The New Economy Fund

Part B

Statement of Additional Information

February 1, 2011

This document is not a prospectus but should be read in conjunction with the current prospectus or retirement plan prospectus of The New Economy Fund (the “fund” or “NEF”) dated February 1, 2011. You may obtain a prospectus from your financial adviser or by writing to the fund at the following address:

The New Economy Fund

Attention: Secretary

333 South Hope Street

Los Angeles, California 90071

213/486-9200

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

Class A	ANEFX	Class 529-A	CNGAX	Class R-1	RNGAX
Class B	ANFBX	Class 529-B	CNGBX	Class R-2	RNGBX
Class C	ANFCX	Class 529-C	CNGCX	Class R-3	RNGCX
Class F-1	ANFFX	Class 529-E	CNGEX	Class R-4	RNGEX
Class F-2	NEFFX	Class 529-F-1	CNGFX	Class R-5	RNGFX
				Class R-6	RNGGX

Table of Contents

Item	Page no.
Certain investment limitations and guidelines	2
Description of certain securities and investment techniques	3
Fund policies	9
Management of the fund	11
Execution of portfolio transactions	39
Disclosure of portfolio holdings	42
Price of shares	44
Taxes and distributions	47
Purchase and exchange of shares	52
Sales charges	57
Sales charge reductions and waivers	60
Selling shares	65
Shareholder account services and privileges	66
General information	69
Appendix	76
Investment portfolio
Financial statements

Page 1

Certain investment limitations and guidelines

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

Investment strategies

·   The fund seeks to achieve its objective by investing in securities of companies that can benefit from innovation, exploit new technologies or provide products and services that meet the demands of an evolving global economy.

Debt securities

·   The fund may invest up to 10% of its assets in nonconvertible debt securities rated Baa1 or below or BBB+ or below by Nationally Recognized Statistical Rating Organizations designated by the fund’s investment adviser or unrated but determined to be of equivalent quality by the fund’s investment adviser.

Investing outside the U.S.

·   The fund may invest up to 45% of its assets in securities of issuers domiciled outside the United States.

*     *     *     *     *     *

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

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Description of certain securities and investment techniques

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

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

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

The growth-oriented, equity-type securities generally purchased by the fund may involve large price swings and potential for loss, particularly in the case of smaller capitalization stocks.

Investing in smaller capitalization stocks — The fund may invest in the stocks of smaller capitalization companies (typically companies with market capitalizations of less than $3.5 billion at the time of purchase). The investment adviser believes that the issuers of smaller capitalization stocks often provide attractive investment opportunities. However, investing in smaller capitalization stocks can involve greater risk than is customarily associated with investing in stocks of larger, more established companies. For example, smaller companies often have limited product lines, limited operating histories, limited markets or financial resources, may be dependent on one or a few key persons for management and can be more susceptible to losses. Also, their securities may be thinly traded (and therefore have to be sold at a discount from current prices or sold in small lots over an extended period of time), may be followed by fewer investment research analysts and may be subject to wider price swings, thus creating a greater chance of loss than securities of larger capitalization companies.

Investing in private companies — The fund may invest in companies that have not publicly offered their securities. Investing in private companies can involve greater risks than those associated with investing in publicly traded companies. For example, the securities of a private company may be subject to the risk that market conditions, developments within the company, investor perception, or regulatory decisions may delay or prevent the company from ultimately offering its securities to the public. Furthermore, these investments are generally considered to be illiquid until a company’s public offering and are often subject to additional contractual restrictions on resale that would prevent the  fund from selling its company shares for a period of time following the public offering.

Investments in private companies can offer the fund significant growth opportunities at attractive prices. However these investments can pose greater risk, and, consequently, there is no guarantee that positive results can be achieved in the future.

Investing outside the U.S. — Investing outside the United States may involve additional risks caused by, among other things, currency controls and fluctuating currency values; different accounting, auditing, financial reporting, disclosure, and regulatory and legal standards and practices; changing local, regional and global economic, political and social conditions;

Page 3

expropriation; changes in tax policy; greater market volatility; different securities market structures; higher transaction costs; and various administrative difficulties, such as delays in clearing and settling portfolio transactions or in receiving payment of dividends.

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

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

In determining the domicile of an issuer, the fund's investment adviser will consider the domicile determination of a leading provider of global indexes, such as Morgan Stanley Capital International, and may also take into account such factors as where the company’s securities are listed and where the company is legally organized, maintains principal corporate offices and/or conducts its principal operations.

Currency transactions — The fund may enter into currency transactions to provide for the purchase or sale of a currency needed to purchase or sell a security denominated in that currency (often referred to as a spot or cover transaction). The fund may also enter into forward currency contracts to protect against changes in currency exchange rates. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Although forward contracts entered into by the fund will typically involve the purchase or sale of a currency against the U.S. dollar, the fund also may cross hedge and purchase or sell one currency against another currency (other than the U.S. dollar). The fund has no current intention to cross hedge one currency against another currency (other than the U.S. dollar).

The fund will not generally attempt to protect against all potential changes in exchange rates and the use of forward contracts does not eliminate the risk of fluctuations in the prices of the underlying securities. If the value of the underlying securities declines or the amount of the fund’s commitment increases because of changes in exchange rates, the fund may need to provide additional cash or securities to satisfy its commitment under the forward contract. The fund is also subject to the risk that it may be delayed or prevented from obtaining payments owed to it under the forward contract as a result of the insolvency or bankruptcy of the counterparty with whom it entered into the forward contract or the failure of the counterparty to comply with the terms of the contract.

While entering into forward currency transactions could minimize the risk of loss due to a decline in the value of the hedged currency, it could also limit any potential gain that may result from an increase in the value of the currency. Entering into forward currency transactions may change the fund’s exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as expected by the fund’s investment adviser. For example, if the fund’s investment adviser increases a fund’s exposure to a foreign currency using forward

Page 4

contracts and that foreign currency’s value declines, a fund may incur a loss. The fund will segregate liquid assets that will be marked to market daily to meet its forward contract commitments to the extent required by the U.S. Securities and Exchange Commission.

Forward currency transactions also may affect the character and timing of income, gain, or loss recognized by the fund for U.S. tax purposes. The use of forward currency contracts could result in the application of the mark-to-market provisions of the Internal Revenue Code and may cause an increase (or decrease) in the amount of taxable dividends paid by a fund.

Debt securities — Although the fund will primarily invest in equity securities, it may invest in debt securities as well. Debt securities, also known as “fixed-income securities,” are used by issuers to borrow money. Bonds, notes, debentures, asset-backed securities (including those backed by mortgages), and loan participations and assignments are common types of debt securities. Generally, issuers pay investors periodic interest and repay the amount borrowed either periodically during the life of the security and/or at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values and their values accrete over time to face value at maturity. The market prices of debt securities fluctuate depending on such factors as interest rates, credit quality and maturity. In general, market prices of debt securities decline when interest rates rise and increase when interest rates fall. For example, prices of these securities can be affected by financial contracts held by the issuer or third parties (such as derivatives) relating to the security or other assets or indices.

Lower rated debt securities, rated Ba1/BB+ or below by Nationally Recognized Statistical Rating Organizations, are described by the rating agencies as speculative and involve greater risk of default or price changes due to changes in the issuer’s creditworthiness than higher rated debt securities, or they may already be in default. The market prices of these securities may fluctuate more than higher quality securities and may decline significantly in periods of general economic difficulty. It may be more difficult to dispose of, and to determine the value of, lower rated debt securities. Investment grade bonds in the ratings categories A or Baa/BBB also may be more susceptible to changes in market or economic conditions than bonds rated in the highest rating categories.

Credit ratings for debt securities provided by rating agencies reflect an evaluation of the safety of principal and interest payments, not market value risk. The rating of an issuer is a rating agency’s view of past and future potential developments related to the issuer and may not necessarily reflect actual outcomes. There can be a lag between the time of developments relating to an issuer and the time a rating is assigned and updated.

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

Securities with equity and debt characteristics — The fund may invest in securities that have a combination of equity and debt characteristics. These securities may at times behave more like equity than debt or vice versa. Some types of convertible bonds, preferred stocks or other preferred securities automatically convert into common stocks or other securities at a stated conversion ratio and some may be subject to redemption at the option of the issuer at a predetermined price. These securities, prior to conversion, may pay a fixed rate of interest or a

Page 5

dividend. Because convertible securities have both debt and equity characteristics, their values vary in response to many factors, including the values of the securities into which they are convertible, general market and economic conditions, and convertible market valuations, as well as changes in interest rates, credit spreads and the credit quality of the issuer.

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

Obligations backed by the “full faith and credit” of the U.S. government — U.S. government obligations include the following types of securities:

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

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

Other federal agency obligations — Additional federal agency securities are neither direct obligations of, nor guaranteed by, the U.S. government. These obligations include securities issued by certain U.S. government agencies and government-sponsored entities. However, they generally involve some form of federal sponsorship: some operate under a government charter; some are backed by specific types of collateral; some are supported by the issuer’s right to borrow from the Treasury; and others are supported only by the credit of the issuing government agency or entity. These agencies and entities include, but are not limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee Valley Authority and Federal Farm Credit Bank System.

On September 7, 2008, Freddie Mac and Fannie Mae were placed into conservatorship by their new regulator, the Federal Housing Finance Agency (“FHFA”). Simultaneously, the U.S. Treasury made a commitment of indefinite duration to maintain the positive net worth of both firms. As conservator, the FHFA has the authority to repudiate any contract either firm has entered into prior to FHFA’s appointment as conservator (or receiver should either firm go into default) if the FHFA, in its sole discretion determines that performance of the contract is burdensome and repudiation would promote the orderly administration of Fannie Mae’s or Freddie Mac’s affairs. While the FHFA has indicated that it does not intend to repudiate the guaranty obligations of either entity, doing so could adversely affect holders of their mortgage-backed securities. For example, if a contract were repudiated, the liability for any direct compensatory damages would accrue to the entity’s conservatorship estate and could only be satisfied to the extent the estate had available assets. As a result, if interest payments on

Page 6

Fannie Mae or Freddie Mac mortgage-backed securities held by the fund were reduced because underlying borrowers failed to make payments or such payments were not advanced by a loan servicer, the fund’s only recourse might be against the conservatorship estate, which might not have sufficient assets to offset any shortfalls.

The FHFA, in its capacity as conservator, has the power to transfer or sell any asset or liability of Fannie Mae or Freddie Mac. The FHFA has indicated it has no current intention to do this; however, should it do so a holder of a Fannie Mae or Freddie Mac mortgage-backed security would have to rely on another party for satisfaction of the guaranty obligations and would be exposed to the credit risk of that party.

Certain rights provided to holders of mortgage-backed securities issued by Fannie Mae or Freddie Mac under their operative documents may not be enforceable against FHFA, or enforcement may be delayed during the course of the conservatorship or any future receivership. For example, the operative documents may provide that upon the occurrence of an event of default by Fannie Mae or Freddie Mac, holders of a requisite percentage of the mortgage-backed security may replace the entity as trustee. However, under the Federal Housing Finance Regulatory Reform Act of 2008, holders may not enforce this right if the event of default arises solely because a conservator or receiver has been appointed.

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

Repurchase agreements — The fund may enter into repurchase agreements under which the fund buys a security and obtains a simultaneous commitment from the seller to repurchase the security at a specified time and price. Because the security purchased constitutes collateral for the repurchase obligation, a repurchase agreement may be considered a loan by the fund that is collateralized by the security purchased. Repurchase agreements permit the fund to maintain liquidity and earn income over periods of time as short as overnight. The seller must maintain with the fund’s custodian collateral equal to at least 100% of the repurchase price, including accrued interest, as monitored daily by the investment adviser. The fund will only enter into repurchase agreements involving securities in which it could otherwise invest and with selected banks and securities dealers whose financial condition is monitored by the investment adviser. If the seller under the repurchase agreement defaults, the fund may incur a loss if the value of the collateral securing the repurchase agreement has declined and may incur disposition costs in connection with liquidating the collateral. If bankruptcy proceedings are commenced with respect to the seller, realization of the collateral by the fund may be delayed or limited.

Restricted or illiquid securities — The fund may purchase securities subject to restrictions on resale. Restricted securities may only be sold pursuant to an exemption from registration under the Securities Act of 1933 (the “1933 Act”), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek

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

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

*     *     *     *     *     *

Portfolio turnover — Portfolio changes will be made without regard to the length of time particular investments may have been held. Short-term trading profits are not the fund’s objective, and changes in its investments are generally accomplished gradually, though short-term transactions may occasionally be made. High portfolio turnover involves correspondingly greater transaction costs in the form of dealer spreads or brokerage commissions. It may also result in the realization of net capital gains, which are taxable when distributed to shareholders, unless the shareholder is exempt from taxation or his or her account is tax-deferred.

The fund’s portfolio turnover rates for the fiscal years ended November 30, 2010 and 2009 were 47% and 51%, respectively. The portfolio turnover rate would equal 100% if each security in a fund’s portfolio were replaced once per year. See “Financial highlights” in the prospectus for the fund’s annual portfolio turnover rate for each of the last five fiscal years.

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Fund policies

All percentage limitations in the following fund policies are considered at the time securities are purchased and are based on the fund’s net assets unless otherwise indicated. None of the following policies involving a maximum percentage of assets will be considered violated unless the excess occurs immediately after, and is caused by, an acquisition by the fund. In managing the fund, the fund’s investment adviser may apply more restrictive policies than those listed below.

Fundamental policies — The fund has adopted the following policies, which may not be changed without approval by holders of a majority of its outstanding shares. Such majority is currently defined in the Investment Company Act of 1940, as amended (the “1940 Act”), as the vote of the lesser of (a) 67% or more of the voting securities present at a shareholder meeting, if the holders of more than 50% of the outstanding voting securities are present in person or by proxy, or (b) more than 50% of the outstanding voting securities.

1.Except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction, the fund may not:

a.Borrow money;

b.Issue senior securities;

c.Underwrite the securities of other issuers;

d.Purchase or sell real estate or commodities;

e.Make loans; or

f.Purchase the securities of any issuer if, as a result of such purchase, the fund’s investments would be concentrated in any particular industry.

2.The fund may not invest in companies for the purpose of exercising control or management.

Nonfundamental policies — The following policy may be changed without shareholder approval:

The fund may not acquire securities of open-end investment companies or unit investment trusts registered under the 1940 Act in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.

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Additional information about the fund’s policies — The information below is not part of the fund’s fundamental or nonfundamental policies. This information is intended to provide a summary of what is currently required or permitted by the 1940 Act and the rules and regulations thereunder, or by the interpretive guidance thereof by the SEC or SEC staff, for particular fundamental policies of the fund. Information is also provided regarding the fund’s current intention with respect to certain investment practices permitted by the 1940 Act.

For purposes of fundamental policy 1a, the fund may borrow money in amounts of up to 33⅓% of its total assets from banks for any purpose. Additionally, the fund may borrow up to 5% of its total assets from banks or other lenders for temporary purposes (a loan is presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed).

For purposes of fundamental policy 1b, a senior security does not include any promissory note or evidence of indebtedness where such loan is for temporary purposes only and in an amount not exceeding 5% of the value of the total assets of the fund at the time the loan is made (a loan is presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed). Further, to the extent the fund covers its commitments under certain types of agreements and transactions, including reverse repurchase agreements, mortgage-dollar-roll transactions, sale-buybacks, when-issued, delayed-delivery, or forward commitment transactions, and other similar trading practices, by segregating or earmarking liquid assets equal in value to the amount of the fund’s commitment, such agreement or transaction will not be considered a senior security by the fund.

For purposes of fundamental policy 1c, the policy will not apply to the fund to the extent the fund may be deemed an underwriter within the meaning of the 1933 Act in connection with the purchase and sale of fund portfolio securities in the ordinary course of pursuing its investment objectives and strategies.

For purposes of fundamental policy 1d, the fund may invest in securities or other instruments backed by real estate or commodities or securities of issuers engaged in the real estate business, including real estate investment trusts, or issuers engaged in business related to commodities. Further, the fund does not consider currency contracts or hybrid instruments to be commodities.

For purposes of fundamental policy 1e, the fund may not lend more than 33⅓% of its total assets, provided that this limitation shall not apply to the fund’s purchase of debt obligations.

For purposes of fundamental policy 1f, the fund may not invest 25% or more of its total assets in the securities of issuers in a particular industry. This policy does not apply to investments in securities of the U.S. Government, its agencies or Government Sponsored Enterprises or repurchase agreements with respect thereto.

The fund currently does not intend to engage in securities lending, purchase securities on margin, sell securities short or invest in puts, calls, straddles or spreads or combinations thereof.

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Management of the fund

Board of trustees and officers

“Independent” trustees1

The fund’s nominating and governance committee and board select independent trustees with a view toward constituting a board that, as a body, possesses the qualifications, skills, attributes and experience to appropriately oversee the actions of the fund’s service providers, decide upon matters of general policy and represent the long-term interests of fund shareholders. In doing so, they consider the qualifications, skills, attributes and experience of the current board members, with a view toward maintaining a board that is diverse in viewpoint, experience, education and skills.

The fund seeks independent trustees who have high ethical standards and the highest levels of integrity and commitment, who have inquiring and independent minds, mature judgment, good communication skills, and other complementary personal qualifications and skills that enable them to function effectively in the context of the fund’s board and committee structure and who have the ability and willingness to dedicate sufficient time to effectively fulfill their duties and responsibilities.

Each independent trustee has a significant record of accomplishments in governance, business, not-for-profit organizations, government service, academia, law, accounting or other professions. Although no single list could identify all experience upon which the fund’s independent trustees draw in connection with their service, the following table summarizes key experience for each independent trustee. These references to the qualifications, attributes and skills of the trustees are pursuant to the disclosure requirements of the U.S. Securities and Exchange Commission, and shall not be deemed to impose any greater responsibility or liability on any trustee or the board as a whole. Notwithstanding the accomplishments listed below, none of the independent trustees is considered an “expert” within the meaning of the federal securities laws with respect to information in the fund’s registration statement.

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Name, age and position with fund (year first elected as a trustee2)	Principal occupation(s) during the past five years	Number of portfolios3 overseen by trustee	Other directorships4 held by trustee during the past five years	Other relevant experience
Joseph C. Berenato, 64 Trustee (2000)	Chairman, Ducommun Incorporated (aerospace components manufacturer); former CEO, Ducommun Incorporated (until 2009)	6	None	·Service as chief financial officer, aerospace components manufacturer ·Senior corporate management experience, corporate banking ·Service on trustee board for educational organization ·M.B.A., Finance and M.A., English
Robert J. Denison, 69 Trustee (2010)	Chair, First Security Management (private investment)	7	None	·Service as chief executive officer of international investment management firm ·Corporate board experience ·Service on advisory and trustee boards for charitable, educational and nonprofit organizations ·Adjunct professor, finance and accounting ·M.B.A.
Mary Anne Dolan, 63 Trustee (2008)	Founder and President, MAD Ink (communications company)	10	None	·Senior management and editorial experience with multiple newspaper publishers and news service organizations ·Service as director of writers conference

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Name, age and position with fund (year first elected as a trustee2)	Principal occupation(s) during the past five years	Number of portfolios3 overseen by trustee	Other directorships4 held by trustee during the past five years	Other relevant experience
R. Clark Hooper, 64 Trustee 2006)	Private investor; former President, Dumbarton Group LLC (securities industry consulting)	46	JPMorgan Value Opportunities Fund, Inc.; The Swiss Helvetia Fund, Inc.	·Senior regulatory and management experience, National Association of Securities Dealers (now FINRA) ·Service on trustee boards for charitable, educational and nonprofit organizations
Koichi Itoh, 70 Trustee (2010)	Chairman, Itoh Building Co., Ltd. (building management)	6	None	·Senior management experience with multiple companies
Merit E. Janow, 52 Chairman of the Board (Independent and Non-Executive) (2010)	Professor, Columbia University, School of International and Public Affairs; former Member, World Trade Organization Appellate Body	43	The NASDAQ Stock Market LLC; Trimble Navigation Limited	·Service with Office of the U.S. Trade Representative and U.S. Department of Justice ·Corporate board experience ·Service on advisory and trustee boards for charitable, educational and nonprofit organizations ·Experience as corporate lawyer ·J.D.

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Name, age and position with fund (year first elected as a trustee2)	Principal occupation(s) during the past five years	Number of portfolios3 overseen by trustee	Other directorships4 held by trustee during the past five years	Other relevant experience
Leonade D. Jones, 63 Trustee (1995)	Retired	9	None	·Service as treasurer of a diversified media and education company ·Founder of e-commerce and educational loan exchange businesses ·Corporate board and investment advisory committee experience ·Service on advisory and trustee boards for charitable, educational, public and nonprofit organizations ·J.D., M.B.A.
Gail L. Neale, 75 Trustee (2010)	President, The Lovejoy Consulting Group, Inc. (a pro bono consulting group advising nonprofit organizations)	5	None	·Service as chief executive officer for international research institute ·Senior management experience for multiple research institutes ·Service on advisory and trustee boards for charitable, educational and nonprofit organizations

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Name, age and position with fund (year first elected as a trustee2)	Principal occupation(s) during the past five years	Number of portfolios3 overseen by trustee	Other directorships4 held by trustee during the past five years	Other relevant experience
Robert J. O’Neill, Ph.D., 74 Trustee (2010)	Member of the Board of Directors, The Lowy Institute for International Policy Studies, Sydney, Australia; Chairman, Academic Advisory Committee, United States Studies Centre, University of Sydney; Chairman of Directors, Forty Seven Friends Pty Ltd (a not-for-profit supporting a local art and craft centre in Australia); former Planning Director and acting CEO, United States Studies Centre, University of Sydney; former Deputy Chairman of the Council and Chairman of the International Advisory Panel, Graduate School of Government, University of Sydney, Australia	3	None	·Service as chief executive officer for strategic research institute ·Senior academic leadership positions for multiple universities ·Service on advisory and trustee boards for charitable, historical, educational, strategic research and nonprofit organizations ·Ph.D., Modern History
Stefanie Powers, 68 Trustee (2010)	Actor, producer, author, entrepreneur; Co-founder and President of The William Holden Wildlife Foundation; conservation consultant to Land Rover and Jaguar North America; founder of The Jaguar Conservation Trust	3	None	·Service producing television and film projects and a line of apparel ·Service on advisory and trustee boards for charitable and nonprofit organizations

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Name, age and position with fund (year first elected as a trustee2)	Principal occupation(s) during the past five years	Number of portfolios3 overseen by trustee	Other directorships4 held by trustee during the past five years	Other relevant experience
Christopher E. Stone, 54 Trustee (2007)	Daniel and Florence Guggenheim Professor of the Practice of Criminal Justice, John F. Kennedy School of Government, Harvard University	6	None	·Service on advisory and trustee boards for charitable, international jurisprudence and nonprofit organizations ·J.D. ·M.Phil, criminology
Steadman Upham, Ph.D., 61 Trustee (2010)	President and Professor of Anthropology, The University of Tulsa	43	None	·Senior academic leadership positions for multiple universities ·Service on advisory and trustee boards for educational and nonprofit organizations ·Ph.D., anthropology

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“Interested” trustees5,6

Interested trustees have similar qualifications, skills and attributes as the independent trustees. Interested trustees are senior executive officers of Capital Research and Management Company or its affiliates. This management role with the fund’s service providers also permits them to make a significant contribution to the fund’s board.

Name, age and position with fund (year first elected as a trustee/officer2)	Principal occupation(s) during the past five years and positions held with affiliated entities or the Principal Underwriter of the fund	Number of portfolios3 overseen by trustee	Other directorships4 held by trustee during the past five years
Timothy D. Armour, 50 Vice Chairman of the Board (1991)	President, PEO and Director, Capital Research and Management Company; Senior Vice President – Capital Research Global Investors, Capital Research and Management Company; Director, Capital Group International, Inc.*	2	None
Claudia P. Huntington, 58 President and Trustee (1996)	Senior Vice President – Capital Research Global Investors, Capital Research and Management Company; Director, Capital Research and Management Company	2	None

Other officers6

Name, age and position with fund (year first elected as an officer2)	Principal occupation(s) during the past five years and positions held with affiliated entities or the Principal Underwriter of the fund
Paul F. Roye, 57 Executive Vice President (2007)	Senior Vice President – Fund Business Management Group, Capital Research and Management Company; Director, American Funds Service Company*; former Director, Division of Investment Management, United States Securities and Exchange Commission
Gordon Crawford, 64 Senior Vice President (1999)	Senior Vice President – Capital Research Global Investors, Capital Research and Management Company
Mark E. Denning, 53 Senior Vice President (2006)	Senior Vice President – Capital Research Global Investors, Capital Research Company*; Director, Capital Research and Management Company; Director, Capital International Limited*

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Name, age and position with fund (year first elected as an officer2)	Principal occupation(s) during the past five years and positions held with affiliated entities or the Principal Underwriter of the fund
Harold H. La, 40 Vice President (2006)	Senior Vice President – Capital Research Global Investors, Capital Research Company*
Donald H. Rolfe, 38 Vice President (2010)	Vice President and Associate Counsel – Fund Business Management Group, Capital Research and Management Company
Lawrence R. Solomon, 48 Vice President (2010)	Senior Vice President — Capital Research Global Investors, Capital Research Company;* Director, Capital Management Services, Inc.*
Vincent P. Corti, 54 Secretary (1984)	Vice President – Fund Business Management Group, Capital Research and Management Company
Neal F. Wellons, 39 Treasurer (2008)	Vice President – Fund Business Management Group, Capital Research and Management Company
Tanya Schneider, 38 Assistant Secretary (2010)	Assistant Vice President – Fund Business Management Group, Capital Research and Management Company
Dori Laskin, 59 Assistant Treasurer (2010)	Vice President – Fund Business Management Group, Capital Research and Management Company
Jeffrey P. Regal, 39 Assistant Treasurer (2010)	Vice President – Fund Business Management Group, Capital Research and Management Company

*Company affiliated with Capital Research and Management Company.

1The term “independent” trustee refers to a trustee who is not an “interested person” of the fund within the meaning of the 1940 Act.

2Trustees and officers of the fund serve until their resignation, removal or retirement.

3Funds managed by Capital Research and Management Company, including the American Funds; American Funds Insurance Series®, which is composed of 16 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series®, which is composed of 10 funds and is available through tax-deferred retirement plans and IRAs; and EndowmentsSM, which is available to certain nonprofit organizations.

4This includes all directorships (other than those in the American Funds or other funds managed by Capital Research and Management Company) that are held by each trustee as a director of a public company or a registered investment company. Unless otherwise noted, all directorships are current.

5“Interested persons” of the fund within the meaning of the 1940 Act, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter).

6All of the 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.

The address for all trustees and officers of the fund is 333 South Hope Street, 55th Floor, Los Angeles, California 90071, Attention: Secretary.

Page 18

Fund shares owned by trustees as of December 31, 2010:

Name	Dollar range1 of fund shares owned	Aggregate dollar range1 of shares owned in all funds in the American Funds family overseen by trustee	Dollar range1,2 of independent trustees deferred compensation3 allocated to fund	Aggregate dollar range1,2 of independent trustees deferred compensation3 allocated to all funds within American Funds family overseen by trustee
“Independent” trustees
Joseph C. Berenato	$10,001 – $50,000	Over $100,000	Over $100,000	Over $100,000
Robert J. Denison4	$10,001 – $50,000	Over $100,000	N/A	N/A
Mary Anne Dolan	$10,001 – $50,000	Over $100,000	N/A	N/A
R. Clark Hooper	$10,001 – $50,000	Over $100,000	N/A	Over $100,000
Koichi Itoh4	$50,001 – $100,000	Over $100,000	$50,001 – $100,000	Over $100,000
Merit E. Janow4	$1 – $10,000	Over $100,000	N/A	N/A
Leonade D. Jones	$50,001 – $100,000	Over $100,000	Over $100,000	Over $100,000
Gail L. Neale4	$10,001 – $50,000	Over $100,000	N/A	N/A
Robert J. O’Neill4	None	None	N/A	N/A
Stefanie Powers4	None	Over $100,000	N/A	N/A
Christopher E. Stone	$10,001 – $50,000	Over $100,000	N/A	N/A
Steadman Upham4	None	None	N/A	Over $100,000

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Name	Dollar range1 of fund shares owned	Aggregate dollar range1 of shares owned in all funds in the American Funds family overseen by trustee
“Interested” trustees
Timothy D. Armour	Over $100,000	Over $100,000
Claudia P. Huntington	Over $100,000	Over $100,000

1Ownership disclosure is made using the following ranges: None; $1 – $10,000; $10,001 – $50,000; $50,001 – $100,000; and Over $100,000. The amounts listed for “interested” trustees include shares owned through The Capital Group Companies, Inc. retirement plan and 401(k) plan.

2N/A indicates that the listed individual, as of December 31, 2010, was not a trustee of a particular fund or did not allocate deferred compensation to the fund or did not participate in the deferred compensation plan.

3Eligible trustees may defer their compensation under a nonqualified deferred compensation plan. Deferred amounts accumulate at an earnings rate determined by the total return of one or more American Funds as designated by the trustee.

4Robert J. Denison, Koichi Itoh, Merit E. Janow, Gail L. Neale, Robert J. O'Neill, Stefanie Powers and Steadman Upham were elected to the board effective January 1, 2010

Trustee compensation — No compensation is paid by the fund to any officer or trustee who is a director, officer or employee of the investment adviser or its affiliates. The boards of funds advised by the investment adviser typically meet either individually or jointly with the boards of one or more other such funds with substantially overlapping board membership (in each case referred to as a “board cluster”). The fund typically pays each independent trustee an annual fee, which ranges from $13,125 to $20,000, based primarily on the total number of board clusters on which that independent trustee serves.

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

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

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

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Trustee compensation earned during the fiscal year ended November 30, 2010:

Name	Aggregate compensation (including voluntarily deferred compensation1) from the fund		Total compensation (including voluntarily deferred compensation1) from all funds managed by Capital Research and Management Company or its affiliates2
Joseph C. Berenato3		$56,936			$350,916
Robert J. Denison4		39,874			268,028
Mary Anne Dolan		45,715			373,229
R. Clark Hooper		45,903			401,974
Koichi Itoh3,4		41,652			276,075
Merit E. Janow4		41,653			254,207
Leonade D. Jones3		45,102			339,438
Gail L. Neale4		39,958			199,427
Robert J. O’Neill4		46,416		160,583
Stefanie Powers4		43,916		145,083
Christopher E. Stone		50,228		241,832
Steadman Upham3,4		39,634		235,539

1Amounts may be deferred by eligible trustees under a nonqualified deferred compensation plan adopted by the fund in 1993. Deferred amounts accumulate at an earnings rate determined by the total return of one or more American Funds as designated by the trustees. Compensation shown in this table for the fiscal year ended November 30, 2010 does not include earnings on amounts deferred in previous fiscal years. See footnote 3 to this table for more information.

2Funds managed by Capital Research and Management Company, including the American Funds; American Funds Insurance Series®, which is composed of 16 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series®, which is composed of 10 funds and is available through tax-deferred retirement plans and IRAs; and EndowmentsSM, which is available to certain nonprofit organizations.

3Since the deferred compensation plan’s adoption, the total amount of deferred compensation accrued by the fund (plus earnings thereon) through the 2010 fiscal year for participating trustees is as follows: Joseph C. Berenato ($199,593), Koichi Itoh ($35,059), Leonade D. Jones ($292,852) and Steadman Upham (32,641) Amounts deferred and accumulated earnings thereon are not funded and are general unsecured liabilities of the fund until paid to the trustees.

4Robert J. Denison, Koichi Itoh, Merit E. Janow, Gail L. Neale, Robert J. O'Neill, Stefanie Powers and Steadman Upham were elected to the board effective January 1, 2010.

As of January 1, 2011, the officers and trustees of the fund and their families, as a group, owned beneficially or of record less than 1% of the outstanding shares of the fund.

Fund organization and the board of trustees — The fund, an open-end, diversified management investment company, was organized as a Massachusetts business trust on May 17, 1983. At a meeting of the fund's shareholders on November 24, 2009, shareholders approved the reorganization of the fund to a Delaware statutory trust. The reorganization may be completed in 2011; however, the fund reserves the right to delay the implementation. A summary comparison of the governing documents and state laws affecting the Delaware statutory trust and the current form of organization of the fund can be found in a joint proxy statement available on the SEC’s website at sec.gov. Although the board of trustees has delegated day-to-day oversight to the investment adviser, all fund operations are supervised by the fund's board, which meets periodically and performs duties required by applicable state and federal laws.

Page 21

Massachusetts common law provides that a trustee of a Massachusetts business trust owes a fiduciary duty to the trust and must carry out his or her responsibilities as a trustee in accordance with that fiduciary duty. Generally, a trustee will satisfy his or her duties if he or she acts in good faith and uses ordinary prudence.

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

The fund has several different classes of shares. Shares of each class represent an interest in the same investment portfolio. Each class has pro rata rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution expenses and may bear different transfer agent fees and other expenses properly attributable to the particular class as approved by the board of trustees and set forth in the fund's rule 18f-3 Plan. Each class’ shareholders have exclusive voting rights with respect to the respective class’ rule 12b-1 plans adopted in connection with the distribution of shares and on other matters in which the interests of one class are different from interests in another class. Shares of all classes of the fund vote together on matters that affect all classes in substantially the same manner. Each class votes as a class on matters that affect that class alone. Note that 529 college savings plan account owners invested in Class 529 shares are not shareholders of the fund and, accordingly, do not have the rights of a shareholder, such as the right to vote proxies relating to fund shares. As the legal owner of the fund’s Class 529 shares, the Virginia College Savings PlanSM will vote any proxies relating to the fund’s Class 529 shares. In addition, the trustees have the authority to establish new series and classes of shares, and to split or combine outstanding shares into greater or lesser number, without shareholder approval.

The fund does not hold annual meetings of shareholders. However, significant matters that require shareholder approval, such as certain elections of board members or a change in a fundamental investment policy, will be presented to shareholders at a meeting called for such purpose. Shareholders have one vote per share owned. At the request of the holders of at least 10% of the shares, the fund will hold a meeting at which any member of the board could be removed by a majority vote.

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

Leadership structure — The board’s chair is currently an independent trustee who is not an “interested person” of the fund within the meaning of the 1940 Act. The board has determined that an independent chair facilitates oversight and enhances the effectiveness of the board. The independent chair’s duties include, without limitation, generally presiding at meetings of the board, approving board meeting schedules and agendas, leading meetings of the independent trustees in executive session, facilitating communication with committee chairs, and serving as the principal independent trustee contact for fund management and independent fund counsel.

Risk oversight — Day-to-day management of the fund, including risk management, is the responsibility of the fund’s contractual service providers, including the fund’s investment adviser, principal underwriter/distributor and transfer agent. Each of these entities is responsible for

Page 22

specific portions of the fund’s operations, including the processes and associated risks relating to the fund’s investments, integrity of cash movements, financial reporting, operations and compliance. The board of trustees oversees the service providers’ discharge of their responsibilities, including the processes they use to manage relevant risks. In that regard, the board receives reports regarding the operations of the fund’s service providers, including risks. For example, the board receives reports from investment professionals regarding risks related to the fund’s investments and trading. The board also receives compliance reports from the fund’s and the investment adviser’s chief compliance officers addressing certain areas of risk.

Committees of the fund’s board, as well as joint committees of independent board members of funds managed by Capital Research and Management Company, also explore risk management procedures in particular areas and then report back to the full board. For example, the fund’s audit committee oversees the processes and certain attendant risks relating to financial reporting, valuation of fund assets, and related controls. Similarly, a joint review and advisory committee oversees certain risk controls relating to the fund’s transfer agency services.

Not all risks that may affect the fund can be identified or processes and controls developed to eliminate or mitigate their effect. Moreover, it is necessary to bear certain risks (such as investment-related risks) to achieve the fund’s objectives. As a result of the foregoing and other factors, the ability of the fund’s service providers to eliminate or mitigate risks is subject to limitations.

Committees of the board of trustees — The fund has an audit committee comprised of Joseph C. Berenato, Leonade D. Jones, Robert J. O’Neill, Stefanie Powers and Christopher E. Stone, none of whom is an “interested person” of the fund within the meaning of the 1940 Act. The committee provides oversight regarding the fund’s accounting and financial reporting policies and practices, its internal controls and the internal controls of the fund’s principal service providers. The committee acts as a liaison between the fund’s independent registered public accounting firm and the full board of trustees. The audit committee held five meetings during the 2010 fiscal year.

The fund has a contracts committee comprised of Joseph C. Berenato, Robert J. Denison, Mary Anne Dolan, R. Clark Hooper, Koichi Itoh, Merit E. Janow, Leonade D. Jones, Gail L. Neale, Robert J. O’Neill, Stefanie Powers, Christopher E. Stone, and Steadman Upham, none of whom is an “interested person” of the fund within the meaning of the 1940 Act. The committee’s principal function is to request, review and consider the information deemed necessary to evaluate the terms of certain agreements between the fund and its investment adviser or the investment adviser’s affiliates, such as the Investment Advisory and Service Agreement, Principal Underwriting Agreement, Administrative Services Agreement and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew or continue, and to make its recommendations to the full board of trustees on these matters. The contracts committee held one meeting during the 2010 fiscal year.

The fund has a nominating and governance committee comprised of Robert J. Denison, Mary Anne Dolan, R. Clark Hooper, Koichi Itoh, Gail L. Neale and Steadman Upham, none of whom is an “interested person” of the fund within the meaning of the 1940 Act. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of trustees. The committee also evaluates, selects and nominates independent trustee candidates to the full board of trustees. While the committee normally is able to identify from its own and other resources an ample number of qualified candidates, it will consider shareholder

Page 23

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 fund, addressed to the fund’s secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the committee. The nominating and governance committee held four meetings during the 2010 fiscal year.

Proxy voting procedures and principles — The fund’s investment adviser, in consultation with the fund’s board, has adopted Proxy Voting Procedures and Principles (the “Principles”) with respect to voting proxies of securities held by the fund, other American Funds, Endowments and American Funds Insurance Series. The complete text of these principles is available on the American Funds website at americanfunds.com. Proxies are voted by a committee of the appropriate equity investment division of the investment adviser under authority delegated by the funds’ boards. Therefore, if more than one fund invests in the same company, they may vote differently on the same proposal. In addition, the funds’ boards monitor the proxy voting process and provide guidance with respect to the Principles.

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

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

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

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

Page 24

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

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

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

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

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

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

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Principal fund shareholders — The following table identifies those investors who own of record, or are known by the fund to own beneficially 5% or more of any class of its shares as of the opening of business on January 1, 2011. Unless otherwise indicated, the ownership percentages below represent ownership of record rather than beneficial ownership.

Name and address	Ownership	Ownership percentage
Edward D. Jones & Co. Omnibus Account Maryland Heights, MO	Record	Class A Class B	13.60%   7.00
First Clearing, LLC Custody Account St. Louis, MO	Record	Class A Class B Class C Class F-1	8.48   6.58 12.93   7.37
Pershing, LLC Jersey City, NJ	Record	Class B Class C Class F-1 Class F-2 Class R-5	7.17   8.21 24.90   7.29   5.30
Merrill Lynch Omnibus Account Jacksonville, FL	Record	Class C Class F-2 Class R-3	8.06 22.63   5.14
UBS WM USA Omnibus Account Jersey City, NJ	Record	Class F-1	10.38
Charles Schwab & Co., Inc. Custody Account San Francisco, CA	Record	Class F-1	9.48
LPL Financial Omnibus Account San Diego, CA	Record	Class F-1 Class F-2	6.17   9.63
Citigroup Global Markets, Inc. Omnibus Account New York, NY	Record	Class F-1	6.16
Capital Group Private Client Services Account #1 Los Angeles, CA	Record Beneficial	Class F-2	24.50
Capital Group Private Client Services Account #2 Los Angeles, CA	Record Beneficial	Class F-2	8.88
Hartford Life Insurance Co. Separate Account 401K Plan Hartford, CT	Record Beneficial	Class R-1 Class R-3	42.57   8.49
Shoe Show, Inc. Retirement Plan Atlanta, GA	Record Beneficial	Class R-1	8.40
Nationwide Trust Company Columbus, OH	Record	Class R-3	5.68
Blue Cross Blue Shield of Nevada Fargo, ND	Record	Class R-4	6.54
The Capital Group Companies Retirement Plans Los Angeles, CA	Record Beneficial	Class R-5	41.17
Mac & Co. Retirement Plan Pittsburgh, PA	Record Beneficial	Class R-5	15.50

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Name and address	Ownership	Ownership percentage
Edward D. Jones & Co. Retirement Plan Norwood, MA	Record Beneficial	Class R-5	13.67
American Funds 2030 Target Date Retirement Fund Los Angeles, CA	Record	Class R-6	18.59
American Funds 2025 Target Date Retirement Fund Los Angeles, CA	Record	Class R-6	13.91
American Funds 2035 Target Date Retirement Fund Los Angeles, CA	Record	Class R-6	11.97
Lowe’s Companies, Inc. 401K Plan Charlotte, NC	Record Beneficial	Class R-6	11.65
American Funds 2040 Target Date Retirement Fund Los Angeles, CA	Record	Class R-6	10.56
Mitra & Co. Milwaukee, WI	Record	Class R-6	8.56
American Funds 2050 Target Date Retirement Fund Los Angeles, CA	Record	Class R-6	5.20
American Funds 2045 Target Date Retirement Fund Los Angeles, CA	Record	Class R-6	5.03

Unless otherwise noted, references in this statement of additional information to Class F shares, Class R shares or Class 529 shares refer to both F share classes, all R share classes or all 529 share classes, respectively.

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

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

Compensation of investment professionals — As described in the prospectus, the investment adviser uses a system of multiple portfolio counselors in managing fund assets. In addition, Capital Research and Management Company’s investment analysts may make

Page 27

investment decisions with respect to a portion of a fund’s portfolio within their research coverage.

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

To encourage a long-term focus, bonuses based on investment results are calculated by comparing pretax total investment returns to relevant benchmarks over the most recent year, a four-year rolling average and an eight-year rolling average with greater weight placed on the four-year and eight-year rolling averages. For portfolio counselors, benchmarks may include measures of the marketplaces in which the fund invests and measures of the results of comparable mutual funds. For investment analysts, benchmarks may include relevant market measures and appropriate industry or sector indexes reflecting their areas of expertise. Capital Research and Management Company makes periodic subjective assessments of analysts’ contributions to the investment process and this is an element of their overall compensation. The investment results of each of the fund’s portfolio counselors may be measured against one or more benchmarks, depending on his or her investment focus, such as: Lipper Multi-Cap Growth Funds Index, Lipper Growth Funds Index, Lipper International Funds Index, Global Service and Information Index and Non-U.S. Service and Information Index. From time to time, Capital Research and Management Company may adjust these benchmarks to better reflect the universe of comparably managed funds of competitive investment management firms.

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Portfolio counselor fund holdings and other managed accounts — As described below, portfolio counselors may personally own shares of the fund. In addition, portfolio counselors may manage portions of other mutual funds or accounts advised by Capital Research and Management Company or its affiliates.

The following table reflects information as of November 30, 2010:

Portfolio counselor	Dollar range of fund shares owned1	Number of other registered investment companies (RICs) for which portfolio counselor is a manager (assets of RICs in billions)2		Number of other pooled investment vehicles (PIVs) for which portfolio counselor is a manager (assets of PIVs in billions)3		Number of other accounts for which portfolio counselor is a manager (assets of other accounts in billions)4
Timothy D. Armour	Over $1,000,000	2	$97.2	None		None
Claudia P. Huntington	Over $1,000,000	3	$148.3	None		None
Gordon Crawford	Over $1,000,000	3	$281.9	None		None
Mark E. Denning	None5	5	$327.0	1	$0.09	None
Harold H. La	$50,001 – $100,0005	1	$106.9	None		None

1Ownership disclosure is made using the following ranges: None; $1 – $10,000; $10,001 – $50,000; $50,001 – $100,000; $100,001 – $500,000; $500,001 – $1,000,000; and Over $1,000,000. The amounts listed include shares owned through The Capital Group Companies, Inc. retirement plan and 401(k) plan.

2Indicates fund(s) where the portfolio counselor also has significant responsibilities for the day to day management of the fund(s). Assets noted are the total net assets of the registered investment companies and are not the total assets managed by the individual, which is a substantially lower amount. No fund has an advisory fee that is based on the performance of the fund.

3Represents funds advised or sub-advised by Capital Research and Management Company or its affiliates and sold outside the United States and/or fixed-income assets in institutional accounts managed by investment adviser subsidiaries of Capital Group International, Inc., an affiliate of Capital Research and Management Company. Assets noted are the total net assets of the funds or accounts and are not the total assets managed by the individual, which is a substantially lower amount. No fund or account has an advisory fee that is based on the performance of the fund or account.

4Reflects other professionally managed accounts held at companies affiliated with Capital Research and Management Company. Personal brokerage accounts of portfolio counselors and their families are not reflected.

5Tax considerations may adversely influence portfolio counselor’s ability to own shares of the fund.

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Investment Advisory and Service Agreement — The Investment Advisory and Service Agreement (the “Agreement”) between the fund and the investment adviser will continue in effect until October 31, 2011, unless sooner terminated, and may be renewed from year to year thereafter, provided that any such renewal has been specifically approved at least annually by (a) the board of trustees, or by the vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the fund, and (b) the vote of a majority of trustees who are not parties to the Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Agreement provides that the investment adviser has no liability to the fund for its acts or omissions in the performance of its obligations to the fund not involving willful misconduct, bad faith, gross negligence or reckless disregard of its obligations under the Agreement. The Agreement also provides that either party has the right to terminate it, without penalty, upon 60 days’ written notice to the other party, and that the Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act). In addition, the Agreement provides that the investment adviser may delegate all, or a portion of, its investment management responsibilities to one or more subsidiary advisers approved by the fund’s board, pursuant to an agreement between the investment adviser and such subsidiary. Any such subsidiary adviser will be paid solely by the investment adviser out of its fees.

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

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As compensation for its services, the investment adviser receives a monthly fee that is accrued daily, calculated at the annualized rates of:

Net asset level

Rate	In excess of		Up to
0.580%	$	0	$	500,000,000
0.480		500,000,000		1,000,000,000
0.440		1,000,000,000		1,500,000,000
0.410		1,500,000,000		2,500,000,000
0.390		2,500,000,000		4,000,000,000
0.380		4,000,000,000		6,500,000,000
0.370		6,500,000,000		10,500,000,000
0.365		10,500,000,000		13,000,000,000
0.360		13,000,000,000		17,000,000,000
0.355		17,000,000,000		21,000,000,000
0.350		21,000,000,000		27,000,000,000
0.345		27,000,000,000

For the fiscal years ended November 30, 2010, 2009 and 2008, the investment adviser was entitled to receive from the fund management fees of $29,207,000, $24,479,000 and $33,127,000, respectively. After giving effect to the management fee waivers/expense reimbursements described below, the fund paid the investment adviser management fees of $29,207,000, $24,297,000 (a reduction of $182,000) and $29,814,000 (a reduction of $3,313,000) for the fiscal years ended November 30, 2009 and 2008, respectively.

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

Administrative services agreement — The Administrative Services Agreement (the “Administrative Agreement”) between the fund and the investment adviser relating to the fund’s Class C, F, R and 529 shares will continue in effect until October 31, 2011, unless sooner terminated, and may be renewed from year to year thereafter, provided that any such renewal has been specifically approved at least annually by the vote of a majority of trustees who are not parties to the Administrative Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The fund may terminate the Administrative Agreement at any time by vote of a majority of independent trustees. The investment adviser has the right to terminate the Administrative Agreement upon 60 days’ written notice to the fund. The Administrative Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act).

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Under the Administrative Agreement, the investment adviser provides certain transfer agent and administrative services for shareholders of the fund’s Class C, F, R and 529 shares. The investment adviser may contract with third parties, including American Funds Service Company,® the fund’s Transfer Agent, to provide some of these services. Services include, but are not limited to, shareholder account maintenance, transaction processing, tax information reporting, and shareholder and fund communications. In addition, the investment adviser monitors, coordinates, oversees and assists with the activities performed by third parties providing such services.

The investment adviser receives an administrative services fee at the annual rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding Class R-5 and R-6 shares) and 529 shares for administrative services provided to these share classes. Administrative services fees are paid monthly and accrued daily. The investment adviser uses a portion of this fee to compensate third parties for administrative services provided to the fund. Of the remainder, the investment adviser does not retain more than 0.05% of the average daily net assets for each applicable share class. For Class R-5 and R-6 shares, the administrative services fee is calculated at the annual rate of up to 0.10% and 0.05%, respectively, of the average daily net assets of such class. The administrative services fee includes compensation for transfer agent and shareholder services provided to the fund’s applicable share classes. In addition to making administrative service fee payments to unaffiliated third parties, the investment adviser also makes payments from the administrative services fee to American Funds Service Company according to a fee schedule, based principally on the number of accounts serviced, contained in a Shareholder Services Agreement between the fund and American Funds Service Company. A portion of the fees paid to American Funds Service Company for transfer agent services is also paid directly from the relevant share class.

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During the 2010 fiscal year, administrative services fees, gross of any payments made by the investment adviser, were:

	Administrative services fee
Class C	$339,000
Class F-1	286,000
Class F-2	78,000
Class 529-A	183,000
Class 529-B	24,000
Class 529-C	67,000
Class 529-E	9,000
Class 529-F-1	10,000
Class R-1	33,000
Class R-2	520,000
Class R-3	308,000
Class R-4	155,000
Class R-5	144,000
Class R-6	106,000

Principal Underwriter and plans of distribution — American Funds Distributors,® Inc. (the “Principal Underwriter”) is the principal underwriter of the fund’s shares. The Principal Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071; 6455 Irvine Center Drive, Irvine, CA 92618; 3500 Wiseman Boulevard, San Antonio, TX 78251 and 12811 North Meridian Street, Carmel, IN 46032.

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

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

·   For Class B and 529-B shares sold prior to April 21, 2009, the Principal Underwriter sold its rights to the 0.75% distribution-related portion of the 12b-1 fees paid by the fund, as well as any contingent deferred sales charges, to a third party. The Principal Underwriter compensated investment dealers for sales of Class B and 529-B shares out of the proceeds of this sale and kept any amounts remaining after this compensation was paid.

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

In addition, the fund reimburses the Principal Underwriter for advancing immediate service fees to qualified dealers and advisers upon the sale of Class C and 529-C shares. The fund also reimbursed the Principal Underwriter for advancing immediate service fees to qualified dealers on sales of Class B and 529-B shares prior to April 21, 2009. The fund also reimburses the Principal Underwriter for service fees (and, in the case of Class 529-E shares, commissions) paid on a quarterly basis to qualified dealers and advisers in connection with investments in Class F-1, 529-F-1, 529-E, R-1, R-2, R-3 and R-4 shares.

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

	Fiscal year		Commissions, revenue or fees retained		Allowance or compensation to dealers
Class A		2010		$1,121,000	$5,059,000
		2009		1,159,000	5,125,000
		2008		1,589,000	6,946,000
Class B		2010		1,000	63
		2009		16,000	90,000
		2008		61,000	421,000
Class C		2010		104,000	225,000
		2009		—	263,000
		2008		163,000	360,000
Class 529-A		2010		94,000	447,000
		2009		68,000	330,000
		2008		105,000	486,000
Class 529-B		2010		204	—
		2009		3,000	12,000
		2008		8,000	62,000
Class 529-C		2010		302	60,000
		2009		451	43,000
		2008		6,000	76,000

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

Each Plan is specific to a particular share class of the fund. As the fund has not adopted a Plan for Class F-2, Class R-5 or Class R-6, no 12b-1 fees are paid from Class F-2, Class R-5 or Class R-6 share assets and the following disclosure is not applicable to these share classes.

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

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Following is a brief description of the Plans:

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

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

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

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

Share class	Service related payments1	Distribution related payments1	Total allowable under the Plans2
Class C	0.25%	0.75%	1.00%
Class 529-C	0.25	0.75	1.00
Class F-1	0.25	—	0.50
Class 529-F-1	0.25	—	0.50
Class 529-E	0.25	0.25	0.75
Class R-1	0.25	0.75	1.00
Class R-2	0.25	0.50	1.00
Class R-3	0.25	0.25	0.75
Class R-4	0.25	—	0.50

1   Amounts in these columns represent the amounts approved by the board of trustees under the applicable Plan.

2   The fund may annually expend the amounts set forth in this column under the current Plans with the approval of the board of trustees.

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During the 2010 fiscal year, 12b-1 expenses accrued and paid, and if applicable, unpaid, were:

	12b-1 expenses	12b-1 unpaid liability outstanding
Class A	$12,966,000	$2,553,000
Class B	1,011,000	112,000
Class C	1,846,000	374,000
Class F-1	435,000	91,000
Class 529-A	234,000	55,000
Class 529-B	135,000	17,000
Class 529-C	399,000	89,000
Class 529-E	32,000	8,000
Class 529-F-1	0	0
Class R-1	194,000	50,000
Class R-2	843,000	202,000
Class R-3	692,000	160,000
Class R-4	245,000	64,000

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

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

A portion of the fund’s 12b-1 expense is paid to financial advisers to compensate them for providing ongoing services. If you have questions regarding your investment in the fund or need assistance with your account, please contact your financial adviser. If you need a financial adviser, please call American Funds Distributors at (800) 421-4120 for assistance.

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

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Other compensation to dealers — As of July 2010, the top dealers (or their affiliates) that American Funds Distributors anticipates will receive additional compensation (as described in the prospectus) include:

AXA Advisors, LLC

Cadaret, Grant & Co., Inc.

Cambridge Investment Research, Inc.

Cetera Financial Group

Financial Network Investment Corporation

Guaranty Brokerage Services, Inc.

Multi-Financial Securities Corporation

Primevest Financial Services, Inc.

Commonwealth Financial Network

D.A. Davidson & Co.

Edward Jones

Genworth Financial Securities Corporation

H. Beck, Inc.

Hefren-Tillotson, Inc.

HTK / Janney Montgomery Group

Hornor, Townsend & Kent, Inc.

Janney Montgomery Scott LLC

ING Financial Partners, Inc.

Transamerica Financial Advisors, Inc.

J. J. B. Hilliard, W. L. Lyons, LLC

J.P. Morgan Chase Banc One

Chase Investment Services Corp.

J.P. Morgan Securities Inc.

Lincoln Financial Advisors Corporation

Lincoln Financial Securities Corporation

LPL Group

Associated Securities Corp.

LPL Financial Corporation

Mutual Service Corporation

Uvest Investment Services

Waterstone Financial Group, Inc.

Merrill Lynch Banc of America

Banc of America Investment Services, Inc.

Banc of America Securities LLC

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Metlife Enterprises

Metlife Securities Inc.

Nathan & Lewis Securities, Inc.

New England Securities

Tower Square Securities, Inc.

Walnut Street Securities, Inc.

MML Investors Services, Inc.

Morgan Keegan & Company, Inc.

Morgan Stanley Smith Barney LLC

National Planning Holdings Inc.

Invest Financial Corporation

Investment Centers of America, Inc.

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National Planning Corporation

SII Investments, Inc.

NFP Securities, Inc.

Northwestern Mutual Investment Services, LLC

Park Avenue Securities LLC

PFS Investments Inc.

PNC Bank, National Association

PNC Investments LLC

Raymond James Group

Raymond James & Associates, Inc.

Raymond James Financial Services Inc.

RBC Capital Markets Corporation

Robert W. Baird & Co. Incorporated

Stifel, Nicolaus & Company, Incorporated

SunTrust Investment Services, Inc.

The Advisor Group

FSC Securities Corporation

Royal Alliance Associates, Inc.

SagePoint Financial, Inc.

Sentra Securities Corporation

Spelman & Co., Inc.

U.S. Bancorp Investments, Inc.

UBS Financial Services Inc.

Wells Fargo Network

A. G. Edwards, A Division Of  Wells Fargo Advisors, LLC

Captrust Financial Advisors

First Clearing LLC

First Union Securities Financial Network, Inc.

Southtrust Securities, Inc.

Wachovia Securities, Inc.

Wells Fargo Advisors Financial Network, LLC

Wells Fargo Advisors Investment Services Group

Wells Fargo Advisors Latin American Channel

Wells Fargo Advisors Private Client Group

Wells Fargo Investments, LLC

Page 38

Execution of portfolio transactions

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

In selecting broker-dealers, the investment adviser strives to obtain “best execution” (the most favorable total price reasonably attainable under the circumstances) for the fund’s portfolio transactions, taking into account a variety of factors. These factors include the size and type of transaction, the nature and character of the markets for the security to be purchased or sold, the cost, quality and reliability of the executions and the broker-dealer’s ability to offer liquidity and anonymity. The investment adviser considers these factors, which involve qualitative judgments, when selecting broker-dealers and execution venues for fund portfolio transactions. The investment adviser views best execution as a process that should be evaluated over time as part of an overall relationship with particular broker-dealer firms rather than on a trade-by-trade basis. The fund does not consider the investment adviser as having an obligation to obtain the lowest commission rate available for a portfolio transaction to the exclusion of price, service and qualitative considerations.

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

The investment adviser may pay commissions in excess of what other broker-dealers might have charged - including on an execution-only basis - for certain portfolio transactions in recognition of brokerage and/or investment research services provided by a broker-dealer. In

Page 39

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

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

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

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

Page 40

among the funds and other accounts that have concurrently authorized a transaction in such security.

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

Brokerage commissions paid on portfolio transactions for the fiscal years ended November 30, 2010, 2009 and 2008 amounted to $6,690,000, $6,107,000 and $7,986,000, respectively. The volume of trading activity increased during the year, resulting in an increase in brokerage commissions paid on portfolio transactions.

The fund is required to disclose information regarding investments in the securities of its “regular” broker-dealers (or parent companies of its regular broker-dealers) that derive more than 15% of their revenue from broker-dealer, underwriter or investment adviser activities. A regular broker-dealer is (a) one of the 10 broker-dealers that received from the fund the largest amount of brokerage commissions by participating, directly or indirectly, in the fund’s portfolio transactions during the fund’s most recently completed fiscal year; (b) one of the 10 broker-dealers that engaged as principal in the largest dollar amount of portfolio transactions of the fund during the fund’s most recently completed fiscal year; or (c) one of the 10 broker-dealers that sold the largest amount of securities of the fund during the fund’s most recently completed fiscal year.

At the end of the fund’s most recent fiscal year, the fund’s regular broker-dealers included Credit Suisse Group, Citigroup Global Markets Inc. and UBS Financial Services Inc. As of the fund’s most recent fiscal year-end, the fund held equity securities of Credit Suisse Group AG in the amount of $34,533,000, Citigroup Inc. in the amount of $61,593,000 and UBS AG in the amount of $23,416,000.

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Disclosure of portfolio holdings

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

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

Affiliated persons of the fund, including officers of the fund and employees of the investment adviser and its affiliates, who receive portfolio holdings information are subject to restrictions and limitations on the use and handling of such information pursuant to applicable codes of ethics, including requirements not to trade in securities based on confidential and proprietary investment information, to maintain the confidentiality of such information, and to preclear securities trades and report securities transactions activity, as applicable. For more information on these restrictions and limitations, please see the “Code of Ethics” section in this statement of additional information and the Code of Ethics. Third party service providers of the fund, as described in this statement of additional information, receiving such information are subject to confidentiality obligations. When portfolio holdings information is disclosed other than through the American Funds website to persons not affiliated with the fund (which, as described above, would typically occur no earlier than one day after the day on which the information is posted on the American Funds website), such persons will be bound by agreements (including confidentiality agreements) or fiduciary obligations that restrict and limit their use of the information to legitimate business uses only. Neither the fund nor its investment adviser or any affiliate thereof receives compensation or other consideration in connection with the disclosure of information about portfolio securities.

Page 42

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

Page 43

Price of shares

Shares are purchased at the offering price or sold at the net asset value price next determined after the purchase or sell order is received by the fund or the Transfer Agent provided that your request contains all information and legal documentation necessary to process the transaction. The Transfer Agent may accept written orders for the sale of fund shares on a future date. These orders are subject to the Transfer Agent’s policies, which generally allow shareholders to provide a written request to sell shares at the net asset value on a specified date no more than five business days after receipt of the order by the Transfer Agent. Any request to sell shares on a future date will be rejected if the request is not in writing, if the requested transaction date is more than five business days after the Transfer Agent receives the request or if the request does not contain all information and legal documentation necessary to process the transaction.

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

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

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

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

Page 44

Equity securities, including depositary receipts, 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 in which the security trades.

Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are generally valued at prices obtained as of approximately 3 p.m. New York time from one or more independent pricing vendors. The pricing vendors base bond prices on, among other things, benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, underlying equity of the issuer, interest rate volatilities, 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, prepayment information, default rates, delinquency and loss assumptions, financial or collateral characteristics or performance, credit enhancements, liquidation value calculations, specific deal information and other reference data. The fund’s investment adviser performs certain checks on these prices prior to calculation of the fund’s net asset value. When the investment adviser deems it appropriate to do so, such securities will be valued in good faith at the mean quoted bid and asked prices that are reasonably and timely available (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type.

Securities with both fixed-income and equity characteristics (e.g., convertible bonds, preferred stocks, units comprised of more than one type of security, etc.), or equity securities traded principally among fixed-income dealers, are generally valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser.

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

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

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

The valuation committee has adopted guidelines and procedures (consistent with SEC rules and guidance) to consider certain relevant principles and factors when making all fair value determinations. As a general principle, securities lacking readily available market quotations, or that have quotations that are considered unreliable by the investment adviser, are valued in good faith by the valuation committee based upon what the fund might reasonably expect to receive upon their current sale. 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. The valuation committee 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. The valuation committee employs additional

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

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

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

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Taxes and distributions

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

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

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

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

Dividends and capital gain distributions — Dividends and capital gain distributions on fund shares will be reinvested in shares of the fund of the same class, unless shareholders indicate in writing that they wish to receive them in cash or in shares of the same class of other

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American Funds, as provided in the prospectus. Dividends and capital gain distributions by 529 share classes will be automatically reinvested.

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

Dividends — The fund intends to follow the practice of distributing substantially all of its investment company taxable income. Investment company taxable income generally includes dividends, interest, net short-term capital gains in excess of net long-term capital losses, and certain foreign currency gains, if any, less expenses and certain foreign currency losses.

Under the Code, gains or losses attributable to fluctuations in exchange rates that occur between the time the fund accrues receivables or liabilities denominated in a foreign currency and the time the fund actually collects such receivables, or pays such liabilities, generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain futures contracts, forward contracts and options, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition are also treated as ordinary gain or loss. These gains or losses, referred to under the Code as Section 988 gains or losses, may increase or decrease the amount of the fund’s investment company taxable income to be distributed to its shareholders as ordinary income.

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

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

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

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

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

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

Capital gain distributions — The fund also intends to distribute its net capital gain each year. The fund’s net capital gain is the entire excess of net realized long-term capital gains over net realized short-term capital losses. Net capital gains for a fiscal year are computed by taking into account any capital loss carryforward of the fund.

The fund may retain a portion of net capital gain for reinvestment and may elect to treat such capital gain as having been distributed to shareholders of the fund. Shareholders receive a credit for the tax that the fund paid on such undistributed net capital gain. In addition, shareholders may increase the basis in their shares of the fund by the difference between the amount of includible gains and the tax deemed paid by the shareholder.

Shareholder taxation — After the end of each calendar year, individual shareholders holding fund shares in taxable accounts will receive a statement of the federal income tax status of all distributions. Shareholders of the fund also may be subject to state and local taxes on distributions received from the fund.

Dividends — The fund will report the amount of each shareholder’s taxable dividend on Form 1099-DIV.

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Capital gains — Distributions of net capital gain that the fund properly designates as “capital gain dividends” generally will be taxable as long-term capital gain, regardless of the length of time the shares of the fund have been held by a shareholder. Any loss realized upon the redemption of shares held at the time of redemption for six months or less from the date of their purchase will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gains (including any undistributed amounts treated as distributed capital gains, as described above) during such six-month period.

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

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

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

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

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

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

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

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Unless otherwise noted, all references in the following pages to Class A, B, C or F-1 shares also refer to the corresponding Class 529-A, 529-B, 529-C or 529-F-1 shares. Class 529 shareholders should also refer to the applicable program description for information on policies and services specifically relating to these accounts. Shareholders holding shares through an eligible retirement plan should contact their plan’s administrator or recordkeeper for information regarding purchases, sales and exchanges.

 Purchase and exchange of shares

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

Contacting your financial adviser — Deliver or mail a check to your financial adviser.

By mail — For initial investments, you may mail a check, made payable to the fund, directly to the address indicated on the account application. Please indicate an investment dealer on the account application. You may make additional investments by filling out the “Account Additions” form at the bottom of a recent transaction confirmation and mailing the form, along with a check made payable to the fund, using the envelope provided with your confirmation.

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

American Funds

12711 North Meridian Street

Carmel, IN 46032-9181

American Funds

5300 Robin Hood Rd.

Norfolk, VA 23513-2407

By telephone — Using the American FundsLine. Please see the “Shareholder account services and privileges” section of this statement of additional information for more information regarding this service.

By Internet — Using americanfunds.com. Please see the “Shareholder account services and privileges” section of this statement of additional information for more information regarding this service.

By wire — If you are making a wire transfer, instruct your bank to wire funds to:

Wells Fargo Bank

ABA Routing No. 121000248

Account No. 4600-076178

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Your bank should include the following information when wiring funds:

For credit to the account of:

American Funds Service Company

(fund’s name)

For further credit to:

(shareholder’s fund account number)

(shareholder’s name)

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

Other purchase information — Class 529 shares may be purchased only through CollegeAmerica by investors establishing qualified higher education savings accounts. Class 529-E shares may be purchased only by investors participating in CollegeAmerica through an eligible employer plan. The American Funds state tax-exempt funds are qualified for sale only in certain jurisdictions, and tax-exempt funds in general should not serve as retirement plan investments. In addition, the fund and the Principal Underwriter reserve the right to reject any purchase order.

Class R-5 and R-6 shares may be made available to certain charitable foundations organized and maintained by The Capital Group Companies, Inc. or its affiliates.

Class R-5 and R-6 shares may also be made available to the Virginia College Savings Plan for use in the Virginia Education Savings Trust and the Virginia Prepaid Education Program and other registered investment companies approved by the fund. Class R-6 shares are also available to other post employment benefits plans.

Purchase minimums and maximums — All investments are subject to the purchase minimums and maximums described in the prospectus. As noted in the prospectus, purchase minimums may be waived or reduced in certain cases.

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

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

·   Employer-sponsored CollegeAmerica accounts.

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

·   Retirement accounts that are funded with employer contributions; and

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

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

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

·   American Funds Money Market Fund accounts registered in the name of clients of Capital Guardian Trust Company’s Capital Group Private Client Services division.

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

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

You may exchange shares of other classes by contacting the Transfer Agent, by contacting your investment dealer or financial adviser, by using American FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or faxing (see “American Funds Service Company service areas” in the prospectus for the appropriate fax numbers) the Transfer Agent. For more information, see “Shareholder account services and privileges” in this statement of additional information. These transactions have the same tax consequences as ordinary sales and purchases.

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

Frequent trading of fund shares — As noted in the prospectus, certain redemptions may trigger a purchase block lasting 30 calendar days under the fund’s “purchase blocking policy.” Under this policy, systematic redemptions will not trigger a purchase block and systematic purchases will not be prevented if the entity maintaining the shareholder account is able to identify the transaction as a systematic redemption or purchase. For purposes of this policy, systematic redemptions include, for example, regular periodic automatic redemptions and

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statement of intention escrow share redemptions. Systematic purchases include, for example, regular periodic automatic purchases and automatic reinvestments of dividends and capital gain distributions. Generally, purchases and redemptions will not be considered “systematic” unless the transaction is pre-scheduled for a specific date.

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

Moving between share classes

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

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

Exchanging Class C shares for Class A shares — If you exchange Class C shares for Class A shares, you are still responsible for paying any Class C contingent deferred sales charges and applicable Class A sales charges.

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

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

Exchanging Class A shares for Class F shares — If you are part of a qualified fee-based program and you wish to exchange your Class A shares for Class F shares to be

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held in the program, any Class A sales charges (including contingent deferred sales charges) that you paid or are payable will not be credited back to your account.

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

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

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

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

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Sales charges

Class A purchases

Purchases by certain 403(b) plans

A 403(b) plan may not invest in Class A or C shares unless such plan was invested in Class A or C shares before January 1, 2009.

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

Purchases by SEP plans and SIMPLE IRA plans

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

Other purchases

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

(1)

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

(2)

currently registered representatives and assistants directly employed by such representatives, retired registered representatives with respect to accounts established while active, or full-time employees (collectively, “Eligible Persons”) (and their (a) spouses or equivalents if recognized under local law,

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	(b) parents and children, including parents and children in step and adoptive relationships, sons-in-law and daughters-in-law , and (c) parents-in-law, if the Eligible Persons or the spouses, children or parents of the Eligible Persons are listed in the account registration with the parents-in-law) of dealers who have sales agreements with the Principal Underwriter (or who clear transactions through such dealers), plans for the dealers, and plans that include as participants only the Eligible Persons, their spouses, parents and/or children;
(3)	currently registered investment advisers (“RIAs”) and assistants directly employed by such RIAs, retired RIAs with respect to accounts established while active, or full-time employees (collectively, “Eligible Persons”) (and their (a) spouses or equivalents if recognized under local law, (b) parents and children, including parents and children in step and adoptive relationships, sons-in-law and daughters-in-law and (c) parents-in-law, if the Eligible Persons or the spouses, children or parents of the Eligible Persons are listed in the account registration with the parents-in-law) of RIA firms that are authorized to sell shares of the funds, plans for the RIA firms, and plans that include as participants only the Eligible Persons, their spouses, parents and/or children;
(4)	companies exchanging securities with the fund through a merger, acquisition or exchange offer;
(5)	insurance company separate accounts;
(6)	accounts managed by subsidiaries of The Capital Group Companies, Inc.;
(7)	The Capital Group Companies, Inc., its affiliated companies and Washington Management Corporation;
(8)	an individual or entity with a substantial business relationship with The Capital Group Companies, Inc. or its affiliates, or an individual or entity related or relating to such individual or entity;
(9)	wholesalers and full-time employees directly supporting wholesalers involved in the distribution of insurance company separate accounts whose underlying investments are managed by any affiliate of The Capital Group Companies, Inc.; and
(10)	full-time employees of banks that have sales agreements with the Principal Underwriter, who are solely dedicated to directly supporting the sale of mutual funds.

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

Transfers to CollegeAmerica — A transfer from the Virginia Prepaid Education ProgramSM or the Virginia Education Savings TrustSM to a CollegeAmerica account will be made with no sales charge. No commission will be paid to the dealer on such a transfer.

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Moving between accounts — Investments in certain account types may be moved to other account types without incurring additional Class A sales charges. These transactions include, for example:

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

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

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

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

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

A dealer concession of up to 1% may be paid by the fund under its Class A plan of distribution to reimburse the Principal Underwriter in connection with dealer and wholesaler compensation paid by it with respect to investments made with no initial sales charge.

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Sales charge reductions and waivers

Reducing your Class A sales charge — As described in the prospectus, there are various ways to reduce your sales charge when purchasing Class A shares. Additional information about Class A sales charge reductions is provided below.

Statement of intention — By establishing a statement of intention (the “Statement”), you enter into a nonbinding commitment to purchase shares of the American Funds (excluding American Funds Money Market Fund) over a 13-month period and receive the same sales charge (expressed as a percentage of your purchases) as if all shares had been purchased at once, unless the Statement is upgraded as described below.

The Statement period starts on the date on which your first purchase made toward satisfying the Statement is processed. Your accumulated holdings (as described in the paragraph below titled “Rights of accumulation”) eligible to be aggregated as of the day immediately before the start of the Statement period may be credited toward satisfying the Statement.

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

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

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

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

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

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

·   individual-type employee benefit plans, such as an IRA, single-participant Keogh-type plan, or a participant account of a 403(b) plan that is treated as an individual-type plan for sales charge purposes (see “Purchases by certain 403(b) plans” under “Sales charges” in this statement of additional information);

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

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

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

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

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

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

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

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

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

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

·   for participant accounts of a 403(b) plan that is treated as an employer-sponsored plan for sales charge purposes (see “Purchases by certain 403(b) plans” under “Sales charges” in this statement of additional information), or made for participant

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accounts of two or more such plans, in each case of a single employer or affiliated employers as defined in the 1940 Act; or

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

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

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

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

The value of all of your holdings in accounts established in calendar year 2005 or earlier will be assigned an initial cost value equal to the market value of those holdings as of the last business day of 2005. Thereafter, the cost value of such accounts will increase or decrease according to actual investments or withdrawals. You must contact your financial adviser or American Funds Service Company if you have additional information that is relevant to the calculation of the value of your holdings.

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

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investments in American Legacy Retirement Investment Plans that were established on or before March 31, 2007.

You may not purchase Class C or 529-C shares if such combined holdings cause you to be eligible to purchase Class A or 529-A shares at the $1 million or more sales charge discount rate (i.e. at net asset value).

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

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

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

·   Required minimum distributions taken from retirement accounts upon the shareholder’s attainment of age 70½ (required minimum distributions that continue to be taken by the beneficiary(ies) after the account owner is deceased also qualify for a waiver).

·   Redemptions through an automatic withdrawal plan (“AWP”) (see “Automatic withdrawals” under “Shareholder account services and privileges” in this statement of additional information). For each AWP payment, assets that are not subject to a CDSC, such as appreciation on shares and shares acquired through reinvestment of dividends and/or capital gain distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gain distributions taken in cash by a shareholder who receives payments through an AWP will also count toward the 12% limit. In the case of an AWP, the 12% limit is calculated at the time an automatic redemption is first made, and is recalculated at the time each additional automatic redemption is made. Shareholders who establish an AWP should be aware that the amount of a payment not subject to a CDSC may vary over time depending on fluctuations in the value of their accounts. This privilege may be revised or terminated at any time.

For purposes of this paragraph, “account” means your investment in the applicable class of shares of the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus. For example, CDSC waivers will not be allowed on redemptions of Class 529-B and 529-C shares due to termination of CollegeAmerica; a determination by the Internal Revenue Service that CollegeAmerica does not qualify as a qualified tuition program under the Code; proposal or

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enactment of law that eliminates or limits the tax-favored status of CollegeAmerica; or elimination of the fund by the Virginia College Savings Plan as an option for additional investment within CollegeAmerica.

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Selling shares

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

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

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

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

If you hold multiple American Funds and a CDSC applies to the shares you are redeeming, the CDSC will be calculated based on the applicable class of shares of the particular fund from which you are making the redemption.

Redemption proceeds will not be mailed until sufficient time has passed to provide reasonable assurance that checks or drafts (including certified or cashier’s checks) for shares purchased have cleared (which may take up to 10 business days from the purchase date). Except for delays relating to clearance of checks for share purchases or in extraordinary circumstances (and as permissible under the 1940 Act), sale proceeds will be paid on or before the seventh day following receipt and acceptance of an order. Interest will not accrue or be paid on amounts that represent uncashed distribution or redemption checks.

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

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Shareholder account services and privileges

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Telephone and Internet purchases, redemptions and exchanges — By using the telephone (including American FundsLine) or the Internet (including americanfunds.com), or fax purchase, redemption and/or exchange options, you agree to hold the fund, the Transfer Agent, any of its

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

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

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

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

Share certificates — Shares are credited to your account. The fund does not issue share certificates.

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General information

Custodian of assets — Securities and cash owned by the fund, including proceeds from the sale of shares of the fund and of securities in the fund’s portfolio, are held by State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111, as Custodian. If the fund holds securities of issuers outside the U.S., the Custodian may hold these securities pursuant to subcustodial arrangements in banks outside the U.S. or branches of U.S. banks outside the U.S.

Transfer Agent — American Funds Service Company, a wholly owned subsidiary of the investment adviser, maintains the records of shareholder accounts, processes purchases and redemptions of the fund’s shares, acts as dividend and capital gain distribution disbursing agent, and performs other related shareholder service functions. The principal office of American Funds Service Company is located at 6455 Irvine Center Drive, Irvine, CA 92618. American Funds Service Company was paid a fee of $9,886,000 for Class A shares and $181,000 for Class B shares, for the 2010 fiscal year. American Funds Service Company is also compensated for certain transfer agency services provided to all share classes from the administrative services fees paid to Capital Research and Management Company and from the relevant share class, as described under “Administrative services agreement.”

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

Independent registered public accounting firm — PricewaterhouseCoopers LLP, 350 South Grand Avenue, Los Angeles, CA 90071, serves as the fund’s independent registered public accounting firm, providing audit services, preparation of tax returns and review of certain documents to be filed with the Securities and Exchange Commission. Prior to the fund's 2010 fiscal year, Deloitte & Touche LLP served in that capacity. The financial statements included in this statement of additional information from the annual report have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

Upon the recommendation of the fund’s Audit Committee, on December 2, 2009, a majority of the fund’s board of trustees, including a majority of the independent trustees, approved the appointment of PricewaterhouseCoopers LLP as the fund’s independent registered public accounting firm for the fund’s fiscal 2010 audit subject to the right of the fund, by a majority vote of the shareholders at any meeting called for that purpose, to terminate the appointment without penalty. At no point during the 2009 or 2010 fiscal year have there been any disagreements between management and Deloitte & Touche LLP, the fund’s former independent registered public accounting firm or PricewaterhouseCoopers LLP, the fund’s current independent registered public accounting firm.

The selection of the fund’s independent registered public accounting firm is reviewed and determined annually by the board of trustees.

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

Prospectuses, reports to shareholders and proxy statements — The fund’s fiscal year ends on November 30. Shareholders are provided updated summary prospectuses annually and at least semi-annually with reports showing the fund’s investment portfolio or summary investment portfolio, financial statements and other information. Shareholders may request a copy of the fund’s current prospectus at no cost by calling 800/421-0180 or by sending an e-mail request to prospectus@americanfunds.com. Shareholders may also access the fund’s current summary prospectus, prospectus, statement of additional information and shareholder reports at americanfunds.com/prospectus.The fund’s annual financial statements are audited by the fund's independent registered public accounting firm. In addition, shareholders may also receive proxy statements for the fund. In an effort to reduce the volume of mail shareholders receive from the fund when a household owns more than one account, the Transfer Agent has taken steps to eliminate duplicate mailings of summary prospectuses, shareholder reports and proxy statements. To receive additional copies of a summary prospectus, report or proxy statement, shareholders should contact the Transfer Agent.

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

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

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

Legal proceedings — On February 16, 2005, the NASD (now the Financial Industry Regulatory Authority or FINRA) filed an administrative complaint against the Principal Underwriter. The complaint alleges violations of certain NASD rules by the Principal Underwriter with respect to the selection of broker-dealer firms that buy and sell securities for mutual fund investment portfolios. The complaint seeks sanctions, restitution and disgorgement. On August 30, 2006, a

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FINRA Hearing Panel ruled against the Principal Underwriter and imposed a $5 million fine. On April 30, 2008, FINRA’s National Adjudicatory Council affirmed the decision by FINRA’s Hearing Panel. The Principal Underwriter has appealed this decision to the U.S. Securities and Exchange Commission.

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

Determination of net asset value, redemption price and maximum offering price per share for Class A shares — November 30, 2010

Net asset value and redemption price per share (Net assets divided by shares outstanding)	$24.23
Maximum offering price per share (100/94.25 of net asset value per share, which takes into account the fund’s current maximum sales charge)	$25.71

Other information — The fund reserves the right to modify the privileges described in this statement of additional information at any time.

The financial statements, including the investment portfolio and the report of the fund’s independent registered public accounting firm contained in the annual report, are included in this statement of additional information.

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Fund numbers — Here are the fund numbers for use with our automated telephone line, American FundsLine®, or when making share transactions:

	Fund numbers
Fund	Class A	Class B	Class C	Class F-1	Class F-2
Stock and stock/bond funds
AMCAP Fund®	002	202	302	402	602
American Funds Global Balanced Fund SM	037	237	337	437	637
American Balanced Fund®	011	211	311	411	611
American Mutual Fund®	003	203	303	403	603
Capital Income Builder®	012	212	312	412	612
Capital World Growth and Income FundSM	033	233	333	433	633
EuroPacific Growth Fund®	016	216	316	416	616
Fundamental InvestorsSM	010	210	310	410	610
The Growth Fund of America®	005	205	305	405	605
The Income Fund of America®	006	206	306	406	606
International Growth and Income FundSM	034	234	334	434	634
The Investment Company of America®	004	204	304	404	604
The New Economy Fund®	014	214	314	414	614
New Perspective Fund®	007	207	307	407	607
New World Fund®	036	236	336	436	636
SMALLCAP World Fund®	035	235	335	435	635
Washington Mutual Investors FundSM	001	201	301	401	601
Bond funds
American Funds Mortgage FundSM	042	242	342	442	642
American Funds Short-Term Tax-Exempt Bond FundSM	039	N/A	N/A	439	639
American Funds Tax-Exempt Fund of New YorkSM	041	241	341	441	641
American High-Income Municipal Bond Fund®	040	240	340	440	640
American High-Income TrustSM	021	221	321	421	621
The Bond Fund of AmericaSM	008	208	308	408	608
Capital World Bond Fund®	031	231	331	431	631
Intermediate Bond Fund of AmericaSM	023	223	323	423	623
Limited Term Tax-Exempt Bond Fund of AmericaSM	043	243	343	443	643
Short-Term Bond Fund of AmericaSM	048	248	348	448	648
The Tax-Exempt Bond Fund of America®	019	219	319	419	619
The Tax-Exempt Fund of California®*	020	220	320	420	620
The Tax-Exempt Fund of Maryland®*	024	224	324	424	624
The Tax-Exempt Fund of Virginia®*	025	225	325	425	625
U.S. Government Securities FundSM	022	222	322	422	622
Money market fund
American Funds Money Market Fund®	059	259	359	459	659

___________

*Qualified for sale only in certain jurisdictions.

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	Fund numbers
Fund	Class 529-A	Class 529-B	Class 529-C	Class 529-E	Class 529-F-1
Stock and stock/bond funds
AMCAP Fund	1002	1202	1302	1502	1402
American Balanced Fund	1011	1211	1311	1511	1411
American Funds Global Balanced Fund	1037	1237	1337	1537	1437
American Mutual Fund	1003	1203	1303	1503	1403
Capital Income Builder	1012	1212	1312	1512	1412
Capital World Growth and Income Fund	1033	1233	1333	1533	1433
EuroPacific Growth Fund	1016	1216	1316	1516	1416
Fundamental Investors	1010	1210	1310	1510	1410
The Growth Fund of America	1005	1205	1305	1505	1405
The Income Fund of America	1006	1206	1306	1506	1406
International Growth and Income Fund	1034	1234	1334	1534	1434
The Investment Company of America	1004	1204	1304	1504	1404
The New Economy Fund	1014	1214	1314	1514	1414
New Perspective Fund	1007	1207	1307	1507	1407
New World Fund	1036	1236	1336	1536	1436
SMALLCAP World Fund	1035	1235	1335	1535	1435
Washington Mutual Investors Fund	1001	1201	1301	1501	1401
Bond funds
American Funds Mortgage Fund	1042	1242	1342	1542	1442
American High-Income Trust	1021	1221	1321	1521	1421
The Bond Fund of America	1008	1208	1308	1508	1408
Capital World Bond Fund	1031	1231	1331	1531	1431
Intermediate Bond Fund of America	1023	1223	1323	1523	1423
Short-Term Bond Fund of America	1048	1248	1348	1548	1448
U.S. Government Securities Fund	1022	1222	1322	1522	1422
Money market fund
American Funds Money Market Fund	1059	1259	1359	1559	1459

Page 73

	Fund numbers
Fund		Class R-1	Class R-2	Class R-3	Class R-4	Class R-5	Class R-6
Stock and stock/bond funds
AMCAP Fund		2102	2202	2302	2402	2502	2602
American Balanced Fund		2111	2211	2311	2411	2511	2611
American Funds Global Balanced Fund		2137	2237	2337	2437	2537	2637
American Mutual Fund		2103	2203	2303	2403	2503	2603
Capital Income Builder		2112	2212	2312	2412	2512	2612
Capital World Growth and Income Fund		2133	2233	2333	2433	2533	2633
EuroPacific Growth Fund		2116	2216	2316	2416	2516	2616
Fundamental Investors		2110	2210	2310	2410	2510	2610
The Growth Fund of America		2105	2205	2305	2405	2505	2605
The Income Fund of America		2106	2206	2306	2406	2506	2606
International Growth and Income Fund		2134	2234	2334	2434	2534	2634
The Investment Company of America		2104	2204	2304	2404	2504	2604
The New Economy Fund		2114	2214	2314	2414	2514	2614
New Perspective Fund		2107	2207	2307	2407	2507	2607
New World Fund		2136	2236	2336	2436	2536	2636
SMALLCAP World Fund		2135	2235	2335	2435	2535	2635
Washington Mutual Investors Fund		2101	2201	2301	2401	2501	2601
Bond funds
American Funds Mortgage Fund		2142	2242	2342	2442	2542	2642
American High-Income Trust		2121	2221	2321	2421	2521	2621
The Bond Fund of America		2108	2208	2308	2408	2508	2608
Capital World Bond Fund		2131	2231	2331	2431	2531	2631
Intermediate Bond Fund of America		2123	2223	2323	2423	2523	2623
Short-Term Bond Fund of America		2148	2248	2348	2448	2548	2648
U.S. Government Securities Fund		2122	2222	2322	2422	2522	2622
Money market fund
American Funds Money Market Fund		2159	2259	2359	2459	2559	2659

Page 74

		Fund numbers
Fund	Class A		Class R-1	Class R-2	Class R-3	Class R-4	Class R-5	Class R-6
Stock and stock/bond funds
American Funds 2055 Target Date Retirement FundSM	082		2182	2282	2382	2482	2582	2682
American Funds 2050 Target Date Retirement Fund®	069		2169	2269	2369	2469	2569	2669
American Funds 2045 Target Date Retirement Fund®	068		2168	2268	2368	2468	2568	2668
American Funds 2040 Target Date Retirement Fund®	067		2167	2267	2367	2467	2567	2667
American Funds 2035 Target Date Retirement Fund®	066		2166	2266	2366	2466	2566	2666
American Funds 2030 Target Date Retirement Fund®	065		2165	2265	2365	2465	2565	2665
American Funds 2025 Target Date Retirement Fund®	064		2164	2264	2364	2464	2564	2664
American Funds 2020 Target Date Retirement Fund®	063		2163	2263	2363	2463	2563	2663
American Funds 2015 Target Date Retirement Fund®	062		2162	2262	2362	2462	2562	2662
American Funds 2010 Target Date Retirement Fund®	061		2161	2261	2361	2461	2561	2661

Page 75

Appendix

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

Description of bond ratings

Moody’s

Long-term rating definitions

Aaa

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

Aa

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

A

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

Baa

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

Ba

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

B

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

Caa

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

Ca

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

C

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

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

Page 76

Standard & Poor’s

Long-term issue credit ratings

AAA

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

AA

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

A

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

BBB

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

BB, B, CCC, CC, and C

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

BB

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

B

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

CCC

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

CC

An obligation rated CC is currently highly vulnerable to nonpayment.

Page 77

C

A C rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the C rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

D

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

Plus (+) or minus (–)

The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

NR

This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.

Page 78

[logo – American Funds®]

The New Economy Fund®

Investment portfolio

November 30, 2010

Common stocks — 91.45%	Shares			Value (000)
INFORMATION TECHNOLOGY — 24.30%
Google Inc., Class A1		411,900		$	228,897
Apple Inc.1		553,400			172,190
QUALCOMM Inc.		2,780,000			129,937
Oracle Corp.		4,668,000			126,223
NetEase.com, Inc. (ADR)1		2,558,000			97,664
eBay Inc.1		2,900,000			84,477
Corning Inc.		4,089,900			72,228
Rovi Corp.1		1,256,000			69,294
Microsoft Corp.		2,690,000			67,815
Avago Technologies Ltd.1		2,397,400			62,596
Yahoo! Inc.1		3,025,000			47,704
Accenture PLC, Class A		1,090,000			47,219
AAC Acoustic Technologies Holdings Inc.		15,096,000			41,603
Monster Worldwide, Inc.1		1,800,000			40,644
Digital River, Inc.1		1,013,100			37,302
Trimble Navigation Ltd.1		1,000,000			37,240
NHN Corp.1		220,000			37,192
Cisco Systems, Inc.1		1,935,000			37,075
Autodesk, Inc.1		1,000,000			35,290
Intel Corp.		1,500,000			31,680
Avid Technology, Inc.1		1,800,000			28,044
NVIDIA Corp.1		1,800,000			24,480
Texas Instruments Inc.		750,000			23,850
Quanta Computer Inc.		11,545,000			22,687
CoreLogic, Inc.		1,170,900			21,322
FLIR Systems, Inc.1		751,762			20,151
EMC Corp.1		750,000			16,117
VTech Holdings Ltd.		1,455,000			15,309
Maxim Integrated Products, Inc.		600,000			13,950
DTS, Inc.1		275,000			12,908
Automatic Data Processing, Inc.		265,000			11,811
Wistron Corp.		5,503,813			11,158
Altera Corp.		218,100			7,653
Flextronics International Ltd.1		981,534			7,116
Linear Technology Corp.		216,000			7,042
KLA-Tencor Corp.		153,000			5,611
Acxiom Corp.1		252,410			4,293
Global Payments Inc.		94,600			3,932
Nokia Corp.		400,000			3,694
AOL Inc.1		115,000			2,781
ProAct Holdings, LLC1,2,3		3,500,000			—
					1,768,179
FINANCIALS — 17.92%
HDFC Bank Ltd.		1,675,000			83,427
Banco Bradesco SA, preferred nominative		3,976,500			77,856
Industrial and Commercial Bank of China Ltd., Class H		100,000,000			77,784
Citigroup Inc.1		14,665,000			61,593
Itaú Unibanco Holding SA, preferred nominative (ADR)		2,556,292			59,638
Société Générale		1,279,953			59,322
JPMorgan Chase & Co.		1,525,000			57,004
Aberdeen Asset Management PLC		19,370,000			53,931
AIA Group Ltd.1		17,826,400			51,539
Moody’s Corp.		1,819,200			48,809
State Street Corp.		930,100			40,180
Bank of America Corp.		3,475,000			38,051
Zions Bancorporation		1,925,000			37,441
Deutsche Bank AG		787,500			37,408
Wells Fargo & Co.		1,362,300			37,068
Banco Santander, SA		3,737,273			35,413
Credit Suisse Group AG		935,720			34,533
Bank of China Ltd., Class H		60,700,000			32,519
AFLAC Inc.		627,800			32,332
Old Republic International Corp.		2,500,000			31,650
China Life Insurance Co. Ltd., Class H		7,330,000			31,481
China Construction Bank Corp., Class H		33,915,000			30,617
Banco Santander (Brasil) SA, units (ADR)		1,159,085			15,126
Banco Santander (Brasil) SA, units		1,159,085			14,974
Marsh & McLennan Companies, Inc.		1,200,000			30,096
CapitaMalls Asia Ltd.		20,000,000			29,841
HSBC Holdings PLC (Hong Kong)		2,442,218			24,831
HSBC Holdings PLC (United Kingdom)		453,500			4,573
UBS AG1		1,563,684			23,417
Tryg A/S		510,000			21,991
Discover Financial Services		1,200,000			21,936
First American Financial Corp.		1,170,900			16,592
Bank of New York Mellon Corp.		500,000			13,495
Prudential PLC		1,272,223			11,240
Shinhan Financial Group Co., Ltd.		250,000			9,639
Deutsche Börse AG		140,000			8,467
Northern Trust Corp.		165,000			8,299
					1,304,113
CONSUMER DISCRETIONARY — 12.87%
Galaxy Entertainment Group Ltd.1		75,770,000			76,989
DIRECTV, Class A1		1,800,000			74,754
News Corp., Class A		5,302,815			72,330
Li & Fung Ltd.		11,000,000			68,563
Comcast Corp., Class A		2,315,000			46,300
Comcast Corp., Class A, special nonvoting shares		1,100,000			20,867
Walt Disney Co.		1,500,000			54,765
Staples, Inc.		2,100,000			46,221
CTC Media, Inc.		2,000,000			45,020
Virgin Media Inc.1		1,738,600			44,299
Pantaloon Retail (India) Ltd.		4,700,000			40,281
Pantaloon Retail (India) Ltd., Class B		22,580			156
Best Buy Co., Inc.		900,000			38,448
Kohl’s Corp.1		680,000			38,366
John Wiley & Sons, Inc., Class A		900,000			37,350
Target Corp.		630,000			35,872
Time Warner Inc.		1,213,334			35,781
Tractor Supply Co.		840,000			35,675
Time Warner Cable Inc.		450,214			27,706
McGraw-Hill Companies, Inc.		800,000			27,592
GEOX SpA		3,903,454			17,861
Jumbo SA		2,234,000			14,731
Intercontinental Hotels Group PLC		800,000			14,186
O’Reilly Automotive, Inc.1		185,000			11,133
Multi Screen Media Private Ltd.1,2,3		79,866			6,470
Lowe’s Companies, Inc.		199,900			4,538
					936,254
HEALTH CARE — 11.53%
Biogen Idec Inc.1		1,412,400			90,351
Alere Inc.1		2,531,500			80,780
Fresenius SE		765,000			65,548
Novartis AG		1,100,000			58,362
St. Jude Medical, Inc.1		1,375,000			53,199
Emergency Medical Services Corp., Class A1		938,200			46,478
Medco Health Solutions, Inc.1		750,000			45,990
Stryker Corp.		903,000			45,231
Myriad Genetics, Inc.1		2,054,100			44,225
Hologic, Inc.1		2,419,550			39,681
Life Technologies Corp.1		779,700			38,833
McKesson Corp.		600,000			38,340
Richter Gedeon Nyrt		143,500			28,501
Beckman Coulter, Inc.		500,000			27,355
Medtronic, Inc.		700,000			23,471
NuVasive, Inc.1		919,286			21,475
Teva Pharmaceutical Industries Ltd. (ADR)		392,000			19,616
American Medical Systems Holdings, Inc.1		677,580			12,149
Vertex Pharmaceuticals Inc.1		360,000			11,927
Amgen Inc.1		212,600			11,202
Illumina, Inc.1		178,000			10,701
Integra LifeSciences Holdings Corp.1		200,000			8,674
Volcano Corp.1		314,520			8,351
ZOLL Medical Corp.1		198,000			6,617
Array BioPharma Inc.1		580,000			1,862
					838,919
INDUSTRIALS — 11.18%
Ryanair Holdings PLC (ADR)		5,224,700			159,510
Union Pacific Corp.		1,192,635			107,468
AirAsia Bhd.1		122,784,000			102,724
easyJet PLC1		8,267,000			55,023
MSC Industrial Direct Co., Inc., Class A		880,000			52,923
United Parcel Service, Inc., Class B		550,000			38,571
Robert Half International Inc.		1,252,400			34,717
CSX Corp.		500,900			30,460
SGS SA		17,174			28,114
Exponent, Inc.1,4		762,515			26,627
Capita Group PLC		2,600,000			26,368
AMR Corp.1		3,000,000			25,680
Downer EDI Ltd.		5,000,000			22,429
United Continental Holdings, Inc.1		787,500			21,798
Samsung Engineering Co., Ltd.		133,000			21,280
PT AKR Corporindo Tbk		129,312,680			20,898
United Stationers Inc.1		189,000			11,996
Watsco, Inc.		170,000			10,246
US Airways Group, Inc.1		705,000			7,868
Beacon Roofing Supply, Inc.1		300,000			5,157
Interline Brands, Inc.1		165,297			3,405
					813,262
TELECOMMUNICATION SERVICES — 4.82%
América Móvil, SAB de CV, Series L (ADR)		1,825,600			103,073
Millicom International Cellular SA		578,269			50,182
PT XL Axiata Tbk1		74,338,000			46,081
Avanti Communications Group PLC1		3,488,372			39,366
SOFTBANK CORP.		1,035,000			35,865
Vodafone Group PLC		11,560,000			28,904
tw telecom inc.1		1,130,000			18,622
Qwest Communications International Inc.		1,790,000			12,530
Telekom Austria AG, non-registered shares		718,879			9,985
United States Cellular Corp.1		139,500			6,386
					350,994
ENERGY — 2.36%
Schlumberger Ltd.		1,152,400			89,127
FMC Technologies, Inc.1		350,000			29,484
AMEC PLC		1,630,000			27,407
Baker Hughes Inc.		500,000			26,080
					172,098
UTILITIES — 0.81%
Scottish and Southern Energy PLC		1,705,000			29,703
GDF SUEZ		880,574			29,204
					58,907
MATERIALS — 0.55%
Monsanto Co.		449,950			26,961
Ecolab Inc.		270,400			12,928
					39,889
CONSUMER STAPLES — 0.46%
Costco Wholesale Corp.		500,000			33,805
MISCELLANEOUS — 4.65%
Other common stocks in initial period of acquisition					338,644
Total common stocks (cost: $5,551,415,000)					6,655,064
Preferred stocks — 0.05%
MISCELLANEOUS — 0.05%
Other preferred stocks in initial period of acquisition					3,984
Total preferred stocks (cost: $4,000,000)					3,984
Rights — 0.05%
MISCELLANEOUS — 0.05%
Other rights in initial period of acquisition					3,377
Total rights (cost: $0)					3,377
	Principal amount			Value
Convertible securities — 0.64%		(000	)		(000	)
INDUSTRIALS — 0.33%
AMR Corp. 6.25% convertible notes 2014	$	15,000		$	17,850
US Airways Group, Inc. 7.25% convertible notes 2014		2,500			6,600
					24,450
CONSUMER DISCRETIONARY — 0.12%
Group 1 Automotive, Inc. 3.00% convertible notes 20205		7,500			8,925
TELECOMMUNICATION SERVICES — 0.10%
tw telecom inc. 2.375% convertible debentures 2026		6,400			7,000
MISCELLANEOUS — 0.09%
Other convertible securities in initial period of acquisition					6,342
Total convertible securities (cost: $39,015,000)					46,717
Short-term securities — 8.03%
U.S. Treasury Bills 0.145%–0.185% due 12/2/2010–5/19/2011		95,800			95,746
Jupiter Securitization Co., LLC 0.24%–0.26% due 12/8/2010–2/8/20115		92,300			92,279
Freddie Mac 0.175%–0.18% due 12/2/2010–3/15/2011		85,600			85,565
Coca-Cola Co. 0.22% due 12/1–12/10/20105		67,400			67,399
Straight-A Funding LLC 0.21%–0.25% due 12/16/2010–1/4/20115		59,000			58,988
Federal Home Loan Bank 0.185% due 1/21/2011		50,000			49,989
Fannie Mae 0.18%–0.20% due 1/18–2/14/2011		36,400			36,389
Bank of America Corp. 0.22%–0.25% due 12/1–12/30/2010		36,050			36,043
Abbott Laboratories 0.18% due 12/15/20105		35,000			34,997
Wal-Mart Stores, Inc. 0.17% due 12/9/20105		27,000			26,999
Total short-term securities (cost: $584,399,000)					584,394
Total investment securities (cost: $6,178,829,000)					7,293,536
Other assets less liabilities					(15,915	)
Net assets				$	7,277,621

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

1 Security did not produce income during the last 12 months.

2 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $8,211,000, which represented .11% of the net assets of the fund.

3 Acquired in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below.

								Percent
	Acquisition	Cost			Value			of net
	date(s)		(000	)		(000	)	assets
Multi Screen Media Private Ltd.	9/6/2000–4/18/2002	$	31,574		$	6,470			.09	%
ProAct Holdings, LLC	1/4/2005		87			—			.00
Total restricted securities		$	31,661		$	6,470			.09	%

4 Represents an affiliated company as defined under the Investment Company Act of 1940.

5 Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $289,587,000, which represented 3.98% of the net assets of the fund.

Key to abbreviation

ADR = American Depositary Receipts

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

MFGEFP-914-0111O-S25563

Summary investment portfolio  November 30, 2010

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

[begin pie chart]

Industry sector diversification (percent of net assets)
Information technology	24.30	%
Financials	17.92	%
Consumer discretionary	12.87	%
Health care	11.53	%
Industrials	11.18	%
Other industries	13.65	%
Other securities	0.74	%
Short-term & other assets less liabilities	7.81	%

[end pie chart]

United States	58.9	%
Euro zone*	6.0
United Kingdom	4.5
China	4.0
Hong Kong	3.5
Brazil	2.5
Switzerland	2.0
India	1.9
Mexico	1.4
Malaysia	1.4
Other countries	6.1
Short-term securities & other assets less liabilities	7.8
*Countries using the euro as a common currency; those represented in the fund's portfolio are Austria, Finland, France, Germany, Greece, Ireland, Italy and Spain.

							Percent
				Value			of net
Common stocks  - 91.45%	Shares				(000	)	assets
Information technology  - 24.30%
Google Inc., Class A (1)		411,900		$	228,897			3.15	%
One of the most frequently used website search engines in the world.
Apple Inc. (1)		553,400			172,190			2.37
Manufacturer of personal computers and various software products, as well as portable media players, browsers and smartphones.
QUALCOMM Inc.		2,780,000			129,937			1.79
Develops and licenses technologies for digital wireless communications products.
Oracle Corp.		4,668,000			126,223			1.73
Major supplier of database management software. Also develops business applications and provides consulting and support.
NetEase.com, Inc. (ADR) (1)		2,558,000			97,664			1.34
Operates an online community in China.
eBay Inc. (1)		2,900,000			84,477			1.16
Online Internet auction company that serves as a marketplace for buyers and sellers of merchandise.
Corning Inc.		4,089,900			72,228			.99
Leading manufacturer of optical fiber, ceramics and high-performance glass used in industrial and scientific products.
Rovi Corp. (1)		1,256,000			69,294			.95
Technology solutions provider for digital entertainment devices and services.
Microsoft Corp.		2,690,000			67,815			.93
A world leader in software and Internet technologies. Its products include the Windows operating system and Office software.
Avago Technologies Ltd. (1)		2,397,400			62,596			.86
Manufacturer of analog interface components and subsystems for communications, industrial and consumer applications.
Yahoo! Inc. (1)		3,025,000			47,704			.66
One of the three largest Internet portals, offering online media, commerce and communications services to consumers and businesses worldwide.
Accenture PLC, Class A		1,090,000			47,219			.65
Management consulting, technology services and outsourcing company.
Other securities					561,935			7.72
					1,768,179			24.30
Financials  - 17.92%
HDFC Bank Ltd.		1,675,000			83,427			1.15
Provides financial services and a wide array of commercial, transactional and electronic banking products.
Banco Bradesco SA, preferred nominative		3,976,500			77,856			1.07
One of the largest private banks in Brazil.
Industrial and Commercial Bank of China Ltd., Class H		100,000,000			77,784			1.07
A state-owned commercial bank in China and one of the world's largest banks.
Citigroup Inc. (1)		14,665,000			61,593			.85
One of the leading diversified financial services companies in the world.
Itaú Unibanco Holding SA, preferred nominative (ADR)		2,556,292			59,638			.82
One of Brazil's leading private commercial banks.
Société Générale		1,279,953			59,322			.81
Has retail, corporate and investment banking operations around the world, with particular strength in Europe.
JPMorgan Chase & Co.		1,525,000			57,004			.78
Leading global financial services firm operating in the investment banking, transaction processing, asset and wealth management, and private equity sectors.
Aberdeen Asset Management PLC		19,370,000			53,931			.74
Global investment management company.
AIA Group Ltd. (1)		17,826,400			51,539			.71
Life insurance and financial services provider in the Asia-Pacific region.
Moody's Corp.		1,819,200			48,809			.67
Publishes credit ratings and research on fixed-income securities and commmercial and government entities.
Bank of America Corp.		3,475,000			38,051			.52
One of the world's largest commercial banks.
Other securities					635,159			8.73
					1,304,113			17.92
Consumer discretionary  - 12.87%
Galaxy Entertainment Group Ltd. (1)		75,770,000			76,989			1.06
Operator of gaming and entertainment facilities in Macau and a manufacturer of construction materials.
DIRECTV, Class A (1)		1,800,000			74,754			1.03
Digital television services provider in the United States, Latin America and the Caribbean.
News Corp., Class A		5,302,815			72,330			.99
A leading global media conglomerate with businesses ranging from movies and television to operation of satellite TV platforms.
Li & Fung Ltd.		11,000,000			68,563			.94
Major consumer products global sourcing and logistics service provider.
Walt Disney Co.		1,500,000			54,765			.75
One of the world's largest entertainment companies with operations that include theme parks, movies, TV (ABC), cable TV networks (ESPN), music and merchandising.
Comcast Corp., Class A		2,315,000			46,300			.64
The largest cable TV and home Internet service provider in the U.S.
Staples, Inc.		2,100,000			46,221			.64
Among the leaders in sales of office supplies and equipment.
Other securities					496,332			6.82
					936,254			12.87
Health care  - 11.53%
Biogen Idec Inc. (1)		1,412,400			90,351			1.24
A leader in developing therapies to treat multiple sclerosis and cancer.
Alere Inc. (1)		2,531,500			80,780			1.11
Manufacturer of consumer and professional medical diagnostic products focused on cardiology, women's health and infectious diseases.
Fresenius SE		765,000			65,548			.90
Health care company based in Germany, specializing in dialysis, hospitals and outpatient medical care.
Novartis AG		1,100,000			58,362			.80
One of the world's largest pharmaceutical companies.
St. Jude Medical, Inc. (1)		1,375,000			53,199			.73
Manufactures mechanical heart valves, pacemakers and other devices to treat cardiovascular diseases.
Emergency Medical Services Corp., Class A (1)		938,200			46,478			.64
Provider of emergency medical services and facility-based outsourced physician services.
Other securities					444,201			6.11
					838,919			11.53
Industrials  - 11.18%
Ryanair Holdings PLC (ADR)		5,224,700			159,510			2.19
European discount airline serving Continental Europe, Ireland and the United Kingdom.
Union Pacific Corp.		1,192,635			107,468			1.48
Operates the largest railroad in the U.S.; also delivers freight to Canada and Mexico.
AirAsia Bhd. (1)		122,784,000			102,724			1.41
Low-fare airline based in Malaysia.
easyJet PLC (1)		8,267,000			55,023			.76
Low-fare airline serving Europe and a few locations in North Africa and the Middle East.
MSC Industrial Direct Co., Inc., Class A		880,000			52,923			.73
Distributor of industrial maintenance and repair products.
Other securities					335,614			4.61
					813,262			11.18
Telecommunication services  - 4.82%
América Móvil, SAB de CV, Series L (ADR)		1,825,600			103,073			1.42
Latin America's largest cellular communications provider.
Millicom International Cellular SA		578,269			50,182			.69
Provider of prepaid cellular telephone service to customers in Latin America, Africa and Asia.
PT XL Axiata Tbk (1)		74,338,000			46,081			.63
Indonesia-based mobile telecommunications services provider.
Other securities					151,658			2.08
					350,994			4.82
Energy  - 2.36%
Schlumberger Ltd.		1,152,400			89,127			1.22
A leading provider of services and technology to the petroleum industry.
Other securities					82,971			1.14
					172,098			2.36
Other - 1.82%
Other securities					132,601			1.82
Miscellaneous  -  4.65%
Other common stocks in initial period of acquisition					338,644			4.65
Total common stocks (cost: $5,551,415,000)					6,655,064			91.45
							Percent
				Value			of net
Preferred stocks  - 0.05%					(000	)	assets
Miscellaneous  -  0.05%
Other preferred stocks in initial period of acquisition					3,984			.05
Total preferred stocks (cost: $4,000,000)					3,984			.05
							Percent
				Value			of net
Rights  - 0.05%					(000	)	assets
Miscellaneous  -  0.05%
Other rights in initial period of acquisition					3,377			.05
Total rights (cost: $0)					3,377			.05
							Percent
				Value			of net
Convertible securities  - 0.64%					(000	)	assets
Other - 0.55%
Other securities					40,375			.55
Miscellaneous  -  0.09%
Other convertible securities in initial period of acquisition					6,342			.09
Total convertible securities (cost: $39,015,000)					46,717			.64
	Principal						Percent
	amount			Value			of net
Short-term securities  - 8.03%		(000	)		(000	)	assets
U.S. Treasury Bills 0.145%-0.185% due 12/2/2010-5/19/2011	$	95,800			95,746			1.31
Jupiter Securitization Co., LLC 0.24%-0.26% due 12/8/2010-2/8/2011 (2)		92,300			92,279			1.27
Freddie Mac 0.175%-0.18% due 12/2/2010-3/15/2011		85,600			85,565			1.18
Coca-Cola Co. 0.22% due 12/1-12/10/2010 (2)		67,400			67,399			.93
Straight-A Funding LLC 0.21%-0.25% due 12/16/2010-1/4/2011 (2)		59,000			58,988			.81
Federal Home Loan Bank 0.185% due 1/21/2011		50,000			49,989			.69
Bank of America Corp. 0.22%-0.25% due 12/1-12/30/2010		36,050			36,043			.49
Other securities					98,385			1.35
Total short-term securities (cost: $584,399,000)					584,394			8.03
Total investment securities (cost: $6,178,829,000)					7,293,536			100.22
Other assets less liabilities					(15,915	)		(.22	)
Net assets				$	7,277,621			100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. Some of these securities (with an aggregate value of $6,470,000, which represented .09% of the net assets of the fund) may be subject to legal or contractual restrictions on resale.

"Miscellaneous" and "Other securities" include securities which were valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $8,211,000, which represented .11% of the net assets of the fund.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares. The value of the fund's holdings in affiliated companies is included in "Other securities" under the respective industry sectors in the summary investment portfolio. Further details on these holdings and related transactions during the year ended November 30, 2010, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Value of affiliate at 11/30/2010 (000)
Exponent, Inc. (1) (3)		100,123		662,392		-		762,515	$	-	$	26,627
Acxiom Corp. (1) (4)		4,650,000		-		4,397,590		252,410		-		-
									$	-	$	26,627

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Security did not produce income during the last 12 months.

(2) Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $289,587,000, which represented 3.98% of the net assets of the fund.

(3) This security was an unaffiliated issuer in its initial period of acquisition at 11/30/2009; it was not publicly disclosed.

(4) Unaffiliated issuer at 11/30/2010.

The descriptions of the companies shown in the summary investment portfolio, which were obtained from published reports and other sources believed to be reliable, are supplemental and are not covered by the Report of Independent Registered Public Accounting Firm.

Key to abbreviation

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at November 30, 2010	(dollars in thousands)
Assets:
Investment securities, at value:
Unaffiliated issuers (cost: $6,158,286)	$	7,266,909
Affiliated issuer (cost: $20,543)		26,627	$	7,293,536
Cash denominated in currencies other than U.S. dollars (cost: $83)				83
Cash				51
Receivables for:
Sales of investments		14,345
Sales of fund's shares		4,284
Dividends and interest		11,362		29,991
				7,323,661
Liabilities:
Payables for:
Purchases of investments		28,443
Repurchases of fund's shares		7,114
Investment advisory services		2,503
Services provided by related parties		4,712
Trustees' deferred compensation		1,476
Non-U.S. taxes		985
Other		807		46,040
Net assets at November 30, 2010			$	7,277,621
Net assets consist of:
Capital paid in on shares of beneficial interest			$	6,645,728
Undistributed net investment income				48,121
Accumulated net realized loss				(529,995	)
Net unrealized appreciation				1,113,767
Net assets at November 30, 2010			$	7,277,621

	(dollars and shares in thousands, except per-share amounts)
Shares of beneficial interest issued and outstanding (no stated par value)  - unlimited shares authorized (301,420 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share
Class A	$	5,760,316		237,801	$	24.22
Class B		90,309		3,902		23.14
Class C		187,943		8,206		22.90
Class F-1		166,636		6,876		24.23
Class F-2		63,345		2,610		24.27
Class 529-A		135,175		5,609		24.10
Class 529-B		12,865		553		23.27
Class 529-C		43,916		1,890		23.24
Class 529-E		7,194		302		23.85
Class 529-F-1		7,047		292		24.09
Class R-1		21,823		933		23.39
Class R-2		117,407		5,002		23.47
Class R-3		149,522		6,265		23.87
Class R-4		110,842		4,597		24.11
Class R-5		133,378		5,480		24.34
Class R-6		269,903		11,102		24.31
See Notes to Financial Statements

Statement of operations
for the year ended November 30, 2010	(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $6,646)	$	110,236
Interest		6,972		$	117,208
Fees and expenses*:
Investment advisory services		29,207
Distribution services		19,032
Transfer agent services		10,067
Administrative services		2,450
Reports to shareholders		621
Registration statement and prospectus		453
Trustees' compensation		768
Auditing and legal		154
Custodian		943
State and local taxes		88
Other		581			64,364
Net investment income					52,844
Net realized gain and unrealized appreciation on investments and currency:
Net realized gain (loss) on:
Investments (net of non-U.S. taxes of $1,170; also includes $38,694 net gain from affiliate)		335,845
Currency transactions		(2,006	)		333,839
Net unrealized appreciation (depreciation) on:
Investments (net of non-U.S. taxes of $985)		358,245
Currency translations		(35	)		358,210
Net realized gain and unrealized appreciation on investments and currency					692,049
Net increase in net assets resulting from operations				$	744,893
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.
See Notes to Financial Statements
Statements of changes in net assets		(dollars in thousands)
	Year ended November 30
		2010			2009
Operations:
Net investment income	$	52,844		$	36,821
Net realized gain (loss) on investments and currency transactions		333,839			(590,658	)
Net unrealized appreciation on investments and currency translations		358,210			2,746,759
Net increase in net assets resulting from operations		744,893			2,192,922
Dividends paid to shareholders from net investment income		(35,024	)		(71,535	)
Net capital share transactions		(531,799	)		(132,994	)
Total increase in net assets		178,070			1,988,393
Net assets:
Beginning of year		7,099,551			5,111,158
End of year (including undistributed net investment income: $48,121 and $33,511, respectively)	$	7,277,621		$	7,099,551
See Notes to Financial Statements

Notes to financial statements

1.   Organization

The New Economy Fund (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 by investing in securities of companies that can benefit from innovation, exploit new technologies or provide products and services that meet the demands of an evolving global economy. Current income is a secondary consideration. In 2009, shareholders approved a proposal to reorganize the fund from a Maryland corporation to a Delaware statutory trust. The reorganization may be completed in 2011; however, the fund reserves the right to delay the implementation.

The fund has 16 share classes consisting of five retail share classes, five 529 college savings plan share classes and six retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F-1) can be used to save for college education. The six retirement plan share classes (R-1, R-2, R-3, R-4, R-5 and R-6) are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Classes B and 529-B*	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to Classes A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F-1 after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F-1, F-2 and 529-F-1	None	None	None
Classes R-1, R-2, R-3, R-4, R-5 and R-6	None	None	None

*Class B and 529-B shares of the fund are not available for purchase.

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

2.   Significant accounting policies

The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The fund follows the significant accounting policies described below, as well as the valuation policies described in the next section on valuation.

Security transactions and related investment income – Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognizedon an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations – Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders –Dividends and distributions paid to shareholders are recorded on the ex-dividend date.

Currency translation – Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, the effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.

3.   Valuation

The fund’s investments are reported at fair value as defined by accounting principles generally accepted in the United States of America. The fund generally determines its net asset value as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.

Methods and inputs – The fund uses the following methods and inputs to establish the fair value of its assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.

Equity securities are generally valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades.

Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are generally valued at prices obtained as of approximately 3:00 p.m. New York time from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.

Fixed-income class	Examples of standard inputs
All	Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”)
Corporate bonds & notes; convertible securities	Standard inputs and underlying equity of the issuer
Bonds & notes of governments & government agencies	Standard inputs and interest rate volatilities

Where the investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or not deemed to be representative), fixed-income securities will be valued in good faith at the mean quoted bid and asked prices that are reasonably and timely available (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type.

Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are generally valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates fair value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days.

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under guidelines adopted by authority of the fund's board of trustees. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly equity securities trading outside the U.S.) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various inputs may be reviewed in order to make a good faith determination of a security’s fair value. These inputs include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.

Classifications - The fund classifies its assets and liabilities into three levels based on the inputs used to value the assets or liabilities.Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.The following table presentsthe fund’s valuation levels as of November 30, 2010 (dollars in thousands):

Investment securities:	Level 1		Level 2		Level 3		Total
Common stocks:
Information technology	$	1,768,179	$	-	$	-	$	1,768,179
Financials		1,304,113		-		-		1,304,113
Consumer discretionary		929,784		-		6,470		936,254
Health care		838,919		-		-		838,919
Industrials		813,262		-		-		813,262
Telecommunication services		350,994		-		-		350,994
Energy		172,098		-		-		172,098
Other		132,601		-		-		132,601
Miscellaneous		338,381		-		263		338,644
Preferred stocks		3,984		-		-		3,984
Rights		1,899		1,478		-		3,377
Convertible securities		6,342		40,375		-		46,717
Short-term securities		-		584,394		-		584,394
Total	$	6,660,556	$	626,247	$	6,733	$	7,293,536

	Beginning value at 12/1/2009		Net unrealized appreciation*		Ending value at 11/30/2010
Investment securities	$	5,232	$	1,501	$	6,733
Net unrealized appreciation during the period on Level 3 investment securities held at November 30, 2010 (dollars in thousands)*:					$	1,501
*Net unrealized appreciation is included in the related amounts on investments in the statement of operations.

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 stocksand other securities held by the fund may decline due to market conditions and otherfactors, including those directly involving the issuers of securities held by the fund. The fund may besubject to additional risks because it invests in a more limited group of sectors and industries than the broad market.

Investing in growth-oriented stocks— Growth-oriented stocks may involve larger price swings and greater potential for loss than other types ofinvestments. These risks may be even greater in the case of smaller capitalization stocks.

Investing in small companies — Investing in smaller companies may pose additional risks. For example, it is often more difficult to value or dispose of small company stocks and more difficult to obtain information about smaller companies than about larger companies. In addition, the prices of these stocks may be more volatile than stocks of larger, more established companies.

Investing outside the United States — Securities of issuers domiciled outside the United States, or with significant operations outside the United States, may lose value because of political, social or economic developments in the country or region in which the issuer operates. These securities may also lose value due to changes in the exchange rate of thecountry’s currency against the U.S. dollar. Securities markets in certain countries may bemore volatile and/or less liquid than those in the United States. Investments outside theUnited States may also be subject to different settlement and accounting practices anddifferent regulatory, legal and reporting standards than those in the United States. Therisks of investing outside the United States may be heightened in connection withinvestments in developing countries.

Investing in developing countries — Investing in countries with developing economies and/or markets may involve risks in addition to and greater than those generally associated with investing in developed countries. For instance, developing countries may have less developed legal and accounting systems than those in developed countries. The governments of these countries may be more unstable and more likely to impose capital controls, nationalize a company or industry, place restrictions on foreign ownership and on withdrawing sale proceeds of securities from the country, and/or impose punitive taxes that could adversely affect the prices of securities. In addition, the economies of these countries may be dependent on relatively few industries that are more susceptible to local and global changes. Securities markets in these countries can also be relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid than securities issued in countries with more developed economies or markets. Because these markets may not be as mature, there may be increased settlement risks for transactions in local securities.

Management — The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses employed by the investment adviser in this process may not produce the desired results.  This could cause the fund to lose value or its results to lag relevant benchmarks or otherfunds with similar objectives.

5. Taxation and distributions                                                      

Federal income taxation – The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

As of and during the period ended November 30, 2010, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2006, by state tax authorities for tax years before 2005 and by tax authorities outside the U.S. for tax years before 2004.

Non-U.S. taxation – Dividend and interest income is recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a 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 gainsfor financial reporting purposes. These differences are due primarily to different treatment for items such as currency gains and losses; short-term capital gains and losses; deferred expenses; net capital losses; and non-U.S. taxes on capital gains.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.

During the year ended November 30, 2010, the fund reclassified $3,176,000 from undistributed net investment income to accumulated net realized loss and $34,000 from undistributed net investment income to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.

As of November 30, 2010, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:

(dollars in thousands)
Undistributed ordinary income	$	49,783
Post-October currency loss deferrals (realized during the period November 1, 2010, through November 30, 2010)*		(236	)
Capital loss carryforward expiring 2017†		(508,680	)
Post-October capital loss deferrals (realized during the period November 1, 2010, through November 30, 2010)*		(21,320	)
Gross unrealized appreciation on investment securities		1,411,257
Gross unrealized depreciation on investment securities		(296,495	)
Net unrealized appreciation on investment securities		1,114,762
Cost of investment securities		6,178,774
*These deferrals are considered incurred in the subsequent year. †Reflects the utilization of capital loss carryforwards of $356,110,000. The capital loss carryforward will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains.

Ordinary income distributions paid to shareholders from net investment incomewere as follows (dollars in thousands):

	Year ended November 30
Share class	2010		2009
Class A	$	29,212	$	63,512
Class B		-		172
Class C		65		496
Class F-1		1,162		791
Class F-2		470		49
Class 529-A		584		1,067
Class 529-B		-		33
Class 529-C		-		89
Class 529-E		18		43
Class 529-F-1		44		50
Class R-1		22		43
Class R-2		-		260
Class R-3		456		879
Class R-4		516		813
Class R-5		1,336		3,238
Class R-6*		1,139		-
Total	$	35,024	$	71,535
*Class R-6 was offered beginning May 1, 2009.

6. Fees and transactions with related parties

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

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a series of decreasing annual rates beginning with 0.580% on the first $500 million of daily net assets and decreasing to 0.345% on such assets in excess of $27 billion. For the year ended November 30, 2010, the investment advisory services fee was $29,207,000, which was equivalent to an annualized rate of 0.411% of average dailynet assets.

Class-specific fees and expenses – Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services – The fund has adopted plans of distribution for all share classes, except Classes F-2, R-5 and R-6. Under the plans, the board of trustees approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of trustees has limited the amounts that may be paid to less than the maximum allowed by the plans.All share classes with a plan may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Classes A and 529-A, the board of trustees has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25%is not exceeded. As of November 30, 2010, there were no unreimbursed expenses subject to reimbursement for Classes A or 529-A.

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

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

Administrative services – The fund has an administrative services agreement with CRMC for all share classes, except Classes A and B, to provide certain services, including transfer agent and recordkeeping services; coordinating, monitoring, assisting and overseeing third-party service providers; and educating advisers and shareholders about the impact of market-related events, tax laws affecting investments, retirement plan restrictions, exchange limitations and other related matters. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services.

Each 529 share class is subject to an additional administrative services fee payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan.The quarterly fee is based on a series of decreasing annual rates beginning with 0.10% on the first $30 billion of the net assets invested in Class 529 shares of the American Funds and decreasing to 0.06% on such assets between $120 billion and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 shares of the American Funds for the last month of the prior calendar quarter. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the year ended November 30, 2010, were as follows (dollars in thousands):

Share class					Administrative services
	Distribution services		Transfer agent services		CRMC administrative services		Transfer agent services		Commonwealth of Virginia administrative services
Class A	$	12,966	$	9,886	Not applicable		Not applicable		Not applicable
Class B		1,011		181	Not applicable		Not applicable		Not applicable
Class C		1,846	Included in administrative services		$	278	$	61	Not applicable
Class F-1		435				261		25	Not applicable
Class F-2		Not applicable				74		4	Not applicable
Class 529-A		234				154		29	$	121
Class 529-B		135				18		6		14
Class 529-C		399				51		16		40
Class 529-E		32				8		1		6
Class 529-F-1		-				8		2		7
Class R-1		194				25		8	Not applicable
Class R-2		843				168		352	Not applicable
Class R-3		692				196		112	Not applicable
Class R-4		245				146		9	Not applicable
Class R-5		Not applicable				140		4	Not applicable
Class R-6		Not applicable				105		1	Not applicable
Total	$	19,032	$	10,067	$	1,632	$	630	$	188

Trustees’ deferred compensation – Since the adoption of the deferred compensation plan in 1993, trustees who are unaffiliated with CRMCmay elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $768,000, shown on the accompanying financial statements, includes $571,000 in current fees (either paid in cash or deferred) and a net increase of $197,000 in the value of the deferred amounts.

Affiliated officers and trustees – Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or trustees received any compensation directly from the fund.

7. Capital share transactions

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

Share class	Sales(*)				Reinvestments of dividends and distributions				Repurchases(*)						Net (decrease) increase
	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
Year ended November 30, 2010
Class A	$	520,542		22,886	$	27,842		1,229	$	(1,088,426	)		(48,430	)	$	(540,042	)		(24,315	)
Class B		6,537		299		-		-		(42,670	)		(1,972	)		(36,133	)		(1,673	)
Class C		39,367		1,820		62		3		(50,578	)		(2,374	)		(11,149	)		(551	)
Class F-1		70,124		3,093		963		42		(106,202	)		(4,789	)		(35,115	)		(1,654	)
Class F-2		29,736		1,321		373		17		(26,252	)		(1,174	)		3,857			164
Class 529-A		24,867		1,101		584		26		(12,687	)		(565	)		12,764			562
Class 529-B		852		39		-		-		(3,450	)		(158	)		(2,598	)		(119	)
Class 529-C		9,008		411		-		-		(5,388	)		(248	)		3,620			163
Class 529-E		1,409		62		18		1		(807	)		(36	)		620			27
Class 529-F-1		1,752		78		44		2		(1,464	)		(66	)		332			14
Class R-1		9,410		428		22		1		(5,362	)		(248	)		4,070			181
Class R-2		35,717		1,619		-		-		(37,073	)		(1,690	)		(1,356	)		(71	)
Class R-3		62,042		2,775		456		20		(53,517	)		(2,411	)		8,981			384
Class R-4		47,601		2,102		516		23		(32,598	)		(1,437	)		15,519			688
Class R-5		34,077		1,508		1,334		59		(78,946	)		(3,586	)		(43,535	)		(2,019	)
Class R-6		124,878		5,665		1,139		50		(37,651	)		(1,663	)		88,366			4,052
Total net increase
(decrease)	$	1,017,919		45,207	$	33,353		1,473	$	(1,583,071	)		(70,847	)	$	(531,799	)		(24,167	)
Year ended November 30, 2009
Class A	$	731,159		40,531	$	60,575		4,001	$	(1,045,409	)		(60,724	)	$	(253,675	)		(16,192	)
Class B		18,436		1,075		167		11		(40,314	)		(2,412	)		(21,711	)		(1,326	)
Class C		57,146		3,267		478		33		(39,225	)		(2,428	)		18,399			872
Class F-1		106,969		5,619		688		45		(155,000	)		(9,610	)		(47,343	)		(3,946	)
Class F-2		50,580		2,614		39		3		(6,165	)		(329	)		44,454			2,288
Class 529-A		19,211		1,052		1,067		71		(10,441	)		(596	)		9,837			527
Class 529-B		1,367		78		33		2		(1,182	)		(68	)		218			12
Class 529-C		7,561		421		89		6		(4,500	)		(265	)		3,150			162
Class 529-E		1,260		71		43		3		(794	)		(47	)		509			27
Class 529-F-1		2,606		141		49		3		(702	)		(41	)		1,953			103
Class R-1		5,237		290		43		3		(3,297	)		(197	)		1,983			96
Class R-2		32,254		1,873		260		17		(24,662	)		(1,422	)		7,852			468
Class R-3		46,623		2,561		879		59		(34,068	)		(1,913	)		13,434			707
Class R-4		31,805		1,797		813		54		(21,230	)		(1,202	)		11,388			649
Class R-5		91,779		5,217		3,166		209		(144,473	)		(8,199	)		(49,528	)		(2,773	)
Class R-6(†)		129,948		7,242		-		-		(3,862	)		(192	)		126,086			7,050
Total net increase
(decrease)	$	1,333,941		73,849	$	68,389		4,520	$	(1,535,324	)		(89,645	)	$	(132,994	)		(11,276	)
(*)Includes exchanges between share classes of the fund.
(†)Class R-6 was offered beginning May 1, 2009.

8. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $2,760,466,000 and $3,378,986,000, respectively, during the year ended November 30, 2010.

Financial highlights(1)

			Income (loss) from investment operations(2)									Dividends and distributions
	Net asset value, beginning of period		Net investment income (loss)			Net gains (losses) on securities (both realized and unrealized)			Total from investment operations			Dividends (from net investment income)			Distributions (from capital gains)			Total dividends and distributions			Net asset value, end of period		Total  return(3) (4)			Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers			Ratio of expenses to average net assets after reimbursements/ waivers(4)			Ratio of net income (loss) to average net assets(4)
Class A:
Year ended 11/30/2010	$	21.87	$	.18		$	2.28		$	2.46		$	(.11	)	$	-		$	(.11	)	$	24.22		11.34	%	$	5,760		.86	%		.86	%		.78	%
Year ended 11/30/2009		15.22		.12			6.76			6.88			(.23	)		-			(.23	)		21.87		45.88			5,733		.95			.94			.67
Year ended 11/30/2008		30.09		.29			(12.57	)		(12.28	)		(.23	)		(2.36	)		(2.59	)		15.22		(44.67	)		4,237		.83			.79			1.24
Year ended 11/30/2007		26.41		.25			3.62			3.87			(.19	)		-			(.19	)		30.09		14.75			8,394		.80			.76			.87
Year ended 11/30/2006		22.98		.20			3.38			3.58			(.15	)		-			(.15	)		26.41		15.65			7,654		.82			.78			.83
Class B:
Year ended 11/30/2010		20.95		-	(5)		2.19			2.19			-			-			-			23.14		10.45			90		1.64			1.64			-	(6)
Year ended 11/30/2009		14.50		(.02	)		6.50			6.48			(.03	)		-			(.03	)		20.95		44.73			117		1.72			1.71			(.09	)
Year ended 11/30/2008		28.80		.10			(12.00	)		(11.90	)		(.04	)		(2.36	)		(2.40	)		14.50		(45.08	)		100		1.60			1.56			.47
Year ended 11/30/2007		25.30		.03			3.48			3.51			(.01	)		-			(.01	)		28.80		13.89			234		1.56			1.52			.11
Year ended 11/30/2006		22.05		.01			3.24			3.25			-			-			-			25.30		14.74			207		1.59			1.55			.06
Class C:
Year ended 11/30/2010		20.75		-	(5)		2.16			2.16			(.01	)		-			(.01	)		22.90		10.45			188		1.64			1.64			.01
Year ended 11/30/2009		14.39		(.02	)		6.44			6.42			(.06	)		-			(.06	)		20.75		44.81			182		1.69			1.68			(.09	)
Year ended 11/30/2008		28.63		.10			(11.91	)		(11.81	)		(.07	)		(2.36	)		(2.43	)		14.39		(45.09	)		113		1.62			1.58			.46
Year ended 11/30/2007		25.18		.02			3.46			3.48			(.03	)		-			(.03	)		28.63		13.84			215		1.61			1.57			.06
Year ended 11/30/2006		21.96		-	(5)		3.23			3.23			(.01	)		-			(.01	)		25.18		14.70			136		1.64			1.60			.01
Class F-1:
Year ended 11/30/2010		21.90		.18			2.28			2.46			(.13	)		-			(.13	)		24.23		11.32			167		.86			.86			.77
Year ended 11/30/2009		15.11		.12			6.77			6.89			(.10	)		-			(.10	)		21.90		45.93			187		.91			.91			.66
Year ended 11/30/2008		29.91		.28			(12.48	)		(12.20	)		(.24	)		(2.36	)		(2.60	)		15.11		(44.68	)		188		.85			.81			1.22
Year ended 11/30/2007		26.28		.25			3.60			3.85			(.22	)		-			(.22	)		29.91		14.76			515		.80			.76			.88
Year ended 11/30/2006		22.88		.19			3.37			3.56			(.16	)		-			(.16	)		26.28		15.63			248		.83			.79			.81
Class F-2:
Year ended 11/30/2010		21.93		.24			2.29			2.53			(.19	)		-			(.19	)		24.27		11.63			63		.59			.59			1.06
Year ended 11/30/2009		15.24		.14			6.81			6.95			(.26	)		-			(.26	)		21.93		46.33			54		.62			.61			.69
Period from 8/1/2008 to 11/30/2008		22.62		.07			(7.45	)		(7.38	)		-			-			-			15.24		(32.63	)		2		.21			.19			.37
Class 529-A:
Year ended 11/30/2010		21.77		.17			2.27			2.44			(.11	)		-			(.11	)		24.10		11.27			135		.91			.91			.75
Year ended 11/30/2009		15.16		.12			6.72			6.84			(.23	)		-			(.23	)		21.77		45.84			110		.97			.97			.64
Year ended 11/30/2008		29.98		.28			(12.52	)		(12.24	)		(.22	)		(2.36	)		(2.58	)		15.16		(44.68	)		69		.87			.83			1.22
Year ended 11/30/2007		26.34		.23			3.61			3.84			(.20	)		-			(.20	)		29.98		14.66			109		.86			.82			.81
Year ended 11/30/2006		22.93		.19			3.37			3.56			(.15	)		-			(.15	)		26.34		15.61			75		.85			.81			.80
Class 529-B:
Year ended 11/30/2010		21.09		(.02	)		2.20			2.18			-			-			-			23.27		10.34			13		1.74			1.74			(.10	)
Year ended 11/30/2009		14.63		(.03	)		6.54			6.51			(.05	)		-			(.05	)		21.09		44.65			14		1.80			1.80			(.18	)
Year ended 11/30/2008		29.05		.08			(12.12	)		(12.04	)		(.02	)		(2.36	)		(2.38	)		14.63		(45.14	)		10		1.71			1.66			.38
Year ended 11/30/2007		25.54		(.01	)		3.52			3.51			-	(5)		-			-	(5)		29.05		13.75			17		1.69			1.65			(.02	)
Year ended 11/30/2006		22.28		(.02	)		3.28			3.26			-			-			-			25.54		14.63			13		1.72			1.68			(.07	)
Class 529-C:
Year ended 11/30/2010		21.06		(.01	)		2.19			2.18			-			-			-			23.24		10.35			44		1.72			1.72			(.07	)
Year ended 11/30/2009		14.62		(.03	)		6.53			6.50			(.06	)		-			(.06	)		21.06		44.71			36		1.79			1.79			(.18	)
Year ended 11/30/2008		29.04		.09			(12.10	)		(12.01	)		(.05	)		(2.36	)		(2.41	)		14.62		(45.15	)		23		1.70			1.66			.39
Year ended 11/30/2007		25.55		-	(5)		3.51			3.51			(.02	)		-			(.02	)		29.04		13.77			36		1.68			1.64			(.02	)
Year ended 11/30/2006		22.30		(.01	)		3.26			3.25			-			-			-			25.55		14.57			24		1.71			1.67			(.06	)
Class 529-E:
Year ended 11/30/2010		21.57		.10			2.24			2.34			(.06	)		-			(.06	)		23.85		10.93			7		1.21			1.21			.44
Year ended 11/30/2009		15.01		.06			6.67			6.73			(.17	)		-			(.17	)		21.57		45.45			6		1.28			1.27			.34
Year ended 11/30/2008		29.71		.20			(12.39	)		(12.19	)		(.15	)		(2.36	)		(2.51	)		15.01		(44.86	)		4		1.19			1.15			.90
Year ended 11/30/2007		26.11		.14			3.58			3.72			(.12	)		-			(.12	)		29.71		14.32			6		1.17			1.13			.50
Year ended 11/30/2006		22.75		.11			3.34			3.45			(.09	)		-			(.09	)		26.11		15.22			4		1.18			1.14			.47
Class 529-F-1:
Year ended 11/30/2010	$	21.77	$	.21		$	2.27		$	2.48		$	(.16	)	$	-		$	(.16	)	$	24.09		11.47	%	$	7		.71	%		.71	%		.94	%
Year ended 11/30/2009		15.17		.15			6.73			6.88			(.28	)		-			(.28	)		21.77		46.18			6		.78			.77			.79
Year ended 11/30/2008		30.00		.32			(12.52	)		(12.20	)		(.27	)		(2.36	)		(2.63	)		15.17		(44.58	)		3		.69			.65			1.41
Year ended 11/30/2007		26.34		.28			3.62			3.90			(.24	)		-			(.24	)		30.00		14.92			3		.67			.63			.99
Year ended 11/30/2006		22.92		.23			3.36			3.59			(.17	)		-			(.17	)		26.34		15.77			2		.68			.64			.97
Class R-1:
Year ended 11/30/2010		21.20		.01			2.21			2.22			(.03	)		-			(.03	)		23.39		10.46			22		1.62			1.62			.03
Year ended 11/30/2009		14.71		(.01	)		6.57			6.56			(.07	)		-			(.07	)		21.20		44.78			16		1.68			1.68			(.08	)
Year ended 11/30/2008		29.22		.11			(12.18	)		(12.07	)		(.08	)		(2.36	)		(2.44	)		14.71		(45.08	)		10		1.61			1.57			.50
Year ended 11/30/2007		25.74		.01			3.54			3.55			(.07	)		-			(.07	)		29.22		13.84			15		1.61			1.57			.04
Year ended 11/30/2006		22.47		-	(5)		3.30			3.30			(.03	)		-			(.03	)		25.74		14.72			8		1.64			1.58			.01
Class R-2:
Year ended 11/30/2010		21.26		-	(5)		2.21			2.21			-			-			-			23.47		10.40			118		1.67			1.67			(.01	)
Year ended 11/30/2009		14.76		(.03	)		6.59			6.56			(.06	)		-			(.06	)		21.26		44.58			108		1.81			1.80			(.19	)
Year ended 11/30/2008		29.30		.08			(12.22	)		(12.14	)		(.04	)		(2.36	)		(2.40	)		14.76		(45.13	)		68		1.72			1.68			.37
Year ended 11/30/2007		25.77		.02			3.54			3.56			(.03	)		-			(.03	)		29.30		13.83			113		1.67			1.56			.07
Year ended 11/30/2006		22.47		.01			3.30			3.31			(.01	)		-			(.01	)		25.77		14.74			85		1.81			1.58			.04
Class R-3:
Year ended 11/30/2010		21.58		.11			2.25			2.36			(.07	)		-			(.07	)		23.87		10.98			150		1.18			1.18			.47
Year ended 11/30/2009		15.01		.07			6.67			6.74			(.17	)		-			(.17	)		21.58		45.39			127		1.25			1.24			.36
Year ended 11/30/2008		29.72		.21			(12.40	)		(12.19	)		(.16	)		(2.36	)		(2.52	)		15.01		(44.83	)		78		1.17			1.13			.93
Year ended 11/30/2007		26.11		.14			3.59			3.73			(.12	)		-			(.12	)		29.72		14.34			123		1.17			1.13			.50
Year ended 11/30/2006		22.75		.10			3.34			3.44			(.08	)		-			(.08	)		26.11		15.18			76		1.22			1.18			.44
Class R-4:
Year ended 11/30/2010		21.79		.18			2.27			2.45			(.13	)		-			(.13	)		24.11		11.28			111		.86			.86			.79
Year ended 11/30/2009		15.17		.13			6.73			6.86			(.24	)		-			(.24	)		21.79		45.97			85		.90			.90			.71
Year ended 11/30/2008		30.01		.28			(12.52	)		(12.24	)		(.24	)		(2.36	)		(2.60	)		15.17		(44.67	)		49		.84			.80			1.25
Year ended 11/30/2007		26.34		.24			3.62			3.86			(.19	)		-			(.19	)		30.01		14.74			73		.83			.79			.83
Year ended 11/30/2006		22.94		.19			3.37			3.56			(.16	)		-			(.16	)		26.34		15.61			40		.86			.82			.79
Class R-5:
Year ended 11/30/2010		21.97		.24			2.31			2.55			(.18	)		-			(.18	)		24.34		11.65			133		.56			.56			1.08
Year ended 11/30/2009		15.31		.17			6.80			6.97			(.31	)		-			(.31	)		21.97		46.45			165		.59			.59			.99
Year ended 11/30/2008		30.24		.36			(12.63	)		(12.27	)		(.30	)		(2.36	)		(2.66	)		15.31		(44.50	)		157		.53			.49			1.58
Year ended 11/30/2007		26.54		.32			3.64			3.96			(.26	)		-			(.26	)		30.24		15.06			181		.54			.50			1.12
Year ended 11/30/2006		23.10		.27			3.38			3.65			(.21	)		-			(.21	)		26.54		15.94			109		.55			.51			1.10
Class R-6:
Year ended 11/30/2010		21.92		.27			2.28			2.55			(.16	)		-			(.16	)		24.31		11.68			270		.51			.51			1.17
Period from 5/1/2009 to 11/30/2009		17.22		.13			4.57			4.70			-			-			-			21.92		27.29			154		.54	(7)		.54	(7)		1.06	(7)

	Year ended November 30
	2010			2009			2008			2007			2006
Portfolio turnover rate for all share classes		47	%		51	%		52	%		40	%		41	%

(1)Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2)Based on average shares outstanding.

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

(4)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes.

(5)Amount less than $.01.

(6)Amount less than .01%.

(7)Annualized.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of The New Economy Fund:

In our opinion, the accompanying statement of assets and liabilities, including the summary investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The New Economy Fund (the “Fund”)at November 30, 2010, and the results of its operations, the changes in its net assets and its financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities owned at November 30, 2010 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The financial statements of the Fund as of November 30, 2009 and for the year then ended, including financial highlights for each of the periods in the four years then ended, were audited by other auditors whose report dated January 13, 2010 expressed an unqualified opinion on those statements.

PricewaterhouseCoopers LLP

Los Angeles, California

January 12, 2011