American Funds American Balanced Fund (ABALX) N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

Certified Shareholder Report of

Registered Management Investment Companies

Investment Company Act File Number: 811-00066

American Balanced Fund, Inc.

(Exact Name of Registrant as Specified in Charter)

P.O. Box 7650, One Market, Steuart Tower

San Francisco, California 94120

(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (415) 421-9360

Date of fiscal year end: December 31

Date of reporting period: June 30, 2009

Patrick F. Quan

Capital Research and Management Company

P.O. Box 7650, One Market, Steuart Tower

San Francisco, California 94120

(Name and Address of Agent for Service)

Copies to:

Michael Glazer

Bingham McCutchen LLP

355 South Grand Avenue, Suite 4400

Los Angeles, California 90071

(Counsel for the Registrant)

ITEM 1 – Reports to Stockholders

[logo - American Funds®]

The right choice for the long term®

American Balanced Fund

[photo of a field of grass - trees in the background]

Semi-annual report for the six months ended June 30, 2009

American Balanced Fund® seeks conservation of capital, current income and long-term growth of both capital and income by investing in common stocks and fixed-income securities. The fund approaches the management of its investments as if they constituted the complete investment program of the prudent investor.

This fund is one of the 30 American Funds. American Funds is one of the nation’s largest mutual fund families. For nearly 80 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. For current information and month-end results, visit americanfunds.com.

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2009:
	1 year			5 years			10 years
Class A shares
Reflecting 5.75% maximum sales charge		–20.45	%		–1.13	%		2.93	%

The total annual fund operating expense ratio was 0.64% for Class A shares for the 12 months ended June 30, 2009. Please note that the expense ratio shown above differs from those shown in the Financial Highlights table on pages 24 to 30 and the Expense Example on pages 31 to 33, which are annualized for the six-month period ended June 30, 2009.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 24 to 30 for details.

The fund’s 30-day yield for Class A shares as of July 31, 2009, calculated in accordance with the Securities and Exchange Commission formula, was 2.59%. The fund’s distribution rate for Class A shares as of that date was 3.10%. Both reflect the 5.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.

Results for other share classes can be found on pages 34 and 35.

Equity investments are subject to market fluctuations. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. 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:

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The first half of 2009 was characterized by a continuation of the extreme volatility that markets experienced in 2008. When all was said and done, however, stocks and bonds both produced modest gains for the period.

In this environment, stocks, as measured by Standard & Poor’s 500 Composite Index, gained 3.2%.* Investment-grade bonds, as measured by Barclays Capital U.S. Aggregate Index, gained 1.9%. American Balanced Fund produced a total return of 4.0%. That exceeded the return of both indexes but trailed the 6.0% total return of the Lipper Balanced Funds Index. The S&P 500 and the Barclays Capital indexes are unmanaged.

As noted above, the first half was very volatile. The S&P 500 declined 25% in the first nine weeks of the year, reaching a 12-year low in early March. It then rebounded a striking 40% in the next 12 weeks and ended the first half slightly above where it began. In the bond market, yields rose sharply on Treasuries, but declined on most other investment-grade bonds.

The economy experienced a continued significant decline in GDP in the early part of the year, but the rate of decline eased considerably in late spring. Given the depth of this recession, it is entirely possible that one might be surprised by the strength of a recovery once inventory restocking begins. Nevertheless, the impact of this recession has had a severe effect on corporate profits. While companies have cut employment and other costs sharply, they can never fully mitigate such an extreme drop in demand. Bankruptcies of some large, iconic corporations have been notable, and there may well be more to follow.

Corporations have reacted by cutting dividends at a rate that has been unprecedented in the postwar period. Our expectation is that dividends paid on the S&P 500 will decline this year by approximately 25%. Since a mutual fund is simply a conduit that passes dividend payments through to its shareholders, the dividends paid by your fund in 2009 will necessarily be lower than in 2008.

In our equity portfolio, information technology remains our largest sector. This area did very well in the first half with a number of stocks showing sharp gains. We continue to feel that the values are quite reasonable and the prospects good when the economy begins to improve. Telecommunication services and the industrial sectors had disappointing results in the first half. The former is not large in the portfolio, but we do own quite a few stocks in the industrial area. We have been adding to them as well as to the consumer sector in the expectation of a better economy in the intermediate term.

The bond portion of the portfolio, which had disappointing returns in 2008, did better than its benchmark index over the six months. Investment-grade corporate bonds provided better returns than government and agency bonds and mortgage- and asset-backed obligations during the period. As of June 30, 41% of the fixed-income portfolio was invested in U.S. government and agency bonds, 34% in mortgage- and asset-backed obligations and 25% in corporate bonds. This reflects an increase in governments and a corresponding decline in other securities as we moved to upgrade the credit quality of the portfolio during the period.

It is American Balanced Fund’s policy to have between 50% and 75% invested in common stocks at all times. The percentage will vary based on our judgment of the relative attractiveness of equities, bonds and cash. At June 30, we had 63% of the portfolio in stocks, which was unchanged from the beginning of the year. Simply to state this without explanation, however, would ignore some of the changes that occurred during the year. During the market weakness in late February, we allocated some assets normally assigned to fixed-income counselors to the responsibility of equity counselors. In similar fashion, we moved some assets in the opposite direction after the market experienced its 40% recovery in early June. In addition, we added substantially to our fixed-income position, ending the period at 35% compared to 30% at the beginning of the year. This increase in bond exposure came from a reduction in cash equivalents, which are now 2% of the fund compared with 7% at the start of the year.

We look forward to reporting to you at the end of the year and thank our investors for their confidence in the fund.

Cordially,

/s/ Robert G. O’Donnell

Robert G. O’Donnell

Vice Chairman of the Board

and Principal Executive Officer

/s/ Gregory D. Johnson

Gregory D. Johnson

President

August 6, 2009

*All data refer to total return.

For current information about the fund, visit americanfunds.com.

Summary investment portfolio, June 30, 2009

unaudited

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

[begin pie chart]

Investment mix by security type	(percent of net assets)
Common stocks		63	%
Fixed-income securities		35
Other assets less liabilities		2

[end pie chart]

							Percent
				Value			of net
Common stocks - 62.83%	Shares				(000	)	assets
Information technology - 11.99%
Microsoft Corp.	$	34,120,000		$	811,032			1.90	%
Oracle Corp.		28,712,984			615,032			1.44
Cisco Systems, Inc. (1)		28,300,000			527,512			1.24
Google Inc., Class A (1)		910,000			383,647			.90
International Business Machines Corp.		3,550,000			370,691			.87
Yahoo! Inc. (1)		21,359,000			334,482			.78
Applied Materials, Inc.		28,570,000			313,413			.73
Intel Corp.		18,250,000			302,037			.71
QUALCOMM Inc.		6,375,000			288,150			.67
Other securities					1,168,835			2.75
					5,114,831			11.99
Financials - 8.34%
Berkshire Hathaway Inc., Class A (1)		8,330			749,700			1.76
Wells Fargo & Co.		28,667,100			695,464			1.63
JPMorgan Chase & Co.		12,145,000			414,266			.97
U.S. Bancorp		21,710,000			389,043			.91
American Express Co.		14,079,000			327,196			.77
Other securities					980,322			2.30
					3,555,991			8.34
Consumer staples - 7.91%
Wal-Mart Stores, Inc.		17,400,000			842,856			1.98
Coca-Cola Co.		16,550,000			794,234			1.86
Philip Morris International Inc.		17,250,000			752,445			1.76
Other securities					986,713			2.31
					3,376,248			7.91
Health care - 7.56%
Merck & Co., Inc.		23,077,200			645,239			1.51
Eli Lilly and Co.		12,352,000			427,873			1.00
Bristol-Myers Squibb Co.		16,500,000			335,115			.78
UnitedHealth Group Inc.		12,850,000			320,993			.75
Abbott Laboratories		6,500,000			305,760			.72
Medtronic, Inc.		7,200,000			251,208			.59
Wyeth		5,200,000			236,028			.55
Other securities					704,988			1.66
					3,227,204			7.56
Industrials - 7.47%
Boeing Co.		10,760,000			457,300			1.07
United Technologies Corp.		8,580,000			445,817			1.04
Deere & Co.		8,940,000			357,153			.84
General Electric Co.		16,000,000			187,520			.44
Other securities					1,739,986			4.08
					3,187,776			7.47
Energy - 7.39%
Chevron Corp.		11,772,000			779,895			1.83
Royal Dutch Shell PLC, Class B (ADR)		12,500,000			635,750			1.49
ConocoPhillips		9,700,000			407,982			.95
Baker Hughes Inc.		7,000,000			255,080			.60
Exxon Mobil Corp.		3,500,000			244,685			.57
Occidental Petroleum Corp.		3,500,000			230,335			.54
Other securities					599,225			1.41
					3,152,952			7.39
Consumer discretionary - 4.20%
Home Depot, Inc.		19,400,000			458,422			1.08
Time Warner Inc.		12,583,333			316,974			.74
McDonald's Corp.		4,070,000			233,985			.55
Other securities					780,535			1.83
					1,789,916			4.20
Telecommunication services - 2.57%
AT&T Inc.		26,512,500			658,571			1.54
Verizon Communications Inc.		10,000,000			307,300			.72
Other securities					131,982			.31
					1,097,853			2.57
Materials - 2.49%
E.I. du Pont de Nemours and Co.		13,600,000			348,432			.82
BHP Billiton Ltd. (2)		9,000,000			246,728			.58
Other securities					466,189			1.09
					1,061,349			2.49
Utilities - 2.00%
GDF Suez (2)		6,963,420			260,054			.61
PG&E Corp.		6,400,000			246,016			.58
Other securities					347,045			.81
					853,115			2.00
Miscellaneous - 0.91%
Other common stocks in initial period of acquisition					389,921			.91
Total common stocks (cost: $29,297,958,000)					26,807,156			62.83
							Percent
				Value			of net
Preferred stocks - 0.41%	Shares				(000	)	assets
Financials - 0.40%
JPMorgan Chase & Co., Series I, 7.90% (3)		12,750,000			11,189			.03
Fannie Mae, Series S, 8.25% noncumulative		839,700			1,169			.00
Other securities					157,905			.37
					170,263			.40
U.S. government agency securities - 0.01%
Other securities					3,688			.01
Total preferred stocks (cost: $270,266,000)					173,951			.41
		Principal					Percent
	amount			Value			of net
Bonds & notes - 35.01%		(000	)		(000	)	assets
Bonds & notes of U.S. government & government agencies - 14.41%
U.S. Treasury:
4.625% 2011	$	793,750			858,179
2.75% 2013		235,000			239,397
3.375% 2013		670,000			702,240
3.50% 2013		463,000			487,886
4.25% 2013		386,835			418,385
3.50% 2018		748,750			752,614
6.25% 2023		538,500			656,550
3.50% 2039		356,500			308,430
0.875%-8.875% 2010-2038 (2) (4)		1,203,091			1,303,901			13.42
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.20% 2012		27,500			27,632			.07
Fannie Mae 6.25% 2029		20,000			23,352			.06
Freddie Mac 5.00% 2018		20,000			18,827			.04
Other securities					350,998			.82
					6,148,391			14.41
Mortgage-backed obligations (5) - 10.80%
Fannie Mae 0%-11.884% 2010-2047 (3)		1,951,291			2,015,098			4.72
Freddie Mac 0%-10.00% 2015-2038 (3)		670,247			694,858			1.63
Other securities					1,896,316			4.45
					4,606,272			10.80
Corporate bonds & notes - 8.64%
Financials - 2.31%
JPMorgan Chase & Co. 4.891% 2015 (3)		20,000			17,404
JPMorgan Chase Capital XXV, Series Y, 6.80% 2037		14,865			12,820
JPMorgan Chase Bank NA 6.00% 2017		5,000			4,874			.08
Wells Fargo & Co. 4.375% 2013		6,920			6,985			.02
Other securities					942,891			2.21
					984,974			2.31
Telecommunication services - 1.17%
SBC Communications Inc. 5.10%-6.45% 2011-2034		114,300			116,574
BellSouth Capital Funding Corp. 7.875% 2030		51,500			57,046
AT&T Wireless Services, Inc. 7.875%- 8.125% 2011-2012		17,400			18,989
AT&T Inc. 4.95% 2013		16,250			16,914
AT&T Corp. 8.00% 2031 (3)		10,000			11,574			.52
Verizon Communications Inc. 3.75%- 6.90% 2011-2038 (6)		136,275			137,358
Verizon Global Funding Corp. 7.25%- 7.75% 2010-2030		39,395			42,474			.42
Other securities					99,221			.23
					500,150			1.17
Consumer discretionary - 1.06%
Other securities					453,103			1.06
Industrials - 0.86%
General Electric Co. 5.25% 2017		24,250			23,855			.06
Other securities					344,739			.80
					368,594			.86
Health care - 0.81%
Merck & Co., Inc. 5.00% 2019		8,925			9,054			.02
Other securities					335,733			.79
					344,787			.81
Information technology - 0.28%
Oracle Corp. 3.75% 2014		15,750			15,750			.04
Other securities					103,652			.24
					119,402			.28
Other corporate bonds & notes - 2.15%
Other securities					917,186			2.15
Total corporate bonds & notes					3,688,196			8.64
Asset-backed obligations - 1.13%
Other securities					483,123			1.13
Municipals - 0.03%
Other securities					11,901			.03
Total bonds & notes (cost: $15,502,844,000)					14,937,883			35.01
	Principal						Percent
	amount			Value			of net
Short-term securities - 2.12%		(000	)		(000	)	assets
General Electric Capital Corp., FDIC insured, 0.23%-0.50% due 7/21-8/25/2009	$	165,600			165,573
GE Financial Assurance Holdings Inc. 0.15% due 7/1/2009		43,000			43,000			.49
Jupiter Securitization Co., LLC 0.26%-0.27% due 7/10-7/14/2009 (6)		58,100			58,095
Park Avenue Receivables Co., LLC 0.25% due 7/6-7/21/2009 (6)		40,000			39,996			.23
Freddie Mac 0.15%-0.33% due 7/13-10/19/2009		92,200			92,168			.22
NetJets Inc. 0.18%-0.22% due 7/9-7/16/2009 (6)		70,000			69,994			.16
Fannie Mae 0.16%-0.40% due 7/6-7/22/2009		67,500			67,493			.16
Coca-Cola Co. 0.22%-0.42% due 7/20-8/7/2009 (6)		34,100			34,093			.08
United Technologies Corp. 0.19% due 7/23/2009 (6)		25,000			24,997			.06
U.S. Treasury Bills 0.29% due 7/2/2009		9,900			9,900			.02
Other securities					298,980			.70
Total short-term securities (cost: $904,273,000)					904,289			2.12
Total investment securities (cost: $45,975,341,000)					42,823,279			100.37
Other assets less liabilities					(158,130	)		(.37	)
Net assets				$	42,665,149			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.

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) Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $1,599,395,000, which represented 3.75% of the net assets of the fund. This amount includes $869,798,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading.

(3) Coupon rate may change periodically.

(4) Index-linked bond whose principal amount moves with a government retail price index.

(5) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

(6) Purchased 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 $1,819,490,000, which represented 4.26% of the net assets of the fund.

Key to abbreviation

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities			unaudited
at June 30, 2009	(dollars in thousands)
Assets:
Investment securities, at value (cost: $45,975,341)			$	42,823,279
Cash				209
Receivables for:
Sales of investments		113,278
Sales of fund's shares		43,018
Dividends and interest		205,306		361,602
				43,185,090
Liabilities:
Payables for:
Purchases of investments		366,990
Repurchases of fund's shares		121,916
Investment advisory services		8,617
Services provided by affiliates		20,111
Directors' deferred compensation		1,824
Other		483		519,941
Net assets at June 30, 2009			$	42,665,149
Net assets consist of:
Capital paid in on shares of capital stock			$	51,021,821
Undistributed net investment income				19,861
Accumulated net realized loss				(5,224,551	)
Net unrealized depreciation				(3,151,982	)
Net assets at June 30, 2009			$	42,665,149

(dollars and shares in thousands, except per-share amounts)
Total authorized capital stock - 5,500,000 shares, $.001 par value (3,031,599 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share*
Class A	$	26,519,172		1,882,404	$	14.09
Class B		3,219,341		229,275		14.04
Class C		3,992,754		284,617		14.03
Class F-1		826,380		58,668		14.09
Class F-2		132,556		9,411		14.08
Class 529-A		1,093,074		77,670		14.07
Class 529-B		254,131		18,065		14.07
Class 529-C		441,085		31,351		14.07
Class 529-E		68,780		4,889		14.07
Class 529-F-1		33,450		2,378		14.07
Class R-1		99,291		7,083		14.02
Class R-2		899,391		64,123		14.03
Class R-3		2,038,570		145,234		14.04
Class R-4		1,921,252		136,551		14.07
Class R-5		824,434		58,483		14.10
Class R-6		301,488		21,397		14.09
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Classes A and 529-A, for which the maximum offering prices per share were $14.95 and $14.93, respectively.
See Notes to Financial Statements

Statement of operations				unaudited
for the six months ended June 30, 2009	(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $8,988)	$	431,732
Interest		359,733		$	791,465
Fees and expenses*:
Investment advisory services		49,443
Distribution services		80,675
Transfer agent services		23,459
Administrative services		11,825
Reports to shareholders		1,895
Registration statement and prospectus		949
Directors' compensation		367
Auditing and legal		18
Custodian		270
Other		1,736			170,637
Net investment income					620,828
Net realized loss and unrealized appreciation on investments and currency:
Net realized loss on:
Investments		(3,563,222	)
Currency transactions		(1,228	)		(3,564,450	)
Net unrealized appreciation on:
Investments		4,352,548
Currency translations		226			4,352,774
Net realized loss and
unrealized appreciation
on investments and currency					788,324
Net increase in net assets resulting from operations				$	1,409,152
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.
See Notes to Financial Statements
Statements of changes in net assets		(dollars in thousands)
	Six months			Year ended
	ended June 30, 2009*			December 31, 2008
Operations:
Net investment income	$	620,828		$	1,479,078
Net realized loss on investments and currency transactions		(3,564,450	)		(1,648,768	)
Net unrealized appreciation (depreciation) on investments and currency translations		4,352,774			(15,316,379	)
Net increase (decrease) in net assets resulting from operations		1,409,152			(15,486,069	)
Dividends and distributions paid to shareholders:
Dividends from net investment income		(639,537	)		(1,602,469	)
Distributions from net realized gain on investments		-			(440,268	)
Total dividends and distributions paidto shareholders		(639,537	)		(2,042,737	)
Net capital share transactions		(1,157,917	)		(6,705	)
Total decrease in net assets		(388,302	)		(17,535,511	)
Net assets:
Beginning of period		43,053,451			60,588,962
End of period (including undistributed
net investment income: $19,861 and $38,570, respectively)	$	42,665,149		$	43,053,451
*Unaudited.
See Notes to Financial Statements

Notes to financial statements

                                                                                                               unaudited

1. Organization and significant accounting policies

Organization – American Balanced Fund, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks conservation of capital, current income and long-term growth of both capital and income by investing in common stocks and fixed-income securities.

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

*Effective April 21, 2009, Class B and 529-B shares of the fund are no longer available for purchase.

On May 1, 2009, the fund made an additional retirement plan share class (Class R-6) available for sale pursuant to an amendment to its registration statement filed with the Securities and Exchange Commission (“SEC”). Refer to the fund’s retirement plan prospectus for more details.

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.

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 following is a summary of the significant accounting policies followed by the fund:

Net asset value – 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.

Security valuation – Equity securities are 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 valued at prices obtained from one or more independent pricing vendors when such prices are available. However, where 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. Vendors base bond prices on, among other things, valuation matrices that incorporate dealer-supplied valuations, proprietary pricing models and evaluations of the yield curve as of approximately 3:00 p.m. New York time. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are 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 market 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 or less remaining to maturity.

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 directors. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly securities 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 factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors 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.

Security transactions and related investment income – Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities.In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

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

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

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

2. Risk factors

Investing in the fund may involve certain risks including, but not limited to, those described below.

The prices of, and the income generated by, securities held by the fund may decline in response to certain events, including those directly involving the companies whose

securities are owned by the fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and commodity price fluctuations.

Securities held by the fund may also be affected by changing interest rates, and by changes in effective maturities and credit ratings. For example, the prices of debt securities in the fund's portfolio generally will decline when interest rates rise and increase when interest rates fall. In addition, falling interest rates may cause an issuer to redeem, "call" or refinance a security before its stated maturity, which may result in the fund having to reinvest the proceeds in lower yielding securities. Lower quality or longer maturity debt securities generally have higher rates of interest and may be subject to greater price fluctuations than higher quality or shorter maturity debt securities. A security backed by the U.S. Treasury or the full faith and credit of the U.S. government is guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market prices for these securities will fluctuate with changes in interest rates.

Investments in securities issued by entities based outside the U.S. may be subject to the risks described above to a greater extent and may also be affected by currency fluctuations and controls; different accounting, auditing, financial reporting, and legal standards and practices in some countries; expropriation; changes in tax policy; greater market volatility; differing 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. Investments in securities issued by

entities domiciled in the U.S. may also be subject to many of these risks.

3. Taxation and distributions                                                                                     

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

As of and during the period ended June 30, 2009, 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 and by state tax authorities for tax years before 2004 .

Non-U.S. taxation – Dividend and interest income is recorded net of non-U.S. taxes paid.

Distributions – Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gainsfor financial reporting purposes. These differences are due primarily to differing treatment for items such as currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; net capital losses; and income on certain investments.The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.

The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of December 31, 2008, the components of distributable earnings on a tax basis were as follows:

(dollars in thousands)
Undistributed ordinary income	$	38,622
Post-October currency loss deferrals (realized during the period November 1, 2008, through December 31, 2008)*		(370	)
Capital loss carryforward expiring 2016†:		(1,180,492	)
Post-October capital loss deferrals (realized during the period November 1, 2008, through December 31, 2008)*		(478,695	)
* These deferrals are considered incurred in the subsequent year.
† The capital loss carryforward will be used to offset any capital gains realized by the fund in the current year or in subsequent years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains.

As of June 30, 2009, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows:

(dollars in thousands)
Gross unrealized appreciation on investment securities	$	2,370,831
Gross unrealized depreciation on investment securities		(5,595,521	)
Net unrealized depreciation on investment securities		(3,224,690	)
Cost of investment securities		46,047,969

The tax character of distributions paid to shareholders was as follows (dollars in thousands):

	Six months ended June 30, 2009						Year ended December 31, 2008
Share class	Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income		Long-term capital gains		Total distributions paid
Class A	$	419,011	$	-	$	419,011	$	1,061,925	$	275,039	$	1,336,964
Class B		40,697		-		40,697		109,514		38,718		148,232
Class C		49,164		-		49,164		125,087		44,051		169,138
Class F-1		14,155		-		14,155		37,856		9,931		47,787
Class F-2*		845		-		845		396		-		396
Class 529-A		16,532		-		16,532		38,098		9,715		47,813
Class 529-B		2,980		-		2,980		7,115		2,495		9,610
Class 529-C		5,066		-		5,066		11,922		4,147		16,069
Class 529-E		947		-		947		2,171		615		2,786
Class 529-F-1		527		-		527		1,175		263		1,438
Class R-1		1,216		-		1,216		2,541		805		3,346
Class R-2		10,523		-		10,523		24,881		8,441		33,322
Class R-3		28,924		-		28,924		77,781		23,940		101,721
Class R-4		23,188		-		23,188		54,862		14,212		69,074
Class R-5		23,445		-		23,445		47,145		7,896		55,041
Class R-6†		2,317		-		2,317		-		-		-
Total	$	639,537	$	-	$	639,537	$	1,602,469	$	440,268	$	2,042,737
*Class F-2 was offered beginning August 1, 2008.
†Class R-6 was offered beginning May 1, 2009.

4. Fees and transactions with related parties

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

Investment advisory services - The Investment Advisory and Service Agreement with CRMC providesfor monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.420% on the first $500 million of daily net assets and decreasing to 0.210% on such assets in excess of $71 billion. For the six months ended June 30, 2009, the investment advisory services fee was $49,443,000, which was equivalent to an annualized rate of 0.245% 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 on the following page.

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 directors 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 directors 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 directors 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 June 30, 2009, 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 described below.

Administrative services – The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Classes A and B. 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 declining series of 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 June 30, 2009, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
			CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$30,398	$20,982	Not applicable	Not applicable	Not applicable
Class B	15,723	2,477	Not applicable	Not applicable	Not applicable
Class C	19,020	Included in administrative services	$2,856	$531	Not applicable
Class F-1	1,020		516	46	Not applicable
Class F-2	Not applicable		35	2	Not applicable
Class 529-A	1,089		628	106	$501
Class 529-B	1,193		150	41	120
Class 529-C	2,007		253	61	202
Class 529-E	157		40	7	31
Class 529-F-1	-		19	3	15
Class R-1	453		58	16	Not applicable
Class R-2	3,096		614	1,338	Not applicable
Class R-3	4,701		1,374	523	Not applicable
Class R-4	1,818		1,072	19	Not applicable
Class R-5	Not applicable		620	5	Not applicable
Class R-6*	Not applicable		23	-†	Not applicable
Total	$80,675	$23,459	$8,258	$2,698	$869

* Class R-6 was offered beginning May 1, 2009.

† Amount less than one thousand.

Directors’ deferred compensation – Since the adoption of the deferred compensation plan in 1993, directors 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.

Directors’ compensation of $367,000, shown on the accompanying financial statements, includes $252,000 in current fees (either paid in cash or deferred) and a net increase of $115,000 in the value of the deferred amounts.

5. Disclosure of fair value measurements

The fund classifies its assets and liabilities into three levels based on the method 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 generally high-quality and liquid; however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.The following table presents the fund’s valuation levels as of June 30, 2009 (dollars in thousands):

Investment securities	Level 1		Level 2			Level 3		Total
Common stocks:
Information technology	$	5,114,831	$	-		$	-	$	5,114,831
Financials		3,555,991		-			-		3,555,991
Consumer staples		3,376,248		-			-		3,376,248
Health care		3,227,204		-			-		3,227,204
Industrials		3,098,674		89,102	*		-		3,187,776
Energy		3,152,952		-			-		3,152,952
Consumer discretionary		1,789,916		-			-		1,789,916
Telecommunication services		965,871		131,982	*		-		1,097,853
Materials		814,621		246,728	*		-		1,061,349
Utilities		593,061		260,054	*		-		853,115
Miscellaneous		247,989		141,932	*		-		389,921
Preferred stocks				173,951			-		173,951
Bonds & notes:
Bonds & notes of U.S. government & government agencies		-		6,148,391			-		6,148,391
Mortgage-backed obligations		-		4,534,442			71,830		4,606,272
Corporate bonds & notes		-		3,647,409			40,787		3,688,196
Asset-backed obligations		-		470,682			12,441		483,123
Municipals		-		11,901			-		11,901
Short-term securities		-		904,289			-		904,289
Total	$	25,937,358	$	16,760,863		$	125,058	$	42,823,279
(*) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading; therefore, $869,798,000 of investment securities were classified as Level 2 instead of Level 1.

The following table reconciles the valuation of the fund's Level 3 investment securities and related transactions for the six months ended June 30, 2009 (dollars in thousands):
	Beginning					Net					Net transfers			Ending
	value		Net			realized			Net unrealized		out of			value
	at 1/1/2009		sales			loss (†)			appreciation (†)		Level 3			at 6/30/2009
Investment securities	$	249,459	$	(38,139	)	$	(4,285	)	$	10,556	$	(92,533	)	$	125,058
Net unrealized appreciation during the period on Level 3 investment securities held at June 30, 2009 (dollars in thousands) (†):														$	3,741
(†) Net realized loss and unrealized appreciation are included in the related amounts on investments in the statement of operations.

6. Capital share transactions

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

Share class	Sales(1)				Reinvestments of dividends and distributions				Repurchases(1)						Net (decrease)  increase
	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
Six months ended June 30, 2009
Class A	$	2,137,063		161,470	$	399,974		30,593	$	(3,454,573	)		(267,070	)	$	(917,536	)		(75,007	)
Class B		92,145		7,094		38,230		2,938		(419,454	)		(32,369	)		(289,079	)		(22,337	)
Class C		272,302		20,617		46,189		3,547		(518,812	)		(40,413	)		(200,321	)		(16,249	)
Class F-1		100,163		7,533		12,357		947		(243,247	)		(18,455	)		(130,727	)		(9,975	)
Class F-2		113,076		8,084		689		52		(20,014	)		(1,558	)		93,751			6,578
Class 529-A		92,952		7,014		16,519		1,264		(70,545	)		(5,446	)		38,926			2,832
Class 529-B		9,404		725		2,978		228		(14,776	)		(1,143	)		(2,394	)		(190	)
Class 529-C		45,610		3,438		5,060		387		(38,921	)		(3,005	)		11,749			820
Class 529-E		6,008		454		946		72		(4,329	)		(336	)		2,625			190
Class 529-F-1		4,559		342		527		40		(3,223	)		(246	)		1,863			136
Class R-1		27,555		2,076		1,211		93		(20,561	)		(1,584	)		8,205			585
Class R-2		158,900		12,072		10,510		806		(144,507	)		(11,071	)		24,903			1,807
Class R-3		267,241		20,246		28,916		2,218		(259,397	)		(19,902	)		36,760			2,562
Class R-4		694,225		50,617		23,173		1,774		(225,546	)		(17,202	)		491,852			35,189
Class R-5		202,394		15,170		23,380		1,795		(847,197	)		(61,310	)		(621,423	)		(44,345	)
Class R-6(2)		290,896		21,251		2,317		166		(284	)		(20	)		292,929			21,397
Total net increase
(decrease)	$	4,514,493		338,203	$	612,976		46,920	$	(6,285,386	)		(481,130	)	$	(1,157,917	)		(96,007	)
Year ended December 31, 2008
Class A	$	6,541,339		403,813	$	1,281,245		75,631	$	(7,906,651	)		(489,944	)	$	(84,067	)		(10,500	)
Class B		344,946		20,857		141,278		8,319		(938,608	)		(57,678	)		(452,384	)		(28,502	)
Class C		941,452		58,091		159,387		9,407		(1,328,803	)		(82,689	)		(227,964	)		(15,191	)
Class F-1		438,016		27,259		41,463		2,445		(519,372	)		(32,224	)		(39,893	)		(2,520	)
Class F-2(3)		45,470		3,072		325		24		(3,610	)		(263	)		42,185			2,833
Class 529-A		213,417		12,731		47,803		2,832		(151,699	)		(9,307	)		109,521			6,256
Class 529-B		32,652		1,942		9,610		567		(32,678	)		(2,012	)		9,584			497
Class 529-C		100,257		5,971		16,065		949		(95,171	)		(5,803	)		21,151			1,117
Class 529-E		14,289		856		2,786		165		(10,967	)		(666	)		6,108			355
Class 529-F-1		11,907		696		1,438		85		(6,688	)		(407	)		6,657			374
Class R-1		50,484		2,997		3,321		198		(34,670	)		(2,104	)		19,135			1,091
Class R-2		349,023		20,926		33,287		1,970		(353,485	)		(21,301	)		28,825			1,595
Class R-3		719,096		42,334		101,705		5,976		(1,297,044	)		(77,190	)		(476,243	)		(28,880	)
Class R-4		662,301		38,924		69,066		4,086		(627,999	)		(38,331	)		103,368			4,679
Class R-5		1,160,744		67,166		54,918		3,317		(288,350	)		(17,190	)		927,312			53,293
Total net increase
(decrease)	$	11,625,393		707,635	$	1,963,697		115,971	$	(13,595,795	)		(837,109	)	$	(6,705	)		(13,503	)
(1) Includes exchanges between share classes of the fund.
(2)Class R-6 was offered beginning May 1, 2009.
(3)Class F-2 was offered beginning August 1, 2008.

7. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $7,139,333,000 and $9,599,735,000 respectively, during the six months ended June 30, 2009.

8. Subsequent events

As of August 6, 2009, the date the financial statements were available to be issued, no subsequent events or transactions had occurred that would have materially impacted the financial statements as presented.

Financial highlights(1)

				Income (loss) from investment operations(2)								Dividends and distributions
		Net asset value, beginning of period		Net investment income		Net gains (losses) on securities (both realized and unrealized)			Total from investment operations			Dividends (from net investment income)			Distributions (from capital gains)			Total dividends and distributions			Net asset value, end of period		Total return(3)(4)			Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers			Ratio of expenses to average net assets after reimbursements/ waivers(4)			Ratio of net income to average net assets(4)
Class A:	Six months ended 6/30/2009(5)	$	13.78	$	.21	$	.32		$	.53		$	(.22	)	$	-		$	(.22	)	$	14.09		3.98	%	$	26,519		.68	%(6)		.68	%(6)		3.24	%(6)
	Year ended 12/31/2008		19.31		.50		(5.35	)		(4.85	)		(.54	)		(.14	)		(.68	)		13.78		(25.73	)		26,972		.61			.59			2.96
	Year ended 12/31/2007		19.02		.53		.72			1.25			(.52	)		(.44	)		(.96	)		19.31		6.60			37,999		.60			.58			2.68
	Year ended 12/31/2006		17.82		.47		1.61			2.08			(.47	)		(.41	)		(.88	)		19.02		11.80			35,431		.61			.58			2.57
	Year ended 12/31/2005		18.00		.41		.15			.56			(.40	)		(.34	)		(.74	)		17.82		3.12			33,009		.61			.59			2.31
	Year ended 12/31/2004		17.29		.39		1.12			1.51			(.36	)		(.44	)		(.80	)		18.00		8.92			29,162		.63			.62			2.23
Class B:	Six months ended 6/30/2009(5)		13.73		.16		.32			.48			(.17	)		-			(.17	)		14.04		3.60			3,219		1.43	(6)		1.43	(6)		2.49	(6)
	Year ended 12/31/2008		19.25		.37		(5.34	)		(4.97	)		(.41	)		(.14	)		(.55	)		13.73		(26.33	)		3,455		1.38			1.35			2.18
	Year ended 12/31/2007		18.96		.38		.72			1.10			(.37	)		(.44	)		(.81	)		19.25		5.83			5,391		1.35			1.32			1.94
	Year ended 12/31/2006		17.77		.33		1.60			1.93			(.33	)		(.41	)		(.74	)		18.96		10.95			5,386		1.36			1.33			1.82
	Year ended 12/31/2005		17.95		.28		.15			.43			(.27	)		(.34	)		(.61	)		17.77		2.37			5,180		1.36			1.34			1.56
	Year ended 12/31/2004		17.24		.26		1.12			1.38			(.23	)		(.44	)		(.67	)		17.95		8.15			4,849		1.37			1.37			1.48
Class C:	Six months ended 6/30/2009(5)		13.72		.16		.32			.48			(.17	)		-			(.17	)		14.03		3.59			3,993		1.45	(6)		1.45	(6)		2.47	(6)
	Year ended 12/31/2008		19.23		.36		(5.33	)		(4.97	)		(.40	)		(.14	)		(.54	)		13.72		(26.33	)		4,128		1.42			1.40			2.14
	Year ended 12/31/2007		18.95		.37		.72			1.09			(.37	)		(.44	)		(.81	)		19.23		5.73			6,078		1.40			1.37			1.89
	Year ended 12/31/2006		17.76		.32		1.60			1.92			(.32	)		(.41	)		(.73	)		18.95		10.90			5,743		1.41			1.38			1.77
	Year ended 12/31/2005		17.94		.27		.15			.42			(.26	)		(.34	)		(.60	)		17.76		2.30			5,582		1.42			1.40			1.51
	Year ended 12/31/2004		17.24		.25		1.11			1.36			(.22	)		(.44	)		(.66	)		17.94		8.02			4,976		1.44			1.44			1.42
Class F-1:	Six months ended 6/30/2009(5)		13.78		.22		.31			.53			(.22	)		-			(.22	)		14.09		4.00			826		.64	(6)		.64	(6)		3.28	(6)
	Year ended 12/31/2008		19.31		.50		(5.35	)		(4.85	)		(.54	)		(.14	)		(.68	)		13.78		(25.73	)		946		.61			.58			2.96
	Year ended 12/31/2007		19.02		.53		.72			1.25			(.52	)		(.44	)		(.96	)		19.31		6.61			1,374		.59			.57			2.69
	Year ended 12/31/2006		17.82		.48		1.60			2.08			(.47	)		(.41	)		(.88	)		19.02		11.83			1,247		.59			.57			2.59
	Year ended 12/31/2005		18.00		.41		.15			.56			(.40	)		(.34	)		(.74	)		17.82		3.10			1,238		.63			.61			2.30
	Year ended 12/31/2004		17.29		.39		1.11			1.50			(.35	)		(.44	)		(.79	)		18.00		8.88			1,110		.67			.67			2.19
Class F-2:	Six months ended 6/30/2009(5)		13.78		.23		.31			.54			(.24	)		-			(.24	)		14.08		4.05			133		.42	(6)		.42	(6)		3.47	(6)
	Period from 8/5/2008 to 12/31/2008		17.44		.21		(3.59	)		(3.38	)		(.28	)		-			(.28	)		13.78		(19.51	)		39		.17			.16			1.45
Class 529-A:	Six months ended 6/30/2009(5)		13.77		.21		.31			.52			(.22	)		-			(.22	)		14.07		3.89			1,093		.74	(6)		.74	(6)		3.19	(6)
	Year ended 12/31/2008		19.29		.49		(5.34	)		(4.85	)		(.53	)		(.14	)		(.67	)		13.77		(25.76	)		1,030		.68			.65			2.90
	Year ended 12/31/2007		19.01		.51		.72			1.23			(.51	)		(.44	)		(.95	)		19.29		6.47			1,323		.68			.66			2.60
	Year ended 12/31/2006		17.81		.47		1.60			2.07			(.46	)		(.41	)		(.87	)		19.01		11.76			1,125		.66			.63			2.53
	Year ended 12/31/2005		17.99		.40		.15			.55			(.39	)		(.34	)		(.73	)		17.81		3.06			907		.67			.65			2.26
	Year ended 12/31/2004		17.28		.38		1.12			1.50			(.35	)		(.44	)		(.79	)		17.99		8.88			679		.69			.68			2.18
Class 529-B:	Six months ended 6/30/2009(5)		13.76		.16		.31			.47			(.16	)		-			(.16	)		14.07		3.54			254		1.53	(6)		1.53	(6)		2.39	(6)
	Year ended 12/31/2008		19.28		.35		(5.34	)		(4.99	)		(.39	)		(.14	)		(.53	)		13.76		(26.36	)		251		1.48			1.46			2.09
	Year ended 12/31/2007		19.00		.36		.71			1.07			(.35	)		(.44	)		(.79	)		19.28		5.64			342		1.47			1.44			1.81
	Year ended 12/31/2006		17.80		.31		1.61			1.92			(.31	)		(.41	)		(.72	)		19.00		10.87			311		1.48			1.45			1.70
	Year ended 12/31/2005		17.99		.25		.14			.39			(.24	)		(.34	)		(.58	)		17.80		2.15			265		1.51			1.49			1.41
	Year ended 12/31/2004		17.28		.23		1.12			1.35			(.20	)		(.44	)		(.64	)		17.99		7.94			219		1.56			1.56			1.30
Class 529-C:	Six months ended 6/30/2009(5)		13.76		.16		.32			.48			(.17	)		-			(.17	)		14.07		3.55			441		1.52	(6)		1.52	(6)		2.40	(6)
	Year ended 12/31/2008		19.29		.35		(5.35	)		(5.00	)		(.39	)		(.14	)		(.53	)		13.76		(26.40	)		420		1.48			1.45			2.09
	Year ended 12/31/2007		19.00		.36		.72			1.08			(.35	)		(.44	)		(.79	)		19.29		5.70			567		1.47			1.44			1.82
	Year ended 12/31/2006		17.81		.32		1.59			1.91			(.31	)		(.41	)		(.72	)		19.00		10.81			501		1.47			1.44			1.71
	Year ended 12/31/2005		17.99		.26		.14			.40			(.24	)		(.34	)		(.58	)		17.81		2.22			418		1.50			1.48			1.42
	Year ended 12/31/2004		17.28		.23		1.12			1.35			(.20	)		(.44	)		(.64	)		17.99		7.94			327		1.55			1.55			1.31
Class 529-E:	Six months ended 6/30/2009(5)	$	13.76	$	.19	$	.32		$	.51		$	(.20	)	$	-		$	(.20	)	$	14.07		3.81	%	$	69		1.02	%(6)		1.02	%(6)		2.91	%(6)
	Year ended 12/31/2008		19.28		.44		(5.34	)		(4.90	)		(.48	)		(.14	)		(.62	)		13.76		(25.99	)		65		.97			.95			2.60
	Year ended 12/31/2007		19.00		.46		.71			1.17			(.45	)		(.44	)		(.89	)		19.28		6.18			84		.96			.94			2.32
	Year ended 12/31/2006		17.80		.41		1.61			2.02			(.41	)		(.41	)		(.82	)		19.00		11.44			73		.96			.93			2.23
	Year ended 12/31/2005		17.98		.35		.14			.49			(.33	)		(.34	)		(.67	)		17.80		2.73			59		.99			.97			1.93
	Year ended 12/31/2004		17.28		.32		1.11			1.43			(.29	)		(.44	)		(.73	)		17.98		8.44			45		1.04			1.03			1.83
Class 529-F-1:	Six months ended 6/30/2009(5)		13.76		.22		.32			.54			(.23	)		-			(.23	)		14.07		4.07			34		.52	(6)		.52	(6)		3.41	(6)
	Year ended 12/31/2008		19.28		.52		(5.34	)		(4.82	)		(.56	)		(.14	)		(.70	)		13.76		(25.61	)		31		.47			.45			3.11
	Year ended 12/31/2007		19.00		.56		.71			1.27			(.55	)		(.44	)		(.99	)		19.28		6.71			36		.46			.44			2.82
	Year ended 12/31/2006		17.80		.50		1.61			2.11			(.50	)		(.41	)		(.91	)		19.00		11.99			28		.46			.43			2.73
	Year ended 12/31/2005		17.98		.42		.15			.57			(.41	)		(.34	)		(.75	)		17.80		3.15			19		.57			.55			2.35
	Year ended 12/31/2004		17.27		.37		1.12			1.49			(.34	)		(.44	)		(.78	)		17.98		8.78			14		.79			.78			2.09
Class R-1:	Six months ended 6/30/2009(5)		13.71		.16		.32			.48			(.17	)		-			(.17	)		14.02		3.62			99		1.42	(6)		1.42	(6)		2.51	(6)
	Year ended 12/31/2008		19.22		.37		(5.33	)		(4.96	)		(.41	)		(.14	)		(.55	)		13.71		(26.30	)		89		1.38			1.35			2.21
	Year ended 12/31/2007		18.94		.37		.72			1.09			(.37	)		(.44	)		(.81	)		19.22		5.74			104		1.40			1.37			1.89
	Year ended 12/31/2006		17.75		.32		1.60			1.92			(.32	)		(.41	)		(.73	)		18.94		10.91			82		1.41			1.39			1.77
	Year ended 12/31/2005		17.94		.27		.13			.40			(.25	)		(.34	)		(.59	)		17.75		2.24			62		1.45			1.42			1.49
	Year ended 12/31/2004		17.24		.25		1.11			1.36			(.22	)		(.44	)		(.66	)		17.94		8.01			41		1.48			1.46			1.43
Class R-2:	Six months ended 6/30/2009(5)		13.72		.16		.32			.48			(.17	)		-			(.17	)		14.03		3.57			899		1.48	(6)		1.48	(6)		2.44	(6)
	Year ended 12/31/2008		19.23		.36		(5.33	)		(4.97	)		(.40	)		(.14	)		(.54	)		13.72		(26.33	)		855		1.42			1.39			2.15
	Year ended 12/31/2007		18.95		.37		.71			1.08			(.36	)		(.44	)		(.80	)		19.23		5.71			1,168		1.41			1.39			1.87
	Year ended 12/31/2006		17.76		.32		1.60			1.92			(.32	)		(.41	)		(.73	)		18.95		10.90			1,079		1.45			1.39			1.77
	Year ended 12/31/2005		17.94		.27		.15			.42			(.26	)		(.34	)		(.60	)		17.76		2.31			902		1.48			1.40			1.51
	Year ended 12/31/2004		17.24		.25		1.11			1.36			(.22	)		(.44	)		(.66	)		17.94		8.05			648		1.55			1.42			1.45
Class R-3:	Six months ended 6/30/2009(5)		13.73		.19		.32			.51			(.20	)		-			(.20	)		14.04		3.85			2,039		.96	(6)		.96	(6)		2.96	(6)
	Year ended 12/31/2008		19.24		.45		(5.33	)		(4.88	)		(.49	)		(.14	)		(.63	)		13.73		(25.94	)		1,959		.90			.87			2.65
	Year ended 12/31/2007		18.96		.46		.72			1.18			(.46	)		(.44	)		(.90	)		19.24		6.23			3,301		.92			.90			2.36
	Year ended 12/31/2006		17.77		.41		1.60			2.01			(.41	)		(.41	)		(.82	)		18.96		11.44			3,059		.92			.90			2.26
	Year ended 12/31/2005		17.95		.36		.15			.51			(.35	)		(.34	)		(.69	)		17.77		2.83			2,541		.91			.89			2.02
	Year ended 12/31/2004		17.25		.34		1.10			1.44			(.30	)		(.44	)		(.74	)		17.95		8.52			1,828		.97			.97			1.94
Class R-4:	Six months ended 6/30/2009(5)		13.76		.21		.32			.53			(.22	)		-			(.22	)		14.07		3.99			1,921		.66	(6)		.66	(6)		3.24	(6)
	Year ended 12/31/2008		19.28		.49		(5.34	)		(4.85	)		(.53	)		(.14	)		(.67	)		13.76		(25.75	)		1,395		.65			.62			2.92
	Year ended 12/31/2007		19.00		.52		.71			1.23			(.51	)		(.44	)		(.95	)		19.28		6.50			1,865		.65			.62			2.64
	Year ended 12/31/2006		17.80		.47		1.60			2.07			(.46	)		(.41	)		(.87	)		19.00		11.78			1,724		.65			.62			2.53
	Year ended 12/31/2005		17.99		.41		.13			.54			(.39	)		(.34	)		(.73	)		17.80		3.03			1,441		.65			.63			2.28
	Year ended 12/31/2004		17.28		.39		1.11			1.50			(.35	)		(.44	)		(.79	)		17.99		8.89			830		.67			.66			2.23
Class R-5:	Six months ended 6/30/2009(5)		13.79		.23		.32			.55			(.24	)		-			(.24	)		14.10		4.13			824		.36	(6)		.36	(6)		3.56	(6)
	Year ended 12/31/2008		19.32		.54		(5.35	)		(4.81	)		(.58	)		(.14	)		(.72	)		13.79		(25.52	)		1,418		.35			.33			3.28
	Year ended 12/31/2007		19.03		.58		.72			1.30			(.57	)		(.44	)		(1.01	)		19.32		6.86			957		.35			.33			2.94
	Year ended 12/31/2006		17.83		.52		1.61			2.13			(.52	)		(.41	)		(.93	)		19.03		12.08			411		.35			.33			2.82
	Year ended 12/31/2005		18.01		.46		.15			.61			(.45	)		(.34	)		(.79	)		17.83		3.38			324		.36			.34			2.57
	Year ended 12/31/2004		17.30		.44		1.12			1.56			(.41	)		(.44	)		(.85	)		18.01		9.21			246		.37			.36			2.51
Class R-6:	Period from 5/1/2009 to 6/30/2009(5)		13.64		.09		.48			.57			(.12	)		-			(.12	)		14.09		4.18			302		.05			.05			.65

	Six months ended June 30,			Year ended December 31
	2009(5)			2008			2007			2006			2005			2004
Portfolio turnover rate for all classes of shares		27	%		41	%		35	%		34	%		35	%		25	%

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

(2)Based on average shares outstanding.

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

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

(5)Unaudited.

(6)Annualized.

See Notes to Financial Statements

Expense example

unaudited

As a shareholder of the fund, you incur two types of costs: (1) transaction costs, such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads), and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2009, through June 30, 2009).

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-1shareholders 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.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning account value 1/1/2009		Ending account value 6/30/2009		Expenses paid during period*		Annualized expense ratio
Class A -- actual return	$	1,000.00	$	1,039.76	$	3.44		.68	%
Class A -- assumed 5% return		1,000.00		1,021.42		3.41		.68
Class B -- actual return		1,000.00		1,035.98		7.22		1.43
Class B -- assumed 5% return		1,000.00		1,017.70		7.15		1.43
Class C -- actual return		1,000.00		1,035.95		7.32		1.45
Class C -- assumed 5% return		1,000.00		1,017.60		7.25		1.45
Class F-1 -- actual return		1,000.00		1,039.95		3.24		.64
Class F-1 -- assumed 5% return		1,000.00		1,021.62		3.21		.64
Class F-2 -- actual return		1,000.00		1,040.48		2.12		.42
Class F-2 -- assumed 5% return		1,000.00		1,022.71		2.11		.42
Class 529-A -- actual return		1,000.00		1,038.91		3.74		.74
Class 529-A -- assumed 5% return		1,000.00		1,021.12		3.71		.74
Class 529-B -- actual return		1,000.00		1,035.43		7.72		1.53
Class 529-B -- assumed 5% return		1,000.00		1,017.21		7.65		1.53
Class 529-C -- actual return		1,000.00		1,035.50		7.67		1.52
Class 529-C -- assumed 5% return		1,000.00		1,017.26		7.60		1.52
Class 529-E -- actual return		1,000.00		1,038.11		5.15		1.02
Class 529-E -- assumed 5% return		1,000.00		1,019.74		5.11		1.02
Class 529-F-1 -- actual return		1,000.00		1,040.67		2.63		.52
Class 529-F-1 -- assumed 5% return		1,000.00		1,022.22		2.61		.52
Class R-1 -- actual return		1,000.00		1,036.23		7.17		1.42
Class R-1 -- assumed 5% return		1,000.00		1,017.75		7.10		1.42
Class R-2 -- actual return		1,000.00		1,035.74		7.47		1.48
Class R-2 -- assumed 5% return		1,000.00		1,017.46		7.40		1.48
Class R-3 -- actual return		1,000.00		1,038.48		4.85		.96
Class R-3 -- assumed 5% return		1,000.00		1,020.03		4.81		.96
Class R-4 -- actual return		1,000.00		1,039.89		3.34		.66
Class R-4 -- assumed 5% return		1,000.00		1,021.52		3.31		.66
Class R-5 -- actual return		1,000.00		1,041.33		1.82		.36
Class R-5 -- assumed 5% return		1,000.00		1,023.01		1.81		.36
Class R-6 -- actual return †		1,000.00		1,041.76		.52		.31
Class R-6 -- assumed 5% return †		1,000.00		1,023.26		1.56		.31

*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period).

† The period for the “annualized expense ratio” and “actual return” line is based on the number of days from May 1, 2009 (the initial sale of the share class), through June 30, 2009, and accordingly, is not representative of a full period. The “assumed 5% return” line is based on 181 days.

Other share class results

unaudited

Classes B, C, F and 529

Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns for periods ended							Life
June 30, 2009:	1 year			5 years			of class
Class B shares1 — first sold 3/15/00
Reflecting applicable contingent deferred sales
charge (CDSC), maximum of 5%, payable only
if shares are sold within six years of purchase		–20.34	%		–1.02	%		4.23	%
Not reflecting CDSC		–16.26			–0.69			4.23
Class C shares — first sold 3/15/01
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		–17.11			–0.74			2.10
Not reflecting CDSC		–16.29			–0.74			2.10
Class F-1 shares2 — first sold 3/15/01
Not reflecting annual asset-based fee charged
by sponsoring firm		–15.55			0.07			2.91
Class F-2 shares2 — first sold 8/5/08
Not reflecting annual asset-based fee charged
by sponsoring firm		—			—			–16.25	3
Class 529-A shares4 — first sold 2/15/02
Reflecting 5.75% maximum sales charge		–20.52			–1.18			1.53
Not reflecting maximum sales charge		–15.68			–0.01			2.36
Class 529-B shares1,4 — first sold 2/15/02
Reflecting applicable CDSC, maximum of 5%,
payable only if shares are sold within six years
of purchase		–20.39			–1.15			1.51
Not reflecting CDSC		–16.31			–0.81			1.51
Class 529-C shares4 — first sold 2/19/02
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		–17.17			–0.81			1.70
Not reflecting CDSC		–16.35			–0.81			1.70
Class 529-E shares2,4 — first sold 3/5/02		–15.88			–0.30			1.65
Class 529-F-1 shares2,4 — first sold 9/17/02
Not reflecting annual asset-based fee charged
by sponsoring firm		–15.46			0.15			3.98

1These shares are no longer available for purchase.

2These shares are sold without any initial or contingent deferred sales charge.

3Results are cumulative total returns; they are not annualized.

4Results shown do not reflect the $10 account setup fee and an annual $10 account maintenance fee.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 24 to 30 for details.

For information regarding the differences among the various share classes, please refer to

the fund’s prospectus.

Office of the fund

One Market

Steuart Tower, Suite 1800

Mailing address: P.O. Box 7650

San Francisco, CA 94120-7650

Investment adviser

Capital Research and Management Company

333 South Hope Street

Los Angeles, CA 90071-1406

6455 Irvine Center Drive

Irvine, CA 92618

Custodian of assets

JPMorgan Chase Bank

270 Park Avenue

New York, NY 10017-2070

Counsel

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street

Los Angeles, CA 90071-2228

Transfer agent for shareholder accounts

American Funds Service Company

(Please write to the address near you.)

P.O. Box 6007

Indianapolis, IN 46206-6007

P.O. Box 2280

Norfolk, VA 23501-2280

Independent registered public accounting firm

Deloitte & Touche LLP

695 Town Center Drive

Suite 1200

Costa Mesa, CA 92626-7188

Principal underwriter

American Funds Distributors, Inc.

333 South Hope Street

Los Angeles, CA 90071-1406

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

“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on the American Funds website.

A complete June 30, 2009, portfolio of American Balanced Fund’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

American Balanced 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 Balanced Fund, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2009, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

[logo - American Funds®]

The right choice for the long term®

What makes American Funds different?

For nearly 80 years, we have followed a consistent philosophy to benefit our investors. Our 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 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 25 years of investment experience, providing a depth of knowledge and broad perspective that few organizations have.

•A commitment to low management fees

The American Funds provide exceptional value for shareholders, with management fees that are among the lowest in the mutual fund industry.

American Funds span a range of investment objectives

•Growth funds

AMCAP Fund®

EuroPacific Growth Fund®

The Growth Fund of America®

The New Economy Fund®

New Perspective Fund®

New World Fund®

SMALLCAP World Fund®

•Growth-and-income funds

American Mutual Fund®

Capital World Growth and Income FundSM

Fundamental InvestorsSM

International Growth and Income FundSM

The Investment Company of America®

Washington Mutual Investors FundSM

•Equity-income funds

Capital Income Builder®

The Income Fund of America®

•Balanced fund

>American Balanced Fund®

•Bond funds

American High-Income TrustSM

The Bond Fund of AmericaSM

Capital World Bond Fund®

Intermediate Bond Fund of America®

Short-Term Bond Fund of AmericaSM

U.S. Government Securities FundSM

•Tax-exempt bond funds

American Funds Short-Term Tax-Exempt Bond FundSM

American High-Income Municipal Bond Fund®

Limited Term Tax-Exempt Bond Fund of AmericaSM

The Tax-Exempt Bond Fund of America®

State-specific tax-exempt funds

The Tax-Exempt Fund of California®

The Tax-Exempt Fund of Maryland®

The Tax-Exempt Fund of Virginia®

•Money market fund

American Funds Money Market Fund SM

•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-911-0809P

Litho in USA AGD/ALD/8077-S20690

Printed on paper containing 10% post-consumer waste

Printed with inks containing soy and/or vegetable oil

ITEM 2 – Code of Ethics

Not applicable for filing of semi-annual reports to shareholders.

ITEM 3 – Audit Committee Financial Expert

Not applicable for filing of semi-annual reports to shareholders.

ITEM 4 – Principal Accountant Fees and Services

Not applicable for filing of semi-annual reports to shareholders.

ITEM 5 – Audit Committee of Listed Registrants

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

ITEM 6 – Schedule of Investments

[logo – American Funds®]

American Balanced Fund®

Investment portfolio

June 30, 2009

 unaudited

Common stocks — 62.83%	Shares			Value (000)
INFORMATION TECHNOLOGY — 11.99%
Microsoft Corp.		34,120,000		$	811,032
Oracle Corp.		28,712,984			615,032
Cisco Systems, Inc.1		28,300,000			527,512
Google Inc., Class A1		910,000			383,647
International Business Machines Corp.		3,550,000			370,691
Yahoo! Inc.1		21,359,000			334,482
Applied Materials, Inc.		28,570,000			313,413
Intel Corp.		18,250,000			302,037
QUALCOMM Inc.		6,375,000			288,150
Hewlett-Packard Co.		5,950,000			229,967
EMC Corp.1		12,200,000			159,820
Corning Inc.		9,250,000			148,555
SAP AG (ADR)		3,500,000			140,665
Automatic Data Processing, Inc.		3,200,000			113,408
Apple Inc.1		655,000			93,292
Paychex, Inc.		3,250,000			81,900
Nokia Corp. (ADR)		5,500,000			80,190
Tyco Electronics Ltd.		3,360,000			62,463
Texas Instruments Inc.		2,750,000			58,575
					5,114,831
FINANCIALS — 8.34%
Berkshire Hathaway Inc., Class A1		8,330			749,700
Wells Fargo & Co.		28,667,100			695,464
JPMorgan Chase & Co.		12,145,000			414,266
U.S. Bancorp		21,710,000			389,043
American Express Co.		14,079,000			327,196
Bank of America Corp.		14,650,001			193,380
ACE Ltd.		3,990,000			176,478
Allstate Corp.		5,700,000			139,080
SunTrust Banks, Inc.		8,005,000			131,682
Chubb Corp.		2,200,000			87,736
Citigroup Inc.		26,495,000			78,690
Lincoln National Corp.		4,100,000			70,561
Comerica Inc.		2,857,775			60,442
Marsh & McLennan Companies, Inc.		2,100,000			42,273
					3,555,991
CONSUMER STAPLES — 7.91%
Wal-Mart Stores, Inc.		17,400,000			842,856
Coca-Cola Co.		16,550,000			794,234
Philip Morris International Inc.		17,250,000			752,445
Avon Products, Inc.		7,000,000			180,460
Kraft Foods Inc., Class A		6,550,000			165,977
Estée Lauder Companies Inc., Class A		4,500,000			147,015
Procter & Gamble Co.		2,350,000			120,085
H.J. Heinz Co.		3,250,000			116,025
Unilever NV (New York registered)		4,500,000			108,810
Hershey Co.		1,985,000			71,460
Walgreen Co.		1,500,000			44,100
Altria Group, Inc.		2,000,000			32,781
					3,376,248
HEALTH CARE — 7.56%
Merck & Co., Inc.		23,077,200			645,239
Eli Lilly and Co.		12,352,000			427,873
Bristol-Myers Squibb Co.		16,500,000			335,115
UnitedHealth Group Inc.		12,850,000			320,993
Abbott Laboratories		6,500,000			305,760
Medtronic, Inc.		7,200,000			251,208
Wyeth		5,200,000			236,028
Johnson & Johnson		3,000,000			170,400
Aetna Inc.		6,650,000			166,582
Amgen Inc.1		2,900,000			153,526
Pfizer Inc		9,000,000			135,000
Stryker Corp.		2,000,000			79,480
					3,227,204
INDUSTRIALS — 7.47%
Boeing Co.		10,760,000			457,300
United Technologies Corp.		8,580,000			445,817
Deere & Co.		8,940,000			357,153
Northrop Grumman Corp.		5,035,000			229,999
Burlington Northern Santa Fe Corp.		3,000,000			220,620
FedEx Corp.		3,600,000			200,232
General Electric Co.		16,000,000			187,520
Emerson Electric Co.		5,500,000			178,200
Union Pacific Corp.		3,400,000			177,004
Tyco International Ltd.		6,260,000			162,635
Parker Hannifin Corp.		3,000,000			128,880
United Parcel Service, Inc., Class B		2,500,000			124,975
General Dynamics Corp.		2,100,000			116,319
Illinois Tool Works Inc.		3,000,000			112,020
European Aeronautic Defence and Space Co. EADS NV2		5,500,000			89,102
					3,187,776
ENERGY — 7.39%
Chevron Corp.		11,772,000			779,895
Royal Dutch Shell PLC, Class B (ADR)		12,500,000			635,750
ConocoPhillips		9,700,000			407,982
Baker Hughes Inc.		7,000,000			255,080
Exxon Mobil Corp.		3,500,000			244,685
Occidental Petroleum Corp.		3,500,000			230,335
TOTAL SA (ADR)		4,020,000			218,005
Schlumberger Ltd.		3,700,000			200,207
EnCana Corp.		3,000,000			148,826
Smith International, Inc.		1,250,000			32,187
					3,152,952
CONSUMER DISCRETIONARY — 4.20%
Home Depot, Inc.		19,400,000			458,422
Time Warner Inc.		12,583,333			316,974
McDonald’s Corp.		4,070,000			233,985
Lowe’s Companies, Inc.		9,050,000			175,660
News Corp., Class A		16,500,000			150,315
Best Buy Co., Inc.		4,050,000			135,634
Nordstrom, Inc.		6,250,000			124,313
Magna International Inc., Class A		1,750,000			73,920
Target Corp.		1,500,000			59,205
Macy’s, Inc.		4,500,000			52,920
Gannett Co., Inc.		2,400,000			8,568
					1,789,916
TELECOMMUNICATION SERVICES — 2.57%
AT&T Inc.		26,512,500			658,571
Verizon Communications Inc.		10,000,000			307,300
Vodafone Group PLC2		68,312,500			131,982
					1,097,853
MATERIALS — 2.49%
E.I. du Pont de Nemours and Co.		13,600,000			348,432
BHP Billiton Ltd.2		9,000,000			246,728
Alcoa Inc.		16,500,000			170,445
Weyerhaeuser Co.		4,590,000			139,674
Praxair, Inc.		1,150,000			81,730
Monsanto Co.		1,000,000			74,340
					1,061,349
UTILITIES — 2.00%
GDF Suez2		6,963,420			260,054
PG&E Corp.		6,400,000			246,016
Exelon Corp.		2,500,000			128,025
Southern Co.		4,000,000			124,640
Edison International		3,000,000			94,380
					853,115
MISCELLANEOUS — 0.91%
Other common stocks in initial period of acquisition					389,921
Total common stocks (cost: $29,297,958,000)					26,807,156
Preferred stocks — 0.41%
FINANCIALS — 0.40%
BNP Paribas 7.195%3,4		57,200,000			41,857
Barclays Bank PLC 7.434%3,4		37,041,000			24,852
SMFG Preferred Capital USD 1 Ltd. 6.078%3,4		25,771,000			20,727
QBE Capital Funding II LP 6.797%3,4		24,470,000			18,127
Santander Finance Preferred S.A., Unipersonal, 6.50%		940,000			16,979
AXA SA, Series B, 6.379%3,4		26,000,000			16,680
JPMorgan Chase & Co., Series I, 7.90%4		12,750,000			11,189
XL Capital Ltd., Series E, 6.50%4		16,160,000			7,928
Lloyds TSB Group PLC 6.267%3,4		19,100,000			6,501
ING Capital Funding Trust III 8.439% noncumulative4		6,750,000			4,254
Fannie Mae, Series S, 8.25% noncumulative		839,700			1,169
					170,263
U.S. GOVERNMENT AGENCY SECURITIES — 0.01%
US AgBank 6.11%3,4		10,000,000			3,688
Total preferred stocks (cost: $270,266,000)					173,951
	Principal amount
Bonds & notes — 35.01%		(000	)
BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 14.41%
U.S. Treasury 0.875% 20102,5	$	58,527			58,609
U.S. Treasury 4.625% 2011		793,750			858,179
U.S. Treasury 5.00% 2011		25,000			26,664
U.S. Treasury 3.00% 20122,5		184,851			196,263
U.S. Treasury 4.25% 2012		211,600			228,363
U.S. Treasury 2.75% 2013		235,000			239,397
U.S. Treasury 3.375% 2013		670,000			702,240
U.S. Treasury 3.50% 2013		463,000			487,886
U.S. Treasury 3.625% 2013		20,000			21,162
U.S. Treasury 4.25% 2013		386,835			418,385
U.S. Treasury 1.875% 20152,5		120,034			121,496
U.S. Treasury 8.875% 2017		37,125			51,375
U.S. Treasury 1.625% 20182,5		103,814			103,014
U.S. Treasury 3.50% 2018		748,750			752,614
U.S. Treasury 2.125% 20192,5		49,656			51,320
U.S. Treasury 7.875% 2021		38,750			52,645
U.S. Treasury 6.25% 2023		538,500			656,550
U.S. Treasury 2.375% 20252,5		56,559			58,215
U.S. Treasury 6.875% 2025		79,500			104,207
U.S. Treasury 5.50% 2028		45,125			52,190
U.S. Treasury 5.25% 2029		15,000			16,887
U.S. Treasury 4.50% 2036		109,550			112,973
U.S. Treasury 4.375% 2038		48,000			48,518
U.S. Treasury 3.50% 2039		356,500			308,430
Federal Home Loan Bank 5.25% 2014		25,875			28,530
Federal Home Loan Bank 5.625% 2016		109,800			104,904
Federal Agricultural Mortgage Corp. 4.875% 20113		40,000			42,492
Federal Agricultural Mortgage Corp. 5.50% 20113		7,000			7,501
United States Government Agency-Guaranteed (FDIC insured), Regions Bank 3.25% 2011		33,000			34,196
United States Government Agency-Guaranteed (FDIC insured), Bank of America Corp., Series L, 3.125% 2012		30,000			30,935
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 2.875% 2011		30,000			30,822
CoBank ACB 7.875% 20183		20,000			19,186
CoBank ACB 1.229% 20223,4		23,425			9,952
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.20% 2012		27,500			27,632
Fannie Mae 6.25% 2029		20,000			23,352
United States Government Agency-Guaranteed (FDIC insured), Sovereign Bancorp, Inc. 2.75% 2012		22,000			22,150
Freddie Mac 5.00% 2018		20,000			18,827
United States Government Agency-Guaranteed (FDIC insured), PNC Funding Corp. 2.30% 2012		14,000			14,112
United States Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp.,
Series 2000-044-A, 3.74% 20156		5,936			6,218
					6,148,391
MORTGAGE-BACKED OBLIGATIONS6 — 10.80%
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010		52,930			55,293
Fannie Mae, Series 2001-T11, Class B, 5.503% 2011		45,000			47,635
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012		16,000			16,571
Fannie Mae 4.89% 2012		30,000			31,503
Fannie Mae 4.00% 2015		15,174			15,490
Fannie Mae 5.00% 2018		2,739			2,871
Fannie Mae 5.00% 2018		1,469			1,540
Fannie Mae 11.00% 2018		368			416
Fannie Mae 5.50% 2019		2,496			2,642
Fannie Mae 5.50% 2020		36,570			38,638
Fannie Mae 11.00% 2020		101			114
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		12,330			12,703
Fannie Mae 10.50% 2022		204			234
Fannie Mae 4.00% 2024		157,133			157,444
Fannie Mae 4.00% 2024		133,055			133,284
Fannie Mae 4.00% 2024		44,793			44,882
Fannie Mae 4.00% 2024		24,881			24,930
Fannie Mae 4.00% 2024		11,058			11,080
Fannie Mae 4.00% 2024		5,723			5,734
Fannie Mae 4.50% 2024		62,644			64,031
Fannie Mae 4.50% 2024		58,802			60,105
Fannie Mae, Series 2001-4, Class NA, 11.844% 20254		297			334
Fannie Mae 6.00% 2027		14,601			15,309
Fannie Mae 8.50% 2027		90			98
Fannie Mae 8.50% 2027		62			68
Fannie Mae 8.50% 2027		33			36
Fannie Mae 8.50% 2027		22			24
Fannie Mae 7.50% 2030		163			179
Fannie Mae 7.50% 2030		45			49
Fannie Mae 7.50% 2031		228			250
Fannie Mae 7.50% 2031		164			179
Fannie Mae, Series 2001-20, Class D, 11.041% 20314		86			99
Fannie Mae 5.50% 2032		2,841			2,949
Fannie Mae 5.50% 2033		28,761			29,840
Fannie Mae 5.50% 2033		21,811			22,626
Fannie Mae 5.50% 2033		3,319			3,443
Fannie Mae 5.50% 2035		12,910			13,390
Fannie Mae 5.50% 2035		8,081			8,381
Fannie Mae 6.50% 2035		15,565			16,699
Fannie Mae, Series 2006-43, Class JO, principal only, 0% 2036		6,115			5,023
Fannie Mae 5.50% 2036		3,351			3,471
Fannie Mae 5.50% 2036		2,990			3,097
Fannie Mae, Series 2006-49, Class PA, 6.00% 2036		15,389			16,316
Fannie Mae 6.00% 2036		7,151			7,497
Fannie Mae 6.50% 2036		11,371			12,086
Fannie Mae 5.617% 20374		27,585			28,987
Fannie Mae 6.00% 2037		103,253			108,404
Fannie Mae 6.00% 2037		52,119			54,588
Fannie Mae 6.00% 2037		24,597			25,755
Fannie Mae 6.00% 2037		23,429			24,411
Fannie Mae 6.00% 2037		18,716			19,597
Fannie Mae 6.00% 2037		4,460			4,671
Fannie Mae 6.50% 2037		61,722			65,601
Fannie Mae 6.50% 2037		43,063			45,931
Fannie Mae 6.50% 2037		35,761			38,142
Fannie Mae 6.50% 2037		22,887			24,326
Fannie Mae 6.50% 2037		3,669			3,899
Fannie Mae 6.50% 2037		2,163			2,299
Fannie Mae 7.00% 2037		41,634			45,071
Fannie Mae 7.00% 2037		40,677			44,238
Fannie Mae 7.00% 2037		14,865			16,092
Fannie Mae 7.00% 2037		11,123			12,041
Fannie Mae 7.00% 2037		10,974			11,880
Fannie Mae 7.00% 2037		7,469			8,086
Fannie Mae 7.00% 2037		5,287			5,723
Fannie Mae 4.50% 2038		30,227			30,194
Fannie Mae 4.50% 2038		9,303			9,300
Fannie Mae 6.00% 2038		43,744			45,796
Fannie Mae 6.00% 2038		12,689			13,285
Fannie Mae 6.50% 2038		51,512			54,943
Fannie Mae 4.50% 2039		164,163			164,084
Fannie Mae 4.50% 2034		100,000			99,812
Fannie Mae 4.50% 2039		50,194			50,139
Fannie Mae 4.50% 2039		8,714			8,704
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		641			687
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		586			630
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2041		876			947
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		817			884
Fannie Mae 6.50% 2047		8,919			9,491
Fannie Mae 6.50% 2047		4,914			5,229
Fannie Mae 6.50% 2047		3,852			4,099
Fannie Mae 6.50% 2047		2,979			3,170
Fannie Mae 6.50% 2047		2,964			3,154
Fannie Mae 6.50% 2047		2,262			2,407
Fannie Mae 6.50% 2047		1,256			1,336
Fannie Mae 7.00% 2047		7,200			7,795
Fannie Mae 7.00% 2047		4,236			4,586
Fannie Mae 7.00% 2047		3,352			3,628
Fannie Mae 7.00% 2047		2,862			3,098
Fannie Mae 7.00% 2047		2,548			2,758
Fannie Mae 7.00% 2047		2,372			2,568
Fannie Mae 7.00% 2047		1,538			1,665
Fannie Mae 7.00% 2047		1,131			1,224
Fannie Mae 7.00% 2047		706			765
Fannie Mae 7.00% 2047		365			395
Freddie Mac, Series 2310, Class B, 9.906% 20154		137			157
Freddie Mac 10.00% 2018		312			351
Freddie Mac 8.50% 2020		242			266
Freddie Mac 8.50% 2020		19			21
Freddie Mac 5.00% 2023		38,692			40,081
Freddie Mac 5.00% 2023		27,030			28,000
Freddie Mac 5.00% 2023		23,129			23,959
Freddie Mac 5.00% 2023		19,223			19,913
Freddie Mac 5.00% 2023		18,019			18,666
Freddie Mac 5.00% 2023		11,357			11,761
Freddie Mac 5.00% 2023		8,974			9,296
Freddie Mac 5.00% 2023		8,810			9,124
Freddie Mac 5.00% 2023		8,112			8,401
Freddie Mac 5.00% 2023		6,816			7,060
Freddie Mac 5.00% 2023		5,371			5,564
Freddie Mac 5.00% 2023		482			499
Freddie Mac 5.50% 2023		18,854			19,761
Freddie Mac 5.50% 2023		15,446			16,180
Freddie Mac 5.50% 2023		10,666			11,173
Freddie Mac 6.00% 2026		18,577			19,522
Freddie Mac 6.00% 2026		13,298			13,975
Freddie Mac 6.00% 2026		10,696			11,241
Freddie Mac 6.50% 2027		3,860			4,114
Freddie Mac 6.50% 2027		1,354			1,443
Freddie Mac 6.50% 2027		1,235			1,316
Freddie Mac 6.50% 2028		2,969			3,165
Freddie Mac, Series T-041, Class 3-A, 7.50% 2032		3,254			3,488
Freddie Mac, Series 3061, Class PN, 5.50% 2035		14,090			14,870
Freddie Mac, Series 3156, Class PO, principal only, 0% 2036		17,649			15,390
Freddie Mac, Series 3146, Class PO, principal only, 0% 2036		12,618			11,201
Freddie Mac, Series 3233, Class PA, 6.00% 2036		30,985			32,671
Freddie Mac 5.445% 20374		10,384			10,855
Freddie Mac, Series 3318, Class JT, 5.50% 2037		31,283			32,527
Freddie Mac, Series 3312, Class PA, 5.50% 2037		23,132			24,058
Freddie Mac 5.61% 20374		3,689			3,857
Freddie Mac 5.725% 20374		7,997			8,383
Freddie Mac, Series 3272, Class PA, 6.00% 2037		24,060			25,340
Freddie Mac 6.00% 2038		206,601			215,890
Freddie Mac 6.00% 2038		6,716			7,023
Freddie Mac 6.00% 2038		1,687			1,764
Freddie Mac 6.00% 2038		1,630			1,704
Freddie Mac 6.00% 2038		792			828
Government National Mortgage Assn. 10.00% 2021		473			547
Government National Mortgage Assn. 6.00% 2038		112,907			117,838
Government National Mortgage Assn. 6.50% 2038		54,387			57,769
Government National Mortgage Assn. 6.50% 2038		26,409			28,052
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		1,414			1,197
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		1,051			948
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		1,452			1,359
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		2,350			1,965
CS First Boston Mortgage Securities Corp., Series 2001-CKN5, Class A-4, 5.435% 2034		21,756			22,102
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		6,748			5,580
CS First Boston Mortgage Securities Corp., Series 2001-CP4, Class A-4, 6.18% 2035		34,833			35,212
CS First Boston Mortgage Securities Corp., Series 2005-5, Class IV-A-1, 6.25% 2035		14,570			9,924
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		35,567			36,480
CS First Boston Mortgage Securities Corp., Series 2003-CK2, Class A-4, 4.801% 2036		17,585			16,488
CS First Boston Mortgage Securities Corp., Series 2001-CK6, Class A-3, 6.387% 2036		20,331			20,828
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037		16,045			15,813
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20404		30,875			24,796
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-CIBC5, Class A-1, 4.372% 2037		7,018			6,998
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-2, 4.739% 2037		1,923			1,912
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C1, Class A-3, 5.376% 2037		10,680			10,625
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.316% 20374		63,000			58,584
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		6,542			6,170
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-SB, 4.824% 2042		25,000			24,183
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A-4, 5.875% 20454		20,375			17,088
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.877% 20364		98,318			57,622
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 6-A, 5.902% 20364		21,698			12,015
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-2, Class 5-A-1, 6.00% 20364		42,128			20,714
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-12, Class 2-A1, 5.883% 20374		18,636			9,385
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		79,804			82,265
GMAC Commercial Mortgage Securities, Inc., Series 1999-C3, Class F, 8.171% 20364		4,000			4,006
GMAC Commercial Mortgage Securities, Inc., Series 2002-C2, Class A-2, 5.389% 2038		2,291			2,323
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2041		32,750			31,799
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-4, 5.083% 20424		40,455			34,902
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20373		18,300			17,007
American Tower Trust I, Series 2007-1A, Class B, 5.537% 20373		20,000			17,589
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20373		32,200			26,709
GE Commercial Mortgage Corp., Series 2004-C1, Class A-2, 3.915% 2038		1,362			1,294
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.513% 20454		65,575			59,890
Countrywide Alternative Loan Trust, Series 2005-6CB, Class 2-A-1, 5.00% 2020		2,850			2,240
Countrywide Alternative Loan Trust, Series 2004-5CB, Class 1-A-1, 6.00% 2034		9,126			6,223
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		18,846			12,241
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		18,394			13,176
Countrywide Alternative Loan Trust, Series 2005-50CB, Class 3-A-1, 6.00% 2035		10,146			5,701
Countrywide Alternative Loan Trust, Series 2007-2CB, Class 1-A-9, 5.75% 2037		12,113			7,223
Countrywide Alternative Loan Trust, Series 2007-HY4, Class 3-A-1, 5.846% 20474		20,364			9,915
Commercial Mortgage Trust, Series 2000-C1, Class E, 8.132% 2033		4,000			3,896
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		39,825			36,896
Commercial Mortgage Trust, Series 2004-LNB2, Class A-3, 4.221% 2039		15,096			15,039
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-3, 6.428% 2035		49,257			50,199
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019		12,265			11,232
Residential Accredit Loans, Inc., Series 2004-QS16, Class 1-A-1, 5.50% 2034		19,109			13,816
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		29,686			24,251
Bank of America 5.50% 20123		44,500			43,807
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class III-A-1, 6.25% 2037		62,054			32,043
Wells Fargo Alternative Loan Trust, Series 2007-PA3, Class IV-A-1, 6.50% 2037		22,112			11,415
Wells Fargo Mortgage-backed Securities Trust, Series 2006-1, Class A-3, 5.00% 2021		14,452			13,085
Wells Fargo Mortgage-backed Securities Trust, Series 2005-AR10, Class II-A-6, 3.902% 20354		30,000			18,573
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR19, Class A-6, 5.627% 20364		22,000			11,337
Banc of America Commercial Mortgage Inc., Series 2002-PB2, Class A-4, 6.186% 2035		4,350			4,441
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		37,667			38,343
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 20352,3		16,250			15,600
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20362,3		27,350			25,572
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class A-5, 5.617% 2048		46,550			38,168
Nationwide Building Society, Series 2007-2, 5.50% 20123		32,500			30,737
Structured Products Asset Return Certificates Trust, Series 2001-CF1, Class A, 6.36% 20332		30,291			30,658
Bear Stearns ARM Trust, Series 2005-6, Class I-A-1, 4.575% 20354		20,003			11,963
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 20354		20,000			10,846
Bear Stearns ARM Trust, Series 2006-4, Class II-A-1, 5.761% 20364		13,385			7,775
Bear Stearns Asset-backed Securities I Trust, Series 2005-AC3, Class II-A-1, 5.25% 2020		34,245			30,242
GE Capital Commercial Mortgage Corp., Series 2002-2, Class A-3, 5.349% 2036		10,000			9,951
GE Capital Commercial Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037		19,364			19,138
GS Mortgage Securities Corp. II, Series 2001-ROCK, Class D, 6.878% 20183		15,000			16,245
GS Mortgage Securities Corp. II, Series 2006-GG8, Class A-4, 5.56% 2039		11,880			8,983
CHL Mortgage Pass-Through Trust, Series 2003-56, Class 6-A-1, 5.331% 20334		5,837			4,580
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.519% 20354		23,245			14,359
CHL Mortgage Pass-Through Trust, Series 2006-HYB5, Class 3-A-1B, 5.90% 20364		13,368			6,263
J.P. Morgan Mortgage Trust, Series 2006-A3, Class 3-A-3, 5.731% 20364		40,000			23,551
IndyMac INDX Mortgage Loan Trust, Series 2006-AR11, Class 6-A-1, 5.627% 20364		19,850			9,204
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.645% 20364		12,253			6,823
IndyMac INDX Mortgage Loan Trust, Series 2006-AR25, Class 3-A-1, 6.106% 20364		14,313			7,148
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20263		22,411			21,038
Morgan Stanley Mortgage Loan Trust, Series 2005-10, Class 4-A-1, 5.50% 2035		31,769			20,969
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		6,010			5,969
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-2, 6.48% 2035		1,725			1,751
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PW10, Class AM, 5.449% 20404		20,000			13,118
IndyMac IMSC Mortgage Loan Trust, Series 2007-F3, Class 3-A-1, 7.00% 2037		34,258			18,387
Citigroup Commercial Mortgage Trust, Series 2004-C2, Class A-4, 4.623% 2041		21,190			17,250
LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A-2, 7.95% 2025		3,193			3,246
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-4, 6.462% 2031		13,185			13,478
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		16,258			16,720
Prudential Mortgage Capital Funding, LLC, Series ROCK 2001-C1, Class A-2, 6.605% 2034		15,117			15,316
WaMu Mortgage Pass-Through Certificates Trust, Series 2007-HY7, Class 2-A1, 5.805% 20374		29,505			15,097
Four Times Square Trust, Series 2000-4TS, Class C, 7.86% 20153		14,000			14,717
American Home Mortgage Assets Trust, Series 2007-3, Class II-2A-1, 6.25% 20374		29,318			14,595
Washington Mutual Mortgage, WMALT Series 2005-1, Class 5-A-1, 6.00% 2035		16,327			13,014
GSR Mortgage Loan Trust, Series 2004-2F, Class XIIIA-1, 5.00% 2019		5,856			5,726
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A-1, 5.50% 2020		6,151			6,080
Bear Stearns ALT-A Trust, Series 2006-2, Class II-4-A-1, 5.874% 20364		26,724			11,219
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class A-1, 5.585% 2034		1,949			1,958
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class A-2, 6.141% 2034		8,810			8,845
Meristar Commercial Mortgage Trust, Series 1999-C1, Class A-1, 7.28% 20163		482			485
Meristar Commercial Mortgage Trust, Series 1999-C1, Class B, 7.90% 20163		7,750			7,839
Banc of America Alternative Loan Trust, Series 2005-2, Class 3-A-1, 5.00% 2020		8,388			7,782
Merrill Lynch Mortgage Trust, Series 2005-LC1, Class A-2, 5.202% 20444		7,504			7,319
Residential Funding Corp., Series 2003-RM2, Class A-II, 5.00% 2018		5,604			5,479
Structured Asset Securities Corp., Series 2004-3, Class 3-A-1, 5.50% 2019		4,415			4,317
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.346% 20273,4		932			669
MASTR Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035		3,268			2,492
Hilton Hotel Pool Trust, Series 2000-HLTA, Class A-1, 7.055% 20153		2,236			2,334
Adjustable Rate Mortgage Trust, Series 2006-1, Class 3-A-3, 5.866% 20364		4,960			2,246
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1, Class A-2, 7.56% 2031		2,230			2,230
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-3, 6.16% 2035		134			134
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036		1,645			1,621
					4,606,272
CORPORATE BONDS & NOTES — 8.64%
FINANCIALS — 2.31%
Liberty Mutual Group Inc. 6.50% 20353		19,845			12,091
Liberty Mutual Group Inc. 7.50% 20363		25,350			17,509
Liberty Mutual Group Inc., Series C, 10.75% 20883,4		26,795			19,325
Liberty Mutual Group Inc. 7.697% 20973		22,180			13,295
Westfield Group 5.40% 20123		495			475
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20143		1,980			1,783
Westfield Group 5.70% 20163		37,745			32,729
Westfield Group 7.125% 20183		15,750			14,641
UniCredito Italiano SpA 5.584% 20173,4		40,000			34,871
UniCredito Italiano SpA 6.00% 20173		10,000			8,971
Kimco Realty Corp. 6.00% 2012		2,750			2,607
Kimco Realty Corp., Series C, 4.82% 2014		13,000			11,053
Kimco Realty Corp., Series C, 5.783% 2016		14,000			11,868
Kimco Realty Corp. 5.70% 2017		21,180			17,587
PRICOA Global Funding I 4.20% 20103		11,000			10,779
Prudential Financial, Inc., Series D, 5.50% 2016		14,000			13,146
Prudential Holdings, LLC, Series C, 8.695% 20233,6		19,500			18,696
American Express Bank 5.50% 2013		21,300			20,921
American Express Co. 6.15% 2017		22,800			21,061
Simon Property Group, LP 5.30% 2013		11,750			11,372
Simon Property Group, LP 5.875% 2017		15,165			13,945
Simon Property Group, LP 6.125% 2018		15,160			14,125
JPMorgan Chase & Co. 4.891% 20154		20,000			17,404
JPMorgan Chase Bank NA 6.00% 2017		5,000			4,874
JPMorgan Chase Capital XXV, Series Y, 6.80% 2037		14,865			12,820
Fifth Third Bancorp 8.25% 2038		9,000			6,905
Fifth Third Capital Trust IV 6.50% 20674		45,530			27,762
ProLogis 5.50% 2012		15,000			13,817
ProLogis 5.625% 2015		10,425			8,276
ProLogis 6.625% 2018		15,500			12,224
Developers Diversified Realty Corp. 4.625% 2010		28,625			25,888
Developers Diversified Realty Corp. 5.50% 2015		13,000			8,300
CNA Financial Corp. 5.85% 2014		25,000			20,096
CNA Financial Corp. 6.50% 2016		16,000			12,982
Monumental Global Funding 5.50% 20133		12,000			11,588
Monumental Global Funding III 1.331% 20143,4		29,000			20,479
Santander Issuances, SA Unipersonal 5.805% 20163,4		20,000			16,094
Sovereign Bancorp, Inc. 8.75% 2018		4,000			3,946
Santander Perpetual, SA Unipersonal 6.671% (undated)3,4		15,400			11,413
Hospitality Properties Trust 6.75% 2013		14,720			12,959
Hospitality Properties Trust 6.70% 2018		21,025			16,126
Goldman Sachs Group, Inc. 6.15% 2018		10,120			9,869
Goldman Sachs Group, Inc. 7.50% 2019		16,245			17,400
CIT Group Inc. 7.625% 20122		15,355			10,902
CIT Group Inc. 5.40% 2013		25,400			15,754
HBOS PLC 6.75% 20183		34,050			25,743
ERP Operating LP 5.375% 2016		25,000			23,031
Bank of America Corp. 5.30% 2017		25,275			21,477
ACE INA Holdings Inc. 5.875% 2014		20,000			20,675
American Honda Finance Corp. 5.125% 20103		20,500			20,233
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		18,000			17,724
Citigroup Inc. 6.00% 2017		19,522			17,045
Metropolitan Life Global Funding I, 5.125% 20133		12,000			12,215
MetLife Capital Trust X 9.25% 20683,4		5,000			4,460
New York Life Global Funding 5.25% 20123		15,000			15,895
Principal Life Insurance Co. 5.30% 2013		15,500			15,478
Allstate Life Global Funding Trust, Series 2008-4, 5.375% 2013		13,000			13,453
Household Finance Corp. 6.375% 2012		13,000			13,233
Nationwide Financial Services, Inc. 6.75% 20674		21,950			12,996
Catlin Insurance Ltd. 7.249% (undated)3,4		21,320			11,954
Loews Corp. 6.00% 2035		14,000			11,926
Resona Bank, Ltd. 5.85% (undated)3,4		15,000			11,340
Assurant, Inc. 5.625% 2014		12,665			11,308
Lincoln National Corp. 5.65% 2012		10,250			9,956
Standard Chartered Bank 6.40% 20173		10,800			9,774
Federal Realty Investment Trust 4.50% 2011		8,500			8,046
Silicon Valley Bank 5.70% 2012		7,600			7,076
Wells Fargo & Co. 4.375% 2013		6,920			6,985
City National Corp. 5.125% 2013		6,989			6,242
Nationwide Mutual Insurance 5.81% 20243,4		10,000			5,878
United Dominion Realty Trust, Inc. 5.00% 2012		6,000			5,802
Credit Agricole SA 6.637% (undated)3,4		4,365			2,641
Den Norske CreditBank 0.938% (undated)4		3,000			1,660
					984,974
TELECOMMUNICATION SERVICES — 1.17%
SBC Communications Inc. 6.25% 2011		10,000			10,600
AT&T Wireless Services, Inc. 7.875% 2011		12,170			13,130
AT&T Wireless Services, Inc. 8.125% 2012		5,230			5,859
AT&T Inc. 4.95% 2013		16,250			16,914
SBC Communications Inc. 5.10% 2014		15,000			15,599
SBC Communications Inc. 5.625% 2016		49,300			50,807
BellSouth Capital Funding Corp. 7.875% 2030		51,500			57,046
AT&T Corp. 8.00% 20314		10,000			11,574
SBC Communications Inc. 6.45% 2034		40,000			39,568
Verizon Global Funding Corp. 7.25% 2010		30,000			31,953
Verizon Communications Inc. 3.75% 20113		29,250			29,862
Verizon Communications Inc. 5.55% 20143		12,440			13,220
Verizon Communications Inc. 5.50% 2017		9,475			9,506
Verizon Communications Inc. 6.10% 2018		21,250			21,834
Verizon Communications Inc. 6.35% 2019		9,360			9,755
Verizon Global Funding Corp. 7.75% 2030		9,395			10,521
Verizon Communications Inc. 6.25% 2037		50,000			48,472
Verizon Communications Inc. 6.90% 2038		4,500			4,709
Telecom Italia Capital SA 5.25% 2015		38,425			37,142
Telecom Italia Capital SA 7.721% 2038		12,500			12,766
Deutsche Telekom International Finance BV 5.875% 2013		12,500			13,123
Deutsche Telekom International Finance BV 4.875% 2014		15,500			15,618
Vodafone Group PLC 5.45% 2019		10,640			10,483
France Télécom 4.375% 2014		10,000			10,089
					500,150
CONSUMER DISCRETIONARY — 1.06%
Comcast Corp. 5.45% 2010		25,000			26,003
Comcast Corp. 5.30% 2014		15,000			15,528
Comcast Corp. 6.45% 2037		6,500			6,426
Comcast Corp. 6.95% 2037		34,250			35,824
Comcast Corp. 6.40% 2038		13,425			13,185
AOL Time Warner Inc. 6.875% 2012		40,000			42,817
Time Warner Inc. 5.875% 2016		14,210			14,025
AOL Time Warner Inc. 7.625% 2031		25,315			24,674
Time Warner Inc. 6.50% 2036		10,000			8,783
Cox Communications, Inc. 4.625% 2010		25,000			25,122
Cox Communications, Inc. 7.75% 2010		15,000			15,620
Cox Communications, Inc. 5.45% 2014		15,500			15,405
Cox Communications, Inc. 8.375% 20393		7,500			8,387
Time Warner Cable Inc. 6.75% 2018		55,370			57,769
Viacom Inc. 5.75% 2011		35,000			35,847
Thomson Reuters Corp. 5.95% 2013		8,140			8,334
Thomson Reuters Corp. 6.50% 2018		20,815			21,700
Omnicom Group Inc. 5.90% 2016		20,000			20,061
News America Inc. 5.30% 2014		8,750			8,823
News America Inc. 6.90% 20193		5,750			6,002
News America Inc. 6.15% 2037		5,000			4,253
Toll Brothers, Inc. 4.95% 2014		20,000			17,986
Nordstrom, Inc. 6.75% 2014		10,000			10,406
Seminole Tribe of Florida 5.798% 20133,6		11,185			10,123
					453,103
INDUSTRIALS — 0.86%
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 20162,6		17,757			15,626
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20192,6		9,197			7,541
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20196		4,791			4,159
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20202,6		11,834			10,947
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20222,6		7,943			6,672
Continental Airlines, Inc., Series 2007-1, Class B, 6.903% 20226		9,045			6,009
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20146		29,550			26,048
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20246		17,506			13,742
Burlington Northern Santa Fe Corp. 7.00% 2014		31,850			34,107
BNSF Funding Trust I 6.613% 20554		6,175			4,897
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20113,6		19,871			19,592
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20133,6		14,029			14,060
Union Pacific Corp. 5.75% 2017		4,325			4,367
Union Pacific Corp. 5.70% 2018		29,150			29,261
CSX Corp. 5.75% 2013		7,670			7,871
CSX Corp. 6.25% 2015		5,990			6,200
CSX Corp. 6.15% 2037		17,645			16,459
Caterpillar Financial Services Corp., Series F, 6.20% 2013		23,940			25,370
General Electric Co. 5.25% 2017		24,250			23,855
Norfolk Southern Corp. 5.75% 20163		7,615			7,898
Norfolk Southern Corp. 5.75% 2018		15,500			15,875
Koninklijke Philips Electronics NV 5.75% 2018		23,500			23,728
Atlas Copco AB 5.60% 20173		14,000			13,485
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20136		13,650			12,882
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20106		32			32
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20156		95			94
United Air Lines, Inc., Series 2007-1, Class A, 6.636% 20246		14,142			10,952
Canadian National Railway Co. 4.95% 2014		6,000			6,268
Southern Capital Corp. Pass Through Trust, Series 2002-1, Class G, MBIA insured, 5.70% 20233,6		1,164			597
					368,594
UTILITIES — 0.81%
National Rural Utilities Cooperative Finance Corp. 5.50% 2013		65,500			69,252
National Rural Utilities Cooperative Finance Corp., Collateral Trust Bonds, 10.375% 2018		8,450			10,612
MidAmerican Energy Holdings Co., Series D, 5.00% 2014		18,000			18,725
MidAmerican Energy Holdings Co. 5.75% 2018		25,925			27,013
MidAmerican Energy Holdings Co. 6.125% 2036		9,750			9,669
MidAmerican Energy Holdings Co. 6.50% 2037		5,000			5,206
PG&E Corp. 5.75% 2014		5,750			6,133
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034		20,000			20,816
E.ON International Finance BV 5.80% 20183		24,450			25,482
Alabama Power Co., Series FF, 5.20% 2016		16,000			16,539
Alabama Power Co. 6.00% 2039		7,500			7,945
Exelon Corp. 4.45% 2010		20,000			20,203
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20163		5,450			5,112
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20363		14,000			11,935
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2005-A, 5.00% 2016		16,000			16,406
San Diego Gas & Electric Co., Series CCC, 5.30% 2015		15,000			15,576
Virginia Electric and Power Co., Series 2003-B, 4.50% 2010		3,500			3,586
Virginia Electric and Power Co., Series B, 5.95% 2017		10,000			10,752
Electricité de France SA 6.95% 20393		12,000			13,518
Public Service Electric and Gas Co., Series E, 5.30% 2018		8,500			8,898
Appalachian Power Co., Series M, 5.55% 2011		7,800			8,087
Veolia Environnement 5.25% 2013		6,500			6,725
Kern River Funding Corp. 4.893% 20183,6		4,891			4,656
Tri-State Generation and Transmission Assn. Inc., Pass Through Trust, Series 2003-A, 6.04% 20183,6		4,089			3,820
					346,666
HEALTH CARE — 0.81%
Cardinal Health, Inc. 1.462% 20094		23,000			22,912
Cardinal Health, Inc. 4.00% 2015		44,100			38,456
Cardinal Health, Inc. 5.80% 2016		27,500			26,657
Cardinal Health, Inc. 5.85% 2017		3,575			3,350
UnitedHealth Group 6.00% 2017		22,170			21,406
UnitedHealth Group Inc. 6.00% 2018		35,000			33,646
GlaxoSmithKline Capital Inc. 4.85% 2013		33,700			35,283
GlaxoSmithKline Capital Inc. 6.375% 2038		16,500			18,004
AstraZeneca PLC 5.90% 2017		25,000			26,814
Pfizer Inc. 4.45% 2012		25,000			26,248
Roche Holdings Inc. 4.50% 20123		20,000			21,092
Hospira, Inc. 5.55% 2012		14,120			14,720
Biogen Idec Inc. 6.00% 2013		13,500			13,826
Humana Inc. 6.45% 2016		14,200			12,511
Coventry Health Care, Inc. 6.30% 2014		13,520			11,936
Merck & Co., Inc. 5.00% 2019		8,925			9,054
Abbott Laboratories 5.125% 2019		8,600			8,872
					344,787
ENERGY — 0.70%
Kinder Morgan Energy Partners LP 6.00% 2017		41,610			41,342
Kinder Morgan Energy Partners LP 6.50% 2037		10,000			9,160
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20093,6		1,677			1,668
Ras Laffan Liquefied Natural Gas II 5.298% 20203,6		22,000			20,161
Ras Laffan Liquefied Natural Gas III 5.838% 20273,6		20,000			16,801
Enbridge Energy Partners, LP, Series B, 6.50% 2018		12,250			12,091
Enbridge Energy Partners, LP, Series B, 7.50% 2038		12,250			12,338
Enbridge Energy Partners, LP 8.05% 20774		17,520			12,807
TransCanada PipeLines Ltd. 6.35% 20674		44,785			31,169
Williams Companies, Inc. 7.875% 2021		15,850			15,642
Williams Companies, Inc. 8.75% 2032		6,025			6,070
Gaz Capital SA 6.51% 20223		27,495			20,690
Rockies Express Pipeline LLC 6.85% 20183		14,750			15,619
BP Capital Markets PLC 3.625% 20143		15,000			14,976
Sunoco, Inc. 4.875% 2014		15,000			13,989
Enterprise Products Operating LLC 6.30% 2017		13,000			13,085
Canadian Natural Resources Ltd. 5.70% 2017		11,925			12,078
Enbridge Inc. 5.60% 2017		10,000			9,817
Husky Energy Inc. 6.80% 2037		9,375			9,329
Polar Tankers, Inc. 5.951% 20373,6		6,685			6,214
Petroleum Export Ltd., Class A-2, XLCA insured, 4.633% 20103,6		2,556			2,508
					297,554
CONSUMER STAPLES — 0.36%
Altria Group, Inc. 9.25% 2019		15,000			16,872
Altria Group, Inc. 9.95% 2038		13,500			15,624
Kraft Foods Inc. 6.75% 2014		16,180			17,763
Kraft Foods Inc. 6.875% 2038		13,000			13,796
British American Tobacco International Finance PLC 9.50% 20183		26,395			31,073
Anheuser-Busch InBev NV 7.75% 20193		20,000			21,911
PepsiCo, Inc. 7.90% 2018		15,000			18,280
CVS Corp. 6.036% 20283,6		7,373			6,317
CVS Caremark Corp. 6.943% 20303,6		12,631			11,459
					153,095
MATERIALS — 0.28%
Dow Chemical Co. 7.60% 2014		18,250			18,817
Rohm and Haas Co. 6.00% 2017		17,445			15,621
Rio Tinto Finance (USA) Ltd. 5.875% 2013		28,500			28,704
International Paper Co. 7.40% 2014		23,250			23,168
Yara International ASA 7.875% 20193		17,250			18,008
ArcelorMittal 6.125% 2018		12,000			10,517
BHP Billiton Finance (USA) Ltd. 5.50% 2014		4,690			5,036
					119,871
INFORMATION TECHNOLOGY — 0.28%
Hewlett-Packard Co. 4.50% 2013		20,000			20,811
Electronic Data Systems Corp., Series B, 6.00% 20134		32,500			35,511
Electronic Data Systems Corp. 7.45% 2029		16,594			20,090
KLA-Tencor Corp. 6.90% 2018		30,250			27,240
Oracle Corp. 3.75% 2014		15,750			15,750
					119,402
Total corporate bonds & notes					3,688,196
ASSET-BACKED OBLIGATIONS6 — 1.13%
World Omni Auto Receivables Trust, Series 2006-B, Class A-4, 5.12% 2012		62,000			63,411
AmeriCredit Automobile Receivables Trust, Series 2006-B-G, Class A-4, FGIC insured, 5.21% 2013		20,880			20,162
AmeriCredit Automobile Receivables Trust, Series 2007-C-M, Class A-4-A, MBIA insured, 5.55% 2014		14,225			12,777
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-4-A, FSA insured, 5.56% 2014		15,000			13,474
Drive Auto Receivables Trust, Series 2005-3, Class A-4, FSA insured, 5.09% 20133		23,304			23,887
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20143		14,893			14,885
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-1, Class A-5, MBIA insured, 5.08% 20113		29,550			28,025
Nissan Auto Lease Trust, Series 2008-A, Class A-3a, 5.14% 2011		25,750			26,423
USAA Auto Owner Trust, Series 2007-1, Class A-4, 5.55% 2013		24,000			25,105
ARG Funding Corp., Series 2005-2, Class A-4, AMBAC insured, 4.84% 20113		24,500			23,325
Chase Issuance Trust, Series 2008-4, Class A, 4.65% 2015		17,000			17,539
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-3, 5.12% 2014		16,076			16,910
UPFC Auto Receivables Trust, Series 2007-B, Class A-3, AMBAC insured, 6.15% 2014		16,750			16,745
Prestige Auto Receivables Trust, Series 2007-1, Class A-3, FSA insured, 5.58% 20143		17,000			16,654
CPS Auto Receivables Trust, Series 2004-B, Class A-2, XLCA insured, 3.56% 20113		753			757
CPS Auto Receivables Trust, Series 2006-A, Class 1-A-4, FSA insured, 5.33% 20123		6,140			5,955
CPS Auto Receivables Trust, Series 2007-TFC, Class A-2, XLCA insured, 5.25% 20133		8,546			8,409
Susquehanna Auto Lease Trust, Series 2007-1, Class A-3, 5.25% 20103		14,797			14,807
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031		5,385			4,041
Residential Asset Securities Corp. Trust, Series 2004-KS9, Class A-I-4, FGIC insured, 4.61% 20322		7,312			5,430
Residential Asset Securities Corp. Trust, Series 2003-KS6, Class A-2, 0.914% 20334		124			110
Residential Asset Securities Corp. Trust, Series 2003-KS8, Class A-I-6, 4.83% 20332		6,762			4,721
Citibank Credit Card Issuance Trust, Series 2008, Class A5, 4.85% 2015		12,000			12,388
Ameriquest Mortgage Securities Inc., Series 2004-R4, Class M-1, 0.864% 20344		20,434			12,350
CarMax Auto Owner Trust, Series 2007-2, Class A-3, 5.23% 2011		11,747			11,950
RAMP Trust, Series 2003-RZ4, Class A-7, 4.79% 20334		6,565			5,452
RAMP Trust, Series 2003-RS11, Class A-I-7, 4.828% 2033		7,675			6,223
Chase Credit Card Owner Trust, Series 2003-4, Class B, 0.969% 20164		14,000			11,401
Long Beach Acceptance Auto Receivables Trust, Series 2004-C, Class A-4, FSA insured, 3.777% 2011		3,776			3,792
Long Beach Acceptance Auto Receivables Trust, Series 2005-B, Class A-4, FSA insured, 4.522% 2012		6,970			7,040
West Penn Funding LLC, Transition Bonds, Series 2005-A, Class A-1, 4.46% 20103		7,211			7,320
Morgan Stanley ABS Capital I Inc., Series 2004-NC3, Class M-1, 1.109% 20344		14,117			7,108
GE SeaCo Finance SRL, Series 2004-1, Class A, AMBAC insured, 0.619% 20192,3,4		10,464			7,011
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011		5,962			5,968
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 20173		7,402			5,764
GMAC Mortgage Loan Trust, Series 2006-HE3, Class A-5, FGIC insured, 5.809% 20364		13,000			3,781
CWHEQ Home Equity Loan Trust, Series 2006-S4, Class A-6, AMBAC insured, 5.834% 20344		9,450			3,664
Home Equity Asset Trust, Series 2004-2, Class M-1, 1.109% 20344		7,984			3,661
CWABS, Inc., Series 2004-BC1, Class M-1, 0.814% 20344		5,581			3,091
Impac CMB Grantor Trust, Series 2004-6, Class 1-A-1, 1.114% 20344		1,414			632
Impac CMB Grantor Trust, Series 2004-6, Class M-2, 1.214% 20344		1,393			516
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-3, 5.70% 2023		461			459
					483,123
MUNICIPALS — 0.03%
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds,
Series 2002-A, Class A, 6.72% 2025		14,129			11,427
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
Series 2001-A, Class A, 6.36% 2025		553			474
					11,901
Total bonds & notes (cost: $15,502,844,000)					14,937,883
	Principal amount			Value
Short-term securities — 2.12%		(000	)		(000	)
General Electric Capital Corp., FDIC insured, 0.23%–0.24% due 7/21–8/3/2009	$	99,900		$	99,889
GE Financial Assurance Holdings Inc. 0.15% due 7/1/2009		43,000			43,000
General Electric Capital Corp., FDIC insured, 0.23%–0.50% due 7/30–8/25/2009		65,700			65,684
Procter & Gamble International Funding S.C.A. 0.19%–0.20% due 7/23–8/24/20093		103,500			103,482
Jupiter Securitization Co., LLC 0.26%–0.27% due 7/10–7/14/20093		58,100			58,095
Park Avenue Receivables Co., LLC 0.25% due 7/6–7/21/20093		40,000			39,996
Freddie Mac 0.15%–0.33% due 7/13–10/19/2009		92,200			92,168
NetJets Inc. 0.18%–0.22% due 7/9–7/16/20093		70,000			69,994
Fannie Mae 0.16%–0.40% due 7/6–7/22/2009		67,500			67,493
Federal Home Loan Bank 0.135%–0.27% due 7/6–8/11/2009		64,700			64,694
Abbott Laboratories 0.17%–0.21% due 8/13–9/28/20093		36,100			36,083
Coca-Cola Co. 0.22%–0.42% due 7/20–8/7/20093		34,100			34,093
Medtronic Inc. 0.18%–0.19% due 7/10/20093		33,096			33,094
Hewlett-Packard Co. 0.20% due 7/2/20093		25,000			25,000
United Technologies Corp. 0.19% due 7/23/20093		25,000			24,997
Pfizer Inc 0.19% due 7/7/20093		14,680			14,679
Harvard University 0.20% due 7/15/2009		11,800			11,799
Johnson & Johnson 0.25% due 7/20/20093		10,150			10,149
U.S. Treasury Bills 0.29% due 7/2/2009		9,900			9,900
Total short-term securities (cost: $904,273,000)					904,289
Total investment securities (cost: $45,975,341,000)					42,823,279
Other assets less liabilities					(158,130	)
Net assets				$	42,665,149

“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 directors. The total value of all such securities, including those in “Miscellaneous,” was $1,599,395,000, which represented 3.75% of the net assets of the fund. This amount includes $869,798,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading.

3 Purchased 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 $1,819,490,000, which represented 4.26% of the net assets of the fund.

4 Coupon rate may change periodically.

5 Index-linked bond whose principal amount moves with a government retail price index.

6 Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

Key to abbreviation

ADR = American Depositary Receipts

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

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus, which can be obtained from your financial professional and should be read carefully before investing.

MFGEFP-911-0809O-S21434

ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 10 – Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders.  The procedures are as follows.  The Registrant has a nominating committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating committee.

ITEM 11 – Controls and Procedures

(a)	The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
(b)	There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12 – Exhibits

(a)(1)	Not applicable for filing of semi-annual reports to shareholders.
(a)(2)	The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN BALANCED FUND, INC.

By /s/ Robert G. O'Donnell

Robert G. O'Donnell, Vice Chairman and

Principal Executive Officer

Date: September 4, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By /s/ Robert G. O'Donnell

Robert G. O'Donnell, Vice Chairman and

Principal Executive Officer

Date: September 4, 2009

By /s/ Jennifer M. Buchheim

Jennifer M. Buchheim, Treasurer and

Principal Financial Officer

Date: September 4, 2009