UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-22605
Capital Group Emerging Markets Total Opportunities Fund
(Exact Name of Registrant as Specified in Charter)
6455 Irvine Center Drive
Irvine, California 92618
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (213) 486-9200
Date of fiscal year end: October 31
Date of reporting period: October 31, 2018
Courtney R. Taylor
Capital Group Emerging Markets Total Opportunities Fund
333 South Hope Street
Los Angeles, California 90071
(Name and Address of Agent for Service)
ITEM 1 – Reports to Stockholders
 | Capital Group Emerging Markets
Annual report |
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, we intend to no longer mail paper copies of the fund’s shareholder reports, unless specifically requested from the fund or your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the fund’s website (capitalguardian.com/ETOP); you will be notified by mail and provided with a website link to access the report each time a report is posted.
You may elect to receive paper copies of all future reports free of charge. If you invest through a financial intermediary, you may contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the fund, you may inform the fund that you wish to continue receiving paper copies of your shareholder reports by contacting us at (800) 421-4225. Your election to receive reports in paper will apply to all funds held with the fund’s transfer agent or through your financial intermediary.
Capital Group Emerging Markets Total Opportunities Fund seeks long-term growth and preservation of capital with lower volatility of returns than emerging market equities.
Fund results shown in this report are for past periods and are not predictive of results for future periods. The results shown are before taxes on fund distributions and sale of fund shares. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, please call (800) 421-4225, ext. 90.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2018 (the most recent calendar quarter-end):
| Lifetime | ||||||
| 1 year | 5 years | (since 1/27/12) | ||||
| Class F-3 shares* | -4.86% | 0.68% | 1.14% | |||
| * | Class F-3 shares were first offered on September 1, 2017. Class F-3 share results prior to September 1, 2017, are based on the results of the original share class of the fund, which was closed as of September 1, 2017. |
The fund’s gross expense ratio is 1.13%, and the net expense ratio is 1.00% for Class F-3 shares as of the prospectus dated January 1, 2019 (unaudited).
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The investment advisor is currently reimbursing a portion of other expenses. This reimbursement will be in effect through at least January 1, 2020. The advisor may elect at its discretion to extend, modify or terminate the reimbursement at that time.
This report is for the information of shareholders of Capital Group Emerging Markets Total Opportunities Fund, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after December 31, 2018, this report must be accompanied by a statistical update for the most recently completed calendar quarter.
Investing in emerging markets involves risks, such as significant currency and price fluctuations, political instability, differing securities regulations and periods of illiquidity, which are detailed in the fund prospectus. Investments in emerging markets have been more volatile than investments in developed markets, reflecting the greater uncertainties of investing in less-established economies. Individuals investing in emerging markets should have a long-term perspective and be able to tolerate potentially sharp declines in the value of their investments.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Contents
| 1 | Letter to investors |
| 2 | 20 largest holdings |
| 3 | 15 largest country positions |
| 6 | Investment portfolio |
| 15 | Financial statements |
| 28 | Expense example |
We’re pleased to present this annual report for Capital Group Emerging Markets Total Opportunities Fund (CGETOP) for the fiscal year ended October 31, 2018. The fund invests in the full spectrum of emerging markets debt and equity securities while seeking to limit the volatility typically associated with investments in the developing world.
The fund declined 7.98% for the 12 months. It held up better than the broad emerging markets equity market, however. The MSCI Emerging Markets Investable Market Index (MSCI EM IMI), which measures the results of the large-, mid- and small-capitalization segments of more than 20 emerging equity markets, dropped 13.03%. The fund’s realized volatility was 7.48%, considerably lower than the 13.99% recorded by the MSCI EM IMI.
Following a very strong rally that stretched from January 2016 to January 2018, emerging markets stocks hit a rough patch starting in February. The combination of a strong U.S. dollar, rising U.S. interest rates and heightened
Unless otherwise indicated, equity returns are based on MSCI indexes and measured in U.S. dollars with net dividends reinvested.
This report, and any product, index or fund referred to herein, is not sponsored, endorsed or promoted in any way by J.P. Morgan or any of its affiliates, who provide no warranties whatsoever, express or implied, and shall have no liability to any prospective investor in connection with this report. J.P. Morgan disclaimer: http://www.jpmorgan.com/pages/jpmorgan/ib/girg.
Results at a glance
For periods ended October 31, 2018, with distributions reinvested
| Cumulative | Average annual | |||||||||||
| total returns | total returns | |||||||||||
| 1 year | 5 years | Lifetime1 | ||||||||||
| Capital Group Emerging Markets Total Opportunities Fund (Class F-3 shares)2 | -7.98 | % | -0.45 | % | 0.72 | % | ||||||
| MSCI Emerging Markets IMI3,4 | -13.03 | 0.66 | 1.61 | |||||||||
| J.P. Morgan GBI-EM Global Diversified3 | -6.58 | -2.59 | -1.43 | |||||||||
| J.P. Morgan EMBI Global3 | -5.27 | 3.61 | 4.25 | |||||||||
| Emerging markets blended market universe5 | -9.37 | 0.71 | 1.63 | |||||||||
Realized daily volatility
Annualized standard deviation of daily returns, for periods ended October 31, 20186
| 1 year | 5 years | Lifetime1 | ||||||||||
| Capital Group Emerging Markets Total Opportunities Fund (Class F-3 shares)2 | 7.48 | % | 8.10 | % | 8.10 | % | ||||||
| MSCI Emerging Markets IMI3,4 | 13.99 | 13.48 | 13.49 | |||||||||
| 1 | Since 1/27/12. |
| 2 | Class F-3 shares were first offered on September 1, 2017. Class F-3 share results prior to September 1, 2017, are based on the results of the original share class of the fund, which was closed as of September 1, 2017. |
| 3 | The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. |
| 4 | Source: MSCI. |
| 5 | Emerging markets blended market universe combines the MSCI EM IMI, JPM EMBI Global and JPM GBI-EM Global Diversified indexes by weighting their cumulative total returns at 50%, 25% and 25%, respectively. This assumes the blend is rebalanced monthly. Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright 2018, J.P. Morgan Chase & Co. All rights reserved. |
| 6 | Realized daily volatility is calculated using annualized standard deviation based on a 252-day factor, and is a measure of how returns over time have varied from the mean. A lower number signifies lower volatility. |
| Capital Group Emerging Markets Total Opportunities Fund | 1 |
| Percent of net assets as of 10/31/18 | ||||
| Argentina government bonds | 4.1 | % | ||
| Turkey government bonds | 3.4 | |||
| Brazil government bonds | 3.2 | |||
| U.S. Treasury bonds | 2.8 | |||
| Pakistan government bonds | 2.4 | |||
| Sri Lanka government bonds | 1.9 | |||
| Mexico government bonds | 1.8 | |||
| Ensco | 1.7 | |||
| América Móvil | 1.6 | |||
| Egypt government bonds | 1.6 | |||
| Samsung Electronics | 1.6 | |||
| British American Tobacco | 1.5 | |||
| Vale | 1.4 | |||
| South Africa government bonds | 1.3 | |||
| AES | 1.1 | |||
| Tata Steel | 1.1 | |||
| ICICI Bank | 1.1 | |||
| Taiwan Semiconductor Manufacturing | 1.1 | |||
| Bahrain government bonds | 1.1 | |||
| Nigeria government bonds | 1.1 | |||
| 36.9 | % | |||
U.S.-China trade frictions battered emerging markets equities. Some localized issues exacerbated volatility, such as political uncertainty and economic turmoil in Turkey and Argentina.
Fixed income returns in emerging markets also disappointed, as U.S. dollar strength roiled emerging debt and currency markets. The J.P. Morgan Emerging Market Bond Index (EMBI) Global, which represents U.S. dollar-denominated debt, fell 5.27%. Local currency sovereign bonds lost value too, as the J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified dropped 6.58%.
The fund takes a multi-asset approach to emerging markets investing. By broadening the opportunity set across traditional market and asset class boundaries, the fund seeks to lower volatility and help limit the impact of turbulent markets. The ultimate goal is to achieve equity-like returns with lower volatility than an all-equity portfolio.
This approach offered protection during the recent downturn, as the fund has not declined as much as emerging markets equities or the emerging markets blended market universe.
Market review
Chinese stocks slid for the period, and the renminbi weakened versus the U.S. dollar. Uncertainties over China’s trade dispute with the U.S. and the country’s slowing pace of economic growth hurt investor sentiment. For the 12 months the MSCI China IMI lost 16.81%.
Indian equities were undercut by nonperforming loans in the banking sector and higher fuel prices. The latter added to the country’s deficit. The MSCI India IMI dipped 15.14%. Along with inflationary pressures, these factors overshadowed strong economic growth in the April-to-June period and raised concerns about the economy’s momentum. The rupee fell, trading near record lows against the U.S. dollar.
Brazil was a bright spot, as the MSCI Brazil IMI rose 3.76%. Brazilian stocks zigzagged ahead of October’s presidential election before finishing in positive territory. Jair Bolsonaro, a far-right lawmaker and former army captain, defeated leftist Fernando Haddad in the election runoff. His election marks a dramatic shift for Brazil, a nation led for many years by the left-leaning Workers’ Party.
Turkey and Argentina were in the spotlight in recent months, as higher U.S. dollar rates exposed their vulnerabilities, leading to a sharp deterioration in their currencies and asset prices. In Turkey, concerns mounted over its economic policies, high levels of corporate U.S. dollar debt and rising inflation. As the turmoil worsened, the central bank sharply hiked the benchmark interest rate in an attempt to shore up investor confidence and stem the collapse of the country’s currency. In Argentina, the peso plummeted amid an escalating fiscal crisis that led the government to ask the International Monetary Fund (IMF) to accelerate funding of an agreed bailout package.
Portfolio review
Our strategy takes a highly selective approach that is diversified across more than 50 countries, with key positions in China/Hong Kong, Brazil, India and Argentina. The mandate also held a 7.0% position in U.S.-domiciled companies that derive significant economic exposure from emerging markets. At the close of the fiscal year, the portfolio held 47.3% of net assets in equities, 41.5% in bonds, and 11.2% in cash and cash equivalents. The
| 2 | Capital Group Emerging Markets Total Opportunities Fund |
| Asset mix (percent of net assets) | as of October 31, 2018 |
| Top 5 equity sectors | Percent of net assets | |||
| Financials | 7.8 | % | ||
| Materials | 7.7 | |||
| Consumer discretionary | 7.0 | |||
| Communication services | 4.9 | |||
| Information technology | 3.9 | |||
| Percent of net assets as of 10/31/18 | |||||||||||||||
| Equity securities | Bonds, notes & other debt instruments | Total | |||||||||||||
| China (including Hong Kong) | 8.1 | % | 2.5 | % | 10.6 | % | |||||||||
| Brazil | 4.1 | 4.1 | 8.2 | ||||||||||||
| United States* | 4.2 | 2.8 | 7.0 | ||||||||||||
| India | 5.9 | 0.7 | 6.6 | ||||||||||||
| Argentina | 0.1 | 4.1 | 4.2 | ||||||||||||
| Mexico | 1.6 | 2.6 | 4.2 | ||||||||||||
| Turkey | 0.3 | 3.4 | 3.7 | ||||||||||||
| South Africa | 1.5 | 1.7 | 3.2 | ||||||||||||
| Russian Federation | 3.1 | 0.1 | 3.2 | ||||||||||||
| South Korea | 2.5 | 0.3 | 2.8 | ||||||||||||
| Islamic Republic of Pakistan | — | 2.4 | 2.4 | ||||||||||||
| Indonesia | 1.4 | 0.8 | 2.2 | ||||||||||||
| Taiwan | 2.2 | — | 2.2 | ||||||||||||
| United Kingdom* | 1.9 | — | 1.9 | ||||||||||||
| Sri Lanka | — | 1.9 | 1.9 | ||||||||||||
| 36.9 | % | 27.4 | % | 64.3 | % | ||||||||||
| * | Includes investments in companies listed in developed markets that have significant operations in emerging markets. |
| Capital Group Emerging Markets Total Opportunities Fund | 3 |
mandate’s diversified asset mix is not a top-down decision. It is driven by the manager’s bottom-up approach and fundamental company-by-company research in pursuit of the fund’s objective.
Several bonds issued by Argentina’s government faltered amid the nation’s growing fiscal problems. Holdings of local currency government bonds and government issued inflation-linked bonds both detracted from returns. Among equities, Loma Negra, an Argentine maker of cement and concrete, also declined.
British American Tobacco slid on regulatory headwinds and slowing tobacco volume. However, it remained a solid dividend payer.
Shares of Chinese drug producer Shanghai Fosun Pharmaceutical detracted from returns. The company was swept up by a broad selloff in the Chinese health care sector, largely triggered by concerns of enhanced regulatory scrutiny following news of vaccines sold that didn’t meet government standards.
Taiwan-based chipmaker Taiwan Semiconductor Manufacturing detracted marginally from results. The industry giant is the main manufacturer for iPhone and iPad chips as it continues to innovate ahead of the competition.
Overall, energy holdings helped the fund’s results. Offshore rig operator Ensco, based in the U.K., was a top contributor to returns. As U.S. shale is experiencing bottlenecks and reduced productivity, offshore oil is becoming cheaper to produce, which should support Ensco further. Petroleo Brasileiro, a Brazilian energy company, rallied sharply on higher oil prices, a stronger balance sheet and better corporate governance. Petroleo Brasilerio was sold from the portfolio.
Brazilian miner Vale advanced, as investors felt that demand for iron ore would rise.
Latin American e-commerce giant MercadoLibre gained on solid results in sales and profits.
The utilities sector overall contributed to returns, with AES leading the way. The U.S.-based power company distributes electricity to several countries.
In a challenging environment for financial markets, the fund’s cash position helped mitigate volatility. Managing currency risk by hedging some local currency exposure into U.S. dollars helped results.
Outlook
Emerging markets have been volatile due to a rally in the U.S. dollar, global trade disputes and tightening monetary policy in developed markets. Historically, long periods of dollar strength have been a headwind for emerging markets, especially in cases where countries have relied on dollar-denominated debt for financing needs.
Despite macro uncertainty, corporate fundamentals in developing countries remain favorable. In aggregate, profits for emerging markets companies are projected to grow by double digits this year and in 2019. Cash flows are improving and debt levels are decreasing, while valuations for emerging markets remain attractive. While volatility is likely to continue in the near future, longer term trends such as the growth of mobile commerce, an expanding consumer class in Asia and increasing smartphone usage look sustainable.
Emerging market debt valuations remain reasonable. On the whole, U.S. dollar debt looks fairly valued. Policy tightening in the U.S. and China is a key risk, but many developing countries are at different stages in the monetary cycle and have room to react. While financial conditions overall are likely to become less accommodative, strong growth in key markets provides a favorable backdrop for emerging markets. Despite significant appreciation in 2017, emerging market currencies mostly appear fairly valued or undervalued versus the U.S. dollar, particularly after the weakness in the first half of 2018.
Overall, managers are closely monitoring near-term risks that may create overlooked opportunities if the broader market takes a blanket macro view of the entire asset class, region or country. This is especially the case for active managers with a deep research base who can assess whether current price-to-earnings ratios, spreads and currency levels for individual markets carry enough premium to compensate for the risks.
We continue to believe that the emerging markets universe offers a wide range of compelling long-term investment opportunities. We look forward to reporting to you again in six months.
Sincerely,
John S. Armour
President
December 18, 2018
| 4 | Capital Group Emerging Markets Total Opportunities Fund |
The value of a $25,000 investment
How a $25,000 investment has grown
(for the period January 27, 2012, to October 31, 2018, with all distributions reinvested)
Average annual total returns based on a $1,000 investment (periods ended October 31, 2018)
| 1 year | 5 years | Lifetime (since 1/27/12) | |||||
| Class F-3 shares5 | -7.98% | -0.45% | 0.72% |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses.
| 1 | The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. |
| 2 | Source: MSCI. |
| 3 | Emerging markets blended market universe combines the MSCI EM IMI, JPM EMBI Global and JPM GBI-EM Global Diversified indexes by weighting their cumulative total returns at 50%, 25% and 25%, respectively. This assumes the blend is rebalanced monthly. |
| 4 | Results are calculated with all distributions, if any, reinvested. |
| 5 | Class F-3 shares were first offered on September 1, 2017. Class F-3 share results prior to September 1, 2017, are based on the results of the original share class of the fund, which was closed as of September 1, 2017. |
| 6 | As of January 27, 2012, commencement of fund operations. |
Results are for past periods and are not predictive of results for future periods. The results shown are before taxes on fund distributions and sale of fund shares. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, please call (800) 421-4225, ext. 90.
| Capital Group Emerging Markets Total Opportunities Fund | 5 |
Investment portfolio October 31, 2018
| Industry sector diversification | Percent of net assets |
| Common stocks 46.69% | Shares | Value (000) | ||||||
| Asia-Pacific 22.00% | ||||||||
| China 4.48% | ||||||||
| AAC Technologies Holdings Inc. | 9,000 | $ | 68 | |||||
| Alibaba Group Holding Ltd. (ADR)1 | 2,800 | 398 | ||||||
| Bank of China Ltd., Class H | 742,000 | 316 | ||||||
| China Unicom (Hong Kong) Ltd. | 102,000 | 106 | ||||||
| Ctrip.com International, Ltd. (ADR)1 | 11,800 | 393 | ||||||
| Huazhu Group Ltd. (ADR) | 1,000 | 26 | ||||||
| Hutchison China MediTech Ltd. (ADR)1 | 8,012 | 263 | ||||||
| IMAX China Holding, Inc. | 58,270 | 136 | ||||||
| Jiangsu Hengrui Medicine Co., Ltd., Class A | 7,000 | 62 | ||||||
| Longfor Group Holdings Ltd. | 196,000 | 476 | ||||||
| Midea Group Co., Ltd., Class A | 46,500 | 247 | ||||||
| Ping An Insurance (Group) Co. of China, Ltd., Class H | 6,500 | 61 | ||||||
| Shanghai Fosun Pharmaceutical (Group) Co., Ltd. Class H | 44,500 | 133 | ||||||
| Shanghai Pharmaceutical (Group) Co., Ltd., Class H | 39,200 | 87 | ||||||
| Tencent Holdings Ltd. | 3,100 | 105 | ||||||
| 2,877 | ||||||||
| Hong Kong 3.61% | ||||||||
| AIA Group Ltd. | 50,500 | 382 | ||||||
| Chow Sang Sang Holdings International Ltd. | 124,000 | 201 | ||||||
| CK Asset Holdings Ltd. | 17,000 | 110 | ||||||
| Galaxy Entertainment Group Ltd. | 90,000 | 487 | ||||||
| Hong Kong Exchanges and Clearing Ltd. | 1,100 | 29 | ||||||
| Sands China Ltd. | 147,600 | 582 | ||||||
| WH Group Limited | 751,500 | 526 | ||||||
| 2,317 | ||||||||
| India 5.28% | ||||||||
| Adani Ports & Special Economic Zone Ltd. | 7,000 | 30 | ||||||
| Bharti Airtel Ltd. | 39,571 | 156 | ||||||
| Godrej Consumer Products Ltd. | 7,800 | 76 | ||||||
| HDFC Bank Ltd. | 3,316 | 86 | ||||||
| HDFC Bank Ltd. (ADR) | 1,200 | 107 | ||||||
| Housing Development Finance Corp. Ltd. | 3,798 | 91 | ||||||
| ICICI Bank Ltd. | 148,182 | 711 | ||||||
| IndusInd Bank Ltd. | 2,806 | 54 | ||||||
| Info Edge (India) Ltd. | 27,957 | 597 | ||||||
| Kotak Mahindra Bank Ltd. | 5,000 | 76 | ||||||
| Lupin Ltd. | 18,781 | 225 | ||||||
| Maruti Suzuki India Ltd. | 450 | 40 | ||||||
| 6 | Capital Group Emerging Markets Total Opportunities Fund |
| Shares | Value (000) | |||||||
| Piramal Enterprises Ltd. | 3,500 | $ | 103 | |||||
| Steel Authority of India Ltd.1 | 344,257 | 300 | ||||||
| Tata Steel Ltd. | 97,985 | 734 | ||||||
| 3,386 | ||||||||
| Indonesia 1.42% | ||||||||
| Astra International Tbk PT | 189,400 | 99 | ||||||
| Bank Central Asia Tbk PT | 311,100 | 484 | ||||||
| Matahari Department Store Tbk PT | 197,100 | 63 | ||||||
| PT Surya Citra Media Tbk | 1,299,300 | 134 | ||||||
| Semen Indonesia (Persero) Tbk PT | 218,600 | 129 | ||||||
| 909 | ||||||||
| Japan 0.04% | ||||||||
| Kansai Paint Co., Ltd. | 1,700 | 25 | ||||||
| Philippines 0.83% | ||||||||
| Bank of the Philippine Islands | 146,218 | 225 | ||||||
| Bloomberry Resorts Corp. | 1,962,473 | 308 | ||||||
| 533 | ||||||||
| Singapore 1.50% | ||||||||
| City Developments Ltd. | 63,492 | 363 | ||||||
| DBS Group Holdings Ltd | 20,100 | 340 | ||||||
| Oversea-Chinese Banking Corp. Ltd. | 33,344 | 259 | ||||||
| 962 | ||||||||
| South Korea 2.48% | ||||||||
| Hyundai Motor Co. | 4,292 | 401 | ||||||
| Hyundai Motor Co., Series 2 | 2,979 | 185 | ||||||
| Samsung Electronics Co., Ltd. | 27,097 | 1,008 | ||||||
| 1,594 | ||||||||
| Taiwan 2.15% | ||||||||
| CTCI Corp. (Taiwan) | 299,000 | 422 | ||||||
| MediaTek Inc. | 34,000 | 250 | ||||||
| Taiwan Semiconductor Manufacturing Co., Ltd. | 94,000 | 711 | ||||||
| 1,383 | ||||||||
| Vietnam 0.21% | ||||||||
| Vinhomes JSC1,2 | 46,225 | 133 | ||||||
| Total Asia-Pacific | 14,119 | |||||||
| Other markets 11.26% | ||||||||
| Australia 0.98% | ||||||||
| Newcrest Mining Ltd. | 42,896 | 626 | ||||||
| Canada 1.45% | ||||||||
| Barrick Gold Corp. | 55,000 | 691 | ||||||
| Nutrien Ltd. (CAD denominated) | 4,480 | 237 | ||||||
| 928 | ||||||||
| Denmark 0.94% | ||||||||
| Carlsberg A/S, Class B | 5,468 | 603 | ||||||
| Germany 0.11% | ||||||||
| Hapag-Lloyd AG | 2,002 | 74 | ||||||
| Netherlands 0.10% | ||||||||
| ASML Holding NV | 370 | 63 | ||||||
| Capital Group Emerging Markets Total Opportunities Fund | 7 |
| Common stocks (continued) | Shares | Value (000) | ||||||
| Other markets (continued) | ||||||||
| Norway 1.00% | ||||||||
| BW LPG Ltd.1 | 135,448 | $ | 641 | |||||
| Sweden 0.08% | ||||||||
| Epiroc AB, Class B1 | 6,244 | 52 | ||||||
| Switzerland 0.43% | ||||||||
| LafargeHolcim Ltd. | 5,989 | 277 | ||||||
| United Kingdom 1.93% | ||||||||
| British American Tobacco PLC | 21,500 | 932 | ||||||
| PZ Cussons PLC | 98,100 | 275 | ||||||
| Spirax-Sarco Engineering PLC | 400 | 33 | ||||||
| 1,240 | ||||||||
| United States 4.24% | ||||||||
| AES Corp. | 50,400 | 735 | ||||||
| Broadcom Inc. | 1,700 | 380 | ||||||
| Ensco PLC, Class A | 148,700 | 1,062 | ||||||
| MercadoLibre, Inc. | 1,290 | 418 | ||||||
| Weatherford International PLC1 | 92,800 | 125 | ||||||
| 2,720 | ||||||||
| Total Other markets | 7,224 | |||||||
| Latin America 6.66% | ||||||||
| Argentina 0.10% | ||||||||
| Loma Negra Compania Industrial Argentina SA (ADR)1 | 7,000 | 63 | ||||||
| Brazil 4.14% | ||||||||
| CCR SA, ordinary nominative | 194,874 | 574 | ||||||
| Hypera SA, ordinary nominative | 43,400 | 347 | ||||||
| IRB Brasil Resseguros SA | 7,370 | 144 | ||||||
| Lojas Americanas SA, ordinary nominative | 21,600 | 81 | ||||||
| Lojas Americanas SA, preferred nominative | 54,200 | 274 | ||||||
| Nexa Resources SA | 39,188 | 437 | ||||||
| OdontoPrev SA, ordinary nominative | 14,200 | 51 | ||||||
| Vale SA, ordinary nominative (ADR) | 49,874 | 753 | ||||||
| 2,661 | ||||||||
| Chile 0.78% | ||||||||
| Enel Américas SA (ADR) | 42,214 | 333 | ||||||
| Inversiones La Construcción SA | 11,070 | 166 | ||||||
| 499 | ||||||||
| Mexico 1.64% | ||||||||
| América Móvil, SAB de CV, Series L (ADR) | 73,200 | 1,054 | ||||||
| Total Latin America | 4,277 | |||||||
| Eastern Europe and Middle East 5.25% | ||||||||
| Czech Republic 0.17% | ||||||||
| MONETA Money Bank, AS, non-registered shares | 33,555 | 111 | ||||||
| Romania 0.15% | ||||||||
| OMV Petrom SA | 1,004,319 | 95 | ||||||
| Russian Federation 3.08% | ||||||||
| Alrosa PJSC | 448,905 | 681 | ||||||
| Detsky Mir PJSC | 191,210 | 260 | ||||||
| Global Ports Investments PLC (GDR)1 | 69,147 | 171 | ||||||
| Globaltrans Investment PLC (GDR) | 5,248 | 51 | ||||||
| Sberbank of Russia PJSC (ADR) | 13,800 | 163 | ||||||
| 8 | Capital Group Emerging Markets Total Opportunities Fund |
| Shares | Value (000) | |||||||
| TCS Group Holding PLC (GDR)3 | 15,700 | $ | 261 | |||||
| TCS Group Holding PLC (GDR) | 1,700 | 28 | ||||||
| Yandex NV, Class A1 | 11,900 | 359 | ||||||
| 1,974 | ||||||||
| Turkey 0.31% | ||||||||
| Akbank TAS | 165,655 | 196 | ||||||
| United Arab Emirates 1.54% | ||||||||
| DP World Ltd. | 37,858 | 681 | ||||||
| First Abu Dhabi Bank PJSC, non-registered shares | 82,216 | 309 | ||||||
| 990 | ||||||||
| Total Eastern Europe and Middle East | 3,366 | |||||||
| Africa 1.52% | ||||||||
| South Africa 1.52% | ||||||||
| Discovery Ltd. | 39,854 | 427 | ||||||
| Naspers Ltd., Class N | 2,729 | 480 | ||||||
| Shoprite Holdings Ltd. | 5,500 | 67 | ||||||
| 974 | ||||||||
| Total common stocks (cost: $30,573,000) | 29,960 | |||||||
| Convertible stocks 0.66% | ||||||||
| Asia-Pacific 0.66% | ||||||||
| India 0.66% | ||||||||
| Piramal Enterprises Ltd., convertible debenture, 7.80% 20192 | 373 | 425 | ||||||
| Total convertible stocks (cost: $618,000) | 425 | |||||||
| Convertible bonds 0.01% | Principal amount (000) | |||||||
| Other markets 0.01% | ||||||||
| United States 0.01% | ||||||||
| Cobalt International Energy, Inc., convertible notes, 2.625% 20194 | $ | 332 | 2 | |||||
| Cobalt International Energy, Inc., convertible notes, 3.125% 20244 | 1,113 | 4 | ||||||
| 6 | ||||||||
| Total convertible bonds (cost: $836,000) | 6 | |||||||
| Bonds, notes & other debt instruments 41.47% | ||||||||
| Latin America 15.65% | �� | |||||||
| Argentina 4.12% | ||||||||
| Argentine Republic (Argentina Central Bank 7D Repo Reference Rate) 42.819% 20205 | ARS | 13,417 | 434 | |||||
| Argentine Republic 2.50% 20216 | 7,847 | 194 | ||||||
| Argentine Republic 6.875% 2021 | $ | 715 | 687 | |||||
| Argentine Republic 3.375% 2023 | € | 230 | 219 | |||||
| Argentine Republic 4.625% 2023 | $ | 372 | 317 | |||||
| Argentine Republic 16.00% 2023 | ARS | 2,157 | 54 | |||||
| Argentine Republic 7.50% 2026 | $ | 838 | 738 | |||||
| 2,643 | ||||||||
| Brazil 4.08% | ||||||||
| Brazil (Federative Republic of) 6.00% 20226 | BRL | 400 | 111 | |||||
| Brazil (Federative Republic of) 6.00% 20246 | 433 | 122 | ||||||
| Brazil (Federative Republic of) 10.00% 2025 | 300 | 82 | ||||||
| Brazil (Federative Republic of) 10.00% 2027 | 350 | 94 | ||||||
| Brazil (Federative Republic of) 6.00% 20286 | 1,922 | 553 | ||||||
| Brazil (Federative Republic of) 6.00% 20506 | 3,652 | 1,083 | ||||||
| Cemig Geração e Transmissão SA 9.25% 2024 | $ | 200 | 214 | |||||
| Cemig Geração e Transmissão SA 9.25% 20243 | 105 | 112 | ||||||
| Odebrecht Drilling Norbe 6.72% 20223,7 | 47 | 45 | ||||||
| Capital Group Emerging Markets Total Opportunities Fund | 9 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Latin America (continued) | ||||||||
| Brazil (continued) | ||||||||
| Odebrecht Drilling Norbe 7.72% 2026 (87.05% PIK)3,7,8 | $ | 154 | $ | 48 | ||||
| Odebrecht Drilling Norbe 0% 20493 | 70 | 2 | ||||||
| Vale SA 6.25% 2026 | 144 | 154 | ||||||
| 2,620 | ||||||||
| Colombia 0.77% | ||||||||
| Colombia (Republic of) 4.00% 2024 | 200 | 198 | ||||||
| Colombia (Republic of), Series B, 7.00% 2032 | COP | 310,000 | 92 | |||||
| Ecopetrol SA 5.375% 2026 | $ | 159 | 161 | |||||
| Emgesa SA ESP 8.75% 2021 | COP | 125,000 | 41 | |||||
| 492 | ||||||||
| Dominican Republic 0.47% | ||||||||
| Dominican Republic 6.875% 20263 | $ | 100 | 105 | |||||
| Dominican Republic 5.95% 20273 | 100 | 100 | ||||||
| Dominican Republic 5.95% 2027 | 100 | 100 | ||||||
| 305 | ||||||||
| Guatemala 0.29% | ||||||||
| Guatemala (Republic of) 4.50% 2026 | 200 | 184 | ||||||
| Mexico 2.62% | ||||||||
| BBVA Bancomer SA 6.50% 2021 | 150 | 155 | ||||||
| Petróleos Mexicanos 7.47% 2026 | MXN | 6,600 | 263 | |||||
| Red de Carreteras de Occidente 9.00% 20287 | 2,100 | 97 | ||||||
| United Mexican States 4.50% 20256 | 1,535 | 77 | ||||||
| United Mexican States, Series M, 8.00% 2020 | 2,890 | 141 | ||||||
| United Mexican States, Series M, 8.00% 2023 | 2,800 | 134 | ||||||
| United Mexican States, Series M20, 10.00% 2024 | 14,400 | 752 | ||||||
| United Mexican States, Series M, 5.75% 2026 | 1,510 | 62 | ||||||
| 1,681 | ||||||||
| Panama 1.24% | ||||||||
| ENA Norte Trust 4.95% 20287 | $ | 221 | 220 | |||||
| Panama (Republic of) 7.125% 2026 | 200 | 235 | ||||||
| Panama (Republic of) 4.50% 20477 | 360 | 338 | ||||||
| 793 | ||||||||
| Paraguay 0.99% | ||||||||
| Paraguay (Republic of) 4.70% 2027 | 350 | 344 | ||||||
| Paraguay (Republic of) 5.60% 20483 | 305 | 293 | ||||||
| 637 | ||||||||
| Peru 0.65% | ||||||||
| Banco de Crédito del Perú 6.875% 2026 (3-month USD-LIBOR + 6.875% on 9/16/2021)9 | 229 | 241 | ||||||
| Peru (Republic of) 6.15% 2032 | PEN | 600 | 178 | |||||
| 419 | ||||||||
| Uruguay 0.42% | ||||||||
| Uruguay (Oriental Republic of) 9.875% 2022 | UYU | 3,700 | 111 | |||||
| Uruguay (Oriental Republic of) 4.25% 20276,7 | 4,885 | 160 | ||||||
| 271 | ||||||||
| Total Latin America | 10,045 | |||||||
| Asia-Pacific 9.08% | ||||||||
| China 2.51% | ||||||||
| Bank of China Ltd. 1.875% 20197 | $ | 200 | 197 | |||||
| China Development Bank (3-month USD-LIBOR + 0.55%) 2.873% 20205 | 355 | 355 | ||||||
| Export-Import Bank of China (3-month USD-LIBOR + 0.60%) 2.927% 20203,5 | 480 | 480 | ||||||
| Industrial and Commercial Bank of China Ltd. 3.231% 2019 | 350 | 349 | ||||||
| State Grid Overseas Investment Ltd. 2.75% 2019 | 230 | 229 | ||||||
| 1,610 | ||||||||
| 10 | Capital Group Emerging Markets Total Opportunities Fund |
| Principal amount (000) | Value (000) | |||||||
| India 0.68% | ||||||||
| India (Republic of) 8.60% 2028 | INR | 30,750 | $ | 434 | ||||
| Indonesia 0.79% | ||||||||
| Indonesia (Republic of) 4.125% 20253 | $ | 525 | 506 | |||||
| Islamic Republic of Pakistan 2.38% | ||||||||
| Pakistan (Islamic Republic of) 6.75% 2019 | 928 | 933 | ||||||
| Pakistan (Islamic Republic of) 7.25% 2019 | 400 | 402 | ||||||
| Pakistan (Islamic Republic of) 5.50% 20213 | 200 | 195 | ||||||
| 1,530 | ||||||||
| Malaysia 0.10% | ||||||||
| Malaysia (Federation of), Series 0513, 3.733% 2028 | MYR | 280 | 65 | |||||
| South Korea 0.31% | ||||||||
| KT Corp. 2.625% 2019 | $ | 200 | 199 | |||||
| Sri Lanka 1.86% | ||||||||
| Sri Lanka (Democratic Socialist Republic of) 6.00% 2019 | 550 | 545 | ||||||
| Sri Lanka (Democratic Socialist Republic of) 6.825% 2026 | 525 | 473 | ||||||
| Sri Lanka (Democratic Socialist Republic of) 6.75% 2028 | 200 | 177 | ||||||
| 1,195 | ||||||||
| Thailand 0.45% | ||||||||
| Bangkok Bank PCL 4.05% 20243 | 225 | 224 | ||||||
| Thailand (Kingdom of) 2.125% 2026 | THB | 2,200 | 64 | |||||
| 288 | ||||||||
| Total Asia-Pacific | 5,827 | |||||||
| Eastern Europe and Middle East 7.31% | ||||||||
| Armenia 0.32% | ||||||||
| Armenia (Republic of) 6.00% 2020 | $ | 200 | 202 | |||||
| Bahrain 1.10% | ||||||||
| Bahrain (Kingdom of) 7.00% 2028 | 720 | 705 | ||||||
| Hungary 0.57% | ||||||||
| Hungary 5.75% 2023 | 340 | 365 | ||||||
| Kingdom of Saudi Arabia 0.55% | ||||||||
| Saudi Arabia (Kingdom of) 3.25% 20263 | 385 | 356 | ||||||
| �� | ||||||||
| Poland 0.10% | ||||||||
| Polish Government, Series 0428, 2.75% 2028 | PLN | 250 | 63 | |||||
| Romania 0.85% | ||||||||
| Romania 5.95% 2021 | RON | 2,170 | 548 | |||||
| Russian Federation 0.11% | ||||||||
| Russian Federation 7.05% 2028 | RUB | 4,900 | 68 | |||||
| Turkey 3.42% | ||||||||
| Turkey (Republic of) 7.00% 2019 | $ | 100 | 101 | |||||
| Turkey (Republic of) 3.00% 20226 | TRY | 1,280 | 226 | |||||
| Turkey (Republic of) 9.50% 2022 | 550 | 73 | ||||||
| Turkey (Republic of) 11.00% 2022 | 800 | 112 | ||||||
| Capital Group Emerging Markets Total Opportunities Fund | 11 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Eastern Europe and Middle East (continued) | ||||||||
| Turkey (continued) | ||||||||
| Turkey (Republic of) 7.10% 2023 | TRY | 7,400 | $ | 864 | ||||
| Turkey (Republic of) 7.375% 2025 | $ | 110 | 109 | |||||
| Turkey (Republic of) 4.25% 2026 | 400 | 330 | ||||||
| Turkey (Republic of) 6.00% 2027 | 250 | 226 | ||||||
| Turkey (Republic of) 5.75% 2047 | 200 | 152 | ||||||
| 2,193 | ||||||||
| Ukraine 0.29% | ||||||||
| Ukraine Government 7.75% 2024 | 200 | 188 | ||||||
| Total Eastern Europe and Middle East | 4,688 | |||||||
| Africa 6.15% | ||||||||
| Egypt 1.58% | ||||||||
| Egypt (Arab Republic of) 17.20% 2023 | EGP | 700 | 38 | |||||
| Egypt (Arab Republic of) 15.90% 2024 | 5,190 | 267 | ||||||
| Egypt (Arab Republic of) 18.40% 2024 | 5,415 | 304 | ||||||
| Egypt (Arab Republic of) 4.75% 2026 | € | 378 | 402 | |||||
| 1,011 | ||||||||
| Federal Republic of Nigeria 1.09% | ||||||||
| Nigeria (Republic of) 14.50% 2021 | NGN | 204,570 | 555 | |||||
| Nigeria (Republic of) 16.288% 2027 | 50,900 | 146 | ||||||
| 701 | ||||||||
| Ghana 0.16% | ||||||||
| Ghana (Republic of) 24.75% 2021 | GHS | 450 | 104 | |||||
| Republic of Kenya 0.86% | ||||||||
| Kenya (Republic of) 5.875% 2019 | $ | 550 | 554 | |||||
| South Africa 1.67% | ||||||||
| Myriad International Holdings 5.50% 2025 | 200 | 205 | ||||||
| South Africa (Republic of) 8.50% 2037 | ZAR | 1,700 | 100 | |||||
| South Africa (Republic of), Series R-2023, 7.75% 2023 | 920 | 60 | ||||||
| South Africa (Republic of), Series R-186, 10.50% 2026 | 8,830 | 635 | ||||||
| South Africa (Republic of), Series R-209, 6.25% 2036 | 1,457 | 68 | ||||||
| 1,068 | ||||||||
| Tunisia 0.79% | ||||||||
| Banque Centrale de Tunisie 6.75% 2023 | € | 455 | 508 | |||||
| Total Africa | 3,946 | |||||||
| Other markets 3.28% | ||||||||
| Netherlands 0.31% | ||||||||
| IHS Netherlands Holdco BV 9.50% 2021 | $ | 200 | 202 | |||||
| Switzerland 0.21% | ||||||||
| Transocean Inc. 6.125% 20253,7 | 135 | 135 | ||||||
| United States 2.76% | ||||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20206 | 724 | 712 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20226 | 1,094 | 1,057 | ||||||
| 1,769 | ||||||||
| Total other markets | 2,106 | |||||||
| Total bonds, notes & other debt instruments (cost: $28,434,000) | 26,612 | |||||||
| 12 | Capital Group Emerging Markets Total Opportunities Fund |
| Short-term securities 10.31% | Principal amount (000) | Value (000) | ||||||
| Province of Alberta 2.19% due 11/1/20183 | $ | 1,000 | $ | 1,000 | ||||
| Argentinian Treasury Bills (0.77%)–1.13% due 2/28/2019–4/30/2019 | ARS | 36,799 | 1,071 | |||||
| Argentinian Treasury Bill 4.66% due 11/30/2018 | $ | 417 | 416 | |||||
| BNP Paribas, New York Branch 2.16% due 11/1/2018 | 1,150 | 1,150 | ||||||
| Egyptian Treasury Bills 14.83%–17.40% due 11/20/2018–3/26/2019 | EGP | 9,625 | 510 | |||||
| Federal Home Loan Bank 2.17%–2.18% due 11/2/2018–11/14/2018 | $ | 1,400 | 1,399 | |||||
| Nigerian Treasury Bills 11.56% due 1/31/2019 | NGN | 25,000 | 67 | |||||
| Tennessee Valley Authority 2.20% due 11/6/2018 | $ | 1,000 | 1,000 | |||||
| Total short-term securities (cost: $6,559,000) | 6,613 | |||||||
| Total investment securities 99.14 % (cost: $67,020,000) | 63,616 | |||||||
| Other assets less liabilities 0.86% | 553 | |||||||
| Net assets 100.00% | 64,169 | |||||||
Forward currency contracts
| Unrealized | ||||||||||
| Contract amount | appreciation | |||||||||
| (depreciation) | ||||||||||
| Purchases | Sales | at 10/31/2018 | ||||||||
| (000) | (000) | Counterparty | Settlement date | (000) | ||||||
| USD211 | EUR181 | Goldman Sachs | 11/5/2018 | $ | 6 | |||||
| EUR181 | USD205 | Goldman Sachs | 11/5/2018 | — | 10 | |||||
| USD395 | MXN7,539 | Bank of America, N.A. | 11/9/2018 | 24 | ||||||
| USD473 | RON1,921 | Bank of America, N.A. | 11/9/2018 | 6 | ||||||
| USD224 | IDR3,435,303 | JPMorgan Chase | 11/15/2018 | (2 | ) | |||||
| USD90 | KRW101,978 | JPMorgan Chase | 11/16/2018 | — | 10 | |||||
| USD168 | TWD5,221 | JPMorgan Chase | 11/16/2018 | — | 10 | |||||
| USD182 | ZAR2,679 | Bank of America, N.A. | 11/16/2018 | — | 10 | |||||
| USD61 | ZAR896 | Bank of America, N.A. | 11/16/2018 | — | 10 | |||||
| USD732 | KRW825,230 | JPMorgan Chase | 11/19/2018 | 7 | ||||||
| USD302 | BRL1,126 | Goldman Sachs | 11/19/2018 | — | 10 | |||||
| TRY2,027 | USD351 | JPMorgan Chase | 11/21/2018 | 7 | ||||||
| USD582 | GBP447 | Citibank | 11/26/2018 | 10 | ||||||
| USD321 | CNH2,236 | JPMorgan Chase | 11/26/2018 | 2 | ||||||
| USD472 | INR34,970 | JPMorgan Chase | 11/28/2018 | 1 | ||||||
| USD1,536 | CNH10,723 | Citibank | 12/3/2018 | 1 | ||||||
| USD208 | EUR183 | Goldman Sachs | 12/3/2018 | — | 10 | |||||
| USD669 | BRL2,735 | Goldman Sachs | 12/21/2018 | (63 | ) | |||||
| USD675 | BRL2,762 | JPMorgan Chase | 12/21/2018 | (64 | ) | |||||
| BRL187 | USD50 | Goldman Sachs | 1/8/2019 | — | 10 | |||||
| USD46 | BRL187 | Goldman Sachs | 1/8/2019 | (3 | ) | |||||
| USD541 | BRL2,116 | Citibank | 10/2/2019 | (11 | ) | |||||
| USD171 | CNY1,205 | Bank of America, N.A. | 10/11/2019 | (2 | ) | |||||
| USD812 | CNY5,720 | Goldman Sachs | 10/11/2019 | (9 | ) | |||||
| $(90 | ) | |||||||||
| Capital Group Emerging Markets Total Opportunities Fund | 13 |
| 1 | Security did not produce income during the last 12 months. |
| 2 | Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $558,000, which represented .87% 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 $3,862,000, which represented 6.02% of the net assets of the fund. |
| 4 | Scheduled interest and/or principal payment was not received. |
| 5 | Coupon rate may change periodically. |
| 6 | Index-linked bond whose principal amount moves with a government price index. |
| 7 | Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
| 8 | Payment in kind; the issuer has the option of paying additional securities in lieu of cash. Most recent payment was 100% cash unless otherwise noted. |
| 9 | Step bond; coupon rate may change at a later date. |
| 10 | Amount less than one thousand. |
Key to abbreviations and symbols
ADR = American Depositary Receipts
ARS = Argentine pesos
BRL = Brazilian reais
CAD = Canadian dollars
CNH = Chinese yuan renminbi
CNY = Chinese yuan renminbi
COP = Colombian pesos
EGP = Egyptian pounds
EUR/€ = Euros
GBP = British pounds
GDR = Global Depositary Receipts
GHS = Ghanaian cedi
IDR = Indonesian rupiah
INR = Indian rupees
KRW = South Korean won
LIBOR = London Interbank Offered Rate
MXN = Mexican pesos
MYR = Malaysian ringgits
NGN = Nigerian naira
PEN = Peruvian nuevos soles
PLN = Polish zloty
RON = Romanian leu
RUB = Russian rubles
THB = Thai baht
TRY = Turkish lira
TWD = New Taiwan dollars
USD/$ = U.S. dollars
UYU = Uruguayan pesos
ZAR = South African rand
See notes to financial statements
| 14 | Capital Group Emerging Markets Total Opportunities Fund |
| Statement of assets and liabilities at October 31, 2018 | ||||||||
| (dollars in thousands) | ||||||||
| Assets: | ||||||||
| Investment securities in unaffiliated issuers, at value (cost: $67,020) | $ | 63,616 | ||||||
| Cash | 17 | |||||||
| Cash denominated in currencies other than U.S. dollars (cost: $377) | 374 | |||||||
| Unrealized appreciation on open forward currency contracts | 64 | |||||||
| Receivables for: | ||||||||
| Sales of investments | $ | 307 | ||||||
| Closed forward currency contracts | 92 | |||||||
| Dividends and interest | 534 | |||||||
| Services provided by related parties | 51 | |||||||
| Other | 2 | 986 | ||||||
| 65,057 | ||||||||
| Liabilities: | ||||||||
| Unrealized depreciation on open forward currency contracts | 154 | |||||||
| Payables for: | ||||||||
| Purchases of investments | 628 | |||||||
| Repurchases of fund’s shares | 7 | |||||||
| Closed forward currency contracts | 9 | |||||||
| Investment advisory services | 46 | |||||||
| Services provided by related parties | 3 | |||||||
| Trustees’ deferred compensation | 2 | |||||||
| Non-U.S. taxes | 5 | |||||||
| Other | 34 | 734 | ||||||
| Net assets at October 31, 2018 | $ | 64,169 | ||||||
| Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 88,121 | ||||||
| Total accumulated loss | (23,952 | ) | ||||||
| Net assets at October 31, 2018 | $ | 64,169 | ||||||
(dollars and shares in thousands, except per-share amounts)
Shares of beneficial interest issued and outstanding (no stated par value) —
unlimited shares authorized (6,141 total shares outstanding)
| Shares | Net asset | |||||||||||
| Net assets | outstanding | value per share | ||||||||||
| Class F-2 | $ | 9 | 1 | $ | 10.44 | |||||||
| Class F-3 | 55,588 | 5,320 | 10.45 | |||||||||
| Class R-6 | 8,572 | 820 | 10.45 | |||||||||
See notes to financial statements
| Capital Group Emerging Markets Total Opportunities Fund | 15 |
| Statement of operations for the year ended October 31, 2018 | ||||||||
| (dollars in thousands) | ||||||||
| Investment income: | ||||||||
| Income: | ||||||||
| Interest (net of non-U.S. taxes of $31) | $ | 3,698 | ||||||
| Dividends (net of non-U.S. taxes of $95) | 1,136 | $ | 4,834 | |||||
| Fees and expenses*: | ||||||||
| Investment advisory services | 911 | |||||||
| Transfer agent services | 5 | |||||||
| Administrative services | 54 | |||||||
| Reports to shareholders | 14 | |||||||
| Registration statement and prospectus | 57 | |||||||
| Trustees’ compensation | 9 | |||||||
| Auditing and legal | 68 | |||||||
| Custodian | 46 | |||||||
| Other | 48 | |||||||
| Total fees and expenses before reimbursements | 1,212 | |||||||
| Less reimbursements of fees and expenses: | ||||||||
| Miscellaneous fee | 136 | |||||||
| Transfer agent services fee | — | † | ||||||
| Total fees and expenses after reimbursements | 1,076 | |||||||
| Net investment income | 3,758 | |||||||
| Net realized loss and unrealized depreciation: | ||||||||
| Net realized loss on: | ||||||||
| Investments in unaffiliated issuers (net of non-U.S. taxes of $66) | (1,359 | ) | ||||||
| Forward currency contracts | (10 | ) | ||||||
| Currency transactions | (273 | ) | (1,642 | ) | ||||
| Net unrealized depreciation on: | ||||||||
| Investments in unaffiliated issuers | (8,324 | ) | ||||||
| Forward currency contracts | (18 | ) | ||||||
| Currency translations | (13 | ) | (8,355 | ) | ||||
| Net realized loss and unrealized depreciation | (9,997 | ) | ||||||
| Net decrease in net assets resulting from operations | $ | (6,239 | ) | |||||
| * | Additional information related to class-specific fees and expenses is included in the notes to financial statements. |
| † | Amount less than one thousand. |
Statements of changes in net assets
(dollars in thousands)
| Year ended October 31 | ||||||||
| 2018 | 2017 | |||||||
| Operations: | ||||||||
| Net investment income | $ | 3,758 | $ | 6,556 | ||||
| Net realized loss | (1,642 | ) | (3,007 | ) | ||||
| Net unrealized (depreciation) appreciation | (8,355 | ) | 15,841 | |||||
| Net (decrease) increase in net assets resulting from operations | (6,239 | ) | 19,390 | |||||
| Distributions paid to shareholders | (6,366 | ) | — | |||||
| Net capital share transactions | (66,865 | ) | (64,420 | ) | ||||
| Total decrease in net assets | (79,470 | ) | (45,030 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 143,639 | 188,669 | ||||||
| End of year | $ | 64,169 | $ | 143,639 | ||||
See notes to financial statements
| 16 | Capital Group Emerging Markets Total Opportunities Fund |
Notes to financial statements
1. Organization
Capital Group Emerging Markets Total Opportunities Fund (the “fund”) is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks long-term growth and preservation of capital with lower volatility of returns than emerging market equities.
The fund has three share classes consisting of two retail share classes (Classes F-2 and F-3), and one retirement plan share class (Class R-6). The retirement plan share class is generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described further in the following table:
| Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature |
| Classes F-2 and F-3 | None | None | None |
| Class R-6 | None | None | None |
Holders of all share classes have equal pro rata rights to the assets, dividends and liquidation proceeds of the fund. 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, transfer agent and administrative 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 fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The fund’s financial statements have been prepared to comply with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles require the fund’s investment adviser to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Subsequent events, if any, have been evaluated through the date of issuance in the preparation of the financial statements. 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. Dividend income is recognized on the ex-dividend date and 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, transfer agent and administrative services, are charged directly to the respective share class.
Distributions paid to shareholders — Income dividends and capital gain distributions 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
Capital Guardian Trust Company (“CGTC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by U.S. GAAP. 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.
| Capital Group Emerging Markets Total Opportunities Fund | 17 |
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.
Equity securities 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.
Fixed-income securities, including short-term securities, 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”) | |
| Corporate bonds & notes; convertible securities | Standard inputs and underlying equity of the issuer | |
| 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 deemed to be not 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, or equity securities traded principally among fixed-income dealers, are generally valued in the manner described for either equity or fixed-income securities, depending on which method is deemed most appropriate by the fund’s investment adviser. 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.
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. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of each share class of the fund is determined. 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. 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.
| 18 | Capital Group Emerging Markets Total Opportunities Fund |
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. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. 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. The following tables present the fund’s valuation levels as of October 31, 2018 (dollars in thousands):
| Investment securities | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Common stocks: | ||||||||||||||||
| Asia-Pacific | $ | 13,986 | $ | 133 | $ | — | $ | 14,119 | ||||||||
| Other markets | 7,224 | — | — | 7,224 | ||||||||||||
| Latin America | 4,277 | — | — | 4,277 | ||||||||||||
| Eastern Europe and Middle East | 3,366 | — | — | 3,366 | ||||||||||||
| Africa | 974 | — | — | 974 | ||||||||||||
| Convertible stocks | — | 425 | — | 425 | ||||||||||||
| Convertible bonds | — | 6 | — | 6 | ||||||||||||
| Bonds, notes & other debt instruments | ||||||||||||||||
| Latin America | — | 10,045 | — | 10,045 | ||||||||||||
| Asia-Pacific | — | 5,827 | — | 5,827 | ||||||||||||
| Eastern Europe and Middle East | — | 4,688 | — | 4,688 | ||||||||||||
| Africa | — | 3,946 | — | 3,946 | ||||||||||||
| Other markets | — | 2,106 | — | 2,106 | ||||||||||||
| Short-term securities | — | 6,613 | — | 6,613 | ||||||||||||
| Total | $ | 29,827 | $ | 33,789 | $ | — | $ | 63,616 | ||||||||
| Other investments* | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Unrealized appreciation on open forward currency contracts | $ | — | $ | 64 | $ | — | $ | 64 | ||||||||
| Liabilities: | ||||||||||||||||
| Unrealized depreciation on open forward currency contracts | — | (154 | ) | — | (154 | ) | ||||||||||
| Total | $ | — | $ | (90 | ) | $ | — | $ | (90 | ) | ||||||
| * | Forward currency contracts are not included in the investment portfolio. |
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 — sometimes rapidly or unpredictably — due to various factors, including events or conditions affecting the general economy or particular industries; overall market changes; local, regional or global political, social or economic instability; governmental, governmental agency or central bank responses to economic conditions; and currency exchange rate, interest rate and commodity price fluctuations.
Issuer risks — The prices of, and the income generated by, securities held by the fund may decline in response to various factors directly related to the issuers of such securities, including reduced demand for an issuer’s goods or services, poor management performance, major litigation against the issuer, changes in government regulations affecting the issuer or its competitive environment and strategic initiatives such as mergers, acquisitions or dispositions and the market response to any such initiatives.
Investing in growth-oriented stocks — Growth-oriented common stocks and other equity-type securities (such as preferred stocks, convertible preferred stocks and convertible bonds) may involve larger price swings and greater potential for loss than other types of investments. These risks may be even greater in the case of smaller capitalization stocks.
| Capital Group Emerging Markets Total Opportunities Fund | 19 |
Investing in income-oriented stocks — The value of the fund’s securities and income provided by the fund may be reduced by changes in the dividend policies of, and the capital resources available for dividend payments at, the companies in which the fund invests.
Investing outside the U.S. — Securities of issuers domiciled outside the U.S., or with significant operations or revenues outside the U.S., may lose value because of adverse political, social, economic or market developments (including social instability, regional conflicts, terrorism and war) in the countries or regions in which the issuers operate or generate revenue. 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. Issuers of these securities may be more susceptible to actions of foreign governments, such as nationalization, currency blockage or the imposition of price controls or punitive taxes, that could adversely impact the value of these securities. 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 accounting practices and different regulatory, legal and reporting standards and practices, and may be more difficult to value, than those in the U.S. In addition, the value of investments outside the U.S. 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. The risks of investing outside the U.S. may be heightened in connection with investments in emerging markets.
Investing in emerging markets — Investing in emerging markets may involve risks in addition to and greater than those generally associated with investing in the securities markets of developed countries. For instance, emerging market countries may have less developed legal and accounting systems than those in developed countries. The governments of these countries may be less stable and more likely to impose capital controls, nationalize a company or industry, place restrictions on foreign ownership and on withdrawing sale proceeds of securities from the country, and/or impose punitive taxes that could adversely affect the prices of securities. In addition, the economies of these countries may be dependent on relatively few industries that are more susceptible to local and global changes. Securities markets in these countries can also be relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid, and may be more difficult to value, than securities issued in countries with more developed economies and/or markets. Less certainty with respect to security valuations may lead to additional challenges and risks in calculating the fund’s net asset value. Additionally, emerging markets are more likely to experience problems with the clearing and settling of trades and the holding of securities by banks, agents and depositories that are less established than those in developed countries.
Investing in small companies — Investing in smaller companies may pose additional risks. For example, it is often more difficult to value or dispose of small company stocks and more difficult to obtain information about smaller companies than about larger companies. Furthermore, smaller companies often have limited product lines, operating histories, markets and/or financial resources, may be dependent on one or a few key persons for management, and can be more susceptible to losses. Moreover, the prices of their stocks may be more volatile than stocks of larger, more established companies, particularly during times of market turmoil.
Investing in debt instruments — The prices of, and the income generated by, 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.
Rising interest rates will generally cause the prices of bonds and other debt securities to fall. A general rise in interest rates may cause investors to sell debt securities on a large scale, which could also adversely affect the price and liquidity of debt securities and could also result in increased redemptions from the fund. 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 failing to recoup the full amount of its initial investment and having to reinvest the proceeds in lower yielding securities. Longer maturity debt securities generally have greater sensitivity to changes in interest rates 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 or guarantor will weaken or be perceived to be weaker, 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. A downgrade or default affecting any of the fund’s securities could cause the value of the fund’s shares to decrease. 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 assess credit and default risks.
Investing in lower rated debt instruments — Lower rated bonds and other lower rated debt securities generally have higher rates of interest and involve greater risk of default or price declines due to changes in the issuer’s creditworthiness than those of higher quality debt securities. The market prices of these securities may fluctuate more than the prices of higher quality debt securities and may decline significantly in periods of general economic difficulty. These risks may be increased with respect to investments in junk bonds.
| 20 | Capital Group Emerging Markets Total Opportunities Fund |
Liquidity risk — Certain fund holdings may be or become difficult or impossible to sell, particularly during times of market turmoil. Illiquidity may result from the lack of an active market for a holding, legal or contractual restrictions on resale, or the reduced number and capacity of market participants to make a market in such holding. Market prices for less liquid or illiquid holdings may be volatile, and reduced liquidity may have an adverse impact on the market price of such holdings. Additionally, the sale of less liquid or illiquid holdings may involve substantial delays (including delays in settlement) and additional costs and the fund may be unable to sell such holdings when necessary to meet its liquidity needs or may be forced to sell at a loss.
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, including models, tools and data, employed by the investment adviser in this process may be flawed or incorrect and 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
Index-linked bonds — The fund has invested in index-linked bonds, which are fixed-income securities whose principal value is periodically adjusted to a government price index. Over the life of an index-linked bond, interest is paid on the adjusted principal value. Increases or decreases in the principal value of index-linked bonds are recorded as interest income in the fund’s statement of operations.
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.
Closed forward currency contracts that have not reached their settlement date are included in the respective receivables or payables for closed forward currency contracts in the fund’s statement of assets and liabilities. Net realized gains or losses from closed forward currency contracts and net unrealized appreciation or depreciation from open forward currency contracts are recorded in the fund’s statement of operations. The average month-end notional amount of open forward currency contracts while held was $9,917,000.
The following tables present the financial statement impacts resulting from the fund’s use of forward currency contracts as of, or for the year ended, October 31, 2018 (dollars in thousands):
| Assets | Liabilities | |||||||||||||
| Contracts | Risk type | Location on statement of assets and liabilities | Value | Location on statement of assets and liabilities | Value | |||||||||
| Forward currency | Currency | Unrealized appreciation on open forward currency contracts | $ | 64 | Unrealized depreciation on open forward currency contracts | $ | 154 | |||||||
| Forward currency | Currency | Receivables for closed forward currency contracts | 92 | Payables for closed forward currency contracts | 9 | |||||||||
| $ | 156 | $ | 163 | |||||||||||
| Net realized loss | Net unrealized depreciation | |||||||||||||
| Contracts | Risk type | Location on statement of operations | Value | Location on statement of operations | Value | |||||||||
| Forward currency | Currency | Net realized loss on forward currency contracts | $ | (10 | ) | Net unrealized depreciation on forward currency contracts | $ | (18 | ) | |||||
Rights of offset — The fund has entered into enforceable master netting agreements with certain counterparties for forward currency contracts, where on any date amounts payable by each party to the other (in the same currency with respect to the same transaction) may be closed or offset by each party’s payment obligation. If an early termination date occurs under these agreements following an event of default or termination event, all obligations of each party to its counterparty are settled net through a single payment in a single currency (“close-out netting”). For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to these master netting arrangements in the statement of assets and liabilities.
| Capital Group Emerging Markets Total Opportunities Fund | 21 |
The following table presents the fund’s forward currency contracts by counterparty that are subject to master netting agreements but that are not offset in the fund’s statement of assets and liabilities. The net amount column shows the impact of offsetting on the fund’s statement of assets and liabilities as of October 31, 2018, if close-out netting was exercised (dollars in thousands):
| Gross amounts not offset in the | ||||||||||||||||||||
| Gross amounts | statement of assets and liabilities and | |||||||||||||||||||
| recognized in the | subject to a master netting agreement | |||||||||||||||||||
| statement of assets | Available | Non-cash | Cash | Net | ||||||||||||||||
| Counterparty | and liabilities | to offset | collateral* | collateral | amount | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Bank of America, N.A. | $ | 31 | $ | (2 | ) | $ | — | $ | — | $ | 29 | |||||||||
| Citibank | 11 | (11 | ) | — | — | — | ||||||||||||||
| Goldman Sachs | 6 | (6 | ) | — | — | — | ||||||||||||||
| JPMorgan Chase | 108 | (75 | ) | — | — | 33 | ||||||||||||||
| Total | $ | 156 | $ | (94 | ) | $ | — | $ | — | $ | 62 | |||||||||
| Liabilities: | ||||||||||||||||||||
| Bank of America, N.A. | $ | 2 | $ | (2 | ) | $ | — | $ | — | $ | — | |||||||||
| Citibank | 11 | (11 | ) | — | — | — | ||||||||||||||
| Goldman Sachs | 75 | (6 | ) | — | — | 69 | ||||||||||||||
| JPMorgan Chase | 75 | (75 | ) | — | — | — | ||||||||||||||
| Total | $ | 163 | $ | (94 | ) | $ | — | $ | — | $ | 69 | |||||||||
| * | Non-cash collateral is shown on a settlement basis. |
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 October 31, 2018, 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 significant interest or penalties.
The fund’s tax returns are not subject to examination by federal, state and, if applicable, non-U.S. tax authorities after the expiration of each jurisdiction’s statute of limitations, which is generally three years after the date of filing but can be extended in certain jurisdictions.
Non-U.S. taxation — Dividend and interest income are recorded net of non-U.S. taxes paid. The fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. These reclaims are recorded when the amount is known and there are no significant uncertainties on collectability. Gains realized by the fund on the sale of securities in certain countries, if any, may be subject to non-U.S. taxes. If applicable, the fund records an estimated deferred tax liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.
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; non-U.S. taxes on capital gains 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.
| 22 | Capital Group Emerging Markets Total Opportunities Fund |
As of October 31, 2018, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investments were as follows (dollars in thousands):
| Undistributed ordinary income | $ | 1,503 | ||
| Capital loss carryforward* | (22,250 | ) | ||
| Gross unrealized appreciation on investments | 5,198 | |||
| Gross unrealized depreciation on investments | (8,315 | ) | ||
| Net unrealized depreciation on investments | (3,117 | ) | ||
| Cost of investments | 66,643 |
| * | Reflects the utilization of capital loss carryforward of $443,000. 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 year ended October 31, 2017. Distributions paid during the year ended October 31, 2018, were characterized for tax purposes as follows (dollars in thousands):
| Total | ||||
| distributions | ||||
| Share class | paid | |||
| Class F-2 | $ | — | * | |
| Class F-3 | 3,717 | |||
| Class R-6 | 2,649 | |||
| Total | $ | 6,366 | ||
| * | Amount less than one thousand. |
7. Fees and transactions with related parties
CGTC is the fund’s investment adviser. American Funds Distributors,® Inc. (“AFD”), the fund’s principal underwriter, and American Funds Service Company® (“AFS”), the fund’s transfer agent are affiliated with CGTC. CGTC, AFD and AFS are considered related parties to the fund.
Investment advisory services — The fund has an investment advisory and service agreement with CGTC that provides for monthly fees accrued daily. For the year ended October 31, 2018, the investment advisory services fee was $911,000, which was equivalent to an annualized rate of 0.850% of average daily net assets.
Miscellaneous fee reimbursement — CGTC has agreed to reimburse a portion of miscellaneous fees and expenses of the fund. This reimbursement will be in effect through at least January 1, 2020. At its discretion, the adviser may elect to extend, modify or terminate the reimbursement. Fees and expenses in the statement of operations are presented gross of the reimbursement from CGTC. The amount reimbursed by CGTC is reflected as a reimbursement of miscellaneous fees and expenses.
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 further described below:
Distribution services — American Funds Distributors®, Inc. (“AFD”), an affiliate of CGTC, is the principal underwriter of the fund’s shares. AFD does not receive any compensation related to the sale of shares of the fund.
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 CGTC under which the fund compensates CGTC for providing administrative services to Class F-2,F-3 and R-6 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 F-2,F-3 and R-6 shares pay an annual fee of 0.05% of their respective average daily net assets.
| Capital Group Emerging Markets Total Opportunities Fund | 23 |
For the year ended October 31, 2018, class-specific expenses under the agreements were as follows (dollars in thousands):
| Transfer agent | Administrative | |||||||
| Share class | services | services | ||||||
| Class F-2 | $ | — | * | $ | — | * | ||
| Class F-3 | 4 | 35 | ||||||
| Class R-6 | 1 | 19 | ||||||
| Total class-specific expenses | $ | 5 | $ | 54 | ||||
| * | Amount less than one thousand. |
Miscellaneous fee reimbursements — CGTC reimbursed a portion of the fund’s fees and expenses. For the year ended October 31, 2018, the total fees reimbursed by CGTC were as follows (dollars in thousands):
| Share class | ||||
| Class F-2 | $ | — | * | |
| Class F-3 | 118 | |||
| Class R-6 | 18 | |||
| Total reimbursements | $ | 136 | ||
| * | Amount less than one thousand. |
Affiliated officers and trustees — Officers and certain trustees of the fund are or may be considered to be affiliated with CGTC, AFD, and AFS. No affiliated officers or trustees received any compensation directly from the fund.
Security transactions with related funds — The fund may purchase from, or sell securities to, other funds managed by CGTC (or funds managed by certain affiliates or CGTC) under procedures adopted by the fund’s board of trustees. The funds involved in such transactions are considered related by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers. When such transactions occur, each transaction is executed at the current market price of the security and no brokerage commissions or fees are paid in accordance with Rule 17a-7 of the 1940 Act.
Interfund lending — Pursuant to an exemptive order issued by the SEC, the fund, along with other CGTC-managed funds (or funds managed by certain affiliates of CGTC), may participate in an interfund lending program. The program provides an alternate credit facility that permits the funds to lend or borrow cash for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. The fund did not lend or borrow cash through the interfund lending program at any time during the year ended October 31, 2018.
| 24 | Capital Group Emerging Markets Total Opportunities Fund |
8. Committed line of credit
The fund participates with other funds managed by CGTC (or funds managed by certain affiliates of CGTC) in a $1.5 billion credit facility (the “line of credit”) to be utilized for temporary purposes to support shareholder redemptions. The fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which are reflected in other expenses in the fund’s statement of operations. The fund did not borrow on this line of credit at any time during the year ended October 31, 2018.
9. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
| Sales1 | Reinvestments of distributions | Repurchases1 | Net (decrease) increase | |||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Year ended October 31, 2018 | ||||||||||||||||||||||||||||||||
| Class F-2 | $ | — | — | $ | — | — | $ | — | — | $ | — | — | ||||||||||||||||||||
| Class F-3 | 2,153 | 196 | 3,608 | 310 | (26,752 | ) | (2,341 | ) | (20,991 | ) | (1,835 | ) | ||||||||||||||||||||
| Class R-6 | 5,030 | 429 | 2,649 | 227 | (53,553 | ) | (4,771 | ) | (45,874 | ) | (4,115 | ) | ||||||||||||||||||||
| Total net increase (decrease) | $ | 7,183 | 625 | $ | 6,257 | 537 | $ | (80,305 | ) | (7,112 | ) | $ | (66,865 | ) | (5,950 | ) | ||||||||||||||||
| Year ended October 31, 2017 | ||||||||||||||||||||||||||||||||
| Class M2 | $ | 12,717 | 1,159 | $ | — | — | $ | (219,756 | ) | (18,997 | ) | $ | (207,039 | ) | (17,838 | ) | ||||||||||||||||
| Class F-23 | 10 | 1 | — | — | — | — | 10 | 1 | ||||||||||||||||||||||||
| Class F-33 | 93,984 | 7,965 | — | — | (9,608 | ) | (810 | ) | 84,376 | 7,155 | ||||||||||||||||||||||
| Class R-63 | 100,468 | 8,517 | — | — | (42,235 | ) | (3,582 | ) | 58,233 | 4,935 | ||||||||||||||||||||||
| Total net increase (decrease) | $ | 207,179 | 17,642 | $ | — | — | $ | (271,599 | ) | (23,389 | ) | $ | (64,420 | ) | (5,747 | ) | ||||||||||||||||
| 1 | Includes exchanges between share classes of the fund. |
| 2 | Class M, the legacy share class, was fully liquidated on September 1, 2017. All existing shares were converted to either Class F-3 or R-6 shares. |
| 3 | Class F-2, F-3 and R-6 shares began investment operations on September 1, 2017. |
10. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $48,449,000 and $106,911,000, respectively, during the year ended October 31, 2018.
| Capital Group Emerging Markets Total Opportunities Fund | 25 |
Financial highlights
| (Loss) income from investment operations1 | ||||||||||||||||||||||||||||||||||||||||||||
| Net (losses) | ||||||||||||||||||||||||||||||||||||||||||||
| gains on | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||
| Net asset | securities | Dividends | Net asset | expenses | expenses | Ratio of | ||||||||||||||||||||||||||||||||||||||
| value, | Net | (both | Total from | (from net | value, | Net assets, | to average net | to average net | net income | |||||||||||||||||||||||||||||||||||
| beginning | investment | realized and | investment | investment | end | Total | end of period | assets before | assets after | to average | ||||||||||||||||||||||||||||||||||
| Period ended | of period | income | unrealized) | operations | income) | of period | return2 | (in millions) | reimbursements | reimbursements2 | net assets2 | |||||||||||||||||||||||||||||||||
| Class F-2: | ||||||||||||||||||||||||||||||||||||||||||||
| 10/31/2018 | $ | 11.88 | $ | .41 | $ | (1.31 | ) | $ | (.90 | ) | $ | (.54 | ) | $ | 10.44 | (8.08 | )%3 | $ | — | 4 | 1.41 | %3 | 1.08 | %3 | 3.58 | %3 | ||||||||||||||||||
| 10/31/20175,6 | 11.80 | .08 | — | 7 | .08 | — | 11.88 | .68 | 3,8 | — | 4 | .21 | 3,8 | .18 | 3,8 | .68 | 3,8 | |||||||||||||||||||||||||||
| Class F-3: | ||||||||||||||||||||||||||||||||||||||||||||
| 10/31/2018 | 11.88 | .41 | (1.30 | ) | (.89 | ) | (.54 | ) | 10.45 | (7.98 | ) | 56 | 1.15 | .98 | 3.61 | |||||||||||||||||||||||||||||
| 10/31/20175,6 | 11.80 | .08 | — | 7 | .08 | — | 11.88 | .68 | 8 | 85 | .19 | 8 | .16 | 8 | .70 | 8 | ||||||||||||||||||||||||||||
| Class R-6: | ||||||||||||||||||||||||||||||||||||||||||||
| 10/31/2018 | 11.88 | .39 | (1.28 | ) | (.89 | ) | (.54 | ) | 10.45 | (7.97 | ) | 8 | 1.10 | 1.05 | 3.32 | |||||||||||||||||||||||||||||
| 10/31/20175,6 | 11.80 | .08 | — | 7 | .08 | — | 11.88 | .68 | 8 | 59 | .20 | 8 | .16 | 8 | .70 | 8 | ||||||||||||||||||||||||||||
| Year ended October 31 | ||||||||
| 2018 | 2017 | |||||||
| Portfolio turnover rate for all share classes | 56% | 61% | ||||||
| 1 | Based on average shares outstanding. |
| 2 | This column reflects the impact, if any, of certain reimbursements from CGTC. During the periods shown, CGTC reimbursed a portion of miscellaneous fees and expenses. In addition, during one of the years shown, CGTC reimbursed a portion of the fund’s transfer agent fees. |
| 3 | All or a significant portion of assets in this class consisted of seed capital invested by CGTC and/or its affiliates. Certain fees are not charged or accrued on these seed capital assets. If such fees were paid by the fund on seed capital assets, fund expenses would have been higher and net income and total return would have been lower. |
| 4 | Amount less than $1 million. |
| 5 | Based on operations for a period that is less than a full year. |
| 6 | Class F-2, F-3 and R-6 shares began investment operations on September 1, 2017. |
| 7 | Amount less than $.01. |
| 8 | Not annualized. |
See notes to financial statements
| 26 | Capital Group Emerging Markets Total Opportunities Fund |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Capital Group Emerging Markets Total Opportunities Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Capital Group Emerging Markets Total Opportunities Fund (the “Fund”) as of October 31, 2018, and the related statement of operations and changes in net assets, including the related notes, and the financial highlights for the year ended October 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations, changes in its net assets, and the financial highlights for the year ended October 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended October 31, 2017 and the financial highlights for each of the five years in the period then ended ( not presented herein, other than the statement of changes in net assets for the year ended October 31, 2017 and the financial highlights for each of the four years in the period ended October 31, 2017) , were audited by other auditors whose report dated December 19, 2017 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
December 18, 2018
We have served as the auditor of one or more investment companies in The Capital Group Companies Investment Company Complex since 1934.
| Capital Group Emerging Markets Total Opportunities Fund | 27 |
| Expense example | unaudited |
As a fund shareholder, you incur ongoing costs, including investment advisory services fees and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period (May 1, 2018, through October 31, 2018).
Actual expenses:
The first line of each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled “Expenses paid during period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Notes:
Retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-2 and F-3 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would be lower by the amount of these fees.
Note that the expenses shown in the table on the following page are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| 28 | Capital Group Emerging Markets Total Opportunities Fund |
| Beginning account value 5/1/2018 | Ending account value 10/31/2018 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
| Class F-2 – actual return | $ | 1,000.00 | $ | 911.79 | $ | 5.64 | 1.17 | % | ||||||||
| Class F-2 – assumed 5% return | 1,000.00 | 1,019.31 | 5.96 | 1.17 | ||||||||||||
| Class F-3 – actual return | 1,000.00 | 911.87 | 4.96 | 1.03 | ||||||||||||
| Class F-3 – assumed 5% return | 1,000.00 | 1,020.01 | 5.24 | 1.03 | ||||||||||||
| Class R-6 – actual return | 1,000.00 | 911.87 | 4.77 | .99 | ||||||||||||
| Class R-6 – assumed 5% return | 1,000.00 | 1,020.21 | 5.04 | .99 | ||||||||||||
| * | The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period). |
| Tax information | unaudited |
We are required to advise you of the federal tax status of certain distributions received by shareholders during the fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended October 31, 2018:
| Foreign taxes | $0.02 per share |
| Foreign source income | $0.77 per share |
| Qualified dividend income | $915,000 |
| U.S. government income that may be exempt from state taxation | $67,000 |
Individual shareholders should refer to their Form 1099 or other tax information, which will be mailed in January 2019, to determine the calendar year amounts to be included on their 2018 tax returns. Shareholders should consult their tax advisors.
Approval of Capital Research and Management Company as investment adviser
The board approved changing the investment adviser of the Capital Group Emerging Markets Total Opportunities Fund to Capital Research and Management Company (“CRMC”). Accordingly, we anticipate that CGTC’s responsibilities as investment adviser will transition to CRMC. CRMC is an affiliate of CGTC and the individuals managing the fund will not change. Importantly, when the change in adviser is effected, there will be no changes to the investment objectives or strategies of any fund. While we anticipate the change will take place in the second or third quarter of 2019, the investment adviser reserves the right to delay implementation until operationally ready.
| Capital Group Emerging Markets Total Opportunities Fund | 29 |
Board of trustees and other officers
Independent trustees1
| Name and year of birth | Year first elected a trustee of the fund2 | Principal occupation(s) during past five years | Number of portfolios overseen by trustee3 | Other directorships held by trustee4 | |||||||||
| Joseph C. Berenato, 1946 Trustee | 2015 | Former Chairman and CEO, Ducommun Incorporated (aerospace components manufacturer) | 16 | None | |||||||||
| Vanessa C. L. Chang, 1952 Chairman of the Board (Independent and Non-Executive) | 2015 | Former director, EL & EL Investments (real estate) | 17 | Edison International; Sykes Enterprises; Transocean Ltd. | |||||||||
| James G. Ellis, 1947 Trustee | 2019 | Dean and Professor of Marketing, Marshall School of Business, University of Southern California | 91 | Mercury General Corporation; Former director of Quiksilver, Inc. | |||||||||
| Jennifer Feikin, 1968 Trustee | 2019 | Business Advisor; previously held positions at Google, AOL, 20th Century Fox and McKinsey & Company; Trustee, The Nature Conservancy of California; Former Director, First Descents | 10 | ||||||||||
| Pablo R. González Guajardo, 1967 Trustee | 2019 | CEO, Kimberly-Clark de Mexico, S.A.B. de C.V. | 17 | America Movil, S.A.B. de C.V.; Grupo Lala, S.A.B. de C.V.; Grupo Sanborns, S.A.B. de C.V.; Kimberly-Clark de Mexico, S.A.B. de C.V. | |||||||||
| Leslie Stone Heisz, 1961 Trustee | 2019 | Former Managing Director, Lazard (retired, 2010); Director, Edwards Lifesciences; Trustee, Public Storage; Director, Kaiser Permanente (California public benefit corporation); Lecturer, UCLA Anderson School of Management | 10 | Former director, Ingram Micro (technology distributor); Former director, Towers Watson (actuary/benefits consultancy); Former director HCC Insurance (P&C insurer) | |||||||||
| William D. Jones, 1955 Trustee | 2019 | Real estate developer/owner, President and CEO, CitiLink Investment Corporation (acquires, develops and manages real estate ventures in urban communities) and for the former City Scene Management Company (provides commercial asset management services) | 18 | Sempra Energy | |||||||||
Richard G. Capen, Jr., H. Frederick Christie and Richard G. Newman, founding trustees of the fund, have retired from the board. The trustees thank Ambassador Capen, Mr. Christie and Mr. Newman for their dedication and service to the fund and its shareholders.
Interested trustee5
| Name, year of birth and position with fund | Year first elected a trustee or officer of the fund2 | Principal occupation(s) during past five years and positions held with affiliated entities or the principal underwriter of the fund | Number of portfolios overseen by trustee3 | Other directorships held by trustee4 | |||||||||
| John S. Armour, 1957 President and Trustee | 2013 | President -- Private Client Services Division, Capital Bank and Trust Company6 | 10 | None | |||||||||
The fund’s statement of additional information includes further details about fund trustees and is available without charge upon request by calling your relationship manager at (800) 421-4225, ext. 90. The address for all trustees and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.
| 30 | Capital Group Emerging Markets Total Opportunities Fund |
Other officers7
| Name, year of birth and position with fund | Year first elected an officer of the fund2 | Principal occupation(s) during past five years and positions held with affiliated entities or the principal underwriter of the fund | ||
| Shaw B. Wagener, 1959 Senior Vice President | 2016 | Chairman of the Board, Capital International, Inc.;6 Partner — Capital International Investors, Capital Research and Management Company;6 Chairman of the Board, Capital Group International, Inc.;6 Director, Capital Group Private Markets, Inc.6 | ||
| Timothy W. McHale, 1978 Vice President | 2011 | Senior Vice President and Senior Counsel — Fund Business Management Group, Capital Research and Management Company;6 Secretary, American Funds Distributors, Inc.6 | ||
| Courtney R. Taylor, 1975 Secretary | 2011 | Assistant Vice President — Fund Business Management Group, Capital Research and Management Company;6 Secretary, Capital Guardian Trust Company | ||
| Gregory F. Niland, 1971 Treasurer | 2014 | Vice President — Investment Operations, Capital Research and Management Company6 | ||
| Susan K. Countess, 1966 Assistant Secretary | 2012 | Associate — Fund Business Management Group, Capital Research and Management Company6 | ||
| Brian C. Janssen, 1972 Assistant Treasurer | 2015 | Vice President — Investment Operations, Capital Research and Management Company6 |
| 1 | The term independent trustee refers to a trustee who is not an “interested person” of the fund within the meaning of the Investment Company Act of 1940. |
| 2 | Trustees and officers of the fund serve until their resignation, removal or retirement. |
| 3 | Funds managed by Capital Guardian Trust Company or its affiliates. |
| 4 | This includes all directorships (other than the fund or other funds managed by Capital Guardian Trust Company or its affiliates) that are held by each trustee as a trustee or director of a public company or a registered investment company. Unless otherwise noted, all directorships are current. |
| 5 | The term interested trustee refers to a trustee who is an “interested person” of the fund within the meaning of the Investment Company Act of 1940, on the basis of his or her affiliation with the fund’s investment adviser, Capital Guardian Trust Company, or affiliated entities (including the fund’s principal underwriter). |
| 6 | Company affiliated with Capital Guardian Trust Company. |
| 7 | All of the officers listed are officers of one or more of the other funds for which Capital Guardian Trust Company or an affiliate serves as investment adviser. |
| Capital Group Emerging Markets Total Opportunities Fund | 31 |
Board of trustees and other officers (continued)
Results of special meeting of shareholders
held November 28, 2018
Shares outstanding (all classes) on August 31, 2018 (record date):
6,250,649
Total shares voting on November 28, 2018:
2,587,890 (41.4% of shares outstanding)
The Proposal: To elect board members:
| Votes for | Percent of shares voting for | Votes withheld | Percent of shares withheld | |||||||||||||
| John S. Armour | 2,587,890 | 100.0 | % | 0 | 0.0 | % | ||||||||||
| Joseph C. Berenato | 2,587,890 | 100.0 | 0 | 0.0 | ||||||||||||
| Vanessa C. L. Chang | 2,587,890 | 100.0 | 0 | 0.0 | ||||||||||||
| James G. Ellis | 2,587,890 | 100.0 | 0 | 0.0 | ||||||||||||
| Jennifer Feikin | 2,587,890 | 100.0 | 0 | 0.0 | ||||||||||||
| Pablo R. González Guarjardo | 57,493 | 2.2 | 2,530,396 | 97.8 | ||||||||||||
| Leslie Stone Heisz | 2,587,890 | 100.0 | 0 | 0.0 | ||||||||||||
| William D. Jones | 2,587,890 | 100.0 | 0 | 0.0 | ||||||||||||
| 32 | Capital Group Emerging Markets Total Opportunities Fund |
Office of the fund and of the investment adviser
Capital Guardian Trust Company
6455 Irvine Center Drive
Irvine, CA 92618-4518
Transfer agent for shareholder accounts
American Funds Service Company
(Write to the address near you.)
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Counsel
Morgan, Lewis & Bockius LLP
One Federal Street
Boston, MA 02110-1726
Independent registered public accounting firm
PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017-3874
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectus, which can be obtained from Capital Guardian Trust Company by calling (800) 266-9532 and should be read carefully before investing. Fund shares offered through American Funds Distributors, Inc.
Capital Group Emerging Markets Total Opportunities Fund files a complete list of its portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website (www. sec.gov). Additionally, the list of portfolio holdings is available by calling your relationship manager at (800) 266-9532.
The proxy voting procedures and policies of Capital Group Emerging Markets Total Opportunities Fund — which describe how we vote proxies relating to portfolio securities — are available upon request by calling your relationship manager at (800) 266-9532. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC website or by calling your relationship manager.
ITEM 2 – Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made by calling 800/421-4225 or to the Secretary of the Registrant, 6455 Irvine Center Drive, Irvine, California 92618.
ITEM 3 – Audit Committee Financial Expert
The Registrant’s board has determined that Vanessa C. L. Chang, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such. Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 – Principal Accountant Fees and Services
| Registrant: | |
| a) Audit Fees: | |
| 2017 | N/A | ||
| 2018 | $52,000 | ||
| b) Audit-Related Fees: | |||
| 2017 | N/A | ||
| 2018 | None | ||
| c) Tax Fees: | |||
| 2017 | N/A | ||
| 2018 | None | ||
| The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns. | |||
| d) All Other Fees: | |||
| 2017 | N/A | ||
| 2018 | None | ||
| Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | |||
| a) Audit Fees: | |||
| Not Applicable | |||
| b) Audit-Related Fees: | |||
| 2017 | N/A | ||
| 2018 | None | ||
| The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Standards for Attestation Engagements Number 16 issued by the American Institute of Certified Public Accountants. | |||
| c) Tax Fees: | |||
| Not Applicable | |||
| d) All Other Fees: | |||
| Not Applicable | |||
| The other fees consist of subscription services related to an accounting research tool. | |||
| All audit and permissible non-audit services that the Registrant’s audit committee considers compatible with maintaining the independent registered public accounting firm’s independence are required to be pre-approved by the committee. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser and affiliates. | |||
| Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant, adviser and affiliates that provide ongoing services to the Registrant, were N/A for fiscal year 2017 and $0 for fiscal year 2018. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence. | |||
ITEM 5 – Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 – Schedule of Investments
Not applicable, insofar as the schedule is included as part of the report to shareholders filed under Item 1 of this Form.
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 – Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. 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. While the committee normally is able to identify from its own 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 committee of the Registrant, c/o the Registrant’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 nominating committee.
ITEM 11 – Controls and Procedures
| (a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
| (b) | Effective May 28, 2018, the Capital Group Emerging Markets Total Opportunities Fund’s investment adviser implemented a new fixed income order management, trading, and compliance system. In connection with introducing this new system, additional automated and manual controls were implemented and some existing controls were modified. None of these changes were in response to any identified deficiency or weakness in the Capital Group Emerging Markets Total Opportunities Fund’s internal control over financial reporting. |
ITEM 12 – Exhibits
| (a)(1) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
| (a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CAPITAL GROUP EMERGING MARKETS TOTAL OPPORTUNITIES FUND | |
| By /s/ John S. Armour | |
John S. Armour, President and Principal Executive Officer | |
| Date: December 31, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By /s/ John S. Armour |
John S. Armour, President and Principal Executive Officer |
| Date: December 31, 2018 |
| By /s/ Gregory F. Niland |
Gregory F. Niland, Treasurer and Principal Financial Officer |
| Date: December 31, 2018 |