[THE AMERICAN FUNDS GROUP(R)]
U.S. GOVERNMENT
SECURITIES
FUND
[cover: illustration of how funds from bank results in real estate sales]
Semi-Annual Report
for the six months ended February 28
1999
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) THE NATION'S THIRD-LARGEST MUTUAL FUND FAMILY. FOR MORE THAN
SIX DECADES, CAPITAL RESEARCH AND MANAGEMENT COMPANY, THE AMERICAN FUNDS'
ADVISER, 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, 1999 (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>
TEN YEARS FIVE YEARS ONE YEAR
+105.60% +29.83% +0.58%
(+7.47% A YEAR) (+5.36% A YEAR)
</TABLE>
Sales charges are lower for accounts of $25,000 or more.
The fund's 30-day yield as of March 31, 1999, calculated in accordance with the
Securities and Exchange Commission formula, was 4.82%. The fund's distribution
rate as of that date was 5.23%. 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.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY.
FELLOW SHAREHOLDERS:
The first six months of U.S. Government Securities Fund's 1999 fiscal year
provided a study in contrasts. Following an extended period of strong gains in
1998, U.S. Treasury securities reversed course in the early months of the new
year. Meanwhile, most other sectors of the bond market, which had been lagging
behind government bonds, held up much better.
Throughout these market movements, U.S. Government Securities Fund produced a
steady stream of income. For the six months ended February 28, the fund paid
monthly dividends totaling 41 cents a share, representing an income return of
3.1% (or 6.2% annualized) for shareholders who reinvested those dividends in
additional shares.
With the decline in U.S. Treasury securities, the fund's net asset value fell
to $13.10 a share from $13.39 six months earlier, leading to a total return
(income plus appreciation) of 0.9% for shareholders who reinvested their
dividends. While small, that return was better than the 0.2% average return of
the 190 U.S. government funds tracked by Lipper, Inc. over the six months,
though lower than the 1.4% increase of the unmanaged Lehman Brothers
Government/Mortgage-Backed Securities Index (both returns reflect reinvestment
of dividends).
The fund's modest six-month return comes on the heels of above-average gains.
For the six months previous to these, the fund produced a total return of 4.5%,
contributing to a 12-month total return of 5.4%. Since beginning operations on
October 17, 1985, U.S. Government Securities Fund has increased 175.7% - an
average compound return of 7.9% a year.
SIX MONTHS IN REVIEW
The fund's fiscal year began in September in the midst of a global financial
crisis that buffeted stocks and most sectors of the bond market; matters
worsened when a noted hedge fund was forced to sell off large positions to
cover its losses. In these stormy seas, investors continued to find a harbor in
U.S. Treasury securities. In a so-called "flight to quality," they bid up
prices at a frenetic pace, sending yields on longer term government bonds to
their lowest levels in nearly 30 years. (Bond prices move in the opposite
direction of yields.)
From late September through November, the Federal Reserve cut short-term
interest rates three times in an effort to stabilize markets. The moves helped
restore investor confidence, but as the "flight to quality" reversed itself,
U.S. Treasury yields crept back up, particularly in February, when
stronger-than-expected economic data rekindled fears of inflation.
[illustration: person holding certificate]
FUND HIGHLIGHTS
In keeping with its emphasis on the highest quality issues, your fund invests
primarily in a combination of U.S. Treasury securities and federally sponsored
mortgage-backed obligations. Within these parameters, however, the portfolio is
broadly diversified, with hundreds of holdings across a spectrum of coupons and
maturities.
[illustration: certificate from bank to industrial site]
The composition of the portfolio remains little changed from six months ago.
The drop in market price slightly reduced our position in U.S. Treasury
securities to half of net assets. About 41% of net assets are invested in
mortgage-backed securities, which rose in price during the fiscal period,
partially offsetting the decline in government bonds. The remainder of the
portfolio is held in other federal agency obligations and cash equivalents.
During the past six months, we shortened the average effective maturity of the
fund's holdings to provide some cushion against a possible rise in interest
rates. (The longer a bond's maturity, the more its price tends to rise and fall
in response to interest rate changes.) At February 28, the average effective
maturity was 6.4 years, down from 7.1 years six months earlier. The relatively
short maturities of the fund's mortgage holdings should also provide some
protection in the event rates rise.
LOOKING FORWARD
Although longer term rates have indeed come up a bit, the U.S. economy's record
peacetime expansion shows few signs of subsiding. Jobs are plentiful, consumer
spending is robust, yet inflation remains remarkably quiescent. While we are
cautiously optimistic, the recent volatility in every sector of the bond market
is an object lesson in how quickly investor sentiment and expectations can
change. Global events - such as Asia's recession and the introduction of the
euro - may complicate matters further, making it increasingly difficult to
predict the economic outlook and the prospects for bonds. As always, we will
continue to monitor developments and make investment decisions we believe will
best serve the long-term interests of shareholders.
Finally, we would note that the monthly dividend payment has been reduced from
seven cents a share to six, reflecting the general decline in interest rates in
recent years. We try to establish dividends at a level we believe will be
sustainable for reasonable periods of time. The previous payout had been in
place for nearly three years, since April 1996.
We look forward to reporting to you in six months.
Cordially,
/s/Paul G. Haaga, Jr. /s/John H. Smet
Paul G. Haaga, Jr. John H. Smet
Chairman of the Board President
April 13, 1999
We are pleased to announce the election of John H. Smet as president of U.S.
Government Securities Fund. He has served as a portfolio counselor for the fund
for 12 years and will continue in that capacity. Abner Goldstine, who had been
president since the fund's inception in 1985, was elected as vice chairman and
will continue to serve as a trustee.
<TABLE>
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The American Funds Income Series
U.S. Government Securities Fund
Investment Portfolio
February 28, 1999 (Unaudited)
[begin pie chart]
U.S. Treasuries 50%
Agency Mortgage-Backed Securities 41%
Agency Debentures 4%
Cash & Equivalents 5%
[end pie chart]
Principal Market Percent
Amount Value of Net
(000) (000) Assets
Federal Agency Obligations -
Mortgage Pass-Throughs (1) - 34.75%
Fannie Mae:
5.50% 2014 $4,980 $4,835
6.00% 2013-2029 27,509 27,110
6.27% 2005 6,959 6,880
6.35% 2005 16,489 16,352
6.50% 2028 12,718 12,627
7.00% 2009-2028 22,974 23,393
8.00% 2005-2028 6,607 6,875
8.315% 2002 (2) 4,238 4,323
8.50% 2007-2027 5,748 6,057
9.00% 2009-2023 1,542 1,639
9.50% 2011-2022 1,334 1,423
10.00% 2017-2021 721 778
11.00% 2010-2015 1,196 1,325
12.00% 2000-2029 4,480 5,085
12.25% 2011-2014 508 576 10.09%
12.50% 2001-2029 6,578 7,599
12.75% 2012 2 2
13.00% 2028 3,633 4,250
13.25% 2011-2014 553 645
13.50% 2015 1,618 1,901
14.00% 2013-2014 824 991
15.00% 2013 9 10
15.50% 2012 14 17
16.00% 2012 10 12
Freddie Mac:
5.50% 2013 4,882 4,746
6.00% 2013-2014 24,844 24,625
6.50% 2012-2013 16,068 16,179
7.00% 2008 769 783
7.50% 2012 2,222 2,289
8.00% 2012-2026 6,778 6,997
8.25% 2007 458 475
8.50% 2009-2027 10,896 11,444
8.75% 2008 414 433
9.00% 2010-2021 2,927 3,088
10.50% 2006-2016 360 399
10.75% 2010 168 184
11.00% 2015-2016 499 558
11.50% 2015 194 218
11.75% 2014 266 302
12.00% 2000-2017 5,261 6,006
12.25% 2015 321 369
12.50% 2015-2019 4,779 5,522 6.66
13.00% 2014-2015 3,146 3,707
13.50% 2018 187 218
13.75% 2014 20 23
14.00% 2011-2014 147 174
14.50% 2010-2011 19 23
14.75% 2010 37 43
15.00% 2011 35 42
15.50% 2011 26 31
16.00% 2012 20 24
16.25% 2011 73 88
Government National Mortgage Assn.:
5.50% 2013 2,602 2,534
6.00% 2008-2029 65,768 64,522
6.50% 2023-2029 36,195 35,963
6.875% 2024 (2) 9,049 9,168
7.00% 2008-2027 43,695 44,346
7.50% 2009-2028 15,055 15,501
8.00% 2022-2026 13,990 14,602
8.50% 2020-2023 3,711 3,943
9.00% 2009-2022 11,320 12,132
9.50% 2009-2021 5,203 5,596
9.75% 2011-2012 1,411 1,519
10.00% 2016-2019 16,913 18,416
10.25% 2012 95 102
10.50% 2015-2019 1,356 1,494
11.00% 2009-2020 2,382 2,671 18.00
11.25% 2001-2016 1,820 1,993
11.50% 2000-2014 704 794
11.75% 2000-2015 112 118
12.00% 2000-2016 1,296 1,449
12.25% 2013-2015 222 249
12.50% 2010-2014 157 178
12.75% 2014-2015 235 269
13.00% 2011-2015 1,233 1,424
13.25% 2013-2015 184 209
13.50% 2013 245 287
14.00% 2014 97 113
14.50% 2012-2014 265 312
15.00% 2011-2013 297 351
16.00% 2011-2012 35 42
------- -------
463,992 34.75
------- -------
Federal Agency Obligations - Other - 3.67%
Fannie Mae Note 6.00% 2008 6,000 6,066 .45
Federal Home Loan Bank Bonds:
5.625% 2001 10,000 10,038
5.125% 2003 6,000 5,866 1.93
5.50% 2003 10,000 9,906
Freddie Mac Note 5.75% 2008 11,000 10,906 .82
Tennessee Valley Authority, Series G, 5.375% 2008 6,500 6,254 .47
------- -------
49,036 3.67
------- -------
Collateralized Mortgage Obligations (1) - 5.80%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 1,984 2,038
Series 91-146, Class Z, 8.00% 2006 4,407 4,520
Series 1997-M5, Class C, ACES, 6.74% 2007 5,000 5,138
Series 1998-M6, Class A2, ACES, 6.32% 2008 17,500 17,770
Trust 35, Class 2, 12.00% 2018 315 347 4.15
Series 90-93, Class G, 5.50% 2020 1,883 1,821
Series 1992-119, Class Z, 8.00% 2022 3,972 4,072
Series 1994-4, Class ZA, 6.50% 2024 5,228 4,986
Series 1997-M6, Class ZA, 6.85% 2026 11,079 10,789
Series 1997-28, Class C, 7.00% 2027 4,000 3,984
Freddie Mac:
Series 1716, Class A, 6.50% 2009 10,586 10,457
Series 83-A, Class 3, 11.875% 2013 127 141
Series 83-B, Class 3, 12.50% 2013 1,081 1,201
Series 178, Class Z, 9.25% 2021 1,793 1,879 1.65
Series 1567, Class A, 5.3375% 2023 (2) 1,274 1,229
Series 1948, Class PJ, 6.65% 2027 6,000 5,852
Series 2030, Class F, 5.4356% 2028 (2) 1,285 1,289
------- -------
77,513 5.80
------- -------
Collateralized Mortgage Obligations
(Privately Originated)(1),(3) - 1.16%
Collateralized Mortgage Obligation Trust,
Series 63, Class Z, 9.00% 2020 3,547 3,681 .28
PaineWebber CMO Pac, Series O, Class 5, 9.50% 2019 3,169 3,369 .25
Ryland Acceptance Corp. Four, Series 88, Class E,
7.95% 2019 8,193 8,387 .63
------- -------
15,437 1.16
------- -------
Development Authorities - 0.22%
International Bank for Reconstruction and
Development 12.25% December 2008 2,000 2,948 .22
------- -------
U. S. Treasury Obligations - 49.59%
6.375% May 1999 18,000 18,059 1.35
9.125% May 1999 19,500 19,671 1.47
6.375% January 2000 4,000 4,046 .30
5.875% February 2000 18,040 18,170 1.36
5.50% March 2000 3,000 3,014 .23
5.875% June 2000 34,640 34,970 2.62
13.125% May 2001 19,000 22,088 1.65
13.375% August 2001 8,000 9,482 .71
6.25% October 2001 1,000 1,025 .08
15.75% November 2001 5,500 6,938 .52
14.25% February 2002 15,000 18,619 1.39
5.875% September 2002 24,000 24,446 1.83
11.625% November 2002 38,000 45,897 3.44
10.75% May 2003 10,250 12,300 .92
11.875% November 2003 6,000 7,591 .57
7.25% May 2004 74,250 80,619 6.04
7.875% November 2004 3,655 4,094 .31
11.625% November 2004 7,300 9,493 .71
7.50% February 2005 17,480 19,329 1.45
3.375% January 2007 (2),(4) 6,983 6,737 .51
7.25% July 2007 22,000 23,134 1.73
6.125% August 2007 9,530 9,965 .75
3.625% January 2008 (2),(4) 2,029 1,989 .15
10.375% November 2009 21,000 25,892 1.94
10.00% May 2010 4,000 4,922 .37
12.75% November 2010 10,000 13,983 1.05
13.875% May 2011 8,000 11,896 .89
10.375% November 2012 35,000 46,222 3.46
12.00% August 2013 11,000 16,046 1.20
9.875% November 2015 2,345 3,353 .25
8.875% August 2017 74,500 99,737 7.47
7.875% February 2021 27,250 33,977 2.54
3.625% April 2028 (2),(4) 4,560 4,432 .33
------- -------
662,136 49.59
------- -------
Total Bonds and Notes (cost: $1,266,435,000) 1,271,062 95.19
------- -------
Short-Term Securities
Federal Agency Discount Notes - 3.75%
Federal Home Loan Bank due 3/1/99 16,600 16,598 1.24
Federal Home Loan Bank due 3/3/99 18,600 18,593 1.39
Federal Home Loan Bank due 3/26/99 15,000 14,948 1.12
------- -------
Total Short-Term Securities (cost: $50,139,000) 50,139 3.75
------- -------
Total Investment Securities (cost: $1,316,574,000) 1,321,201 98.94
Excess of cash and receivables over payables 14,208 1.06
------- -------
Net Assets $1,335,409 100.00%
======== ========
(1)Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore, the
effective maturities are shorter than the stated
maturities.
(2)Coupon rate may change periodically.
(3)Comprised of federal agency originated or
guaranteed loans.
(4)Index-linked bond whose principal amount moves
with a government retail price index.
See Notes to Financial Statements
</TABLE>
<TABLE>
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The American Funds Income Series
U.S. Government Securities Fund
Financial Statements (Unaudited)
- ----------------------------- ------- -------
Statement of Assets and Liabilities
at February 28, 1999 (dollars in thousands)
- ----------------------------- ------- -------
Assets:
Investment securities at market
(cost: $1,316,574) $1,321,201
Cash 125
Receivables for-
Sales of investments $ 40,941
Sales of fund's shares 3,093
Accrued interest 14,425 58,459
------- -------
1,379,785
Liabilities:
Payables for-
Purchases of investments 39,189
Repurchases of fund's shares 2,126
Dividends payable 1,956
Management services 393
Accrued expenses 712 44,376
------- -------
Net Assets at February 28, 1999-
Equivalent to $13.10 per share on
101,905,781 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $1,335,409
=========
Statement of Operations
for the six months ended February 28, 1999 (dollars in thousands)
------- -------
Investment Income:
Income:
Interest $ 43,102
Expenses:
Management services fee $2,483
Distribution expenses 1,976
Transfer agent fee 474
Reports to shareholders 54
Registration statement and prospectus 99
Postage, stationery and supplies 105
Trustees' fees 14
Auditing and legal fees 44
Custodian fee 13
Taxes other than federal income tax 13
Other expenses 11 5,286
------- -------
Net investment income 37,816
-------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 4,176
Change in unrealized appreciation
on investments:
Beginning of period 37,133
End of period 4,627
-------
Change in unrealized appreciation
on investments (32,506)
-------
Net realized gain and
change in unrealized appreciation on investments (28,330)
-------
Net Increase in Net Assets Resulting
from Operations $9,486
=========
Statement of Changes in Net
Assets (dollars in thousands)
- ----------------------------- ------- -------
Six months ended Year ended
February 28, August 31
1999* 1998
Operations: ------- -------
Net investment income $ 37,816 $ 70,243
Net realized gain (loss) on investments 4,176 (187)
Net change in unrealized appreciation
on investments (32,506) 34,508
------- -------
Net increase in net assets
resulting from operations 9,486 104,564
------- -------
Dividends Paid to Shareholders (40,064) (73,356)
------- -------
Capital Share Transactions:
Proceeds from shares sold:
35,319,018 and 28,937,114
shares, respectively 474,274 383,161
Proceeds from shares issued in
reinvestment of net investment income
dividends: 2,346,721 and 4,071,001
shares respectively 31,409 53,739
Cost of shares repurchased:
26,096,673 and 27,545,162
shares, respectively (349,501) (363,863)
------- -------
Net increase in net assets resulting
from capital share transactions 156,182 73,037
------- -------
Total Increase in Net Assets 125,604 104,245
Net Assets:
Beginning of period 1,209,805 1,105,560
------- -------
End of period (including undistributed
net investment income of $(783) and
$1,465, respectively) $1,335,409 $1,209,805
========= =========
*Unaudited
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
Unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
SECURITY VALUATION - 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.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - 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 AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily after the determination of the fund's net investment income and
are paid to shareholders monthly.
2. FEDERAL INCOME TAXATION
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 investment income, including any net realized gain
on investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of February 28, 1999, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $4,627,000, of which $27,383,000
related to appreciated securities and $22,756,000 related to depreciated
securities. During the year ended August 31, 1998, a capital loss carryforward
totaling $8,610,000 expired. The fund had available at August 31, 1998 a net
capital loss carryforward totaling $89,790,000 which may be used to offset
capital gains realized during subsequent years through 2006 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 $1,316,574,000 at February 28, 1999.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $2,483,000 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; and 0.16% of such assets in excess of $3 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.
DISTRIBUTION EXPENSES - 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, 1999, distribution expenses under the Plan were limited to
$1,976,000. Had no limitation been in effect, the fund would have paid
$2,074,000 in distribution expenses under the Plan. As of February 28, 1999,
accrued and unpaid distribution expenses were $659,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $521,000 (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
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $474,000.
DEFERRED DIRECTORS' AND TRUSTEES' FEES - 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, 1999, aggregate amounts deferred
and earnings thereon were $65,000.
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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities of $621,454,000 and
$465,198,000, respectively, during the six months ended February 28, 1999.
As of February 28, 1999, accumulated net realized loss on investments was
$85,722,000 and paid-in capital was $1,417,287,000.
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 $13,000 was paid by these credits rather than in cash.
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PER-SHARE DATA AND RATIOS
- ----------------------- -------- -------- -------- -------- -------- --------
Six months
ended Year Ended August 31
February 28, -------- -------- -------- -------- --------
1999 (1) 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
Net Asset Value, Beginning
of Period $ 13.39 $13.03 $ 12.78 $ 13.24 $ 13.18 $ 14.73
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income .38 .83 .88 .93 1.01 1.03
Net gains or lossess on securities
(both realized and unrealized) (.27) .40 .25 (.49) .06 (1.56)
-------- -------- -------- -------- -------- --------
Total from investment operations .11 1.23 1.13 .44 1.07 (.53)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment
income) (.40) (.87) (.88) (.90) (1.01) (1.02)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 13.10 $ 13.39 $ 13.03 $ 12.78 $ 13.24 $ 13.18
======= ======= ======= ======= ======= =======
Total Return (2) 0.87% (3) 9.70% 9.08% 3.40% 8.60% (3.72%)
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $1,335 $1,210 $1,106 $1,216 $1,337 $1,373
Ratio of expenses to average
net assets .40% (3) .79% .80% .81% .79% .78%
Ratio of net income to
average net assets 2.86% (3) 6.24% 6.74% 7.04% 7.79% 7.35%
Portfolio turnover rate 42.67% (3) 81.99% 28.16% 40.01% 46.77% 71.58%
(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.
</TABLE>
[THE AMERICAN FUNDS GROUP(R)]
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 92821-5823
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 FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT US AT WWW.AMERICANFUNDS.COM ON THE
WORLD WIDE WEB.
PREPARING FOR THE YEAR 2000
The fund's key service providers - Capital Research and Management Company, the
investment adviser, and American Funds Service Company, the transfer agent -
have updated all significant computer systems to process date-related
information properly following the turn of the century. Testing of these and
other systems with business partners, vendors and other service providers will
continue through much of 1999. We will continue to keep you up to date in our
regular publications. If you'd like more detailed information, call Shareholder
Services at 800/421-0180, ext. 21, or visit our Web site at
www.americanfunds.com.
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, 1999, 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 D/CG/3967
Lit. No. GVT-013-0499
