THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC OFFERING
AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH
TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.
/s/ Julie F. Williams
Julie F. Williams
Secretary
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government
Securities Fund(SM)
Prospectus
NOVEMBER 1, 1998
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
333 South Hope Street
Los Angeles, California 90071
TICKER SYMBOL: AMUSX NEWSPAPER ABBREV.: Govt FUND NO.: 22
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary 4
...............................................
Fees and Expenses of the Fund 7
...............................................
Investment Objective, Strategies and Risks 8
...............................................
Important Recent Developments 10
...............................................
Management and Organization 10
...............................................
Shareholder Information 12
...............................................
Purchase and Exchange of Shares 13
...............................................
Distribution Arrangements 16
...............................................
Financial Highlights 18
- -----------------------------------------------
</TABLE>
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
The fund seeks to provide you with a high level of current income as well as
preserve your investment, by investing primarily in securities that are guaran-
teed by the United States Government.
The fund is designed for investors seeking income and more price stability than
stocks and lower quality fixed income securities, and capital preservation over
the long term. An investment in the fund is subject to risks, including the
possibility that its share price and total return may decline in response to
certain events such as a rise in interest rates or changes in the market or
general economy. It is important to note that neither the fund nor its yield
are guaranteed by the U.S. Government. Accordingly, you may lose money by in-
vesting in the fund. The likelihood of loss is greater if you invest for a
shorter period of time.
Your investment in the fund is not a bank deposit and is not insured or guaran-
teed by the Federal Deposit Insurance Corporation or any other government agen-
cy, entity or person.
4 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
The following information illustrates how the fund's results may vary:
[CHART OF THE FUND'S RESULTS CALCULATED WITHOUT A SALES CHARGE ON A CALENDAR
YEAR BASIS]
Here are the fund's results calculated without a sales charge on a calendar
year basis. (If a sales charge were included, results would be lower.)
<TABLE>
<CAPTION>
CALENDAR YEAR FUND'S RESULTS
------------- --------------
<S> <C>
9/30/88 6.92%
9/30/89 11.71%
9/30/90 9.80%
9/30/91 14.16%
9/30/92 7.59%
9/30/93 10.45%
9/30/94 -4.65%
9/30/95 15.46%
9/30/96 2.82%
9/30/97 8.39%
</TABLE>
The fund's year-to-date return for the nine months ended September 30, 1998
was 7.74%.
The fund's highest/lowest quarterly results during this time period were:
X HIGHEST 5.77% (quarter ended June 30, 1989)
X LOWEST -3.91% (quarter ended March 31, 1994)
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For periods ended December 31, 1997:
<TABLE>
<CAPTION>
AVERAGE THE FUND WITH
ANNUAL MAXIMUM
TOTAL SALES CHARGE LEHMAN
RETURN DEDUCTED/1/ INDEX/2/ CPI/3/
- ------------------------------------------------------
<S> <C> <C> <C>
One Year 3.24% 9.54% 1.70%
.......................................................
Five Years 5.23% 7.29% 2.60%
.......................................................
Ten Years 7.59% 9.02% 3.41%
.......................................................
Lifetime/4/ 7.69% 9.29% 3.29%
</TABLE>
Yield/1/: 5.48%
(For current yield information, please call American FundsLine(R) at 1-800-325-
3590)
/1/ These fund results were calculated according to a formula which requires
that the maximum sales charge be deducted. Results would be higher if they
were calculated at net asset value.
/2/ The Lehman Brothers Government/Mortgage-Backed Securities Index represents
a market-weighted index that includes U.S. Treasuries and agencies, as well
as FNMAs, FHLMCs, and GNMAs. This index is unmanaged and does not reflect
sales charges, commissions or expenses.
/3/ The Consumer Price Index is a measure of inflation and is computed from
data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.
/4/ The fund began investment operations on October 17, 1985.
These results are meant to illustrate the potential fluctuations in the fund's
results over shorter periods of time. Past results are not an indication of fu-
ture results.
6 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
The following describes the fees and expenses that you may pay if
you buy and hold shares of the fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
- -------------------------------------------------------------------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.75%/1/
...................................................................
Maximum sales charge imposed on reinvested dividends 0%
...................................................................
Maximum deferred sales charge 0%/2/
...................................................................
Redemption or exchange fees 0%
...................................................................
/1/ Sales charges are reduced or eliminated for larger purchases.
/2/ A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following any purchases you made without a sales charge.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the fund assets)
- -------------------------------------------------------------------
Management Fees 0.40%
...................................................................
Service (12b-1) Fees 0.29%*
...................................................................
Other Expenses 0.10%
...................................................................
Total Annual Fund Operating Expenses 0.79%
...................................................................
*12b-1 expenses may not exceed 0.30% of the fund's average net assets annually.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
- -------------------------------------------------------------------
One year $ 552
...................................................................
Three years $ 715
...................................................................
Five years $ 893
...................................................................
Ten years $1,406
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is to provide a high level of current income
consistent with prudent investment risk and preservation of capital. It invests
primarily in securities that are guaranteed by the "full faith and credit"
pledge of the U.S. Government. The fund may also invest in securities issued by
U.S. governmental agencies or instrumentalities that are not guaranteed by the
U.S. Government. In addition, the fund may invest a substantial portion of its
assets in securities backed by pools of mortgages.
The value of certain debt securities held by the fund may be affected by chang-
ing interest rates and prepayment risks. For example, as with other debt secu-
rities, the value of U.S. Government securities generally will decline when in-
terest rates rise and vice versa. A security backed by the U.S. Treasury or the
full faith and credit of the United States is guaranteed only as to the timely
payment of interest and principal when held to maturity. Accordingly, the cur-
rent market prices for such securities are not guaranteed and will fluctuate.
In addition, many types of debt securities, including mortgage-related securi-
ties, are subject to prepayment risk. For example, when interest rates fall,
homeowners are more likely to refinance their mortgages and "prepay" their
principal earlier than expected. The fund must then reinvest the unanticipated
principal in new securities when interest rates on new mortgage investments are
falling, thus reducing the income of the fund. The fund may also invest in
cash, cash equivalents, or short-term debt securities. The extent of the fund's
cash position will be dependent on market conditions, fund purchases and re-
demptions, and other factors. For example, under certain circumstances, in re-
sponse to abnormal market conditions, the fund may be invested substantially in
cash or cash equivalents. This will detract from the achievement of the fund's
objective over the short term, and it may protect the fund during a market
downturn.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities which represent good long-term in-
vestment opportunities.
8 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INVESTMENT RESULTS
The following additional investment results are for periods ended December 31,
1997:
<TABLE>
<CAPTION>
THE FUND
AVERAGE ANNUAL WITH NO LIPPER U.S. LIPPER U.S.
TOTAL RETURN SALES CHARGE/1/ GVT AVERAGE/2/ GNMA AVERAGE/3/
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 8.39% 8.88% 8.79%
...................................................................................
Five Years 6.26% 6.35% 6.51%
...................................................................................
Ten Years 8.12% 7.99% 8.44%
...................................................................................
Lifetime/4/ 8.12% 7.77% 8.40%
</TABLE>
/1/ These fund results were calculated according to a formula that is required
for all stock and bond funds.
/2/ The Lipper General U.S. Government Funds average represents funds that
invest at least 65% of their assets in U.S. Government and agencies issues.
/3/ The Lipper GNMA Funds average represents funds that invest at least 65% of
their assets in Government National Mortgage Association securities.
/4/ The fund began investment operations on October 17, 1985.
The following chart illustrates the portfolio composition of the fund as of the
end of its fiscal year, August 31, 1998.
U.S. TREASURIES 52%
................................................
AGENCY MORTGAGE-BACKED SECURITIES 41%
................................................ [GRAPH APPEARS HERE]
CASH & EQUIVALENTS 6%
................................................
AGENCY DEBENTURES 1%
................................................
Because the fund is actively managed, its holdings will change from time to
time.
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IMPORTANT RECENT DEVELOPMENTS
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its share-
holders. However, the fund understands that its key service providers -- in-
cluding the investment adviser and its affiliates -- are taking steps to ad-
dress the issue. In addition, the Year 2000 problem may adversely affect the
issuers in which the fund invests. For example, issuers may incur substantial
costs to address the problem. They may also suffer losses caused by corporate
and governmental data processing errors. The fund and its investment adviser
will continue to monitor developments relating to this issue.
- --------------------------------------------------------------------------------
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the fund. The total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is indicated earlier under
"Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company Insti-
tute's Advisory Group on Personal Investing. This policy has also been incor-
porated into the fund's code of ethics.
10 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
fund is divided into segments which are managed by individual counselors. Coun-
selors decide how their respective segments will be invested (within the limits
provided by a fund's objective(s) and policies and by Capital Research and Man-
agement Company's investment committee). In addition, Capital Research and Man-
agement Company's research professionals may make investment decisions with re-
spect to a portion of a fund's portfolio. The primary individual portfolio
counselors for the U.S. Government Securities Fund are listed below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
APPROXIMATE
YEARS OF EXPERIENCE AS AN
INVESTMENT PROFESSIONAL
(INCLUDING THE LAST FIVE YEARS)
...............................
YEARS OF EXPERIENCE AS WITH CAPITAL
PORTFOLIO COUNSELOR FOR RESEARCH AND
PORTFOLIO COUNSELORS U.S. GOVERNMENT MANAGEMENT
FOR U.S. GOVERNMENT SECURITIES FUND COMPANY OR
SECURITIES FUND PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES TOTAL YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOHN H. Executive Vice 12 years 15 years 16 years
SMET President
of the fund. Vice
President, Capital
Research and
Management Company
- ---------------------------------------------------------------------------------------------------
THOMAS H. Vice President -- 2 years 9 years 12 years
HOGH Investment
Management Group,
Capital Research
and Management
Company
- ---------------------------------------------------------------------------------------------------
JOHN W. Vice President -- 8 years 10 years 10 years
RESSNER Investment
Management Group,
Capital Research
and Management
Company
- ---------------------------------------------------------------------------------------------------
The fund began operations on October 17, 1985.
- ---------------------------------------------------------------------------------------------------
</TABLE>
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days written notice. For your convenience, American Funds Service Com-
pany has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
[map of the United States]
<TABLE>
<S> <C> <C> <C>
WESTERN SERVICE WESTERN CENTRAL EAST CENTRAL EASTERN SERVICE
CENTER SERVICE CENTER SERVICE CENTER CENTER
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Indianapolis, Norfolk, Virginia
92822-2205 Texas Indiana 23501-2280
Fax: 714/671-7080 78265-9522 46206-6007 Fax: 757/670-4773
Fax: 210/474-4050 Fax: 317/735-6620
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS DESCRIBED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to own-
ing a fund in The American Funds Group titled "Welcome to the Family" is sent
to new shareholders and is available by writing or calling American Funds Serv-
ice Company.
You may invest in the fund through various retirement plans. However, some re-
tirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan administrator/
trustee or dealer.
12 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer autho-
rized to sell the fund's shares. You may purchase additional shares using vari-
ous options described in the statement of additional information and "Welcome
to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group gen-
erally without a sales charge. Exchanges of shares from the money market funds
initially purchased without a sales charge generally will be subject to the ap-
propriate sales charge. Exchanges have the same tax consequences as ordinary
sales and purchases. See "Transactions by Telephone..." for information regard-
ing electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER, RE-
SERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE IS
CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A PERIOD
OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT
ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY INVESTOR
WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES ACTUAL OR PO-
TENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
<TABLE>
- --------------------------------------------------------------------
<S> <C>
To establish an account $1,000
For a retirement plan account $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
</TABLE>
SHARE PRICE
The fund determines its share price, also called net asset value, as of 4:00
p.m. New York time, which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value, market
prices are used when available. If a market price for a particular security is
not available, the fund will determine the appropriate price for the security.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and accepts
your request. The offering price is the net asset value plus a sales charge, if
applicable.
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced for
larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
...............................
NET DEALER CONCESSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.00%
.....................................................................................
$25,000 but less than $50,000 4.50% 4.71% 3.75%
.....................................................................................
$50,000 but less than $100,000 4.00% 4.17% 3.25%
.....................................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
.....................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
.....................................................................................
$500,000 but less than $1 million 2.00% 2.04% 1.60%
.....................................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF
PURCHASE. A dealer concession of up to 1% may be paid by the fund under its
Plan of Distribution and/or by American Funds Distributors on investments made
with no initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. You must let your investment dealer or American Funds Service Company
know if you qualify for a reduction in your sales charge using one or any
combination of the methods described in the statement of additional information
or "Welcome to the Family."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of ex-
penses are approved in advance by the fund's board of trustees. Up to 0.25% of
average net assets is paid annually to qualified dealers for providing certain
services pursuant to the fund's Plan of Distribution. The 12b-1 fee paid by the
fund, as a percentage of average net assets, for the previous fiscal year is
indicated earlier
14 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
under "Fees and Expenses of the Fund." Since these fees are paid out of the
fund's assets on an ongoing basis, over time they will increase the cost of an
investment and may cost you more than paying higher initial sales charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to or spon-
sor informational meetings for dealers as described in the statement of addi-
tional information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
. Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
. Requests must be signed by the registered shareholder(s).
. A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address
of record which has been changed within the last 10 days.
. Additional documentation may be required for sales of shares held in cor-
porate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R):
. Redemptions by telephone or fax (including American FundsLine and Ameri-
can FundsLine OnLine) are limited to $50,000 per shareholder each day
. Checks must be made payable to the registered shareholder(s)
. Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE, OR AMERICAN FUNDSLINE
ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your ac-
count(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided Amer-
ican Funds Service Company employs reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine. If reasonable procedures are not employed, the fund may be liable for
losses due to unauthorized or fraudulent instructions.
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends from its net investment income daily and distri-
butes the accrued dividends to you each month. Capital gains, if any, are usu-
ally distributed in December.
You may elect to reinvest dividends and/or capital gain distributions to pur-
chase additional shares of this fund or any other fund in The American Funds
Group ror you may elect to receive them in cash.
TAX CONSEQUENCES
Dividends derived from taxable interest income, distributions of capital gains
and dividends on gains from the disposition of certain market discount bonds
will not be exempt from federal, state or local income tax.
Dividends and capital gains are generally taxable whether they are reinvested
or received in cash -- unless you are exempt from taxation or entitled to tax
deferral. Capital gains may be taxed at different rates depending on the length
of time the fund holds its assets.
16 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You must provide the fund with a certified correct taxpayer identification num-
ber (generally your Social Security Number) and certify that you are not sub-
ject to backup withholding. If you fail to do so, the IRS can require the fund
to withhold 31% of your taxable distributions and redemptions. Federal law also
requires the fund to withhold 30% of the applicable tax treaty rate from divi-
dends paid to certain non-resident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family,"
and your tax adviser for further information.
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the past five years. Certain information reflects fi-
nancial results for a single fund share. The total returns in the table repre-
sent the rate that an investor would have earned or lost on an investment in
the fund (assuming reinvestment of all dividends and distributions). This in-
formation has been audited by Deloitte & Touche LLP, whose report, along with
the fund's financial statements, are included in the statement of additional
information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
....................
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year 13.03 $12.78 $13.24 $13.18 $14.73
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .83 .88 .93 1.01 1.03
................................................................................
Net realized and unrealized
gain (loss) on investments .40 .25 (.49) .06 (1.56)
................................................................................
Total income (loss) from
investment operations 1.23 1.13 .44 1.07 (.53)
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.87) (.88) (.90) (1.01) (1.02)
................................................................................
Net Asset Value,
End of Year $13.39 $13.03 $12.78 $13.24 $13.18
................................................................................
Total Return/1/ 9.70% 9.08% 3.40% 8.60% (3.72)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) $1,210 $1,106 $1,216 $1,337 $1,373
................................................................................
Ratio of expenses to
average net assets .79% .80% .81% .79% .78%
................................................................................
Ratio of net income
to average net assets 6.24% 6.74% 7.04% 7.79% 7.35%
................................................................................
Portfolio turnover rate 81.99% 28.16% 40.01% 46.77% 71.58%
</TABLE>
/1/ Excludes maximum sales charge of 4.75%.
18 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
20 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
22 U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS 23
<TABLE>
<S> <C> <C>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext. 11
</TABLE>
FOR 24-HOUR INFORMATION
<TABLE>
<S> <C>
American American Funds
FundsLine(R) Internet Web site
800/325-3590 http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
------------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. If
there are any inconsistencies or ambiguities, the English
text will prevail.
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OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including
financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing
market conditions and the fund's investment strategies, and
the independent accountants' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the
fund, including the fund's financial statements.
A current SAI has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by
reference into this prospectus. The SAI and other related
materials about the fund are available for review or to be
copied at the SEC's Public Reference Room (1-800-SEC-0330)
or on the SEC's Internet Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing
policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary of
Service Company the fund
800/421-0180 ext. 1 333 South Hope Street
Los Angeles, California
90071
Investment Company File No. 811-4318 [LOGO OF RECYCLED PATER] Printed on
recycled paper
