[The American Funds Group(r)]
Semi-Annual Report
for the six months ended February 29
U.S. Government Securities Fund
2000
[abstract illustration depicting various scenes of commerce]
U.S. Government Securities Fund/SM/ seeks high current income, consistent with
prudent investment risk and preservation of capital, by investing primarily in
obligations backed by the full faith and credit of the United States
government.
U.S. Government Securities Fund is one of the 29 mutual funds in The American
Funds Group,(r) the nation's third-largest mutual fund family. For nearly seven
decades, Capital Research and Management Company, the American Funds adviser,
has invested with a long-term focus based on thorough research and attention to
risk.
Fund results in this report were calculated for A shares at net asset value
(without a sales charge) unless otherwise indicated. Here are the total returns
and average annual compound returns with all distributions reinvested for
periods ended March 31, 2000 (the most recent calendar quarter), assuming
payment of the 3.75% maximum sales charge at the beginning of the stated
periods - 10 years: +90.72%, or +6.67% a year; 5 years: +29.36%, or +5.28% a
year; 1 year: -2.18%. Sales charges are lower for accounts of $100,000 or more.
The fund's 30-day yield as of March 31, 2000, calculated in accordance with the
Securities and Exchange Commission formula, was 5.89%.
Figures shown are past results and are not predictive of future results. Share
price and return will vary, so you may lose money. Investing for short periods
makes losses more likely. Investments are not FDIC-insured, nor are they
deposits of or guaranteed by a bank or any other entity.
Please see the back cover for important information about Class A and B shares.
Fellow Shareholders:
Rising interest rates and glimmers of inflation continued to roil bond markets
during the six months ended February 29. In an unusual development, however,
prices of U.S. Treasury securities benefited from the prospect of a shrinking
supply of government bonds.
In this challenging environment, U.S. Government Securities Fund was able to
post a modest gain for the six months. For shareholders who reinvested monthly
dividends totaling 36 cents a share, a decline in the net asset value of your
shares was more than offset by the fund's 2.9% income return (5.8% annualized).
The result was a six-month total return (income minus the decline in capital
value) of 1.4%.
That matched the 1.4% average total return of the 189 U.S. government bond
funds tracked by Lipper Inc. The Lehman Brothers Government/Mortgage-Backed
Securities Index finished the six months slightly higher, with a 2.0% gain,
also on a reinvested basis.
Reflecting last spring's bond market rout, the fund's 12-month return was only
0.6%. While we realize how disappointing that may seem, we would emphasize that
over longer, more meaningful periods - and through various market cycles - the
fund has done quite well. Since beginning operations on October 17, 1985, U.S.
Government Securities Fund has increased 177.3% with dividends reinvested,
representing an average compound return of 7.4% a year.
Inflation worries and a shortage of government bonds
With little to temper the nation's prosperity during the six months, bond
investors grew concerned about the pace of worldwide economic growth and the
increasing likelihood of inflation. And indeed, signs of higher prices have
emerged. Wage pressures have strengthened; the cost of raw materials has crept
up, and oil prices have soared to levels not seen since the early 1990s. In a
preemptive strike against a possibly overheating economy, the Federal Reserve
Board notched up short-term interest rates in November, February and March.
These developments dampened most bond prices during the six-month period. U.S.
Treasury securities, however, proved to be the bright spot. A squeeze on the
market supply of Treasuries - caused by a sharp slowdown in federal borrowing
and compounded by the launch of an unprecedented program to buy back publicly
held government debt - sent investors scrambling for existing government bonds.
As prices on longer term bonds improved, their yields fell, even as tightening
by the Fed pushed up yields on short-term instruments.
Good values among mortgage-backed securities
In keeping with its emphasis on the highest quality issues, U.S. Government
Securities Fund invests primarily in a combination of U.S. Treasury bonds and
federally sponsored mortgage-backed securities. Over the years, we believe that
balance has helped moderate volatility and improve overall returns.
During the recent surge in U.S. Treasury prices, we have found attractive
values among mortgage-backed securities. With interest rates up, refinancings
have slowed and fewer new mortgages are coming to market - factors that should
bode well for existing mortgage holdings. Accordingly, we have increased the
portfolio's mortgage position, to 44% of net assets as of February 29. At the
same time, we have trimmed our investments in U.S. Treasury securities, to 42%
of net assets, as we believe they are somewhat overvalued at this time.
Looking ahead
Going forward, we believe the Federal Reserve is likely to continue raising
short-term interest rates as it tries to engineer a "soft landing" for the U.S.
economy. That could contribute to further turbulence for bonds in the months
ahead.
Longer term, we are cautiously optimistic. A meaningful increase in inflation
has yet to materialize, in part because rising productivity has allowed
businesses to absorb cost increases without price hikes. Global competition
could also help contain price increases. Meanwhile, holders of government bonds
could benefit from greater demand for a dwindling pool of securities.
Regardless of current market conditions, we are committed to our goal of
providing shareholders with generous income and preservation of capital through
the highest quality bonds available. We have always invested with a view to the
long term and would urge shareholders to maintain that same perspective.
We look forward to reporting to you again in six months.
Cordially,
/s/ Paul G. Haaga, Jr. /s/ John H. Smet
Paul G. Haaga, Jr. John H. Smet
Chairman of the Board President
April 14, 2000
<TABLE>
The American Funds Income Series
U.S. Government Securities Fund
The American Funds Income Series
U.S. Government Securities Fund
February 29, 2000
<S> <C> <C> <C>
Portfolio Composition
U.S. Treasuries 42%
Agency Mortgage-Backed Securities 44%
Agency Debentures 11%
Cash & Equivalents 3%
Investment Portfolio
February 29, 2000 Principal Market
Percent
(Unaudited) Amount Value
of Net
(000) (000)
Assets
Federal Agency Obligations:
Mortgage Pass - Throughs(1) - 37.85%
Fannie Mae: $4,687 $4,302
5.50% 2014 3,000 2,776
6.00% 2008 7,850 7,040
6.25% 2029 6,884 6,635
6.27% 2005 16,312 15,771
6.35% 2005 5,688 5,310
6.50% 2028 11,443 11,190
7.00% 2009 - 2028 8,623 8,452
7.50% 2039 2,052 2,067
8.00% 2005 - 2023 2,904 2,889
8.267% 2002(2) 4,160 4,275
8.50% 2007 - 2027 1,089 1,131
9.00% 2009 - 2023 927 977
9.50% 2011 - 2022 468 501
10.00% 2017 - 2021 3,020 3,308
11.00% 2010 - 2020 2,256 2,497
11.50% 2015 - 2020 7,802 8,705
12.00% 2000 - 2029 333 372
12.25% 2011 - 2013 5,866 6,644
12.50% 2012 - 2029 1 1
12.75% 2012 2,771 3,147
13.00% 2028 459 522
13.25% 2011 - 2014 1,271 1,451
13.50% 2015 467 543
14.00% 2013 - 2014 805 951
15.00% 2013 10 12
15.50% 2012 9 10
8.89%
16.00% 2012
Freddie Mac: 2,715 2,547
6.00% 2014 588 581
7.00% 2008 1,378 1,400
8.00% 2012 360 364
8.25% 2007 6,339 6,512
8.50% 2009 - 2021 320 327
8.75% 2008 2,059 2,120
9.00% 2010 - 2021 236 249
10.50% 2006 - 2016 137 144
10.75% 2010 336 361
11.00% 2015 - 2016 135 145
11.50% 2015 224 244
11.75% 2014 3,794 4,167
12.00% 2000 - 2017 246 269
12.25% 2015 3,557 3,935
12.50% 2015 - 2019 2,330 2,608
13.00% 2014 - 2015 114 128
13.50% 2018 13 14
13.75% 2014 119 136
14.00% 2011 - 2014 66 76
14.50% 2010 - 2011 53 60
14.75% 2010 25 28
15.00% 2011 25 29
15.50% 2011 18 21
16.00% 2012 72 83
2.32
16.25% 2011
Government National Mortgage Assn.: 2,444 2,227
5.50% 2013 94,841 87,501
6.00% 2008 - 2029 57,132 53,809
6.50% 2014 - 2029 59,741 57,403
7.00% 2008 - 2029 22,652 22,322
7.50% 2009 - 2029 36,824 36,989
8.00% 2022 - 2030 2,479 2,548
8.50% 2020 - 2023 8,584 8,948
9.00% 2009 - 2022 3,411 3,614
9.50% 2009 - 2021 1,012 1,070
9.75% 2011 - 2012 20,857 22,357
10.00% 2016 - 2022 67 72
10.25% 2012 1,046 1,140
10.50% 2015 - 2019 141 157
11.00% 2013 1,479 1,586
11.25% 2001 - 2016 41 44
11.75% 2000 - 2015 167 187
12.25% 2013 - 2015 164 184
12.75% 2014 - 2015 1,074 1,235
13.00% 2011 - 2015 168 191
13.25% 2013 - 2015 169 196
13.50% 2013 94 109
14.00% 2014 242 286
14.50% 2012 - 2014 20 25
26.64
16.00% 2011 - 2012
----------
- ----------
432,227
37.85
----------
- ----------
Federal Agency Obligations:
Other - 10.98%
Federal Home Loan Bank Bonds: 3,500 3,466
5.625% 2001 4,000 3,843
5.50% 2003 5,000 4,757
6.00% 2004 41,825 38,074
4.39
5.80% 2008
Freddie Mac Notes: 14,500 13,637
5.125% 2003 11,000 10,012
2.07
5.75% 2008
Tennessee Valley Authority: 48,670 42,792
Series G, 5.375% 2008 10,000 8,777
4.52
Series E, 6.25% 2017
----------
- ----------
125,358
10.98
----------
- ----------
Collaterized Mortgage
Obligations(1) - 4.77% 1,422 1,426
Series 91-50, Class H, 7.75% 2006 3,093 3,115
Series 91-146, Class Z, 8.00% 2006 5,000 4,781
Series 1997-M5, Class C, ACES, 6.74% 2007 7,500 7,029
Series 1998-M6, Class A2, ACES, 6.32% 2008 221 241
Trust 35, Class 2, 12.00% 2018 1,257 1,179
Series 90-93, Class G, 5.50% 2020 4,302 4,293
Series 1992-119, Class Z, 8.00% 2022 5,578 4,969
Series 1994-4, Class ZA, 6.50% 2024 11,862 10,428
Series 1997-M6, Class ZA, 6.85% 2026 4,000 3,819
3.62
Series 1997-28, Class C, 7.00% 2027
Freddie Mac: 10,586 10,123
Series 1716, Class A, 6.50% 2009 100 105
Series 83-A, Class 3, 11.875% 2013 692 744
Series 83-B, Class 3, 12.50% 2013 1,116 1,143
Series 178, Class Z, 9.25% 2021 1,072 1,041
1.15
Series 1567, Class A, 5.268% 2023(2) ----------
- ----------
54,436
4.77
----------
- ----------
Collateralized Mortgage Obligations
(Privately Originated)(1)(3) - 1.04%
Collateralized Mortgage Obligation Trust, 2,567 2,613
.23
Series 63, Class Z, 9.00% 2020
Paine Webber CMO, Pac, 2,147 2,224
.19
Series O, Class 5, 9.50% 2019
Ryland Acceptance Corp. Four, 7,167 7,113
.62
Series 88, Class E, 7.95% 2019 ----------
- ----------
11,950
1.04
----------
- ----------
Development Authorities - 0.23%
International Bank for Reconstruction and Development 2,000 2,621
.23
12.25% December 2008 ----------
- ----------
2,621
.23
----------
- ----------
U.S. Treasury Obligations - 41.58% 5,000 4,977
6.25% October 2001 19,000 18,685
5.875% September 2002 27,000 30,244
11.625% November 2002 10,250 11,426
10.75% May 2003 6,000 6,993
11.875% November 2003 8,250 8,429
7.25% May 2004 42,100 30,748
0% November 2004 3,655 3,831
7.875% November 2004 6,240 7,447
11.625% November 2004 7,980 8,256
7.50% February 2005 71,240 47,241
0% May 2006 16,000 15,630
7.25% February 2007 27,500 27,418
6.625% May 2007 9,780 9,476
6.125% August 2007 3,140 2,923
5.50% February 2008 13,225 12,250
5.50% May 2009 21,000 23,914
10.375% November 2009 4,000 4,541
10.00% May 2010 10,000 12,738
12.75% November 2010 8,000 10,806
13.875% May 2011 35,000 42,361
10.375% November 2012 11,000 14,618
12.00% August 2013 2,345 3,109
9.875% November 2015 5,550 6,836
8.75% May 2017 66,000 82,284
8.875% August 2017 11,250 13,096
7.875% February 2021 8,375 9,093
7.125% February 2023 6,350 5,486
41.58
5.25% February 2029 ----------
- ----------
474,856
41.58
----------
- ----------
1,101,448
96.45
Total Bonds and Notes (cost: $1,140,860,000) ----------
- ----------
Short-Term Securities
Federal Agency Discount Notes - 4.24%
11,700 11,698
1.02
Federal Home Loan Bank due 3/1/00 5,000 4,998
.44
Federal Home Loan Bank due 3/3/00 2,150 2,147
.19
Federal Home Loan Bank due 3/8/00 2,150 2,144
.19
Federal Home Loan Bank due 3/17/00 5,000 4,972
.44
Federal Home Loan Bank due 4/5/00 7,000 6,938
.61
Federal Home Loan Bank due 4/24/00 5,706 5,646
.49
Federal Home Loan Bank due 5/4/00 3,000 2,968
.26
Federal Home Loan Bank due 5/5/00 7,000 6,904
.60
Federal Home Loan Bank due 5/24/00
----------
- ----------
48,415
4.24
Total Short-Term Securities (cost: $48,416,000) ----------
- ----------
1,149,863
100.69
Total Investment Securities (cost:$1,189,276,000) 7,831
.69
Excess of payables over cash and receivables ----------
- ----------
$1,142,032
100.00%
Net Assets ===========
=======
(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 maturites.
(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) (Unaudited)
- ---------------------------------------- ------------ ------------
Statement of Assets and Liabilities
at February 29, 2000 (dollars in thousands)
- ---------------------------------------- ------------ ------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $1,189,276) $1,149,863
Receivables for-
Sales of investments $ 9,236
Sales of fund's shares 884
Accrued interest 12,860
Other 4 22,984
------------ ------------
1,172,847
Liabilities:
Payables for-
Purchases of investments 22,924
Repurchases of fund's shares 4,811
Dividends payable 1,963
Management services 368
Accrued expenses 749 30,815
------------ ------------
Net Assets at August 31, 1999-
Equivalent to $12.45 per share on
91,712,760 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $1,142,032
============
Statement of Operations (Unaudited)
for six months ended, February 29, 2000 (dollars in thousands)
------------ ------------
Investment Income:
Income:
Interest $ 43,379
Expenses:
Management services fee $2,429
Distribution expenses 1,820
Transfer agent fee 678
Reports to shareholders 70
Registration statement and prospectus 81
Postage, stationery and supplies 155
Trustees' fees 12
Auditing and legal fees 47
Custodian fee 12
Taxes other than federal income tax 22 5,326
------------ ------------
Net investment income 38,053
------------
Realized Loss and Unrealized
Depreciation on Investments:
Net realized loss (21,706)
Net on investments unrealized depreciation:
Beginning of period (40,843)
End of period (39,413)
------------
Net change in unrealized depreciation on investments 1,430
------------
Net realized loss and change in unrealized
depreciation on investments (20,276)
------------
Net Increase in Net Assets Resulting
from Operations $ 17,777
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- ------------ ------------
Six Months endYear ended
February 29, August 31
2000* 1999
Operations: ------------ ------------
Net investment income $ 38,053 $ 77,125
Net realized loss on investments (21,706) (1,614)
Net change in unrealized (depreciation)
appreciation on investments 1,430 (77,976)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 17,777 (2,465)
------------ ------------
Dividends Paid to Shareholders (36,106) (77,414)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
13,013,228 and 59,582,486
shares, respectively 163,442 788,396
Proceeds from shares issued in
reinvestment of net investment income
dividends: 2,303,266 and 4,640,790
shares, respectively 28,848 61,070
Cost of shares repurchased:
28,246,258 and 49,917,467
shares, respectively (353,648) (657,673)
------------ ------------
Net increase (decrease) in net assets resulting
from capital share transactions (161,358) 191,793
------------ ------------
Total (Decrease) Increase in Net Assets (179,687) 111,914
Net Assets:
Beginning of year 1,321,719 1,209,805
------------ ------------
End of year (including undistributed
net investment income of $3,122, and
$1,176, respectively) $1,142,032 $1,321,719
=========== ===========
*Unaudited
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
Unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The American Funds Income Series(the "trust") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company and has initially issued one series of shares, U.S.
Government Securities Fund(the "fund"). The fund seeks high current income,
consistent with prudent investment risk and preservation of capital, by
investing primarily in obligations backed by the full faith and credit of the
United States government.
SIGNIFICANT ACCOUNTING POLICIES - The 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 February 29, 2000, net unrealized depreciation on investments for book
and federal income tax purposes aggregated $39,413,000, of which $6,714,000
related to appreciated securities and $46,127,000 related to depreciated
securities. There was no difference between book and tax realized losses on
securities transactions for the period ended February 29, 2000. 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. The cost of portfolio securities for book
and federal income tax purposes was $1,189,276,000 at February 29, 2000.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $2,429,000 for management services was
incurred pursuant to an agreement with Capital Research and Management Company
(CRMC), with which certain officers and Trustees of the trust are affiliated.
The Investment Advisory and Service Agreement provides for monthly fees,
accrued daily, based on an annual rate of 0.30% of the first $60 million of
average net assets; 0.21% of such assets in excess of $60 million but not
exceeding $1 billion; 0.18% of such assets in excess of $1 billion but not
exceeding $3 billion; and 0.16% of such assets in excess of $3 billion; plus
3.00% on the first $3,333,333 of the fund's monthly gross investment income;
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.
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 period
ended February 29, 2000, distribution expenses under the Plan was $1,820,000.
As of February 29, 2000, accrued and unpaid distribution expenses were
$597,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $244,000 (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 $678,000.
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 February 29, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993) net of any payments to
Trustees, were $96,000.
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 $322,229,000 and $441,713,000, respectively, during
period ended February 29, 2000.
As of February 29, 2000, net realized loss on investments was $96,457,000 and
paid-in capital was $1,183,067,000.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $12,000 was paid by these credits rather than in cash.
<TABLE>
PER-SHARE DATA AND RATIOS
- --------------------------------- --------------------------------------------------
Six months
ended Year Ended August 31
February 29, --------------------------------------
2000(1) 1999 1998 1997 1996 1995
---------------------------------------------------
Net Asset Value, Beginning
of Period $ 12.63 $ 13.39 $13.03 $12.78 $13.24 $13.18
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income from Investment
Operations:
Net investment income .38 .77 .83 .88 .93 1.01
Net gains or lossess on securities
(both realized and unrealized) (.20) (.76) .40 .25 (.49) .06
---------------------------------------------------
Total from investment operations .18 .01 1.23 1.13 .44 1.06
---------------------------------------------------
Less Distributions:
Dividends (from net investment
income) (.36) (.77) (.87) (.88) (.90) (1.01)
---------------------------------------------------
Net Asset Value, End of Period $ 12.45 $ 12.63 $13.39 $13.03 $12.78 $13.24
===================================================
Total Return (2) 1.44%(3) (.01)% 9.70% 9.08% 3.40% 8.60%
Ratios/Supplemental Data:
Net assets, end of period (in
millions) $1,142 $1,322 $1,210 $1,106 $1,216 $1,337
Ratio of expenses to average
net assets .43%(3) .80% .79% .80% .81% .79%
Ratio of net income to
average net assets 3.04%(3) 5.80 6.24% 6.74% 7.04% 7.79%
Portfolio turnover rate 49.61%(3 81.10 81.99% 28.16% 40.01% 46.77%
(1)Unaudited
(2)Excludes maximum sales charge of 4.75%, before
January 10, 2000, and 3.75% thereafter.
(3)Based on operations for the period shown and,
accordingly, not representative of a full year.
</TABLE>
Results of Shareholders Meeting (Unaudited)
Held October 28, 1999
Shares Outstanding on August 24, 1999 (record date) 104,346,976
Shares Voting on October 28, 1999 53,904,533
(51.7%)
Proposal 1: Election of Trustees
<TABLE>
<CAPTION>
Percent of Percent of
Shares Votes Shares
Director Votes For Voting For Withheld Withheld
<S> <C> <C> <C> <C>
Richard G. Capen, Jr. 53,407,109 99.1% 497,424 .9%
H. Frederick Christie 53,374,199 99.0% 530,334 1.0%
Don R. Conlan 53,403,078 99.1% 501,455 .9%
Diane C. Creel 53,390,376 99.0% 514,157 1.0%
Martin Fenton 53,408,147 99.1% 496,386 .9%
Leonard R. Fuller 53,403,862 99.1% 500,671 .9%
Abner D. Goldstine 53,362,799 99.0% 541,734 1.0%
Paul G. Haaga, Jr. 53,406,153 99.1% 498,380 .9%
Richard G. Newman 53,415,025 99.1% 489,508 .9%
Frank M. Sanchez 53,329,397 98.9% 575,136 1.1%
</TABLE>
Proposal 2: Ratification of Auditors
<TABLE>
<CAPTION>
Percent of Percent of Percent of
Shares Shares Shares
Votes For Voting For Votes Against Voting Against Abstentions Abstaining
<S> <C> <C> <C> <C> <C>
52,786,137 97.9% 318,700 .6% 799,696 1.5%
</TABLE>
[The American Funds Group(r)]
U.S. Government Securities Fund
Offices of the fund and of the
investment adviser, Capital Research
and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
Custodian of assets
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
Counsel
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
For information about your account, any of the fund's services, or for a
prospectus for any of the American Funds, please contact your financial
adviser. You may also call American Funds Service Company, toll-free, at
800/421-0180 or visit www.americanfunds.com on the World Wide Web. Please read
the prospectus carefully before you invest or send money.
This report is for the information of shareholders of U.S. Government
Securities Fund, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after June 30, 2000, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
There are two ways to invest in U.S. Government Securities Fund. Class A shares
are subject to a 3.75% maximum up-front sales charge that declines for accounts
of $100,000 or more. Class B shares, which are not available for certain
employer-sponsored retirement plans, have no up-front sales charge. They are,
however, subject to additional expenses of approximately 0.75% a year over the
first eight years of ownership. If redeemed within six years, they may also be
subject to a contingent deferred sales charge (5% maximum) that declines over
time.
Printed on recycled paper
Litho in USA DD/CG/4567
Lit. No. GVT-013-0400
