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active management: an investment management approach that aims to meet investor objectives such as growth, income and preservation of capital through informed, independent investment judgment. The opposite of passive management, or indexing, which seeks to replicate market performance through a portfolio that mirrors the composition of market indexes such as Standard & Poor’s 500 Composite IndexSM. See also index fund.

adjusted gross income (AGI): the income amount on which an individual’s federal income tax is figured. AGI is calculated by making adjustments to gross, or total, income from taxable sources minus certain deductions.

advisor: a financial professional who helps investors meet their financial needs and objectives through investments, tax planning, asset allocation, risk management, retirement planning and estate planning. See also financial professional. Also, an organization employed by a mutual fund to manage assets or provide investment advice. See investment adviser.

affiliate: generally, an “affiliate” of an issuer is a person (or company) that, directly or indirectly, controls or is controlled by, or is under common control with such issuer. Under the Investment Company Act of 1940, an affiliation can arise when a mutual fund owns more than five percent of the outstanding voting securities of a particular issuer.

alternative minimum tax (AMT): federal tax that seeks to prevent high-income taxpayers from avoiding significant tax liability by using exclusions, deductions and credits.

American Depositary Receipt (ADR): a certificate representing ownership of a specific number of shares of an international stock. ADRs allow U.S. investors to buy and trade shares of international companies on U.S. exchanges, rather than in overseas markets. ADRs trade in U.S. dollars and are bought and sold just like U.S. securities.

American Funds®among the nation’s largest mutual fund families, with assets of more than $1.2 trillion and more than 50 million shareholder accounts. The American Funds and the American Funds Target Date Retirement Series® are managed by Capital Research and Management CompanySM. Since 1931, Capital Research has invested with a long-term focus based on thorough research and attention to risk. The American Funds are offered through financial advisors so that shareholders can benefit from the guidance of a professional.

American Funds Distributors, Inc.SMthe national distributor of the mutual funds managed by Capital Research and Management Company.

American Funds Service CompanySMprovider of services to shareholders of the mutual funds managed by Capital Research and Management Company.

analyst: a research specialist who develops a detailed understanding of an industry or region. Capital Research and Management Company has 181 analysts based all over the world. Many are part of a larger research “cluster,” a group of analysts who cover different parts of the same industry. Examples of clusters include technology, telecommunications and health care. See also investment analyst and research portfolio.

annual report: a yearly record of a mutual fund’s financial status that must be distributed to shareholders under Securities and Exchange Commission regulations. The report includes a review of the fund’s operations as well as various financial statements.

annuity: a contract sold by life insurance companies that offers tax-deferral and, if elected, guaranteed payments to the annuitant (the beneficiary of these payments) for a specified period of time. Annuities are sold in units, not shares. A fixed annuity pays a fixed amount for the duration of the contract, while a variable annuity pays different amounts based on the performance of the underlying investments. The account value of an annuity is often at least partially guaranteed by the issuer.

appreciation: an increase in the value of an asset such as a stock, bond, commodity or parcel of real estate. See also capital appreciation and capital growth.

asset: anything with commercial or exchange value owned by a business, institution or individual. Examples include cash, real estate and investments. Mutual fund assets consist of the securities held in the fund’s portfolio. The opposite of a liability.

asset allocation: the mix of assets in which money is invested, including stock and fixed-income investments, cash equivalents, and tangible assets such as real estate and collectibles. A central concept in financial planning and investment management, asset allocation affects both risk and return: Investing in a combination of investments can reduce risk and enhance returns through diversification.

asset-backed security: securities backed by payments received from a specified pool of receivables, such as mortgages, automobile loans or credit card accounts. The structure is intended to isolate the issuer of the securities from the bankruptcy risk of the originator of the receivables (for example, a bank or another provider of credit).

asset-based fee: an annual fee charged by some broker-dealers for advice, which usually ranges from 0.5% to 3% of assets. This fee is typically charged instead of a transaction-based fee.

audit: the examination of a mutual fund’s accounting documents and financial statements by a professional accounting firm to verify their accuracy and conformity with generally accepted accounting principles.

auditor’s report: the declaration of a professional accountant following the review of a mutual fund’s financial statements. The report describes the scope and the findings of the review and is an important assurance to a lender or investor. The opinion of an auditor can be unqualified or qualified, depending on the extent of the audit performed and the auditor’s confidence in the accuracy of the financial statements.

automatic investment plan: a program enabling mutual fund investors to purchase or sell fund shares automatically. For example, American Funds shareholders can have a fixed amount from a bank savings or checking account debited to buy fund shares on a weekly, monthly, quarterly or annual basis. Investing at regular intervals allows shareholders to benefit from dollar cost averaging. (This method does not ensure a profit and does not protect against loss in a declining market, so investors should consider their willingness to continue purchases during a declining or fluctuating market.)

average: a weighted, adjusted arithmetic mean of selected securities designed to represent the market or important segments of the market. The Dow Jones Industrial AverageSM, the best known market average, is price-weighted.

average annual total return: the annual rate of return, including reinvestment of distributions, earned over a specific period of time.

averaging: an investment strategy that involves making regular dollar investments on a specified time schedule, regardless of price or direction of the market. In the long run, the investor typically buys more shares when the price is lower, so that the overall cost is lower than if a constant number of shares were bought at set intervals. Also known as dollar cost averaging or cost averaging. (This method does not ensure a profit and does not protect against loss in a declining market, so investors should consider their willingness to continue purchases during a declining or fluctuating market.)

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.