[THE AMERICAN FUNDS GROUP(R)]
U.S. GOVERNMENT SECURITIES FUND
[illustrations: U.S. Government Treasury Building, scale, and various graphs]
Semi-Annual Report for the six months ended February 28, 1998
U.S. GOVERNMENT SECURITIES FUND(SM) seeks high current income, consistent with
prudent investment risk and preservation of capital, by investing primarily in
obligations backed by the full faith and credit of the United States
government.
U.S. GOVERNMENT SECURITIES FUND is one of the 28 mutual funds in The American
Funds Group,(r) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended March 31, 1998 (the
most recent calendar quarter), assuming payment of the 4.75% maximum sales
charge at the beginning of the stated periods:
<TABLE>
<CAPTION>
<S> <C> <C>
10 YEARS 5 YEARS 12 MONTHS
+101.88% +25.21% +5.13%
(+7.28% A YEAR) (+4.60% A YEAR)
</TABLE>
Sales charges are lower for accounts of $25,000 or more. The fund's 30-day
yield as of March 31, 1998, calculated in accordance with the Securities and
Exchange Commission formula, was 5.29%. The fund's distribution rate as of that
date was 6.06%. The SEC yield reflects income the fund expects to earn based on
its current portfolio of securities, while the distribution rate is based
solely on the fund's past dividends. Accordingly, the fund's SEC yield and
distribution rate may differ.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY BY
INVESTING IN THE FUND. THE SHORTER THE TIME PERIOD OF YOUR INVESTMENT, THE
GREATER THE POSSIBILITY OF LOSS. 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.
FELLOW SHAREHOLDERS:
[ilustration: scale]
The first half of U.S. Government Securities Fund's 1998 fiscal year was a
favorable period for U.S. bonds. In an environment of falling interest rates
and rising bond prices, your fund generated a steady stream of current income
and a modest increase in share value.
For the six months ended February 28, the fund paid monthly dividends totaling
44.5 cents a share. That represents an income return of 3.5% (7.0% on an
annualized basis) for shareholders who reinvested those dividends in additional
shares, as most do. Those who took dividends in cash received a 3.4% income
return (6.8% annualized).
With few signs of inflation on the horizon, optimistic investors pushed up bond
prices, sending yields on longer term bonds down to their lowest levels in
nearly a decade. (Bond prices move in the opposite direction of interest
rates.) The fund's net asset value rose to $13.23 per share from $13.03 six
months earlier, contributing to a total return (dividends plus appreciation) of
5.0%. That compares with a 5.7% increase with interest compounded for the
Lehman Brothers Government/Mortgage-Backed Securities Index, which is unmanaged
and has no expenses.
Over the past 12 months, the fund produced a total return of 9.0% to bring its
total return since beginning operations on October 17, 1985 to 161.7% - an
average compound return of 8.1% a year.
SIX MONTHS IN REVIEW
Bond markets rallied during the six-month period, amid mounting evidence that
inflationary pressures would remain subdued even as the U.S. economy continued
to flourish. Global competition from cheap imports forced U.S. manufacturers to
keep costs down, while Southeast Asia's financial difficulties led many
fixed-income investors to predict the U.S. economy would contract as exports to
the region slowed. The Asian crisis also helped U.S. interest rates by
stimulating a "flight to quality" by investors for the relatively safe haven of
dollar-denominated assets.
With top-grade investments across a spectrum of government and federal agency
obligations, U.S. Government Securities Fund participated strongly in the broad
market rally. U.S. Treasury securities did well, due in part to a reduced
federal budget deficit that should slow the pace of bond issuance by the
federal government. These holdings account for more than half of net assets and
made solid contributions to the fund's results.
At the close of the period, about 43% of net assets was held in mortgage-backed
securities, up slightly from six months earlier. These instruments typically
pay higher yields to compensate for the risk of prepayment and, as such, have
helped enhance the fund's income return. (If an underlying mortgage is prepaid
when interest rates decline, investors risk having to reinvest their assets at
lower rates.) The fund's investment professionals spend considerable time
trying to minimize the impact of unexpected changes in prepayment rates. Many
of the mortgages in the portfolio are older, "seasoned" loans, which are less
likely to be refinanced. The fund also holds a number of adjustable-rate
mortgages - whose coupons adjust with changes in interest rates <UNDEF> which
tend to be somewhat less volatile than their fixed-rate counterparts.
During the past six months, we have lengthened the average maturity of the
fund's holdings in an effort to take advantage of declining interest rates.
(The longer a bond's maturity, the more its price tends to rise and fall in
response to changes in interest rates.) At the close of the period, the average
effective maturity was 7.7 years, up from 6.5 years.
LOOKING AHEAD
A number of factors suggest that the positive bond environment could continue.
Despite an economic expansion now in its eighth year, inflation is
exceptionally benign. That could keep interest rates down - and bond prices up
- - for some time. Meanwhile, the continued strength of the U.S. dollar could
sustain demand for U.S. Treasury securities by foreign buyers.
At the same time, while we are cautiously optimistic, it is difficult to
predict how long our "Goldilocks" economy - not too hot, not too cold - can
stay "just right." Indeed, in the face of rising business activity, a shrinking
pool of available labor has already caused wages to increase slightly - an
important factor in raising costs. Meanwhile, struggles in Asia, which have not
yet had as significant an impact as expected, have injected a degree of
uncertainty into the economic outlook. It also remains to be seen how Japan,
the world's second-largest economy and a major holder of U.S. Treasuries, will
cope with its growing difficulties.
As always, we will continue to monitor developments that may affect the
holdings in the fund.
We look forward to reporting to you again in six months.
Cordially,
/s/Paul G. Haaga, Jr. /s/Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
April 13, 1998
<TABLE>
The American Funds Income Series
U.S. Government Securities Fund (Unaudited)
Investment Portfolio
February 28, 1998
<S> <C> <C> <C>
U.S. Treasuries 51%
GNMAs and Other Mortgage-Backed Securities 43%
Other Obligations 2%
Cash & Equivalents 4%
Principal Market Percent
Amount Value of Net
(000) (000) Assets
Federal Agency Obligations -
Mortgage Pass-Throughs (1) - 36.10%
Fannie Mae (formerly Federal National Mortgage Assn.):
6.00% 2013 $4,000 $3,945
6.50% 2028 16,500 16,340
6.55% 2027 13,100 12,490
7.00% 2009-2028 33,412 33,942
8.00% 2005-2023 4,355 4,547
8.277% 2002 (2) 4,465 4,648
8.50% 2007-2027 9,709 10,238
9.00% 2009-2023 2,379 2,553
9.50% 2011-2022 1,946 2,096
10.00% 2017-2021 1,137 1,246
11.00% 2010-2015 1,707 1,920
12.00% 2000-2019 1,250 1,435
12.25% 2013-2014 247 288 8.69%
12.50% 2001-2015 929 1,098
12.75% 2012 23 28
13.25% 2011-2014 667 797
14.00% 2013 51 60
15.00% 2013 13 15
15.50% 2012 35 43
16.00% 2012 16 19
Freddie Mac (formerly Federal Home Loan Mortgage Corp.):
6.00% 2013 5,500 5,426
6.50% 2013 6,400 6,424
7.00% 2008 1,036 1,058
8.25% 2007 597 621
8.50% 2009-2021 13,349 14,010
8.75% 2008 542 570
9.00% 2010-2021 4,702 4,984
10.50% 2006-2016 654 720
10.75% 2009-2010 242 267
11.00% 2011-2016 682 766
11.50% 2011-2015 271 310
11.75% 2011-2014 291 332
12.00% 2000-2028 7,281 8,382
12.25% 2013-2015 382 441
12.50% 2009-2019 5,794 6,816 4.69
13.00% 2010-2014 747 885
13.50% 2010-2015 226 272
13.75% 2014 31 37
14.00% 2011-2014 131 158
14.50% 2010-2011 24 29
14.75% 2010 47 57
15.00% 2011 44 54
15.50% 2011 31 38
16.00% 2012 21 26
16.25% 2011 78 95
Government National Mortgage Assn.:
6.00% 2013-2028 16,000 15,695
6.50% 2023-2028 25,079 24,860
7.00% 2008-2026 (2) 81,330 83,026
7.375% 2022-2024 (2) 5,186 5,327
7.50% 2009-2026 25,704 26,483
8.00% 2022-2028 7,615 8,000
8.50% 2020-2028 16,854 17,910
9.00% 2011-2022 13,981 15,128
9.50% 2009-2021 7,768 8,465
9.75% 1999-2012 1,873 2,016
10.00% 2016-2019 24,815 27,770
10.25% 2012 115 126
10.50% 2015-2019 2,119 2,398
11.00% 2009-2020 3,869 4,453 22.72
11.25% 2001-2016 2,295 2,540
11.50% 2000-2014 994 1,152
11.75% 2000-2015 206 223
12.00% 1999-2019 2,498 2,920
12.25% 2013-2015 252 289
12.50% 2010-2015 1,763 2,091
12.75% 2013-2015 322 367
13.00% 2011-2015 1,551 1,859
13.25% 2013-2015 229 260
13.50% 2010-2014 824 1,000
14.00% 2011-2014 127 156
14.50% 2012-2014 333 409
15.00% 2011-2013 433 528
16.00% 2011-2012 38 47
--------- ---------
406,024 27.50
--------- ---------
Federal Agency Obligations - Other - 0.79%
FNSM Callable Principal STRIPS:
0%/8.25% 2022 (3) 2,000 1,920 .17
Freddie Mac Note, 6.27% 2004 7,000 6,934 .62
--------- ---------
8,854 .79
--------- ---------
U. S. Guaranteed Obligations - Other - 1.13%
Big Rivers Electrical Corp. 10.70% 2017 12,000 12,671 1.13
--------- --------- ---------
Collateralized Mortgage Obligations (1) - 5.38%
Fannie Mae:
Trust 91-50, Class H, 7.75% 2006 2,412 2,499
Trust 91-146, Class Z, 8.00% 2006 6,707 6,957
Trust 97-41, Class B, 7.25% 2014 5,000 5,044
Trust 35, Class 2, 12.00% 2018 473 540 3.27
Trust 90-93, Class G, 5.50% 2020 2,961 2,859
Trust 92-119, Class Z, 8.00% 2022 3,668 3,942
Trust 94-4, Class ZA, 6.50% 2024 4,899 4,601
Trust 97-M6, Class ZA, 6.85% 2026 10,347 10,330
Freddie Mac:
Series 1716, Class A, 6.50% 2009 10,586 10,285
Series 83-A, Class 3, 11.875% 2013 166 184
Series 83-B, Class 3, 12.50% 2013 1,415 1,780
Series 76, Class F, 9.125% 2020 1,286 1,315 2.11
Series 178, Class Z, 9.25% 2021 2,631 2,832
Series 1567, Class A, 6.088% 2023 (2) 1,573 1,492
Series 1948, Class PJ, 6.65% 2027 6,000 5,799
--------- --------- ---------
60,459 5.38
--------- ---------
Collateralized Mortgage Obligations
(Privately Originated)(1),(4) - 1.87%
Collateralized Mortgage Obligation Trust,
Series 63, Class Z, 9.00% 2020 4,004 4,294 .38
PaineWebber CMO Pac, Series O, Class 5, 9.50% 2019 4,656 5,108 .46
Ryland Acceptance Corp., Series 88, Class E,
7.95% 2019 11,211 11,624 1.03
--------- --------- ---------
21,026 1.87
--------- ---------
Development Authorities - 0.26%
International Bank for Reconstruction and
Development, 12.25% December 2008 2,000 2,967 .26
--------- --------- ---------
U. S. Treasury Obligations - 50.93%
6.875% July 1999 16,750 17,043 1.52
5.875% November 1999 8,000 8,036 .72
5.625% December 1999 8,000 8,008 .71
8.50% November 2000 12,500 13,408 1.19
13.125% May 2001 19,000 23,186 2.06
13.375% August 2001 10,000 12,444 1.11
6.25% October 2001 2,000 2,042 .18
15.75% November 2001 5,500 7,349 .65
14.25% February 2002 15,000 19,554 1.74
11.625% November 2002 38,000 47,316 4.21
10.75% May 2003 10,250 12,590 1.12
11.875% November 2003 12,000 15,587 1.39
7.25% May 2004 72,500 78,549 6.98
11.625% November 2004 4,500 5,970 .53
7.50% February 2005 11,500 12,690 1.13
%6.50% May 2005 6,000 6,286 .56
3.412% January 2007 (2),(5) 5,250 5,218 .46
6.25% February 2007 2,000 2,076 .18
6.625% May 2007 4,500 4,794 .43
10.375% November 2009 25,000 31,305 2.78
10.00% May 2010 4,000 4,981 .44
12.75% November 2010 10,000 14,275 1.27
13.875% May 2011 8,000 12,175 1.08
10.375% November 2012 35,000 46,588 4.14
12.00% August 2013 11,000 16,230 1.44
8.875% August 2017 89,000 118,370 10.53
7.875% February 2021 5,000 6,153 .55
7.125% February 2023 18,000 20,590 1.83
--------- --------- ---------
572,813 50.93
--------- ---------
Total Bonds and Notes (cost:$1,065,821,000) 1,084,814 87.85
--------- ---------
Short-Term Securities
Commercial Paper - 0.38%
New Center Asset Trust 5.69% due 3/2/98 4,250 4,249 .38
--------- --------- ---------
U.S. Treasury Securities - 10.12%
U.S. Treasury Bills due 4/16/98 34,700 34,484 3.06
U.S. Treasury Bills due 4/23/98 45,000 44,646 3.97
U.S. Treasury Bills due 4/30/98 35,000 34,700 3.09
--------- --------- ---------
113,830 10.12
--------- ---------
Total Short-Term Securities (cost:$118,066,000) 118,079 10.50
--------- ---------
Total Investment Securities (cost:$1,183,887,000) 1,202,893 106.96
Excess of payables over cash and receivables 78,257 6.96
--------- ---------
Net Assets $1,124,636 100.00%
======================
(1)Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore, the
effective maturity is shorter than the stated
maturity.
(2)Coupon rate may change periodically.
(3)Zero-coupon bond which will
convert to a coupon-bearing security at a future
date.
(4)Comprised of federal agency originated or
guaranteed loans.
(5)Indexed-linked bond whose principal amount moves
with a government retail price index.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
The American Funds Income Series
U.S. Government Securities Fund
Financial Statements (Unaudited)
- ---------------------------------------- -------------- ---------------
Statement of Assets and Liabilities
at February 28, 1998 (dollars in thousands)
- ---------------------------------------- -------------- ---------------
Assets:
Investment securities at market
(cost: $1,183,887) $1,202,893
Cash 87
Receivables for-
Sales of investments $ 9,374
Sales of fund's shares 1,885
Accrued interest 12,423 23,682
-------------- ---------------
1,226,662
Liabilities:
Payables for-
Purchases of investments 97,474
Repurchases of fund's shares 1,451
Dividends payable 1,982
Management services 351
Accrued expenses 768 102,026
-------------- ---------------
Net Assets at February 28, 1998-
Equivalent to $13.23 per share on
85,005,079 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $1,124,636
============
Statement of Operations (Unaudited)
for the six months ended February 28, 1998 (dollars in thousands)
-------------- ---------------
Investment Income:
Income:
Interest $ 39,679
Expenses:
Management services fee $2,214
Distribution expenses 1,597
Transfer agent fee 384
Reports to shareholders 71
Registration statement and prospectus 39
Postage, stationery and supplies 100
Trustees' fees 13
Auditing and legal fees 42
Custodian fee 14
Taxes other than federal income tax 17
Other expenses 14 4,505
-------------- ---------------
Net investment income 35,174
---------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 3,100
Net unrealized (depreciation) appreciation
on investments:
Beginning of period 2,624
End of period 19,006
--------------------
Net unrealized appreciation
on investments 16,382
---------------
Net realized gain and
unrealized appreciation on investments 19,482
---------------
Net Increase in Net Assets Resulting
from Operations $54,656
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- ----------------------------------
Six months end Year ended
February 28, August 31
1998* 1997
Operations: ----------------------------------
Net investment income $ 35,174 $ 78,056
Net realized gain (loss) on investments 3,100 (6,208)
Net unrealized appreciation
on investments 16,382 29,551
----------------------------------
Net increase in net assets
resulting from operations 54,656 101,399
----------------------------------
Dividends Paid to Shareholders (37,511) (78,533)
----------------------------------
Capital Share Transactions:
Proceeds from shares sold:
10,459,701 and 13,697,793
shares, respectively 138,324 177,817
Proceeds from shares issued in
reinvestment of net investment income
dividends: 2,070,471 and 4,328,162
shares respectively 27,312 56,223
Cost of shares repurchased:
12,398,855 and 28,335,433
shares, respectively (163,705) (367,751)
----------------------------------
Net increase (decrease) in net assets resulting
from capital share transactions 1,931 (133,711)
----------------------------------
Total Increase (Decrease) in Net Assets 19,076 (110,845)
Net Assets:
Beginning of period 1,105,560 1,216,405
----------------------------------
End of period (including undistributed
net investment income of $2,021 and
$4,358, respectively) $1,124,636 $1,105,560
============== =============
*Unaudited
See Notes to Financial Statements
</TABLE>
U.S. GOVERNMENT SECURITIES FUND
Notes to Financial Statements (Unaudited)
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 fund seeks high current income,
consistent with prudent investment risk and preservation of capital, by
investing primarily in obligations backed by the full faith and credit of the
United States government. The following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Fixed-income securities are valued at prices obtained from a pricing
service, 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 quoted bid and asked prices or at prices for securities of
comparable maturity, quality and type. Securities with original maturities of
one year or less having 60 days or less to maturity are amortized to maturity
based on their cost if acquired within 60 days of maturity or, if already held
on the 60th day, based on the value determined on the 61st day. Securities and
assets for which representative market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed by
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. In the event
the fund purchases securities on a delayed-delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Interest
income is reported on the accrual basis. Discounts and premiums on securities
purchased are amortized. Dividends to shareholders are declared daily after
the determination of the fund's net investment income and are paid to
shareholders monthly.
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, to its shareholders. Therefore, no federal income tax provision is
required.
As of February 28, 1998, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $19,006,000, of which
$33,316,000 related to appreciated securities and $14,310,000 related to
depreciated securities. During the six months ended February 28, 1998, the fund
realized, on a tax basis, a net capital gain of $3,100,000 on securities
transactions. The fund had available at August 31, 1997 a net capital loss
carryforward totaling $85,413,000 which may be used to offset capital gains
realized during subsequent years through 2005 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
any distributions from capital gains while there is a capital loss
carryforward. The cost of portfolio securities for book and federal income tax
purposes was $1,183,887,000 at February 28, 1998.
3. The fee of $2,214,000 for management services was incurred 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;
0.16% of such assets in excess of $3 billion but not exceeding $6 billion;
0.15% of such assets in excess of $6 billion; plus 3.00% on the first
$3,333,333 of the fund's monthly gross investment income; 2.25% of such income
in excess of $3,333,333 but not exceeding $8,333,333; and 2.00% of such income
in excess of $8,333,333.
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 fund's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. As of February 28, 1998, accrued and
unpaid distribution expenses were $649,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $384,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $218,000 (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,
1998, aggregate amounts deferred and earnings thereon were $73,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain 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, 1998, accumulated net realized loss on investments was
$104,612,000 and paid-in capital was $1,208,221,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $224,667,000 and $248,591,000, respectively, during
the six months ended February 28, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $14,000 includes $12,000 that was paid by these credits
rather than in cash.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS
- --------------------------------- -----------------------------------------------
Six months
ended Year Ended August 31
February 28,-------- --------------------------
1998 (1) 1997 1996 1995 1994 1993
-------------------- --------------------------
Net Asset Value, Beginning
of Period $13.03 $12.78 $13.24$13.18$14.73$14.13
-------------------- --------------------------
Income from Investment
Operations:
Net investment income .41 .88 .93 1.01 1.03 1.07
Net realized and unrealized
gain (loss) on investments. .23 .25 (.49) .06 (1.56) .61
Total income (loss) from -------------------- --------------------------
investment operations .64 1.13 .44 1.07 (.53) 1.68
-------------------- --------------------------
Less Distributions:
Dividends from net investment
income (.44) (.88) (.90)(1.01)(1.02)(1.08)
-------------------- --------------------------
Net Asset Value, End of Period $13.23 $13.03 $12.78$13.24$13.18$14.73
============ ====== ==========================
Total Return (2) 5.01% (3) 9.08% 3.40% 8.60%(3.72%12.44%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $1,125 $1,106 $1,216$1,337$1,373$1,581
Ratio of expenses to average
net assets .40% (3) .80 .81% .79% .78% .83%
Ratio of net income to
average net assets 3.15% (3) 6.74% 7.04% 7.79% 7.35% 7.54%
Portfolio turnover rate 22.05% (3) 28.16%40.01%46.77%71.58%35.24%
(1)Unaudited
(2)Excludes maximum sales charge of 4.75%.
(3)Based on operations for the period shown
and, accordingly, not representative of a
full year's operations.
</TABLE>
[THE AMERICAN FUNDS GROUP(R)]
OF$CES 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 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
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
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
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 $NANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
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, 1998, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Printed on recycled paper
Litho in USA AGD/AL/3758
Lit. No. GVT-013-0498
