American Funds Money Market Fund®
[photo of the training wheel attached to a bicycle]
Semi-annual report for the six months ended March 31, 2011
American Funds Money Market Fund seeks to provide you with a way to earn income on your cash reserves while preserving capital and maintaining liquidity. The fund is a money market fund that seeks to preserve the value of your investment at $1.00 per share.
This fund is one of the 33 American Funds. American Funds is one of the nation’s largest mutual fund families. For 80 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.
Figures shown in this report are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Investment returns will vary. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank. For current information and month-end results, visit americanfunds.com.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for the period ended March 31, 2011.
| | | | Lifetime |
| | 1 year | 5 years | (since 5/1/2009) |
| | | | |
| Class A shares | 0.00% | — | 0.00% |
The total annual fund operating expense ratio was 0.39% for Class A shares as of the most recent fiscal year-end.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Although the fund has 12b-1 plans for some share classes, the fund is currently suspending certain 12b-1 payments in this low interest rate environment. Should payments commence, the fund’s investment results will be negatively affected. The fund’s investment adviser has reimbursed certain expenses. These reimbursements may be adjusted or discontinued by the investment adviser at any time, subject to any restrictions in the fund’s prospectus. Fund results shown reflect the reimbursements. See the fund’s prospectus or the Financial Highlights table on pages 20 to 23 for details.
The fund’s annualized seven-day yield for Class A shares as of April 30, 2011, calculated in accordance with the Securities and Exchange Commission formula, was 0.00% (–0.29% without the reimbursement). The annualized seven-day SEC yield more accurately reflects the fund’s current earnings than does the fund’s return.
The return of principal for money market funds is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying holdings in the fund. Money market issuer ratings, which typically range from A-1/P-1 (highest) to A-3/P-3 (lowest) are assigned by credit rating agencies such as Moody’s, Standard & Poor’s and/or Fitch as an indication of an issuer’s creditworthiness. See the prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.
Fellow shareholders:
We welcome the opportunity to bring you American Funds Money Market Fund’s semi-annual report for the six months ended March 31, 2011. At the close of the fund’s previous fiscal year on September 30, 2010, the U.S. economy was slowly gaining strength while short-term rates remained near historically low levels. Those conditions continued through the first half of the current fiscal year.
In this environment, the fund maintained a constant net asset value of $1.00 per share, consistent with its goal of preserving shareholder capital. The fund’s annualized seven-day SEC yield was 0.00% as of March 31, 2011.
The economy and the Federal Reserve
The nation’s economy continued to recover during the first half of the fiscal year, albeit at a muted pace. Real gross domestic product climbed 3.1% for the fourth quarter of 2010, and a number of factors suggested that conditions were steadily improving. Manufacturing output rose four consecutive months, inching up 0.7% in March, and industrial production advanced. Job creation improved slightly, although the jobless rate remained relatively high at 8.8% at the end of March. There was little change in the housing market, which remained weak. By the end of the period, political turmoil in the Middle East, natural disasters in Japan and concerns about emerging inflation left anxious investors questioning the strength of the recovery.
The seasonally adjusted overall rate of inflation, as measured by the Consumer Price Index, increased 0.5% in both February and March, driven primarily by volatile food and gasoline prices. However, the seasonally adjusted core rate of inflation — which excludes food and energy prices and is the Federal Reserve’s primary gauge of inflation — rose only 0.1% in March. The core inflation rate for the full six months was 0.7%, while the overall rate of inflation was 2.3%. The Fed left its benchmark federal funds rate unchanged between zero and 0.25%. This lending rate has historically had a significant influence on yields for short-term debt instruments.
[Begin Sidebar]
| Your fund’s annualized seven-day SEC yield as of March 31, 2011* | | | |
| | | | |
| American Funds Money Market Fund | | | 0.00 | % |
(reflecting a fee reimbursement, –0.24% without the reimbursement) | | | | |
| | | | | |
| *The annualized seven-day SEC yield more accurately reflects the fund’s current earnings than its 30-day yield or total return. | | | | |
[End Sidebar]
The fund’s objective
Protecting our shareholders’ principal, while seeking to provide a reasonable income return, is our foremost objective. Because American Funds Money Market Fund seeks to provide stability and liquidity, it can play a valuable role in your overall investment plan. The market turbulence of the past several years underscores the importance of maintaining a balanced portfolio that includes a money market fund.
We thank you for making American Funds Money Market Fund part of your investment portfolio. As always, we appreciate the confidence you have placed in us and look forward to reporting back to you at the end of the fiscal year.
Cordially,
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Vice Chairman of the Board
/s/ Kristine M. Nishiyama
Kristine M. Nishiyama
President
May 11, 2011
For current information about the fund, visit americanfunds.com.
Notes to financial statements
unaudited
American Funds Money Market Fund (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks to provide income on cash reserves while preserving capital and maintaining liquidity.
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 | None | None | 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, 529-B, C and 529-C 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. Interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Class allocations – Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. 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 to shareholders – Dividends paid to shareholders are declared daily after the determination of the fund’s net investment income and are paid to shareholders monthly.
The fund’s investments are reported at fair value as defined by accounting principles generally accepted in the United States of America. The fund generally determines the net asset value of each share class as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open. The fund values its shares in accordance with Securities and Exchange Commission ("SEC") rules, using the penny-rounding method, which permits the fund to maintain each share class at a constant net asset value of $1.00 per share.
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.
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. 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.
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 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. 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. At March 31, 2011, all of the fund’s investment securities were classified as Level 2.
Investing in the fund may involve certain risks including, but not limited to, those described below.
Investing in money market securities – The value and liquidity of the securities held by the fund may be affected by changing interest rates, changes in the credit quality of the issuers, changes in credit ratings of the securities and general market conditions. For example, the values of these securities may decline when interest rates rise and increase when interest rates fall.
Credit and liquidity support – Changes in the credit quality of banks and financial institutions providing credit and liquidity support features with respect to securities held by the fund could cause the values of these securities to decline.
Investing outside the U.S. – Securities of issuers domiciled outside the U.S., or with significant operations outside the U.S., may lose value because of political, social or economic developments in the country or region in which the issuer operates.
Management – The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the techniques and risk analyses employed by the investment adviser in this process may not produce the desired results.
| 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 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 March 31, 2011, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.
The fund is not subject to examination by U.S. federal and state tax authorities for tax years before 2009, the year the fund commenced operations.
Distributions – Distributions paid to shareholders are based on net investment income determined on a tax basis, which may differ from net investment income for financial reporting purposes. As of March 31, 2011, there were no material differences between book and tax reporting. The fiscal year in which amounts are distributed may differ from the year in which the net investment income is recorded by the fund for financial reporting purposes.
The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of September 30, 2010, the fund had no tax basis undistributed ordinary income.
As of March 31, 2011, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows:
| (dollars in thousands) | |
| Gross unrealized appreciation on investment securities | | $ | 852 | |
| Gross unrealized depreciation on investment securities | | | (85 | ) |
| Net unrealized appreciation on investment securities | | | 767 | |
| Cost of investment securities | | | 18,742,605 | |
| 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 0.295% on the first $1 billion of daily net assets and decreasing to 0.256% on such assets in excess of $34 billion. For the six months ended March 31, 2011, the investment advisory services fee was $26,447,000, which was equivalent to an annualized rate of 0.269% of average daily net assets.
Class-specific fees and expenses – Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:
Distribution services – The fund has 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 0.15% 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 a portion (0.15% for Class A, B, 529-A and 529-B shares and 0.25% for all other share classes) of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.
| Share class | Currently approved limits | Plan limits |
| Class A | 0.15% | 0.15% |
| Class 529-A | 0.15 | 0.50 |
| Classes B and 529-B | 0.90 | 0.90 |
| Classes C, 529-C and R-1 | 1.00 | 1.00 |
| Class R-2 | 0.75 | 1.00 |
| Classes 529-E and R-3 | 0.50 | 0.75 |
| Classes F-1, 529-F-1 and R-4 | 0.25 | 0.50 |
Transfer agent services – The fund has a transfer agent agreement with AFS for Classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC as described below.
Administrative services – The fund has an administrative services agreement with CRMC for all share classes, except Classes A and B, to provide certain services, including transfer agent and recordkeeping services; coordinating, monitoring, assisting and overseeing third-party service providers; and educating advisers and shareholders about the impact of market-related events, tax laws affecting investments, retirement plan restrictions, exchange limitations and other related matters. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services.
Each 529 share class is subject to an additional administrative services fee payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan. The quarterly fee is based on a series of decreasing annual rates beginning with 0.10% on the first $30 billion of the net assets invested in Class 529 shares of the American Funds and decreasing to 0.06% on such assets between $120 billion and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 shares of the American Funds for the last month of the prior calendar quarter. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.
Expenses under the agreements described above for the six months ended March 31, 2011, were as follows (dollars in thousands):
| | | | | | | | | Administrative services | |
| Share class | | Distribution services | | | Transfer agent services | | | CRMC administrative services | | | Transfer agent services | | | Commonwealth of Virginia administrative services | |
| Class A | | $ | - | | | $ | 7,266 | | | Not applicable | | | Not applicable | | | Not applicable | |
| Class B | | | 1,192 | | | | 149 | | | Not applicable | | | Not applicable | | | Not applicable | |
| Class C | | | - | | | Included in administrative services | | | $ | 231 | | | $ | 61 | | | Not applicable | |
| Class F-1 | | | 39 | | | | | | | | 22 | | | | 1 | | | Not applicable | |
| Class F-2 | | Not applicable | | | | | 4 | | | | - | | | Not applicable | |
| Class 529-A | | | - | | | | | | | | 319 | | | | 82 | | | $ | 324 | |
| Class 529-B | | | 148 | | | | | | | | 19 | | | | 6 | | | | 20 | |
| Class 529-C | | | - | | | | | | | | 68 | | | | 21 | | | | 69 | |
| Class 529-E | | | - | | | | | | | | 19 | | | | 5 | | | | 19 | |
| Class 529-F-1 | | | - | | | | | | | | 16 | | | | 4 | | | | 16 | |
| Class R-1 | | | - | | | | | | | | 47 | | | | 14 | | | Not applicable | |
| Class R-2 | | | - | | | | | | | | 974 | | | | 1,576 | | | Not applicable | |
| Class R-3 | | | - | | | | | | | | 823 | | | | 497 | | | Not applicable | |
| Class R-4 | | | - | | | | | | | | 504 | | | | 28 | | | Not applicable | |
| Class R-5 | | Not applicable | | | | | 151 | | | | 3 | | | Not applicable | |
| Class R-6 | | Not applicable | | | | | 15 | | | | - | * | | Not applicable | |
| Total | | $ | 1,379 | | | $ | 7,415 | | | $ | 3,212 | | | $ | 2,298 | | | $ | 448 | |
| | | | | | | | | | | | | | | | | | | | | |
| *Amount less than one thousand. | | | | | | | | | | | | | | | | | |
Reimbursements of fees and expenses – Due to lower short-term interest rates, CRMC agreed to pay a portion of fees and expenses. For the six months ended March 31, 2011, the total fees paid by CRMC were as follows:
| Share class | | (dollars in thousands) | |
| Class A | | $ | 15,402 | |
| Class B | | | 1,519 | |
| Class C | | | 521 | |
| Class F-1 | | | 79 | |
| Class F-2 | | | 10 | |
| Class 529-A | | | 1,092 | |
| Class 529-B | | | 215 | |
| Class 529-C | | | 236 | |
| Class 529-E | | | 64 | |
| Class 529-F-1 | | | 55 | |
| Class R-1 | | | 101 | |
| Class R-2 | | | 3,272 | |
| Class R-3 | | | 1,926 | |
| Class R-4 | | | 905 | |
| Class R-5 | | | 320 | |
| Class R-6 | | | 48 | |
| Total | | $ | 25,765 | |
Trustees’ deferred compensation – Trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund. These amounts represent general, unsecured liabilities of the fund and vary according to the total return of the fund. Trustees’ compensation, shown on the accompanying financial statements, includes the current fees (either paid in cash or deferred) and the net increase or decrease 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):
| | | Sales* | | | Repurchases* | | | Net (decrease) increase | |
| Share class | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | |
| Six months ended March 31, 2011 | | | | | | | | | | | | | | | | | | |
| Class A | | $ | 8,026,329 | | | | 8,026,329 | | | $ | (10,029,613 | ) | | | (10,029,613 | ) | | $ | (2,003,284 | ) | | | (2,003,284 | ) |
| Class B | | | 61,599 | | | | 61,599 | | | | (155,226 | ) | | | (155,226 | ) | | | (93,627 | ) | | | (93,627 | ) |
| Class C | | | 184,862 | | | | 184,862 | | | | (260,161 | ) | | | (260,161 | ) | | | (75,299 | ) | | | (75,299 | ) |
| Class F-1 | | | 38,479 | | | | 38,479 | | | | (46,350 | ) | | | (46,350 | ) | | | (7,871 | ) | | | (7,871 | ) |
| Class F-2 | | | 10,022 | | | | 10,022 | | | | (7,584 | ) | | | (7,584 | ) | | | 2,438 | | | | 2,438 | |
| Class 529-A | | | 172,901 | | | | 172,901 | | | | (179,722 | ) | | | (179,722 | ) | | | (6,821 | ) | | | (6,821 | ) |
| Class 529-B | | | 7,353 | | | | 7,353 | | | | (13,480 | ) | | | (13,480 | ) | | | (6,127 | ) | | | (6,127 | ) |
| Class 529-C | | | 32,176 | | | | 32,176 | | | | (38,522 | ) | | | (38,522 | ) | | | (6,346 | ) | | | (6,346 | ) |
| Class 529-E | | | 9,289 | | | | 9,289 | | | | (10,289 | ) | | | (10,289 | ) | | | (1,000 | ) | | | (1,000 | ) |
| Class 529-F-1 | | | 12,618 | | | | 12,618 | | | | (9,684 | ) | | | (9,684 | ) | | | 2,934 | | | | 2,934 | |
| Class R-1 | | | 48,190 | | | | 48,190 | | | | (52,035 | ) | | | (52,035 | ) | | | (3,845 | ) | | | (3,845 | ) |
| Class R-2 | | | 535,118 | | | | 535,118 | | | | (614,952 | ) | | | (614,952 | ) | | | (79,834 | ) | | | (79,834 | ) |
| Class R-3 | | | 510,226 | | | | 510,226 | | | | (590,277 | ) | | | (590,277 | ) | | | (80,051 | ) | | | (80,051 | ) |
| Class R-4 | | | 323,457 | | | | 323,457 | | | | (374,262 | ) | | | (374,262 | ) | | | (50,805 | ) | | | (50,805 | ) |
| Class R-5 | | | 138,576 | | | | 138,576 | | | | (178,505 | ) | | | (178,505 | ) | | | (39,929 | ) | | | (39,929 | ) |
| Class R-6 | | | 68,943 | | | | 68,943 | | | | (40,475 | ) | | | (40,475 | ) | | | 28,468 | | | | 28,468 | |
| Total net increase | | | | | | | | | | | | | | | | | | | | | | | | |
| (decrease) | | $ | 10,180,138 | | | | 10,180,138 | | | $ | (12,601,137 | ) | | | (12,601,137 | ) | | $ | (2,420,999 | ) | | | (2,420,999 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended September 30, 2010 | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | $ | 18,258,836 | | | | 18,258,836 | | | $ | (22,216,445 | ) | | | (22,216,445 | ) | | $ | (3,957,609 | ) | | | (3,957,609 | ) |
| Class B | | | 197,577 | | | | 197,577 | | | | (451,447 | ) | | | (451,447 | ) | | | (253,870 | ) | | | (253,870 | ) |
| Class C | | | 431,573 | | | | 431,573 | | | | (615,330 | ) | | | (615,330 | ) | | | (183,757 | ) | | | (183,757 | ) |
| Class F-1 | | | 86,450 | | | | 86,450 | | | | (107,944 | ) | | | (107,944 | ) | | | (21,494 | ) | | | (21,494 | ) |
| Class F-2 | | | 260,228 | | | | 260,228 | | | | (385,837 | ) | | | (385,837 | ) | | | (125,609 | ) | | | (125,609 | ) |
| Class 529-A | | | 361,732 | | | | 361,732 | | | | (379,806 | ) | | | (379,806 | ) | | | (18,074 | ) | | | (18,074 | ) |
| Class 529-B | | | 20,963 | | | | 20,963 | | | | (33,902 | ) | | | (33,902 | ) | | | (12,939 | ) | | | (12,939 | ) |
| Class 529-C | | | 80,108 | | | | 80,108 | | | | (89,720 | ) | | | (89,720 | ) | | | (9,612 | ) | | | (9,612 | ) |
| Class 529-E | | | 20,462 | | | | 20,462 | | | | (21,147 | ) | | | (21,147 | ) | | | (685 | ) | | | (685 | ) |
| Class 529-F-1 | | | 23,664 | | | | 23,664 | | | | (25,897 | ) | | | (25,897 | ) | | | (2,233 | ) | | | (2,233 | ) |
| Class R-1 | | | 100,796 | | | | 100,796 | | | | (108,920 | ) | | | (108,920 | ) | | | (8,124 | ) | | | (8,124 | ) |
| Class R-2 | | | 1,194,920 | | | | 1,194,920 | | | | (1,234,094 | ) | | | (1,234,094 | ) | | | (39,174 | ) | | | (39,174 | ) |
| Class R-3 | | | 1,157,307 | | | | 1,157,307 | | | | (1,207,265 | ) | | | (1,207,265 | ) | | | (49,958 | ) | | | (49,958 | ) |
| Class R-4 | | | 728,919 | | | | 728,919 | | | | (742,401 | ) | | | (742,401 | ) | | | (13,482 | ) | | | (13,482 | ) |
| Class R-5 | | | 306,643 | | | | 306,643 | | | | (310,360 | ) | | | (310,360 | ) | | | (3,717 | ) | | | (3,717 | ) |
| Class R-6 | | | 93,096 | | | | 93,096 | | | | (70,167 | ) | | | (70,167 | ) | | | 22,929 | | | | 22,929 | |
| Total net increase | | | | | | | | | | | | | | | | | | | | | | | | |
| (decrease) | | $ | 23,323,274 | | | | 23,323,274 | | | $ | (28,000,682 | ) | | | (28,000,682 | ) | | $ | (4,677,408 | ) | | | (4,677,408 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
*Includes exchanges between share classes of the fund. | | | | | | | | | | | | | | | | | | | | | |
Expense example
unaudited
As a shareholder of the fund, you incur certain ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. Certain share classes also incur transaction costs such as contingent deferred sales charges (loads) on redemptions. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period (October 1, 2010, through March 31, 2011).
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Notes:
There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually), that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2 and 529-F-1 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would be lower by the amount of these fees.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | Beginning account value 10/1/2010 | | | Ending account value 3/31/2011 | | | Expenses paid during period* | | | Annualized expense ratio | |
| | | | | | | | | | | | | |
| Class A -- actual return | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 0.90 | | | | .18 | % |
| Class A -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class B -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class B -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class C -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class C -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class F-1 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class F-1 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class F-2 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.85 | | | | .17 | |
| Class F-2 -- assumed 5% return | | | 1,000.00 | | | | 1,024.08 | | | | 0.86 | | | | .17 | |
| Class 529-A -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class 529-A -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class 529-B -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class 529-B -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class 529-C -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class 529-C -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class 529-E -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class 529-E -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class 529-F-1 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class 529-F-1 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class R-1 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class R-1 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class R-2 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class R-2 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class R-3 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class R-3 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class R-4 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class R-4 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class R-5 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.90 | | | | .18 | |
| Class R-5 -- assumed 5% return | | | 1,000.00 | | | | 1,024.03 | | | | 0.91 | | | | .18 | |
| Class R-6 -- actual return | | | 1,000.00 | | | | 1,000.00 | | | | 0.85 | | | | .17 | |
| Class R-6 -- assumed 5% return | | | 1,000.00 | | | | 1,024.08 | | | | 0.86 | | | | .17 | |
| | | | | | | | | | | | | | | | | |
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period). |
Approval of Investment Advisory and Service Agreement
The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through March 31, 2012. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.
In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement, and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.
1. Nature, extent and quality of services
The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.
2. Investment results
The board and the committee considered the investment results of the fund in light of its objective of providing shareholders a way to earn income on their cash reserves while preserving capital and maintaining liquidity. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices, in each case as available at the time of the related board and committee meetings. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s results have been satisfactory, and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.
3. Advisory fees and total expenses
The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by clients of an affiliate of CRMC. They noted that, to the extent there were differences between the advisory fees paid by the fund and the advisory fees paid by those clients, the differences appropriately reflected the investment, operational and regulatory differences between advising the fund and the other clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.
4. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments, and attract and retain qualified personnel. They noted information regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure and the termination of CRMC’s 10% advisory fee waiver effective December 31, 2008. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.
Offices of the fund and of the investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
6455 Irvine Center Drive
Irvine, CA 92618
Transfer agent for shareholder accounts
American Funds Service Company
(Write to the address near you.)
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Counsel
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071-3106
Independent registered public accounting firm
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 90071-2889
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on the American Funds website.
American Funds Money Market Fund files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. Additional information regarding the operation of the Public Reference Room may be obtained by calling the SEC’s Office of Investor Education and Advocacy at 800/SEC-0330. Additionally, the list of portfolio holdings is available by calling AFS.
This report is for the information of shareholders of American Funds Money Market Fund, but it also may be used as sales literature when preceded or accompanied by the current prospectus or summary prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after June 30, 2011, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
What makes American Funds different?
For 80 years, we have followed a consistent philosophy to benefit our investors. Our 33 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have attracted over 50 million shareholder accounts.
Our unique combination of strengths includes these five factors:
| | •A long-term, value-oriented approach |
We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.
| | •An extensive global research effort |
Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.
| | •The multiple portfolio counselor system |
Our unique approach to portfolio management, developed more than 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.
| | •Experienced investment professionals |
American Funds portfolio counselors have an average of 27 years of investment experience, providing a depth of knowledge and broad perspective that few organizations have.
| | •A commitment to low management fees |
The American Funds provide exceptional value for shareholders, with management fees that are among the lowest in the mutual fund industry.
American Funds span a range of investment objectives
| | The Growth Fund of America® |
| | Capital World Growth and Income FundSM |
| | International Growth and Income FundSM |
| | The Investment Company of America® |
| | Washington Mutual Investors FundSM |
| | The Income Fund of America® |
| | American Funds Global Balanced FundSM |
| | American Funds Mortgage FundSM |
| | American High-Income TrustSM |
| | The Bond Fund of AmericaSM |
| | Intermediate Bond Fund of America® |
| | Short-Term Bond Fund of AmericaSM |
| | U.S. Government Securities FundSM |
| | American Funds Short-Term Tax-Exempt Bond FundSM |
| | American High-Income Municipal Bond Fund® |
| | Limited Term Tax-Exempt Bond Fund of AmericaSM |
| | The Tax-Exempt Bond Fund of America® |
| | State-specific tax-exempt funds |
| | American Funds Tax-Exempt Fund of New YorkSM |
| | The Tax-Exempt Fund of California® |
| | The Tax-Exempt Fund of Maryland® |
| | The Tax-Exempt Fund of Virginia® |
| | >American Funds Money Market Fund® |
| | •American Funds Target Date Retirement Series® |
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGESR-959-0511P
Litho in USA AGD/RRD/10079-S25013
Printed on paper containing 10% post-consumer waste
Printed with inks containing soy and/or vegetable oil
ITEM 2 – Code of Ethics
