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Previous: SUBURBAN BANCSHARES INC, 10-Q, 1995-05-09 |
Next: VANGUARD CELLULAR SYSTEMS INC, SC 13G/A, 1995-05-09 |
U.S. Government Securities Fund
The American Funds Income Series
Semi-Annual Report for the six months ended February 28, 1995
[The American Funds Group(R)]
U.S. GOVERNMENT SECURITIES FUND(SM) seeks high income, consistent with prudent
risk and preservation of capital, by investing primarily in securities for
which the timely payment of principal and interest is guaranteed by the U.S.
government.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns for periods ended March 31, 1995 (the most recent calendar quarter) on
an investment at the 4.75% maximum sales charge with all distributions
reinvested - Since inception on 10/17/85: +99.61%, or +7.59% a year; 5 years:
+40.52%, or +7.04% a year; 12 months: -1.79%. Sales charges are lower for
accounts of $25,000 or more. The fund's 30-day yield as of March 31, 1995,
calculated in accordance with the Securities and Exchange Commission formula,
was 6.54%. The fund's distribution rate as of that date was 7.49%. The SEC
yield reflects income earned by the fund, while the distribution rate reflects
dividends actually paid by the fund.
During the 12 months through March 31 (the most recent calendar quarter), the
fund ranked 92nd out of 151 general U.S. government funds (the top 61%),
according to Lipper Analytical Services; over the past five years, it ranked
31st out of 80 funds, or the top 39%; and over its lifetime, 10th out of 27
funds, or the top 38%. Lipper rankings do not reflect the effects of sales
charges.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY HAVE A GAIN OR LOSS OF PRINCIPAL WHEN YOU SELL YOUR SHARES.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY,
THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. All investments are subject
to certain risks. For example, those which include bonds are affected by
interest rate fluctuations. Investors should note that prepayments on
mortgage-backed securities can result in an accelerated return of principal
which could impact investment results. Accordingly, investors should maintain a
long-term perspective.
FELLOW SHAREHOLDERS:
The bond market remained quite volatile during the six months ended February
28, but U.S. Government Securities Fund produced a steady stream of income.
Dividend distributions totaling 51 cents a share represented an income return
of 3.9% if you reinvested those dividends, or 7.9% on an annualized basis.
The value of your investment gained 2.4% during the past six months, with
dividends reinvested. By comparison, the unmanaged Lehman Brothers
Government/Mortgage-Backed Securities Index rose 3.2%. If you took your
dividends in cash, your income return was 3.9%, while your investment lost 1.6%
of its value.
ASSESSING THE PAST SIX MONTHS
From September 1 through late 1994, bond prices continued a year-long decline,
mostly in response to the acceleration of economic growth and efforts by the
Federal Reserve to forestall a rise in inflation. Later in the period, prices
moved higher on the expectation that the Fed's campaign was succeeding and that
its most recent increases in short-term rates, on November 15 and February 1,
would be the last for the near future. As a result, the yield on the 30-year
Treasury bond declined from a high of 8.16% in November to a low of 7.44% in
February, while market values rallied accordingly.
A year ago we began to shorten the maturities of the fund's securities to
soften the impact of rising rates. We continued to shorten maturities through
the latest reporting period. Twelve months ago, the average life of the
portfolio was 9.1 years. Last August 31, it was 6.9 years. By February 28, it
was 5.8 years. Consistent with our longer term approach to investing, we
remained cautious during the most recent rally in bond prices, looking beyond
what we believed could well be a short-term trend in the market.
While there are indications that the economy is slowing down, we expect it to
continue to grow for the rest of the calendar year at a rate that is not
excessive, but which may be sufficient to make higher inflation a possibility.
Accordingly, there is a good chance that the Fed will boost short-term rates
further during the next six months, and that long-term interest rates will move
back toward their recent highs.
[Pullquote]
"We remained cautious during the most recent rally in bond prices, looking
beyond what we believed could well be a short-term trend in the market."
[End Pullquote]
SOUND REASONS TO INVEST
Even with our cautious short-term outlook, we believe that U.S. Government
Securities Fund remains on solid ground. The fund is designed to pursue a
handsome income stream. Moreover, its ability to diversify across the spectrum
of government securities, from U.S. Treasury issues to mortgage-backed and
other government-guaranteed obligations, as well as cash equivalents, gives us
some flexibility to respond to diverse market opportunities.
Another point worth keeping in mind is that during declining markets
reinvesting your dividends enables you to buy more shares at a lower price,
which can enhance your prospects for longer term growth. The fund's long-term
record has demonstrated this to be an effective strategy. Over the fund's 9-1/2
year lifetime, its annual compound return has averaged 8.2%.
How do the results of U.S. Government Securities Fund compare with those of
similar funds? During the 12 months through February 28, the fund's
conservative investment posture held back its results, ranking it 102nd out of
149 general U.S. government funds, according to Lipper Analytical Services. Yet
over its five-year and lifetime periods, our fund ranked higher than 60% of
similar funds.
We will keep a close watch on further changes in inflationary trends, movements
in currency and all other developments regarding interest rates and U.S.
economic growth. In addition, we will continue to employ a long-term approach
to managing the fund, and look forward to reporting to you again in six months.
Cordially,
Paul G. Haaga, Jr.
Chairman of the Board
Abner D. Goldstine
President
April 13, 1995
The Fund's Investment Portfolio
February 28, 1995
U.S. Treasuries - 60%
GNMAs and Other Mortgage-Backed Securities - 26%
Other Federal Obligations - 6%
Development Authorities - 2%
Cash Equivalents - 6%
The American Funds Income Series
U.S. Government Securities Fund
<TABLE>
<CAPTION>
Investment Portfolio February 28, 1995 Unaudited
Principal Market Percent
Amount Value of Net
(000) (000) Assets
<S> <C> <C> <C>
FEDERAL AGENCY OBLIGATIONS -
MORTGAGE PASS-THROUGHS /1/ - 21.46%
Federal Home Loan Mortgage Corporation:
8.25% 2007 $1,049 $1,048 .08%
8.50% 2020-2021 11,690 11,851 .90
8.75% 2008 956 971 .07
9.00% 2010-2021 5,347 5,503 .42
10.50% 2006-2016 1,413 1,505 .11
10.75% 2009-2010 528 564 .04
11.00% 2011-2016 1,116 1,196 .09
11.50% 2011-2015 678 731 .06
11.75% 2011-2015 782 841 .06
12.00% 2000-2016 8,321 9,032 .69
12.25% 2011-2015 812 881 .07
12.50% 2009-2019 9,951 11,229 .85
13.00% 2010-2014 1,436 1,635 .12
13.50% 2010-2015 408 468 .04
13.75% 2014 61 69 .01
14.00% 2011-2014 288 329 .02
14.50% 2010-2011 44 51 .00
14.75% 2010 88 101 .01
15.00% 2011 79 91 .01
15.50% 2011 90 103 .01
16.00% 2012 66 77 .01
16.25% 2011 129 149 .01
Federal National Mortgage Association:
7.00% 2023 4,476 4,224 .32
8.00% 2005-2023 6,375 6,335 .48
8.50% 2007-2023 15,813 16,021 1.23
9.00% 2011-2025 6,743 6,949 .53
9.50% 2011 1,054 1,103 .08
11.00% 1999-2015 2,702 2,932 .22
12.00% 2000-2019 3,064 3,357 .25
12.25% 2013-2014 386 423 .03
12.50% 2001-2015 1,827 2,010 .15
12.75% 2012 107 118 .01
13.25% 2011-2014 1,207 1,365 .10
14.00% 2013 161 185 .01
14.50% 2014 16 19 .00
15.00% 2013 20 23 .00
15.50% 2012 51 60 .00
16.00% 2012 33 39 .00
Government National Mortgage Association:
4.50% 2024 /2/ 29,119 27,366 2.08
5.00% 2024 /2/ 4,858 4,683 .36
5.50% 2023 /2/ 4,282 4,022 .31
7.00% 2023-2024 27,091 25,372 1.93
7.50% 2010-2025 37,439 36,270 2.76
8.00% 2023 1,641 1,631 .12
8.50% 2020-2023 7,029 7,166 .54
9.00% 2011-2022 18,519 19,169 1.46
9.50% 2016-2020 12,013 12,587 .96
9.75% 1999-2012 3,659 3,806 .29
10.00% 2016-2019 4,184 4,506 .34
10.25% 2012 391 414 .03
10.50% 2015-2019 5,067 5,517 .42
11.00% 2009-2020 8,687 9,544 .72
11.25% 2001-2016 4,812 5,151 .39
11.50% 2000-2014 2,315 2,547 .19
11.75% 2000-2015 606 650 .05
12.00% 1999-2019 4,960 5,445 .41
12.25% 2013-2015 655 720 .05
12.50% 2010-2015 3,479 3,904 .30
12.75% 2013-2015 734 809 .06
13.00% 2011-2015 2,860 3,231 .25
13.25% 2013-2015 451 496 .04
13.50% 2010-2015 1,588 1,817 .14
14.00% 2011-2014 378 433 .03
14.50% 2011-2014 539 627 .05
15.00% 2011-2013 868 1,012 .09
16.00% 2011-2012 48 56 .00
----------- --------
282,539 21.46
----------- --------
FEDERAL AGENCY OBLIGATIONS - OTHER - 4.69%
FNSM Callable Principal STRIPS:
0%/7.94% 2001 /3/ 5,000 4,353 .33
0%/8.25% 2022 /3/ 2,000 1,398 .11
0%/8.62% 2022 /3/ 4,500 3,386 .26
Federal Home Loan Bank Bonds 6.00% 1996 10,000 9,945 .76
Federal Home Loan Bank Notes 6.41% 2003 3,000 2,701 .21
Federal Home Loan Mortgage Notes 6.19% 2004 5,000 4,470 .34
Federal Home Loan Mortgage Notes 6.27% 2004 7,000 6,252 .47
Federal Home Loan Mortgage Notes 6.59% 2003 5,000 4,528 .34
Federal Home Loan Mortgage Notes 6.60% 2003 4,000 3,690 .28
Federal National Mortgage Association Notes 6.30%
1997 10,000 9,734 .74
Federal National Mortgage Association Notes 6.40%
2004 1,500 1,363 .10
Student Loan Marketing Association 6.88% 1996 10,000 9,950 .75
---------- --------
61,770 4.69
---------- --------
U. S. GUARANTEED OBLIGATIONS - OTHER - 1.02%
Big Rivers Electrical Corporation 10.70% 2017 12,000 13,372 1.02
---------- --------
COLLATERALIZED MORTGAGE OBLIGATIONS/1/ - 4.74%
Federal Home Loan Mortgage Corporation:
Series 1625, Class SC, 6.100623% 2008 /4/ 10,580 5,502 .42
Series 1625, Class SG, 6.100574% 2008 /4/ 2,178 1,274 .10
Series 1659, Class SA, 6.900161% 2009 /4/ 2,500 1,347 .10
Series 1673, Class SA, 6.077664% 2024 /4/ 2,000 713 .05
Series 1716, Class A, 6.50% 2009 10,586 9,501 .72
Series 83-A, Class 3, 11.875% 2013 331 348 .03
Series 83-B, Class 3, 12.50% 2013 3,050 3,268 .25
Federal National Mortgage Association:
Trust 35, Class 2, 12.00% 2018 916 1,051 .08
Trust 90-93, Class G, 5.50% 2020 3,600 2,968 .23
Trust 91-50, Class H, Planned Amotization
Class, 7.75% 2006 4,000 3,976 .30
Trust 91-65, Class X, 6.50% 2019 25,200 21,460 1.63
Trust 91-146, Class Z, 8.00% 2006 5,870 5,727 .44
Trust G93-19, Class SJ, 1.76470% 2023 /4/ 436 142 .01
Trust 93-43, Class SA, 10.293563% 2008 /4/ 620 457 .03
Trust 93-120, Class SB, 9.589174% 2023 /4/ 4,000 2,030 .15
Trust 93-120, Class SN, 9.544258% 2023 /4/ 3,233 1,552 .12
Trust 93-229, Class SB, 6.114529% 2008 /4/ 2,500 1,106 .08
----------- ---------
62,422 4.74
----------- ---------
DEVELOPMENT AUTHORITIES - 1.83%
International Bank for Reconstruction and
Development:
14.90% May 1997 5,000 5,773 .44
12.25% December 2008 2,000 2,706 .21
8.875% June 2009 14,000 15,565 1.18
----------- ---------
24,044 1.83
----------- ---------
U. S. TREASURY OBLIGATIONS - 47.73%
9.375% April 1996 83,000 85,490 6.50
8.00% January 1997 71,000 72,553 5.51
8.50% April 1997 45,000 46,505 3.53
8.75% October 1997 9,000 9,401 .71
6.00% November 1997 3,000 2,934 .22
8.125% February 1998 17,500 18,063 1.37
9.00% May 1998 31,000 32,802 2.49
9.25% August 1998 26,500 28,326 2.15
7.00% April 1999 8,500 8,500 .65
9.125% May 1999 11,000 11,832 .90
8.50% November 2000 12,000 12,782 .97
8.00% May 2001 5,500 5,742 .44
13.125% May 2001 39,000 50,682 3.85
13.375% August 2001 24,500 32,355 2.46
15.75% November 2001 5,500 7,996 .61
14.25% February 2002 39,000 54,009 4.10
11.625% November 2002 40,000 50,256 3.82
10.375% November 2009 13,000 15,649 1.19
11.75% February 2010 8,000 10,438 .79
12.75% November 2010 10,000 13,903 1.06
12.00% August 2013 15,000 20,634 1.57
8.875% August 2017 33,000 37,496 2.84
----------- ---------
628,348 47.73
----------- ---------
Total Bonds and Notes (cost:$1,111,451,000) 1,072,495 81.47
----------- ---------
SHORT-TERM SECURITIES
Commercial Paper - 4.19%
Associates Corp. of North America 6.10% due 3/1/95 13,000 12,998 .99
Dow Chemical 6.07% due 3/1/95 14,600 14,598 1.11
Ford Motor Credit Co. 6.04% due 4/24/95 1,300 1,288 .10
National Rural Utilities Cooperative 3,400 3,387 .26
Finance Corp. 5.98% due 3/23/95
PepsiCo Inc. 5.97% due 3/20/95 13,000 12,957 .98
PepsiCo Inc. 5.98% due 3/21/95 10,000 9,965 .75
----------- ---------
55,193 4.19
----------- ---------
U.S. Treasury Short-Term Securities - 12.42%
12.625% due 5/15/95 12,000 12,157 .92
11.50% due 11/15/95 82,500 85,362 6.48
7.875% due 2/15/96 40,000 40,506 3.08
8.875% due 2/15/96 25,000 25,547 1.94
----------- ---------
163,572 12.42
----------- ---------
Total Short-Term Securities (cost:$218,765,000) 218,765 16.61
----------- ---------
Total Investment Securities (cost:$1,330,216,000) 1,291,260 98.08
Excess of cash and receivables over payable 25,237 1.92
----------- ---------
Net Assets $1,316,497 100.00
=========== =========
/1/ Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore the
effective maturity of these securities is
shorter than the stated maturity.
/2/ Coupon rate changes periodically.
/3/ Represents zero coupon bond which will
convert to a coupon-bearing security at a later
date.
/4/ Represents an inverse floater, which is a
floating rate note whose interest rate moves in
the opposite direction of prevailing interest
rates.
</TABLE>
See Notes to Financial Statements
U.S. Government Securities Fund
<TABLE>
<CAPTION>
Financial Statements Unaudited
- ---------------------------------------- ------------ ------------
<S> <C> <C>
Statement of Assets and Liabilities
at February 28, 1995 (dollars in thousands)
- ---------------------------------------- ------------ ------------
Assets:
Investment securities at market
(COST: $1,330,216) $1,291,260
Cash 1,013
Receivables for-
Sales of investments $ 19,299
Sales of fund's shares 2,746
Accrued interest 20,015 42,060
------------ ------------
1,334,333
Liabilities:
Payables for-
Purchases of investments 12,024
Repurchases of fund's shares 1,617
Dividends payable 3,053
Management services 453
Accrued expenses 689 17,836
------------ ------------
Net Assets at February 28, 1995-
EQUIVALENT TO $12.97 PER SHARE ON
101,527,636 SHARES OF BENEFICIAL
INTEREST ISSUED AND OUTSTANDING;
UNLIMITED SHARES AUTHORIZED $1,316,497
=============
Statement of Operations Unaudited
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1995 (dollars in thousands)
------------ ------------
Investment Income:
Income:
Interest $ 56,871
Expenses:
Management services fee 2,774
Distribution expenses 1,677
Transfer agent fee 472
Reports to shareholders 91
Registration statement and prospectus 33
Postage, stationery and supplies 47
Trustees' fees 8
Auditing and legal fees 17
Custodian fee 18
Taxes other than federal income tax 14 5,151
------------ ------------
Net investment income 51,720
------------
REALIZED LOSS AND UNREALIZED
DEPRECIATION ON INVESTMENTS:
NET REALIZED LOSS (18,569)
Net unrealized
depreciation on investments:
Beginning of period (35,444)
End of period (38,956)
------------
Net unrealized depreciation on
investments (3,512)
------------
NET REALIZED LOSS AND UNREALIZED
depreciation on investments (22,081)
------------
NET INCREASE IN NET ASSETS RESULTING
from Operations $29,639
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- ------------- -------------
Six months Year ended
ended
2/28/95* 8/31/94
Operations: ------------- -------------
Net investment income $ 51,720 $ 109,861
NET REALIZED LOSS ON INVESTMENTS (18,569) (8,805)
NET UNREALIZED DEPRECIATION
on investments (3,512) (159,327)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
resulting from operations 29,639 (58,271)
------------- -------------
Dividends Paid to Shareholders (51,983) (109,394)
------------- -------------
Capital Share Transactions:
Proceeds from shares sold:
10,271,901 AND 25,313,467
shares, respectively 131,353 354,749
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
2,836,366 and 5,638,860 shares,
respectively 36,280 76,780
Cost of shares repurchased:
15,713,701 and 34,055,830
shares, respectively (201,436) (472,436)
------------- -------------
NET (DECREASE) INCREASE IN NET ASSETS
resulting from capital share transactions (33,803) (40,907)
------------- -------------
TOTAL (DECREASE) INCREASE IN NET ASSETS (56,147) (208,572)
Net Assets:
Beginning of period 1,372,644 1,581,216
------------- -------------
End of period (including undistributed
net investment income of $2,343 and
$2,605, RESPECTIVELY) $1,316,497 $1,372,644
============= =============
*Unaudited
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. The American Funds Income Series (the "trust") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company and has initially issued one series of shares, U.S.
Government Securities Fund (the "fund"). The following paragraphs summarize
the significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, when such prices are available; however,
in circumstances where the investment adviser deems it appropriate to do so,
such securities will be valued at the mean of their representative quoted bid
and asked prices or, if such prices are not available, at the mean of such
prices for securities of comparable maturity, quality and type. Short-term
securities with original or remaining maturities in excess of 60 days are
valued at the mean of their quoted bid and asked prices. Short-term securities
with 60 days or less to maturity are valued at amortized cost, which
approximates market value. The maturities of variable or floating rate
instruments are deemed to be the time remaining until the next interest rate
adjustment date. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by the Valuation
Committee of the Board of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Discounts on
securities purchased are amortized over the life of the respective securities.
The fund does not amortize premiums on securities purchased. Dividends are
declared on a daily basis after the determination of the fund's net asset value
and are paid to shareholders on a monthly basis.
Pursuant to the custodian agreement, the fund receives credit against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $18,000
includes $12,000 that was paid with credits rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments not offset by loss carryforwards, to its shareholders. Therefore,
no federal income tax provision is required.
As of February 28, 1995, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $38,956,000, of which $10,208,000
related to appreciated securities and $49,164,000 related to depreciated
securities. During the six months ended February 28, 1995, the fund realized,
on a tax basis, a net capital loss of $18,569,000 on securities transactions.
The fund has available at February 28, 1995 a net capital loss carryforward
totaling $40,507,000 which may be used to offset capital gains realized during
subsequent years through 2001 and thereby relieve the fund and its shareholders
of any federal income tax liability with respect to the capital gains that are
so offset. It is the intention of the fund not to make distributions from
capital gains while there is a capital loss carryforward. The cost of
portfolio securities for book and federal income tax purposes was
$1,330,216,000 at February 28, 1995.
3. The fee of $2,774,0000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the trust are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.30% of the first $60 million of average net assets;
0.21% of such assets in excess of $60 million but not exceeding $1 billion;
0.18% of such assets in excess of $1 billion but not exceeding $3 billion; and
0.16% of such assets in excess of $3 billion ("asset-based fee"); plus 3.00% on
the first $3,333,333 of the fund's monthly gross investment income; 2.25% of
the next $5,000,000 of such income; and 2.00% of such income in excess of
$8,333,333 ("income-based fee").
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the trust's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the six months ended February 28,
1995, distribution expenses under the Plan were $1,677,000. As of February 28,
1995, accrued and unpaid distribution expenses were $668,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $472,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $1,343,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Trustees who are unaffiliated with CRMC may elect to defer part or all of the
fees earned for services as members of the board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of February 28,
1995, aggregate amounts deferred were $10,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain of the Trustees and officers of the
trust are or may be considered to be affiliated with CRMC, AFS and AFD. No
such persons received any remuneration directly from the fund.
4. As of February 28, 1995, accumulated undistributed net realized loss on
investments was $70,524,000 and paid-in capital was $1,322,106,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $315,278,000 and $348,223,000, respectively, during
the six months ended February 28, 1995.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year Ended August 31
Six months -------- -------- -------- --------
ended
February 28, 1994 1993 1992 1991 1990
1995/1/
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................... $13.18 $14.73 $14.13 $13.57 $13.25 $13.48
------------ -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income...... .51 1.03 1.07 1.18 1.22 1.31
Net realized and unrealized
(loss) gain on investments (0.21) (1.56) .61 .53 .37 (.26)
Total income from ------------ -------- -------- -------- -------- --------
investment operations........... 0.30 (0.53) 1.68 1.71 1.59 1.05
------------ -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment
income...................... (.51) (1.02) (1.08) (1.15) (1.27) (1.28)
------------ -------- -------- -------- -------- --------
Net Asset Value, End of Period.. $12.97 $13.18 $14.73 $14.13 $13.57 $13.25
============ ======== ======== ======== ======== ==========
Total Return/2/................ 2.40%/3/ (3.72%) 12.44% 13.05% 12.34% 8.11%
Ratios/Supplemental Data:
Net assets, end of period (in
millions)................... $1,316 $1,373 $1,581 $1,328 $1,018 $619
Ratio of expenses to average
net assets.................. .39%/3/ .78% .83% .88% .95% .87%
Ratio of net income to
average net assets.......... 3.94%/3/ 7.35% 7.54% 8.63% 9.07% 9.73%
Portfolio turnover rate...... 25.5%/3/ 71.6 % 35.2 % 44.8 % 53.4 % 50.0 %
</TABLE>
/1/ Unaudited
/2/ This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price
/3/ Based on operations for the period shown and, accordingly, not
representative of a full year's operations
THE AMERICAN FUNDS INCOME SERIES
U.S. GOVERNMENT SECURITIES FUND
BOARD OF TRUSTEES
H. FREDERICK CHRISTIE
Palos Verdes Estates, California
Private investor; former President and
Chief Executive Officer, The Mission Group;
former President, Southern California
Edison Company
DIANE C. CREEL
Long Beach, California
Chairwoman, Chief Executive Officer and President,
The Earth Technology Corporation
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board,
Senior Resource Group, Inc.
(senior living centers management)
LEONARD R. FULLER
Los Angeles, California
President, Fuller & Company, Inc.
(financial management consulting firm)
ABNER D. GOLDSTINE
Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the fund
Senior Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III
Pasadena, California
Private investor
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board, President and
Chief Executive Officer, AECOM Technology Corporation
(architectural engineering)
PETER C. VALLI
Long Beach, California
Chairman and Chief Executive Officer,
BW/IP International, Inc.
(industrial manufacturing)
LEONARD WEIL retired from the Board effective December 31, 1994. He has been a
member of the Board of Trustees since 1987. The Trustees thank him for his many
contributions to the fund.
DIANE CREEL AND LEONARD FULLER were elected Trustees effective September 22,
1994.
OTHER OFFICERS
MARY C. CREMIN
Los Angeles, California
Vice President and Treasurer of the fund
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
JOHN H. SMET
Los Angeles, California
Vice President of the fund
Vice President, Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the fund
Compliance Associate - Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, JR.
Los Angeles, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR CALL THE FUND'S
TRANSFER AGENT, TOLL-FREE, AT 800/421-0180.
This report is for the information of shareholders of U.S. Government
Securities Fund, but it may also 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 June 30, 1995, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA AGD/AL
Lit. No. GVT-013-0495
Printed on recycled paper
[The American Funds Group(R)]
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