SEC. File Nos. 333-183931
Washington, D.C. 20549
Post-Effective Amendment No. 2
Amendment No. 4
It is proposed that this filing become effective
on February 1, 2014, pursuant to paragraph (b) of Rule 485.
This table describes the fees and expenses that you
may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree
to invest in the future, at least $100,000 in American Funds. More information about these and other discounts is available from
your financial professional and in the “Sales charge reductions and waivers” section on page 28 of the prospectus
and on page 56 of the fund’s statement of additional information.
The example assumes that you invest $10,000 in the fund
for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund’s operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
For the share classes listed below, you would pay the following
if you did not redeem your shares:
The fund seeks to provide inflation protection and income
by investing primarily in inflation linked securities. Normally, at least 80% of the fund’s assets will be invested in inflation
linked bonds issued by U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations. Inflation linked bonds
are structured to protect against inflation by linking the bond’s principal and interest payments to an inflation index so
that principal and interest adjust to reflect changes in the index. For example, U.S. Treasury Inflation-Protected Securities (TIPS)
are linked to the Consumer Price Index for Urban Consumers (CPURNSA). Other sovereign governments and corporations also issue inflation
linked securities that are tied to their own local consumer price index or the CPURNSA.
The fund will invest at least 80% of its assets in securities
guaranteed or sponsored by the U.S. government. The fund will invest primarily in debt securities with quality ratings of Aa3 or
better or AA- or better by Nationally Recognized Statistical Rating Organizations designated by the fund’s investment adviser
or in debt securities that are unrated but determined to be of equivalent quality by the fund’s investment adviser. However,
the fund may invest in debt securities guaranteed or sponsored
by the U.S. government without regard to the quality rating
assigned to the U.S. government by a Nationally Recognized Statistical Rating Organization. The fund will invest in debt securities
with a wide range of maturities.
The fund may also invest in interest rate swaps in order
to manage the fund’s sensitivity to interest rates.
The investment adviser uses a system of multiple portfolio
managers in managing the fund’s assets. Under this approach, the portfolio of the fund is divided into segments managed
by individual managers who decide how their respective segments will be invested.
The fund relies on the professional judgment of its investment
adviser to make decisions about the fund’s portfolio investments. The basic investment philosophy of the investment adviser
is to seek to invest in attractively priced securities that, in its opinion, represent good, long-term investment opportunities.
The investment adviser believes that an important way to accomplish this is through fundamental research, which may include analysis
of interest rate and duration risk, credit quality, general economic conditions and various quantitative measures. Securities may
be sold when the investment adviser believes that they no longer represent relatively attractive investment opportunities.
Bonds and other debt securities are subject to credit
risk, which is the possibility that the credit strength of an issuer will weaken and/or an issuer of a debt security will fail
to make timely payments of principal or interest and the security will go into default. Lower quality debt securities generally
have higher rates of interest and may be subject to greater price fluctuations than higher quality debt securities. Credit risk
is gauged, in part, by the credit ratings of the debt securities in which the fund invests. However, ratings are only the opinions
of the rating agencies issuing them and are not guarantees as to credit quality or an evaluation of market risk. The fund’s
investment adviser relies on its own credit analysts to research issuers and issues in seeking to mitigate various credit and
default risks.
may cause the prices to increase. Inflation linked bonds
may experience greater losses than other debt securities with similar durations when real interest rates rise faster than nominal
interest rates. There can be no assurance that the value of inflation linked securities will be directly correlated to changes
in interest rates; for example, if interest rates rise for reasons other than inflation, the increase may not be reflected in
the security’s inflation measure.
Investing in inflation linked bonds may also mean that during
periods of extreme deflation, the fund may have reduced income to distribute. If prices for goods and services decline throughout
the economy, the principal and income on inflation linked securities may decline and result in losses to the fund.
Your investment in the fund is not a bank deposit and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, entity or person. You
should consider how this fund fits into your overall investment program.
The following bar chart shows the fund’s investment
results for its first full calendar year of operations, and the following table shows how the fund’s average annual total
returns for various periods compare with different broad measures of market results. This information provides some indication
of the risks of investing in the fund. The Lipper Inflation-Protected Bond Funds Average includes other funds that disclose investment
objectives and/or strategies reasonably comparable to the fund’s objective and/or strategies. Past investment results (before
and after taxes) are not predictive of future investment results. Updated information on the fund’s investment results can
be obtained by visiting americanfunds.com.
After-tax returns are shown only for Class A shares;
after-tax returns for other share classes will vary. After-tax returns are calculated using the highest individual federal income
tax rates in effect during each year of the periods shown and do not reflect the impact of state and local taxes. Your actual
after-tax returns depend on your individual tax situation and likely will differ from the results shown above. In addition, after-tax
returns are not relevant if you hold your fund shares through a tax-deferred arrangement, such as a 401(k) plan, individual retirement
account (IRA) or 529 college savings plan.
Management
Investment adviser
Capital Research and Management
Company
SM
Portfolio managers
The individuals primarily
responsible for the portfolio management of the fund are:
Portfolio
manager/
Fund title (if applicable)
|
Portfolio
manager
experience in this fund
|
Primary
title
with investment adviser
|
David
A. Hoag
President
|
1
year
|
Senior Vice President –
Capital Fixed Income Investors, Capital Research and Management Company
|
Ritchie
Tuazon
|
Less
than 1 year
|
Vice President – Capital
Fixed Income Investors, Capital Research Company
|
Purchase and sale of fund shares
The minimum amount to establish an account for all share
classes is $250 and the minimum to add to an account is $50. For a payroll deduction retirement plan account, payroll deduction
savings plan account or employer-sponsored 529 account, the minimum is $25 to establish or add to an account.
If you are a retail investor, you may sell (redeem)
shares through your dealer or financial advisor or by writing to American Funds Service Company®
at P.O. Box 6007,
Indianapolis, Indiana 46206-6007; telephoning American Funds Service Company at (800) 421-4225; faxing American Funds
Service Company at (888) 421-4351; or accessing our website at americanfunds.com. Please contact your plan administrator
or recordkeeper to sell (redeem) shares from your retirement plan.
Tax information
Dividends and capital gain distributions you receive from
the fund are subject to federal income taxes and may also be subject to state and local taxes, unless you are tax-exempt or your
account is tax-favored.
Payments to broker-dealers and other financial intermediaries
If you purchase shares of the fund through a broker-dealer
or other financial intermediary (such as a bank), the fund and the fund’s distributor or its affiliates may pay the intermediary
for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer
or other intermediary and your individual financial advisor to recommend the fund over another investment. Ask your individual
financial advisor or visit your financial intermediary’s website for more information.
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Investment objective, strategies
and risks
The fund’s investment objective is to
provide inflation protection and income consistent with investment in inflation linked securities. While it has no present
intention to do so, the fund’s board may change the fund’s investment objective without shareholder approval upon
60 days’ written notice to shareholders.
Normally, at least 80% of the fund’s assets will be
invested in inflation linked bonds issued by U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations.
This policy is subject to change only upon 60 days’ written notice to shareholders. Inflation linked bonds are structured
to protect against inflation by linking the bond’s principal and interest payments to an inflation index, such as the Consumer
Price Index for Urban Consumers (CPURNSA), so that principal and interest adjust to reflect changes in the index. If the index
measuring inflation falls, the principal value or coupon of these securities will be adjusted downward. Consequently, the interest
payable on these securities will be reduced. Also, if the principal value of these securities is adjusted according to the rate
of inflation, the adjusted principal value repaid at maturity may be less than the original principal. In the case of U.S. Treasury
Inflation-Protected Securities (TIPS), currently the only inflation linked security that is issued by the U.S Treasury, the principal
amounts are adjusted daily based upon changes in the rate of inflation (as currently represented by the non-seasonally adjusted
CPURNSA, calculated with a three-month lag). TIPS may pay interest semi-annually, equal to a fixed percentage of the inflation-adjusted
principal amount. The interest rate on these bonds is fixed at issuance, but over the life of the bond, this interest may be paid
on an increasing or decreasing principal amount that has been adjusted for inflation. The current market value of TIPS is not guaranteed
and will fluctuate. However, the U.S. government guarantees that, at maturity, principal will be repaid at the higher of the original
face value of the security (in the event of deflation) or the inflation adjusted value.
Other non-U.S. sovereign governments also issue inflation
linked securities that are tied to their own local consumer price index, and that offer similar deflationary protection. Corporations
also periodically issue inflation linked securities tied to CPURNSA or similar inflationary indexes. While TIPS and non-U.S. sovereign
inflation linked securities are currently the largest part of the inflation linked market, the fund may invest in corporate inflation
linked securities.
Under normal market conditions, the fund will invest at
least 80% of its assets in securities guaranteed or sponsored by the U.S. government. This may include TIPS, U.S. Treasury
securities and debt and mortgage-backed securities issued by government-sponsored entities and federal agencies and instrumentalities
that are not backed by the full faith and credit of the U.S. government.
The fund may invest in debt securities guaranteed or sponsored
by the U.S. government without regard to the quality rating assigned to the U.S. government by a Nationally Recognized Statistical
Rating Organization. The fund will invest in other debt securities primarily with quality ratings of Aa3 or better or AA- or better
by Nationally Recognized Statistical Rating Organizations designated by the fund’s investment adviser or in debt securities
that are unrated but determined to be of equivalent quality by the fund’s investment adviser. The fund invests in debt securities
with a wide range of maturities.
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The fund may also invest in interest rate swaps in order
to manage the fund’s sensitivity to interest rates.
The prices of, and the income generated by, the securities
held by the fund may decline in response to certain events taking place around the world, including those directly involving the
issuers of securities held by the fund; conditions affecting the general economy; overall market changes; local, regional or global
political, social or economic instability; governmental or governmental agency responses to economic conditions; and currency,
interest rate and commodity price fluctuations.
The prices of, and the income generated by, most bonds and
other debt securities held by the fund may be affected by changing interest rates and by changes in the effective maturities and
credit ratings of these securities. For example, the prices of debt securities in the fund’s portfolio generally will decline
when interest rates rise and increase when interest rates fall.
In addition, falling interest rates may cause an issuer
to redeem, call or refinance a debt security before its stated maturity, which may result in the fund having to reinvest the proceeds
in lower yielding securities. Longer maturity debt securities generally have higher rates of interest and may be subject to greater
price fluctuations than shorter maturity debt securities.
Bonds and other debt securities are also subject to
credit risk, which is the possibility that the credit strength of an issuer will weaken and/or an issuer of a debt security will
fail to make timely payments of principal or interest and the security will go into default. Lower quality debt securities generally
have higher rates of interest and may be subject to greater price fluctuations than higher quality debt securities. Credit risk
is gauged, in part, by the credit ratings of the debt securities in which the fund invests. However, ratings are only the opinions
of the rating agencies issuing them and are not guarantees as to credit quality or an evaluation of market risk. The fund’s
investment adviser relies on its own credit analysts to research issuers and issues in seeking to mitigate various credit and
default risks.
Many types of bonds and other debt securities, including
mortgage-backed securities, are subject to prepayment risk. For example, when interest rates fall, homeowners are more likely
to refinance their home mortgages and “prepay” their principal earlier than expected. The fund must then reinvest
the prepaid principal in new securities when interest rates on new mortgage investments are falling, thus reducing the fund’s
income. Conversely, if interest rates increase and the loans underlying the securities are prepaid slower than expected, the time
in which the securities are paid off could be extended. This may reduce the fund’s cash for potential reinvestment in higher
yielding securities. In addition, the values of the securities ultimately depend upon the payment pattern of the underlying loans
by individuals.
The values of inflation linked bonds generally fluctuate
in response to changes in real interest rates — i.e., the rates of interest one expects to receive after factoring in inflation.
A rise in real interest rates may cause the prices of inflation linked securities to fall, while a decline in real interest rates
may cause the prices to increase. Inflation linked bonds may experience greater losses than other debt securities with similar
durations when real interest rates rise faster than nominal interest rates. There can be no assurance that the value of inflation
linked securities
American Funds Inflation Linked Bond Fund / Prospectus
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will be directly correlated to changes in interest rates;
for example, if interest rates rise for reasons other than inflation, the increase may not be reflected in the security’s
inflation measure.
Investing in inflation linked bonds may also mean that during
periods of extreme deflation, the fund may have reduced income to distribute. If prices for goods and services decline throughout
the economy, the principal and income on inflation linked securities may decline and result in losses to the fund.
Securities backed by the U.S. Treasury or the full faith
and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity.
Accordingly, the current market values for these securities will fluctuate with changes in interest rates. Securities issued by
government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the
U.S. government are neither issued nor guaranteed by the U.S. government.
The use of interest rate swaps involves the risk that
anticipated changes in interest rates will not be accurately predicted, which may result in losses to the fund. Interest rate
swaps also involve the possible failure of a counterparty to perform in accordance with the terms of the swap agreement. If a
counterparty defaults on its obligations under a swap agreement, the fund may lose any amount it expected to receive from the
counterparty, potentially including amounts in excess of the fund’s initial investment.
There may be little trading in the secondary market for
particular bonds or other debt securities, which may make them more difficult to value, acquire or sell.
The prices of securities of issuers domiciled outside
the United States or with significant operations outside the United States may decline due to conditions specific to the countries
or regions in which the issuers are domiciled or in which the issuers operate, including adverse political, social, economic or
market changes in such countries or regions. The securities of issuers domiciled in certain countries outside the United States
may be more volatile, less liquid and/or more difficult to value than those of U.S. issuers. Issuers in countries outside the
United States may also be subject to different tax and accounting policies and different auditing, reporting, legal and regulatory
standards. In addition, the value of investments outside the United States may be reduced by foreign taxes, including foreign
withholding taxes on interest and dividends. Further, there may be increased risks of delayed settlement of securities purchased
or sold by the fund. These investments may also be affected by changes in foreign currency exchange rates against the U.S. dollar
and/or currencies of other countries. The risks of investing outside the United States may be heightened in connection with investments
in emerging markets.
The fund may also hold cash or money market instruments,
including commercial paper and short-term securities issued by the U.S. government, its agencies and instrumentalities. The percentage
of the fund invested in such holdings varies and depends on various factors, including market conditions and purchases and redemptions
of fund shares. For temporary defensive purposes, the fund may invest without limitation in such instruments. The investment adviser
may determine that it is appropriate to invest substantially in such instruments in response to certain
American Funds Inflation Linked Bond Fund / Prospectus
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circumstances, such as periods of market turmoil. A larger
percentage of such holdings could moderate the fund’s investment results in a period of rising market prices. A larger percentage
of cash or money market instruments could reduce the magnitude of the fund’s loss in a period of falling market prices and
provide liquidity to make additional investments or to meet redemptions.
The fund’s investment results will depend on the ability
of the fund’s investment adviser to navigate the risks discussed above.
In addition to the investment strategies described above,
the fund has other investment practices that are described in the statement of additional information, which includes a description
of certain risks associated with those practices.
Fund comparative indexes
The investment
results table in this prospectus shows how the fund’s average annual total returns compare with various broad measures of
market results. The Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index consists of investment-grade, fixed-rate,
publicly placed, dollar-denominated and non-convertible inflation-protected securities issued by the U.S. Treasury that have at
least one year remaining to maturity and have at least $250 million par amount outstanding. This index is unmanaged, and its results
include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal
income taxes.The Lipper Inflation-Protected Bond Funds Average is composed of funds that invest primarily in inflation-indexed
fixed income securities. The results of the underlying funds in the average include the reinvestment of dividends and capital
gain distributions, as well as brokerage commissions paid by the fund for portfolio transactions and other fund expenses, but
do not reflect the effect of sales charges, account fees or U.S. federal income taxes.
Fund results
All fund results in this
prospectus reflect the reinvestment of dividends and capital gain distributions, if any. Unless otherwise noted, fund results
reflect any fee waivers and/or expense reimbursements in effect during the periods presented.
American Funds Inflation Linked Bond Fund / Prospectus
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Management and organization
Investment adviser
Capital Research and
Management Company, an experienced investment management organization founded in 1931, serves as the investment adviser to the
fund and other funds, including the American Funds. Capital Research and Management Company is a wholly owned subsidiary of The
Capital Group Companies, Inc. and is located at 333 South Hope Street, Los Angeles, California 90071. Capital Research
and Management Company manages the investment portfolio and business affairs of the fund. The estimated total management fee to
be paid by the fund, as a percentage of average net assets, and estimated for the current fiscal year, appears in the Annual Fund
Operating Expenses table under “Fees and expenses of the fund.” The management fee is based on the daily net assets
of the fund. Please see the statement of additional information for further details. A discussion regarding the basis for the
approval of the fund’s investment advisory and service agreement by the fund’s board of trustees is contained in the
fund’s semi-annual report to shareholders for the period ending May 31, 2013.
Capital Research and Management Company manages equity
assets through three equity investment divisions and fixed-income assets through its fixed-income investment division, Capital
Fixed Income Investors. The three equity investment divisions — Capital World Investors, Capital Research Global Investors
and Capital International Investors — make investment decisions independently of one another.
The equity investment divisions may, in the future,
be incorporated as wholly owned subsidiaries of Capital Research and Management Company. In that event, Capital Research and Management
Company would continue to be the investment adviser, and day-to-day investment management of equity assets would continue to be
carried out through one or more of these subsidiaries. Although not currently contemplated, Capital Research and Management Company
could incorporate its fixed-income division in the future and engage it to provide day-to-day investment management of fixed-income
assets. Capital Research and Management Company and each of the funds it advises have received an exemptive order from the U.S.
Securities and Exchange Commission that allows Capital Research and Management Company to use, upon approval of the fund’s
board, its management subsidiaries and affiliates to provide day-to-day investment management services to the fund, including
making changes to the management subsidiaries and affiliates providing such services. There is no assurance that Capital Research
and Management Company will incorporate its investment divisions or exercise any authority granted to it under the exemptive order.
American Funds Inflation Linked Bond Fund / Prospectus
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Portfolio holdings
Portfolio holdings
information for the fund is available on the American Funds website at americanfunds.com. A description of the fund’s policies
and procedures regarding disclosure of information about its portfolio holdings is available in the statement of additional information.
The Capital System
SM
Capital Research and Management Company uses a system of multiple portfolio managers in managing mutual
fund assets. Under this approach, the portfolio of a fund is divided into segments managed by individual managers who decide how
their respective segments will be invested. Investment decisions are subject to a fund’s objective(s), policies and restrictions
and the oversight of the appropriate investment-related committees of Capital Research and Management Company and its investment
divisions. The table below shows the investment experience and role in management of the fund for each of the fund’s primary
portfolio managers who, notwithstanding The Capital System, will work together to oversee the fund’s entire portfolio.
Portfolio
manager
|
Investment
experience
|
Experience
in this fund
|
Role
in
management
of the fund
|
David
A. Hoag
|
Investment professional for
26 years in total;
22 years with Capital Research and Management Company or affiliate
|
1 year
|
Serves as a fixed-income portfolio
manager
|
Ritchie
Tuazon
|
Investment professional for
14 years in total;
3 years with Capital Research and Management Company or affiliate
|
Less than 1 year
|
Serves as a fixed-income portfolio
manager
|
Information regarding the portfolio managers’ compensation,
their ownership of securities in the fund and other accounts they manage is in the statement of additional information.
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Certain privileges and/or services described on the
following pages of this prospectus and in the statement of additional information may not be available to you, depending
on your investment dealer or retirement plan recordkeeper. Please see your financial advisor, investment dealer or retirement
plan recordkeeper for more information.
Shareholder information
Shareholder services
American Funds Service Company,
the fund’s transfer agent, offers a wide range of services that you can use to alter your investment program should your
needs or circumstances change. These services may be terminated or modified at any time upon 60 days’ written notice.
A more detailed description of policies and services
is included in the fund’s statement of additional information and the owner’s guide sent to new American Funds shareholders
entitled
Welcome
.
Class 529 shareholders should also refer to the applicable program description for information
on policies and services relating specifically to their account(s).
These documents are available by writing to or calling
American Funds Service Company.
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Unless otherwise noted, references to Class A, B, C or
F-1 shares on the following pages also refer to the corresponding Class 529-A, 529-B, 529-C or 529-F-1 shares. Unless otherwise
noted, references to Class F shares refer to both Class F-1 and F-2 shares and references to Class R shares refer to Class R-1,
R-2, R-3, R-4, R-5 and R-6 shares.
Purchase, exchange and sale of shares
The fund’s transfer agent, on behalf of the fund
and American Funds Distributors,®
the fund’s distributor, is required by law to obtain certain personal information
from you or any other person(s) acting on your behalf in order to verify your or such person’s identity. If you do not provide
the information, the transfer agent may not be able to open your account. If the transfer agent is unable to verify your identity
or that of any other person(s) authorized to act on your behalf, or believes it has identified potentially criminal activity, the
fund and American Funds Distributors reserve the right to close your account or take such other action they deem reasonable or
required by law.
When purchasing shares, you should designate the fund or
funds in which you wish to invest. Subject to the exception below, if no fund is designated, your money will be held uninvested
(without liability to the transfer agent for loss of income or appreciation pending receipt of proper instructions) until investment
instructions are received, but for no more than three business days. Your investment will be made at the net asset value (plus
any applicable sales charge, in the case of Class A shares) next determined after investment instructions are received and accepted
by the transfer agent. If investment instructions are not received, your money will be invested in Class A shares of American Funds
Money Market Fund® on the third business day after receipt of your investment.
If the amount of your cash investment is $10,000 or less,
no fund is designated, and you made a cash investment (excluding exchanges) within the last 16 months, your money will be invested
in the same proportion and in the same fund or funds and in the same class of shares in which your last cash investment was made.
Different procedures may apply to certain employer-sponsored
arrangements, including, but not limited to, SEPs and SIMPLE IRAs.
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Valuing shares
The net asset value of
each share class of the fund is the value of a single share of that class. The fund calculates the net asset value each day the
New York Stock Exchange is open for trading as of approximately 4 p.m. New York time, the normal close of regular trading.
If, for example, the New York Stock Exchange closes at 1 p.m. New York time, the fund’s net asset value would still be determined
as of 4 p.m. New York time. In this example, portfolio securities traded on the New York Stock Exchange would be valued at their
closing prices unless the investment adviser determines that a “fair value” adjustment is appropriate due to subsequent
events. Assets are valued primarily on the basis of market quotations. However, the fund has adopted procedures for making fair
value determinations if market quotations are not readily available or are not considered reliable. For example, fair value procedures
may be used if an issuer defaults and there is no market for its securities. Use of these procedures is intended to result in
more appropriate net asset values.
Because the fund may hold securities that are listed
primarily on foreign exchanges that trade on weekends or days when the fund does not price its shares, the values of securities
held in the fund may change on days when you will not be able to purchase or redeem fund shares.
Your shares will be purchased at the net asset value (plus
any applicable sales charge, in the case of Class A shares) or sold at the net asset value next determined after American Funds
Service Company receives your request, provided that your request contains all information and legal documentation necessary to
process the transaction. A contingent deferred sales charge may apply at the time you sell certain Class A, B and C shares.
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Purchase of Class A and C shares
You may
generally open an account and purchase Class A and C shares by contacting any financial advisor (who may impose transaction charges
in addition to those described in this prospectus) authorized to sell the fund’s shares. You may purchase additional shares
in various ways, including through your financial advisor and by mail, telephone, the Internet and bank wire.
Class B shares
Class B and 529-B shares
may not be purchased or acquired, except by exchange from Class B or 529-B shares of another fund in the American Funds family.
Any other investment received by the fund that is intended for Class B or 529-B shares will instead be invested in Class A
or 529-A shares and will be subject to any applicable sales charges.
Shareholders with investments in Class B and 529-B shares
may continue to hold such shares until they convert to Class A or 529-A shares. However, no additional investments will be accepted
in Class B or 529-B shares. Dividends and capital gain distributions may continue to be reinvested in Class B or 529-B shares until
their conversion dates. In addition, shareholders invested in Class B or 529-B shares will be able to exchange those shares for
Class B or 529-B shares of other American Funds offering Class B or 529-B shares until they convert.
Automatic conversion of Class B and C shares
Class B
shares automatically convert to Class A shares in the month of the eight-year anniversary of the purchase date. Class C
shares automatically convert to Class F-1 shares in the month of the 10-year anniversary of the purchase date; however, Class 529-C
shares will not convert to Class 529-F-1 shares. The Internal Revenue Service currently takes the position that these automatic
conversions are not taxable. Should its position change, the automatic conversion feature may be suspended. If this were to happen,
you would have the option of converting your Class B, 529-B or C shares to the respective share classes at the anniversary
dates described above. This exchange would be based on the relative net asset values of the two classes in question, without the
imposition of a sales charge or fee, but you might face certain tax consequences as a result.
Purchase of Class F shares
You may generally
open an account and purchase Class F shares only through fee-based programs of investment dealers that have special agreements
with the fund’s distributor, through certain registered investment advisors and through other intermediaries approved by
the fund’s distributor. These intermediaries typically charge ongoing fees for services they provide. Intermediary fees
are not paid by the fund and normally range from .75% to 1.50% of assets annually, depending on the services offered.
Purchase of Class 529 shares
Class 529
shares may be purchased only through an account established with a 529 college savings plan managed by the American Funds
organization. You may open this type of account and purchase Class 529 shares by contacting any financial advisor (who may impose
transaction charges in addition to those described in this prospectus) authorized to sell such an account. You may purchase additional
shares in various ways, including through your financial advisor and by mail, telephone, the Internet and bank wire.
Class 529-E shares may be purchased only by employees participating
through an eligible employer plan.
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Accounts holding Class 529 shares are subject to a $10 account
setup fee and an annual $10 account maintenance fee.
Investors residing in any state may purchase Class 529 shares
through an account established with a 529 college savings plan managed by the American Funds organization. Class 529-A, 529-B,
529-C and 529-F-1 shares are structured similarly to the corresponding Class A, B, C and F-1 shares. For example, the same initial
sales charges apply to Class 529-A shares as to Class A shares.
Purchase of Class R shares
Class R shares
are generally available only to retirement plans established under Internal Revenue Code Sections 401(a), 403(b) or 457, and to
nonqualified deferred compensation plans and certain voluntary employee benefit association and post-retirement benefit plans.
Class R shares also are generally available only to retirement plans where plan level or omnibus accounts are held on the
books of the fund. Class R-5 and R-6 shares are generally available only to fee-based programs or through retirement
plan intermediaries. In addition, Class R-5 and R-6 shares are available for investment by other registered investment companies
approved by the fund’s investment adviser or distributor. Class R shares generally are not available to retail nonretirement
accounts, traditional and Roth individual retirement accounts (IRAs), Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE
IRAs and 529 college savings plans.
Purchases by employer-sponsored retirement plans
Eligible retirement plans generally may open an account and purchase Class A or R shares by contacting any investment
dealer (who may impose transaction charges in addition to those described in this prospectus) authorized to sell these classes
of the fund’s shares. Some or all R share classes may not be available through certain investment dealers. Additional shares
may be purchased through a plan’s administrator or recordkeeper.
Class A shares are generally not available for retirement
plans using the PlanPremier® or Recordkeeper Direct® recordkeeping programs.
Employer-sponsored retirement plans that are eligible
to purchase Class R shares may instead purchase Class A shares and pay the applicable Class A sales charge, provided
that their recordkeepers can properly apply a sales charge on plan investments. These plans are not eligible to make initial purchases
of $1 million or more in Class A shares and thereby invest in Class A shares without a sales charge, nor are they
eligible to establish a statement of intention that qualifies them to purchase Class A shares without a sales charge. More
information about statements of intention can be found under “Sales charge reductions and waivers” in this prospectus.
Plans investing in Class A shares with a sales charge may purchase additional Class A shares in accordance with the sales
charge table in this prospectus.
Employer-sponsored retirement plans that invested
in Class A shares without any sales charge before April 1, 2004, and that continue to meet the eligibility requirements in effect
as of that date for purchasing Class A shares at net asset value, may continue to purchase Class A shares without any initial or
contingent deferred sales charge.
A 403(b) plan may not invest in Class A or C shares
unless it was invested in Class A or C shares before January 1, 2009.
American Funds Inflation Linked Bond Fund / Prospectus
18
|
Purchase minimums and maximums
Purchase minimums
described in this prospectus may be waived in certain cases. In addition, the fund reserves the right to redeem the shares of any
shareholder for their then current net asset value per share if the shareholder’s aggregate investment in the fund falls
below the fund’s minimum initial investment amount. See the statement of additional information for details.
For accounts established with an automatic investment plan,
the initial purchase minimum of $250 may be waived if the purchases (including purchases through exchanges from another fund) made
under the plan are sufficient to reach $250 within five months of account establishment.
The effective purchase maximums for Class 529-A, 529-C,
529-E and 529-F-1 shares will reflect the maximum applicable contribution limits under state law. See the applicable program description
for more information.
The purchase maximum for Class C shares is $500,000 per
transaction. In addition, if you have significant American Funds holdings, you may not be eligible to invest in Class C or
529-C shares. Specifically, you may not purchase Class C or 529-C shares if you are eligible to purchase Class A or 529-A
shares at the $1 million or more sales charge discount rate (that is, at net asset value). See “Sales charge reductions
and waivers” in this prospectus and the statement of additional information for more details regarding sales charge discounts.
American Funds Inflation Linked Bond Fund / Prospectus
19
|
Exchange
Generally, you may exchange your
shares for shares of the same class of other American Funds without a sales charge. Class A, C or F-1 shares may generally be
exchanged for the corresponding 529 share class without a sales charge. Class B shares may not be exchanged for Class 529-B shares.
Exchanges from Class A, C or F-1 shares to the corresponding 529 share class, particularly in the case of Uniform Gifts to
Minors Act or Uniform Transfers to Minors Act custodial accounts, may result in significant legal and tax consequences, as described
in the applicable program description. Please consult your financial advisor before making such an exchange.
Exchanges of shares from American Funds Money Market
Fund initially purchased without a sales charge generally will be subject to the appropriate sales charge. For purposes of computing
the contingent deferred sales charge on Class B and C shares, the length of time you have owned your shares will be measured from
the first day of the month in which shares were purchased and will not be affected by any permitted exchange.
Exchanges have the same tax consequences as ordinary sales
and purchases. For example, to the extent you exchange shares held in a taxable account that are worth more now than what you paid
for them, the gain will be subject to taxation.
See “Transactions by telephone, fax or the Internet”
in the section “How to sell shares” of this prospectus for information regarding electronic exchanges.
Please see the statement of additional information for details
and limitations on moving investments in certain share classes to different share classes and on moving investments held in certain
accounts to different accounts.
American Funds Inflation Linked Bond Fund / Prospectus
20
|
How to sell shares
You may sell (redeem) shares in any of the following ways:
Employer-sponsored retirement plans
Shares held in eligible retirement plans may be sold
through the plan’s administrator or recordkeeper.
Through your dealer or financial advisor (certain charges
may apply)
|
·
|
Shares held for you in your dealer’s name must be sold through the dealer.
|
|
·
|
Generally,
Class F shares must
be sold through intermediaries
such as dealers or
financial advisors.
|
Writing to American Funds Service Company
|
·
|
Requests must be signed by the registered shareholder(s).
|
|
·
|
A signature guarantee is required if the redemption is:
|
|
—
|
made payable to someone other than the registered shareholder(s); or
|
|
—
|
sent
to
an
address
other
than
the
address
of
record
or
to
an
address
of
record
that
has
been
changed
within
the
previous
10
days.
|
|
·
|
American Funds Service Company reserves the right to require signature guarantee(s) on any redemption.
|
|
·
|
Additional documentation may be required for redemptions of shares held in corporate, partnership or fiduciary accounts.
|
Telephoning or faxing American Funds Service Company or
using the Internet
|
·
|
Redemptions by telephone, fax or the Internet (including American FundsLine® and americanfunds.com) are limited to $125,000
per American Funds shareholder each day.
|
|
·
|
Checks must be made payable to the registered shareholder.
|
|
·
|
Checks must be mailed to an address of record that has been used with the account for at least 10 days.
|
If you recently purchased shares and subsequently request
a redemption of those shares, you will receive proceeds from the redemption once a sufficient period of time has passed to reasonably
ensure that checks or drafts, including certified or cashier’s checks, for the shares purchased have cleared (normally 10
business days).
Although payment of redemptions normally will be in cash,
the fund’s declaration of trust permits payment of the redemption price wholly or partly with portfolio securities or other
fund assets under conditions and circumstances determined by the fund’s board of trustees.
American Funds Inflation Linked Bond Fund / Prospectus
21
|
Transactions by telephone, fax or the Internet
Generally,
you are automatically eligible to redeem or exchange shares by telephone, fax or the Internet, unless you notify us in writing
that you do not want any or all of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax or Internet
services on your account(s), you agree to hold the fund, American Funds Service Company, any of its affiliates or mutual funds
managed by such affiliates, and each of their respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, costs or liabilities (including attorney fees) that may be incurred in connection with the exercise of these
privileges, provided that American Funds Service Company employs reasonable procedures to confirm that the instructions received
from any person with appropriate account information are genuine. If reasonable procedures are not employed, American Funds Service
Company and/or the fund may be liable for losses due to unauthorized or fraudulent instructions.
Frequent trading of fund shares
The fund and American
Funds Distributors reserve the right to reject any purchase order for any reason. The fund is not designed to serve as a vehicle
for frequent trading. Frequent trading of fund shares may lead to increased costs to the fund and less efficient management of
the fund’s portfolio, potentially resulting in dilution of the value of the shares held by long-term shareholders. Accordingly,
purchases, including those that are part of exchange activity, that the fund or American Funds Distributors has determined could
involve actual or potential harm to the fund may be rejected.
The fund, through its transfer agent, American Funds Service
Company, maintains surveillance procedures that are designed to detect frequent trading in fund shares. Under these procedures,
various analytics are used to evaluate factors that may be indicative of frequent trading. For example, transactions in fund shares
that exceed certain monetary thresholds may be scrutinized. American Funds Service Company also may review transactions that occur
close in time to other transactions in the same account or in multiple accounts under common ownership or influence. Trading activity
that is identified through these procedures or as a result of any other information available to the fund will be evaluated to
determine whether such activity might constitute frequent trading. These procedures may be modified from time to time as appropriate
to improve the detection of frequent trading, to facilitate monitoring for frequent trading in particular retirement plans or other
accounts and to comply with applicable laws.
In addition to the fund’s broad ability to restrict
potentially harmful trading as described above, the fund’s board of trustees has adopted a “purchase blocking policy”
under which any shareholder redeeming shares having a value of $5,000 or more from a fund will be precluded from investing in that
fund for 30 calendar days after the redemption transaction. This policy also applies to redemptions and purchases that are part
of exchange transactions. Under the fund’s purchase blocking policy, certain purchases will not be prevented and certain
redemptions will not trigger a purchase block, such as:
|
·
|
purchases and redemptions of shares having a value of less than $5,000;
|
|
·
|
transactions in Class 529 shares;
|
American Funds Inflation Linked Bond Fund / Prospectus
22
|
|
·
|
purchases and redemptions by investment companies managed or sponsored by the fund’s investment adviser or its affiliates,
including reallocations and transactions allowing the investment company to meet its redemptions and purchases;
|
|
·
|
retirement plan contributions, loans and distributions (including hardship withdrawals) identified as such on the retirement
plan recordkeeper’s system;
|
|
·
|
purchase transactions
involving in-kind transfers
of shares of the fund,
rollovers, Roth IRA
conversions and IRA recharacterizations,
where the entity maintaining
the shareholder account
is able to identify the
transaction as one of these
types of transactions;
and
|
|
·
|
systematic redemptions and purchases, where the entity maintaining the shareholder account is able to identify the transaction
as a systematic redemption or purchase.
|
Generally, purchases and redemptions will not be considered
“systematic” unless the transaction is prescheduled for a specific date.
The fund reserves the right to waive the purchase blocking
policy with respect to specific shareholder accounts in those instances where American Funds Service Company determines that its
surveillance procedures are adequate to detect frequent trading in fund shares.
American Funds Service Company will work with certain intermediaries
(such as investment dealers holding shareholder accounts in street name, retirement plan recordkeepers, insurance company separate
accounts and bank trust companies) to apply their own procedures, provided that American Funds Service Company believes the intermediary’s
procedures are reasonably designed to enforce the frequent trading policies of the fund. You should refer to disclosures provided
by the intermediaries with which you have an account to determine the specific trading restrictions that apply to you.
If American Funds Service Company identifies any activity
that may constitute frequent trading, it reserves the right to contact the intermediary and request that the intermediary either
provide information regarding an account owner’s transactions or restrict the account owner’s trading. If American
Funds Service Company is not satisfied that the intermediary has taken appropriate action, American Funds Service Company may terminate
the intermediary’s ability to transact in fund shares.
There is no guarantee that all instances of frequent trading
in fund shares will be prevented.
Notwithstanding the fund’s surveillance procedures
and purchase blocking policy described above, all transactions in fund shares remain subject to the right of the fund, American
Funds Distributors and American Funds Service Company to restrict potentially abusive trading generally, including the types of
transactions described above that will not be prevented or trigger a block under the purchase blocking policy. See the statement
of additional information for more information about how American Funds Service Company may address other potentially abusive
trading activity in the American Funds.
American Funds Inflation Linked Bond Fund / Prospectus
23
|
Distributions and taxes
Dividends and distributions
The fund intends to distribute
dividends to you, usually in December.
Capital gains, if any, are usually distributed in December.
When a dividend or capital gain is distributed, the net asset value per share is reduced by the amount of the payment.
You may elect to reinvest dividends and/or capital gain
distributions to purchase additional shares of this fund or other American Funds, or you may elect to receive them in cash. Dividends
and capital gain distributions for 529 share classes and retirement plan shareholders will be reinvested automatically.
Taxes on dividends and distributions
For federal
tax purposes, dividends and distributions of short-term capital gains are taxable as ordinary income. The fund’s distributions
of net long-term capital gains are taxable as long-term capital gains. Any dividends or capital gain distributions you receive
from the fund will normally be taxable to you when made, regardless of whether you reinvest dividends or capital gain distributions
or receive them in cash.
Dividends and capital gain distributions that are automatically
reinvested in a tax-favored retirement or education savings account do not result in federal or state income tax at the time of
reinvestment.
Taxes on transactions
Your redemptions, including
exchanges, may result in a capital gain or loss for federal tax purposes. A capital gain or loss on your investment is the
difference between the cost of your shares, including any sales charges, and the amount you receive when you sell them.
Exchanges within a tax-favored retirement plan account will
not result in a capital gain or loss for federal or state income tax purposes. With limited exceptions, distributions from a retirement
plan account are taxable as ordinary income.
Shareholder fees
Fees borne directly by
the fund normally have the effect of reducing a shareholder’s taxable income on distributions. By contrast, fees paid directly
to advisors by a fund shareholder for ongoing advice are deductible for income tax purposes only to the extent that they (combined
with certain other qualifying expenses) exceed 2% of such shareholder’s adjusted gross income.
Please see your tax advisor for more information.
Holders of Class 529 shares should refer to the applicable program description for more information regarding the tax consequences
of selling Class 529 shares.
American Funds Inflation Linked Bond Fund / Prospectus
24
|
Choosing a share class
The fund offers different classes of shares through this
prospectus. The services or share classes available to you may vary depending upon how you wish to purchase shares of the fund.
Each share class represents an investment in the same portfolio
of securities, but each class has its own sales charge and expense structure, allowing you to choose the class that best fits your
situation.
When you purchase shares of the fund for an individual-type account, you should choose a share class. If none is
chosen, your investment will be made in Class A shares or, in the case of a 529 plan investment, Class 529-A shares.
Factors you should consider when choosing a class of shares
include:
|
·
|
how long you expect to own the shares;
|
|
·
|
how much you intend to invest;
|
|
·
|
total expenses associated with owning shares of each class;
|
|
·
|
whether you qualify for any reduction or waiver of sales charges (for example, Class A or 529-A shares may be a less expensive
option over time, particularly if you qualify for a sales charge reduction or waiver);
|
|
·
|
whether you plan to take any distributions in the near future (for example, the contingent deferred sales charge will not be
waived if you sell your Class 529-B or 529-C shares to cover higher education expenses); and
|
|
·
|
availability of share classes:
|
|
—
|
Class B and 529-B shares may not be purchased or acquired except by exchange from Class B or 529-B shares of another fund in
the American Funds family;
|
|
—
|
Class C shares are not available to retirement plans
that do not currently invest in such shares and that are eligible
to invest in Class R shares, including retirement plans established
under Internal Revenue Code Sections 401(a) (including 401(k)
plans), 403(b) or 457;
|
|
—
|
Class F and 529-F-1 shares are generally available
only to fee-based programs of investment dealers that have
special agreements with the fund’s distributor, to certain
registered investment advisors and to other intermediaries
approved by the fund’s distributor; and
|
|
—
|
Class
R
shares
are
generally
available
only
to
retirement
plans
established
under
Internal
Revenue
Code
Sections
401(a)
(including
401(k)
plans),
403(b)
or
457,
and
to
nonqualified
deferred
compensation
plans
and
certain
voluntary
employee
benefit
association
and
post-retirement
benefit
plans
.
|
Each investor’s financial considerations are
different. You should speak with your financial advisor to help you decide which share class is best for you.
American Funds Inflation Linked Bond Fund / Prospectus
25
|
Sales charges
Class A shares
The initial sales charge you pay each
time you buy Class A shares differs depending upon the amount you invest and may be reduced or eliminated for larger purchases
as indicated below. The “offering price,” the price you pay to buy shares, includes any applicable sales charge, which
will be deducted directly from your investment. Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to an initial sales charge.
|
Sales charge as a
percentage of:
|
|
Investment
|
Offering price
|
Net amount
invested
|
Dealer commission
as a percentage
of offering price
|
Less than $500,000
|
2.50%
|
2.56%
|
2.00%
|
$500,000 but less than $750,000
|
2.00
|
2.04
|
1.60
|
$750,000 but less than $1 million
|
1.50
|
1.52
|
1.20
|
$1 million or more and certain other investments described below
|
none
|
none
|
see below
|
The sales charge, expressed as a percentage of the offering
price or the net amount invested, may be higher or lower than the percentages described in the table above due to rounding. This
is because the dollar amount of the sales charge is determined by subtracting the net asset value of the shares purchased from
the offering price, which is calculated to two decimal places using standard rounding criteria. The impact of rounding will vary
with the size of the investment and the net asset value of the shares. Similarly, any contingent deferred sales charge paid by
you on investments in Class A shares may be higher or lower than the 1% charge described below due to rounding.
Except as provided below, investments in Class A shares
of $1 million or more may be subject to a 1% contingent deferred sales charge if the shares are sold within one year of purchase.
The contingent deferred sales charge is based on the original purchase cost or the current market value of the shares being sold,
whichever is less.
Class A share purchases not subject to sales charges
The
following investments are not subject to any initial or contingent deferred sales charge if American Funds Service Company is properly
notified of the nature of the investment:
|
·
|
investments in Class A shares made by endowments or foundations with $50 million or more in assets;
|
|
·
|
investments made by accounts that are part of certain qualified fee-based programs and that purchased Class A shares before
the discontinuation of the relevant investment dealer’s load-waived Class A share program with the American Funds; and
|
|
·
|
certain rollover investments from retirement plans to IRAs (see “Rollovers from retirement plans to IRAs” in this
prospectus for more information).
|
The distributor may pay dealers a commission of up to 1%
on investments made in Class A shares with no initial sales charge. The fund may reimburse the distributor for these payments
through its plans of distribution (see “Plans of distribution” in this prospectus).
American Funds Inflation Linked Bond Fund / Prospectus
26
|
Transfers from certain 529 plans to plans managed by the
American Funds organization will be made with no sales charge. No commission will be paid to the dealer on such a transfer. Please
see the statement of additional information for more information.
Certain other investors may qualify to purchase shares
without a sales charge, such as employees of investment dealers and registered investment advisors authorized to sell American
Funds and employees of The Capital Group Companies, Inc. and its affiliates. Please see the statement of additional information
for further details.
Class B and C shares
For Class B shares, a contingent
deferred sales charge may be applied to shares you sell within six years of the date you purchased the Class B shares, as shown
in the table below. The contingent deferred sales charge is eliminated six years after purchase.
Contingent deferred sales charge on Class B shares
|
Year of redemption:
|
1
|
2
|
3
|
4
|
5
|
6
|
7+
|
Contingent deferred sales charge:
|
5%
|
4%
|
4%
|
3%
|
2%
|
1%
|
0%
|
Class C shares are sold without any initial sales charge.
American Funds Distributors pays 1% of the amount invested to dealers who sell Class C shares. A contingent deferred sales charge
of 1% applies if Class C shares are sold within one year of purchase. The contingent deferred sales charge is eliminated one year
after purchase.
Any contingent deferred sales charge paid by you on sales
of Class B or C shares, expressed as a percentage of the applicable redemption amount, may be higher or lower than the percentages
described above due to rounding.
Class 529-E and Class F shares
Class 529-E and Class
F shares are sold without any initial or contingent deferred sales charge.
Class R shares
Class R shares are sold without any
initial or contingent deferred sales charge. The distributor will pay dealers annually asset-based compensation of up to 1.00%
for sales of Class R-1 shares, up to .75% for Class R-2 shares, up to .50% for Class R-3 shares and up to .25% for Class R-4 shares.
No dealer compensation is paid from fund assets on sales of Class R-5 or R-6 shares. The fund may reimburse the distributor for
these payments through its plans of distribution.
See “Plans of distribution” in this prospectus
for ongoing compensation paid to your dealer or financial advisor for all share classes.
Contingent deferred sales charges
Shares
acquired through reinvestment of dividends or capital gain distributions are not subject to a contingent deferred sales charge.
In addition, the contingent deferred sales charge may be waived in certain circumstances. See “Contingent deferred sales
charge waivers” in the section “Sales charge reductions and waivers” of this prospectus. The contingent deferred
sales charge is based on the original purchase cost or the current market value of the shares being sold, whichever is less. For
purposes of determining the contingent deferred sales charge, if you sell only some of your shares, shares that are not subject
to any contingent deferred sales charge will be sold first, followed by shares that you have owned the longest.
American Funds Inflation Linked Bond Fund / Prospectus
27
|
Sales charge reductions and waivers
To receive a reduction in your Class A initial sales
charge, you must let your financial advisor or American Funds Service Company know at the time you purchase shares that you qualify
for such a reduction. If you do not let your advisor or American Funds Service Company know that you are eligible for a reduction,
you may not receive the sales charge discount to which you are otherwise entitled.
In order to determine your eligibility
to receive a sales charge discount, it may be necessary for you to provide your advisor or American Funds Service Company with
information and records (including account statements) of all relevant accounts invested in the American Funds.
In addition to the information in this prospectus,
you may obtain more information about share classes, sales charges and sales charge reductions and waivers through a link on the
home page of the American Funds website at americanfunds.com, from the statement of additional information or from your financial
advisor.
Reducing your Class A initial sales charge
Consistent
with the policies described in this prospectus, you and your “immediate family” (your spouse — or equivalent,
if recognized under local law — and your children under the age of 21) may combine all of your American Funds investments
to reduce Class A sales charges. In addition, two or more retirement plans of an employer or an employer’s affiliates
may combine all of their American Funds investments to reduce Class A sales charges. Certain investments in the American Funds
Target Date Retirement Series,® American Funds Portfolio Series
SM
and American Funds College Target Date Series® may also be combined for this purpose. Please see the applicable
series’ prospectus for further information. However, for this purpose, investments representing direct purchases of American
Funds Money Market Fund are excluded. Following are different ways that you may qualify for a reduced Class A sales charge:
Aggregating accounts
To receive a reduced Class
A sales charge, investments made by you and your immediate family (see above) may be aggregated if made for your own account(s)
and/or certain other accounts, such as:
|
·
|
trust accounts established by the above individuals (please see the statement of additional information for details regarding
aggregation of trust accounts where the person(s) who established the trust is/are deceased);
|
|
·
|
solely controlled business accounts; and
|
|
·
|
single-participant retirement plans.
|
Investments made through employer-sponsored retirement
plan accounts will not be aggregated with individual-type accounts.
Concurrent purchases
You may combine simultaneous
purchases (including, upon your request, purchases for gifts) of any class of shares of two or more American Funds (excluding American
Funds Money Market Fund) to qualify for a reduced Class A sales charge.
Rights of accumulation
You may take into account
your accumulated holdings in all share classes of the American Funds (excluding American Funds Money Market Fund) to determine
the initial sales charge you pay on each purchase of Class A shares. Subject to your investment dealer’s capabilities, your
accumulated
American Funds Inflation Linked Bond Fund / Prospectus
28
|
holdings will be calculated as the higher of
(a)
the current value of your existing holdings (as of the day prior to your additional American Funds investment) or
(b)
the
amount you invested (including reinvested dividends and capital gains, but excluding capital appreciation) less any withdrawals.
Please see the statement of additional information for further details. You should retain any records necessary to substantiate
the historical amounts you have invested.
If you make a gift of shares, upon your request you
may purchase the shares at the sales charge discount allowed under rights of accumulation of all of your American Funds accounts.
Statement of intention
You may reduce your
Class A sales charge by establishing a statement of intention. A statement of intention allows you to combine all purchases of
all share classes of the American Funds (excluding American Funds Money Market Fund) that you intend to make over a 13-month period
to determine the applicable sales charge; however, purchases made under a right of reinvestment, appreciation of your holdings,
and reinvested dividends and capital gains do not count as purchases made during the statement period. Your accumulated holdings
(as described and calculated under “Rights of accumulation” above) eligible to be aggregated as of the day immediately
before the start of the statement period may be credited toward satisfying the statement. A portion of your account may be held
in escrow to cover additional Class A sales charges that may be due if your total purchases over the statement period do not
qualify you for the applicable sales charge reduction. Employer-sponsored retirement plans may be restricted from establishing
statements of intention. See the discussion regarding employer-sponsored retirement plans under “Purchase, exchange and sale
of shares” in this prospectus for more information.
American Funds Inflation Linked Bond Fund / Prospectus
29
|
Right of reinvestment
If you notify American
Funds Service Company prior to the time of reinvestment, you may reinvest proceeds from a redemption, dividend payment or capital
gain distribution without a sales charge in the same fund or other American Funds, provided that the reinvestment occurs within
90 days after the date of the redemption, dividend payment or distribution and is made into the same account from which you
redeemed the shares or received the dividend payment or distribution. If the account has been closed, you may reinvest without
a sales charge if the new receiving account has the same registration as the closed account and the reinvestment is made within
90 days after the date of redemption, dividend payment or distribution.
Proceeds from a Class B share redemption for which
a contingent deferred sales charge was paid will be reinvested in Class A shares without any initial sales charge. If you
redeem Class B shares without paying a contingent deferred sales charge, you may reinvest the proceeds in Class B shares
or purchase Class A shares. If you purchase Class A shares, you are responsible for paying any applicable Class A
sales charges. Proceeds from any other type of redemption and all dividend payments and capital gain distributions will be reinvested
in the same share class from which the original redemption, dividend payment or distribution was made. Any contingent deferred
sales charge on Class A or C shares will be credited to your account. Redemption proceeds of Class A shares representing direct
purchases in American Funds Money Market Fund that are reinvested in other American Funds will be subject to a sales charge.
Proceeds will be reinvested at the next calculated net asset
value after your request is received by American Funds Service Company, provided that your request contains all information and
legal documentation necessary to process the transaction. For purposes of this “right of reinvestment policy,” automatic
transactions (including, for example, automatic purchases, withdrawals and payroll deductions) and ongoing retirement plan contributions
are not eligible for investment without a sales charge. You may not reinvest proceeds in the American Funds as described in this
paragraph if such proceeds are subject to a purchase block as described under “Frequent trading of fund shares” in
this prospectus. This paragraph does not apply to certain rollover investments as described under “Rollovers from retirement
plans to IRAs” in this prospectus.
American Funds Inflation Linked Bond Fund / Prospectus
30
|
Contingent deferred sales charge waivers
The contingent
deferred sales charge on Class A, B and C shares may be waived in the following cases:
|
·
|
permitted exchanges of shares, except if shares acquired by exchange are then redeemed within the period during which a contingent
deferred sales charge would apply to the initial shares purchased;
|
|
·
|
tax-free returns of excess contributions to IRAs;
|
|
·
|
redemptions due to death or postpurchase disability of the shareholder (this generally excludes accounts registered in the
names of trusts and other entities);
|
|
·
|
for 529 share classes only, redemptions due to a beneficiary’s death, postpurchase disability or receipt of a scholarship
(to the extent of the scholarship award);
|
|
·
|
redemptions due to the complete termination of a trust upon the death of the trustor/grantor or beneficiary, but only if such
termination is specifically provided for in the trust document; and
|
|
·
|
the following types of transactions, if together they do not exceed 12% of the value of an account annually (see the statement
of additional information for further details about waivers regarding these types of transactions):
|
|
—
|
redemptions due to receiving required minimum distributions from retirement accounts upon reaching age 70½ (required
minimum distributions that continue to be taken by the beneficiary(ies) after the account owner is deceased also qualify for a
waiver); and
|
|
—
|
if you have established an automatic withdrawal plan, redemptions through such a plan (including any dividends and/or capital
gain distributions taken in cash).
|
To have your Class A, B or C contingent deferred sales
charge waived, you must inform your advisor or American Funds Service Company at the time you redeem shares that you qualify for
such a waiver.
American Funds Inflation Linked Bond Fund / Prospectus
31
|
Rollovers from retirement plans
to IRAs
Assets from retirement plans may be invested in Class A,
C or F shares through an IRA rollover, subject to the other provisions of this prospectus. Class C shares are not available if
the assets are being rolled over from investments held in the American Funds Recordkeeper Direct and PlanPremier retirement plan
recordkeeping programs.
Rollovers to IRAs from retirement plans that are rolled
into Class A shares will be subject to applicable sales charges. The following rollovers to Class A shares will be made without
a sales charge:
|
·
|
rollovers to Capital
Bank and Trust Company
SM
IRAs if the
assets were invested in
American Funds at the time
of distribution;
|
|
·
|
rollovers to
IRAs from 403(b)
plans with Capital
Bank and Trust Company
as custodian; and
|
|
·
|
rollovers to Capital
Bank and Trust Company
IRAs from investments held
in the American Funds Recordkeeper
Direct and PlanPremier
retirement plan recordkeeping
programs.
|
IRA rollover assets that roll over without a sales charge
as described above will not be subject to a contingent deferred sales charge, and investment dealers will be compensated solely
with an annual service fee that begins to accrue immediately. All other rollovers invested in Class A shares, as well as future
contributions to the IRA, will be subject to sales charges and to the terms and conditions generally applicable to Class A share
investments as described in this prospectus and in the statement of additional information.
American Funds Inflation Linked Bond Fund / Prospectus
32
|
Plans of distribution
The fund has plans of distribution, or “12b-1 plans,”
for certain share classes under which it may finance activities intended primarily to sell shares, provided that the categories
of expenses are approved in advance by the fund’s board of trustees. The plans provide for payments, based on annualized
percentages of average daily net assets, of:
Up to:
|
Share class(es)
|
0.30%
|
Class A shares
|
0.50%
|
Class 529-A, F-1, 529-F-1 and R-4 shares
|
0.75%
|
Class 529-E and R-3 shares
|
1.00%
|
Class B, 529-B, C, 529-C, R-1 and R-2 shares
|
For all share classes indicated above, up to .25% may be
used to pay service fees to qualified dealers for providing certain shareholder services. The amount remaining for each share class,
if any, may be used for distribution expenses.
The estimated 12b-1 fees expected to be paid by each
applicable share class of the fund, as a percentage of average net assets for the fiscal year, are indicated in the Annual Fund
Operating Expenses table on page 2 of this prospectus. Since these fees are paid out of the fund’s assets or income on an
ongoing basis, over time they may cost you more than paying other types of sales charges or service fees and reduce the return
on your investment. The higher fees for Class B and C shares may cost you more over time than paying the initial sales charge
for Class A shares.
American Funds Inflation Linked Bond Fund / Prospectus
33
|
Other compensation to dealers
American Funds Distributors, at its expense, provides
additional compensation to investment dealers. These payments may be made, at the discretion of American Funds Distributors, to
the top 100 dealers (or their affiliates) that have sold shares of the American Funds. A number of factors will be considered
in determining payments, including the qualifying dealer’s sales, assets and redemption rates, and the quality of the dealer’s
relationship with American Funds Distributors. The payment will be determined using a formula applied consistently to dealers
based on the relevant facts and circumstances. The level of payments made to a qualifying firm in any given year will vary and
(excluding payments for meetings as described below) will represent the sum of
(a)
up to .10% of the previous year’s
American Funds sales by that dealer and
(b)
up to .02% of American Funds assets attributable to that dealer, with an adjustment
made for the dealer’s relative redemption rate and the quality of the dealer’s relationship with American Funds Distributors.
For calendar year 2013, aggregate payments made by American Funds Distributors to dealers were less than .02% of the average assets
of the American Funds. Aggregate payments made by American Funds Distributors to dealers may also change from year to year. American
Funds Distributors makes these payments to help defray the costs incurred by qualifying dealers in connection with efforts to
educate financial advisors about the American Funds so that they can make recommendations and provide services that are suitable
and meet shareholder needs. American Funds Distributors will, on an annual basis, determine the advisability of continuing these
payments. American Funds Distributors may also pay expenses associated with meetings conducted by selling dealers, advisory platform
providers and other intermediaries to facilitate educating financial advisors and shareholders about the American Funds. If investment
advisers, distributors or other affiliates of mutual funds pay additional compensation or other incentives in differing amounts,
dealer firms and their advisors may have financial incentives for recommending a particular mutual fund over other mutual funds
or investments. You should consult with your financial advisor and review carefully any disclosure by your financial advisor’s
firm as to compensation received.
American Funds Inflation Linked Bond Fund / Prospectus
34
|
Fund expenses
Note that references to Class A, B, C and F-1 shares in
this “Fund expenses” section do not include the corresponding Class 529 shares.
In periods of market volatility, assets of the fund
may decline significantly, causing total annual fund operating expenses (as a percentage of the value of your investment) to become
higher than the numbers shown in the Annual Fund Operating Expenses table on page 2 of this prospectus.
For all share classes except Class B shares, “Other
expenses” items in the Annual Fund Operating Expenses table in this prospectus include fees for administrative services
provided by the fund’s investment adviser and its affiliates. The fee table is based on estimated expenses for the fund’s
current fiscal year.
The “Other expenses” items in the Annual
Fund Operating Expenses table also include custodial, legal, transfer agent and subtransfer agent/recordkeeping payments and various
other expenses applicable to all share classes.
Retail
investors
Subtransfer agent/recordkeeping payments may be made to third parties (including affiliates of the fund’s
investment adviser) that provide subtransfer agent, recordkeeping and/or shareholder services with respect to certain shareholder
accounts in lieu of the transfer agent providing such services. The amount paid for subtransfer agent/recordkeeping services varies
depending on the share class and services provided, and typically ranges from $3 to $19 per account. For Class 529 shares, an expense
of up to a maximum of .10% paid to a state or states for oversight and administrative services is included as an “Other expenses”
item.
Employer-sponsored retirement plan investors
The
amount paid for subtransfer agent/ recordkeeping services varies depending on the share class selected and the entity receiving
the payments. The table below shows the maximum payments to entities providing these services to retirement plans.
|
Payments to affiliated entities
|
Payments to unaffiliated entities
|
Class A
|
0.05% of assets or
$12 per participant position
1
|
0.05% of assets or
$12 per participant position
1
|
Class R-1
|
0.10% of assets
|
0.10% of assets
|
Class R-2
|
0.15% of assets plus $27 per participant position
2
or 0.35% of assets
3
|
0.25% of assets
|
Class R-3
|
0.10% of assets plus $12 per participant position
2
or 0.19% of assets
3
|
0.15% of assets
|
Class R-4
|
0.10% of assets
|
0.10% of assets
|
Class R-5
|
0.05% of assets
|
0.05% of assets
|
Class R-6
|
none
|
none
|
1
Payment amount depends on the date services commenced.
2
Payment with respect to Recordkeeper Direct program.
3
Payment with respect to PlanPremier program.
American Funds Inflation Linked Bond Fund / Prospectus
35
|
Financial highlights
The Financial Highlights table is intended to help you
understand the fund’s results. Certain information reflects financial results for a single share of a particular class.
The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and capital gain distributions). Where indicated, figures in the table reflect the impact, if any,
of certain reimbursements from Capital Research and Management Company. For more information about these reimbursements, see the
fund’s statement of additional information and annual report. The information in the Financial Highlights table has been
audited by PricewaterhouseCoopers LLP, whose current report, along with the fund’s financial statements, is included in
the statement of additional information, which is available upon request.
|
|
Loss
from investment operations
1
|
|
|
|
|
|
|
|
Net
asset
value,
beginning
of period
|
Net
investment
loss
|
Net
losses on
securities
(both
realized
and
unrealized)
|
Total
from
investment
operations
|
Net
asset
value,
end of
period
|
Total
return
2,3
|
Net
assets,
end of
period
(in thousands)
|
Ratio
of
expenses
to average
net assets
before
reim-
bursement
4
|
Ratio
of
expenses
to average
net assets
after
reim-
bursement
3,4
|
Ratio
of
net
loss to
average
net assets
3
|
Class
A:
|
|
|
|
|
|
|
|
|
|
|
Period
from 12/14/2012 to 11/30/2013
5,6
|
$10.00
|
$(.03)
|
$(.67)
|
$(.70)
|
$9.30
|
(7.00)%
|
$ 2,816
|
.61%
7
|
.43%
7
|
(.36)%
7
|
Class
R-6:
|
|
|
|
|
|
|
|
|
|
|
Period from 11/1/2013 to 11/30/2013
6,8
|
9.33
|
—
9
|
(.04)
|
(.04)
|
9.29
|
(.43)
|
204,070
|
.03
|
.03
|
—
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the period
12/14/2012
to 11/30/2013
5,6
|
|
Portfolio
turnover rate for all share classes
|
543%
|
|
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
of
a
reimbursement
from
Capital
Research
and
Management
Company.
During
the
period
shown,
Capital
Research
and
Management
Company
reimbursed
other
fees
and
expenses.
|
|
4
|
Although
the
fund
has
plans
of
distribution
for
some
share
classes,
fees
for
distribution
services
are
not
paid
by
the
fund
on
amounts
invested
in
the
fund
by
the
fund’s
investment
adviser
and/or
its
affiliates.
If
fees
for
distribution
services
were
charged
on
these
assets,
fund
expenses
would
be
higher
and
net
income and total return would
be
lower.
|
|
5
|
For
the
period
December
14,
2012,
commencement
of
operations,
through
November
30,
2013.
|
|
6
|
Based
on
operations
for
the
period
shown
and,
accordingly,
is
not
representative
of
a
full
year.
|
|
8
|
Class
R-6
shares
were
offered
beginning
November
1,
2013.
|
|
10
|
Amount
less
than
.01%.
|
American Funds Inflation Linked Bond Fund / Prospectus
36
|
Notes
American Funds Inflation Linked Bond Fund / Prospectus
37
|
Notes
American Funds Inflation Linked Bond Fund / Prospectus
38
|
|
|
|
|
|
For shareholder services
|
American Funds Service Company
(800) 421-4225
|
|
|
For retirement plan services
|
Call your employer or plan administrator
|
|
|
For 529 plans
|
American Funds Service Company
(800) 421-4225, ext. 529
|
|
|
For 24-hour information
|
American FundsLine
(800) 325-3590
americanfunds.com
For Class R share information, visit
AmericanFundsRetirement.com
|
|
|
Telephone calls you have with American Funds may be monitored or recorded for quality assurance, verification and recordkeeping purposes. By speaking to American Funds on the telephone, you consent to such monitoring and recording.
|
|
Multiple
translations
This prospectus may be translated into other languages. If there is any inconsistency or ambiguity,
the English text will prevail.
Annual/Semi-annual
report to shareholders
The shareholder reports contain additional information about the fund, including financial
statements, investment results, portfolio holdings, a discussion of market conditions and the fund’s investment strategies,
and the independent registered public accounting firm’s report (in the annual report).
Program
description
The CollegeAmerica® 529 program description contains additional information about the policies
and services related to 529 plan accounts.
Statement
of additional information (SAI) and codes of ethics
The current SAI, as amended from time to time, contains more
detailed information about the fund, including the fund’s financial statements, and is incorporated by reference into this
prospectus. This means that the current SAI, for legal purposes, is part of this prospectus. The codes of ethics describe the personal
investing policies adopted by the fund, the fund’s investment adviser and its affiliated companies.
The codes of ethics and current SAI are on file with the
U.S. Securities and Exchange Commission (SEC). These and other related materials about the
fund
are available for review or to be copied at the SEC’s Public Reference Room in Washington, D.C., (202) 551-8090,
on the EDGAR database on the SEC’s website at sec.gov or, after payment of a duplicating fee, via email request to
publicinfo@sec.gov or by writing to the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. The
codes of ethics, current SAI and shareholder reports are also available, free of charge, on our website, americanfunds.com.
E-delivery
and household mailings
Each year you are automatically sent an updated summary prospectus and annual and semi-annual
reports for the
fund
. You may also occasionally receive proxy statements
for the
fund
. In order to reduce the volume of mail you receive,
when possible, only one copy of these documents will be sent to shareholders who are part of the same family and share the same
household address. You may elect to receive these documents electronically in lieu of paper form by enrolling in e-delivery on
our website, americanfunds.com.
If you would like to opt out of household-based mailings
or receive a complimentary copy of the current SAI, codes of ethics, annual/semi-annual report to shareholders or applicable program
description, please call American Funds Service Company at (800) 421-4225 or write to the secretary of the
fund
at 6455 Irvine Center Drive, Irvine, California 92618.
Securities
Investor Protection Corporation (SIPC)
Shareholders may obtain information about SIPC® on its website
at sipc.org or by calling (202) 371-8300.
MFGEPRX-060-0214P
Litho in USA CGD/10238
|
Investment Company File No. 811-22746
|
THE FUND MAKES AVAILABLE A SPANISH TRANSLATION OF THE ABOVE PROSPECTUS
IN CONNECTION WITH THE PUBLIC OFFERING AND SALE OF ITS SHARES. THE ENGLISH LANGUAGE PROSPECTUS ABOVE IS A FAIR AND ACCURATE REPRESENTATION
OF THE SPANISH EQUIVALENT.
/s/
|
COURTNEY R. TAYLOR
|
|
COURTNEY R. TAYLOR
|
|
SECRETARY
|
American Funds Inflation Linked Bond
Fund
SM
Part B
Statement of Additional Information
February 1, 2014
This document is not a prospectus
but should be read in conjunction with the current prospectus of American Funds Inflation Linked Bond Fund (the “fund”)
dated February 1, 2014. You may obtain a prospectus from your financial advisor, by calling American Funds Service Company®
at (800) 421-4225 or by writing to the fund at the following address:
American Funds Inflation Linked Bond Fund
Attention: Secretary
6455 Irvine Center Drive
Irvine, California 92618
Certain privileges and/or services
described below may not be available to all shareholders (including shareholders who purchase shares at net asset value through
eligible retirement plans) depending on the shareholder’s investment dealer or retirement plan recordkeeper. Please see
your financial advisor, investment dealer, plan recordkeeper or employer for more information.
Class A
|
|
Class 529-A
|
|
Class R-1
|
|
Class B
|
|
Class 529-B
|
|
Class R-2
|
|
Class C
|
|
Class 529-C
|
|
Class R-3
|
|
Class F-1
|
|
Class 529-E
|
|
Class R-4
|
|
Class F-2
|
|
Class 529-F-1
|
|
Class R-5
|
|
|
|
|
|
Class R-6
|
|
Table of Contents
Item
|
|
Page no.
|
Certain investment limitations and guidelines
|
|
|
2
|
|
Description of certain securities and investment techniques
|
|
|
3
|
|
Fund policies
|
|
|
12
|
|
Management of the fund
|
|
|
14
|
|
Execution of portfolio transactions
|
|
|
37
|
|
Disclosure of portfolio holdings
|
|
|
40
|
|
Price of shares
|
|
|
42
|
|
Taxes and distributions
|
|
|
45
|
|
Purchase and exchange of shares
|
|
|
48
|
|
Sales charges
|
|
|
53
|
|
Sales charge reductions and waivers
|
|
|
56
|
|
Selling shares
|
|
|
60
|
|
Shareholder account services and privileges
|
|
|
61
|
|
General information
|
|
|
64
|
|
Appendix
|
|
|
72
|
|
Investment portfolio
Financial statements
|
|
|
|
|
American Funds Inflation Linked Bond Fund - Page
1
|
Certain investment limitations and
guidelines
The following limitations and guidelines
are considered at the time of purchase, under normal circumstances, and are based on a percentage of the fund’s net assets
unless otherwise noted. This summary is not intended to reflect all of the fund’s investment limitations.
|
·
|
The fund will invest at least 80% of its assets in inflation linked bonds issued by U.S. and non-U.S.
governments, their agencies or instrumentalities, and corporations.
|
|
·
|
The fund will invest at least 80% of its assets in securities guaranteed or sponsored by the U.S.
government.
|
|
·
|
The fund may invest up to 20% of its assets in debt securities with credit ratings of A1 or below
or A+ or below from Nationally Recognized Statistical Rating Organizations designated by the fund’s investment adviser or
unrated but determined to be of equivalent quality by the fund’s investment adviser at time of purchase. The fund currently
intends to look to the ratings from Moody’s Investors Service, Standard & Poor’s Corporation and Fitch Ratings.
If rating agencies differ, securities will be considered to have received the highest of these ratings, consistent with the fund’s
investment policies. Securities guaranteed or sponsored by the U.S. government are not considered for purposes of this limit.
|
|
·
|
The fund may invest up to 20% of its assets in securities of issuers domiciled outside the United
States. In determining the domicile of an issuer, the fund’s investment adviser will consider the domicile determination
of a leading provider of global indexes and may also take into account such factors as where the company is legally organized,
maintains principal corporate offices and/or conducts its principal operations.
|
* * * * * *
The fund may experience difficulty liquidating
certain portfolio securities during significant market declines or periods of heavy redemptions.
American Funds Inflation Linked Bond Fund - Page
2
|
Description of certain securities
and investment techniques
The descriptions below are intended to
supplement the material in the prospectus under “Investment objective, strategies and risks.”
Debt securities —
Debt securities,
also known as “fixed-income securities,” are used by issuers to borrow money. Bonds, notes, debentures, asset-backed
securities (including those backed by mortgages), and loan participations and assignments are common types of debt securities.
Generally, issuers pay investors periodic interest and repay the amount borrowed either periodically during the life of the security
and/or at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount
from their face values and their values accrete over time to face value at maturity. Some debt securities bear interest at rates
that are not fixed, but that vary with changes in specified market rates or indices. The market prices of debt securities fluctuate
depending on such factors as interest rates, credit quality and maturity. In general, market prices of debt securities decline
when interest rates rise and increase when interest rates fall. These fluctuations will generally be greater for longer-term debt
securities than for shorter-term debt securities.
Lower rated debt securities, rated Ba1/BB+
or below by Nationally Recognized Statistical Rating Organizations, are described by the rating agencies as speculative and involve
greater risk of default or price changes due to changes in the issuer’s creditworthiness than higher rated debt securities,
or they may already be in default. Such securities are sometimes referred to as “junk bonds” or high yield bonds. The
market prices of these securities may fluctuate more than higher quality securities and may decline significantly in periods of
general economic difficulty. It may be more difficult to dispose of, and to determine the value of, lower rated debt securities.
Investment grade bonds in the ratings categories A or Baa/BBB also may be more susceptible to changes in market or economic conditions
than bonds rated in the highest rating categories.
Certain additional risk factors relating
to debt securities are discussed below:
Sensitivity to interest rate
and economic changes —
Debt securities may be sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or substantial period of rising interest rates, issuers that are
highly leveraged may experience increased financial stress that could adversely affect their ability to meet projected business
goals, to obtain additional financing and to service their principal and interest payment obligations. Periods of economic change
and uncertainty also can be expected to result in increased volatility of market prices and yields of certain debt securities.
For example, prices of these securities can be affected by financial contracts held by the issuer or third parties (such as derivatives)
relating to the security or other assets or indices. Changes in the value of the fund’s portfolio securities will not necessarily
affect the income derived from these securities, but may affect the fund’s net asset value.
Payment expectations —
Debt securities may contain redemption or call provisions. If an issuer exercises these provisions in a lower interest rate market,
the fund would have to replace the security with a lower yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or principal or is the subject of bankruptcy proceedings,
the fund may incur losses or expenses in seeking recovery of amounts owed to it.
Liquidity and valuation —
There may be little trading in the secondary market for particular debt securities, which may affect adversely the fund’s
ability to value accurately or dispose of such debt securities. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the value and/or liquidity of debt securities.
American Funds Inflation Linked Bond Fund - Page
3
|
The investment adviser attempts to reduce
the risks described above through diversification of the fund’s portfolio and by credit analysis of each issuer, as well
as by monitoring broad economic trends and corporate and legislative developments, but there can be no assurance that it will be
successful in doing so.
Credit ratings for debt securities provided
by rating agencies reflect an evaluation of the safety of principal and interest payments, not market value risk. The rating of
an issuer is a rating agency’s view of past and future potential developments related to the issuer and may not necessarily
reflect actual outcomes. There can be a lag between the time of developments relating to an issuer and the time a rating is assigned
and updated. The investment adviser considers these ratings of securities as one of many criteria in making its investment decisions.
Bond rating agencies may assign modifiers
(such as +/–) to ratings categories to signify the relative position of a credit within the rating category. Investment
policies that are based on ratings categories should be read to include any security within that category, without giving consideration
to the modifier except where otherwise provided. See the Appendix to this statement of additional information for more information
about credit ratings.
Inflation linked bonds —
The fund may invest in inflation linked bonds issued by governments, their agencies or instrumentalities and corporations.
The principal amount of an inflation
linked bond is adjusted in response to changes in the level of an inflation index, such as the Consumer Price Index for Urban Consumers.
Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury Inflation-Protected
Securities, and therefore the principal amount of such bonds cannot be reduced below par even during a period of deflation. However,
the current market value of these bonds is not guaranteed and will fluctuate, reflecting the rise and fall of yields. In certain
jurisdictions outside the United States the repayment of the original bond principal upon the maturity of an inflation linked bond
is not guaranteed, allowing for the amount of the bond repaid at maturity to be less than par.
The value of inflation protected securities
is expected to change in response to the changes in real interest rates. Real interest rates, in turn, are tied to the relationship
between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates would decline, leading to an increase in value of the inflation protected securities. In contrast, if
nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value
of inflation protected securities. There can be no assurance, however, that the value of inflation protected securities will be
directly correlated to the changes in interest rates. If interest rates rise due to reasons other than inflation, investors in
these securities may not be protected to the extent that the increase is not reflected in the security’s inflation measure.
The interest rate for inflation linked
bonds is fixed at issuance as a percentage of this adjustable principal. Accordingly, the actual interest income may both rise
and fall as the principal amount of the bonds adjusts in response to movements of the consumer price index. For example, typically
interest income would rise during a period of inflation and fall during a period of deflation.
The market for inflation protected securities
may be less developed or liquid, and more volatile, than certain other securities markets. There is a limited number of inflation
protected securities currently available for the fund to purchase, making the market less liquid and more volatile than the U.S.
Treasury and agency markets.
Obligations backed by the “full
faith and credit” of the U.S. government —
U.S. government obligations include the following types of securities:
American Funds Inflation Linked Bond Fund - Page
4
|
U.S. Treasury securities
—
U.S. Treasury securities include direct obligations of the U.S. Treasury, such as Treasury bills, notes and
bonds. For these securities, the payment of principal and interest is unconditionally guaranteed by the U.S. government, and thus
they are of high credit quality. Such securities are subject to variations in market value due to fluctuations in interest rates
and in government policies, but, if held to maturity, are expected to be paid in full (either at maturity or thereafter).
Federal agency securities —
The securities of certain U.S. government agencies and government-sponsored entities are guaranteed as to the timely payment of
principal and interest by the full faith and credit of the U.S. government. Such agencies and entities include The Federal Financing
Bank (FFB), the Government National Mortgage Association (Ginnie Mae), the Veterans Administration (VA), the Federal Housing Administration
(FHA), the Export-Import Bank (Exim Bank), the Overseas Private Investment Corporation (OPIC), the Commodity Credit Corporation
(CCC) and the Small Business Administration (SBA).
Other federal agency obligations —
Additional federal agency securities are neither direct obligations of, nor guaranteed by, the U.S. government. These obligations
include securities issued by certain U.S. government agencies and government-sponsored entities. However, they generally involve
some form of federal sponsorship: some operate under a government charter; some are backed by specific types of collateral; some
are supported by the issuer’s right to borrow from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not limited to: Federal Home Loan Bank, Federal Home
Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee Valley Authority and Federal
Farm Credit Bank System.
On September 7, 2008, Freddie Mac and
Fannie Mae were placed into conservatorship by their new regulator, the Federal Housing Finance Agency (“FHFA”). Simultaneously,
the U.S. Treasury made a commitment of indefinite duration to maintain the positive net worth of both firms. As conservator, the
FHFA has the authority to repudiate any contract either firm has entered into prior to FHFA’s appointment as conservator
(or receiver should either firm go into default) if the FHFA, in its sole discretion determines that performance of the contract
is burdensome and repudiation would promote the orderly administration of Fannie Mae’s or Freddie Mac’s affairs. While
the FHFA has indicated that it does not intend to repudiate the guaranty obligations of either entity, doing so could adversely
affect holders of their mortgage-backed securities. For example, if a contract were repudiated, the liability for any direct compensatory
damages would accrue to the entity’s conservatorship estate and could only be satisfied to the extent the estate had available
assets. As a result, if interest payments on Fannie Mae or Freddie Mac mortgage-backed securities held by the fund were reduced
because underlying borrowers failed to make payments or such payments were not advanced by a loan servicer, the fund’s only
recourse might be against the conservatorship estate, which might not have sufficient assets to offset any shortfalls.
The FHFA, in its capacity as conservator,
has the power to transfer or sell any asset or liability of Fannie Mae or Freddie Mac. The FHFA has indicated it has no current
intention to do this; however, should it do so a holder of a Fannie Mae or Freddie Mac mortgage-backed security would have to rely
on another party for satisfaction of the guaranty obligations and would be exposed to the credit risk of that party.
Certain rights provided to holders of
mortgage-backed securities issued by Fannie Mae or Freddie Mac under their operative documents may not be enforceable against FHFA,
or enforcement may be delayed during the course of the conservatorship or any future receivership. For example, the operative documents
may provide that upon the occurrence of an event of default by Fannie Mae or Freddie Mac, holders of a requisite percentage of
the mortgage-backed security may replace the entity as trustee. However, under the Federal Housing Finance Regulatory Reform Act
of 2008, holders
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may not enforce this right if the event
of default arises solely because a conservator or receiver has been appointed.
Government support for short-term
debt instruments —
Various agencies and instrumentalities of the U.S. government and governments of other countries
have implemented programs that support short-term debt instruments, including commercial paper, in an attempt to sustain liquidity
in the markets for these securities. Entities issuing obligations supported by these programs in which the fund invests must be
on an approved list that is monitored on a regular basis. The U.S. government or other entities implementing these programs may
discontinue these programs, change the terms of the programs or adopt new programs at their discretion.
Pass-through securities —
The
fund may invest in various debt obligations backed by pools of mortgages or other assets including, but not limited to, loans on
single family residences, home equity loans, mortgages on commercial buildings, credit card receivables and leases on airplanes
or other equipment. Principal and interest payments made on the underlying asset pools backing these obligations are typically
passed through to investors, net of any fees paid to any insurer or any guarantor of the securities. Pass-through securities
may have either fixed or adjustable coupons. These securities include:
Mortgage-backed securities
—
These securities may be issued by U.S. government agencies and government-sponsored entities, such as Ginnie Mae, Fannie
Mae and Freddie Mac, and by private entities. The payment of interest and principal on mortgage-backed obligations issued by U.S.
government agencies may be guaranteed by the full faith and credit of the U.S. government (in the case of Ginnie Mae), or may be
guaranteed by the issuer (in the case of Fannie Mae and Freddie Mac). However, these guarantees do not apply to the market prices
and yields of these securities, which vary with changes in interest rates.
Mortgage-backed securities issued
by private entities are structured similarly to those issued by U.S. government agencies. However, these securities and the underlying
mortgages are not guaranteed by any government agencies and the underlying mortgages are not subject to the same underwriting requirements.
These securities generally are structured with one or more types of credit enhancements such as insurance or letters of credit
issued by private companies. Borrowers on the underlying mortgages are usually permitted to prepay their underlying mortgages.
Prepayments can alter the effective maturity of these instruments. In addition, delinquencies, losses or defaults by borrowers
can adversely affect the prices and volatility of these securities. Such delinquencies and losses can be exacerbated by declining
or flattening housing and property values. This, along with other outside pressures, such as bankruptcies and financial difficulties
experienced by mortgage loan originators, decreased investor demand for mortgage loans and mortgage-related securities and increased
investor demand for yield, can adversely affect the value and liquidity of mortgage-backed securities.
Collateralized mortgage obligations
(CMOs) —
CMOs are also backed by a pool of mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages, while privately issued CMOs may be backed by either
government agency mortgages or private mortgages. Payments of principal and interest are passed through to each bond issue at varying
schedules resulting in bonds with different coupons, effective maturities and sensitivities to interest rates. Some CMOs may be
structured in a way that when interest rates change, the impact of changing prepayment rates on the effective maturities of certain
issues of these securities is magnified. CMOs may be less liquid or may exhibit greater price volatility than other types of mortgage
or asset-backed securities.
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Commercial mortgage-backed securities
—
These securities are backed by mortgages on commercial property, such as hotels, office buildings, retail stores, hospitals
and other commercial buildings. These securities may have a lower prepayment uncertainty than other mortgage-related securities
because commercial mortgage loans generally prohibit or impose penalties on prepayments of principal. In addition, commercial mortgage-related
securities often are structured with some form of credit enhancement to protect against potential losses on the underlying mortgage
loans. Many of the risks of investing in commercial mortgage-backed securities reflect the risks of investing in the real estate
securing the underlying mortgage loans, including the effects of local and other economic conditions on real estate markets, the
ability of tenants to make rental payments and the ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid or exhibit greater price volatility than other types of mortgage or asset-backed securities and may
be more difficult to value.
Asset-backed securities —
These securities are backed by other assets such as credit card, automobile or consumer loan receivables, retail installment loans
or participations in pools of leases. Credit support for these securities may be based on the underlying assets and/or provided
through credit enhancements by a third party. The values of these securities are sensitive to changes in the credit quality of
the underlying collateral, the credit strength of the credit enhancement, changes in interest rates and at times the financial
condition of the issuer. Obligors of the underlying assets also may make prepayments that can change effective maturities of the
asset-backed securities. These securities may be less liquid and more difficult to value than other securities.
“IOs” and “POs”
are issued in portions or tranches with varying maturities and characteristics. Some tranches may only receive the interest paid
on the underlying mortgages (IOs) and others may only receive the principal payments (POs). The values of IOs and POs are extremely
sensitive to interest rate fluctuations and prepayment rates, and IOs are also subject to the risk of early repayment of the underlying
mortgages that will substantially reduce or eliminate interest payments.
Investing outside the U.S. —
Investing outside the United States may involve additional risks caused by, among other things, currency controls and fluctuating
currency values; different accounting, auditing, financial reporting, disclosure, and regulatory and legal standards and practices;
changing local, regional and global economic, political and social conditions; expropriation; changes in tax policy; greater market
volatility; different securities market structures; higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment of dividends.
The risks described above may be heightened
in connection with investments in emerging markets. Although there is no universally accepted definition, the investment adviser
generally considers emerging markets to refer to the securities markets of countries in the earlier stages of their industrialization
cycle with a low per capita gross domestic product (“GDP”) and a low market capitalization to GDP ratio relative to
those in the United States and the European Union. Historically, emerging markets have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing and emerging countries only to a limited extent.
Additional costs could be incurred in
connection with the fund’s investment activities outside the United States. Brokerage commissions may be higher outside the
United States, and the fund will bear certain expenses in connection with its currency transactions. Furthermore, increased custodian
costs may be associated with maintaining assets in certain jurisdictions.
In determining the domicile of an issuer,
the fund’s investment adviser will consider the domicile determination of a leading provider of global indexes, such as Morgan
Stanley Capital International,
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and may also take into account such factors
as where the company’s securities are listed and where the company is legally organized, maintains principal corporate offices
and/or conducts its principal operations.
Currency transactions —
The fund may enter into currency transactions to provide for the purchase or sale of a currency needed to purchase a security denominated
in that currency (often referred to as a spot or cover transaction). The fund may also enter into forward currency contracts to
protect against changes in currency exchange rates. A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Although forward contracts entered into by the fund will typically involve the purchase
or sale of a currency against the U.S. dollar, the fund also may cross hedge and purchase or sell one currency against another
currency (other than the U.S. dollar).
Currency exchange rates generally are
determined by forces of supply and demand in the foreign exchange markets and the relative merits of investment in different countries
as viewed from an international perspective. Currency exchange rates can also be affected unpredictably by intervention by U.S.
or foreign governments or central banks or by currency controls or political developments in the United States or abroad.
Generally, the fund will not attempt
to protect against all potential changes in exchange rates and the use of forward contracts does not eliminate the risk of fluctuations
in the prices of the underlying securities. If the value of the underlying securities declines or the amount of the fund’s
commitment increases because of changes in exchange rates, the fund may need to provide additional cash or securities to satisfy
its commitment under the forward contract. The fund is also subject to the risk that it may be delayed or prevented from obtaining
payments owed to it under the forward contract as a result of the insolvency or bankruptcy of the counterparty with which it entered
into the forward contract or the failure of the counterparty to comply with the terms of the contract.
While entering into forward currency
transactions could minimize the risk of loss due to a decline in the value of the hedged currency, it could also limit any potential
gain that may result from an increase in the value of the currency. Entering into forward currency transactions may change the
fund’s exposure to currency exchange rates and could result in losses to the fund if currencies do not perform as expected
by the fund’s investment adviser. For example, if the fund’s investment adviser increases the fund’s exposure
to a foreign currency using forward contracts and that foreign currency’s value declines, the fund may incur a loss. The
fund will segregate liquid assets that will be marked to market daily to meet its forward contract commitments to the extent required
by the U.S. Securities and Exchange Commission.
Forward currency transactions also may
affect the character and timing of income, gain, or loss recognized by the fund for U.S. tax purposes. The use of forward currency
contracts could result in the application of the mark-to-market provisions of the Internal Revenue Code and may cause an increase
(or decrease) in the amount of taxable dividends paid by the fund.
Interest rate swaps
—
The fund may enter into interest rate swaps in order to manage the interest rate sensitivity of the fund by increasing
or decreasing the duration of the fund or a portion of the fund’s portfolio. An interest rate swap is an agreement between
two parties to exchange or swap payments based on changes in an interest rate or rates. Typically, one interest rate is fixed
and the other rate changes based on changes in a designated interest rate benchmark such as the London Interbank Offered Rate
(LIBOR), prime rate or other benchmark. Interest rate swaps generally do not involve the delivery of securities or other principal
amounts. Rather, cash payments are exchanged by the parties based on the application of the designated interest rates to a notional
amount, which is the predetermined dollar principal of the trade upon which payment obligations are computed.
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Accordingly, the fund’s current
obligation or right under the swap agreement is generally equal to the net amount to be paid or received under the swap agreement
based on the relative value of the position held by each party. The fund will generally segregate assets with a daily value at
least equal to the excess, if any, of the fund’s accrued obligations under the swap agreement over the accrued amount the
fund is entitled to receive under the agreement.
The use of interest rate swaps involves
certain risks, including losses if interest rate changes are not correctly anticipated by the fund’s investment adviser.
To the extent the fund enters into bilaterally negotiated swap transactions, the fund will enter into swap agreements only with
counterparties that meet certain credit standards; however, if the counterparty’s creditworthiness deteriorates rapidly
and the counterparty defaults on its obligations under the swap agreement or declares bankruptcy, the fund may lose any amount
it expected to receive from the counterparty. Certain interest rate swap transactions are currently subject to mandatory central
clearing or may be eligible for voluntary central clearing. Because clearing interposes a central clearinghouse as the ultimate
counterparty to each participant’s swap, central clearing is intended to decrease (but not eliminate) counterparty risk
relative to uncleared bilateral swaps. Additionally, the term of an interest rate swap can be days, months or years and, as a
result, certain swaps may be less liquid than others.
Forward commitment, when issued and
delayed delivery transactions —
The fund may enter into commitments to purchase or sell securities at a future date.
When the fund agrees to purchase such securities, it assumes the risk of any decline in value of the security from the date of
the agreement. If the other party to such a transaction fails to deliver or pay for the securities, the fund could miss a favorable
price or yield opportunity, or could experience a loss.
The fund may enter into roll transactions,
such as a mortgage dollar roll where the fund sells mortgage-backed securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon, and maturity) securities on a specified future date, at a pre-determined
price. During the period between the sale and repurchase (the “roll period”), the fund forgoes principal and interest
paid on the mortgage-backed securities. The fund is compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the “drop”), if any, as well as by the interest earned
on the cash proceeds of the initial sale. The fund could suffer a loss if the contracting party fails to perform the future transaction
and the fund is therefore unable to buy back the mortgage-backed securities it initially sold. The fund also takes the risk that
the mortgage-backed securities that it repurchases at a later date will have less favorable market characteristics than the securities
originally sold (e.g., greater prepayment risk). These transactions are accounted for as purchase and sale transactions, which
may increase the fund’s portfolio turnover rate.
With to be announced (TBA) transactions,
the particular securities (i.e., specified mortgage pools) to be delivered or received are not identified at the trade date, but
are “to be announced” at a later settlement date. However, securities to be delivered must meet specified criteria,
including face value, coupon rate and maturity, and must be within industry-accepted “good delivery” standards.
The fund will not use these transactions
for the purpose of leveraging and will segregate liquid assets that will be marked to market daily in an amount sufficient to meet
its payment obligations in these transactions. Although these transactions will not be entered into for leveraging purposes, to
the extent the fund’s aggregate commitments in connection with these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount greater than its net assets subject to market risk).
Should market values of the fund’s portfolio securities decline while the fund is in a leveraged position, greater depreciation
of its net assets would likely occur than if it were not in such a position. The fund will not borrow money to settle these transactions
and, therefore, will liquidate other portfolio securities in advance of settlement if necessary to generate additional cash to
meet its obligations. After a transaction is entered into, the fund may still dispose of
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or renegotiate the transaction. Additionally,
prior to receiving delivery of securities as part of a transaction, the fund may sell such securities.
Repurchase agreements —
The fund may enter into repurchase agreements under which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Because the security purchased constitutes collateral for the
repurchase obligation, a repurchase agreement may be considered a loan by the fund that is collateralized by the security purchased.
Repurchase agreements permit the fund to maintain liquidity and earn income over periods of time as short as overnight. The seller
must maintain with the fund’s custodian collateral equal to at least 100% of the repurchase price, including accrued interest,
as monitored daily by the investment adviser. The fund will only enter into repurchase agreements involving securities in which
it could otherwise invest and with selected banks and securities dealers whose financial condition is monitored by the investment
adviser. If the seller under the repurchase agreement defaults, the fund may incur a loss if the value of the collateral securing
the repurchase agreement has declined and may incur disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the collateral by the fund may be delayed or limited.
Reverse repurchase agreements —
The fund may enter into reverse repurchase agreements, or the other side of a repurchase agreement, under which the fund sells
a security and makes a simultaneous commitment to the buyer to repurchase the security at a specified time and price. A reverse
repurchase agreement may be considered the economic equivalent of borrowing by the fund. Reverse repurchase agreements permit the
fund to maintain liquidity and earn income over periods of time as short as overnight. The seller must maintain with the fund’s
custodian collateral equal to at least 100% of the repurchase price, including accrued interest, as monitored daily by the investment
adviser. The fund will only enter into reverse repurchase agreements involving securities in which it can invest and with selected
banks and securities dealers whose financial condition is monitored by the investment adviser. If the buyer under the reverse repurchase
agreement defaults, the fund may incur a loss if the value of the security underlying the agreement has declined during the period
prior to the fund being able to obtain the securities and may incur costs in connection with its attempt to obtain the security.
If bankruptcy proceedings are commenced with respect to the buyer, realization of the security by the fund may be delayed or limited.
Cash and cash equivalents —
The fund may hold cash or invest in cash equivalents. Cash equivalents include (
a
) commercial paper (for
example, short-term notes with maturities typically up to 12 months in length issued by corporations, governmental bodies or bank/corporation
sponsored conduits (asset-backed commercial paper)); (
b
) short-term bank obligations (for example, certificates of deposit,
bankers’ acceptances (time drafts on a commercial bank where the bank accepts an irrevocable obligation to pay at maturity))
or bank notes; (
c
) savings association and savings bank obligations (for example, bank notes and certificates of deposit
issued by savings banks or savings associations); (
d
) securities of the U.S. government, its agencies or instrumentalities
that mature, or that may be redeemed, in one year or less; and (
e
) corporate bonds and notes that mature, or that
may be redeemed, in one year or less.
Restricted or illiquid securities
—
The fund may purchase securities subject to restrictions on resale. Restricted securities may only be sold pursuant
to an exemption from registration under the Securities Act of 1933, as amended (the “1933 Act”), or in a registered
public offering. Restricted securities held by the fund are often eligible for resale under Rule 144A, an exemption under the 1933
Act allowing for resales to “Qualified Institutional Buyers.” Where registration is required, the holder of a registered
security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time
it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement.
Difficulty in selling such securities may result in a loss to the fund or cause it to incur additional administrative costs.
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Securities (including restricted securities)
not actively traded will be considered illiquid unless they have been specifically determined to be liquid under procedures adopted
by the fund’s board of trustees, taking into account factors such as the frequency and volume of trading, the commitment
of dealers to make markets and the availability of qualified investors, all of which can change from time to time. The fund may
incur certain additional costs in disposing of illiquid securities.
Maturity —
There are no
restrictions on the maturity composition of the portfolio. The fund invests in debt securities with a wide range of maturities.
Under normal market conditions, longer term securities yield more than shorter term securities, but are subject to greater price
fluctuations.
* * * * * *
Portfolio turnover —
Portfolio
changes will be made without regard to the length of time particular investments may have been held. Short-term trading profits
are not the fund’s objective, and changes in its investments are generally accomplished gradually, though short-term transactions
may occasionally be made. High portfolio turnover may involve correspondingly greater transaction costs in the form of dealer spreads
or brokerage commissions. It may also result in the realization of net capital gains, which are taxable when distributed to shareholders,
unless the shareholder is exempt from taxation or his or her account is tax-favored.
Fixed-income securities are generally
traded on a net basis and usually neither brokerage commissions nor transfer taxes are involved. Transaction costs are usually
reflected in the spread between the bid and asked price.
The fund’s portfolio turnover
rate for the fiscal year ended November 30, 2013 was 543%. The portfolio turnover rate would equal 100% if each security in the
fund’s portfolio were replaced once per year.
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Fund policies
All percentage limitations in the following
fund policies are considered at the time securities are purchased and are based on the fund’s net assets unless otherwise
indicated. None of the following policies involving a maximum percentage of assets will be considered violated unless the excess
occurs immediately after, and is caused by, an acquisition by the fund. In managing the fund, the fund’s investment adviser
may apply more restrictive policies than those listed below.
Fundamental policies —
The
fund has adopted the following policies, which may not be changed without approval by holders of a majority of its outstanding
shares. Such majority is currently defined in the Investment Company Act of 1940, as amended (the “1940 Act”), as the
vote of the lesser of (
a
) 67% or more of the voting securities present at a shareholder meeting, if the holders of
more than 50% of the outstanding voting securities are present in person or by proxy, or (
b
) more than 50% of the outstanding
voting securities.
1. Except as permitted by (
i
)
the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment
companies, or interpretations or modifications thereof by the U.S. Securities and Exchange Commission (“SEC”), SEC
staff or other authority of competent jurisdiction, or (
ii
) exemptive or other relief or permission from the SEC, SEC staff
or other authority of competent jurisdiction, the fund may not:
|
b.
|
Issue senior securities;
|
|
c.
|
Underwrite the securities of other issuers;
|
|
d.
|
Purchase or sell real estate or commodities;
|
|
f.
|
Purchase the securities of any issuer if, as a result of such purchase, the fund’s investments
would be concentrated in any particular industry.
|
2. The fund may not invest in companies
for the purpose of exercising control or management.
Nonfundamental policies —
The following policy may be changed without shareholder approval:
The fund may not acquire securities of
open-end investment companies or unit investment trusts registered under the 1940 Act in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G)
of the 1940 Act.
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Additional information about the fund’s
policies —
The information below is not part of the fund’s fundamental or nonfundamental policies. This information
is intended to provide a summary of what is currently required or permitted by the 1940 Act and the rules and regulations thereunder,
or by the interpretive guidance thereof by the SEC or SEC staff, for particular fundamental policies of the fund. Information is
also provided regarding the fund’s current intention with respect to certain investment practices permitted by the 1940 Act.
For purposes of fundamental policy
1a, the fund may borrow money in amounts of up to 33-1/3% of its total assets from banks for any purpose. Additionally, the fund
may borrow up to 5% of its total assets from banks or other lenders for temporary purposes (a loan is presumed to be for temporary
purposes if it is repaid within 60 days and is not extended or renewed). A reverse repurchase agreement may be considered the
economic equivalent of borrowing by the fund; however, to the extent that the fund covers its commitments under a reverse repurchase
agreement (and under certain similar agreements and transactions) by segregating or earmarking liquid assets equal in value to
the amount of the fund’s commitment, such agreement will not be considered borrowing by the fund.
For purposes of fundamental policy 1b,
a senior security does not include any promissory note or evidence of indebtedness if such loan is for temporary purposes only
and in an amount not exceeding 5% of the value of the total assets of the fund at the time the loan is made (a loan is presumed
to be for temporary purposes if it is repaid within 60 days and is not extended or renewed). Further, to the extent the fund covers
its commitments under certain types of agreements and transactions, including reverse repurchase agreements, mortgage-dollar-roll
transactions, sale-buybacks, when-issued, delayed-delivery, or forward commitment transactions, and other similar trading practices,
by segregating or earmarking liquid assets equal in value to the amount of the fund’s commitment, such agreement or transaction
will not be considered a senior security by the fund.
For purposes of fundamental policy 1c,
the policy will not apply to the fund to the extent the fund may be deemed an underwriter within the meaning of the 1933 Act in
connection with the purchase and sale of fund portfolio securities in the ordinary course of pursuing its investment objectives
and strategies.
For purposes of fundamental policy 1e,
the fund may not lend more than 33-1/3% of its total assets, provided that this limitation shall not apply to the fund’s
purchase of debt obligations.
For purposes of fundamental policy
1f, the fund may not invest more than 25% of its total assets in the securities of issuers in a particular industry. This policy
does not apply to investments in securities of the U.S. Government, its agencies or Government Sponsored Enterprises or repurchase
agreements with respect thereto.
The fund currently does not intend to
engage in securities lending or purchase securities on margin.
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Management of the fund
Board of trustees and officers
“Independent” trustees
1
The fund’s nominating and governance
committee and board select independent trustees with a view toward constituting a board that, as a body, possesses the qualifications,
skills, attributes and experience to appropriately oversee the actions of the fund’s service providers, decide upon matters
of general policy and represent the long-term interests of fund shareholders. In doing so, they consider the qualifications, skills,
attributes and experience of the current board members, with a view toward maintaining a board that is diverse in viewpoint, experience,
education and skills.
The fund seeks independent trustees who
have high ethical standards and the highest levels of integrity and commitment, who have inquiring and independent minds, mature
judgment, good communication skills, and other complementary personal qualifications and skills that enable them to function effectively
in the context of the fund’s board and committee structure and who have the ability and willingness to dedicate sufficient
time to effectively fulfill their duties and responsibilities.
Each independent trustee has a significant
record of accomplishments in governance, business, not-for-profit organizations, government service, academia, law, accounting
or other professions. Although no single list could identify all experience upon which the fund’s independent trustees draw
in connection with their service, the following table summarizes key experience for each independent trustee. These references
to the qualifications, attributes and skills of the trustees are pursuant to the disclosure requirements of the SEC, and shall
not be deemed to impose any greater responsibility or liability on any trustee or the board as a whole. Notwithstanding the accomplishments
listed below, none of the independent trustees is considered an “expert” within the meaning of the federal securities
laws with respect to information in the fund’s registration statement.
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Name,
age and
position with fund
(year first elected
as a trustee
2
)
|
Principal
occupation(s)
during the
past five years
|
Number
of
portfolios
overseen
by
trustee
|
Other
directorships
3
held
by trustee during the past five years
|
Other
relevant experience
|
William
H. Baribault, 68
Trustee (2012)
|
Chairman
of the Board and CEO, Oakwood Enterprises (private investment and consulting)
|
69
|
Former
director of Henry Co. (until 2009); Professional Business Bank (until 2009)
|
·
Service as chief executive officer for multiple companies
·
Corporate board experience
·
Service on advisory and trustee boards for charitable, educational and nonprofit organizations
|
James
G. Ellis, 67
Trustee (2012)
|
Dean
and Professor of Marketing, Marshall School of Business, University of Southern California
|
69
|
Quiksilver,
Inc.
|
·
Service as chief executive officer for multiple companies
·
Corporate board experience
·
Service on advisory and trustee boards for charitable, municipal and nonprofit organizations
·
M.B.A.
|
Leonard
R.
Fuller, 67
Trustee (2012)
|
President
and CEO, Fuller Consulting (financial management consulting firm)
|
69
|
None
|
·
Former partner, public accounting firm
·
Financial management consulting
·
Service on advisory and trustee boards for municipal, educational and nonprofit organizations
·
M.B.A.
|
R.
Clark
Hooper, 67
Chairman of the Board (Independent and Non-Executive) (2012)
|
Private
investor
|
71
|
JPMorgan
Value Opportunities Fund, Inc.; The Swiss Helvetia Fund, Inc.
|
·
Senior regulatory and management experience, National Association of Securities Dealers (now FINRA)
·
Service on trustee boards for charitable, educational and nonprofit organizations
|
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Name,
age and
position with fund
(year first elected
as a trustee
2
)
|
Principal
occupation(s)
during the
past five years
|
Number
of
portfolios
overseen
by
trustee
|
Other
directorships
3
held
by trustee during the past five years
|
Other
relevant experience
|
Merit
E. Janow, 55
Trustee (2012)
|
Dean
and Professor, Columbia University, School of International and Public Affairs
|
68
|
The
NASDAQ Stock Market LLC; Trimble Navigation Limited
|
·
Service with Office of the U.S. Trade Representative and U.S. Department of Justice
·
Corporate board experience
·
Service on advisory and trustee boards for charitable, educational and nonprofit organizations
·
Experience as corporate lawyer
·
J.D.
|
Laurel
B. Mitchell, Ph.D., 58
Trustee (2012)
|
Clinical
Professor and Director, Accounting Program, University of Redlands
|
65
|
None
|
·
Assistant professor, accounting
·
Service in the Office of Chief Accountant and Enforcement Division of the U.S. Securities and Exchange Commission
·
Experience in corporate management and public accounting
·
Service on advisory and trustee boards for charitable, educational and nonprofit organizations
·
Ph.D., accounting
·
Formerly licensed as C.P.A.
|
Frank
M. Sanchez, 70
Trustee (2012)
|
Principal,
The Sanchez Family Corporation dba McDonald’s Restaurants (McDonald’s licensee)
|
65
|
None
|
·
Senior academic leadership position
·
Corporate board experience
·
Service on advisory and trustee boards for charitable and nonprofit organizations
·
Ph.D., education administration and finance
|
American Funds Inflation Linked Bond Fund - Page
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|
Name,
age and
position with fund
(year first elected
as a trustee
2
)
|
Principal
occupation(s)
during the
past five years
|
Number
of
portfolios
overseen
by
trustee
|
Other
directorships
3
held
by trustee during the past five years
|
Other
relevant experience
|
Margaret
Spellings, 56
Trustee (2012)
|
President,
George W. Bush Foundation; former President and CEO, Margaret Spellings & Company (public policy and strategic consulting);
former President, U.S. Chamber Foundation and Senior Advisor to the President and CEO, U.S. Chamber of Commerce; former U.S.
Secretary of Education, U.S. Department of Education
|
69
|
Former
director of Apollo Education Group, Inc. (until 2013)
|
·
Former Assistant to the President for Domestic Policy, The White House
·
Former senior advisor to the Governor of Texas
·
Service on advisory and trustee boards for charitable and nonprofit organizations
|
Steadman
Upham, Ph.D., 64
Trustee (2012)
|
President
and University Professor, The University of Tulsa
|
68
|
None
|
·
Senior academic leadership positions for multiple universities
·
Service on advisory and trustee boards for educational and nonprofit organizations
·
Ph.D., anthropology
|
American Funds Inflation Linked Bond Fund - Page
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|
“Interested” trustee(s)
4,5
Interested trustees have similar qualifications,
skills and attributes as the independent trustees. Interested trustees are senior executive officers of Capital Research and Management
Company or its affiliates. This management role with the fund’s service providers also permits them to make a significant
contribution to the fund’s board.
Name,
age and
position with fund
(year first elected
as a director/officer
2
)
|
Principal
occupation(s)
during the
past five years
and positions
held with affiliated
entities or the
Principal Underwriter
of the fund
|
Number
of
portfolios
overseen
by trustee
|
Other
directorships
3
held by trustee
during the
past five years
|
John
H. Smet, 57
Trustee (2012)
|
Senior
Vice President – Capital Fixed Income Investors, Capital Research and Management Company; Director, Capital Research
and Management Company
|
20
|
None
|
American Funds Inflation Linked Bond Fund - Page
18
|
Other officers
5
Name,
age and
position with fund
(year first elected
as an officer
2
)
|
Principal
occupation(s) during the past five years
and positions held with affiliated entities
or the Principal Underwriter of the fund
|
David
A. Hoag, 48
President (2012)
|
Senior
Vice President – Capital Fixed Income Investors, Capital Research and Management Company; Senior Vice President –
Capital Fixed Income Investors, Capital Guardian Trust Company*; Senior Vice President – Capital Fixed Income Investors,
Capital Bank and Trust Company*
|
Kristine
M. Nishiyama, 43
Senior Vice President (2012)
|
Senior
Vice President and Senior Counsel – Fund Business Management Group, Capital Research and Management Company; Senior
Vice President and General Counsel, Capital Bank and Trust Company*
|
Courtney
R. Taylor, 38
Secretary (2012)
|
Assistant
Vice President – Fund Business Management Group, Capital Research and Management Company
|
Karl
C. Grauman, 46
Treasurer (2012)
|
Vice
President – Fund Business Management Group, Capital Research and Management Company
|
Steven
I. Koszalka, 49
Assistant Secretary (2012)
|
Vice
President – Fund Business Management Group, Capital Research and Management Company
|
Brian
C. Janssen, 41
Assistant Treasurer (2012)
|
Vice
President — Fund Business Management Group, Capital Research and Management Company
|
Dori
Laskin, 62
Assistant Treasurer (2012)
|
Vice
President – Fund Business Management Group, Capital Research and Management Company
|
|
*
|
Company affiliated with Capital Research and Management Company.
|
|
1
|
The term “independent” trustee refers to a trustee who is not an “interested person” of the fund within
the meaning of the 1940 Act.
|
|
2
|
Trustees and officers of the fund serve until their resignation, removal or retirement.
|
|
3
|
This
includes
all
directorships/trusteeships
(other
than
those
in
the
American
Funds
or
other
funds
managed
by
Capital
Research
and
Management
Company
or
its
affiliates)
that
are
held
by
each
trustee
as
a
director/trustee
of
a
public
company
or
a
registered
investment
company.
Unless
otherwise
noted,
all
directorships/trusteeships
are
current.
|
|
4
|
“Interested
persons”
of
the
fund
within
the
meaning
of
the
1940
Act,
on
the
basis
of
their
affiliation
with
the
fund’s
investment
adviser,
Capital
Research
and
Management
Company,
or
affiliated
entities
(including
the
fund’s
principal
underwriter).
|
|
5
|
All
of
the
officers
listed
are
officers
and/or
directors/trustees
of
one
or
more
of
the
other
funds
for
which
Capital
Research
and
Management
Company
serves
as
investment
adviser.
|
The address for all trustees and
officers of the fund is 333 South Hope Street, 55th Floor, Los Angeles, California 90071, Attention: Secretary.
American Funds Inflation Linked Bond Fund - Page
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|
Fund shares owned by trustees
as of December 31, 2013:
Name
|
Dollar
range
1
of fund
shares owned
|
Aggregate
dollar range
1
of shares
owned in
all funds
in the
American Funds
family overseen
by trustee
|
Dollar
range
1,2
of
independent
trustees
deferred compensation
3
allocated
to fund
|
Aggregate
dollar
range
1,2
of
independent
trustees
deferred
compensation
3
allocated to
all funds
within
American Funds
family overseen
by trustee
|
“Independent” trustees
|
William
H. Baribault
|
N/A
|
Over
$100,000
|
N/A
|
$10,001
– $50,000
|
James
G. Ellis
|
N/A
|
Over
$100,000
|
N/A
|
N/A
|
Leonard
R. Fuller
|
N/A
|
Over
$100,000
|
N/A
|
Over
$100,000
|
R.
Clark Hooper
|
N/A
|
Over
$100,000
|
N/A
|
Over
$100,000
|
Merit
E. Janow
|
N/A
|
Over
$100,000
|
N/A
|
N/A
|
Laurel
B. Mitchell
|
N/A
|
Over
$100,000
|
N/A
|
$10,001
– $50,000
|
Frank
M. Sanchez
|
N/A
|
$10,001
– $50,000
|
N/A
|
N/A
|
Margaret
Spellings
|
N/A
|
Over
$100,000
|
N/A
|
$50,001
– $100,000
|
Steadman
Upham
|
N/A
|
Over
$100,000
|
N/A
|
Over
$100,000
|
Name
|
Dollar
range
1
of fund
shares owned
|
Aggregate
dollar range
1
of shares
owned in
all funds
in the
American Funds
family overseen
by trustee
|
“Interested” trustees
|
John
H. Smet
|
N/A
|
Over
$100,000
|
|
1
|
Ownership disclosure is made using the following ranges: None; $1 – $10,000; $10,001 – $50,000; $50,001 –
$100,000; and Over $100,000. The amounts listed for “interested” trustees include shares owned through The Capital
Group Companies, Inc. retirement plan and 401(k) plan.
|
|
2
|
N/A
indicates
that
the
listed
individual,
as
of
December
31,
2013,
was
not
a
trustee
of
a
particular
fund,
did
not
allocate
deferred
compensation
to
the
fund
or
did
not
participate
in
the
deferred
compensation
plan.
|
|
3
|
Eligible
trustees
may
defer
their
compensation
under
a
nonqualified
deferred
compensation
plan.
Amounts
deferred
by
the
trustee
accumulate
at
an
earnings
rate
determined
by
the
total
return
of
one
or
more
American
Funds
as
designated
by
the
trustee.
|
American Funds Inflation Linked Bond Fund - Page
20
|
Trustee compensation —
No
compensation is paid by the fund to any officer or trustee who is a director, officer or employee of the investment adviser or
its affiliates. Except for the independent trustees listed in the “Board of trustees and officers — ‘Independent’
trustees” table under the “Management of the fund” section in this statement of additional information, all other
officers and trustees of the fund are directors, officers or employees of the investment adviser or its affiliates. The boards
of funds advised by the investment adviser typically meet either individually or jointly with the boards of one or more other such
funds with substantially overlapping board membership (in each case referred to as a “board cluster”). The fund typically
pays each independent trustee an annual fee, which ranges from $53 to $106, based primarily on the total number of board clusters
on which that independent trustee serves.
In addition, the fund generally pays
independent trustees attendance and other fees for meetings of the board and its committees. Board and committee chairs receive
additional fees for their services.
Independent trustees also receive attendance
fees for certain special joint meetings and information sessions with directors and trustees of other groupings of funds advised
by the investment adviser. The fund and the other funds served by each independent trustee each pay an equal portion of these attendance
fees.
No pension or retirement benefits are
accrued as part of fund expenses. Independent trustees may elect, on a voluntary basis, to defer all or a portion of their fees
through a deferred compensation plan in effect for the fund. The fund also reimburses certain expenses of the independent trustees.
American Funds Inflation Linked Bond Fund - Page
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|
Trustee compensation earned during
the fiscal year ended November 30, 2013:
Name
|
Aggregate
compensation
(including voluntarily
deferred compensation
1
)
from the fund
|
Total
compensation (including
voluntarily deferred
compensation
1
)
from all funds managed by
Capital Research and
Management
Company or its affiliates
|
William
H. Baribault
|
$18
|
$338,924
|
James
G. Ellis
|
9
|
327,383
|
Leonard
R. Fuller
2
|
17
|
369,633
|
R.
Clark Hooper
|
22
|
471,680
|
Merit
E. Janow
|
10
|
346,132
|
Laurel
B. Mitchell
2
|
18
|
281,512
|
Frank
M. Sanchez
|
16
|
258,013
|
Margaret
Spellings
2
|
9
|
299,382
|
Steadman
Upham
2
|
16
|
264,632
|
|
1
|
Amounts
may
be
deferred
by
eligible
trustees
under
a
nonqualified
deferred
compensation
plan
adopted
by
the
fund
in
1993.
Deferred
amounts
accumulate
at
an
earnings
rate
determined
by
the
total
return
of
one
or
more
American
Funds
as
designated
by
the
trustees.
Compensation
shown
in
this
table
for
the
fiscal
year
ended
November
30,
2013
does
not
include
earnings
on
amounts
deferred
in
previous
fiscal
years.
See
footnote
2
to
this
table
for
more
information.
|
|
2
|
Since
the
deferred
compensation
plan’s
adoption,
the
total
amount
of
deferred
compensation
accrued
by
the
fund
(plus
earnings
thereon)
through
the
end
of
the
2013
fiscal
year
for
participating
trustees
is
as
follows:
Leonard
R.
Fuller
($2),
Laurel
B.
Mitchell
($1),
Margaret
Spellings
($2)
and
Steadman
Upham
($12).
Amounts
deferred
and
accumulated
earnings
thereon
are
not
funded
and
are
general
unsecured
liabilities
of
the
fund
until
paid
to
the
trustees.
|
As of January 1, 2014, the officers
and trustees of the fund and their families, as a group, owned beneficially or of record less than 1% of the outstanding shares
of the fund.
Fund organization and the board
of trustees —
The fund, an open-end, diversified management investment company, was organized as a Delaware statutory
trust on May 25, 2012. All fund operations are supervised by the fund’s board of trustees which meets periodically and performs
duties required by applicable state and federal laws.
Delaware law charges trustees with the
duty of managing the business affairs of the trust. Trustees are considered to be fiduciaries of the trust and owe duties of care
and loyalty to the trust and its shareholders.
Independent board members are paid certain
fees for services rendered to the fund as described above. They may elect to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund.
The fund has several different classes
of shares. Shares of each class represent an interest in the same investment portfolio. Each class has pro rata rights as to voting,
redemption, dividends and liquidation, except that each class bears different distribution expenses and may bear different transfer
agent fees and other expenses properly attributable to the particular class as approved by the board of trustees and set forth
in the fund’s rule 18f-3 Plan. Each class’ shareholders have exclusive voting rights with respect to the respective
class’ rule 12b-1 plans adopted in connection with the distribution of shares and on other matters in which the interests
of one class are different from interests in another class. Shares of all classes of the fund vote together on matters that affect
all classes in substantially the same manner. Each class votes as a class on matters that affect that class alone. Note that 529
college savings plan account owners invested in Class 529 shares are not shareholders of the fund and,
American Funds Inflation Linked Bond Fund - Page
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|
accordingly, do not have the rights of
a shareholder, such as the right to vote proxies relating to fund shares. As the legal owner of the fund’s Class 529 shares,
the Virginia College Savings Plan
SM
will vote any proxies relating to the fund’s Class 529 shares. In addition,
the trustees have the authority to establish new series and classes of shares, and to split or combine outstanding shares into
a greater or lesser number, without shareholder approval.
The fund does not hold annual meetings
of shareholders. However, significant matters that require shareholder approval, such as certain elections of board members or
a change in a fundamental investment policy, will be presented to shareholders at a meeting called for such purpose. Shareholders
have one vote per share owned.
The fund’s declaration of trust
and by-laws, as well as separate indemnification agreements with independent trustees, provide in effect that, subject to certain
conditions, the fund will indemnify its officers and trustees against liabilities or expenses actually and reasonably incurred
by them relating to their service to the fund. However, trustees are not protected from liability by reason of their willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office.
Removal of trustees by shareholders
—
At any meeting of shareholders, duly called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of two-thirds of the votes entitled to be cast, remove any trustee from office and may elect a successor or
successors to fill any resulting vacancies for the unexpired terms of removed trustees. In addition, the trustees of the fund will
promptly call a meeting of shareholders for the purpose of voting upon the removal of any trustees when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.
Leadership structure —
The board’s chair is currently an independent trustee who is not an “interested person” of the fund within the
meaning of the 1940 Act. The board has determined that an independent chair facilitates oversight and enhances the effectiveness
of the board. The independent chair’s duties include, without limitation, generally presiding at meetings of the board,
approving board meeting schedules and agendas, leading meetings of the independent trustees in executive session, facilitating
communication with committee chairs, and serving as the principal independent trustee contact for fund management and independent
counsel to the fund.
Risk oversight —
Day-to-day
management of the fund, including risk management, is the responsibility of the fund’s contractual service providers, including
the fund’s investment adviser, principal underwriter/distributor and transfer agent. Each of these entities is responsible
for specific portions of the fund’s operations, including the processes and associated risks relating to the fund’s
investments, integrity of cash movements, financial reporting, operations and compliance. The board of trustees oversees the service
providers’ discharge of their responsibilities, including the processes they use to manage relevant risks. In that regard,
the board receives reports regarding the operations of the fund’s service providers, including risks. For example, the board
receives reports from investment professionals regarding risks related to the fund’s investments and trading. The board also
receives compliance reports from the fund’s and the investment adviser’s chief compliance officers addressing certain
areas of risk.
Committees of the fund’s board,
as well as joint committees of independent board members of funds managed by Capital Research and Management Company, also explore
risk management procedures in particular areas and then report back to the full board. For example, the fund’s audit committee
oversees the processes and certain attendant risks relating to financial reporting, valuation of fund assets, and related controls.
Similarly, a joint review and advisory committee oversees certain risk controls relating to the fund’s transfer agency services.
American Funds Inflation Linked Bond Fund - Page
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|
Not all risks that may affect the fund
can be identified or processes and controls developed to eliminate or mitigate their effect. Moreover, it is necessary to bear
certain risks (such as investment-related risks) to achieve the fund’s objectives. As a result of the foregoing and other
factors, the ability of the fund’s service providers to eliminate or mitigate risks is subject to limitations.
Committees of the board of trustees
—
The fund has an audit committee comprised of William H. Baribault, Leonard R. Fuller, Laurel B. Mitchell, Frank
M. Sanchez and Steadman Upham, none of whom is an “interested person” of the fund within the meaning of the 1940 Act.
The committee provides oversight regarding the fund’s accounting and financial reporting policies and practices, its internal
controls and the internal controls of the fund’s principal service providers. The committee acts as a liaison between the
fund’s independent registered public accounting firm and the full board of trustees. The audit committee held six meetings
during the 2013 fiscal year.
The fund has a contracts committee
comprised of William H. Baribault, James G. Ellis, Leonard R. Fuller, R. Clark Hooper, Merit E. Janow, Laurel B. Mitchell, Frank
M. Sanchez, Margaret Spellings and Steadman Upham, none of whom is an “interested person” of the fund within the meaning
of the 1940 Act. The committee’s principal function is to request, review and consider the information deemed necessary
to evaluate the terms of certain agreements between the fund and its investment adviser or the investment adviser’s affiliates,
such as the Investment Advisory and Service Agreement, Principal Underwriting Agreement, Administrative Services Agreement and
Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew or continue, and
to make its recommendations to the full board of trustees on these matters. The contracts committee held one meeting during the
2013 fiscal year.
The fund has a nominating and governance
committee comprised of William H. Baribault, James G. Ellis, Leonard R. Fuller, R. Clark Hooper, Merit E. Janow, Laurel B. Mitchell,
Frank M. Sanchez and Margaret Spellings, none of whom is an “interested person” of the fund within the meaning of
the 1940 Act. 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. The committee also evaluates,
selects and nominates independent trustee candidates to the full board of trustees. While the committee normally is able to identify
from its own and other 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 fund, addressed to the fund’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 committee. The nominating and governance committee held one meeting during the 2013 fiscal year.
Proxy voting procedures and principles
—
The fund’s investment adviser, in consultation with the fund’s board, has adopted Proxy Voting Procedures
and Principles (the “Principles”) with respect to voting proxies of securities held by the fund, other American Funds
and American Funds Insurance Series. The complete text of these principles is available on the American Funds website at americanfunds.com.
Proxies are voted by a committee of the appropriate equity investment division of the investment adviser under authority delegated
by the funds’ boards. Therefore, if more than one fund invests in the same company, they may vote differently on the same
proposal. In addition, the funds’ boards monitor the proxy voting process and generally provide guidance with respect to
the Principles through a joint proxy committee of the American Funds.
The investment adviser seeks to vote
all U.S. proxies; however, in certain circumstances it may be impracticable or impossible to do so. Proxies for companies outside
the U.S. also are voted, provided there is sufficient time and information available. After a proxy statement is received, the
investment adviser prepares a summary of the proposals contained in the proxy statement. A discussion of any potential conflicts
of interest also is included in the summary. For proxies of securities managed by a
American Funds Inflation Linked Bond Fund - Page
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|
particular investment division of the
investment adviser, the initial voting recommendation is made by one or more of the division’s investment analysts familiar
with the company and industry. A second recommendation is made by a proxy coordinator (an investment analyst or other individual
with experience in corporate governance and proxy voting matters) within the appropriate investment division, based on knowledge
of these Principles and familiarity with proxy-related issues. The proxy summary and voting recommendations are made available
to the appropriate proxy voting committee for a final voting decision.
The analyst and proxy coordinator making
voting recommendations are responsible for noting any potential material conflicts of interest. One example might be where a board
member of one or more American Funds is also a board member of a company whose proxy is being voted. In such instances, proxy voting
committee members are alerted to the potential conflict. The proxy voting committee may then elect to vote the proxy or seek a
third-party recommendation or vote of an ad hoc group of committee members.
The Principles, which have been in effect
in substantially their current form for many years, provide an important framework for analysis and decision-making by all funds.
However, they are not exhaustive and do not address all potential issues. The Principles provide a certain amount of flexibility
so that all relevant facts and circumstances can be considered in connection with every vote. As a result, each proxy received
is voted on a case-by-case basis considering the specific circumstances of each proposal. The voting process reflects the funds’
understanding of the company’s business, its management and its relationship with shareholders over time.
Information regarding how the fund
voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available on
or about September 1 of each year (
a
) without charge, upon request by calling American Funds Service Company at (800) 421-4225,
(
b
) on the American Funds website and (
c
) on the SEC’s website at sec.gov.
The following summary sets forth the
general positions of the American Funds, American Funds Insurance Series and the investment adviser on various proposals. A copy
of the full Principles is available upon request, free of charge, by calling American Funds Service Company or visiting the American
Funds website.
Director matters —
The election of a company’s slate of nominees for director generally is supported. Votes may be withheld for some or all
of the nominees if this is determined to be in the best interest of shareholders. Separation of the chairman and CEO positions
also may be supported.
Governance provisions —
Typically, proposals to declassify a board (elect all directors annually) are supported based on the belief that this increases
the directors’ sense of accountability to shareholders. Proposals for cumulative voting generally are supported in order
to promote management and board accountability and an opportunity for leadership change. Proposals designed to make director elections
more meaningful, either by requiring a majority vote or by requiring any director receiving more withhold votes than affirmative
votes to tender his or her resignation, generally are supported.
Shareholder rights —
Proposals to repeal an existing poison pill generally are supported. (There may be certain circumstances, however, when a proxy
voting committee of a fund or an investment division of the investment adviser believes that a company needs to maintain anti-takeover
protection.) Proposals to eliminate the right of shareholders to act by written consent or to take away a shareholder’s right
to call a special meeting typically are not supported.
American Funds Inflation Linked Bond Fund - Page
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|
Compensation and benefit plans
—
Option plans are complicated, and many factors are considered in evaluating a plan. Each plan is evaluated based on
protecting shareholder interests and a knowledge of the company and its management. Considerations include the pricing (or repricing)
of options awarded under the plan and the impact of dilution on existing shareholders from past and future equity awards. Compensation
packages should be structured to attract, motivate and retain existing employees and qualified directors; however, they should
not be excessive.
Routine matters —
The ratification of auditors, procedural matters relating to the annual meeting and changes to company name are examples of items
considered routine. Such items generally are voted in favor of management’s recommendations unless circumstances indicate
otherwise.
American Funds Inflation Linked Bond Fund - Page
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|
Principal fund shareholders —
The following table identifies those investors who own of record, or are known by the fund to own beneficially, 5%
or more of any class of its shares as of the opening of business on January 1, 2014. Unless otherwise indicated, the ownership
percentages below represent ownership of record rather than beneficial ownership.
Name
and address
|
Ownership
|
Ownership
percentage
|
Capital Research & Management Company
Corporate Account
Los Angeles, CA
|
Record
|
Class
A
|
100.00%
|
American Funds 2020 Target Date Retirement
Fund
Los Angeles, CA
|
Record
|
Class
R-6
|
30.86
|
American Funds 2025 Target Date Retirement
Fund
Los Angeles, CA
|
Record
|
Class
R-6
|
29.32
|
American Funds 2010 Target Date Retirement
Fund
Los Angeles, CA
|
Record
|
Class
R-6
|
21.30
|
American Funds 2015 Target Date Retirement
Fund
Los Angeles, CA
|
Record
|
Class
R-6
|
18.52
|
Unless otherwise noted, references
in this statement of additional information to Class F shares, Class R shares or Class 529 shares refer to both F share classes,
all R share classes or all 529 share classes, respectively.
Investment adviser —
Capital Research and Management Company, the fund’s investment adviser, founded in 1931, maintains research facilities in
the United States and abroad (Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong Kong, Singapore and
Tokyo). These facilities are staffed with experienced investment professionals. The investment adviser is located at 333 South
Hope Street, Los Angeles, CA 90071. It is a wholly owned subsidiary of The Capital Group Companies, Inc., a holding company for
several investment management subsidiaries. Capital Research and Management Company manages equity assets through three equity
investment divisions and fixed-income assets through its fixed-income investment division, Capital Fixed Income Investors. The
three equity investment divisions — Capital World Investors, Capital Research Global Investors and Capital International
Investors — make investment decisions independently of one another. Portfolio managers in Capital International Investors
rely on a research team that also provides investment services to institutional clients and other accounts advised by affiliates
of Capital Research and Management Company. The fund is operated
by the investment adviser, which has claimed an exclusion from the definition of the term commodity pool operator under the Commodity
Exchange Act (the “CEA”) with respect to the fund and, therefore, is not subject
to registration or regulation as such under the CEA with respect to the fund.
The investment adviser has adopted policies
and procedures that address issues that may arise as a result of an investment professional’s management of the fund and
other funds and accounts. Potential issues could involve allocation of investment opportunities and trades among funds and accounts,
use of information regarding the timing of fund trades, investment professional compensation and voting relating to portfolio securities.
The investment adviser believes that its policies and procedures are reasonably designed to address these issues.
Compensation of investment professionals
—
As described in the prospectus, the investment adviser uses a system of multiple portfolio managers in managing
fund assets. Notwithstanding, The Capital System
SM
, the fund’s portfolio managers will work together to oversee
the fund’s entire portfolio.
Portfolio managers are paid competitive
salaries by Capital Research and Management Company. In addition, they may receive bonuses based on their individual portfolio
results. Investment professionals also may participate in profit-sharing plans. The relative mix of compensation
American Funds Inflation Linked Bond Fund - Page
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|
represented by bonuses, salary and
profit-sharing plans will vary depending on the individual’s portfolio results, contributions to the organization and other
factors.
To encourage a long-term focus, bonuses
based on investment results are calculated by comparing pretax total investment returns to relevant benchmarks over the most recent
year, a four-year rolling average and an eight-year rolling average with greater weight placed on the four-year and eight-year
rolling averages. For portfolio managers, benchmarks may include measures of the marketplaces in which the fund invests and measures
of the results of comparable mutual funds. The investment results of each of the fund’s portfolio managers may be measured
against one or more benchmarks, depending on his or her investment focus, such as Barclays U.S. Treasury Inflation Protected Securities
Index. From time to time, Capital Research and Management Company may adjust or customize these benchmarks to better reflect the
universe of comparably managed funds of competitive investment management firms.
Portfolio manager fund holdings
and other managed accounts —
As described below, portfolio managers may personally own shares of the fund. In
addition, portfolio managers may manage portions of other mutual funds or accounts advised by Capital Research and Management
Company or its affiliates.
The following table reflects information
as of November 30, 2013:
Portfolio
manager
|
Dollar
range
of fund
shares
owned
1
|
Number
of other
registered
investment
companies (RICs)
for which
portfolio
manager
is a manager
(assets of RICs
in billions)
2
|
Number
of other
pooled
investment
vehicles (PIVs)
for which
portfolio
manager
is a manager
(assets of PIVs
in billions)
3
|
Number
of other
accounts
for which
portfolio
manager
is a manager
(assets of
other accounts
in billions)
4
|
David
A. Hoag
|
N/A
|
5
|
$130.5
|
None
|
None
|
Ritchie
Tuazon
|
N/A
|
None
|
None
|
None
|
|
|
|
|
|
|
|
1
|
Ownership
disclosure
is
made
using
the
following
ranges:
None;
$1
–
$10,000;
$10,001
–
$50,000;
$50,001
–
$100,000;
$100,001
–
$500,000;
$500,001
–
$1,000,000;
and
Over
$1,000,000.
The
amounts
listed
include
shares
owned
through
The
Capital
Group
Companies,
Inc.
retirement
plan
and
401(k)
plan.
|
|
2
|
Indicates
RIC(s)
where
the
portfolio
manager
also
has
significant
responsibilities
for
the
day
to
day
management
of
the
RIC(s).
Assets
noted
are
the
total
net
assets
of
the
RIC(s)
and
are
not
the
total
assets
managed
by
the
individual,
which
is
a
substantially
lower
amount.
|
|
3
|
Represents
funds
advised
or
sub-advised
by
Capital
Research
and
Management
Company
or
its
affiliates
and
sold
outside
the
United
States
and/or
fixed-income
assets
in
institutional
accounts
managed
by
investment
adviser
subsidiaries
of
Capital
Group
International,
Inc.,
an
affiliate
of
Capital
Research
and
Management
Company.
Assets
noted
are
the
total
net
assets
of
the
funds
or
accounts
and
are
not
the
total
assets
managed
by
the
individual,
which
is
a
substantially
lower
amount.
|
|
4
|
Reflects
other
professionally
managed
accounts
held
at
companies
affiliated
with
Capital
Research
and
Management
Company.
Personal
brokerage
accounts
of
portfolio
managers
and
their
families
are
not
reflected.
|
Investment Advisory and Service Agreement
—
The Investment Advisory and Service Agreement (the “Agreement”) between the fund and the investment adviser
will continue in effect until March 31, 2014, unless sooner terminated, and may be renewed from year to year thereafter, provided
that any such renewal has been specifically approved at least annually by (
a
) the board of trustees, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of the fund, and (
b
) the vote of a majority of
trustees who are not parties to the Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Agreement provides that the investment adviser has no liability
to the fund for
American Funds Inflation Linked Bond Fund - Page
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|
its acts or omissions in the performance
of its obligations to the fund not involving willful misconduct, bad faith, gross negligence or reckless disregard of its obligations
under the Agreement. The Agreement also provides that either party has the right to terminate it, without penalty, upon 60 days’
written notice to the other party, and that the Agreement automatically terminates in the event of its assignment (as defined in
the 1940 Act). In addition, the Agreement provides that the investment adviser may delegate all, or a portion of, its investment
management responsibilities to one or more subsidiary advisers approved by the fund’s board, pursuant to an agreement between
the investment adviser and such subsidiary. Any such subsidiary adviser will be paid solely by the investment adviser out of its
fees.
In addition to providing investment advisory
services, the investment adviser furnishes the services and pays the compensation and travel expenses of persons to perform the
fund’s executive, administrative, clerical and bookkeeping functions, and provides suitable office space, necessary small
office equipment and utilities, general purpose accounting forms, supplies and postage used at the fund’s offices. The fund
pays all expenses not assumed by the investment adviser, including, but not limited to: custodian, stock transfer and dividend
disbursing fees and expenses; shareholder recordkeeping and administrative expenses; costs of the designing, printing and mailing
of reports, prospectuses, proxy statements and notices to its shareholders; taxes; expenses of the issuance and redemption of fund
shares (including stock certificates, registration and qualification fees and expenses); expenses pursuant to the fund’s
plans of distribution (described below); legal and auditing expenses; compensation, fees and expenses paid to independent trustees;
association dues; costs of stationery and forms prepared exclusively for the fund; and costs of assembling and storing shareholder
account data.
Under the Agreement, the investment adviser
receives a management fee at the annual rate of .36% of the average daily net assets of the fund. Management fees are paid monthly
and accrued daily.
For the fiscal year ended November
30, 2013, the investment adviser was entitled to receive from the fund a management fee of $129,000.
The investment adviser has agreed
to reimburse a portion of the fees and expenses of the fund during its start-up period. This reimbursement may be adjusted or
discontinued by the investment adviser, subject to any restrictions in the fund’s prospectus. For the period ended November
30, 2013, the total fees and expenses reimbursed by the investment adviser were $38,000. Fees and expenses in the statement of
operations are presented gross of any reimbursements from the investment adviser.
Administrative services —
The investment adviser and its affiliates provide certain administrative services for shareholders of the fund’s Class A,
C, F, R and 529 shares. Services include, but are not limited to, coordinating, monitoring, assisting and overseeing third parties
that provide services to fund shareholders.
These services are provided pursuant
to an Administrative Services Agreement (the “Administrative Agreement”) between the fund and the investment adviser
relating to the fund’s Class A, C, F, R and 529 shares. The Administrative Agreement will continue in effect until March
31, 2014, unless sooner renewed or terminated, and may be renewed from year to year thereafter, provided that any such renewal
has been specifically approved at least annually by the vote of a majority of the members of the fund’s board who are not
parties to the Administrative Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person at
a meeting called for the purpose of voting on such approval. The fund may terminate the Administrative Agreement at any time by
vote of a majority of independent board members. The investment adviser has the right to terminate the Administrative Agreement
upon 60 days’ written notice to the fund. The Administrative Agreement automatically terminates in the event of its assignment
(as defined in the 1940 Act).
American Funds Inflation Linked Bond Fund - Page
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|
Under the Administrative Agreement,
the investment adviser receives an administrative services fee at the annual rate of .01% of the average daily net assets of the
fund attributable to Class A shares and .05% of the average daily net assets of the fund attributable to Class C, F, R and 529
shares for administrative services. Administrative services fees are paid monthly and accrued daily.
During the 2013 fiscal year, administrative
services fees were:
|
Administrative
services fee
|
Class
A
|
$2,000
|
Class
R-6
|
7,000
|
American Funds Inflation Linked Bond Fund - Page
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|
Principal Underwriter and plans of
distribution —
American Funds Distributors, Inc. (the “Principal Underwriter”) is the principal underwriter
of the fund’s shares. The Principal Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071; 6455 Irvine Center
Drive, Irvine, CA 92618; 3500 Wiseman Boulevard, San Antonio, TX 78251; and 12811 North Meridian Street, Carmel, IN 46032.
The Principal Underwriter receives revenues
relating to sales of the fund’s shares, as follows:
|
·
|
For Class A and 529-A shares, the Principal Underwriter receives commission revenue consisting
of the balance of the Class A and 529-A sales charge remaining after the allowances by the Principal Underwriter to investment
dealers.
|
|
·
|
For Class B and 529-B shares sold prior to April 21, 2009, the Principal Underwriter sold its rights
to the .75% distribution-related portion of the 12b-1 fees paid by the fund, as well as any contingent deferred sales charges,
to a third party. The Principal Underwriter compensated investment dealers for sales of Class B and 529-B shares out of the proceeds
of this sale and kept any amounts remaining after this compensation was paid.
|
|
·
|
For Class C and 529-C shares, the Principal Underwriter receives any contingent deferred sales
charges that apply during the first year after purchase.
|
In addition, the fund reimburses the
Principal Underwriter for advancing immediate service fees to qualified dealers and advisors upon the sale of Class C and 529-C
shares. The fund also reimburses the Principal Underwriter for service fees (and, in the case of Class 529-E shares, commissions)
paid on a quarterly basis to intermediaries, such as qualified dealers or financial advisors, in connection with investments in
Class F-1, 529-F-1, 529-E, R-1, R-2, R-3 and R-4 shares.
No commissions, revenues or service
fees were retained by the Principal Underwriter during the 2013 fiscal year.
American Funds Inflation Linked Bond Fund - Page
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|
Plans of distribution —
The fund has adopted plans of distribution (the “Plans”) pursuant to rule 12b-1 under the 1940 Act. The Plans permit
the fund to expend amounts to finance any activity primarily intended to result in the sale of fund shares, provided the fund’s
board of trustees has approved the category of expenses for which payment is being made.
Each Plan is specific to a particular
share class of the fund. As the fund has not adopted a Plan for Class F-2, Class R-5 or Class R-6, no 12b-1 fees are paid from
Class F-2, Class R-5 or Class R-6 share assets and the following disclosure is not applicable to these share classes.
Payments under the Plans may be made
for service-related and/or distribution-related expenses. Service-related expenses include paying service fees to qualified dealers.
Distribution-related expenses include commissions paid to qualified dealers. The amounts estimated actually paid under the Plans
for the past fiscal year, expressed as a percentage of the fund’s average daily net assets attributable to the applicable
share class, are disclosed in the prospectus under “Fees and expenses of the fund.” Further information regarding
the amounts available under each Plan is in the “Plans of Distribution” section of the prospectus.
American Funds Inflation Linked Bond Fund - Page
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|
Following is a brief description of the
Plans:
Class A and 529-A —
For Class A and 529-A shares, up to .25% of the fund’s average daily net assets attributable to such shares is reimbursed
to the Principal Underwriter for paying service-related expenses, and the balance available under the applicable Plan may be paid
to the Principal Underwriter for distribution-related expenses. The fund may annually expend up to .30% for Class A shares and
up to .50% for Class 529-A shares under the applicable Plan.
Distribution-related expenses
for Class A and 529-A shares include dealer commissions and wholesaler compensation paid on sales of shares of $1 million or more
purchased without a sales charge. Commissions on these “no load” purchases (which are described in further detail
under the “Sales Charges” section of this statement of additional information) in excess of the Class A and 529-A
Plan limitations and not reimbursed to the Principal Underwriter during the most recent fiscal quarter are recoverable for 15
months, provided that the reimbursement of such commissions does not cause the fund to exceed the annual expense limit. After
15 months, these commissions are not recoverable.
Class B and 529-B —
The Plans for Class B and 529-B shares provide for payments to the Principal Underwriter of up to .25% of the fund’s average
daily net assets attributable to such shares for paying service-related expenses and .75% for distribution-related expenses, which
include the financing of commissions paid to qualified dealers.
Other share classes (Class C,
529-C, F-1, 529-F-1, 529-E, R-1, R-2, R-3 and R-4) —
The Plans for each of the other share classes that have adopted
Plans provide for payments to the Principal Underwriter for paying service-related and distribution-related expenses of up to the
following amounts of the fund’s average daily net assets attributable to such shares:
Share class
|
Service
related
payments
1
|
Distribution
related
payments
1
|
Total
allowable
under
the Plans
2
|
Class C
|
0.25%
|
0.75%
|
1.00%
|
Class 529-C
|
0.25
|
0.75
|
1.00
|
Class F-1
|
0.25
|
—
|
0.50
|
Class 529-F-1
|
0.25
|
—
|
0.50
|
Class 529-E
|
0.25
|
0.25
|
0.75
|
Class R-1
|
0.25
|
0.75
|
1.00
|
Class R-2
|
0.25
|
0.50
|
1.00
|
Class R-3
|
0.25
|
0.25
|
0.75
|
Class R-4
|
0.25
|
—
|
0.50
|
|
1
|
Amounts in these columns represent the amounts approved by the board of trustees under the applicable Plan.
|
|
2
|
The fund may annually expend the amounts set forth in this column under the current Plans with the approval of the board of
trustees.
|
During the 2013 fiscal year, no 12b-1
expenses were accrued or paid.
Approval of the Plans —
As required by rule 12b-1 and the 1940 Act, the Plans (together with the Principal Underwriting Agreement) have been approved by
the full board of trustees and separately by a majority of the independent trustees of the fund who have no direct or indirect
financial interest in the operation of the Plans or the Principal Underwriting Agreement. In addition, the selection and nomination
of independent trustees of the fund are committed to the discretion of the independent trustees during the existence of the Plans.
American Funds Inflation Linked Bond Fund - Page
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Potential benefits of the Plans to the
fund include quality shareholder services, savings to the fund in transfer agency costs, and benefits to the investment process
from growth or stability of assets. The Plans may not be amended to materially increase the amount spent for distribution without
shareholder approval. Plan expenses are reviewed quarterly by the board of trustees and the Plans must be renewed annually by the
board of trustees.
A portion of the fund’s 12b-1
expense is paid to financial advisors to compensate them for providing ongoing services. If you have questions regarding your
investment in the fund or need assistance with your account, please contact your financial advisor. If you need a financial advisor,
please call American Funds Distributors at (800) 421-4120 for assistance.
Fee to Virginia College Savings Plan
—
With respect to Class 529 shares, as compensation for its oversight and administration, Virginia College Savings Plan
receives a quarterly fee accrued daily and calculated at the annual rate of .10% on the first $30 billion of the net assets invested
in Class 529 shares of the American Funds, .09% on net assets between $30 billion and $60 billion, .08% on net assets between $60
billion and $90 billion, .07% on net assets between $90 billion and $120 billion, and .06% on net assets between $120 billion
and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of average net assets of Class
529 shares of the American Funds for the last month of the prior calendar quarter.
American Funds Inflation Linked Bond Fund - Page
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|
Other compensation to dealers
—
As of July 2013, the top dealers (or their affiliates) that American Funds Distributors anticipates will receive
additional compensation (as described in the prospectus) include:
AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Cetera Financial Group
Cetera Advisor Networks LLC
Cetera Advisors LLC
Cetera Financial Specialists LLC
Cetera Investment Services LLC
Commonwealth Financial Network
D.A. Davidson & Co.
Edward Jones
H. Beck, Inc.
Hefren-Tillotson, Inc.
HTK / Janney Montgomery Group
Hornor, Townsend & Kent, Inc.
Janney Montgomery Scott LLC
ING Financial Advisers, LLC
J. J. B. Hilliard, W. L. Lyons,
LLC
Lincoln Network
Lincoln Financial Advisors Corporation
Lincoln Financial Securities Corporation
LPL Group
LPL Financial LLC
Uvest Investment Services
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Metlife Enterprises
Metlife Securities Inc.
New England Securities
Tower Square Securities, Inc.
Walnut Street Securities, Inc.
MML Investors Services, LLC
Morgan Stanley Smith Barney LLC
NFP Securities, Inc.
Northwestern Mutual Investment Services,
LLC
NPH / Jackson National
Invest Financial Corporation
Investment Centers of America,
Inc.
National Planning Corporation
SII Investments, Inc.
Park Avenue Securities LLC
PFS Investments Inc.
Raymond James Group
Morgan Keegan & Company, Inc.
Raymond James & Associates,
Inc.
Raymond James Financial Services
Inc.
RBC Capital Markets Corporation
Robert W. Baird & Co. Incorporated
Stifel, Nicolaus & Company,
Incorporated
American Funds Inflation Linked Bond Fund - Page
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|
The Advisor Group
FSC Securities Corporation
Royal Alliance Associates, Inc.
SagePoint Financial, Inc.
Transamerica Financial Advisors,
Inc.
UBS Financial Services Inc.
Wells Fargo Network
First Clearing LLC
Wells Fargo Advisors Financial
Network, LLC
Wells Fargo Advisors Investment
Services Group
Wells Fargo Advisors Latin American
Channel
Wells Fargo Advisors Private Client
Group
American Funds Inflation Linked Bond Fund - Page
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Execution of portfolio transactions
The investment adviser places orders
with broker-dealers for the fund’s portfolio transactions. Purchases and sales of equity securities on a securities exchange
or an over-the-counter market are effected through broker-dealers who receive commissions for their services. Generally, commissions
relating to securities traded on foreign exchanges will be higher than commissions relating to securities traded on U.S. exchanges
and may not be subject to negotiation. Equity securities may also be purchased from underwriters at prices that include underwriting
fees. Purchases and sales of fixed-income securities are generally made with an issuer or a primary market-maker acting as principal
with no stated brokerage commission. The price paid to an underwriter for fixed-income securities includes underwriting fees. Prices
for fixed-income securities in secondary trades usually include undisclosed compensation to the market-maker reflecting the spread
between the bid and ask prices for the securities.
In selecting broker-dealers, the investment
adviser strives to obtain “best execution” (the most favorable total price reasonably attainable under the circumstances)
for the fund’s portfolio transactions, taking into account a variety of factors. These factors include the size and type
of transaction, the nature and character of the markets for the security to be purchased or sold, the cost, quality, likely speed
and reliability of the executions, the broker-dealer’s or execution venue’s ability to offer liquidity and anonymity
and the potential for minimizing market impact. The investment adviser considers these factors, which involve qualitative judgments,
when selecting broker-dealers and execution venues for fund portfolio transactions. The investment adviser views best execution
as a process that should be evaluated over time as part of an overall relationship with particular broker-dealer firms. The fund
does not consider the investment adviser as having an obligation to obtain the lowest commission rate available for a portfolio
transaction to the exclusion of price, service and qualitative considerations.
The investment adviser may execute portfolio
transactions with broker-dealers who provide certain brokerage and/or investment research services to it, but only when in the
investment adviser’s judgment the broker-dealer is capable of providing best execution for that transaction. The receipt
of these services permits the investment adviser to supplement its own research and analysis and makes available the views of,
and information from, individuals and the research staffs of other firms. Such views and information may be provided in the form
of written reports, telephone contacts and meetings with securities analysts. These services may include, among other things, reports
and other communications with respect to individual companies, industries, countries and regions, economic, political and legal
developments, as well as scheduling meetings with corporate executives and seminars and conferences related to relevant subject
matters. The investment adviser considers these services to be supplemental to its own internal research efforts and therefore
the receipt of investment research from broker-dealers does not tend to reduce the expenses involved in the investment adviser’s
research efforts. If broker-dealers were to discontinue providing such services it is unlikely the investment adviser would attempt
to replicate them on its own, in part because they would then no longer provide an independent, supplemental viewpoint. Nonetheless,
if it were to attempt to do so, the investment adviser would incur substantial additional costs. Research services that the investment
adviser receives from broker-dealers may be used by the investment adviser in servicing the fund and other funds and accounts that
it advises; however, not all such services will necessarily benefit the fund.
The investment adviser may pay commissions
in excess of what other broker-dealers might have charged, including on an execution-only basis, for certain portfolio transactions
in recognition of brokerage and/or investment research services provided by a broker-dealer. In this regard, the investment adviser
has adopted a brokerage allocation procedure consistent with the requirements of Section 28(e) of the U.S. Securities Exchange
Act of 1934. Section 28(e) permits an investment adviser to cause an account to pay a higher commission to a broker-dealer that
provides certain brokerage and/or investment research services to the investment adviser, if the investment adviser makes a good
American Funds Inflation Linked Bond Fund - Page
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|
faith determination that such commissions
are reasonable in relation to the value of the services provided by such broker-dealer to the investment adviser in terms of that
particular transaction or the investment adviser’s overall responsibility to the fund and other accounts that it advises.
Certain brokerage and/or investment research services may not necessarily benefit all accounts paying commissions to each such
broker-dealer; therefore, the investment adviser assesses the reasonableness of commissions in light of the total brokerage and
investment research services provided by each particular broker-dealer.
In accordance with its internal brokerage
allocation procedure, each equity investment division of the investment adviser periodically assesses the brokerage and investment
research services provided by each broker-dealer from which it receives such services. Using its judgment, each equity investment
division of the investment adviser provides its trading desks with information regarding the relative value of services provided
by particular broker-dealers. Neither the investment adviser nor the fund incurs any obligation to any broker-dealer to pay for
research by generating trading commissions. As part of its ongoing relationships with broker-dealers, the investment adviser routinely
meets with firms, typically at the firm’s request, to discuss the level and quality of the brokerage and research services
provided, as well as the perceived value and cost of such services. In valuing the brokerage and investment research services the
investment adviser receives from broker-dealers in connection with its good faith determination of reasonableness, the investment
adviser does not attribute a dollar value to such services, but rather takes various factors into consideration, including the
quantity, quality and usefulness of the services to the investment adviser.
The investment adviser seeks, on an ongoing
basis, to determine what the reasonable levels of commission rates are in the marketplace. The investment adviser takes various
considerations into account when evaluating such reasonableness, including, (
a
) rates quoted by broker-dealers, (
b
)
the size of a particular transaction in terms of the number of shares and dollar amount, (
c
) the complexity of a particular
transaction, (
d
) the nature and character of the markets on which a particular trade takes place, (
e
) the ability
of a broker-dealer to provide anonymity while executing trades, (
f
) the ability of a broker-dealer to execute large trades
while minimizing market impact, (
g
) the extent to which a broker-dealer has put its own capital at risk, (
h
) the
level and type of business done with a particular broker-dealer over a period of time, (
i
) historical commission rates,
and (
j
) commission rates that other institutional investors are paying.
When executing portfolio transactions
in the same equity security for the funds and accounts, or portions of funds and accounts, over which the investment adviser, through
its equity investment divisions, has investment discretion, each of the investment divisions normally aggregates its respective
purchases or sales and executes them as part of the same transaction or series of transactions. When executing portfolio transactions
in the same fixed-income security for the fund and the other funds or accounts over which it or one of its affiliated companies
has investment discretion, the investment adviser normally aggregates such purchases or sales and executes them as part of the
same transaction or series of transactions. The objective of aggregating purchases and sales of a security is to allocate executions
in an equitable manner among the funds and other accounts that have concurrently authorized a transaction in such security.
The investment adviser may place orders
for the fund’s portfolio transactions with broker-dealers who have sold shares of the funds managed by the investment adviser
or its affiliated companies; however, it does not consider whether a broker-dealer has sold shares of the funds managed by the
investment adviser or its affiliated companies when placing any such orders for the fund’s portfolio transactions.
Forward currency contracts are traded
directly between currency traders (usually large commercial banks) and their customers. The cost to the fund of engaging in such
contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing.
Because such contracts are entered into on a principal basis, their prices usually include undisclosed compensation to the market
maker reflecting the spread between the bid and ask prices for the
American Funds Inflation Linked Bond Fund - Page
38
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contracts. The fund may incur additional
fees in connection with the purchase or sale of certain contracts.
No brokerage commissions were paid
by the fund on portfolio transactions for the fiscal year ended November 30, 2013.
The fund is required to disclose information
regarding investments in the securities of its “regular” broker-dealers (or parent companies of its regular broker-dealers)
that derive more than 15% of their revenue from broker-dealer, underwriter or investment adviser activities. A regular broker-dealer
is (
a
) one of the 10 broker-dealers that received from the fund the largest amount of brokerage commissions by participating,
directly or indirectly, in the fund’s portfolio transactions during the fund’s most recently completed fiscal year;
(
b
) one of the 10 broker-dealers that engaged as principal in the largest dollar amount of portfolio transactions of the
fund during the fund’s most recently completed fiscal year; or (
c
) one of the 10 broker-dealers that sold the largest
amount of securities of the fund during the fund’s most recently completed fiscal year.
At the end of the fund’s most
recent fiscal year, the fund did not have investments in securities of any of its regular broker-dealers.
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Disclosure of portfolio holdings
The fund’s investment adviser,
on behalf of the fund, has adopted policies and procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund’s board of trustees, and compliance will be periodically
assessed by the board in connection with reporting from the fund’s Chief Compliance Officer.
Under these policies and procedures,
the fund’s complete list of portfolio holdings available for public disclosure, dated as of the end of each calendar quarter,
is permitted to be posted on the American Funds website no earlier than the 10th day after such calendar quarter. In practice,
the publicly disclosed portfolio is typically posted on the American Funds website within 30 days after the end of the calendar
quarter. The publicly disclosed portfolio may exclude certain securities when deemed to be in the best interest of the fund as
permitted by applicable regulations. In addition, the fund’s list of top 10 equity portfolio holdings measured by percentage
of net assets, dated as of the end of each calendar month, is permitted to be posted on the American Funds website no earlier
than the 10th day after such month. Such portfolio holdings information may be disclosed to any person pursuant to an ongoing
arrangement to disclose portfolio holdings information to such person no earlier than one day after the day on which the information
is posted on the American Funds website.
The fund’s custodian, outside
counsel, auditor, financial printers, proxy voting service providers, pricing information vendors, consultants or agents operating
under a contract with the investment adviser or its affiliates, co-litigants (such as in connection with a bankruptcy proceeding
related to a fund holding) and certain other third parties described below, each of which requires portfolio holdings information
for legitimate business and fund oversight purposes, may receive the information earlier. See the “General information”
section in this statement of additional information for further information about the fund’s custodian, outside counsel
and auditor.
The fund’s portfolio holdings,
dated as of the end of each calendar month, are made available to up to 20 key broker-dealer relationships with research departments
to help them evaluate the fund for eligibility on approved lists or in model portfolios. These firms include certain of those
listed under the “Other compensation to dealers” section of this statement of additional information and certain broker-dealer
firms that offer trading platforms for registered investment advisers. Monthly holdings may be provided to these intermediaries
no earlier than the 10th day after the end of the calendar month. In practice, monthly holdings are provided within 30 days after
the end of the calendar month. Holdings may also be disclosed more frequently to certain statistical and data collection agencies
including Morningstar, Lipper, Inc., Value Line, Vickers Stock Research, Bloomberg, Overlap and Thomson Financial Research.
Affiliated persons of the fund, including
officers of the fund and employees of the investment adviser and its affiliates, who receive portfolio holdings information are
subject to restrictions and limitations on the use and handling of such information pursuant to applicable codes of ethics, including
requirements not to trade in securities based on confidential and proprietary investment information, to maintain the confidentiality
of such information, and to pre-clear securities trades and report securities transactions activity, as applicable. For more information
on these restrictions and limitations, please see the “Code of ethics” section in this statement of additional information
and the Code of Ethics. Third-party service providers of the fund and other entities, as described in this statement of additional
information, receiving such information are subject to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the fund, such persons will be bound by agreements
(including confidentiality agreements) or fiduciary or other obligations that restrict and limit their use of the information
to legitimate business uses only. None of the fund, its investment adviser or any of their affiliates receives compensation or
other consideration in connection with the disclosure of information about portfolio securities.
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Subject to board policies, the authority
to disclose a fund’s portfolio holdings, and to establish policies with respect to such disclosure, resides with the appropriate
investment-related committees of the fund’s investment adviser. In exercising their authority, the committees determine
whether disclosure of information about the fund’s portfolio securities is appropriate and in the best interest of fund
shareholders. The investment adviser has implemented policies and procedures to address conflicts of interest that may arise from
the disclosure of fund holdings. For example, the investment adviser’s code of ethics specifically requires, among other
things, the safeguarding of information about fund holdings and contains prohibitions designed to prevent the personal use of
confidential, proprietary investment information in a way that would conflict with fund transactions. In addition, the investment
adviser believes that its current policy of not selling portfolio holdings information and not disclosing such information to
unaffiliated third parties until such holdings have been made public on the American Funds website (other than to certain fund
service providers and other third parties for legitimate business and fund oversight purposes) helps reduce potential conflicts
of interest between fund shareholders and the investment adviser and its affiliates.
The fund’s investment adviser
and its affiliates provide investment advice to clients other than the fund that have investment objectives that may be substantially
similar to those of the fund. These clients also may have portfolios consisting of holdings substantially similar to those of
the fund and generally have access to current portfolio holdings information for their accounts. These clients do not owe the
fund’s investment adviser or the fund a duty of confidentiality with respect to disclosure of their portfolio holdings.
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Price of shares
Shares are purchased at the offering
price or sold at the net asset value price next determined after the purchase or sell order is received by the fund or the Transfer
Agent provided that your request contains all information and legal documentation necessary to process the transaction. The Transfer
Agent may accept written orders for the sale of fund shares on a future date. These orders are subject to the Transfer Agent’s
policies, which generally allow shareholders to provide a written request to sell shares at the net asset value on a specified
date no more than five business days after receipt of the order by the Transfer Agent. Any request to sell shares on a future date
will be rejected if the request is not in writing, if the requested transaction date is more than five business days after the
Transfer Agent receives the request or if the request does not contain all information and legal documentation necessary to process
the transaction.
The offering or net asset value price
is effective for orders received prior to the time of determination of the net asset value and, in the case of orders placed with
dealers or their authorized designees, accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of their designees.
In the case of orders sent directly to the fund or the Transfer Agent, an investment dealer should be indicated. The dealer is
responsible for promptly transmitting purchase and sell orders to the Principal Underwriter.
Orders received by the investment dealer
or authorized designee, the Transfer Agent or the fund after the time of the determination of the net asset value will be entered
at the next calculated offering price. Note that investment dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more information about how to purchase through your
intermediary, contact your intermediary directly.
Prices that appear in the newspaper
do not always indicate prices at which you will be purchasing and redeeming shares of the fund, since such prices generally reflect
the previous day’s closing price, while purchases and redemptions are made at the next calculated price. The price you pay
for shares, the offering price, is based on the net asset value per share, which is calculated once daily as of approximately
4 p.m. New York time, which is the normal close of trading on the New York Stock Exchange, each day the New York Stock Exchange
is open. If, for example, the New York Stock Exchange closes at 1 p.m. New York time, the fund’s share price would still
be determined as of 4 p.m. New York time. In such example, portfolio securities traded on the New York Stock Exchange would be
valued at their closing prices unless the investment adviser determines that a fair value adjustment is appropriate due to subsequent
events. The New York Stock Exchange is currently closed on weekends and on the following holidays: New Year’s Day; Martin
Luther King, Jr. Day; Presidents’ Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving; and Christmas
Day. Each share class of the fund has a separately calculated net asset value (and share price).
All portfolio securities of funds managed
by Capital Research and Management Company (other than American Funds Money Market Fund®) are valued, and the net asset values
per share for each share class are determined, as indicated below. The fund follows standard industry practice by typically reflecting
changes in its holdings of portfolio securities on the first business day following a portfolio trade.
Equity securities, including depositary
receipts, 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.
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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. The pricing vendors base bond prices on, among other things, benchmark yields, transactions, bids, offers, quotations
from dealers and trading systems, new issues, underlying equity of the issuer, interest rate volatilities, 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, prepayment information, default rates, delinquency and loss assumptions, financial or collateral characteristics
or performance, credit enhancements, liquidation value calculations, specific deal information and other reference data. The fund’s
investment adviser performs certain checks on vendor prices prior to calculation of the fund’s net asset value. When 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 ask prices that are reasonably and timely available
(or bid prices, if ask prices are not available) or at prices for securities of comparable maturity, quality and type.
Securities with both fixed-income and
equity characteristics (e.g., convertible bonds, preferred stocks, units comprised of more than one type of security, etc.), 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.
Securities with original maturities of
one year or less having 60 days or less to maturity are amortized to maturity based on their cost if acquired within 60 days of
maturity, or if already held on the 60th day, based on the value determined on the 61st day. Forward currency contracts are valued
at the mean of representative quoted bid and ask prices, generally based on prices supplied by one or more pricing vendors.
Assets or liabilities initially expressed
in terms of currencies other than U.S. dollars are translated prior to the next determination of the net asset value of the fund’s
shares into U.S. dollars at the prevailing market rates.
Securities and other assets for which
representative market quotations are not readily available or are considered unreliable by the investment adviser are valued at
fair value as determined in good faith under fair value guidelines adopted by authority of the fund’s board. Subject to board
oversight, the fund’s board has delegated the obligation to make fair valuation determinations to a valuation committee established
by the fund’s investment adviser. The board receives regular reports describing fair-valued securities and the valuation
methods used.
The valuation committee has adopted guidelines
and procedures (consistent with SEC rules and guidance) to consider certain relevant principles and factors when making all fair
value determinations. As a general principle, securities lacking readily available market quotations, or that have quotations that
are considered unreliable by the investment adviser, are valued in good faith by the valuation committee based upon what the fund
might reasonably expect to receive upon their current sale. 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.
The valuation committee considers relevant indications of value that are reasonably and timely available to it in determining the
fair value to be assigned to a particular security, such as 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.
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Each class of shares represents interests
in the same portfolio of investments and is identical in all respects to each other class, except for differences relating to distribution,
service and other charges and expenses, certain voting rights, differences relating to eligible investors, the designation of each
class of shares, conversion features and exchange privileges. Expenses attributable to the fund, but not to a particular class
of shares, are borne by each class pro rata based on relative aggregate net assets of the classes. Expenses directly attributable
to a class of shares are borne by that class of shares. Liabilities attributable to particular share classes, such as liabilities
for repurchase of fund shares, are deducted from total assets attributable to such share classes.
Net assets so obtained for each share
class are then divided by the total number of shares outstanding of that share class, and the result, rounded to the nearest cent,
is the net asset value per share for that class.
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Taxes and distributions
Disclaimer:
Some of the following information may not apply to certain shareholders, including those holding fund shares in a tax-favored
account, such as a retirement plan or education savings account. Shareholders should consult their tax advisors about the application
of federal, state and local tax law in light of their particular situation.
Taxation as a regulated investment
company
— The fund intends to qualify each year as a “regulated investment company” under Subchapter M of
the Internal Revenue Code of 1986, as amended (the “Code”), so that it will not be liable for federal tax on income
and capital gains distributed to shareholders. In order to qualify as a regulated investment company, and avoid being subject to
federal income taxes, the fund intends to distribute substantially all of its net investment income and realized net capital gains
on a fiscal year basis, and intends to comply with other tests applicable to regulated investment companies under Subchapter M.
The Code includes savings provisions
allowing the fund to cure inadvertent failures of certain qualification tests required under Subchapter M. However, should the
fund fail to qualify under Subchapter M, the fund would be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to shareholders would be taxed as dividend income to the extent of the fund’s earnings
and profits.
Amounts not distributed by the fund on
a timely basis in accordance with a calendar year distribution requirement may be subject to a nondeductible 4% excise tax. Unless
an applicable exception applies, to avoid the tax, the fund must distribute during each calendar year an amount equal to the sum
of (1) at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) at
least 98.2% of its capital gains in excess of its capital losses for the twelve month period ending on October 31, and (3) all
ordinary income and capital gains for previous years that were not distributed during such years.
Dividends paid by the fund from ordinary
income or from an excess of net short-term capital gain over net long-term capital loss are taxable to shareholders as ordinary
income dividends. For corporate shareholders, a portion of the fund’s ordinary income dividends may be eligible for the 70%
deduction for dividends received by corporations to the extent the fund’s income consists of dividends paid by U.S. corporations.
This deduction does not include dividends received from non-U.S. corporations and dividends on stocks the fund has not held for
more than 45 days during the 90-day period beginning 45 days before the stock became ex-dividend (90 and 180 days for certain preferred
stock). Corporate shareholders can only apply the lower rate to the qualified portion of a fund’s dividends if they have
held the shares in the fund on which the dividends were paid for the applicable 45 day or 90 day holding period surrounding the
ex-dividend date of the fund’s dividends.
The fund may declare a capital gain distribution
consisting of the excess of net realized long-term capital gains over net realized short-term capital losses. Net capital gains
for a fiscal year are computed by taking into account any capital loss carryforward of the fund. Capital losses may be carried
forward indefinitely and retain their character as either short-term or long-term.
The fund may retain a portion of net
capital gain for reinvestment and may elect to treat such capital gain as having been distributed to shareholders of the fund.
Shareholders may receive a credit for the tax that the fund paid on such undistributed net capital gain and would increase the
basis in their shares of the fund by the difference between the amount of includible gains and the tax deemed paid by the shareholder.
Distributions of net capital gain that
the fund properly designates as a capital gain distribution generally will be taxable as long-term capital gain, regardless of
the length of time the shares of the
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fund have been held by a shareholder.
Any loss realized upon the redemption of shares held at the time of redemption for six months or less from the date of their purchase
will be treated as a long-term capital loss to the extent of any capital gain distributions (including any undistributed amounts
treated as distributed capital gains, as described above) during such six-month period.
Capital gain distributions by the fund
result in a reduction in the net asset value of the fund’s shares. Investors should consider the tax implications of buying
shares just prior to a capital gain distribution. The price of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will subsequently receive a partial return of their investment capital
upon payment of the distribution, which will be taxable to them.
Redemptions and exchanges of fund
shares —
Redemptions of shares, including exchanges for shares of other American Funds, may result in federal, state
and local tax consequences (gain or loss) to the shareholder.
Any loss realized on a redemption or
exchange of shares of the fund will be disallowed to the extent substantially identical shares are reacquired within the 61-day
period beginning 30 days before and ending 30 days after the shares are disposed of. Any loss disallowed under this rule will be
added to the shareholder’s tax basis in the new shares purchased.
If a shareholder exchanges or otherwise
disposes of shares of the fund within 90 days of having acquired such shares, and if, as a result of having acquired those shares,
the shareholder subsequently pays a reduced or no sales charge for shares of the fund, or of a different fund acquired before January
31
st
of the year following the year the shareholder exchanged or otherwise disposed of the original fund shares, the
sales charge previously incurred in acquiring the fund’s shares will not be taken into account (to the extent such previous
sales charges do not exceed the reduction in sales charges) for the purposes of determining the amount of gain or loss on the exchange,
but will be treated as having been incurred in the acquisition of such other fund(s).
Tax consequences of investments in
non-U.S. securities —
Dividend and interest income received by the fund from sources outside the United States may be
subject to withholding and other taxes imposed by such foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Some foreign countries impose taxes on capital gains with
respect to investments by foreign investors.
If more than 50% of the value of the
total assets of the fund at the close of the taxable year consists of securities of foreign corporations, the fund may elect to
pass through to shareholders the foreign taxes paid by the fund. If such an election is made, shareholders may claim a credit or
deduction on their federal income tax returns for, and will be required to treat as part of the amounts distributed to them, their
pro rata portion of qualified taxes paid by the fund to foreign countries. The application of the foreign tax credit depends upon
the particular circumstances of each shareholder.
Foreign currency gains and losses, including
the portion of gain or loss on the sale of debt securities attributable to fluctuations in foreign exchange rates, are generally
taxable as ordinary income or loss. These gains or losses may increase or decrease the amount of dividends payable by the fund
to shareholders. A fund may elect to treat gain and loss on certain foreign currency contracts as capital gain and loss instead
of ordinary income or loss.
If the fund invests in stock of certain
passive foreign investment companies (PFICs), the fund intends to mark-to-market these securities and recognize any gains at the
end of its fiscal and excise tax years. Deductions for losses are allowable only to the extent of any previously recognized gains.
Both gains and losses will be treated as ordinary income or loss, and the fund is required to distribute any
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resulting income. If the fund is unable
to identify an investment as a PFIC security and thus does not make a timely mark-to-market election, the fund may be subject to
adverse tax consequences.
Other tax considerations —
After the end of each calendar year, individual shareholders holding fund shares in taxable accounts will receive a statement of
the federal income tax status of all distributions. Shareholders of the fund also may be subject to state and local taxes on distributions
received from the fund.
For fund shares acquired on or after
January 1, 2012, the fund is required to report cost basis information for redemptions, including exchanges, to both shareholders
and the IRS.
Shareholders may obtain more information
about cost basis online at americanfunds.com/costbasis.
Under the backup withholding provisions
of the Code, the fund generally will be required to withhold federal income tax on all payments made to a shareholder if the shareholder
either does not furnish the fund with the shareholder’s correct taxpayer identification number or fails to certify that
the shareholder is not subject to backup withholding. Backup withholding also applies if the IRS notifies the shareholder or the
fund that the taxpayer identification number provided by the shareholder is incorrect or that the shareholder has previously failed
to properly report interest or dividend income.
The foregoing discussion of U.S.
federal income tax law relates solely to the application of that law to U.S. persons (i.e., U.S. citizens and legal residents
and U.S. corporations, partnerships, trusts and estates). Each shareholder who is not a U.S. person should consider the U.S. and
foreign tax consequences of ownership of shares of the fund, including the possibility that such a shareholder may be subject
to U.S. withholding taxes.
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Unless otherwise noted, all references
in the following pages to Class A, B, C or F-1 shares also refer to the corresponding Class 529-A, 529-B, 529-C or 529-F-1 shares.
Class 529 shareholders should also refer to the applicable program description for information on policies and services specifically
relating to these accounts. Shareholders holding shares through an eligible retirement plan should contact their plan’s administrator
or recordkeeper for information regarding purchases, sales and exchanges.
Purchase and exchange of shares
Purchases by individuals —
As described in the prospectus, you may generally open an account and purchase fund shares by contacting a financial
advisor or investment dealer authorized to sell the fund’s shares. You may make investments by any of the following means:
Contacting your financial
advisor —
Deliver or mail a check to your financial advisor.
By mail —
For initial
investments, you may mail a check, made payable to the fund, directly to the address indicated on the account application. Please
indicate an investment dealer on the account application. You may make additional investments by filling out the “Account
Additions” form at the bottom of a recent transaction confirmation and mailing the form, along with a check made payable
to the fund, using the envelope provided with your confirmation.
The amount of time it takes for
us to receive regular U.S. postal mail may vary and there is no assurance that we will receive such mail on the day you expect.
Mailing addresses for regular U.S. postal mail can be found in the prospectus. To send investments or correspondence to us via
overnight mail or courier service, use either of the following addresses:
American Funds
12711 North Meridian Street
Carmel, IN 46032-9181
American Funds
5300 Robin Hood Road
Norfolk, VA 23513-2407
By telephone —
Using
the American FundsLine. Please see the “Shareholder account services and privileges” section of this statement of additional
information for more information regarding this service.
By Internet —
Using
americanfunds.com. Please see the “Shareholder account services and privileges” section of this statement of additional
information for more information regarding this service.
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By wire —
If you are
making a wire transfer, instruct your bank to wire funds to:
Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178
Your bank should include the following
information when wiring funds:
For credit to the account of:
American Funds Service Company
(fund’s name)
For further credit to:
(shareholder’s fund account number)
(shareholder’s name)
You may contact American Funds
Service Company at (800) 421-4225 if you have questions about making wire transfers.
Other purchase information —
Class 529 shares may be purchased only through CollegeAmerica by investors establishing qualified higher education savings
accounts. Class 529-E shares may be purchased only by investors participating in CollegeAmerica through an eligible employer plan.
The American Funds state tax-exempt funds are qualified for sale only in certain jurisdictions, and tax-exempt funds in general
should not serve as retirement plan investments. In addition, the fund and the Principal Underwriter reserve the right to reject
any purchase order.
Class R-5 and R-6 shares may be made
available to certain charitable foundations organized and maintained by The Capital Group Companies, Inc. or its affiliates.
Class R-5 and R-6 shares may also be
made available to the Virginia College Savings Plan for use in the Virginia Education Savings Trust and the Virginia Prepaid Education
Program and other registered investment companies approved by the fund’s investment adviser or distributor. Class R-6 shares
are also available to other post employment benefits plans.
Purchase minimums and maximums —
All investments are subject to the purchase minimums and maximums described in the prospectus. As noted in the prospectus, purchase
minimums may be waived or reduced in certain cases.
In the case of American Funds non-tax-exempt
funds, the initial purchase minimum of $25 may be waived for the following account types:
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·
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Payroll deduction retirement plan accounts (such as, but not limited to, 403(b), 401(k), SIMPLE
IRA, SARSEP and deferred compensation plan accounts); and
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·
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Employer-sponsored CollegeAmerica accounts.
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The following account types may be established
without meeting the initial purchase minimum:
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·
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Retirement accounts that are funded with employer contributions; and
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·
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Accounts that are funded with monies set by court decree.
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The following account types may be established
without meeting the initial purchase minimum, but shareholders wishing to invest in two or more funds must meet the normal initial
purchase minimum of each fund:
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·
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Accounts that are funded with (
a)
transfers of assets, (
b
) rollovers from retirement
plans, (
c
) rollovers from 529 college savings plans or (
d
) required minimum distribution automatic exchanges; and
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·
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American Funds Money Market Fund accounts registered in the name of clients of Capital Guardian
Trust Company’s Capital Group Private Client Services division.
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Certain accounts held on the fund’s
books, known as omnibus accounts, contain multiple underlying accounts that are invested in shares of the fund. These underlying
accounts are maintained by entities such as financial intermediaries and are subject to the applicable initial purchase minimums
as described in the prospectus and this statement of additional information. However, in the case where the entity maintaining
these accounts aggregates the accounts’ purchase orders for fund shares, such accounts are not required to meet the fund’s
minimum amount for subsequent purchases.
Exchanges —
You
may only exchange shares into other American Funds within the same share class. However, exchanges from Class A shares of American
Funds Money Market Fund may be made to Class C shares of other American Funds for dollar cost averaging purposes. Exchanges are
not permitted from Class A shares of American Funds Money Market Fund to Class C shares of American Funds Short-Term Tax-Exempt
Bond Fund, Intermediate Bond Fund of America, Limited Term Tax-Exempt Bond Fund of America, Short-Term Bond Fund of America or
American Funds Inflation Linked Bond Fund. Exchange purchases are subject to the minimum investment requirements of the fund purchased
and no sales charge generally applies. However, exchanges of shares from American Funds Money Market Fund are subject to applicable
sales charges, unless the American Funds Money Market Fund shares were acquired by an exchange from a fund having a sales charge,
or by reinvestment or cross-reinvestment of dividends or capital gain distributions. Exchanges of Class F shares generally may
only be made through fee-based programs of investment firms that have special agreements with the fund’s distributor and
certain registered investment advisors.
You may exchange shares of other
classes by contacting the Transfer Agent, by contacting your investment dealer or financial advisor, by using American FundsLine
or americanfunds.com, or by telephoning (800) 421-4225 toll-free, or faxing (see “American Funds Service Company
service areas” in the prospectus for the appropriate fax numbers) the Transfer Agent. For more information, see “Shareholder
account services and privileges” in this statement of additional information.
These transactions have the same tax consequences
as ordinary sales and purchases.
Shares held in employer-sponsored retirement
plans may be exchanged into other American Funds by contacting your plan administrator or recordkeeper. Exchange redemptions and
purchases are processed simultaneously at the share prices next determined after the exchange order is received (see “Price
of shares” in this statement of additional information).
Conversion —
Currently,
Class C shares of the fund automatically convert to Class F-1 shares in the month of the 10-year anniversary of the purchase date.
The board of trustees of the fund reserves the right at any time, without shareholder approval, to amend the conversion feature
of the Class C shares, including without limitation, providing for conversion into a different share class or for no conversion.
In making its decision, the board of trustees will consider, among other things, the effect of any such amendment on shareholders.
Frequent trading of fund shares —
As noted in the prospectus, certain redemptions may trigger a purchase block lasting 30 calendar days under the fund’s “purchase
blocking policy.” Under this policy, systematic redemptions will not trigger a purchase block and systematic purchases will
not be
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prevented if the entity maintaining the
shareholder account is able to identify the transaction as a systematic redemption or purchase. For purposes of this policy, systematic
redemptions include, for example, regular periodic automatic redemptions and statement of intention escrow share redemptions. Systematic
purchases include, for example, regular periodic automatic purchases and automatic reinvestments of dividends and capital gain
distributions. Generally, purchases and redemptions will not be considered “systematic” unless the transaction is prescheduled
for a specific date.
Other potentially abusive activity
—
In addition to implementing purchase blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds — for example, short-term trading activity in multiple funds. When
identified, American Funds Service Company will request that the shareholder discontinue the activity. If the activity continues,
American Funds Service Company will freeze the shareholder account to prevent all activity other than redemptions of fund shares.
Moving between share classes
If you wish to “move”
your investment between share classes (within the same fund or between different funds), we generally will process your request
as an exchange of the shares you currently hold for shares in the new class or fund. Below is more information about how sales
charges are handled for various scenarios.
Exchanging Class B shares for
Class A shares —
If you exchange Class B shares for Class A shares during the contingent deferred sales charge period
you are responsible for paying any applicable deferred sales charges attributable to those Class B shares, but you will not be
required to pay a Class A sales charge. If, however, you exchange your Class B shares for Class A shares after the contingent deferred
sales charge period, you are responsible for paying any applicable Class A sales charges.
Exchanging Class C shares for
Class A shares —
If you exchange Class C shares for Class A shares, you are still responsible for paying any Class C
contingent deferred sales charges and applicable Class A sales charges.
Exchanging Class C shares for
Class F shares —
If you are part of a qualified fee-based program and you wish to exchange your Class C shares for Class
F shares to be held in the program, you are still responsible for paying any applicable Class C contingent deferred sales charges.
Exchanging Class F shares for
Class A shares —
You can exchange Class F shares held in a qualified fee-based program for Class A shares without paying
an initial Class A sales charge if you are leaving or have left the fee-based program. You can exchange Class F shares received
in a conversion from Class C shares for Class A shares at any time without paying an initial Class A sales charge if you notify
American Funds Service Company of the conversion when you make your request. If you have already redeemed your Class F shares,
the foregoing requirements apply and you must purchase Class A shares within 90 days after redeeming your Class F shares to receive
the Class A shares without paying an initial Class A sales charge.
Exchanging Class A shares for
Class F shares —
If you are part of a qualified fee-based program and you wish to exchange your Class A shares for Class
F shares to be held in the program, any Class A sales charges (including contingent deferred sales charges) that you paid or are
payable will not be credited back to your account.
Exchanging Class A shares for
Class R shares —
Provided it is eligible to invest in Class R shares, a retirement plan currently invested in Class A
shares may exchange its shares for Class
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R shares. Any Class A sales charges
that the retirement plan previously paid will not be credited back to the plan’s account.
Exchanging Class F-1 shares
for Class F-2 shares —
If you are part of a qualified fee-based program that offers Class F-2 shares, you may exchange
your Class F-1 shares for Class F-2 shares to be held in the program.
Moving between other share
classes —
If you desire to move your investment between share classes and the particular scenario is not described
in this statement of additional information, please contact American Funds Service Company at (800) 421-4225 for more
information.
Non-reportable transactions
—
Automatic conversions described in the prospectus will be non-reportable for tax purposes. In addition, an exchange
of shares from one share class of a fund to another share class of the same fund will be treated as a non-reportable exchange for
tax purposes, provided that the exchange request is received in writing by American Funds Service Company and processed as a single
transaction. However, a movement between a 529 share class and a non-529 share class of the same fund will be reportable.
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Sales charges
Class A purchases
Purchases by certain 403(b)
plans
A 403(b) plan may not invest in
Class A or C shares unless such plan was invested in Class A or C shares before January 1, 2009.
Participant accounts of a 403(b)
plan that were treated as an individual-type plan for sales charge purposes before January 1, 2009, may continue to be treated
as accounts of an individual-type plan for sales charge purposes. Participant accounts of a 403(b) plan that were treated as an
employer-sponsored plan for sales charge purposes before January 1, 2009, may continue to be treated as accounts of an employer-sponsored
plan for sales charge purposes. Participant accounts of a 403(b) plan that is established on or after January 1, 2009, are treated
as accounts of an employer-sponsored plan for sales charge purposes.
Purchases by SEP plans and SIMPLE
IRA plans
Participant accounts in a Simplified
Employee Pension (SEP) plan or a Savings Incentive Match Plan for Employees of Small Employers IRA (SIMPLE IRA) plan will be aggregated
together for Class A sales charge purposes if the SEP plan or SIMPLE IRA plan was established after November 15, 2004, by an employer
adopting a prototype plan produced by American Funds Distributors, Inc. In the case where the employer adopts any other plan (including,
but not limited to, an IRS model agreement), each participant’s account in the plan will be aggregated with the participant’s
own personal investments that qualify under the aggregation policy. A SEP plan or SIMPLE IRA plan with a certain method of aggregating
participant accounts as of November 15, 2004, may continue with that method so long as the employer has not modified the plan document
since that date.
Other purchases
Pursuant to a determination of
eligibility by a vice president or more senior officer of the Capital Research and Management Company Fund Administration Unit,
or by his or her designee, Class A shares of the American Funds stock, stock/bond and bond funds may be sold at net asset value
to:
(1)
|
current or retired
directors, trustees, officers and advisory board members of, and certain lawyers who provide services to, the funds managed
by Capital Research and Management Company, current or retired employees and partners of The Capital Group Companies, Inc.
and its affiliated companies, certain family members of the above persons, and trusts or plans primarily for such persons;
|
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(2)
|
currently registered
representatives and assistants directly employed by such representatives, retired registered representatives with respect
to accounts established while active, or full-time employees (collectively, “Eligible Persons”) (and their (
a
)
spouses or equivalents if recognized under local law, (
b
) parents and children, including parents and children in step
and adoptive relationships, sons-in-law and daughters-in-law, and (
c
) parents-in-law, if the Eligible Persons or the
spouses, children or parents of the Eligible Persons are listed in the account registration with the parents-in-law) of dealers
who have sales agreements with the Principal Underwriter (or who clear transactions through such dealers), plans for the dealers,
and plans that include as participants only the Eligible Persons, their spouses, parents and/or children (these policies are
subject to the dealer’s policies and system capabilities);
|
(3)
|
currently registered investment
advisors (“RIAs”) and assistants directly employed by such RIAs, retired RIAs with respect to accounts established
while active, or full-time employees (collectively, “Eligible RIAs”) (and their (
a
) spouses or equivalents
if recognized under local law, (
b
) parents and children, including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law and (
c
) parents-in-law, if the Eligible RIAs or the spouses, children or parents of
the Eligible RIAs are listed in the account registration with the parents-in-law) of RIA firms that are authorized to sell
shares of the funds, plans for the RIA firms, and plans that include as participants only the Eligible RIAs, their spouses,
parents and/or children (these policies are subject to the RIA’s policies and system capabilities);
|
(4)
|
companies exchanging securities with the fund through a merger, acquisition or exchange offer;
|
(5)
|
insurance company separate accounts;
|
(6)
|
accounts managed by subsidiaries of The Capital Group Companies, Inc.;
|
(7)
|
The Capital Group Companies,
Inc. and its affiliated companies;
|
(8)
|
an individual or entity with a substantial business relationship with The Capital Group Companies, Inc. or its affiliates, or an individual or entity related or relating to such individual or entity;
|
(9)
|
wholesalers and full-time employees directly supporting wholesalers involved in the distribution of insurance company separate accounts whose underlying investments are managed by any affiliate of The Capital Group Companies, Inc.; and
|
(10)
|
full-time employees of banks that have sales agreements with the Principal Underwriter, who are solely dedicated to directly supporting the sale of mutual funds.
|
Shares are offered at net asset
value to these persons and organizations due to anticipated economies in sales effort and expense. Once an account is established
under this net asset value privilege, additional investments can be made at net asset value for the life of the account.
Transfers to CollegeAmerica
—
A transfer from the Virginia Prepaid Education Program
SM
or the Virginia Education
Savings Trust
SM
to a CollegeAmerica account will be made with no sales charge. No commission
will be paid to the dealer on such a transfer.
Moving between accounts —
Investments in certain account types may be moved to other account types without incurring additional Class A sales charges. These
transactions include, for example:
|
·
|
redemption proceeds from a non-retirement account (for example, a joint tenant account) used to
purchase fund shares in an IRA or other individual-type retirement account;
|
|
·
|
required minimum distributions from an IRA or other individual-type retirement account used to
purchase fund shares in a non-retirement account; and
|
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|
·
|
death distributions paid to a beneficiary’s account that are used by the beneficiary to purchase
fund shares in a different account.
|
Loan repayments —
Repayments
on loans taken from a retirement plan or an individual-type retirement account are not subject to sales charges if American Funds
Service Company is notified of the repayment.
Dealer commissions and compensation
—
Commissions (up to 1.00%) are paid to dealers who initiate and are responsible for certain Class A share purchases
not subject to initial sales charges. These purchases consist of purchases of $1 million or more, purchases by employer-sponsored
defined contribution-type retirement plans investing $1 million or more or with 100 or more eligible employees, and purchases made
at net asset value by certain retirement plans, endowments and foundations with assets of $50 million or more. Commissions on such
investments (other than IRA rollover assets that roll over at no sales charge under the fund’s IRA rollover policy as described
in the prospectus) are paid to dealers at the following rates: 1.00% on amounts of less than $4 million, .50% on amounts of at
least $4 million but less than $10 million and .25% on amounts of at least $10 million. Commissions are based on cumulative investments
over the life of the account with no adjustment for redemptions, transfers, or market declines. For example, if a shareholder has
accumulated investments in excess of $4 million (but less than $10 million) and subsequently redeems all or a portion
of the account(s), purchases following the redemption will generate a dealer commission of .50%.
A dealer concession of up to 1% may be
paid by the fund under its Class A plan of distribution to reimburse the Principal Underwriter in connection with dealer and wholesaler
compensation paid by it with respect to investments made with no initial sales charge.
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Sales charge reductions and waivers
Reducing your Class A sales charge
—
As described in the prospectus, there are various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.
Statement of intention —
By establishing a statement of intention (the “Statement”), you enter into a nonbinding commitment to purchase shares
of the American Funds (excluding American Funds Money Market Fund) over a 13-month period and receive the same sales charge (expressed
as a percentage of your purchases) as if all shares had been purchased at once, unless the Statement is upgraded as described below.
The Statement period starts on
the date on which your first purchase made toward satisfying the Statement is processed. Your accumulated holdings (as described
in the paragraph below titled “Rights of accumulation”) eligible to be aggregated as of the day immediately before
the start of the Statement period may be credited toward satisfying the Statement.
You may revise the commitment you
have made in your Statement upward at any time during the Statement period. If your prior commitment has not been met by the time
of the revision, the Statement period during which purchases must be made will remain unchanged. Purchases made from the date of
the revision will receive the reduced sales charge, if any, resulting from the revised Statement. If your prior commitment has
been met by the time of the revision, your original Statement will be considered met and a new Statement will be established.
The Statement will be considered
completed if the shareholder dies within the 13-month Statement period. Commissions to dealers will not be adjusted or paid on
the difference between the Statement amount and the amount actually invested before the shareholder’s death.
When a shareholder elects to
use a Statement, shares equal to 5% of the dollar amount specified in the Statement may be held in escrow in the shareholder’s
account out of the initial purchase (or subsequent purchases, if necessary) by the Transfer Agent. All dividends and any capital
gain distributions on shares held in escrow will be credited to the shareholder’s account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified Statement period, the appropriate number of shares
held in escrow will be redeemed to pay the difference between the sales charge actually paid and the sales charge which would
have been paid if the total of such purchases had been made at a single time. Any dealers assigned to the shareholder’s
account at the time a purchase was made during the Statement period will receive a corresponding commission adjustment if appropriate.
If the difference is not paid by the close of the Statement period, the appropriate number of shares held in escrow will be redeemed
to pay such difference. If the proceeds from this redemption are inadequate, the purchaser may be liable to the Principal Underwriter
for the balance still outstanding.
In addition, if you currently have
individual holdings in American Legacy variable annuity contracts or variable life insurance policies that were established on
or before March 31, 2007, you may continue to apply purchases under such contracts and policies to a Statement.
Shareholders purchasing shares
at a reduced sales charge under a Statement indicate their acceptance of these terms and those in the prospectus with their first
purchase.
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Aggregation —
Qualifying
investments for aggregation include those made by you and your “immediate family” as defined in the prospectus, if
all parties are purchasing shares for their own accounts and/or:
|
·
|
individual-type employee benefit plans, such as an IRA, single-participant Keogh-type plan, or
a participant account of a 403(b) plan that is treated as an individual-type plan for sales charge purposes (see “Purchases
by certain 403(b) plans” under “Sales charges” in this statement of additional information);
|
|
·
|
SEP plans and SIMPLE IRA plans established after November 15, 2004, by an employer adopting any
plan document other than a prototype plan produced by American Funds Distributors, Inc.;
|
|
·
|
business accounts solely controlled by you or your immediate family (for example, you own the entire
business);
|
|
·
|
trust accounts established by you or your immediate family (for trusts with only one primary beneficiary,
upon the trustor’s death the trust account may be aggregated with such beneficiary’s own accounts; for trusts with
multiple primary beneficiaries, upon the trustor’s death the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary; each primary beneficiary’s separate trust account may
then be aggregated with such beneficiary’s own accounts);
|
|
·
|
endowments or foundations established and controlled by you or your immediate family; or
|
|
·
|
529 accounts, which will be aggregated at the account owner level (Class 529-E accounts may only
be aggregated with an eligible employer plan).
|
Individual purchases by a trustee(s)
or other fiduciary(ies) may also be aggregated if the investments are:
|
·
|
for a single trust estate or fiduciary account, including employee benefit plans other than the
individual-type employee benefit plans described above;
|
|
·
|
made for two or more employee benefit plans of a single employer or of affiliated employers as
defined in the 1940 Act, excluding the individual-type employee benefit plans described above;
|
|
·
|
for a diversified common trust fund or other diversified pooled account not specifically formed
for the purpose of accumulating fund shares;
|
|
·
|
for nonprofit, charitable or educational organizations, or any endowments or foundations established
and controlled by such organizations, or any employer-sponsored retirement plans established for the benefit of the employees of
such organizations, their endowments, or their foundations;
|
|
·
|
for participant accounts of a 403(b) plan that is treated as an employer-sponsored plan for sales
charge purposes (see “Purchases by certain 403(b) plans” under “Sales charges” in this statement of additional
information), or made for participant accounts of two or more such plans, in each case of a single employer or affiliated employers
as defined in the 1940 Act; or
|
|
·
|
for a SEP or SIMPLE IRA plan established after November 15, 2004, by an employer adopting a prototype
plan produced by American Funds Distributors, Inc.
|
Purchases made for nominee or street
name accounts (securities held in the name of an investment dealer or another nominee such as a bank trust department instead of
the
American Funds Inflation Linked Bond Fund - Page
57
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customer) may not be aggregated
with those made for other accounts and may not be aggregated with other nominee or street name accounts unless otherwise qualified
as described above.
Concurrent purchases —
As described in the prospectus, you may reduce your Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as applicable holdings in the American Funds Target Date Retirement Series, American Funds Portfolio Series
and American Funds College Target Date Series. Shares of American Funds Money Market Fund purchased through an exchange, reinvestment
or cross-reinvestment from a fund having a sales charge also qualify. However, direct purchases of American Funds Money Market
Fund are excluded. If you currently have individual holdings in American Legacy variable annuity contracts or variable life insurance
policies that were established on or before March 31, 2007, you may continue to combine purchases made under such contracts and
policies to reduce your Class A sales charge.
Rights of accumulation —
Subject to the limitations described in the aggregation policy, you may take into account your accumulated holdings in all share
classes of the American Funds, as well as applicable holdings in the American Funds Target Date Retirement Series, American Funds
Portfolio Series and American Funds College Target Date Series, to determine your sales charge on investments in accounts eligible
to be aggregated. Direct purchases of American Funds Money Market Fund are excluded. Subject to your investment dealer’s
or recordkeeper’s capabilities, your accumulated holdings will be calculated as the higher of (
a
) the current value
of your existing holdings (the “market value”) as of the day prior to your American Funds investment or (
b
)
the amount you invested (including reinvested dividends and capital gains, but excluding capital appreciation) less any withdrawals
(the “cost value”). Depending on the entity on whose books your account is held, the value of your holdings in that
account may not be eligible for calculation at cost value. For example, accounts held in nominee or street name may not be eligible
for calculation at cost value and instead may be calculated at market value for purposes of rights of accumulation.
The value of all of your holdings
in accounts established in calendar year 2005 or earlier will be assigned an initial cost value equal to the market value of those
holdings as of the last business day of 2005. Thereafter, the cost value of such accounts will increase or decrease according
to actual investments or withdrawals. You must contact your financial advisor or American Funds Service Company if you have additional
information that is relevant to the calculation of the value of your holdings.
When determining your American
Funds Class A sales charge, if your investment is not in an employer-sponsored retirement plan, you may also continue to take into
account the market value (as of the day prior to your American Funds investment) of your individual holdings in various American
Legacy variable annuity contracts and variable life insurance policies that were established on or before March 31, 2007. An employer-sponsored
retirement plan may also continue to take into account the market value of its investments in American Legacy Retirement Investment
Plans that were established on or before March 31, 2007.
You may not purchase Class C or
529-C shares if such combined holdings cause you to be eligible to purchase Class A or 529-A shares at the $1 million or more sales
charge discount rate (i.e. at net asset value).
If you make a gift of American
Funds Class A shares, upon your request, you may purchase the shares at the sales charge discount allowed under rights of accumulation
of all of your American Funds and applicable American Legacy accounts.
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CDSC waivers for Class A, B and C
shares —
As noted in the prospectus, a contingent deferred sales charge (“CDSC”) may be waived for redemptions
due to death or post-purchase disability of a shareholder (this generally excludes accounts registered in the names of trusts and
other entities). In the case of joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at the time he or she
notifies the Transfer Agent of the other joint tenant’s death and removes the decedent’s name from the account, may
redeem shares from the account without incurring a CDSC. Redemptions made after the Transfer Agent is notified of the death of
a joint tenant will be subject to a CDSC.
In addition, a CDSC may be waived for
the following types of transactions, if together they do not exceed 12% of the value of an “account” (defined below)
annually (the “12% limit”):
|
·
|
Required minimum distributions taken from retirement accounts upon the shareholder’s attainment
of age 70½ (required minimum distributions that continue to be taken by the beneficiary(ies) after the account owner is
deceased also qualify for a waiver).
|
|
·
|
Redemptions through an automatic withdrawal plan (“AWP”) (see “Automatic withdrawals”
under “Shareholder account services and privileges” in this statement of additional information). For each AWP payment,
assets that are not subject to a CDSC, such as shares acquired through reinvestment of dividends and/or capital gain distributions,
will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC
to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any
dividends and/or capital gain distributions taken in cash by a shareholder who receives payments through an AWP will also count
toward the 12% limit. In the case of an AWP, the 12% limit is calculated at the time an automatic redemption is first made, and
is recalculated at the time each additional automatic redemption is made. Shareholders who establish an AWP should be aware that
the amount of a payment not subject to a CDSC may vary over time depending on fluctuations in the value of their accounts. This
privilege may be revised or terminated at any time.
|
For purposes of this paragraph, “account”
means your investment in the applicable class of shares of the particular fund from which you are making the redemption.
CDSC waivers are allowed only in the
cases listed here and in the prospectus. For example, CDSC waivers will not be allowed on redemptions of Class 529-B and 529-C
shares due to termination of CollegeAmerica; a determination by the Internal Revenue Service that CollegeAmerica does not qualify
as a qualified tuition program under the Code; proposal or enactment of law that eliminates or limits the tax-favored status of
CollegeAmerica; or elimination of the fund by the Virginia College Savings Plan as an option for additional investment within CollegeAmerica.
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Selling shares
The methods for selling (redeeming) shares
are described more fully in the prospectus. If you wish to sell your shares by contacting American Funds Service Company directly,
any such request must be signed by the registered shareholders. To contact American Funds Service Company via overnight mail or
courier service, see “Purchase and exchange of shares.”
A signature guarantee may be required
for certain redemptions. In such an event, your signature may be guaranteed by a domestic stock exchange or the Financial Industry
Regulatory Authority, bank, savings association or credit union that is an eligible guarantor institution. The Transfer Agent reserves
the right to require a signature guarantee on any redemptions.
Additional documentation may be required
for sales of shares held in corporate, partnership or fiduciary accounts. You must include with your written request any shares
you wish to sell that are in certificate form.
If you sell Class A, B or C shares and
request a specific dollar amount to be sold, we will sell sufficient shares so that the sale proceeds, after deducting any applicable
CDSC, equals the dollar amount requested.
If you hold multiple American Funds and
a CDSC applies to the shares you are redeeming, the CDSC will be calculated based on the applicable class of shares of the particular
fund from which you are making the redemption.
Redemption proceeds will not be mailed
until sufficient time has passed to provide reasonable assurance that checks or drafts (including certified or cashier’s
checks) for shares purchased have cleared (which may take up to 10 business days from the purchase date). Except for delays relating
to clearance of checks for share purchases or in extraordinary circumstances (and as permissible under the 1940 Act), sale proceeds
will be paid on or before the seventh day following receipt and acceptance of an order. Interest will not accrue or be paid on
amounts that represent uncashed distribution or redemption checks.
You may request that redemption proceeds
of $1,000 or more from American Funds Money Market Fund be wired to your bank by writing American Funds Service Company. A signature
guarantee is required on all requests to wire funds.
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Shareholder account services and
privileges
The following services and privileges
are generally available to all shareholders. However, certain services and privileges described in the prospectus and this statement
of additional information may not be available for Class 529 shareholders or if your account is held with an investment dealer
or through an employer-sponsored retirement plan.
Automatic investment plan —
An automatic investment plan enables you to make monthly or quarterly investments in the American Funds through automatic debits
from your bank account. To set up a plan, you must fill out an account application and specify the amount that you would like to
invest and the date on which you would like your investments to occur. The plan will begin within 30 days after your account application
is received. Your bank account will be debited on the day or a few days before your investment is made, depending on the bank’s
capabilities. The Transfer Agent will then invest your money into the fund you specified on or around the date you specified. If
the date you specified falls on a weekend or holiday, your money will be invested on the following business day. However, if the
following business day falls in the next month, your money will be invested on the business day immediately preceding the weekend
or holiday. If your bank account cannot be debited due to insufficient funds, a stop-payment or the closing of the account, the
plan may be terminated and the related investment reversed. You may change the amount of the investment or discontinue the plan
at any time by contacting the Transfer Agent.
Automatic reinvestment —
Dividends and capital gain distributions are reinvested in additional shares of the same class and fund at net asset value unless
you indicate otherwise on the account application. You also may elect to have dividends and/or capital gain distributions paid
in cash by informing the fund, the Transfer Agent or your investment dealer. Dividends and capital gain distributions paid to retirement
plan shareholders or shareholders of the 529 share classes will be automatically reinvested.
If you have elected to receive dividends
and/or capital gain distributions in cash, and the postal or other delivery service is unable to deliver checks to your address
of record, or you do not respond to mailings from American Funds Service Company with regard to uncashed distribution checks, your
distribution option may be automatically converted to having all dividends and other distributions reinvested in additional shares.
Cross-reinvestment of dividends and
distributions —
For all share classes, except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net asset value, subject to the following conditions:
(1) the aggregate value of your account(s)
in the fund(s) paying distributions equals or exceeds $5,000 (this is waived if the value of the account in the fund receiving
the distributions equals or exceeds that fund’s minimum initial investment requirement);
(2) if the value of the account of
the fund receiving distributions is below the minimum initial investment requirement, distributions must be automatically reinvested;
and
(3) if you discontinue the cross-reinvestment
of distributions, the value of the account of the fund receiving distributions must equal or exceed the minimum initial investment
requirement. If you do not meet this requirement within 90 days of notification, the fund has the right to automatically redeem
the account.
Automatic exchanges —
For
all share classes, you may automatically exchange shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness day) of each month you designate.
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Automatic withdrawals —
Depending on the type of account, for all share classes except R shares, you may automatically withdraw shares from
any of the American Funds. You can make automatic withdrawals of $50 or more. You can designate the day of each period for withdrawals
and request that checks be sent to you or someone else. Withdrawals may also be electronically deposited to your bank account.
The Transfer Agent will withdraw your money from the fund you specify on or around the date you specify. If the date you specified
falls on a weekend or holiday, the redemption will take place on the previous business day. However, if the previous business
day falls in the preceding month, the redemption will take place on the following business day after the weekend or holiday. You
should consult with your advisor or intermediary to determine if your account is eligible for automatic withdrawals.
Withdrawal payments are not to be considered
as dividends, yield or income. Generally, automatic investments may not be made into a shareholder account from which there are
automatic withdrawals. Withdrawals of amounts exceeding reinvested dividends and distributions and increases in share value would
reduce the aggregate value of the shareholder’s account. The Transfer Agent arranges for the redemption by the fund of sufficient
shares, deposited by the shareholder with the Transfer Agent, to provide the withdrawal payment specified.
Redemption proceeds from an automatic
withdrawal plan are not eligible for reinvestment without a sales charge.
Account statements —
Your
account is opened in accordance with your registration instructions. Transactions in the account, such as additional investments,
will be reflected on regular confirmation statements from the Transfer Agent. Dividend and capital gain reinvestments, purchases
through automatic investment plans and certain retirement plans, as well as automatic exchanges and withdrawals, will be confirmed
at least quarterly.
American FundsLine and americanfunds.com
—
You may check your share balance, the price of your shares or your most recent account transaction; redeem
shares (up to $125,000 per American Funds shareholder each day) from nonretirement plan accounts; or exchange shares around the
clock with American FundsLine or using americanfunds.com. To use American FundsLine, call (800) 325-3590 from a TouchTone™
telephone. Redemptions and exchanges through American FundsLine and americanfunds.com are subject to the conditions noted above
and in “Telephone and Internet purchases, redemptions and exchanges” below. You will need your fund number (see the
list of the American Funds under the “General information — fund numbers” section in this statement of
additional information), personal identification number (generally the last four digits of your Social Security number or other
tax identification number associated with your account) and account number.
Generally, all shareholders are automatically
eligible to use these services. However, if you are not currently authorized to do so, you may complete an American FundsLink
Authorization Form. Once you establish this privilege, you, your financial advisor or any person with your account information
may use these services.
Telephone and Internet purchases,
redemptions and exchanges —
By using the telephone (including American FundsLine) or the Internet (including americanfunds.com),
or fax purchase, redemption and/or exchange options, you agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) that may be incurred in connection with the exercise of these
privileges. Generally, all shareholders are automatically eligible to use these services. However, you may elect to opt out of
these services by writing the Transfer Agent (you may also reinstate them at any time by writing the Transfer Agent). If the Transfer
Agent does not employ reasonable procedures to confirm that the instructions received from any person with appropriate account
information are genuine, it and/or the fund may be liable for
American Funds Inflation Linked Bond Fund - Page
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|
losses due to unauthorized or fraudulent
instructions. In the event that shareholders are unable to reach the fund by telephone because of technical difficulties, market
conditions or a natural disaster, redemption and exchange requests may be made in writing only.
Checkwriting —
You may establish
check writing privileges for Class A shares (but not Class 529-A shares) of American Funds Money Market Fund upon meeting
the fund’s initial purchase minimum of $1,000. This can be done by using an account application. If you request check writing
privileges, you will be provided with checks that you may use to draw against your account. These checks may be made payable to
anyone you designate and must be signed by the authorized number of registered shareholders exactly as indicated on your account
application.
Redemption of shares —
The
fund’s declaration of trust permits the fund to direct the Transfer Agent to redeem the shares of any shareholder for their
then current net asset value per share if at such time the shareholder of record owns shares having an aggregate net asset value
of less than the minimum initial investment amount required of new shareholders as set forth in the fund’s current registration
statement under the 1940 Act, and subject to such further terms and conditions as the board of trustees of the fund may from time
to time adopt.
While payment of redemptions normally
will be in cash, the fund’s declaration of trust permit payment of the redemption price wholly or partly with portfolio securities
or other fund assets under conditions and circumstances determined by the fund’s board of trustees. For example, redemptions
could be made in this manner if the board determined that making payments wholly in cash over a particular period would be unfair
and/or harmful to other fund shareholders.
Share certificates —
Shares
are credited to your account. The fund does not issue share certificates.
American Funds Inflation Linked Bond Fund - Page
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|
General information
Custodian of assets —
Securities and cash owned by the fund, including proceeds from the sale of shares of the fund and of securities in the fund’s
portfolio, are held by Bank of New York Mellon, One Wall Street, New York, NY 10286, as custodian. If the fund holds securities
of issuers outside the U.S., the custodian may hold these securities pursuant to subcustodial arrangements in banks outside the
U.S. or branches of U.S. banks outside the U.S.
Transfer agent services —
American
Funds Service Company, a wholly owned subsidiary of the investment adviser, maintains the records of shareholder accounts, processes
purchases and redemptions of the fund’s shares, acts as dividend and capital gain distribution disbursing agent, and performs
other related shareholder service functions. The principal office of American Funds Service Company is located at 6455 Irvine Center
Drive, Irvine, CA 92618. Transfer agent fees are paid according to a fee schedule, based principally on the number of accounts
serviced, contained in a Shareholder Services Agreement between the fund and American Funds Service Company.
In the case of certain shareholder accounts,
third parties who may be unaffiliated with the investment adviser provide transfer agency and shareholder services in place of
American Funds Service Company. These services are rendered under agreements with American Funds Service Company or its affiliates
and the third parties receive compensation according to such agreements. Compensation for transfer agency and shareholder services,
whether paid to American Funds Service Company or such third parties, is ultimately paid from fund assets and is reflected in the
expenses of the fund as disclosed in the prospectus.
During the 2013 fiscal year, transfer
agent fees were $19.
Independent registered public
accounting firm —
PricewaterhouseCoopers LLP, 601 South Figueroa Street, Los Angeles, CA 90017, serves as the
fund’s independent registered public accounting firm, providing audit services, preparation of tax returns and review of
certain documents to be filed with the SEC. The financial statements included in this statement of additional information from
the annual report have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated
in their report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing. The selection of the fund’s independent registered public accounting
firm is reviewed and determined annually by the board of trustees.
Independent legal counsel —
Bingham McCutchen LLP, 355 South Grand Avenue, Suite 4400, Los Angeles, CA 90071, serves as independent legal counsel (“counsel”)
for the fund and for independent trustees in their capacities as such. A determination with respect to the independence of the
fund’s counsel will be made at least annually by the independent trustees of the fund, as prescribed by the 1940 Act and
related rules.
Prospectuses, reports to shareholders
and proxy statements —
The fund’s fiscal year ends on November 30. Shareholders are provided updated summary
prospectuses annually and at least semi-annually with reports showing the fund’s investment portfolio or summary investment
portfolio, financial statements and other information. Shareholders may request a copy of the fund’s current prospectus
at no cost by calling (800) 421-4225 or by sending an email request to prospectus@americanfunds.com. Shareholders may
also access the fund’s current summary prospectus, prospectus, statement of additional information and shareholder reports
at americanfunds.com/prospectus. In addition, shareholders may also receive proxy statements for the fund. In an effort to reduce
the volume of mail shareholders receive from the fund when a household owns more than one account, the Transfer Agent has taken
steps to eliminate duplicate mailings of
American Funds Inflation Linked Bond Fund - Page
64
|
summary prospectuses, shareholder
reports and proxy statements. To receive additional copies of a summary prospectus, report or proxy statement, shareholders should
contact the Transfer Agent.
Shareholders may also elect to receive
updated summary prospectuses, annual reports and semi-annual reports electronically by signing up for electronic delivery on our
website, americanfunds.com. Upon electing the electronic delivery of updated summary prospectuses and other reports, a shareholder
will no longer automatically receive such documents in paper form by mail. A shareholder who elects electronic delivery is able
to cancel this service at any time and return to receiving updated summary prospectuses and other reports in paper form by mail.
Summary prospectuses, prospectuses, annual
reports and semi-annual reports that are mailed to shareholders by the American Funds organization are printed with ink containing
soy and/or vegetable oil on paper containing recycled fibers.
Codes of ethics —
The fund
and Capital Research and Management Company and its affiliated companies, including the fund’s Principal Underwriter, have
adopted codes of ethics that allow for personal investments, including securities in which the fund may invest from time to time.
These codes include a ban on acquisitions of securities pursuant to an initial public offering; restrictions on acquisitions of
private placement securities; preclearance and reporting requirements; review of duplicate confirmation statements; annual recertification
of compliance with codes of ethics; blackout periods on personal investing for certain investment personnel; ban on short-term
trading profits for investment personnel; limitations on service as a director of publicly traded companies; disclosure of personal
securities transactions; and policies regarding political contributions.
American Funds Inflation Linked Bond Fund - Page
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|
Determination of net asset value,
redemption price and maximum offering price per share for Class A shares — November 30, 2013
Net asset value and redemption
price per share
(Net assets divided by shares outstanding)
|
$9.30
|
Maximum offering price per share
(100/97.50 of net asset value per share,
which takes into account the fund’s current maximum
sales charge)
|
$9.54
|
Other information —
The
fund reserves the right to modify the privileges described in this statement of additional information at any time.
American Funds Inflation Linked Bond Fund - Page
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|
Fund numbers — Here are the fund
numbers for use with our automated telephone line, American FundsLine®, or when making share transactions:
|
Fund numbers
|
Fund
|
Class
A
|
Class
B
|
Class
C
|
Class
F-1
|
Class
F-2
|
Stock
and stock/bond funds
|
|
|
|
|
|
AMCAP
Fund®
|
002
|
202
|
302
|
402
|
602
|
American
Balanced Fund®
|
011
|
211
|
311
|
411
|
611
|
American
Funds Global Balanced Fund
SM
|
037
|
237
|
337
|
437
|
637
|
American
Mutual Fund®
|
003
|
203
|
303
|
403
|
603
|
Capital
Income Builder®
|
012
|
212
|
312
|
412
|
612
|
Capital
World Growth and Income Fund®
|
033
|
233
|
333
|
433
|
633
|
EuroPacific
Growth Fund®
|
016
|
216
|
316
|
416
|
616
|
Fundamental
Investors®
|
010
|
210
|
310
|
410
|
610
|
The
Growth Fund of America®
|
005
|
205
|
305
|
405
|
605
|
The
Income Fund of America®
|
006
|
206
|
306
|
406
|
606
|
International
Growth and Income Fund
SM
|
034
|
234
|
334
|
434
|
634
|
The
Investment Company of America®
|
004
|
204
|
304
|
404
|
604
|
The
New Economy Fund®
|
014
|
214
|
314
|
414
|
614
|
New
Perspective Fund®
|
007
|
207
|
307
|
407
|
607
|
New
World Fund®
|
036
|
236
|
336
|
436
|
636
|
SMALLCAP
World Fund®
|
035
|
235
|
335
|
435
|
635
|
Washington
Mutual Investors Fund
SM
|
001
|
201
|
301
|
401
|
601
|
Bond
funds
|
|
|
|
|
|
American
Funds Corporate Bond Fund
SM
|
032
|
232
|
332
|
432
|
632
|
American
Funds Global High-Income Opportunities Fund
SM
|
038
|
238
|
338
|
438
|
638
|
American
Funds Inflation Linked Bond Fund
SM
|
060
|
260
|
360
|
460
|
660
|
American
Funds Mortgage Fund®
|
042
|
242
|
342
|
442
|
642
|
American
Funds Short-Term Tax-Exempt Bond Fund®
|
039
|
N/A
|
N/A
|
439
|
639
|
American
Funds Tax-Exempt Fund of New York®
|
041
|
241
|
341
|
441
|
641
|
American
High-Income Municipal Bond Fund®
|
040
|
240
|
340
|
440
|
640
|
American
High-Income Trust®
|
021
|
221
|
321
|
421
|
621
|
The
Bond Fund of America®
|
008
|
208
|
308
|
408
|
608
|
Capital
World Bond Fund®
|
031
|
231
|
331
|
431
|
631
|
Intermediate
Bond Fund of America®
|
023
|
223
|
323
|
423
|
623
|
Limited
Term Tax-Exempt Bond Fund of America®
|
043
|
243
|
343
|
443
|
643
|
Short-Term
Bond Fund of America®
|
048
|
248
|
348
|
448
|
648
|
The
Tax-Exempt Bond Fund of America®
|
019
|
219
|
319
|
419
|
619
|
The
Tax-Exempt Fund of California®
|
020
|
220
|
320
|
420
|
620
|
The
Tax-Exempt Fund of Maryland®*
|
024
|
224
|
324
|
424
|
624
|
The
Tax-Exempt Fund of Virginia®*
|
025
|
225
|
325
|
425
|
625
|
U.S.
Government Securities Fund
SM
|
022
|
222
|
322
|
422
|
622
|
Money
market fund
|
|
|
|
|
|
American
Funds Money Market Fund®
|
059
|
259
|
359
|
459
|
659
|
___________
*Qualified for sale only in
certain jurisdictions.
American Funds Inflation Linked Bond Fund - Page
67
|
|
Fund
numbers
|
Fund
|
Class
529-A
|
Class
529-B
|
Class
529-C
|
Class
529-E
|
Class
529-F-1
|
Stock
and stock/bond funds
|
|
|
|
|
|
AMCAP
Fund
|
1002
|
1202
|
1302
|
1502
|
1402
|
American
Balanced Fund
|
1011
|
1211
|
1311
|
1511
|
1411
|
American
Funds Global Balanced Fund
|
1037
|
1237
|
1337
|
1537
|
1437
|
American
Mutual Fund
|
1003
|
1203
|
1303
|
1503
|
1403
|
Capital
Income Builder
|
1012
|
1212
|
1312
|
1512
|
1412
|
Capital
World Growth and Income Fund
|
1033
|
1233
|
1333
|
1533
|
1433
|
EuroPacific
Growth Fund
|
1016
|
1216
|
1316
|
1516
|
1416
|
Fundamental
Investors
|
1010
|
1210
|
1310
|
1510
|
1410
|
The
Growth Fund of America
|
1005
|
1205
|
1305
|
1505
|
1405
|
The
Income Fund of America
|
1006
|
1206
|
1306
|
1506
|
1406
|
International
Growth and Income Fund
|
1034
|
1234
|
1334
|
1534
|
1434
|
The
Investment Company of America
|
1004
|
1204
|
1304
|
1504
|
1404
|
The
New Economy Fund
|
1014
|
1214
|
1314
|
1514
|
1414
|
New
Perspective Fund
|
1007
|
1207
|
1307
|
1507
|
1407
|
New
World Fund
|
1036
|
1236
|
1336
|
1536
|
1436
|
SMALLCAP
World Fund
|
1035
|
1235
|
1335
|
1535
|
1435
|
Washington
Mutual Investors Fund
|
1001
|
1201
|
1301
|
1501
|
1401
|
Bond
funds
|
|
|
|
|
|
American
Funds Corporate Bond Fund
|
1032
|
1232
|
1332
|
1532
|
1432
|
American
Funds Global High-Income Opportunities Fund
|
1038
|
1238
|
1338
|
1538
|
1438
|
American
Funds Inflation Linked Bond Fund
|
1060
|
1260
|
1360
|
1560
|
1460
|
American
Funds Mortgage Fund
|
1042
|
1242
|
1342
|
1542
|
1442
|
American
High-Income Trust
|
1021
|
1221
|
1321
|
1521
|
1421
|
The
Bond Fund of America
|
1008
|
1208
|
1308
|
1508
|
1408
|
Capital
World Bond Fund
|
1031
|
1231
|
1331
|
1531
|
1431
|
Intermediate
Bond Fund of America
|
1023
|
1223
|
1323
|
1523
|
1423
|
Short-Term
Bond Fund of America
|
1048
|
1248
|
1348
|
1548
|
1448
|
U.S.
Government Securities Fund
|
1022
|
1222
|
1322
|
1522
|
1422
|
Money
market fund
|
|
|
|
|
|
American
Funds Money Market Fund
|
1059
|
1259
|
1359
|
1559
|
1459
|
American Funds Inflation Linked Bond Fund - Page
68
|
|
Fund
numbers
|
Fund
|
Class
R-1
|
Class
R-2
|
Class
R-3
|
Class
R-4
|
Class
R-5
|
Class
R-6
|
Stock
and stock/bond funds
|
|
|
|
|
|
|
AMCAP
Fund
|
2102
|
2202
|
2302
|
2402
|
2502
|
2602
|
American
Balanced Fund
|
2111
|
2211
|
2311
|
2411
|
2511
|
2611
|
American
Funds Global Balanced Fund
|
2137
|
2237
|
2337
|
2437
|
2537
|
2637
|
American
Mutual Fund
|
2103
|
2203
|
2303
|
2403
|
2503
|
2603
|
Capital
Income Builder
|
2112
|
2212
|
2312
|
2412
|
2512
|
2612
|
Capital
World Growth and Income Fund
|
2133
|
2233
|
2333
|
2433
|
2533
|
2633
|
EuroPacific
Growth Fund
|
2116
|
2216
|
2316
|
2416
|
2516
|
2616
|
Fundamental
Investors
|
2110
|
2210
|
2310
|
2410
|
2510
|
2610
|
The
Growth Fund of America
|
2105
|
2205
|
2305
|
2405
|
2505
|
2605
|
The
Income Fund of America
|
2106
|
2206
|
2306
|
2406
|
2506
|
2606
|
International
Growth and Income Fund
|
2134
|
2234
|
2334
|
2434
|
2534
|
2634
|
The
Investment Company of America
|
2104
|
2204
|
2304
|
2404
|
2504
|
2604
|
The
New Economy Fund
|
2114
|
2214
|
2314
|
2414
|
2514
|
2614
|
New
Perspective Fund
|
2107
|
2207
|
2307
|
2407
|
2507
|
2607
|
New
World Fund
|
2136
|
2236
|
2336
|
2436
|
2536
|
2636
|
SMALLCAP
World Fund
|
2135
|
2235
|
2335
|
2435
|
2535
|
2635
|
Washington
Mutual Investors Fund
|
2101
|
2201
|
2301
|
2401
|
2501
|
2601
|
Bond
funds
|
|
|
|
|
|
|
American
Funds Corporate Bond Fund
|
2132
|
2232
|
2332
|
2432
|
2532
|
2632
|
American
Funds Global High-Income Opportunities Fund
|
2138
|
2238
|
2338
|
2438
|
2538
|
2638
|
American
Funds Inflation Linked Bond Fund
|
2160
|
2260
|
2360
|
2460
|
2560
|
2660
|
American
Funds Mortgage Fund
|
2142
|
2242
|
2342
|
2442
|
2542
|
2642
|
American
High-Income Trust
|
2121
|
2221
|
2321
|
2421
|
2521
|
2621
|
The
Bond Fund of America
|
2108
|
2208
|
2308
|
2408
|
2508
|
2608
|
Capital
World Bond Fund
|
2131
|
2231
|
2331
|
2431
|
2531
|
2631
|
Intermediate
Bond Fund of America
|
2123
|
2223
|
2323
|
2423
|
2523
|
2623
|
Short-Term
Bond Fund of America
|
2148
|
2248
|
2348
|
2448
|
2548
|
2648
|
U.S.
Government Securities Fund
|
2122
|
2222
|
2322
|
2422
|
2522
|
2622
|
Money
market fund
|
|
|
|
|
|
|
American
Funds Money Market Fund
|
2159
|
2259
|
2359
|
2459
|
2559
|
2659
|
American Funds Inflation Linked Bond Fund - Page
69
|
|
Fund
numbers
|
Fund
|
Class
A
|
Class
B
|
Class
C
|
Class
F-1
|
Class
F-2
|
American
Funds Target Date Retirement Series®
|
|
|
|
|
|
American
Funds 2055 Target Date Retirement Fund®
|
082
|
282
|
382
|
482
|
682
|
American
Funds 2050 Target Date Retirement Fund®
|
069
|
269
|
369
|
469
|
669
|
American
Funds 2045 Target Date Retirement Fund®
|
068
|
268
|
368
|
468
|
668
|
American
Funds 2040 Target Date Retirement Fund®
|
067
|
267
|
367
|
467
|
667
|
American
Funds 2035 Target Date Retirement Fund®
|
066
|
266
|
366
|
466
|
36066
|
American
Funds 2030 Target Date Retirement Fund®
|
065
|
265
|
365
|
465
|
665
|
American
Funds 2025 Target Date Retirement Fund®
|
064
|
264
|
364
|
464
|
664
|
American
Funds 2020 Target Date Retirement Fund®
|
063
|
263
|
363
|
463
|
663
|
American
Funds 2015 Target Date Retirement Fund®
|
062
|
262
|
362
|
462
|
662
|
American
Funds 2010 Target Date Retirement Fund®
|
061
|
261
|
361
|
461
|
661
|
|
Fund
numbers
|
Fund
|
Class
R-1
|
Class
R-2
|
Class
R-3
|
Class
R-4
|
Class
R-5
|
Class
R-6
|
American
Funds Target Date Retirement Series®
|
|
|
|
|
|
|
American
Funds 2055 Target Date Retirement Fund®
|
2182
|
2282
|
2382
|
2482
|
2582
|
2682
|
American
Funds 2050 Target Date Retirement Fund®
|
2169
|
2269
|
2369
|
2469
|
2569
|
2669
|
American
Funds 2045 Target Date Retirement Fund®
|
2168
|
2268
|
2368
|
2468
|
2568
|
2668
|
American
Funds 2040 Target Date Retirement Fund®
|
2167
|
2267
|
2367
|
2467
|
2567
|
2667
|
American
Funds 2035 Target Date Retirement Fund®
|
2166
|
2266
|
2366
|
2466
|
2566
|
2666
|
American
Funds 2030 Target Date Retirement Fund®
|
2165
|
2265
|
2365
|
2465
|
2565
|
2665
|
American
Funds 2025 Target Date Retirement Fund®
|
2164
|
2264
|
2364
|
2464
|
2564
|
2664
|
American
Funds 2020 Target Date Retirement Fund®
|
2163
|
2263
|
2363
|
2463
|
2563
|
2663
|
American
Funds 2015 Target Date Retirement Fund®
|
2162
|
2262
|
2362
|
2462
|
2562
|
2662
|
American
Funds 2010 Target Date Retirement Fund®
|
2161
|
2261
|
2361
|
2461
|
2561
|
2661
|
|
Fund
numbers
|
Fund
|
Class
529-A
|
Class
529-B
|
Class
529-C
|
Class
529-E
|
Class
529-F-1
|
American
Funds College Target Date Series®
|
|
|
|
|
|
American
Funds College 2030 Fund®
|
1094
|
1294
|
1394
|
1594
|
1494
|
American
Funds College 2027 Fund®
|
1093
|
1293
|
1393
|
1593
|
1493
|
American
Funds College 2024 Fund®
|
1092
|
1292
|
1392
|
1592
|
1492
|
American
Funds College 2021 Fund®
|
1091
|
1291
|
1391
|
1591
|
1491
|
American
Funds College 2018 Fund®
|
1090
|
1290
|
1390
|
1590
|
1490
|
American
Funds College 2015 Fund®
|
1089
|
1289
|
1389
|
1589
|
1489
|
American
Funds College Enrollment Fund
SM
|
1088
|
1288
|
1388
|
1588
|
1488
|
American Funds Inflation Linked Bond Fund - Page
70
|
|
Fund
numbers
|
Fund
|
Class
A
|
Class
B
|
Class
C
|
Class
F-1
|
Class
F-2
|
American
Funds Portfolio Series
SM
|
|
|
|
|
|
American
Funds Global Growth Portfolio
SM
|
055
|
255
|
355
|
455
|
655
|
American
Funds Growth Portfolio
SM
|
053
|
253
|
353
|
453
|
653
|
American
Funds Growth and Income Portfolio
SM
|
051
|
251
|
351
|
451
|
651
|
American
Funds Balanced Portfolio
SM
|
050
|
250
|
350
|
450
|
650
|
American
Funds Income Portfolio
SM
|
047
|
247
|
347
|
447
|
647
|
American
Funds Tax-Advantaged Income Portfolio
SM
|
046
|
246
|
346
|
446
|
646
|
American
Funds Preservation Portfolio
SM
|
045
|
245
|
345
|
445
|
645
|
American
Funds Tax-Exempt Preservation Portfolio
SM
|
044
|
244
|
344
|
444
|
644
|
|
Class
529-A
|
Class
529-B
|
Class
529-C
|
Class
529-E
|
Class
529-F-1
|
American
Funds Global Growth Portfolio
|
1055
|
1255
|
1355
|
1555
|
1455
|
American
Funds Growth Portfolio
|
1053
|
1253
|
1353
|
1553
|
1453
|
American
Funds Growth and Income Portfolio
|
1051
|
1251
|
1351
|
1551
|
1451
|
American
Funds Balanced Portfolio
|
1050
|
1250
|
1350
|
1550
|
1450
|
American
Funds Income Portfolio
|
1047
|
1247
|
1347
|
1547
|
1447
|
American
Funds Tax-Advantaged Income Portfolio
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
American
Funds Preservation Portfolio
|
1045
|
1245
|
1345
|
1545
|
1445
|
American
Funds Tax-Exempt Preservation Portfolio
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
|
|
|
|
|
|
Class
R-1
|
Class
R-2
|
Class
R-3
|
Class
R-4
|
Class
R-5
|
Class
R-6
|
American
Funds Global Growth Portfolio
|
2155
|
2255
|
2355
|
2455
|
2555
|
2655
|
American
Funds Growth Portfolio
|
2153
|
2253
|
2353
|
2453
|
2553
|
2653
|
American
Funds Growth and Income Portfolio
|
2151
|
2251
|
2351
|
2451
|
2551
|
2651
|
American
Funds Balanced Portfolio
|
2150
|
2250
|
2350
|
2450
|
2550
|
2650
|
American
Funds Income Portfolio
|
2147
|
2247
|
2347
|
2447
|
2547
|
2647
|
American
Funds Tax-Advantaged Income Portfolio
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
American
Funds Preservation Portfolio
|
2145
|
2245
|
2345
|
2445
|
2545
|
2645
|
American
Funds Tax-Exempt Preservation Portfolio
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
American Funds Inflation Linked Bond Fund - Page
71
|
Appendix
The following descriptions of debt security
ratings are based on information provided by Moody’s Investors Service, Standard & Poor’s Corporation and Fitch
Ratings, Inc.
Description of bond ratings
Moody’s
Long-term rating definitions
Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A
Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa
Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative
characteristics.
Ba
Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject to high credit risk.
Caa
Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal
and interest.
C
Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal
or interest.
Note:
Moody’s appends numerical
modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks
in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
ranking in the lower end of that generic rating category.
American Funds Inflation Linked Bond Fund - Page
72
|
Standard & Poor’s
Long-term issue credit ratings
AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its
financial commitment on the obligation is extremely strong.
AA
An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet
its financial commitment on the obligation is very strong.
A
An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation
is still strong.
BBB
An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C
Obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties
or major exposures to adverse conditions.
BB
An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity
to meet its financial commitment on the obligation.
B
An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s
capacity or willingness to meet its financial commitment on the obligation.
CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC
An obligation rated CC is currently highly vulnerable to nonpayment.
American Funds Inflation Linked Bond Fund - Page
73
|
C
A C rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages
allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action
which have not experienced a payment default. Among others, the C rating may be assigned to subordinated debt, preferred stock
or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred
stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash
or replaced by other instruments having a total value that is less than par.
D
An obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be
made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized. An obligation’s rating is lowered to D upon completion of a distressed
exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having
a total value that is less than par.
Plus (+) or minus (–)
The ratings from AA to CCC may be modified
by the addition of a plus or minus sign to show relative standing within the major rating categories.
NR
This indicates that no rating has been
requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate
a particular obligation as a matter of policy.
American Funds Inflation Linked Bond Fund - Page
74
|
Fitch Ratings, Inc.
Long-term credit ratings
AAA
Highest credit quality. AAA ratings denote the lowest expectation of default risk. They are assigned only in case of exceptionally
strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable
events.
AA
Very high credit quality. AA ratings denote expectations of very low default risk. They indicate very strong capacity for payment
of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A
High credit quality. A ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the
case for higher ratings.
BBB
Good credit quality. BBB ratings indicate that expectations of default risk are low. The capacity for payment of financial commitments
is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity.
BB
Speculative. BB ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business
or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial
commitments.
B
Highly speculative. B ratings indicate that material default risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and
economic environment.
CCC
Substantial credit risk. Default is a real possibility.
CC
Very high levels of credit risk. Default of some kind appears probable.
C
Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill. Conditions that are
indicative of a C category rating for an issuer include:
|
·
|
The
issuer has entered
into a grace or cure
period following nonpayment
of a material financial
obligation;
|
|
·
|
The
issuer has entered
into a temporary negotiated
waiver or standstill
agreement following
a payment default on
a material financial
obligation; or
|
|
·
|
Fitch
Ratings otherwise believes
a condition of RD or
D to be imminent or
inevitable, including
through the formal
announcement of a distressed
debt exchange.
|
American Funds Inflation Linked Bond Fund - Page
75
|
RD
Restricted default. RD ratings indicate an issuer that in Fitch Ratings’ opinion has experienced an uncured payment default
on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership,
liquidation or other formal winding up procedure, and which has not otherwise ceased operating. This would include:
|
·
|
The
selective payment default
on a specific class
or currency of debt;
|
|
·
|
The
uncured expiry of any
applicable grace period,
cure period or default
forbearance period
following a payment
default on a bank loan,
capital markets security
or other material financial
obligation;
|
|
·
|
The
extension of multiple
waivers or forbearance
periods upon a payment
default on one or more
material financial
obligations, either
in series or in parallel;
or
|
|
·
|
Execution
of a distressed debt
exchange on one or
more material financial
obligations.
|
D
Default. D ratings indicate an issuer that in Fitch Ratings’ opinion has entered into bankruptcy filings, administration,
receivership, liquidation or other formal winding up procedure, or which has otherwise ceased business.
Default ratings are not assigned
prospectively to entities or their obligations; within this context, nonpayment on an instrument that contains a deferral feature
or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless
a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.
Imminent default typically refers
to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be
where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default.
Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still
lies several days or weeks in the immediate future.
In all cases, the assignment of a
default rating reflects the agency’s opinion as to the most appropriate rating category consistent with the rest of its
universe of ratings, and may differ from the definition of default under the terms of an issuer’s financial obligations
or local commercial practice.
Note:
The modifiers
“+” or “–” may be appended to a rating to denote relative status within major rating categories.
Such suffixes are not added to the AAA long-term rating category, or to categories below B.
American Funds Inflation Linked Bond Fund - Page
76
|
Investment portfolio
November
30, 2013
Investment mix by security type
|
Percent of net assets
|
Portfolio quality summary*
|
|
Percent of net assets
|
U.S. Treasury and agency
†
|
|
|
88.7
|
%
|
Aaa/AAA
|
|
|
1.5
|
|
Aa/AA
|
|
|
0.2
|
|
A/A
|
|
|
2.5
|
|
Baa/BBB
|
|
|
3.1
|
|
Short-term securities & other assets less liabilities
|
|
|
4.0
|
|
*
|
Bond ratings, which typically range from Aaa/AAA (highest)
to D (lowest), are assigned by credit rating agencies such as Moody’s, Standard & Poor’s and/or Fitch as an
indication of an issuer’s creditworthiness. If agency ratings differ, the security will be considered to have received
the highest of those ratings, consistent with the fund’s investment policies. The ratings are not covered by the
Report of Independent Registered Public Accounting Firm.
|
†
|
These securities are guaranteed by the full faith and credit of the United
States government.
|
Bonds, notes & other debt instruments 95.96%
|
|
Principal amount
(000)
|
|
|
Value
(000)
|
|
|
Percent of
net assets
|
|
U.S. Treasury inflation-protected securities
1
87.22%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.50% 2015
|
|
|
$
|
10,826
|
|
|
|
$
|
11,034
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.125% 2017
|
|
|
|
103
|
|
|
|
|
106
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.125% 2018
2
|
|
|
|
45,681
|
|
|
|
|
47,136
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.625% 2021
|
|
|
|
19,375
|
|
|
|
|
20,044
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.125% 2022
|
|
|
|
16,189
|
|
|
|
|
15,797
|
|
|
|
|
87.22
|
%
|
U.S. Treasury Inflation-Protected Security 0.125% 2023
|
|
|
|
964
|
|
|
|
|
927
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.375% 2023
|
|
|
|
40,589
|
|
|
|
|
39,868
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 2.375% 2025
|
|
|
|
435
|
|
|
|
|
511
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 2.00% 2026
|
|
|
|
27,133
|
|
|
|
|
30,717
|
|
|
|
|
|
|
U.S. Treasury Inflation-Protected Security 0.625% 2043
|
|
|
|
18,102
|
|
|
|
|
14,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,444
|
|
|
|
|
87.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilities 1.92%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MidAmerican Energy Holdings Co. 3.75% 2023
3
|
|
|
|
4,000
|
|
|
|
|
3,973
|
|
|
|
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal agency bonds & notes 1.48%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac, Series K034, Class A-2, multifamily 3.531%
2023
4,5
|
|
|
|
3,000
|
|
|
|
|
3,060
|
|
|
|
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financials 1.43%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rabobank Nederland 5.75% 2043
|
|
|
|
2,590
|
|
|
|
|
2,657
|
|
|
|
|
1.28
|
|
American Express Co. 0.828% 2018
4
|
|
|
|
300
|
|
|
|
|
300
|
|
|
|
|
.15
|
|
|
|
|
|
|
|
|
|
|
2,957
|
|
|
|
|
1.43
|
|
American Funds Inflation Linked Bond Fund
|
4
|
|
|
Principal amount
(000)
|
|
|
Value
(000)
|
|
|
Percent of
net assets
|
|
Mortgage-backed
obligations
5
1.16%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hilton
USA Trust, Series 2013-HLF-AFX, 2.662% 2030
3
|
|
|
$
|
2,000
|
|
|
|
$
|
2,008
|
|
|
|
|
.97
|
%
|
CS First Boston
Mortgage Securities Corp., Series 2007-C2,
Class A-M, 5.615%
2049
4
|
|
|
|
200
|
|
|
|
|
214
|
|
|
|
|
.10
|
|
Greenwich Capital
Commercial Funding Corp., Series 2007-GG11,
Class
A-M, 5.867% 2049
4
|
|
|
|
156
|
|
|
|
|
173
|
|
|
|
|
.09
|
|
|
|
|
|
|
|
|
|
|
2,395
|
|
|
|
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials 1.12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glencore Xstrata
LLC 1.604% 2019
3,4
|
|
|
|
2,400
|
|
|
|
|
2,322
|
|
|
|
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds &
notes of governments outside the U.S. 0.91%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
German Government
0.75% 2018
1
|
|
|
€
|
742
|
|
|
|
|
1,060
|
|
|
|
|
.51
|
|
United Mexican
States Government, Series M20, 10.00% 2024
|
|
|
MXN
|
7,500
|
|
|
|
|
746
|
|
|
|
|
.36
|
|
South
Africa (Republic of), Series 197, 5.50% 2023
1
|
|
|
ZAR
|
544
|
|
|
|
|
74
|
|
|
|
|
.04
|
|
|
|
|
|
|
|
|
|
|
1,880
|
|
|
|
|
.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
staples 0.57%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip
Morris International Inc. 3.60% 2023
|
|
|
$
|
1,210
|
|
|
|
|
1,190
|
|
|
|
|
.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
care 0.15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer
Inc. 0.554% 2018
4
|
|
|
|
300
|
|
|
|
|
301
|
|
|
|
|
.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bonds,
notes & other debt instruments
(cost: $199,863,000)
|
|
|
|
|
|
|
|
|
198,522
|
|
|
|
|
95.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term securities 4.58%
|
|
|
|
|
|
|
|
|
|
|
|
|
Army and Air Force Exchange Service 0.10% due 1/27/2014
3
|
|
|
|
2,500
|
|
|
|
|
2,500
|
|
|
|
|
1.21
|
|
Wal-Mart Stores, Inc. 0.05% due 12/3–12/18/2013
3
|
|
|
|
2,200
|
|
|
|
|
2,200
|
|
|
|
|
1.06
|
|
ExxonMobil Corp. 0.06%
due 12/19/2013
|
|
|
|
2,000
|
|
|
|
|
2,000
|
|
|
|
|
.97
|
|
Fannie Mae 0.04% due 12/4/2013
|
|
|
|
1,300
|
|
|
|
|
1,300
|
|
|
|
|
.63
|
|
Canada Bill 0.895% due 5/22/2014
|
|
|
C$
|
1,250
|
|
|
|
|
1,169
|
|
|
|
|
.57
|
|
Federal Home Loan Bank 0.05% due 1/10/2014
|
|
|
$
|
300
|
|
|
|
|
300
|
|
|
|
|
.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term securities
(cost: $9,482,000)
|
|
|
|
|
|
|
|
|
9,469
|
|
|
|
|
4.58
|
|
Total investment securities
(cost: $209,345,000)
|
|
|
|
|
|
|
|
|
207,991
|
|
|
|
|
100.54
|
|
Other assets less liabilities
|
|
|
|
|
|
|
|
|
(1,105
|
)
|
|
|
|
(.54
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
|
|
|
$
|
206,886
|
|
|
|
|
100.00
|
%
|
American Funds Inflation Linked Bond Fund
|
5
|
Forward currency contracts
The fund has entered into a forward currency contract to sell
currency as shown in the following table. The average notional amount of open forward currency contracts was $943,000 over
the prior five-month period.
|
|
|
|
Contract amount
|
|
|
Unrealized
depreciation
|
|
|
|
Settlement date
|
|
Counterparty
|
|
Receive
(000)
|
|
Deliver
(000)
|
|
at 11/30/2013
(000)
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euros
|
|
1/8/2014
|
|
Bank of New York Mellon
|
|
|
$946
|
|
|
|
€700
|
|
|
|
|
$(5
|
)
|
Interest rate swaps
The fund has entered into interest rate swaps as shown in the following
table. The average notional amount of interest rate swaps was $15,988,000 over the prior four-month period.
Pay/receive
floating rate
|
|
Floating rate index
|
|
Fixed rate
|
|
Expiration date
|
|
Notional
amount
(000)
|
|
Unrealized
(depreciation)
appreciation
at 11/30/2013
(000)
|
Receive
|
|
6-month EUR-LIBOR
|
|
|
1.227
|
%
|
|
8/8/2018
|
|
$
|
675
|
|
|
|
$(10
|
)
|
Receive
|
|
3-month USD-LIBOR
|
|
|
1.46375
|
|
|
11/26/2018
|
|
|
2,000
|
|
|
|
(1
|
)
|
Receive
|
|
3-month USD-LIBOR
|
|
|
1.434
|
|
|
11/29/2018
|
|
|
8,000
|
|
|
|
10
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
1.46625
|
|
|
12/3/2018
|
|
|
8,500
|
|
|
|
—
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
2.751
|
|
|
11/6/2023
|
|
|
1,200
|
|
|
|
7
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
2.80625
|
|
|
11/7/2023
|
|
|
8,000
|
|
|
|
6
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
2.775
|
|
|
11/8/2023
|
|
|
3,000
|
|
|
|
11
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
2.782
|
|
|
11/8/2023
|
|
|
3,000
|
|
|
|
9
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
3.566
|
|
|
10/28/2043
|
|
|
400
|
|
|
|
13
|
|
Receive
|
|
3-month USD-LIBOR
|
|
|
3.755
|
|
|
12/3/2043
|
|
|
2,500
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 45
|
|
1
|
Index-linked bond whose principal amount moves with a government
price index.
|
2
|
A portion of this security was pledged as collateral. The total value of
pledged collateral was $1,171,000, which represented .57% of the net assets of the fund.
|
3
|
Acquired in a transaction exempt from registration under Rule 144A or
section 4(2) of 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 $13,003,000, which represented 6.29%
of the net assets of the fund.
|
4
|
Coupon rate may change periodically.
|
5
|
Principal payments may be made periodically. Therefore, the effective maturity
date may be earlier than the stated maturity date.
|
Key to abbreviations and symbols
C$ = Canadian dollars
€ = Euros
MXN = Mexican pesos
ZAR = South African rand
See Notes to Financial Statements
American Funds Inflation Linked Bond Fund
|
6
|
Financial statements
Statement
of assets and liabilities
at November 30, 2013
|
|
(dollars
in thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Investment securities, at value (cost:
$209,345)
|
|
|
|
|
|
$
|
207,991
|
|
Cash denominated in currencies other than U.S. dollars (cost: $7)
|
|
|
|
|
|
|
7
|
|
Cash
|
|
|
|
|
|
|
419
|
|
Receivables for:
|
|
|
|
|
|
|
|
|
Sales of investments
|
|
$
|
6,952
|
|
|
|
|
|
Sales of fund’s shares
|
|
|
91
|
|
|
|
|
|
Variation margin on interest rate swaps
|
|
|
20
|
|
|
|
|
|
Interest
|
|
|
429
|
|
|
|
7,492
|
|
|
|
|
|
|
|
|
215,909
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Unrealized depreciation on open forward currency contracts
|
|
|
|
|
|
|
5
|
|
Payables for:
|
|
|
|
|
|
|
|
|
Purchases of investments
|
|
|
8,955
|
|
|
|
|
|
Investment advisory services
|
|
|
53
|
|
|
|
|
|
Services provided by related parties
|
|
|
7
|
|
|
|
|
|
Trustees’ deferred compensation
|
|
|
—
|
*
|
|
|
|
|
Other
|
|
|
3
|
|
|
|
9,018
|
|
Net assets at November 30, 2013
|
|
|
|
|
|
$
|
206,886
|
|
|
|
|
|
|
|
|
|
|
Net assets consist of:
|
|
|
|
|
|
|
|
|
Capital paid in on shares of beneficial interest
|
|
|
|
|
|
$
|
209,335
|
|
Undistributed net investment income
|
|
|
|
|
|
|
26
|
|
Accumulated net realized loss
|
|
|
|
|
|
|
(1,161
|
)
|
Net unrealized depreciation
|
|
|
|
|
|
|
(1,314
|
)
|
Net assets at November 30, 2013
|
|
|
|
|
|
$
|
206,886
|
|
(dollars and shares in thousands, except per-share
amounts)
Shares of beneficial interest issued and outstanding (no stated
par value) —
unlimited shares authorized (22,258 total shares outstanding)
|
|
Net assets
|
|
|
Shares
outstanding
|
|
|
Net asset value
per share
|
|
Class A
|
|
$
|
2,816
|
|
|
|
303
|
|
|
$
|
9.30
|
|
Class R-6
|
|
|
204,070
|
|
|
|
21,955
|
|
|
|
9.29
|
|
*
|
Amount less than one thousand.
|
See Notes to Financial Statements
American Funds Inflation Linked Bond Fund
|
7
|
Statement of operations
for the period December 14, 2012
1
to November 30, 2013
|
(dollars in thousands)
|
Investment income:
|
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
$
|
80
|
|
Fees and expenses
2
:
|
|
|
|
|
|
|
|
|
Investment advisory services
|
|
$
|
129
|
|
|
|
|
|
Transfer agent services
|
|
|
—
|
3
|
|
|
|
|
Administrative services
|
|
|
9
|
|
|
|
|
|
Reports to shareholders
|
|
|
5
|
|
|
|
|
|
Registration statement and prospectus
|
|
|
9
|
|
|
|
|
|
Trustees’ compensation
|
|
|
—
|
3
|
|
|
|
|
Auditing and legal
|
|
|
23
|
|
|
|
|
|
Custodian
|
|
|
—
|
3
|
|
|
|
|
Insurance
|
|
|
10
|
|
|
|
|
|
Other
|
|
|
13
|
|
|
|
|
|
Total fees and expenses before reimbursement
|
|
|
198
|
|
|
|
|
|
Less reimbursement of fees and expenses
|
|
|
38
|
|
|
|
|
|
Total fees and expenses after reimbursement
|
|
|
|
|
|
|
160
|
|
Net investment loss
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
Net realized loss and unrealized depreciation on investments,
forward currency contracts,
interest rate swaps and currency transactions:
|
|
|
|
|
|
|
|
|
Net realized (loss) gain on:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
(1,002
|
)
|
|
|
|
|
Forward currency contracts
|
|
|
3
|
|
|
|
|
|
Interest rate swaps
|
|
|
(39
|
)
|
|
|
|
|
Currency transactions
|
|
|
(16
|
)
|
|
|
(1,054
|
)
|
Net unrealized (depreciation) appreciation on:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
(1,354
|
)
|
|
|
|
|
Forward currency contracts
|
|
|
(5
|
)
|
|
|
|
|
Interest rate swaps
|
|
|
45
|
|
|
|
(1,314
|
)
|
Net realized loss and unrealized
depreciation on investments, forward currency contracts, interest rate swaps and currency transactions
|
|
|
|
|
|
|
(2,368
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
|
|
|
|
$
|
(2,448
|
)
|
1
|
Commencement of operations.
|
2
|
Additional information related to class-specific fees and expenses is
included in the Notes to Financial Statements.
|
3
|
Amount less than one thousand.
|
See Notes to Financial Statements
American Funds Inflation Linked Bond Fund
|
8
|
Statement of changes in net assets
for the period December 14, 2012*
to November 30, 2013
|
(dollars in thousands)
|
Operations:
|
|
|
|
|
Net investment loss
|
|
$
|
(80
|
)
|
Net realized loss on
investments, forward currency contracts, interest rate swaps and currency transactions
|
|
|
(1,054
|
)
|
Net unrealized depreciation on investments, forward
currency contracts and interest rate swaps
|
|
|
(1,314
|
)
|
Net decrease in net assets resulting from operations
|
|
|
(2,448
|
)
|
|
|
|
|
|
Net capital share transactions
|
|
|
209,334
|
|
|
|
|
|
|
Total increase in net assets
|
|
|
206,886
|
|
|
|
|
|
|
Net assets:
|
|
|
|
|
Beginning of period
|
|
|
—
|
|
End of period (including undistributed net investment income: $26)
|
|
$
|
206,886
|
|
*
|
Commencement of operations.
|
See Notes to Financial Statements
American Funds Inflation Linked Bond Fund
|
9
|
Notes to financial statements
1. Organization
American Funds Inflation Linked Bond Fund (the “fund”)
was organized on May 25, 2012, as a Delaware statutory trust. On December 6, 2012, the fund obtained its initial capitalization
of $100,000 from the sale of 10,000 Class A shares of beneficial interest to Capital Research and Management Company (“CRMC”),
the fund’s investment adviser. Operations commenced on December 14, 2012, upon the initial purchase of investment securities.
The fund’s fiscal year ends on November 30. The fund is registered under the Investment Company Act of 1940 as an open-end,
diversified management investment company. The fund seeks to provide inflation protection and income consistent with investment
in inflation linked securities.
The fund has 16 share classes consisting of five retail share
classes (Classes A, B and C, as well as two F share classes, F-1 and F-2), five 529 college savings plan share classes (Classes
529-A, 529-B, 529-C, 529-E and 529-F-1) and six retirement plan share classes (Classes R-1, R-2, R-3, R-4, R-5 and R-6). The 529
college savings plan share classes can be used to save for college education. The retirement plan share classes are generally
offered only through eligible employer-sponsored retirement plans. The fund’s share classes are further described:
Share
class
|
|
Initial sales charge
|
|
Contingent deferred sales
charge upon redemption
|
|
Conversion feature
|
Classes A and 529-A
|
|
Up to 2.50%
|
|
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
share 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 in this section, 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. 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.
American Funds Inflation Linked Bond Fund
|
10
|
Dividends and distributions to shareholders —
Dividends
and distributions 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 supplied by one or more pricing vendors 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. 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 in the fund’s statement of operations. 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
CRMC values the fund’s investments at fair value as defined
by accounting principles generally accepted in the United States of America. The net asset value of each share class of the fund
is generally determined as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.
Methods and inputs —
The fund’s investment
adviser uses the following methods and inputs to establish the fair value of the fund’s assets and liabilities. Use of particular
methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.
Fixed-income securities, including short-term securities purchased
with more than 60 days left to maturity, are generally valued at prices obtained from one or more pricing vendors. Vendors value
such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that
are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However,
these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.
Fixed-income class
|
|
Examples of standard inputs
|
All
|
|
Benchmark
yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other
relationships observed in the markets among comparable securities; and proprietary pricing models such as yield
measures calculated using factors such as cash flows, financial or collateral performance and other reference data
(collectively referred to as “standard inputs”)
|
Bonds & notes of governments & government
agencies
|
|
Standard inputs and interest rate volatilities
|
When the fund’s 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 ask prices that are reasonably and timely available (or bid prices, if ask prices are
not available) or at prices for securities of comparable maturity, quality and type.
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. Forward currency contracts are
valued at the mean of representative quoted bid and ask prices, generally based on prices supplied by one or more pricing vendors.
Interest rate swaps are generally valued by pricing vendors based on market inputs that include the index and term of index, reset
frequency, payer/receiver, currency, and pay frequency.
Securities and other assets for which representative market
quotations are not readily available or are considered unreliable by the fund’s investment adviser are fair valued as determined
in good faith under fair valuation guidelines adopted by authority of the fund’s board of trustees as further described.
The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission rules and guidance,
to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications
of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security,
such as 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.
American Funds Inflation Linked Bond Fund
|
11
|
Processes and structure —
The fund’s board
of trustees has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board
oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”)
to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee
regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s
valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed
appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues.
The Fair Valuation Committee reports any changes to the fair valuation guidelines to the board of trustees with supplemental information
to support the changes. The fund’s board and audit committee also regularly review reports that describe fair value determinations
and methods.
The fund’s investment adviser has also established a Fixed-Income
Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors.
This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security
valuation are also subject to additional internal reviews, including an annual control self-evaluation program facilitated by
the investment adviser’s compliance group.
Classifications —
The fund’s investment adviser
classifies the fund’s assets and liabilities into three levels based on the inputs used to value the assets or liabilities.
Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant
observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Level 3 values are
based on significant unobservable inputs that reflect the investment adviser’s determination of assumptions that market
participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk
or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because
the inputs used to determine fair value may not always be quoted prices in an active market. At November 30, 2013, all of the
fund’s investments were classified as Level 2.
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 securities held by the fund may decline due to market conditions and other factors, including those directly
involving the issuers of securities held by the fund.
Investing in bonds —
Rising interest rates will
generally cause the prices of bonds and other debt securities to fall. Longer maturity debt securities may be subject to greater
price fluctuations than shorter maturity debt securities. In addition, falling interest rates may cause an issuer to redeem, call
or refinance a debt security before its stated maturity, which may result in the fund having to reinvest the proceeds in lower
yielding securities.
Bonds and other debt securities are subject to credit risk,
which is the possibility that the credit strength of an issuer will weaken and/or an issuer of a debt security will fail to make
timely payments of principal or interest and the security will go into default. Lower quality debt securities generally have higher
rates of interest and may be subject to greater price fluctuations than higher quality debt securities. Credit risk is gauged,
in part, by the credit ratings of the debt securities in which the fund invests. However, ratings are only the opinions of the
rating agencies issuing them and are not guarantees as to credit quality or an evaluation of market risk. The fund’s investment
adviser relies on its own credit analysts to research issuers and issues in seeking to mitigate various credit and default risks.
Investing in inflation linked bonds —
The values
of inflation linked bonds generally fluctuate in response to changes in real interest rates — i.e., the rates of interest
one expects to receive after factoring in inflation. A rise in real interest rates may cause the prices of inflation linked securities
to fall, while a decline in real interest rates may cause the prices to increase. Inflation linked bonds may experience greater
losses than other debt securities with similar durations when real interest rates rise faster than nominal interest rates. There
can be no assurance that the value of inflation linked securities will be directly correlated to changes in interest rates; for
example, if interest rates rise for reasons other than inflation, the increase may not be reflected in the security’s inflation
measure.
Investing in inflation linked bonds may also mean that during
periods of extreme deflation, the fund may have reduced income to distribute. If prices for goods and services decline throughout
the economy, the principal and income on inflation linked securities may decline and result in losses to the fund.
American Funds Inflation Linked Bond Fund
|
12
|
Investing in securities backed by the U.S. government
—
Securities backed by the U.S. Treasury or the full faith and credit of the U.S. government are guaranteed only as
to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these
securities will fluctuate with changes in interest rates. Securities issued by government-sponsored entities and federal
agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor
guaranteed by the U.S. government.
Investing in interest rate swaps —
The use of interest
rate swaps involves the risk that anticipated changes in interest rates will not be accurately predicted, which may result in
losses to the fund. Interest rate swaps also involve the possible failure of a counterparty to perform in accordance with the
terms of the swap agreement. If a counterparty defaults on its obligations under a swap agreement, the fund may lose any amount
it expected to receive from the counterparty, potentially including amounts in excess of the fund’s initial investment.
Thinly traded securities —
There may be little
trading in the secondary market for particular bonds or other debt securities, which may make them more difficult to value, acquire
or sell.
Investing outside the U.S. —
Securities of issuers
domiciled outside the U.S., or with significant operations outside the U.S., may lose value because of adverse political, social,
economic or market developments in the countries or regions in which the issuers operate. These securities may also lose value
due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Securities markets
in certain countries may be more volatile and/or less liquid than those in the U.S. Investments outside the U.S. may also be subject
to different settlement and accounting practices and different regulatory, legal and reporting standards, and may be more difficult
to value, than those in the U.S. The risks of investing outside the U.S. may be heightened in connection with investments in emerging
markets.
Management —
The investment adviser to the fund
actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses employed
by the investment adviser in this process may not produce the desired results. This could cause the fund to lose value or its
investment results to lag relevant benchmarks or other funds with similar objectives.
5. Certain investment techniques
Forward currency contracts —
The fund has entered
into forward currency contracts, which represent agreements to exchange currencies on specific future dates at predetermined rates.
The fund’s investment adviser uses forward currency contracts to manage the fund’s exposure to changes in exchange
rates. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of
their contracts and from possible movements in exchange rates.
On a daily basis, the fund’s investment adviser values
forward currency contracts and records unrealized appreciation or depreciation for open forward currency contracts in the fund’s
statement of assets and liabilities. Realized gains or losses are recorded at the time the forward currency contract is closed
or offset by another contract with the same broker for the same settlement date and currency.
Interest rate swaps —
The fund has entered into
interest rate swaps, which are agreements to exchange one stream of future interest payments for another based on a specified
notional amount. Typically, interest rate swaps exchange a fixed-interest rate for a payment that floats relative to a benchmark
or vice versa. The fund’s investment adviser uses interest rate swaps to manage the interest rate sensitivity of the fund
by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio. Risks may arise as a result of
the fund’s investment adviser incorrectly anticipating changes in interest rates, increased volatility, reduced liquidity
and the potential inability of counterparties to meet the terms of their agreements.
Upon entering into an interest rate swap contract, the fund
is required to deposit cash, U.S. government securities or other liquid securities, which is known as “initial margin.”
Generally, the initial margin required for a particular interest rate swap is set and held as collateral by the clearinghouse
on which the contract is cleared. The amount of initial margin required may be significantly modified from time to time by the
clearinghouse during the term of the contract.
On a daily basis, the fund’s investment adviser records
daily interest accruals related to the exchange of future payments as a receivable and payable in the fund’s statement of
assets and liabilities. The fund also pays or receives a “variation margin” based on the increase or decrease in the
value of the interest rate swaps, including accrued interest, and records variation margin on interest rate swaps in the statement
of assets and liabilities. The fund records realized gains and losses on both the net accrued interest and any gain or loss recognized
at the time the interest rate swap is closed or expires. Net realized gains or losses, as well as any net unrealized appreciation
or depreciation, from interest rate swaps are recorded in the fund’s statement of operations.
American Funds Inflation Linked Bond Fund
|
13
|
The following tables present the financial statement impacts
resulting from the fund’s use of forward currency contracts and interest rate swaps as of November 30, 2013 (dollars in
thousands):
|
|
Asset
|
|
Liability
|
Contract
|
|
Location on statement of
assets and liabilities
|
Value
|
|
Location on statement of
assets and liabilities
|
Value
|
Forward currency
|
|
Unrealized appreciation on open forward currency contracts
|
|
$
|
—
|
|
|
Unrealized depreciation on open forward currency contracts
|
|
$
|
5
|
|
Interest rate swaps
|
|
Receivable for variation margin on interest rate swaps
|
|
|
20
|
|
|
Payable for variation margin on
interest rate swaps
|
|
|
—
|
|
|
|
|
|
$
|
20
|
|
|
|
|
$
|
5
|
|
|
|
Net realized gain (loss)
|
|
Net unrealized (depreciation) appreciation
|
Contract
|
|
Location on statement of
operations
|
Value
|
|
Location on statement of
operations
|
Value
|
Forward currency
|
|
Net realized gain on forward currency contracts
|
|
$
|
3
|
|
|
Net unrealized
depreciation on forward currency contracts
|
|
$
|
(5
|
)
|
Interest rate swaps
|
|
Net realized loss on interest rate
swaps
|
|
|
(39
|
)
|
|
Net unrealized appreciation on interest rate swaps
|
|
|
45
|
|
|
|
|
|
$
|
(36
|
)
|
|
|
|
$
|
40
|
|
Collateral —
The fund has entered into a
collateral program due to its use of forward currency contracts and interest rate swaps. For forward currency contracts, the
program calls for the fund to either receive or pledge collateral based on the net gain or loss on unsettled forward currency
contracts by counterparty. The purpose of the forward currency contract collateral is to cover potential losses that could
occur in the event that either party cannot meet its contractual obligations. For interest rate swaps, the program calls for
the fund to pledge collateral for initial and variation margin by contract.
6. 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 November 30, 2013, 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 2012, the year the fund commenced operations.
Non-U.S. taxation —
Interest income is recorded
net of non-U.S. taxes paid.
Distributions —
Distributions paid
to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized 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; cost of investments sold; net capital losses; and income on
certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment
income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a
portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
During the period ended November 30, 2013, the fund reclassified
$1,000 from undistributed net investment income to capital paid in on shares of beneficial interest and $107,000 from accumulated
net realized loss to undistributed net investment income to align financial reporting with tax reporting.
American
Funds Inflation Linked Bond Fund
|
14
|
As of November 30, 2013, the tax basis components of distributable
earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows (dollars in thousands):
Undistributed ordinary income
|
|
$
|
46
|
|
Capital loss carryforward*
|
|
|
(846
|
)
|
Gross unrealized appreciation on investment securities
|
|
|
31
|
|
Gross unrealized depreciation on investment securities
|
|
|
(1,724
|
)
|
Net unrealized depreciation on investment securities
|
|
|
(1,693
|
)
|
Cost of investment securities
|
|
|
209,684
|
|
*
|
The capital loss carryforward will be used to offset any capital gains realized by the fund
in future years. The fund will not make distributions from capital gains while a capital loss carryforward remains.
|
No distributions were paid to shareholders during the period
ended November 30, 2013.
7. Fees and transactions with related parties
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. CRMC, AFD and AFS are
considered related parties to the fund.
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
an annual rate of 0.360% of average daily net assets. For the period ended November 30, 2013, the investment advisory
services fee was $129,000.
CRMC has agreed to reimburse a portion of the fees and expenses
of the fund during its startup period. This reimbursement may be adjusted or discontinued by CRMC, subject to any restrictions
in the fund’s prospectus. For the period ended November 30, 2013, total fees and expenses reimbursed by CRMC were $38,000.
Fees and expenses in the statement of operations are presented gross of any reimbursements from CRMC.
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 Class F-2, R-5 and R-6 shares. 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 in this section. 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 Class A and 529-A shares, distribution-related
expenses include the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales
charge. These share 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 November 30, 2013, there were no unreimbursed expenses subject
to reimbursement for Class A or 529-A shares.
Share class
|
|
Currently approved limits
|
|
Plan limits
|
Class A
|
|
|
0.30
|
%
|
|
|
0.30
|
%
|
Class 529-A
|
|
|
0.25
|
|
|
|
0.50
|
|
Classes B and 529-B
|
|
|
1.00
|
|
|
|
1.00
|
|
Classes C, 529-C and R-1
|
|
|
1.00
|
|
|
|
1.00
|
|
Class R-2
|
|
|
0.75
|
|
|
|
1.00
|
|
Classes 529-E and R-3
|
|
|
0.50
|
|
|
|
0.75
|
|
Classes F-1, 529-F-1 and R-4
|
|
|
0.25
|
|
|
|
0.50
|
|
American
Funds Inflation Linked Bond Fund
|
15
|
Transfer agent services —
The fund
has a shareholder services agreement with AFS under which the fund compensates AFS for providing transfer agent services to
each of the fund’s share classes. These services include recordkeeping, shareholder communications and transaction
processing. In addition, the fund reimburses AFS for amounts paid to third parties for performing transfer agent services on
behalf of fund shareholders.
Administrative services —
The fund
has an administrative services agreement with CRMC under which the fund compensates CRMC for providing administrative
services to Class A, C, F, 529 and R shares. These services include, but are not limited to, coordinating, monitoring,
assisting and overseeing third parties that provide services to fund shareholders. Under the agreement, Class A shares pay an
annual fee of 0.01% and Class C, F, 529 and R shares pay an annual fee of 0.05% of their respective average daily net
assets.
529 plan services —
Each 529
share class is subject to service fees to compensate 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. The fee is included in
other expenses in the fund’s statement of operations. The Commonwealth of Virginia is not considered a related
party.
For the period ended November 30, 2013, class-specific expenses
under the agreements were as follows (dollars in thousands):
Share class
|
|
Distribution
services
|
|
Transfer agent
services
|
|
|
Administrative
services
|
|
529 plan
services
|
Class A
|
|
$—
|
|
$—
|
*
|
|
$2
|
|
Not applicable
|
Class R-6
†
|
|
Not applicable
|
|
—
|
*
|
|
7
|
|
Not applicable
|
Total class-specific expenses
|
|
$—
|
|
$—
|
*
|
|
$9
|
|
Not applicable
|
*
|
Amount less than one thousand.
|
†
|
Class R-6 shares were offered beginning November 1, 2013.
|
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 in the fund’s statement of operations includes the current fees (either
paid in cash or deferred) and the net increase or decrease in the value of the deferred amounts.
Affiliated officers and trustees —
Officers
and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFD and AFS. No affiliated officers or
trustees received any compensation directly from the fund.
8. Capital share transactions
Capital share transactions in the fund were as follows (dollars
and shares in thousands):
|
|
Sales
|
|
|
Reinvestments
of dividends
|
|
|
Repurchases
|
|
|
Net increase
|
|
Share class
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
For the period December 14, 2012* to November 30, 2013
|
|
Class A
|
|
$
|
25,000
|
|
|
|
2,500
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
(20,500
|
)
|
|
|
(2,197
|
)
|
|
$
|
4,500
|
|
|
|
303
|
|
Class R-6
†
|
|
|
205,132
|
|
|
|
21,987
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(298
|
)
|
|
|
(32
|
)
|
|
|
204,834
|
|
|
|
21,955
|
|
Total net increase
(decrease)
|
|
$
|
230,132
|
|
|
|
24,487
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
(20,798
|
)
|
|
|
(2,229
|
)
|
|
$
|
209,334
|
|
|
|
22,258
|
|
*
|
Commencement of operations.
|
†
|
Class R-6 shares were offered beginning November 1, 2013.
|
American
Funds Inflation Linked Bond Fund
|
16
|
9. Investment transactions and other disclosures
The fund made purchases and sales of investment securities,
excluding short-term securities and U.S. government obligations, if any, of $32,675,000 and $14,739,000, respectively, during
the period ended November 30, 2013.
CRMC has agreed to bear all offering and organizational
expenses of the fund. The offering costs include state and SEC registration fees. Organizational costs include administrative
and legal fees. The total amount of offering and organizational expenses borne by CRMC was $20,000. These expenses are not
included in the fund’s statement of operations.
10. Ownership concentration
At November 30, 2013, CRMC held all of the fund’s
Class A outstanding shares. The ownership represents the seed money invested in the fund when it began operations on December
14, 2012.
At November 30, 2013, the fund’s Class R-6 shares
had four shareholders: American Funds 2010 Target Date Retirement Fund, American Funds 2015 Target Date Retirement Fund,
American Funds 2020 Target Date Retirement Fund and American Funds 2025 Target Date Retirement Fund. Aggregate ownership of
the fund’s Class R-6 outstanding shares was 22%, 19%, 30% and 29% respectively. CRMC is the investment adviser to
these four target date funds.
American
Funds Inflation Linked Bond Fund
|
17
|
Financial highlights
|
|
|
|
Loss from investment operations
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset
value,
beginning
of period
|
|
|
Net
investment
loss
|
|
|
Net losses
on securities
(both
realized and
unrealized)
|
|
|
Total from
investment
operations
|
|
|
Net asset
value, end
of period
|
|
|
Total
return
2,3
|
|
|
Net assets,
end of
period (in
thousands)
|
|
|
Ratio of
expenses to
average net
assets before
reimbursement
4
|
|
|
Ratio of
expenses to
average net
assets after
reimbursement
3,4
|
|
|
Ratio
of net
loss to
average
net assets
3
|
|
Class A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from 12/14/2012
to 11/30/2013
5,6
|
|
$
|
10.00
|
|
|
$
|
(.03
|
)
|
|
$
|
(.67
|
)
|
|
$
|
(.70
|
)
|
|
$
|
9.30
|
|
|
|
(7.00
|
)%
|
|
$
|
2,816
|
|
|
|
.61
|
%
7
|
|
|
.43
|
%
7
|
|
|
(.36
|
)%
7
|
Class R-6:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from 11/1/2013
to 11/30/2013
6,8
|
|
|
9.33
|
|
|
|
—
|
9
|
|
|
(.04
|
)
|
|
|
(.04
|
)
|
|
|
9.29
|
|
|
|
(.43
|
)
|
|
|
204,070
|
|
|
|
.03
|
|
|
|
.03
|
|
|
|
—
|
10
|
|
For the period 12/14/2012
to
11/30/2013
5,6
|
Portfolio turnover rate for all share classes
|
543%
|
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 of a reimbursement from CRMC. During the
period shown, CRMC reimbursed other fees and expenses.
|
4
|
Although the fund has plans of distribution for some share classes, fees
for distribution services are not paid by the fund on amounts invested in the fund by CRMC and/or its affiliates. If fees
for distribution services were charged on these assets, fund expenses would be higher and net income and total return would
be lower.
|
5
|
For the period December 14, 2012, commencement of operations, through November 30, 2013.
|
6
|
Based on operations for the period shown and, accordingly, is not representative
of a full year.
|
7
|
Annualized.
|
8
|
Class R-6 shares were offered beginning November 1, 2013.
|
9
|
Amount less than $.01.
|
10
|
Amount less than .01%.
|
See Notes
to Financial Statements
American
Funds Inflation Linked Bond Fund
|
18
|
Report
of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of American Funds Inflation
Linked Bond Fund:
In our opinion, the accompanying statement of assets
and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material respects, the financial position of American Funds Inflation
Linked Bond Fund (the “Fund”) at November 30, 2013, and the results of its operations, the changes in its net
assets and the financial highlights for the period December 14, 2012 (commencement of operations) through November 30, 2013,
in conformity with accounting principles generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the
Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which
included confirmation of securities at November 30, 2013 by correspondence with the custodian and brokers, provides a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Los Angeles, California
January 17, 2014
American Funds Inflation Linked Bond Fund