that may apply for the periods indicated above
under “Fees and Expenses.” Although your actual costs may be higher or lower, based on these assumptions your costs would be:
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or
“turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating
Expenses or in the Example, affect the Fund’s performance. As set forth in the Financial Highlights of the Fund, during the most recent fiscal year, the Fund’s portfolio turnover rate was 9.58% of the average value of its portfolio. As set forth in the Financial Highlights of the Master Fund (as defined below),
during the most recent fiscal year, the Master Fund’s portfolio turnover rate was 545% of the average value of its portfolio.
Principal Investment Strategies
The Fund invests all of its assets in the Class 1 shares of The Bond Fund of America (the
“Master Bond Fund”), a series of American Funds Insurance Series®, a registered open-end investment company. In pursuing its investment objective, the Master
Bond Fund seeks to maximize your level of current income and preserve your capital by investing primarily in bonds. Normally, the Master Bond Fund invests at least 80% of its net assets in bonds and other debt securities which may be represented by
derivatives. The Master Bond Fund invests at least 60% of its net assets in debt securities (excluding derivatives) rated A3 or better or A- or better by Nationally Recognized Statistical Ratings Organizations (“NRSROs”) designated by the Master Bond Fund’s investment adviser, or in debt securities that are unrated but determined to be of equivalent quality by the Master Bond Fund’s investment adviser, and in government securities, money market instruments, cash or cash equivalents. The Master Bond Fund may invest in debt securities 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 Master Bond Fund may invest 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, such as the Consumer Price Index for Urban Consumers, so that principal and interest adjust to reflect changes in the index.
The
Master Bond Fund may use futures contracts and swaps, which are types of derivatives. A derivative is a financial contract, the value of which is based on the value of an
underlying financial asset (such as a stock, bond or currency), a reference rate or market index.
The Master Bond Fund may invest up to 5% of its assets in debt securities rated Ba1 or below
and BB+ or below by NRSROs designated by the Master Bond Fund’s investment adviser, or in debt securities that are unrated but determined to be of equivalent quality by the Master Bond Fund’s investment adviser. Securities rated Ba1 or below and BB+ or below are sometimes referred to as “junk bonds.”
The Master Bond Fund’s investment adviser uses a system of multiple portfolio managers in managing the Master Bond Fund’s assets. Under this approach, the portfolio of the Master Bond Fund is divided into segments managed by individual portfolio
managers.
The Master Bond Fund relies on the professional judgment of its investment adviser to make decisions about the Master Bond
Fund’s portfolio investments. The basic investment philosophy of the Master Bond Fund’s investment adviser is to seek to invest in attractively priced securities that, in its opinion, represent good long-term investment opportunities. Securities may be sold when the Master Bond Fund’s investment adviser believes that they no longer represent relatively attractive investment
opportunities. The Master Bond Fund may engage in active and frequent trading of securities. The Master Bond Fund’s investment adviser may consider environmental, social and governance (“ESG”) factors that, depending on the facts and circumstances, are material to the value of an issuer or instrument.
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund’s investments—and therefore, the value of Fund shares—may fluctuate through its investment in the Master Bond Fund. These changes may occur because of: