Notes to financial statements
American Funds Mortgage Fund (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks to provide current income and preserve capital.
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 below:
Share class
|
Initial sales charge
|
Contingent deferred sales charge upon redemption
|
Conversion feature
|
Classes A and 529-A
|
Up to 3.75%
|
None (except 1% for certain redemptions within one year of purchase without an initial sales charge)
|
None
|
Classes B and 529-B*
|
None
|
Declines from 5% to 0% for redemptions within six years of purchase
|
Classes B and 529-B convert to Classes A and 529-A, respectively, after eight years
|
Class C
|
None
|
1% for redemptions within one year of purchase
|
Class C converts to Class F-1 after 10 years
|
Class 529-C
|
None
|
1% for redemptions within one year of purchase
|
None
|
Class 529-E
|
None
|
None
|
None
|
Classes F-1, F-2 and 529-F-1
|
None
|
None
|
None
|
Classes R-1, R-2, R-3, R-4, R-5 and R-6
|
None
|
None
|
None
|
*
Class B and 529-B shares of the fund are not available for purchase.
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds.
Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.
2.
|
Significant accounting policies
|
The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The fund follows the significant accounting policies described below, as well as the valuation policies described in the next section on valuation.
Security transactions and related investment income
– Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. 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) are allocated daily among the various share classes based on the relative value of their settled shares. Realized and
unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders
–
Dividends paid to shareholders are declared daily after the determination of the fund’s net investment income and are paid to shareholders monthly. Distributions paid to shareholders are recorded on the ex-dividend date.
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, 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
|
Mortgage-backed; asset-backed obligations
|
Standard inputs and cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information
|
Municipal securities
|
Standard inputs and, for certain distressed securities, cash flows or liquidation values using a net present value calculation based on inputs that include, but are not limited to, financial statements and debt contracts
|
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.
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 value guidelines adopted by authority of the fund’s
board of trustees as further described below. 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.
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 August 31, 2012, all of the fund’s
investment securities were classified as Level 2.
Investing in the fund may involve certain risks including, but not limited to, those described below.
Investing in mortgage-related securities —
Mortgage-related securities are subject to
prepayment risk as well as the risks associated with investing in debt securities in
general. If interest rates fall and the loans underlying these securities are prepaid faster
than expected, the fund may have to reinvest the prepaid principal in lower yielding
securities, thus reducing the fund’s income. Conversely, if interest rates increase and the
loans underlying the securities are prepaid more slowly than expected, the expected
duration of the securities may be extended, reducing the cash flow for potential reinvestment in higher yielding securities.
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 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.
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 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 future delivery contracts —
Contracts for future delivery of mortgage-related securities, such as to be announced contracts and mortgage dollar rolls, involve the fund selling mortgage-related securities and simultaneously contracting to repurchase similar securities for delivery at a future date at a predetermined price. This can increase the fund’s market exposure, and the market price of the securities the fund contracts to
repurchase could drop below their purchase price. While the fund can preserve and
generate capital through the use of such contracts by, for example, realizing the difference between the sale price and the future purchase price, the income generated by the fund may be reduced by engaging in such transactions. In addition, these transactions may increase the turnover rate of the fund.
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
|
Mortgage dollar rolls –
The fund has entered into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Mortgage dollar rolls are accounted for as purchase and sale transactions, which may increase the fund’s portfolio turnover rate.
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 August 31, 2012, 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 2010, the year the fund commenced operations.
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 short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; and paydowns on fixed-income securities.
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 year ended August 31, 2012, the fund reclassified $4,042,000 from undistributed net realized gain to undistributed net investment income and $474,000 from undistributed net realized gain to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.
As of August 31, 2012, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:
(dollars in thousands)
|
|
Undistributed ordinary income
|
|
$
|
4,223
|
|
Undistributed long-term capital gain
|
|
|
3,247
|
|
Gross unrealized appreciation on investment securities
|
|
|
12,461
|
|
Gross unrealized depreciation on investment securities
|
|
|
(39
|
)
|
Net unrealized appreciation on investment securities
|
|
|
12,422
|
|
Cost of investment securities
|
|
|
762,857
|
|
Tax-basis distributions paid or accrued
to shareholders from ordinary income were as follows (dollars in thousands):
Share class
|
|
Year ended
August 31, 2012
|
|
|
For the period November 1, 2010* to August 31, 2011
|
|
Class A
|
|
$
|
3,446
|
|
|
$
|
1,063
|
|
Class B
|
|
|
20
|
|
|
|
4
|
|
Class C
|
|
|
321
|
|
|
|
60
|
|
Class F-1
|
|
|
201
|
|
|
|
34
|
|
Class F-2
|
|
|
1,059
|
|
|
|
21
|
|
Class 529-A
|
|
|
81
|
|
|
|
13
|
|
Class 529-B
|
|
|
3
|
|
|
|
-
|
†
|
Class 529-C
|
|
|
24
|
|
|
|
4
|
|
Class 529-E
|
|
|
5
|
|
|
|
2
|
|
Class 529-F-1
|
|
|
17
|
|
|
|
2
|
|
Class R-1
|
|
|
59
|
|
|
|
10
|
|
Class R-2
|
|
|
23
|
|
|
|
9
|
|
Class R-3
|
|
|
25
|
|
|
|
11
|
|
Class R-4
|
|
|
21
|
|
|
|
10
|
|
Class R-5
|
|
|
122
|
|
|
|
22
|
|
Class R-6
|
|
|
7,150
|
|
|
|
4,891
|
|
Total
|
|
$
|
12,577
|
|
|
$
|
6,156
|
|
|
|
|
|
|
|
|
|
|
(*)
Commencement of operations.
|
|
|
|
|
|
|
|
|
(†)
Amount less than one thousand.
|
|
|
|
|
|
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.
Investment advisory services –
The fund has an investment advisory and service agreement with CRMC that provides for monthly fees accrued daily. These fees are based on a series of decreasing annual rates beginning with 0.30% on the first $60 million of daily net assets and decreasing to 0.14% on such assets in excess of $10 billion. The agreement also provides for monthly fees, accrued daily, based on a series of decreasing rates beginning with 3.00% on the first $3,333,333 of the fund's monthly gross income and decreasing to 2.00% on such income in excess of $8,333,333. For the year ended August 31, 2012, the investment advisory services fee was $1,315,000, which was equivalent to an annualized rate of 0.255% of average daily
net assets.
Class-specific fees and expenses –
Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:
Distribution services
– The fund has plans of distribution for all share classes, except 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 below. In some cases, the board of trustees has limited the amounts that may be paid to less than the maximum allowed by the plans.
All share classes with a plan may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.
For 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 0.25% is not exceeded. As of August 31, 2012, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A shares.
Share class
|
Currently approved limits
|
Plan limits
|
Class A
|
0.25%
|
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
|
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.
During the period September 1, 2011, through December 31, 2011, only Class A and B shares were subject to the shareholder services agreement with AFS. During this period, AFS and other third parties were compensated for providing transfer agent services to Class C, F, 529 and R shares through the fees paid by the fund to CRMC under the fund’s administrative services agreement with CRMC as described in the administrative services section on the following page; CRMC paid for any transfer agent services expenses in excess of 0.10% of the respective average daily net assets of each of such share classes.
Effective January 1, 2012, the shareholder services agreement with AFS was modified to include Class C, F, 529 and R shares and payment for transfer agent services for such classes under the administrative services agreement terminated. Under this structure, transfer agent services expenses for some classes may exceed 0.10% of average daily net assets, resulting in an increase in expenses paid by some share classes.
For the year
ended August 31, 2012, the total transfer agent services fee paid under these agreements was $277,000, of which $265,000 was paid by the fund to AFS and $12,000 was paid by the fund to CRMC through its administrative services agreement with the fund. Amounts paid to CRMC by the fund were then paid by CRMC to AFS and other third parties.
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.
During the period September 1, 2011, through December 31, 2011, the agreement applied only to Class C, F, 529 and R shares. The agreement also required CRMC to arrange for the provision of transfer agent services for such share classes, which paid CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) of their respective average daily net assets. During this period, up to 0.05% of these fees were used to compensate CRMC for performing administrative services; all other amounts paid under this agreement were used to compensate AFS and other third parties for transfer agent services.
Effective January 1, 2012, the administrative services agreement with CRMC was modified to include Class A shares. Under the revised 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 to CRMC for administrative services. Fees for transfer agent services are no longer included as part of the administrative services fee paid by the fund to CRMC.
For the year
ended August 31, 2012, total fees paid to CRMC for performing administrative services were $191,000.
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 on the accompanying financial statements. The Commonwealth of Virginia is not considered a related party.
Class-specific expenses under the agreements described above for the year ended August 31, 2012, were as follows (dollars in thousands):
Share class
|
|
Distribution services
|
|
|
Transfer agent services
|
|
|
Administrative services
|
|
|
529 plan
services
|
|
Class A
|
|
$
|
309
|
|
|
$
|
187
|
|
|
$
|
11
|
|
|
Not applicable
|
|
Class B
|
|
|
12
|
|
|
|
2
|
|
|
Not applicable
|
|
|
Not applicable
|
|
Class C
|
|
|
239
|
|
|
|
30
|
|
|
|
11
|
|
|
Not applicable
|
|
Class F-1
|
|
|
21
|
|
|
|
6
|
|
|
|
4
|
|
|
Not applicable
|
|
Class F-2
|
|
Not applicable
|
|
|
|
34
|
|
|
|
19
|
|
|
Not applicable
|
|
Class 529-A
|
|
|
9
|
|
|
|
5
|
|
|
|
2
|
|
|
$
|
5
|
|
Class 529-B
|
|
|
3
|
|
|
|
-
|
*
|
|
|
-
|
*
|
|
|
-
|
*
|
Class 529-C
|
|
|
32
|
|
|
|
3
|
|
|
|
2
|
|
|
|
3
|
|
Class 529-E
|
|
|
2
|
|
|
|
-
|
*
|
|
|
-
|
*
|
|
|
-
|
*
|
Class 529-F-1
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
*
|
|
|
1
|
|
Class R-1
|
|
|
30
|
|
|
|
-
|
*
|
|
|
2
|
|
|
Not applicable
|
|
Class R-2
|
|
|
10
|
|
|
|
4
|
|
|
|
1
|
|
|
Not applicable
|
|
Class R-3
|
|
|
6
|
|
|
|
2
|
|
|
|
1
|
|
|
Not applicable
|
|
Class R-4
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
Not applicable
|
|
Class R-5
|
|
Not applicable
|
|
|
|
2
|
|
|
|
2
|
|
|
Not applicable
|
|
Class R-6
|
|
Not applicable
|
|
|
|
-
|
*
|
|
|
135
|
|
|
Not applicable
|
|
Total class-specific expenses
|
|
$
|
675
|
|
|
$
|
277
|
|
|
$
|
191
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
Amount less than one thousand.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trustees’ deferred compensation
– Trustees who are unaffiliated with CRMC
may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation, shown on the accompanying financial statements, includes $2,000 in current fees (either paid in cash or deferred) and a net increase of less than $1,000 in the value of the deferred amounts.
Affiliated officers and trustees
– Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or trustees received any compensation directly from the fund.
8.
|
Capital share transactions
|
Capital share transactions in the fund were as follows (dollars and shares in thousands):
|
|
Sales
(1)
|
|
|
Reinvestments of dividends and distributions
|
|
|
Repurchases
(1)
|
|
|
|
Net increase
(decrease)
|
|
Share class
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Shares
|
|
Year ended August 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
148,888
|
|
|
14,617
|
|
|
$
|
2,803
|
|
|
276
|
|
|
$
|
(43,317
|
)
|
|
|
(4,254
|
)
|
|
|
$
|
108,374
|
|
|
10,639
|
|
Class B
|
|
|
1,753
|
|
|
172
|
|
|
|
20
|
|
|
2
|
|
|
|
(1,063
|
)
|
|
|
(104
|
)
|
|
|
|
710
|
|
|
70
|
|
Class C
|
|
|
23,252
|
|
|
2,283
|
|
|
|
310
|
|
|
30
|
|
|
|
(7,226
|
)
|
|
|
(708
|
)
|
|
|
|
16,336
|
|
|
1,605
|
|
Class F-1
|
|
|
14,454
|
|
|
1,419
|
|
|
|
180
|
|
|
18
|
|
|
|
(6,352
|
)
|
|
|
(623
|
)
|
|
|
|
8,282
|
|
|
814
|
|
Class F-2
|
|
|
62,824
|
|
|
6,175
|
|
|
|
1,010
|
|
|
99
|
|
|
|
(8,565
|
)
|
|
|
(842
|
)
|
|
|
|
55,269
|
|
|
5,432
|
|
Class 529-A
|
|
|
6,855
|
|
|
673
|
|
|
|
80
|
|
|
8
|
|
|
|
(590
|
)
|
|
|
(58
|
)
|
|
|
|
6,345
|
|
|
623
|
|
Class 529-B
|
|
|
573
|
|
|
56
|
|
|
|
3
|
|
|
1
|
|
|
|
(134
|
)
|
|
|
(13
|
)
|
|
|
|
442
|
|
|
44
|
|
Class 529-C
|
|
|
8,134
|
|
|
796
|
|
|
|
23
|
|
|
2
|
|
|
|
(770
|
)
|
|
|
(75
|
)
|
|
|
|
7,387
|
|
|
723
|
|
Class 529-E
|
|
|
517
|
|
|
51
|
|
|
|
5
|
|
|
1
|
|
|
|
(60
|
)
|
|
|
(6
|
)
|
|
|
|
462
|
|
|
46
|
|
Class 529-F-1
|
|
|
864
|
|
|
85
|
|
|
|
17
|
|
|
2
|
|
|
|
(109
|
)
|
|
|
(11
|
)
|
|
|
|
772
|
|
|
76
|
|
Class R-1
|
|
|
589
|
|
|
57
|
|
|
|
50
|
|
|
5
|
|
|
|
(1,420
|
)
|
|
|
(139
|
)
|
|
|
|
(781
|
)
|
|
(77
|
)
|
Class R-2
|
|
|
1,901
|
|
|
187
|
|
|
|
14
|
|
|
1
|
|
|
|
(537
|
)
|
|
|
(53
|
)
|
|
|
|
1,378
|
|
|
135
|
|
Class R-3
|
|
|
1,406
|
|
|
138
|
|
|
|
13
|
|
|
2
|
|
|
|
(231
|
)
|
|
|
(23
|
)
|
|
|
|
1,188
|
|
|
117
|
|
Class R-4
|
|
|
890
|
|
|
87
|
|
|
|
9
|
|
|
1
|
|
|
|
(144
|
)
|
|
|
(14
|
)
|
|
|
|
755
|
|
|
74
|
|
Class R-5
|
|
|
8,710
|
|
|
853
|
|
|
|
107
|
|
|
11
|
|
|
|
(2,010
|
)
|
|
|
(198
|
)
|
|
|
|
6,807
|
|
|
666
|
|
Class R-6
|
|
|
42,545
|
|
|
4,176
|
|
|
|
7,161
|
|
|
705
|
|
|
|
(18,337
|
)
|
|
|
(1,798
|
)
|
|
|
|
31,369
|
|
|
3,083
|
|
Total net increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(decrease)
|
|
$
|
324,155
|
|
|
31,825
|
|
|
$
|
11,805
|
|
|
1,164
|
|
|
$
|
(90,865
|
)
|
|
|
(8,919
|
)
|
|
|
$
|
245,095
|
|
|
24,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period November 1, 2010
(2)
to August 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
91,253
|
|
|
9,204
|
|
|
$
|
624
|
|
|
63
|
|
|
$
|
(6,378
|
)
|
|
|
(640
|
)
|
|
|
$
|
85,499
|
|
|
8,627
|
|
Class B
|
|
|
1,072
|
|
|
107
|
|
|
|
4
|
|
|
1
|
|
|
|
(318
|
)
|
|
|
(32
|
)
|
|
|
|
758
|
|
|
76
|
|
Class C
|
|
|
15,187
|
|
|
1,521
|
|
|
|
55
|
|
|
6
|
|
|
|
(788
|
)
|
|
|
(79
|
)
|
|
|
|
14,454
|
|
|
1,448
|
|
Class F-1
|
|
|
3,235
|
|
|
326
|
|
|
|
21
|
|
|
2
|
|
|
|
(309
|
)
|
|
|
(31
|
)
|
|
|
|
2,947
|
|
|
297
|
|
Class F-2
|
|
|
1,781
|
|
|
179
|
|
|
|
9
|
|
|
1
|
|
|
|
(85
|
)
|
|
|
(9
|
)
|
|
|
|
1,705
|
|
|
171
|
|
Class 529-A
|
|
|
1,358
|
|
|
138
|
|
|
|
13
|
|
|
1
|
|
|
|
(89
|
)
|
|
|
(9
|
)
|
|
|
|
1,282
|
|
|
130
|
|
Class 529-B
|
|
|
144
|
|
|
14
|
|
|
|
-
|
(3)
|
|
-
|
(3)
|
|
|
-
|
|
(3)
|
|
-
|
|
(3)
|
|
|
144
|
|
|
14
|
|
Class 529-C
|
|
|
614
|
|
|
62
|
|
|
|
4
|
|
|
1
|
|
|
|
(53
|
)
|
|
|
(6
|
)
|
|
|
|
565
|
|
|
57
|
|
Class 529-E
|
|
|
145
|
|
|
15
|
|
|
|
2
|
|
|
-
|
(3)
|
|
|
(26
|
)
|
|
|
(3
|
)
|
|
|
|
121
|
|
|
12
|
|
Class 529-F-1
|
|
|
331
|
|
|
33
|
|
|
|
2
|
|
|
-
|
(3)
|
|
|
(4
|
)
|
|
|
-
|
|
(3)
|
|
|
329
|
|
|
33
|
|
Class R-1
|
|
|
3,337
|
|
|
332
|
|
|
|
3
|
|
|
-
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
3,340
|
|
|
332
|
|
Class R-2
|
|
|
970
|
|
|
97
|
|
|
|
2
|
|
|
-
|
(3)
|
|
|
(73
|
)
|
|
|
(7
|
)
|
|
|
|
899
|
|
|
90
|
|
Class R-3
|
|
|
923
|
|
|
93
|
|
|
|
3
|
|
|
-
|
(3)
|
|
|
(59
|
)
|
|
|
(6
|
)
|
|
|
|
867
|
|
|
87
|
|
Class R-4
|
|
|
651
|
|
|
66
|
|
|
|
2
|
|
|
-
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
653
|
|
|
66
|
|
Class R-5
|
|
|
2,773
|
|
|
277
|
|
|
|
12
|
|
|
1
|
|
|
|
(607
|
)
|
|
|
(59
|
)
|
|
|
|
2,178
|
|
|
219
|
|
Class R-6
|
|
|
256,397
|
|
|
26,198
|
|
|
|
4,810
|
|
|
486
|
|
|
|
(14,763
|
)
|
|
|
(1,471
|
)
|
|
|
|
246,444
|
|
|
25,213
|
|
Total net increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(decrease)
|
|
$
|
380,171
|
|
|
38,662
|
|
|
$
|
5,566
|
|
|
562
|
|
|
$
|
(23,552
|
)
|
|
|
(2,352
|
)
|
|
|
$
|
362,185
|
|
|
36,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes exchanges between share classes of the fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Commencement of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
Amount less than one thousand.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Investment transactions
|
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $2,303,323,000 and $2,084,879,000, respectively, during the year ended August 31, 2012.
10.
|
Ownership concentration
|
At August 31, 2012, the fund had three shareholders, American Funds 2020 Target Date Retirement Fund, American Funds 2015 Target Date Retirement Fund and American Funds 2010 Target Date Retirement Fund, with aggregate ownership of the fund’s outstanding shares of 18%, 13% and 16%, respectively. CRMC is the investment adviser to the three target date retirement funds.