 | |||||||
| Other assets less liabilities | 157,521 | |||||||
| Net assets | $ | 56,512,934 | ||||||
As permitted by U.S. Securities and Exchange Commission (“SEC”) 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 $3,937,581,000, which represented 6.97% of the net assets of the fund. This entire amount relates 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.
2Represents an affiliated company as defined under the Investment Company Act of 1940.
3Security did not produce income during the last 12 months.
4Acquired in a transaction exempt from registration under Rule 144A or section 4(2) of 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 $803,809,000, which represented 1.42% of the net assets of the fund.
5Coupon rate may change periodically.
6Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
7Index-linked bond whose principal amount moves with a government price index.
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 investment objectives, risks, charges and expenses. This and other important information is contained in the fund 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 800/421-4225 or visit the American Funds website at americanfunds.com.
MFGEFP-904-0812O-S32872
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, 2012 |
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, 2012 |
By /s/ Brian D. Bullard |
Brian D. Bullard, Treasurer and Principal Financial Officer |
| Date: August 31, 2012 |