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: (949) 975-5000
Date of fiscal year end: December 31
Date of reporting period: December 31, 2020
Brian D. Bullard
The Investment Company of America
6455 Irvine Center Drive
Irvine, California 92618
(Name and Address of Agent for Service)
ITEM 1 – Reports to Stockholders
|
ICA The Investment
Annual report |
 |
Invest in a fund whose
objective has stood
the test of time
The Investment Company of America seeks to achieve long-term growth of capital and income.
This fund is one of more than 40 offered by Capital Group, home of American Funds, one of the nation’s largest mutual fund families. For nearly 90 years, Capital Group 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. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com.
See page 4 for Class A share results with relevant sales charges deducted. For other share class results, visit capitalgroup.com and americanfundsretirement.com.
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 capitalgroup.com for more information.
The fund’s 30-day yield for Class A shares as of January 31, 2021, reflecting the 5.75% maximum sales charge and calculated in accordance with the U.S. Securities and Exchange Commission formula, was 1.29%.
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.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Contents
| 1 | Letter to investors |
| 4 | The value of a long-term perspective |
| 6 | Investment portfolio |
| 12 | Financial statements |
| 35 | Board of trustees and other officers |
In 2020, the United States and global equity markets saw substantial volatility as nations attempted to curb the spread of the novel coronavirus, or COVID-19. While markets had started the year strong with the unmanaged Standard & Poor’s 500 Composite Index (S&P 500) posting record highs in January and February, March brought a sudden reversal of fortune.
The S&P 500, a market capitalization-weighted index based on the results of approximately 500 widely held common stocks, saw its third largest, single-day percentage drop of nearly 12% on Monday, March 16, as the economy reacted to the declaration of a national emergency regarding the COVID-19 pandemic the preceding Friday. Despite this, equity markets largely recovered and ended the year strong.
The investment objectives of The Investment Company of America (ICA) are to achieve long-term growth of capital and income. It seeks to accomplish these objectives by looking for quality companies that have good prospects of long-term growth and dividend income. Against this backdrop, ICA gained 14.50% for the 12-month period ended December 31, 2020, with distributions reinvested. In comparison, the S&P 500 gained 18.40% over the same period.
For the 20 years ended December 31, 2020, ICA posted an average annual total return of 7.38% with distributions reinvested, compared with 7.47% by the S&P 500. Over its lifetime, ICA has had an average annual total return of 12.11% with distributions reinvested, compared with 11.03% by the S&P 500.
Market overview
Following the March downturn, major indices generally rebounded in the second quarter as well as the second half of the year. Initial recovery was spurred by the variety of COVID-related measures passed between March and April aimed at ensuring economic stabilization during the national lockdown. This included the U.S.’s largest-ever economic stimulus package — the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act.
While interest rates were cut throughout 2019 and into early 2020, the Federal Open Markets Committee slashed the target range for the federal funds rate in mid-March to between 0.00% and 0.25% — rates last seen during the global financial crisis of the late 2000’s. These actions, among others, helped drive a strong initial rebound in markets.
Volatility continued throughout the year, however. Markets lost their momentum in September and October as the virus began to spread more rapidly, forcing further lockdowns which outweighed pockets of stronger economic data. Yet the markets reversed the trend in the last two months of the year. In November, the Dow Jones Industrial Average experienced its largest monthly gain in more than 30 years, and in December, the S&P 500 posted its 33rd record high of 2020.
Equity markets vs. economic indicators
Following the first quarter market drop, markets and common economic indicators experienced noticeable divergence throughout the remainder of the year.
| The Investment Company of America | 1 |
2020 results at a glance
Year ended December 31, 2020 (with all distributions reinvested)
| ICA (Class A shares) | Standard & Poor’s 500 Composite Index* | |||||||
| Income return | 1.58 | % | 1.82 | % | ||||
| Capital return | 12.92 | % | 16.58 | % | ||||
| Total return | 14.50 | % | 18.40 | % | ||||
| * | Source: S&P Dow Jones Indices LLC. The S&P 500 is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index. |
Dividends and capital gain distributions paid in 2020
| Per Class A share | Payment date | |||||||
| Income dividends | $ | 0.155 | March 18 | |||||
| 0.155 | June 17 | |||||||
| 0.155 | September 16 | |||||||
| 0.155 | December 16 | |||||||
| $ | 0.620 | |||||||
| Capital gain distributions | $ | 0.114 | June 17 | |||||
Expense ratios and portfolio turnover rates1
Year ended December 31, 2020
| Expense ratio | Portfolio turnover rate | |||||||
| ICA | 0.59 | % | 39 | % | ||||
| Industry average2 | 1.03 | % | 49 | % | ||||
| 1 | The expense ratio is the annual percentage of net assets used to pay fund expenses. The ratio shown is for Class A shares for the year ended December 31, 2020. The portfolio turnover rate is a measure of how often securities are bought and sold by a fund. |
| 2 | Source: Refinitiv Lipper. Lipper Growth & Income Funds Average (industry average expense ratio based on statistics for front-end load funds, for the most recent fiscal year-ends available as of 12/31/20.) |
The S&P 500 not only recovered but also set and broke new records, cresting the 3,500 mark then ending 2020 above 3,700. Similarly, both IHS Markit and The Institute for Supply Management measurements of the purchasing managers’ index showed a significant uptick in December.
In line with the S&P 500’s drop, the unemployment rate spiked, reaching nearly 15% in April. While the equity market showed a V-shaped recovery, the unemployment rate has continued to hover around 7%. Additionally, the University of Michigan’s consumer sentiment index fell 30 points from over 100 in February, ranging between approximately 72 and 82 for the remainder of the year. Overall, market sentiment improved in the last quarter of the year with optimism over COVID-19 vaccines.
A tale of two equities: Growth vs. value
Underlying the equity market’s performance for the year is a tale of two equity strategies: growth vs. value. Growth stocks vastly outpaced their value peers, widening the performance gap for the fourth year in a row, and for large-capitalization stocks in particular, to levels not seen since 1999.
Up nearly 44% for the year, the information technology sector was the primary force behind this divergence. The importance of tech companies grew significantly in the pandemic as people increasingly depended on online solutions as companies pivoted to a virtual, or work-from-home, model.
| 2 | The Investment Company of America |
On the other side, sectors weighing on value strategies included energy, financial services and other sectors considered “defensive.” Oil supply greatly outstripped demand which fell precipitously early in the year, in line with the initial wave of stay-at-home orders. The sector rallied and ended the year on a strong note as oil prices rose to their highest levels since early March, driven by positive vaccine news, but were unable to reach January levels. Financials lagged before staging a moderate recovery towards the latter part of the year.
ICA’s portfolio in review
ICA lagged its primary benchmark, the S&P 500, for the 12-month period due to two key drivers. While the information technology sector comprised nearly 19% of the fund’s holdings, on average, throughout 2020 — its largest holding by sector on average — and helped drive positive results, the index weight was approximately 26.5% on average for the year. Secondly, the fund’s exposure to the energy sector, while at roughly 5.4% on average for the period, was nearly double the index’s 2.8% weighting, leading the sector’s downturn to weigh more heavily upon the fund.
On a relative basis, the industrials sector, also detracted from the fund’s performance for the year as aerospace and defense companies lagged earlier in the year as not only the pandemic weighed on expectations for an aerospace recovery, but also increasing concerns that rising budget deficits could crimp defense spending going forward.
Financials and communication services were top relative contributors for the year. ICA’s exposure to the financials sector is roughly half that of the index, which helped as many large banks were weighed down by the extraordinarily low interest rates and sluggish economic growth. Stock selection with a focus on interactive media and services in the communication services industry was crucial, as companies like Netflix and Facebook saw a surge in demand spurred by stay-at-home orders.
ICA’s cash position both helped and hindered the fund during the year, initially helping provide a cushion during the market downturn in the first quarter, but detracted from results somewhat for the year. Contribution from the health care sector was similarly mixed as the industry saw both significant interest and volatility driven by the changing face of the pandemic.
We remain focused on the long term
While concerns for the future of the U.S. economy remain amid political cross currents and recent events, our focus remains the same: Find solid companies at attractive valuations to hold for the long term. We remain confident in our robust fundamental research and bottom-up analysis — an investment philosophy that has served the fund well since its inception in the 1930s, and which has seen many market and economic cycles come and go.
We thank you for your ongoing trust and confidence you place in us. We look forward to reporting to you again in six months.
Cordially,
Grant L. Cambridge
Co-President
Martin Romo
Co-President
February 11, 2021
For current information about the fund, visit capitalgroup.com.
| The Investment Company of America | 3 |
The value of a long-term perspective
Fund results shown are for Class A shares and reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment.1 Thus, the net amount invested was $9,425.2 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. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com.
The results shown are before taxes on fund distributions and sale of fund shares.
| 1 | As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. |
| 2 | The maximum initial sales charge was 8.5% prior to July 1, 1988. |
| 3 | Includes dividends and capital gain distributions reinvested in the years 1970 to 2020. |
| 4 | Source: S&P Dow Jones Indices LLC. The S&P 500 is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index. |
| 5 | Includes reinvested capital gain distributions, but does not reflect income dividends taken in cash. |
| 4 | The Investment Company of America |
How a hypothetical $10,000 investment has grown over 50 years
This chart illustrates how a hypothetical $10,000 investment in The Investment Company of America over the past 50 years, from December 31, 1970, through December 31, 2020, showing the closing values for each year.
| The Investment Company of America | 5 |
Investment portfolio December 31, 2020
| Industry sector diversification | Percent of net assets |
| Common stocks 95.33% | Shares | Value (000) | ||||||
| Energy 4.41% | ||||||||
| Baker Hughes Co., Class A | 44,578,105 | $ | 929,454 | |||||
| Canadian Natural Resources, Ltd. (CAD denominated) | 11,087,371 | 266,449 | ||||||
| Chevron Corp. | 9,994,989 | 844,077 | ||||||
| Concho Resources Inc. | 6,541,258 | 381,682 | ||||||
| ConocoPhillips | 9,412,331 | 376,399 | ||||||
| Diamondback Energy, Inc. | 3,736,175 | 180,831 | ||||||
| EOG Resources, Inc. | 21,503,532 | 1,072,381 | ||||||
| Exxon Mobil Corp. | 1,267,110 | 52,230 | ||||||
| Pioneer Natural Resources Company | 850,935 | 96,913 | ||||||
| Royal Dutch Shell PLC, Class B1 | 14,085,600 | 242,671 | ||||||
| Schlumberger Ltd. | 3,919,156 | 85,555 | ||||||
| TC Energy Corp. (CAD denominated) | 7,116,125 | 289,308 | ||||||
| 4,817,950 | ||||||||
| Materials 4.48% | ||||||||
| Air Products and Chemicals, Inc. | 169,274 | 46,249 | ||||||
| BHP Group PLC1 | 20,568,725 | 542,064 | ||||||
| Celanese Corp. | 1,037,551 | 134,819 | ||||||
| Dow Inc. | 5,975,444 | 331,637 | ||||||
| Freeport-McMoRan Inc. | 16,389,837 | 426,464 | ||||||
| International Flavors & Fragrances Inc.2 | 2,687,898 | 292,551 | ||||||
| Linde PLC | 6,138,148 | 1,617,463 | ||||||
| LyondellBasell Industries NV | 2,042,964 | 187,258 | ||||||
| Newmont Corp. | 567,800 | 34,006 | ||||||
| PPG Industries, Inc. | 380,741 | 54,911 | ||||||
| Rio Tinto PLC1 | 10,886,044 | 814,536 | ||||||
| Sherwin-Williams Company | 190,990 | 140,360 | ||||||
| Vale SA, ordinary nominative (ADR) | 15,752,294 | 264,008 | ||||||
| 4,886,326 | ||||||||
| Industrials 8.42% | ||||||||
| Carrier Global Corp. | 26,136,531 | 985,870 | ||||||
| Caterpillar Inc. | 308,941 | 56,233 | ||||||
| CSX Corp. | 9,622,923 | 873,280 | ||||||
| Cummins Inc. | 449,385 | 102,055 | ||||||
| Fortive Corp. | 472,870 | 33,489 | ||||||
| General Dynamics Corp. | 5,309,733 | 790,194 | ||||||
| General Electric Co. | 79,617,300 | 859,867 | ||||||
| Honeywell International Inc. | 234,766 | 49,935 | ||||||
| Illinois Tool Works Inc. | 3,384,760 | 690,085 | ||||||
| L3Harris Technologies, Inc. | 4,256,933 | 804,645 | ||||||
| Lockheed Martin Corp. | 887,032 | 314,879 | ||||||
| Norfolk Southern Corp. | 435,767 | 103,543 | ||||||
| Northrop Grumman Corp. | 1,494,444 | 455,387 | ||||||
| Otis Worldwide Corp. | 3,266,339 | 220,641 | ||||||
| Raytheon Technologies Corp. | 18,306,558 | 1,309,102 | ||||||
| 6 | The Investment Company of America |
| Common stocks (continued) | Shares | Value (000) | ||||||
| Industrials (continued) | ||||||||
| RELX PLC1 | 3,180,834 | $ | 78,239 | |||||
| Rolls-Royce Holdings PLC1,3 | 200,898,840 | 305,867 | ||||||
| Safran SA1,2,3 | 945,148 | 134,041 | ||||||
| Stanley Black & Decker, Inc. | 3,300,760 | 589,384 | ||||||
| Union Pacific Corp. | 215,000 | 44,767 | ||||||
| United Parcel Service, Inc., Class B | 715,718 | 120,527 | ||||||
| Waste Connections, Inc. | 358,386 | 36,760 | ||||||
| Waste Management, Inc. | 1,955,495 | 230,612 | ||||||
| 9,189,402 | ||||||||
| Consumer discretionary 10.26% | ||||||||
| Airbnb, Inc., Class A3 | 51,500 | 7,560 | ||||||
| Amazon.com, Inc.3 | 1,151,615 | 3,750,729 | ||||||
| Aptiv PLC | 1,505,939 | 196,209 | ||||||
| Booking Holdings Inc.3 | 6,492 | 14,459 | ||||||
| Darden Restaurants, Inc. | 1,359,649 | 161,961 | ||||||
| EssilorLuxottica1 | 911,093 | 142,091 | ||||||
| General Motors Company | 25,701,124 | 1,070,195 | ||||||
| Hasbro, Inc.4 | 7,586,945 | 709,683 | ||||||
| Hilton Worldwide Holdings Inc. | 2,320,824 | 258,215 | ||||||
| Home Depot, Inc. | 9,492,487 | 2,521,394 | ||||||
| Kering SA1 | 245,689 | 178,615 | ||||||
| Las Vegas Sands Corp. | 712,754 | 42,480 | ||||||
| Marriott International, Inc., Class A | 840,513 | 110,880 | ||||||
| McDonald’s Corp. | 2,782,029 | 596,968 | ||||||
| NIKE, Inc., Class B | 1,380,247 | 195,264 | ||||||
| Royal Caribbean Cruises Ltd. | 7,011,385 | 523,680 | ||||||
| Sony Corp.1 | 2,850,300 | 286,580 | ||||||
| Starbucks Corp. | 436,500 | 46,697 | ||||||
| Target Corp. | 991,717 | 175,068 | ||||||
| TJX Companies, Inc. | 1,069,439 | 73,032 | ||||||
| VF Corp. | 645,900 | 55,166 | ||||||
| YUM! Brands, Inc. | 769,000 | 83,483 | ||||||
| 11,200,409 | ||||||||
| Consumer staples 7.49% | ||||||||
| Altria Group, Inc. | 12,354,956 | 506,553 | ||||||
| Anheuser-Busch InBev SA/NV1 | 1,822,576 | 127,366 | ||||||
| British American Tobacco PLC1 | 18,669,946 | 694,427 | ||||||
| Clorox Co. | 575,000 | 116,104 | ||||||
| Constellation Brands, Inc., Class A | 993,685 | 217,667 | ||||||
| Costco Wholesale Corp. | 127,924 | 48,199 | ||||||
| Estée Lauder Companies Inc., Class A | 160,280 | 42,665 | ||||||
| General Mills, Inc. | 1,561,263 | 91,802 | ||||||
| Keurig Dr Pepper Inc. | 28,840,836 | 922,907 | ||||||
| Kraft Heinz Company | 734,095 | 25,444 | ||||||
| Lamb Weston Holdings, Inc.4 | 10,041,516 | 790,669 | ||||||
| Mondelez International, Inc. | 2,298,136 | 134,372 | ||||||
| Nestlé SA1 | 7,084,153 | 834,009 | ||||||
| PepsiCo, Inc. | 3,811,845 | 565,297 | ||||||
| Pernod Ricard SA1 | 956,035 | 183,261 | ||||||
| Philip Morris International Inc. | 27,257,398 | 2,256,640 | ||||||
| Procter & Gamble Company | 791,938 | 110,190 | ||||||
| Reckitt Benckiser Group PLC1 | 2,938,959 | 262,848 | ||||||
| Walmart Inc. | 1,747,000 | 251,830 | ||||||
| 8,182,250 | ||||||||
| Health care 13.60% | ||||||||
| Abbott Laboratories | 26,843,934 | 2,939,142 | ||||||
| AbbVie Inc. | 5,759,075 | 617,085 | ||||||
| AmerisourceBergen Corp. | 367,397 | 35,917 | ||||||
| Amgen Inc. | 5,826,311 | 1,339,585 | ||||||
| Anthem, Inc. | 276,954 | 88,927 | ||||||
| AstraZeneca PLC1 | 2,647,490 | 264,508 | ||||||
| Baxter International Inc. | 1,222,719 | 98,111 | ||||||
| Centene Corp.3 | 731,411 | 43,907 | ||||||
| Chugai Pharmaceutical Co., Ltd.1 | 3,589,700 | 191,650 | ||||||
| Cigna Corp. | 279,000 | 58,082 | ||||||
| The Investment Company of America | 7 |
| Common stocks (continued) | Shares | Value (000) | ||||||
| Health care (continued) | ||||||||
| Daiichi Sankyo Company, Ltd.1 | 33,733,200 | $ | 1,156,388 | |||||
| Danaher Corp. | 860,470 | 191,145 | ||||||
| DexCom, Inc.3 | 90,246 | 33,366 | ||||||
| Edwards Lifesciences Corp.3 | 1,680,056 | 153,271 | ||||||
| Eli Lilly and Company | 1,020,273 | 172,263 | ||||||
| Gilead Sciences, Inc. | 21,751,493 | 1,267,242 | ||||||
| GlaxoSmithKline PLC1 | 27,580,265 | 505,355 | ||||||
| Humana Inc. | 490,282 | 201,148 | ||||||
| Johnson & Johnson | 597,311 | 94,005 | ||||||
| Medtronic PLC | 4,178,193 | 489,433 | ||||||
| Merck & Co., Inc. | 11,896,644 | 973,145 | ||||||
| Novartis AG1 | 2,424,587 | 229,004 | ||||||
| Roche Holding AG, nonvoting, non-registered shares1 | 581,760 | 202,981 | ||||||
| Royalty Pharma PLC, Class A | 8,190,570 | 409,938 | ||||||
| Seagen Inc.3 | 789,441 | 138,263 | ||||||
| Stryker Corp. | 404,794 | 99,191 | ||||||
| Teva Pharmaceutical Industries Ltd. (ADR)3 | 22,781,732 | 219,844 | ||||||
| Thermo Fisher Scientific Inc. | 1,720,769 | 801,500 | ||||||
| UnitedHealth Group Inc. | 5,033,378 | 1,765,105 | ||||||
| Zimmer Biomet Holdings, Inc. | 478,046 | 73,662 | ||||||
| 14,853,163 | ||||||||
| Financials 7.78% | ||||||||
| AIA Group Ltd.1 | 29,880,800 | 368,062 | ||||||
| American International Group, Inc. | 22,506,047 | 852,079 | ||||||
| Aon PLC, Class A | 1,201,233 | 253,784 | ||||||
| Arthur J. Gallagher & Co. | 1,932,338 | 239,049 | ||||||
| Bank of America Corp. | 1,355,445 | 41,084 | ||||||
| BlackRock, Inc. | 772,941 | 557,708 | ||||||
| Chubb Ltd. | 3,228,312 | 496,902 | ||||||
| Citigroup Inc. | 13,010,653 | 802,237 | ||||||
| Citizens Financial Group, Inc. | 3,911,117 | 139,862 | ||||||
| CME Group Inc., Class A | 821,789 | 149,607 | ||||||
| Discover Financial Services | 4,238,815 | 383,740 | ||||||
| Great-West Lifeco Inc. (CAD denominated) | 9,980,768 | 237,973 | ||||||
| JPMorgan Chase & Co. | 13,298,427 | 1,689,831 | ||||||
| KeyCorp | 1,280,241 | 21,009 | ||||||
| Marsh & McLennan Companies, Inc. | 474,291 | 55,492 | ||||||
| PNC Financial Services Group, Inc. | 8,173,495 | 1,217,851 | ||||||
| S&P Global Inc. | 1,702,500 | 559,663 | ||||||
| The Blackstone Group Inc., Class A | 616,456 | 39,952 | ||||||
| Travelers Companies, Inc. | 2,205,900 | 309,642 | ||||||
| Truist Financial Corp. | 1,674,158 | 80,242 | ||||||
| 8,495,769 | ||||||||
| Information technology 20.54% | ||||||||
| Accenture PLC, Class A | 2,496,375 | 652,078 | ||||||
| Adobe Inc.3 | 876,606 | 438,408 | ||||||
| Amphenol Corp., Class A | 4,844,753 | 633,548 | ||||||
| Analog Devices, Inc. | 324,556 | 47,947 | ||||||
| Apple Inc. | 17,516,117 | 2,324,214 | ||||||
| Applied Materials, Inc. | 907,058 | 78,279 | ||||||
| ASML Holding NV1 | 1,994,785 | 964,004 | ||||||
| Broadcom Inc. | 12,759,660 | 5,586,817 | ||||||
| Cognizant Technology Solutions Corp., Class A | 2,202,000 | 180,454 | ||||||
| Fidelity National Information Services, Inc. | 1,238,472 | 175,194 | ||||||
| Global Payments Inc. | 1,010,000 | 217,574 | ||||||
| GoDaddy Inc., Class A3 | 466,562 | 38,701 | ||||||
| Intel Corp. | 10,636,766 | 529,924 | ||||||
| Intuit Inc. | 273,269 | 103,801 | ||||||
| Mastercard Inc., Class A | 2,965,661 | 1,058,563 | ||||||
| Microsoft Corp. | 33,295,332 | 7,405,548 | ||||||
| NetApp, Inc. | 2,548,476 | 168,811 | ||||||
| Okta, Inc., Class A3 | 215,063 | 54,682 | ||||||
| Paychex, Inc. | 211,011 | 19,662 | ||||||
| QUALCOMM Inc. | 557,490 | 84,928 | ||||||
| Samsung Electronics Co., Ltd.1 | 6,000,000 | 448,425 | ||||||
| ServiceNow, Inc.3 | 1,316,014 | 724,374 | ||||||
| 8 | The Investment Company of America |
| Value | ||||||||
| Common stocks (continued) | Shares | (000) | ||||||
| Information technology (continued) | ||||||||
| SS&C Technologies Holdings, Inc. | 2,577,886 | $ | 187,541 | |||||
| Taiwan Semiconductor Manufacturing Company, Ltd.1 | 2,483,000 | 46,634 | ||||||
| Visa Inc., Class A | 1,167,791 | 255,431 | ||||||
| Vontier Corp.3 | 189,148 | 6,317 | ||||||
| 22,431,859 | ||||||||
| Communication services 13.52% | ||||||||
| Activision Blizzard, Inc. | 1,343,470 | 124,741 | ||||||
| Alphabet Inc., Class A3 | 1,237,550 | 2,168,980 | ||||||
| Alphabet Inc., Class C3 | 707,399 | 1,239,278 | ||||||
| Charter Communications, Inc., Class A3 | 749,814 | 496,040 | ||||||
| Comcast Corp., Class A | 67,965,636 | 3,561,399 | ||||||
| Facebook, Inc., Class A3 | 16,399,555 | 4,479,702 | ||||||
| Netflix, Inc.3 | 4,621,717 | 2,499,101 | ||||||
| Omnicom Group Inc. | 1,750,000 | 109,148 | ||||||
| Vodafone Group PLC1 | 47,782,430 | 78,632 | ||||||
| 14,757,021 | ||||||||
| Utilities 2.77% | ||||||||
| AES Corp. | 11,216,388 | 263,585 | ||||||
| American Electric Power Company, Inc. | 2,688,731 | 223,891 | ||||||
| CenterPoint Energy, Inc. | 2,606,837 | 56,412 | ||||||
| CMS Energy Corp. | 3,575,142 | 218,119 | ||||||
| Consolidated Edison, Inc. | 1,248,292 | 90,214 | ||||||
| Dominion Energy, Inc. | 3,109,822 | 233,859 | ||||||
| Edison International | 4,209,122 | 264,417 | ||||||
| Enel SpA1 | 11,500,000 | 116,131 | ||||||
| Entergy Corp. | 547,000 | 54,613 | ||||||
| Exelon Corp. | 8,541,970 | 360,642 | ||||||
| NextEra Energy, Inc. | 4,282,076 | 330,362 | ||||||
| PG&E Corp.3 | 30,382,888 | 378,571 | ||||||
| Sempra Energy | 2,492,021 | 317,508 | ||||||
| Xcel Energy Inc. | 1,708,761 | 113,923 | ||||||
| 3,022,247 | ||||||||
| Real estate 2.06% | ||||||||
| Alexandria Real Estate Equities, Inc. REIT | 1,762,564 | 314,124 | ||||||
| American Tower Corp. REIT | 2,041,264 | 458,182 | ||||||
| Crown Castle International Corp. REIT | 3,983,520 | 634,137 | ||||||
| Equinix, Inc. REIT | 274,759 | 196,227 | ||||||
| Prologis, Inc. REIT | 1,205,350 | 120,125 | ||||||
| Public Storage REIT | 588,807 | 135,973 | ||||||
| SBA Communications Corp. REIT | 1,384,849 | 390,708 | ||||||
| 2,249,476 | ||||||||
| Total common stocks (cost: $61,249,637,000) | 104,085,872 | |||||||
| Preferred securities 0.30% | ||||||||
| Financials 0.30% | ||||||||
| Fannie Mae, Series S, 8.25% noncumulative, preferred shares3 | 18,204,422 | 156,194 | ||||||
| Federal Home Loan Mortgage Corp., Series Z, 8.375% noncumulative, preferred shares3 | 20,152,693 | 176,537 | ||||||
| Total preferred securities (cost: $332,204,000) | 332,731 | |||||||
| Convertible stocks 0.23% | ||||||||
| Consumer discretionary 0.13% | ||||||||
| Aptiv PLC, Series A, convertible preferred shares, 5.50% 2023 | 957,190 | 147,694 | ||||||
| Information technology 0.04% | ||||||||
| Broadcom Inc., Series A, cumulative convertible preferred shares, 8.00% 2022 | 27,762 | 39,491 | ||||||
| The Investment Company of America | 9 |
| Convertible stocks (continued) | Shares | Value (000) | ||||||
| Utilities 0.06% | ||||||||
| NextEra Energy, Inc., convertible preferred units, 4.872% 2022 | 461,024 | $ | 27,292 | |||||
| Sempra Energy, Series A, convertible preferred shares, 6.00% 2021 | 403,467 | 40,250 | ||||||
| 67,542 | ||||||||
| Total convertible stocks (cost: $192,060,000) | 254,727 | |||||||
| Convertible bonds & notes 0.15% | Principal amount (000) | |||||||
| Consumer discretionary 0.15% | ||||||||
| Royal Caribbean Cruises Ltd., convertible notes, 4.25% 20235 | $ | 114,843 | 153,229 | |||||
| Royal Caribbean Cruises Ltd., convertible notes, 2.875% 20235 | 8,532 | 10,238 | ||||||
| Total convertible bonds & notes (cost: $127,672,000) | 163,467 | |||||||
| Bonds, notes & other debt instruments 0.12% | ||||||||
| U.S. Treasury bonds & notes 0.07% | ||||||||
| U.S. Treasury 2.75% 2023 | 70,138 | 74,383 | ||||||
| Corporate bonds, notes & loans 0.05% | ||||||||
| Consumer discretionary 0.05% | ||||||||
| Royal Caribbean Cruises Ltd. 11.50% 20255 | 48,800 | 57,111 | ||||||
| Total bonds, notes & other debt instruments (cost: $117,559,000) | 131,494 | |||||||
| Short-term securities 4.05% | Shares | |||||||
| Money market investments 4.05% | ||||||||
| Capital Group Central Cash Fund 0.12%4,6 | 41,226,193 | 4,123,032 | ||||||
| BlackRock Liquidity Funds – FedFund, Institutional Shares 0%6,7 | 97,100,000 | 97,100 | ||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares 0.02%6,7 | 94,200,000 | 94,200 | ||||||
| Invesco Short-Term Investments Trust – Government & Agency Portfolio, Institutional Class 0.03%6,7 | 44,541,292 | 44,541 | ||||||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.03%6,7 | 32,300,000 | 32,300 | ||||||
| Morgan Stanley Institutional Liquidity Funds – Government Portfolio, Institutional Class 0.03%6,7 | 13,200,000 | 13,200 | ||||||
| RBC Funds Trust – U.S. Government Money Market Fund, RBC Institutional Class 1 0.02%6,7 | 8,800,000 | 8,800 | ||||||
| Fidelity Investments Money Market Government Portfolio, Class I 0.01%6,7 | 4,400,000 | 4,400 | ||||||
| Total short-term securities (cost: $4,416,932,000) | 4,417,573 | |||||||
| Total investment securities 100.18% (cost: $66,436,064,000) | 109,385,864 | |||||||
| Other assets less liabilities (0.18)% | (197,564 | ) | ||||||
| Net assets 100.00% | $ | 109,188,300 | ||||||
| 10 | The Investment Company of America |
Investments in affiliates4
| Net | ||||||||||||||||||||||||||||
| Value of | Net | unrealized | Value of | |||||||||||||||||||||||||
| affiliates at | realized | appreciation | affiliates at | Dividend | ||||||||||||||||||||||||
| 1/1/2020 | Additions | Reductions | (loss) gain | (depreciation) | 12/31/2020 | income | ||||||||||||||||||||||
| (000) | (000) | (000) | (000) | (000) | (000) | (000) | ||||||||||||||||||||||
| Common stocks 1.37% | ||||||||||||||||||||||||||||
| Energy 0.00% | ||||||||||||||||||||||||||||
| Concho Resources Inc.8 | $ | 877,297 | $ | — | $ | 186,998 | $ | (312,360 | ) | $ | 3,743 | $ | — | $ | 6,678 | |||||||||||||
| Noble Energy, Inc.8 | 601,536 | — | 92,006 | (547,034 | ) | 37,504 | — | 2,906 | ||||||||||||||||||||
| — | ||||||||||||||||||||||||||||
| Consumer discretionary 0.65% | ||||||||||||||||||||||||||||
| Hasbro, Inc. | 836,705 | 100,832 | 107,539 | (37,867 | ) | (82,448 | ) | 709,683 | 18,954 | |||||||||||||||||||
| Consumer staples 0.72% | ||||||||||||||||||||||||||||
| Lamb Weston Holdings, Inc. | 703,028 | 384,802 | 292,594 | 32,621 | (37,188 | ) | 790,669 | 8,534 | ||||||||||||||||||||
| Total common stocks | 1,500,352 | |||||||||||||||||||||||||||
| Short-term securities 3.78% | ||||||||||||||||||||||||||||
| Money market investments 3.78% | ||||||||||||||||||||||||||||
| Capital Group Central Cash Fund 0.12%6 | 5,198,794 | 13,847,440 | 14,921,598 | 443 | (2,047 | ) | 4,123,032 | 36,255 | ||||||||||||||||||||
| Total 5.15% | $ | (864,197 | ) | $ | (80,436 | ) | $ | 5,623,384 | $ | 73,327 | ||||||||||||||||||
| 1 | Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $9,398,389,000, which represented 8.61% 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 | All or a portion of this security was on loan. The total value of all such securities was $299,070,000, which represented .27% of the net assets of the fund. Refer to Note 5 for more information on securities lending. |
| 3 | Security did not produce income during the last 12 months. |
| 4 | Affiliate of the fund or part of the same group of investment companies as the fund, in each case as defined under the Investment Company Act of 1940. |
| 5 | Acquired in a transaction exempt from registration under Rule 144A 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 $220,578,000, which represented .20% of the net assets of the fund. |
| 6 | Rate represents the seven-day yield at 12/31/2020. |
| 7 | Security purchased with cash collateral from securities on loan. Refer to Note 5 for more information on securities lending. |
| 8 | Unaffiliated issuer at 12/31/2020. |
Key to abbreviations
ADR = American Depositary Receipts
CAD = Canadian dollars
See notes to financial statements.
| The Investment Company of America | 11 |
| Statement of assets and liabilities | |
| at December 31, 2020 | (dollars in thousands) |
| Assets: | ||||||||
| Investment securities, at value (includes $299,070 of investment securities on loan): | ||||||||
| Unaffiliated issuers (cost: $61,307,979) | $ | 103,762,480 | ||||||
| Affiliated issuers (cost: $5,128,085) | 5,623,384 | $ | 109,385,864 | |||||
| Cash | 34,866 | |||||||
| Cash denominated in currencies other than U.S. dollars (cost: $2,919) | 2,919 | |||||||
| Receivables for: | ||||||||
| Sales of investments | 9,422 | |||||||
| Sales of fund’s shares | 64,419 | |||||||
| Dividends and interest | 140,616 | |||||||
| Securities lending income | 740 | |||||||
| Other | 1,934 | 217,131 | ||||||
| 109,640,780 | ||||||||
| Liabilities: | ||||||||
| Collateral for securities on loan | 294,541 | |||||||
| Payables for: | ||||||||
| Purchases of investments | 29,760 | |||||||
| Repurchases of fund’s shares | 77,681 | |||||||
| Investment advisory services | 21,214 | |||||||
| Services provided by related parties | 22,651 | |||||||
| Trustees’ deferred compensation | 4,291 | |||||||
| Other | 2,342 | 157,939 | ||||||
| Net assets at December 31, 2020 | $ | 109,188,300 | ||||||
| Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 65,170,178 | ||||||
| Total distributable earnings | 44,018,122 | |||||||
| Net assets at December 31, 2020 | $ | 109,188,300 |
See notes to financial statements.
| 12 | The Investment Company of America |
Statement of assets and liabilities
| at December 31, 2020 (continued) | (dollars and shares in thousands, except per-share amounts) |
Shares of beneficial interest issued and outstanding (no stated
par value) —
unlimited shares authorized (2,459,326 total shares outstanding)
| Net assets | Shares outstanding | Net asset value per share | ||||||||||
| Class A | $ | 68,122,504 | 1,533,470 | $ | 44.42 | |||||||
| Class C | 1,379,739 | 31,428 | 43.90 | |||||||||
| Class T | 12 | — | * | 44.41 | ||||||||
| Class F-1 | 1,787,888 | 40,364 | 44.29 | |||||||||
| Class F-2 | 8,602,072 | 193,772 | 44.39 | |||||||||
| Class F-3 | 3,915,720 | 88,198 | 44.40 | |||||||||
| Class 529-A | 3,169,168 | 71,550 | 44.29 | |||||||||
| Class 529-C | 117,226 | 2,651 | 44.22 | |||||||||
| Class 529-E | 83,666 | 1,896 | 44.14 | |||||||||
| Class 529-T | 15 | — | * | 44.41 | ||||||||
| Class 529-F-1 | 11 | — | * | 44.21 | ||||||||
| Class 529-F-2 | 135,616 | 3,053 | 44.41 | |||||||||
| Class 529-F-3 | 11 | — | * | 44.41 | ||||||||
| Class R-1 | 70,069 | 1,591 | 44.03 | |||||||||
| Class R-2 | 659,113 | 14,951 | 44.09 | |||||||||
| Class R-2E | 75,606 | 1,708 | 44.28 | |||||||||
| Class R-3 | 955,865 | 21,608 | 44.24 | |||||||||
| Class R-4 | 1,336,715 | 30,188 | 44.28 | |||||||||
| Class R-5E | 100,998 | 2,276 | 44.38 | |||||||||
| Class R-5 | 195,712 | 4,407 | 44.41 | |||||||||
| Class R-6 | 18,480,574 | 416,215 | 44.40 | |||||||||
| * | Amount less than one thousand. |
See notes to financial statements.
| The Investment Company of America | 13 |
Financial statements (continued)
| Statement of operations | |
| for the year ended December 31, 2020 | (dollars in thousands) |
| Investment income: | ||||||||
| Income: | ||||||||
| Dividends (net of non-U.S. taxes of $23,403; also includes $73,327 from affiliates) | $ | 2,044,103 | ||||||
| Interest | 26,845 | |||||||
| Securities lending income (net of fees) | 1,874 | $ | 2,072,822 | |||||
| Fees and expenses*: | ||||||||
| Investment advisory services | 228,570 | |||||||
| Distribution services | 184,542 | |||||||
| Transfer agent services | 65,838 | |||||||
| Administrative services | 29,305 | |||||||
| Reports to shareholders | 2,441 | |||||||
| Registration statement and prospectus | 1,669 | |||||||
| Trustees’ compensation | 1,283 | |||||||
| Auditing and legal | 304 | |||||||
| Custodian | 1,007 | |||||||
| Other | 2,080 | |||||||
| Total fees and expenses before reimbursement | 517,039 | |||||||
| Less reimbursement of fees and expenses: | ||||||||
| Transfer agent services reimbursement | — | † | ||||||
| Total fees and expenses after reimbursement | 517,039 | |||||||
| Net investment income | 1,555,783 | |||||||
| Net realized gain and unrealized appreciation: | ||||||||
| Net realized gain (loss) on: | ||||||||
| Investments: | ||||||||
| Unaffiliated issuers | 1,550,336 | |||||||
| Affiliated issuers | (864,197 | ) | ||||||
| In-kind redemptions | 75,685 | |||||||
| Currency transactions | 1,604 | 763,428 | ||||||
| Net unrealized appreciation (depreciation) on: | ||||||||
| Investments: | ||||||||
| Unaffiliated issuers | 11,408,114 | |||||||
| Affiliated issuers | (80,436 | ) | ||||||
| Currency translations | 660 | 11,328,338 | ||||||
| Net realized gain and unrealized appreciation | 12,091,766 | |||||||
| Net increase in net assets resulting from operations | $ | 13,647,549 |
| * | Additional information related to class-specific fees and expenses is included in the notes to financial statements. |
| † | Amount less than one thousand. |
See notes to financial statements.
| 14 | The Investment Company of America |
Financial statements (continued)
Statements of changes in net assets
| Year ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Operations: | ||||||||
| Net investment income | $ | 1,555,783 | $ | 1,815,916 | ||||
| Net realized gain | 763,428 | 4,591,152 | ||||||
| Net unrealized appreciation | 11,328,338 | 14,416,842 | ||||||
| Net increase in net assets resulting from operations | 13,647,549 | 20,823,910 | ||||||
| Distributions paid to shareholders | (1,893,511 | ) | (6,476,969 | ) | ||||
| Net capital share transactions | (5,530,573 | ) | 3,185,635 | |||||
| Total increase in net assets | 6,223,465 | 17,532,576 | ||||||
| Net assets: | ||||||||
| Beginning of year | 102,964,835 | 85,432,259 | ||||||
| End of year | $ | 109,188,300 | $ | 102,964,835 | ||||
See notes to financial statements.
| The Investment Company of America | 15 |
Notes to financial statements
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.
The fund has 21 share classes consisting of six retail share classes (Classes A, C, T, F-1, F-2 and F-3), seven 529 college savings plan share classes (Classes 529-A, 529-C, 529-E, 529-T, 529-F-1, 529-F-2 and 529-F-3) and eight retirement plan share classes (Classes R-1, R-2, R-2E, R-3, R-4, R-5E, 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 further in the following table:
| Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature | ||||
| Classes A and 529-A | Up to 5.75% for Class A; up to 3.50% for Class 529-A1 | None (except 1% for certain redemptions within 18 months of purchase without an initial sales charge) | None | ||||
| Classes C and 529-C | None | 1% for redemptions within one year of purchase | Class C converts to Class A after eight years and Class 529-C converts to Class 529-A after five years2 | ||||
| Class 529-E | None | None | None | ||||
| Classes T and 529-T3 | Up to 2.50% | None | None | ||||
| Classes F-1, F-2, F-3, 529-F-1, 529-F-2 and 529-F-3 | None | None | None | ||||
| Classes R-1, R-2, R-2E, R-3, R-4, R-5E, R-5 and R-6 | None | None | None |
| 1 | Prior to June 30, 2020, the initial sales charge was up to 5.75% for Class 529-A purchases. |
| 2 | Prior to June 30, 2020, Class C converted to Class F-1 and Class 529-C converted to Class 529-A after ten years. |
| 3 | Class T and 529-T shares are not available for purchase. |
Holders of all share classes have equal pro rata rights to the assets, dividends and liquidation proceeds of the fund. 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, transfer agent and administrative 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 share class.
2. Significant accounting policies
The fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The fund’s financial statements have been prepared to comply with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles require the fund’s investment adviser to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Subsequent events, if any, have been evaluated through the date of issuance in the preparation of the financial statements. The fund follows the significant accounting policies described in this section, 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), realized gains and losses and unrealized appreciation and depreciation are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, transfer agent and administrative services, are charged directly to the respective share class.
Distributions paid to shareholders — Income dividends and capital gain distributions are recorded on the ex-dividend date.
| 16 | The Investment Company of America |
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. 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 in the fund’s statement of operations. 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.
In-kind redemptions — The fund normally redeems shares in cash; however, under certain conditions and circumstances, payment of the redemption price wholly or partly with portfolio securities or other fund assets may be permitted. A redemption of shares in-kind is based upon the closing value of the shares being redeemed as of the trade date. Realized gains/losses resulting from redemptions of shares in-kind are reflected separately in the fund’s statement of operations.
3. Valuation
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by U.S. GAAP. The net asset value per share is calculated once daily as of the close of regular trading on the New York Stock Exchange, normally 4 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, 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 & loans; 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 deemed to be not 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 for either equity or fixed-income securities, depending on which method is deemed most appropriate by the fund’s investment adviser. The Capital Group Central Cash Fund (“CCF”), a fund within the Capital Group Central Fund Series (“Central Funds”), is valued based upon a floating net asset value, which fluctuates with changes in the value of CCF’s portfolio securities. The underlying securities are valued based on the policies and procedures in CCF’s statement of additional information.
| The Investment Company of America | 17 |
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 valuation guidelines adopted by authority of the fund’s board of trustees as further described. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission 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. 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 December 31, 2020 (dollars in thousands):
| Investment securities | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Common stocks: | ||||||||||||||||
| Energy | $ | 4,575,279 | $ | 242,671 | $ | — | $ | 4,817,950 | ||||||||
| Materials | 3,529,726 | 1,356,600 | — | 4,886,326 | ||||||||||||
| Industrials | 8,671,255 | 518,147 | — | 9,189,402 | ||||||||||||
| Consumer discretionary | 10,593,123 | 607,286 | — | 11,200,409 | ||||||||||||
| Consumer staples | 6,080,339 | 2,101,911 | — | 8,182,250 | ||||||||||||
| Health care | 12,303,277 | 2,549,886 | — | 14,853,163 | ||||||||||||
| Financials | 8,127,707 | 368,062 | — | 8,495,769 | ||||||||||||
| Information technology | 20,972,796 | 1,459,063 | — | 22,431,859 | ||||||||||||
| Communication services | 14,678,389 | 78,632 | — | 14,757,021 | ||||||||||||
| Utilities | 2,906,116 | 116,131 | — | 3,022,247 | ||||||||||||
| Real estate | 2,249,476 | — | — | 2,249,476 | ||||||||||||
| Preferred securities | 332,731 | — | — | 332,731 | ||||||||||||
| Convertible stocks | 254,727 | — | — | 254,727 | ||||||||||||
| Convertible bonds & notes | — | 163,467 | — | 163,467 | ||||||||||||
| Bonds, notes & other debt instruments | — | 131,494 | — | 131,494 | ||||||||||||
| Short-term securities | 4,417,573 | — | — | 4,417,573 | ||||||||||||
| Total | $ | 99,692,514 | $ | 9,693,350 | $ | — | $ | 109,385,864 | ||||||||
| 18 | The Investment Company of America |
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 —sometimes rapidly or unpredictably — due to various factors, including events or conditions affecting the general economy or particular industries; overall market changes; local, regional or global political, social or economic instability; governmental, governmental agency or central bank responses to economic conditions; and currency exchange rate, interest rate and commodity price fluctuations.
Economies and financial markets throughout the world are highly interconnected. Economic, financial or political events, trading and tariff arrangements, wars, terrorism, cybersecurity events, natural disasters, public health emergencies (such as the spread of infectious disease) and other circumstances in one country or region, including actions taken by governmental or quasi-governmental authorities in response to any of the foregoing, could have impacts on global economies or markets. As a result, whether or not the fund invests in securities of issuers located in or with significant exposure to the countries affected, the value and liquidity of the fund’s investments may be negatively affected by developments in other countries and regions.
Issuer risks — The prices of, and the income generated by, securities held by the fund may decline in response to various factors directly related to the issuers of such securities, including reduced demand for an issuer’s goods or services, poor management performance, major litigation, investigations or other controversies related to the issuer, changes in government regulations affecting the issuer or its competitive environment and strategic initiatives such as mergers, acquisitions or dispositions and the market response to any such initiatives.
Investing in income-oriented stocks — The value of the fund’s securities and income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available for dividend payments at, the companies in which the fund invests.
Investing in growth-oriented stocks — Growth-oriented common stocks and other equity-type securities (such as preferred stocks, convertible preferred stocks and convertible bonds) 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 or revenues outside the U.S., may lose value because of adverse political, social, economic or market developments (including social instability, regional conflicts, terrorism and war) in the countries or regions in which the issuers operate or generate revenue. 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. Issuers of these securities may be more susceptible to actions of foreign governments, such as nationalization, currency blockage or the imposition of price controls or punitive taxes, each of which could adversely impact the value of these securities. 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 accounting practices and different regulatory, legal and reporting standards and practices, and may be more difficult to value, than those in the U.S. In addition, the value of investments outside the U.S. may be reduced by foreign taxes, including foreign withholding taxes on interest and dividends. Further, there may be increased risks of delayed settlement of securities purchased or sold by the fund. The risks of investing outside the U.S. may be heightened in connection with investments in emerging markets.
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, including models, tools and data, employed by the investment adviser in this process may be flawed or incorrect and 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. Certain investment techniques
Securities lending — The fund has entered into securities lending transactions in which the fund earns income by lending investment securities to brokers, dealers or other institutions. Each transaction involves three parties: the fund, acting as the lender of the securities, a borrower, and a lending agent that acts as an intermediary.
| The Investment Company of America | 19 |
Securities lending transactions are entered into by the fund under a securities lending agent agreement with the lending agent. The lending agent facilitates the exchange of securities between the fund and approved borrowers, ensures that securities loans are properly coordinated and documented, marks-to-market the value of collateral daily, secures additional collateral from a borrower if it falls below preset terms, and may reinvest cash collateral on behalf of the fund according to agreed parameters. The lending agent provides indemnification to the fund against losses resulting from a borrower default. Although risk is mitigated by the collateral and indemnification, the fund could experience a delay in recovering its securities and a potential loss of income or value if a borrower fails to return securities, collateral investments decline in value or the lending agent fails to perform.
The borrower is required to post highly liquid assets, such as cash or U.S. government securities, as collateral for the loan in an amount at least equal to the value of the securities loaned. Investments made with cash collateral are recognized as assets in the fund’s investment portfolio. The same amount is recorded as a liability in the fund’s statement of assets and liabilities. While securities are on loan, the fund will continue to receive the equivalent of the interest, dividends or other distributions paid by the issuer, as well as a portion of the interest on the investment of the collateral. Additionally, although the fund does not have the right to vote on securities while they are on loan, the fund has a right to consent on corporate actions and a right to recall loaned securities to vote. A borrower is obligated to return loaned securities at the conclusion of a loan or, during the pendency of a loan, on demand from the fund.
As of December 31, 2020, the total value of securities on loan was $299,070,000, and the total value of collateral received was $305,130,000. Collateral received includes cash of $294,541,000 and U.S. government securities of $10,589,000. Investment securities purchased from cash collateral are disclosed in the investment portfolio as short-term securities. Securities received as collateral, if any, are not recognized as fund assets. The contractual maturity of cash collateral received under the securities lending agreement is classified as overnight and continuous.
Collateral — The fund receives highly liquid assets, such as cash or U.S. government securities, as collateral in exchange for lending investment securities. The purpose of the collateral is to cover potential losses that could occur in the event the borrower cannot meet its contractual obligation. The lending agent may reinvest cash collateral from securities lending transactions according to agreed parameters. Cash collateral reinvested by the lending agent, if any, is disclosed in the fund’s investment portfolio.
6. 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 year ended December 31, 2020, 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 significant interest or penalties.
The fund’s tax returns are not subject to examination by federal, state and, if applicable, non-U.S. tax authorities after the expiration of each jurisdiction’s statute of limitations, which is generally three years after the date of filing but can be extended in certain jurisdictions.
Non-U.S. taxation — Dividend and interest income are recorded net of non-U.S. taxes paid. The fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. As a result of rulings from European courts, the fund filed for additional reclaims related to prior years. These reclaims are recorded when the amount is known and there are no significant uncertainties on collectability. During the year ended December 31, 2020, the fund recognized $56,281,000 in reclaims (net of fees and the effect of realized gain or loss from currency translations) and $18,296,000 in interest related to European court rulings, which is included in dividend income and interest income, respectively, in the fund’s statement of operations. Gains realized by the fund on the sale of securities in certain countries, if any, may be subject to non-U.S. taxes. If applicable, the fund records an estimated deferred tax liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.
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; capital losses related to sales of certain securities within 30 days of purchase; unrealized appreciation of certain investments in securities outside the U.S. and cost of investments sold. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
| 20 | The Investment Company of America |
During the year ended December 31, 2020, the fund reclassified $105,156,000 from total distributable earnings to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.
As of December 31, 2020, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investments were as follows (dollars in thousands):
| Undistributed ordinary income | $ | 472,538 | ||
| Undistributed long-term capital gains | 949,680 | |||
| Gross unrealized appreciation on investments | 44,679,836 | |||
| Gross unrealized depreciation on investments | (2,081,575 | ) | ||
| Net unrealized appreciation on investments | 42,598,261 | |||
| Cost of investments | 66,787,603 |
Distributions paid were characterized for tax purposes as follows (dollars in thousands):
| Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||||||||||||||||
| Share class | Ordinary income | Long-term capital gains | Total distributions paid | Ordinary income | Long-term capital gains | Total distributions paid | ||||||||||||||||||
| Class A | $ | 966,135 | $ | 178,390 | $ | 1,144,525 | $ | 1,199,266 | $ | 2,813,523 | $ | 4,012,789 | ||||||||||||
| Class C | 11,683 | 4,288 | 15,971 | 18,976 | 70,387 | 89,363 | ||||||||||||||||||
| Class T | — | * | — | * | — | * | — | * | — | * | — | * | ||||||||||||
| Class F-1 | 25,522 | 4,841 | 30,363 | 34,945 | 84,944 | 119,889 | ||||||||||||||||||
| Class F-2 | 135,727 | 22,370 | 158,097 | 157,797 | 349,360 | 507,157 | ||||||||||||||||||
| Class F-3 | 66,159 | 10,084 | 76,243 | 73,512 | 156,215 | 229,727 | ||||||||||||||||||
| Class 529-A | 43,198 | 8,121 | 51,319 | 52,417 | 126,964 | 179,381 | ||||||||||||||||||
| Class 529-C | 1,467 | 739 | 2,206 | 3,292 | 12,578 | 15,870 | ||||||||||||||||||
| Class 529-E | 1,023 | 235 | 1,258 | 1,398 | 3,782 | 5,180 | ||||||||||||||||||
| Class 529-T | — | * | — | * | — | * | — | * | 1 | 1 | ||||||||||||||
| Class 529-F-1 | 1,527 | 334 | 1,861 | 2,293 | 5,024 | 7,317 | ||||||||||||||||||
| Class 529-F-2† | 533 | — | 533 | |||||||||||||||||||||
| Class 529-F-3† | — | * | — | — | * | |||||||||||||||||||
| Class R-1 | 554 | 200 | 754 | 901 | 3,357 | 4,258 | ||||||||||||||||||
| Class R-2 | 4,951 | 1,776 | 6,727 | 7,489 | 28,654 | 36,143 | ||||||||||||||||||
| Class R-2E | 750 | 203 | 953 | 964 | 3,098 | 4,062 | ||||||||||||||||||
| Class R-3 | 11,038 | 2,595 | 13,633 | 15,039 | 42,037 | 57,076 | ||||||||||||||||||
| Class R-4 | 19,203 | 3,674 | 22,877 | 27,322 | 63,984 | 91,306 | ||||||||||||||||||
| Class R-5E | 1,459 | 242 | 1,701 | 1,120 | 2,936 | 4,056 | ||||||||||||||||||
| Class R-5 | 3,717 | 618 | 4,335 | 5,673 | 11,545 | 17,218 | ||||||||||||||||||
| Class R-6 | 312,342 | 47,813 | 360,155 | 353,523 | 742,653 | 1,096,176 | ||||||||||||||||||
| Total | $ | 1,606,988 | $ | 286,523 | $ | 1,893,511 | $ | 1,955,927 | $ | 4,521,042 | $ | 6,476,969 | ||||||||||||
| * | Amount less than one thousand. |
| † | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
7. 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. CRMC, AFD and AFS are considered related parties to the fund.
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 year ended December 31, 2020, the investment advisory services fee was $228,570,000, which was equivalent to an annualized rate of 0.234% of average daily net assets.
| The Investment Company of America | 21 |
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 further described below:
Distribution services — The fund has plans of distribution for all share classes, except Class F-2, F-3, 529-F-2, 529-F-3, R-5E, R-5 and R-6 shares. 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 in this section. 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.
| Share class | Currently approved limits | Plan limits | ||||||
| Class A | 0.25 | % | 0.25 | % | ||||
| Class 529-A | 0.25 | 0.50 | ||||||
| Classes C, 529-C and R-1 | 1.00 | 1.00 | ||||||
| Class R-2 | 0.75 | 1.00 | ||||||
| Class R-2E | 0.60 | 0.85 | ||||||
| Classes 529-E and R-3 | 0.50 | 0.75 | ||||||
| Classes T, F-1, 529-T, 529-F-1 and R-4 | 0.25 | 0.50 | ||||||
For Class A and 529-A shares, distribution-related expenses include the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These share classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limits are not exceeded. As of December 31, 2020, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A shares.
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. For the year ended December 31, 2020, CRMC reimbursed transfer agent services fees of less than $1,000 for Class 529-F-3 shares. CRMC does not intend to recoup this reimbursement.
Administrative services — The fund has an administrative services agreement with CRMC under which the fund compensates CRMC for providing administrative services to all share classes. Administrative services are provided by CRMC and its affiliates to help assist third parties providing non-distribution services to fund shareholders. These services include providing in-depth information on the fund and market developments that impact fund investments. Administrative services also include, but are not limited to, coordinating, monitoring and overseeing third parties that provide services to fund shareholders. The agreement provides the fund the ability to charge an administrative services fee at the annual rate of 0.05% of the average daily net assets attributable to each share class of the fund. Currently the fund pays CRMC an administrative services fee at the annual rate of 0.03% of the average daily net assets attributable to each share class of the fund for CRMC’s provision of administrative services.
529 plan services — Each 529 share class is subject to service fees to compensate the Virginia College Savings Plan (“Virginia529”) for its oversight and administration of the CollegeAmerica 529 college savings plan. The fee is based on the combined net assets invested in Class 529 and ABLE shares of the American Funds. Class ABLE shares are offered on other American Funds by Virginia529 through ABLEAmerica®, a tax-advantaged savings program for individuals with disabilities. The quarterly fee is based on a series of decreasing annual rates beginning with 0.09% on the first $20 billion of the combined net assets invested in the American Funds and decreasing to 0.03% on such assets in excess of $100 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 and ABLE shares of the American Funds for the last month of the prior calendar quarter. The fee is included in other expenses in the fund’s statement of operations. Virginia529 is not considered a related party to the fund.
| 22 | The Investment Company of America |
For the year ended December 31, 2020, class-specific expenses under the agreements were as follows (dollars in thousands):
| Share class | Distribution services | Transfer agent services | Administrative services | 529 plan services |
|||||||||||
| Class A | $145,229 | $46,856 | $18,250 | Not applicable | |||||||||||
| Class C | 13,402 | 1,064 | 410 | Not applicable | |||||||||||
| Class T | — | — | * | — | * | Not applicable | |||||||||
| Class F-1 | 4,189 | 2,184 | 511 | Not applicable | |||||||||||
| Class F-2 | Not applicable | 8,244 | 2,260 | Not applicable | |||||||||||
| Class F-3 | Not applicable | 217 | 1,042 | Not applicable | |||||||||||
| Class 529-A | 6,507 | 1,955 | 839 | $1,722 | |||||||||||
| Class 529-C | 1,792 | 142 | 56 | 115 | |||||||||||
| Class 529-E | 381 | 29 | 23 | 48 | |||||||||||
| Class 529-T | — | — | * | — | * | — | * | ||||||||
| Class 529-F-1 | — | * | 65 | 28 | 58 | ||||||||||
| Class 529-F-2† | Not applicable | 13 | 7 | 13 | |||||||||||
| Class 529-F-3† | Not applicable | — | * | — | * | — | * | ||||||||
| Class R-1 | 652 | 67 | 20 | Not applicable | |||||||||||
| Class R-2 | 4,483 | 2,064 | 179 | Not applicable | |||||||||||
| Class R-2E | 403 | 138 | 20 | Not applicable | |||||||||||
| Class R-3 | 4,386 | 1,307 | 263 | Not applicable | |||||||||||
| Class R-4 | 3,118 | 1,233 | 374 | Not applicable | |||||||||||
| Class R-5E | Not applicable | 120 | 25 | Not applicable | |||||||||||
| Class R-5 | Not applicable | 102 | 62 | Not applicable | |||||||||||
| Class R-6 | Not applicable | 38 | 4,936 | Not applicable | |||||||||||
| Total class-specific expenses | $184,542 | $65,838 | $29,305 | $1,956 | |||||||||||
| * | Amount less than one thousand. |
| † | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
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 $1,283,000 in the fund’s statement of operations reflects $589,000 in current fees (either paid in cash or deferred) and a net increase of $694,000 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, AFD and AFS. No affiliated officers or trustees received any compensation directly from the fund.
Investment in CCF — The fund holds shares of CCF, an institutional prime money market fund managed by CRMC. CCF invests in high-quality, short-term money market instruments. CCF is used as the primary investment vehicle for the fund’s short-term investments. CCF shares are only available for purchase by CRMC, its affiliates, and other funds managed by CRMC or its affiliates, and are not available to the public. CRMC does not receive an investment advisory services fee from CCF.
Security transactions with related funds — The fund purchased securities from, and sold securities to, other funds managed by CRMC (or funds managed by certain affiliates of CRMC) under procedures adopted by the fund’s board of trustees. The funds involved in such transactions are considered related by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers. Each transaction was executed at the current market price of the security and no brokerage commissions or fees were paid in accordance with Rule 17a-7 of the 1940 Act. During the year ended December 31, 2020, the fund engaged in such purchase and sale transactions with related funds in the amounts of $2,315,689,000 and $1,972,323,000, respectively, which generated $367,056,000 of net realized losses from such sales.
Interfund lending — Pursuant to an exemptive order issued by the SEC, the fund, along with other CRMC-managed funds (or funds managed by certain affiliates of CRMC), may participate in an interfund lending program. The program provides an alternate credit facility that permits the funds to lend or borrow cash for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. The fund did not lend or borrow cash through the interfund lending program at any time during the year ended December 31, 2020.
| The Investment Company of America | 23 |
8. Warrants
As of December 31, 2020, the fund had warrants outstanding which may be exercised at any time for the purchase of 818,231 Class A shares at approximately $5.24 per share. If these warrants had been exercised as of December 31, 2020, the net asset value of each share class would have been reduced by approximately $0.02 per share. No warrants were exercised during the year ended December 31, 2020.
9. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
| Sales1 | Reinvestments of distributions | Repurchases1 | Net (decrease) increase | |||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Year ended December 31, 2020 | ||||||||||||||||||||||||||||||||
| Class A | $ | 3,285,188 | 86,876 | $ | 1,113,924 | 30,061 | $ | (7,557,244 | ) | (199,815 | ) | $ | (3,158,132 | ) | (82,878 | ) | ||||||||||||||||
| Class C | 180,729 | 4,865 | 15,870 | 436 | (540,393 | ) | (14,275 | ) | (343,794 | ) | (8,974 | ) | ||||||||||||||||||||
| Class T | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Class F-1 | 152,213 | 4,028 | 29,506 | 805 | (492,077 | ) | (13,171 | ) | (310,358 | ) | (8,338 | ) | ||||||||||||||||||||
| Class F-2 | 2,276,245 | 59,270 | 152,802 | 4,132 | (2,716,811 | ) | (71,568 | ) | (287,764 | ) | (8,166 | ) | ||||||||||||||||||||
| Class F-3 | 840,108 | 21,950 | 72,271 | 1,957 | (976,901 | ) | (25,986 | ) | (64,522 | ) | (2,079 | ) | ||||||||||||||||||||
| Class 529-A | 362,161 | 9,368 | 51,299 | 1,387 | (477,561 | ) | (12,297 | ) | (64,101 | ) | (1,542 | ) | ||||||||||||||||||||
| Class 529-C | 20,635 | 542 | 2,205 | 62 | (198,659 | ) | (5,153 | ) | (175,819 | ) | (4,549 | ) | ||||||||||||||||||||
| Class 529-E | 5,945 | 157 | 1,257 | 34 | (18,081 | ) | (468 | ) | (10,879 | ) | (277 | ) | ||||||||||||||||||||
| Class 529-T | — | — | — | 2 | — | 2 | — | — | — | 2 | — | 2 | ||||||||||||||||||||
| Class 529-F-1 | 20,084 | 521 | 1,861 | 52 | (135,299 | ) | (3,502 | ) | (113,354 | ) | (2,929 | ) | ||||||||||||||||||||
| Class 529-F-23 | 123,289 | 3,151 | 532 | 12 | (4,780 | ) | (110 | ) | 119,041 | 3,053 | ||||||||||||||||||||||
| Class 529-F-33 | 10 | — | 2 | — | 2 | — | 2 | — | — | 10 | — | 2 | ||||||||||||||||||||
| Class R-1 | 8,263 | 220 | 751 | 20 | (19,924 | ) | (532 | ) | (10,910 | ) | (292 | ) | ||||||||||||||||||||
| Class R-2 | 120,416 | 3,162 | 6,720 | 183 | (182,350 | ) | (4,826 | ) | (55,214 | ) | (1,481 | ) | ||||||||||||||||||||
| Class R-2E | 15,495 | 399 | 953 | 26 | (19,652 | ) | (512 | ) | (3,204 | ) | (87 | ) | ||||||||||||||||||||
| Class R-3 | 155,079 | 4,090 | 13,617 | 369 | (265,356 | ) | (6,942 | ) | (96,660 | ) | (2,483 | ) | ||||||||||||||||||||
| Class R-4 | 144,530 | 3,807 | 22,864 | 620 | (406,878 | ) | (10,612 | ) | (239,484 | ) | (6,185 | ) | ||||||||||||||||||||
| Class R-5E | 43,150 | 1,126 | 1,700 | 46 | (24,415 | ) | (623 | ) | 20,435 | 549 | ||||||||||||||||||||||
| Class R-5 | 24,424 | 643 | 4,333 | 118 | (113,946 | ) | (2,961 | ) | (85,189 | ) | (2,200 | ) | ||||||||||||||||||||
| Class R-6 | 2,033,130 | 54,683 | 360,151 | 9,750 | (3,043,956 | ) | (79,905 | ) | (650,675 | ) | (15,472 | ) | ||||||||||||||||||||
| Total net increase (decrease) | $ | 9,811,094 | 258,858 | $ | 1,852,616 | 50,070 | $ | (17,194,283 | ) | (453,258 | ) | $ | (5,530,573 | ) | (144,330 | ) | ||||||||||||||||
| 24 | The Investment Company of America |
| Sales1 | Reinvestments of distributions | Repurchases1 | Net (decrease) increase | |||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Year ended December 31, 2019 | ||||||||||||||||||||||||||||||||
| Class A | $ | 2,639,532 | 70,091 | $ | 3,911,251 | 100,881 | $ | (6,653,493 | ) | (175,551 | ) | $ | (102,710 | ) | (4,579 | ) | ||||||||||||||||
| Class C | 192,841 | 5,186 | 88,797 | 2,312 | (437,680 | ) | (11,762 | ) | (156,042 | ) | (4,264 | ) | ||||||||||||||||||||
| Class T | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Class F-1 | 225,028 | 6,018 | 117,096 | 3,028 | (332,072 | ) | (8,805 | ) | 10,052 | 241 | ||||||||||||||||||||||
| Class F-2 | 2,178,081 | 57,801 | 490,237 | 12,650 | (1,798,534 | ) | (47,482 | ) | 869,784 | 22,969 | ||||||||||||||||||||||
| Class F-3 | 935,135 | 24,875 | 217,292 | 5,607 | (598,859 | ) | (15,784 | ) | 553,568 | 14,698 | ||||||||||||||||||||||
| Class 529-A | 241,683 | 6,415 | 179,329 | 4,637 | (442,596 | ) | (11,734 | ) | (21,584 | ) | (682 | ) | ||||||||||||||||||||
| Class 529-C | 28,865 | 770 | 15,864 | 411 | (100,193 | ) | (2,668 | ) | (55,464 | ) | (1,487 | ) | ||||||||||||||||||||
| Class 529-E | 5,816 | 155 | 5,176 | 134 | (17,188 | ) | (457 | ) | (6,196 | ) | (168 | ) | ||||||||||||||||||||
| Class 529-T | — | — | 1 | — | 2 | — | — | 1 | — | 2 | ||||||||||||||||||||||
| Class 529-F-1 | 21,881 | 582 | 7,317 | 190 | (22,965 | ) | (607 | ) | 6,233 | 165 | ||||||||||||||||||||||
| Class R-1 | 7,029 | 189 | 4,240 | 110 | (21,033 | ) | (557 | ) | (9,764 | ) | (258 | ) | ||||||||||||||||||||
| Class R-2 | 112,513 | 3,011 | 36,099 | 936 | (179,649 | ) | (4,794 | ) | (31,037 | ) | (847 | ) | ||||||||||||||||||||
| Class R-2E | 19,260 | 515 | 4,061 | 105 | (13,828 | ) | (370 | ) | 9,493 | 250 | ||||||||||||||||||||||
| Class R-3 | 152,126 | 4,072 | 57,013 | 1,475 | (263,345 | ) | (7,034 | ) | (54,206 | ) | (1,487 | ) | ||||||||||||||||||||
| Class R-4 | 134,606 | 3,592 | 91,272 | 2,362 | (354,494 | ) | (9,391 | ) | (128,616 | ) | (3,437 | ) | ||||||||||||||||||||
| Class R-5E | 49,461 | 1,330 | 4,055 | 104 | (15,480 | ) | (406 | ) | 38,036 | 1,028 | ||||||||||||||||||||||
| Class R-5 | 27,608 | 736 | 17,213 | 445 | (66,956 | ) | (1,785 | ) | (22,135 | ) | (604 | ) | ||||||||||||||||||||
| Class R-6 | 2,245,839 | 60,491 | 1,096,174 | 28,288 | (1,055,791 | ) | (27,220 | ) | 2,286,222 | 61,559 | ||||||||||||||||||||||
| Total net increase (decrease) | $ | 9,217,304 | 245,829 | $ | 6,342,487 | 163,675 | $ | (12,374,156 | ) | (326,407 | ) | $ | 3,185,635 | 83,097 | ||||||||||||||||||
| 1 | Includes exchanges between share classes of the fund. |
| 2 | Amount less than one thousand. |
| 3 | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
10. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $36,077,543,000 and $40,884,643,000, respectively, during the year ended December 31, 2020.
| The Investment Company of America | 25 |
Financial highlights
| Income (loss) from investment operations1 | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Period ended | 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 return2,3 | Net assets, end of period (in millions) | Ratio of expenses to average net assets before reimburse- ments4 | Ratio of expenses to average net assets after reimburse- ments3,4 | Ratio of net income to average net assets3 | |||||||||||||||||||||||||||||||||||||||
| Class A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | $ | 39.57 | $ | .60 | $ | 4.98 | $ | 5.58 | $ | (.62 | ) | $ | (.11 | ) | $ | (.73 | ) | $ | 44.42 | 14.50 | % | $ | 68,122 | .59 | % | .59 | % | 1.54 | % | |||||||||||||||||||||||
| 12/31/2019 | 33.91 | .70 | 7.53 | 8.23 | (.76 | ) | (1.81 | ) | (2.57 | ) | 39.57 | 24.54 | 63,959 | .59 | .59 | 1.86 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.39 | .75 | (3.28 | ) | (2.53 | ) | (.74 | ) | (3.21 | ) | (3.95 | ) | 33.91 | (6.51 | ) | 54,973 | .57 | .57 | 1.85 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.23 | .69 | 6.41 | 7.10 | (.68 | ) | (2.26 | ) | (2.94 | ) | 40.39 | 19.73 | 63,640 | .57 | .57 | 1.76 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.37 | .65 | 4.20 | 4.85 | (.69 | ) | (1.30 | ) | (1.99 | ) | 36.23 | 14.59 | 58,402 | .59 | .59 | 1.86 | ||||||||||||||||||||||||||||||||||||
| Class C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.10 | .30 | 4.94 | 5.24 | (.33 | ) | (.11 | ) | (.44 | ) | 43.90 | 13.64 | 1,380 | 1.33 | 1.33 | .79 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.54 | .41 | 7.43 | 7.84 | (.47 | ) | (1.81 | ) | (2.28 | ) | 39.10 | 23.57 | 1,580 | 1.35 | 1.35 | 1.09 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 39.98 | .42 | (3.24 | ) | (2.82 | ) | (.41 | ) | (3.21 | ) | (3.62 | ) | 33.54 | (7.24 | ) | 1,498 | 1.36 | 1.36 | 1.05 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 35.89 | .37 | 6.34 | 6.71 | (.36 | ) | (2.26 | ) | (2.62 | ) | 39.98 | 18.77 | 1,806 | 1.38 | 1.38 | .95 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.08 | .37 | 4.14 | 4.51 | (.40 | ) | (1.30 | ) | (1.70 | ) | 35.89 | 13.70 | 1,710 | 1.39 | 1.39 | 1.06 | ||||||||||||||||||||||||||||||||||||
| Class T: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.56 | .69 | 4.99 | 5.68 | (.72 | ) | (.11 | ) | (.83 | ) | 44.41 | 14.79 | 5 | — | 6 | .35 | 5 | .35 | 5 | 1.77 | 5 | |||||||||||||||||||||||||||||||
| 12/31/2019 | 33.91 | .79 | 7.52 | 8.31 | (.85 | ) | (1.81 | ) | (2.66 | ) | 39.56 | 24.79 | 5 | — | 6 | .35 | 5 | .35 | 5 | 2.09 | 5 | |||||||||||||||||||||||||||||||
| 12/31/2018 | 40.38 | .83 | (3.27 | ) | (2.44 | ) | (.82 | ) | (3.21 | ) | (4.03 | ) | 33.91 | (6.29 | )5 | — | 6 | .36 | 5 | .36 | 5 | 2.05 | 5 | |||||||||||||||||||||||||||||
| 12/31/20177,8 | 38.08 | .56 | 4.59 | 5.15 | (.59 | ) | (2.26 | ) | (2.85 | ) | 40.38 | 13.61 | 5,9 | — | 6 | .38 | 5,10 | .38 | 5,10 | 1.92 | 5,10 | |||||||||||||||||||||||||||||||
| Class F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.45 | .57 | 4.98 | 5.55 | (.60 | ) | (.11 | ) | (.71 | ) | 44.29 | 14.44 | 1,788 | .65 | .65 | 1.48 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.82 | .67 | 7.50 | 8.17 | (.73 | ) | (1.81 | ) | (2.54 | ) | 39.45 | 24.43 | 1,922 | .66 | .66 | 1.78 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.29 | .71 | (3.27 | ) | (2.56 | ) | (.70 | ) | (3.21 | ) | (3.91 | ) | 33.82 | (6.59 | ) | 1,639 | .66 | .66 | 1.76 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.15 | .65 | 6.39 | 7.04 | (.64 | ) | (2.26 | ) | (2.90 | ) | 40.29 | 19.60 | 2,039 | .68 | .68 | 1.66 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.30 | .62 | 4.18 | 4.80 | (.65 | ) | (1.30 | ) | (1.95 | ) | 36.15 | 14.48 | 1,972 | .69 | .69 | 1.78 | ||||||||||||||||||||||||||||||||||||
| Class F-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.55 | .67 | 4.98 | 5.65 | (.70 | ) | (.11 | ) | (.81 | ) | 44.39 | 14.73 | 8,602 | .38 | .38 | 1.74 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.90 | .77 | 7.52 | 8.29 | (.83 | ) | (1.81 | ) | (2.64 | ) | 39.55 | 24.76 | 7,986 | .39 | .39 | 2.05 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.37 | .82 | (3.27 | ) | (2.45 | ) | (.81 | ) | (3.21 | ) | (4.02 | ) | 33.90 | (6.31 | ) | 6,067 | .39 | .39 | 2.03 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.21 | .76 | 6.41 | 7.17 | (.75 | ) | (2.26 | ) | (3.01 | ) | 40.37 | 19.94 | 4,840 | .40 | .40 | 1.93 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.36 | .71 | 4.19 | 4.90 | (.75 | ) | (1.30 | ) | (2.05 | ) | 36.21 | 14.78 | 4,359 | .41 | .41 | 2.02 | ||||||||||||||||||||||||||||||||||||
| Class F-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.55 | .72 | 4.98 | 5.70 | (.74 | ) | (.11 | ) | (.85 | ) | 44.40 | 14.88 | 3,916 | .28 | .28 | 1.85 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.90 | .82 | 7.52 | 8.34 | (.88 | ) | (1.81 | ) | (2.69 | ) | 39.55 | 24.89 | 3,571 | .29 | .29 | 2.16 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.37 | .86 | (3.28 | ) | (2.42 | ) | (.84 | ) | (3.21 | ) | (4.05 | ) | 33.90 | (6.24 | ) | 2,562 | .30 | .30 | 2.12 | |||||||||||||||||||||||||||||||||
| 12/31/20177,11 | 37.51 | .74 | 5.17 | 5.91 | (.79 | ) | (2.26 | ) | (3.05 | ) | 40.37 | 15.91 | 9 | 2,817 | .30 | 10 | .30 | 10 | 1.99 | 10 | ||||||||||||||||||||||||||||||||
| Class 529-A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.46 | .57 | 4.97 | 5.54 | (.60 | ) | (.11 | ) | (.71 | ) | 44.29 | 14.43 | 3,169 | .64 | .64 | 1.49 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.82 | .67 | 7.52 | 8.19 | (.74 | ) | (1.81 | ) | (2.55 | ) | 39.46 | 24.46 | 2,884 | .65 | .65 | 1.79 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.29 | .71 | (3.27 | ) | (2.56 | ) | (.70 | ) | (3.21 | ) | (3.91 | ) | 33.82 | (6.59 | ) | 2,495 | .66 | .66 | 1.76 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.15 | .65 | 6.40 | 7.05 | (.65 | ) | (2.26 | ) | (2.91 | ) | 40.29 | 19.62 | 2,843 | .66 | .66 | 1.67 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.30 | .62 | 4.18 | 4.80 | (.65 | ) | (1.30 | ) | (1.95 | ) | 36.15 | 14.49 | 2,351 | .68 | .68 | 1.77 | ||||||||||||||||||||||||||||||||||||
See end of table for footnotes.
| 26 | The Investment Company of America |
Financial highlights (continued)
| Income (loss) from investment operations1 | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Period ended | 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 return2,3 | Net assets, end of period (in millions) | Ratio of expenses to average net assets before reimburse- ments4 | Ratio of expenses to average net assets after reimburse- ments3,4 | Ratio of net income to average net assets3 | |||||||||||||||||||||||||||||||||||||||
| Class 529-C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | $ | 39.36 | $ | .29 | $ | 4.97 | $ | 5.26 | $ | (.29 | ) | $ | (.11 | ) | $ | (.40 | ) | $ | 44.22 | 13.60 | % | $ | 117 | 1.37 | % | 1.37 | % | .77 | % | |||||||||||||||||||||||
| 12/31/2019 | 33.74 | .39 | 7.49 | 7.88 | (.45 | ) | (1.81 | ) | (2.26 | ) | 39.36 | 23.54 | 283 | 1.39 | 1.39 | 1.05 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.19 | .41 | (3.26 | ) | (2.85 | ) | (.39 | ) | (3.21 | ) | (3.60 | ) | 33.74 | (7.28 | ) | 293 | 1.41 | 1.41 | 1.01 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.03 | .35 | 6.37 | 6.72 | (.30 | ) | (2.26 | ) | (2.56 | ) | 40.19 | 18.71 | 374 | 1.43 | 1.43 | .90 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.20 | .35 | 4.16 | 4.51 | (.38 | ) | (1.30 | ) | (1.68 | ) | 36.03 | 13.61 | 504 | 1.45 | 1.45 | 1.00 | ||||||||||||||||||||||||||||||||||||
| Class 529-E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.31 | .48 | 4.97 | 5.45 | (.51 | ) | (.11 | ) | (.62 | ) | 44.14 | 14.20 | 84 | .86 | .86 | 1.26 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.71 | .59 | 7.47 | 8.06 | (.65 | ) | (1.81 | ) | (2.46 | ) | 39.31 | 24.14 | 85 | .88 | .88 | 1.56 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.16 | .61 | (3.25 | ) | (2.64 | ) | (.60 | ) | (3.21 | ) | (3.81 | ) | 33.71 | (6.78 | ) | 79 | .90 | .90 | 1.52 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.04 | .56 | 6.37 | 6.93 | (.55 | ) | (2.26 | ) | (2.81 | ) | 40.16 | 19.34 | 92 | .90 | .90 | 1.43 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.21 | .53 | 4.17 | 4.70 | (.57 | ) | (1.30 | ) | (1.87 | ) | 36.04 | 14.20 | 84 | .92 | .92 | 1.53 | ||||||||||||||||||||||||||||||||||||
| Class 529-T: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.56 | .67 | 4.99 | 5.66 | (.70 | ) | (.11 | ) | (.81 | ) | 44.41 | 14.72 | 5 | — | 6 | .40 | 5 | .40 | 5 | 1.72 | 5 | |||||||||||||||||||||||||||||||
| 12/31/2019 | 33.91 | .77 | 7.52 | 8.29 | (.83 | ) | (1.81 | ) | (2.64 | ) | 39.56 | 24.72 | 5 | — | 6 | .41 | 5 | .41 | 5 | 2.03 | 5 | |||||||||||||||||||||||||||||||
| 12/31/2018 | 40.38 | .81 | (3.27 | ) | (2.46 | ) | (.80 | ) | (3.21 | ) | (4.01 | ) | 33.91 | (6.34 | )5 | — | 6 | .42 | 5 | .42 | 5 | 2.00 | 5 | |||||||||||||||||||||||||||||
| 12/31/20177,8 | 38.08 | .55 | 4.59 | 5.14 | (.58 | ) | (2.26 | ) | (2.84 | ) | 40.38 | 13.57 | 5,9 | — | 6 | .43 | 5,10 | .43 | 5,10 | 1.88 | 5,10 | |||||||||||||||||||||||||||||||
| Class 529-F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.40 | .65 | 4.97 | 5.62 | (.70 | ) | (.11 | ) | (.81 | ) | 44.21 | 14.69 | 5 | — | 6 | .40 | 5 | .40 | 5 | 1.72 | 5 | |||||||||||||||||||||||||||||||
| 12/31/2019 | 33.78 | .76 | 7.50 | 8.26 | (.83 | ) | (1.81 | ) | (2.64 | ) | 39.40 | 24.72 | 115 | .42 | .42 | 2.02 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.24 | .80 | (3.25 | ) | (2.45 | ) | (.80 | ) | (3.21 | ) | (4.01 | ) | 33.78 | (6.34 | ) | 93 | .43 | .43 | 1.99 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.11 | .74 | 6.38 | 7.12 | (.73 | ) | (2.26 | ) | (2.99 | ) | 40.24 | 19.88 | 83 | .44 | .44 | 1.89 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.27 | .70 | 4.17 | 4.87 | (.73 | ) | (1.30 | ) | (2.03 | ) | 36.11 | 14.73 | 70 | .46 | .46 | 1.99 | ||||||||||||||||||||||||||||||||||||
| Class 529-F-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/20207,12 | 38.92 | .12 | 5.55 | 5.67 | (.18 | ) | — | (.18 | ) | 44.41 | 14.56 | 9 | 136 | .06 | 9 | .06 | 9 | .29 | 9 | |||||||||||||||||||||||||||||||||
| Class 529-F-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/20207,12 | 38.92 | .13 | 5.54 | 5.67 | (.18 | ) | — | (.18 | ) | 44.41 | 14.59 | 9 | — | 6 | .09 | 9 | .06 | 9 | .30 | 9 | ||||||||||||||||||||||||||||||||
| Class R-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.21 | .30 | 4.95 | 5.25 | (.32 | ) | (.11 | ) | (.43 | ) | 44.03 | 13.63 | 70 | 1.35 | 1.35 | .77 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.63 | .40 | 7.45 | 7.85 | (.46 | ) | (1.81 | ) | (2.27 | ) | 39.21 | 23.54 | 74 | 1.37 | 1.37 | 1.07 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.07 | .41 | (3.24 | ) | (2.83 | ) | (.40 | ) | (3.21 | ) | (3.61 | ) | 33.63 | (7.24 | ) | 72 | 1.38 | 1.38 | 1.03 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 35.97 | .36 | 6.36 | 6.72 | (.36 | ) | (2.26 | ) | (2.62 | ) | 40.07 | 18.73 | 88 | 1.39 | 1.39 | .94 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.15 | .37 | 4.15 | 4.52 | (.40 | ) | (1.30 | ) | (1.70 | ) | 35.97 | 13.66 | 85 | 1.40 | 1.40 | 1.05 | ||||||||||||||||||||||||||||||||||||
See end of table for footnotes.
| The Investment Company of America | 27 |
Financial highlights (continued)
| Income (loss) from investment operations1 | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Period ended | 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 return2,3 | Net assets, end of period (in millions) | Ratio of expenses to average net assets before reimburse- ments4 | Ratio of expenses to average net assets after reimburse- ments3,4 | Ratio of net income to average net assets3 | |||||||||||||||||||||||||||||||||||||||
| Class R-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | $ | 39.26 | $ | .29 | $ | 4.97 | $ | 5.26 | $ | (.32 | ) | $ | (.11 | ) | $ | (.43 | ) | $ | 44.09 | 13.62 | % | $ | 659 | 1.37 | % | 1.37 | % | .76 | % | |||||||||||||||||||||||
| 12/31/2019 | 33.67 | .40 | 7.46 | 7.86 | (.46 | ) | (1.81 | ) | (2.27 | ) | 39.26 | 23.54 | 645 | 1.39 | 1.39 | 1.06 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.12 | .41 | (3.25 | ) | (2.84 | ) | (.40 | ) | (3.21 | ) | (3.61 | ) | 33.67 | (7.26 | ) | 582 | 1.40 | 1.40 | 1.02 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.01 | .36 | 6.37 | 6.73 | (.36 | ) | (2.26 | ) | (2.62 | ) | 40.12 | 18.75 | 687 | 1.39 | 1.39 | .94 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.18 | .37 | 4.16 | 4.53 | (.40 | ) | (1.30 | ) | (1.70 | ) | 36.01 | 13.68 | 653 | 1.39 | 1.39 | 1.06 | ||||||||||||||||||||||||||||||||||||
| Class R-2E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.43 | .40 | 4.99 | 5.39 | (.43 | ) | (.11 | ) | (.54 | ) | 44.28 | 13.94 | 75 | 1.08 | 1.08 | 1.05 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.81 | .51 | 7.49 | 8.00 | (.57 | ) | (1.81 | ) | (2.38 | ) | 39.43 | 23.89 | 71 | 1.09 | 1.09 | 1.35 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.28 | .53 | (3.26 | ) | (2.73 | ) | (.53 | ) | (3.21 | ) | (3.74 | ) | 33.81 | (6.99 | ) | 52 | 1.10 | 1.10 | 1.33 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.15 | .48 | 6.40 | 6.88 | (.49 | ) | (2.26 | ) | (2.75 | ) | 40.28 | 19.14 | 43 | 1.09 | 1.09 | 1.23 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.33 | .47 | 4.19 | 4.66 | (.54 | ) | (1.30 | ) | (1.84 | ) | 36.15 | 14.03 | 16 | 1.09 | 1.09 | 1.32 | ||||||||||||||||||||||||||||||||||||
| Class R-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.40 | .46 | 4.98 | 5.44 | (.49 | ) | (.11 | ) | (.60 | ) | 44.24 | 14.13 | 956 | .92 | .92 | 1.20 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.78 | .57 | 7.49 | 8.06 | (.63 | ) | (1.81 | ) | (2.44 | ) | 39.40 | 24.08 | 949 | .93 | .93 | 1.51 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.24 | .59 | (3.26 | ) | (2.67 | ) | (.58 | ) | (3.21 | ) | (3.79 | ) | 33.78 | (6.84 | ) | 864 | .94 | .94 | 1.47 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.11 | .54 | 6.38 | 6.92 | (.53 | ) | (2.26 | ) | (2.79 | ) | 40.24 | 19.28 | 1,028 | .95 | .95 | 1.38 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.27 | .52 | 4.18 | 4.70 | (.56 | ) | (1.30 | ) | (1.86 | ) | 36.11 | 14.17 | 951 | .95 | .95 | 1.50 | ||||||||||||||||||||||||||||||||||||
| Class R-4: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.44 | .58 | 4.98 | 5.56 | (.61 | ) | (.11 | ) | (.72 | ) | 44.28 | 14.48 | 1,337 | .62 | .62 | 1.50 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.81 | .68 | 7.50 | 8.18 | (.74 | ) | (1.81 | ) | (2.55 | ) | 39.44 | 24.46 | 1,435 | .63 | .63 | 1.81 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.28 | .72 | (3.28 | ) | (2.56 | ) | (.70 | ) | (3.21 | ) | (3.91 | ) | 33.81 | (6.58 | ) | 1,346 | .64 | .64 | 1.77 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.14 | .66 | 6.39 | 7.05 | (.65 | ) | (2.26 | ) | (2.91 | ) | 40.28 | 19.64 | 1,688 | .65 | .65 | 1.68 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.29 | .63 | 4.19 | 4.82 | (.67 | ) | (1.30 | ) | (1.97 | ) | 36.14 | 14.55 | 1,518 | .64 | .64 | 1.80 | ||||||||||||||||||||||||||||||||||||
| Class R-5E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.54 | .66 | 4.98 | 5.64 | (.69 | ) | (.11 | ) | (.80 | ) | 44.38 | 14.69 | 101 | .42 | .42 | 1.70 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.89 | .76 | 7.52 | 8.28 | (.82 | ) | (1.81 | ) | (2.63 | ) | 39.54 | 24.72 | 68 | .43 | .43 | 2.01 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.36 | .81 | (3.27 | ) | (2.46 | ) | (.80 | ) | (3.21 | ) | (4.01 | ) | 33.89 | (6.35 | ) | 24 | .43 | .43 | 2.01 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.20 | .76 | 6.39 | 7.15 | (.73 | ) | (2.26 | ) | (2.99 | ) | 40.36 | 19.89 | 10 | .44 | .44 | 1.95 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.36 | .62 | 4.24 | 4.86 | (.72 | ) | (1.30 | ) | (2.02 | ) | 36.20 | 14.69 | 3 | .43 | .43 | 1.71 | ||||||||||||||||||||||||||||||||||||
| Class R-5: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.56 | .69 | 4.99 | 5.68 | (.72 | ) | (.11 | ) | (.83 | ) | 44.41 | 14.82 | 196 | .32 | .32 | 1.80 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.91 | .80 | 7.52 | 8.32 | (.86 | ) | (1.81 | ) | (2.67 | ) | 39.56 | 24.82 | 261 | .33 | .33 | 2.11 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.38 | .84 | (3.27 | ) | (2.43 | ) | (.83 | ) | (3.21 | ) | (4.04 | ) | 33.91 | (6.27 | ) | 245 | .34 | .34 | 2.07 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.22 | .78 | 6.41 | 7.19 | (.77 | ) | (2.26 | ) | (3.03 | ) | 40.38 | 20.00 | 315 | .35 | .35 | 1.98 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.36 | .74 | 4.18 | 4.92 | (.76 | ) | (1.30 | ) | (2.06 | ) | 36.22 | 14.85 | 262 | .35 | .35 | 2.12 | ||||||||||||||||||||||||||||||||||||
| Class R-6: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/31/2020 | 39.56 | .72 | 4.97 | 5.69 | (.74 | ) | (.11 | ) | (.85 | ) | 44.40 | 14.85 | 18,480 | .27 | .27 | 1.85 | ||||||||||||||||||||||||||||||||||||
| 12/31/2019 | 33.90 | .82 | 7.53 | 8.35 | (.88 | ) | (1.81 | ) | (2.69 | ) | 39.56 | 24.92 | 17,077 | .28 | .28 | 2.16 | ||||||||||||||||||||||||||||||||||||
| 12/31/2018 | 40.38 | .86 | (3.28 | ) | (2.42 | ) | (.85 | ) | (3.21 | ) | (4.06 | ) | 33.90 | (6.25 | ) | 12,548 | .29 | .29 | 2.13 | |||||||||||||||||||||||||||||||||
| 12/31/2017 | 36.22 | .80 | 6.41 | 7.21 | (.79 | ) | (2.26 | ) | (3.05 | ) | 40.38 | 20.07 | 11,556 | .30 | .30 | 2.03 | ||||||||||||||||||||||||||||||||||||
| 12/31/2016 | 33.36 | .75 | 4.20 | 4.95 | (.79 | ) | (1.30 | ) | (2.09 | ) | 36.22 | 14.92 | 6,977 | .30 | .30 | 2.14 | ||||||||||||||||||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Portfolio turnover rate for all share classes13 | 39 | % | 31 | % | 36 | % | 28 | % | 25 | % | ||||||||||
| 28 | The Investment Company of America |
Financial highlights (continued)
| 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 from CRMC. During one of the periods shown, CRMC reimbursed a portion of transfer agent services fees for certain share classes. |
| 4 | Ratios do not include expenses of any Central Funds. The fund indirectly bears its proportionate share of the expenses of any Central Funds. |
| 5 | All or a significant portion of assets in this class consisted of seed capital invested by CRMC and/or its affiliates. Fees for distribution services are not charged or accrued on these seed capital assets. If such fees were paid by the fund on seed capital assets, fund expenses would have been higher and net income and total return would have been lower. |
| 6 | Amount less than $1 million. |
| 7 | Based on operations for a period that is less than a full year. |
| 8 | Class T and 529-T shares began investment operations on April 7, 2017. |
| 9 | Not annualized. |
| 10 | Annualized. |
| 11 | Class F-3 shares began investment operations on January 27, 2017. |
| 12 | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
| 13 | Rates do not include the fund’s portfolio activity with respect to any Central Funds. |
See notes to financial statements.
| The Investment Company of America | 29 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of The Investment Company of America:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of The Investment Company of America (the “Fund”), including the investment portfolio, as of December 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Costa Mesa, California
February 11, 2021
We have served as the auditor of one or more American Funds investment companies since 1956.
| 30 | The Investment Company of America |
| Expense example | unaudited |
As a fund shareholder, 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 (July 1, 2020, through December 31, 2020).
Actual expenses:
The first line of each share class in the table on the following 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 titled “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 following 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:
Retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2, F-3, 529-F-1, 529-F-2 and 529-F-3 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 on the following page 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.
| The Investment Company of America | 31 |
| Expense example | (continued) |
| Beginning account value 7/1/2020 | Ending account value 12/31/2020 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
| Class A – actual return | $ | 1,000.00 | $ | 1,186.90 | $ | 3.20 | .58 | % | ||||||||
| Class A – assumed 5% return | 1,000.00 | 1,022.28 | 2.96 | .58 | ||||||||||||
| Class C – actual return | 1,000.00 | 1,182.62 | 7.26 | 1.32 | ||||||||||||
| Class C – assumed 5% return | 1,000.00 | 1,018.55 | 6.72 | 1.32 | ||||||||||||
| Class T – actual return | 1,000.00 | 1,188.41 | 1.88 | .34 | ||||||||||||
| Class T – assumed 5% return | 1,000.00 | 1,023.49 | 1.73 | .34 | ||||||||||||
| Class F-1 – actual return | 1,000.00 | 1,186.62 | 3.53 | .64 | ||||||||||||
| Class F-1 – assumed 5% return | 1,000.00 | 1,021.98 | 3.26 | .64 | ||||||||||||
| Class F-2 – actual return | 1,000.00 | 1,188.28 | 2.04 | .37 | ||||||||||||
| Class F-2 – assumed 5% return | 1,000.00 | 1,023.34 | 1.89 | .37 | ||||||||||||
| Class F-3 – actual return | 1,000.00 | 1,188.81 | 1.49 | .27 | ||||||||||||
| Class F-3 – assumed 5% return | 1,000.00 | 1,023.84 | 1.38 | .27 | ||||||||||||
| Class 529-A – actual return | 1,000.00 | 1,186.66 | 3.47 | .63 | ||||||||||||
| Class 529-A – assumed 5% return | 1,000.00 | 1,022.03 | 3.21 | .63 | ||||||||||||
| Class 529-C – actual return | 1,000.00 | 1,182.18 | 7.43 | 1.35 | ||||||||||||
| Class 529-C – assumed 5% return | 1,000.00 | 1,018.40 | 6.87 | 1.35 | ||||||||||||
| Class 529-E – actual return | 1,000.00 | 1,185.42 | 4.68 | .85 | ||||||||||||
| Class 529-E – assumed 5% return | 1,000.00 | 1,020.92 | 4.33 | .85 | ||||||||||||
| Class 529-T – actual return | 1,000.00 | 1,188.06 | 2.21 | .40 | ||||||||||||
| Class 529-T – assumed 5% return | 1,000.00 | 1,023.19 | 2.04 | .40 | ||||||||||||
| Class 529-F-1 – actual return | 1,000.00 | 1,187.83 | 2.21 | .40 | ||||||||||||
| Class 529-F-1 – assumed 5% return | 1,000.00 | 1,023.19 | 2.04 | .40 | ||||||||||||
| Class 529-F-2 – actual return† | 1,000.00 | 1,188.06 | .71 | .39 | ||||||||||||
| Class 529-F-2 – assumed 5% return† | 1,000.00 | 1,023.24 | 1.99 | .39 | ||||||||||||
| Class 529-F-3 – actual return† | 1,000.00 | 1,188.50 | .60 | .33 | ||||||||||||
| Class 529-F-3 – assumed 5% return† | 1,000.00 | 1,023.54 | 1.68 | .33 | ||||||||||||
| Class R-1 – actual return | 1,000.00 | 1,182.56 | 7.37 | 1.34 | ||||||||||||
| Class R-1 – assumed 5% return | 1,000.00 | 1,018.45 | 6.82 | 1.34 | ||||||||||||
| Class R-2 – actual return | 1,000.00 | 1,182.58 | 7.43 | 1.35 | ||||||||||||
| Class R-2 – assumed 5% return | 1,000.00 | 1,018.40 | 6.87 | 1.35 | ||||||||||||
| Class R-2E – actual return | 1,000.00 | 1,183.96 | 5.89 | 1.07 | ||||||||||||
| Class R-2E – assumed 5% return | 1,000.00 | 1,019.81 | 5.45 | 1.07 | ||||||||||||
| Class R-3 – actual return | 1,000.00 | 1,185.28 | 5.01 | .91 | ||||||||||||
| Class R-3 – assumed 5% return | 1,000.00 | 1,020.62 | 4.63 | .91 | ||||||||||||
| Class R-4 – actual return | 1,000.00 | 1,186.84 | 3.36 | .61 | ||||||||||||
| Class R-4 – assumed 5% return | 1,000.00 | 1,022.13 | 3.11 | .61 | ||||||||||||
| Class R-5E – actual return | 1,000.00 | 1,188.10 | 2.26 | .41 | ||||||||||||
| Class R-5E – assumed 5% return | 1,000.00 | 1,023.14 | 2.09 | .41 | ||||||||||||
| Class R-5 – actual return | 1,000.00 | 1,188.50 | 1.77 | .32 | ||||||||||||
| Class R-5 – assumed 5% return | 1,000.00 | 1,023.59 | 1.63 | .32 | ||||||||||||
| Class R-6 – actual return | 1,000.00 | 1,188.85 | 1.49 | .27 | ||||||||||||
| Class R-6 – assumed 5% return | 1,000.00 | 1,023.84 | 1.38 | .27 | ||||||||||||
| * | The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period). |
| † | The period for the “annualized expense ratio” and “actual return” line is based on the number of days since the share class began investment operations on October 30, 2020. The “assumed 5% return” line is based on 184 days. |
| 32 | The Investment Company of America |
| Tax information | unaudited |
We are required to advise you of the federal tax status of certain distributions received by shareholders during the fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended December 31, 2020:
| Long-term capital gains | $ | 315,767,000 | ||
| Qualified dividend income | 100% | |||
| Section 163(j) interest dividends | $ | 19,941,000 | ||
| Corporate dividends received deduction | $ | 1,398,131,000 | ||
| U.S. government income that may be exempt from state taxation | $ | 14,597,000 |
Individual shareholders should refer to their Form 1099 or other tax information, which was mailed in January 2021, to determine the calendar year amounts to be included on their 2020 tax returns. Shareholders should consult their tax advisors.
| The Investment Company of America | 33 |
Liquidity Risk Management Program
The fund has adopted a liquidity risk management program (the “program”). The fund’s board has designated Capital Research and Management Company (“CRMC”) as the administrator of the program. Personnel of CRMC or its affiliates conduct the day-to-day operation of the program pursuant to policies and procedures administered by the Capital Group Liquidity Risk Management Committee.
Under the program, CRMC manages the fund’s liquidity risk, which is the risk that the fund could not meet shareholder redemption requests without significant dilution of remaining shareholders’ interests in the fund. This risk is managed by monitoring the degree of liquidity of the fund’s investments, limiting the amount of the fund’s illiquid investments, and utilizing various risk management tools and facilities available to the fund for meeting shareholder redemptions, among other means. CRMC’s process of determining the degree of liquidity of the fund’s investments is supported by one or more third-party liquidity assessment vendors.
The fund’s board reviewed a report prepared by CRMC regarding the operation and effectiveness of the program for the period October 1, 2019, through September 30, 2020. No significant liquidity events impacting the fund were noted in the report. In addition, CRMC provided its assessment that the program had been effective in managing the fund’s liquidity risk.
| 34 | The Investment Company of America |
Board of trustees and other officers
Independent trustees1
| Name and year of birth | Year first elected a trustee of the fund2 | Principal occupation(s) during past five years | Number of portfolios in fund complex overseen by trustee | Other directorships3 held by trustee | ||||
| Mary Anne Dolan, 1947 | 2000 | Founder and President, MAD Ink (communications company); former Editor-in-Chief, The Los Angeles Herald Examiner (retired 1989) | 10 | None | ||||
| James G. Ellis, 1947 | 2008 | Professor of Marketing and former Dean, Marshall School of Business, University of Southern California | 99 | Mercury General Corporation | ||||
| Pablo R. González Guajardo, 1967 | 2015 | CEO, Kimberly-Clark de México, SAB de CV | 16 | América Móvil, SAB de CV; Grupo Lala, SAB de CV; Grupo Sanborns, SAB de CV; Kimberly-Clark de México, SAB de CV | ||||
| William D. Jones, 1955 Chairman of the Board (Independent and Non-Executive) | 2010 | Real estate developer/owner, President and CEO, CityLink Investment Corporation (acquires, develops and manages real estate ventures in urban communities) and for the former City Scene Management Company (provided commercial asset management services) | 17 | Sempra Energy | ||||
| John C. Mazziotta, MD, PhD, 1949 | 2011 | Physician; Professor of Neurology, University of California at Los Angeles; Vice Chancellor, UCLA Health Sciences; CEO, UCLA Health System; former Dean, David Geffen School of Medicine at UCLA; former Chair, Department of Neurology, UCLA; former Associate Director, Semel Institute, UCLA; former Director, Brain Mapping Center, UCLA | 4 | None | ||||
| William R. McLaughlin, 1956 | 2015 | Advisor and former President and CEO, The Orvis Company (outdoor equipment retailer) | 4 | None | ||||
| Kenneth M. Simril, 1965 | 2019 | President and CEO, SCI Ingredients Holdings, Inc. (food manufacturing) | 7 | At Home Group Inc. | ||||
| Kathy J. Williams, 1955 | 2019 | Commissioner, Juvenile Justice Delinquency Prevention Commission; Board Member, Aspen Public Radio; former Commissioner, Marin County Human Rights Commission | 4 | None |
Interested trustees4,5
| Name, year of birth and position with fund | Year first elected a trustee or officer of the fund2 | Principal occupation(s) during past five years and positions held with affiliated entities or the principal underwriter of the fund | Number of portfolios in fund complex overseen by trustee | Other directorships3 held by trustee | ||||
| James Terrile, 1965 Senior Vice President and Trustee | 2019 | Partner — Capital Research Global Investors, Capital Research and Management Company | 4 | None | ||||
| William L. Robbins, 1968 Trustee | 2019 | Partner — Capital International Investors, Capital Research and Management Company; Partner — Capital International Investors, Capital Bank and Trust Company6; Chair and Director, Capital Group International, Inc.6 | 4 | None |
The fund’s statement of additional information includes further details about fund directors and is available without charge upon request by calling American Funds Service Company at (800) 421-4225 or by visiting the Capital Group website at capitalgroup.com. The address for all trustees and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.
See page 36 for footnotes.
| The Investment Company of America | 35 |
Other officers5
| Name, year of birth and position with fund |
Year first elected an officer of the fund2 |
Principal occupation(s) during past five years and positions held with affiliated entities or the principal underwriter of the fund | ||
| Grant L. Cambridge, 1962 Co-President |
2019 | Partner — Capital International Investors, Capital Research and Management Company | ||
| Martin Romo, 1967 Co-President |
2018 | Chairman and Principal Executive Officer, Capital Research Company6; Partner — Capital Research Global Investors, Capital Research and Management Company; Director, The Capital Group Companies, Inc.6 | ||
| Herbert Y. Poon, 1973 Executive Vice President |
2012 | Senior Vice President and Senior Counsel — Fund Business Management Group, Capital Research and Management Company; Chief Compliance Officer, Capital Research and Management Company; Chief Compliance Officer, Capital Research Company6 | ||
| Christopher D. Buchbinder, 1971 Senior Vice President |
2010 | Partner — Capital Research Global Investors, Capital Research and Management Company; Director, The Capital Group Companies, Inc.6 | ||
| Barry S. Crosthwaite, 1958 Senior Vice President |
2019 | Partner — Capital International Investors, Capital Research and Management Company | ||
| Joyce E. Gordon, 1956 Senior Vice President |
1998 | Partner — Capital Research Global Investors, Capital Research and Management Company | ||
| James B. Lovelace, 1956 Senior Vice President |
1994 | Partner — Capital Research Global Investors, Capital Research and Management Company; Partner — Capital Research Global Investors, Capital Bank and Trust Company6 | ||
| Donald D. O’Neal, 1960 Senior Vice President |
1994 | Partner — Capital International Investors, Capital Research and Management Company; Partner — Capital International Investors, Capital Bank and Trust Company6 | ||
| Paul F. Roye, 1953 Senior Vice President |
2008 | Senior Vice President and Senior Counsel — Fund Business Management Group, Capital Research and Management Company; Director, Capital Research and Management Company | ||
| Jessica C. Spaly, 1977 Vice President |
2010 | Partner — Capital Research Global Investors, Capital Research and Management Company | ||
| Michael W. Stockton, 1967 Secretary |
2013–2016, 2019 | Senior Vice President — Fund Business Management Group, Capital Research and Management Company | ||
| Brian Bullard, 1969 Treasurer |
2016 | Senior Vice President — Investment Operations, Capital Research and Management Company | ||
| Sandra Chuon, 1972 Assistant Treasurer |
2019 | Assistant Vice President — Investment Operations, Capital Research and Management Company | ||
| Hong T. Le, 1978 Assistant Treasurer |
2016 | Vice President — Investment Operations, Capital Research and Management Company |
| 1 | The term independent trustee refers to a trustee who is not an “interested person” of the fund within the meaning of the Investment Company Act of 1940. |
| 2 | Trustees and officers of the fund serve until their resignation, removal or retirement. |
| 3 | This includes all directorships/trusteeships (other than those in the American Funds or other funds managed by Capital Research and Management Company or its affiliates) that are held by each trustee as a trustee or director of a public company or a registered investment company. |
| 4 | The term interested trustee refers to a trustee who is an “interested person” within the meaning of the Investment Company Act of 1940, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter). |
| 5 | All of the trustees and/or officers listed are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as investment adviser. |
| 6 | Company affiliated with Capital Research and Management Company. |
| 36 | The Investment Company of America |
Office of the fund
333 South Hope Street
Los Angeles, CA 90071-1406
Investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
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 1000
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 Capital Group website at capitalgroup.com.
“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on our 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 our website.
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 NPORT-P. The list of portfolio holdings is available free of charge on the SEC website and on our website.
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 March 31, 2021, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
The Standard & Poor’s 500 Composite Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2021 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC.
American Funds Distributors, Inc., member FINRA.
The Capital Advantage®
Since 1931, Capital Group, home of American Funds, has helped investors pursue long-term investment success. Our consistent approach — in combination with The Capital SystemSM — has resulted in superior outcomes.
| Aligned with investor success | |
| We base our decisions on a long-term perspective, which we believe aligns our goals with the interests of our clients. Our portfolio managers average 28 years of investment industry experience, including 22 years at our company, reflecting a career commitment to our long-term approach.1 | |
| The Capital System | |
| The Capital System combines individual accountability with teamwork. Funds using The Capital System are divided into portions that are managed independently by investment professionals with diverse backgrounds, ages and investment approaches. An extensive global research effort is the backbone of our system. | |
| American Funds’ superior outcomes | |
| Equity funds have beaten their Lipper peer indexes in 92% of 10-year periods and 99% of 20-year periods.2 Fixed income funds have helped investors achieve diversification through attention to correlation between bonds and equities.3 Fund management fees have been among the lowest in the industry.4 |
| 1 | Investment industry experience as of December 31, 2019. | |
| 2 | Based on Class F-2 share results for rolling periods through December 31, 2019. Periods covered are the shorter of the fund’s lifetime or since the comparable Lipper index inception date (except Capital Income Builder and SMALLCAP World Fund, for which the Lipper average was used). Expenses differ for each share class, so results will vary. | |
| 3 | Based on Class F-2 share results as of December 31, 2019. Fifteen of the 17 fixed income American Funds that have been in existence for the three-year period showed a three-year correlation below 0.2. Standard & Poor’s 500 Composite Index was used as an equity market proxy. Correlation based on monthly total returns. Correlation is a statistical measure of how two securities move in relation to each other. A correlation ranges from –1 to 1. A positive correlation close to 1 implies that as one security moves, either up or down, the other security will move in “lockstep,” in the same direction. A negative correlation close to –1 indicates that the securities have moved in the opposite direction. | |
| 4 | On average, our management fees were in the lowest quintile 65% of the time, based on the 20-year period ended December 31, 2019, versus comparable Lipper categories, excluding funds of funds. | |
| Class F-2 shares were first offered on August 1, 2008. Class F-2 share results prior to the date of first sale are hypothetical based on the results of the original share class of the fund without a sales charge, adjusted for typical estimated expenses. Results for certain funds with an inception date after August 1, 2008, also include hypothetical returns because those funds’ Class F-2 shares sold after the funds’ date of first offering. Please see capitalgroup.com for more information on specific expense adjustments and the actual dates of first sale. | ||
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
ITEM 2 – Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made by calling 800/421-4225 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.
ITEM 3 – Audit Committee Financial Expert
The Registrant’s board has determined that James G. Ellis, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such. Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 – Principal Accountant Fees and Services
| ICA | ||
| Registrant: | ||
| a) Audit Fees: | ||
| Audit | 2019 | 105,000 |
| 2020 | 216,000 | |
| b) Audit-Related Fees: | ||
| 2019 | 20,000 | |
| 2020 | 19,000 | |
| c) Tax Fees: | ||
| 2019 | 8,000 | |
| 2020 | 8,000 | |
| The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns. | ||
| d) All Other Fees: | ||
| 2019 | None | |
| 2020 | None | |
| Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | ||
| a) Audit Fees: | ||
| Not Applicable | ||
| b) Audit-Related Fees: | ||
| 2019 | 1,812,000 | |
| 2020 | 1,477,000 | |
| The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Standards for Attestation Engagements Number 18 issued by the American Institute of Certified Public Accountants. | ||
| c) Tax Fees: |
| 2019 | 46,000 | |
| 2020 | 40,000 | |
| The tax fees consist of consulting services relating to the Registrant’s investments. | ||
| d) All Other Fees: | ||
| 2019 | 2,000 | |
| 2020 | None | |
| The other fees consist of subscription services related to an accounting research tool. | ||
| All audit and permissible non-audit services that the Registrant’s audit committee considers compatible with maintaining the independent registered public accounting firm’s independence are required to be pre-approved by the committee. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser and affiliates. | ||
| Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant, adviser and affiliates that provide ongoing services to the Registrant, were $1,889,000 for fiscal year 2019 and $1,544,000 for fiscal year 2020. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence. |
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
Not applicable, insofar as the schedule is included as part of the report to shareholders filed under Item 1 of this Form.
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 semi-annual 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) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
| (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/ Herbert Y. Poon________________ | |
|
Herbert Y. Poon, Principal Executive Officer | |
| Date: February 26, 2021 |
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/ Herbert Y. Poon_____________ |
|
Herbert Y. Poon, Principal Executive Officer |
| Date: February 26, 2021 |
| By ___/s/ Brian D. Bullard__________________ |
|
Brian D. Bullard, Treasurer and Principal Financial Officer |
| Date: February 26, 2021 |