American Funds American Balanced 529A (CLBAX) N-CSR Certified 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

(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: December 31, 2011

Patrick F. Quan

American Balanced Fund

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

     

American Balanced Fund®

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Special feature

The benefits of a balanced approach to investing in today’s market

See page 6

Annual report for the year ended December 31, 2011

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

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

See page 4 for Class A share results with relevant sales charges deducted. Results for other share classes can be found on page 30.

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. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 27 and 28 for details.

The fund’s 30-day yield for Class A shares as of January 31, 2012, calculated in accordance with the U.S. Securities and Exchange Commission formula, was 1.67%. The fund’s distribution rate for Class A shares as of that date was 2.00%. 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.

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.

[Begin Sidebar]

American Balanced Fund results*
(yearly returns through December 31)
	Value of			Income			Total
	principal			return			return†
1975 (from July 26)		2.4	%		3.2	%		5.6	%
1976		20.0			6.0			26.0
1977		–4.5			5.2			0.7
1978		0.6			5.6			6.2
1979		1.6			6.0			7.6
1980		7.1			7.3			14.4
1981		–3.5			7.9			4.4
1982		20.8			8.6			29.4
1983		8.4			7.7			16.1
1984		2.2			7.2			9.4
1985		22.3			6.8			29.1
1986		10.9			6.0			16.9
1987		–2.3			6.3			4.0
1988		6.6			6.3			12.9
1989		14.9			6.6			21.5
1990	­–7.3				5.7			–1.6
1991		18.6			6.1			24.7
1992		4.4			5.1			9.5
1993		6.3			5.0			11.3
1994	­–4.2				4.5			0.3
1995		22.4			4.7			27.1
1996		9.2			4.0			13.2
1997		17.1			3.9			21.0
1998		7.5			3.6			11.1
1999		–0.1			3.6			3.5
2000		12.0			3.9			15.9
2001		4.5			3.7			8.2
2002		–9.0			2.7			–6.3
2003		20.2			2.6			22.8
2004		6.8			2.1			8.9
2005		0.9			2.2			3.1
2006		9.1			2.7			11.8
2007		3.8			2.8			6.6
2008		–28.5			2.8			–25.7
2009		18.1			3.0			21.1
2010		10.8			2.2			13.0
2011		1.6			2.2			3.8
Average annual total return:								10.6	%
*Capital Research and Management Company became the fund’s investment adviser on July 26, 1975.
† Total return measures capital appreciation and income return, assuming reinvestment of dividends and capital gain distributions.

[End Sidebar]

Fellow investors:

U.S. stocks posted a small gain for 2011 after struggling most of the year with concerns about the global economy and debt problems in Europe and at home. U.S. bonds outshone stocks by a wide margin, as many investors moved into fixed-income investments.

Equities, as measured by Standard & Poor’s 500 Composite Index, had a 2.1% total return for the 12 months ended December 31, 2011. Investment-grade bonds, as measured by Barclays Capital U.S. Aggregate Index, gained 7.8%. American Balanced Fund (AMBAL) increased 3.8%, outpacing the 0.7% return of the Lipper Balanced Funds Index. The market indexes are unmanaged.

It was especially advantageous in 2011 for the fund to hold a well-chosen, diversified mix of high-quality equities and bonds. American Balanced Fund follows a policy of having between 50% and 75% invested in equities at all times. At the end of the year, the fund had 70% in equities, 28% in bonds and 2% in short-term securities including cash.

Over longer term periods, AMBAL has also done well compared with the fund’s benchmarks. For the 10 years ended December 31, 2011, the fund posted an average annual total return of 5.0% compared with 4.1% for the Lipper Balanced Funds Index. The positive total return over the last decade is noteworthy especially given the fact that this decade included two of the worst declines in history. Over the fund’s 36-year lifetime with Capital Research and Management Company, AMBAL had an average annual return of 10.6% compared with 9.9% by the Lipper Balanced Funds Index. For more details on the potential benefits of a balanced approach to investing, see our feature article on page 6.

Equities started the year continuing the rally that began in mid-2010 driven by strong U.S. corporate earnings and some signs of improvement in the American economy. But a confluence of negative events put pressure on equities globally beginning in April, and the S&P 500 registered five straight months of losses amid heightened uncertainty. The events included weather disruptions in the United States, natural disasters such as the Japanese earthquake and tsunami and the debt crises in Greece, Ireland, Portugal and Spain. Fiscal policy and political gridlock in the U.S. also unsettled investors.

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[Begin Sidebar]

In this report
	Special feature
6	The benefits of a balanced approach to investing in today’s market
	We find out why balanced funds remain one of the soundest mutual fund types.
	Contents
1	Letter to investors
4	The value of a long-term perspective
12	Summary investment
	portfolio
17	Financial statements
35	Board of trustees and other officers

About the cover: Harmony in nature exists with trees and crops in Clackamas County, Oregon.

[End Sidebar]

[photo of a row of trees]

Gross domestic growth remained positive, though its pace was tepid. Housing and employment data continued to disappoint for most of the year. The unemployment rate remained near 9% before dipping to 8.7% in November. Although private sector hiring accelerated, those gains were offset by losses in the government sector as municipalities and states laid off workers. Home prices continued to drift lower, although the pace of sales began to pick up. Other indicators, including purchasing manager surveys and consumer spending data, also began pointing to an upswing in the economy.

While the microeconomic backdrop was certainly challenging, the equity portion of the fund benefited from the selection of large-capitalization high-quality equities. Eight of the fund’s 10 largest holdings contributed positively. They included Philip Morris International (+34.1%), Home Depot (+19.9%), Chevron (+16.6%), Union Pacific (+14.3), Royal Dutch Shell (+14.0%), Boeing (+12.4%), American Express (+9.9%) and Merck (+4.6%). Two of the 10 largest stocks detracted from results. They were Wells Fargo (–11.1%) and Berkshire Hathaway (–4.7%).

The U.S. bond market, as measured by Barclays Capital, rose during the year on the back of sharp gains by U.S. Treasury bonds, which advanced 9.8%. Treasuries rallied because investors became concerned that problems in the European financial system could lead to a renewed global slowdown. The Federal Reserve intervened by making large-scale purchases of U.S. bonds, which helped long-term interest rates fall significantly. Investment-grade corporate bonds increased 8.1% and mortgage-backed securities rose 6.2%. AMBAL’s bond investments made a solid contribution to the results of the fund, and helped to reduce significantly the volatility of the fund.

As has been true since its inception, the fund approaches the management of its investments as if they constituted the complete investment program of the prudent investor. We plan to continue to manage our portfolio in the same way during what may be an uncertain period for the global economy. We are confident that we can produce solid results over the long term based on our research-driven approach.

Cordially,

/s/ Gregory D. Johnson

Gregory D. Johnson

Vice Chairman of the Board

and Principal Executive Officer

February 8, 2012

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

[Begin Sidebar]

We are deeply saddened by the loss of Jon B. Lovelace Jr., chairman emeritus and former portfolio counselor of Capital Research and Management Company and former chairman of The Capital Group Companies.

Nearly every aspect of the Capital Group bears some stamp of Jon’s leadership and service from 1951 until 2005. He was one of the principal architects of our Multiple Portfolio Counselor System, an early proponent of international investing, the founder of New Perspective Fund and Capital Income Builder and a standard-bearer of the Capital Group’s mission to serve investors.

Though he never sought the spotlight, his accomplishments in life, work and philanthropy will long be remembered.

[End Sidebar]

History of American Balanced Fund

A historical view of the comparative total returns of stocks, bonds, the 60%/40% S&P/BC Index, the Lipper Balanced Funds Index and AMBAL.

Stocks, bonds and balance (July 26, 1975, to December 31, 2011)
										Lipper			American
Total	U.S.			U.S.				60%/40%		Balanced			Balanced
returns (through December 31)	stocks			bonds			S&P/BC Index			Funds Index			Fund
1975 (from July 26)		3.1	%		5.6	%		4.2	%		3.4	%		5.6	%
1976		23.9			15.6			20.7			26.0			26.0
1977		–7.2			3.0			–3.1			–0.7			0.7
1978		6.6			1.4			4.7			4.8			6.2
1979		18.6			1.9			11.8			14.7			7.6
1980		32.5			2.7			20.4			19.7			14.4
1981		–4.9			6.2			–0.5			1.9			4.4
1982		21.5			32.6			26.2			30.6			29.4
1983		22.6			8.4			16.8			17.4			16.1
1984		6.3			15.1			10.0			7.5			9.4
1985		31.7			22.1			27.9			29.8			29.1
1986		18.7			15.3			17.6			18.4			16.9
1987		5.3			2.8			5.6			4.1			4.0
1988		16.6			7.9			13.1			11.2			12.9
1989		31.6			14.5			24.7			19.7			21.5
1990		–3.1			9.0			1.8			0.7			–1.6
1991		30.4			16.0			24.7			25.8			24.7
1992		7.6			7.4			7.6			7.5			9.5
1993		10.1			9.7			10.0			12.0			11.3
1994		1.3			–2.9			–0.3			–2.0			0.3
1995		37.5			18.5			29.6			24.9			27.1
1996		22.9			3.6			15.0			13.1			13.2
1997		33.4			9.7			23.6			20.3			21.0
1998		28.6			8.7			21.0			15.1			11.1
1999		21.0			–0.8			12.0			9.0			3.5
2000		–9.1			11.6			–1.0			2.4			15.9
2001		–11.9			8.4			–3.7			–3.2			8.2
2002		–22.1			10.3			–9.8			–10.7			–6.3
2003		28.7			4.1			18.5			19.9			22.8
2004		10.9			4.3			8.3			9.0			8.9
2005		4.9			2.4			4.0			5.2			3.1
2006		15.8			4.3			11.1			11.6			11.8
2007		5.5			7.0			6.2			6.5			6.6
2008		–37.0			5.2			–22.1			–26.2			–25.7
2009		26.5			5.9			18.4			23.4			21.1
2010		15.1			6.5			12.1			11.9			13.0
2011		2.1			7.8			4.7			0.7			3.8
Average annual total returns		10.9	%		8.4	%		10.2	%		9.9	%		10.6	%
Volatility		15.3			5.6			10.0			10.4			9.9

Figures assume reinvestment of all distributions.

Sources: Stocks — S&P 500; Bonds — Barclays Capital U.S. Aggregate Index. Barclays Capital U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. For the period July 31, 1975, to December 31, 1975, Barclays Capital Government/Credit Bond Index was used.

The 60%/40% S&P/BC Index blends the S&P 500 with the Barclays Capital U.S. Aggregate Index by weighting their total returns at 60% and 40%, respectively. The portfolio is rebalanced monthly.

The market indexes are unmanaged and, therefore, have no expenses.

The Lipper Balanced Funds Index is an equally weighted index of the 30 largest U.S. balanced funds.

Capital Research and Management Company became the fund’s investment adviser on July 26, 1975.

Volatility is calculated using annualized standard deviation (based on monthly returns), a measure of how returns over time have varied from the mean; a lower number signifies lower volatility.

The value of a long-term perspective

How a $10,000 investment has grown

Fund results shown are for Class A shares and reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment.1 Thus, the net amount invested was $9,425.2 Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

This chart shows how a hypothetical $10,000 investment in American Balanced Fund grew from July 26, 1975 — when Capital Research and Management Company became the fund’s investment adviser — to December 31, 2011.

As you can see, the investment grew to $372,947 with all distributions reinvested. The fund’s year-by-year results appear under the chart. You can use this table to estimate how the value of your own holdings has grown.

[begin mountain chart]

DATE	American Balanced Fund with dividends reinvested		S&P 500 with dividends reinvested3		Barclays Capital U.S. Aggregate Index3,5		Lipper Balanced Funds Index4
Initial (7/25/75)		9,425		10,000		10,000		10,000
12/31/1975		9,948		10,314		10,558		10,340
12/31/1976		12,533		12,782		12,205		13,031
12/31/1977		12,620		11,867		12,576		12,938
12/31/1978		13,404		12,647		12,751		13,558
12/31/1979		14,427		15,001		12,997		15,548
12/31/1980		16,498		19,869		13,348		18,611
12/31/1981		17,224		18,891		14,182		18,957
12/31/1982		22,280		22,961		18,809		24,763
12/31/1983		25,869		28,140		20,381		29,081
12/31/1984		28,291		29,905		23,468		31,251
12/31/1985		36,527		39,393		28,655		40,574
12/31/1986		42,690		46,746		33,029		48,050
12/31/1987		44,406		49,200		33,940		50,033
12/31/1988		50,123		57,349		36,616		55,627
12/31/1989		60,915		75,489		41,936		66,584
12/31/1990		59,959		73,142		45,694		67,020
12/31/1991		74,765		95,378		53,006		84,330
12/31/1992		81,853		102,634		56,930		90,620
12/31/1993		91,080		112,956		62,480		101,451
12/31/1994		91,386		114,442		60,658		99,375
12/31/1995		116,179		157,396		71,864		124,107
12/31/1996		131,474		193,510		74,473		140,306
12/31/1997		159,131		258,048		81,662		168,784
12/31/1998		176,846		331,786		88,756		194,248
12/31/1999		182,974		401,589		88,027		211,685
12/31/2000		211,985		365,037		98,261		216,741
12/31/2001		229,339		321,685		106,558		209,726
12/31/2002		214,967		250,617		117,485		187,310
12/31/2003		264,029		322,463		122,307		224,652
12/31/2004		287,587		357,528		127,614		244,841
12/31/2005		296,549		375,070		130,713		257,566
12/31/2006		331,559		434,261		136,378		287,442
12/31/2007		353,427		458,102		145,879		306,204
12/31/2008		262,497		288,647		153,523		226,055
12/31/2009		317,839		365,056		162,628		278,844
12/31/2010		359,216		420,124		173,267		312,027
12/31/2011		372,947		428,892		186,854		314,335

[end mountain chart]

Average annual total return: 10.4%

Average annual total returns based on a $1,000 investment
(for periods ended December 31, 2011)*
	1 year			5 years			10 years
Class A shares		–2.13	%		1.18	%		4.36	%
*Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge.

The total annual fund operating expense ratio is 0.62% for Class A shares as of the prospectus dated March 1, 2012 (unaudited).

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. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 27 and 28 for details.

Year ended Dec. 31		1975	6	1976		1977	1978		1979	1980	1981	1982
Total value (dollars in thousands)
Dividends reinvested	$	.3		.6		.7	.7		.8	1.1	1.3	1.5
Value at year-end1	$	9.9		12.5		12.6	13.4		14.4	16.5	17.2	22.3
AMBAL total return		(0.5	)%	26.0		0.7	6.2		7.6	14.4	4.4	29.4
Year ended Dec. 31		1983		1984		1985	1986		1987	1988	1989	1990
Total value (dollars in thousands)
Dividends reinvested		1.7		1.9		1.9	2.2		2.7	2.8	3.3	3.5
Value at year-end1		25.9		28.3		36.5	42.7		44.4	50.1	60.9	60.0
AMBAL total return		16.1		9.4		29.1	16.9		4.0	12.9	21.5	(1.6	)
Year ended Dec. 31		1991		1992		1993	1994		1995	1996	1997	1998
Total value (dollars in thousands)
Dividends reinvested		3.7		3.8		4.1	4.1		4.3	4.7	5.2	5.8
Value at year-end1		74.8		81.9		91.1	91.4		116.2	131.5	159.1	176.8
AMBAL total return		24.7		9.5		11.3	0.3		27.1	13.2	21.0	11.1
Year ended Dec. 31		1999		2000		2001	2002		2003	2004	2005	2006
Total value (dollars in thousands)
Dividends reinvested		6.4		7.2		7.8	6.3		5.6	5.5	6.4	7.9
Value at year-end1		183.0		212.0		229.3	215.0		264.0	287.6	296.5	331.6
AMBAL total return		3.5		15.9		8.2	(6.3	)	22.8	8.9	3.1	11.8
Year ended Dec. 31		2007		2008		2009	2010		2011
Total value (dollars in thousands)
Dividends reinvested		9.2		10.1		7.9	7.1		8.1
Value at year-end1		353.4		262.5		317.8	359.2		372.9
AMBAL total return		6.6		(25.7	)	21.1	13.0		3.8

1As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares.

2The maximum initial sales charge was 8.5% prior to July 1, 1988.

3The indexes are unmanaged and, therefore, have no expenses.

4Results of the Lipper Balanced Funds Index do not reflect any sales charges.

5Barclays Capital U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. For the period July 31, 1975, to December 31, 1975, Barclays Capital Government/Credit Bond Index was used.

6For the period July 26, 1975 (when Capital Research and Management Company became the fund’s investment adviser) through December 31, 1975.

The results shown are before taxes on fund distributions and sale of fund shares.

The benefits of a balanced approach to investing in today’s market

[photo of a row of trees]

[Begin Photo Caption]

[photo of Greg Johnson]

Greg Johnson

vice chairman of the fund

[End Photo Caption]

[Begin Photo Caption]

[photo of Gene Stein]

Gene Stein

portfolio counselor

[End Photo Caption]

As we look back at 2011 — one of the more volatile years in postwar stock market history — it seems a good time to consider why balanced funds continue to remain one of the soundest mutual fund types and how American Balanced Fund (AMBAL) strives to meet the needs of today’s investors.

“AMBAL offers investors the opportunity to balance the growth potential of equities with the income and stability of bonds,” says Gregory Johnson, vice chairman of the fund. “AMBAL also provides broad diversification and tends to be less volatile than many other mutual funds.”

Results over volatile periods show that the balanced approach of a mix of equities and bonds can produce better results than the stock market with less volatility and angst for shareholders. We met with AMBAL’s equity and fixed-income portfolio counselors and an investment analyst to find out how they work together to achieve their investment results and what investment opportunities they see in the year ahead. In addition to Greg Johnson, portfolio counselors Gene Stein, Dina Perry, Alan Berro and Jim Mulally, as well as investment analyst Anne-Marie Peterson are featured. Gene Stein and Jeff Lager are new portfolio counselors this year. One of the goals of our multiple portfolio management approach is to include in the fund a mix of portfolio counselors. They have a wide variety of investment styles and backgrounds.

It’s important to remember that the fund’s policy is to have between 50% and 75% of its assets in common stocks and the remainder in bonds and cash. “The percentage will vary based on our judgment of the relative attractiveness of equities, bonds and cash,” Greg says. “The fund’s bond investments play an important role in dampening the fund’s volatility and provide current income for AMBAL.”

Greg, what types of companies do we choose for the fund’s investment portfolio?

While we primarily invest in U.S.-based companies, it is important to note that many of our equity investments have a significant portion of their revenue and profits that come from their operations outside the United States. We tend to focus on quality companies that allocate and return capital to their investors intelligently. Most of our companies pay dividends. By investing in these kinds of companies, we receive current income and growth of principal over time.

[Begin Photo Caption]

[photo of Dina Perry]

Dina Perry

portfolio counselor

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Greg, how would you describe your investment style?

I’m a growth-oriented investor who likes to invest in large-capitalization global companies that have solid balance sheets and cash flow and are well-positioned competitively. I also pay a lot of attention to how companies allocate their capital and the quality of their management teams. I began at the Capital Group as an investment analyst who covered retail companies and restaurant chains. As you’ll see, many of my colleagues have quite different investment styles.

Gene, what is your investment style?

I am a value-oriented investor. I am very concerned about investing in any company that sells at a large premium to the market and, in particular, with a price/earnings ratio of over 20 times earnings. At that high valuation, too many things can go wrong. I like to invest in companies whose price has declined because they have a temporary problem, but it should be a problem that can be solved internally such as new management or some other internal improvement that will help the company return to its former profit margins. I like to invest in a broad range of industries.

[Begin Sidebar]

American Balanced Fund’s portfolio counselors
American Balanced Fund’s eight portfolio counselors have an average 28 years of investment experience.* The knowledge and wisdom they have accumulated over the years have helped them manage your fund through many stock market cycles.
	Years of
	Investment
Portfolio counselor	experience*
Hilda L. Applbaum	25
Alan N. Berro	26
Gregory D. Johnson	18
Jeffrey T. Lager	17
James R. Mulally	36
Dina N. Perry	34
John H. Smet	30
Eugene P. Stein	40
*Years of experience as of December 31, 2011.

[End Sidebar]

[photo of a grass path between two rows of trees]

[Begin Pull Quote]

“I do add exciting and interesting stocks, but AMBAL is not the fund for highly speculative companies.”

— Alan Berro

[End Pull Quote]

Are you finding any attractive companies in the current market?

Gene: Yes. U.S. companies are on average selling at price/earnings ratios of 12½ times earnings. That is historically a good time to invest, especially with the current lower interest rates. Every sector of the economy offers good opportunities. You can find them in industrial manufacturing, information technology, energy, health care and financial companies.

Dina, what is your investment style?

Dina: I would describe my style as “value/contrarian.” The U.S. economy is doing a lot better than most people expected. I think the growth rate is faster and more predictable at this point than in most other developed markets. On the other hand, I think Europe’s growth trajectory is really going to be very weak. Cyclicals in the U.S. are a large part of my investments, and continued growth should help them. I have invested in drug and technology companies and recently I have added food companies. These companies with their stable growth rates should do well in a softer economic environment. I continue to find equities with a higher yield than 2% attractive, especially as compared to bonds.

[Begin Photo Caption]

[photo of Alan N. Berro]

Alan N. Berro

Portfolio counselor

[End Photo Caption]

Alan: As an equity manager, I try to run my portion of the fund as a high-quality growth and income fund. I own dividend-paying stocks, well-established companies with proven records. My holdings include AT&T, Microsoft, Dow Chemical and Proctor & Gamble. Those are all household names. They are in leadership positions in their industries. My companies have a yield that is somewhat above the stock market yield. I do add exciting and interesting stocks, but AMBAL is not the fund for highly speculative companies.

[Begin Photo Caption]

[photo of Anne-Marie Peterson]

Anne-Marie Peterson

investment analyst

[End Photo Caption]

[Begin Photo Caption]

[photo of Jim Mulally]

Jim Mulally

portfolio counselor

[End Photo Caption]

How do you decide when to invest in these household-name stocks?

Alan: AMBAL companies offer clearly differentiated products that improve people’s lives. We have many investment analysts identifying these companies. It’s our job as portfolio counselors to buy these companies when they are out of favor and something has gone wrong. We bring a different time horizon to the investment equation. If the price falls too much, this can create an opportunity to increase our investment. We get paid to go against the crowd. I bought more of a large software company recently after it had reported disappointing earnings in November. I owned it and I still like it. As I saw it, the stock just went on sale, it’s 10% off and I want to increase my position. Most investors think of investing for the next three to five months where we invest for the next three to five years.

Anne-Marie, how do you cover your retail and restaurant companies as an investment analyst?

My job is like trying to figure out a giant puzzle with many moving parts. Currently, my important holdings include Home Depot and Costco. First, I meet with all of the chief executive officers of the companies I cover. I also talk to middle-level people as well as suppliers, vendors and consultants. I personally visit restaurants and retail stores to see if what executives tell me in meetings is actually going on in the stores. Describing a new plan is one thing and executing it is quite another. I have also built up a network of friends and associates at Capital’s many offices overseas. They try out new restaurant products and report back to me.

What stands out to you about your investment in Home Depot?

Home Depot has built a strong customer service-oriented store culture. It has become the second largest retail business in the nation. The home repair company has increased its payout ratio to 50% and increased its dividend by 16% in November.

Jim, why did the fund’s bond investments do so well in 2011?

U.S. Treasury bonds, usually thought of as the safest investment, turned out to be the best investment of 2011. Because of the continuing uncertainty over the European debt situation, the relative security of U.S. bonds became attractive to investors. U.S. Treasury bonds did over 3% better than mortgage-backed bonds and nearly 2% better than corporate bonds (of similar maturities). Investors had overestimated how weak the U.S. economy was. At the end of the year, the AMBAL fixed-income portfolio was 32% in U.S. Treasury and other government obligations, 34% in mortgage- and asset-backed bonds and 34% in corporate bonds. Six months ago as of June 30, the fixed-income portfolio was 35% in U.S. Treasury and other government obligations, 36% in mortgage-backed and asset-backed bonds and 29% in corporate bonds. n

[Begin Sidebar]

Fund results shown 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. For current information and month-end results, visit americanfunds.com.

Above-average returns with less volatility

The table below recaps AMBAL’s history since 1975 under CRMC’s management. As you can see, the fund has had a slightly higher average annual total return than both the 60%/40% S&P/BC Index and the Lipper Balanced Funds Index with lower volatility. Further, its annualized return was within 0.3% of the S&P 500 with only about two-thirds of the market’s volatility. The detail of all these data points may be found on page 3.

For the period July 26, 1975, to December 31, 2011

[begin scatter chart]

	S&P 500 Index			Barclays Capital U.S. Aggregate Index			Lipper Balanced Funds Index			American Balanced Fund			60%/40% S&P/BC Index
Total Returns
Avg. Annual Compound Returns (7/26/75 - 12/31/11		10.9	%		8.4	%		9.9	%		10.6	%		10.2	%
Volatility (7/26/75-12/31/11		15.3			5.6			10.4			9.9			10.0

[end scatter chart]

Sources: Stocks — S&P 500; Bonds — Barclays Capital U.S. Aggregate Index. Barclays Capital U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. For the period July 31, 1975, to December 31, 1975, Barclays Capital Government/Credit Bond Index was used.

The 60%/40% S&P/BC Index blends the S&P 500 with the Barclays Capital U.S. Aggregate Index by weighting their total returns at 60% and 40%, respectively. The portfolio is rebalanced monthly.

The market indexes are unmanaged and, therefore, have no expenses.

The Lipper Balanced Funds Index is an equally weighted index of the 30 largest U.S. balanced funds.

Capital Research and Management Company became the fund’s investment adviser on July 26, 1975.

Volatility is calculated using annualized standard deviation (based on monthly returns), a measure of how returns over time have varied from the mean; a lower number signifies lower volatility.

[End Sidebar]

Summary investment portfolio     December 31, 2011

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

[begin pie chart]

Investment mix by security type	(percent of net assets)
Common stocks		70	%
Fixed-income securities		28
Short-term securities & other assets less liabilities		2

[end pie chart]

						Percent
			Value			of net
Common stocks - 69.73%	Shares			(000	)	assets
Financials - 10.80%
Wells Fargo & Co.		45,386,600	$	1,250,855			2.53	%
Berkshire Hathaway Inc., Class A (1)		8,039		922,515			1.87
American Express Co.		16,224,000		765,286			1.55
Goldman Sachs Group, Inc.		8,196,700		741,228			1.50
ACE Ltd.		4,470,000		313,436			.63
Other securities				1,341,783			2.72
				5,335,103			10.80
Industrials - 9.61%
Union Pacific Corp.		9,210,000		975,707			1.98
Boeing Co.		11,675,000		856,361			1.73
Lockheed Martin Corp.		7,223,956		584,418			1.18
General Electric Co.		25,100,000		449,541			.91
Deere & Co.		5,640,000		436,254			.89
Parker Hannifin Corp.		4,100,000		312,625			.63
Other securities				1,132,302			2.29
				4,747,208			9.61
Information technology - 9.22%
Apple Inc. (1)		1,550,000		627,750			1.27
Oracle Corp.		24,031,391		616,405			1.25
Microsoft Corp.		23,705,700		615,400			1.24
Texas Instruments Inc.		17,525,000		510,153			1.03
Google Inc., Class A (1)		645,000		416,605			.84
TE Connectivity Ltd.		10,380,000		319,808			.65
Other securities				1,452,426			2.94
				4,558,547			9.22
Energy - 9.09%
Chevron Corp.		13,737,000		1,461,617			2.96
Royal Dutch Shell PLC, Class B (ADR)		15,947,360		1,212,159			2.45
ConocoPhillips		4,200,000		306,054			.62
Other securities				1,513,909			3.06
				4,493,739			9.09
Consumer discretionary - 8.01%
Home Depot, Inc.		23,655,000		994,456			2.01
Comcast Corp., Class A		22,435,000		531,934			1.08
Amazon.com, Inc. (1)		2,920,000		505,452			1.02
McDonald's Corp.		3,435,000		344,634			.70
Other securities				1,580,631			3.20
				3,957,107			8.01
Consumer staples - 7.40%
Philip Morris International Inc.		14,420,000		1,131,682			2.29
Costco Wholesale Corp.		8,757,326		729,660			1.48
Procter & Gamble Co.		5,998,000		400,127			.81
Kraft Foods Inc., Class A		10,622,000		396,838			.80
Nestlé SA		5,000,000		287,448
Nestlé SA (ADR)		1,500,000		86,565			.76
PepsiCo, Inc.		3,770,000		250,140			.51
Other securities				372,586			.75
				3,655,046			7.40
Health care - 6.86%
Merck & Co., Inc.		23,174,575		873,682			1.77
Bristol-Myers Squibb Co.		21,630,000		762,241			1.54
UnitedHealth Group Inc.		7,550,000		382,634			.77
Cardinal Health, Inc.		8,115,000		329,550			.67
Pfizer Inc		14,250,000		308,370			.62
Johnson & Johnson		3,895,000		255,434			.52
Other securities				479,532			.97
				3,391,443			6.86
Materials - 4.16%
Dow Chemical Co.		16,980,000		488,345			.99
Potash Corp. of Saskatchewan Inc.		11,181,860		461,587			.93
E.I. du Pont de Nemours and Co.		8,250,000		377,685			.77
Other securities				726,921			1.47
				2,054,538			4.16
Telecommunication services - 1.83%
AT&T Inc.		10,420,000		315,101			.64
Verizon Communications Inc.		7,415,000		297,490			.60
American Tower Corp.		4,850,000		291,048			.59
				903,639			1.83
Utilities - 1.63%
PG&E Corp.		7,660,000		315,745			.64
Other securities				490,958			.99
				806,703			1.63
Miscellaneous - 1.12%
Other common stocks in initial period of acquisition				552,543			1.12
Total common stocks (cost: $27,635,669,000)				34,455,616			69.73
	Principal					Percent
	amount		Value			of net
Bonds & notes - 27.68%		(000)		(000	)	assets
Corporate bonds & notes - 9.35%
Financials - 3.42%
Goldman Sachs Group, Inc. 3.625%-5.25% 2016-2021		92,500		89,670			.18
Wells Fargo & Co. 2.625%-4.60% 2016-2021		74,500		79,325			.16
American Express Bank 5.50% 2013		21,300		22,273
American Express Co. 6.15% 2017		22,800		26,113			.10
Berkshire Hathaway Inc. 2.20% 2016		23,000		23,707			.05
Other securities				1,449,109			2.93
				1,690,197			3.42
Telecommunication services - 0.99%
BellSouth Capital Funding Corp. 7.875% 2030		51,500		69,362
AT&T Inc. 2.40%-5.35% 2013-2040		41,250		43,219
SBC Communications Inc. 5.10%-6.45% 2014-2034		79,300		92,630			.42
Other securities				282,228			.57
				487,439			.99
Consumer discretionary - 0.79%
Comcast Corp. 5.30%-6.95% 2014-2037		71,000		85,131			.17
Home Depot, Inc. 4.40%-5.95% 2021-2041		30,000		36,327			.07
Other securities				271,528			.55
				392,986			.79
Industrials - 0.76%
General Electric Corp. 5.25% 2017		17,270		19,853
General Electric Capital Corp. 1.014%-6.00% 2014-2021 (2)		110,805		113,033			.27
Union Pacific Corp. 5.70%-5.75% 2017-2018		33,475		39,726			.08
Other securities				201,987			.41
				374,599			.76
Energy - 0.76%
Shell International Finance BV 1.875% 2013		16,500		16,814			.04
Other securities				357,191			.72
				374,005			.76
Materials - 0.55%
Dow Chemical Co. 7.60% 2014		18,250		20,651
Rohm and Haas Co. 6.00% 2017		17,445		19,864			.08
Other securities				232,255			.47
				272,770			.55
Mortgage-backed obligations (3) - 9.26%
Fannie Mae 0%-11.512% 2012-2047 (2)	$	2,852,591		3,047,756			6.17
Freddie Mac 0%-6.925% 2023-2041 (2)		392,108		417,081			.85
Other securities				1,108,811			2.24
				4,573,648			9.26
Other corporate bonds & notes - 2.08%
Other securities				1,026,128			2.08
Total corporate bonds & notes				4,618,124			9.35
Bonds & notes of U.S. government & government agencies - 8.58%
U.S. Treasury:
2.75% 2013		291,500		304,804
3.375% 2013		333,500		350,095
4.25% 2013		245,335		261,272
6.25% 2023		455,500		652,271
4.625% 2040		242,470		326,595
0.626%-5.25% 2012-2041 (4)		1,901,118		2,114,520			8.11
Freddie Mac 1.75% 2015		83,000		85,869			.17
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.20% 2012		27,500		27,743			.05
Fannie Mae 6.25% 2029		8,000		11,288			.03
Other securities				108,024			.22
				4,242,481			8.58
Other - 0.49%
Other securities				245,146			.49
Total bonds & notes (cost: $12,844,531,000)				13,679,399			27.68
	Principal					Percent
	amount		Value			of net
Short-term securities - 3.50%		(000)		(000	)	assets
Freddie Mac 0.07%-0.15% due 1/17-8/21/2012	$	550,475		550,414			1.11
Fannie Mae 0.025%-0.23% due 1/3-5/21/2012		340,300		340,253			.69
Variable Funding Capital Company LLC 0.25% due 1/25/2012 (5)		35,000		34,993			.07
U.S. Treasury Bills 0.04%-0.258% due 1/12/2012		19,980		19,980			.04
Other securities				783,634			1.59
Total short-term securities (cost: $1,729,125,000)				1,729,274			3.50
Total investment securities (cost: $42,209,325,000)				49,864,289			100.91
Other assets less liabilities				(449,800	)		(.91	)
Net assets			$	49,414,489			100.00	%

As permitted by U.S. Securities and Exchange Commission regulations, "Miscellaneous" securities include holdings in their first year of acquisition that have not previously been publicly disclosed.

“Other securities” includes all issues that are not disclosed separately in the summary investment portfolio, including securities which were valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $147,192,000, which represented .30% of the net assets of the fund. This amount includes $128,843,000 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.

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) Coupon rate may change periodically.

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

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

(5) Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $1,658,852,000, which represented 3.36% 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
at December 31, 2011	(dollars in thousands)
Assets:
Investment securities, at value (cost: $42,209,325)			$	49,864,289
Cash				125
Receivables for:
Sales of fund's shares	$	81,148
Dividends and interest		182,160		263,308
				50,127,722
Liabilities:
Payables for:
Purchases of investments		505,519
Repurchases of fund's shares		172,479
Investment advisory services		10,073
Services provided by related parties		21,555
Trustees' deferred compensation		2,829
Other		778		713,233
Net assets at December 31, 2011			$	49,414,489
Net assets consist of:
Capital paid in on shares of beneficial interest			$	45,699,492
Undistributed net investment income				54,645
Accumulated net realized loss				(3,994,528	)
Net unrealized appreciation				7,654,880
Net assets at December 31, 2011			$	49,414,489

	(dollars and shares in thousands, except per-share amounts)
Shares of beneficial interest issued and outstanding (no stated par value) -
unlimited shares authorized (2,715,624 total shares outstanding)
		Net assets		Shares  outstanding		Net asset value  per share
Class A		$	30,715,593		1,686,492	$	18.21
Class B			1,745,339		96,114		18.16
Class C			4,247,324		234,245		18.13
Class F-1			1,013,870		55,683		18.21
Class F-2			277,165		15,223		18.21
Class 529-A			1,751,103		96,264		18.19
Class 529-B			179,854		9,885		18.19
Class 529-C			606,894		33,373		18.19
Class 529-E			98,473		5,416		18.18
Class 529-F-1			61,104		3,361		18.18
Class R-1			125,942		6,952		18.12
Class R-2			1,078,721		59,509		18.13
Class R-3			2,331,258		128,495		18.14
Class R-4			2,152,051		118,311		18.19
Class R-5			1,544,261		84,743		18.22
Class R-6			1,485,537		81,558		18.21
See Notes to Financial Statements

Statement of operations
for the year ended December 31, 2011	(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $6,377)	$	783,110
Interest		523,461		$	1,306,571
Fees and expenses*:
Investment advisory services		121,350
Distribution services		182,738
Transfer agent services		42,807
Administrative services		30,064
Reports to shareholders		2,393
Registration statement and prospectus		762
Trustees' compensation		458
Auditing and legal		133
Custodian		278
Other		2,214			383,197
Net investment income					923,374
Net realized gain and unrealized depreciation
on investments and currency:
Net realized gain (loss) on:
Investments		1,067,910
Currency transactions		(221	)		1,067,689
Net unrealized depreciation on:
Investments		(150,405	)
Currency translations		(84	)		(150,489	)
Net realized gain and unrealized depreciation
on investments and currency					917,200
Net increase in net assets resulting
from operations				$	1,840,574
*Additional information related to class-specific fees and expenses is included
in the Notes to Financial Statements.
See Notes to Financial Statements
Statements of changes in net assets
		(dollars in thousands)
	Year ended December 31
		2011			2010
Operations:
Net investment income	$	923,374		$	1,088,234
Net realized gain on investments and currency transactions		1,067,689			901,876
Net unrealized (depreciation) appreciation on investments and currency translations		(150,489	)		3,853,849
Net increase in net assets resulting from operations		1,840,574			5,843,959
Dividends paid to shareholders from net investment income		(1,032,748	)		(959,212	)
Net capital share transactions		(1,924,854	)		(2,173,629	)
Total (decrease) increase in net assets		(1,117,028	)		2,711,118
Net assets:
Beginning of year		50,531,517			47,820,399
End of year (including undistributed
net investment income: $54,645 and $155,196, respectively)	$	49,414,489		$	50,531,517
See Notes to Financial Statements

Notes to financial statements

1.   Organization

American Balanced Fund (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

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

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

2.   Significant accounting policies

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

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

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

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

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

3.   Valuation

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

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

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

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

Fixed-income class	Examples of standard inputs
All	Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”)
Corporate bonds & notes; convertible securities	Standard inputs and underlying equity of the issuer
Bonds & notes of governments & government agencies	Standard inputs and interest rate volatilities
Mortgage-backed; asset-backed obligations	Standard inputs and cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information
Municipal securities	Standard inputs and, for certain distressed securities, cash flows or liquidation values using a net present value calculation based on inputs that include, but are not limited to, financial statements and debt contracts

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

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

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

Classifications – The fund classifies its assets and liabilities into three levels based on the inputs used to value the assets or liabilities.Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading.Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.The following table presentsthe fund’s valuation levels as of December 31, 2011 (dollars in thousands):

Investment securities:	Level 1		Level 2			Level 3		Total
Common stocks:
Financials	$	5,335,103	$	-		$	-	$	5,335,103
Industrials		4,747,208		-			-		4,747,208
Information technology		4,429,704		128,843	(1)		-		4,558,547
Energy		4,493,739		-			-		4,493,739
Consumer discretionary		3,957,107		-			-		3,957,107
Consumer staples		3,655,046		-			-		3,655,046
Health care		3,391,443		-			-		3,391,443
Materials		2,054,538		-			-		2,054,538
Telecommunication services		903,639		-			-		903,639
Utilities		806,703		-			-		806,703
Miscellaneous		552,543		-			-		552,543
Bonds & notes:
Corporate bonds & notes		-		4,618,124			-		4,618,124
Mortgage-backed obligations		-		4,555,299			18,349		4,573,648
Bonds & notes of U.S. government & government agencies		-		4,242,481			-		4,242,481
Other		-		245,146			-		245,146
Short-term securities		-		1,729,274			-		1,729,274
Total	$	34,326,773	$	15,519,167		$	18,349	$	49,864,289
(1)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, $128,843,000 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 year ended December 31, 2011 (dollars in thousands):
	Beginning value at 1/1/2011		Transfers into Level 3(2)		Sales			Net realized loss(3)			Unrealized depreciation(3)			Ending value at 12/31/2011
Investment securities	$	20,390	$	17,839	$	(18,356	)	$	(281	)	$	(1,243	)	$	18,349
Net unrealized depreciation during the period on Level 3 investment securities held at December 31, 2011 (dollars in thousands)(3):														$	(416	)
(2)Transfers into or out of Level 3 are based on the beginning market value of the quarter in which they occurred.
(3)Net realized loss and unrealized depreciation are included in the related amounts on investments in the statement of operations.

4.   Risk factors

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

Market conditions — The prices of, and the income generated by, the common stocks, bonds and other securities held by the fund may decline due to market conditions and other factors, including those directly involving the issuers of securities held by the fund.

Investing in growth-oriented stocks — Growth-oriented stocks may involve larger price swings and greater potential for loss than other types of investments.

Investing in income-oriented stocks — Income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available at, the companies in which the fund invests.

Investing in bonds — Rising interest rates will generally cause the prices of bonds and other debt securities to fall. Longer maturity debt securities may be subject to greater price fluctuations than shorter maturity debt securities. 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.

Bonds and other debt securities are subject to credit risk, which is the possibility that the credit strength of an issuer will weaken and/or an issuer of a debt security will fail to make timely payments of principal or interest and the security will go into default. Lower quality debt securities generally have higher rates of interest and may be subject to greater price fluctuations than higher quality debt securities.

Investing in securities backed by the U.S. government — Securities backed by the U.S. Treasury or the full faith and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates. Securities issued by government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor guaranteed by the U.S. government.

Investing in mortgage-backed and asset-backed securities — Many types of bonds and other debt securities, including mortgage-backed securities, are subject to prepayment risk, as well as the risks associated with investing in debt securities in general. If interest rates fall and the loans underlying these securities are prepaid faster than expected, the fund may have to reinvest the prepaid principal in lower yielding securities, thus reducing the fund’s income. Conversely, if interest rates increase and the loans underlying the securities are prepaid more slowly than expected, the expected duration of the securities may be extended. This reduces the potential for the fund to invest the principal in higher yielding securities.

Thinly traded securities — There may be little trading in the secondary market for particular bonds or other debt securities, which may make them more difficult to value, acquire or sell.

Investing outside the U.S. — Securities of issuers domiciled outside the U.S., or with significant operations outside the U.S., may lose value because of political, social, economic or market developmentr instability in the countries or regions in which the issuer operates. These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Securities markets in certain countries may be more volatile and/or less liquid than those in the U.S. Investments outside the U.S. may also be subject to different settlement and accounting practices and different regulatory, legal and reporting standards, and may be more difficult to value, than those in the U.S. The risks of investing outside the U.S. may be heightened in connection with investments in emerging and developing countries.

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

5. Taxation and distributions                                                      

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

As of and during the period ended December 31, 2011, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by state tax authorities for tax years before 2007.

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

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

During the year ended December 31, 2011, the fund reclassified $8,967,000 from accumulated net realized loss to undistributed net investment income and $144,000 from undistributed net investment income to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2011, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:

	(dollars in thousands)
Undistributed ordinary income		$	57,731
Capital loss carryforward expiring 2017*			(3,867,615	)
Post-October capital loss deferral†			(20,625	)
Gross unrealized appreciation on investment securities			9,104,795
Gross unrealized depreciation on investment securities			(1,556,434	)
Net unrealized appreciation on investment securities			7,548,361
Cost of investment securities			42,315,928
*Reflects the utilization of capital loss carryforward of $1,097,701,000. The capital loss carryforward will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains.
†This deferral is considered incurred in the subsequent year.

Tax-basis distributions paid to shareholders from ordinary income were as follows (dollars in thousands):

Share class	Year ended December 31, 2011		Year ended December 31, 2010
Class A	$	683,562	$	642,622
Class B		29,810		38,561
Class C		62,169		59,537
Class F-1		20,555		18,620
Class F-2		6,282		4,485
Class 529-A		35,963		29,590
Class 529-B		2,703		3,310
Class 529-C		8,089		7,021
Class 529-E		1,794		1,526
Class 529-F-1		1,370		1,146
Class R-1		1,858		1,783
Class R-2		16,070		14,920
Class R-3		44,622		42,027
Class R-4		46,169		41,065
Class R-5		36,957		34,233
Class R-6		34,775		18,766
Total	$	1,032,748	$	959,212

6. Fees and transactions with related parties

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

Investment advisory services – The fund has an investment advisory and service agreement with CRMC that providesfor monthly fees accrued daily. These fees are based on a series of decreasing 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 year ended December 31, 2011, the investment advisory services fee was $121,350,000, which was equivalent to an annualized rate of 0.241% of average dailynet assets.

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

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

For Classes A and 529-A, distribution-related expenses include the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25%is not exceeded. As of December 31, 2011, there were no unreimbursed expenses subject to reimbursement for Classes A or 529-A.

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

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

On December 1, 2011, the board of trustees approved an amended shareholder services agreement with AFS effective January 1, 2012. The amended agreement covers the transfer agent services described above and is applicable to all share classes. AFS may use these fees to compensate third parties for performing these services. Beginning January 1, 2012, transfer agent services previously provided to share classes other than Classes A and B will no longer be paid to CRMC, and passed through to AFS and other third parties, through the administrative services agreement described in the administrative services paragraph below.

Administrative services – The fund has an administrative services agreement with CRMC for all share classes, except Classes A and B, to provide administrative services that include, but are not limited to, coordinating, monitoring, assisting and overseeing third parties that provide services to fund shareholders. The current agreement also provides for certain transfer agent and recordkeeping services. 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.

On December 1, 2011, the board of trustees approved an amended administrative services agreement with CRMC effective January 1, 2012. The amended agreement covers the administrative services described on the previous page and calls for each share class, except Class B, to pay CRMC annual fees of 0.05% (0.01% for Class A) based on its respective average daily net assets to compensate CRMC for administrative services. Transfer agent and recordkeeping services previously provided to share classes other than Classes A and B will no longer be paid to CRMC, and passed through to AFS and other third parties, through the administrative services agreement. Beginning January 1, 2012, transfer agent and recordkeeping services for all share classes will be paid to AFS through the shareholder services agreement described in the transfer agent services section on the previous page.

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

Expenses under the agreements described on the previous page for the year ended December 31, 2011, were as follows (dollars in thousands):

					Administrative services
Share class	Distribution services		Transfer agent services		CRMC administrative services		Transfer agent services		Commonwealth of Virginia administrative services
Class A	$	74,768	$	40,144	Not applicable		Not applicable		Not applicable
Class B		21,648		2,663	Not applicable		Not applicable		Not applicable
Class C		44,730	Included in administrative services		$	6,587	$	993	Not applicable
Class F-1		2,320				1,206		51	Not applicable
Class F-2	Not applicable					386		11	Not applicable
Class 529-A		3,709				1,870		307	$	1,686
Class 529-B		2,123				234		62		212
Class 529-C		6,008				667		150		603
Class 529-E		484				96		17		97
Class 529-F-1		-				64		11		58
Class R-1		1,317				174		26	Not applicable
Class R-2		8,390				1,659		2,650	Not applicable
Class R-3		11,949				3,560		1,254	Not applicable
Class R-4		5,292				3,153		36	Not applicable
Class R-5	Not applicable					1,489		9	Not applicable
Class R-6	Not applicable					681		5	Not applicable
Total	$	182,738	$	42,807	$	21,826	$	5,582	$	2,656

Trustees’ deferred compensation – Trustees who are unaffiliated with CRMCmay elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $458,000, shown on the accompanying financial statements, includes $335,000 in current fees (either paid in cash or deferred) and a net increase of $123,000 in the value of the deferred amounts.

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

7. Capital share transactions

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

	Sales*				Reinvestments of dividends				Repurchases*						Net (decrease) increase
Share class	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
Year ended December 31, 2011
Class A	$	4,223,895		231,805	$	663,135		36,593	$	(6,085,463	)		(333,848	)	$	(1,198,433	)		(65,450	)
Class B		50,910		2,801		29,043		1,604		(947,064	)		(52,262	)		(867,111	)		(47,857	)
Class C		510,355		28,097		59,584		3,300		(968,478	)		(53,503	)		(398,539	)		(22,106	)
Class F-1		333,652		18,400		19,875		1,097		(250,726	)		(13,764	)		102,801			5,733
Class F-2		113,096		6,191		5,401		299		(72,215	)		(3,978	)		46,282			2,512
Class 529-A		324,687		17,841		35,952		1,987		(223,405	)		(12,285	)		137,234			7,543
Class 529-B		8,599		472		2,701		149		(79,212	)		(4,365	)		(67,912	)		(3,744	)
Class 529-C		107,912		5,932		8,086		446		(100,915	)		(5,556	)		15,083			822
Class 529-E		17,915		985		1,794		99		(15,145	)		(835	)		4,564			249
Class 529-F-1		14,927		817		1,370		76		(13,573	)		(742	)		2,724			151
Class R-1		30,531		1,691		1,853		103		(44,023	)		(2,428	)		(11,639	)		(634	)
Class R-2		294,617		16,251		16,060		890		(377,220	)		(20,830	)		(66,543	)		(3,689	)
Class R-3		567,426		31,306		44,594		2,469		(727,831	)		(40,079	)		(115,811	)		(6,304	)
Class R-4		664,130		36,562		46,159		2,550		(600,219	)		(32,894	)		110,070			6,218
Class R-5		395,594		21,673		36,954		2,038		(457,935	)		(25,097	)		(25,387	)		(1,386	)
Class R-6		511,243		27,945		34,770		1,920		(138,250	)		(7,565	)		407,763			22,300
Total net increase
(decrease)	$	8,169,489		448,769	$	1,007,331		55,620	$	(11,101,674	)		(610,031	)	$	(1,924,854	)		(105,642	)
Year ended December 31, 2010
Class A	$	4,166,008		249,273	$	619,160		37,146	$	(6,092,729	)		(364,893	)	$	(1,307,561	)		(78,474	)
Class B		65,367		3,927		37,144		2,243		(1,107,951	)		(66,736	)		(1,005,440	)		(60,566	)
Class C		516,589		31,043		56,464		3,405		(870,586	)		(52,496	)		(297,533	)		(18,048	)
Class F-1		198,682		11,915		17,458		1,048		(293,849	)		(17,642	)		(77,709	)		(4,679	)
Class F-2		101,541		6,079		3,737		224		(62,044	)		(3,736	)		43,234			2,567
Class 529-A		294,964		17,634		29,578		1,774		(173,539	)		(10,403	)		151,003			9,005
Class 529-B		8,942		538		3,309		199		(78,240	)		(4,683	)		(65,989	)		(3,946	)
Class 529-C		104,832		6,282		7,018		422		(91,127	)		(5,477	)		20,723			1,227
Class 529-E		15,354		917		1,526		92		(12,903	)		(775	)		3,977			234
Class 529-F-1		15,751		941		1,145		69		(7,015	)		(420	)		9,881			590
Class R-1		37,708		2,271		1,779		107		(36,988	)		(2,216	)		2,499			162
Class R-2		286,839		17,281		14,908		899		(336,868	)		(20,271	)		(35,121	)		(2,091	)
Class R-3		519,370		31,278		42,007		2,530		(712,888	)		(42,990	)		(151,511	)		(9,182	)
Class R-4		590,296		35,449		41,059		2,466		(557,696	)		(33,050	)		73,659			4,865
Class R-5		378,814		22,620		34,230		2,052		(341,409	)		(20,656	)		71,635			4,016
Class R-6		524,170		31,091		18,756		1,121		(152,302	)		(9,314	)		390,624			22,898
Total net increase
(decrease)	$	7,825,227		468,539	$	929,278		55,797	$	(10,928,134	)		(655,758	)	$	(2,173,629	)		(131,422	)
*Includes exchanges between share classes of the fund.

8. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $19,972,449,000 and $19,210,590,000, respectively, during the year ended December 31, 2011.

Financial highlights

			Income (loss) from investment operations(1)								Dividends and distributions
	Net asset value, beginning of period		Net investment income(2)		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(2)(4)
Class A:
Year ended 12/31/2011	$	17.93	$	.36	$	.32		$	.68		$	(.40	)	$	-		$	(.40	)	$	18.21		3.82	%	$	30,716		.62	%		.62	%		1.97	%
Year ended 12/31/2010		16.21		.40		1.68			2.08			(.36	)		-			(.36	)		17.93		13.02			31,409		.63			.63			2.42
Year ended 12/31/2009		13.78		.40		2.44			2.84			(.41	)		-			(.41	)		16.21		21.08			29,675		.67			.67			2.80
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
Class B:
Year ended 12/31/2011		17.87		.22		.33			.55			(.26	)		-			(.26	)		18.16		3.08			1,745		1.38			1.38			1.21
Year ended 12/31/2010		16.16		.28		1.66			1.94			(.23	)		-			(.23	)		17.87		12.12			2,573		1.38			1.38			1.66
Year ended 12/31/2009		13.73		.29		2.44			2.73			(.30	)		-			(.30	)		16.16		20.24			3,305		1.43			1.43			2.06
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
Class C:
Year ended 12/31/2011		17.85		.21		.32			.53			(.25	)		-			(.25	)		18.13		3.00			4,247		1.42			1.42			1.17
Year ended 12/31/2010		16.14		.27		1.67			1.94			(.23	)		-			(.23	)		17.85		12.11			4,576		1.43			1.43			1.61
Year ended 12/31/2009		13.72		.29		2.43			2.72			(.30	)		-			(.30	)		16.14		20.16			4,429		1.45			1.45			2.02
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
Class F-1:
Year ended 12/31/2011		17.92		.36		.33			.69			(.40	)		-			(.40	)		18.21		3.87			1,014		.63			.63			1.96
Year ended 12/31/2010		16.21		.40		1.67			2.07			(.36	)		-			(.36	)		17.92		12.95			895		.63			.63			2.41
Year ended 12/31/2009		13.78		.41		2.44			2.85			(.42	)		-			(.42	)		16.21		21.13			885		.64			.64			2.85
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
Class F-2:
Year ended 12/31/2011		17.92		.40		.33			.73			(.44	)		-			(.44	)		18.21		4.12			277		.40			.40			2.19
Year ended 12/31/2010		16.21		.44		1.67			2.11			(.40	)		-			(.40	)		17.92		13.21			228		.40			.40			2.63
Year ended 12/31/2009		13.78		.43		2.45			2.88			(.45	)		-			(.45	)		16.21		21.41			164		.41			.41			2.87
Period from 8/5/2008 to 12/31/2008(5)		17.44		.21		(3.59	)		(3.38	)		(.28	)		-			(.28	)		13.78		(19.51	)		39		.17			.16			1.45
Class 529-A:
Year ended 12/31/2011		17.91		.34		.33			.67			(.39	)		-			(.39	)		18.19		3.75			1,751		.70			.70			1.89
Year ended 12/31/2010		16.19		.39		1.68			2.07			(.35	)		-			(.35	)		17.91		12.97			1,589		.69			.69			2.35
Year ended 12/31/2009		13.77		.39		2.43			2.82			(.40	)		-			(.40	)		16.19		20.97			1,291		.73			.73			2.73
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
Class 529-B:
Year ended 12/31/2011		17.90		.20		.33			.53			(.24	)		-			(.24	)		18.19		2.95			180		1.49			1.49			1.09
Year ended 12/31/2010		16.19		.26		1.66			1.92			(.21	)		-			(.21	)		17.90		11.99			244		1.48			1.48			1.56
Year ended 12/31/2009		13.76		.28		2.44			2.72			(.29	)		-			(.29	)		16.19		20.09			284		1.53			1.53			1.95
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
Class 529-C:
Year ended 12/31/2011		17.90		.20		.33			.53			(.24	)		-			(.24	)		18.19		3.00			607		1.48			1.48			1.11
Year ended 12/31/2010		16.19		.26		1.67			1.93			(.22	)		-			(.22	)		17.90		12.03			583		1.48			1.48			1.57
Year ended 12/31/2009		13.76		.28		2.44			2.72			(.29	)		-			(.29	)		16.19		20.10			507		1.52			1.52			1.94
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
Class 529-E:
Year ended 12/31/2011		17.90		.30		.32			.62			(.34	)		-			(.34	)		18.18		3.47			98		.97			.97			1.62
Year ended 12/31/2010		16.19		.35		1.66			2.01			(.30	)		-			(.30	)		17.90		12.59			92		.97			.97			2.07
Year ended 12/31/2009		13.76		.35		2.44			2.79			(.36	)		-			(.36	)		16.19		20.71			80		1.02			1.02			2.45
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
Class 529-F-1:
Year ended 12/31/2011	$	17.90	$	.38	$	.33		$	.71		$	(.43	)	$	-		$	(.43	)	$	18.18		3.98	%	$	61		.48	%		.48	%		2.11	%
Year ended 12/31/2010		16.19		.43		1.67			2.10			(.39	)		-			(.39	)		17.90		13.15			57		.47			.47			2.57
Year ended 12/31/2009		13.76		.42		2.44			2.86			(.43	)		-			(.43	)		16.19		21.31			42		.52			.52			2.93
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
Class R-1:
Year ended 12/31/2011		17.83		.22		.33			.55			(.26	)		-			(.26	)		18.12		3.09			126		1.40			1.40			1.19
Year ended 12/31/2010		16.13		.27		1.66			1.93			(.23	)		-			(.23	)		17.83		12.10			135		1.40			1.40			1.65
Year ended 12/31/2009		13.71		.29		2.43			2.72			(.30	)		-			(.30	)		16.13		20.22			120		1.43			1.43			2.03
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
Class R-2:
Year ended 12/31/2011		17.85		.22		.32			.54			(.26	)		-			(.26	)		18.13		3.05			1,079		1.38			1.38			1.21
Year ended 12/31/2010		16.14		.27		1.67			1.94			(.23	)		-			(.23	)		17.85		12.14			1,128		1.40			1.40			1.64
Year ended 12/31/2009		13.72		.29		2.43			2.72			(.30	)		-			(.30	)		16.14		20.14			1,054		1.47			1.47			1.99
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
Class R-3:
Year ended 12/31/2011		17.86		.30		.32			.62			(.34	)		-			(.34	)		18.14		3.50			2,331		.95			.95			1.64
Year ended 12/31/2010		16.15		.35		1.67			2.02			(.31	)		-			(.31	)		17.86		12.64			2,408		.94			.94			2.10
Year ended 12/31/2009		13.73		.36		2.43			2.79			(.37	)		-			(.37	)		16.15		20.73			2,326		.97			.97			2.49
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
Class R-4:
Year ended 12/31/2011		17.91		.35		.33			.68			(.40	)		-			(.40	)		18.19		3.80			2,152		.65			.65			1.94
Year ended 12/31/2010		16.19		.40		1.68			2.08			(.36	)		-			(.36	)		17.91		13.01			2,007		.65			.65			2.39
Year ended 12/31/2009		13.76		.40		2.44			2.84			(.41	)		-			(.41	)		16.19		21.09			1,736		.67			.67			2.75
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
Class R-5:
Year ended 12/31/2011		17.94		.41		.32			.73			(.45	)		-			(.45	)		18.22		4.11			1,544		.35			.35			2.24
Year ended 12/31/2010		16.22		.45		1.68			2.13			(.41	)		-			(.41	)		17.94		13.32			1,545		.35			.35			2.69
Year ended 12/31/2009		13.79		.45		2.43			2.88			(.45	)		-			(.45	)		16.22		21.44			1,332		.37			.37			3.19
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
Class R-6:
Year ended 12/31/2011		17.93		.42		.32			.74			(.46	)		-			(.46	)		18.21		4.16			1,486		.30			.30			2.30
Year ended 12/31/2010		16.21		.46		1.67			2.13			(.41	)		-			(.41	)		17.93		13.38			1,063		.30			.30			2.75
Period from 5/1/2009 to 12/31/2009(5)		13.64		.30		2.61			2.91			(.34	)		-			(.34	)		16.21		21.52			590		.33	(6)		.33	(6)		2.94	(6)

	Year ended December 31
	2011			2010			2009			2008			2007
Portfolio turnover rate for all share classes		47	%		37	%		46	%		41	%		35	%

(1)Based on average shares outstanding.

(2)For the year ended December 31, 2010, this column reflects the impact of a corporate action event that resulted in a one-time increase to net investment income. If the corporate action event had not occurred, the Class A net investment income per share and ratio of net income to average net assets would have been lower by $.04 and .25percentage points, respectively. The impact to the other share classes would have been similar.

(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)Based on operations for the periods shown and, accordingly, is not representative of a full year.

(6)Annualized.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of American Balanced Fund:

We have audited the accompanying statement of assets and liabilities of American Balanced Fund (the “Fund”), including the summary investment portfolio, as of December 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Balanced Fund as of December 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Costa Mesa, California

February 8, 2012

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 December 31, 2011:
							10 years1/
	1 year			5 years			Life of class
Class B shares2
Reflecting applicable contingent deferred sales charge
(CDSC), maximum of 5%, payable only if shares
are sold within six years of purchase		–1.92	%		1.26	%		4.35	%
Not reflecting CDSC		3.08			1.62			4.35
Class C shares
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		2.00			1.57			4.14
Not reflecting CDSC		3.00			1.57			4.14
Class F-1 shares3
Not reflecting annual asset-based fee charged
by sponsoring firm		3.87			2.39			4.98
Class F-2 shares3 — first sold 8/5/08
Not reflecting annual asset-based fee charged
by sponsoring firm		4.12			—			4.24
Class 529-A shares4 — first sold 2/15/02
Reflecting 5.75% maximum sales charge		–2.20			1.10			4.38
Not reflecting maximum sales charge		3.75			2.31			5.01
Class 529-B shares2,4 — first sold 2/15/02
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase		–2.05			1.13			4.30
Not reflecting CDSC		2.95			1.50			4.30
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		2.00			1.52			4.30
Not reflecting CDSC		3.00			1.52			4.30
Class 529-E shares3,4 — first sold 3/5/02		3.47			2.02			4.41
Class 529-F-1 shares3,4 — first sold 9/17/02
Not reflecting annual asset-based fee charged
by sponsoring firm		3.98			2.53			6.45

1Applicable to Classes B, C and F-1 shares only. All other share classes reflect results for the life of the class.

2These shares are not available for purchase.

3These shares are sold without any initial or contingent deferred sales charge.

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

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 27 and 28 for details that include expense ratios for all share classes.

For information regarding the differences among the various share classes, refer to the fund’s prospectus.

Expense example                                                                                                                                   

                  unaudited

As a shareholder of the fund, you incur two types of costs: (1) transaction costs, such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads), and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period (July 1, 2011, through December 31, 2011).

Actual expenses:

The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.

Hypothetical example for comparison purposes:

The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Notes:

There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually), that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2 and 529-F-1 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would be lower by the amount of these fees.

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

	Beginning account value 7/1/2011		Ending account value 12/31/2011		Expenses paid during period*		Annualized expense ratio
Class A -- actual return	$	1,000.00	$	986.87	$	3.10		.62	%
Class A -- assumed 5% return		1,000.00		1,022.08		3.16		.62
Class B -- actual return		1,000.00		983.33		6.90		1.38
Class B -- assumed 5% return		1,000.00		1,018.25		7.02		1.38
Class C -- actual return		1,000.00		982.77		7.10		1.42
Class C -- assumed 5% return		1,000.00		1,018.05		7.22		1.42
Class F-1 -- actual return		1,000.00		987.36		3.21		.64
Class F-1 -- assumed 5% return		1,000.00		1,021.98		3.26		.64
Class F-2 -- actual return		1,000.00		988.51		2.00		.40
Class F-2 -- assumed 5% return		1,000.00		1,023.19		2.04		.40
Class 529-A -- actual return		1,000.00		986.43		3.55		.71
Class 529-A -- assumed 5% return		1,000.00		1,021.63		3.62		.71
Class 529-B -- actual return		1,000.00		982.73		7.50		1.50
Class 529-B -- assumed 5% return		1,000.00		1,017.64		7.63		1.50
Class 529-C -- actual return		1,000.00		983.01		7.45		1.49
Class 529-C -- assumed 5% return		1,000.00		1,017.69		7.58		1.49
Class 529-E -- actual return		1,000.00		985.10		4.85		.97
Class 529-E -- assumed 5% return		1,000.00		1,020.32		4.94		.97
Class 529-F-1 -- actual return		1,000.00		987.52		2.45		.49
Class 529-F-1 -- assumed 5% return		1,000.00		1,022.74		2.50		.49
Class R-1 -- actual return		1,000.00		983.35		7.00		1.40
Class R-1 -- assumed 5% return		1,000.00		1,018.15		7.12		1.40
Class R-2 -- actual return		1,000.00		983.48		6.95		1.39
Class R-2 -- assumed 5% return		1,000.00		1,018.20		7.07		1.39
Class R-3 -- actual return		1,000.00		985.13		4.75		.95
Class R-3 -- assumed 5% return		1,000.00		1,020.42		4.84		.95
Class R-4 -- actual return		1,000.00		986.72		3.25		.65
Class R-4 -- assumed 5% return		1,000.00		1,021.93		3.31		.65
Class R-5 -- actual return		1,000.00		988.23		1.75		.35
Class R-5 -- assumed 5% return		1,000.00		1,023.44		1.79		.35
Class R-6 -- actual return		1,000.00		988.49		1.50		.30
Class R-6 -- assumed 5% return		1,000.00		1,023.69		1.53		.30
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period).

Tax information                                                                                                                  

             unaudited

We are required to advise you of the federal tax status of certain distributions received by shareholders during the fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended December 31, 2011:

Qualified dividend income	$786,652,000
Corporate dividends received deduction	$678,072,000
U.S. government income that may be exempt from state taxation	$109,988,000

Individual shareholders should refer to their Form 1099 or other tax information, which was mailed in January 2012, to determine the calendar year amounts to be included on their 2011 tax returns. Shareholders should consult their tax advisers.

Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through December 31, 2012. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.

In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.

1. Nature, extent and quality of services

The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.

2. Investment results

The board and the committee considered the investment results of the fund in light of its objectives of providing conservation of capital, current income and long-term growth of capital and income. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indexes, in each case as available at the time of the related board and committee meetings. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.

3. Advisory fees and total expenses

The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by clients of an affiliate of CRMC. They noted that, to the extent there were differences between the advisory fees paid by the fund and the advisory fees paid by those clients, the differences appropriately reflected the investment, operational and regulatory differences between advising the fund and the other clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.

4. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.

Board of trustees and other officers

“Independent” trustees1
	Year first
	elected a
	trustee of
Name and age	the fund2	Principal occupation(s) during past five years
Vanessa C. L. Chang, 59	2012	Director, EL & EL Investments (real estate)
Mary Jane Elmore, 57	2008	Managing Director and General Partner, Institutional
		Venture Partners
Robert A. Fox, 74	1976–1978	Managing General Partner, Fox Investments LP;
Chairman of the Board	1982	corporate director
(Independent and
Non-Executive)
Leonade D. Jones, 64	1993	Retired; former Treasurer, The Washington Post
		Company
William D. Jones, 56	2008	Real estate developer/owner, President and CEO,
		CityLink Investment Corporation (acquires, develops
		and manages real estate ventures in selected urban
		communities) and City Scene Management Company
		(provides commercial asset and property
		management services)
John M. Lillie, 75	2003	Business consultant
John G. McDonald, 74	1975–1978	Stanford Investors Professor, Graduate School of
	1988	Business, Stanford University
James J. Postl, 66	2007	Retired; former President and CEO, Pennzoil-Quaker
		State Company (automotive products and services)
Isaac Stein, 65	2004	President, Waverley Associates (private investment
		fund); Chairman Emeritus of the Board of Trustees,
		Stanford University
“Independent” trustees1
	Number of
	portfolios
	in fund
	complex3
	overseen by
Name and age	trustee	Other directorships4 held by trustee
Vanessa C. L. Chang, 59	6	Edison International
Mary Jane Elmore, 57	3	None
Robert A. Fox, 74	9	None
Chairman of the Board
(Independent and
Non-Executive)
Leonade D. Jones, 64	9	None
William D. Jones, 56	7	Sempra Energy
John M. Lillie, 75	3	None
John G. McDonald, 74	13	iStar Financial, Inc.; Plum Creek Timber Co.;
		QuinStreet, Inc.; Scholastic Corporation
James J. Postl, 66	3	Cooper Industries; Pulte, Inc.
Isaac Stein, 65	3	Alexza Pharmaceuticals, Inc.; Maxygen, Inc.

“Interested” trustee5
	Year first
	elected a
	trustee or	Principal occupation(s) during past five years and
Name, age and	officer of	positions held with affiliated entities or the
position with fund	the fund2	principal underwriter of the fund
Gregory D. Johnson, 48	2003	Senior Vice President — Capital World Investors,
Vice Chairman of the Board		Capital Research and Management Company
and President
“Interested” trustee5
	Number of
	portfolios
	in fund
	complex3
Name, age and	overseen by
position with fund	trustee	Other directorships4 held by trustee
Gregory D. Johnson, 48	1	None
Vice Chairman of the Board
and President

The fund’s statement of additional information includes further details about fund trustees and is available without charge upon request by calling American Funds Service Company at 800/421-4225 or by visiting the American Funds website at americanfunds.com. The address for all trustees and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.

Other officers6
	Year first
	elected	Principal occupation(s) during past five years
Name, age and	an officer	and positions held with affiliated entities or the
position with fund	of the fund2	principal underwriter of the fund
Hilda L. Applbaum, 51	1999	Senior Vice President — Capital World Investors,
Senior Vice President		Capital Research and Management Company
Jeffrey T. Lager, 43	2002	Senior Vice President — Capital World Investors,
Senior Vice President		Capital Research Company7
James R. Mulally, 59	2009	Senior Vice President — Fixed Income, Capital
Senior Vice President		Research and Management Company
Paul F. Roye, 58	2007	Senior Vice President — Fund Business Management
Senior Vice President		Group, Capital Research and Management Company;
		Director, American Funds Service Company;7 former
		Director, Division of Investment Management, United
		States Securities and Exchange Commission
John H. Smet, 55	2000	Senior Vice President — Fixed Income, Capital
Senior Vice President		Research and Management Company; Director,
		The Capital Group Companies, Inc.7
Alan N. Berro, 51	2010	Senior Vice President — Capital World Investors,
Vice President		Capital Research and Management Company
Patrick F. Quan, 53	1986	Vice President — Fund Business Management
Secretary		Group, Capital Research and Management Company
M. Susan Gupton, 38	2011	Vice President — Fund Business Management
Treasurer		Group, Capital Research and Management Company
Julie E. Lawton, 38	2009	Assistant Vice President — Fund Business
Assistant Secretary		Management Group, Capital Research and
		Management Company
Dori Laskin, 60	2011	Vice President — Fund Business Management
Assistant Treasurer		Group, Capital Research and Management Company
Jeffrey P. Regal, 40	2011	Vice President — Fund Business Management
Assistant Treasurer		Group, Capital Research and Management Company

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

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

3Capital Research and Management Company manages the American Funds, consisting of 33 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 18 funds and serves as the underlying investment vehicle for certain variable insurance contracts; and American Funds Target Date Retirement Series,® which is composed of 10 funds and is available through tax-deferred retirement plans and IRAs.

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

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

6All of the officers listed, except Jeffrey T. Lager, are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as investment adviser.

7Company affiliated with Capital Research and Management Company.

Office of the fund

One Market

Steuart Tower, Suite 2000

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

Transfer agent for shareholder accounts

American Funds Service Company

(Write to the address near you.)

P.O. Box 6007

Indianapolis, IN 46206-6007

P.O. Box 2280

Norfolk, VA 23501-2280

Counsel

Bingham McCutchen LLP

355 South Grand Avenue, Suite 4400

Los Angeles, CA 90071-3106

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 and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-4225 or visit the American Funds website at americanfunds.com.

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

A complete December 31, 2011, 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 or summary prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after March 31, 2012, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

     

The American Funds difference

Since 1931, American Funds has helped investors pursue long-term investment success. Our consistent approach — in combination with a proven system — has resulted in a superior long-term track record.

Consistent approach

We base our decisions on a long-term perspective because we believe it is the best way to achieve superior long-term investment results. Our portfolio counselors average 25 years of investment experience, including 21 years at our company, reflecting a career commitment to our long-term approach.1

Proven system

Our system combines individual accountability with teamwork. Each fund is divided into portions that are managed by investment professionals with varied backgrounds, ages and investment styles. An extensive global research effort is the backbone of our system.

Superior long-term track record

Our equity funds have beaten their Lipper peer indexes in 91% of 10-year periods and 96% of 20-year periods. Our fixed-income funds have beaten their Lipper indexes in 60% of 10-year periods and 67% of 20-year periods.2 Our fund management fees have generally been among the lowest in the industry.3

1 As of 12/31/11.

2 Based on Class A share results for periods through 12/31/11. Periods covered are the shorter of the fund’s lifetime or since the comparable Lipper index inception date.

3 Based on management fees for the 20-year period ended 12/31/11 versus comparable Lipper categories, excluding funds of funds.

American Funds span a range of investment objectives

• Growth funds

Emphasis on long-term growth through stocks

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

Emphasis on long-term growth and dividends through stocks

American Mutual Fund®

Capital World Growth and Income Fund®

Fundamental InvestorsSM

International Growth and Income FundSM

The Investment Company of America®

Washington Mutual Investors FundSM

• Equity-income funds

Emphasis on above-average income and growth through stocks and/or bonds

Capital Income Builder®

The Income Fund of America®

• Balanced funds

Emphasis on long-term growth and current income through stocks and bonds

American Balanced Fund®

American Funds Global Balanced FundSM

• Bond funds

Emphasis on current income through bonds

American Funds Mortgage Fund®

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

Emphasis on tax-exempt current income through municipal bonds

American Funds Short-Term Tax-Exempt Bond FundSM

American High-Income Municipal Bond Fund®

Limited Term Tax-Exempt Bond Fund of AmericaSM

The Tax-Exempt Bond Fund of America®

State-specific tax-exempt funds

American Funds Tax-Exempt Fund of New YorkSM

The Tax-Exempt Fund of California®

The Tax-Exempt Fund of Maryland®

The Tax-Exempt Fund of Virginia®

Money market fund

American Funds Money Market Fund®

• American Funds Target Date Retirement Series®

The Capital Group Companies

American FundsCapital Research and ManagementCapital InternationalCapital GuardianCapital Bank and Trust

Lit. No. MFGEAR-911-0212P

Litho in USA AGD/RRD/8050-S28689

Printed on paper containing 10% post-consumer waste

Printed with inks containing soy and/or vegetable oil

ITEM 2 – Code of Ethics

The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer.  The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics.  Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, One Market, Steuart Tower, Suite 2000, San Francisco, California 94105.

ITEM 3 – Audit Committee Financial Expert

The Registrant’s board has determined that Isaac Stein, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members.  There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such.  Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.

ITEM 4 – Principal Accountant Fees and Services

Registrant:
	a)  Audit Fees:
		2010	$71,000
		2011	$86,000
	b)  Audit-Related Fees:
		2010	$15,000
		2011	$15,000
		The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
	c)  Tax Fees:
		2010	$7,000
		2011	$7,000
		The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns including returns relating to the Registrant’s investing activity in non-U.S. jurisdictions.
	d)  All Other Fees:
		2010	None
		2011	None
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below):
	a)  Audit Fees:
		Not Applicable
	b)  Audit-Related Fees:
		2010	$1,092,000
		2011	$911,000
		The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
	c)  Tax Fees:
		2010	$15,000
		2011	$43,000
		The tax fees consist of consulting services relating to the Registrant’s investments.
	d)  All Other Fees:
		2010	$2,000
		2011	$4,000
		The other fees consist of subscription services related to an accounting research tool.

All audit and permissible non-audit services that the Registrant’s audit committee considers compatible with maintaining the independent registered public accounting firm’s independence are required to be pre-approved by the committee.  The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services.  Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser and affiliates.

Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant, adviser and affiliates that provide ongoing services to the Registrant, were $1,556,000 for fiscal year 2010 and $1,605,000 for fiscal year 2011. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.

ITEM 5 – Audit Committee of Listed Registrants

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

ITEM 6 – Schedule of Investments

American Balanced Fund®

Investment portfolio

December 31, 2011

Common stocks — 69.73%	Shares			Value (000)
FINANCIALS — 10.80%
Wells Fargo & Co.		45,386,600		$	1,250,855
Berkshire Hathaway Inc., Class A1		8,039			922,515
American Express Co.		16,224,000			765,286
Goldman Sachs Group, Inc.		8,196,700			741,228
ACE Ltd.		4,470,000			313,436
JPMorgan Chase & Co.		6,939,700			230,745
Weyerhaeuser Co.		12,115,242			226,192
Citigroup Inc.		6,500,000			171,015
SunTrust Banks, Inc.		9,500,000			168,150
U.S. Bancorp		5,210,000			140,931
Moody’s Corp.		2,500,000			84,200
Chubb Corp.		1,200,000			83,064
T. Rowe Price Group, Inc.		1,120,000			63,784
Progressive Corp.		3,130,000			61,066
HDFC Bank Ltd. (ADR)		2,200,000			57,816
Allstate Corp.		2,000,000			54,820
					5,335,103
INDUSTRIALS — 9.61%
Union Pacific Corp.		9,210,000			975,707
Boeing Co.		11,675,000			856,361
Lockheed Martin Corp.		7,223,956			584,418
General Electric Co.		25,100,000			449,541
Deere & Co.		5,640,000			436,254
Parker Hannifin Corp.		4,100,000			312,625
Cummins Inc.		2,595,000			228,412
United Technologies Corp.		2,850,000			208,306
Emerson Electric Co.		3,495,000			162,832
European Aeronautic Defence and Space Co. EADS NV		4,500,000			140,653
General Dynamics Corp.		1,865,000			123,855
Northrop Grumman Corp.		1,400,000			81,872
Honeywell International Inc.		1,500,000			81,525
Expeditors International of Washington, Inc.		1,480,000			60,621
CSX Corp.		2,100,000			44,226
					4,747,208
INFORMATION TECHNOLOGY — 9.22%
Apple Inc.1		1,550,000			627,750
Oracle Corp.		24,031,391			616,405
Microsoft Corp.		23,705,700			615,400
Texas Instruments Inc.		17,525,000			510,153
Google Inc., Class A1		645,000			416,605
TE Connectivity Ltd.		10,380,000			319,808
Maxim Integrated Products, Inc.		9,420,000			245,297
ASML Holding NV (New York registered)		4,304,000			179,864
International Business Machines Corp.		950,000			174,686
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		13,000,000			167,830
EMC Corp.1		6,000,000			129,240
Samsung Electronics Co. Ltd.2		140,000			128,843
Paychex, Inc.		3,477,000			104,692
Corning Inc.		8,000,000			103,840
Yahoo! Inc.1		5,906,000			95,264
Analog Devices, Inc.		2,000,000			71,560
Automatic Data Processing, Inc.		950,000			51,310
					4,558,547
ENERGY — 9.09%
Chevron Corp.		13,737,000			1,461,617
Royal Dutch Shell PLC, Class B (ADR)		15,947,360			1,212,159
ConocoPhillips		4,200,000			306,054
Schlumberger Ltd.		3,490,000			238,402
Concho Resources Inc.1		1,935,000			181,406
Baker Hughes Inc.		3,400,000			165,376
Kinder Morgan, Inc.		4,670,000			150,234
Newfield Exploration Co.1		3,500,000			132,055
Occidental Petroleum Corp.		1,200,000			112,440
Apache Corp.		1,195,000			108,243
Transocean Ltd.		2,500,000			95,975
Technip SA		800,000			75,191
Cimarex Energy Co.		1,180,000			73,042
Petróleo Brasileiro SA — Petrobras, ordinary nominative (ADR)		2,825,000			70,201
Suncor Energy Inc.		2,000,000			57,679
TOTAL SA (ADR)		1,050,000			53,665
					4,493,739
CONSUMER DISCRETIONARY — 8.01%
Home Depot, Inc.		23,655,000			994,456
Comcast Corp., Class A		22,435,000			531,934
Amazon.com, Inc.1		2,920,000			505,452
McDonald’s Corp.		3,435,000			344,634
VF Corp.		1,800,000			228,582
Walt Disney Co.		6,000,000			225,000
Time Warner Inc.		5,000,000			180,700
DIRECTV, Class A1		4,045,000			172,964
McGraw-Hill Companies, Inc.		3,000,000			134,910
General Motors Co.1		6,500,000			131,755
Macy’s, Inc.		4,000,000			128,720
Starbucks Corp.		2,500,000			115,025
Las Vegas Sands Corp.1		2,500,000			106,825
NIKE, Inc., Class B		827,221			79,719
Johnson Controls, Inc.		2,445,000			76,431
					3,957,107
CONSUMER STAPLES — 7.40%
Philip Morris International Inc.		14,420,000			1,131,682
Costco Wholesale Corp.		8,757,326			729,660
Procter & Gamble Co.		5,998,000			400,127
Kraft Foods Inc., Class A		10,622,000			396,838
Nestlé SA		5,000,000			287,448
Nestlé SA (ADR)		1,500,000			86,565
PepsiCo, Inc.		3,770,000			250,140
Kellogg Co.		2,700,000			136,539
Coca-Cola Co.		1,290,000			90,261
Unilever NV (New York registered)		2,360,000			81,113
Colgate-Palmolive Co.		700,000			64,673
					3,655,046
HEALTH CARE — 6.86%
Merck & Co., Inc.		23,174,575			873,682
Bristol-Myers Squibb Co.		21,630,000			762,241
UnitedHealth Group Inc.		7,550,000			382,634
Cardinal Health, Inc.		8,115,000			329,550
Pfizer Inc		14,250,000			308,370
Johnson & Johnson		3,895,000			255,434
Baxter International Inc.		4,225,000			209,053
Roche Holding AG		700,000			118,642
Gilead Sciences, Inc.1		2,625,000			107,441
Teva Pharmaceutical Industries Ltd. (ADR)		1,100,000			44,396
					3,391,443
MATERIALS — 4.16%
Dow Chemical Co.		16,980,000			488,345
Potash Corp. of Saskatchewan Inc.		11,181,860			461,587
E.I. du Pont de Nemours and Co.		8,250,000			377,685
Nucor Corp.		4,250,000			168,172
Alcoa Inc.		17,500,000			151,375
Cliffs Natural Resources Inc.		1,800,000			112,230
Monsanto Co.		1,300,000			91,091
Steel Dynamics, Inc.		5,179,668			68,113
Rio Tinto PLC		1,060,000			51,443
Barrick Gold Corp.		1,060,000			47,965
Martin Marietta Materials, Inc.		484,449			36,532
					2,054,538
TELECOMMUNICATION SERVICES — 1.83%
AT&T Inc.		10,420,000			315,101
Verizon Communications Inc.		7,415,000			297,490
American Tower Corp.		4,850,000			291,048
					903,639
UTILITIES — 1.63%
PG&E Corp.		7,660,000			315,745
Exelon Corp.		3,000,000			130,110
Duke Energy Corp.		5,080,000			111,760
GDF SUEZ		4,000,000			109,338
National Grid PLC		8,000,000			77,650
Edison International		1,500,000			62,100
					806,703
MISCELLANEOUS — 1.12%
Other common stocks in initial period of acquisition					552,543
Total common stocks (cost: $27,635,669,000)					34,455,616
	Principal amount			Value
Bonds & notes — 27.68%		(000	)		(000	)
CORPORATE BONDS & NOTES — 9.35%
FINANCIALS — 3.42%
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20143	$	4,445			4,661
Westfield Group 5.75% 20153		16,250			17,289
Westfield Group 5.70% 20163		30,520			32,728
Westfield Group 7.125% 20183		21,280			23,807
WEA Finance LLC 4.625% 20213		25,000			24,574
Goldman Sachs Group, Inc. 3.625% 2016		72,500			70,130
Goldman Sachs Group, Inc. 5.25% 2021		20,000			19,540
Citigroup Inc. 1.307% 20134		35,000			34,359
Citigroup Inc. 4.587% 2015		20,950			21,107
Citigroup Inc. 3.953% 2016		13,050			13,021
Citigroup Inc. 6.125% 2018		5,525			5,887
Citigroup Inc. 8.50% 2019		9,975			11,755
Wells Fargo & Co. 2.625% 2016		15,500			15,512
Wells Fargo & Co. 3.676% 2016		19,000			19,879
Wells Fargo & Co. 4.60% 2021		40,000			43,934
Bank of America Corp., Series L, 3.625% 2016		23,820			21,982
Bank of America Corp. 3.75% 2016		21,955			20,353
Bank of America Corp. 5.75% 2017		13,650			12,912
Bank of America Corp. 5.625% 2020		15,500			14,337
Bank of America Corp. 5.00% 2021		7,750			7,069
Prologis, Inc. 5.50% 2012		15,000			15,070
Prologis, Inc. 5.625% 2015		10,425			11,099
Prologis, Inc. 6.625% 2018		15,500			16,856
Prologis, Inc. 7.375% 2019		19,835			22,436
Morgan Stanley, Series F, 2.875% 2014		18,000			17,250
Morgan Stanley 3.80% 2016		17,000			15,681
Morgan Stanley, Series F, 5.75% 2021		24,000			22,418
Kimco Realty Corp. 6.00% 2012		2,750			2,831
Kimco Realty Corp., Series C, 4.82% 2014		13,000			13,514
Kimco Realty Corp., Series C, 5.783% 2016		14,000			15,159
Kimco Realty Corp. 5.70% 2017		21,180			22,850
Royal Bank of Scotland PLC 3.40% 2013		16,500			16,060
Royal Bank of Scotland PLC 3.95% 2015		16,000			15,018
Royal Bank of Scotland PLC 4.875% 2015		20,000			19,140
Société Générale 1.441% 20143,4		17,500			15,430
Société Générale 5.20% 20213		40,800			34,716
JPMorgan Chase & Co. 2.60% 2016		12,500			12,331
JPMorgan Chase & Co. 4.25% 2020		6,250			6,303
JPMorgan Chase & Co. 4.35% 2021		30,000			30,345
American Express Bank 5.50% 2013		21,300			22,273
American Express Co. 6.15% 2017		22,800			26,113
Barclays Bank PLC 2.50% 2013		8,500			8,466
Barclays Bank PLC 2.375% 2014		20,000			19,587
Barclays Bank PLC 5.125% 2020		18,000			18,514
BNP Paribas 1.291% 20144		17,000			15,688
BNP Paribas 3.60% 2016		19,000			17,842
BNP Paribas 5.00% 2021		12,750			12,289
CNA Financial Corp. 5.85% 2014		25,000			26,364
CNA Financial Corp. 6.50% 2016		16,000			17,327
Hospitality Properties Trust 6.75% 2013		7,215			7,333
Hospitality Properties Trust 6.30% 2016		12,631			13,269
Hospitality Properties Trust 6.70% 2018		21,025			22,301
Monumental Global Funding 5.50% 20133		12,000			12,502
Monumental Global Funding III 0.603% 20143,4		29,000			27,669
ERP Operating LP 5.375% 2016		25,000			27,232
ERP Operating LP 4.75% 2020		12,000			12,467
Simon Property Group, LP 6.75% 2014		8,495			9,361
Simon Property Group, LP 5.875% 2017		15,165			17,344
Simon Property Group, LP 6.125% 2018		8,160			9,378
ACE INA Holdings Inc. 5.875% 2014		20,000			22,078
ACE INA Holdings Inc. 2.60% 2015		12,665			12,906
Standard Chartered PLC 3.85% 20153		12,500			12,592
Standard Chartered PLC 3.20% 20163		21,000			20,574
HBOS PLC 6.75% 20183		41,050			32,946
Boston Properties, Inc. 3.70% 2018		20,000			20,446
Boston Properties, Inc. 5.875% 2019		10,000			11,276
Liberty Mutual Group Inc. 6.50% 20353		10,855			10,597
Liberty Mutual Group Inc. 7.697% 20973		22,180			20,994
Household Finance Corp. 6.375% 2012		13,000			13,374
HSBC Bank PLC 2.00% 20143		17,000			16,754
MetLife Global Funding I 5.125% 20133		12,000			12,541
MetLife Global Funding I 2.50% 20153		16,000			16,109
Berkshire Hathaway Inc. 2.20% 2016		23,000			23,707
QBE Capital Funding II LP 6.797% (undated)3,4		24,470			20,893
Capital One Financial Corp. 3.15% 2016		19,500			19,608
UBS AG 2.25% 2014		18,500			18,013
Bank of New York Mellon Corp., Series G, 2.50% 2016		17,000			17,236
Westpac Banking Corp. 3.00% 2015		17,000			17,102
Credit Suisse Group AG 2.20% 2014		17,000			16,823
Nordea Bank 2.125% 20143		17,000			16,682
Toyota Motor Credit Corp. 1.375% 2013		16,500			16,662
ANZ National (International) Ltd. 3.125% 20153		16,500			16,512
Bank of Tokyo-Mitsubishi, Ltd. 2.45% 20153		16,000			16,296
Principal Life Insurance Co. 5.30% 2013		15,500			16,269
HCP, Inc. 5.375% 2021		15,000			15,748
New York Life Global Funding 5.25% 20123		15,000			15,560
Prudential Holdings, LLC, Series C, 8.695% 20233,5		11,500			14,477
Allstate Life Global Funding Trust, Series 2008-4, 5.375% 2013		13,000			13,733
AXA SA, Series B, junior subordinated 6.379% (undated)3,4		20,680			13,649
Toronto-Dominion Bank 2.375% 2016		12,000			12,228
American International Group, Inc. 4.875% 2016		12,000			11,370
Nationwide Mutual Insurance Co. 5.81% 20243,4		8,150			7,396
Nationwide Financial Services, Inc., junior subordinated 6.75% 20674		3,540			3,080
Lincoln National Corp. 5.65% 2012		10,000			10,203
Santander Issuances, SA Unipersonal 6.50% 20193,4		11,500			10,019
Intesa Sanpaolo SpA 6.50% 20213		11,260			9,253
UDR, Inc. 5.00% 2012		6,000			6,004
Developers Diversified Realty Corp. 7.875% 2020		5,215			5,825
					1,690,197
TELECOMMUNICATION SERVICES — 0.99%
AT&T Inc. 4.95% 2013		16,250			16,941
SBC Communications Inc. 5.10% 2014		15,000			16,534
AT&T Inc. 2.40% 2016		18,000			18,389
SBC Communications Inc. 5.625% 2016		24,300			27,910
BellSouth Capital Funding Corp. 7.875% 2030		51,500			69,362
SBC Communications Inc. 6.45% 2034		40,000			48,186
AT&T Inc. 5.35% 2040		7,000			7,889
Verizon Communications Inc. 5.55% 2014		12,440			13,524
Verizon Communications Inc. 3.00% 2016		34,000			35,647
Verizon Communications Inc. 5.50% 2017		13,975			16,202
Verizon Communications Inc. 6.25% 2037		40,000			49,433
Verizon Communications Inc. 4.75% 2041		100			108
Verizon Communications Inc. 6.00% 2041		7,900			9,813
Telecom Italia Capital SA 5.25% 2015		35,500			32,597
Telecom Italia Capital SA 6.999% 2018		12,000			11,230
Telecom Italia Capital SA 7.175% 2019		9,000			8,443
Telefónica Emisiones, SAU 3.729% 2015		4,175			4,007
Telefónica Emisiones, SAU 3.992% 2016		18,000			17,326
Telefónica Emisiones, SAU 5.134% 2020		11,825			11,122
Deutsche Telekom International Finance BV 4.875% 2014		15,500			16,515
Deutsche Telekom International Finance BV 8.75% 20304		6,161			8,605
Deutsche Telekom International Finance BV 9.25% 2032		4,339			6,459
France Télécom 4.375% 2014		10,000			10,571
France Télécom 4.125% 2021		20,000			20,193
American Tower Corp. 4.625% 2015		10,000			10,433
					487,439
CONSUMER DISCRETIONARY — 0.79%
Time Warner Cable Inc. 6.75% 2018		37,620			44,730
Time Warner Cable Inc. 5.00% 2020		25,000			27,427
Time Warner Cable Inc. 4.00% 2021		15,000			15,200
Comcast Corp. 5.30% 2014		15,000			16,173
Comcast Corp. 6.30% 2017		16,750			19,842
Comcast Corp. 6.45% 2037		15,000			18,213
Comcast Corp. 6.95% 2037		24,250			30,903
Home Depot, Inc. 4.40% 2021		15,000			16,938
Home Depot, Inc. 5.95% 2041		15,000			19,389
Time Warner Inc. 5.875% 2016		14,210			16,423
Time Warner Inc. 6.25% 2041		15,000			18,016
Thomson Reuters Corp. 5.95% 2013		8,140			8,677
Thomson Reuters Corp. 6.50% 2018		20,815			24,966
Volkswagen International Finance NV 1.625% 20133		16,000			16,052
Volkswagen International Finance NV 0.984% 20143,4		17,000			16,670
Nordstrom, Inc. 6.75% 2014		10,000			11,222
Nordstrom, Inc. 4.00% 2021		6,245			6,520
Cox Communications, Inc. 5.45% 2014		15,500			17,220
NBCUniversal Media, LLC 2.875% 2016		16,000			16,332
Walt Disney Co. 0.875% 2014		15,500			15,586
Macy’s Retail Holdings, Inc. 8.125% 20154		10,000			11,556
Seminole Tribe of Florida 5.798% 20133,5		4,910			4,931
					392,986
INDUSTRIALS — 0.76%
General Electric Capital Corp. 1.014% 20144		50,000			48,900
General Electric Capital Corp., Series A, 2.25% 2015		21,500			21,620
General Electric Capital Corp. 2.95% 2016		9,305			9,582
General Electric Corp. 5.25% 2017		17,270			19,853
General Electric Capital Corp., Series A, 6.00% 2019		15,000			17,251
General Electric Capital Corp. 4.65% 2021		15,000			15,680
Burlington Northern Santa Fe LLC 7.00% 2014		31,850			35,707
Burlington Northern Santa Fe LLC 4.10% 2021		7,000			7,565
Union Pacific Corp. 5.75% 2017		4,325			5,124
Union Pacific Corp. 5.70% 2018		29,150			34,602
Continental Airlines, Inc., Series 1997-1, Class A, 7.461% 20165		8,394			8,368
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20195		7,775			8,047
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20195		4,167			4,355
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20205		7,429			7,767
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20225		6,537			6,749
Waste Management, Inc. 2.60% 2016		8,890			9,035
Waste Management, Inc. 4.60% 2021		15,000			16,279
Danaher Corp. 2.30% 2016		16,795			17,479
Atlas Copco AB 5.60% 20173		14,000			15,865
American Airlines, Inc., Series 2011-2, Class A, 8.625% 20235		15,000			15,628
Canadian National Railway Co. 4.95% 2014		6,000			6,471
Canadian National Railway Co. 1.45% 2016		8,900			8,863
CSX Corp. 5.75% 2013		7,670			8,077
CSX Corp. 6.25% 2015		5,990			6,850
Volvo Treasury AB 5.95% 20153		9,460			10,057
Norfolk Southern Corp. 5.75% 2016		7,615			8,825
					374,599
ENERGY — 0.76%
Enbridge Energy Partners, LP, Series B, 6.50% 2018		12,250			14,265
Enbridge Energy Partners, LP 4.20% 2021		26,865			28,099
Enbridge Energy Partners, LP, Series B, 7.50% 2038		12,250			16,257
Kinder Morgan Energy Partners LP 6.00% 2017		29,610			33,556
Kinder Morgan Energy Partners, L.P. 5.80% 2021		3,325			3,768
Kinder Morgan Energy Partners LP 4.15% 2022		12,855			13,097
StatoilHydro ASA 2.90% 2014		13,285			13,952
StatoilHydro ASA 1.80% 2016		16,000			16,234
Statoil ASA 3.125% 2017		16,500			17,429
Enterprise Products Operating LLC 5.20% 2020		13,000			14,409
Enterprise Products Operating LLC 4.05% 2022		17,500			17,860
Woodside Finance Ltd. 4.60% 20213		24,975			25,540
Anadarko Petroleum Corp. 5.95% 2016		20,500			23,267
BG Energy Capital PLC 2.50% 20153		7,200			7,333
BG Energy Capital PLC 2.875% 20163		12,325			12,611
Total Capital SA 3.00% 2015		17,000			17,985
Williams Partners L.P. 4.125% 2020		13,500			13,875
Williams Partners L.P. 4.00% 2021		3,010			3,096
Shell International Finance BV 1.875% 2013		16,500			16,814
Cenovus Energy Inc. 4.50% 2014		15,000			16,172
Canadian Natural Resources Ltd. 5.70% 2017		11,925			14,120
Husky Energy Inc. 6.80% 2037		9,375			11,781
Transocean Inc. 6.375% 2021		8,620			9,176
Transocean Inc. 7.35% 2041		1,880			2,092
Enbridge Inc. 5.60% 2017		10,000			11,217
					374,005
CONSUMER STAPLES — 0.74%
Anheuser-Busch InBev NV 3.625% 2015		36,500			38,903
Anheuser-Busch InBev NV 4.125% 2015		16,500			17,805
Anheuser-Busch InBev NV 7.75% 2019		20,000			25,932
Altria Group, Inc. 9.25% 2019		15,000			20,165
Altria Group, Inc. 4.75% 2021		15,000			16,541
Altria Group, Inc. 9.95% 2038		13,500			20,563
PepsiCo, Inc. 3.10% 2015		17,000			18,033
PepsiCo, Inc. 2.50% 2016		15,000			15,624
PepsiCo, Inc. 7.90% 2018		15,000			20,273
Kraft Foods Inc. 6.75% 2014		16,180			17,992
Kraft Foods Inc. 6.50% 2040		20,000			26,065
Wal-Mart Stores, Inc. 2.875% 2015		11,700			12,413
Wal-Mart Stores, Inc. 2.80% 2016		25,000			26,753
Coca-Cola Co. 1.50% 2015		18,970			19,250
Coca-Cola Co. 1.80% 2016		17,500			17,842
British American Tobacco International Finance PLC 9.50% 20183		13,580			18,460
Kroger Co. 3.90% 2015		16,250			17,486
Procter & Gamble Co. 1.45% 2016		13,460			13,636
					363,736
HEALTH CARE — 0.67%
Cardinal Health, Inc. 4.00% 2015		37,100			39,741
Cardinal Health, Inc. 5.80% 2016		17,500			20,080
Cardinal Health, Inc. 4.625% 2020		20,000			21,472
UnitedHealth Group Inc. 6.00% 2017		22,170			26,113
UnitedHealth Group Inc. 6.00% 2018		35,000			41,657
UnitedHealth Group Inc. 4.70% 2021		4,890			5,506
Express Scripts Inc. 3.125% 2016		23,000			23,156
Express Scripts Inc. 6.125% 20413		15,000			16,246
Amgen Inc. 2.50% 2016		27,875			28,248
GlaxoSmithKline Capital Inc. 4.85% 2013		26,200			27,740
Novartis Capital Corp. 2.90% 2015		16,000			16,949
Biogen Idec Inc. 6.00% 2013		13,500			14,200
Gilead Sciences, Inc. 2.40% 2014		4,295			4,376
Gilead Sciences, Inc. 3.05% 2016		3,425			3,510
Gilead Sciences, Inc. 4.40% 2021		4,870			5,164
Coventry Health Care, Inc. 6.30% 2014		11,955			13,017
Medco Health Solutions, Inc. 2.75% 2015		10,095			10,163
DENTSPLY International Inc. 2.75% 2016		9,830			9,937
Abbott Laboratories 2.70% 2015		4,500			4,724
					331,999
MATERIALS — 0.55%
ArcelorMittal 3.75% 2015		34,500			33,014
ArcelorMittal 5.25% 2020		20,000			18,186
ArcelorMittal 7.00% 2039		25,000			23,265
Dow Chemical Co. 7.60% 2014		18,250			20,651
Rohm and Haas Co. 6.00% 2017		17,445			19,864
International Paper Co. 7.40% 2014		23,250			25,829
International Paper Co. 7.30% 2039		8,425			10,265
Rio Tinto Finance (USA) Ltd. 8.95% 2014		9,180			10,743
Rio Tinto Finance (USA) Ltd. 2.25% 2016		15,000			15,298
E.I. du Pont de Nemours and Co. 0.994% 20144		25,000			25,161
Teck Resources Ltd. 4.75% 2022		17,500			18,841
Anglo American Capital PLC 2.15% 20133		14,355			14,387
Ecolab Inc. 3.00% 2016		12,365			12,808
Newcrest Finance Pty Ltd. 4.45% 20213		12,825			12,670
Xstrata Canada Financial Corp. 4.95% 20213		11,520			11,788
					272,770
UTILITIES — 0.42%
National Rural Utilities Cooperative Finance Corp. 5.50% 2013		45,500			48,687
National Rural Utilities Cooperative Finance Corp. 10.375% 2018		8,450			12,170
MidAmerican Energy Holdings Co., Series D, 5.00% 2014		18,000			19,352
PacifiCorp., First Mortgage Bonds, 5.65% 2018		2,465			2,946
MidAmerican Energy Holdings Co. 5.75% 2018		15,300			17,675
MidAmerican Energy Holdings Co. 5.95% 2037		6,125			7,250
E.ON International Finance BV 5.80% 20183		24,450			27,999
CenterPoint Energy Resources Corp. 4.50% 2021		18,751			19,889
Electricité de France SA 6.95% 20393		12,000			14,145
Virginia Electric and Power Co., Series B, 5.95% 2017		10,000			12,052
Iberdrola Finance Ireland 3.80% 20143		11,000			10,991
Niagara Mohawk Power 3.553% 20143		10,000			10,513
Tri-State Generation and Transmission Assn. Inc., Pass Through Trust, Series 2003-A, 6.04% 20183,5		3,286			3,646
					207,315
INFORMATION TECHNOLOGY — 0.25%
International Business Machines Corp. 1.95% 2016		52,500			54,102
International Business Machines Corp. 2.00% 2016		17,000			17,457
Cisco Systems, Inc. 0.794% 20144		19,000			18,998
Cisco Systems, Inc. 2.90% 2014		10,000			10,588
KLA-Tencor Corp. 6.90% 2018		19,000			21,933
					123,078
Total corporate bonds & notes					4,618,124
MORTGAGE-BACKED OBLIGATIONS5 — 9.26%
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012		16,000			16,416
Fannie Mae 4.89% 2012		30,000			30,277
Fannie Mae 5.00% 2018		1,078			1,160
Fannie Mae 5.00% 2018		700			753
Fannie Mae 11.00% 2018		199			226
Fannie Mae 5.50% 2019		1,159			1,260
Fannie Mae 5.50% 2020		19,623			21,349
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		3,269			3,355
Fannie Mae 3.50% 2024		1,712			1,792
Fannie Mae 4.00% 2024		56,820			59,966
Fannie Mae 4.00% 2024		25,684			27,104
Fannie Mae 4.00% 2024		16,677			17,599
Fannie Mae 4.00% 2024		13,677			14,434
Fannie Mae 4.00% 2024		5,926			6,253
Fannie Mae 4.00% 2024		3,370			3,556
Fannie Mae 3.50% 2025		52,355			54,815
Fannie Mae 3.50% 2025		46,298			48,473
Fannie Mae 3.50% 2025		30,526			31,960
Fannie Mae 3.50% 2025		24,796			25,963
Fannie Mae 3.50% 2025		20,903			21,885
Fannie Mae 3.50% 2025		12,578			13,169
Fannie Mae 3.50% 2025		5,897			6,174
Fannie Mae 3.50% 2025		1,753			1,836
Fannie Mae 3.50% 2025		934			978
Fannie Mae 3.50% 2025		591			619
Fannie Mae 4.00% 2025		11,225			11,846
Fannie Mae 4.50% 2025		17,533			18,702
Fannie Mae 4.50% 2025		17,395			18,555
Fannie Mae, Series 2001-4, Class NA, 11.512% 20254		107			118
Fannie Mae 3.50% 2026		67,315			70,478
Fannie Mae 3.50% 2026		25,063			26,242
Fannie Mae 3.00% 2027		61,851			63,890
Fannie Mae 4.50% 2027		34,620			36,914
Fannie Mae, Series 2001-20, Class D, 11.027% 20314		46			51
Fannie Mae 5.00% 2033		10,000			10,816
Fannie Mae 5.00% 2033		5,000			5,408
Fannie Mae 5.50% 2033		13,962			15,219
Fannie Mae 5.50% 2033		11,503			12,536
Fannie Mae 5.50% 2033		1,373			1,496
Fannie Mae 5.00% 2034		11,000			11,930
Fannie Mae 5.00% 2034		6,000			6,490
Fannie Mae 5.00% 2035		5,000			5,450
Fannie Mae 5.50% 2035		6,152			6,704
Fannie Mae 5.50% 2035		3,910			4,266
Fannie Mae 6.50% 2035		8,344			9,478
Fannie Mae, Series 2006-43, Class JO, principal only, 0% 2036		4,238			3,908
Fannie Mae 5.00% 2036		10,000			10,813
Fannie Mae 5.00% 2036		5,000			5,406
Fannie Mae 5.50% 2036		1,629			1,775
Fannie Mae 5.50% 2036		1,405			1,531
Fannie Mae, Series 2006-49, Class PA, 6.00% 2036		10,322			11,606
Fannie Mae 6.00% 2036		3,546			3,909
Fannie Mae 5.489% 20374		9,364			9,979
Fannie Mae 6.00% 2037		58,380			64,357
Fannie Mae 6.00% 2037		52,817			58,322
Fannie Mae 6.00% 2037		19,422			21,380
Fannie Mae 6.00% 2037		12,380			13,616
Fannie Mae 6.00% 2037		7,953			8,747
Fannie Mae 6.00% 2037		2,035			2,238
Fannie Mae 6.50% 2037		16,807			18,691
Fannie Mae 6.50% 2037		13,408			14,910
Fannie Mae 6.50% 2037		12,743			14,012
Fannie Mae 6.50% 2037		7,610			8,367
Fannie Mae 7.00% 2037		3,163			3,474
Fannie Mae 7.00% 2037		2,741			3,012
Fannie Mae 7.00% 2037		1,299			1,427
Fannie Mae 5.00% 2038		6,000			6,490
Fannie Mae 5.50% 2038		4,465			4,866
Fannie Mae 6.00% 2038		35,106			38,700
Fannie Mae 6.00% 2038		19,668			21,631
Fannie Mae 6.00% 2038		5,664			6,230
Fannie Mae 6.50% 2038		17,221			19,151
Fannie Mae 4.50% 2039		49,666			52,909
Fannie Mae 5.00% 2039		5,000			5,406
Fannie Mae 6.00% 2039		107,692			118,718
Fannie Mae 6.00% 2039		42,521			46,875
Fannie Mae 6.00% 2039		18,000			19,897
Fannie Mae 6.00% 2039		9,693			10,661
Fannie Mae 6.00% 2039		8,784			9,661
Fannie Mae 3.50% 2040		32,929			33,905
Fannie Mae 3.50% 2040		22,318			22,980
Fannie Mae 3.50% 2040		18,496			19,044
Fannie Mae 4.00% 2040		155,274			163,308
Fannie Mae 4.00% 2040		46,521			49,197
Fannie Mae 4.00% 2040		26,081			27,430
Fannie Mae 4.50% 2040		60,200			64,131
Fannie Mae 4.50% 2040		52,157			55,528
Fannie Mae 4.50% 2040		41,193			43,883
Fannie Mae 4.50% 2040		36,344			38,717
Fannie Mae 4.50% 2040		18,845			20,076
Fannie Mae 5.00% 2040		48,895			52,885
Fannie Mae 5.00% 2040		7,000			7,579
Fannie Mae 5.00% 2040		5,424			5,867
Fannie Mae 5.00% 2040		5,000			5,408
Fannie Mae 6.00% 2040		9,488			10,435
Fannie Mae 3.50% 2041		47,559			48,969
Fannie Mae 3.50% 2041		33,493			34,486
Fannie Mae 3.50% 2041		29,034			29,895
Fannie Mae 3.50% 2041		25,075			25,818
Fannie Mae 4.00% 2041		70,944			74,615
Fannie Mae 4.00% 2041		42,755			44,968
Fannie Mae 4.00% 2041		35,935			37,794
Fannie Mae 4.00% 2041		22,584			23,753
Fannie Mae 4.50% 2041		86,355			91,993
Fannie Mae 4.50% 2041		24,611			26,218
Fannie Mae 4.50% 2041		18,373			19,572
Fannie Mae 4.50% 2041		12,396			13,415
Fannie Mae 4.50% 2041		9,719			10,517
Fannie Mae 4.50% 2041		9,517			10,299
Fannie Mae 5.50% 2041		113,000			123,156
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		446			494
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		353			397
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2041		590			697
Fannie Mae 3.50% 2042		40,000			41,150
Fannie Mae 4.50% 2042		49,000			52,154
Fannie Mae 5.00% 2042		140,000			151,266
Fannie Mae 6.00% 2042		145,000			159,681
Fannie Mae, Series 2002-W1, Class 2A, 7.108% 20424		622			727
Fannie Mae 6.50% 2047		2,909			3,191
Fannie Mae 6.50% 2047		932			1,023
Fannie Mae 6.50% 2047		815			894
Fannie Mae 6.50% 2047		496			544
Fannie Mae 7.00% 2047		1,713			1,882
Fannie Mae 7.00% 2047		1,564			1,718
Fannie Mae 7.00% 2047		1,244			1,366
Fannie Mae 7.00% 2047		1,207			1,326
Fannie Mae 7.00% 2047		810			890
Fannie Mae 7.00% 2047		694			763
Fannie Mae 7.00% 2047		554			609
Fannie Mae 7.00% 2047		270			297
Fannie Mae 7.00% 2047		127			140
Fannie Mae 7.00% 2047		64			70
Freddie Mac 5.00% 2023		15,106			16,198
Freddie Mac 5.00% 2023		10,610			11,384
Freddie Mac 5.00% 2023		8,244			8,841
Freddie Mac 5.00% 2023		3,635			3,897
Freddie Mac 5.00% 2023		3,249			3,484
Freddie Mac 5.00% 2023		2,777			2,978
Freddie Mac 5.50% 2023		6,800			7,345
Freddie Mac 5.00% 2024		20,731			22,275
Freddie Mac 6.00% 2026		6,833			7,537
Freddie Mac 6.00% 2026		5,270			5,813
Freddie Mac 6.00% 2026		4,673			5,154
Freddie Mac 6.50% 2027		2,433			2,714
Freddie Mac 6.50% 2027		757			845
Freddie Mac 6.50% 2027		493			550
Freddie Mac 6.50% 2028		1,417			1,581
Freddie Mac, Series T-041, Class 3-A, 6.925% 20324		2,702			3,013
Freddie Mac, Series 3061, Class PN, 5.50% 2035		9,477			10,433
Freddie Mac, Series 3156, Class PO, principal only, 0% 2036		12,351			11,319
Freddie Mac, Series 3146, Class PO, principal only, 0% 2036		9,160			8,078
Freddie Mac, Series 3233, Class PA, 6.00% 2036		20,817			23,298
Freddie Mac, Series 3318, Class JT, 5.50% 2037		20,142			22,008
Freddie Mac, Series 3312, Class PA, 5.50% 2037		16,386			17,904
Freddie Mac, Series 3272, Class PA, 6.00% 2037		15,298			16,901
Freddie Mac 6.00% 2038		11,025			12,125
Freddie Mac 6.00% 2038		1,741			1,910
Freddie Mac 6.50% 2038		7,010			7,762
Freddie Mac 4.00% 2041		159,629			167,714
Freddie Mac 4.00% 2041		13,342			14,020
Government National Mortgage Assn. 10.00% 2021		320			379
Government National Mortgage Assn. 6.00% 2038		43,874			49,317
Government National Mortgage Assn. 6.50% 2038		19,568			22,202
Government National Mortgage Assn. 4.00% 2039		5,445			5,852
Government National Mortgage Assn. 4.00% 2039		4,752			5,107
Government National Mortgage Assn. 4.00% 2039		3,608			3,878
Government National Mortgage Assn. 4.00% 2040		23,102			24,906
Government National Mortgage Assn. 4.00% 2040		19,226			20,661
Government National Mortgage Assn. 4.00% 2040		14,424			15,501
Government National Mortgage Assn. 4.00% 2040		9,395			10,096
Government National Mortgage Assn. 4.00% 2040		8,587			9,228
Government National Mortgage Assn. 4.00% 2040		6,358			6,833
Government National Mortgage Assn. 4.00% 2040		5,833			6,288
Government National Mortgage Assn. 4.00% 2040		5,827			6,279
Government National Mortgage Assn. 4.00% 2040		4,767			5,122
Government National Mortgage Assn. 4.00% 2040		2,921			3,139
Government National Mortgage Assn. 4.00% 2040		551			592
Government National Mortgage Assn. 4.00% 2041		56,309			60,513
Government National Mortgage Assn. 4.00% 2041		20,374			21,895
Government National Mortgage Assn. 4.00% 2041		10,945			11,762
Government National Mortgage Assn. 4.00% 2041		1,858			1,997
Government National Mortgage Assn. 4.00% 2041		934			1,004
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-CIBC5, Class A-1, 4.372% 2037		499			499
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-3B, 5.30% 20374		35,912			36,531
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2002-C1, Class A-3, 5.376% 2037		8,868			8,963
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		3,320			3,336
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A-SB, 4.824% 2042		16,603			17,324
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A-4, 5.875% 20454		16,835			18,734
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2011-C4, Class A-2, 3.341% 20463		15,005			15,521
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2011-C3A, Class A-2, 3.673% 20463		40,900			42,671
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2007-CB19, Class A-4, 5.74% 20494		20,920			22,729
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20373		18,300			19,107
American Tower Trust I, Series 2007-1A, Class B, 5.537% 20373		20,000			21,502
American Tower Trust I, Series 2007-1A, Class D, 5.957% 20373		32,200			34,440
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		957			1,013
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		670			730
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		983			1,025
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		1,728			1,941
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		5,333			5,518
CS First Boston Mortgage Securities Corp., Series 2003-CK2, Class A-4, 4.801% 2036		17,585			18,091
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037		5,759			5,775
CS First Boston Mortgage Securities Corp., Series 2007-C4, Class A-4, 5.795% 20394		14,490			15,202
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 20404		18,011			18,620
Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class A-4, 5.882% 20384		22,761			25,372
Greenwich Capital Commercial Funding Corp., Series 2007-GG9, Class A-4, 5.444% 2039		27,953			30,377
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2005-CD1, Class A-4, 5.225% 20444		9,250			10,267
Citigroup-Deutsche Bank Commercial Mortgage Trust, Series 2006-CD3, Class A-5, 5.617% 2048		37,965			41,628
Bank of America 5.50% 20123		44,500			45,401
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		39,825			40,879
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2006-LDP8, Class A-4, 5.399% 2045		32,860			36,358
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.309% 20454		25,000			25,637
GE Capital Commercial Mortgage Corp., Series 2002-2, Class A-3, 5.349% 2036		9,002			9,109
Nationwide Building Society, Series 2007-2, 5.50% 20123		32,500			33,231
DBUBS Mortgage Trust, Series 2011-LC1A, Class A1, 3.742% 20463		14,568			15,317
DBUBS Mortgage Trust, Series 2011-LC1A, Class A3, 5.002% 20463		9,500			10,768
Banc of America Commercial Mortgage Inc., Series 2002-PB2, Class A-4, 6.186% 2035		495			496
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-4, 5.115% 20454		6,788			7,505
Banc of America Commercial Mortgage Inc., Series 2006-4, Class A-4, 5.634% 2046		2,000			2,222
Banc of America Commercial Mortgage Inc., Series 2007-3, Class A-4, 5.622% (undated)4		13,569			14,611
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		21,627			22,008
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2041		19,296			20,004
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PW10, Class AM, 5.449% 20404		20,000			19,029
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20262,3		18,090			18,349
Wells Fargo Mortgage-backed Securities Trust, Series 2005-AR10, Class II-A-6, 2.689% 20354		20,045			17,955
Bank of Montreal 2.85% 20153		17,000			17,639
GS Mortgage Securities Corp. II, Series 2006-GG8, Class A-4, 5.56% 2039		11,880			12,951
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		14,592			12,393
American General Mortgage Loan Trust, Series 2010-1A, Class A-1, 5.15% 20583,4		6,041			6,187
CHL Mortgage Pass-Through Trust, Series 2003-56, Class 6-A-1, 2.929% 20334		4,186			3,724
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-4, 6.462% 2031		3,621			3,624
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A-1, 5.50% 2020		2,900			2,961
Merrill Lynch Mortgage Trust, Series 2005-LC1, Class A-2, 5.202% 20444		986			986
					4,573,648
BONDS & NOTES OF U.S. GOVERNMENT & GOVERNMENT AGENCIES — 8.58%
U.S. Treasury 4.25% 2012		211,600			218,079
U.S. Treasury 1.125% 2013		99,333			100,656
U.S. Treasury 1.375% 2013		138,667			140,904
U.S. Treasury 1.50% 2013		172,500			176,847
U.S. Treasury 1.875% 20136		36,986			38,695
U.S. Treasury 2.75% 2013		291,500			304,804
U.S. Treasury 3.375% 2013		333,500			350,095
U.S. Treasury 4.25% 2013		245,335			261,272
U.S. Treasury 1.875% 2014		146,100			151,475
U.S. Treasury 2.625% 2014		175,000			185,036
U.S. Treasury 1.875% 20156		104,773			115,723
U.S. Treasury 1.50% 2016		180,625			186,839
U.S. Treasury 2.00% 2016		36,000			37,995
U.S. Treasury 4.50% 2016		58,500			67,670
U.S. Treasury 2.125% 20196		73,826			87,850
U.S. Treasury 0.625% 20216		56,262			60,259
U.S. Treasury 6.25% 2023		455,500			652,271
U.S. Treasury 2.375% 20256		60,064			76,519
U.S. Treasury 5.25% 2029		15,000			20,721
U.S. Treasury 4.50% 2036		157,132			205,497
U.S. Treasury 4.375% 2039		28,000			36,305
U.S. Treasury 4.625% 2040		242,470			326,595
U.S. Treasury 4.75% 2041		150,750			207,450
Freddie Mac 1.75% 2015		83,000			85,869
CoBank ACB 7.875% 20183		20,000			23,810
CoBank ACB 1.146% 20223,4		23,425			17,641
United States Government Agency-Guaranteed (FDIC insured), Bank of America Corp., Series L, 3.125% 2012		30,000			30,407
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.20% 2012		27,500			27,743
United States Government Agency-Guaranteed (FDIC insured), Sovereign Bancorp, Inc. 2.75% 2012		22,000			22,021
United States Government Agency-Guaranteed (FDIC insured), PNC Funding Corp. 2.30% 2012		14,000			14,145
Fannie Mae 6.25% 2029		8,000			11,288
					4,242,481
ASSET-BACKED OBLIGATIONS5 — 0.23%
Chase Issuance Trust, Series 2008-4, Class A, 4.65% 2015		17,000			17,789
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-3, 5.12% 2014		16,076			16,507
Chase Credit Card Owner Trust, Series 2003-4, Class B, 0.928% 20164		14,000			13,990
Citibank Credit Card Issuance Trust, Series 2008, Class A5, 4.85% 2015		12,000			12,630
Morgan Stanley ABS Capital I Inc., Series 2004-NC3, Class M-1, 1.089% 20344		12,797			9,384
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2009-2A, Class A-1, 4.26% 20143		9,000			9,216
RAMP Trust, Series 2003-RZ4, Class A-7, 4.79% 20334		3,472			3,287
RAMP Trust, Series 2003-RS11, Class A-I-7, 4.828% 2033		4,417			4,282
AmeriCredit Automobile Receivables Trust, Series 2007-D-F, Class A-4-A, FSA insured, 5.56% 2014		6,465			6,575
Home Equity Asset Trust, Series 2004-2, Class M-1, 1.089% 20344		7,984			5,705
GE SeaCo Finance SRL, Series 2004-1, Class A, AMBAC insured, 0.585% 20193,4		5,052			4,929
Residential Asset Securities Corp. Trust, Series 2003-KS6, Class A-2, 0.894% 20334		92			74
Residential Asset Securities Corp. Trust, Series 2003-KS8, Class A-I-6, 4.83% 2033		4,038			3,687
CWABS, Inc., Series 2004-BC1, Class M-1, 1.044% 20344		3,391			2,637
Impac CMB Grantor Trust, Series 2004-6, Class 1-A-1, 1.094% 20344		1,050			760
Impac CMB Grantor Trust, Series 2004-6, Class M-2, 1.194% 20344		1,012			556
CPS Auto Receivables Trust, Series 2007-TFC, Class A-2, XLCA insured, 5.25% 20133		1,282			1,284
					113,292
BONDS & NOTES OF GOVERNMENTS & GOVERNMENT AGENCIES OUTSIDE THE U.S. — 0.17%
Polish Government 5.25% 2014		2,500			2,593
Polish Government 6.375% 2019		14,350			15,929
Province of Ontario, Series 1, 1.875% 2012		16,750			16,958
Croatian Government 6.75% 20193		17,000			16,174
Australia Government Agency-Guaranteed, Australia and New Zealand Banking Group Ltd. 3.25% 20123		13,000			13,083
Hungarian Government 6.25% 2020		12,250			11,086
France Government Agency-Guaranteed, Société Finance 2.875% 20143		10,460			10,567
					86,390
MUNICIPALS — 0.09%
State of California, Los Angeles Community College District (County of Los Angeles),
General Obligation Build America Bonds, 2008 Election, Taxable Series 2010-E, 6.60% 2042		15,000			19,334
State of Maryland, Howard Hughes Medical Institute, Taxable Bonds, 3.45% 2014		15,475			16,517
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds,
Series 2002-A, Class A, 6.72% 2025		10,232			9,613
					45,464
Total bonds & notes (cost: $12,844,531,000)					13,679,399
	Principal amount			Value
Short-term securities — 3.50%		(000	)		(000	)
Freddie Mac 0.07%–0.15% due 1/17–8/21/2012	$	550,475		$	550,414
Fannie Mae 0.025%–0.23% due 1/3–5/21/2012		340,300			340,253
Federal Home Loan Bank 0.07%–0.32% due 2/10–11/21/2012		219,830			219,758
Chariot Funding, LLC 0.18%–0.22% due 1/25–2/28/20123		207,000			206,972
Coca-Cola Co. 0.17%–0.19% due 3/7–5/1/20123		85,000			84,960
Straight-A Funding LLC 0.19% due 1/5–2/17/20123		84,650			84,639
Procter & Gamble Co. 0.17% due 1/4–1/5/20123		60,900			60,900
Private Export Funding Corp. 0.11%–0.17% due 1/23–5/10/20123		60,000			59,930
Federal Farm Credit Banks 0.09%–0.16% due 4/10–11/8/2012		44,000			43,978
Variable Funding Capital Company LLC 0.25% due 1/25/20123		35,000			34,993
U.S. Treasury Bills 0.04%–0.258% due 1/12/2012		19,980			19,980
Medtronic Inc. 0.08% due 2/16/20123		11,300			11,298
Johnson & Johnson 0.04% due 4/3/20123		11,200			11,199
Total short-term securities (cost: $1,729,125,000)					1,729,274
Total investment securities (cost: $42,209,325,000)					49,864,289
Other assets less liabilities					(449,800	)
Net assets				$	49,414,489

As permitted by U.S. Securities and Exchange Commission regulations, “Miscellaneous” securities include holdings in their first year of acquisition that have not previously been publicly disclosed.

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

2Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $147,192,000, which represented .30% of the net assets of the fund. This amount includes $128,843,000 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.

3Acquired 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 $1,658,852,000, which represented 3.36% of the net assets of the fund.

4Coupon rate may change periodically.

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

6Index-linked bond whose principal amount moves with a government price index.

Key to abbreviation

ADR = American Depositary Receipts

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

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-4225 or visit the American Funds website at americanfunds.com.

MFGEFP-911-0212O-S29430

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO

To the Shareholders and Board of Trustees of

American Balanced Fund:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of American Balanced Fund (the “Fund”) as of December 31, 2011, and for the year then ended and have issued our report thereon dated February 8, 2012, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR.  Our audit also included the Fund’s investment portfolio (the “Schedule”) as of December 31, 2011, appearing in Item 6 of this Form N-CSR.  This Schedule is the responsibility of the Fund’s management.  Our responsibility is to express an opinion based on our audit.  In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.

DELOITTE & TOUCHE LLP

Costa Mesa, California

February 8, 2012

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

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

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

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

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

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

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

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

ITEM 11 – Controls and Procedures

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

ITEM 12 – Exhibits

(a)(1)	The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto.
(a)(2)	The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.

SIGNATURES

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

AMERICAN BALANCED FUND

By /s/ Gregory D. Johnson

Gregory D. Johnson, Vice Chairman, President and Principal Executive Officer

Date: February 29, 2012

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

By /s/ Gregory D. Johnson

Gregory D. Johnson, Vice Chairman, President and Principal Executive Officer

Date: February 29, 2012

By /s/ M. Susan Gupton

M. Susan Gupton, Treasurer and

Principal Financial Officer

Date: February 29, 2012