Statement of Additional Information - American Funds Mortgage Fund

The fund may retain a portion of net capital gain for reinvestment and may elect to treat such capital gain as having been distributedto shareholders of the fund. Shareholders may receive a credit for the tax that the fund paid on such undistributed net capital gain andwould increase the basis in their shares of the fund by the difference between the amount of includible gains and the tax deemed paidby the shareholder.Distributions of net capital gain that the fund properly designates as a capital gain distribution generally will be taxable as long-termcapital gain, regardless of the length of time the shares of the fund have been held by a shareholder. Any loss realized upon theredemption of shares held at the time of redemption for six months or less from the date of their purchase will be treated as a longtermcapital 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 taximplications of buying shares just prior to a capital gain distribution. The price of shares purchased at that time includes the amount ofthe forthcoming distribution. Those purchasing just prior to a distribution will subsequently receive a partial return of their investmentcapital 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 arereacquired within the 61-day period beginning 30 days before and ending 30 days after the shares are disposed of. Any lossdisallowed 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 aresult of having acquired those shares, the shareholder subsequently pays a reduced or no sales charge for shares of the fund, or ofa different fund acquired before January 31 st of the year following the year the shareholder exchanged or otherwise disposed of theoriginal fund shares, the sales charge previously incurred in acquiring the fund’s shares will not be taken into account (to the extentsuch previous sales charges do not exceed the reduction in sales charges) for the purposes of determining the amount of gain or losson 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 sourcesoutside the United States may be subject to withholding and other taxes imposed by such foreign jurisdictions. Tax conventionsbetween certain countries and the United States, however, may reduce or eliminate these foreign taxes. Some foreign countriesimpose 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 foreigncorporations, 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 theamounts distributed to them, their pro rata portion of qualified taxes paid by the fund to foreignPage 48