Notes to financial statements unaudited
| 1. | Organization and significant accounting policies |
Organization - The New Economy Fund (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks long-term growth of capital.
The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:
Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature |
| Class 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 |
| Class B and 529-B | None | Declines from 5% to 0% for redemptions within six years of purchase | Class B and 529-B convert to Class 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 after 10 years |
| Class 529-C | None | 1% for redemptions within one year of purchase | None |
| Class 529-E | None | None | None |
| Class F and 529-F | None | None | None |
| Class R-1, R-2, R-3, R-4 and R-5 | None | None | None |
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.
Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:
Security valuation - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (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 valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of representative quoted bid and asked prices. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's board of trustees. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities are fair valued.
Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Class allocations - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders - Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies 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. In the accompanying financial statements, the effects of changes in non-U.S. 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 non-U.S. currencies are disclosed separately.
Forward currency contracts - The fund may enter into forward currency contracts, which represent agreements to exchange non-U.S. currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in non-U.S. exchange rates arising from investments denominated in non-U.S. currencies. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates. Due to these risks, the fund could incur losses up to the entire contract amount, which may exceed the net unrealized value shown on the accompanying financial statements. On a daily basis, the fund values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The fund records realized gains or losses at the time the forward contract is closed or offset by another contract with the same broker for the same settlement date and currency.
Investment risk - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.
Taxation - Dividend and interest income is recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities. For the six months ended May 31, 2006, non-U.S. taxes paid on realized gains were $867,000. As of May 31, 2006, non-U.S. taxes provided on unrealized gains were $255,000.
3. Federal income taxation and distributions
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.
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 differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; deferred expenses; cost of investments sold; net capital losses; and non-U.S. taxes on capital gains. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.
The components of distributable earnings on a tax basis are reported as of the fund’s most recent year end. As of November 30, 2005, the fund has tax basis undistributed ordinary income of $42,668,000 and capital loss carryforwards of $214,957,000 and $399,829,000 expiring in 2010 and 2011 respectively.
As of May 31, 2006, the tax basis unrealized appreciation (depreciation) and cost of investments were as follows (dollars in thousands):
| Gross unrealized appreciation on investment securities | | 1,591,400 | |
| Gross unrealized depreciation on investment securities | | (433,772 | ) |
| Net unrealized appreciation on investment securities | | 1,157,628 | |
| Cost of investment securities | | 6,754,162 | |
Ordinary income distributions paid to shareholders from net investment income and non-U.S. currency gains were as follows (dollars in thousands):
| Share class | | Six months ended May 31, 2006 | | | Year ended November 30, 2005 | |
| Class A | $ | 45,629 | | $ | 25,438 | |
| Class B | | - | | | - | |
| Class C | | 36 | | | - | |
| Class F | | 807 | | | 288 | |
| Class 529-A | | 344 | | | 141 | |
| Class 529-B | | - | | | - | |
| Class 529-C | | - | | | - | |
| Class 529-E | | 12 | | | 2 | |
| Class 529-F | | 7 | | | 2 | |
| Class R-1 | | 6 | | | - | |
| Class R-2 | | 32 | | | - | |
| Class R-3 | | 188 | | | 52 | |
| Class R-4 | | 218 | | | 69 | |
| Class R-5 | | 716 | | | 331 | |
| Total | $ | 47,995 | | $ | 26,323 | |
4. Fees and transactions with related parties
Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company SM ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc. SM ("AFD"), the principal underwriter of the fund’s shares.
Investment advisory services -The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.580% on the first $500 million of daily net assets and decreasing to 0.345% on such assets in excess of $27 billion. CRMC is currently waiving 10% of investment advisory services fees. During the six months ended May 31, 2006, total investment advisory services fees waived by CRMC were $1,648,000. As a result, the fee shown on the accompanying financial statements of $16,478,000, which was equivalent to an annualized rate of 0.406%, was reduced to $14,830,000, or 0.365% of average daily net assets.
Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:
Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. 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 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 Class A and 529-A, the board of trustees has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of May 31, 2006, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.
Share class | Currently approved limits | Plan limits |
| Class A | 0.25% | 0.25% |
| Class 529-A | 0.25 | 0.50 |
| Class B and 529-B | 1.00 | 1.00 |
| Class C, 529-C and R-1 | 1.00 | 1.00 |
| Class R-2 | 0.75 | 1.00 |
| Class 529-E and R-3 | 0.50 | 0.75 |
| Class F, 529-F and R-4 | 0.25 | 0.50 |
Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.
Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) 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. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the six months ended May 31, 2006, the total administrative services fees paid by CRMC were $1,000 and $67,000 for Class R-1 and R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. 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 six months ended May 31, 2006, were as follows (dollars in thousands):
Share class | Distribution services | Transfer agent services | Administrative services |
CRMC administrative services | Transfer agent services | Commonwealth of Virginia administrative services |
| Class A | $8,954 | $4,262 | Not applicable | Not applicable | Not applicable |
| Class B | 973 | 127 | Not applicable | Not applicable | Not applicable |
| Class C | 547 | Included in administrative services | $82 | $20 | Not applicable |
| Class F | 168 | 65 | 23 | Not applicable |
| Class 529-A | 49 | 31 | 6 | $ 29 |
| Class 529-B | 54 | 6 | 3 | 5 |
| Class 529-C | 88 | 9 | 5 | 9 |
| Class 529-E | 8 | 2 | - * | 2 |
| Class 529-F | - | 1 | - * | 1 |
| Class R-1 | 23 | 3 | 2 | Not applicable |
| Class R-2 | 255 | 51 | 158 | Not applicable |
| Class R-3 | 143 | 43 | 40 | Not applicable |
| Class R-4 | 43 | 26 | 2 | Not applicable |
| Class R-5 | Not applicable | 42 | 1 | Not applicable |
| Total | $11,305 | $4,389 | $361 | $260 | $46 |
* Amount less than one thousand.
Deferred trustees’ compensation - Since the adoption of the deferred compensation plan in 1993, trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $255,000, shown on the accompanying financial statements, includes $140,000 in current fees (either paid in cash or deferred) and a net increase of $115,000 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.
5. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
| Share class | | Sales* | | Reinvestments of dividends | | Repurchases* | | Net (decrease) increase | |
| | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | |
Six months ended May 31, 2006 | | | �� | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | $ | 379,170 | | | 15,702 | | $ | 43,555 | | | 1,851 | | $ | (567,443 | ) | | (23,514 | ) | $ | (144,718 | ) | | (5,961 | ) |
| Class B | | | 13,491 | | | 580 | | | - | | | - | | | (15,186 | ) | | (653 | ) | | (1,695 | ) | | (73 | ) |
| Class C | | | 24,641 | | | 1,065 | | | 34 | | | 1 | | | (10,168 | ) | | (438 | ) | | 14,507 | | | 628 | |
| Class F | | | 44,694 | | | 1,857 | | | 755 | | | 32 | | | (12,329 | ) | | (514 | ) | | 33,120 | | | 1,375 | |
| Class 529-A | | | 11,120 | | | 462 | | | 344 | | | 15 | | | (2,104 | ) | | (88 | ) | | 9,360 | | | 389 | |
| Class 529-B | | | 1,365 | | | 58 | | | - | | | - | | | (148 | ) | | (6 | ) | | 1,217 | | | 52 | |
| Class 529-C | | | 3,687 | | | 157 | | | - | | | - | | | (526 | ) | | (23 | ) | | 3,161 | | | 134 | |
| Class 529-E | | | 636 | | | 26 | | | 12 | | | 1 | | | (108 | ) | | (5 | ) | | 540 | | | 22 | |
| Class 529-F | | | 508 | | | 21 | | | 7 | | | 1 | | | (40 | ) | | (2 | ) | | 475 | | | 20 | |
| Class R-1 | | | 1,537 | | | 65 | | | 6 | | | -† | | | (901 | ) | | (38 | ) | | 642 | | | 27 | |
| Class R-2 | | | 17,245 | | | 727 | | | 32 | | | 1 | | | (8,976 | ) | | (380 | ) | | 8,301 | | | 348 | |
| Class R-3 | | | 20,666 | | | 865 | | | 188 | | | 8 | | | (8,970 | ) | | (374 | ) | | 11,884 | | | 499 | |
| Class R-4 | | | 8,900 | | | 370 | | | 218 | | | 9 | | | (7,011 | ) | | (290 | ) | | 2,107 | | | 89 | |
| Class R-5 | | | 14,213 | | | 586 | | | 670 | | | 28 | | | (7,307 | ) | | (301 | ) | | 7,576 | | | 313 | |
| Total net increase | | | | | | | | | | | | | | | | | | | | | | | | | |
| (decrease) | | $ | 541,873 | | | 22,541 | | $ | 45,821 | | | 1,947 | | $ | (641,217 | ) | | (26,626 | ) | $ | (53,523 | ) | | (2,138 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended November 30, 2005 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | $ | 489,359 | | | 23,401 | | $ | 24,304 | | | 1,194 | | $ | (1,244,541 | ) | | (59,702 | ) | $ | (730,878 | ) | | (35,107 | ) |
| Class B | | | 17,024 | | | 844 | | | - | | | - | | | (24,991 | ) | | (1,246 | ) | | (7,967 | ) | | (402 | ) |
| Class C | | | 25,476 | | | 1,267 | | | - | | | - | | | (15,776 | ) | | (792 | ) | | 9,700 | | | 475 | |
| Class F | | | 47,144 | | | 2,253 | | | 271 | | | 14 | | | (17,771 | ) | | (855 | ) | | 29,644 | | | 1,412 | |
| Class 529-A | | | 13,163 | | | 632 | | | 141 | | | 7 | | | (3,061 | ) | | (146 | ) | | 10,243 | | | 493 | |
| Class 529-B | | | 1,832 | | | 90 | | | - | | | - | | | (442 | ) | | (22 | ) | | 1,390 | | | 68 | |
| Class 529-C | | | 4,134 | | | 202 | | | - | | | - | | | (855 | ) | | (41 | ) | | 3,279 | | | 161 | |
| Class 529-E | | | 789 | | | 38 | | | 2 | | | -† | | | (108 | ) | | (4 | ) | | 683 | | | 34 | |
| Class 529-F | | | 366 | | | 17 | | | 2 | | | -† | | | (30 | ) | | (1 | ) | | 338 | | | 16 | |
| Class R-1 | | | 2,343 | | | 114 | | | - | | | - | | | (634 | ) | | (31 | ) | | 1,709 | | | 83 | |
| Class R-2 | | | 22,858 | | | 1,114 | | | - | | | - | | | (12,217 | ) | | (597 | ) | | 10,641 | | | 517 | |
| Class R-3 | | | 18,462 | | | 892 | | | 52 | | | 2 | | | (9,781 | ) | | (474 | ) | | 8,733 | | | 420 | |
| Class R-4 | | | 14,696 | | | 703 | | | 69 | | | 3 | | | (3,761 | ) | | (179 | ) | | 11,004 | | | 527 | |
| Class R-5 | | | 24,754 | | | 1,155 | | | 319 | | | 16 | | | (7,644 | ) | | (364 | ) | | 17,429 | | | 807 | |
| Total net increase | | | | | | | | | | | | | | | | | | | | | | | | | |
| (decrease) | | $ | 682,400 | | | 32,722 | | $ | 25,160 | | | 1,236 | | $ | (1,341,612 | ) | | (64,454 | ) | $ | (634,052 | ) | | (30,496 | ) |
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| * Includes exchanges between share classes of the fund. | | | | | | | | | | | | | | | | | | | | | | |
| † Amount less than one thousand. | | | | | | | | | | | | | | | | | | | | | | | | | |
6. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities, of $1,831,335,000 and $1,846,195,000, respectively, during the six months ended May 31, 2006.
Financial highlights (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | Income (loss) from investment operations(2) | | | Dividends and distributions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | Net asset value, beginning of period | | | Net investment income (loss | ) | | | | | Net gains (losses) on securities (both realized and unrealized | ) | | Total from investment operations | | | Dividends (from net investment income | ) | | Distributions (from capital gains | ) | | Total dividends and distributions | | | Net asset value, end of period | | | Total return( | 3) | | Net assets, end of period (in millions | ) | | | | | Ratio of expenses to average net assets before reimbursements/ waivers | | | | | | Ratio of expenses to average net assets after reimbursements/ waivers | | | (4 | ) | | Ratio of net income (loss) to average net assets | | | | |
Class A: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | $ | 22.98 | | $ | .11 | | | | | $ | .58 | | $ | .69 | | $ | (.15 | ) | $ | - | | $ | (.15 | ) | $ | 23.52 | | | 3.00 | % | $ | 7,086 | | | | | | .83 | % | | (6 | ) | | .79 | % | | (6 | ) | | .89 | % | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.27 | | | .15 | | | | | | 2.63 | | | 2.78 | | | (.07 | ) | | - | | | (.07 | ) | | 22.98 | | | 13.79 | | | 7,061 | | | | | | .83 | | | | | | .79 | | | | | | .73 | | | | |
| Year ended 11/30/2004 | | | | | | 18.11 | | | .06 | | | | | | 2.11 | | | 2.17 | | | (.01 | ) | | - | | | (.01 | ) | | 20.27 | | | 12.00 | | | 6,938 | | | | | | .84 | | | | | | .84 | | | | | | .32 | | | | |
| Year ended 11/30/2003 | | | | | | 14.94 | | | .01 | | | | | | 3.16 | | | 3.17 | | | - | | | - | | | - | | | 18.11 | | | 21.22 | | | 6,671 | | | | | | .89 | | | | | | .89 | | | | | | .09 | | | | |
| Year ended 11/30/2002 | | | | | | 18.01 | | | - | | | (7 | ) | | (3.07 | ) | | (3.07 | ) | | - | | | - | | | - | | | 14.94 | | | (17.05 | ) | | 5,883 | | | | | | .89 | | | | | | .89 | | | | | | (.01 | ) | | | |
| Year ended 11/30/2001 | | | | | | 24.69 | | | .01 | | | | | | (3.76 | ) | | (3.75 | ) | | - | | | (2.93 | ) | | (2.93 | ) | | 18.01 | | | (17.67 | ) | | 8,086 | | | | | | .82 | | | | | | .82 | | | | | | .02 | | | | |
Class B: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.05 | | | .01 | | | | | | .56 | | | .57 | | | - | | | - | | | - | | | 22.62 | | | 2.58 | | | 188 | | | | | | 1.60 | | | (6 | ) | | 1.56 | | | (6 | ) | | .13 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 19.52 | | | (.01 | ) | | | | | 2.54 | | | 2.53 | | | - | | | - | | | - | | | 22.05 | | | 12.96 | | | 185 | | | | | | 1.60 | | | | | | 1.57 | | | | | | (.05 | ) | | | |
| Year ended 11/30/2004 | | | | | | 17.57 | | | (.08 | ) | | | | | 2.03 | | | 1.95 | | | - | | | - | | | - | | | 19.52 | | | 11.10 | | | 172 | | | | | | 1.62 | | | | | | 1.62 | | | | | | (.45 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.61 | | | (.11 | ) | | | | | 3.07 | | | 2.96 | | | - | | | - | | | - | | | 17.57 | | | 20.26 | | | 144 | | | | | | 1.68 | | | | | | 1.68 | | | | | | (.70 | ) | | | |
| Year ended 11/30/2002 | | | | | | 17.75 | | | (.12 | ) | | | | | (3.02 | ) | | (3.14 | ) | | - | | | - | | | - | | | 14.61 | | | (17.69 | ) | | 104 | | | | | | 1.69 | | | | | | 1.69 | | | | | | (.79 | ) | | | |
| Year ended 11/30/2001 | | | | | | 24.56 | | | (.16 | ) | | | | | (3.72 | ) | | (3.88 | ) | | - | | | (2.93 | ) | | (2.93 | ) | | 17.75 | | | (18.36 | ) | | 111 | | | | | | 1.63 | | | | | | 1.63 | | | | | | (.81 | ) | | | |
Class C: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 21.96 | | | .01 | | | | | | .56 | | | .57 | | | (.01 | ) | | - | | | (.01 | ) | | 22.52 | | | 2.59 | | | 113 | | | | | | 1.65 | | | (6 | ) | | 1.61 | | | (6 | ) | | .09 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 19.46 | | | (.02 | ) | | | | | 2.52 | | | 2.50 | | | - | | | - | | | - | | | 21.96 | | | 12.85 | | | 96 | | | | | | 1.65 | | | | | | 1.61 | | | | | | (.09 | ) | | | |
| Year ended 11/30/2004 | | | | | | 17.52 | | | (.09 | ) | | | | | 2.03 | | | 1.94 | | | - | | | - | | | - | | | 19.46 | | | 11.07 | | | 76 | | | | | | 1.66 | | | | | | 1.65 | | | | | | (.47 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.57 | | | (.11 | ) | | | | | 3.06 | | | 2.95 | | | - | | | - | | | - | | | 17.52 | | | 20.25 | | | 51 | | | | | | 1.69 | | | | | | 1.69 | | | | | | (.73 | ) | | | |
| Year ended 11/30/2002 | | | | | | 17.70 | | | (.12 | ) | | | | | (3.01 | ) | | (3.13 | ) | | - | | | - | | | - | | | 14.57 | | | (17.68 | ) | | 26 | | | | | | 1.70 | | | | | | 1.70 | | | | | | (.77 | ) | | | |
| Period from 3/15/2001 to 11/30/2001 | | | | | | 19.75 | | | (.16 | ) | | | | | (1.89 | ) | | (2.05 | ) | | - | | | - | | | - | | | 17.70 | | | (10.38 | ) | | 15 | | | | | | 1.86 | | | (6 | ) | | 1.86 | | | (6 | ) | | (1.19 | ) | | (6 | ) |
Class F: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.88 | | | .11 | | | | | | .58 | | | .69 | | | (.16 | ) | | - | | | (.16 | ) | | 23.41 | | | 3.01 | | | 149 | | | | | | .84 | | | (6 | ) | | .80 | | | (6 | ) | | .92 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.19 | | | .15 | | | | | | 2.62 | | | 2.77 | | | (.08 | ) | | - | | | (.08 | ) | | 22.88 | | | 13.77 | | | 114 | | | | | | .86 | | | | | | .83 | | | | | | .70 | | | | |
| Year ended 11/30/2004 | | | | | | 18.07 | | | .06 | | | | | | 2.09 | | | 2.15 | | | (.03 | ) | | - | | | (.03 | ) | | 20.19 | | | 11.89 | | | 72 | | | | | | .89 | | | | | | .88 | | | | | | .32 | | | | |
| Year ended 11/30/2003 | | | | | | 14.91 | | | .01 | | | | | | 3.15 | | | 3.16 | | | - | | | - | | | - | | | 18.07 | | | 21.19 | | | 40 | | | | | | .91 | | | | | | .91 | | | | | | .04 | | | | |
| Year ended 11/30/2002 | | | | | | 17.98 | | | - | | | (7 | ) | | (3.07 | ) | | (3.07 | ) | | - | | | - | | | - | | | 14.91 | | | (17.08 | ) | | 15 | | | | | | .95 | | | | | | .95 | | | | | | (.02 | ) | | | |
| Period from 3/15/2001 to 11/30/2001 | | | | | | 19.92 | | | (.04 | ) | | | | | (1.90 | ) | | (1.94 | ) | | - | | | - | | | - | | | 17.98 | | | (9.74 | ) | | 7 | | | | | | 1.00 | | | (6 | ) | | 1.00 | | | (6 | ) | | (.34 | ) | | (6 | ) |
Class 529-A: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.93 | | | .11 | | | | | | .57 | | | .68 | | | (.15 | ) | | - | | | (.15 | ) | | 23.46 | | | 2.97 | | | 62 | | | | | | .86 | | | (6 | ) | | .82 | | | (6 | ) | | .88 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.24 | | | .14 | | | | | | 2.63 | | | 2.77 | | | (.08 | ) | | - | | | (.08 | ) | | 22.93 | | | 13.74 | | | 51 | | | | | | .87 | | | | | | .84 | | | | | | .69 | | | | |
| Year ended 11/30/2004 | | | | | | 18.11 | | | .06 | | | | | | 2.10 | | | 2.16 | | | (.03 | ) | | - | | | (.03 | ) | | 20.24 | | | 11.96 | | | 35 | | | | | | .87 | | | | | | .86 | | | | | | .33 | | | | |
| Year ended 11/30/2003 | | | | | | 14.93 | | | .02 | | | | | | 3.16 | | | 3.18 | | | - | | | - | | | - | | | 18.11 | | | 21.30 | | | 20 | | | | | | .85 | | | | | | .85 | | | | | | .11 | | | | |
| Period from 2/15/2002 to 11/30/2002 | | | | | | 17.14 | | | - | | | (7 | ) | | (2.21 | ) | | (2.21 | ) | | - | | | - | | | - | | | 14.93 | | | (12.89 | ) | | 8 | | | | | | 1.00 | | | (6 | ) | | 1.00 | | | (6 | ) | | .02 | | | (6 | ) |
Class 529-B: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.28 | | | - | | | (7 | ) | | .57 | | | .57 | | | - | | | - | | | - | | | 22.85 | | | 2.56 | | | 11 | | | | | | 1.73 | | | (6 | ) | | 1.69 | | | (6 | ) | | .01 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 19.76 | | | (.04 | ) | | | | | 2.56 | | | 2.52 | | | - | | | - | | | - | | | 22.28 | | | 12.75 | | | 10 | | | | | | 1.76 | | | | | | 1.72 | | | | | | (.20 | ) | | | |
| Year ended 11/30/2004 | | | | | | 17.82 | | | (.11 | ) | | | | | 2.05 | | | 1.94 | | | - | | | - | | | - | | | 19.76 | | | 10.89 | | | 7 | | | | | | 1.78 | | | | | | 1.78 | | | | | | (.58 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.83 | | | (.13 | ) | | | | | 3.12 | | | 2.99 | | | - | | | - | | | - | | | 17.82 | | | 20.16 | | | 4 | | | | | | 1.81 | | | | | | 1.81 | | | | | | (.86 | ) | | | |
| Period from 2/19/2002 to 11/30/2002 | | | | | | 16.76 | | | (.09 | ) | | | | | (1.84 | ) | | (1.93 | ) | | - | | | - | | | - | | | 14.83 | | | (11.52 | ) | | 1 | | | | | | 1.84 | | | (6 | ) | | 1.84 | | | (6 | ) | | (.82 | ) | | (6 | ) |
Class 529-C: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.30 | | | - | | | (7 | ) | | .56 | | | .56 | | | - | | | - | | | - | | | 22.86 | | | 2.51 | | | 19 | | | | | | 1.72 | | | (6 | ) | | 1.68 | | | (6 | ) | | .03 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 19.77 | | | (.04 | ) | | | | | 2.57 | | | 2.53 | | | - | | | - | | | - | | | 22.30 | | | 12.80 | | | 15 | | | | | | 1.75 | | | | | | 1.71 | | | | | | (.18 | ) | | | |
| Year ended 11/30/2004 | | | | | | 17.83 | | | (.11 | ) | | | | | 2.05 | | | 1.94 | | | - | | | - | | | - | | | 19.77 | | | 10.88 | | | 10 | | | | | | 1.77 | | | | | | 1.76 | | | | | | (.57 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.84 | | | (.13 | ) | | | | | 3.12 | | | 2.99 | | | - | | | - | | | - | | | 17.83 | | | 20.15 | | | 5 | | | | | | 1.80 | | | | | | 1.80 | | | | | | (.84 | ) | | | |
| Period from 2/21/2002 to 11/30/2002 | | | | | | 16.55 | | | (.09 | ) | | | | | (1.62 | ) | | (1.71 | ) | | - | | | - | | | - | | | 14.84 | | | (10.33 | ) | | 2 | | | | | | 1.80 | | | (6 | ) | | 1.80 | | | (6 | ) | | (.78 | ) | | (6 | ) |
Class 529-E: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.75 | | | .07 | | | | | | .56 | | | .63 | | | (.09 | ) | | - | | | (.09 | ) | | 23.29 | | | 2.77 | | | 4 | | | | | | 1.20 | | | (6 | ) | | 1.16 | | | (6 | ) | | .55 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.09 | | | .07 | | | | | | 2.61 | | | 2.68 | | | (.02 | ) | | - | | | (.02 | ) | | 22.75 | | | 13.37 | | | 3 | | | | | | 1.22 | | | | | | 1.18 | | | | | | .35 | | | | |
| Year ended 11/30/2004 | | | | | | 18.01 | | | (.01 | ) | | | | | 2.09 | | | 2.08 | | | - | | | - | | | - | | | 20.09 | | | 11.55 | | | 2 | | | | | | 1.23 | | | | | | 1.23 | | | | | | (.03 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.91 | | | (.05 | ) | | | | | 3.15 | | | 3.10 | | | - | | | - | | | - | | | 18.01 | | | 20.79 | | | 1 | | | | | | 1.25 | | | | | | 1.25 | | | | | | (.30 | ) | | | |
| Period from 3/15/2002 to 11/30/2002 | | | | | | 18.26 | | | (.02 | ) | | | | | (3.33 | ) | | (3.35 | ) | | - | | | - | | | - | | | 14.91 | | | (18.35 | ) | | - | | | (8 | ) | | 1.25 | | | (6 | ) | | 1.25 | | | (6 | ) | | (.23 | ) | | (6 | ) |
Class 529-F: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.92 | | | .13 | | | | | | .57 | | | .70 | | | (.17 | ) | | - | | | (.17 | ) | | 23.45 | | | 3.07 | | | 1 | | | | | | .70 | | | (6 | ) | | .66 | | | (6 | ) | | 1.08 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.20 | | | .16 | | | | | | 2.63 | | | 2.79 | | | (.07 | ) | | - | | | (.07 | ) | | 22.92 | | | 13.84 | | | 1 | | | | | | .81 | | | | | | .77 | | | | | | .76 | | | | |
| Year ended 11/30/2004 | | | | | | 18.09 | | | .04 | | | | | | 2.09 | | | 2.13 | | | (.02 | ) | | - | | | (.02 | ) | | 20.20 | | | 11.79 | | | 1 | | | | | | .98 | | | | | | .98 | | | | | | .23 | | | | |
| Year ended 11/30/2003 | | | | | | 14.94 | | | (.01 | ) | | | | | 3.16 | | | 3.15 | | | - | | | - | | | - | | | 18.09 | | | 21.08 | | | - | | | (8 | ) | | 1.00 | | | | | | 1.00 | | | | | | (.04 | ) | | | |
| Period from 10/11/2002 to 11/30/2002 | | | | | | 12.30 | | | - | | | (7 | ) | | 2.64 | | | 2.64 | | | - | | | - | | | - | | | 14.94 | | | 21.46 | | | - | | | (8 | ) | | .14 | | | | | | .14 | | | | | | (.03 | ) | | | |
Class R-1: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | $ | 22.47 | | $ | .01 | | | | | $ | .57 | | $ | .58 | | $ | (.03 | ) | | - | | $ | (.03 | ) | $ | 23.02 | | | 2.60 | % | $ | 5 | | | | | | 1.67 | % | | (6 | ) | | 1.60 | % | | (6 | ) | | .10 | % | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 19.90 | | | (.02 | ) | | | | | 2.59 | | | 2.57 | | | - | | | - | | | - | | | 22.47 | | | 12.91 | | | 4 | | | | | | 1.70 | | | | | | 1.61 | | | | | | (.09 | ) | | | |
| Year ended 11/30/2004 | | | | | | 17.92 | | | (.08 | ) | | | | | 2.06 | | | 1.98 | | | - | | | - | | | - | | | 19.90 | | | 11.05 | | | 2 | | | | | | 1.76 | | | | | | 1.65 | | | | | | (.44 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.90 | | | (.11 | ) | | | | | 3.13 | | | 3.02 | | | - | | | - | | | - | | | 17.92 | | | 20.27 | | | 1 | | | | | | 1.96 | | | | | | 1.66 | | | | | | (.69 | ) | | | |
| Period from 6/21/2002 to 11/30/2002 | | | | | | 15.45 | | | (.04 | ) | | | | | (.51 | ) | | (.55 | ) | | - | | | - | | | - | | | 14.90 | | | (3.56 | ) | | - | | | (8 | ) | | 1.43 | | | | | | .73 | | | | | | (.28 | ) | | | |
Class R-2: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.47 | | | .01 | | | | | | .57 | | | .58 | | | (.01 | ) | | - | | | (.01 | ) | | 23.04 | | | 2.59 | | | 70 | | | | | | 1.82 | | | (6 | ) | | 1.58 | | | (6 | ) | | .12 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 19.90 | | | (.01 | ) | | | | | 2.58 | | | 2.57 | | | - | | | - | | | - | | | 22.47 | | | 12.91 | | | 61 | | | | | | 1.91 | | | | | | 1.58 | | | | | | (.05 | ) | | | |
| Year ended 11/30/2004 | | | | | | 17.92 | | | (.08 | ) | | | | | 2.06 | | | 1.98 | | | - | | | - | | | - | | | 19.90 | | | 11.05 | | | 44 | | | | | | 2.03 | | | | | | 1.61 | | | | | | (.40 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.88 | | | (.11 | ) | | | | | 3.15 | | | 3.04 | | | - | | | - | | | - | | | 17.92 | | | 20.43 | | | 21 | | | | | | 2.35 | | | | | | 1.62 | | | | | | (.68 | ) | | | |
| Period from 5/31/2002 to 11/30/2002 | | | | | | 17.02 | | | (.05 | ) | | | | | (2.09 | ) | | (2.14 | ) | | - | | | - | | | - | | | 14.88 | | | (12.57 | ) | | 3 | | | | | | 2.00 | | | (6 | ) | | 1.63 | | | (6 | ) | | (.78 | ) | | (6 | ) |
Class R-3: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.75 | | | .06 | | | | | | .57 | | | .63 | | | (.08 | ) | | - | | | (.08 | ) | | 23.30 | | | 2.79 | | | 63 | | | | | | 1.25 | | | (6 | ) | | 1.21 | | | (6 | ) | | .50 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.10 | | | .07 | | | | | | 2.61 | | | 2.68 | | | (.03 | ) | | - | | | (.03 | ) | | 22.75 | | | 13.35 | | | 50 | | | | | | 1.24 | | | | | | 1.19 | | | | | | .33 | | | | |
| Year ended 11/30/2004 | | | | | | 18.03 | | | - | | | (7 | ) | | 2.07 | | | 2.07 | | | - | | | - | | | - | | | 20.10 | | | 11.48 | | | 35 | | | | | | 1.26 | | | | | | 1.23 | | | | | | (.02 | ) | | | |
| Year ended 11/30/2003 | | | | | | 14.92 | | | (.05 | ) | | | | | 3.16 | | | 3.11 | | | - | | | - | | | - | | | 18.03 | | | 20.84 | | | 17 | | | | | | 1.37 | | | | | | 1.24 | | | | | | (.29 | ) | | | |
| Period from 6/25/2002 to 11/30/2002 | | | | | | 15.26 | | | (.02 | ) | | | | | (.32 | ) | | (.34 | ) | | - | | | - | | | - | | | 14.92 | | | (2.23 | ) | | 2 | | | | | | .61 | | | | | | .54 | | | | | | (.12 | ) | | | |
Class R-4: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 22.94 | | | .10 | | | | | | .59 | | | .69 | | | (.16 | ) | | - | | | (.16 | ) | | 23.47 | | | 3.01 | | | 34 | | | | | | .87 | | | (6 | ) | | .83 | | | (6 | ) | | .86 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.25 | | | .15 | | | | | | 2.63 | | | 2.78 | | | (.09 | ) | | - | | | (.09 | ) | | 22.94 | | | 13.76 | | | 31 | | | | | | .86 | | | | | | .82 | | | | | | .70 | | | | |
| Year ended 11/30/2004 | | | | | | 18.12 | | | .07 | | | | | | 2.09 | | | 2.16 | | | (.03 | ) | | - | | | (.03 | ) | | 20.25 | | | 11.92 | | | 17 | | | | | | .86 | | | | | | .85 | | | | | | .34 | | | | |
| Year ended 11/30/2003 | | | | | | 14.94 | | | .01 | | | | | | 3.17 | | | 3.18 | | | - | | | - | | | - | | | 18.12 | | | 21.28 | | | 10 | | | | | | .88 | | | | | | .88 | | | | | | .09 | | | | |
| Period from 7/25/2002 to 11/30/2002 | | | | | | 12.85 | | | (.01 | ) | | | | | 2.10 | | | 2.09 | | | - | | | - | | | - | | | 14.94 | | | 16.26 | | | 4 | | | | | | .33 | | | | | | .31 | | | | | | (.03 | ) | | | |
Class R-5: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended 5/31/2006 | | | (5 | ) | | 23.10 | | | .14 | | | | | | .58 | | | .72 | | | (.21 | ) | | - | | | (.21 | ) | | 23.61 | | | 3.14 | | | 85 | | | | | | .56 | | | (6 | ) | | .52 | | | (6 | ) | | 1.18 | | | (6 | ) |
| Year ended 11/30/2005 | | | | | | 20.37 | | | .21 | | | | | | 2.65 | | | 2.86 | | | (.13 | ) | | - | | | (.13 | ) | | 23.10 | | | 14.14 | | | 76 | | | | | | .55 | | | | | | .52 | | | | | | 1.02 | | | | |
| Year ended 11/30/2004 | | | | | | 18.21 | | | .12 | | | | | | 2.10 | | | 2.22 | | | (.06 | ) | | - | | | (.06 | ) | | 20.37 | | | 12.26 | | | 51 | | | | | | .55 | | | | | | .55 | | | | | | .62 | | | | |
| Year ended 11/30/2003 | | | | | | 14.97 | | | .06 | | | | | | 3.18 | | | 3.24 | | | - | | | - | | | - | | | 18.21 | | | 21.64 | | | 44 | | | | | | .56 | | | | | | .56 | | | | | | .41 | | | | |
| Period from 5/15/2002 to 11/30/2002 | | | | | | 17.58 | | | .03 | | | | | | (2.64 | ) | | (2.61 | ) | | - | | | - | | | - | | | 14.97 | | | (14.85 | ) | | 31 | | | | | | .56 | | | (6 | ) | | .56 | | | (6 | ) | | .44 | | | (6 | ) |
| | | | | | | Year ended November 30 | |
| | | | 2006(5 | ) | | 2005 | | | 2004 | | | 2003 | | | 2002 | | | 2001 | |
| | | | | | | | | | | | | | | | | | | | |
| Portfolio turnover rate for all classes of shares | | | 25 | % | | 32 | % | | 35 | % | | 38 | % | | 37 | % | | 41 | % |
| (1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year. |
| (2) Based on average shares outstanding. |
| (3) Total returns exclude all sales charges, including contingent deferred sales charges. |
| (4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for |
| investment advisory services for all share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), |
| CRMC agreed to pay a portion of the fees related to transfer agent services. |
| (5) Unaudited. |
| (6) Annualized. |
| (7) Amount less than $.01. |
| (8) Amount less than $1 million. |
| |
| |
| See Notes to Financial Statements |
Expense example unaudited
As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (December 1, 2005, through May 31, 2006).
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. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica 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 and Class 529-F 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 also be lower by the amount of these fees.
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. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica 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 and Class 529-F 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 on the previous page. In addition, your ending account value would also be lower by the amount of these fees.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | Beginning account value 12/1/2005 | | | Ending account value 5/31/2006 | | | Expenses paid during period* | | | Annualized expense ratio | |
| | | | | | | | | | | | | | |
| Class A -- actual return | | $ | 1,000.00 | | $ | 1,029.99 | | $ | 4.00 | | | .79 | % |
| Class A -- assumed 5% return | | | 1,000.00 | | | 1,020.99 | | | 3.98 | | | .79 | |
| Class B -- actual return | | | 1,000.00 | | | 1,025.84 | | | 7.88 | | | 1.56 | |
| Class B -- assumed 5% return | | | 1,000.00 | | | 1,017.15 | | | 7.85 | | | 1.56 | |
| Class C -- actual return | | | 1,000.00 | | | 1,025.85 | | | 8.13 | | | 1.61 | |
| Class C -- assumed 5% return | | | 1,000.00 | | | 1,016.90 | | | 8.10 | | | 1.61 | |
| Class F -- actual return | | | 1,000.00 | | | 1,030.06 | | | 4.05 | | | .80 | |
| Class F -- assumed 5% return | | | 1,000.00 | | | 1,020.94 | | | 4.03 | | | .80 | |
| Class 529-A -- actual return | | | 1,000.00 | | | 1,029.68 | | | 4.15 | | | .82 | |
| Class 529-A -- assumed 5% return | | | 1,000.00 | | | 1,020.84 | | | 4.13 | | | .82 | |
| Class 529-B -- actual return | | | 1,000.00 | | | 1,025.58 | | | 8.53 | | | 1.69 | |
| Class 529-B -- assumed 5% return | | | 1,000.00 | | | 1,016.50 | | | 8.50 | | | 1.69 | |
| Class 529-C -- actual return | | | 1,000.00 | | | 1,025.11 | | | 8.48 | | | 1.68 | |
| Class 529-C -- assumed 5% return | | | 1,000.00 | | | 1,016.55 | | | 8.45 | | | 1.68 | |
| Class 529-E -- actual return | | | 1,000.00 | | | 1,027.72 | | | 5.86 | | | 1.16 | |
| Class 529-E -- assumed 5% return | | | 1,000.00 | | | 1,019.15 | | | 5.84 | | | 1.16 | |
| Class 529-F -- actual return | | | 1,000.00 | | | 1,030.72 | | | 3.34 | | | .66 | |
| Class 529-F -- assumed 5% return | | | 1,000.00 | | | 1,021.64 | | | 3.33 | | | .66 | |
| Class R-1 -- actual return | | | 1,000.00 | | | 1,025.96 | | | 8.08 | | | 1.60 | |
| Class R-1 -- assumed 5% return | | | 1,000.00 | | | 1,016.95 | | | 8.05 | | | 1.60 | |
| Class R-2 -- actual return | | | 1,000.00 | | | 1,025.88 | | | 7.98 | | | 1.58 | |
| Class R-2 -- assumed 5% return | | | 1,000.00 | | | 1,017.05 | | | 7.95 | | | 1.58 | |
| Class R-3 -- actual return | | | 1,000.00 | | | 1,027.88 | | | 6.12 | | | 1.21 | |
| Class R-3 -- assumed 5% return | | | 1,000.00 | | | 1,018.90 | | | 6.09 | | | 1.21 | |
| Class R-4 -- actual return | | | 1,000.00 | | | 1,030.10 | | | 4.20 | | | .83 | |
| Class R-4 -- assumed 5% return | | | 1,000.00 | | | 1,020.79 | | | 4.18 | | | .83 | |
| Class R-5 -- actual return | | | 1,000.00 | | | 1,031.38 | | | 2.63 | | | .52 | |
| Class R-5 -- assumed 5% return | | | 1,000.00 | | | 1,022.34 | | | 2.62 | | | .52 | |
| | | | | | | | | | | | | | |
* Expenses 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 (182), and divided by 365 (to reflect the one-half year period). | |
Offices
Offices of the fund and of the
investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110-2804
Counsel
Paul, Hastings, Janofsky & Walker LLP
55 Second Street, 24th Floor
San Francisco, CA 94105-3441
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
There are several ways to invest in The New Economy Fund. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annualized expenses for Class B shares were 0.77 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (“CDSC”) of up to 5% that declines over time. Class C shares were subject to annualized expenses 0.82 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annualized expenses (by 0.01 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class.
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.
A complete May 31, 2006, portfolio of The New Economy Fund’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
The New Economy 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. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.
This report is for the information of shareholders of The New Economy Fund, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2006, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
[Logo - American Funds®]
The right choice for the long term®
What makes American Funds different?
For nearly 75 years, we have followed a consistent philosophy that we firmly believe is in our investors’ best interests. The range of opportunities offered by our family of just 29 carefully conceived, broadly diversified funds has attracted over 35 million shareholder accounts.
Our unique combination of strengths includes these five factors:
• A long-term, value-oriented approach
We buy stocks and bonds of well-managed companies at reasonable prices and hold them for the long term.
• An extensive global research effort
American Funds investment professionals search the world to gain a comprehensive understanding of companies and markets.
• The multiple portfolio counselor system
Our unique method of portfolio management, developed nearly 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.
• Experienced investment professionals
American Funds portfolio counselors have an average of 23 years of investment experience, providing a wealth of knowledge and experience that few organizations have.
• A commitment to low operating expenses
The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.
29 mutual funds, consistent philosophy, consistent results
• Growth funds
AMCAP Fund®
EuroPacific Growth Fund®
The Growth Fund of America®
> The New Economy Fund®
New Perspective Fund®
New World FundSM
SMALLCAP World Fund®
• Growth-and-income funds
American Mutual Fund®
Capital World Growth and Income FundSM
Fundamental InvestorsSM
The Investment Company of America®
Washington Mutual Investors FundSM
• Equity-income funds
Capital Income Builder®
The Income Fund of America®
• Balanced fund
American Balanced Fund®
• Bond funds
American High-Income TrustSM
The Bond Fund of AmericaSM
Capital World Bond Fund®
Intermediate Bond Fund of America®
U.S. Government Securities FundSM
• Tax-exempt bond funds
American High-Income Municipal Bond Fund®
Limited Term Tax-Exempt Bond Fund of AmericaSM
The Tax-Exempt Bond Fund of America®
State-specific tax-exempt funds
The Tax-Exempt Fund of California®
The Tax-Exempt Fund of Maryland®
The Tax-Exempt Fund of Virginia®
• Money market funds
The Cash Management Trust of America®
The Tax-Exempt Money Fund of AmericaSM
The U.S. Treasury Money Fund of AmericaSM
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
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