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: 811-22215
International Growth and Income 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: June 30
Date of reporting period: December 31, 2011
Patrick F. Quan
International Growth and Income 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
International Growth and Income FundSM
[photo of a compass on a map]
Semi-annual report for the six months ended December 31, 2011
International Growth and Income Fund seeks to provide long-term growth of capital with current income by investing primarily in the stocks of larger, well-established companies outside the U.S.
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.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended December 31, 2011: | ||||||||||||
Lifetime | ||||||||||||
Class A shares | 1 year | 5 years | (since 10/1/08) | |||||||||
Reflecting 5.75% maximum sales charge | –12.81 | % | — | 5.11 | % |
The total annual fund operating expense ratio was 0.89% for Class A shares as of the prospectus dated September 1, 2011.
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 October 1, 2008, through December 31, 2008. In addition, the investment adviser reimbursed other fees and expenses during some of the periods shown in this report. These reimbursements may be adjusted or discontinued by the investment adviser at any time, subject to any restrictions in the fund’s prospectus. Applicable fund results shown reflect the waiver and reimbursements, without which they would have been lower. See the fund’s prospectus or the Financial Highlights table on pages 28 to 31 for details.
The fund’s 30-day yield for Class A shares as of January 31, 2012, reflecting the 5.75% maximum sales charge and calculated in accordance with the U.S. Securities and Exchange Commission formula, was 2.85%.
Results for other share classes can be found on page 36.
Investing outside the United States may be subject to risks such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries. See the prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.
Fellow investors:
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International stocks ended the first half of the fiscal year sharply lower as investors became increasingly dismayed by Europe’s widening sovereign debt crisis and by some signs of economic weakness in the United States, China and Europe.
Against this backdrop, International Growth and Income Fund fell 12.8% for the six months ended December 31, 2011. While we are never pleased to see a decline in the value of the fund, we take some comfort in the fact that the fund’s total return bettered the 16.8% drop of its benchmark, the MSCI ACWI (All Country World Index) ex USA. The index, which measures a broad range of developed- and developing-country stock markets, is unmanaged and its returns do not include expenses. The fund also bested its peer group, as measured by the Lipper International Funds Index, which declined 17.6%.
The fund’s total return includes quarterly dividends totaling 31.9 cents a share paid during the period. Investors also received a capital gains distribution of 51.4 cents a share in December.
A turbulent environment
The heightened volatility that began during the fund’s previous fiscal year continued through much of the recent six-month period, as investors focused on Europe’s apparent failure to contain its worsening sovereign debt crisis. Mixed economic data from the U.S., Europe and a number of developing nations also weighed on investor sentiment. Most of the world’s stock markets suffered declines, with a number of euro zone nations registering some of the steepest. A drop in the value of the euro (the common currency of the 17 nations comprising the euro zone) versus the U.S. dollar amplified these losses for U.S. investors.
[Begin Sidebar]
Results at a glance | ||||||||||||
For periods ended December 31, 2011, with all distributions reinvested | ||||||||||||
Average annual | ||||||||||||
Total returns | total returns | |||||||||||
Lifetime | ||||||||||||
Six months | 1 year | (since 10/1/2008) | ||||||||||
International Growth and | ||||||||||||
Income Fund (Class A shares) | –12.81 | % | –7.50 | % | 7.05 | % | ||||||
MSCI ACWI ex USA* | –16.75 | –13.33 | 1.85 | |||||||||
Lipper International Funds Index | –17.56 | –14.48 | 0.45 | |||||||||
*The index is unmanaged and, therefore, has no expenses. |
[End Sidebar]
During the period, Europe’s leaders took a series of steps to address the problems of its most indebted nations. In many cases, those efforts were met with investor disappointment. In December, most European Union nations agreed to sign a treaty requiring much closer fiscal, economic and political integration — as well as tighter budgeting restrictions. It remains unclear, however, if Europe’s political leaders can follow this step with further measures that will bring about a definitive resolution to the situation.
As Europe is home to nearly half of the fund’s equity holdings, we are closely monitoring developments in the region. While we expect Europe will continue to face serious challenges for some time, we are hopeful that its leaders will adopt sensible and appropriate policies.
Worries also extended to slowing growth in the developing world, particularly in China and India. For the six months, China’s stock market lost 19.1%* in U.S. dollar terms as questions about inflation and the health of the country’s property market weighed on equities. In an ongoing effort to battle inflation while preserving growth, Chinese authorities raised interest rates a number of times in 2011 before reversing course with a rate cut in November. In India, a slowdown in industrial production and inflation fears driven partly by rising food prices unnerved investors; equities registered a 31.4% loss. Reports of government corruption scandals in India also upset the markets.
*Country returns are based on MSCI indexes, expressed in U.S. dollars, and assume the reinvestmentof dividends.
[Begin Sidebar]
Largest equity holdings | |||||
(as of December 31, 2011) | |||||
Percent of | |||||
Company | Country | net assets | |||
Royal Dutch Shell | United Kingdom | 3.5 | % | ||
British American Tobacco | United Kingdom | 3.3 | |||
TOTAL | France | 2.7 | |||
National Grid | United Kingdom | 2.7 | |||
Novartis | Switzerland | 2.1 | |||
Power Assets Holdings | Hong Kong | 1.9 | |||
Unilever NV | Netherlands | 1.9 | |||
Taiwan Semiconductor Manufacturing | Taiwan | 1.9 | |||
Tesco | United Kingdom | 1.7 | |||
GDF SUEZ | France | 1.6 |
[End Sidebar]
[Begin Sidebar]
Where the fund’s assets were invested | |||||||||
Percent of net assets by country as of December 31, 2011 | |||||||||
International Growth | MSCI ACWI | ||||||||
and Income Fund | ex USA* | ||||||||
Europe | |||||||||
Euro zone† | 24.6 | % | 19.0 | % | |||||
United Kingdom | 18.3 | 15.9 | |||||||
Switzerland | 4.5 | 5.9 | |||||||
Sweden | 1.7 | 2.1 | |||||||
Other Europe | .6 | 3.6 | |||||||
Europe | 49.7 | 46.5 | |||||||
Asia/Pacific | |||||||||
Australia | 7.7 | 5.9 | |||||||
Japan | 7.2 | 14.7 | |||||||
Hong Kong | 3.9 | 1.9 | |||||||
Taiwan | 3.0 | 2.5 | |||||||
China | 2.1 | 4.1 | |||||||
South Korea | 1.9 | 3.5 | |||||||
Singapore | .7 | 1.1 | |||||||
New Zealand | .7 | .1 | |||||||
Thailand | .6 | .5 | |||||||
Indonesia | .5 | .7 | |||||||
Other Asia/Pacific | .4 | 2.4 | |||||||
Asia/Pacific | 28.7 | 37.4 | |||||||
The Americas | |||||||||
Canada | 6.2 | 8.4 | |||||||
Mexico | 2.2 | 1.1 | |||||||
United States | .8 | — | |||||||
Brazil | .6 | 3.5 | |||||||
Other Americas | .1 | .8 | |||||||
The Americas | 9.9 | 13.8 | |||||||
Other | |||||||||
South Africa | 2.6 | 1.8 | |||||||
Other countries | — | .5 | |||||||
Other | 2.6 | 2.3 | |||||||
Short-term securities & | |||||||||
other assets less liabilities | 9.1 | — | |||||||
Total | 100.0 | % | 100.0 | % | |||||
*MSCI ACWI (All Country World Index) ex USA market capitalizations as of December 31, 2011. | |||||||||
† Countries using the euro as a common currency; those represented in the fund’s portfolio or the MSCI ACWI (All Country World Index) ex USA are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. |
[End Sidebar]
Likewise, reports of economic weakness and the difficulties in Europe contributed to stock market declines in a number of developed markets in the Asia/Pacific region. Among them were Australia (–14.1%), Singapore (–19.0%) and Japan (–10.0%).
There were some encouraging signs during the period. U.S. economic data was surprisingly positive toward the end of 2011 and corporate profits remained strong. And, despite the slowdown, economic growth in China and India continued at a relatively healthy rate.
Broad-based weakness
While the fund dropped less than its key benchmarks, the breadth of the downturn left virtually no market sector unharmed. Most of the fund’s holdings — including seven of its top 10 — suffered declines. French utilities company GDF SUEZ (–25.3%), oil and gas company TOTAL (–11.6%) and Swiss pharmaceutical producer Novartis (–6.7%) all lost ground. Among the few bright spots were British American Tobacco (+8.3%), consumer products maker Unilever (+5.0%) and oil giant Royal Dutch Shell (+6.8%), the fund’s largest holding.
Given the landscape, portfolio holdings in some of the more economically sensitive industries, including telecommunication services, automobiles and retailers, suffered sharp declines. A number of investments in financial companies also recorded losses, burdened by the troubles in Europe.
A focus on companies
While country and regional returns help to characterize the overall investment climate, the portfolio counselors who manage International Growth and Income Fund base their investment decisions on the merits of individual companies, not macroeconomic trends. This approach has resulted in a broadly diversified portfolio. (Turn to page 3 for a geographic breakdown.)
During the period, the fund’s counselors selectively added to holdings of telecommunications and energy companies. They also reduced a handful of capital goods and real estate holdings to free up cash for what they believe were better investment opportunities elsewhere.
Looking forward
The difficult conditions of recent months drive home the fact that investing always involves a measure of uncertainty and requires some tolerance for risk. We nonetheless believe there are a number of exciting investment opportunities with the potential to reward long-term investors.
The world’s economic challenges and market volatility are likely to continue in the near term. We maintain a cautious approach when choosing investments for the fund’s portfolio. However, we remain hopeful that the world’s political leaders will adopt policies that can support economies and financial systems at risk. We also believe that, despite recent signs of weakness, China will resume its role as a primary driver of global growth over the long term. In the meantime, we will focus on identifying strong companies with growth potential that often reward investors in the form of regular dividend payments.
We appreciate the confidence you have placed in us and look forward to reporting back to you again at the close of the fiscal year.
Cordially,
/s/ Steven T. Watson
Steven T. Watson
Vice Chairman of the Board
/s/ Carl M. Kawaja
Carl M. Kawaja
President
February 13, 2012
For current information about the fund, visit americanfunds.com.
[Begin Sidebar]
We are deeply saddened by the loss of Jon B. Lovelace, 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]
Summary investment portfolio December 31, 2011
unaudited
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]
Industry sector diversification | (percent of net assets) | |||
Financials | 14.58 | % | ||
Consumer staples | 12.89 | |||
Energy | 9.87 | |||
Telecommunication services | 9.75 | |||
Industrials | 9.09 | |||
Other industries | 33.46 | |||
Other securities | 1.26 | |||
Short-term securities & other assets less liabilities | 9.10 |
[end pie chart]
Country diversification | (percent of net assets) | |||
Euro zone* | 24.6 | % | ||
United Kingdom | 18.3 | |||
Australia | 7.7 | |||
Japan | 7.2 | |||
Canada | 6.2 | |||
Switzerland | 4.5 | |||
Hong Kong | 3.9 | |||
Taiwan | 3.0 | |||
South Africa | 2.6 | |||
Mexico | 2.2 | |||
Other countries | 10.7 | |||
Short-term securities & other assets less liabilities | 9.1 | |||
*Countries using the euro as a common currency; those represented in the fund's portfolio are Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. |
Percent | ||||||||||||
Value | of net | |||||||||||
Common stocks - 89.64% | Shares | (000 | ) | assets | ||||||||
Financials - 14.58% | ||||||||||||
Prudential PLC | 7,208,148 | $ | 71,475 | 1.56 | % | |||||||
Bank of Nova Scotia | 1,229,200 | 61,330 | 1.34 | |||||||||
QBE Insurance Group Ltd. | 3,705,000 | 49,074 | 1.07 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 1,695,000 | 47,214 | 1.03 | |||||||||
Agricultural Bank of China, Class H | 107,325,000 | 46,155 | 1.01 | |||||||||
Toronto-Dominion Bank | 610,000 | 45,680 | 1.00 | |||||||||
Industrial and Commercial Bank of China Ltd., Class H | 59,329,500 | 35,216 | .77 | |||||||||
United Overseas Bank Ltd. | 2,928,550 | 34,477 | .75 | |||||||||
Sampo Oyj, Class A | 1,235,000 | 30,641 | .67 | |||||||||
Fairfax Financial Holdings Ltd. | 70,000 | 30,184 | .66 | |||||||||
Other securities | 215,512 | 4.72 | ||||||||||
666,958 | 14.58 | |||||||||||
Consumer staples - 12.89% | ||||||||||||
British American Tobacco PLC | 3,189,500 | 151,348 | 3.31 | |||||||||
Unilever NV, depository receipts | 2,577,200 | 88,625 | 1.94 | |||||||||
Tesco PLC | 12,236,914 | 76,671 | 1.68 | |||||||||
Shoprite Holdings Ltd. | 3,585,000 | 60,486 | 1.32 | |||||||||
Nestlé SA | 670,000 | 38,518 | .84 | |||||||||
Pernod Ricard SA | 369,660 | 34,285 | .75 | |||||||||
Kimberly-Clark de México, SAB de CV, Class A | 5,879,300 | 31,708 | .69 | |||||||||
Other securities | 107,825 | 2.36 | ||||||||||
589,466 | 12.89 | |||||||||||
Energy - 9.87% | ||||||||||||
Royal Dutch Shell PLC, Class B | 4,234,000 | 161,360 | 3.53 | |||||||||
TOTAL SA | 2,453,500 | 125,430 | 2.74 | |||||||||
Crescent Point Energy Corp. | 1,640,500 | 72,303 | 1.58 | |||||||||
Other securities | 92,484 | 2.02 | ||||||||||
451,577 | 9.87 | |||||||||||
Telecommunication services - 9.75% | ||||||||||||
Koninklijke KPN NV | 6,015,000 | 71,972 | 1.57 | |||||||||
Telstra Corp. Ltd. | 20,894,000 | 71,163 | 1.56 | |||||||||
France Télécom SA | 3,503,300 | 55,022 | 1.20 | |||||||||
KT Corp. (1) | 1,046,500 | 32,450 | ||||||||||
KT Corp. (ADR) | 1,385,000 | 21,661 | 1.18 | |||||||||
América Móvil, SAB de CV, Series L | 23,370,000 | 26,494 | ||||||||||
América Móvil, SAB de CV, Series L (ADR) | 1,108,000 | 25,041 | 1.13 | |||||||||
Other securities | 142,120 | 3.11 | ||||||||||
445,923 | 9.75 | |||||||||||
Industrials - 9.09% | ||||||||||||
Schneider Electric SA | 1,103,032 | 58,075 | 1.27 | |||||||||
Siemens AG | 553,500 | 52,968 | 1.16 | |||||||||
Marubeni Corp. | 6,210,000 | 37,839 | .83 | |||||||||
Capita Group PLC | 3,855,000 | 37,627 | .82 | |||||||||
Other securities | 229,022 | 5.01 | ||||||||||
415,531 | 9.09 | |||||||||||
Utilities - 7.75% | ||||||||||||
National Grid PLC | 12,590,655 | 122,208 | 2.67 | |||||||||
Power Assets Holdings Ltd. | 12,028,000 | 88,972 | 1.94 | |||||||||
GDF SUEZ | 2,756,271 | 75,341 | 1.65 | |||||||||
Other securities | 67,976 | 1.49 | ||||||||||
354,497 | 7.75 | |||||||||||
Materials - 7.56% | ||||||||||||
L'Air Liquide SA, bonus shares (1) | 349,508 | 43,240 | ||||||||||
L'Air Liquide SA, non-registered shares | 100,958 | 12,490 | 1.22 | |||||||||
Orica Ltd. | 1,982,348 | 49,148 | 1.07 | |||||||||
Amcor Ltd. | 5,125,000 | 37,794 | .83 | |||||||||
Fletcher Building Ltd. | 6,955,000 | 33,240 | .73 | |||||||||
Impala Platinum Holdings Ltd. | 1,476,827 | 30,616 | .67 | |||||||||
K+S AG | 638,000 | 28,834 | .63 | |||||||||
Other securities | 110,533 | 2.41 | ||||||||||
345,895 | 7.56 | |||||||||||
Information technology - 6.29% | ||||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 35,271,506 | 88,298 | 1.93 | |||||||||
Nintendo Co., Ltd. | 364,400 | 50,184 | 1.10 | |||||||||
Canon, Inc. | 1,074,000 | 47,581 | 1.04 | |||||||||
Other securities | 101,623 | 2.22 | ||||||||||
287,686 | 6.29 | |||||||||||
Health care - 5.33% | ||||||||||||
Novartis AG | 1,660,100 | 94,908 | 2.08 | |||||||||
Sanofi | 482,683 | 35,452 | .78 | |||||||||
GlaxoSmithKline PLC | 1,350,000 | 30,851 | .67 | |||||||||
Other securities | 82,531 | 1.80 | ||||||||||
243,742 | 5.33 | |||||||||||
Consumer discretionary - 5.30% | ||||||||||||
Virgin Media Inc. | 1,815,000 | 38,805 | .85 | |||||||||
H & M Hennes & Mauritz AB, Class B | 935,000 | 30,066 | .66 | |||||||||
Other securities | 173,573 | 3.79 | ||||||||||
242,444 | 5.30 | |||||||||||
Miscellaneous - 1.23% | ||||||||||||
Other common stocks in initial period of acquisition | 56,018 | 1.23 | ||||||||||
Total common stocks (cost: $3,891,477,000) | 4,099,737 | 89.64 | ||||||||||
Percent | ||||||||||||
Value | of net | |||||||||||
Preferred stocks - 0.27% | (000 | ) | assets | |||||||||
Financials - 0.27% | ||||||||||||
Other securities | 12,360 | .27 | ||||||||||
Total preferred stocks (cost: $12,000,000) | 12,360 | .27 | ||||||||||
Percent | ||||||||||||
Value | of net | |||||||||||
Convertible securities - 0.07% | (000 | ) | assets | |||||||||
Materials - 0.07% | ||||||||||||
Other securities | 3,334 | .07 | ||||||||||
Total convertible securities (cost: $12,190,000) | 3,334 | .07 | ||||||||||
Principal | Percent | |||||||||||
amount | Value | of net | ||||||||||
Bonds & notes - 0.92% | (000 | ) | (000 | ) | assets | |||||||
Financials - 0.36% | ||||||||||||
SMFG Preferred Capital USD 3 Ltd., junior subordinated 9.50% (undated) (2) (3) | $ | 5,410 | 6,235 | .14 | ||||||||
Other securities | 10,313 | .22 | ||||||||||
16,548 | .36 | |||||||||||
Consumer staples - 0.36% | ||||||||||||
British American Tobacco International Finance PLC 8.125% -9.50% 2013-2018 (2) | 14,159 | 16,339 | .36 | |||||||||
Other - 0.20% | ||||||||||||
Other securities | 9,079 | .20 | ||||||||||
Total bonds & notes (cost: $35,754,000) | 41,966 | .92 | ||||||||||
Principal | Percent | |||||||||||
amount | Value | of net | ||||||||||
Short-term securities - 8.19% | (000 | ) | (000 | ) | assets | |||||||
Fannie Mae 0.055%-0.17% due 1/3-6/20/2012 | 74600 | 74,577 | 1.63 | |||||||||
National Australia Funding (Delaware) Inc. 0.145%-0.22% due 1/17-2/22/2012 (2) | 74,200 | 74,196 | 1.62 | |||||||||
Freddie Mac 0.10%-0.13% due 6/19-8/21/2012 | 36,100 | 36,079 | .79 | |||||||||
Barclays Bank PLC 0.09% due 1/3/2012 | 30,000 | 30,000 | .65 | |||||||||
Nestlé Capital Corp. 0.12% due 6/1/2012 (2) | 25,000 | 24,983 | .55 | |||||||||
Other securities | 134,881 | 2.95 | ||||||||||
Total short-term securities (cost: $374,709,000) | 374,716 | 8.19 | ||||||||||
Total investment securities (cost: $4,326,130,000) | 4,532,113 | 99.09 | ||||||||||
Other assets less liabilities | 41,440 | .91 | ||||||||||
Net assets | $ | 4,573,553 | 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. |
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) Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $107,870,000, which represented 2.36% of the net assets of the fund. This amount includes $64,630,000 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. |
(2) Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," was $243,431,000, which represented 5.32% of the net assets of the fund. |
(3) Coupon rate may change periodically. |
Key to abbreviation |
ADR = American Depositary Receipts |
See Notes to Financial Statements |
Financial statements
Statement of assets and liabilities | unaudited | |||||||
at December 31, 2011 | (dollars in thousands) | |||||||
Assets: | ||||||||
Investment securities, at value (cost: $4,326,130) | $ | 4,532,113 | ||||||
Cash | 71 | |||||||
Receivables for: | ||||||||
Sales of investments | $ | 3,568 | ||||||
Sales of fund's shares | 57,388 | |||||||
Dividends and interest | 19,451 | 80,407 | ||||||
4,612,591 | ||||||||
Liabilities: | ||||||||
Payables for: | ||||||||
Purchases of investments | 23,353 | |||||||
Repurchases of fund's shares | 11,445 | |||||||
Investment advisory services | 1,989 | |||||||
Services provided by related parties | 1,415 | |||||||
Trustees' deferred compensation | 753 | |||||||
Other | 83 | 39,038 | ||||||
Net assets at December 31, 2011 | $ | 4,573,553 | ||||||
Net assets consist of: | ||||||||
Capital paid in on shares of beneficial interest | $ | 4,380,945 | ||||||
Undistributed net investment income | 4,099 | |||||||
Distributions in excess of net realized gain | (17,556 | ) | ||||||
Net unrealized appreciation | 206,065 | |||||||
Net assets at December 31, 2011 | $ | 4,573,553 |
(dollars and shares in thousands, except per-share amounts) | ||||||||||||
Shares of beneficial interest issued and outstanding (no stated par value) - | ||||||||||||
unlimited shares authorized (166,477 total shares outstanding) | ||||||||||||
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Class A | $ | 3,092,156 | 112,543 | $ | 27.48 | |||||||
Class B | 23,222 | 846 | 27.45 | |||||||||
Class C | 193,537 | 7,057 | 27.43 | |||||||||
Class F-1 | 400,228 | 14,567 | 27.48 | |||||||||
Class F-2 | 346,219 | 12,598 | 27.48 | |||||||||
Class 529-A | 64,906 | 2,364 | 27.45 | |||||||||
Class 529-B | 1,128 | 41 | 27.42 | |||||||||
Class 529-C | 16,060 | 587 | 27.36 | |||||||||
Class 529-E | 1,975 | 72 | 27.46 | |||||||||
Class 529-F-1 | 3,006 | 109 | 27.48 | |||||||||
Class R-1 | 3,954 | 144 | 27.43 | |||||||||
Class R-2 | 24,714 | 903 | 27.38 | |||||||||
Class R-3 | 20,881 | 761 | 27.45 | |||||||||
Class R-4 | 11,570 | 421 | 27.47 | |||||||||
Class R-5 | 31,036 | 1,126 | 27.58 | |||||||||
Class R-6 | 338,961 | 12,338 | 27.47 | |||||||||
See Notes to Financial Statements |
Statement of operations | unaudited | |||||||
for the six months ended December 31, 2011 | (dollars in thousands) | |||||||
Investment income: | ||||||||
Income: | ||||||||
Dividends (net of non-U.S. taxes of $5,384) | $ | 67,115 | ||||||
Interest | 2,465 | $ | 69,580 | |||||
Fees and expenses*: | ||||||||
Investment advisory services | 12,074 | |||||||
Distribution services | 5,596 | |||||||
Transfer agent services | 1,981 | |||||||
Administrative services | 895 | |||||||
Reports to shareholders | 214 | |||||||
Registration statement and prospectus | 235 | |||||||
Trustees' compensation | 65 | |||||||
Auditing and legal | 21 | |||||||
Custodian | 376 | |||||||
Other | 109 | |||||||
Total fees and expenses before reimbursement | 21,566 | |||||||
Less reimbursement of fees and expenses | 5 | |||||||
Total fees and expenses after reimbursement | 21,561 | |||||||
Net investment income | 48,019 | |||||||
Net realized loss and unrealized depreciation | ||||||||
on investments and currency: | ||||||||
Net realized loss on: | ||||||||
Investments (net of non-U.S. taxes of $235) | (16,192 | ) | ||||||
Currency transactions | (401 | ) | (16,593 | ) | ||||
Net unrealized depreciation on: | ||||||||
Investments | (691,189 | ) | ||||||
Currency translations | (729 | ) | (691,918 | ) | ||||
Net realized loss and unrealized depreciation | ||||||||
on investments and currency | (708,511 | ) | ||||||
Net decrease in net assets resulting | ||||||||
from operations | $ | (660,492 | ) | |||||
(*) Additional information related to class-specific fees and expenses is included | ||||||||
in the Notes to Financial Statements. | ||||||||
See Notes to Financial Statements | ||||||||
Statements of changes in net assets | ||||||||
(dollars in thousands) | ||||||||
Six months ended December 31, 2011* | Year ended June 30, 2011* | |||||||
Operations: | ||||||||
Net investment income | $ | 48,019 | $ | 153,206 | ||||
Net realized (loss) gain on investments and currency transactions | (16,593 | ) | 88,886 | |||||
Net unrealized (depreciation) appreciation on investments and currency translations | (691,918 | ) | 853,517 | |||||
Net (decrease) increase in net assets resulting from operations | (660,492 | ) | 1,095,609 | |||||
Dividends and distributions paid to shareholders from net investment income: | ||||||||
Dividends from net investment income | (50,246 | ) | (155,725 | ) | ||||
Distributions from net realized gain on investments | (82,548 | ) | (25,100 | ) | ||||
Total dividends and distributions paid to shareholders | (132,794 | ) | (180,825 | ) | ||||
Net capital share transactions | 239,026 | 733,102 | ||||||
Total (decrease) increase in net assets | (554,260 | ) | 1,647,886 | |||||
Net assets: | ||||||||
Beginning of period | 5,127,813 | 3,479,927 | ||||||
End of period (including undistributed | ||||||||
net investment income: $4,099 and $6,326, respectively) | $ | 4,573,553 | $ | 5,127,813 | ||||
*Unaudited. | ||||||||
See Notes to Financial Statements |
Notes to financial statements
unaudited
1. | Organization |
International Growth and Income Fund (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks to provide long-term growth of capital with current income by investing primarily in stocks of larger, well-established companies domiciled outside the U.S., including emerging market countries.
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 recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Class allocations – Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders – Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
Currency translation – Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, the effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.
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 table on the following page. 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 |
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 presents the fund’s valuation levels as of December 31, 2011 (dollars in thousands):
Investment securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common stocks: | ||||||||||||||||
Financials | $ | 666,958 | $ | - | $ | - | $ | 666,958 | ||||||||
Consumer staples | 589,466 | - | - | 589,466 | ||||||||||||
Energy | 451,577 | - | - | 451,577 | ||||||||||||
Telecommunication services | 413,473 | 32,450 | * | - | 445,923 | |||||||||||
Industrials | 415,531 | - | - | 415,531 | ||||||||||||
Utilities | 354,497 | - | - | 354,497 | ||||||||||||
Materials | 302,655 | 43,240 | - | 345,895 | ||||||||||||
Information technology | 259,709 | 27,977 | * | - | 287,686 | |||||||||||
Health care | 243,742 | - | - | 243,742 | ||||||||||||
Consumer discretionary | 242,444 | - | - | 242,444 | ||||||||||||
Miscellaneous | 51,815 | 4,203 | * | - | 56,018 | |||||||||||
Preferred stocks | - | 12,360 | - | 12,360 | ||||||||||||
Convertible securities | - | 3,334 | - | 3,334 | ||||||||||||
Bonds & notes | - | 41,966 | - | 41,966 | ||||||||||||
Short-term securities | - | 374,716 | - | 374,716 | ||||||||||||
Total | $ | 3,991,867 | $ | 540,246 | $ | - | $ | 4,532,113 | ||||||||
(*) 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, $64,630,000 of investment securities were classified as Level 2 instead of Level 1. |
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 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 outside the U.S. — Securities of issuers domiciled outside the U. S., or with significant operations outside the U.S., may lose value because of political, social or economic developments in the 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. These risks may be heightened in connection with investments in emerging market and developing countries.
Investing in emerging market and developing countries — Investing in countries with developing economies and/or markets may involve risks in addition to and greater than those generally associated with investing in developed countries. For instance, emerging market and developing countries may have less developed legal and accounting systems than those in developed countries. The governments of these countries may be more unstable and more likely to impose capital controls, nationalize a company or industry, place restrictions on foreign ownership and on withdrawing sale proceeds of securities from the country, and/or impose punitive taxes that could adversely affect the prices of securities. In addition, the economies of these countries may be dependent on relatively few industries that are more susceptible to local and global changes. Securities markets in these countries can also be relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid, and may be more difficult to value, than securities issued in countries with more developed economies and/or markets. Additionally, there may be increased settlement risks for transactions in local securities.
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.
Management – The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses employed by the investment adviser in this process may not produce the desired results. This could cause the fund to lose value or its results to lag relevant benchmarks or 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 and state tax authorities for tax years before 2008, the year the fund commenced operations.
Non-U.S. taxation – Dividend and interest income are recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.
Distributions – Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized 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; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.
The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of June 30, 2011, the fund had tax basis undistributed ordinary income of $6,655,000 and undistributed long-term capital gains of $82,401,000.
As of December 31, 2011, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows:
(dollars in thousands) | ||||
Gross unrealized appreciation on investment securities | 566,953 | |||
Gross unrealized depreciation on investment securities | (362,326 | ) | ||
Net unrealized appreciation on investment securities | 204,627 | |||
Cost of investment securities | 4,327,486 |
The tax character of distributions paid to shareholders was as follows (dollars in thousands):
Six months ended December 31, 2011 | Year ended June 30, 2011 | |||||||||||||||||||||||
Share class | Ordinary income | Long-term capital gains | Total distributions paid | Ordinary income | Long-term capital gains | Total distributions paid | ||||||||||||||||||
Class A | $ | 35,044 | $ | 56,512 | $ | 91,556 | $ | 111,191 | $ | 17,858 | $ | 129,049 | ||||||||||||
Class B | 176 | 425 | 601 | 775 | 173 | 948 | ||||||||||||||||||
Class C | 1,405 | 3,538 | 4,943 | 5,468 | 1,176 | 6,644 | ||||||||||||||||||
Class F-1 | 4,219 | 7,180 | 11,399 | 12,652 | 2,041 | 14,693 | ||||||||||||||||||
Class F-2 | 3,554 | 5,505 | 9,059 | 9,952 | 1,505 | 11,457 | ||||||||||||||||||
Class 529-A | 691 | 1,181 | 1,872 | 1,876 | 280 | 2,156 | ||||||||||||||||||
Class 529-B | 7 | 21 | 28 | 39 | 7 | 46 | ||||||||||||||||||
Class 529-C | 105 | 288 | 393 | 345 | 65 | 410 | ||||||||||||||||||
Class 529-E | 20 | 38 | 58 | 59 | 10 | 69 | ||||||||||||||||||
Class 529-F-1 | 33 | 54 | 87 | 64 | 8 | 72 | ||||||||||||||||||
Class R-1 | 35 | 73 | 108 | 118 | 22 | 140 | ||||||||||||||||||
Class R-2 | 175 | 452 | 627 | 543 | 103 | 646 | ||||||||||||||||||
Class R-3 | 197 | 380 | 577 | 573 | 91 | 664 | ||||||||||||||||||
Class R-4 | 122 | 209 | 331 | 309 | 43 | 352 | ||||||||||||||||||
Class R-5 | 367 | 535 | 902 | 839 | 116 | 955 | ||||||||||||||||||
Class R-6 | 4,096 | 6,157 | 10,253 | 10,922 | 1,602 | 12,524 | ||||||||||||||||||
Total | $ | 50,246 | $ | 82,548 | $ | 132,794 | $ | 155,725 | $ | 25,100 | $ | 180,825 |
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 provides for monthly fees accrued daily. These fees are based on a series of decreasing annual rates beginning with 0.690% on the first $500 million of daily net assets and decreasing to 0.460% on such assets in excess of $6.5 billion. For the six months ended December 31, 2011, the investment advisory services fee was $12,074,000, which was equivalent to an annualized rate of 0.523% 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 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 0.30% 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 0.30% 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 | 0.30% | 0.30% |
Class 529-A | 0.30 | 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 has a transfer agent agreement with AFS for Classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC as described 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. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for one of the retirement plan share classes. For the six months ended December 31, 2011, the total administrative services fees paid by CRMC were $5,000 for Class R-2. Administrative services fees are presented gross of any payments made by CRMC.
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 six months 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 | $ | 3,664 | $ | 1,965 | Not applicable | Not applicable | Not applicable | |||||||||||||
Class B | 127 | 16 | Not applicable | Not applicable | Not applicable | |||||||||||||||
Class C | 1,009 | Included in administrative services | $ | 135 | $ | 19 | Not applicable | |||||||||||||
Class F-1 | 483 | 225 | 10 | Not applicable | ||||||||||||||||
Class F-2 | Not applicable | 206 | 4 | Not applicable | ||||||||||||||||
Class 529-A | 58 | 37 | 5 | $ | 32 | |||||||||||||||
Class 529-B | 7 | 1 | - | * | 1 | |||||||||||||||
Class 529-C | 78 | 9 | 2 | 8 | ||||||||||||||||
Class 529-E | 5 | 1 | - | * | 1 | |||||||||||||||
Class 529-F-1 | - | 2 | - | * | 1 | |||||||||||||||
Class R-1 | 16 | 2 | 1 | Not applicable | ||||||||||||||||
Class R-2 | 86 | 17 | 41 | Not applicable | ||||||||||||||||
Class R-3 | 51 | 16 | 12 | Not applicable | ||||||||||||||||
Class R-4 | 12 | 8 | 1 | Not applicable | ||||||||||||||||
Class R-5 | Not applicable | 15 | - | * | Not applicable | |||||||||||||||
Class R-6 | Not applicable | 82 | 1 | Not applicable | ||||||||||||||||
Total | $ | 5,596 | $ | 1,981 | $ | 756 | $ | 96 | $ | 43 | ||||||||||
*Amount less than one thousand. |
Trustees’ deferred compensation –Trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund 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 $65,000, shown on the accompanying financial statements, includes $158,000 in current fees (either paid in cash or deferred) and a net decrease of $93,000 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 and distributions | Repurchases(*) | Net increase (decrease) | |||||||||||||||||||||||||||||
Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
Six months ended December 31, 2011 | ||||||||||||||||||||||||||||||||
Class A | $ | 336,248 | 11,702 | $ | 88,810 | 3,237 | $ | (389,193 | ) | (13,554 | ) | $ | 35,865 | 1,385 | ||||||||||||||||||
Class B | 2,638 | 91 | 595 | 22 | (5,962 | ) | (208 | ) | (2,729 | ) | (95 | ) | ||||||||||||||||||||
Class C | 23,195 | 811 | 4,850 | 177 | (29,526 | ) | (1,032 | ) | (1,481 | ) | (44 | ) | ||||||||||||||||||||
Class F-1 | 101,921 | 3,592 | 11,302 | 412 | (67,883 | ) | (2,380 | ) | 45,340 | 1,624 | ||||||||||||||||||||||
Class F-2 | 125,757 | 4,466 | 8,524 | 311 | (49,488 | ) | (1,752 | ) | 84,793 | 3,025 | ||||||||||||||||||||||
Class 529-A | 10,701 | 374 | 1,871 | 68 | (4,423 | ) | (154 | ) | 8,149 | 288 | ||||||||||||||||||||||
Class 529-B | 90 | 3 | 28 | 1 | (527 | ) | (19 | ) | (409 | ) | (15 | ) | ||||||||||||||||||||
Class 529-C | 3,133 | 110 | 393 | 14 | (1,201 | ) | (42 | ) | 2,325 | 82 | ||||||||||||||||||||||
Class 529-E | 418 | 15 | 58 | 2 | (438 | ) | (16 | ) | 38 | 1 | ||||||||||||||||||||||
Class 529-F-1 | 1,020 | 35 | 87 | 3 | (216 | ) | (8 | ) | 891 | 30 | ||||||||||||||||||||||
Class R-1 | 363 | 13 | 77 | 3 | (572 | ) | (20 | ) | (132 | ) | (4 | ) | ||||||||||||||||||||
Class R-2 | 6,488 | 225 | 597 | 22 | (3,063 | ) | (107 | ) | 4,022 | 140 | ||||||||||||||||||||||
Class R-3 | 3,938 | 134 | 547 | 20 | (3,490 | ) | (119 | ) | 995 | 35 | ||||||||||||||||||||||
Class R-4 | 3,701 | 129 | 297 | 11 | (2,131 | ) | (76 | ) | 1,867 | 64 | ||||||||||||||||||||||
Class R-5 | 10,435 | 344 | 892 | 33 | (3,632 | ) | (124 | ) | 7,695 | 253 | ||||||||||||||||||||||
Class R-6 | 42,739 | 1,506 | 10,253 | 373 | (1,195 | ) | (43 | ) | 51,797 | 1,836 | ||||||||||||||||||||||
Total net increase (decrease) | $ | 672,785 | 23,550 | $ | 129,181 | 4,709 | $ | (562,940 | ) | (19,654 | ) | $ | 239,026 | 8,605 | ||||||||||||||||||
Year ended June 30, 2011 | ||||||||||||||||||||||||||||||||
Class A | $ | 814,973 | 26,137 | $ | 123,458 | 3,957 | $ | (498,306 | ) | (16,200 | ) | $ | 440,125 | 13,894 | ||||||||||||||||||
Class B | 6,618 | 212 | 928 | 30 | (11,924 | ) | (389 | ) | (4,378 | ) | (147 | ) | ||||||||||||||||||||
Class C | 55,361 | 1,780 | 6,408 | 205 | (42,148 | ) | (1,366 | ) | 19,621 | 619 | ||||||||||||||||||||||
Class F-1 | 139,074 | 4,489 | 14,045 | 450 | (80,499 | ) | (2,597 | ) | 72,620 | 2,342 | ||||||||||||||||||||||
Class F-2 | 88,329 | 2,846 | 10,079 | 323 | (39,750 | ) | (1,272 | ) | 58,658 | 1,897 | ||||||||||||||||||||||
Class 529-A | 25,752 | 824 | 2,154 | 69 | (5,406 | ) | (175 | ) | 22,500 | 718 | ||||||||||||||||||||||
Class 529-B | 778 | 25 | 46 | 1 | (457 | ) | (15 | ) | 367 | 11 | ||||||||||||||||||||||
Class 529-C | 7,391 | 237 | 410 | 13 | (1,886 | ) | (61 | ) | 5,915 | 189 | ||||||||||||||||||||||
Class 529-E | 857 | 28 | 69 | 2 | (264 | ) | (8 | ) | 662 | 22 | ||||||||||||||||||||||
Class 529-F-1 | 1,656 | 52 | 72 | 3 | (249 | ) | (8 | ) | 1,479 | 47 | ||||||||||||||||||||||
Class R-1 | 1,296 | 42 | 99 | 3 | (520 | ) | (17 | ) | 875 | 28 | ||||||||||||||||||||||
Class R-2 | 12,384 | 397 | 606 | 19 | (4,167 | ) | (134 | ) | 8,823 | 282 | ||||||||||||||||||||||
Class R-3 | 13,857 | 441 | 618 | 20 | (3,719 | ) | (119 | ) | 10,756 | 342 | ||||||||||||||||||||||
Class R-4 | 7,451 | 235 | 303 | 10 | (2,012 | ) | (64 | ) | 5,742 | 181 | ||||||||||||||||||||||
Class R-5 | 14,270 | 460 | 952 | 30 | (4,793 | ) | (154 | ) | 10,429 | 336 | ||||||||||||||||||||||
Class R-6 | 72,722 | 2,335 | 12,524 | 402 | (6,338 | ) | (205 | ) | 78,908 | 2,532 | ||||||||||||||||||||||
Total net increase (decrease) | $ | 1,262,769 | 40,540 | $ | 172,771 | 5,537 | $ | (702,438 | ) | (22,784 | ) | $ | 733,102 | 23,293 | ||||||||||||||||||
* 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 $663,538,000 and $459,974,000, respectively, during the six months ended December 31, 2011.
Financial highlights
(Loss) income from investment operations(1) | Dividends and distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | Net investment income | Net (losses) gains 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(2)(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(3) | Ratio of net income to average net assets(3) | |||||||||||||||||||||||||||||||||||||||||
Class A: | Six months ended 12/31/2011(4)(5) | $ | 32.48 | $ | .30 | $ | (4.47 | ) | $ | (4.17 | ) | $ | (.32 | ) | $ | (.51 | ) | $ | (.83 | ) | $ | 27.48 | (12.81 | )% | $ | 3,092 | .92 | %(6) | .92 | %(6) | 2.09 | %(6) | |||||||||||||||||||||
Year ended 6/30/2011 | 25.86 | 1.06 | 6.80 | 7.86 | (1.06 | ) | (.18 | ) | (1.24 | ) | 32.48 | 30.64 | 3,611 | .89 | .89 | 3.43 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.78 | .80 | 1.39 | 2.19 | (.74 | ) | (.37 | ) | (1.11 | ) | 25.86 | 8.44 | 2,515 | .94 | .93 | 2.79 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .62 | (.39 | ) | .23 | (.45 | ) | - | (.45 | ) | 24.78 | 1.04 | 1,424 | 1.11 | (6) | 1.06 | (6) | 3.73 | (6) | ||||||||||||||||||||||||||||||||||
Class B: | Six months ended 12/31/2011(4)(5) | 32.44 | .19 | (4.47 | ) | (4.28 | ) | (.20 | ) | (.51 | ) | (.71 | ) | 27.45 | (13.16 | ) | 23 | 1.70 | (6) | 1.70 | (6) | 1.30 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.82 | .79 | 6.82 | 7.61 | (.81 | ) | (.18 | ) | (.99 | ) | 32.44 | 29.62 | 31 | 1.68 | 1.68 | 2.56 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.75 | .56 | 1.40 | 1.96 | (.52 | ) | (.37 | ) | (.89 | ) | 25.82 | 7.60 | 28 | 1.72 | 1.71 | 1.96 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .53 | (.42 | ) | .11 | (.36 | ) | - | (.36 | ) | 24.75 | .49 | 18 | 1.81 | (6) | 1.77 | (6) | 3.16 | (6) | ||||||||||||||||||||||||||||||||||
Class C: | Six months ended 12/31/2011(4)(5) | 32.42 | .19 | (4.47 | ) | (4.28 | ) | (.20 | ) | (.51 | ) | (.71 | ) | 27.43 | (13.17 | ) | 194 | 1.72 | (6) | 1.72 | (6) | 1.29 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.81 | .80 | 6.79 | 7.59 | (.80 | ) | (.18 | ) | (.98 | ) | 32.42 | 29.57 | 230 | 1.73 | 1.73 | 2.58 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.75 | .57 | 1.38 | 1.95 | (.52 | ) | (.37 | ) | (.89 | ) | 25.81 | 7.55 | 167 | 1.75 | 1.74 | 2.00 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .51 | (.41 | ) | .10 | (.35 | ) | - | (.35 | ) | 24.75 | .48 | 87 | 1.84 | (6) | 1.80 | (6) | 3.07 | (6) | ||||||||||||||||||||||||||||||||||
Class F-1: | Six months ended 12/31/2011(4)(5) | 32.49 | .30 | (4.48 | ) | (4.18 | ) | (.32 | ) | (.51 | ) | (.83 | ) | 27.48 | (12.82 | ) | 400 | .94 | (6) | .94 | (6) | 2.08 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.86 | 1.06 | 6.79 | 7.85 | (1.04 | ) | (.18 | ) | (1.22 | ) | 32.49 | 30.58 | 420 | .94 | .94 | 3.40 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.78 | .79 | 1.39 | 2.18 | (.73 | ) | (.37 | ) | (1.10 | ) | 25.86 | 8.41 | 274 | .97 | .96 | 2.76 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .63 | (.39 | ) | .24 | (.46 | ) | - | (.46 | ) | 24.78 | 1.06 | 164 | 1.07 | (6) | 1.03 | (6) | 3.76 | (6) | ||||||||||||||||||||||||||||||||||
Class F-2: | Six months ended 12/31/2011(4)(5) | 32.50 | .34 | (4.50 | ) | (4.16 | ) | (.35 | ) | (.51 | ) | (.86 | ) | 27.48 | (12.74 | ) | 346 | .71 | (6) | .71 | (6) | 2.37 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.87 | 1.13 | 6.79 | 7.92 | (1.11 | ) | (.18 | ) | (1.29 | ) | 32.50 | 30.87 | 311 | .71 | .71 | 3.65 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.79 | .86 | 1.39 | 2.25 | (.80 | ) | (.37 | ) | (1.17 | ) | 25.87 | 8.69 | 199 | .71 | .70 | 3.02 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .60 | (.31 | ) | .29 | (.50 | ) | - | (.50 | ) | 24.79 | 1.28 | 119 | .82 | (6) | .76 | (6) | 3.57 | (6) | ||||||||||||||||||||||||||||||||||
Class 529-A: | Six months ended 12/31/2011(4)(5) | 32.46 | .30 | (4.49 | ) | (4.19 | ) | (.31 | ) | (.51 | ) | (.82 | ) | 27.45 | (12.87 | ) | 65 | .98 | (6) | .98 | (6) | 2.05 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.85 | 1.09 | 6.75 | 7.84 | (1.05 | ) | (.18 | ) | (1.23 | ) | 32.46 | 30.62 | 67 | .94 | .94 | 3.50 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.77 | .82 | 1.35 | 2.17 | (.72 | ) | (.37 | ) | (1.09 | ) | 25.85 | 8.33 | 35 | .99 | .98 | 2.87 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .70 | (.49 | ) | .21 | (.44 | ) | - | (.44 | ) | 24.77 | .96 | 9 | 1.20 | (6) | 1.16 | (6) | 4.16 | (6) | ||||||||||||||||||||||||||||||||||
Class 529-B: | Six months ended 12/31/2011(4)(5) | 32.39 | .16 | (4.45 | ) | (4.29 | ) | (.17 | ) | (.51 | ) | (.68 | ) | 27.42 | (13.22 | ) | 1 | 1.82 | (6) | 1.82 | (6) | 1.11 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.80 | .78 | 6.78 | 7.56 | (.79 | ) | (.18 | ) | (.97 | ) | 32.39 | 29.47 | 2 | 1.79 | 1.79 | 2.51 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.74 | .55 | 1.38 | 1.93 | (.50 | ) | (.37 | ) | (.87 | ) | 25.80 | 7.49 | 1 | 1.82 | 1.81 | 1.94 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .50 | (.41 | ) | .09 | (.35 | ) | - | (.35 | ) | 24.74 | .43 | - | (8) | 1.93 | (6) | 1.88 | (6) | 3.00 | (6) | |||||||||||||||||||||||||||||||||
Class 529-C: | Six months ended 12/31/2011(4)(5) | 32.35 | .18 | (4.47 | ) | (4.29 | ) | (.19 | ) | (.51 | ) | (.70 | ) | 27.36 | (13.20 | ) | 16 | 1.81 | (6) | 1.81 | (6) | 1.22 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.77 | .83 | 6.73 | 7.56 | (.80 | ) | (.18 | ) | (.98 | ) | 32.35 | 29.45 | 16 | 1.78 | 1.78 | 2.68 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.72 | .59 | 1.35 | 1.94 | (.52 | ) | (.37 | ) | (.89 | ) | 25.77 | 7.53 | 8 | 1.81 | 1.80 | 2.08 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .65 | (.57 | ) | .08 | (.36 | ) | - | (.36 | ) | 24.72 | .41 | 2 | 1.91 | (6) | 1.88 | (6) | 3.81 | (6) | ||||||||||||||||||||||||||||||||||
Class 529-E: | Six months ended 12/31/2011(4)(5) | $ | 32.46 | $ | .25 | $ | (4.47 | ) | $ | (4.22 | ) | $ | (.27 | ) | $ | (.51 | ) | $ | (.78 | ) | $ | 27.46 | (12.97 | )% | $ | 2 | 1.27 | %(6) | 1.27 | %(6) | 1.75 | %(6) | |||||||||||||||||||||
Year ended 6/30/2011 | 25.85 | .97 | 6.76 | 7.73 | (.94 | ) | (.18 | ) | (1.12 | ) | 32.46 | 30.18 | 2 | 1.27 | 1.27 | 3.12 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.78 | .75 | 1.33 | 2.08 | (.64 | ) | (.37 | ) | (1.01 | ) | 25.85 | 8.01 | 1 | 1.30 | 1.29 | 2.64 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .74 | (.56 | ) | .18 | (.40 | ) | - | (.40 | ) | 24.78 | .82 | - | (8) | 1.39 | (6) | 1.35 | (6) | 4.36 | (6) | |||||||||||||||||||||||||||||||||
Class 529-F-1: | Six months ended 12/31/2011(4)(5) | 32.50 | .33 | (4.50 | ) | (4.17 | ) | (.34 | ) | (.51 | ) | (.85 | ) | 27.48 | (12.78 | ) | 3 | .80 | (6) | .80 | (6) | 2.26 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.87 | 1.25 | 6.66 | 7.91 | (1.10 | ) | (.18 | ) | (1.28 | ) | 32.50 | 30.80 | 3 | .77 | .77 | 3.99 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.79 | .91 | 1.32 | 2.23 | (.78 | ) | (.37 | ) | (1.15 | ) | 25.87 | 8.60 | 1 | .79 | .78 | 3.18 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .76 | (.49 | ) | .27 | (.48 | ) | - | (.48 | ) | 24.79 | 1.18 | - | (8) | .90 | (6) | .86 | (6) | 4.48 | (6) | |||||||||||||||||||||||||||||||||
Class R-1: | Six months ended 12/31/2011(4)(5) | 32.43 | .23 | (4.48 | ) | (4.25 | ) | (.24 | ) | (.51 | ) | (.75 | ) | 27.43 | (13.07 | ) | 4 | 1.44 | (6) | 1.44 | (6) | 1.56 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.82 | .87 | 6.78 | 7.65 | (.86 | ) | (.18 | ) | (1.04 | ) | 32.43 | 29.81 | 5 | 1.54 | 1.54 | 2.80 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.76 | .59 | 1.37 | 1.96 | (.53 | ) | (.37 | ) | (.90 | ) | 25.82 | 7.58 | 3 | 1.71 | 1.70 | 2.06 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .45 | (.34 | ) | .11 | (.35 | ) | - | (.35 | ) | 24.76 | .52 | 2 | 1.82 | (6) | 1.77 | (6) | 2.68 | (6) | ||||||||||||||||||||||||||||||||||
Class R-2: | Six months ended 12/31/2011(4)(5) | 32.38 | .19 | (4.47 | ) | (4.28 | ) | (.21 | ) | (.51 | ) | (.72 | ) | 27.38 | (13.20 | ) | 25 | 1.77 | (6) | 1.73 | (6) | 1.30 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.79 | .85 | 6.74 | 7.59 | (.82 | ) | (.18 | ) | (1.00 | ) | 32.38 | 29.60 | 25 | 1.77 | 1.70 | 2.74 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.74 | .61 | 1.34 | 1.95 | (.53 | ) | (.37 | ) | (.90 | ) | 25.79 | 7.57 | 13 | 1.81 | 1.73 | 2.15 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .54 | (.44 | ) | .10 | (.36 | ) | - | (.36 | ) | 24.74 | .48 | 3 | 1.88 | (6) | 1.78 | (6) | 3.22 | (6) | ||||||||||||||||||||||||||||||||||
Class R-3: | Six months ended 12/31/2011(4)(5) | 32.45 | .25 | (4.47 | ) | (4.22 | ) | (.27 | ) | (.51 | ) | (.78 | ) | 27.45 | (12.99 | ) | 21 | 1.30 | (6) | 1.30 | (6) | 1.72 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.84 | 1.01 | 6.73 | 7.74 | (.95 | ) | (.18 | ) | (1.13 | ) | 32.45 | 30.16 | 24 | 1.27 | 1.27 | 3.24 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.78 | .75 | 1.33 | 2.08 | (.65 | ) | (.37 | ) | (1.02 | ) | 25.84 | 8.02 | 10 | 1.30 | 1.29 | 2.65 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .61 | (.42 | ) | .19 | (.41 | ) | - | (.41 | ) | 24.78 | .85 | 3 | 1.38 | (6) | 1.33 | (6) | 3.64 | (6) | ||||||||||||||||||||||||||||||||||
Class R-4: | Six months ended 12/31/2011(4)(5) | 32.48 | .30 | (4.48 | ) | (4.18 | ) | (.32 | ) | (.51 | ) | (.83 | ) | 27.47 | (12.85 | ) | 12 | .95 | (6) | .95 | (6) | 2.07 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.86 | 1.15 | 6.70 | 7.85 | (1.05 | ) | (.18 | ) | (1.23 | ) | 32.48 | 30.60 | 12 | .93 | .93 | 3.69 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.79 | .84 | 1.33 | 2.17 | (.73 | ) | (.37 | ) | (1.10 | ) | 25.86 | 8.38 | 5 | .98 | .96 | 2.93 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .61 | (.37 | ) | .24 | (.45 | ) | - | (.45 | ) | 24.79 | 1.09 | 2 | 1.07 | (6) | 1.02 | (6) | 3.63 | (6) | ||||||||||||||||||||||||||||||||||
Class R-5: | Six months ended 12/31/2011(4)(5) | 32.60 | .34 | (4.49 | ) | (4.15 | ) | (.36 | ) | (.51 | ) | (.87 | ) | 27.58 | (12.71 | ) | 31 | .67 | (6) | .67 | (6) | 2.37 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.95 | 1.15 | 6.81 | 7.96 | (1.13 | ) | (.18 | ) | (1.31 | ) | 32.60 | 30.94 | 28 | .67 | .67 | 3.71 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.86 | .85 | 1.41 | 2.26 | (.80 | ) | (.37 | ) | (1.17 | ) | 25.95 | 8.69 | 14 | .72 | .70 | 2.96 | |||||||||||||||||||||||||||||||||||||
Period from 10/1/2008(7) to 6/30/2009(4) | 25.00 | .76 | (.47 | ) | .29 | (.43 | ) | - | (.43 | ) | 24.86 | 1.28 | 6 | .81 | (6) | .78 | (6) | 4.65 | (6) | ||||||||||||||||||||||||||||||||||
Class R-6: | Six months ended 12/31/2011(4)(5) | 32.48 | .35 | (4.49 | ) | (4.14 | ) | (.36 | ) | (.51 | ) | (.87 | ) | 27.47 | (12.70 | ) | 339 | .62 | (6) | .62 | (6) | 2.41 | (6) | ||||||||||||||||||||||||||||||
Year ended 6/30/2011 | 25.86 | 1.17 | 6.77 | 7.94 | (1.14 | ) | (.18 | ) | (1.32 | ) | 32.48 | 30.99 | 341 | .62 | .62 | 3.77 | |||||||||||||||||||||||||||||||||||||
Year ended 6/30/2010 | 24.78 | .90 | 1.37 | 2.27 | (.82 | ) | (.37 | ) | (1.19 | ) | 25.86 | 8.74 | 206 | .66 | .65 | 3.16 | |||||||||||||||||||||||||||||||||||||
Period from 5/1/2009 to 6/30/2009(4) | 22.97 | .25 | 1.90 | 2.15 | (.34 | ) | - | (.34 | ) | 24.78 | 9.38 | 64 | .12 | .12 | 1.01 |
Six months ended December 31, 2011(5) | Year ended June 30, 2011 | Year ended June 30, 2010 | For the period 10/1/2008(7) to 6/30/2009(4) | |||||||||||||
Portfolio turnover rate for all share classes | 11 | % | 31 | % | 16 | % | 33 | % |
(1)Based on average shares outstanding. | |||||||||||||
(2)Total returns exclude any applicable sales charges, including contingent deferred sales charges. | |||||||||||||
(3)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 the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes. | |||||||||||||
(4)Based on operations for the periods shown and, accordingly, is not representative of a full year. | |||||||||||||
(5)Unaudited. | |||||||||||||
(6)Annualized. | |||||||||||||
(7)Commencement of operations. | |||||||||||||
(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 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 | $ | 871.89 | $ | 4.33 | .92 | % | ||||||||
Class A -- assumed 5% return | 1,000.00 | 1,020.51 | 4.67 | .92 | ||||||||||||
Class B -- actual return | 1,000.00 | 868.44 | 7.98 | 1.70 | ||||||||||||
Class B -- assumed 5% return | 1,000.00 | 1,016.59 | 8.62 | 1.70 | ||||||||||||
Class C -- actual return | 1,000.00 | 868.32 | 8.08 | 1.72 | ||||||||||||
Class C -- assumed 5% return | 1,000.00 | 1,016.49 | 8.72 | 1.72 | ||||||||||||
Class F-1 -- actual return | 1,000.00 | 871.83 | 4.42 | .94 | ||||||||||||
Class F-1 -- assumed 5% return | 1,000.00 | 1,020.41 | 4.77 | .94 | ||||||||||||
Class F-2 -- actual return | 1,000.00 | 872.60 | 3.34 | .71 | ||||||||||||
Class F-2 -- assumed 5% return | 1,000.00 | 1,021.57 | 3.61 | .71 | ||||||||||||
Class 529-A -- actual return | 1,000.00 | 871.29 | 4.61 | .98 | ||||||||||||
Class 529-A -- assumed 5% return | 1,000.00 | 1,020.21 | 4.98 | .98 | ||||||||||||
Class 529-B -- actual return | 1,000.00 | 867.82 | 8.55 | 1.82 | ||||||||||||
Class 529-B -- assumed 5% return | 1,000.00 | 1,015.99 | 9.22 | 1.82 | ||||||||||||
Class 529-C -- actual return | 1,000.00 | 868.00 | 8.50 | 1.81 | ||||||||||||
Class 529-C -- assumed 5% return | 1,000.00 | 1,016.04 | 9.17 | 1.81 | ||||||||||||
Class 529-E -- actual return | 1,000.00 | 870.26 | 5.97 | 1.27 | ||||||||||||
Class 529-E -- assumed 5% return | 1,000.00 | 1,018.75 | 6.44 | 1.27 | ||||||||||||
Class 529-F-1 -- actual return | 1,000.00 | 872.24 | 3.76 | .80 | ||||||||||||
Class 529-F-1 -- assumed 5% return | 1,000.00 | 1,021.11 | 4.06 | .80 | ||||||||||||
Class R-1 -- actual return | 1,000.00 | 869.31 | 6.77 | 1.44 | ||||||||||||
Class R-1 -- assumed 5% return | 1,000.00 | 1,017.90 | 7.30 | 1.44 | ||||||||||||
Class R-2 -- actual return | 1,000.00 | 867.97 | 8.31 | 1.77 | ||||||||||||
Class R-2 -- assumed 5% return | 1,000.00 | 1,016.24 | 8.97 | 1.77 | ||||||||||||
Class R-3 -- actual return | 1,000.00 | 870.11 | 6.11 | 1.30 | ||||||||||||
Class R-3 -- assumed 5% return | 1,000.00 | 1,018.60 | 6.60 | 1.30 | ||||||||||||
Class R-4 -- actual return | 1,000.00 | 871.51 | 4.47 | .95 | ||||||||||||
Class R-4 -- assumed 5% return | 1,000.00 | 1,020.36 | 4.82 | .95 | ||||||||||||
Class R-5 -- actual return | 1,000.00 | 872.91 | 3.15 | .67 | ||||||||||||
Class R-5 -- assumed 5% return | 1,000.00 | 1,021.77 | 3.40 | .67 | ||||||||||||
Class R-6 -- actual return | 1,000.00 | 872.97 | 2.92 | .62 | ||||||||||||
Class R-6 -- assumed 5% return | 1,000.00 | 1,022.02 | 3.15 | .62 | ||||||||||||
*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 366 (to reflect the one-half year period). |
Approval of Investment Advisory and Service Agreement
The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through 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 objective of providing long-term growth of capital with current 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 indices, in each case as available at the time of the related board and committee meetings. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.
3. Advisory fees and total expenses
The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by clients of an affiliate of CRMC. They noted that, to the extent there were differences between the advisory fees paid by the fund and the advisory fees paid by those clients, the differences appropriately reflected the investment, operational and regulatory differences between advising the fund and the other clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.
4. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments, and attract and retain qualified personnel. They noted information regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure. 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.
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: | ||||||||||||
Life | ||||||||||||
1 year | 5 years | of class | ||||||||||
Class B shares1 — first sold 10/1/08 | ||||||||||||
Reflecting applicable contingent deferred sales charge | ||||||||||||
(CDSC), maximum of 5%, payable only if shares | ||||||||||||
are sold within six years of purchase | –12.61 | % | — | 5.42 | % | |||||||
Not reflecting CDSC | –8.21 | — | 6.24 | |||||||||
Class C shares — first sold 10/1/08 | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only if | ||||||||||||
shares are sold within one year of purchase | –9.11 | — | 6.20 | |||||||||
Not reflecting CDSC | –8.22 | — | 6.20 | |||||||||
Class F-1 shares2 — first sold 10/1/08 | ||||||||||||
Not reflecting annual asset-based fee charged by | ||||||||||||
sponsoring firm | –7.52 | — | 7.03 | |||||||||
Class F-2 shares2 — first sold 10/1/08 | ||||||||||||
Not reflecting annual asset-based fee charged by | ||||||||||||
sponsoring firm | –7.34 | — | 7.29 | |||||||||
Class 529-A shares3 — first sold 10/1/08 | ||||||||||||
Reflecting 5.75% maximum sales charge | –12.86 | — | 5.03 | |||||||||
Not reflecting maximum sales charge | –7.56 | — | 6.97 | |||||||||
Class 529-B shares1,3 — first sold 10/1/08 | ||||||||||||
Reflecting applicable CDSC, maximum of 5%, payable | ||||||||||||
only if shares are sold within six years of purchase | –12.73 | — | 5.30 | |||||||||
Not reflecting CDSC | –8.33 | — | 6.12 | |||||||||
Class 529-C shares3 — first sold 10/1/08 | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only if | ||||||||||||
shares are sold within one year of purchase | –9.18 | — | 6.12 | |||||||||
Not reflecting CDSC | –8.30 | — | 6.12 | |||||||||
Class 529-E shares2,3 — first sold 10/1/08 | –7.84 | — | 6.67 | |||||||||
Class 529-F-1 shares2,3 — first sold 10/1/08 | ||||||||||||
Not reflecting annual asset-based fee charged by | ||||||||||||
sponsoring firm | –7.40 | — | 7.20 |
1These shares are not available for purchase. |
2These shares are sold without any initial or contingent deferred sales charge. |
3Results 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 October 1, 2008, through December 31, 2008. In addition, the investment adviser reimbursed other fees and expenses during some of the periods shown in this report. These reimbursements may be adjusted or discontinued by the investment adviser at any time, subject to any restrictions in the fund’s prospectus. Applicable fund results shown reflect the waiver and reimbursements, without which they would have been lower. See the fund’s prospectus or the Financial Highlights table on pages 28 to 31 for details.
For information regarding the differences among the various share classes, refer to the fund’s prospectus.
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
Transfer agent for shareholder accounts
American Funds Service Company
(Write to the address near you.)
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Counsel
Bingham McCutchen LLP
355 South Grand Avenue, Suite 4400
Los Angeles, CA 90071-3106
Independent registered public accounting firm
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 International Growth and Income Fund’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
International Growth and Income 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 International Growth and Income 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.1
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 |
AMCAP Fund® |
EuroPacific Growth Fund® |
The Growth Fund of America® |
The New Economy Fund® |
New Perspective Fund® |
New World Fund® |
SMALLCAP World Fund® |
•Growth-and-income funds |
American Mutual Fund® |
Capital World Growth and Income Fund® |
Fundamental InvestorsSM |
International Growth and Income FundSM |
The Investment Company of America® |
Washington Mutual Investors FundSM |
•Equity-income funds |
Capital Income Builder® |
The Income Fund of America® |
•Balanced funds |
American Balanced Fund® |
American Funds Global Balanced FundSM |
•Bond funds |
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 |
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 Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGESR-934-0212P
Litho in USA BAG/RRD/9996-S28422
Printed on paper containing 10% post-consumer waste
Printed with inks containing soy and/or vegetable oil
ITEM 2 – Code of Ethics
Not applicable for filing of semi-annual reports to shareholders.
ITEM 3 – Audit Committee Financial Expert
Not applicable for filing of semi-annual reports to shareholders.
ITEM 4 – Principal Accountant Fees and Services
Not applicable for filing of semi-annual reports to shareholders.
ITEM 5 – Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 – Schedule of Investments
International Growth and Income FundSM
Investment portfolio
December 31, 2011
unaudited
Common stocks — 89.64% | Shares | Value (000) | ||||||
FINANCIALS — 14.58% | ||||||||
Prudential PLC | 7,208,148 | $ | 71,475 | |||||
Bank of Nova Scotia | 1,229,200 | 61,330 | ||||||
QBE Insurance Group Ltd. | 3,705,000 | 49,074 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 1,695,000 | 47,214 | ||||||
Agricultural Bank of China, Class H | 107,325,000 | 46,155 | ||||||
Toronto-Dominion Bank | 610,000 | 45,680 | ||||||
Industrial and Commercial Bank of China Ltd., Class H | 59,329,500 | 35,216 | ||||||
United Overseas Bank Ltd. | 2,928,550 | 34,477 | ||||||
Sampo Oyj, Class A | 1,235,000 | 30,641 | ||||||
Fairfax Financial Holdings Ltd. | 70,000 | 30,184 | ||||||
AXA SA | 2,097,239 | 27,266 | ||||||
Westfield Group | 3,405,000 | 27,199 | ||||||
HSBC Holdings PLC (Hong Kong) | 1,887,396 | 14,338 | ||||||
HSBC Holdings PLC (United Kingdom) | 1,008,896 | 7,694 | ||||||
Allianz SE | 215,150 | 20,581 | ||||||
BNP Paribas SA | 469,036 | 18,424 | ||||||
Sanlam Ltd. | 4,210,000 | 15,046 | ||||||
ICICI Bank Ltd. | 1,045,000 | 13,473 | ||||||
ING Groep NV, depository receipts1 | 1,730,000 | 12,449 | ||||||
Mizuho Financial Group, Inc. | 7,550,000 | 10,201 | ||||||
China Life Insurance Co. Ltd., Class H | 3,800,000 | 9,394 | ||||||
AIA Group Ltd. | 2,837,600 | 8,860 | ||||||
Standard Chartered PLC | 399,375 | 8,739 | ||||||
Banco Bilbao Vizcaya Argentaria, SA | 869,491 | 7,517 | ||||||
Société Générale | 333,062 | 7,417 | ||||||
Itaú Unibanco Holding SA, preferred nominative | 379,400 | 6,914 | ||||||
666,958 | ||||||||
CONSUMER STAPLES — 12.89% | ||||||||
British American Tobacco PLC | 3,189,500 | 151,348 | ||||||
Unilever NV, depository receipts | 2,577,200 | 88,625 | ||||||
Tesco PLC | 12,236,914 | 76,671 | ||||||
Shoprite Holdings Ltd. | 3,585,000 | 60,486 | ||||||
Nestlé SA | 670,000 | 38,518 | ||||||
Pernod Ricard SA | 369,660 | 34,285 | ||||||
Kimberly-Clark de México, SAB de CV, Class A | 5,879,300 | 31,708 | ||||||
Anheuser-Busch InBev NV | 375,000 | 22,959 | ||||||
Imperial Tobacco Group PLC | 537,000 | 20,307 | ||||||
Coca-Cola Amatil Ltd. | 1,703,988 | 20,060 | ||||||
Grupo Modelo, SAB de CV, Series C | 2,610,000 | 16,551 | ||||||
Wesfarmers Ltd. | 500,000 | 15,086 | ||||||
Coca-Cola Hellenic Bottling Co. SA | 750,000 | 12,862 | ||||||
589,466 | ||||||||
ENERGY — 9.87% | ||||||||
Royal Dutch Shell PLC, Class B | 4,234,000 | 161,360 | ||||||
TOTAL SA | 2,453,500 | 125,430 | ||||||
Crescent Point Energy Corp. | 1,640,500 | 72,303 | ||||||
Saipem SpA, Class S | 575,700 | 24,477 | ||||||
TransCanada Corp. | 415,928 | 18,181 | ||||||
JX Holdings, Inc. | 2,955,000 | 17,852 | ||||||
Oil Search Ltd. | 2,750,000 | 17,579 | ||||||
Keyera Corp. | 293,300 | 14,395 | ||||||
451,577 | ||||||||
TELECOMMUNICATION SERVICES — 9.75% | ||||||||
Koninklijke KPN NV | 6,015,000 | 71,972 | ||||||
Telstra Corp. Ltd. | 20,894,000 | 71,163 | ||||||
France Télécom SA | 3,503,300 | 55,022 | ||||||
KT Corp.2 | 1,046,500 | 32,450 | ||||||
KT Corp. (ADR) | 1,385,000 | 21,661 | ||||||
América Móvil, SAB de CV, Series L | 23,370,000 | 26,494 | ||||||
América Móvil, SAB de CV, Series L (ADR) | 1,108,000 | 25,041 | ||||||
Taiwan Mobile Co., Ltd. | 8,987,000 | 28,018 | ||||||
Bell Aliant Inc. | 855,000 | 23,995 | ||||||
Portugal Telecom, SGPS, SA | 4,035,425 | 23,242 | ||||||
Total Access Communication PCL | 7,155,400 | 15,762 | ||||||
Total Access Communication PCL, nonvoting depository receipt | 861,000 | 1,897 | ||||||
Telefónica Czech Republic, AS | 842,000 | 16,327 | ||||||
Vodafone Group PLC | 5,110,500 | 14,199 | ||||||
HKT Trust, units1 | 18,916,000 | 11,106 | ||||||
Hellenic Telecommunications Organization SA | 2,032,000 | 7,574 | ||||||
445,923 | ||||||||
INDUSTRIALS — 9.09% | ||||||||
Schneider Electric SA | 1,103,032 | 58,075 | ||||||
Siemens AG | 553,500 | 52,968 | ||||||
Marubeni Corp. | 6,210,000 | 37,839 | ||||||
Capita Group PLC | 3,855,000 | 37,627 | ||||||
Kubota Corp. | 3,380,000 | 28,324 | ||||||
AB SKF, Class B | 1,255,000 | 26,551 | ||||||
Geberit AG | 118,000 | 22,738 | ||||||
Aggreko PLC | 650,000 | 20,361 | ||||||
CCR SA, ordinary nominative | 3,013,800 | 19,745 | ||||||
ASSA ABLOY AB, Class B | 783,500 | 19,650 | ||||||
Qantas Airways Ltd.1 | 11,710,600 | 17,487 | ||||||
Mitsubishi Corp. | 818,100 | 16,528 | ||||||
Vallourec SA | 180,000 | 11,685 | ||||||
Meggitt PLC | 2,020,000 | 11,068 | ||||||
Ryanair Holdings PLC (ADR)1 | 360,000 | 10,030 | ||||||
Wolseley PLC | 294,800 | 9,761 | ||||||
Orkla AS | 1,207,800 | 9,017 | ||||||
Komatsu Ltd. | 260,000 | 6,077 | ||||||
415,531 | ||||||||
UTILITIES — 7.75% | ||||||||
National Grid PLC | 12,590,655 | 122,208 | ||||||
Power Assets Holdings Ltd. | 12,028,000 | 88,972 | ||||||
GDF SUEZ | 2,756,271 | 75,341 | ||||||
SUEZ Environnement Co. | 1,725,000 | 19,872 | ||||||
Snam Rete Gas SpA | 3,702,095 | 16,320 | ||||||
CLP Holdings Ltd. | 1,550,000 | 13,182 | ||||||
International Power PLC | 2,000,000 | 10,473 | ||||||
E.ON AG | 275,000 | 5,933 | ||||||
Cia. Energética de Minas Gerais — CEMIG, preferred nominative | 123,090 | 2,196 | ||||||
354,497 | ||||||||
MATERIALS — 7.56% | ||||||||
L’Air Liquide SA, bonus shares2 | 349,508 | 43,240 | ||||||
L’Air Liquide SA, non-registered shares | 100,958 | 12,490 | ||||||
Orica Ltd. | 1,982,348 | 49,148 | ||||||
Amcor Ltd. | 5,125,000 | 37,794 | ||||||
Fletcher Building Ltd. | 6,955,000 | 33,240 | ||||||
Impala Platinum Holdings Ltd. | 1,476,827 | 30,616 | ||||||
K+S AG | 638,000 | 28,834 | ||||||
Syngenta AG | 80,800 | 23,656 | ||||||
BASF SE | 315,300 | 21,991 | ||||||
PT Semen Gresik (Persero) Tbk | 17,030,000 | 21,505 | ||||||
Shin-Etsu Chemical Co., Ltd. | 290,000 | 14,280 | ||||||
Linde AG | 87,285 | 12,986 | ||||||
Anglo American PLC | 235,000 | 8,617 | ||||||
Mitsui Chemicals, Inc. | 2,456,000 | 7,498 | ||||||
345,895 | ||||||||
INFORMATION TECHNOLOGY — 6.29% | ||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 35,271,506 | 88,298 | ||||||
Nintendo Co., Ltd. | 364,400 | 50,184 | ||||||
Canon, Inc. | 1,074,000 | 47,581 | ||||||
Samsung Electronics Co. Ltd.2 | 30,400 | 27,977 | ||||||
ASM Pacific Technology Ltd. | 1,925,000 | 21,601 | ||||||
Keyence Corp. | 66,000 | 15,915 | ||||||
Quanta Computer Inc. | 5,369,000 | 11,295 | ||||||
HTC Corp. | 568,102 | 9,325 | ||||||
ASML Holding NV | 200,000 | 8,406 | ||||||
HOYA Corp. | 329,800 | 7,104 | ||||||
287,686 | ||||||||
HEALTH CARE — 5.33% | ||||||||
Novartis AG | 1,660,100 | 94,908 | ||||||
Sanofi | 482,683 | 35,452 | ||||||
GlaxoSmithKline PLC | 1,350,000 | 30,851 | ||||||
Sonic Healthcare Ltd. | 1,837,000 | 21,194 | ||||||
CSL Ltd. | 610,000 | 19,965 | ||||||
Roche Holding AG | 113,600 | 19,254 | ||||||
Smith & Nephew PLC | 1,520,000 | 14,765 | ||||||
Bayer AG | 115,000 | 7,353 | ||||||
243,742 | ||||||||
CONSUMER DISCRETIONARY — 5.30% | ||||||||
Virgin Media Inc. | 1,815,000 | 38,805 | ||||||
H & M Hennes & Mauritz AB, Class B | 935,000 | 30,066 | ||||||
Daimler AG | 538,000 | 23,619 | ||||||
Bayerische Motoren Werke AG | 280,000 | 18,757 | ||||||
Wynn Macau, Ltd. | 7,176,800 | 18,019 | ||||||
OPAP SA | 1,921,500 | 16,986 | ||||||
Intercontinental Hotels Group PLC | 940,000 | 16,890 | ||||||
Toyota Motor Corp. | 500,000 | 16,662 | ||||||
Volkswagen AG, nonvoting preferred | 87,000 | 13,034 | ||||||
Naspers Ltd., Class N | 275,000 | 12,032 | ||||||
Thomson Reuters Corp. | 410,000 | 10,959 | ||||||
ProSiebenSAT.1 Media AG, nonvoting preferred | 540,000 | 9,865 | ||||||
Cie. Financière Richemont SA, Class A, non-registered shares | 147,000 | 7,435 | ||||||
Christian Dior SA | 54,500 | 6,462 | ||||||
Esprit Holdings Ltd. | 2,026,442 | 2,614 | ||||||
Tata Motors Ltd., Class A (DVR) | 146,245 | 239 | ||||||
242,444 | ||||||||
MISCELLANEOUS — 1.23% | ||||||||
Other common stocks in initial period of acquisition | 56,018 | |||||||
Total common stocks (cost: $3,891,477,000) | 4,099,737 | |||||||
Preferred stocks — 0.27% | ||||||||
FINANCIALS — 0.27% | ||||||||
HSBC Holdings PLC, Series 2, 8.00% | 472,795 | 12,360 | ||||||
Total preferred stocks (cost: $12,000,000) | 12,360 | |||||||
Principal amount | ||||||||
Convertible securities — 0.07% | (000 | ) | ||||||
MATERIALS — 0.07% | ||||||||
Sino-Forest Corp. 4.25% convertible notes 20163 | $ | 13,074,000 | 3,334 | |||||
Total convertible securities (cost: $12,190,000) | 3,334 | |||||||
Bonds & notes — 0.92% | ||||||||
FINANCIALS — 0.36% | ||||||||
SMFG Preferred Capital USD 3 Ltd., junior subordinated 9.50% (undated)3,4 | 5,410 | 6,235 | ||||||
Westfield Group 5.40% 20123 | 175 | 179 | ||||||
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20143 | 430 | 451 | ||||||
Westfield Group 5.70% 20163 | 4,540 | 4,868 | ||||||
Société Générale, junior subordinated 6.999% (undated)4 | € | 6,200 | 4,815 | |||||
16,548 | ||||||||
CONSUMER STAPLES — 0.36% | ||||||||
British American Tobacco International Finance PLC 8.125% 20133 | $ | 12,159 | 13,620 | |||||
British American Tobacco International Finance PLC 9.50% 20183 | 2,000 | 2,719 | ||||||
16,339 | ||||||||
CONSUMER DISCRETIONARY — 0.15% | ||||||||
DaimlerChrysler North America Holding Corp. 7.30% 2012 | 4,642 | 4,650 | ||||||
DaimlerChrysler North America Holding Corp. 6.50% 2013 | 1,990 | 2,169 | ||||||
6,819 | ||||||||
TELECOMMUNICATION SERVICES — 0.05% | ||||||||
Digicel Group Ltd. 12.00% 20143 | 2,000 | 2,260 | ||||||
Total bonds & notes (cost: $35,754,000) | 41,966 | |||||||
Principal amount | Value | |||||||
Short-term securities — 8.19% | (000 | ) | (000 | ) | ||||
Fannie Mae 0.055%–0.17% due 1/3–6/20/2012 | $ | 74,600 | $ | 74,577 | ||||
National Australia Funding (Delaware) Inc. 0.145%–0.22% due 1/17–2/22/20123 | 74,200 | 74,196 | ||||||
Freddie Mac 0.10%–0.13% due 6/19–8/21/2012 | 36,100 | 36,079 | ||||||
Barclays Bank PLC 0.09% due 1/3/2012 | 30,000 | 30,000 | ||||||
Old Line Funding, LLC 0.22% due 2/7/20123 | 28,400 | 28,398 | ||||||
Jupiter Securitization Co., LLC 0.12% due 1/18/20123 | 25,100 | 25,099 | ||||||
Nestlé Capital Corp. 0.12% due 6/1/20123 | 25,000 | 24,983 | ||||||
Svenska Handelsbanken Inc. 0.25% due 2/28/20123 | 21,100 | 21,091 | ||||||
Straight-A Funding LLC 0.17% due 1/18/20123 | 20,000 | 19,999 | ||||||
International Bank for Reconstruction and Development 0.08% due 6/4/2012 | 16,700 | 16,695 | ||||||
IBM Corp. 0.05% due 1/23/20123 | 16,000 | 15,999 | ||||||
Federal Home Loan Bank 0.14% due 2/13/2012 | 7,600 | 7,600 | ||||||
Total short-term securities (cost: $374,709,000) | 374,716 | |||||||
Total investment securities (cost: $4,326,130,000) | 4,532,113 | |||||||
Other assets less liabilities | 41,440 | |||||||
Net assets | $ | 4,573,553 |
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, including those in “Miscellaneous,” was $107,870,000, which represented 2.36% of the net assets of the fund. This amount includes $64,630,000 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 $243,431,000, which represented 5.32% of the net assets of the fund. |
4Coupon rate may change periodically. |
Key to abbreviations and symbol
ADR = American Depositary Receipts
DVR = Differential Voting Rights
€ = Euros
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-934-0212O-S29487
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) | Not applicable for filing of semi-annual reports to shareholders. |
(a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL GROWTH AND INCOME FUND | |
By /s/ Paul F. Roye | |
Paul F. Roye, Executive Vice 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/ Paul F. Roye |
Paul F. Roye, Executive Vice 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 |