AMERICAN FUNDS INCOME SERIES, 485BPOS, 1999-10-29

AMERICAN FUNDS INCOME SERIES
485BPOS, 1999-10-29

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SIGNED
SEC. File Nos. 2-98199
811-4318

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 22
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 21

THE AMERICAN FUNDS INCOME SERIES
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)

Registrant's telephone number, including area code:
(213) 486-9200

JULIE F. WILLIAMS, Secretary
The American Funds Income Series
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)

Copies to:
Robert E. Carlson, Esq.
PAUL, HASTING, JANOFSKY & WALKER LLP
555 S. Flower Street
Los Angeles, CA 90071-2371
(Counsel for the Registrant)

Approximate date of proposed public offering:
It is proposed that this filing become effective on November 1, 1999 pursuant
to paragraph (b) of rule 485.

<PAGE>

U.S. Government Securities Fund/SM/

Prospectus
NOVEMBER 1, 1999

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<PAGE>

---------------------------------------------------------

THE AMERICAN FUNDS INCOME SERIES
U.S. GOVERNMENT SECURITIES FUND

333 South Hope Street
Los Angeles, California 90071

<TABLE>
<CAPTION>
<S> <C> <C>
TICKER SYMBOL: AMUSX NEWSPAPER ABBREV: Govt FUND NO: 22
</TABLE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Fund 5
-------------------------------------------------------
Investment Objective, Strategies and Risks 6
-------------------------------------------------------
Year 2000 8
-------------------------------------------------------
Management and Organization 9
-------------------------------------------------------
Shareholder Information 11
-------------------------------------------------------
Purchase and Exchange of Shares 12
-------------------------------------------------------
Distribution Arrangements 17
-------------------------------------------------------
Financial Highlights 18
-------------------------------------------------------
</TABLE>

22-010-1199/RRD
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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
guaranteed by the United States Government. Securities in the fund will be
rated AAA/Aaa.

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 the fund may decline in value in response to economic,
political or social events in the U.S. or abroad. While the fund invests in the
highest quality debt securities, these securities may be affected by changing
interest rates and prepayment risks. It is important to note that neither the
fund nor its yield are guaranteed by the U.S. Government.

Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

INVESTMENT RESULTS

The following information illustrates how the fund's results fluctuate. Past
results are not an indication of future results.

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.)

[bar chart]
1989 11.71
1990 9.80
1991 14.16
1992 7.59
1993 10.44
1994 -4.65
1995 15.46
1996 2.82
1997 8.39
1998 7.87
[end bar chart]

The fund's year-to-date return for the nine months ended September 30, 1999
was -1.24%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
Highest 5.77% (quarter ended June 30, 1989)
Lowest -3.91% (quarter ended March 31, 1994)
</TABLE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

For periods ended December 31, 1998:

<TABLE>
<CAPTION>
LEHMAN
THE FUND WITH GOVERNMENT/
AVERAGE ANNUAL MAXIMUM SALES MORTGAGE-BACKED
TOTAL RETURN CHARGE DEDUCTED/1/ INDEX/2/ CPI/3/
<S> <C> <C> <C>
One Year 2.74% 8.72% 1.61%
------------------------------------------------------------------
6 Five Years 4.74% 7.18% 2.37%
------------------------------------------------------------------
Ten Years 7.68% 9.14% 3.12%
------------------------------------------------------------------
Lifetime/4/ 7.71% 9.24% 3.16%
------------------------------------------------------------------
</TABLE>

30-day yield/1/: 4.57%
(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 of 4.75% be deducted and include the reinvestment of
dividend and capital gain distributions. 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. Treasury and agency securities, 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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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.

<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment)
----------------------------------------------------------------
<S> <C>
Maximum sales charge imposed on purchases 4.75%/1/
(as a percentage of offering price)
----------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0%
----------------------------------------------------------------
Maximum deferred sales charge 0%/2/
----------------------------------------------------------------
Redemption or exchange fees 0%
</TABLE>

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 certain purchases made without a sales charge.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
----------------------------------------------------------
<S> <C>
Management Fees 0.38%
Service (12b-1) Fees 0.30%*
Other Expenses 0.12%
Total Annual Fund Operating Expenses 0.80%
</TABLE>

* 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:

<TABLE>
<CAPTION>
<S> <C>
One year $ 553
-----------------------------------------------------------
Three years $ 718
-----------------------------------------------------------
Five years $ 898
-----------------------------------------------------------
Ten years $1,418
</TABLE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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,
also called "mortgage-backed securities." These securities will be rated AAA
by Standard & Poor's Corporation or Aaa by Moody's Investor Services, Inc. or
unrated but determined to be of equivalent quality.

The value of certain debt securities held by the fund may be affected by
changing interest rates and prepayment risks. For example, as with other debt
securities, the value of U.S. Government securities generally will decline when
interest 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 current market prices for such securities will fluctuate. Many types of
debt securities, including mortgage-related securities, are subject to
prepayment risk. For example, when interest rates fall, homeowners are more
likely to refinance their home 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 fund's income.

The fund may also hold cash, money market instruments or short-term debt
securities. The size of the fund's cash position will vary and will depend on
various factors, including market conditions and purchases and redemptions of
fund shares. A larger cash position could detract from the achievement of the
fund's objective, but it also provides greater liquidity to meet redemptions or
to make additional investments, and it would reduce the fund's exposure in the
event of 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 that represent good long-term
investment opportunities. Securities may be sold when they no longer represent
good long-term value.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

For periods ended December 31, 1998:

<TABLE>
<CAPTION>
AVERAGE ANNUAL THE FUND WITH LIPPER U.S. GVT LIPPER GNMA
TOTAL RETURN NO SALES CHARGE/1/ AVERAGE/2/ AVERAGE/3/
<S> <C> <C> <C>
One Year 7.87% 8.10% 6.50%
------------------------------------------------------------------
Five Years 5.76% 6.16% 6.53%
------------------------------------------------------------------
Ten Years 8.21% 8.22% 8.31%
------------------------------------------------------------------
Lifetime/4/ 8.10% 7.85% 8.27%
------------------------------------------------------------------
</TABLE>

Distribution rate/5/: 6.26%

1 These fund results were calculated at net asset value according to a formula
that is required for all stock and bond funds and include the reinvestment of
dividend and capital gain distributions.

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. The
results of the underlying funds in the index include the reinvestment of
dividend and capital gain distributions, but do not reflect sales charges and
commissions.

3 The Lipper GNMA Funds Average represents funds that invest at least 65% of
their assets in Government National Mortgage Association securities. The
results of the underlying funds in the index include the reinvestment of
dividend and capital gain distributions, but do not reflect sales charges and
commissions.

4 The fund began investment operations on October 17, 1985.

5 The distribution rate represents actual distributions paid by the fund. It
was calculated at net asset value by annualizing dividends paid by the fund
over one month and dividing that number by the fund's average net asset value
for the month.

The following chart illustrates the asset mix of the fund's investment
portfolio as of the end of the fund's fiscal year, August 31, 1999.

[pie chart]
U.S. Treasuries 47%
Agency Mortgage-Backed Securities 40%
Agency Debentures 9%
Cash & Cash Equivalents 4%
[end pie chart]

Because the fund is actively managed, its holdings will change from time to
time.
------------------------------------------------------------------------------

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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
shareholders. However, the fund understands that its key service providers -
including the investment adviser and its affiliates - are taking steps to
address 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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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 discussed 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
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.

MULTIPLE PORTFOLIO COUNSELOR SYSTEM

Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors 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 Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for U.S. Government Securities Fund are listed on the
following page.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
YEARS OF EXPERIENCE AS AN INVESTMENT PROFESSIONAL
AS PORTFOLIO COUNSELOR (INCLUDNG THE LAST FIVE YEARS)
(AND RESEARCH PROFESSIONAL, -----------------------------------
PORTFOLIO COUNSELORS IF APPLICABLE) FOR WITH CAPITAL
FOR U.S. GOVERNMENT RESEARCH AND
U.S. GOVERNMENT SECURITIES FUND MANAGEMENT
SECURITIES FUND PRIMARY TITLE(S) (APPROXIMATE) COMPANY

OR AFFILIATES TOTAL YEARS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOHN H. President of the fund. 13 years 16 years 17 years
SMET Vice President, Capital
Research and Management
Company
-------------------------------------------------------------------------------------------------------------------
THOMAS H. Vice President - 3 years 10 years 13 years
HOGH Investment Management
Group, Capital Research
and Management Company
-------------------------------------------------------------------------------------------------------------------
JOHN W. Executive Vice President, 9 years 11 years 11 years
RESSNER Capital Research Company*

* Company affiliated with Capital Research and Management Company.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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
Company 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>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service 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, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>

A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning 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
Service Company.

You may invest in the fund through various retirement plans. However, some
retirement 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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES

PURCHASE

Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may purchase additional shares using
various 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
generally without a sales charge. Exchanges of shares from the money market
funds initially purchased without a sales charge generally will be subject to
the appropriate sales charge. Exchanges have the same tax consequences as
ordinary sales and purchases. See "Transactions by Telephone..." for
information regarding electronic exchanges.

THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE 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 POTENTIAL HARM TO THE FUND.

<TABLE>
<CAPTION>
INVESTMENT MINIMUMS
<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 calculates 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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

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.

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
----------------------------------
DEALER
NET COMMISSION
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 4.50% 4.71% 3.75%
$50,000
------------------------------------------------------------------------------
$50,000 but less than 4.00% 4.17% 3.25%
$100,000
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$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 are sold with no initial sales charge.
HOWEVER A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS ARE
MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type
plans investing $1 million or more, or with 100 or more eligible employees, may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by retirement plans, endowments or foundations with
$50 million or more in assets may also be made with no sales charge and are not
subject to a contingent deferred sales charge. The fund may pay a dealer
concession of up to 1% under its Plan of Distribution on investments made with
no initial sales charge.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

REDUCING YOUR SALES CHARGE

You and your "immediate family" (your spouse and your children under the age of
21) 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 below and in the statement of additional information and "Welcome to
the Family."

AGGREGATING ACCOUNTS

To receive a reduced sales charge, investments made by you and your immediate
family (see above) may be aggregated if made for their own account(s) and/or:

- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.

- solely controlled business accounts

- single-participant retirement plans

Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.

CONCURRENT PURCHASES

You may combine simultaneous purchases of two or more American Funds, except
direct purchases of money market funds, to qualify for a reduced sales charge.

RIGHTS OF ACCUMULATION

You may take into account the current value of your existing holdings in The
American Funds Group, as well as individual holdings in various American Legacy
products, to determine your sales charge. Direct purchases of money market
funds are excluded.

STATEMENT OF INTENTION

You may establish a Statement of Intention (SOI) that allows you to combine the
purchases you intend to make over a 13-month period in any non-money market
fund or individual American Legacy product. At your request purchases made
during the previous 90 days may be included; however, capital appreciation and
reinvested dividends and capital gains do not apply toward these combined
purchases. An SOI allows you to take immediate advantage of the

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

maximum quantity discount available. A portion of your account may be held in
escrow to cover additional sales charges which may be due if your total
investments over the 13-month period do not qualify for the applicable sales
charge reduction.

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
expenses 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 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 sponsor
informational meetings for, dealers as described in the statement of additional
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
corporate, partnership or fiduciary accounts.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

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 American
FundsLine OnLine) are limited to $50,000 per shareholder each day.

- Checks must be made payable to the registered shareholder.

- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.

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
account(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
American 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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
DISTRIBUTION ARRANGEMENTS

DIVIDENDS AND DISTRIBUTIONS

The fund declares dividends from net investment income daily and distributes
the accrued dividends, which may fluctuate, to shareholders each month.
Dividends begin accruing one day after payment for shares is received by the
fund or American Funds Service Company. Capital gains, if any, are usually
distributed in December. When a capital gain is distributed, the net asset
value per share is reduced by the amount of the payment.

You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash.

TAX CONSEQUENCES

As with any investment, your investment in the fund could have tax
consequences. If you are not investing through a tax-advantaged retirement
account, you should consider these tax consequences.

TAXES ON DISTRIBUTIONS

Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation
or entitled to tax deferral.

For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of
long-term capital gains are taxable to you as capital gains. Any taxable
distributions you receive from the fund will normally be taxable to you when
made, regardless of whether you reinvest distributions or receive them in cash.

TAXES ON TRANSACTIONS

Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.

Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This information 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>
YEARS ENDED AUGUST 31
---------------------------
1999 1998 1997 1996 1995
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, $13.39 $13.03 $12.78 $13.24 $13.18
Beginning of Year
------------------------------------------------------------------------------
Income From Investment
Operations:
Net investment income .77 .83 .88 .93 1.01
Net gains or losses on
securities (both (.76) .40 .25 (.49) .06
realized and unrealized)
------------------------------------------------------------------------------
Total from investment .01 1.23 1.13 .44 1.07
operations
------------------------------------------------------------------------------
Less Distributions:
Dividends (from net (.77) (.87) (.88) (.90) (1.01)
investment income)
------------------------------------------------------------------------------
Net Asset Value, $12.63 $13.39 $13.03 $12.78 $13.24
End of Year
------------------------------------------------------------------------------
Total return* -0.01% 9.70% 9.08% 3.40% 8.60%
------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year (in $1,322 $1,210 $1,106 $1,216 $1,337
millions)
------------------------------------------------------------------------------
Ratio of expenses to .79% .79% .80% .81% .79%
average net assets
------------------------------------------------------------------------------
Ratio of net income 5.80% 6.24% 6.74% 7.04% 7.79%
to average net assets
------------------------------------------------------------------------------
Portfolio turnover rate 81.10% 81.99% 28.16% 40.01% 46.77%

* Excludes maximum sales charge of 4.75%.
</TABLE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <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>

<TABLE>
<CAPTION>
<S> <C>
FOR 24-HOUR INFORMATION
American FundsLine(R) American FundsLine OnLine(R)
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 is any
inconsistency or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.

---------------------------------------------------------
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.

CODE OF ETHICS

Includes a description of the fund's personal investing policy.

The fund's code of ethics and current SAI has been filed with the Securities
and Exchange Commission ("SEC"). The SAI is incorporated by reference into
this prospectus. These and other related materials about the fund are available
for review or to be copied at the SEC's Public Reference Room in Washington,
D.C. (1-800-SEC-0330) or on the SEC's Internet Web site at http://www.sec.gov.

To request a free copy of any of the documents above:

<TABLE>
<CAPTION>
<S> <C> <C>
Call American Funds Write to the Secretary of the fund
Service Company or 333 South Hope Street Los Angeles,
800/421-0180 ext. 1 California 90071
</TABLE>

Investment Company File No. 811-4318
Printed on recycled paper

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

<PAGE>

U.S. Government Securities Fund/SM/

Prospectus
NOVEMBER 1, 1999

<PAGE>

---------------------------------------------------------
THE AMERICAN FUNDS INCOME SERIES U.S. GOVERNMENT SECURITIES FUND

333 South Hope Street Los Angeles, California 90071

<TABLE>
<CAPTION>
<S> <C> <C>
TICKER SYMBOL: AMUSX NEWSPAPER ABBREV: Govt FUND NO: 22
</TABLE>

22-010-1199/RRD
U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
RISK/RETURN SUMMARY

Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

INVESTMENT RESULTS

The following information illustrates how the fund's results fluctuate. Past
results are not an indication of future results.

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.)

[bar chart]
1989 11.71
1990 9.80
1991 14.16
1992 7.59
1993 10.44
1994 -4.65
1995 15.46
1996 2.82
1997 8.39
1998 7.87
[end bar chart]

The fund's year-to-date return for the nine months ended September 30, 1999
was -1.24%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
Highest 5.77% (quarter ended June 30, 1989)
Lowest -3.91% (quarter ended March 31, 1994)
</TABLE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

For periods ended December 31, 1998:

<TABLE>
<CAPTION>
LEHMAN
THE FUND WITH GOVERNMENT/
AVERAGE ANNUAL MAXIMUM SALES MORTGAGE-BACKED
TOTAL RETURN CHARGE DEDUCTED/1/ INDEX/2/ CPI/3/
<S> <C> <C> <C>
One Year 2.74% 8.72% 1.61%
------------------------------------------------------------------
Five Years 4.74% 7.18% 2.37%
------------------------------------------------------------------
Ten Years 7.68% 9.14% 3.12%
------------------------------------------------------------------
Lifetime/4/ 7.71% 9.24% 3.16%
------------------------------------------------------------------
</TABLE>

30-day yield/1/: 4.57%
(For current yield information, please call American FundsLine/R/ at
1-800-325-3590)

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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
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.

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 certain purchases made without a sales charge.

* 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.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

For periods ended December 31, 1998:

Distribution rate/5/: 6.26%

1 These fund results were calculated at net asset value according to a formula
that is required for all stock and bond funds and include the reinvestment of
dividend and capital gain distributions.

4 The fund began investment operations on October 17, 1985.

The following chart illustrates the asset mix of the fund's investment
portfolio as of the end of the fund's fiscal year, August 31, 1999.

[pie chart]
U.S. Treasuries 47%
Agency Mortgage-Backed Securities 40%
Agency Debentures 9%
Cash & Cash Equivalents 4%
[end pie chart]

Because the fund is actively managed, its holdings will change from time to
time.
------------------------------------------------------------------------------

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
YEAR 2000

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
MANAGEMENT AND ORGANIZATION

INVESTMENT ADVISER

MULTIPLE PORTFOLIO COUNSELOR SYSTEM

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
SHAREHOLDER INFORMATION

SHAREHOLDER SERVICES

AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
LOGO

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES

PURCHASE

EXCHANGE

SHARE PRICE

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

SALES CHARGE

A sales charge may apply to your purchase. Your sales charge may be reduced for
larger purchases as indicated below.

PURCHASES NOT SUBJECT TO SALES CHARGE

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

REDUCING YOUR SALES CHARGE

AGGREGATING ACCOUNTS

To receive a reduced sales charge, investments made by you and your immediate
family (see above) may be aggregated if made for their own account(s) and/or:

- solely controlled business accounts

- single-participant retirement plans

Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.

CONCURRENT PURCHASES

You may combine simultaneous purchases of two or more American Funds, except
direct purchases of money market funds, to qualify for a reduced sales charge.

RIGHTS OF ACCUMULATION

STATEMENT OF INTENTION

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

PLAN OF DISTRIBUTION

OTHER COMPENSATION TO DEALERS

American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.

HOW TO SELL SHARES

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
corporate, partnership or fiduciary accounts.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

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 American
FundsLine OnLine) are limited to $50,000 per shareholder each day.

- Checks must be made payable to the registered shareholder.

- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.

TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE, OR AMERICAN FUNDSLINE
ONLINE

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
DISTRIBUTION ARRANGEMENTS

DIVIDENDS AND DISTRIBUTIONS

TAX CONSEQUENCES

As with any investment, your investment in the fund could have tax
consequences. If you are not investing through a tax-advantaged retirement
account, you should consider these tax consequences.

TAXES ON DISTRIBUTIONS

Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation
or entitled to tax deferral.

TAXES ON TRANSACTIONS

Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
FINANCIAL HIGHLIGHTS

* Excludes maximum sales charge of 4.75%.
</TABLE>

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

U.S. GOVERNMENT SECURITIES FUND / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
FOR 24-HOUR INFORMATION
American FundsLine(R) American FundsLine OnLine(R)
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 is any
inconsistency or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.

---------------------------------------------------------
OTHER FUND INFORMATION

ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS

STATEMENT OF ADDITIONAL INFORMATION (SAI)

Contains more detailed information on all aspects of the fund, including the
fund's financial statements.

CODE OF ETHICS

Includes a description of the fund's personal investing policy.

To request a free copy of any of the documents above:

<TABLE>
<CAPTION>
<S> <C> <C>
Call American Funds Write to the Secretary of the fund
Service Company or 333 South Hope Street Los Angeles,
800/421-0180 ext. 1 California 90071
</TABLE>

Investment Company File No. 811-4318
Printed on recycled paper

<PAGE>

U.S. GOVERNMENT SECURITIES FUND

Part B
Statement of Additional Information

November 1, 1999

This document is not a prospectus but should be read in conjunction with the
current prospectus of U.S. Government Securities Fund (the "fund" or "GVT")
dated November 1, 1999. The prospectus may be obtained from your investment
dealer or financial planner or by writing to the fund at the following address:

The American Funds Income Series
U.S. Government Securities Fund
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
(213) 486-9200

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Page No.
- ---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 6
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 8
Fund Trustees and Officers. . . . . . . . . . . . . . . . . . . . . 9
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 15
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 19
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shareholder Account Services and Privileges . . . . . . . . . . . . 27
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 30
General Information . . . . . . . . . . . . . . . . . . . . . . . . 30
Investment Results and Related Statistics . . . . . . . . . . . . . 32
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Financial Statements
</TABLE>

U.S. Government Securities Fund -- Page 1

<PAGE>

CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.

U.S. GOVERNMENT SECURITIES

- - The fund will invest at least 65% of its assets in securities guaranteed by
the U.S. Government, its agencies or instrumentalities.

- - The fund may also invest in securities sponsored by the U.S. Government but
not guaranteed by the full faith and credit of the U.S. Government, cash
and cash equivalents, short-term debt, and other mortgage-related
securities.

- - The fund will only purchase collateralized mortgage obligations (CMOs) or
mortgage-backed bonds which are fully collateralized by securities issued
by GNMA, FNMA or FHLMC and/or mortgages insured GNMA.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions. The
descriptions below are intended to supplement the material in the prospectus
under "Investment Objective, Strategies and Risks."

U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. For these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government, and
thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.

Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but are
not limited to, Farmers Home Administration, Federal Home Loan Bank, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee
Valley Authority, and Federal Farm Credit Bank System.

These securities will be rated AAA by Standard & Poor's Corporation or Aaa by
Moody's Investors Services, Inc. or unrated but determined to be of equivalent
quality.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by a pool of mortgages or other assets including loans on single family
residences, home equity loans, mortgages on commercial buildings, credit card
receivables, and leases on airplanes or other equipment. Principal and interest
payments made on the underlying asset pools backing these obligations are
typically passed through to investors. Pass-through securities may have either
fixed or adjustable coupons. These securities include those discussed below.

U.S. Government Securities Fund -- Page 2

<PAGE>

"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities. The payment of interest and
principal on securities issued by U.S. government agencies is guaranteed by the
full faith and credit of the U.S. government (in the case of GNMA securities) or
the issuer (in the case of FNMA and FHLMC securities). However, the guarantees
do not apply to the market prices and yields of these securities, which vary
with changes in interest rates.

Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities
and the underlying mortgages are not guaranteed by government agencies. In
addition, these securities generally are structured with one or more types of
credit enhancement. Mortgage-backed securities generally permit borrowers to
prepay their underlying mortgages. Prepayments can alter the effective maturity
of these instruments.

"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages.
Payments of principal and interest are passed-through to each bond at varying
schedules resulting in bonds with different coupons, effective maturities, and
sensitivities to interest rates. In fact, some CMOs may be structured in a way
that when interest rates change the impact of changing prepayment rates on these
securities' effective maturities is magnified.

The fund will only purchase CMOs or mortgage-backed bonds which are fully
collateralized by securities issued by GNMA, FNMA or FHLMC and/or mortgages
insured GNMA.

"Commercial mortgage-backed securities" are backed by mortgages of commercial
property, such as hotels, office buildings, retail stores, hospitals, and other
commercial buildings. These securities may have a lower prepayment uncertainty
than other mortgage-related securities because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of
credit enhancement to protect against potential losses on the underlying
mortgage loans. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans, including the effects of local and other economic
conditions on real estate markets, the ability of tenants to make loan payments,
and the ability of a property to attract and retain tenants.

"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. The values of these securities are sensitive to changes in the
credit quality of the underlying collateral, the credit strength of the credit
enhancement, changes in interest rates, and at times the financial condition of
the issuer. Some asset-backed securities also may receive prepayments which can
change the securities' effective maturities.

INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities, and corporations. The
principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted

U.S. Government Securities Fund -- Page 3

<PAGE>

principal value. For example, in a period of deflation, principal value will be
adjusted downward, reducing the interest payable.

Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.

REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements, under
which it buys a security and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and price. Repurchase agreements
permit the fund to maintain liquidity and earn income over periods of time as
short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the Investment Adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the Investment Adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
fund may be delayed or limited.

FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When the fund agrees to sell such securities it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.

As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of the
fund's portfolio securities decline while the fund is in a leveraged position,
greater depreciation of its net assets would likely occur than were it not in
such a position. As the fund's aggregate commitments under these transactions
increase the opportunity for leverage similarly may increase. The fund will not
borrow money to settle these transactions and therefore, will liquidate other
portfolio securities in advance of settlement if necessary to generate
additional cash to meet its obligations thereunder.

The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement is the sale of a security by a fund
and its agreement to repurchase the security at a specified time and price. A
"roll" transaction is the sale of mortgage-backed or other securities together
with a commitment to purchase similar, but not identical securities at a later
date. The fund assumes the rights and risks of ownership, including the risk of
price and yield

U.S. Government Securities Fund -- Page 4

<PAGE>

fluctuations as of the time of the agreement. The fund intends to treat roll
transactions as two separate transactions: one involving the purchase of a
security and a separate transaction involving the sale of a security. Since the
fund does not intend to enter into roll transactions for financing purposes, it
may treat these transactions as not falling within the definition of "borrowing"
set forth in Section 2(a)(23) of the Investment Company Act of 1940. The fund
will segregate liquid assets which will be marked to market daily in an amount
sufficient to meet its payment obligations under "roll" transactions and reverse
repurchase agreements with broker-dealers (no collateral is required for reverse
repurchase agreements with banks).

RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures that have been adopted by the fund's board of trustees, taking
into account factors such as the frequency and volume of trading, the commitment
of dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.

CASH AND CASH EQUIVALENTS - These securities include (i) commercial paper
(short-term notes up to 9 months in maturity issued by corporations or
governmental bodies), (ii) commercial bank obligations (e.g., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity)), (iii) savings
association and saving bank obligations (e.g., certificates of deposit issued by
savings banks or savings associations), (iv) securities of the U.S. Government,
its agencies or instrumentalities that mature, or may be redeemed, in one year
or less, and (v) corporate bonds and notes that mature, or that may be redeemed,
in one year or less.

MATURITY -- The maturity composition of the fund's portfolio will be adjusted in
response to market conditions and expectations. As described above, the fund
may invest in various mortgage pass-through securities and normally will invest
substantially in GNMA certificates. The fund may also invest in securities with
interest rates that are not fixed but fluctuate based upon changes in market
rates or designated indexes. Variable rate obligations have interest rates that
are adjusted at designated intervals, and interest rates on floating rate
obligations are adjusted whenever there are exchanges in the indexes or market
rates on which their interest rates are based. In some cases the fund has the
ability to demand payment from the dealer or issuer at par plus accrued interest
on short notice (seven days or less). The effective maturity of a floating or
variable rate obligation is deemed to be the longer of (i) the notice period
required before the fund is entitled to receive payment of the obligation upon
demand or (ii) the period remaining until the obligation's next interest rate
adjustment. If not sold or redeemed by the fund through the demand feature,
these obligations would mature on a specified date which may range up to 30
years or more from the date of issuance.

The fund may also engage in the following investment practices, although it has
no current intention to do so over the next twelve months:

LOANS OF PORTFOLIO SECURITIES -- The fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors whose
financial condition is monitored by the Investment Adviser. The borrower must
maintain with the fund's custodian collateral consisting of cash, cash
equivalents or U.S. Government securities equal to at least 100% of the value of
the borrowed securities, plus any accrued interest. The Investment Adviser will
monitor the adequacy of the collateral on a daily basis. The fund may at any
time call a loan of its portfolio

U.S. Government Securities Fund -- Page 5

<PAGE>

securities and obtain the return of the loaned securities. The fund will receive
any interest paid on the loaned securities and a fee or a portion of the
interest earned on the collateral. The fund will limit its loans of portfolio
securities to an aggregate of 33-1/3% of the value of its total assets, measured
at the time any such loan is made.

* * * * * *

PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved.

The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio were replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.

These restrictions provided that the fund may not:

1. Purchase any security (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities ("U.S. Government
securities") if, immediately after and as a result of such investment, more than
5% of the value of the fund's total assets would be invested in securities of
the issuer;

2. Invest 25% or more of the value of its total assets in the securities of
issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. Government securities;

3. Invest in companies for the purpose of exercising control or management;

4. Knowingly purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization;

U.S. Government Securities Fund -- Page 6

<PAGE>

5. Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the fund may purchase or sell readily
marketable debt securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein, including real
estate investment trusts;

6. Acquire securities subject to restrictions on disposition imposed by the
Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities held by the fund would exceed 10% of the value of the fund's total
assets;

7. Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933;

8. Make loans, except that the fund may purchase readily marketable debt
securities and invest in repurchase agreements and make loans of portfolio
securities. The fund will not invest in repurchase agreements maturing in more
than seven days (unless subject to a demand feature) if any such investment,
together with any illiquid securities (including securities which are subject to
legal or contractual restrictions on resale) held by the fund, exceeds 10% of
the value of its total assets;

9. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;

10. Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;

11. Borrow money, except from banks for temporary or emergency purposes not in
excess of 5% of the value of the fund's total assets, except that the fund may
enter into reverse repurchase agreements, provided that the fund will limit its
aggregate borrowings to no more than one-third of its total assets;

12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the sale of securities pursuant to a reverse
repurchase agreement;

13. Purchase or retain the securities of any issuer, if those individual
officers and Trustees of the Trust, its investment adviser, or distributor, each
owning beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;

14. Invest in interests in oil, gas, or other mineral exploration or
development programs;

15. Invest more than 5% of its total assets in warrants which are unattached to
securities;

16. Write, purchase or sell puts, calls or combinations thereof.

Notwithstanding Investment Restriction #4, the fund may invest in securities of
other investment companies if deemed advisable by its officers in connection
with the administration of a deferred compensation plan adopted by the Trustees
pursuant to an exemptive order granted by the Securities and Exchange
Commission. For purposes of Investment Restriction #6, the fund will not invest
more than 15% of its net assets in illiquid securities.

U.S. Government Securities Fund -- Page 7

<PAGE>

FUND ORGANIZATION AND VOTING RIGHTS

The fund, an open-end, diversified management investment company, was organized
as a Massachusetts business trust on May 8, 1985.

All fund operations are supervised by the fund's board of trustees which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in "Trustees and Trustee Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.

The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.

U.S. Government Securities Fund -- Page 8

<PAGE>

FUND TRUSTEES AND OFFICERS
Trustees and Trustee Compensation

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
FROM THE FUND
POSITION DURING FISCAL YEAR
WITH PRINCIPAL OCCUPATION(S) DURING ENDED
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS AUGUST 31, 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard G. Capen, Jr. Trustee Corporate Director and author; former none/3/
6077 San Elijo, Box 2494 United States Ambassador to Spain;
Rancho Santa Fe, CA 92067 former Vice Chairman of the Board,
Age: 63 Knight-Ridder, Inc., former Chairman
and Publisher, The Miami Herald
- ------------------------------------------------------------------------------------------------------------------
H. Frederick Christie Trustee Private Investor. Former President and $4,100/3/
P.O. Box 144 Chief Executive Officer, The Mission
Palos Verdes Estates, CA Group (non-utility holding company,
90274 subsidiary of Southern California
Age: 66 Edison Company)
- ------------------------------------------------------------------------------------------------------------------
+ Don R. Conlan Trustee President (Retired), The Capital Group none/4/
1630 Milan Avenue Companies, Inc.
South Pasadena, CA 91030
Age: 63
- ------------------------------------------------------------------------------------------------------------------
Diane C. Creel Trustee CEO and President, The Earth Technology $4,100/3/
100 W. Broadway Corporation (international consulting
Suite 5000 engineering)
Long Beach, CA 90802
Age: 50
- ------------------------------------------------------------------------------------------------------------------
Martin Fenton Trustee Chairman, Senior Resource Group $4,900/3/
4660 La Jolla Village (management of senior living centers)
Drive
Suite 725
San Diego, CA 92122
Age: 64
- ------------------------------------------------------------------------------------------------------------------
Leonard R. Fuller Trustee President, Fuller Consulting (financial $4,100/3/
4337 Marina City Drive management consulting firm)
Suite 841 ETN
Marina del Rey, CA 90292
Age: 53
- ------------------------------------------------------------------------------------------------------------------
+* Abner D. Goldstine Vice Chairman Senior Vice President and Director, none/4/
Age: 69 and Trustee Capital Research and Management Company
------------------------
- ------------------------------------------------------------------------------------------
+** Paul G. Haaga, Jr. Chairman of Executive Vice President and Director, none/4/
Age: 50 the Board Capital Research and Management Company

- ------------------------------------------------------------------------------------------------------------------
Richard G. Newman Trustee Chairman, President and CEO, AECOM $4,500/3/
3250 Wilshire Boulevard Technology Corporation (architectural
Los Angeles, CA 90010-1599 engineering)
Age: 63
- ------------------------------------------------------------------------------------------------------------------
Frank M. Sanchez Trustee President, The Sanchez Family none/3/
5234 Via San Delarro, #1 Corporation dba McDonald's Restaurants
Los Angeles, CA 90022 (McDonald's licensee)
Age: 55
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/2/ FOR THE TRUSTEE
NAME, ADDRESS AND AGE YEAR ENDED AUGUST 31, 1999 SERVES/2/
- --------------------------------------------------------------------------
<S> <C> <C>
Richard G. Capen, Jr. $ 43,700 8
6077 San Elijo, Box 2494
Rancho Santa Fe, CA 92067
Age: 63
- --------------------------------------------------------------------------
H. Frederick Christie $206,600 19
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 66
- --------------------------------------------------------------------------
+ Don R. Conlan none/4/ 12
1630 Milan Avenue
South Pasadena, CA 91030
Age: 63
- --------------------------------------------------------------------------
Diane C. Creel $ 48,000 12
100 W. Broadway
Suite 5000
Long Beach, CA 90802
Age: 50
- --------------------------------------------------------------------------
Martin Fenton $131,600 15
4660 La Jolla Village
Drive
Suite 725
San Diego, CA 92122
Age: 64
- --------------------------------------------------------------------------
Leonard R. Fuller $ 51,600 13
4337 Marina City Drive
Suite 841 ETN
Marina del Rey, CA 90292
Age: 53
- --------------------------------------------------------------------------
+* Abner D. Goldstine none/4/ 12
Age: 69
- --------------------------------------------------------------------------
+** Paul G. Haaga, Jr. none/4/ 14
Age: 50

- --------------------------------------------------------------------------
Richard G. Newman $107,100 13
3250 Wilshire Boulevard
Los Angeles, CA 90010-1599
Age: 63
- --------------------------------------------------------------------------
Frank M. Sanchez $ 4,000 6
5234 Via San Delarro, #1
Los Angeles, CA 90022
Age: 55
- --------------------------------------------------------------------------
</TABLE>

U.S. Government Securities Fund -- Page 9

<PAGE>

U.S. Government Securities Fund -- Page 10

<PAGE>

+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and
Management Company or the parent company of the Investment Adviser, The
Capital Group Companies, Inc.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071
1 Amounts may be deferred by eligible Trustees under a non-qualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustees.

2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World
Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
The Income Fund of America, Inc., Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
Money Fund of America, U.S. Government Securities Fund and Washington Mutual
Investors Fund, Inc. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.

3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) as of fiscal year
ended August 31, 1999 for participating Trustees is as follows: H. Frederick
Christie ($9,423), Diane C. Creel ($4,659), Martin Fenton, ($15,276), Leonard
R. Fuller ($9,710) and Richard G. Newman ($35,568). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Trustees.
4 Don R. Conlan, Abner D. Goldstine, and Paul G. Haaga, Jr. are affiliated with
the Investment Adviser and, accordingly, receive no compensation from the fund.

U.S. Government Securities Fund -- Page 11

<PAGE>

OFFICERS

<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
John Smet 43 President and PEO Vice President, Capital
11100 Santa Monica Research and Management Company
Blvd.
Los Angeles, CA 90025
- -------------------------------------------------------------------------------
Michael J. Downer 44 Vice President Senior Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
- -------------------------------------------------------------------------------
Julie F. Williams 51 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
- -------------------------------------------------------------------------------
Anthony W. Hynes, Jr. 36 Treasurer Vice President - Fund Business
135 South State Management Group, Capital
College Blvd. Research and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
Kimberly S. Verdick 35 Assistant Assistant Vice President - Fund
333 South Hope Street Secretary Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
- -------------------------------------------------------------------------------
Todd L. Miller 40 Assistant Assistant Vice President - Fund
135 South State Treasurer Business Management Group,
College Blvd. Capital Research and Management
Brea, CA 92821 Company
- -------------------------------------------------------------------------------
</TABLE>

All of the officers listed are officers, and/or directors/trustees of one of
more of the other funds for which Capital Research and Management Company serves
as Investment Adviser.

No compensation is paid by a fund to any officer or Trustee who is a director,
officer or employee of the Investment Adviser or affiliated companies. The fund
pays annual fees of $2,500 to Trustees who are not affiliated with the
Investment Adviser, plus $200 for each Board of Trustees meeting attended, plus
$200 for each meeting attended as a member of a committee of the Board of
Trustees. No pension or retirement benefits are accrued as part of fund
expenses. The Trustees may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the Trustees who are not
affiliated with the Investment Adviser. As of October 1, 1999 the officers and
Directors of the fund and their families, as a group, owned beneficially or of
record less than 1% of the outstanding shares of the fund.

MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains research
facilities in the U.S. and abroad (Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a staff
of professionals, many of whom have a number of years of investment experience.
The Investment Adviser is located at 333 South Hope Street, Los Angeles, CA
90071, and at 135 South State College Boulevard, Brea, CA 92821. The

U.S. Government Securities Fund -- Page 12

<PAGE>

Investment Adviser's research professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.

An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital International
Perspective, providing financial and market information about more than 2,400
companies around the world.

The Investment Adviser is responsible for managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types throughout the world. These investors include privately
owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.

INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser will
continue in effect until May 31, 2000, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Trustees, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).

The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plan of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; costs of
stationery and forms prepared exclusively for the fund; and costs of assembling
and storing shareholder account data.

The management fee is based upon the net assets of the fund and monthly gross
investment income. For the purpose of such computations under the Agreement,
gross investment income means gross income, computed without taking account of
gains or losses from sales of capital assets, but including original issue
discount as defined for federal income tax purposes. The Internal Revenue Code
in general defines original issue discount to mean the difference between the
issue price and the stated redemption price at maturity of certain debt
obligations. The holder of such indebtedness is in general required to treat as
ordinary income the proportionate part of

U.S. Government Securities Fund -- Page 13

<PAGE>

the original issue discount attributable to the period during which the holder
held the indebtedness.

The management fee is based upon the annual rates of 0.30% of the first $60
million of the fund's average net assets, plus 0.21% on average net assets in
excess of $60 million but not exceeding $1 billion, plus 0.18% on average net
assets in excess of $1 billion but not exceeding $3 billion, plus 0.16% on
average net assets in excess of $3 billion, plus 3% of the first $40 million of
annual gross income, plus 2.25% of annual gross investment income in excess of
$40 million but not exceeding $100 million, plus 2% of annual gross investment
income in excess of $100 million. Assuming net assets of $1.3 billion and gross
investment income levels of 6%, 7%, 8%, 9% and 10%, management fees would be
0.37%, 0.39%, 0.41%, 0.43%, and 0.45%, respectively.

The Agreement provides for a management fee reduction to the extent that the
fund's annual ordinary operating expenses exceed 1-1/2% of the first $30 million
of the net assets of the fund and 1% of the net assets in excess thereof.
Expenses which are not subject to this limitation are interest, taxes, and
extraordinary expenses. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses.

For the fiscal years ended August 31, 1999, 1998, 1997, the Investment Adviser
received advisory fees of $5,028,000, $4,450,000, and $4,700,000, respectively.

PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the fiscal year ended
August 31, 1999 amounted to $983,000 after allowance of $4,031,000 to dealers.
During the fiscal years ended 1998 and 1997 the Principal Underwriter retained
$469,000 and $382,000, respectively after an allowance of $1,913,000 and
$1,565,000 to dealers, respectively.

As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has been approved by the full Board of
Trustees and separately by a majority of the trustees who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plan or the Principal Underwriting Agreement, and the Plan
has been approved by the vote of a majority of the outstanding voting securities
of the fund. The officers and trustees who are "interested persons" of the fund
may be considered to have a direct or indirect financial interest in the
operation of the Plan due to present or past affiliations with the Investment
Adviser and related companies. Potential benefits of the Plan to the fund
include improved shareholder services, savings to the fund in transfer agency
costs, savings to the fund in advisory fees and other expenses, benefits to the
investment process from growth or stability of assets and maintenance of a
financially healthy management organization. The selection and nomination of
trustees who are not "interested persons" of the fund are committed to the

U.S. Government Securities Fund -- Page 14

<PAGE>

discretion of the trustees who are not "interested persons" during the existence
of the Plan. The Plan is reviewed quarterly and must be renewed annually by the
Board of Trustees.

Under the Plan the fund may expend up to 0.30% of its net assets annually to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Trustees has approved the category of
expenses for which payment is being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales of
shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan, any defined contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with 100 or more eligible
employees or a community foundation).

Commissions on sales of shares exceeding $1 million (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During the
fiscal year ended August 31, 1999, the fund paid or accrued $3,989,000 for
compensation to dealers under the Plan. As of August 31, 1999, accrued and
unpaid distribution expenses were $647,000.

The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting, selling
or distributing securities, but permit banks to make shares of mutual funds
available to their customers and to perform administrative and shareholder
servicing functions. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. If a bank were prohibited from so acting,
shareholder clients of such bank would be permitted to remain shareholders of
the fund and alternate means for continuing the servicing of such shareholders
would be sought. In such event, changes in the operation of the fund might occur
and shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being provided by
such bank. It is not expected that shareholders would suffer adverse financial
consequences as a result of any of these occurrences.

In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein, and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS - The fund intends to follow the practice of distributing
substantially all of its investment company taxable income which includes any
excess of net realized short-term gains over net realized long-term capital
losses. Additional distributions may be made, if necessary. The fund also
intends to follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However,
the fund may retain all or part of such gain for reinvestment, after paying the
related federal taxes for which shareholders may then be able to claim a credit
against their federal tax liability. If the fund does not distribute the amount
of capital gain and/or net investment income required to be distributed by an
excise tax provision of the Code, the fund may be subject to that excise tax. In
certain circumstances,

U.S. Government Securities Fund -- Page 15

<PAGE>

the fund may determine that it is in the interest of shareholders to distribute
less than the required amount. In this case, the fund will pay any income or
excise taxes due.

Dividends will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other American
Funds, as provided in the prospectus.

TAXES - The fund intends to elect to be treated as a regulated investment
company under Subchapter M of the Code. A regulated investment company
qualifying under Subchapter M of the Code is required to distribute to its
shareholders at least 90% of its investment company taxable income (including
the excess of net short-term capital gain over net long-term capital losses) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code. The fund intends to distribute annually all
of its investment company taxable income and net realized capital gains and
therefore does not expect to pay federal income tax, although in certain
circumstances the fund may determine that it is in the interest of shareholders
to distribute less than that amount.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which the fund pays income tax during the periods
described above. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.

Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking into
account any capital loss carry-forward of the fund.

If any net long-term capital gains in excess of net short-term capital losses
are retained by a fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.

Distributions of investment company taxable income are taxable to shareholders
as ordinary income.

U.S. Government Securities Fund -- Page 16

<PAGE>

Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.

Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable as described above, whether
received in shares or in cash. Shareholders electing to receive distributions in
the form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share on
the reinvestment date.

All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another American
Fund, may result in tax consequences (gain or loss) to the shareholder and must
also be reported on the shareholder's federal income tax return.

Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of the
fund's gross income, a portion of the income distributions of the fund will be
eligible for the deduction for dividends received by corporations. Shareholders
will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.

A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the fund which must
be distributed to shareholders in order to maintain the qualification of the
fund as a regulated investment company and to avoid federal income tax at the
level of the fund.

U.S. Government Securities Fund -- Page 17

<PAGE>

Shareholders will be subject to income tax on such original issue discount,
whether or not they elect to receive their distributions in cash.

The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt U.S. shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.

Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year fund shareholders will
receive a statement of the federal income tax status of all distributions.

The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on dividend income received by him or her.

Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.

U.S. Government Securities Fund -- Page 18

<PAGE>

PURCHASE OF SHARES

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers "for initial "Investment Minimums and Fund
investment minimums. Numbers").
- -------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
- -------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
- -------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By wire Call800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:

Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco, CA
94106
(ABA#121000248)

For credit to the
account of:
American Funds Service
Company a/c#
4600-076178
(fund name)
(your fund acct. no.)
- -------------------------------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER.
- -------------------------------------------------------------------------------
</TABLE>

U.S. Government Securities Fund -- Page 19

<PAGE>

INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine/(R)/ (see description
below):

<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000 02
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 500 11
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 03
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . . . . . . 1,000 12
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . . . . . . 1,000 33
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 16
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . . . . . . 250 10
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . . . . . . 1,000 05
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . . . . . . 1,000 06
The Investment Company of America/(R)/ . . . . . . . . . . . . . . . . . 250 04
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 1,000 14
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 07
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 36
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . . 1,000 35
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . . . . . . 250 01
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . . . . . . 1,000 40
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . . . . . . 1,000 21
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . . . . . . 1,000 08
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 1,000 31
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 1,000 23
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . . . . . . 1,000 43
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . . . . . . 1,000 19
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . . . . . . 1,000 20
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . . . . . . 1,000 24
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . . . . . . 1,000 25
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . . . . . . 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . . . . . . 2,500 09
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . . . . . . 2,500 39
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . . . . . . 2,500 49
___________
*Available only in certain states.
</TABLE>

For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts (IRAs).
Minimums are reduced to $50 for purchases through "Automatic Investment Plans"
(except for the money market funds) or to $25 for purchases by retirement plans
through payroll deductions and may be reduced or waived for shareholders of
other funds in The American Funds Group. TAX-EXEMPT FUNDS SHOULD NOT

U.S. Government Securities Fund -- Page 20

<PAGE>

SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for additional
investments (except as noted above).

SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below. The
money market funds of The American Funds Group are offered at net asset value.
(See "Investment Minimums and Fund Numbers" for a listing of the funds.)

<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE PRICE
- ------------------------------------------ -------- ----- -----
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000 . . . . . . . . . . . 6.10% 5.75% 5.00%
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $25,000 . . . . . . . . 4.99 4.75 4.00
$25,000 but less than $50,000 . . 4.71 4.50 3.75
$50,000 but less than $100,000 . . 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 . 3.63 3.50 2.75
$250,000 but less than $500,000 . 2.56 2.50 2.00
$500,000 but less than $1,000,000 2.04 2.00 1.60
$1,000,000 or more . . . . . . . . . . none none (see below)
- -----------------------------------------------------------------------------
</TABLE>

PURCHASES NOT SUBJECT TO SALES CHARGES - Investment of $1 million or more are
sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED SALES
CHARGE MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE.
Employer-sponsored defined contribution-type plans investing $1 million or more,
or with 100 or more eligible employees, may invest with no sales charge and are
not subject to a contingent deferred sales charge. Investments made by
retirement plans, endowments or foundations with $50 million or more in assets
may also be made with no sales charge and are not subject to a contingent
deferred sales charge. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments made with no initial sales charge.

In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:

(1) current or retired directors, trustees, officers and advisory board members
of the funds managed by Capital Research and Management Company, employees of
Washington Man-

U.S. Government Securities Fund -- Page 21

<PAGE>

agement Corporation, employees and partners of The Capital Group Companies, Inc.
and its affiliated companies, certain family members of the above persons, and
trusts or plans primarily for such persons;

(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;

(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;

(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and

(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.

DEALER COMMISSIONS - Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at net
asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 1.00% on amounts of $1 million to
$4 million, 0.50% on amounts over $4 million to $10 million, and 0.25% on
amounts over $10 million.

OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.

Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing certain
information and assistance with respect to the fund.

REDUCING YOUR SALES CHARGE - You and your "immediate family" (your spouse and
your children under age 21) may combine investments to reduce your costs. You
must let your investment dealer or American Funds Service Company (the "Transfer
Agent") know if you qualify for a reduction in your sales charge using one or
any combination of the methods described below.

U.S. Government Securities Fund -- Page 22

<PAGE>

STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a over a 13-month period and receive the
same sales charge as if all shares had been purchased at once. This
includes purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $50,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to utilize a Statement in order to qualify for a reduced sales
charge, shares equal to 5% of the dollar amount specified in the Statement
will be held in escrow in the shareholder's account out of the initial
purchase (or subsequent purchases, if necessary) by the Transfer Agent. All
dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the
sales charge which would have been paid if the total of such purchases had
been made at a single time. If the difference is not paid by the close of
the period, the appropriate number of shares held in escrow will be
redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for
the balance still outstanding. The Statement may be revised upward at any
time during the 13-month period, and such a revision will be treated as a
new Statement, except that the 13-month period during which the purchase
must be made will remain unchanged. Existing holdings eligible for rights
of accumulation (see the account application) and any individual
investments in American Legacy products (American Legacy, American Legacy
II and American Legacy III variable annuities, American Legacy Life,
American Legacy Variable Life, and American Legacy Estate Builder) may be
credited toward satisfying the Statement. During the Statement period
reinvested dividends and capital gain distributions, investments in money
market funds, and investments made under a right of reinstatement will not
be credited toward satisfying the Statement.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period, and
any individual investments in American Legacy products are added to the
figure determined above. The sum is the Statement amount and applicable
breakpoint level. On the first investment and all other investments made
pursuant to the Statement, a sales charge will be assessed according to the
sales charge breakpoint thus determined.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.

AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:

- employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;

U.S. Government Securities Fund -- Page 23

<PAGE>

- business accounts solely controlled by these individuals (for example,
the individuals own the entire business);

- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

- for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;

- made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or

- for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares.

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES - You may combine purchases of two or more funds in
The American Funds Group, except direct purchases of the money market
funds. Shares of money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a sales charge do
qualify.

RIGHTS OF ACCUMULATION - You may take into account the current value of
your existing holdings in The American Funds Group, as well as your
holdings in Endowments (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or
charity. When determining your sales charge, you may also take into account
the value of your individual holdings, as of the end of the week prior to
your investment, in various American Legacy products (American Legacy,
American Legacy II and American Legacy III variable annuities, American
Legacy Life, American Legacy Variable Life, and American Legacy Estate
Builder). Direct purchases of the money market funds are excluded.

PRICE OF SHARES - Shares are purchased at the offering price next determined
after the purchase order is received and accepted by the fund or the Transfer
Agent; this offering price is effective for orders received prior to the time of
determination of the net asset value and, in the case of orders placed with
dealers, accepted by the Principal Underwriter prior to its close of business.
In the case of orders sent directly to the fund or the Transfer Agent, an
investment dealer MUST be indicated. The dealer is responsible for promptly
transmitting purchase orders to the Principal Underwriter. Orders received by
the investment dealer, the Transfer Agent, or the fund after the time of the
determination of the net asset value will be entered at the next calculated
offering price. Prices which appear in the newspaper are not always indicative
of prices at which you will

U.S. Government Securities Fund -- Page 24

<PAGE>

be purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price whereas purchases and redemptions are
made at the next calculated price.

The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York time) each day the New York Stock Exchange is
open. For example, if the Exchange closes at 1:00 p.m. on one day and at 4:00
p.m. on the next, the fund's share price would be determined as of 4:00 p.m. New
York time on both days. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.</r?

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:

1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. 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.

Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.

Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;

2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and

3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share

Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Trustees.

U.S. Government Securities Fund -- Page 25

<PAGE>

SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. You may sell (redeem) shares in
your account in any of the following ways:

THROUGH YOUR DEALER (certain charges may apply)

- Shares held for you in your dealer's street 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
or record which has been changed within the last 10 days.

Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.

- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.

- You must include any shares you wish to sell that are in certificate
form.

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/(R)/ and
American FundsLine OnLine/(R)/) 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.

MONEY MARKET FUNDS

- You may have redemptions of $1,000 or more wired to your bank by
writing American Funds Service Company.

- You may establish check writing privileges (use the money market
funds application).

U.S. Government Securities Fund -- Page 26

<PAGE>

- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group within
90 days after the date of the redemption or distribution. Redemption proceeds of
shares representing direct purchases in the money market funds are excluded.
Proceeds will be reinvested at the next calculated net asset value after your
request is received and accepted by the Transfer Agent.

CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds made
within twelve months of purchase on investments of $1 million or more (other
than redemptions by employer-sponsored retirement plans). The charge is 1% of
the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be redeemed first for purposes
of calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from 403(b) plans or IRAs due to death, disability
or attainment of age 591/2; for tax-free returns of excess contributions to
IRAs; and for redemptions through certain automatic withdrawals not exceeding
10% of the amount that would otherwise be subject to the charge.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments into the American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. If your
bank account cannot be debited due to insufficient funds, a stop-payment or the
closing of the account, the plan may be terminated and the related investment
reversed. You may change the amount of the investment or discontinue the plan at
any time by writing to the Transfer Agent.

AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares at no sales charge unless you indicate otherwise on the
account application. You also

U.S. Government Securities Fund -- Page 27

<PAGE>

may elect to have dividends and/or capital gain distributions paid in cash by
informing the fund, the Transfer Agent or your investment dealer.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:

(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),

(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,

(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.

You may exchange shares by writing to the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine and
American FundsLine OnLine (see "American FundsLine and American FundsLine
OnLine" below), or by telephoning 800/421-0180 toll-free, faxing (see "Principal
Underwriter and Transfer Agent" in the prospectus for the appropriate fax
numbers) or telegraphing the Transfer Agent. (See "Telephone and Computer
Purchases, Redemptions and Exchanges" below.) Shares held in corporate-type
retirement plans for which Capital Guardian Trust Company serves as trustee may
not be exchanged by telephone, computer, fax or telegraph. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "Purchase of Shares--Price of
Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.

AUTOMATIC EXCHANGES - You may automatically exchange shares in amounts of $50 or
more among any of the funds in The American Funds Group on any day (or preceding
business day if the day falls on a non-business day of each month you designate.
You must either (a) meet the minimum initial investment requirement for the
receiving fund OR (b) the originating fund's balance must be at least $5,000 and
the receiving fund's minimum must be met within one year.

U.S. Government Securities Fund -- Page 28

<PAGE>

AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.

ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.

AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Shareholder Account Services and
Privileges - Telephone and Computer Purchases, Redemptions and Exchanges" below.
You will need your fund number (see the list of funds in The American Funds
Group under "Purchase of Shares - Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of your Social Security
number or other tax identification number associated with your account) and
account number.

TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, 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 liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, the fund may be liable
for losses due to unauthorized or fraudulent instructions. In the event that
shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions, or a natural disaster, redemption and exchange
requests may be made in writing only.

SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.

REDEMPTION OF SHARES - The fund's declaration of trust permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder owns of record
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the

U.S. Government Securities Fund -- Page 29

<PAGE>

fund's current registration statement under the 1940 Act, and subject to such
further terms and conditions as the Board of Trustees of the fund may from time
to time adopt.

EXECUTION OF PORTFOLIO TRANSACTIONS

The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.

There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment Adviser
believes that to do so is in the interest of the fund. When such concurrent
authorizations occur, the objective is to allocate the executions in an
equitable manner. The fund will not pay a mark-up for research in principal
transactions.

Dealer concessions paid on underwriting transactions for the fiscal years ended
August 31, 1999, 1998 and 1997, amounted to $56,000, $8,000 and $73,000,
respectively.

GENERAL INFORMATION

CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S. banks
or foreign branches of U.S. banks.

TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee of
$1,001,000 for the fiscal year ended August 31, 1999.

INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, serves as the fund's independent auditors
providing audit services, preparation of tax returns and review of certain
documents to be filed with the Securities and Exchange Commission. The financial
statements included in this Statement of Additional Information from the Annual
Report have been so included in reliance on the report Deloitte & Touche LLP,
independent auditors, given on the authority of said firm as experts in
accounting and auditing. The selection of the fund's independent accountants is
reviewed and determined annually by the Board of Trustees.

U.S. Government Securities Fund -- Page 30

<PAGE>

REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on August 31. Shareholders
are provided at least semiannually with reports showing the investment
portfolio, financial statements and other information. The fund's annual
financial statements are audited by the fund's independent auditors, Deloitte &
Touche LLP. In an effort to reduce the volume of mail shareholders receive from
the fund when a household owns more than one account, the Transfer Agent has
taken steps to eliminate duplicate mailings of shareholder reports. To receive
additional copies of a report, shareholders should contact the Transfer Agent.

YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that these
service providers are taking steps to address the "Year 2000 problem". However,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.

PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments. The personal
investing policy is consistent with Investment Company Institute guidelines.
This policy includes: a ban on acquisitions of securities pursuant to an initial
public offering; restrictions on acquisitions of private placement securities;
pre-clearance and reporting requirements; review of duplicate confirmation
statements; annual recertification of compliance with codes of ethics; blackout
periods on personal investing for certain investment personnel; ban on
short-term trading profits for investment personnel; limitations on service as a
director of publicly traded companies; and disclosure of personal securities
transactions.

SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts where the fund was organized and California where the
fund's principal office is located, shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the fund. However, the risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder liability
for acts, omissions, obligations or affairs of the fund and provides that notice
of the disclaimer may be given in each agreement, obligation, or instrument
which is entered into or executed by the fund or Trustees. The Declaration of
Trust provides for indemnification out of fund property of any shareholder held
personally liable for the obligations of the fund and also provides for the fund
to reimburse such shareholder for all legal and other expenses reasonably
incurred in connection with any such claim or liability.

Under the Declaration of Trust, the Trustees, officers, employees or agents of
the fund are not liable for actions or failure to act; however, they are not
protected from liability by reason of their willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
their office.

U.S. Government Securities Fund -- Page 31

<PAGE>

OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Auditors contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- AUGUST 31, 1999

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $12.63
Maximum offering price per share
(100/95.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $13.26
</TABLE>

INVESTMENT RESULTS AND RELATED STATISTICS

The fund's yield is 5.39% based on a 30-day (or one month) period ended August
31, 1999, computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:

YIELD = 2[( a-b/cd + 1)/6/ -1]

Where: a = dividends and interest earned during the period.

b =
expenses accrued for the period (net of reimbursements).

c =
the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d =
the maximum offering price per share on the last day of the
period.

The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.

The fund's one year total return and average annual total return for the five-
and ten-year periods ended August 31, 1999 were -4.78%, 5.05% and 6.64%,
respectively. The fund's average annual total return at net asset value for the
one-, five- and ten-year periods ended on August 31, 1999 were -0.01%, 6.08% and
7.16, respectively.

In calculating average annual total return, the fund assumes: (1) deduction of
the maximum sales load of 4.75% from the $1,000 initial investment; (2)
reinvestment of dividends and distributions at net asset value on the
reinvestment date determined by the Board; and (3) a complete redemption at the
end of any period illustrated. In addition, the fund will provide lifetime
average total return figures.

U.S. Government Securities Fund -- Page 32

<PAGE>

The fund may also, at times, calculate total return based on net asset value per
share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.

The fund may include information on its investment results and/or comparisons of
its investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.

The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.

The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.

The fund may compare its investment results with the Consumer Price Index, which
is a measure of the average change in prices over time in a fixed market basket
of goods and services (e.g. food, clothing, and fuels, transportation, and other
goods and services that people buy for day-to-day living).

The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.

The investment results for the fund set forth below were calculated as described
in the fund's prospectus. The fund's results will vary from time to time
depending upon market conditions, the composition of the fund's portfolio and
operating expenses of the fund, so that any investment results reported by the
fund should not be considered representative of what an investment in the fund
may earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative to
the risks associated with the fund's investment objective and policies.

U.S. Government Securities Fund -- Page 33

<PAGE>

EXPERIENCE OF INVESTMENT ADVISER - The Investment Adviser manages nine growth
and growth-income funds that are at least 10 years old. In the rolling 10-year
periods since January 1, 1969 (138 in all), those funds have had better total
returns than their comparable Lipper indexes and 128 of 138 periods.

Note that past results are not an indication of future investment results. Also,
the fund has different investment policies than the funds mentioned above. These
results are included solely for the purpose of informing investors about the
experience and history of Capital Research and Management Company.

IF YOU ARE CONSIDERING GVT FOR AN
INDIVIDUAL RETIREMENT ACCOUNT HERE ARE THE BENEFITS OF SYSTEMATIC INVESTING:
<TABLE>
<CAPTION>

Here's how much you would have if you
invested $2,000 a year in the Fund:
-----------------------------------
2 Years 4 Years Lifetime
(9/1/97 - 8/31/99) (9/1/95 - 8/31/99) (10/17/85 - 8/31/99)
- -----------------------------------------------------------------------------
<S> <C> <C>
$3,994 $8,629 $45,413
- -----------------------------------------------------------------------------
</TABLE>

U.S. Government Securities Fund -- Page 34

<PAGE>

SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
. . . AND HAD TAKEN
ALL DIVIDENDS AND
CAPITAL GAIN
DISTRIBUTIONS
IN SHARES, YOUR
IF YOU HAD INVESTMENT WOULD
INVESTED $10,000 HAVE BEEN WORTH
IN THE FUND THIS MANY THIS MUCH AT
YEARS AGO . . . AUGUST 31, 1999

NUMBER PERIODS
OF YEARS 9/1 - 8/31 VALUE**
<S> <C> <C>
1
1998 - 1999 $ 9,522
2
1997 - 1999 10,447
3
1996 - 1999 11,393
4
1995 - 1999 11,783
5
1994 - 1999 12,794
6
1993 - 1999 12,324
7
1992 - 1999 13,856
8
1991 - 1999 15,656
9
1990 - 1999 17,593
10
1989 - 1999 19,022
11
1988 - 1999 20,881
12
1987 - 1999 22,636
13 1986 - 1999 23,012
Lifetime 1985* - 1999 26,037
</TABLE>

U.S. Government Securities Fund -- Page 35

<PAGE>

Illustration of a $10,000 investment in the Fund with dividends reinvested
(For the lifetime of the Fund October 17, 1985 - August 31, 1999)

<TABLE>
<CAPTION>
COSTOFSHARES VALUEOFSHARES**
------------ ---------------
FISCAL TOTAL FROM FROM FROM
YEAR END ANNUAL DIVIDENDS INVESTMENT INITIAL CAPITAL GAINS DIVIDENDS TOTAL
8/31 DIVIDENDS (CUMULATIVE) COST INVESTMENT REINVESTED REINVESTED VALUE
---- --------- ------------ ---- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1986* $ 825 $ 825 $ 10,825 $ 9,920 $ 26 $ 833 $10,779
1987 1,035 1,860 11,860 9,167 38 1,748 10,953
1988 1,099 2,959 12,959 9,027 37 2,809 11,873
1989 1,211 4,170 14,170 8,987 37 4,016 13,040
1990 1,289 5,459 15,459 8,833 37 5,227 14,097
1991 1,383 6,842 16,842 9,047 37 6,753 15,837
1992 1,382 8,224 18,224 9,420 39 8,445 17,904
1993 1,417 9,641 19,641 9,820 41 10,269 20,130
1994 1,440 11,081 21,081 8,787 36 10,557 19,380
1995 1,547 12,628 22,628 8,827 37 12,184 21,048
1996 1,493 14,121 24,121 8,520 35 13,208 21,763
1997 1,545 15,666 25,666 8,687 36 15,016 23,739
1998 1,624 17,290 27,290 8,927 37 17,077 26,041
1999 1,538 18,828 28,828 8,420 35 17,582 26,037
</TABLE>

The dollar amount of capital gain distributions during the period was $41.
* From inception on October 17, 1985.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.

U.S. Government Securities Fund -- Page 36

<PAGE>

APPENDIX
Description of Commercial Paper Ratings

MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate
- -------
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.

Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

S&P ratings of commercial paper are graded into four categories ranging from "A"
- ---
for the highest quality obligations to "D" for the lowest.

A -- Issues assigned its highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with numbers
1, 2, and 3 to indicate the relative degree of safety.

A-1 -- This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 -- Capacity for timely payments on issues with this designation is strong;
however, the relative degree of safety is not as high as for issues designated
"A-1."

U.S. Government Securities Fund -- Page 37

[begin pie chart]
The American Funds Income Series
U.S. Government Securities Fund
August 31, 1999
[S] [C]
Portfolio Composition

U.S. Treasuries 47%
Agency Mortgage-Backed Securit 40%
Agency Debentures 9%
Cash & Equivalents 4%

[end pie chart]

<TABLE>
The American Funds Income Series
U.S. Government Securities Fund

Investment Portfolio
August 31, 1999

<S> <C> <C> <C>
Principal Market Percent
Amount Value of Net
(000) (000) Assets

Federal Agency Obligations -
Mortgage Pass-Throughs (1) - 33.67%
Fannie Mae:
5.50% 2014 $4,834 $4,502
6.00% 2008-2013 12,304 11,657
6.27% 2005 6,922 6,742
6.35% 2005 16,402 16,026
6.50% 2028 5,889 5,574
7.00% 2009-2028 20,174 19,938
7.50% 2039 9,384 9,363
8.00% 2005-2023 2,225 2,261
8.282% 2002 (2) 3,441 3,472
8.50% 2007-2027 4,725 4,889
9.00% 2009-2023 1,271 1,330
9.50% 2011-2022 1,088 1,153
10.00% 2017-2021 601 650
11.00% 2010-2029 3,550 3,926
11.50% 2015 463 516
12.00% 2000-2029 3,899 4,387 8.47%
12.25% 2011-2013 365 408
12.50% 2001-2029 6,749 7,693
12.75% 2012 1 2
13.00% 2028 3,070 3,506
13.25% 2011-2014 508 583
13.50% 2015 1,434 1,651
14.00% 2013-2014 503 588
15.00% 2013 924 1,120
15.5% 2012 12 14
16.00% 2012 9 11
Freddie Mac:
6.00% 2014 5,735 5,462
6.50% 2014 9,976 9,693
7.00% 2008 660 657
8.00% 2012 1,715 1,759
8.25% 2007 407 415
8.50% 2009-2021 7,309 7,560
8.75% 2008 359 369
9.00% 2010-2021 2,427 2,523
10.50% 2006-2016 299 322
10.75% 2010 148 159
11.00% 2015-2016 404 441
11.50% 2015 165 180
11.75% 2014 244 269
12.00% 2000-2017 4,472 4,985
12.25% 2015 254 283
12.50% 2015-2019 4,057 4,549
13.00% 2014-2015 2,716 3,087
13.50% 2018 123 141 3.28
13.75% 2014 18 21
14.00% 2011-2014 119 138
14.5% 2010-2011 80 92
14.75% 2010 62 72
15.00% 2011 28 33
15.50% 2011 25 29
16.00% 2012 19 22
16.25% 2011 72 84
Government National Mortgage Assn.:
5.50% 2013 2,510 2,345
6.00% 2008-2030 96,805 90,642
6.50% 2013-2029 63,245 60,038
7.00% 2008-2029 58,907 57,251
7.50% 2009-2028 23,487 23,496
8.00% 2022-2027 15,182 15,389
8.50% 2020-2023 2,888 2,992
9.00% 2009-2022 9,601 10,117
9.50% 2009-2021 4,150 4,432
9.75% 2011-2012 1,132 1,216
10.00% 2016-2019 13,424 14,665
10.25% 2012 69 74
10.50% 2015-2019 1,158 1,277
11.00% 2013 144 159
11.25% 2001-2016 1,619 1,743
11.50% 2000-2014 61 67 21.92
11.75% 2000-2015 69 73
12.00% 2000-2016 1,140 1,264
12.25% 2013-2015 169 188
12.75% 2014-2015 195 220
13.00% 2011-2015 1,112 1,276
13.25% 2013-2015 181 205
13.50% 2013 172 200
14.00% 2014 96 111
14.50% 2012-2014 247 292
16.00% 2011-2012 21 25
----------------------
445,064 33.67
----------------------

Federal Agency Obligations
Other - 9.01%
Federal Home Loan Bank Bonds:
5.625% 2001 10,000 9,927
5.50% 2003 10,000 9,691 3.43
6.00% 2004 10,000 9,648
5.80% 2008 17,325 16,042
Freddie Mac Notes:
5.125% 2003 17,000 16,190 1.22
5.75% 2008 11,000 10,201 .77
Tennessee Valley Authority:
Series G, 5.375% 2008 42,670 38,276
Series E, 6.25% 2017 10,000 9,108 3.59
----------------------
119,083 9.01
----------------------

Collateralized Mortgage
Obligations (1) - 5.03%
Fannie Mae:
Series 91-50, Class H, 7.75% 2006 1,628 1,648
Series 91-146, Class Z, 8.00% 2006 3,597 3,683
Series 1997-M5, Class C, ACES, 6.74% 2007 5,000 4,862
Series 1998-M6, Class A2, ACES, 6.32% 2008 17,500 16,505
Trust 35, Class 2, 12.00% 2018 254 279 3.90
Series 90-93, Class G, 5.50% 2020 1,505 1,430
Series 1992-119, Class Z, 8.00% 2022 4,134 4,168
Series 1994-4, Class ZA, 6.50% 2024 5,400 4,840
Series 1997-M6, Class ZA, 6.85% 2026 11,464 10,238
Series 1997-28, Class C, 7.00% 2027 4,000 3,846
Freddie Mac:
Series 1716, Class A, 6.50% 2009 10,586 10,259
Series 83-A, Class 3, 11.875% 2013 112 122
Series 83-B, Class 3, 12.50% 2013 892 978
Series 178, Class Z, 9.25% 2021 1,376 1,420 1.13
Series 1567, Class A, 5.527% 2023 (2) 1,133 1,104
Series 2030, Class F, 5.769% 2028 (2) 1,043 1,051
----------------------
66,433 5.03
----------------------

Collateralized Mortgage Obligations
(Privately Originated)(1),(3) - .98%

Collateralized Mortgage Obligation Trust,
Series 63, Class Z, 9.00% 2020 2,893 2,975 .23
PaineWebber CMO Pac,
Series O, Class 5, 9.50% 2019 2,566 2,685 .20
Ryland Acceptance Corp. Four,
Series 88, Class E, 7.95% 2019 7,216 7,266 .55
----------------------
12,926 .98
----------------------

Development Authorities - 0.21%

International Bank for Reconstruction and
Development 12.25% December 2008 2,000 2,735 .21
----------------------

U. S. Treasury Obligations - 46.91%

6.375% January 2000 8,000 8,026 .61
5.875% June 2000 13,200 13,237 1.00
13.125% May 2001 19,000 21,236 1.60
13.375% August 2001 8,000 9,099 .69
6.25% October 2001 1,000 1,009 .08
15.75% November 2001 5,500 6,613 .50
14.25% February 2002 15,000 17,850 1.35
5.875% September 2002 31,000 30,995 2.34
11.625% November 2002 48,000 55,748 4.22
5.75% April 2003 19,770 19,650 1.49
10.75% May 2003 10,250 11,847 .90
5.75% August 2003 3,170 3,148 .24
11.875% November 2003 6,000 7,260 .55
7.25% May 2004 39,750 41,750 3.16
7.875% November 2004 3,655 3,945 .30
11.625% November 2004 7,300 9,053 .68
7.50% February 2005 7,980 8,491 .64
0.00% May 2006 71,240 47,357 3.58
6.25% February 2007 31,000 31,102 2.35
6.625% May 2007 40,000 41,031 3.10
6.125 August 2007 16,530 16,476 1.25
10.375% November 2009 21,000 24,701 1.87
10.00% May 2010 4,000 4,691 .35
12.75% November 2010 10,000 13,236 1.00
13.875% May 2011 8,000 11,238 .85
10.375% November 2012 35,000 43,739 3.31
12.00% August 2013 11,000 15,139 1.14
9.875% November 2015 2,345 3,139 .24
8.875% August 2017 57,000 71,250 5.39
7.875% February 2021 16,250 18,847 1.43
7.125% February 2023 8,375 9,067 .69
----------------------
619,970 46.90
----------------------
Total Bonds and Notes (cost: $1,307,054,000) 1,266,211 95.80
----------------------

Short-Term Securities

Federal Agency Discount Notes - 3.15%

Federal Home Loan Bank due 9/1/99 14,780 14,778 1.12
Federal Home Loan Bank due 10/13/99 27,000 26,834 2.03
----------------------
Total Short-Term Securities (cost: $41,612,000) 41,612 3.15
----------------------

Total Investment Securities (cost: $1,348,666,000) 1,307,823 98.95

Excess of cash and receivables over payables 13,896 1.05
----------------------
Net Assets $1,321,719 100.00
====================

(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.

See Notes to Financial Statements

</TABLE>

<TABLE>
The American Funds Income Series
U.S. Government Securities Fund
Financial Statements (Unaudited)
<S> <C> <C>
- ---------------------------------------- -----------------------------
Statement of Assets and Liabilities
at August 31, 1999 (dollars in thousands)
- ---------------------------------------- -----------------------------
Assets:
Investment securities at market
(cost: $1,348,666) $1,307,823
Cash 66
Receivables for-
Sales of investments $ 312
Sales of fund's shares 3,238
Accrued interest 15,672
Other 4 19,226
-----------------------------
1,327,115
Liabilities:
Payables for-
Purchases of investments 370
Repurchases of fund's shares 1,789
Dividends payable 2,083
Management services 428
Accrued expenses 726 5,396
-----------------------------
Net Assets at August 31, 1999-
Equivalent to $12.63 per share on
104,642,524 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $1,321,719
============

Statement of Operations
for the year ended August 31, 1999 (dollars in thousands)
-----------------------------
Investment Income:
Income:
Interest $ 87,717

Expenses:
Management services fee $5,028
Distribution expenses 3,989
Transfer agent fee 1,001
Reports to shareholders 78
Registration statement and prospectus 152
Postage, stationery and supplies 199
Trustees' fees 25
Auditing and legal fees 45
Custodian fee 26
Taxes other than federal income tax 13
Other expenses 36 10,592
-----------------------------
Net investment income 77,125
------------
Realized Loss and Unrealized
Depreciation on Investments:
Net realized loss (1,614)
Net on investments unrealized depreciation:
Beginning of year 37,133
End of year (40,843)
--------------------
Net unrealized depreciation on investments (77,976)
------------
Net realized loss and unrealized
depreciation on investments (79,590)
------------
Net Decrease in Net Assets Resulting
from Operations $ (2,465)
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- -----------------------------
Year ended Year ended
August 31, August 31
1999 1998
Operations: -----------------------------
Net investment income $ 77,125 $ 70,243
Net realized loss on investments (1,614) (187)
Net change in unrealized (depreciation)
appreciation on investments (77,976) 34,508
-----------------------------
Net (decrease) increase in net assets
resulting from operations (2,465) 104,564
-----------------------------
Dividends Paid to Shareholders (77,414) (73,356)
-----------------------------
Capital Share Transactions:
Proceeds from shares sold:
59,582,486 and 28,937,114
shares, respectively 788,396 383,161
Proceeds from shares issued in
reinvestment of net investment income
dividends: 4,640,790 and 4,071,001
shares, respectively 61,070 53,739
Cost of shares repurchased:
49,917,467 and 27,545,162
shares, respectively (657,673) (363,863)
-----------------------------
Net increase in net assets resulting
from capital share transactions 191,793 73,037
-----------------------------
Total Increase in Net Assets 111,914 104,245

Net Assets:
Beginning of year 1,209,805 1,105,560
-----------------------------
End of year (including undistributed
net investment income of $1,176 and
$1,465, respectively) $1,321,719 $1,209,805
================ =============

See Notes to Financial Statements

</TABLE>

Notes to Financial Statements

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 financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. 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. The ability of the
issuers of the debt securities held by the fund to meet their obligations may
be affected by economic developments in a specific industry, state or region.
Short-term securities maturing within 60 days are valued at amortized cost,
which approximates market value.

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 - Security
transactions are accounted for as of the trade date. Realized gains and losses
from securities transactions are determined based on specific identified cost.
In the event securities are purchased on a delayed delivery or "when-issued"
basis, the fund will instruct the custodian to segregate liquid assets
sufficient to meet its payment obligations in these transactions. Dividend
income is recognized on the ex-dividend date, and interest income is recognized
on an accrual basis. Market discounts, premiums and original issue discounts on
securities purchased are amortized daily over the expected life of the
security.

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

The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.

As of August 31, 1999, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $40,843,000, of which $9,169,000
related to appreciated securities and $50,012,000 related to depreciated
securities. There was no difference between book and tax realized losses on
securities transactions for the year ended August 31, 1999. During the year
ended August 31, 1999, the fund realized, on a tax basis, a net capital loss of
$1,614,000 on securities transactions. The fund had available at August 31,
1999 a net capital loss carryforward totaling $68,463,000 which may be used to
offset capital gains realized during subsequent years through 2007 and thereby
relieve the fund and its shareholders of any federal income tax liability with
respect to the capital gains that are so offset. The fund will not make
distributions from capital gains while a capital loss carryforward remains. In
addition, the fund has deferred, for tax purposes, to fiscal year ending August
31, 2000, the recognition of capital losses totaling $4,005,000 which were
realized during the period November 1, 1998 through August 31, 1999. The cost
of portfolio securities for book and federal income tax purposes was
$1,348,666,000 at August 31, 1999.

3. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $5,028,000 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
(asset-based fee); plus 3.00% on the first $3,333,333 of the fund's monthly
gross investment income; and 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
(income-based fee).

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 year ended
August 31, 1999, distribution expenses under the Plan were limited to
$3,989,000. Had no limitation been in effect, the fund would have paid
$4,156,000 in distribution expenses under the Plan. As of August 31, 1999,
accrued and unpaid distribution expenses were $647,000.

American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $983,000 (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 $1,001,000.

DEFERRED 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 August 31, 1999, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993) net of any
payments to Trustees, were $75,000.

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, excluding
short-term securities of $1,147,057,000 and $951,728,000, respectively, during
year ended August 31, 1999.

As of August 31, 1999, net realized loss on investments was $72,469,000
and paid-in capital was $1,433,855,000. The fund reclassified $19,043,000 from
undistributed net realized gains to paid-in capital for the year ended August
31, 1999 as a result of permanent differences between book and tax.

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 $26,000 includes $25,000 that was paid by these credits
rather than in cash.

<TABLE>
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS
- --------------------------------- -------- -----------------------------

Year Ended August 31
-------- -----------------------------
1999 1998 1997 1996 1995
-------- -----------------------------
Net Asset Value, Beginning
of Year $13.39 $13.03 $12.78 $13.24 $13.18
-------- -----------------------------

Income from Investment
Operations:
Net investment income .77 .83 .88 .93 1.01
Net gains or lossess on securities
(both realized and unrealized) (.76) .40 .25 (.49) .06
-------- -----------------------------
Total from investment operations .01 1.23 1.13 .44 1.07
-------- -----------------------------
Less Distributions:
Dividends (from net investment
income) (.77) (.87) (.88) (.90) (1.01)
-------- -----------------------------
Net Asset Value, End of Year $12.63 $13.39 $13.03 $12.78 $13.24
======= =============================
Total Return* (.01)% 9.70% 9.08% 3.40% 8.60%

Ratios/Supplemental Data:
Net assets, end of year (in
millions) $1,322 $1,210 $1,106 $1,216 $1,337
Ratio of expenses to average
net assets .79% .79% .80% .81% .79%
Ratio of net income to
average net assets 5.80 6.24% 6.74% 7.04% 7.79%
Portfolio turnover rate 81.10 81.99% 28.16% 40.01% 46.77%

*Excludes maximum sales charge of 4.75%.

</TABLE>

Independent Auditors' Report
To the Board of Trustees and Shareholders of
The American Funds Income Series-
U.S. Government Securities Fund:

We have audited the accompanying statement of assets and liabilities of
The American Funds Income Series -- U.S. Government Securities Fund (the
"Fund"), including the schedule of portfolio investments as of August 31, 1999,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended,
and the per-share data and ratios for each of the five years in the period then
ended. These financial statements and the per-share data and ratios are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the per-share data and ratios based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at August 31, 1999, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of The American Funds Income Series -- U.S. Government Securities Fund
at August 31, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the per-share data and ratios for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Los Angeles, California

September 30, 1999

Tax Information (unaudited)

Certain states may exempt from income taxation a portion of the dividends paid
from net investment income if derived from direct U.S. Treasury obligations.
For purposes of computing this exclusion, 53% of the dividends paid by the fund
from net investment income was derived from interest on direct U.S. Treasury
obligations.

Dividends received by retirement plans such as IRAs, Keogh-type plans, and
403(b) plans need not be reported as taxable income. However, many retirement
trusts may need this information for their annual information reporting.

SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FISCAL YEAR AND NOT A CALENDAR
YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION
WHICH WILL BE MAILED IN JANUARY 2000 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO
BE INCLUDED ON THEIR RESPECTIVE 1999 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.

PART C
OTHER INFORMATION
U.S. GOVERNMENT SECURITIES FUND

ITEM 23. EXHIBITS

(a) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(b) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(c) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(d) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(e) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(f) None
(g) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(h) None
(i) Not applicable to this filing
(j) Consent of independent auditors
(k) None
(l) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(m) Previously filed (see Post-Effective Amendment No. 19 filed October 29,
1997)
(n) None
(o) None
(p) Code of Ethics

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None

ITEM 25. INDEMNIFICATION

Registrant is a joint-insured under Investment Advisor/Mutual Fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company and ICI Mutual Insurance Company which
insures its officers and Trustees against certain liabilities. However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.

ITEM 25. INDEMNIFICATION (CONTINUED)

Article VI of the Trust's By-Laws states:

(a) The Trust shall indemnify any Trustee or officer of the Trust who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith or in a manner reasonably believed to be
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such person's
conduct was unlawful.

(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.

(c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity for the determination as to the standard of
conduct as provided in subparagraph (d).

ITEM 25. INDEMNIFICATION (CONTINUED)

(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion.

(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking and security by or on behalf of the Trustee or officer to
repay such amount unless it shall ultimately be determined that such person is
entitled to be indemnified by the Trust as authorized herein.

(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.

(g) Any indemnification pursuant to this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled and shall
continue as to a person who has ceased to be Trustee or officer and shall inure
to the benefit of the heirs, executors and administrators of such person.

(h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed to
protect any Trustee, officer, distributor, investment adviser or controlling
shareholder of the Trust against any liability to the Trust or to its
shareholders to which such person would otherwise be subject by reason of
willful malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.

(i) The Trust shall have the power to purchase and maintain insurance on
behalf of any person against any liability asserted against or incurred by such
person, whether or not the Trust would have the power to indemnify such person
against such liability under the provisions of this Article. Nevertheless,
insurance will not be purchased or maintained by the Trust if the purchase or
maintenance of such insurance would result in the indemnification of any person
in contravention of any rule or regulation of the SEC.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer of
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer of controlling person
in connection with the securities being registered, the Registrant will, unless
in

ITEM 25. INDEMNIFICATION (CONTINUED)

the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

None

ITEM 27. PRINCIPAL UNDERWRITERS

(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The Investment Company of America, Intermediate Bond Fund of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of America,
U.S. Treasury Money Fund of America and Washington Mutual Investors Fund, Inc.

<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David L. Abzug Regional Vice President None

27304 Park Vista Road

Agoura Hills, CA 91301

John A. Agar Vice President None

#61 Point West Circle

Little Rock, AR 72211

Robert B. Aprison Vice President None

2983 Bryn Wood Drive

Madison, WI 53711

L William W. Bagnard Vice President None

Steven L. Barnes Senior Vice President None

5400 Mount Meeker Road, Suite 1

Boulder, CO 80301-3508

B Carl R. Bauer Assistant Vice President None

Michelle A. Bergeron Senior Vice President None

4160 Gateswalk Drive

Smyrna, GA 30080

J. Walter Best, Jr. Regional Vice President None

9013 Brentmeade Blvd.

Brentwood, TN 37027

Joseph T. Blair Senior Vice President None

148 E. Shore Ave.

Groton Long Point, CT 06340

John A. Blanchard Vice President None

6421 Aberdeen Road

Mission Hills, KS 66208

Ian B. Bodell Senior Vice President None

P.O. Box 1665

Brentwood, TN 37024-1665

Mick L. Brethower Senior Vice President None

2320 North Austin Avenue

Georgetown, TX 78626

Alan Brown Regional Vice President None

4129 Laclede Avenue

St. Louis, MO 63108

B J. Peter Burns Vice President None

Brian C. Casey Regional Vice President None

8002 Greentree Road

Bethesda, MD 20817

Victor C. Cassato Senior Vice President None

609 W. Littleton Blvd., Suite 310

Greenwood Village, CO 80120

Christopher J. Cassin Senior Vice President None

19 North Grant Street

Hinsdale, IL 60521

Denise M. Cassin Vice President None

1301 Stoney Creek Drive

San Ramon, CA 94538

L Larry P. Clemmensen Director None

L Kevin G. Clifford Director, President and Co-Chief None

Executive Officer

Ruth M. Collier Senior Vice President None

29 Landsdowne Drive

Larchmont, NY 10538

S David Coolbaugh Assistant Vice President None

Thomas E. Cournoyer Vice President None

2333 Granada Boulevard

Coral Gables, FL 33134

Douglas A. Critchell Senior Vice President None

3521 Rittenhouse Street, N.W.

Washington, D.C. 20015

L Carl D. Cutting Vice President None

Daniel J. Delianedis Regional Vice President None

8689 Braxton Drive

Eden Prairie, MN 55347

Michael A. Dilella Vice President None

P. O. Box 661

Ramsey, NJ 07446

G. Michael Dill Senior Vice President None
505 E. Main Street

Jenks, OK 74037

Kirk D. Dodge Senior Vice President None

633 Menlo Avenue, Suite 210

Menlo Park, CA 94025

Peter J. Doran Director, Senior Vice None
President

Suite 216W

100 Merrick Road

Rockville Centre, NY 11570

L Michael J. Downer Secretary Vice President

Robert W. Durbin Vice President None

74 Sunny Lane

Tiffin, OH 44883

I Lloyd G. Edwards Senior Vice President None

L Paul H. Fieberg Senior Vice President None

John Fodor Vice President None

15 Latisquama Road

Southborough, MA 01772

Daniel B. Frick Regional Vice President None

845 Western Avenue

Glen Ellyn, IL 60137

Clyde E. Gardner Senior Vice President None

Route 2, Box 3162

Osage Beach, MO 65065

B Evelyn K. Glassford Vice President None

Jeffrey J. Greiner Vice President None

12210 Taylor Road

Plain City, OH 43064

L Paul G. Haaga, Jr. Director Chairman of the Board

B Mariellen Hamann Assistant Vice President None

David E. Harper Senior Vice President None

150 Old Franklin School Road

Pittstown, NJ 08867

Ronald R. Hulsey Vice President None

6744 Avalon

Dallas, TX 75214

Robert S. Irish Regional Vice President None

1225 Vista Del Mar Drive

Delray Beach, FL 33483

Michael J. Johnston Director None

630 Fifth Avenue, 36th Floor

New York, NY 10111

B Damien M. Jordan Vice President None

Arthur J. Levine Senior Vice President None

12558 Highlands Place

Fishers, IN 46038

B Karl A. Lewis Assistant Vice President None

T. Blake Liberty Regional Vice President None

5506 East Mineral Lane

Littleton, CO 80122

Mark J. Lien Regional Vice President None

5570 Beechwood Terrace

West Des Moines, IA 50266

L Lorin E. Liesy Assistant Vice President None

L Susan G. Lindgren Vice President - None
Institutional

Investment Services

LW Robert W. Lovelace Director None

Stephen A. Malbasa Vice President None

13405 Lake Shore Blvd.

Cleveland, OH 44110

Steven M. Markel Senior Vice President None

5241 South Race Street

Littleton, CO 80121

L J. Clifton Massar Director, Senior Vice None
President

L E. Lee McClennahan Senior Vice President None

S John V. McLaughlin Senior Vice President None

Terry W. McNabb Vice President None

2002 Barrett Station Road

St. Louis, MO 63131

L R. William Melinat Vice President - None
Institutional

Investment Services

David R. Murray Vice President None

60 Briant Drive

Sudbury, MA 01776

Stephen S. Nelson Vice President None

P.O. Box 470528

Charlotte, NC 28247-0528

William E. Noe Regional Vice President None

304 River Oaks Road

Brentwood, TN 37027

Peter A. Nyhus Vice President None

3084 Wilds Ridge Court

Prior Lake, MN 55372

Eric P. Olson Vice President None

62 Park Drive

Glenview, IL 60025

Samuel W. Perry Regional Vice President None

6133 Calle del Paisano

Scottsdale, AZ 85251

Fredric Phillips Senior Vice President None

175 Highland Avenue, 4th Floor

Needham, MA 02494

B Candance D. Pilgrim Assistant Vice President None

Carl S. Platou Vice President None

7455 80th Place, S.E.

Mercer Island, WA 98040

L John O. Post Senior Vice President None

S Richard P. Prior Assistant Vice President None

Steven J. Reitman Senior Vice President None

212 The Lane

Hinsdale, IL 60521

Brian A. Roberts Vice President None

P.O. Box 472245

Charlotte, NC 28247

George S. Ross Senior Vice President None

55 Madison Avenue

Morristown, NJ 07962

L Julie D. Roth Vice President None

L James F. Rothenberg Director None

Douglas F. Rowe Vice President None

414 Logan Ranch Road

Georgetown, TX 78628

Christopher S. Rowey Regional Vice President None

9417 Beverlywood Street

Los Angeles, CA 90034

Dean B. Rydquist Senior Vice President None

1080 Bay Pointe Crossing

Alpharetta, GA 30005

Richard R. Samson Senior Vice President None

4604 Glencoe Avenue, #4

Marina del Rey, CA 90292

Joseph D. Scarpitti Vice President None

31465 St. Andrews

Westlake, OH 44145

L R. Michael Shanahan Director None

David W. Short Chairman of the Board and None

1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer

Pittsburgh, PA 15238

William P. Simon Senior Vice President None

912 Castlehill Lane

Devon, PA 19333

L John C. Smith Assistant Vice President - None

Institutional Investment
Services

Rodney G. Smith Vice President None

100 N. Central Expressway

Suite 1214

Richardson, TX 75080

Anthony L. Soave Regional Vice President None

8831 Morning Mist Drive

Clarkston, MI 48348

Nicholas D. Spadaccini Regional Vice President None

855 Markley Woods Way

Cincinnati, OH 45230

L Kristen J. Spazafumo Assistant Vice President None

Daniel S. Spradling Senior Vice President None

181 Second Avenue

Suite 228

San Mateo, CA 94401

LW Eric H. Stern Director None

B Max D. Stites Vice President None

Thomas A. Stout Regional Vice President None

1004 Ditchley Road

Virginia Beach, VA 23451

Craig R. Strauser Vice President None

3 Dover Way

Lake Oswego, OR 97034

Francis N. Strazzeri Senior Vice President None

31641 Saddletree Drive

Westlake Village, CA 91361

L Drew W. Taylor Assistant Vice President None

S James P. Toomey Vice President None

I Christopher E. Trede Vice President None

George F. Truesdail Vice President None

400 Abbotsford Court

Charlotte, NC 28270

Scott W. Ursin-Smith Vice President None

60 Reedland Woods Way

Tiburon, CA 94920

J. David Viale Regional Vice President None

7 Gladstone Lane

Laguna Niguel, CA 92677

Thomas E. Warren Regional Vice President None

119 Faubel Street

Sarasota, FL 34242

L J. Kelly Webb Senior Vice President, None

Treasurer and Controller

Gregory J. Weimer Vice President None

206 Hardwood Drive

Venetia, PA 15367

B Timothy W. Weiss Director None

George Wenzel Regional Vice President None

3406 Shakespeare Drive

Troy, MI 48084

Timothy J. Wilson Vice President None

113 Farmview Place

Venetia, PA 15367

B Laura L. Wimberly Vice President None

H Marshall D. Wingo Director, Senior Vice None
President

L Robert L. Winston Director, Senior Vice None
President

William R. Yost Vice President None

9320 Overlook Trail

Eden Prairie, MN 55347

Janet M. Young Regional Vice President None

1616 Vermont

Houston, TX 77006

Scott D. Zambon Regional Vice President None

2887 Player Lane

Tustin Ranch, CA 92782

</TABLE>

__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and held in the
offices of its investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071, and/or 135 South State
College Boulevard, Brea, California 92821.

Registrant's records covering shareholder accounts are maintained and kept by
its transfer agent, American Funds Service Company, 135 South State College
Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 3500 Wiseman Boulevard, San Antonio, Texas 78251 and
5300 Robin Hood Road, Norfolk, VA 23513.

Registrant's records covering portfolio transactions are maintained and kept
by its custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, New York 10081.

ITEM 29. MANAGEMENT SERVICES

None

ITEM 30. UNDERTAKINGS
n/a

SIGNATURE OF REGISTRANT

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
28th day of October, 1999.

THE AMERICAN FUNDS INCOME SERIES
By/s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)

Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on October 28, 1999, by the
following persons in the capacities indicated.

<TABLE>
<CAPTION>
Signature Title

<S> <C> <C>
(1) Principal Executive Officer:
/s/ John H. Smet President
(John H. Smet)
(2) Principal Financial Officer and Principal
Accounting Officer:
/s/ Anthony W. Hynes, Jr. Treasurer
(Anthony W. Hynes, Jr.)
(3) Trustees:
Richard G. Capen, Jr.*/1/ Trustee
H. Frederick Christie* Trustee
Don R. Conlan* Trustee
Diane C. Creel* Trustee
Martin Fenton, Jr.* Trustee
Leonard R. Fuller* Trustee
/s/ Abner D. Goldstine Vice Chairman and Trustee
(Abner D. Goldstine)
/s/ Paul G. Haaga, Jr. Chairman and Trustee
(Paul G. Haaga, Jr.
Richard G. Newman* Trustee
Frank M. Sanchez*/1/
</TABLE>

/1/Powers of Attorney attached hereto.
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact

Counsel represents that this amendment does not contain disclosures that
would make the amendment ineligible for effectiveness under the provisions of
rule 485(b).
/s/ Michael J. Downer
(Michael J. Downer)

POWER OF ATTORNEY

I, Frank M. Sanchez, the undersigned Trustee of The American Funds Income
Series, a Massachusetts business trust, revoking all prior powers of attorney
given as a Trustee of The American Funds Income Series do hereby constitute and
appoint Michael J. Downer, Paul G. Haaga, Jr., Anthony W. Hynes, Jr., Todd L.
Miller, Kimberly S. Verdick and Julie F. Williams, or any of them, to act as
attorneys-in-fact for and in my name, place and stead (1) to sign my name as
Trustee of said Trust to any and all Registration Statements of The American
Funds Income Series, File No. 2-98199, under the Securities Act of 1933 as
amended and/or the Investment Company Act of 1940, as amended, and any and all
amendments thereto, said Registration Statements and amendments to be filed
with the Securities and Exchange Commission, and to any and all reports,
applications or renewal of applications required by any State in the United
States of America in which this Trust is registered to sell shares, and (2) to
deliver any and all such Registration Statements and amendments, so signed, for
filing with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, granting to said attorneys-in-fact, and each of them, full power and
authority to do and perform every act and thing whatsoever requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.

EXECUTED at Los Angeles, California, this 28th day of October, 1999.

/s/ Frank M. Sanchez
Frank M. Sanchez, Trustee

POWER OF ATTORNEY

I, Richard G. Capen, Jr., the undersigned Trustee of The American Funds Income
Series, a Massachusetts business trust, revoking all prior powers of attorney
given as a Trustee of The American Funds Income Series do hereby constitute and
appoint Michael J. Downer, Paul G. Haaga, Jr., Anthony W. Hynes, Jr., Todd L.
Miller, Kimberly S. Verdick and Julie F. Williams, or any of them, to act as
attorneys-in-fact for and in my name, place and stead (1) to sign my name as
Trustee of said Trust to any and all Registration Statements of The American
Funds Income Series, File No. 2-98199, under the Securities Act of 1933 as
amended and/or the Investment Company Act of 1940, as amended, and any and all
amendments thereto, said Registration Statements and amendments to be filed
with the Securities and Exchange Commission, and to any and all reports,
applications or renewal of applications required by any State in the United
States of America in which this Trust is registered to sell shares, and (2) to
deliver any and all such Registration Statements and amendments, so signed, for
filing with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, granting to said attorneys-in-fact, and each of them, full power and
authority to do and perform every act and thing whatsoever requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.

EXECUTED at Los Angeles, California, this 28th day of October, 1999.
/s/ Richard G. Capen, Jr.
Richard G. Capen, Jr., Trustee

INDEPENDENT AUDITORS' CONSENT
The American Funds Income Series - U.S. Government Securities Fund:

We consent to (a) the use in this Post-Effective Amendment No. 22 to
Registration Statement No. 2-98199 on Form N-1A of our report dated September
30, 1999 appearing in the Financial Statements, which are included in Part B,
the Statement of Additional Information of such Registration Statement, (b) the
references to us under the heading "General Information" in such Statement of
Additional Information and (c) the reference to us under the heading "Financial
Highlights" in the Prospectus, which is a part of such Registration Statement.

DELOITTE & TOUCHE LLP

Los Angeles, California

October 27, 1999

<PAGE>
THE CAPITAL GROUP COMPANIES
CODE OF CONDUCT
(as of October 1, 1999)

All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.

Over the years we have earned a reputation for the highest integrity.
Regardless of lesser standards that may be followed through business or
community custom, we must observe exemplary standards of honesty and integrity.

REPORTING VIOLATIONS

If you know of any violation of our Code of Conduct, you have a responsibility
to report it. Deviations from controls or procedures that safeguard the
company, including the assets of shareholders and clients, should also be
reported.

You can report confidentially to:

Your manager or department head

CGC Audit Committee:

Donnalisa Barnum
Larry P. Clemmensen
Roberta Conroy
Bill Hurt
Sonny Kamm
Mike Kerr
John McLaughlin
Bob O'Donnell
Tom Rowland
John Smet
Mark Smith
Wally Stern
Antonio Vegezzi
Shaw Wagener
Kelly Webb

Mike Downer or any other lawyer in the CGC Legal Group

Don Wolfe of Deloitte & Touche LLP (CGC's auditors)

CONFLICTS OF INTEREST

A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at work.
Associates must not place themselves or the company in a position of actual or
potential conflict. Associates may not accept gifts worth more than $100,
excessive business entertainment, loans, or anything else involving personal
gain from those who conduct business with the company. In addition, a business
entertainment event exceeding $200 in value should not be accepted unless the
associate receives permission from the Gifts Policy Committee.

REPORTING -- Although the limitations on accepting gifts applies to ALL
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report ALL gifts received)
and business entertainment in which an event exceeds $75.

GIFTS POLICY COMMITTEE

The Gifts Policy Committee oversees administration of and compliance with the
Policy.

INSIDER TRADING

Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.

While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply to
all CGC associates and extend to activities both within and outside each
associate's duties. All associates must read the Insider Trading Policy in the
Appendix of the CGC Handbook for Associates.

PERSONAL INVESTING POLICY

As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.

You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.

There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.

ALL ASSOCIATES

Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.

Favors or preferential treatment from stockbrokers may not be accepted.

Associates may not subscribe to any initial public offering or any other
securities offering that is subject to allocation (so-called "hot issues").
Generally, this prohibition applies to spouses of associates and any family
member residing in the same household. However, an associate may request that
the Personal Investing Policy Committee consider granting an exception.

COVERED PERSONS

Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. You should take the time to review this memo as ongoing interpretations
of the policy will be explained therein.

Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you are
trustee or custodian have a transaction in a security when the funds or client
accounts are considering or concluding a transaction in the same security.

Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).

PRE-CLEARANCE OF SECURITIES TRANSACTIONS

Before buying or selling securities, covered persons should find out if the
purchase or sale of a particular security would involve a conflict of interest.
This involves checking with the CGC Legal Group based in LAO by calling [phone
number]. (You will generally receive a response within one business day.)
Unless a shorter period is specified, clearance is good for two trading days
(including the day you check). If you have not executed your transaction
within this period, you must again pre-clear your transaction.

Covered persons must promptly submit quarterly reports of certain transactions.
Transactions of securities (including fixed-income securities) or options (see
below) must be pre-cleared as described above and reported except for: gifts
or bequests of securities (although pre-clearance and reporting are required if
these securities are later sold); open-end investment companies (mutual funds);
shares of CGC stock; money market instruments with maturities of one year or
less; direct obligations of the U.S. Government, bankers' acceptances, CDs or
other commercial paper; commodities; and options or futures on broad-based
indices. Covered persons must also report transactions made by family members
in their household and by those for which they are a trustee or custodian.
Reporting forms will be supplied at the appropriate times.

In addition, the following transactions must be reported but need not have been
pre-cleared: transactions in debt instruments rated "A" or above by at least
one national rating service; sales pursuant to tender offers; and dividend
reinvestment plan purchases (provided the purchase pursuant to such plan is
made with dividend proceeds only).

BROKERAGE ACCOUNTS

Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. The broker is
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may be
more favorable than the broker grants to accounts with similar characteristics.
In addition, covered persons must direct their brokers to send duplicate
confirmations and copies of all periodic statements on a timely basis to The
Legal Group of The Capital Group Companies, Inc., [P.O. Box address]. ALL
DOCUMENTS RECEIVED IN THIS POST OFFICE BOX ARE KEPT STRICTLY CONFIDENTIAL.

[If extraneous information is included on an associate's statements (E.G.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]

ANNUAL RECERTIFICATION

All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.

ADDITIONAL RULES FOR INVESTMENT PERSONNEL

DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Any associate who is in a
position to recommend the purchase or sale of securities by the fund or client
accounts must not recommend securities that s/he personally owns without FIRST
disclosing ownership. Typically, a complete disclosure of holdings (such as in
the annual disclosure of personal securities) satisfies this requirement.

BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after A
FUND OR CLIENT ACCOUNT THAT HIS OR HER COMPANY MANAGES transacts in that
security. Profits resulting from transactions occurring within this time
period are subject to special review and may be subject to disgorgement.

BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.

ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS - Investment personnel will
be required to disclose all personal securities holdings upon commencement of
employment and thereafter on an annual basis. Reporting forms will be supplied
for this purpose.

SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company BEFORE
SERVING ON THE BOARD OF DIRECTORS OF PUBLICLY TRADED COMPANIES.

PERSONAL INVESTING POLICY COMMITTEE

Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee.

<PAGE>
THE CAPITAL GROUP COMPANIES
CODE OF CONDUCT
(as of January 1, 1998)

REPORTING VIOLATIONS

You can report confidentially to:

- - Your manager or department head

- - CGC Audit Committee:

Donnalisa Barnum
Larry P. Clemmensen
Roberta Conroy
Bill Hurt
Sonny Kamm
Mike Kerr
Bob O'Donnell
John Smet
Mark Smith
Wally Stern
Kelly Webb
Shaw Wagener

- - Mike Downer or any other lawyer in the CGC Legal Group

- - Don Wolfe of Deloitte & Touche LLP (CGC's auditors)

CONFLICTS OF INTEREST

GIFTS POLICY COMMITTEE

The Gifts Policy Committee oversees administration of and compliance with the
Policy. If you have any questions about the Policy, you should contact Ken
Gorvetzian, Kristine Nishiyama, or Michele Yang.

INSIDER TRADING

PERSONAL INVESTING POLICY

As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.

There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.

ALL ASSOCIATES

Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.

Favors or preferential treatment from stockbrokers may not be accepted.

COVERED PERSONS

Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. A MEMO CONTAINING MORE IN-DEPTH DETAILS OF THE PERSONAL INVESTING
POLICY IS ATTACHED TO EACH QUARTERLY REPORTING FORM. You should take the time
to review this memo as ongoing interpretations of the policy will be explained
therein.

Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).

PRE-CLEARANCE OF SECURITIES TRANSACTIONS

BROKERAGE ACCOUNTS

ANNUAL RECERTIFICATION

All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.

ADDITIONAL RULES FOR INVESTMENT PERSONNEL

PERSONAL INVESTING POLICY COMMITTEE

Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee (by
calling Cheryl Ruff or Michele Yang).