The American Funds Income Series®
(U.S. Government Securities Fund)
Part
B
Statement
of Additional Information
November 1, 2022
This document is not a prospectus but should be read in conjunction with the current prospectus of U.S. Government Securities Fund (the “fund”) dated November 1, 2022. You may obtain a prospectus from your financial professional, by calling American Funds Service Company® at (800) 421-4225 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
Certain privileges and/or services described below may not be available to all shareholders (including shareholders who purchase shares at net asset value through eligible retirement plans) depending on the shareholder’s investment dealer or retirement plan recordkeeper. Please see your financial professional, investment dealer, plan recordkeeper or employer for more information.
|
Class A |
AMUSX |
Class 529-A |
CGTAX |
Class R-1 |
RGVAX |
|
Class C |
UGSCX |
Class 529-C |
CGTCX |
Class R-2 |
RGVBX |
|
Class T |
TUSGX |
Class 529-E |
CGTEX |
Class R-2E |
RGEVX |
|
Class F-1 |
UGSFX |
Class 529-T |
TSUGX |
Class R-3 |
RGVCX |
|
Class F-2 |
GVTFX |
Class 529-F-1 |
CGTFX |
Class R-4 |
RGVEX |
|
Class F-3 |
USGFX |
Class 529-F-2 |
FSUGX |
Class R-5E |
RGVJX |
|
Class 529-F-3 |
FSUUX |
Class R-5 |
RGVFX | ||
|
Class R-6 |
RGVGX |
Table of Contents
|
Item |
Page no. |
|
2 | |
|
Description of certain securities, investment techniques and risks |
3 |
|
19 | |
|
21 | |
|
49 | |
|
53 | |
|
55 | |
|
58 | |
|
62 | |
|
67 | |
|
70 | |
|
75 | |
|
76 | |
|
79 | |
|
89 |
Investment
portfolio
Financial
statements
U.S. Government Securities Fund — Page 1
Certain investment limitations and guidelines
The following limitations and guidelines are considered at the time of purchase, under normal circumstances, 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.
· The fund will invest at least 80% of its assets in securities (including cash equivalents) guaranteed or sponsored by the U.S. government, its agencies and instrumentalities, including bonds and other debt securities. For purposes of this investment guideline, investments may be represented by derivative instruments, such as futures contracts and swaps.
· Securities (excluding cash equivalents) not guaranteed or sponsored by the U.S. government, its agencies or instrumentalities held by the fund will be rated AAA or Aaa by Nationally Recognized Statistical Rating Organizations designated by the fund’s investment adviser or unrated securities determined to be of equivalent quality by the fund’s investment adviser. The fund currently intends to look to the ratings from Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings. If rating agencies differ, securities will be considered to have received the highest of these ratings, consistent with the fund's investment policies.
· All securities held by the fund will be denominated in U.S. dollars.
* * * * * *
The fund may experience difficulty liquidating certain portfolio securities during significant market declines or periods of heavy redemptions.
U.S. Government Securities Fund — Page 2
Description of certain securities, investment techniques and risks
The descriptions below are intended to supplement the material in the prospectus under “Investment objective, strategies and risks.”
Market conditions – The value of, and the income generated by, the securities in which the fund invests may decline, sometimes rapidly or unpredictably, due to factors affecting certain issuers, particular industries or sectors, or the overall markets. Rapid or unexpected changes in market conditions could cause the fund to liquidate its holdings at inopportune times or at a loss or depressed value. The value of a particular holding may decrease due to developments related to that issuer, but also due to general market conditions, including real or perceived economic developments such as changes in interest rates, credit quality, inflation, or currency rates, or generally adverse investor sentiment. The value of a holding may also decline due to factors that negatively affect a particular industry or sector, such as labor shortages, increased production costs, or competitive conditions.
Global economies and financial markets are highly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. Furthermore, local, regional and global events such as war, acts of terrorism, social unrest, natural disasters, the spread of infectious illness or other public health threats could also adversely impact issuers, markets and economies, including in ways that cannot necessarily be foreseen. The fund could be negatively impacted if the value of a portfolio holding were harmed by such conditions or events.
Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Market disruptions may exacerbate political, social, and economic risks. Additionally, market disruptions may result in increased market volatility; regulatory trading halts; closure of domestic or foreign exchanges, markets, or governments; or market participants operating pursuant to business continuity plans for indeterminate periods of time. Such events can be highly disruptive to economies and markets and significantly impact individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the fund’s investments and operation of the fund. These events could disrupt businesses that are integral to the fund’s operations or impair the ability of employees of fund service providers to perform essential tasks on behalf of the fund.
Governmental and quasi-governmental authorities may take a number of actions designed to support local and global economies and the financial markets in response to economic disruptions. Such actions may include a variety of significant fiscal and monetary policy changes, including, for example, direct capital infusions into companies, new monetary programs and significantly lower interest rates. These actions may result in significant expansion of public debt and may result in greater market risk. Additionally, an unexpected or quick reversal of these policies, or the ineffectiveness of these policies, could negatively impact overall investor sentiment and further increase volatility in securities markets.
Obligations backed by the “full faith and credit” of the U.S. government — U.S. government obligations include the following types of securities:
U.S. Treasury securities — U.S. Treasury securities include direct obligations of the U.S. Treasury, such as Treasury bills, notes and bonds. For these securities, the payment of principal and interest is unconditionally guaranteed by the U.S. government, and thus they are of high credit quality. Such securities are subject to variations in market value due to fluctuations in interest rates and in government policies, but, if held to maturity, are expected to be paid in full (either at maturity or thereafter).
U.S. Government Securities Fund — Page 3
Federal agency securities — The securities of certain U.S. government agencies and government-sponsored entities are guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. Such agencies and entities include, but are not limited to, the Federal Financing Bank (“FFB”), the Government National Mortgage Association (“Ginnie Mae”), the U.S. Department of Veterans Affairs (“VA”), the Federal Housing Administration (“FHA”), the Export-Import Bank of the United States (“Exim Bank”), the U.S. International Development Finance Corporation (“DFC”), the Commodity Credit Corporation (“CCC”) and the U.S. Small Business Administration (“SBA”).
Other federal agency obligations — Additional federal agency securities are neither direct obligations of, nor guaranteed by, the U.S. government. These obligations include securities issued by certain U.S. government agencies and government-sponsored entities. However, they generally involve some form of federal sponsorship: some operate under a congressional charter; some are backed by collateral consisting of “full faith and credit” obligations as described above; some are supported by the issuer’s right to borrow from the Treasury; and others are supported only by the credit of the issuing government agency or entity. These agencies and entities include, but are not limited to: the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Federal National Mortgage Association (“Fannie Mae”), the Tennessee Valley Authority and the Federal Farm Credit Bank System.
In 2008, Freddie Mac and Fannie Mae were placed into conservatorship by their new regulator, the Federal Housing Finance Agency (“FHFA”). Simultaneously, the U.S. Treasury made a commitment of indefinite duration to maintain the positive net worth of both firms. As conservator, the FHFA has the authority to repudiate any contract either firm has entered into prior to the FHFA’s appointment as conservator (or receiver should either firm go into default) if the FHFA, in its sole discretion determines that performance of the contract is burdensome and repudiation would promote the orderly administration of Fannie Mae’s or Freddie Mac’s affairs. While the FHFA has indicated that it does not intend to repudiate the guaranty obligations of either entity, doing so could adversely affect holders of their mortgage-backed securities. For example, if a contract were repudiated, the liability for any direct compensatory damages would accrue to the entity’s conservatorship estate and could only be satisfied to the extent the estate had available assets. As a result, if interest payments on Fannie Mae or Freddie Mac mortgage-backed securities held by the fund were reduced because underlying borrowers failed to make payments or such payments were not advanced by a loan servicer, the fund’s only recourse might be against the conservatorship estate, which might not have sufficient assets to offset any shortfalls.
The FHFA, in its capacity as conservator, has the power to transfer or sell any asset or liability of Fannie Mae or Freddie Mac. The FHFA has indicated it has no current intention to do this; however, should it do so a holder of a Fannie Mae or Freddie Mac mortgage-backed security would have to rely on another party for satisfaction of the guaranty obligations and would be exposed to the credit risk of that party.
Certain rights provided to holders of mortgage-backed securities issued by Fannie Mae or Freddie Mac under their operative documents may not be enforceable against the FHFA, or enforcement may be delayed during the course of the conservatorship or any future receivership. For example, the operative documents may provide that upon the occurrence of an event of default by Fannie Mae or Freddie Mac, holders of a requisite percentage of the mortgage-backed security may replace the entity as trustee. However, under the Federal Housing Finance Regulatory Reform Act of 2008, holders may not enforce this right if the event of default arises solely because a conservator or receiver has been appointed.
Debt instruments — Debt securities, also known as “fixed income securities,” are used by issuers to borrow money. Bonds, notes, debentures, asset-backed securities (including those backed by mortgages), and loan participations and assignments are common types of debt securities. Generally,
U.S. Government Securities Fund — Page 4
issuers pay investors periodic interest and repay the amount borrowed either periodically during the life of the security and/or at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values and their values accrete over time to face value at maturity. Some debt securities bear interest at rates that are not fixed, but that vary with changes in specified market rates or indices. The market prices of debt securities fluctuate depending on such factors as interest rates, credit quality and maturity. In general, market prices of debt securities decline when interest rates rise and increase when interest rates fall. These fluctuations will generally be greater for longer-term debt securities than for shorter-term debt securities. Prices of these securities can also be affected by financial contracts held by the issuer or third parties (such as derivatives) relating to the security or other assets or indices. Borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or they may pay only a small fraction of the amount owed. Direct indebtedness of countries, particularly developing countries, also involves a risk that the governmental entities responsible for the repayment of the debt may be unable, or unwilling, to pay interest and repay principal when due.
Certain additional risk factors relating to debt securities are discussed below:
Sensitivity to interest rate and economic changes — Debt securities may be sensitive to economic changes, political and corporate developments, and interest rate changes. In addition, during an economic downturn or a period of rising interest rates, issuers that are highly leveraged may experience increased financial stress that could adversely affect their ability to meet projected business goals, to obtain additional financing and to service their principal and interest payment obligations. Periods of economic change and uncertainty also can be expected to result in increased volatility of market prices and yields of certain debt securities and derivative instruments. As discussed under “Market conditions” above in this statement of additional information, governments and quasi-governmental authorities may take actions to support local and global economies and financial markets during periods of economic crisis, including direct capital infusions into companies, new monetary programs and significantly lower interest rates. Such actions may expose fixed income markets to heightened volatility and may reduce liquidity for certain investments, which could cause the value of the fund’s portfolio to decline.
Payment expectations — Debt securities may contain redemption or call provisions. If an issuer exercises these provisions in a lower interest rate market, the fund may have to replace the security with a lower yielding security, resulting in decreased income to investors. If the issuer of a debt security defaults on its obligations to pay interest or principal or is the subject of bankruptcy proceedings, the fund may incur losses or expenses in seeking recovery of amounts owed to it.
Liquidity and valuation — There may be little trading in the secondary market for particular debt securities, which may affect adversely the fund’s ability to value accurately or dispose of such debt securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and/or liquidity of debt securities.
Credit ratings for debt securities provided by rating agencies reflect an evaluation of the safety of principal and interest payments, not market value risk. The rating of an issuer is a rating agency’s view of past and future potential developments related to the issuer and may not necessarily reflect actual outcomes. There can be a lag between the time of developments relating to an issuer and the time a rating is assigned and updated. The investment adviser considers these ratings of securities as one of many criteria in making its investment decisions.
Bond rating agencies may assign modifiers (such as +/–) to ratings categories to signify the relative position of a credit within the rating category. Investment policies that are based on ratings categories
U.S. Government Securities Fund — Page 5
should be read to include any security within that category, without giving consideration to the modifier except where otherwise provided. See the Appendix to this statement of additional information for more information about credit ratings.
Pass-through securities — The fund may invest in various debt obligations backed by pools of mortgages. Principal and interest payments made on the underlying asset pools backing these obligations are typically passed through to investors, net of any fees paid to any insurer or any guarantor of the securities. Pass-through securities may have either fixed or adjustable coupons. The risks of an investment in these obligations depend in part on the type of the collateral securing the obligations and the class of the instrument in which the fund invests. These securities include:
Mortgage-backed securities — These securities may be issued by U.S. government agencies and government-sponsored entities, such as Ginnie Mae, Fannie Mae and Freddie Mac. The payment of interest and principal on mortgage-backed obligations issued by U.S. government agencies may be guaranteed by the full faith and credit of the U.S. government (in the case of Ginnie Mae), or may be guaranteed by the issuer (in the case of Fannie Mae and Freddie Mac). However, these guarantees do not apply to the market prices and yields of these securities, which vary with changes in interest rates.
Collateralized mortgage obligations (CMOs) — 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 issue at varying schedules resulting in bonds with different coupons, effective maturities and sensitivities to interest rates. Some CMOs may be structured in a way that when interest rates change, the impact of changing prepayment rates on the effective maturities of certain issues of these securities is magnified. CMOs may be less liquid or may exhibit greater price volatility than other types of mortgage or asset-backed securities.
Commercial mortgage-backed securities — These securities are backed by mortgages on 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 rental payments and the ability of a property to attract and retain tenants. Commercial mortgage-backed securities may be less liquid or exhibit greater price volatility than other types of mortgage or asset-backed securities and may be more difficult to value.
Asset-backed securities — These 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. Obligors of the underlying assets also may make prepayments that can change effective maturities of the asset-backed securities. These securities may be less liquid and more difficult to value than other securities.
U.S. Government Securities Fund — Page 6
Collateralized bond obligations (CBOs) and collateralized loan obligations (CLOs) — A CBO is a trust typically backed by a diversified pool of fixed-income securities, which may include high risk, lower rated securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, senior secured loans, senior unsecured loans, and subordinate corporate loans, including lower rated loans. CBOs and CLOs may charge management fees and administrative expenses.
For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest and highest yielding portion is the “equity” tranche which bears the bulk of any default by the bonds or loans in the trust and is constructed to protect the other, more senior tranches from default. Since they are partially protected from defaults, the more senior tranches typically have higher ratings and lower yields than the underlying securities in the trust and can be rated investment grade. Despite the protection from the equity tranche, the more senior tranches can still experience substantial losses due to actual defaults of the underlying assets, increased sensitivity to defaults due to impairment of the collateral or the more junior tranches, market anticipation of defaults, as well as potential general aversions to CBO or CLO securities as a class. Normally, these securities are privately offered and sold, and thus, are not registered under the securities laws. CBOs and CLOs may be less liquid, may exhibit greater price volatility and may be more difficult to value than other securities.
Inflation-linked bonds — The fund may invest in inflation-linked bonds issued by governments, their agencies or instrumentalities and corporations.
The principal amount of an inflation-linked bond is adjusted in response to changes in the level of an inflation index, such as the Consumer Price Index for Urban Consumers (“CPURNSA”). If the index measuring inflation falls, the principal value or coupon of these securities will be adjusted downward. Consequently, the interest payable on these securities will be reduced. Also, if the principal value of these securities is adjusted according to the rate of inflation, the adjusted principal value repaid at maturity may be less than the original principal. In the case of U.S. Treasury Inflation-Protected Securities (“TIPS”), currently the only inflation-linked security that is issued by the U.S Treasury, the principal amounts are adjusted daily based upon changes in the rate of inflation (as currently represented by the non-seasonally adjusted CPURNSA, calculated with a three-month lag). TIPS may pay interest semi-annually, equal to a fixed percentage of the inflation-adjusted principal amount. The interest rate on these bonds is fixed at issuance, but over the life of the bond this interest may be paid on an increasing or decreasing principal amount that has been adjusted for inflation. The current market value of TIPS is not guaranteed and will fluctuate. However, the U.S. government guarantees that, at maturity, principal will be repaid at the higher of the original face value of the security (in the event of deflation) or the inflation adjusted value.
Other non-U.S. sovereign governments also issue inflation-linked securities that are tied to their own local consumer price indexes and that offer similar deflationary protection. In certain of these non-U.S. jurisdictions, the repayment of the original bond principal upon the maturity of an inflation-linked bond is not guaranteed, allowing for the amount of the bond repaid at maturity to be less than par. Corporations also periodically issue inflation-linked securities tied to CPURNSA or similar inflationary indexes. While TIPS and non-U.S. sovereign inflation-linked securities are currently the largest part of the inflation-linked market, the fund may invest in corporate inflation-linked securities.
The value of inflation-linked securities is expected to change in response to the changes in real interest rates. Real interest rates, in turn, are tied to the relationship between nominal interest rates and the rate of inflation. If inflation were to rise at a faster rate than nominal interest rates, real interest rates would decline, leading to an increase in value of the inflation-linked securities. In contrast, if nominal interest rates were to increase at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-linked securities. There can be no assurance, however, that the value of
U.S. Government Securities Fund — Page 7
inflation-linked securities will be directly correlated to the changes in interest rates. If interest rates rise due to reasons other than inflation, investors in these securities may not be protected to the extent that the increase is not reflected in the security’s inflation measure.
The interest rate for inflation-linked bonds is fixed at issuance as a percentage of this adjustable principal. Accordingly, the actual interest income may both rise and fall as the principal amount of the bonds adjusts in response to movements of the consumer price index. For example, typically interest income would rise during a period of inflation and fall during a period of deflation.
The market for inflation-linked securities may be less developed or liquid, and more volatile, than certain other securities markets. There is a limited number of inflation-linked securities currently available for the fund to purchase, making the market less liquid and more volatile than the U.S. Treasury and agency markets.
Forward commitment, when issued and delayed delivery transactions — 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 from 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.
The fund may enter into roll transactions, such as a mortgage dollar roll where the fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon, and maturity) securities on a specified future date, at a pre-determined price. During the period between the sale and repurchase (the “roll period”), the fund forgoes principal and interest paid on the mortgage-backed securities. The fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”), if any, as well as by the interest earned on the cash proceeds of the initial sale. The fund could suffer a loss if the contracting party fails to perform the future transaction and the fund is therefore unable to buy back the mortgage-backed securities it initially sold. The fund also takes the risk that the mortgage-backed securities that it repurchases at a later date will have less favorable market characteristics than the securities originally sold (e.g., greater prepayment risk). These transactions are accounted for as purchase and sale transactions, which contribute to the fund’s portfolio turnover rate.
With to be announced (TBA) transactions, the particular securities (i.e., specified mortgage pools) to be delivered or received are not identified at the trade date, but are “to be announced” at a later settlement date. However, securities to be delivered must meet specified criteria, including face value, coupon rate and maturity, and be within industry-accepted “good delivery” standards.
The fund will not use these transactions for the purpose of leveraging. Although these transactions will not be entered into for leveraging purposes, 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 if it were not in such a position. 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. After a transaction is entered into, the fund may still dispose of or renegotiate the transaction. Additionally, prior to receiving delivery of securities as part of a transaction, the fund may sell such securities.
Under the SEC’s rule applicable to the fund's use of derivatives, when issued, forward-settling and nonstandard settlement cycle securities, as well as TBAs, will be treated as derivatives unless the fund intends to physically settle these transactions and the transactions will settle within 35 days of their respective trade dates.
U.S. Government Securities Fund — Page 8
Unfunded commitment agreements — The fund may enter into unfunded commitment agreements to make certain investments, including unsettled bank loan purchase transactions. Under the SEC’s rule applicable to the fund’s use of derivatives, unfunded commitment agreements are not derivatives transactions. The fund will only enter into such unfunded commitment agreements if the fund reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements as they come due.
Repurchase agreements — The fund may enter into repurchase agreements, or “repos”, under which the fund buys a security and obtains a simultaneous commitment from the seller to repurchase the security at a specified time and price. Because the security purchased constitutes collateral for the repurchase obligation, a repo may be considered a loan by the fund that is collateralized by the security purchased. Repos permit the fund to maintain liquidity and earn income over periods of time as short as overnight.
The seller must maintain with a custodian collateral equal to at least the repurchase price, including accrued interest. In tri-party repos, a third party custodian, called a clearing bank, facilitates repo clearing and settlement, including by providing collateral management services. However, as an alternative to tri-party repos, the fund could enter into bilateral repos, where the parties themselves are responsible for settling transactions.
The fund will only enter into repos involving securities of the type in which it could otherwise invest. If the seller under the repo defaults, the fund may incur a loss if the value of the collateral securing the repo has declined and may incur disposition costs and delays in connection with liquidating the collateral. If bankruptcy proceedings are commenced with respect to the seller, realization of the collateral by the fund may be delayed or limited.
Derivatives — In pursuing its investment objective, the fund may invest in derivative instruments. A derivative is a financial instrument, the value of which depends on, or is otherwise derived from, another underlying variable. Most often, the variable underlying a derivative is the price of a traded asset, such as a traditional cash security (e.g., a stock or bond), a currency or a commodity; however, the value of a derivative can be dependent on almost any variable, from the level of an index or a specified rate to the occurrence (or non-occurrence) of a credit event with respect to a specified reference asset. The fund may take positions in futures contracts and swaps, each of which is a derivative instrument described in greater detail below.
Derivative instruments may be distinguished by the manner in which they trade: some are standardized instruments that trade on an organized exchange while others are individually negotiated and traded in the over-the-counter (OTC) market. Derivatives also range broadly in complexity, from simple derivatives to more complex instruments. As a general matter, however, all derivatives — regardless of the manner in which they trade or their relative complexities — entail certain risks, some of which are different from, and potentially greater than, the risks associated with investing directly in traditional cash securities.
As is the case with traditional cash securities, derivative instruments are generally subject to counterparty credit risk; however, in some cases, derivatives may pose counterparty risks greater than those posed by cash securities. The use of derivatives involves the risk that a loss may be sustained by the fund as a result of the failure of the fund’s counterparty to make required payments or otherwise to comply with its contractual obligations. For some derivatives, though, the value of — and, in effect, the return on — the instrument may be dependent on both the individual credit of the fund’s counterparty and on the credit of one or more issuers of any underlying assets. If the fund does not correctly evaluate the creditworthiness of its counterparty and, where applicable, of issuers of any underlying reference assets, the fund’s investment in a derivative instrument may result in losses. Further, if a
U.S. Government Securities Fund — Page 9
fund’s counterparty were to default on its obligations, the fund’s contractual remedies against such counterparty may be subject to applicable bankruptcy and insolvency laws, which could affect the fund’s rights as a creditor and delay or impede the fund’s ability to receive the net amount of payments that it is contractually entitled to receive. Derivative instruments are subject to additional risks, including operational risk (such as documentation issues, settlement issues and systems failures) and legal risk (such as insufficient documentation, insufficient capacity or authority of a counterparty, and issues with the legality or enforceability of a contract).
The value of some derivative instruments in which the fund invests may be particularly sensitive to changes in prevailing interest rates, currency exchange rates or other market conditions. Like the fund’s other investments, the ability of the fund to successfully utilize such derivative instruments may depend in part upon the ability of the fund’s investment adviser to accurately forecast interest rates and other economic factors. The success of the fund’s derivative investment strategy will also depend on the investment adviser’s ability to assess and predict the impact of market or economic developments on the derivative instruments in which the fund invests, in some cases without having had the benefit of observing the performance of a derivative under all possible market conditions. If the investment adviser incorrectly forecasts such factors and has taken positions in derivative instruments contrary to prevailing market trends, or if the investment adviser incorrectly predicts the impact of developments on a derivative instrument, the fund could suffer losses.
Certain derivatives may also be subject to liquidity and valuation risks. The potential lack of a liquid secondary market for a derivative (and, particularly, for an OTC derivative) may cause difficulty in valuing or selling the instrument. If a derivative transaction is particularly large or if the relevant market is illiquid, as is often the case with many privately-negotiated OTC derivatives, the fund may not be able to initiate a transaction or to liquidate a position at an advantageous time or price. Particularly when there is no liquid secondary market for the fund’s derivative positions, the fund may encounter difficulty in valuing such illiquid positions. The value of a derivative instrument does not always correlate perfectly with its underlying asset, rate or index, and many derivatives, and OTC derivatives in particular, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the fund.
Because certain derivative instruments may obligate the fund to make one or more potential future payments, which could significantly exceed the value of the fund’s initial investments in such instruments, derivative instruments may also have a leveraging effect on the fund’s portfolio. Certain derivatives have the potential for unlimited loss, irrespective of the size of the fund’s investment in the instrument. When a fund leverages its portfolio, investments in that fund will tend to be more volatile, resulting in larger gains or losses in response to market changes.
The fund’s compliance with the SEC’s rule applicable to the fund’s use of derivatives may limit the ability of the fund to use derivatives as part of its investment strategy. The rule deems a fund that uses derivatives only in a limited manner as a limited derivatives user and requires that such fund adopt and implement written policies and procedures reasonably designed to manage the fund’s derivatives risks. The rule also requires that a fund that uses derivatives in more than a limited manner adopt a derivatives risk management program, appoint a derivatives risk manager and comply with an outer limit on leverage based on value at risk, or “VaR”. VaR is an estimate of an instrument’s or portfolio’s potential losses over a given time horizon (i.e., 20 trading days) and at a specified confidence level (i.e., 99%). VaR will not provide, and is not intended to provide, an estimate of an instrument’s or portfolio’s maximum potential loss amount. For example, a VaR of 5% with a specified confidence level of 99% would mean that a VaR model estimates that 99% of the time a fund would not be expected to lose more than 5% of its total assets over the given time period. However, 1% of the time, the fund would be expected to lose more than 5% of its total assets, and in such a scenario the VaR model does not provide an estimate of the extent of this potential loss. The derivatives rule may not be effective in limiting the fund’s risk of loss, as measurements of VaR rely on historical data and may not accurately measure the degree of risk reflected in the fund’s derivatives or other investments. A fund is generally
U.S. Government Securities Fund — Page 10
required to satisfy the rule’s outer limit on leverage by limiting the fund’s VaR to 200% of the VaR of a designated reference portfolio that does not utilize derivatives each business day. If a fund does not have an appropriate designated reference portfolio in light of the fund’s investments, investment objectives and strategy, a fund must satisfy the rule’s outer limit on leverage by limiting the fund’s VaR to 20% of the value of the fund’s net assets each business day.
Futures — The fund may enter into futures contracts to seek to manage the fund’s interest rate sensitivity by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio. A futures contract is an agreement to buy or sell a security or other financial instrument (the “reference asset”) for a set price on a future date. Futures contracts are standardized, exchange-traded contracts, and, when a futures contract is bought or sold, the fund will incur brokerage fees and will be required to maintain margin deposits.
Unlike when the fund purchases or sells a security, such as a stock or bond, no price is paid or received by the fund upon the purchase or sale of a futures contract. When the fund enters into a futures contract, the fund is required to deposit with its futures broker, known as a futures commission merchant (FCM), a specified amount of liquid assets in a segregated account in the name of the FCM at the applicable derivatives clearinghouse or exchange. This amount, known as initial margin, is set by the futures exchange on which the contract is traded and may be significantly modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract, which is returned to the fund upon termination of the contract, assuming all contractual obligations have been satisfied. Additionally, on a daily basis, the fund pays or receives cash, or variation margin, equal to the daily change in value of the futures contract. Variation margin does not represent a borrowing or loan by the fund but is instead a settlement between the fund and the FCM of the amount one party would owe the other if the futures contract expired. In computing daily net asset value, the fund will mark-to-market its open futures positions. In the event of the bankruptcy or insolvency of an FCM that holds margin on behalf of the fund, the fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM’s other customers, potentially resulting in losses to the fund. An event of bankruptcy or insolvency at a clearinghouse or exchange holding initial margin could also result in losses for the fund.
When the fund invests in futures contracts and deposits margin with an FCM, the fund becomes subject to so-called “fellow customer” risk – that is, the risk that one or more customers of the FCM will default on their obligations and that the resulting losses will be so great that the FCM will default on its obligations and margin posted by one customer, such as the fund, will be used to cover a loss caused by a different defaulting customer. Applicable rules generally prohibit the use of one customer’s funds to meet the obligations of another customer and limit the ability of an FCM to use margin posed by non-defaulting customers to satisfy losses caused by defaulting customers. As a general matter, an FCM is required to use its own funds to meet a defaulting customer’s obligations. While a customer’s loss would likely need to be substantial before non-defaulting customers would be exposed to loss on account of fellow customer risk, applicable rules nevertheless permit the commingling of margin and do not limit the mutualization of customer losses from investment losses, custodial failures, fraud or other causes. If the loss is so great that, notwithstanding the application of an FCM’s own funds, there is a shortfall in the amount of customer funds required to be held in segregation, the FCM could default and be placed into bankruptcy. Under these circumstances, bankruptcy law provides that non-defaulting customers will share pro rata in any shortfall. A shortfall in customer segregated funds may also make the transfer of the accounts of non-defaulting customers to another FCM more difficult.
Although certain futures contracts, by their terms, require actual future delivery of and payment for the reference asset, in practice, most futures contracts are usually closed out
U.S. Government Securities Fund — Page 11
before the delivery date by offsetting purchases or sales of matching futures contracts. Closing out an open futures contract purchase or sale is effected by entering into an offsetting futures contract sale or purchase, respectively, for the same aggregate amount of the identical reference asset and the same delivery date with the same FCM. If the offsetting purchase price is less than the original sale price (in each case taking into account transaction costs, including brokerage fees), the fund realizes a gain; if it is more, the fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price (in each case taking into account transaction costs, including brokerage fees), the fund realizes a gain; if it is less, the fund realizes a loss.
The value of a futures contract tends to increase and decrease in tandem with the value of its underlying reference asset. Purchasing futures contracts will, therefore, tend to increase the fund’s exposure to positive and negative price fluctuations in the reference asset, much as if the fund had purchased the reference asset directly. When the fund sells a futures contract, by contrast, the value of its futures position will tend to move in a direction contrary to the market for the reference asset. Accordingly, selling futures contracts will tend to offset both positive and negative market price changes, much as if the reference asset had been sold.
There is no assurance that a liquid market will exist for any particular futures contract at any particular time. Futures exchanges may establish daily price fluctuation limits for futures contracts and may halt trading if a contract’s price moves upward or downward more than the limit in a given day. On volatile trading days, when the price fluctuation limit is reached and a trading halt is imposed, it may be impossible to enter into new positions or close out existing positions. If the market for a futures contract is not liquid because of price fluctuation limits or other market conditions, the fund may be prevented from promptly liquidating unfavorable futures positions and the fund could be required to continue to hold a position until delivery or expiration regardless of changes in its value, potentially subjecting the fund to substantial losses. Additionally, the fund may not be able to take other actions or enter into other transactions to limit or reduce its exposure to the position. Under such circumstances, the fund would remain obligated to meet margin requirements until the position is cleared. As a result, the fund’s access to other assets posted as margin for its futures positions could also be impaired.
Although futures exchanges generally operate similarly in the United States and abroad, foreign futures exchanges may follow trading, settlement and margin procedures that are different than those followed by futures exchanges in the United States. Futures contracts traded outside the United States may not involve a clearing mechanism or related guarantees and may involve greater risk of loss than U.S.-traded contracts, including potentially greater risk of losses due to insolvency of a futures broker, exchange member, or other party that may owe initial or variation margin to the fund. Margin requirements on foreign futures exchanges may be different than those of futures exchanges in the United States, and, because initial and variation margin payments may be measured in foreign currency, a futures contract traded outside the United States may also involve the risk of foreign currency fluctuations.
Swaps — The fund may enter into swaps, which are two-party contracts entered into primarily by institutional investors for a specified time period. In a typical swap transaction, two parties agree to exchange the returns earned or realized from one or more underlying assets or rates of return.
Swaps can be traded on a swap execution facility (SEF) and cleared through a central clearinghouse (cleared), traded over-the-counter (OTC) and cleared, or traded bilaterally and not cleared. For example, standardized interest rate swaps and credit default swap indices are traded on SEFs and cleared. Other forms of swaps, such as total return swaps, are entered into on a bilateral basis. Because clearing interposes a central clearinghouse as the ultimate
U.S. Government Securities Fund — Page 12
counterparty to each participant’s swap, and margin is required to be exchanged under the rules of the clearinghouse, central clearing is intended to decrease (but not eliminate) counterparty risk relative to uncleared bilateral swaps. To the extent the fund enters into bilaterally negotiated swap transactions, the fund will enter into swaps only with counterparties that meet certain credit standards and subject to agreed collateralization procedures; however, if the counterparty’s creditworthiness deteriorates rapidly and the counterparty defaults on its obligations under the swap or declares bankruptcy, the fund may lose any amount it expected to receive from the counterparty. In addition, bilateral swaps are subject to certain regulatory margin requirements that mandate the posting and collection of minimum margin amounts, which may result in the fund and its counterparties posting higher margin amounts for bilateral swaps than would otherwise be the case.
The term of a swap can be days, months or years and certain swaps may be less liquid than others. If a swap transaction is particularly large or if the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses.
Swaps can take different forms. The fund may enter into the following types of swaps:
Interest rate swaps — The fund may enter into interest rate swaps to seek to manage the interest rate sensitivity of the fund by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio. An interest rate swap is an agreement between two parties to exchange or swap payments based on changes in an interest rate or rates. Typically, one interest rate is fixed and the other is variable based on a designated short-term interest rate such as the Secured Overnight Financing Rate (SOFR), prime rate or other benchmark, or on an inflation index such as the Consumer Price Index (which is a measure that examines the weighted average of prices of a basket of consumer goods and services and measures changes in the purchasing power of the U.S. dollar and the rate of inflation). In other types of interest rate swaps, known as basis swaps, the parties agree to swap variable interest rates based on different designated short-term interest rates. Interest rate swaps generally do not involve the delivery of securities or other principal amounts. Rather, cash payments are exchanged by the parties based on the application of the designated interest rates to a notional amount, which is the predetermined dollar principal of the trade upon which payment obligations are computed. Accordingly, the fund’s current obligation or right under the swap is generally equal to the net amount to be paid or received under the swap based on the relative value of the position held by each party.
In addition to the risks of entering into swaps discussed above, the use of interest rate swaps involves the risk of losses if interest rates change.
Total return swaps — The fund may enter into total return swaps in order to gain exposure to a market without investing directly in such market. A total return swap is an agreement in which one party agrees to make periodic payments to the other party based on the change in market value of the assets underlying the contract in exchange for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. The fund may invest in total return swaps where the asset underlying the contract is a securities index. Like other swaps, the use of total return swaps involves certain risks, including if the underlying assets do not perform as anticipated by the funds.
Restricted or illiquid securities — The fund may purchase securities subject to restrictions on resale. Restricted securities may only be sold pursuant to an exemption from registration under the Securities
U.S. Government Securities Fund — Page 13
Act of 1933, as amended (the “1933 Act”), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. Difficulty in selling such securities may result in a loss to the fund or cause it to incur additional administrative costs.
Some fund holdings (including some restricted securities) may be deemed illiquid if the fund expects that a reasonable portion of the holding cannot be sold in seven calendar days or less without the sale significantly changing the market value of the investment. The determination of whether a holding is considered illiquid is made by the fund’s adviser under a liquidity risk management program adopted by the fund’s board and administered by the fund’s adviser. The fund may incur significant additional costs in disposing of illiquid securities.
Cash and cash equivalents — The fund may hold cash or invest in cash equivalents. Cash equivalents include, but are not limited to: (a) shares of money market or similar funds managed by the investment adviser or its affiliates; (b) shares of other money market funds; (c) commercial paper; (d) short-term bank obligations (for example, certificates of deposit, bankers’ acceptances (time drafts on a commercial bank where the bank accepts an irrevocable obligation to pay at maturity)) or bank notes; (e) savings association and savings bank obligations (for example, bank notes and certificates of deposit issued by savings banks or savings associations); (f) securities of the U.S. government, its agencies or instrumentalities that mature, or that may be redeemed, in one year or less; and (g) higher quality corporate bonds and notes that mature, or that may be redeemed, in one year or less.
Commercial paper — The fund may purchase commercial paper. Commercial paper refers to short-term promissory notes issued by a corporation to finance its current operations. Such securities normally have maturities of thirteen months or less and, though commercial paper is often unsecured, commercial paper may be supported by letters of credit, surety bonds or other forms of collateral. Maturing commercial paper issuances are usually repaid by the issuer from the proceeds of new commercial paper issuances. As a result, investment in commercial paper is subject to rollover risk, or the risk that the issuer cannot issue enough new commercial paper to satisfy its outstanding commercial paper. Like all fixed income securities, commercial paper prices are susceptible to fluctuations in interest rates. If interest rates rise, commercial paper prices will decline and vice versa. However, the short-term nature of a commercial paper investment makes it less susceptible to volatility than many other fixed income securities because interest rate risk typically increases as maturity lengths increase. Commercial paper tends to yield smaller returns than longer-term corporate debt because securities with shorter maturities typically have lower effective yields than those with longer maturities. As with all fixed income securities, there is a chance that the issuer will default on its commercial paper obligations and commercial paper may become illiquid or suffer from reduced liquidity in these or other situations.
Commercial paper in which the fund may invest includes commercial paper issued in reliance on the exemption from registration afforded by Section 4(a)(2) of the 1933 Act. Section 4(a)(2) commercial paper has substantially the same price and liquidity characteristics as commercial paper generally, except that the resale of Section 4(a)(2) commercial paper is limited to institutional investors who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Technically, such a restriction on resale renders Section 4(a)(2) commercial paper a restricted security under the 1933 Act. In practice, however, Section 4(a)(2) commercial paper typically can be resold as easily as any other unrestricted security held by the fund. Accordingly, Section 4(a)(2) commercial paper has been generally determined to be liquid under procedures adopted by the fund’s board of trustees.
Variable and floating rate obligations — The interest rates payable on certain securities and other instruments in which the fund may invest may not be fixed but may fluctuate based upon changes in
U.S. Government Securities Fund — Page 14
market interest rates or credit ratings. Variable and floating rate obligations bear coupon rates that are adjusted at designated intervals, based on the then current market interest rates or credit ratings. The rate adjustment features tend to limit the extent to which the market value of the obligations will fluctuate. When the fund holds variable or floating rate securities, a decrease in market interest rates will adversely affect the income received from such securities and the net asset value of the fund’s shares.
The London Interbank Offered Rate (“LIBOR”) is one of the most widely used interest rate benchmarks and is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. On July 27, 2017, the U.K. Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. On March 5, 2021, the FCA and ICE Benchmark Administration, Limited (IBA), the administrator of LIBOR, announced that the publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities will cease immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023. As a result, LIBOR may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on certain loans, bonds, derivatives and other instruments in the fund’s portfolio.
Public and private sector industry initiatives have been underway to identify new or alternative reference rates to be used in place of LIBOR. In the US, the Alternative Reference Rates Committee (ARCC), a group of market participants convened to help ensure a successful transition away from USD LIBOR, has identified the Secured Overnight Financing Rate (“SOFR”), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as its preferred alternative rate. Working groups and regulators in other countries have suggested other alternative rates for their markets. There is no assurance that the composition or characteristics of any such alternative reference rate will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. This, in turn, may affect the value or return on certain of the fund’s investments, result in costs incurred in connection with closing out positions and entering into new trades and reduce the effectiveness of related fund transactions such as hedges. Relatedly, there are outstanding contracts governing bonds and other instruments which reference LIBOR that are due to mature beyond the LIBOR cessation date. These “legacy contracts” will need to be transitioned to an alternative reference rate, and a failure to do so may adversely impact the security (for example, under existing contract language the instrument could fall back to a fixed rate or have no fallback rate) and create contractual uncertainty, as well as market and litigation risk. Although there are ongoing efforts among certain government entities and other organizations to address these uncertainties, the ultimate effectiveness of such efforts is not yet known. These risks may also apply with respect to potential changes in connection with other interbank offering rates (e.g., Euribor) and other indices, rates and values that may be used as “benchmarks” and are the subject of recent regulatory reform.
Adjustment of maturities — The investment adviser seeks to anticipate movements in interest rates and may adjust the maturity distribution of the portfolio accordingly, keeping in mind the fund’s objectives.
U.S. Government Securities Fund — Page 15
Cybersecurity risks — With the increased use of technologies such as the Internet to conduct business, the fund has become potentially more susceptible to operational and information security risks through breaches in cybersecurity. In general, a breach in cybersecurity can result from either a deliberate attack or an unintentional event. Cybersecurity breaches may involve, among other things, “ransomware” attacks, injection of computer viruses or malicious software code, or the use of vulnerabilities in code to gain unauthorized access to digital information systems, networks or devices that are used directly or indirectly by the fund or its service providers through “hacking” or other means. Cybersecurity risks also include the risk of losses of service resulting from external attacks that do not require unauthorized access to the fund’s systems, networks or devices. For example, denial-of-service attacks on the investment adviser’s or an affiliate’s website could effectively render the fund’s network services unavailable to fund shareholders and other intended end-users. Any such cybersecurity breaches or losses of service may, among other things, cause the fund to lose proprietary information, suffer data corruption or lose operational capacity, or may result in the misappropriation, unauthorized release or other misuse of the fund’s assets or sensitive information (including shareholder personal information or other confidential information), the inability of fund shareholders to transact business, or the destruction of the fund’s physical infrastructure, equipment or operating systems. These, in turn, could cause the fund to violate applicable privacy and other laws and incur or suffer regulatory penalties, reputational damage, additional costs (including compliance costs) associated with corrective measures and/or financial loss. While the fund and its investment adviser have established business continuity plans and risk management systems designed to prevent or reduce the impact of cybersecurity attacks, there are inherent limitations in such plans and systems due in part to the ever-changing nature of technology and cybersecurity attack tactics, and there is a possibility that certain risks have not been adequately identified or prepared for.
In addition, cybersecurity failures by or breaches of the fund’s third-party service providers (including, but not limited to, the fund’s investment adviser, transfer agent, custodian, administrators and other financial intermediaries) may disrupt the business operations of the service providers and of the fund, potentially resulting in financial losses, the inability of fund shareholders to transact business with the fund and of the fund to process transactions, the inability of the fund to calculate its net asset value, violations of applicable privacy and other laws, rules and regulations, regulatory fines, penalties, reputational damage, reimbursement or other compensatory costs and/or additional compliance costs associated with implementation of any corrective measures. The fund and its shareholders could be negatively impacted as a result of any such cybersecurity breaches, and there can be no assurance that the fund will not suffer losses relating to cybersecurity attacks or other informational security breaches affecting the fund’s third-party service providers in the future, particularly as the fund cannot control any cybersecurity plans or systems implemented by such service providers.
Cybersecurity risks may also impact issuers of securities in which the fund invests, which may cause the fund’s investments in such issuers to lose value.
U.S. Government Securities Fund — Page 16
Inflation/Deflation risk — The fund may be subject to inflation and deflation risk. Inflation risk is the risk that the present value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of the fund‘s assets can decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the fund‘s assets.
Interfund borrowing and lending — Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission, the fund may lend money to, and borrow money from, other funds advised by Capital Research and Management Company or its affiliates. The fund will borrow through the program only when the costs are equal to or lower than the costs of bank loans. The fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one day's notice. The fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional borrowing costs.
Affiliated investment companies — The fund may purchase shares of certain other investment companies managed by the investment adviser or its affiliates (“Central Funds”). The risks of owning another investment company are similar to the risks of investing directly in the securities in which that investment company invests. Investments in other investment companies could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available through direct investments in a particular asset class, and will subject the fund to the risks associated with the particular asset class or asset classes in which an underlying fund invests. However, an investment company may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the fund’s performance. Any investment in another investment company will be consistent with the fund’s objective(s) and applicable regulatory limitations. Central Funds do not charge management fees. As a result, the fund does not bear additional management fees when investing in Central Funds, but the fund does bear its proportionate share of Central Fund expenses.
* * * * * *
U.S. Government Securities Fund — Page 17
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. Higher portfolio turnover may involve correspondingly greater transaction costs in the form of dealer spreads or brokerage commissions. It may also result in the realization of net capital gains, which are taxable when distributed to shareholders, unless the shareholder is exempt from taxation or his or her account is tax-favored.
Fixed income securities are generally traded on a net basis and usually neither brokerage commissions nor transfer taxes are involved. Transaction costs are usually reflected in the spread between the bid and asked price. Certain investments, such as to be announced contracts and mortgage dollar rolls increase a fund’s portfolio turnover rate.
The fund’s portfolio turnover rates for the fiscal years ended August 31, 2022 and 2021 were 488% and 631%, respectively. The decrease in turnover was due to decreased trading activity during the period. The fund’s portfolio turnover rate excluding mortgage dollar roll transactions for the fiscal year ended August 31, 2022 was 73%. See "Forward commitment, when issued and delayed delivery transactions" above for more information on mortgage dollar rolls. The portfolio turnover rate would equal 100% if each security in a fund’s portfolio were replaced once per year. See “Financial highlights” in the prospectus for the fund’s annual portfolio turnover rate for each of the last five fiscal years.
U.S. Government Securities Fund — Page 18
All percentage limitations in the following fund policies are considered at the time securities are purchased and are based on the fund’s net assets unless otherwise indicated. None of the following policies 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. In managing the fund, the fund’s investment adviser may apply more restrictive policies than those listed below.
Fundamental policies — The fund has adopted the following policies, which may not be changed without approval by holders of a majority of its outstanding shares. Such majority is currently defined in the Investment Company Act of 1940, as amended (the “1940 Act”), as the vote of the lesser of (a) 67% or more of the voting securities present at a shareholder meeting, if the holders of more than 50% of the outstanding voting securities are present in person or by proxy, or (b) more than 50% of the outstanding voting securities.
1. Except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies, or interpretations or modifications thereof by the U.S. Securities and Exchange Commission (“SEC”), SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction, the fund may not:
a. Borrow money;
b. Issue senior securities;
c. Underwrite the securities of other issuers;
d. Purchase or sell real estate or commodities;
e. Make loans; or
f. Purchase the securities of any issuer if, as a result of such purchase, the fund’s investments would be concentrated in any particular industry.
2. The fund may not invest in companies for the purpose of exercising control or management.
Nonfundamental policies — The following policy may be changed without shareholder approval:
The fund may not acquire securities of open-end investment companies or unit investment trusts registered under the 1940 Act in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
U.S. Government Securities Fund — Page 19
Additional information about the fund‘s policies — The information below is not part of the fund’s fundamental or nonfundamental policies. This information is intended to provide a summary of what is currently required or permitted by the 1940 Act and the rules and regulations thereunder, or by the interpretive guidance thereof by the SEC or SEC staff, for particular fundamental policies of the fund. Information is also provided regarding the fund’s current intention with respect to certain investment practices permitted by the 1940 Act.
For purposes of fundamental policy 1a, the fund may borrow money in amounts of up to 33-1/3% of its total assets from banks for any purpose. Additionally, the fund may borrow up to 5% of its total assets from banks or other lenders for temporary purposes (a loan is presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed). The percentage limitations in this policy are considered at the time of borrowing and thereafter.
For purposes of fundamental policies 1a and 1e, the fund may borrow money from, or loan money to, other funds managed by Capital Research and Management Company or its affiliates to the extent permitted by applicable law and an exemptive order issued by the SEC.
For purposes of fundamental policy 1b, a senior security does not include any promissory note or evidence of indebtedness if such loan is for temporary purposes only and in an amount not exceeding 5% of the value of the total assets of the fund at the time the loan is made (a loan is presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed). Further, the fund is permitted to enter into derivatives and certain other transactions, notwithstanding the prohibitions and restrictions on the issuance of senior securities under the 1940 Act, in accordance with current SEC rules and interpretations.
For purposes of fundamental policy 1c, the policy will not apply to the fund to the extent the fund may be deemed an underwriter within the meaning of the 1933 Act in connection with the purchase and sale of fund portfolio securities in the ordinary course of pursuing its investment objectives and strategies.
For purposes of fundamental policy 1e, the fund may not lend more than 33-1/3% of its total assets, provided that this limitation shall not apply to the fund’s purchase of debt obligations.
For purposes of fundamental policy 1f, the fund may not invest more than 25% of its total assets in the securities of issuers in a particular industry. This policy does not apply to investments in securities of the U.S. government, its agencies or government sponsored enterprises or repurchase agreements with respect thereto.
U.S. Government Securities Fund — Page 20
Board of trustees and officers
Independent trustees1
The fund’s nominating and governance committee and board select independent trustees with a view toward constituting a board that, as a body, possesses the qualifications, skills, attributes and experience to appropriately oversee the actions of the fund’s service providers, decide upon matters of general policy and represent the long-term interests of fund shareholders. In doing so, they consider the qualifications, skills, attributes and experience of the current board members, with a view toward maintaining a board that is diverse in viewpoint, experience, education and skills.
The fund seeks independent trustees who have high ethical standards and the highest levels of integrity and commitment, who have inquiring and independent minds, mature judgment, good communication skills, and other complementary personal qualifications and skills that enable them to function effectively in the context of the fund’s board and committee structure and who have the ability and willingness to dedicate sufficient time to effectively fulfill their duties and responsibilities.
Each independent trustee has a significant record of accomplishments in governance, business, not-for-profit organizations, government service, academia, law, accounting or other professions. Although no single list could identify all experience upon which the fund’s independent trustees draw in connection with their service, the following table summarizes key experience for each independent trustee. These references to the qualifications, attributes and skills of the trustees are pursuant to the disclosure requirements of the SEC, and shall not be deemed to impose any greater responsibility or liability on any trustee or the board as a whole. Notwithstanding the accomplishments listed below, none of the independent trustees is considered an “expert” within the meaning of the federal securities laws with respect to information in the fund’s registration statement.
U.S. Government Securities Fund — Page 21
|
Name,
year of birth |
Principal |
Number
of |
Other
|
Other relevant experience |
|
Francisco
G. Cigarroa, MD, 1957 |
Professor of Surgery, University of Texas Health San Antonio; Trustee, Ford Foundation; Clayton Research Scholar, Clayton Foundation for Biomedical Research |
86 |
None |
· Corporate board experience · Service on boards of community and nonprofit organizations · MD |
|
James
G. Ellis, 1947 |
Former Dean and Professor of Marketing, Marshall School of Business, University of Southern California |
96 |
Advanced Merger Partners; EVe Mobility Acquisition Corp (acquisitions of companies in the electric vehicle market); J. G. Boswell (agricultural production); Mercury General Corporation |
· Service as chief executive officer for multiple companies · Corporate board experience · Service on advisory and trustee boards for charitable, municipal and nonprofit organizations · MBA |
|
Nariman
Farvardin, 1956 |
President, Stevens Institute of Technology |
91 |
None |
· Senior management experience, educational institution · Corporate board experience · Professor, electrical and computer engineering · Service on advisory boards and councils for educational, nonprofit and governmental organizations · MS, PhD, electrical engineering |
U.S. Government Securities Fund — Page 22
|
Name,
year of birth |
Principal |
Number
of |
Other
|
Other relevant experience |
|
Mary
Davis Holt, 1950 |
Principal, Mary Davis Holt Enterprises, LLC (leadership development consulting); former Partner, Flynn Heath Holt Leadership, LLC (leadership consulting); former COO, Time Life Inc. (1993–2003) |
87 |
None |
· Service as chief operations officer, global media company · Senior corporate management experience · Corporate board experience · Service on advisory and trustee boards for educational, business and nonprofit organizations · MBA |
|
Merit
E. Janow, 1958 |
Dean Emerita and Professor of Practice, International Economic Law & International Affairs, Columbia University, School of International and Public Affairs |
93 |
Aptiv (autonomous and green vehicle technology); Mastercard Incorporated Former director of Trimble Inc. (software, hardware and services technology) (until 2021) |
· Service with Office of the U.S. Trade Representative and U.S. Department of Justice · Corporate board experience · Service on advisory and trustee boards for charitable, educational and nonprofit organizations · Experience as corporate lawyer · JD |
|
Margaret
Spellings, 1957 |
President and CEO, Texas 2036; former President, Margaret Spellings & Company (public policy and strategic consulting); former President, The University of North Carolina; former President, George W. Bush Presidential Center |
91 |
Former director of ClubCorp Holdings, Inc. (until 2017) |
· Former U.S. Secretary of Education, U.S. Department of Education · Former Assistant to the President for Domestic Policy, The White House · Former senior advisor to the Governor of Texas · Service on advisory and trustee boards for charitable and nonprofit organizations |
U.S. Government Securities Fund — Page 23
|
Name,
year of birth |
Principal |
Number
of |
Other
|
Other relevant experience |
|
Alexandra
Trower, 1964 |
Former Executive Vice President, Global Communications and Corporate Officer, The Estée Lauder Companies |
86 |
None |
· Service on trustee boards for charitable and nonprofit organizations · Senior corporate management experience · Branding |
|
Paul
S. Williams, 1959 |
Former Partner/Managing Director, Major, Lindsey & Africa (executive recruiting firm) |
86 |
Air Transport Services Group, Inc. (aircraft leasing and air cargo transportation); Compass Minerals, Inc. (producer of salt and specialty fertilizers); Public Storage, Inc.; Romeo Power, Inc. (manufacturer of batteries for electric vehicles) Former director of Bob Evans Farms, Inc. (restaurant company) (until 2017); Essendant, Inc. (business products wholesaler) (until 2019) |
· Senior corporate management experience · Corporate board experience · Corporate governance experience · Service on trustee boards for charitable and educational nonprofit organizations · Securities law expertise · JD |
U.S. Government Securities Fund — Page 24
Interested trustee(s)4,5
Interested trustees have similar qualifications, skills and attributes as the independent trustees. Interested trustees are senior executive officers and/or directors of Capital Research and Management Company or its affiliates. Such management roles with the fund‘s service providers also permit the interested trustees to make a significant contribution to the fund’s board.
|
Name,
year of birth |
Principal
occupation(s) |
Number
of |
Other
|
|
Michael
C. Gitlin, 1970 |
Partner – Capital Fixed Income Investors, Capital Research and Management Company; Vice Chairman and Director, Capital Research and Management Company; Director, The Capital Group Companies, Inc.* |
86 |
None |
|
Karl
J. Zeile, 1966 |
Partner – Capital Fixed Income Investors, Capital Research and Management Company |
21 |
None |
U.S. Government Securities Fund — Page 25
Other officers5
|
Name,
year of birth |
Principal
occupation(s) during the past five years |
|
Fergus
N. MacDonald, 1969 |
Partner – Capital Fixed Income Investors, Capital Research and Management Company; Director, The Capital Group Companies, Inc.* |
|
Kristine
M. Nishiyama, 1970 |
Senior Vice President and Senior Counsel – Fund Business Management Group, Capital Research and Management Company; Chair, Senior Vice President, General Counsel and Director, Capital Bank and Trust Company* |
|
Michael
W. Stockton, 1967 |
Senior Vice President – Fund Business Management Group, Capital Research and Management Company |
|
David
J. Betanzos, 1974 |
Partner – Capital Fixed Income Investors, Capital Research and Management Company; Director, Capital Research and Management Company |
|
Ritchie
Tuazon, 1978 |
Partner – Capital Fixed Income Investors, Capital Research and Management Company |
|
Steven
I. Koszalka, 1964 |
Vice President – Fund Business Management Group, Capital Research and Management Company |
|
Brian
C. Janssen, 1972 |
Senior Vice President – Investment Operations, Capital Research and Management Company |
|
Jane
Y. Chung, 1974 |
Associate – Fund Business Management Group, Capital Research and Management Company |
|
Sandra
Chuon, 1972 |
Vice President – Investment Operations, Capital Research and Management Company |
|
Becky
L. Park, 1979 |
Vice President – Investment Operations, Capital Research and Management Company |
* Company affiliated with Capital Research and Management Company.
1 The term independent trustee refers to a trustee who is not an “interested person” of the fund within the meaning of the 1940 Act.
2 Trustees and officers of the fund serve until their resignation, removal or retirement.
3 This includes all directorships/trusteeships (other than those in the American Funds or other funds managed by Capital Research and Management Company or its affiliates) that are held by each trustee as a director/trustee of a public company or a registered investment company. Unless otherwise noted, all directorships/trusteeships are current.
4 The term interested trustee refers to a trustee who is an “interested person” of the fund within the meaning of the 1940 Act, on the basis of his or her affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter).
5 All of the trustees and/or officers listed are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as investment adviser.
The address for all trustees and officers of the fund is 333 South Hope Street, 55th Floor, Los Angeles, California 90071, Attention: Secretary.
U.S. Government Securities Fund — Page 26
Fund shares owned by trustees as of December 31, 2021:
|
Name |
Dollar
range1,2 |
Aggregate |
Dollar |
Aggregate |
|
Independent trustees | ||||
|
Francisco G. Cigarroa |
None |
None |
N/A |
Over $100,000 |
|
James G. Ellis |
None |
Over $100,000 |
N/A |
N/A |
|
Nariman Farvardin |
None |
Over $100,000 |
N/A |
Over $100,000 |
|
Mary Davis Holt |
None |
Over $100,000 |
N/A |
N/A |
|
Merit E. Janow |
None |
Over $100,000 |
N/A |
$50,001 – $100,000 |
|
Margaret Spellings |
None |
Over $100,000 |
N/A |
Over $100,000 |
|
Alexandra Trower |
None |
Over $100,000 |
N/A |
Over $100,000 |
|
Paul S. Williams |
None |
Over $100,000 |
N/A |
Over $100,000 |
|
Name |
Dollar
range1,2 |
Aggregate in same family of investment companies as the fund |
|
Interested trustees | ||
|
Michael C. Gitlin |
Over $100,000 |
Over $100,000 |
|
Karl J. Zeile |
$50,001 – $100,000 |
Over $100,000 |
1 Ownership disclosure is made using the following ranges: None; $1 – $10,000; $10,001 – $50,000; $50,001 – $100,000; and Over $100,000. The amounts listed for interested trustees include shares owned through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
2 N/A indicates that the listed individual, as of December 31, 2021, was not a trustee of a particular fund, did not allocate deferred compensation to the fund or did not participate in the deferred compensation plan.
3 Eligible trustees may defer their compensation under a nonqualified deferred compensation plan. Amounts deferred by the trustee accumulate at an earnings rate determined by the total return of one or more American Funds as designated by the trustee.
U.S. Government Securities Fund — Page 27
Trustee compensation — No compensation is paid by the fund to any officer or trustee who is a director, officer or employee of the investment adviser or its affiliates. Except for the independent trustees listed in the “Board of trustees and officers — Independent trustees” table under the “Management of the fund” section in this statement of additional information, all other officers and trustees of the fund are directors, officers or employees of the investment adviser or its affiliates. The boards of funds advised by the investment adviser typically meet either individually or jointly with the boards of one or more other such funds with substantially overlapping board membership (in each case referred to as a “board cluster”). The fund typically pays each independent trustee an annual retainer fee based primarily on the total number of board clusters on which that independent trustee serves.
In addition, the fund generally pays independent trustees attendance and other fees for meetings of the board and its committees. Board and committee chairs receive additional fees for their services.
Independent trustees also receive attendance fees for certain special joint meetings and information sessions with directors and trustees of other groupings of funds advised by the investment adviser. The fund and the other funds served by each independent trustee each pay a portion of these attendance fees.
No pension or retirement benefits are accrued as part of fund expenses. Independent 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 independent trustees.
U.S. Government Securities Fund — Page 28
Trustee compensation earned during the fiscal year ended August 31, 2022:
|
Name |
Aggregate
compensation |
Total
compensation (including |
|
Francisco G. Cigarroa2 |
$10,343 |
$317,250 |
|
James G. Ellis |
7,963 |
494,750 |
|
Nariman Farvardin2 |
6,865 |
447,238 |
|
Mary Davis Holt |
7,748 |
383,250 |
|
R.
Clark Hooper2 |
3,359 |
209,338 |
|
Merit E. Janow2 |
6,173 |
473,976 |
|
Margaret Spellings2 |
8,494 |
523,976 |
|
Alexandra Trower2 |
10,522 |
322,750 |
|
Paul S. Williams2 |
10,351 |
317,500 |
1 Amounts may be deferred by eligible trustees under a nonqualified 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 American Funds as designated by the trustees. Compensation shown in this table for the fiscal year ended August 31, 2022 does not include earnings on amounts deferred in previous fiscal years. See footnote 2 to this table for more information.
2 Since the deferred compensation plan’s adoption, the total amount of deferred compensation accrued by the fund (plus earnings thereon) through the end of the 2022 fiscal year for participating trustees is as follows: Francisco G. Cigarroa ($6,686), Nariman Farvardin ($37,357), R. Clark Hooper ($19,228), Merit E. Janow ($2,222), Margaret Spellings ($21,336), Alexandra Trower ($78,044) and Paul S. Williams ($8,312). Amounts deferred and accumulated earnings thereon are not funded and are general unsecured liabilities of the fund until paid to the trustees.
U.S. Government Securities Fund — Page 29
Fund organization and the board of trustees — The fund, an open-end, diversified management investment company, was organized as a Massachusetts business trust on May 8, 1985, and reorganized as a Delaware statutory trust on November 1, 2010. 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.
Delaware law charges trustees with the duty of managing the business affairs of the trust. Trustees are considered to be fiduciaries of the trust and owe duties of care and loyalty to the trust and its shareholders.
Independent board members are paid certain fees for services rendered to the fund as described above. They may elect to defer all or a portion of these fees through a deferred compensation plan in effect for the fund.
The fund has several different classes of shares. Shares of each class represent an interest in the same investment portfolio. Each class has pro rata rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution expenses and may bear different transfer agent fees and other expenses properly attributable to the particular class as approved by the board of trustees and set forth in the fund’s rule 18f-3 Plan. Each class’ shareholders have exclusive voting rights with respect to the respective class’ rule 12b-1 plans adopted in connection with the distribution of shares and on other matters in which the interests of one class are different from interests in another class. Shares of all classes of the fund vote together on matters that affect all classes in substantially the same manner. Each class votes as a class on matters that affect that class alone. Note that 529 college savings plan account owners invested in Class 529 shares are not shareholders of the fund and, accordingly, do not have the rights of a shareholder, such as the right to vote proxies relating to fund shares. As the legal owner of the fund’s Class 529 shares, Virginia College Savings PlanSM (Virginia529SM) will vote any proxies relating to the fund’s Class 529 shares. In addition, the trustees have the authority to establish new series and classes of shares, and to split or combine outstanding shares into a greater or lesser number, without shareholder approval.
The fund does not hold annual meetings of shareholders. However, significant matters that 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.
The fund’s declaration of trust and by-laws, as well as separate indemnification agreements with independent trustees, provide in effect that, subject to certain conditions, the fund will indemnify its officers and trustees against liabilities or expenses actually and reasonably incurred by them relating to their service to the fund. However, trustees 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.
Removal of trustees by shareholders — At any meeting of shareholders, duly called and at which a quorum is present, shareholders may, by the affirmative vote of the holders of two-thirds of the votes entitled to be cast, remove any trustee from office and may elect a successor or successors to fill any resulting vacancies for the unexpired terms of removed trustees. In addition, the trustees of the fund will promptly call a meeting of shareholders for the purpose of voting upon the removal of any trustees when requested in writing to do so by the record holders of at least 10% of the outstanding shares.
Leadership structure — The board’s chair is currently an independent trustee who is not an “interested person” of the fund within the meaning of the 1940 Act. The board has determined that an independent chair facilitates oversight and enhances the effectiveness of the board. The independent chair’s duties include, without limitation, generally presiding at meetings of the board, approving
U.S. Government Securities Fund — Page 30
board meeting schedules and agendas, leading meetings of the independent trustees in executive session, facilitating communication with committee chairs, and serving as the principal independent trustee contact for fund management and counsel to the independent trustees and the fund.
Risk oversight — Day-to-day management of the fund, including risk management, is the responsibility of the fund’s contractual service providers, including the fund’s investment adviser, principal underwriter/distributor and transfer agent. Each of these entities is responsible for specific portions of the fund’s operations, including the processes and associated risks relating to the fund‘s investments, integrity of cash movements, financial reporting, operations and compliance. The board of trustees oversees the service providers’ discharge of their responsibilities, including the processes they use to manage relevant risks. In that regard, the board receives reports regarding the operations of the fund’s service providers, including risks. For example, the board receives reports from investment professionals regarding risks related to the fund‘s investments and trading. The board also receives compliance reports from the fund’s and the investment adviser’s chief compliance officers addressing certain areas of risk.
Committees of the fund’s board, which are comprised of independent board members, none of whom is an “interested person” of the fund within the meaning of the 1940 Act, as well as joint committees of independent board members of funds managed by Capital Research and Management Company, also explore risk management procedures in particular areas and then report back to the full board. For example, the fund’s audit committee oversees the processes and certain attendant risks relating to financial reporting, valuation of fund assets, and related controls. Similarly, a joint review and advisory committee oversees certain risk controls relating to the fund’s transfer agency services.
Not all risks that may affect the fund can be identified or processes and controls developed to eliminate or mitigate their effect. Moreover, it is necessary to bear certain risks (such as investment-related risks) to achieve the fund’s objectives. As a result of the foregoing and other factors, the ability of the fund’s service providers to eliminate or mitigate risks is subject to limitations.
Committees of the board of trustees — The fund has an audit committee comprised of Francisco G. Cigarroa, James G. Ellis and Paul S. Williams. The committee provides oversight regarding the fund’s accounting and financial reporting policies and practices, its internal controls and the internal controls of the fund’s principal service providers. The committee acts as a liaison between the fund’s independent registered public accounting firm and the full board of trustees. The audit committee held five meetings during the 2022 fiscal year.
The fund has a contracts committee comprised of all of its independent board members. The committee’s principal function is to request, review and consider the information deemed necessary to evaluate the terms of certain agreements between the fund and its investment adviser or the investment adviser’s affiliates, such as the Investment Advisory and Service Agreement, Principal Underwriting Agreement, Administrative Services Agreement and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew or continue, and to make its recommendations to the full board of trustees on these matters. The contracts committee held one meeting during the 2022 fiscal year.
The fund has a nominating and governance committee comprised of Nariman Farvardin, Mary Davis Holt, Merit E. Janow, Margaret Spellings and Alexandra Trower. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of trustees. The committee also coordinates annual self-assessments of the board and evaluates, selects and nominates independent trustee candidates to the full board of trustees. While the committee normally is able to identify from its own and other resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such
U.S. Government Securities Fund — Page 31
suggestions must be sent in writing to the nominating and governance committee of the fund, addressed to the fund’s secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the committee. The nominating and governance committee held two meetings during the 2022 fiscal year.
The independent board members of the fund have oversight responsibility for the fund and certain other funds managed by the investment adviser. As part of their oversight responsibility for these funds, each independent board member sits on one of three fund review committees comprised solely of independent board members. The three committees are divided by portfolio type. Each committee functions independently and is not a decision making body. The purpose of the committees is to assist the board of each fund in the oversight of the investment management services provided by the investment adviser. In addition to regularly monitoring and reviewing investment results, investment activities and strategies used to manage the fund’s assets, the committees also receive reports from the investment adviser’s Principal Investment Officers for the funds, portfolio managers and other investment personnel concerning efforts to achieve the fund’s investment objectives. Each committee reports to the full board of the fund.
Proxy voting procedures and principles — The fund’s investment adviser, in consultation with the fund’s board, has adopted Proxy Voting Procedures and Principles (the “Principles”) with respect to voting proxies of securities held by the fund and other funds advised by the investment adviser or its affiliates. The complete text of these principles is available at capitalgroup.com. Proxies are voted by a committee of the appropriate equity investment division of the investment adviser under authority delegated by the funds’ boards. The boards of American Funds have established a Joint Proxy Committee (“JPC”) composed of independent board members from each American Funds board. The JPC’s role is to facilitate appropriate oversight of the proxy voting process and provide valuable input on corporate governance and related matters.
The Principles provide an important framework for analysis and decision-making by all funds. However, they are not exhaustive and do not address all potential issues. The Principles provide a certain amount of flexibility so that all relevant facts and circumstances can be considered in connection with every vote. As a result, each proxy received is voted on a case-by-case basis considering the specific circumstances of each proposal. The voting process reflects the funds’ understanding of the company’s business, its management and its relationship with shareholders over time. In all cases, the investment objectives and policies of the funds managed by the investment adviser remain the focus.
The investment adviser seeks to vote all U.S. proxies; however, in certain circumstances it may be impracticable or impossible to do so. Proxies for companies outside the U.S. also are voted, provided there is sufficient time and information available. Certain regulators have granted investment limit relief to the investment adviser and its affiliates, conditioned upon limiting its voting power to specific voting ceilings. To comply with these voting ceilings, the investment adviser will scale back its votes across all funds and clients on a pro-rata basis based on assets.
After a proxy statement is received, the investment adviser’s stewardship and engagement team prepares a summary of the proposals contained in the proxy statement. A notation of any potential conflicts of interest also is included in the summary (see below for a description of the investment adviser’s special review procedures).
For proxies of securities managed by a particular equity investment division of the investment adviser, the initial voting recommendation is made either by one or more of the division’s investment analysts familiar with the company and industry or, for routine matters, by a member of the investment adviser’s stewardship and engagement team and reviewed by the applicable analyst(s). Depending on the vote,
U.S. Government Securities Fund — Page 32
a second recommendation may be made by a proxy coordinator (an investment analyst or other individual with experience in corporate governance and proxy voting matters) within the appropriate investment division, based on knowledge of these Principles and familiarity with proxy-related issues. The proxy summary and voting recommendations are made available to the proxy voting committee of the applicable investment division for a final voting decision. In cases where a fund is co-managed and a security is held by more than one of the investment adviser’s equity investment divisions, the divisions may develop different voting recommendations for individual ballot proposals. If this occurs, and if permitted by local market conventions, the fund’s position will generally be voted proportionally by divisional holding, according to their respective decisions. Otherwise, the outcome will be determined by the equity investment division or divisions with the larger position in the security as of the record date for the shareholder meeting.
In addition to its proprietary proxy voting, governance and executive compensation research, Capital Research and Management Company may utilize research provided by Institutional Shareholder Services, Glass-Lewis & Co. or other third-party advisory firms on a case-by-case basis. It does not, as a policy, follow the voting recommendations provided by these firms. It periodically assesses the information provided by the advisory firms and reports to the JPC, as appropriate.
From time to time the investment adviser may vote proxies issued by, or on proposals sponsored or publicly supported by (a) a client with substantial assets managed by the investment adviser or its affiliates, (b) an entity with a significant business relationship with The Capital Group Companies, Inc. or its affiliates, or (c) a company with a director of an American Fund on its board (each referred to as an “Interested Party”). Other persons or entities may also be deemed an Interested Party if facts or circumstances appear to give rise to a potential conflict. The investment adviser analyzes these proxies and proposals on their merits and does not consider these relationships when casting its vote.
The investment adviser has developed procedures to identify and address instances where a vote could appear to be influenced by such a relationship. Under the procedures, prior to a final vote being cast by the investment adviser, the relevant proxy committees’ voting results for proxies issued by Interested Parties are reviewed by a Special Review Committee (“SRC”) of the investment division voting the proxy if the vote was in favor of the Interested Party.
If a potential conflict is identified according to the procedure above, the SRC will be provided with a summary of any relevant communications with the Interested Party, the rationale for the voting decision, information on the organization’s relationship with the Interested Party and any other pertinent information. If the SRC determines, based on the information provided, that a conflict of interest could affect the investment adviser’s best judgement as a fiduciary, the SRC will take appropriate steps to address the conflict of interest including, if appropriate, engaging an independent, third-party fiduciary to vote the proxy. The SRC includes senior investment professionals and legal and compliance professionals.
Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available on or about September 1 of such year (a) without charge, upon request by calling American Funds Service Company at (800) 421-4225, (b) on the Capital Group website and (c) on the SEC’s website at sec.gov.
The following summary sets forth the general positions of American Funds, American Funds Insurance Series and the investment adviser on various proposals. A copy of the full Principles is available upon request, free of charge, by calling American Funds Service Company or visiting the Capital Group website.
Director matters — The election of a company’s slate of nominees for director generally is supported. Votes may be withheld for some or all of the nominees if this is determined to be in
U.S. Government Securities Fund — Page 33
the best interest of shareholders or if, in the opinion of the investment adviser, such nominee has not fulfilled his or her fiduciary duty. In making this determination, the investment adviser considers, among other things, a nominee’s potential conflicts of interest, track record in shareholder protection and value creation as well as their capacity for full engagement on board matters. The investment adviser generally supports diversity of experience among board members, and the separation of the chairman and CEO positions.
Governance provisions — Typically, proposals to declassify a board (elect all directors annually) are supported based on the belief that this increases the directors’ sense of accountability to shareholders. Proposals for cumulative voting generally are supported in order to promote management and board accountability and an opportunity for leadership change. Proposals designed to make director elections more meaningful, either by requiring a majority vote or by requiring any director receiving more withhold votes than affirmative votes to tender his or her resignation, generally are supported.
Shareholder rights — Proposals to repeal an existing poison pill generally are supported. (There may be certain circumstances, however, when a proxy voting committee of a fund or an investment division of the investment adviser believes that a company needs to maintain anti-takeover protection.) Proposals to eliminate the right of shareholders to act by written consent or to take away a shareholder’s right to call a special meeting typically are not supported.
Compensation and benefit plans — Option plans are complicated, and many factors are considered in evaluating a plan. Each plan is evaluated based on protecting shareholder interests and a knowledge of the company and its management. Considerations include the pricing (or repricing) of options awarded under the plan and the impact of dilution on existing shareholders from past and future equity awards. Compensation packages should be structured to attract, motivate and retain existing employees and qualified directors; however, they should not be excessive.
Routine matters — The ratification of auditors, procedural matters relating to the annual meeting and changes to company name are examples of items considered routine. Such items generally are voted in favor of management’s recommendations unless circumstances indicate otherwise.
“ESG” shareholder proposals — The investment adviser believes environmental and social issues present investment risks and opportunities that can shape a company’s long-term financial sustainability. Shareholder proposals, including those relating to social and environmental issues, are evaluated in terms of their materiality to the company and its ability to generate long-term value in light of the company’s specific operating context. The investment adviser generally supports transparency and standardized disclosure, particularly that which leverages existing regulatory reporting or industry best practices. With respect to environmental matters, this includes disclosures aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the standards set forth by the Sustainability Accounting Standards Board (SASB), and sustainability reports more generally. With respect to social matters, the investment adviser expects companies to be able to articulate a strategy or plan to advance diversity and equity within the workforce, including the company’s management and board, subject to local norms and expectations. To that end, disclosure of data relating to workforce diversity and equity that is consistent with broadly applicable standards is generally supported.
U.S. Government Securities Fund — Page 34
Principal fund shareholders — The following table identifies those investors who own of record, or are known by the fund to own beneficially, 5% or more of any class of its shares as of the opening of business on October 1, 2022. Unless otherwise indicated, the ownership percentages below represent ownership of record rather than beneficial ownership.
|
NAME AND ADDRESS |
OWNERSHIP |
OWNERSHIP PERCENTAGE | |
|
EDWARD
D JONES & CO |
RECORD |
CLASS A |
38.57% |
|
CLASS F-3 |
32.68 | ||
|
CLASS 529-A |
14.38 | ||
|
CLASS 529-C |
9.88 | ||
|
PERSHING
LLC |
RECORD |
CLASS A |
5.49 |
|
CLASS C |
8.73 | ||
|
CLASS F-1 |
5.09 | ||
|
CLASS F-2 |
10.46 | ||
|
CLASS F-3 |
8.95 | ||
|
RAYMOND
JAMES |
RECORD |
CLASS C |
17.88 |
|
CLASS 529-C |
9.31 | ||
|
CLASS 529-F-2 |
6.47 | ||
|
WELLS
FARGO CLEARING SERVICES LLC |
RECORD |
CLASS C |
6.42 |
|
CLASS 529-C |
9.69 | ||
|
NATIONAL
FINANCIAL SERVICES LLC |
RECORD |
CLASS F-1 |
34.41 |
|
CLASS F-2 |
14.34 | ||
|
CLASS F-3 |
5.71 | ||
|
CHARLES
SCHWAB & CO INC |
RECORD |
CLASS F-1 |
14.89 |
|
LPL
FINANCIAL |
RECORD |
CLASS F-2 |
17.12 |
|
MORGAN
STANLEY SMITH BARNEY LLC |
RECORD |
CLASS F-2 |
10.70 |
|
CLASS 529-A |
6.42 | ||
|
CLASS 529-C |
11.23 | ||
|
CLASS 529-E |
10.41 | ||
|
MLPF&S
FOR THE SOLE BENEFIT OF |
RECORD |
CLASS F-2 |
8.83 |
|
CLASS R-4 |
10.48 | ||
|
CLASS R-5 |
32.47 | ||
U.S. Government Securities Fund — Page 35
|
NAME AND ADDRESS |
OWNERSHIP |
OWNERSHIP PERCENTAGE | |
|
AMERICAN
ENTERPRISE INVESTMENT SVC |
RECORD |
CLASS F-2 |
8.37 |
|
TD
AMERITRADE INC FOR THE |
RECORD |
CLASS F-3 |
21.42 |
|
LINCOLN
INVESTMENT PLANNING LLC |
RECORD |
CLASS F-3 |
16.29 |
|
CHARLES
SCHWAB & CO INC |
RECORD |
CLASS F-3 |
9.72 |
|
CAPITAL
RESEARCH & MANAGEMENT COMPANY |
RECORD |
CLASS 529-F-1 |
100.00 |
|
CLASS 529-F-3 |
100.00 | ||
|
ABC
RAIL PRODUCTS CORPORATION |
RECORD |
CLASS R-1 |
14.70 |
|
SAVAGE
INC |
RECORD |
CLASS R-1 |
6.19 |
|
SEATTLE
SCHOOL DISTRICT (WA) |
RECORD |
CLASS R-1 |
5.84 |
|
EMJAY
CORP |
RECORD |
CLASS R-1 |
5.14 |
|
METCOM
INC |
RECORD |
CLASS R-2E |
11.70 |
|
DP
INDUSTRIES |
RECORD |
CLASS R-2E |
9.98 |
|
SERVICE
MASTER OF CHARLESTON |
RECORD |
CLASS R-2E |
8.16 |
|
TRAVEL
STORE INC |
RECORD |
CLASS R-2E |
7.10 |
U.S. Government Securities Fund — Page 36
|
NAME AND ADDRESS |
OWNERSHIP |
OWNERSHIP PERCENTAGE | |
|
ADP
ACCESS PRODUCT |
RECORD |
CLASS R-2E |
6.57 |
|
SP
DESIGN GROUP |
RECORD |
CLASS R-2E |
5.61 |
|
TRADER
JOE'S COMPANY |
RECORD |
CLASS R-5E |
53.60 |
|
AMERICAN
FUNDS 2030 TARGET DATE |
RECORD |
CLASS R-6 |
13.96 |
|
AMERICAN
FUNDS 2035 TARGET DATE |
RECORD |
CLASS R-6 |
12.30 |
|
AMERICAN
FUNDS 2025 TARGET DATE |
RECORD |
CLASS R-6 |
11.48 |
|
AMERICAN
FUNDS 2040 TARGET DATE |
RECORD |
CLASS R-6 |
10.81 |
|
AMERICAN
FUNDS 2045 TARGET DATE |
RECORD |
CLASS R-6 |
8.64 |
|
AMERICAN
FUNDS 2050 TARGET DATE |
RECORD |
CLASS R-6 |
7.47 |
|
AMERICAN
FUNDS 2020 TARGET DATE |
RECORD |
CLASS R-6 |
6.23 |
Because Class T and Class 529-T shares are not currently offered to the public, Capital Research and Management Company, the fund’s investment adviser, owns 100% of the fund‘s outstanding Class T and Class 529-T shares.
As of October 1, 2022, the officers and trustees of the fund, as a group, owned beneficially or of record less than 1% of the outstanding shares of the fund.
Unless otherwise noted, references in this statement of additional information to Class F shares, Class R shares or Class 529 shares refer to all F share classes, all R share classes or all 529 share classes, respectively.
U.S. Government Securities Fund — Page 37
Investment adviser — Capital Research and Management Company, the fund’s investment adviser, founded in 1931, maintains research facilities in the United States and abroad (Geneva, Hong Kong, London, Los Angeles, Mumbai, New York, San Francisco, Singapore, Tokyo, Toronto and Washington, D.C.). These facilities are staffed with experienced investment professionals. The investment adviser is located at 333 South Hope Street, Los Angeles, CA 90071. It is a wholly owned subsidiary of The Capital Group Companies, Inc., a holding company for several investment management subsidiaries. Capital Research and Management Company manages equity assets through three equity investment divisions and fixed income assets through its fixed income investment division, Capital Fixed Income Investors. The three equity investment divisions — Capital World Investors, Capital Research Global Investors and Capital International Investors — make investment decisions independently of one another. Portfolio managers in Capital International Investors rely on a research team that also provides investment services to institutional clients and other accounts advised by affiliates of Capital Research and Management Company. The investment adviser, which is deemed under the Commodity Exchange Act (the “CEA”) to be the operator of the fund, has claimed an exclusion from the definition of the term commodity pool operator under the CEA with respect to the fund and, therefore, is not subject to registration or regulation as such under the CEA with respect to the fund.
The investment adviser has adopted policies and procedures that address issues that may arise as a result of an investment professional’s management of the fund and other funds and accounts. Potential issues could involve allocation of investment opportunities and trades among funds and accounts, use of information regarding the timing of fund trades, investment professional compensation and voting relating to portfolio securities. The investment adviser believes that its policies and procedures are reasonably designed to address these issues.
Compensation of investment professionals — As described in the prospectus, the investment adviser uses a system of multiple portfolio managers in managing fund assets. In addition, Capital Research and Management Company’s investment analysts may make investment decisions with respect to a portion of a fund’s portfolio within their research coverage.
Portfolio managers and investment analysts are paid competitive salaries by Capital Research and Management Company. In addition, they may receive bonuses based on their individual portfolio results. Investment professionals also may participate in profit-sharing plans. The relative mix of compensation represented by bonuses, salary and profit-sharing plans will vary depending on the individual’s portfolio results, contributions to the organization and other factors.
To encourage a long-term focus, bonuses based on investment results are calculated by comparing pretax total investment returns to relevant benchmarks over the most recent one-, three-, five- and eight-year periods, with increasing weight placed on each succeeding measurement period. For portfolio managers, benchmarks may include measures of the marketplaces in which the fund invests and measures of the results of comparable mutual funds. For investment analysts, benchmarks may include relevant market measures and appropriate industry or sector indexes reflecting their areas of expertise. Capital Research and Management Company makes periodic subjective assessments of analysts’ contributions to the investment process and this is an element of their overall compensation. The investment results of each of the fund’s portfolio managers may be measured against one or more benchmarks, depending on his or her investment focus, such as Bloomberg U.S. Government/Mortgage-Backed Securities Index and a custom average consisting of funds that disclose investment objectives and strategies comparable to those of the fund. From time to time, Capital Research and Management Company may adjust or customize these benchmarks to better reflect the universe of comparably managed funds of competitive investment management firms.
U.S. Government Securities Fund — Page 38
Portfolio manager fund holdings and other managed accounts — As described below, portfolio managers may personally own shares of the fund. In addition, portfolio managers may manage portions of other mutual funds or accounts advised by Capital Research and Management Company or its affiliates.
The following table reflects information as of August 31, 2022:
|
Portfolio |
Dollar
range |
Number |
Number |
Number | ||
|
Fergus N. MacDonald |
$500,001 – $1,000,000 |
8 |
$220.0 |
4 |
$1.04 |
None |
|
David J. Betanzos |
$100,001 – $500,000 |
6 |
$119.1 |
2 |
$0.40 |
None |
|
Ritchie Tuazon |
$100,001 – $500,000 |
5 |
$225.9 |
3 |
$2.82 |
None |
1 Ownership disclosure is made using the following ranges: None; $1 – $10,000; $10,001 – $50,000; $50,001 – $100,000; $100,001 – $500,000; $500,001 – $1,000,000; and Over $1,000,000.
2 Indicates other RIC(s), PIV(s) or other accounts managed by Capital Research and Management Company or its affiliates for which the portfolio manager also has significant day to day management responsibilities. Assets noted are the total net assets of the RIC(s), PIV(s) or other accounts and are not the total assets managed by the individual, which is a substantially lower amount. No RIC, PIV or other account has an advisory fee that is based on the performance of the RIC, PIV or other account, unless otherwise noted.
3 Personal brokerage accounts of portfolio managers and their families are not reflected.
The fund’s investment adviser has adopted policies and procedures to mitigate material conflicts of interest that may arise in connection with a portfolio manager’s management of the fund, on the one hand, and investments in the other pooled investment vehicles and other accounts, on the other hand, such as material conflicts relating to the allocation of investment opportunities that may be suitable for both the fund and such other accounts.
U.S. Government Securities Fund — Page 39
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 April 30, 2023, 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 (a) 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 (b) 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, in accordance with applicable laws and regulations. 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). In addition, the Agreement provides that the investment adviser may delegate all, or a portion of, its investment management responsibilities to one or more subsidiary advisers approved by the fund’s board, pursuant to an agreement between the investment adviser and such subsidiary. Any such subsidiary adviser will be paid solely by the investment adviser out of its fees.
In addition to providing investment advisory services, the investment adviser furnishes the services and pays the compensation and travel expenses of persons to perform the fund’s executive, administrative, clerical and bookkeeping functions, and provides suitable office space, necessary small office equipment and utilities, general purpose accounting forms, supplies and postage used at the fund’s offices. 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; shareholder recordkeeping and administrative 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 fund shares (including stock certificates, registration and qualification fees and expenses); expenses pursuant to the fund’s plans of distribution (described below); legal and auditing expenses; compensation, fees and expenses paid to independent trustees; association dues; costs of stationery and forms prepared exclusively for the fund; and costs of assembling and storing shareholder account data.
U.S. Government Securities Fund — Page 40
Under the Agreement, the investment adviser receives a management fee based on the following annualized rates and daily net asset levels:
|
Rate |
Net asset level | |
|
In excess of |
Up to | |
|
0.30% |
$ 0 |
$ 60,000,000 |
|
0.21 |
60,000,000 |
1,000,000,000 |
|
0.18 |
1,000,000,000 |
3,000,000,000 |
|
0.15 |
3,000,000,000 |
10,000,000,000 |
|
0.14 |
10,000,000,000 |
15,000,000,000 |
|
0.13 |
15,000,000,000 |
21,000,000,000 |
|
0.12 |
21,000,000,000 |
|
Management fees are paid monthly and accrued daily.
The Agreement also provides for fees based on monthly gross investment income at the following annualized rates:
|
Rate |
Monthly gross investment income | |
|
In excess of |
Up to | |
|
3.00% |
$ 0 |
$3,333,333 |
|
2.25 |
3,333,333 |
8,333,333 |
|
2.00 |
8,333,333 |
|
For the purposes of such computations under the Agreement, the fund’s gross investment income is determined in accordance with generally accepted accounting principles and does not reflect any net realized gains or losses on the sale of portfolio securities.
For the fiscal years ended August 31, 2022, 2021 and 2020, the investment adviser earned from the fund management fees of $45,016,000, $37,436,000 and $31,528,000, respectively. The fund's board of trustees approved an amended Investment Advisory and Service Agreement, pursuant to which the annualized rate payable to the investment adviser on daily net assets in excess of certain levels would be decreased. The investment adviser voluntarily waived management fees to give effect to the approved rates in advance of the effective date of the amended Agreement. Accordingly, after giving effect to the voluntary fee waiver described above, the fund paid the investment adviser management fees of $37,417,000 (a reduction of $19,000) for the fiscal year ended August 31, 2021.
U.S. Government Securities Fund — Page 41
Administrative services — The investment adviser and its affiliates provide certain administrative services for shareholders of the fund’s Class A, C, T, F, R and 529 shares. Administrative services are provided by the investment adviser and its affiliates to help assist third parties providing non-distribution services to fund shareholders. These services include providing in-depth information on the fund and market developments that impact fund investments. Administrative services also include, but are not limited to, coordinating, monitoring and overseeing third parties that provide services to fund shareholders.
These services are provided pursuant to an Administrative Services Agreement (the “Administrative Agreement”) between the fund and the investment adviser relating to the fund’s Class A, C, T, F, R and 529 shares. The Administrative Agreement will continue in effect until April 30, 2023, unless sooner renewed or terminated, and may be renewed from year to year thereafter, provided that any such renewal has been specifically approved by the vote of a majority of the members of the fund’s board who are not parties to the Administrative Agreement or interested persons (as defined in the 1940 Act) of any such party. The fund may terminate the Administrative Agreement at any time by vote of a majority of independent board members. The investment adviser has the right to terminate the Administrative Agreement upon 60 days’ written notice to the fund. The Administrative Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act).
The Administrative Services Agreement between the fund and the investment adviser provides the fund the ability to charge an administrative services fee of .05% for all share classes. The fund’s investment adviser receives an administrative services fee at the annual rate of .03% of the average daily net assets of the fund attributable to each of the share classes (which could be increased as noted above) for its provision of administrative services. Administrative services fees are paid monthly and accrued daily.
During the 2022 fiscal year, administrative services fees were:
|
Administrative services fee | |
|
Class A |
$1,110,000 |
|
Class C |
45,000 |
|
Class T |
—* |
|
Class F-1 |
41,000 |
|
Class F-2 |
251,000 |
|
Class F-3 |
236,000 |
|
Class 529-A |
60,000 |
|
Class 529-C |
4,000 |
|
Class 529-E |
3,000 |
|
Class 529-T |
—* |
|
Class 529-F-1 |
—* |
|
Class 529-F-2 |
7,000 |
|
Class 529-F-3 |
—* |
|
Class R-1 |
2,000 |
|
Class R-2 |
29,000 |
|
Class R-2E |
3,000 |
|
Class R-3 |
38,000 |
|
Class R-4 |
35,000 |
|
Class R-5E |
12,000 |
|
Class R-5 |
17,000 |
|
Class R-6 |
4,769,000 |
* Amount less than $1,000.
U.S. Government Securities Fund — Page 42
Principal Underwriter and plans of distribution — 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; 6455 Irvine Center Drive, Irvine, CA 92618; 3500 Wiseman Boulevard, San Antonio, TX 78251; and 12811 North Meridian Street, Carmel, IN 46032.
The Principal Underwriter receives revenues relating to sales of the fund’s shares, as follows:
· For Class A and 529-A shares, the Principal Underwriter receives commission revenue consisting of the balance of the Class A and 529-A sales charge remaining after the allowances by the Principal Underwriter to investment dealers.
· For Class C and 529-C shares, the Principal Underwriter receives any contingent deferred sales charges that apply during the first year after purchase.
In addition, the fund reimburses the Principal Underwriter for advancing immediate service fees to qualified dealers and financial professionals upon the sale of Class C and 529-C shares. The fund also reimburses the Principal Underwriter for service fees (and, in the case of Class 529-E shares, commissions) paid on a quarterly basis to intermediaries, such as qualified dealers or financial professionals, in connection with investments in Class T, F-1, 529-E, 529-T, 529-F-1, R-1, R-2, R-2E, R-3 and R-4 shares.
Commissions, revenue or service fees retained by the Principal Underwriter after allowances or compensation to dealers were:
|
Fiscal year |
Commissions, |
Allowance
or | |
|
Class A |
2022 |
$ 556,000 |
$2,087,000 |
|
2021 |
1,196,000 |
4,646,000 | |
|
2020 |
1,447,000 |
5,632,000 | |
|
Class C |
2022 |
54,000 |
113,000 |
|
2021 |
129,000 |
376,000 | |
|
2020 |
— |
525,000 | |
|
Class 529-A |
2022 |
20,000 |
86,000 |
|
2021 |
28,000 |
112,000 | |
|
2020 |
39,000 |
158,000 | |
|
Class 529-C |
2022 |
5,000 |
17,000 |
|
2021 |
9,000 |
28,000 | |
|
2020 |
2,000 |
42,000 |
Plans of distribution — The fund has adopted plans of distribution (the “Plans”) pursuant to rule 12b-1 under the 1940 Act. The Plans permit the fund to expend amounts to finance any activity 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.
Each Plan is specific to a particular share class of the fund. As the fund has not adopted a Plan for Class F-2, F-3, 529-F-2, 529-F-3, R-5E, R-5 or R-6, no 12b-1 fees are paid from Class F-2, F-3, 529-F-2, 529-F-3, R-5E, R-5 or R-6 share assets and the following disclosure is not applicable to these share classes.
Payments under the Plans may be made for service-related and/or distribution-related expenses. Service-related expenses include paying service fees to qualified dealers. Distribution-related expenses include commissions paid to qualified dealers. The amounts actually paid under the Plans for the past fiscal year, expressed as a percentage of the fund’s average daily net assets attributable to the
U.S. Government Securities Fund — Page 43
applicable share class, are disclosed in the prospectus under “Fees and expenses of the fund.” Further information regarding the amounts available under each Plan is in the “Plans of Distribution” section of the prospectus.
Following is a brief description of the Plans:
Class A and 529-A — For Class A and 529-A shares, up to .25% of the fund’s average daily net assets attributable to such shares is reimbursed to the Principal Underwriter for paying service-related expenses, and the balance available under the applicable Plan may be paid to the Principal Underwriter for distribution-related expenses. The fund may annually expend up to .30% for Class A shares and up to .50% for Class 529-A shares under the applicable Plan; however, for Class 529-A shares, the board of trustees has approved payments to the Principal Underwriter of up to .30% of the fund’s average daily net assets, in the aggregate, for paying service- and distribution-related expenses.
Distribution-related expenses for Class A and 529-A shares include dealer commissions and wholesaler compensation paid on sales of shares of $1 million or more purchased without a sales charge. Commissions on these “no load” purchases (which are described in further detail under the “Sales Charges” section of this statement of additional information) in excess of the Class A and 529-A Plan limitations and not reimbursed to the Principal Underwriter during the most recent fiscal quarter are recoverable for 15 months, provided that the reimbursement of such commissions does not cause the fund to exceed the annual expense limit. After 15 months, these commissions are not recoverable.
Class T and 529-T — For Class T and 529-T shares, the fund may annually expend up to .50% under the applicable Plan; however, the fund’s board of trustees has approved payments to the Principal Underwriter of up to .25% of the fund’s average daily net assets attributable to Class T and 529-T shares for paying service-related expenses.
Other share classes — The Plans for each of the other share classes that have adopted Plans provide for payments to the Principal Underwriter for paying service-related and distribution-related expenses of up to the following amounts of the fund’s average daily net assets attributable to such shares:
|
Share class |
Service |
Distribution |
Total |
|
Class C |
0.25% |
0.75% |
1.00% |
|
Class F-1 |
0.25 |
— |
0.50 |
|
Class 529-C |
0.25 |
0.75 |
1.00 |
|
Class 529-E |
0.25 |
0.25 |
0.75 |
|
Class 529-F-1 |
0.25 |
— |
0.50 |
|
Class R-1 |
0.25 |
0.75 |
1.00 |
|
Class R-2 |
0.25 |
0.50 |
1.00 |
|
Class R-2E |
0.25 |
0.35 |
0.85 |
|
Class R-3 |
0.25 |
0.25 |
0.75 |
|
Class R-4 |
0.25 |
— |
0.50 |
1 Amounts in these columns represent the amounts approved by the board of trustees under the applicable Plan.
2 The fund may annually expend the amounts set forth in this column under the current Plans with the approval of the board of trustees.
Payment of service fees — For purchases of less than $1 million, payment of service fees to investment dealers generally begins accruing immediately after establishment of an account in Class A, C, 529-A
U.S. Government Securities Fund — Page 44
or 529-C shares. For purchases of $1 million or more, payment of service fees to investment dealers generally begins accruing 12 months after establishment of an account in Class A or 529-A shares. Service fees are not paid on certain investments made at net asset value including accounts established by registered representatives and their family members as described in the “Sales charges” section of the prospectus.
During the 2022 fiscal year, 12b-1 expenses accrued and paid, and if applicable, unpaid, were:
|
12b-1 expenses |
12b-1
unpaid liability | |
|
Class A |
$9,376,000 |
$669,000 |
|
Class C |
1,511,000 |
136,000 |
|
Class T |
— |
— |
|
Class F-1 |
342,000 |
47,000 |
|
Class 529-A |
453,000 |
33,000 |
|
Class 529-C |
122,000 |
11,000 |
|
Class 529-E |
53,000 |
5,000 |
|
Class 529-T |
— |
— |
|
Class 529-F-1 |
— |
— |
|
Class R-1 |
80,000 |
7,000 |
|
Class R-2 |
728,000 |
139,000 |
|
Class R-2E |
67,000 |
14,000 |
|
Class R-3 |
629,000 |
114,000 |
|
Class R-4 |
295,000 |
55,000 |
Approval of the Plans — As required by rule 12b-1 and the 1940 Act, the Plans (together with the Principal Underwriting Agreement) have been approved by the full board of trustees and separately by a majority of the independent trustees of the fund who have no direct or indirect financial interest in the operation of the Plans or the Principal Underwriting Agreement. In addition, the selection and nomination of independent trustees of the fund are committed to the discretion of the independent trustees during the existence of the Plans.
Potential benefits of the Plans to the fund and its shareholders include enabling shareholders to obtain advice and other services from a financial professional at a reasonable cost, the likelihood that the Plans will stimulate sales of the fund benefiting the investment process through growth or stability of assets and the ability of shareholders to choose among various alternatives in paying for sales and service. The Plans may not be amended to materially increase the amount spent for distribution without shareholder approval. Plan expenses are reviewed quarterly by the board of trustees and the Plans must be renewed annually by the board of trustees.
A portion of the fund’s 12b-1 expense is paid to financial professionals to compensate them for providing ongoing services. If you have questions regarding your investment in the fund or need assistance with your account, please contact your financial professional. If you need a financial professional, please call American Funds Distributors at (800) 421-4120 for assistance.
U.S. Government Securities Fund — Page 45
Fee to Virginia529 — Class 529 shares are offered to certain American Funds by Virginia529 through CollegeAmerica and Class ABLE shares are offered to certain American Funds by Virginia529 through ABLEAmerica, a tax-advantaged savings program for individuals with disabilities. As compensation for its oversight and administration of the CollegeAmerica and ABLEAmerica savings plans, Virginia529 is entitled to receive a quarterly fee based on the combined net assets invested in Class 529 shares and Class ABLE shares across all American Funds. The quarterly fee is accrued daily and calculated at the annual rate of .09% on the first $20 billion of net assets invested in American Funds Class 529 shares and Class ABLE shares, .05% on net assets between $20 billion and $75 billion and .03% on net assets over $75 billion. The fee for any given calendar quarter is accrued and calculated on the basis of average net assets of American Funds Class 529 and Class ABLE shares for the last month of the prior calendar quarter. Virginia529 is currently waiving that portion of its fee attributable to Class ABLE shares. Such waiver is expected to remain in effect until the earlier of (a) the date on which total net assets invested in Class ABLE shares reach $300 million and (b) June 30, 2023.
U.S. Government Securities Fund — Page 46
Other compensation to dealers — As of March 31, 2022, the top dealers (or their affiliates) that American Funds Distributors anticipates will receive additional compensation (as described in the prospectus) include:
|
Advisor Group |
|
|
FSC Securities Corporation |
|
|
Ladenburg, Thalmann & Co., Inc. |
|
|
Royal Alliance Associates, Inc. |
|
|
SagePoint Financial, Inc. |
|
|
Securities America, Inc. |
|
|
Triad Advisors LLC |
|
|
Woodbury Financial Services, Inc. |
|
|
American Portfolios Financial Services, Inc. |
|
|
Ameriprise |
|
|
Ameriprise Financial Services LLC |
|
|
Ameriprise Financial Services, Inc. |
|
|
Cambridge |
|
|
Cambridge Investment Research, Inc. |
|
|
Cetera Financial Group |
|
|
Cetera Advisor Networks LLC |
|
|
Cetera Advisors LLC |
|
|
Cetera Financial Specialists LLC |
|
|
Cetera Investment Services LLC |
|
|
First Allied Securities Inc. |
|
|
Charles Schwab Network |
|
|
Charles Schwab & Co., Inc. |
|
|
Charles Schwab Trust Bank |
|
|
Commonwealth |
|
|
Commonwealth Financial Network |
|
|
D.A. Davidson & Co. |
|
|
Edward Jones |
|
|
Equitable Advisors |
|
|
Equitable Advisors LLC |
|
|
Fidelity |
|
|
Fidelity Investments |
|
|
Fidelity Retirement Network |
|
|
National Financial Services LLC |
|
|
Hefren-Tillotson |
|
|
Hefren-Tillotson, Inc. |
|
|
HTK |
|
|
Hornor, Townsend & Kent, LLC |
|
|
J.P. Morgan Chase Banc One |
|
|
J.P. Morgan Securities LLC |
|
|
JP Morgan Chase Bank, N.A. |
|
|
Janney Montgomery Scott |
|
|
Janney Montgomery Scott LLC |
U.S. Government Securities Fund — Page 47
|
Kestra Securities |
|
|
Grove Point Investments LLC |
|
|
Kestra Investment Services LLC |
|
|
Lincoln Network |
|
|
Lincoln Financial Advisors Corporation |
|
|
Lincoln Financial Securities Corporation |
|
|
LPL Group |
|
|
LPL Financial LLC |
|
|
Private Advisor Group, LLC |
|
|
Merrill |
|
|
Bank of America Private Bank |
|
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated |
|
|
MML Investors Services |
|
|
MML Distributors LLC |
|
|
MML Investors Services, LLC |
|
|
The MassMutual Trust Company FSB |
|
|
Morgan Stanley Wealth Management |
|
|
Northwestern Mutual |
|
|
Northwestern Mutual Investment Services, LLC |
|
|
Park Avenue Securities LLC |
|
|
Raymond James Group |
|
|
Raymond James & Associates, Inc. |
|
|
Raymond James Financial Services Inc. |
|
|
RBC |
|
|
RBC Capital Markets LLC |
|
|
Robert W. Baird |
|
|
Robert W. Baird & Co, Incorporated |
|
|
Stifel, Nicolaus & Co |
|
|
Stifel, Nicolaus & Company, Incorporated |
|
|
U.S. Bancorp Investments, Inc. |
|
|
U.S. Bancorp Investments, Inc. |
|
|
US Bank NA |
|
|
UBS |
|
|
UBS Financial Services, Inc. |
|
|
UBS Securities, LLC |
|
|
Voya Financial |
|
|
Voya Financial Advisors, Inc. |
|
|
Voya Financial Advisors LLC |
|
|
Wells Fargo Network |
|
|
Wells Fargo Advisors Financial Network, LLC |
|
|
Wells Fargo Advisors LLC (WBS) |
|
|
Wells Fargo Advisors Private Client Group |
|
|
Wells Fargo Bank, N.A. |
|
|
Wells Fargo Clearing Services LLC |
|
|
Wells Fargo Securities, LLC |
U.S. Government Securities Fund — Page 48
Execution of portfolio transactions
The investment adviser places orders with broker-dealers for the fund’s portfolio transactions. Purchases and sales of equity securities on a securities exchange or an over-the-counter market are effected through broker-dealers who receive commissions for their services. Generally, commissions relating to securities traded on foreign exchanges will be higher than commissions relating to securities traded on U.S. exchanges and may not be subject to negotiation. Equity securities may also be purchased from underwriters at prices that include underwriting fees. Purchases and sales of fixed income securities are generally made with an issuer or a primary market maker acting as principal with no stated brokerage commission. The price paid to an underwriter for fixed income securities includes underwriting fees. Prices for fixed income securities in secondary trades usually include undisclosed compensation to the market maker reflecting the spread between the bid and ask prices for the securities.
In selecting broker-dealers, the investment adviser strives to obtain “best execution” (the most favorable total price reasonably attainable under the circumstances) for the fund’s portfolio transactions, taking into account a variety of factors. These factors include the size and type of transaction, the nature and character of the markets for the security to be purchased or sold, the cost, quality, likely speed and reliability of execution and settlement, the broker-dealer’s or execution venue’s ability to offer liquidity and anonymity and the trade-off between market impact and opportunity costs. The investment adviser considers these factors, which involve qualitative judgments, when selecting broker-dealers and execution venues for fund portfolio transactions. The investment adviser views best execution as a process that should be evaluated over time as part of an overall relationship with particular broker-dealer firms. The investment adviser and its affiliates negotiate commission rates with broker-dealers based on what they believe is reasonably necessary to obtain best execution. They seek, on an ongoing basis, to determine what the reasonable levels of commission rates for execution services are in the marketplace, taking various considerations into account, including the extent to which a broker-dealer has put its own capital at risk, historical commission rates and commission rates that other institutional investors are paying. The fund does not consider the investment adviser as having an obligation to obtain the lowest commission rate available for a portfolio transaction to the exclusion of price, service and qualitative considerations. Brokerage commissions are only a small part of total execution costs and other factors, such as market impact and speed of execution, contribute significantly to overall transaction costs.
The investment adviser may execute portfolio transactions with broker-dealers who provide certain brokerage and/or investment research services to it but only when in the investment adviser’s judgment the broker-dealer is capable of providing best execution for that transaction. The investment adviser makes decisions for procurement of research separately and distinctly from decisions on the choice of brokerage and execution services. The receipt of these research services permits the investment adviser to supplement its own research and analysis and makes available the views of, and information from, individuals and the research staffs of other firms. Such views and information may be provided in the form of written reports, telephone contacts and meetings with securities analysts. These services may include, among other things, reports and other communications with respect to individual companies, industries, countries and regions, economic, political and legal developments, as well as scheduling meetings with corporate executives and seminars and conferences related to relevant subject matters. Research services that the investment adviser receives from broker-dealers may be used by the investment adviser in servicing the fund and other funds and accounts that it advises; however, not all such services will necessarily benefit the fund.
The investment adviser bears the cost of all third-party investment research services for all client accounts it advises. However, in order to compensate certain U.S. broker-dealers for research consumed, and valued, by the investment adviser’s investment professionals, the investment adviser continues to operate a limited commission sharing arrangement with commissions on equity trades for certain registered investment companies it advises. The investment adviser voluntarily reimburses such
U.S. Government Securities Fund — Page 49
registered investment companies for all amounts collected into the commission sharing arrangement. In order to operate the commission sharing arrangement, the investment adviser may cause such registered investment companies to pay commissions in excess of what other broker-dealers might have charged for certain portfolio transactions in recognition of brokerage and/or investment research services. In this regard, the investment adviser has adopted a brokerage allocation procedure consistent with the requirements of Section 28(e) of the Securities Exchange Act of 1934. Section 28(e) permits the investment adviser and its affiliates to cause an account to pay a higher commission to a broker-dealer to compensate the broker-dealer or another service provider for certain brokerage and/or investment research services provided to the investment adviser and its affiliates, if the investment adviser and each affiliate makes a good faith determination that such commissions are reasonable in relation to the value of the services provided by such broker-dealer to the investment adviser and its affiliates in terms of that particular transaction or the investment adviser’s overall responsibility to the fund and other accounts that it advises. Certain brokerage and/or investment research services may not necessarily benefit all accounts paying commissions to each such broker-dealer; therefore, the investment adviser and its affiliates assess the reasonableness of commissions in light of the total brokerage and investment research services provided to the investment adviser and its affiliates. Further, investment research services may be used by all investment associates of the investment adviser and its affiliates, regardless of whether they advise accounts with trading activity that generates eligible commissions.
In accordance with their internal brokerage allocation procedure, the investment adviser and its affiliates periodically assess the brokerage and investment research services provided by each broker-dealer and each other service provider from which they receive such services. As part of its ongoing relationships, the investment adviser and its affiliates routinely meet with firms to discuss the level and quality of the brokerage and research services provided, as well as the value and cost of such services. In valuing the brokerage and investment research services the investment adviser and its affiliates receive from broker-dealers and other research providers in connection with its good faith determination of reasonableness, the investment adviser and its affiliates take various factors into consideration, including the quantity, quality and usefulness of the services to the investment adviser and its affiliates. Based on this information and applying their judgment, the investment adviser and its affiliates set an annual research budget.
Research analysts and portfolio managers periodically participate in a research poll to determine the usefulness and value of the research provided by individual broker-dealers and research providers. Based on the results of this research poll, the investment adviser and its affiliates may, through commission sharing arrangements with certain broker-dealers, direct a portion of commissions paid to a broker-dealer by the fund and other registered investment companies managed by the investment adviser or its affiliates to be used to compensate the broker-dealer and/or other research providers for research services they provide. While the investment adviser and its affiliates may negotiate commission rates and enter into commission sharing arrangements with certain broker-dealers with the expectation that such broker-dealers will be providing brokerage and research services, none of the investment adviser, any of its affiliates or any of their clients incurs any obligation to any broker-dealer to pay for research by generating trading commissions. The investment adviser and its affiliates negotiate prices for certain research that may be paid through commission sharing arrangements or by themselves with cash.
When executing portfolio transactions in the same equity security for the funds and accounts, or portions of funds and accounts, over which the investment adviser, through its equity investment divisions, has investment discretion, each investment division within the adviser and its affiliates normally aggregates its respective purchases or sales and executes them as part of the same transaction or series of transactions. When executing portfolio transactions in the same fixed income security for the fund and the other funds or accounts over which it or one of its affiliated companies has investment discretion, the investment adviser normally aggregates such purchases or sales and executes them as part of the same transaction or series of transactions. The objective of aggregating
U.S. Government Securities Fund — Page 50
purchases and sales of a security is to allocate executions in an equitable manner among the funds and other accounts that have concurrently authorized a transaction in such security. The investment adviser and its affiliates serve as investment adviser for certain accounts that are designed to be substantially similar to another account. This type of account will often generate a large number of relatively small trades when it is rebalanced to its reference fund due to differing cash flows or when the account is initially started up. The investment adviser may not aggregate program trades or electronic list trades executed as part of this process. Non-aggregated trades performed for these accounts will be allocated entirely to that account. This is done only when the investment adviser believes doing so will not have a material impact on the price or quality of other transactions.
The investment adviser currently owns a minority interest in IEX Group and alternative trading systems, Luminex ATS and LeveL ATS (through a minority interest in their common parent holding company). The investment adviser, or brokers with whom the investment adviser places orders, may place orders on these or other exchanges or alternative trading systems in which it, or one of its affiliates, has an ownership interest, provided such ownership interest is less than five percent of the total ownership interests in the entity. The investment adviser is subject to the same best execution obligations when trading on any such exchange or alternative trading systems.
Purchase and sale transactions may be effected directly among and between certain funds or accounts advised by the investment adviser or its affiliates, including the fund. The investment adviser maintains cross-trade policies and procedures and places a cross-trade only when such a trade is in the best interest of all participating clients and is not prohibited by the participating funds’ or accounts’ investment management agreement or applicable law.
The investment adviser may place orders for the fund’s portfolio transactions with broker-dealers who have sold shares of the funds managed by the investment adviser or its affiliated companies; however, it does not consider whether a broker-dealer has sold shares of the funds managed by the investment adviser or its affiliated companies when placing any such orders for the fund’s portfolio transactions.
Purchases and sales of futures contracts for the fund will be effected through executing brokers and FCMs that specialize in the types of futures contracts that the fund expects to hold. The investment adviser will use reasonable efforts to choose executing brokers and FCMs capable of providing the services necessary to obtain the most favorable price and execution available. The full range and quality of services available will be considered in making these determinations. The investment adviser will monitor the executing brokers and FCMs used for purchases and sales of futures contracts for their ability to execute trades based on many factors, such as the sizes of the orders, the difficulty of executions, the operational facilities of the firm involved and other factors.
Forward currency contracts are traded directly between currency traders (usually large commercial banks) and their customers. The cost to the fund of engaging in such contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing. Because such contracts are entered into on a principal basis, their prices usually include undisclosed compensation to the market maker reflecting the spread between the bid and ask prices for the contracts. The fund may incur additional fees in connection with the purchase or sale of certain contracts.
No brokerage commissions were paid by the fund on portfolio transactions for the fiscal years ended August 31, 2022, 2021 and 2020.
The fund is required to disclose information regarding investments in the securities of its “regular” broker-dealers (or parent companies of its regular broker-dealers) that derive more than 15% of their revenue from broker-dealer, underwriter or investment adviser activities. A regular broker-dealer is (a) one of the 10 broker-dealers that received from the fund the largest amount of brokerage
U.S. Government Securities Fund — Page 51
commissions by participating, directly or indirectly, in the fund’s portfolio transactions during the fund’s most recently completed fiscal year; (b) one of the 10 broker-dealers that engaged as principal in the largest dollar amount of portfolio transactions of the fund during the fund’s most recently completed fiscal year; or (c) one of the 10 broker-dealers that sold the largest amount of securities of the fund during the fund’s most recently completed fiscal year.
At the end of the fund’s most recently completed fiscal year, the fund did not have investments in securities of any of its regular broker-dealers.
U.S. Government Securities Fund — Page 52
Disclosure of portfolio holdings
The fund’s investment adviser, on behalf of the fund, has adopted policies and procedures with respect to the disclosure of information about fund portfolio securities. These policies and procedures have been reviewed by the fund’s board of trustees, and compliance will be periodically assessed by the board in connection with reporting from the fund’s Chief Compliance Officer.
Under these policies and procedures, the fund’s complete list of portfolio holdings available for public disclosure, dated as of the end of each calendar quarter, is permitted to be posted on the Capital Group website no earlier than the 10th day after such calendar quarter. In practice, the publicly disclosed portfolio is typically posted on the Capital Group website within 30 days after the end of the calendar quarter. The publicly disclosed portfolio may exclude certain securities when deemed to be in the best interest of the fund as permitted by applicable regulations. In addition, the fund’s list of top 10 equity portfolio holdings measured by percentage of net assets, dated as of the end of each calendar month, is permitted to be posted on the Capital Group website no earlier than the 10th day after such month. Such portfolio holdings information may be disclosed to any person pursuant to an ongoing arrangement to disclose portfolio holdings information to such person no earlier than one day after the day on which the information is posted on the Capital Group website.
Certain intermediaries are provided additional information about the fund’s management team, including information on the fund’s portfolio securities they have selected. This information is provided to larger intermediaries that require the information to make the fund available for investment on the firm’s platform. Intermediaries receiving the information are required to keep it confidential and use it only to analyze the fund.
The fund’s custodian, outside counsel, auditor, financial printers, proxy voting service providers, pricing information vendors, consultants or agents operating under a contract with the investment adviser or its affiliates, co-litigants (such as in connection with a bankruptcy proceeding related to a fund holding) and certain other third parties described below, each of which requires portfolio holdings information for legitimate business and fund oversight purposes, may receive fund portfolio holdings information earlier. See the “General information” section in this statement of additional information for further information about the fund’s custodian, outside counsel and auditor.
The fund‘s portfolio holdings, dated as of the end of each calendar month, are made available to up to 20 key broker-dealer relationships with research departments to help them evaluate the fund for eligibility on approved lists or in model portfolios. These firms include certain of those listed under the “Other compensation to dealers” section of this statement of additional information and certain broker-dealer firms that offer trading platforms for registered investment advisers. Monthly holdings may be provided to these intermediaries no earlier than the 10th day after the end of the calendar month. In practice, monthly holdings are provided within 30 days after the end of the calendar month. Holdings may also be disclosed more frequently to certain statistical and data collection agencies including Morningstar, Lipper, Inc., Value Line, Vickers Stock Research, Bloomberg and Thomson Financial Research.
Affiliated persons of the fund, including officers of the fund and employees of the investment adviser and its affiliates, who receive portfolio holdings information are subject to restrictions and limitations on the use and handling of such information pursuant to applicable codes of ethics, including requirements not to trade in securities based on confidential and proprietary investment information, to maintain the confidentiality of such information, and to pre-clear securities trades and report securities transactions activity, as applicable. For more information on these restrictions and limitations, please see the “Code of ethics” section in this statement of additional information and the Code of Ethics. Third-party service providers of the fund and other entities, as described in this statement of additional information, receiving such information are subject to confidentiality
U.S. Government Securities Fund — Page 53
obligations and obligations that would prohibit them from trading in securities based on such information. When portfolio holdings information is disclosed other than through the Capital Group website to persons not affiliated with the fund, such persons will be bound by agreements (including confidentiality agreements) or fiduciary or other obligations that restrict and limit their use of the information to legitimate business uses only. None of the fund, its investment adviser or any of their affiliates receives compensation or other consideration in connection with the disclosure of information about portfolio securities.
Subject to board policies, the authority to disclose a fund’s portfolio holdings, and to establish policies with respect to such disclosure, resides with the appropriate investment-related committees of the fund’s investment adviser. In exercising their authority, the committees determine whether disclosure of information about the fund’s portfolio securities is appropriate and in the best interest of fund shareholders. The investment adviser has implemented policies and procedures to address conflicts of interest that may arise from the disclosure of fund holdings. For example, the investment adviser’s code of ethics specifically requires, among other things, the safeguarding of information about fund holdings and contains prohibitions designed to prevent the personal use of confidential, proprietary investment information in a way that would conflict with fund transactions. In addition, the investment adviser believes that its current policy of not selling portfolio holdings information and not disclosing such information to unaffiliated third parties until such holdings have been made public on the Capital Group website (other than to certain fund service providers and other third parties for legitimate business and fund oversight purposes) helps reduce potential conflicts of interest between fund shareholders and the investment adviser and its affiliates.
The fund’s investment adviser and its affiliates provide investment advice to clients other than the fund that have investment objectives that may be substantially similar to those of the fund. These clients also may have portfolios consisting of holdings substantially similar to those of the fund and generally have access to current portfolio holdings information for their accounts. These clients do not owe the fund’s investment adviser or the fund a duty of confidentiality with respect to disclosure of their portfolio holdings.
U.S. Government Securities Fund — Page 54
Shares are purchased at the offering price or sold at the net asset value price next determined after the purchase or sell order is received by the fund or the Transfer Agent provided that your request contains all information and legal documentation necessary to process the transaction. The Transfer Agent may accept written orders for the sale of fund shares on a future date. These orders are subject to the Transfer Agent’s policies, which generally allow shareholders to provide a written request to sell shares at the net asset value on a specified date no more than five business days after receipt of the order by the Transfer Agent. Any request to sell shares on a future date will be rejected if the request is not in writing, if the requested transaction date is more than five business days after the Transfer Agent receives the request or if the request does not contain all information and legal documentation necessary to process the transaction.
The offering or net asset value 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 or their authorized designees, accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of their designees. In the case of orders sent directly to the fund or the Transfer Agent, an investment dealer should be indicated. The dealer is responsible for promptly transmitting purchase and sell orders to the Principal Underwriter.
Prices that appear in the newspaper do not always indicate prices at which you will be purchasing and redeeming shares of the fund, since such prices generally reflect the previous day’s closing price, while 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 as of the close of regular trading on the New York Stock Exchange, normally 4 p.m. New York time, each day the New York Stock Exchange is open. If the New York Stock Exchange makes a scheduled (e.g. the day after Thanksgiving) or an unscheduled close prior to 4 p.m. New York time, the net asset value of the fund will be determined at approximately the time the New York Stock Exchange closes on that day. If on such a day market quotations and prices from third-party pricing services are not based as of the time of the early close of the New York Stock Exchange but are as of a later time (up to approximately 4 p.m. New York time), for example because the market remains open after the close of the New York Stock Exchange, those later market quotations and prices will be used in determining the fund’s net asset value.
Orders in good order received after the New York Stock Exchange closes (scheduled or unscheduled) will be processed at the net asset value (plus any applicable sales charge) calculated on the following business day. 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; Juneteenth National Independence Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. Each share class of the fund has a separately calculated net asset value (and share price).
Orders received by the investment dealer or authorized designee, 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. Note that investment dealers or other intermediaries may have their own rules about share transactions and may have earlier cut-off times than those of the fund. For more information about how to purchase through your intermediary, contact your intermediary directly.
All portfolio securities of funds managed by Capital Research and Management Company (other than American Funds U.S. Government Money Market Fund) are valued, and the net asset values per share for each share class are determined, as indicated below. The fund follows standard industry practice by typically reflecting changes in its holdings of portfolio securities on the first business day following a portfolio trade.
U.S. Government Securities Fund — Page 55
Equity securities, including depositary receipts, exchange-traded funds, and certain convertible preferred stocks that trade on an exchange or market, are generally valued at the official closing price of, or 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. Prices for each security are taken from the principal exchange or market on which the security trades.
Exchange-traded options and futures are generally valued at the official closing price for options and official settlement price for futures on the exchange or market on which such instruments are traded, as of the close of business on the day such instruments are being valued.
Fixed income securities, including short-term securities, are generally valued at evaluated prices obtained from third-party pricing vendors. Vendors value such securities based on one or more inputs that may include, among other things, benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, underlying equity of the issuer, interest rate volatilities, spreads and other relationships observed in the markets among comparable securities and proprietary pricing models such as yield measures calculated using factors such as cash flows, prepayment information, default rates, delinquency and loss assumptions, financial or collateral characteristics or performance, credit enhancements, liquidation value calculations, specific deal information and other reference data.
Swaps are generally valued using evaluated prices obtained from third-party pricing vendors who calculate these values based on market inputs that may include yields of the indices referenced in the instrument and the relevant curve, dealer quotes, default probabilities and recovery rates, other reference data, and terms of the contract.
Forward currency contracts are valued based on the spot and forward exchange rates obtained from a third-party pricing vendor.
Futures contracts are generally valued at the official settlement price of, or the last reported sale price on, the principal exchange or market on which such instruments are traded, as of the close of business on the day the contracts are being valued or, lacking any sales, at the last available bid price.
Swaps, including interest rate swaps, total return swaps and positions in credit default swap indices, are valued using market quotations or valuations provided by one or more pricing vendors.
Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are valued at fair value as determined in good faith under fair value guidelines adopted by the investment adviser and approved by the fund’s board. Subject to board oversight, the fund’s board has designated the fund’s investment adviser to make fair valuation determinations, which are directed by a valuation committee established by the fund’s investment adviser. The board receives regular reports describing fair valued securities and the valuation methods used.
As a general principle, these guidelines consider relevant company, market and other data and considerations to determine the price that the fund might reasonably expect to receive if such fair valued securities were sold in an orderly transaction. Fair valuations may differ materially from valuations that would have been used had greater market activity occurred. The investment adviser’s valuation committee considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as the type and cost of the security, contractual or legal restrictions on resale of the security, relevant financial or business developments of the issuer, actively traded similar or related securities and transactions, dealer or broker quotes, conversion or exchange rights on the security, related corporate actions, significant
U.S. Government Securities Fund — Page 56
events occurring after the close of trading in the security and changes in overall market conditions. The valuation committee employs additional fair value procedures to address issues related to equity securities that trade principally in markets outside the United States. Such securities may trade in markets that open and close at different times, reflecting time zone differences. If significant events occur after the close of a market (and before the fund’s net asset values are next determined) which affect the value of equity securities held in the fund’s portfolio, appropriate adjustments from closing market prices may be made to reflect these events. Events of this type could include, for example, earthquakes and other natural disasters or significant price changes in other markets (e.g., U.S. stock markets).
Certain short-term securities, such as variable rate demand notes or repurchase agreements involving securities fully collateralized by cash or U.S. government securities, are valued at par.
Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars, prior to the next determination of the net asset value of the fund’s shares, at the exchange rates obtained from a third-party pricing vendor.
Each class of shares represents interests in the same portfolio of investments and is identical in all respects to each other class, except for differences relating to distribution, service and other charges and expenses, certain voting rights, differences relating to eligible investors, the designation of each class of shares, conversion features and exchange privileges. Expenses attributable to the fund, but not to a particular class of shares, are borne by each class pro rata based on the relative aggregate net assets of the classes. Expenses directly attributable to a class of shares are borne by that class of shares. Liabilities attributable to particular share classes, such as liabilities for repurchase of fund shares, are deducted from total assets attributable to such share classes.
Net assets so obtained for each share class are then divided by the total number of shares outstanding of that share class, and the result, rounded to the nearest cent, is the net asset value per share for that class.
U.S. Government Securities Fund — Page 57
Disclaimer: Some of the following information may not apply to certain shareholders, including those holding fund shares in a tax-favored account, such as a retirement plan or education savings account. Shareholders should consult their tax advisors about the application of federal, state and local tax law in light of their particular situation.
Taxation as a regulated investment company — The fund intends to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), so that it will not be liable for federal tax on income and capital gains distributed to shareholders. In order to qualify as a regulated investment company, and avoid being subject to federal income taxes, the fund intends to distribute substantially all of its net investment income and realized net capital gains on a fiscal year basis, and intends to comply with other tests applicable to regulated investment companies under Subchapter M.
The Code includes savings provisions allowing the fund to cure inadvertent failures of certain qualification tests required under Subchapter M. However, should the fund fail to qualify under Subchapter M, the fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gains.
Amounts not distributed by the fund on a timely basis in accordance with a calendar year distribution requirement may be subject to a nondeductible 4% excise tax. Unless an applicable exception applies, to avoid the tax, the fund must distribute during each calendar year an amount equal to the sum of (a) at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (b) at least 98.2% of its capital gains in excess of its capital losses for the twelve month period ending on October 31, and (c) all ordinary income and capital gains for previous years that were not distributed during such years and on which the fund paid no U.S. federal income tax.
Dividends paid by the fund from ordinary income or from an excess of net short-term capital gain over net long-term capital loss are taxable to shareholders as ordinary income dividends. Shareholders of the fund that are individuals and meet certain holding period requirements with respect to their fund shares may be eligible for reduced tax rates on “qualified dividend income,” if any, distributed by the fund to such shareholders.
The fund may declare a capital gain distribution consisting of the excess of net realized long-term capital gains over net realized short-term capital losses. Net capital gains for a fiscal year are computed by taking into account any capital loss carryforward of the fund.
The fund may retain a portion of net capital gain for reinvestment and may elect to treat such capital gain as having been distributed to shareholders of the fund. Shareholders may receive a credit for the tax that the fund paid on such undistributed net capital gain and would increase the basis in their shares of the fund by the difference between the amount of includible gains and the tax deemed paid by the shareholder.
Distributions of net capital gain that the fund properly reports as a capital gain distribution generally will be taxable as long-term capital gain, regardless of the length of time the shares of the fund have been held by a shareholder. 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 capital gain distributions (including any undistributed amounts treated as distributed capital gains, as described above) during such six-month period.
Capital gain distributions by the fund result in a reduction in the net asset value of the fund’s shares. Investors should consider the tax implications of buying shares just prior to a capital gain distribution.
U.S. Government Securities Fund — Page 58
The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will subsequently receive a partial return of their investment capital upon payment of the distribution, which will be taxable to them.
Certain distributions reported by the fund as Section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Section 163(j) of the Code. Such treatment by the shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that the fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the fund’s business interest income over the sum of the fund’s (i) business interest expense and (ii) other deductions properly allocable to the fund’s business interest income.
Individuals (and certain other non-corporate entities) are generally eligible for a 20% deduction with respect to taxable ordinary REIT dividends. Applicable Treasury regulations allow the fund to pass through to its shareholders such taxable ordinary REIT dividends. Accordingly, individual (and certain other non-corporate) shareholders of the fund that have received such taxable ordinary REIT dividends may be able to take advantage of this 20% deduction with respect to any such amounts passed through.
Redemptions and exchanges of fund shares — Redemptions of shares, including exchanges for shares of other American Funds, may result in federal, state and local tax consequences (gain or loss) to the shareholder.
Any loss realized on a redemption or exchange of shares of the fund will be disallowed to the extent substantially identical shares are reacquired within the 61-day period beginning 30 days before and ending 30 days after the shares are disposed of. Any loss disallowed under this rule will be added to the shareholder’s tax basis in the new shares purchased.
If a shareholder exchanges or otherwise disposes of shares of the fund within 90 days of having acquired such shares, and if, as a result of having acquired those shares, the shareholder subsequently pays a reduced or no sales charge for shares of the fund, or of a different fund acquired before January 31st of the year following the year the shareholder exchanged or otherwise disposed of the original fund shares, the sales charge previously incurred in acquiring the fund’s shares will not be taken into account (to the extent such previous sales charges do not exceed the reduction in sales charges) for the purposes of determining the amount of gain or loss on the exchange, but will be treated as having been incurred in the acquisition of such other fund(s).
Tax consequences of investing in non-U.S. securities — Dividend and interest income received by the fund from sources outside the United States may be subject to withholding and other taxes imposed by such foreign jurisdictions. Tax conventions between certain countries and the United States, however, may reduce or eliminate these foreign taxes. Some foreign countries impose taxes on capital gains with respect to investments by foreign investors.
If more than 50% of the value of the total assets of the fund at the close of the taxable year consists of securities of foreign corporations, the fund may elect to pass through to shareholders the foreign taxes paid by the fund. If such an election is made, shareholders may claim a credit or deduction on their federal income tax returns for, and will be required to treat as part of the amounts distributed to them, their pro rata portion of qualified taxes paid by the fund to foreign countries. The application of the foreign tax credit depends upon the particular circumstances of each shareholder.
U.S. Government Securities Fund — Page 59
Foreign currency gains and losses, including the portion of gain or loss on the sale of debt securities attributable to fluctuations in foreign exchange rates, are generally taxable as ordinary income or loss. These gains or losses may increase or decrease the amount of dividends payable by the fund to shareholders. A fund may elect to treat gain and loss on certain foreign currency contracts as capital gain and loss instead of ordinary income or loss.
If the fund invests in stock of certain passive foreign investment companies (PFICs), the fund intends to mark-to-market these securities and recognize any gains at the end of its fiscal and excise tax years. Deductions for losses are allowable only to the extent of any previously recognized gains. Both gains and losses will be treated as ordinary income or loss, and the fund is required to distribute any resulting income. If the fund is unable to identify an investment as a PFIC security and thus does not make a timely mark-to-market election, the fund may be subject to adverse tax consequences.
Tax consequences of investing in derivatives — The fund may enter into transactions involving derivatives, such as futures, swaps and forward contracts. Special tax rules may apply to these types of transactions that could defer losses to the fund, accelerate the fund’s income, alter the holding period of certain securities or change the classification of capital gains. These tax rules may therefore impact the amount, timing and character of fund distributions.
Discount — Certain bonds acquired by the fund, such as zero coupon bonds, may be treated as bonds that were originally issued at a discount. Original issue discount represents interest for federal income tax purposes and is generally defined as the difference between the price at which a bond was issued (or the price at which it was deemed issued for federal income tax purposes) and its stated redemption price at maturity. Original issue discount is treated for federal income tax purposes as tax exempt income earned by a fund over the term of the bond, and therefore is subject to the distribution requirements of the Internal Revenue Code. The annual amount of income earned on such a bond by a fund generally is determined on the basis of a constant yield to maturity which takes into account the semiannual compounding of accrued interest (including original issue discount). Certain bonds acquired by the fund may also provide for contingent interest and/or principal. In such a case, rules similar to those for original issue discount bonds would require the accrual of income based on an assumed yield that may exceed the actual interest payments on the bond.
Some of the bonds may be acquired by a fund on the secondary market at a discount which exceeds the original issue discount, if any, on such bonds. This additional discount constitutes market discount for federal income tax purposes. Any gain recognized on the disposition of any bond having market discount generally will be treated as taxable ordinary income to the extent it does not exceed the accrued market discount on such bond (unless a fund elects to include market discount in income in the taxable years to which it is attributable). Realized accrued market discount on obligations that pay tax-exempt interest is nonetheless taxable. Generally, market discount accrues on a daily basis for each day the bond is held by a fund at a constant rate over the time remaining to the bond's maturity. In the case of any debt instrument having a fixed maturity date of not more than one year from date of issue, the gain realized on disposition will be treated as short-term capital gain. Some of the bonds acquired by a fund with a fixed maturity date of one year or less from the date of their issuance may be treated as having original issue discount or, in certain cases, “acquisition discount” (generally, the excess of a bond’s stated redemption price at maturity over its acquisition price). A fund will be required to include any such original issue discount or acquisition discount in taxable ordinary income. The rate at which such acquisition discount and market discount accrues, and thus included in a fund’s investment company taxable income, will depend upon which of the permitted accrual methods the fund elects.
Other tax considerations — After the end of each calendar year, individual shareholders holding fund shares in taxable accounts will receive a statement of the federal income tax status of all distributions. Shareholders of the fund also may be subject to state and local taxes on distributions received from the fund.
U.S. Government Securities Fund — Page 60
For fund shares acquired on or after January 1, 2012, the fund is required to report cost basis information for redemptions, including exchanges, to both shareholders and the IRS.
Shareholders may obtain more information about cost basis online at capitalgroup.com/costbasis.
Under the backup withholding provisions of the Code, the fund generally will be required to withhold federal income tax on all payments made to a shareholder if the shareholder either does not furnish the fund with the shareholder’s correct taxpayer identification number or fails to certify that the shareholder is not subject to backup withholding. Backup withholding also applies if the IRS notifies the shareholder or the fund that the taxpayer identification number provided by the shareholder is incorrect or that the shareholder has previously failed to properly report interest or dividend income.
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 legal 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 U.S. withholding taxes.
U.S. Government Securities Fund — Page 61
Unless otherwise noted, all references in the following pages to Class A, C, T or F shares also refer to the corresponding Class 529-A, 529-C, 529-T or 529-F shares. Class 529 shareholders should also refer to the applicable program description for information on policies and services specifically relating to these accounts. Shareholders holding shares through an eligible retirement plan should contact their plan’s administrator or recordkeeper for information regarding purchases, sales and exchanges.
Purchase and exchange of shares
Purchases by individuals — As described in the prospectus, you may generally open an account and purchase fund shares by contacting a financial professional or investment dealer authorized to sell the fund’s shares. You may make investments by any of the following means:
Contacting your financial professional — Deliver or mail a check to your financial professional.
By mail — For initial investments, you may mail a check, made payable to the fund, directly to the address indicated on the account application. Please indicate an investment dealer on the account application. You may make additional investments by filling out the “Account Additions” form at the bottom of a recent transaction confirmation and mailing the form, along with a check made payable to the fund, using the envelope provided with your confirmation.
The amount of time it takes for us to receive regular U.S. postal mail may vary and there is no assurance that we will receive such mail on the day you expect. Mailing addresses for regular U.S. postal mail can be found in the prospectus. To send investments or correspondence to us via overnight mail or courier service, use either of the following addresses:
American Funds
12711 North Meridian Street
Carmel, IN 46032-9181
American Funds
5300 Robin Hood Road
Norfolk, VA 23513-2407
By telephone — Calling American Funds Service Company. Please see the “Shareholder account services and privileges” section of this statement of additional information for more information regarding this service.
By Internet — Using capitalgroup.com. Please see the “Shareholder account services and privileges” section of this statement of additional information for more information regarding this service.
U.S. Government Securities Fund — Page 62
By wire — If you are making a wire transfer, instruct your bank to wire funds to:
Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178
Your bank should include the following information when wiring funds:
For credit to the account of:
American Funds Service Company
(fund’s name)
For further credit to:
(shareholder’s fund account number)
(shareholder’s name)
You may contact American Funds Service Company at (800) 421-4225 if you have questions about making wire transfers.
Other purchase information — Class 529 shares may be purchased only through CollegeAmerica by investors establishing qualified higher education savings accounts. Class 529-E shares may be purchased only by investors participating in CollegeAmerica through an eligible employer plan. American Funds state tax-exempt funds are qualified for sale only in certain jurisdictions, and tax-exempt funds in general should not serve as retirement plan investments. In addition, the fund and the Principal Underwriter reserve the right to reject any purchase order.
Class R-5 and R-6 shares may be made available to certain charitable foundations organized and maintained by The Capital Group Companies, Inc. or its affiliates. Class R-6 shares are also available to corporate investment accounts established by The Capital Group Companies, Inc. and its affiliates.
Class R-5 and R-6 shares may also be made available to Virginia529 for use in the Virginia Education Savings Trust and the Virginia Prepaid Education Program and other registered investment companies approved by the fund’s investment adviser or distributor. Class R-6 shares are also available to other post employment benefits plans.
Purchase minimums and maximums — All investments are subject to the purchase minimums and maximums described in the prospectus. As noted in the prospectus, purchase minimums may be waived or reduced in certain cases.
In the case of American Funds non-tax-exempt funds, the initial purchase minimum of $25 may be waived for the following account types:
· Payroll deduction retirement plan accounts (such as, but not limited to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan accounts); and
· Employer-sponsored CollegeAmerica accounts.
U.S. Government Securities Fund — Page 63
The following account types may be established without meeting the initial purchase minimum:
· Retirement accounts that are funded with employer contributions; and
· Accounts that are funded with monies set by court decree.
The following account types may be established without meeting the initial purchase minimum, but shareholders wishing to invest in two or more funds must meet the normal initial purchase minimum of each fund:
· Accounts that are funded with (a) transfers of assets, (b) rollovers from retirement plans, (c) rollovers from 529 college savings plans or (d) required minimum distribution automatic exchanges; and
· American Funds U.S. Government Money Market Fund accounts registered in the name of clients of Capital Group Private Client Services.
Certain accounts held on the fund’s books, known as omnibus accounts, contain multiple underlying accounts that are invested in shares of the fund. These underlying accounts are maintained by entities such as financial intermediaries and are subject to the applicable initial purchase minimums as described in the prospectus and this statement of additional information. However, in the case where the entity maintaining these accounts aggregates the accounts’ purchase orders for fund shares, such accounts are not required to meet the fund’s minimum amount for subsequent purchases.
Exchanges — With the exception of Class T shares, for which rights of exchange are not generally available, you may only exchange shares without a sales charge into other American Funds within the same share class; however, Class A, C, T or F shares may also generally be exchanged without a sales charge for the corresponding 529 share class. Clients of Capital Group Private Client Services may exchange the shares of the fund for those of any other fund(s) managed by Capital Research and Management Company or its affiliates.
Notwithstanding the above, exchanges from Class A shares of American Funds U.S. Government Money Market Fund may be made to Class C shares of other American Funds for dollar cost averaging purposes.
Exchange purchases are subject to the minimum investment requirements of the fund purchased and no sales charge generally applies. However, exchanges of shares from American Funds U.S. Government Money Market Fund are subject to applicable sales charges, unless the American Funds U.S. Government 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.
Exchanges of Class F shares generally may only be made through fee-based programs of investment firms that have special agreements with the fund’s distributor and certain registered investment advisors.
You may exchange shares of other classes by contacting your financial professional by calling American Funds Service Company at (800) 421-4225 or using capitalgroup.com, or faxing (see “American Funds Service Company service areas” in the prospectus for the appropriate fax numbers) the Transfer Agent. For more information, see “Shareholder account services and privileges” in this statement of additional information. These transactions have the same tax consequences as ordinary sales and purchases.
Shares held in employer-sponsored retirement plans may be exchanged into other American Funds by contacting your plan administrator or recordkeeper. Exchange redemptions and purchases are
U.S. Government Securities Fund — Page 64
processed simultaneously at the share prices next determined after the exchange order is received (see “Price of shares” in this statement of additional information).
Conversion — Class C shares of the fund automatically convert to Class A shares in the month of the 8-year anniversary of the purchase date. Class 529-C shares of the fund automatically convert to Class 529-A shares in the month of the 5-year anniversary of the purchase date. The board of trustees of the fund reserves the right at any time, without shareholder approval, to amend the conversion features of the Class C and Class 529-C shares, including without limitation, providing for conversion into a different share class or for no conversion. In making its decision, the board of trustees will consider, among other things, the effect of any such amendment on shareholders.
Frequent trading of fund shares — As noted in the prospectus, certain redemptions may trigger a restriction under the fund’s “frequent trading policy.” Under this policy, systematic redemptions will not trigger a restriction and systematic purchases will not be prevented if the entity maintaining the shareholder account is able to identify the transaction as a systematic redemption or purchase. For purposes of this policy, systematic redemptions include, for example, regular periodic automatic redemptions and statement of intention escrow share redemptions. Systematic purchases include, for example, regular periodic automatic purchases and automatic reinvestments of dividends and capital gain distributions. Generally, purchases and redemptions will not be considered “systematic” unless the transaction is prescheduled for a specific date.
Potentially abusive activity — American Funds Service Company will monitor for the types of activity that could potentially be harmful to the American Funds — for example, short-term trading activity in multiple funds. When identified, American Funds Service Company will request that the shareholder discontinue the activity. If the activity continues, American Funds Service Company will freeze the shareholder account to prevent all activity other than redemptions of fund shares.
Moving between share classes
If you wish to “move” your investment between share classes (within the same fund or between different funds), we generally will process your request as an exchange of the shares you currently hold for shares in the new class or fund. Below is more information about how sales charges are handled for various scenarios.
Exchanging Class C shares for Class A or Class T shares — If you exchange Class C shares for Class A or Class T shares, you are still responsible for paying any Class C contingent deferred sales charges and applicable Class A or Class T sales charges.
Exchanging Class C shares for Class F shares — If you are part of a qualified fee-based program or approved self-directed platform and you wish to exchange your Class C shares for Class F shares to be held in the program, you are still responsible for paying any applicable Class C contingent deferred sales charges.
Exchanging Class F shares for Class A shares — You can exchange Class F shares held in a qualified fee-based program for Class A shares without paying an initial Class A sales charge if you are leaving or have left the fee-based program. Your financial intermediary can also convert Class F-1 shares to Class A shares without a sales charge if they are held in a brokerage account and they were initially transferred to the account or converted from Class C shares. You can exchange Class F shares received in a conversion from Class C shares for Class A shares at any time without paying an initial Class A sales charge if you notify American Funds Service Company of the conversion when you make your request. If you have already redeemed your Class F shares, the foregoing requirements apply and you must purchase Class
U.S. Government Securities Fund — Page 65
A shares within 90 days after redeeming your Class F shares to receive the Class A shares without paying an initial Class A sales charge.
Exchanging Class A or Class T shares for Class F shares — If you are part of a qualified fee-based program or approved self-directed platform and you wish to exchange your Class A or Class T shares for Class F shares to be held in the program, any Class A or Class T sales charges (including contingent deferred sales charges) that you paid or are payable will not be credited back to your account.
Exchanging Class A shares for Class R shares — Provided it is eligible to invest in Class R shares, a retirement plan currently invested in Class A shares may exchange its shares for Class R shares. Any Class A sales charges that the retirement plan previously paid will not be credited back to the plan’s account. No contingent deferred sales charge will be assessed as part of the share class conversion.
Moving between Class F shares — If you are part of a qualified fee-based program that offers Class F shares, you may exchange your Class F shares for any other Class F shares to be held in the program. For example, if you hold Class F-2 shares, you may exchange your shares for Class F-1 or Class F-3 shares to be held in the program.
Moving between other share classes — If you desire to move your investment between share classes and the particular scenario is not described in this statement of additional information, please contact American Funds Service Company at (800) 421-4225 for more information.
Non-reportable transactions — Automatic conversions described in the prospectus will be non-reportable for tax purposes. In addition, an exchange of shares from one share class of a fund to another share class of the same fund will be treated as a non-reportable exchange for tax purposes, provided that the exchange request is received in writing by American Funds Service Company and processed as a single transaction. However, a movement between a 529 share class and a non-529 share class of the same fund will be reportable.
U.S. Government Securities Fund — Page 66
Class A purchases
Purchases by certain 403(b) plans
A 403(b) plan may not invest in American Funds Class A or C shares unless such plan was invested in Class A or C shares before January 1, 2009.
Participant accounts of a 403(b) plan that invested in American Funds Class A or C shares and were treated as an individual-type plan for sales charge purposes before January 1, 2009, may continue to be treated as accounts of an individual-type plan for sales charge purposes. Participant accounts of a 403(b) plan that invested in American Funds Class A or C shares and were treated as an employer-sponsored plan for sales charge purposes before January 1, 2009, may continue to be treated as accounts of an employer-sponsored plan for sales charge purposes. Participant accounts of a 403(b) plan that was established on or after January 1, 2009, are treated as accounts of an employer-sponsored plan for sales charge purposes.
Purchases by SEP plans and SIMPLE IRA plans
Participant accounts in a Simplified Employee Pension (SEP) plan or a Savings Incentive Match Plan for Employees of Small Employers IRA (SIMPLE IRA) will be aggregated at the plan level for Class A sales charge purposes if an employer adopts a prototype plan produced by American Funds Distributors, Inc. or (a) the employer or plan sponsor submits all contributions for all participating employees in a single contribution transmittal or the contributions are identified as related to the same plan; (b) each transmittal is accompanied by checks or wire transfers and generally must be submitted through the transfer agent’s automated contribution system if held on the fund’s books; and (c) if the fund is expected to carry separate accounts in the name of each plan participant and (i) the employer or plan sponsor notifies the funds’ transfer agent or the intermediary holding the account that the separate accounts of all plan participants should be linked and (ii) all new participant accounts are established by submitting the appropriate documentation on behalf of each new participant. Participant accounts in a SEP or SIMPLE plan that are eligible to aggregate their assets at the plan level may not also aggregate the assets with their individual accounts.
U.S. Government Securities Fund — Page 67
Other purchases
In addition, American Funds Class A and Class 529-A shares may be offered at net asset value to companies exchanging securities with the fund through a merger, acquisition or exchange offer and to certain individuals meeting the criteria described above who invested in Class A and Class 529-A shares before Class F-2 and Class 529-F-2 shares were made available under this privilege.
Transfers to CollegeAmerica — A transfer from the Virginia Prepaid Education ProgramSM or the Virginia Education Savings TrustSM to a CollegeAmerica account will be made with no sales charge. No commission will be paid to the dealer on such a transfer. Investment dealers will be compensated solely with an annual service fee that begins to accrue immediately.
Class F-2 and Class 529-F-2 purchases
If requested, American Funds Class F-2 and Class 529-F-2 shares will be sold to:
|
(1) |
current or retired directors, trustees, officers and advisory board members of, and certain lawyers who provide services to the funds managed by Capital Research and Management Company, current or retired employees 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; and | |
|
(2) |
The Capital Group Companies, Inc. and its affiliated companies. |
Once an account in Class F-2 or Class 529-F-2 is established under this privilege, additional investments can be made in Class F-2 or Class 529-F-2 for the life of the account. Depending on the financial intermediary holding your account, these privileges may be unavailable. Investors should consult their financial intermediary for further information.
Moving between accounts — American Funds investments by certain account types may be moved to other account types without incurring additional Class A sales charges. These transactions include:
· redemption proceeds from a non-retirement account (for example, a joint tenant account) used to purchase fund shares in an IRA or other individual-type retirement account;
· required minimum distributions from an IRA or other individual-type retirement account used to purchase fund shares in a non-retirement account; and
· death distributions paid to a beneficiary’s account that are used by the beneficiary to purchase fund shares in a different account.
Investors may not move investments from a Capital Bank & Trust Company SIMPLE IRA Plus to a Capital Bank & Trust Company SIMPLE IRA unless it is part of a plan transfer or to a current employer’s Capital Bank & Trust Company SIMPLE IRA plan.
These privileges are generally available only if your account is held directly with the fund’s transfer agent or if the financial intermediary holding your account has the systems, policies and procedures to support providing the privileges on its systems. Investors should consult their financial intermediary for further information.
Loan repayments — Repayments on loans taken from a retirement plan are not subject to sales charges if American Funds Service Company is notified of the repayment.
U.S. Government Securities Fund — Page 68
Dealer commissions and compensation — Commissions (up to 1.00%) are paid to dealers who initiate and are responsible for certain Class A share purchases not subject to initial sales charges. These purchases consist of a) purchases of $1 million or more, and b) purchases by employer-sponsored defined contribution-type retirement plans investing $1 million or more or with 100 or more eligible employees. Commissions on such investments (other than IRA rollover assets that roll over at no sales charge under the fund’s IRA rollover policy as described in the prospectus) are paid to dealers at the following rates: 1.00% on amounts of less than $10 million, .50% on amounts of at least $10 million but less than $25 million and .25% on amounts of at least $25 million. Commissions are based on cumulative investments over the life of the account with no adjustment for redemptions, transfers, or market declines. For example, if a shareholder has accumulated investments in excess of $10 million (but less than $25 million) and subsequently redeems all or a portion of the account(s), purchases following the redemption will generate a dealer commission of .50%.
A dealer concession of up to 1% may be paid by the fund under its Class A plan of distribution to reimburse the Principal Underwriter in connection with dealer and wholesaler compensation paid by it with respect to investments made with no initial sales charge.
U.S. Government Securities Fund — Page 69
Sales charge reductions and waivers
Reducing your Class A sales charge — As described in the prospectus, there are various ways to reduce your sales charge when purchasing Class A shares. Additional information about Class A sales charge reductions is provided below.
Statement of intention — By establishing a statement of intention (the "Statement"), you enter into a nonbinding commitment to purchase shares of American Funds (excluding American Funds U.S. Government Money Market Fund) over a 13-month period and receive the same sales charge (expressed as a percentage of your purchases) as if all shares had been purchased at once, unless the Statement is upgraded as described below.
The Statement period starts on the date on which your first purchase made toward satisfying the Statement is processed. Your accumulated holdings (as described in the paragraph below titled “Rights of accumulation”) eligible to be aggregated as of the day immediately before the start of the Statement period may be credited toward satisfying the Statement.
You may revise the commitment you have made in your Statement upward at any time during the Statement period. If your prior commitment has not been met by the time of the revision, the Statement period during which purchases must be made will remain unchanged. Purchases made from the date of the revision will receive the reduced sales charge, if any, resulting from the revised Statement. If your prior commitment has been met by the time of the revision, your original Statement will be considered met and a new Statement will be established.
The Statement will be considered completed if the shareholder dies within the 13-month Statement period. Commissions to dealers will not be adjusted or paid on the difference between the Statement amount and the amount actually invested before the shareholder’s death.
When a shareholder elects to use a Statement, shares equal to 5% of the dollar amount specified in the Statement may 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 Statement period the investments made during the statement period will be adjusted to reflect 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. Any dealers assigned to the shareholder’s account at the time a purchase was made during the Statement period will receive a corresponding commission adjustment if appropriate.
In addition, if you currently have individual holdings in American Legacy variable annuity contracts or variable life insurance policies that were established on or before March 31, 2007, you may continue to apply purchases under such contracts and policies to a Statement.
Shareholders purchasing shares at a reduced sales charge under a Statement indicate their acceptance of these terms and those in the prospectus with their first purchase.
The Statement period may be extended in cases where the fund’s distributor determines it is appropriate to do so; for example in periods when there are extenuating circumstances such as a natural disaster that may limit an individual’s ability to meet the investment required under the Statement.
U.S. Government Securities Fund — Page 70
Aggregation — Qualifying investments for aggregation include those made by you and your “immediate family” as defined in the prospectus, if all parties are purchasing shares for their own accounts and/or:
· individual-type employee benefit plans, such as an IRA, single-participant Keogh-type plan, or a participant account of a 403(b) plan that is treated as an individual-type plan for sales charge purposes (see “Purchases by certain 403(b) plans” under “Sales charges” in this statement of additional information);
· SEP plans and SIMPLE IRA plans established after November 15, 2004, by an employer adopting any plan document other than a prototype plan produced by American Funds Distributors, Inc.;
· business accounts solely controlled by you or your immediate family (for example, you own the entire business);
· trust accounts established by you or your immediate family (for trusts with only one primary beneficiary, upon the trustor’s death the trust account may be aggregated with such beneficiary’s own accounts; for trusts with multiple primary beneficiaries, upon the trustor’s death the trustees of the trust may instruct American Funds Service Company to establish separate trust accounts for each primary beneficiary; each primary beneficiary’s separate trust account may then be aggregated with such beneficiary’s own accounts);
· endowments or foundations established and controlled by you or your immediate family; or
· 529 accounts, which will be aggregated at the account owner level (Class 529-E accounts may only be aggregated with an eligible employer plan).
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 employee benefit plans other than the individual-type employee benefit plans described above;
· made for two or more employee benefit plans of a single employer or of affiliated employers as defined in the 1940 Act, excluding the individual-type employee benefit plans described above;
· for a diversified common trust fund or other diversified pooled account not specifically formed for the purpose of accumulating fund shares;
· for nonprofit, charitable or educational organizations, or any endowments or foundations established and controlled by such organizations, or any employer-sponsored retirement plans established for the benefit of the employees of such organizations, their endowments, or their foundations;
· for participant accounts of a 403(b) plan that is treated as an employer-sponsored plan for sales charge purposes (see “Purchases by certain 403(b) plans” under “Sales charges” in this statement of additional information), or made for participant accounts of two or more such plans, in each case of a single employer or affiliated employers as defined in the 1940 Act; or
· for a SEP or SIMPLE IRA plan established after November 15, 2004, by an employer adopting a prototype plan produced by American Funds Distributors, Inc.
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
U.S. Government Securities Fund — Page 71
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.
Joint accounts may be aggregated with other accounts belonging to the primary owner and/or his or her immediate family. The primary owner of a joint account is the individual responsible for taxes on the account.
Concurrent purchases — As described in the prospectus, you may reduce your Class A sales charge by combining purchases of all classes of shares in American Funds. Shares of American Funds U.S. Government Money Market Fund purchased through an exchange, reinvestment or cross-reinvestment from a fund having a sales charge also qualify. However, direct purchases of American Funds U.S. Government Money Market Fund Class A shares are excluded. If you currently have individual holdings in American Legacy variable annuity contracts or variable life insurance policies that were established on or before March 31, 2007, you may continue to combine purchases made under such contracts and policies to reduce your Class A sales charge.
Rights of accumulation — Subject to the limitations described in the aggregation policy, you may take into account your accumulated holdings in all share classes of American Funds to determine your sales charge on investments in accounts eligible to be aggregated. Direct purchases of American Funds U.S. Government Money Market Fund Class A shares are excluded. Subject to your investment dealer’s or recordkeeper’s capabilities, your accumulated holdings will be calculated as the higher of (a) the current value of your existing holdings (the “market value”) as of the day prior to your American Funds investment or (b) the amount you invested (including reinvested dividends and capital gains, but excluding capital appreciation) less any withdrawals (the “cost value”). Depending on the entity on whose books your account is held, the value of your holdings in that account may not be eligible for calculation at cost value. For example, accounts held in nominee or street name may not be eligible for calculation at cost value and instead may be calculated at market value for purposes of rights of accumulation.
The value of all of your holdings in accounts established in calendar year 2005 or earlier will be assigned an initial cost value equal to the market value of those holdings as of the last business day of 2005. Thereafter, the cost value of such accounts will increase or decrease according to actual investments or withdrawals. You must contact your financial professional or American Funds Service Company if you have additional information that is relevant to the calculation of the value of your holdings.
When determining your American Funds Class A sales charge, if your investment is not in an employer-sponsored retirement plan, you may also continue to take into account the market value (as of the day prior to your American Funds investment) of your individual holdings in various American Legacy variable annuity contracts and variable life insurance policies that were established on or before March 31, 2007. An employer-sponsored retirement plan may also continue to take into account the market value of its investments in American Legacy Retirement Investment Plans that were established on or before March 31, 2007.
You may not purchase Class C or 529-C shares if such combined holdings cause you to be eligible to purchase Class A or 529-A shares at the $1 million or more sales charge discount rate (i.e. at net asset value).
U.S. Government Securities Fund — Page 72
If you make a gift of American Funds Class A shares, upon your request, you may purchase the shares at the sales charge discount allowed under rights of accumulation of all of your American Funds and applicable American Legacy accounts.
Reducing your Class T sales charge — As described in the prospectus, the initial sales charge you pay each time you buy Class T shares may differ depending upon the amount you invest and may be reduced for larger purchases. Additionally, Class T shares acquired through reinvestment of dividends or capital gain distributions are not subject to an initial sales charge. Sales charges on Class T shares are applied on a transaction-by-transaction basis, and, accordingly, Class T shares are not eligible for any other sales charge waivers or reductions, including through the aggregation of Class T shares concurrently purchased by other related accounts or in other American Funds. The sales charge applicable to Class T shares may not be reduced by establishing a statement of intention, and rights of accumulation are not available for Class T shares.
U.S. Government Securities Fund — Page 73
CDSC waivers for Class A and C shares — As noted in the prospectus, a contingent deferred sales charge (“CDSC”) will be waived for redemptions due to death or post-purchase disability of a shareholder (this generally excludes accounts registered in the names of trusts and other entities). In the case of joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at the time he or she notifies the Transfer Agent of the other joint tenant’s death and removes the decedent’s name from the account, may redeem shares from the account without incurring a CDSC. Redemptions made after the Transfer Agent is notified of the death of a joint tenant will be subject to a CDSC.
In addition, a CDSC will be waived for the following types of transactions, if they do not exceed 12% of the value of an “account” (defined below) annually (the “12% limit”):
· Required minimum distributions taken from retirement accounts in accordance with IRS regulations.
· Redemptions through an automatic withdrawal plan (“AWP”) (see “Automatic withdrawals” under “Shareholder account services and privileges” in this statement of additional information). For each AWP payment, assets that are not subject to a CDSC, such as shares acquired through reinvestment of dividends and/or capital gain distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gain distributions taken in cash by a shareholder who receives payments through an AWP will also count toward the 12% limit. In the case of an AWP, the 12% limit is calculated at the time an automatic redemption is first made, and is recalculated at the time each additional automatic redemption is made. Shareholders who establish an AWP should be aware that the amount of a payment not subject to a CDSC may vary over time depending on fluctuations in the value of their accounts. This privilege may be revised or terminated at any time.
For purposes of this paragraph, “account” means your investment in the applicable class of shares of the particular fund from which you are making the redemption.
The CDSC on American Funds Class A shares may be waived in cases where the fund’s transfer agent determines the benefit to the fund of collecting the CDSC would be outweighed by the cost of applying it.
CDSC waivers are allowed only in the cases listed here and in the prospectus. For example, CDSC waivers will not be allowed on redemptions of Class 529-C shares due to termination of CollegeAmerica; a determination by the Internal Revenue Service that CollegeAmerica does not qualify as a qualified tuition program under the Code; proposal or enactment of law that eliminates or limits the tax-favored status of CollegeAmerica; or elimination of the fund by Virginia529 as an option for additional investment within CollegeAmerica.
U.S. Government Securities Fund — Page 74
The methods for selling (redeeming) shares are described more fully in the prospectus. If you wish to sell your shares by contacting American Funds Service Company directly, any such request must be signed by the registered shareholders. To contact American Funds Service Company via overnight mail or courier service, see “Purchase and exchange of shares.”
A signature guarantee may be required for certain redemptions. In such an event, your signature may be guaranteed by a domestic stock exchange or the Financial Industry Regulatory Authority, bank, savings association or credit union that is an eligible guarantor institution. The Transfer Agent reserves the right to require a signature guarantee on any redemptions.
Additional documentation may be required for sales of shares held in corporate, partnership or fiduciary accounts. You must include with your written request any shares you wish to sell that are in certificate form.
If you sell Class A or C shares and request a specific dollar amount to be sold, we will sell sufficient shares so that the sale proceeds, after deducting any applicable CDSC, equals the dollar amount requested.
If you hold multiple American Funds and a CDSC applies to the shares you are redeeming, the CDSC will be calculated based on the applicable class of shares of the particular fund from which you are making the redemption.
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 (normally seven business 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), the fund typically expects to pay redemption proceeds one business day following receipt and acceptance of a redemption order. Interest will not accrue or be paid on amounts that represent uncashed distribution or redemption checks.
You may request that redemption proceeds of $1,000 or more from American Funds U.S. Government Money Market Fund be wired to your bank by writing American Funds Service Company. A signature guarantee is required on all requests to wire funds and you may be subject to a fee for the transaction.
U.S. Government Securities Fund — Page 75
Shareholder account services and privileges
The following services and privileges are generally available to all shareholders. However, certain services and privileges described in the prospectus and this statement of additional information may not be available for Class 529 shareholders or if your account is held with an investment dealer or through an employer-sponsored retirement plan.
Automatic investment plan — An automatic investment plan enables you to make monthly or quarterly investments in 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 that you would like to invest 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 the date you specified falls on a weekend or holiday, your money will be invested on the following business day. However, if the following business day falls in the next month, your money will be invested on the business day immediately preceding the weekend or holiday. 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 contacting the Transfer Agent.
Automatic reinvestment — Dividends and capital gain distributions are reinvested in additional shares of the same class and fund at net asset value unless you indicate otherwise on the account application. You also may elect to have dividends and/or capital gain distributions paid in cash by informing the fund, the Transfer Agent or your investment dealer. Dividends and capital gain distributions paid to retirement plan shareholders or shareholders of the 529 share classes will be automatically reinvested.
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 may be automatically converted to having all dividends and other distributions reinvested in additional shares.
Cross-reinvestment of dividends and distributions — For all share classes, except Class T shares and the 529 classes of shares, you may cross-reinvest dividends and capital gains (distributions) into other American Funds in the same share class at net asset value, subject to the following conditions:
(1) 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);
(2) if the value of the account of the fund receiving distributions is below the minimum initial investment requirement, distributions must be automatically reinvested; and
(3) 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.
Depending on the financial intermediary holding your account, your reinvestment privileges may be unavailable or differ from those described in this statement of additional information. Investors should consult their financial intermediary for further information.
U.S. Government Securities Fund — Page 76
Automatic exchanges — For all share classes other than Class T shares, you may automatically exchange shares of the same class in amounts of $50 or more among any American Funds on any day (or preceding business day if the day falls on a nonbusiness day) of each month you designate.
Automatic withdrawals — Depending on the type of account, for all share classes except R shares, you may automatically withdraw shares from any of the American Funds. You can make automatic withdrawals of $50 or more. You can designate the day of each period for withdrawals and request that checks be sent to you or someone else. Withdrawals may also be electronically deposited to your bank account. The Transfer Agent will withdraw your money from the fund you specify on or around the date you specify. If the date you specified falls on a weekend or holiday, the redemption will take place on the previous business day. However, if the previous business day falls in the preceding month, the redemption will take place on the following business day after the weekend or holiday. You should consult with your financial professional or intermediary to determine if your account is eligible for automatic withdrawals.
Withdrawal payments are not to be considered as dividends, yield or income. Generally, 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.
Redemption proceeds from an automatic withdrawal plan are not eligible for reinvestment without a sales charge.
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, purchases through automatic investment plans and certain retirement plans, as well as automatic exchanges and withdrawals, will be confirmed at least quarterly.
American Funds Service Company and capitalgroup.com — You may check your share balance, the price of your shares or your most recent account transaction; redeem shares (up to $125,000 per American Funds shareholder each day); or exchange shares by calling American Funds Service Company at (800) 421-4225 or using capitalgroup.com. Redemptions and exchanges through American Funds Service Company and capitalgroup.com are subject to the conditions noted above and in “Telephone and Internet purchases, redemptions and exchanges” below. You will need your fund number (see the list of American Funds under the “General information — fund numbers” section in this statement of additional information), personal identification number (generally the last four digits of your Social Security number or other tax identification number associated with your account) and account number.
Generally, all shareholders are automatically eligible to use these services. However, if you are not currently authorized to do so, please contact American Funds Service Company for assistance. Once you establish this privilege, you, your financial professional or any person with your account information may use these services.
Telephone and Internet purchases, redemptions and exchanges — By using the telephone or the Internet (including capitalgroup.com), or fax 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 liabilities (including attorney fees) that may be incurred in connection with the exercise of these privileges. Generally, all shareholders are automatically eligible to use these
U.S. Government Securities Fund — Page 77
services. However, you may elect to opt out of these services 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, it and/or 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.
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 of record owns shares having an aggregate net asset value of less than the minimum initial investment amount required of new shareholders as set forth in the 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.
While payment of redemptions normally will be in cash, the fund’s declaration of trust permits payment of the redemption price wholly or partly with portfolio securities or other fund assets under conditions and circumstances determined by the fund’s board of trustees. For example, redemptions could be made in this manner if the board determined that making payments wholly in cash over a particular period would be unfair and/or harmful to other fund shareholders.
Share certificates — Shares are credited to your account. The fund does not issue share certificates.
U.S. Government Securities Fund — Page 78
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 JP Morgan Chase Bank N.A., 270 Park Avenue, New York, NY 10017-2070, as custodian. If the fund holds securities of issuers outside the U.S., the custodian may hold these securities pursuant to subcustodial arrangements in banks outside the U.S. or branches of U.S. banks outside the U.S.
Transfer agent services — American Funds Service Company, a wholly owned subsidiary of the investment adviser, maintains the records of shareholder accounts, 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. The principal office of American Funds Service Company is located at 6455 Irvine Center Drive, Irvine, CA 92618. Transfer agent fees are paid according to a fee schedule, based on the number of accounts serviced or a percentage of fund assets, contained in a Shareholder Services Agreement between the fund and American Funds Service Company.
In the case of certain shareholder accounts, third parties who may be unaffiliated with the investment adviser provide transfer agency and shareholder services in place of American Funds Service Company. These services are rendered under agreements with American Funds Service Company or its affiliates and the third parties receive compensation according to such agreements. Compensation for transfer agency and shareholder services, whether paid to American Funds Service Company or such third parties, is ultimately paid from fund assets and is reflected in the expenses of the fund as disclosed in the prospectus.
During the 2022 fiscal year, transfer agent fees, gross of any payments made by American Funds Service Company to third parties, were:
|
Transfer agent fee | |
|
Class A |
$4,311,000 |
|
Class C |
171,000 |
|
Class T |
—* |
|
Class F-1 |
217,000 |
|
Class F-2 |
903,000 |
|
Class F-3 |
2,000 |
|
Class 529-A |
214,000 |
|
Class 529-C |
13,000 |
|
Class 529-E |
6,000 |
|
Class 529-T |
—* |
|
Class 529-F-1 |
—* |
|
Class 529-F-2 |
17,000 |
|
Class 529-F-3 |
— |
|
Class R-1 |
6,000 |
|
Class R-2 |
322,000 |
|
Class R-2E |
23,000 |
|
Class R-3 |
191,000 |
|
Class R-4 |
119,000 |
|
Class R-5E |
61,000 |
|
Class R-5 |
30,000 |
|
Class R-6 |
44,000 |
* Amount less than $1,000.
U.S. Government Securities Fund — Page 79
Independent registered public accounting firm — Deloitte & Touche LLP, 695 Town Center Drive, Costa Mesa, CA 92626, serves as the fund’s independent registered public accounting firm, providing audit services and review of certain documents to be filed with the SEC. Deloitte Tax LLP prepares tax returns for the fund. The financial statements included in this statement of additional information that are from the fund's annual report have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The selection of the fund’s independent registered public accounting firm is reviewed and determined annually by the board of trustees.
Independent legal counsel — Morgan, Lewis & Bockius LLP, One Federal Street, Boston, MA 02110-1726, serves as independent legal counsel (“counsel”) for the fund and for independent trustees in their capacities as such. A determination with respect to the independence of the fund’s counsel will be made at least annually by the independent trustees of the fund, as prescribed by applicable 1940 Act rules.
Prospectuses, reports to shareholders and proxy statements — The fund’s fiscal year ends on August 31. Shareholders are provided updated summary prospectuses annually and at least semi-annually with reports showing the fund’s investment portfolio or summary investment portfolio, financial statements and other information. Shareholders may request a copy of the fund’s current prospectus at no cost by calling (800) 421-4225 or by sending an email request to [email protected]. Shareholders may also access the fund’s current summary prospectus, prospectus, statement of additional information and shareholder reports at capitalgroup.com/prospectus. The fund’s annual financial statements are audited by the fund’s independent registered public accounting firm, Deloitte & Touche LLP. In addition, shareholders may also receive proxy statements for the fund. 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 summary prospectuses, shareholder reports and proxy statements. To receive additional copies of a summary prospectus, report or proxy statement, shareholders should contact the Transfer Agent.
Shareholders may also elect to receive updated summary prospectuses, annual reports and semi-annual reports electronically by signing up for electronic delivery on our website, capitalgroup.com. Shareholders who elect to receive documents electronically will receive such documents in electronic form and will not receive documents in paper form by mail. A shareholder who elects electronic delivery is able to cancel this service at any time and return to receiving updated summary prospectuses and other reports in paper form by mail.
Summary prospectuses, prospectuses, annual reports and semi-annual reports that are mailed to shareholders by the Capital Group organization are printed with ink containing soy and/or vegetable oil on paper containing recycled fibers.
Codes of ethics — The fund and Capital Research and Management Company and its affiliated companies, including the fund’s Principal Underwriter, have adopted codes of ethics that allow for personal investments, including securities in which the fund may invest from time to time. These codes include a ban on acquisitions of securities pursuant to an initial public offering; restrictions on acquisitions of private placement securities; preclearance 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; disclosure of personal securities transactions; and policies regarding political contributions.
U.S. Government Securities Fund — Page 80
Determination of net asset value, redemption price and maximum offering price per share for Class A shares — August 31, 2022
|
Net
asset value and redemption price per share |
$12.78 |
|
Maximum
offering price per share |
$13.28 |
Other information — The fund reserves the right to modify the privileges described in this statement of additional information at any time.
The fund’s financial statements, including the investment portfolio and the report of the fund’s independent registered public accounting firm contained in the annual report, are included in this statement of additional information.
U.S. Government Securities Fund — Page 81
Fund numbers — Here are the fund numbers for use when making share transactions:
|
Fund numbers | ||||||
|
Fund |
Class A |
Class C |
Class T |
Class F-1 |
Class F-2 |
Class F-3 |
|
Stock and stock/fixed income funds |
||||||
|
AMCAP Fund® |
002 |
302 |
43002 |
402 |
602 |
702 |
|
American Balanced Fund® |
011 |
311 |
43011 |
411 |
611 |
711 |
|
American Funds® Developing World Growth and Income Fund |
30100 |
33100 |
43100 |
34100 |
36100 |
37100 |
|
American Funds® Global Balanced Fund |
037 |
337 |
43037 |
437 |
637 |
737 |
|
American Funds® Global Insight Fund |
30122 |
33122 |
43122 |
34122 |
36122 |
37122 |
|
American Funds® International Vantage Fund |
30123 |
33123 |
43123 |
34123 |
36123 |
37123 |
|
American Mutual Fund® |
003 |
303 |
43003 |
403 |
603 |
703 |
|
Capital Income Builder® |
012 |
312 |
43012 |
412 |
612 |
712 |
|
Capital World Growth and Income Fund® |
033 |
333 |
43033 |
433 |
633 |
733 |
|
EuroPacific Growth Fund® |
016 |
316 |
43016 |
416 |
616 |
716 |
|
Fundamental Investors® |
010 |
310 |
43010 |
410 |
610 |
710 |
|
The Growth Fund of America® |
005 |
305 |
43005 |
405 |
605 |
705 |
|
The Income Fund of America® |
006 |
306 |
43006 |
406 |
606 |
706 |
|
International Growth and Income Fund |
034 |
334 |
43034 |
434 |
634 |
734 |
|
The Investment Company of America® |
004 |
304 |
43004 |
404 |
604 |
704 |
|
The New Economy Fund® |
014 |
314 |
43014 |
414 |
614 |
714 |
|
New Perspective Fund® |
007 |
307 |
43007 |
407 |
607 |
707 |
|
New World Fund® |
036 |
336 |
43036 |
436 |
636 |
736 |
|
SMALLCAP World Fund® |
035 |
335 |
43035 |
435 |
635 |
735 |
|
Washington Mutual Investors Fund |
001 |
301 |
43001 |
401 |
601 |
701 |
|
Fixed income funds |
||||||
|
American Funds Emerging Markets Bond Fund ® |
30114 |
33114 |
43114 |
34114 |
36114 |
37114 |
|
American Funds Corporate Bond Fund ® |
032 |
332 |
43032 |
432 |
632 |
732 |
|
American Funds Inflation Linked Bond Fund® |
060 |
360 |
43060 |
460 |
660 |
760 |
|
American Funds Mortgage Fund® |
042 |
342 |
43042 |
442 |
642 |
742 |
|
American Funds® Multi-Sector Income Fund |
30126 |
33126 |
43126 |
34126 |
36126 |
37126 |
|
American
Funds Short-Term Tax-Exempt |
039 |
N/A |
43039 |
439 |
639 |
739 |
|
American Funds® Strategic Bond Fund |
30112 |
33112 |
43112 |
34112 |
36112 |
37112 |
|
American
Funds Tax-Exempt Fund of |
041 |
341 |
43041 |
441 |
641 |
741 |
|
American High-Income Municipal Bond Fund® |
040 |
340 |
43040 |
440 |
640 |
740 |
|
American High-Income Trust® |
021 |
321 |
43021 |
421 |
621 |
721 |
|
The Bond Fund of America® |
008 |
308 |
43008 |
408 |
608 |
708 |
|
Capital World Bond Fund® |
031 |
331 |
43031 |
431 |
631 |
731 |
|
Intermediate Bond Fund of America® |
023 |
323 |
43023 |
423 |
623 |
723 |
|
Limited
Term Tax-Exempt Bond Fund |
043 |
343 |
43043 |
443 |
643 |
743 |
|
Short-Term Bond Fund of America® |
048 |
348 |
43048 |
448 |
648 |
748 |
|
The Tax-Exempt Bond Fund of America® |
019 |
319 |
43019 |
419 |
619 |
719 |
|
The Tax-Exempt Fund of California® |
020 |
320 |
43020 |
420 |
620 |
720 |
|
U.S. Government Securities Fund® |
022 |
322 |
43022 |
422 |
622 |
722 |
|
Money market fund |
||||||
|
American
Funds® U.S. Government |
059 |
359 |
43059 |
459 |
659 |
759 |
U.S. Government Securities Fund — Page 82
|
Fund numbers | |||||||||
|
Fund |
Class
|
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
|
Stock and stock/fixed income funds |
|||||||||
|
AMCAP Fund |
1002 |
1302 |
1502 |
46002 |
1402 |
1602 |
1702 |
N/A |
N/A |
|
American Balanced Fund |
1011 |
1311 |
1511 |
46011 |
1411 |
1611 |
1711 |
N/A |
N/A |
|
American Funds Developing World Growth and Income Fund |
10100 |
13100 |
15100 |
46100 |
14100 |
16100 |
17100 |
N/A |
N/A |
|
American Funds Global Balanced Fund |
1037 |
1337 |
1537 |
46037 |
1437 |
1637 |
1737 |
N/A |
N/A |
|
American Funds Global Insight Fund |
10122 |
13122 |
15122 |
46122 |
14122 |
16122 |
17122 |
N/A |
N/A |
|
American Funds International Vantage Fund |
10123 |
13123 |
15123 |
46123 |
14123 |
16123 |
17123 |
N/A |
N/A |
|
American Mutual Fund |
1003 |
1303 |
1503 |
46003 |
1403 |
1603 |
1703 |
N/A |
N/A |
|
Capital Income Builder |
1012 |
1312 |
1512 |
46012 |
1412 |
1612 |
1712 |
N/A |
N/A |
|
Capital World Growth and Income Fund |
1033 |
1333 |
1533 |
46033 |
1433 |
1633 |
1733 |
N/A |
N/A |
|
EuroPacific Growth Fund |
1016 |
1316 |
1516 |
46016 |
1416 |
1616 |
1716 |
N/A |
N/A |
|
Fundamental Investors |
1010 |
1310 |
1510 |
46010 |
1410 |
1610 |
1710 |
N/A |
N/A |
|
The Growth Fund of America |
1005 |
1305 |
1505 |
46005 |
1405 |
1605 |
1705 |
N/A |
N/A |
|
The Income Fund of America |
1006 |
1306 |
1506 |
46006 |
1406 |
1606 |
1706 |
N/A |
N/A |
|
International Growth and Income Fund |
1034 |
1334 |
1534 |
46034 |
1434 |
1634 |
1734 |
N/A |
N/A |
|
The Investment Company of America |
1004 |
1304 |
1504 |
46004 |
1404 |
1604 |
1704 |
N/A |
N/A |
|
The New Economy Fund |
1014 |
1314 |
1514 |
46014 |
1414 |
1614 |
1714 |
N/A |
N/A |
|
New Perspective Fund |
1007 |
1307 |
1507 |
46007 |
1407 |
1607 |
1707 |
N/A |
N/A |
|
New World Fund |
1036 |
1336 |
1536 |
46036 |
1436 |
1636 |
1736 |
N/A |
N/A |
|
SMALLCAP World Fund |
1035 |
1335 |
1535 |
46035 |
1435 |
1635 |
1735 |
N/A |
N/A |
|
Washington Mutual Investors Fund |
1001 |
1301 |
1501 |
46001 |
1401 |
1601 |
1701 |
N/A |
N/A |
|
Fixed income funds |
|||||||||
|
American Funds Emerging Markets Bond Fund |
10114 |
13114 |
15114 |
46114 |
14114 |
16114 |
17114 |
N/A |
N/A |
|
American Funds Corporate Bond Fund |
1032 |
1332 |
1532 |
46032 |
1432 |
1632 |
1732 |
N/A |
N/A |
|
American Funds Inflation Linked Bond Fund |
1060 |
1360 |
1560 |
46060 |
1460 |
1660 |
1760 |
N/A |
N/A |
|
American Funds Mortgage Fund |
1042 |
1342 |
1542 |
46042 |
1442 |
1642 |
1742 |
N/A |
N/A |
|
American Funds Multi-Sector Income Fund |
10126 |
13126 |
15126 |
46126 |
14126 |
16126 |
17126 |
N/A |
N/A |
|
American Funds Strategic Bond Fund |
10112 |
13112 |
15112 |
46112 |
14112 |
16112 |
17112 |
N/A |
N/A |
|
American High-Income Trust |
1021 |
1321 |
1521 |
46021 |
1421 |
1621 |
1721 |
N/A |
N/A |
|
The Bond Fund of America |
1008 |
1308 |
1508 |
46008 |
1408 |
1608 |
1708 |
N/A |
N/A |
|
Capital World Bond Fund |
1031 |
1331 |
1531 |
46031 |
1431 |
1631 |
1731 |
N/A |
N/A |
|
Intermediate Bond Fund of America |
1023 |
1323 |
1523 |
46023 |
1423 |
1623 |
1723 |
N/A |
N/A |
|
Short-Term Bond Fund of America |
1048 |
1348 |
1548 |
46048 |
1448 |
1648 |
1748 |
N/A |
N/A |
|
U.S. Government Securities Fund |
1022 |
1322 |
1522 |
46022 |
1422 |
1622 |
1722 |
N/A |
N/A |
|
Money market fund |
|
||||||||
|
American
Funds U.S. Government |
1059 |
1359 |
1559 |
46059 |
1459 |
1659 |
1759 |
48059 |
60059 |
U.S. Government Securities Fund — Page 83
|
Fund numbers | ||||||||
|
Fund |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
|
Stock and stock/fixed income funds |
||||||||
|
AMCAP Fund |
2102 |
2202 |
4102 |
2302 |
2402 |
2702 |
2502 |
2602 |
|
American Balanced Fund |
2111 |
2211 |
4111 |
2311 |
2411 |
2711 |
2511 |
2611 |
|
American Funds Developing World Growth and Income Fund |
21100 |
22100 |
41100 |
23100 |
24100 |
27100 |
25100 |
26100 |
|
American Funds Global Balanced Fund |
2137 |
2237 |
4137 |
2337 |
2437 |
2737 |
2537 |
2637 |
|
American Funds Global Insight Fund |
21122 |
22122 |
41122 |
23122 |
24122 |
27122 |
25122 |
26122 |
|
American Funds International Vantage Fund |
21123 |
22123 |
41123 |
23123 |
24123 |
27123 |
25123 |
26123 |
|
American Mutual Fund |
2103 |
2203 |
4103 |
2303 |
2403 |
2703 |
2503 |
2603 |
|
Capital Income Builder |
2112 |
2212 |
4112 |
2312 |
2412 |
2712 |
2512 |
2612 |
|
Capital World Growth and Income Fund |
2133 |
2233 |
4133 |
2333 |
2433 |
2733 |
2533 |
2633 |
|
EuroPacific Growth Fund |
2116 |
2216 |
4116 |
2316 |
2416 |
2716 |
2516 |
2616 |
|
Fundamental Investors |
2110 |
2210 |
4110 |
2310 |
2410 |
2710 |
2510 |
2610 |
|
The Growth Fund of America |
2105 |
2205 |
4105 |
2305 |
2405 |
2705 |
2505 |
2605 |
|
The Income Fund of America |
2106 |
2206 |
4106 |
2306 |
2406 |
2706 |
2506 |
2606 |
|
International Growth and Income Fund |
2134 |
2234 |
41034 |
2334 |
2434 |
27034 |
2534 |
2634 |
|
The Investment Company of America |
2104 |
2204 |
4104 |
2304 |
2404 |
2704 |
2504 |
2604 |
|
The New Economy Fund |
2114 |
2214 |
4114 |
2314 |
2414 |
2714 |
2514 |
2614 |
|
New Perspective Fund |
2107 |
2207 |
4107 |
2307 |
2407 |
2707 |
2507 |
2607 |
|
New World Fund |
2136 |
2236 |
4136 |
2336 |
2436 |
2736 |
2536 |
2636 |
|
SMALLCAP World Fund |
2135 |
2235 |
4135 |
2335 |
2435 |
2735 |
2535 |
2635 |
|
Washington Mutual Investors Fund |
2101 |
2201 |
4101 |
2301 |
2401 |
2701 |
2501 |
2601 |
|
Fixed income funds |
||||||||
|
American Funds Emerging Markets Bond Fund |
21114 |
22114 |
41114 |
23114 |
24114 |
27114 |
25114 |
26114 |
|
American Funds Corporate Bond Fund |
2132 |
2232 |
4132 |
2332 |
2432 |
2732 |
2532 |
2632 |
|
American Funds Inflation Linked Bond Fund |
2160 |
2260 |
4160 |
2360 |
2460 |
2760 |
2560 |
2660 |
|
American Funds Mortgage Fund |
2142 |
2242 |
4142 |
2342 |
2442 |
2742 |
2542 |
2642 |
|
American Funds Multi-Sector Income Fund |
21126 |
22126 |
41126 |
23126 |
24126 |
27126 |
25126 |
26126 |
|
American Funds Strategic Bond Fund |
21112 |
22112 |
41112 |
23112 |
24112 |
27112 |
25112 |
26112 |
|
American High-Income Trust |
2121 |
2221 |
4121 |
2321 |
2421 |
2721 |
2521 |
2621 |
|
The Bond Fund of America |
2108 |
2208 |
4108 |
2308 |
2408 |
2708 |
2508 |
2608 |
|
Capital World Bond Fund |
2131 |
2231 |
4131 |
2331 |
2431 |
2731 |
2531 |
2631 |
|
Intermediate Bond Fund of America |
2123 |
2223 |
4123 |
2323 |
2423 |
2723 |
2523 |
2623 |
|
Short-Term Bond Fund of America |
2148 |
2248 |
4148 |
2348 |
2448 |
2748 |
2548 |
2648 |
|
U.S. Government Securities Fund |
2122 |
2222 |
4122 |
2322 |
2422 |
2722 |
2522 |
2622 |
|
Money market fund |
||||||||
|
American
Funds U.S. Government |
2159 |
2259 |
4159 |
2359 |
2459 |
2759 |
2559 |
2659 |
U.S. Government Securities Fund — Page 84
|
Fund numbers | ||||||
|
Fund |
Class A |
Class C |
Class T |
Class F-1 |
Class F-2 |
Class F-3 |
|
American Funds Target Date Retirement Series® |
||||||
|
American Funds® 2065 Target Date Retirement Fund |
30185 |
33185 |
43185 |
34185 |
36185 |
37185 |
|
American Funds 2060 Target Date Retirement Fund® |
083 |
383 |
43083 |
483 |
683 |
783 |
|
American Funds 2055 Target Date Retirement Fund® |
082 |
382 |
43082 |
482 |
682 |
782 |
|
American Funds 2050 Target Date Retirement Fund® |
069 |
369 |
43069 |
469 |
669 |
769 |
|
American Funds 2045 Target Date Retirement Fund® |
068 |
368 |
43068 |
468 |
668 |
768 |
|
American Funds 2040 Target Date Retirement Fund® |
067 |
367 |
43067 |
467 |
667 |
767 |
|
American Funds 2035 Target Date Retirement Fund® |
066 |
366 |
43066 |
466 |
36066 |
766 |
|
American Funds 2030 Target Date Retirement Fund® |
065 |
365 |
43065 |
465 |
665 |
765 |
|
American Funds 2025 Target Date Retirement Fund® |
064 |
364 |
43064 |
464 |
664 |
764 |
|
American Funds 2020 Target Date Retirement Fund® |
063 |
363 |
43063 |
463 |
663 |
763 |
|
American Funds 2015 Target Date Retirement Fund® |
062 |
362 |
43062 |
462 |
662 |
762 |
|
American Funds 2010 Target Date Retirement Fund® |
061 |
361 |
43061 |
461 |
661 |
761 |
|
Fund numbers | ||||||||
|
Fund |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
|
American Funds Target Date Retirement Series® |
||||||||
|
American
Funds® 2065 |
21185 |
22185 |
41185 |
23185 |
24185 |
27185 |
25185 |
26185 |
|
American
Funds 2060 |
2183 |
2283 |
4183 |
2383 |
2483 |
2783 |
2583 |
2683 |
|
American
Funds 2055 |
2182 |
2282 |
4182 |
2382 |
2482 |
2782 |
2582 |
2682 |
|
American
Funds 2050 |
2169 |
2269 |
4169 |
2369 |
2469 |
2769 |
2569 |
2669 |
|
American
Funds 2045 |
2168 |
2268 |
4168 |
2368 |
2468 |
2768 |
2568 |
2668 |
|
American
Funds 2040 |
2167 |
2267 |
4167 |
2367 |
2467 |
2767 |
2567 |
2667 |
|
American
Funds 2035 |
2166 |
2266 |
4166 |
2366 |
2466 |
2766 |
2566 |
2666 |
|
American
Funds 2030 |
2165 |
2265 |
4165 |
2365 |
2465 |
2765 |
2565 |
2665 |
|
American
Funds 2025 |
2164 |
2264 |
4164 |
2364 |
2464 |
2764 |
2564 |
2664 |
|
American
Funds 2020 |
2163 |
2263 |
4163 |
2363 |
2463 |
2763 |
2563 |
2663 |
|
American
Funds 2015 |
2162 |
2262 |
4162 |
2362 |
2462 |
2762 |
2562 |
2662 |
|
American
Funds 2010 |
2161 |
2261 |
4161 |
2361 |
2461 |
2761 |
2561 |
2661 |
U.S. Government Securities Fund — Page 85
|
Fund numbers | |||||||
|
Fund |
Class
|
Class
|
Class
|
Class
|
Class
|
Class
|
Class
|
|
American Funds College Target Date Series® |
|||||||
|
American Funds® College 2039 Fund |
10136 |
13136 |
15136 |
46136 |
14136 |
16136 |
17136 |
|
American Funds® College 2036 Fund |
10125 |
13125 |
15125 |
46125 |
14125 |
16125 |
17125 |
|
American Funds College 2033 Fund® |
10103 |
13103 |
15103 |
46103 |
14103 |
16103 |
17103 |
|
American Funds College 2030 Fund® |
1094 |
1394 |
1594 |
46094 |
1494 |
1694 |
1794 |
|
American Funds College 2027 Fund® |
1093 |
1393 |
1593 |
46093 |
1493 |
1693 |
1793 |
|
American Funds College 2024 Fund® |
1092 |
1392 |
1592 |
46092 |
1492 |
1692 |
1792 |
|
American Funds College Enrollment Fund® |
1088 |
1388 |
1588 |
46088 |
1488 |
1688 |
1788 |
U.S. Government Securities Fund — Page 86
|
Fund numbers | ||||||
|
Fund |
Class A |
Class C |
Class T |
Class F-1 |
Class F-2 |
Class F-3 |
|
American Funds® Portfolio Series |
||||||
|
American Funds® Global Growth Portfolio |
055 |
355 |
43055 |
455 |
655 |
755 |
|
American Funds® Growth Portfolio |
053 |
353 |
43053 |
453 |
653 |
753 |
|
American Funds® Growth and Income Portfolio |
051 |
351 |
43051 |
451 |
651 |
751 |
|
American Funds® Moderate Growth and Income Portfolio |
050 |
350 |
43050 |
450 |
650 |
750 |
|
American Funds® Conservative Growth and Income Portfolio |
047 |
347 |
43047 |
447 |
647 |
747 |
|
American
Funds® Tax-Aware Conservative |
046 |
346 |
43046 |
446 |
646 |
746 |
|
American Funds® Preservation Portfolio |
045 |
345 |
43045 |
445 |
645 |
745 |
|
American Funds® Tax-Exempt Preservation Portfolio |
044 |
344 |
43044 |
444 |
644 |
744 |
|
Fund numbers | |||||||||
|
Fund |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
|
American Funds Global Growth Portfolio |
1055 |
1355 |
1555 |
46055 |
1455 |
1655 |
1755 |
48055 |
60055 |
|
American Funds Growth Portfolio |
1053 |
1353 |
1553 |
46053 |
1453 |
1653 |
1753 |
48053 |
60053 |
|
American Funds Growth and Income Portfolio |
1051 |
1351 |
1551 |
46051 |
1451 |
1651 |
1751 |
48051 |
60051 |
|
American Funds Moderate Growth and Income Portfolio |
1050 |
1350 |
1550 |
46050 |
1450 |
1650 |
1750 |
48050 |
60050 |
|
American Funds Conservative Growth and Income Portfolio |
1047 |
1347 |
1547 |
46047 |
1447 |
1647 |
1747 |
48047 |
60047 |
|
American Funds Tax-Aware Conservative Growth and Income Portfolio |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|
American Funds Preservation Portfolio |
1045 |
1345 |
1545 |
46045 |
1445 |
1645 |
1745 |
48045 |
60045 |
|
American Funds Tax-Exempt Preservation Portfolio |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|
Fund numbers | ||||||||
|
Fund |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
|
American Funds Global Growth Portfolio |
2155 |
2255 |
4155 |
2355 |
2455 |
2755 |
2555 |
2655 |
|
American Funds Growth Portfolio |
2153 |
2253 |
4153 |
2353 |
2453 |
2753 |
2553 |
2653 |
|
American Funds Growth and Income Portfolio |
2151 |
2251 |
4151 |
2351 |
2451 |
2751 |
2551 |
2651 |
|
American Funds Moderate Growth and Income Portfolio |
2150 |
2250 |
4150 |
2350 |
2450 |
2750 |
2550 |
2650 |
|
American Funds Conservative Growth and Income Portfolio |
2147 |
2247 |
4147 |
2347 |
2447 |
2747 |
2547 |
2647 |
|
American
Funds Tax-Aware Conservative |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|
American Funds Preservation Portfolio |
2145 |
2245 |
4145 |
2345 |
2445 |
2745 |
2545 |
2645 |
|
American Funds Tax-Exempt Preservation Portfolio |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
U.S. Government Securities Fund — Page 87
|
Fund numbers | ||||||
|
Fund |
Class A |
Class C |
Class T |
Class F-1 |
Class F-2 |
Class F-3 |
|
American Funds® Retirement Income Portfolio Series |
||||||
|
American Funds® Retirement Income Portfolio – Conservative |
30109 |
33109 |
43109 |
34109 |
36109 |
37109 |
|
American Funds® Retirement Income Portfolio – Moderate |
30110 |
33110 |
43110 |
34110 |
36110 |
37110 |
|
American Funds® Retirement Income Portfolio – Enhanced |
30111 |
33111 |
43111 |
34111 |
36111 |
37111 |
|
Fund numbers | ||||||||
|
Fund |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
Class |
|
American Funds Retirement Income Portfolio – Conservative |
21109 |
22109 |
41109 |
23109 |
24109 |
27109 |
25109 |
26109 |
|
American Funds Retirement Income Portfolio – Moderate |
21110 |
22110 |
41110 |
23110 |
24110 |
27110 |
25110 |
26110 |
|
American Funds Retirement Income Portfolio – Enhanced |
21111 |
22111 |
41111 |
23111 |
24111 |
27111 |
25111 |
26111 |
U.S. Government Securities Fund — Page 88
The following descriptions of debt security ratings are based on information provided by Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings, Inc.
Description of bond ratings
Moody’s
Long-term
rating scale
Aaa
Obligations
rated Aaa are judged to be of the highest quality, subject to the lowest level
of credit risk.
Aa
Obligations
rated Aa are judged to be of high quality and are subject to very low credit
risk.
A
Obligations
rated A are considered upper-medium grade and are subject to low credit
risk.
Baa
Obligations
rated Baa are judged to be medium-grade and subject to moderate credit risk and
as such may possess certain speculative characteristics.
Ba
Obligations
rated Ba are judged to be speculative and are subject to substantial credit
risk.
B
Obligations
rated B are considered speculative and are subject to high credit
risk.
Caa
Obligations
rated Caa are judged to be speculative and of poor standing and are subject to
very high credit risk.
Ca
Obligations
rated Ca are highly speculative and are likely in, or very near, default, with
some prospect of recovery of principal and interest.
C
Obligations
rated C are the lowest rated and are typically in default, with little prospect
for recovery of principal or interest.
Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies and securities firms.
U.S. Government Securities Fund — Page 89
Standard
& Poor’s
Long-term
issue credit ratings
AAA
An
obligation rated AAA has the highest rating assigned by Standard & Poor’s.
The obligor’s capacity to meet its financial commitment on the obligation is
extremely strong.
AA
An
obligation rated AA differs from the highest-rated obligations only to a small
degree. The obligor’s capacity to meet its financial commitment on the
obligation is very strong.
A
An
obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor’s capacity to meet its financial
commitment on the obligation is still strong.
BBB
An
obligation rated BBB exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB
An
obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor’s
inadequate capacity to meet its financial commitment on the
obligation.
B
An
obligation rated B is more vulnerable to nonpayment than obligations rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions will likely
impair the obligor’s capacity or willingness to meet its financial commitment on
the obligation.
CCC
An
obligation rated CCC is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC
An
obligation rated CC is currently highly vulnerable to nonpayment. The CC rating
is used when a default has not occurred, but Standard & Poor’s expects
default to be a virtual certainty, regardless of the anticipated time to
default.
U.S. Government Securities Fund — Page 90
C
An
obligation rated C is currently highly vulnerable to nonpayment, and the
obligation is expected to have lower relative seniority or lower ultimate
recovery compared to obligations that are rated higher.
D
An
obligation rated D is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the D rating category is used when payments on
an obligation are not made on the date due, unless Standard & Poor’s
believes that such payments will be made within five business days in the
absence of a stated grace period or within the earlier of the stated grace
period or 30 calendar days. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay provisions.
An obligation’s rating is lowered to D if it is subject to a distressed exchange
offer.
Plus (+) or minus (–)
The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
NR
This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.
U.S. Government Securities Fund — Page 91
Fitch
Ratings, Inc.
Long-term
credit ratings
AAA
Highest
credit quality. AAA ratings denote the lowest expectation of default risk. They
are assigned only in case of exceptionally strong capacity for payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
AA
Very
high credit quality. AA ratings denote expectations of very low default risk.
They indicate very strong capacity for payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable
events.
A
High
credit quality. A ratings denote expectations of low default risk. The capacity
for payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
BBB
Good
credit quality. BBB ratings indicate that expectations of default risk are low.
The capacity for payment of financial commitments is considered adequate but
adverse changes in circumstances and economic conditions are more likely to
impair this capacity.
BB
Speculative.
BB ratings indicate an elevated vulnerability to default risk, particularly in
the event of adverse changes in business or economic conditions over time;
however, business or financial flexibility exists which supports the servicing
of financial commitments.
B
Highly
speculative. B ratings indicate that material default risk is present, but a
limited margin of safety remains. Financial commitments are currently being met;
however, capacity for continued payment is vulnerable to deterioration in the
business and economic environment.
CCC
Substantial
credit risk. Default is a real possibility.
CC
Very
high levels of credit risk. Default of some kind appears
probable.
C
Exceptionally
high levels of credit risk. Default is imminent or inevitable, or the issuer is
in standstill. Conditions that are indicative of a C category rating for an
issuer include:
· The issuer has entered into a grace or cure period following nonpayment of a material financial obligation;
· The issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; or
· Fitch Ratings otherwise believes a condition of RD or D to be imminent or inevitable, including through the formal announcement of a distressed debt exchange.
U.S. Government Securities Fund — Page 92
RD
Restricted
default. RD ratings indicate an issuer that in Fitch Ratings’ opinion has
experienced an uncured payment default on a bond, loan or other material
financial obligation but which has not entered into bankruptcy filings,
administration, receivership, liquidation or other formal winding up procedure,
and which has not otherwise ceased operating. This would
include:
· The selective payment default on a specific class or currency of debt;
· The uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation;
· The extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; or
· Execution of a distressed debt exchange on one or more material financial obligations.
D
Default.
D ratings indicate an issuer that in Fitch Ratings’ opinion has entered into
bankruptcy filings, administration, receivership, liquidation or other formal
winding up procedure, or which has otherwise ceased business.
Default ratings are not assigned prospectively to entities or their obligations; within this context, nonpayment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.
Imminent default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.
In all cases, the assignment of a default rating reflects the agency’s opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer’s financial obligations or local commercial practice.
Note: The modifiers “+” or “–” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA long-term rating category, or to categories below B.
U.S. Government Securities Fund — Page 93
Description of commercial paper ratings
Moody’s
Global short-term rating scale
P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Standard & Poor’s
Commercial paper ratings (highest three ratings)
A-1
A short-term obligation rated A-1 is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.
A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.
A-3
A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
U.S. Government Securities Fund — Page 94
Investment portfolio August 31, 2022
| Portfolio by type of security | Percent of net assets |
| Portfolio quality summary* | Percent of
net assets | |
| U.S. Treasury and agency† | 48.58 | % |
| AAA/Aaa | 48.18 | |
| AA/Aa | .12 | |
| Short-term securities & other assets less liabilities | 3.12 | |
| * | Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor’s, Moody’s and/or Fitch as an indication of an issuer’s creditworthiness. In assigning a credit rating to a security, the fund looks specifically to the ratings assigned to the issuer of the security by Standard & Poor’s, Moody’s and/or Fitch. If agency ratings differ, the security will be considered to have received the highest of those ratings, consistent with the fund’s investment policies. The ratings are not covered by the Report of Independent Registered Public Accounting Firm. |
| † | These securities are guaranteed by the full faith and credit of the U.S. government. |
| Bonds, notes & other debt instruments 96.88% | Principal amount (000) |
Value (000) |
||||||
| Mortgage-backed obligations 48.30% | ||||||||
| Federal agency mortgage-backed obligations 48.30% | ||||||||
| Fannie Mae Pool #257055 6.50% 20271 | USD | 171 | $ | 178 | ||||
| Fannie Mae Pool #256993 6.50% 20271 | 93 | 96 | ||||||
| Fannie Mae Pool #AZ0554 3.50% 20301 | 129 | 127 | ||||||
| Fannie Mae Pool #AY1948 3.50% 20301 | 104 | 103 | ||||||
| Fannie Mae Pool #735571 8.00% 20311 | 67 | 69 | ||||||
| Fannie Mae Pool #CA1442 3.00% 20331 | 474 | 460 | ||||||
| Fannie Mae Pool #BJ5302 3.00% 20331 | 312 | 302 | ||||||
| Fannie Mae Pool #695412 5.00% 20331 | 4 | 4 | ||||||
| Fannie Mae Pool #BO6247 2.50% 20341 | 4,529 | 4,312 | ||||||
| Fannie Mae Pool #BN3172 4.00% 20341 | 10 | 10 | ||||||
| Fannie Mae Pool #BN1085 4.00% 20341 | 8 | 8 | ||||||
| Fannie Mae Pool #AD3566 5.00% 20351 | 43 | 43 | ||||||
| Fannie Mae Pool #MA2787 4.00% 20361 | 6,990 | 7,005 | ||||||
| Fannie Mae Pool #MA2588 4.00% 20361 | 4,359 | 4,368 | ||||||
| Fannie Mae Pool #MA2717 4.00% 20361 | 3,937 | 3,945 | ||||||
| Fannie Mae Pool #MA2746 4.00% 20361 | 3,468 | 3,475 | ||||||
| Fannie Mae Pool #AS6870 4.00% 20361 | 2,192 | 2,196 | ||||||
| Fannie Mae Pool #MA2819 4.00% 20361 | 437 | 438 | ||||||
| Fannie Mae Pool #MA2856 4.00% 20361 | 10 | 10 | ||||||
| Fannie Mae Pool #MA3099 4.00% 20371 | 3,238 | 3,245 | ||||||
| Fannie Mae Pool #256860 6.50% 20371 | 40 | 43 | ||||||
| Fannie Mae Pool #256810 6.50% 20371 | 27 | 29 | ||||||
| Fannie Mae Pool #888372 6.50% 20371 | 18 | 19 | ||||||
| Fannie Mae Pool #888698 7.00% 20371 | 41 | 44 | ||||||
| Fannie Mae Pool #256828 7.00% 20371 | 14 | 15 | ||||||
| Fannie Mae Pool #970343 6.00% 20381 | 33 | 34 | ||||||
| Fannie Mae Pool #889388 7.00% 20381 | 137 | 145 | ||||||
| Fannie Mae Pool #AC0794 5.00% 20391 | 137 | 143 | ||||||
| Fannie Mae Pool #931768 5.00% 20391 | 13 | 13 | ||||||
| Fannie Mae Pool #932606 5.00% 20401 | 60 | 61 | ||||||
| Fannie Mae Pool #MA4501 2.00% 20411 | 53,342 | 47,024 | ||||||
| Fannie Mae Pool #MA4387 2.00% 20411 | 2,124 | 1,878 | ||||||
| Fannie Mae Pool #AJ1873 4.00% 20411 | 265 | 265 | ||||||
| Fannie Mae Pool #AH0351 4.50% 20411 | 280 | 286 | ||||||
| 4 | U.S. Government Securities Fund |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| Mortgage-backed obligations (continued) | ||||||||
| Federal agency mortgage-backed obligations (continued) | ||||||||
| Fannie Mae Pool #AI1862 5.00% 20411 | USD | 705 | $ | 734 | ||||
| Fannie Mae Pool #AI3510 5.00% 20411 | 408 | 425 | ||||||
| Fannie Mae Pool #AJ0704 5.00% 20411 | 340 | 354 | ||||||
| Fannie Mae Pool #AJ5391 5.00% 20411 | 249 | 260 | ||||||
| Fannie Mae Pool #AE1248 5.00% 20411 | 243 | 254 | ||||||
| Fannie Mae Pool #AE1277 5.00% 20411 | 124 | 129 | ||||||
| Fannie Mae Pool #AE1283 5.00% 20411 | 67 | 68 | ||||||
| Fannie Mae Pool #AE1274 5.00% 20411 | 64 | 67 | ||||||
| Fannie Mae Pool #MA4540 2.00% 20421 | 18,922 | 16,681 | ||||||
| Fannie Mae Pool #MA4570 2.00% 20421 | 10,679 | 9,414 | ||||||
| Fannie Mae Pool #MA4586 2.00% 20421 | 3,363 | 2,969 | ||||||
| Fannie Mae Pool #AJ9327 3.50% 20421 | 28 | 27 | ||||||
| Fannie Mae Pool #AE1290 5.00% 20421 | 41 | 42 | ||||||
| Fannie Mae Pool #AT5898 3.00% 20431 | 8,420 | 8,004 | ||||||
| Fannie Mae Pool #AL3829 3.50% 20431 | 1,321 | 1,290 | ||||||
| Fannie Mae Pool #AT7161 3.50% 20431 | 340 | 331 | ||||||
| Fannie Mae Pool #AR1512 3.50% 20431 | 307 | 300 | ||||||
| Fannie Mae Pool #AT0412 3.50% 20431 | 143 | 139 | ||||||
| Fannie Mae Pool #AT3954 3.50% 20431 | 78 | 76 | ||||||
| Fannie Mae Pool #AT0300 3.50% 20431 | 66 | 65 | ||||||
| Fannie Mae Pool #AX8521 3.50% 20441 | 194 | 188 | ||||||
| Fannie Mae Pool #AY1829 3.50% 20441 | 75 | 73 | ||||||
| Fannie Mae Pool #BE5017 3.50% 20451 | 690 | 669 | ||||||
| Fannie Mae Pool #BE5009 3.50% 20451 | 382 | 371 | ||||||
| Fannie Mae Pool #AY3880 4.00% 20451 | 76 | 75 | ||||||
| Fannie Mae Pool #MA2833 3.00% 20461 | 6,910 | 6,512 | ||||||
| Fannie Mae Pool #AS8310 3.00% 20461 | 146 | 138 | ||||||
| Fannie Mae Pool #BC3465 4.00% 20461 | 7 | 7 | ||||||
| Fannie Mae Pool #BM1179 3.00% 20471 | 149 | 141 | ||||||
| Fannie Mae Pool #AS8804 3.50% 20471 | 11,942 | 11,569 | ||||||
| Fannie Mae Pool #CA0770 3.50% 20471 | 9,520 | 9,220 | ||||||
| Fannie Mae Pool #BE8740 3.50% 20471 | 645 | 625 | ||||||
| Fannie Mae Pool #BD2440 3.50% 20471 | 406 | 393 | ||||||
| Fannie Mae Pool #BE8742 3.50% 20471 | 181 | 177 | ||||||
| Fannie Mae Pool #BH2846 3.50% 20471 | 83 | 80 | ||||||
| Fannie Mae Pool #BH2848 3.50% 20471 | 75 | 72 | ||||||
| Fannie Mae Pool #BH2847 3.50% 20471 | 39 | 38 | ||||||
| Fannie Mae Pool #BJ5015 4.00% 20471 | 1,626 | 1,616 | ||||||
| Fannie Mae Pool #BH3122 4.00% 20471 | 52 | 51 | ||||||
| Fannie Mae Pool #BJ4901 3.50% 20481 | 489 | 473 | ||||||
| Fannie Mae Pool #CA2850 4.00% 20481 | 1,979 | 1,974 | ||||||
| Fannie Mae Pool #BK6840 4.00% 20481 | 1,107 | 1,099 | ||||||
| Fannie Mae Pool #BK5232 4.00% 20481 | 817 | 812 | ||||||
| Fannie Mae Pool #BK9743 4.00% 20481 | 316 | 313 | ||||||
| Fannie Mae Pool #BJ4342 4.00% 20481 | 136 | 134 | ||||||
| Fannie Mae Pool #BJ6169 4.00% 20481 | 40 | 39 | ||||||
| Fannie Mae Pool #BN1172 4.50% 20481 | 197 | 198 | ||||||
| Fannie Mae Pool #BJ8318 4.50% 20481 | 176 | 176 | ||||||
| Fannie Mae Pool #BK9761 4.50% 20481 | 137 | 139 | ||||||
| Fannie Mae Pool #BO2264 3.00% 20491 | 39,021 | 36,357 | ||||||
| Fannie Mae Pool #FM1505 3.00% 20491 | 12,301 | 11,459 | ||||||
| Fannie Mae Pool #BO2890 3.00% 20491 | 2,505 | 2,334 | ||||||
| Fannie Mae Pool #BN6708 3.50% 20491 | 12,263 | 11,802 | ||||||
| Fannie Mae Pool #CA4151 3.50% 20491 | 6,543 | 6,328 | ||||||
| Fannie Mae Pool #FM1062 3.50% 20491 | 4,872 | 4,711 | ||||||
| Fannie Mae Pool #FM1443 3.50% 20491 | 3,630 | 3,494 | ||||||
| Fannie Mae Pool #FM1220 3.50% 20491 | 3,073 | 2,957 | ||||||
| Fannie Mae Pool #FM2656 3.50% 20491 | 2,530 | 2,451 | ||||||
| Fannie Mae Pool #BJ8411 3.50% 20491 | 1,271 | 1,224 | ||||||
| Fannie Mae Pool #BF0320 5.50% 20491 | 3,890 | 4,156 | ||||||
| Fannie Mae Pool #CA7606 3.00% 20501 | 46,046 | 43,152 | ||||||
| Fannie Mae Pool #CA5539 3.00% 20501 | 14,878 | 13,883 | ||||||
| Fannie Mae Pool #FM2179 3.00% 20501 | 12,034 | 11,233 | ||||||
| Fannie Mae Pool #FM2822 3.00% 20501 | 7,368 | 6,873 | ||||||
| Fannie Mae Pool #CA5338 3.00% 20501 | 5,969 | 5,555 | ||||||
| Fannie Mae Pool #FM2777 3.00% 20501 | 3,462 | 3,231 | ||||||
| Fannie Mae Pool #FM2664 3.50% 20501 | 23,859 | 22,953 | ||||||
| U.S. Government Securities Fund | 5 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| Mortgage-backed obligations (continued) | ||||||||
| Federal agency mortgage-backed obligations (continued) | ||||||||
| Fannie Mae Pool #FM2389 3.50% 20501 | USD | 2,071 | $ | 1,992 | ||||
| Fannie Mae Pool #FS0433 2.50% 20511 | 46,621 | 42,207 | ||||||
| Fannie Mae Pool #FM9492 2.50% 20511 | 14,854 | 13,384 | ||||||
| Fannie Mae Pool #CA8828 2.50% 20511 | 10,503 | 9,472 | ||||||
| Fannie Mae Pool #CB2371 2.50% 20511 | 8,533 | 7,688 | ||||||
| Fannie Mae Pool #FM9804 2.50% 20511 | 7,947 | 7,165 | ||||||
| Fannie Mae Pool #FM9694 2.50% 20511 | 7,370 | 6,648 | ||||||
| Fannie Mae Pool #CB0457 2.50% 20511 | 6,365 | 5,697 | ||||||
| Fannie Mae Pool #CB2319 2.50% 20511 | 3,319 | 2,986 | ||||||
| Fannie Mae Pool #CB2372 2.50% 20511 | 1,591 | 1,434 | ||||||
| Fannie Mae Pool #BT9510 2.50% 20511 | 1,253 | 1,128 | ||||||
| Fannie Mae Pool #BT9483 2.50% 20511 | 1,254 | 1,127 | ||||||
| Fannie Mae Pool #CB2414 3.00% 20511 | 46,382 | 43,498 | ||||||
| Fannie Mae Pool #FM7694 3.00% 20511 | 35,693 | 33,303 | ||||||
| Fannie Mae Pool #CB0041 3.00% 20511 | 34,958 | 32,762 | ||||||
| Fannie Mae Pool #CB2292 3.00% 20511 | 21,432 | 20,086 | ||||||
| Fannie Mae Pool #CB2293 3.00% 20511 | 21,518 | 20,083 | ||||||
| Fannie Mae Pool #FM9632 3.00% 20511 | 15,944 | 14,876 | ||||||
| Fannie Mae Pool #FM9976 3.00% 20511 | 10,928 | 10,283 | ||||||
| Fannie Mae Pool #FM9631 3.00% 20511 | 6,716 | 6,269 | ||||||
| Fannie Mae Pool #FM7687 3.00% 20511 | 3,265 | 3,051 | ||||||
| Fannie Mae Pool #CB2544 3.00% 20521 | 22,063 | 20,558 | ||||||
| Fannie Mae Pool #FS0647 3.00% 20521 | 6,590 | 6,186 | ||||||
| Fannie Mae Pool #BF0141 5.50% 20561 | 450 | 483 | ||||||
| Fannie Mae Pool #BF0379 3.50% 20591 | 21,182 | 20,381 | ||||||
| Fannie Mae Pool #BM6693 3.50% 20591 | 8,474 | 8,153 | ||||||
| Fannie Mae Pool #BF0497 3.00% 20601 | 27,956 | 25,936 | ||||||
| Fannie Mae Pool #BF0481 3.50% 20601 | 15,097 | 14,526 | ||||||
| Fannie Mae Pool #BF0480 3.50% 20601 | 9,580 | 9,273 | ||||||
| Fannie Mae, Series 2001-4, Class NA, 9.00% 20251,2 | 1 | 1 | ||||||
| Fannie Mae, Series 2001-25, Class ZA, 6.50% 20311 | 93 | 97 | ||||||
| Fannie Mae, Series 2006-65, Class PF, (1-month USD-LIBOR + 0.28%) 2.724% 20361,2 | 295 | 293 | ||||||
| Fannie Mae, Series 1999-T2, Class A1, 7.50% 20391,2 | 99 | 102 | ||||||
| Fannie Mae, Series 2001-T10, Class A1, 7.00% 20411 | 36 | 38 | ||||||
| Fannie Mae, Series 2016-M2, Class AV2, Multi Family, 2.152% 20231 | 568 | 565 | ||||||
| Fannie Mae, Series 2016-M3, Class ASQ2, Multi Family, 2.263% 20231 | 20 | 20 | ||||||
| Fannie Mae, Series 2013-M12, Class APT, Multi Family, 2.49% 20231,2 | 688 | 682 | ||||||
| Fannie Mae, Series 2014-M1, Class A2, Multi Family, 3.341% 20231,2 | 1,125 | 1,118 | ||||||
| Fannie Mae, Series 2017-M3, Class AV2, Multi Family, 2.591% 20241,2 | 760 | 747 | ||||||
| Fannie Mae, Series 2017-M10, Class AV2, Multi Family, 2.639% 20241,2 | 1,472 | 1,441 | ||||||
| Fannie Mae, Series 2017-M15, Class AV2, Multi Family, 2.656% 20241,2 | 940 | 917 | ||||||
| Fannie Mae, Series 2014-M3, Class A2, Multi Family, 3.501% 20241,2 | 1,959 | 1,942 | ||||||
| Fannie Mae, Series 2016-M9, Class A1, Multi Family, 2.003% 20261 | 43 | 43 | ||||||
| Fannie Mae, Series 2016-M5, Class A1, Multi Family, 2.073% 20261 | 1,077 | 1,051 | ||||||
| Fannie Mae, Series 2016-M11, Class A1, Multi Family, 2.08% 20261 | 1,670 | 1,635 | ||||||
| Fannie Mae, Series 2016-M12, Class A1, Multi Family, 2.132% 20261 | 113 | 112 | ||||||
| Fannie Mae, Series 2016-M4, Class A1, Multi Family, 2.187% 20261 | 136 | 136 | ||||||
| Fannie Mae, Series 2006-83, Class AO, principal only, 0% 20361 | 419 | 361 | ||||||
| Fannie Mae, Series 2006-56, Class OG, principal only, 0% 20361 | 268 | 231 | ||||||
| Freddie Mac Pool #QS0124 1.50% 20301 | 476 | 442 | ||||||
| Freddie Mac Pool #1H1354 2.54% 20361,2 | 66 | 68 | ||||||
| Freddie Mac Pool #C91909 4.00% 20361 | 65 | 65 | ||||||
| Freddie Mac Pool #RB5138 2.00% 20411 | 50,144 | 44,205 | ||||||
| Freddie Mac Pool #QK1181 2.00% 20411 | 7,470 | 6,604 | ||||||
| Freddie Mac Pool #G06459 5.00% 20411 | 1,270 | 1,328 | ||||||
| Freddie Mac Pool #RB5148 2.00% 20421 | 42,927 | 37,843 | ||||||
| Freddie Mac Pool #RB5153 2.00% 20421 | 13,055 | 11,528 | ||||||
| Freddie Mac Pool #RB5145 2.00% 20421 | 10,097 | 8,902 | ||||||
| Freddie Mac Pool #G61082 3.00% 20431 | 3,755 | 3,579 | ||||||
| Freddie Mac Pool #Q18236 3.50% 20431 | 459 | 446 | ||||||
| Freddie Mac Pool #Q19133 3.50% 20431 | 343 | 335 | ||||||
| Freddie Mac Pool #Q17696 3.50% 20431 | 327 | 318 | ||||||
| Freddie Mac Pool #Q15874 4.00% 20431 | 33 | 33 | ||||||
| Freddie Mac Pool #Q28558 3.50% 20441 | 1,546 | 1,503 | ||||||
| Freddie Mac Pool #760014 2.80% 20451,2 | 721 | 712 | ||||||
| Freddie Mac Pool #760012 3.113% 20451,2 | 995 | 990 | ||||||
| Freddie Mac Pool #760013 3.202% 20451,2 | 612 | 610 | ||||||
| 6 | U.S. Government Securities Fund |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| Mortgage-backed obligations (continued) | ||||||||
| Federal agency mortgage-backed obligations (continued) | ||||||||
| Freddie Mac Pool #G60238 3.50% 20451 | USD | 9,017 | $ | 8,760 | ||||
| Freddie Mac Pool #Z40130 3.00% 20461 | 1,691 | 1,610 | ||||||
| Freddie Mac Pool #G67700 3.50% 20461 | 3,328 | 3,238 | ||||||
| Freddie Mac Pool #G60744 3.50% 20461 | 2,040 | 1,978 | ||||||
| Freddie Mac Pool #760015 2.548% 20471,2 | 1,684 | 1,649 | ||||||
| Freddie Mac Pool #Q52069 3.50% 20471 | 914 | 885 | ||||||
| Freddie Mac Pool #Q51622 3.50% 20471 | 690 | 669 | ||||||
| Freddie Mac Pool #Q47615 3.50% 20471 | 545 | 528 | ||||||
| Freddie Mac Pool #ZT0538 3.50% 20481 | 1,752 | 1,695 | ||||||
| Freddie Mac Pool #Q54701 3.50% 20481 | 623 | 604 | ||||||
| Freddie Mac Pool #Q54709 3.50% 20481 | 617 | 598 | ||||||
| Freddie Mac Pool #Q55056 3.50% 20481 | 508 | 493 | ||||||
| Freddie Mac Pool #Q54700 3.50% 20481 | 497 | 482 | ||||||
| Freddie Mac Pool #Q54782 3.50% 20481 | 393 | 380 | ||||||
| Freddie Mac Pool #Q54781 3.50% 20481 | 385 | 373 | ||||||
| Freddie Mac Pool #Q56590 3.50% 20481 | 299 | 289 | ||||||
| Freddie Mac Pool #Q54699 3.50% 20481 | 270 | 262 | ||||||
| Freddie Mac Pool #Q56591 3.50% 20481 | 211 | 205 | ||||||
| Freddie Mac Pool #Q54831 3.50% 20481 | 188 | 182 | ||||||
| Freddie Mac Pool #Q56589 3.50% 20481 | 187 | 181 | ||||||
| Freddie Mac Pool #Q54698 3.50% 20481 | 169 | 164 | ||||||
| Freddie Mac Pool #Q55060 3.50% 20481 | 168 | 163 | ||||||
| Freddie Mac Pool #G67711 4.00% 20481 | 27,242 | 27,089 | ||||||
| Freddie Mac Pool #Q56599 4.00% 20481 | 1,146 | 1,137 | ||||||
| Freddie Mac Pool #Q55971 4.00% 20481 | 790 | 785 | ||||||
| Freddie Mac Pool #Q56175 4.00% 20481 | 747 | 743 | ||||||
| Freddie Mac Pool #Q55970 4.00% 20481 | 393 | 391 | ||||||
| Freddie Mac Pool #Q58411 4.50% 20481 | 1,526 | 1,553 | ||||||
| Freddie Mac Pool #Q58436 4.50% 20481 | 806 | 819 | ||||||
| Freddie Mac Pool #Q58378 4.50% 20481 | 562 | 568 | ||||||
| Freddie Mac Pool #Q57242 4.50% 20481 | 424 | 427 | ||||||
| Freddie Mac Pool #RA1339 3.00% 20491 | 1,804 | 1,680 | ||||||
| Freddie Mac Pool #ZA6700 3.50% 20491 | 11,491 | 11,058 | ||||||
| Freddie Mac Pool #SD7502 3.50% 20491 | 8,041 | 7,785 | ||||||
| Freddie Mac Pool #RA1580 3.50% 20491 | 4,627 | 4,475 | ||||||
| Freddie Mac Pool #RA1463 3.50% 20491 | 4,484 | 4,337 | ||||||
| Freddie Mac Pool #QA1442 3.50% 20491 | 4,350 | 4,187 | ||||||
| Freddie Mac Pool #QA0284 3.50% 20491 | 2,190 | 2,108 | ||||||
| Freddie Mac Pool #QA2748 3.50% 20491 | 580 | 558 | ||||||
| Freddie Mac Pool #RA2319 3.00% 20501 | 9,513 | 8,852 | ||||||
| Freddie Mac Pool #SD0187 3.00% 20501 | 7,230 | 6,763 | ||||||
| Freddie Mac Pool #SD7513 3.50% 20501 | 79,651 | 76,640 | ||||||
| Freddie Mac Pool #RA2003 4.50% 20501 | 6,705 | 6,748 | ||||||
| Freddie Mac Pool #RA6406 2.00% 20511 | 5,885 | 5,096 | ||||||
| Freddie Mac Pool #SD7545 2.50% 20511 | 7,010 | 6,318 | ||||||
| Freddie Mac Pool #RA5259 2.50% 20511 | 6,216 | 5,562 | ||||||
| Freddie Mac Pool #RA5971 3.00% 20511 | 2,249 | 2,101 | ||||||
| Freddie Mac Pool #SD7554 2.50% 20521 | 1,534 | 1,382 | ||||||
| Freddie Mac Pool #8D0226 2.522% 20521,2 | 6,639 | 6,153 | ||||||
| Freddie Mac Pool #SD7553 3.00% 20521 | 148,120 | 138,682 | ||||||
| Freddie Mac Pool #SD7550 3.00% 20521 | 43,848 | 41,262 | ||||||
| Freddie Mac Pool #SD0873 3.50% 20521 | 33,195 | 32,063 | ||||||
| Freddie Mac, Series 1567, Class A, (1-month USD-LIBOR + 0.40%) 2.399% 20231,2 | 2 | 2 | ||||||
| Freddie Mac, Series 3156, Class PF, (1-month USD-LIBOR + 0.25%) 2.641% 20361,2 | 573 | 567 | ||||||
| Freddie Mac, Series K031, Class A1, Multi Family, 2.778% 20221 | 29 | 28 | ||||||
| Freddie Mac, Series KS01, Class A2, Multi Family, 2.522% 20231 | 1,373 | 1,367 | ||||||
| Freddie Mac, Series K033, Class A2, Multi Family, 3.06% 20231,2 | 21,150 | 21,000 | ||||||
| Freddie Mac, Series K031, Class A2, Multi Family, 3.30% 20231 | 17,787 | 17,707 | ||||||
| Freddie Mac, Series K029, Class A2, Multi Family, 3.32% 20231 | 1,333 | 1,329 | ||||||
| Freddie Mac, Series K035, Class A2, Multi Family, 3.458% 20231,2 | 20,873 | 20,775 | ||||||
| Freddie Mac, Series K058, Class A2, Multi Family, 2.653% 20261 | 3,507 | 3,359 | ||||||
| Freddie Mac, Series K065, Class A2, Multi Family, 3.243% 20271 | 1,370 | 1,338 | ||||||
| Freddie Mac, Series K074, Class A2, Multi Family, 3.60% 20281 | 560 | 555 | ||||||
| Freddie Mac, Series 3156, Class PO, principal only, 0% 20361 | 482 | 410 | ||||||
| Freddie Mac, Series 3213, Class OG, principal only, 0% 20361 | 225 | 201 | ||||||
| Freddie Mac, Series 3146, Class PO, principal only, 0% 20361 | 192 | 161 | ||||||
| U.S. Government Securities Fund | 7 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| Mortgage-backed obligations (continued) | ||||||||
| Federal agency mortgage-backed obligations (continued) | ||||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-2, Class HA, 3.00% 20561,2 | USD | 18,984 | $ | 18,304 | ||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-2, Class MA, 3.00% 20561 | 18,696 | 17,991 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-1, Class HA, 3.00% 20561,2 | 16,735 | 16,143 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-3, Class MT, 3.00% 20561 | 10,097 | 9,429 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-3, Class HT, 3.25% 20561 | 2,037 | 1,941 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-1, Class HT, 3.00% 20571 | 10,897 | 10,184 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-4, Class HT, 3.25% 20571,2 | 11,681 | 11,159 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-2, Class MT, 3.50% 20571 | 12,605 | 12,069 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-4, Class MT, 3.50% 20571 | 6,519 | 6,257 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-3, Class MA, 3.50% 20571 | 4,465 | 4,372 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-2, Class MA, 3.50% 20571 | 3,596 | 3,524 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-4, Class MT, 3.50% 20571 | 1,855 | 1,776 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-2, Class MA, 3.50% 20581 | 23,279 | 22,740 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-2, Class MT, 3.50% 20581 | 10,726 | 10,268 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-1, Class MT, 3.50% 20581 | 9,343 | 8,939 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-3, Class MT, 3.50% 20581 | 4,812 | 4,608 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-1, Class MA, 3.50% 20581 | 4,001 | 3,912 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-3, Class MA, 3.50% 20581 | 560 | 548 | ||||||
| Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-4, Class MA, 3.00% 20591 | 13,967 | 13,428 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2018-2, Class A1, 3.50% 20281 | 68,197 | 66,737 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2018-1, Class A1, 3.50% 20281 | 14,225 | 13,921 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2019-2, Class A1C, 2.75% 20291 | 43,183 | 40,984 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2019-3, Class A1C, 2.75% 20291 | 24,665 | 23,398 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2020-1, Class A1D, 2.00% 20301 | 17,439 | 16,151 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2020-1, Class A2D, 2.00% 20301 | 4,381 | 3,774 | ||||||
| Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2022-1, Class A1, 3.50% 20321 | 62,081 | 61,217 | ||||||
| Government National Mortgage Assn. 2.00% 20521,3 | 10,575 | 9,343 | ||||||
| Government National Mortgage Assn. 2.00% 20521,3 | 10,325 | 9,121 | ||||||
| Government National Mortgage Assn. 2.50% 20521,3 | 27,225 | 24,814 | ||||||
| Government National Mortgage Assn. 2.50% 20521,3 | 2,605 | 2,375 | ||||||
| Government National Mortgage Assn. 3.00% 20521,3 | 31,574 | 29,649 | ||||||
| Government National Mortgage Assn. 3.00% 20521,3 | 22,500 | 21,119 | ||||||
| Government National Mortgage Assn. 3.50% 20521,3 | 40,543 | 39,103 | ||||||
| Government National Mortgage Assn. 4.00% 20521,3 | 195,855 | 192,489 | ||||||
| Government National Mortgage Assn. 4.00% 20521,3 | 107,770 | 106,229 | ||||||
| Government National Mortgage Assn. 4.00% 20521,3 | 87,000 | 85,627 | ||||||
| Government National Mortgage Assn. 4.50% 20521,3 | 429,437 | 429,085 | ||||||
| Government National Mortgage Assn. 4.50% 20521,3 | 323,634 | 323,786 | ||||||
| Government National Mortgage Assn. 5.00% 20521,3 | 406,332 | 411,030 | ||||||
| Government National Mortgage Assn. 5.00% 20521,3 | 351,066 | 355,811 | ||||||
| Government National Mortgage Assn. 5.50% 20521,3 | 142,052 | 145,198 | ||||||
| Government National Mortgage Assn. 5.50% 20521,3 | 34,828 | 35,720 | ||||||
| Government National Mortgage Assn. Pool #754335 6.50% 20291 | 160 | 164 | ||||||
| Government National Mortgage Assn. Pool #754334 6.50% 20321 | 286 | 293 | ||||||
| Government National Mortgage Assn. Pool #AH5901 3.75% 20341 | 853 | 864 | ||||||
| Government National Mortgage Assn. Pool #754319 6.50% 20371 | 110 | 113 | ||||||
| Government National Mortgage Assn. Pool #700778 5.50% 20381 | 63 | 67 | ||||||
| Government National Mortgage Assn. Pool #004182 5.50% 20381 | 12 | 12 | ||||||
| Government National Mortgage Assn. Pool #782365 6.00% 20381 | 129 | 142 | ||||||
| Government National Mortgage Assn. Pool #754287 6.50% 20381 | 116 | 119 | ||||||
| Government National Mortgage Assn. Pool #AA4873 6.50% 20381 | 82 | 83 | ||||||
| Government National Mortgage Assn. Pool #738836 6.50% 20381 | 66 | 66 | ||||||
| Government National Mortgage Assn. Pool #741910 4.00% 20391 | 127 | 127 | ||||||
| Government National Mortgage Assn. Pool #004367 4.00% 20391 | 18 | 18 | ||||||
| Government National Mortgage Assn. Pool #698406 5.00% 20391 | 286 | 299 | ||||||
| Government National Mortgage Assn. Pool #783690 6.00% 20391 | 711 | 763 | ||||||
| Government National Mortgage Assn. Pool #754314 6.50% 20391 | 469 | 498 | ||||||
| 8 | U.S. Government Securities Fund |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| Mortgage-backed obligations (continued) | ||||||||
| Federal agency mortgage-backed obligations (continued) | ||||||||
| Government National Mortgage Assn. Pool #004636 4.50% 20401 | USD | 442 | $ | 456 | ||||
| Government National Mortgage Assn. Pool #736089 5.00% 20401 | 134 | 137 | ||||||
| Government National Mortgage Assn. Pool #736084 5.00% 20401 | 107 | 110 | ||||||
| Government National Mortgage Assn. Pool #783689 5.50% 20401 | 1,232 | 1,333 | ||||||
| Government National Mortgage Assn. Pool #754636 3.50% 20411 | 460 | 446 | ||||||
| Government National Mortgage Assn. Pool #005157 4.00% 20411 | 92 | 88 | ||||||
| Government National Mortgage Assn. Pool #783687 4.50% 20411 | 4,647 | 4,724 | ||||||
| Government National Mortgage Assn. Pool #783688 5.00% 20411 | 2,036 | 2,138 | ||||||
| Government National Mortgage Assn. Pool #005040 5.00% 20411 | 29 | 30 | ||||||
| Government National Mortgage Assn. Pool #005187 5.50% 20411 | 65 | 66 | ||||||
| Government National Mortgage Assn. Pool #005112 6.50% 20411 | 160 | 166 | ||||||
| Government National Mortgage Assn. Pool #754591 4.00% 20421 | 974 | 982 | ||||||
| Government National Mortgage Assn. Pool #754637 4.00% 20421 | 576 | 576 | ||||||
| Government National Mortgage Assn. Pool #AA2589 3.50% 20431 | 868 | 838 | ||||||
| Government National Mortgage Assn. Pool #MA5332 5.00% 20481 | 13 | 14 | ||||||
| Government National Mortgage Assn. Pool #MA6042 5.00% 20491 | 27 | 27 | ||||||
| Government National Mortgage Assn. Pool #892950 4.062% 20601,2 | 588 | 590 | ||||||
| Government National Mortgage Assn. Pool #710077 4.70% 20611 | 8 | 8 | ||||||
| Government National Mortgage Assn. Pool #756695 4.70% 20611 | 4 | 4 | ||||||
| Government National Mortgage Assn. Pool #710074 4.72% 20611 | 2 | 2 | ||||||
| Government National Mortgage Assn. Pool #751409 4.95% 20611 | 1 | 1 | ||||||
| Government National Mortgage Assn. Pool #756715 4.39% 20621 | 28 | 28 | ||||||
| Government National Mortgage Assn. Pool #767610 4.614% 20621 | — | 4 | — | 4 | ||||
| Government National Mortgage Assn. Pool #759735 4.721% 20621 | 1 | 1 | ||||||
| Government National Mortgage Assn. Pool #795471 5.104% 20621 | 1 | 1 | ||||||
| Government National Mortgage Assn. Pool #894475 3.859% 20631,2 | 1,349 | 1,372 | ||||||
| Government National Mortgage Assn. Pool #767641 4.484% 20631 | 1 | 1 | ||||||
| Government National Mortgage Assn. Pool #795533 4.951% 20631 | — | 4 | — | 4 | ||||
| Government National Mortgage Assn. Pool #AG8149 3.498% 20641,2 | 200 | 200 | ||||||
| Government National Mortgage Assn. Pool #894482 3.863% 20641,2 | 1,802 | 1,834 | ||||||
| Government National Mortgage Assn. Pool #AG8156 3.968% 20641,2 | 222 | 223 | ||||||
| Government National Mortgage Assn. Pool #AG8194 4.303% 20641 | 12 | 12 | ||||||
| Government National Mortgage Assn. Pool #AG8150 4.875% 20641 | 2 | 2 | ||||||
| Government National Mortgage Assn. Pool #AG8068 4.95% 20641 | 2 | 2 | ||||||
| Government National Mortgage Assn. Pool #AG8155 5.152% 20641 | 4 | 4 | ||||||
| Government National Mortgage Assn. Pool #AG8189 5.154% 20641 | 3 | 3 | ||||||
| Government National Mortgage Assn. Pool #AG8171 5.20% 20641 | 1 | 1 | ||||||
| Government National Mortgage Assn. Pool #AA7554 6.64% 20641 | 45 | 44 | ||||||
| Government National Mortgage Assn. Pool #AL7438 4.354% 20651 | 2 | 2 | ||||||
| Government National Mortgage Assn., Series 2003-46, Class NB, 5.00% 20331 | 142 | 143 | ||||||
| Government National Mortgage Assn., Series 2010-H23, Class PT, 5.50% 20601,2 | 175 | 176 | ||||||
| Government National Mortgage Assn., Series 2012-H23, Class FI, interest only, 0.553% 20621,2 | 151 | 2 | ||||||
| Government National Mortgage Assn., Series 2012-H20, Class PT, 2.853% 20621,2 | 1,261 | 1,258 | ||||||
| Government National Mortgage Assn., Series 2012-H12, Class FT, (1-year CMT Weekly Rate + 0.70%) 3.13% 20621,2 | 764 | 762 | ||||||
| Uniform Mortgage-Backed Security 2.00% 20371,3 | 9,100 | 8,393 | ||||||
| Uniform Mortgage-Backed Security 2.50% 20371,3 | 28,000 | 26,495 | ||||||
| Uniform Mortgage-Backed Security 4.00% 20371,3 | 11,000 | 10,965 | ||||||
| Uniform Mortgage-Backed Security 2.00% 20521,3 | 96,904 | 83,385 | ||||||
| Uniform Mortgage-Backed Security 2.00% 20521,3 | 4,784 | 4,118 | ||||||
| Uniform Mortgage-Backed Security 2.50% 20521,3 | 41,107 | 36,720 | ||||||
| Uniform Mortgage-Backed Security 2.50% 20521,3 | 11,000 | 9,824 | ||||||
| Uniform Mortgage-Backed Security 3.00% 20521,3 | 6,326 | 5,858 | ||||||
| Uniform Mortgage-Backed Security 3.50% 20521,3 | 424,432 | 404,257 | ||||||
| Uniform Mortgage-Backed Security 3.50% 20521,3 | 68,440 | 65,227 | ||||||
| Uniform Mortgage-Backed Security 4.00% 20521,3 | 1,222,852 | 1,192,993 | ||||||
| Uniform Mortgage-Backed Security 4.00% 20521,3 | 89,507 | 87,388 | ||||||
| Uniform Mortgage-Backed Security 4.50% 20521,3 | 1,205,538 | 1,197,109 | ||||||
| Uniform Mortgage-Backed Security 4.50% 20521,3 | 195,631 | 194,500 | ||||||
| Uniform Mortgage-Backed Security 5.00% 20521,3 | 661,252 | 667,503 | ||||||
| Uniform Mortgage-Backed Security 5.00% 20521,3 | 289,100 | 291,475 | ||||||
| Uniform Mortgage-Backed Security 5.50% 20521,3 | 680,519 | 694,528 | ||||||
| Uniform Mortgage-Backed Security 5.50% 20521,3 | 87,103 | 89,090 | ||||||
| Uniform Mortgage-Backed Security 6.00% 20521,3 | 63,155 | 65,237 | ||||||
| Total mortgage-backed obligations | 9,158,507 | |||||||
| U.S. Government Securities Fund | 9 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| U.S. Treasury bonds & notes 45.74% | ||||||||
| U.S. Treasury inflation-protected securities 28.69% | ||||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20235 | USD | 262,146 | $ | 258,439 | ||||
| U.S. Treasury Inflation-Protected Security 0.375% 20235 | 305,252 | 302,724 | ||||||
| U.S. Treasury Inflation-Protected Security 0.625% 20235 | 360,714 | 356,430 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20245 | 725,150 | 715,212 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20245 | 411,722 | 405,757 | ||||||
| U.S. Treasury Inflation-Protected Security 0.50% 20245 | 274,846 | 272,239 | ||||||
| U.S. Treasury Inflation-Protected Security 0.625% 20245 | 929,076 | 921,643 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20255 | 116,173 | 114,099 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20255 | 88,355 | 86,581 | ||||||
| U.S. Treasury Inflation-Protected Security 0.375% 20255 | 682,245 | 674,467 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20265 | 327,455 | 320,315 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20265 | 180,627 | 176,430 | ||||||
| U.S. Treasury Inflation-Protected Security 0.625% 20265 | 26,762 | 26,624 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20275 | 246,174 | 239,250 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20315 | 216,178 | 205,500 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20325 | 56,191 | 53,057 | ||||||
| U.S. Treasury Inflation-Protected Security 2.125% 20415 | 3,719 | 4,388 | ||||||
| U.S. Treasury Inflation-Protected Security 0.75% 20425,6 | 112,126 | 104,852 | ||||||
| U.S. Treasury Inflation-Protected Security 0.625% 20435 | 43,659 | 39,339 | ||||||
| U.S. Treasury Inflation-Protected Security 1.00% 20495 | 58,145 | 56,846 | ||||||
| U.S. Treasury Inflation-Protected Security 0.25% 20505 | 1,803 | 1,451 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20515 | 67,000 | 52,181 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20525 | 66,835 | 52,345 | ||||||
| 5,440,169 | ||||||||
| U.S. Treasury 17.05% | ||||||||
| U.S. Treasury 0.50% 2023 | 30,000 | 29,573 | ||||||
| U.S. Treasury 1.50% 2023 | 2,000 | 1,989 | ||||||
| U.S. Treasury 2.625% 2023 | 30,888 | 30,715 | ||||||
| U.S. Treasury 2.75% 2023 | 9,293 | 9,255 | ||||||
| U.S. Treasury 2.75% 2023 | 8,600 | 8,552 | ||||||
| U.S. Treasury 2.875% 2023 | 16,500 | 16,393 | ||||||
| U.S. Treasury 2.875% 2023 | 1,080 | 1,072 | ||||||
| U.S. Treasury (3-month U.S. Treasury Bill Yield + 0.034%) 2.935% 20232 | 50,000 | 50,039 | ||||||
| U.S. Treasury 0.375% 2024 | 100,000 | 95,121 | ||||||
| U.S. Treasury 1.50% 20246 | 18,000 | 17,238 | ||||||
| U.S. Treasury 1.50% 2024 | 500 | 480 | ||||||
| U.S. Treasury 1.75% 2024 | 38,572 | 37,402 | ||||||
| U.S. Treasury 1.75% 2024 | 18,000 | 17,312 | ||||||
| U.S. Treasury 2.00% 2024 | 72,000 | 70,315 | ||||||
| U.S. Treasury 2.00% 2024 | 45,000 | 43,840 | ||||||
| U.S. Treasury 2.00% 2024 | 17,400 | 16,971 | ||||||
| U.S. Treasury 3.00% 2024 | 44,000 | 43,612 | ||||||
| U.S. Treasury 0.25% 2025 | 500 | 454 | ||||||
| U.S. Treasury 0.375% 2025 | 1,320 | 1,194 | ||||||
| U.S. Treasury 2.875% 20256 | 1,000 | 983 | ||||||
| U.S. Treasury 2.875% 2025 | 500 | 492 | ||||||
| U.S. Treasury 3.125% 2025 | 32,000 | 31,671 | ||||||
| U.S. Treasury 0.375% 2026 | 108,240 | 97,446 | ||||||
| U.S. Treasury 0.875% 2026 | 53,740 | 48,540 | ||||||
| U.S. Treasury 1.25% 2026 | 23,960 | 21,894 | ||||||
| U.S. Treasury 1.375% 2026 | 25,000 | 23,102 | ||||||
| U.S. Treasury 2.125% 2026 | 22,750 | 21,700 | ||||||
| U.S. Treasury 2.25% 2026 | 5,200 | 4,992 | ||||||
| U.S. Treasury 2.375% 2026 | 50,000 | 48,203 | ||||||
| U.S. Treasury 2.625% 2026 | 49,000 | 47,681 | ||||||
| U.S. Treasury 0.375% 2027 | 84,600 | 72,918 | ||||||
| U.S. Treasury 0.50% 2027 | 100,955 | 87,815 | ||||||
| U.S. Treasury 0.50% 2027 | 18,790 | 16,266 | ||||||
| U.S. Treasury 0.50% 2027 | 14,000 | 12,226 | ||||||
| U.S. Treasury 0.625% 2027 | 23,500 | 20,380 | ||||||
| U.S. Treasury 0.625% 2027 | 12,500 | 10,867 | ||||||
| U.S. Treasury 1.50% 2027 | 11,000 | 10,149 | ||||||
| U.S. Treasury 2.375% 2027 | 10,000 | 9,562 | ||||||
| U.S. Treasury 2.625% 2027 | 3,000 | 2,905 | ||||||
| U.S. Treasury 2.75% 2027 | 174,576 | 169,850 | ||||||
| U.S. Treasury 2.75% 2027 | 48,950 | 47,636 | ||||||
| 10 | U.S. Government Securities Fund |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| U.S. Treasury bonds & notes (continued) | ||||||||
| U.S. Treasury (continued) | ||||||||
| U.S. Treasury 3.25% 2027 | USD | 66,300 | $ | 65,968 | ||||
| U.S. Treasury 0.75% 2028 | 2,900 | 2,527 | ||||||
| U.S. Treasury 1.25% 2028 | 59,360 | 52,735 | ||||||
| U.S. Treasury 1.25% 2028 | 6,300 | 5,609 | ||||||
| U.S. Treasury 1.75% 2029 | 25,000 | 22,721 | ||||||
| U.S. Treasury 2.625% 2029 | 63,533 | 60,880 | ||||||
| U.S. Treasury 2.875% 2029 | 28,000 | 27,219 | ||||||
| U.S. Treasury 3.125% 2029 | 135,467 | 134,080 | ||||||
| U.S. Treasury 0.625% 2030 | 30,880 | 25,440 | ||||||
| U.S. Treasury 0.625% 2030 | 14,510 | 11,900 | ||||||
| U.S. Treasury 6.25% 2030 | 5,250 | 6,318 | ||||||
| U.S. Treasury 1.375% 2031 | 20,000 | 17,122 | ||||||
| U.S. Treasury 1.625% 2031 | 173,244 | 152,956 | ||||||
| U.S. Treasury 1.875% 2032 | 15,000 | 13,400 | ||||||
| U.S. Treasury 5.00% 2037 | 1,500 | 1,818 | ||||||
| U.S. Treasury 1.125% 2040 | 144,100 | 97,042 | ||||||
| U.S. Treasury 1.125% 2040 | 20,500 | 13,940 | ||||||
| U.S. Treasury 1.375% 2040 | 4,914 | 3,452 | ||||||
| U.S. Treasury 4.625% 2040 | 5,600 | 6,553 | ||||||
| U.S. Treasury 1.75% 2041 | 55,890 | 41,446 | ||||||
| U.S. Treasury 1.875% 2041 | 140,195 | 107,293 | ||||||
| U.S. Treasury 2.25% 2041 | 44,863 | 36,514 | ||||||
| U.S. Treasury 3.125% 2041 | 10,000 | 9,398 | ||||||
| U.S. Treasury 4.375% 2041 | 7,000 | 7,878 | ||||||
| U.S. Treasury 2.75% 2042 | 27,000 | 23,638 | ||||||
| U.S. Treasury 2.75% 2042 | 6,000 | 5,265 | ||||||
| U.S. Treasury 3.25% 2042 | 42,000 | 40,084 | ||||||
| U.S. Treasury 2.875% 2043 | 10,880 | 9,683 | ||||||
| U.S. Treasury 3.375% 2044 | 18,500 | 17,821 | ||||||
| U.S. Treasury 2.50% 2045 | 60,000 | 49,528 | ||||||
| U.S. Treasury 2.875% 2045 | 5,000 | 4,415 | ||||||
| U.S. Treasury 3.00% 2045 | 3,500 | 3,162 | ||||||
| U.S. Treasury 3.00% 2045 | 3,350 | 3,023 | ||||||
| U.S. Treasury 2.50% 2046 | 50,000 | 41,137 | ||||||
| U.S. Treasury, principal only, 0% 20476 | 1,000 | 414 | ||||||
| U.S. Treasury 2.75% 2047 | 7,250 | 6,299 | ||||||
| U.S. Treasury 2.75% 2047 | 3,000 | 2,603 | ||||||
| U.S. Treasury 3.00% 2047 | 29,425 | 26,653 | ||||||
| U.S. Treasury 3.00% 2048 | 9,435 | 8,626 | ||||||
| U.S. Treasury 3.125% 2048 | 6,500 | 6,105 | ||||||
| U.S. Treasury 3.375% 2048 | 28,375 | 28,054 | ||||||
| U.S. Treasury 2.25% 2049 | 16,800 | 13,433 | ||||||
| U.S. Treasury 2.375% 2049 | 8,250 | 6,786 | ||||||
| U.S. Treasury 2.875% 2049 | 94,000 | 85,334 | ||||||
| U.S. Treasury 3.00% 2049 | 6,000 | 5,570 | ||||||
| U.S. Treasury 1.25% 20506 | 188,750 | 116,435 | ||||||
| U.S. Treasury 1.375% 2050 | 50,380 | 32,141 | ||||||
| U.S. Treasury 1.625% 20506 | 292,196 | 199,469 | ||||||
| U.S. Treasury 2.00% 2050 | 61,860 | 46,690 | ||||||
| U.S. Treasury 1.875% 2051 | 52,054 | 37,886 | ||||||
| U.S. Treasury 1.875% 2051 | 18,120 | 13,164 | ||||||
| U.S. Treasury 2.00% 2051 | 76,124 | 57,051 | ||||||
| U.S. Treasury 2.375% 2051 | 21,100 | 17,332 | ||||||
| U.S. Treasury 2.25% 2052 | 500 | 398 | ||||||
| U.S. Treasury 3.00% 20526 | 106,000 | 100,170 | ||||||
| 3,231,383 | ||||||||
| Total U.S. Treasury bonds & notes | 8,671,552 | |||||||
| Federal agency bonds & notes 2.84% | ||||||||
| Export-Import Bank of the United States-Guaranteed, VCK Lease SA 2.591% 2026 | 1,230 | 1,192 | ||||||
| Export-Import Bank of the United States-Guaranteed, Ethiopian Leasing 2012, LLC 2.646% 2026 | 658 | 642 | ||||||
| Fannie Mae 0.625% 20256 | 318,800 | 295,395 | ||||||
| Fannie Mae 0.75% 2027 | 21,700 | 19,067 | ||||||
| Fannie Mae 0.875% 2030 | 63,500 | 52,291 | ||||||
| Fannie Mae 7.125% 2030 | 5,000 | 6,197 | ||||||
| U.S. Government Securities Fund | 11 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) |
Value (000) |
||||||
| Federal agency bonds & notes (continued) | ||||||||
| Federal Home Loan Bank 3.375% 2023 | USD | 14,160 | $ | 14,125 | ||||
| Federal Home Loan Bank 3.25% 2028 | 56,500 | 56,255 | ||||||
| Federal Home Loan Bank 5.50% 2036 | 1,000 | 1,195 | ||||||
| Freddie Mac 0.375% 2023 | 25,000 | 24,507 | ||||||
| Private Export Funding Corp. 3.55% 2024 | 14,300 | 14,280 | ||||||
| Small Business Administration, Series 2003-20B, 4.84% 2023 | 30 | 31 | ||||||
| Tennessee Valley Authority 0.75% 2025 | 13,200 | 12,243 | ||||||
| Tennessee Valley Authority 2.875% 2027 | 5,000 | 4,901 | ||||||
| Tennessee Valley Authority 4.65% 2035 | 4,480 | 4,782 | ||||||
| Tennessee Valley Authority 5.88% 2036 | 3,625 | 4,340 | ||||||
| Tennessee Valley Authority, Series 2008, Class A, 4.875% 2048 | 3,300 | 3,644 | ||||||
| TVA Southaven 3.846% 2033 | 1,562 | 1,497 | ||||||
| U.S. Agency for International Development, Israel (State of), Class 1A, 5.50% 2023 | 5,000 | 5,096 | ||||||
| U.S. Agency for International Development, Jordan (Kingdom of) 3.00% 2025 | 3,125 | 3,066 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-9, 2.80% 2023 | 500 | 496 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-10, 2.85% 2024 | 750 | 741 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-11, 2.95% 2025 | 875 | 855 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-12, 3.10% 2026 | 875 | 852 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-13, 3.15% 2027 | 3,850 | 3,729 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-14, 3.25% 2028 | 1,250 | 1,205 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-15, 3.35% 2029 | 850 | 816 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-16, 3.50% 2030 | 825 | 824 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-17, 3.55% 2031 | 825 | 825 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-18, 3.60% 2032 | 800 | 800 | ||||||
| U.S. Department of Housing and Urban Development, Series 2015-A-19, 3.65% 2033 | 675 | 658 | ||||||
| U.S. Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp. 3.82% 2032 | 1,367 | 1,342 | ||||||
| U.S. Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp. 3.938% 2032 | 1,078 | 1,086 | ||||||
| 538,975 | ||||||||
| Total bonds, notes & other debt instruments (cost: $19,437,574,000) | 18,369,034 | |||||||
| Short-term securities 42.22% | Shares | |||||||
| Money market investments 19.36% | ||||||||
| Capital Group Central Cash Fund 2.26%7,8 | 36,716,294 | 3,670,895 | ||||||
| Weighted average yield at acquisition |
Principal amount (000) |
|||||||||||
| Federal agency bills & notes 12.57% | ||||||||||||
| Fannie Mae 9/7/2022 | 2.090 | % | USD | 15,000 | 14,994 | |||||||
| Federal Farm Credit Banks 10/19/2022 | 2.000 | 40,000 | 39,866 | |||||||||
| Federal Farm Credit Banks 11/8/2022 | 2.230 | 6,500 | 6,467 | |||||||||
| Federal Farm Credit Banks 11/9/2022 | 2.600 | 50,000 | 49,743 | |||||||||
| Federal Home Loan Bank 9/2/2022 | 1.799 | 123,150 | 123,142 | |||||||||
| Federal Home Loan Bank 9/6/2022 | 2.190 | 112,050 | 112,015 | |||||||||
| Federal Home Loan Bank 9/7/2022 | 1.773 | 304,350 | 304,235 | |||||||||
| Federal Home Loan Bank 9/8/2022 | 2.155 | 87,400 | 87,361 | |||||||||
| Federal Home Loan Bank 9/9/2022 | 2.105 | 300,300 | 300,148 | |||||||||
| Federal Home Loan Bank 9/12/2022 | 1.881 | 86,000 | 85,940 | |||||||||
| Federal Home Loan Bank 9/13/2022 | 2.210 | 13,350 | 13,340 | |||||||||
| Federal Home Loan Bank 9/19/2022 | 2.247 | 126,200 | 126,056 | |||||||||
| Federal Home Loan Bank 9/21/2022 | 1.810 | 80,000 | 79,897 | |||||||||
| Federal Home Loan Bank 9/23/2022 | 2.260 | 80,000 | 79,887 | |||||||||
| Federal Home Loan Bank 9/28/2022 | 1.840 | 110,000 | 109,809 | |||||||||
| Federal Home Loan Bank 10/5/2022 | 1.962 | 216,000 | 215,527 | |||||||||
| Federal Home Loan Bank 10/6/2022 | 2.045 | 47,250 | 47,141 | |||||||||
| Federal Home Loan Bank 10/7/2022 | 1.998 | 150,000 | 149,643 | |||||||||
| Federal Home Loan Bank 10/11/2022 | 1.932 | 100,000 | 99,729 | |||||||||
| Federal Home Loan Bank 10/12/2022 | 2.242 | 190,281 | 189,753 | |||||||||
| 12 | U.S. Government Securities Fund |
| Short-term securities (continued) | Weighted average yield at acquisition |
Principal amount (000) |
Value (000) |
|||||||||
| Federal agency bills & notes (continued) | ||||||||||||
| Federal Home Loan Bank 10/31/2022 | 2.452 | % | USD | 50,000 | $ | 49,782 | ||||||
| Federal Home Loan Bank 12/2/2022 | 1.592 | 50,000 | 49,631 | |||||||||
| Federal Home Loan Bank 12/6/2022 | 1.528 | 50,000 | 49,612 | |||||||||
| Total federal agency bills & notes | 2,383,718 | |||||||||||
| U.S. Treasury bills 10.29% | ||||||||||||
| U.S. Treasury 9/6/2022 | 1.652 | 93,500 | 93,473 | |||||||||
| U.S. Treasury 9/13/2022 | 2.124 | 80,000 | 79,943 | |||||||||
| U.S. Treasury 9/15/2022 | 0.830 | 150,000 | 149,875 | |||||||||
| U.S. Treasury 9/20/2022 | 1.213 | 99,850 | 99,737 | |||||||||
| U.S. Treasury 9/22/2022 | 0.892 | 200,000 | 199,755 | |||||||||
| U.S. Treasury 9/29/2022 | 1.708 | 100,000 | 99,833 | |||||||||
| U.S. Treasury 10/4/2022 | 1.371 | 100,000 | 99,785 | |||||||||
| U.S. Treasury 10/13/2022 | 2.176 | 350,000 | 349,049 | |||||||||
| U.S. Treasury 10/20/2022 | 2.425 | 383,500 | 382,195 | |||||||||
| U.S. Treasury 11/25/2022 | 1.479 | 400,000 | 397,355 | |||||||||
| 1,951,000 | ||||||||||||
| Total short-term securities (cost: $8,007,905,000) | 8,005,613 | |||||||||||
| Total investment securities 139.10% (cost: $27,445,479,000) | 26,374,647 | |||||||||||
| Other assets less liabilities (39.10%) | (7,413,583 | ) | ||||||||||
| Net assets 100.00% | $ | 18,961,064 | ||||||||||
Futures contracts
| Contracts | Type | Number
of contracts |
Expiration | Notional amount (000) |
Value
and unrealized (depreciation) appreciation at 8/31/2022 (000) |
|||||||||
| 30 Day Federal Funds Futures | Long | 7,651 | September 2022 | USD | 3,113,808 | $ | (454 | ) | ||||||
| 30 Day Federal Funds Futures | Long | 2,681 | November 2022 | 1,083,602 | 245 | |||||||||
| 30 Day Federal Funds Futures | Long | 2,960 | December 2022 | 1,190,879 | (729 | ) | ||||||||
| 30 Day Federal Funds Futures | Short | 71 | February 2023 | (28,482 | ) | 139 | ||||||||
| 90 Day Eurodollar Futures | Long | 3,812 | December 2022 | 914,260 | (29,081 | ) | ||||||||
| 3 Month SOFR Futures | Long | 3 | March 2023 | 722 | (3 | ) | ||||||||
| 3 Month SOFR Futures | Short | 3,180 | June 2023 | (764,234 | ) | 4,734 | ||||||||
| 90 Day Eurodollar Futures | Long | 17,770 | September 2023 | 4,268,132 | (135,834 | ) | ||||||||
| 90 Day Eurodollar Futures | Short | 10,965 | December 2023 | (2,638,864 | ) | 75,670 | ||||||||
| 90 Day Eurodollar Futures | Short | 10,342 | December 2024 | (2,502,376 | ) | 42,555 | ||||||||
| 2 Year U.S. Treasury Note Futures | Short | 10,139 | December 2022 | (2,112,239 | ) | 3,385 | ||||||||
| 5 Year U.S. Treasury Note Futures | Long | 41,523 | December 2022 | 4,601,592 | (20,853 | ) | ||||||||
| 10 Year U.S. Treasury Note Futures | Long | 7,657 | December 2022 | 895,151 | (4,972 | ) | ||||||||
| 10 Year Ultra U.S. Treasury Note Futures | Long | 3,816 | December 2022 | 477,715 | (2,870 | ) | ||||||||
| 20 Year U.S. Treasury Bond Futures | Long | 3,523 | December 2022 | 478,577 | (1,912 | ) | ||||||||
| 30 Year Ultra U.S. Treasury Bond Futures | Short | 2,168 | December 2022 | (324,116 | ) | (1,270 | ) | |||||||
| $ | (71,250 | ) | ||||||||||||
| U.S. Government Securities Fund | 13 |
Swap contracts
Interest rate swaps
Centrally cleared interest rate swaps
| Receive | Pay | Notional | Value at | Upfront premium paid |
Unrealized (depreciation) appreciation |
|||||||||||||||||||||
| Rate | Payment frequency |
Rate | Payment frequency |
Expiration date |
amount (000) |
8/31/2022 (000) |
(received) (000) |
at 8/31/2022 (000) |
||||||||||||||||||
| 1.955% | Annual | U.S. EFFR | Annual | 9/21/2022 | USD | 4,119,500 | $ | (1,144 | ) | $ | — | $ | (1,144 | ) | ||||||||||||
| 1.2525% | Annual | U.S. EFFR | Annual | 2/14/2023 | 586,311 | (5,588 | ) | — | (5,588 | ) | ||||||||||||||||
| 3-month USD-LIBOR | Quarterly | 1.495% | Semi-annual | 11/10/2023 | 115,000 | 3,225 | — | 3,225 | ||||||||||||||||||
| U.S. EFFR | Annual | 2.4325% | Annual | 12/21/2023 | 94,000 | 1,521 | — | 1,521 | ||||||||||||||||||
| 0.2405% | Annual | U.S. EFFR | Annual | 3/1/2024 | 467,500 | (23,345 | ) | — | (23,345 | ) | ||||||||||||||||
| U.S. EFFR | Annual | 0.11% | Annual | 5/18/2024 | 718,900 | 24,668 | — | 24,668 | ||||||||||||||||||
| 3.52647% | Annual | U.S. EFFR | Annual | 6/16/2024 | 336,442 | (566 | ) | — | (566 | ) | ||||||||||||||||
| 3.5291% | Annual | U.S. EFFR | Annual | 6/16/2024 | 363,558 | (595 | ) | — | (595 | ) | ||||||||||||||||
| 3.497% | Annual | U.S. EFFR | Annual | 6/16/2024 | 309,200 | (677 | ) | — | (677 | ) | ||||||||||||||||
| 3.4585% | Annual | U.S. EFFR | Annual | 6/17/2024 | 47,859 | (137 | ) | — | (137 | ) | ||||||||||||||||
| 3.4325% | Annual | U.S. EFFR | Annual | 6/17/2024 | 227,000 | (750 | ) | — | (750 | ) | ||||||||||||||||
| U.S. EFFR | Annual | 0.126% | Annual | 6/25/2025 | 148,100 | 12,932 | — | 12,932 | ||||||||||||||||||
| U.S. EFFR | Annual | 0.1275% | Annual | 6/25/2025 | 148,100 | 12,926 | — | 12,926 | ||||||||||||||||||
| U.S. EFFR | Annual | 0.106% | Annual | 6/30/2025 | 165,373 | 14,582 | — | 14,582 | ||||||||||||||||||
| 3-month USD-LIBOR | Quarterly | 1.867% | Semi-annual | 7/11/2025 | 199,200 | 9,478 | — | 9,478 | ||||||||||||||||||
| 2.925% | Semi-annual | 3-month USD-LIBOR | Quarterly | 2/1/2028 | 48,600 | (845 | ) | — | (845 | ) | ||||||||||||||||
| 2.91% | Semi-annual | 3-month USD-LIBOR | Quarterly | 2/1/2028 | 60,800 | (1,099 | ) | — | (1,099 | ) | ||||||||||||||||
| 2.908% | Semi-annual | 3-month USD-LIBOR | Quarterly | 2/1/2028 | 60,700 | (1,103 | ) | — | (1,103 | ) | ||||||||||||||||
| 2.92% | Semi-annual | 3-month USD-LIBOR | Quarterly | 2/2/2028 | 45,900 | (807 | ) | — | (807 | ) | ||||||||||||||||
| 3.16% | Annual | SOFR | Annual | 6/20/2028 | 39,600 | 395 | — | 395 | ||||||||||||||||||
| U.S. EFFR | Annual | 2.32625% | Annual | 4/18/2029 | 60,500 | 2,476 | — | 2,476 | ||||||||||||||||||
| U.S. EFFR | Annual | 0.5385% | Annual | 3/26/2030 | 233,200 | 38,263 | — | 38,263 | ||||||||||||||||||
| 0.913% | Semi-annual | 3-month USD-LIBOR | Quarterly | 6/9/2030 | 235,000 | (37,414 | ) | — | (37,414 | ) | ||||||||||||||||
| U.S. EFFR | Annual | 0.666% | Annual | 11/19/2030 | 111,300 | 18,505 | — | 18,505 | ||||||||||||||||||
| SOFR | Annual | 3.10% | Annual | 6/20/2033 | 21,400 | (393 | ) | — | (393 | ) | ||||||||||||||||
| 3-month USD-LIBOR | Quarterly | 2.9625% | Semi-annual | 2/1/2038 | 36,300 | 571 | — | 571 | ||||||||||||||||||
| 3-month USD-LIBOR | Quarterly | 2.963% | Semi-annual | 2/1/2038 | 36,300 | 569 | — | 569 | ||||||||||||||||||
| 3-month USD-LIBOR | Quarterly | 2.986% | Semi-annual | 2/1/2038 | 29,200 | 409 | — | 409 | ||||||||||||||||||
| 0.833% | Semi-annual | 3-month USD-LIBOR | Quarterly | 4/3/2040 | 21,600 | (7,006 | ) | — | (7,006 | ) | ||||||||||||||||
| 3-month USD-LIBOR | Quarterly | 0.81% | Semi-annual | 7/28/2045 | 242,600 | 92,988 | (144 | ) | 93,132 | |||||||||||||||||
| $ | 152,039 | $ | (144 | ) | $ | 152,183 | ||||||||||||||||||||
Investments in affiliates8
| Value
of affiliate at 9/1/2021 (000) |
Additions (000) |
Reductions (000) |
Net realized gain (000) |
Net unrealized appreciation (000) |
Value
of affiliate at 8/31/2022 (000) |
Dividend income (000) |
||||||||||||||||||||||
| Short-term securities 19.36% | ||||||||||||||||||||||||||||
| Money market investments 19.36% | ||||||||||||||||||||||||||||
| Capital Group Central Cash Fund 2.26%7 | $ | — | $ | 4,020,201 | $ | 349,488 | $ | — | 4 | $ | 182 | $ | 3,670,895 | $ | 4,583 | |||||||||||||
| 1 | Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
| 2 | Coupon rate may change periodically. Reference rate and spread are as of the most recent information available. Some coupon rates are determined by the issuer or agent based on current market conditions; therefore, the reference rate and spread are not available. |
| 3 | Purchased on a TBA basis. |
| 4 | Amount less than one thousand. |
| 5 | Index-linked bond whose principal amount moves with a government price index. |
| 6 | All or a portion of this security was pledged as collateral. The total value of pledged collateral was $136,302,000, which represented .72% of the net assets of the fund. |
| 7 | Rate represents the seven-day yield at 8/31/2022. |
| 8 | Part of the same “group of investment companies” as the fund as defined under the Investment Company Act of 1940, as amended. |
| 14 | U.S. Government Securities Fund |
Key to abbreviations
Assn. = Association
CMT = Constant Maturity Treasury
EFFR = Effective Federal Funds Rate
LIBOR = London Interbank Offered Rate
SOFR = Secured Overnight Financing Rate
TBA = To be announced
USD = U.S. dollars
Refer to the notes to financial statements.
| U.S. Government Securities Fund | 15 |
Financial statements
| Statement of assets and
liabilities at August 31, 2022 |
(dollars in thousands) |
| Assets: | ||||||||
| Investment securities, at value: | ||||||||
| Unaffiliated issuers (cost: $23,774,766) | $ | 22,703,752 | ||||||
| Affiliated issuers (cost: $3,670,713) | 3,670,895 | $ | 26,374,647 | |||||
| Cash | 547 | |||||||
| Cash collateral pledged for swap contracts | 12 | |||||||
| Receivables for: | ||||||||
| Sales of investments | 7,131,311 | |||||||
| Sales of fund’s shares | 9,597 | |||||||
| Dividends and interest | 40,758 | |||||||
| Variation margin on futures contracts | 4,056 | |||||||
| Variation margin on centrally cleared swap contracts | 2,509 | 7,188,231 | ||||||
| 33,563,437 | ||||||||
| Liabilities: | ||||||||
| Payables for: | ||||||||
| Purchases of investments | 14,500,941 | |||||||
| Repurchases of fund’s shares | 86,880 | |||||||
| Dividends on fund’s shares | 1,120 | |||||||
| Investment advisory services | 4,334 | |||||||
| Services provided by related parties | 1,750 | |||||||
| Trustees’ deferred compensation | 286 | |||||||
| Variation margin on futures contracts | 5,675 | |||||||
| Variation margin on centrally cleared swap contracts | 1,356 | |||||||
| Other | 31 | 14,602,373 | ||||||
| Net assets at August 31, 2022 | $ | 18,961,064 | ||||||
| Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 21,147,734 | ||||||
| Total accumulated loss | (2,186,670 | ) | ||||||
| Net assets at August 31, 2022 | $ | 18,961,064 | ||||||
(dollars and shares in thousands, except per-share amounts)
Shares of
beneficial interest issued and outstanding (no stated par value) —
unlimited
shares authorized (1,483,365 total shares outstanding)
| Net assets | Shares outstanding |
Net asset value per share |
||||||||||
| Class A | $ | 3,316,901 | 259,461 | $ | 12.78 | |||||||
| Class C | 129,213 | 10,172 | 12.70 | |||||||||
| Class T | 9 | 1 | 12.78 | |||||||||
| Class F-1 | 132,416 | 10,360 | 12.78 | |||||||||
| Class F-2 | 757,964 | 59,289 | 12.78 | |||||||||
| Class F-3 | 878,631 | 68,723 | 12.79 | |||||||||
| Class 529-A | 176,612 | 13,815 | 12.78 | |||||||||
| Class 529-C | 9,683 | 764 | 12.68 | |||||||||
| Class 529-E | 8,990 | 703 | 12.78 | |||||||||
| Class 529-T | 11 | 1 | 12.78 | |||||||||
| Class 529-F-1 | 9 | 1 | 12.78 | |||||||||
| Class 529-F-2 | 23,689 | 1,853 | 12.79 | |||||||||
| Class 529-F-3 | 9 | 1 | 12.79 | |||||||||
| Class R-1 | 7,159 | 563 | 12.71 | |||||||||
| Class R-2 | 88,588 | 6,972 | 12.71 | |||||||||
| Class R-2E | 9,278 | 726 | 12.77 | |||||||||
| Class R-3 | 114,178 | 8,936 | 12.78 | |||||||||
| Class R-4 | 105,199 | 8,228 | 12.79 | |||||||||
| Class R-5E | 39,132 | 3,062 | 12.78 | |||||||||
| Class R-5 | 46,018 | 3,598 | 12.79 | |||||||||
| Class R-6 | 13,117,375 | 1,026,136 | 12.78 | |||||||||
Refer to the notes to financial statements.
| 16 | U.S. Government Securities Fund |
Financial statements (continued)
| Statement of
operations for the year ended August 31, 2022 |
(dollars in thousands) |
| Investment income: | ||||||||
| Income: | ||||||||
| Interest from unaffiliated issuers | $ | 594,883 | ||||||
| Dividends from affiliated issuers | 4,583 | $ | 599,466 | |||||
| Fees and expenses*: | ||||||||
| Investment advisory services | 45,016 | |||||||
| Distribution services | 13,656 | |||||||
| Transfer agent services | 6,650 | |||||||
| Administrative services | 6,662 | |||||||
| 529 plan services | 142 | |||||||
| Reports to shareholders | 271 | |||||||
| Registration statement and prospectus | 808 | |||||||
| Trustees’ compensation | 39 | |||||||
| Auditing and legal | 41 | |||||||
| Custodian | 63 | |||||||
| Other | 39 | 73,387 | ||||||
| Net investment income | 526,079 | |||||||
| Net realized loss and unrealized depreciation: | ||||||||
| Net realized (loss) gain on: | ||||||||
| Investments: | ||||||||
| Unaffiliated issuers | (1,070,141 | ) | ||||||
| Affiliated issuers | — | † | ||||||
| Futures contracts | (209,583 | ) | ||||||
| Swap contracts | 188,592 | (1,091,132 | ) | |||||
| Net unrealized (depreciation) appreciation on: | ||||||||
| Investments: | ||||||||
| Unaffiliated issuers | (1,185,231 | ) | ||||||
| Affiliated issuers | 182 | |||||||
| Futures contracts | (46,926 | ) | ||||||
| Swap contracts | (307 | ) | (1,232,282 | ) | ||||
| Net realized loss and unrealized depreciation | (2,323,414 | ) | ||||||
| Net decrease in net assets resulting from operations | $ | (1,797,335 | ) | |||||
| * | Additional information related to class-specific fees and expenses is included in the notes to financial statements. |
| † | Amount less than one thousand. |
Statements of changes in net assets
(dollars in thousands)
| Year ended August 31, | ||||||||
| 2022 | 2021 | |||||||
| Operations: | ||||||||
| Net investment income | $ | 526,079 | $ | 199,105 | ||||
| Net realized (loss) gain | (1,091,132 | ) | 34,480 | |||||
| Net unrealized depreciation | (1,232,282 | ) | (233,980 | ) | ||||
| Net decrease in net assets resulting from operations | (1,797,335 | ) | (395 | ) | ||||
| Distributions paid or accrued to shareholders | (555,318 | ) | (1,047,270 | ) | ||||
| Net capital share transactions | (1,555,049 | ) | 4,716,292 | |||||
| Total (decrease) increase in net assets | (3,907,702 | ) | 3,668,627 | |||||
| Net assets: | ||||||||
| Beginning of year | 22,868,766 | 19,200,139 | ||||||
| End of year | $ | 18,961,064 | $ | 22,868,766 | ||||
Refer to the notes to financial statements.
| U.S. Government Securities Fund | 17 |
Notes to financial statements
1. Organization
The American Funds Income Series (the “trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), 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 to provide a high level of current income consistent with prudent investment risk and preservation of capital.
The fund has 21 share classes consisting of six retail share classes (Classes A, C, T, F-1, F-2 and F-3), seven 529 college savings plan share classes (Classes 529-A, 529-C, 529-E, 529-T, 529-F-1, 529-F-2 and 529-F-3) and eight retirement plan share classes (Classes R-1, R-2, R-2E, R-3, R-4, R-5E, R-5 and R-6). The 529 college savings plan share classes can be used to save for college education. The retirement plan share classes are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described further in the following table:
| Share class | Initial
sales charge |
Contingent
deferred sales charge upon redemption |
Conversion feature | |||
| Classes A and 529-A | Up to 3.75% for Class A; up to 3.50% for Class 529-A | None (except 1.00% for certain redemptions within 18 months of purchase without an initial sales charge) | None | |||
| Classes C and 529-C | None | 1.00% for redemptions within one year of purchase | Class C converts to Class A after eight years and Class 529-C converts to Class 529-A after five years | |||
| Class 529-E | None | None | None | |||
| Classes T and 529-T* | Up to 2.50% | None | None | |||
| Classes F-1, F-2, F-3, 529-F-1, 529-F-2 and 529-F-3 | None | None | None | |||
| Classes R-1, R-2, R-2E, R-3, R-4, R-5E, R-5 and R-6 | None | None | None |
| * | Class T and 529-T shares are not available for purchase. |
Holders of all share classes have equal pro rata rights to the assets, dividends and liquidation proceeds of the fund. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses (“class-specific fees and expenses”), primarily due to different arrangements for distribution, transfer agent and administrative services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each share class.
2. Significant accounting policies
The fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The fund’s financial statements have been prepared to comply with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles require the fund’s investment adviser to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Subsequent events, if any, have been evaluated through the date of issuance in the preparation of the financial statements. The fund follows the significant accounting policies described in this section, as well as the valuation policies described in the next section on valuation.
Security transactions and related investment income — Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. 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 fixed-income securities are amortized daily over the expected life of the security.
Class allocations — Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. Realized gains and losses and unrealized appreciation and depreciation are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, transfer agent and administrative services, are charged directly to the respective share class.
Distributions paid or accrued to shareholders — Income dividends are declared daily after the determination of the fund’s net investment income and are paid to shareholders monthly. Capital gain distributions are recorded on the ex-dividend date.
| 18 | U.S. Government Securities Fund |
3. Valuation
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by U.S. GAAP. The net asset value per share is calculated once daily as of the close of regular trading on the New York Stock Exchange, normally 4 p.m. New York time, each day the New York Stock Exchange is open.
Methods and inputs — The fund’s investment adviser uses the following methods and inputs to establish the fair value of the fund’s assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.
Fixed-income securities, including short-term securities, are generally valued at prices obtained from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.
| Fixed-income class | Examples of standard inputs | |
| All | Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”) | |
| Bonds & notes of governments & government agencies | Standard inputs and interest rate volatilities | |
| Mortgage-backed; asset-backed obligations | Standard inputs and cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information |
When the fund’s investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or deemed to be not representative), fixed-income securities will be valued in good faith at the mean quoted bid and ask prices that are reasonably and timely available (or bid prices, if ask prices are not available) or at prices for securities of comparable maturity, quality and type. The Capital Group Central Cash Fund (“CCF”), a fund within the Capital Group Central Fund Series (“Central Funds”), is valued based upon a floating net asset value, which fluctuates with changes in the value of CCF’s portfolio securities. The underlying securities are valued based on the policies and procedures in CCF’s statement of additional information.
Exchange-traded futures are generally valued at the official settlement price of the exchange or market on which such instruments are traded, as of the close of business on the day the futures are being valued. Interest rate swaps are generally valued by pricing vendors based on market inputs that include the index and term of index, reset frequency, payer/receiver, currency and pay frequency.
Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the fund’s investment adviser are fair valued as determined in good faith under fair valuation guidelines adopted by authority of the fund’s board of trustees as further described. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission rules and guidance, to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of each share class of the fund is determined. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.
Processes and structure — The fund’s board of trustees has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”) to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues.
| U.S. Government Securities Fund | 19 |
The Fair Valuation Committee reports any changes to the fair valuation guidelines to the board of trustees. The fund’s board and audit committee also regularly review reports that describe fair value determinations and methods.
The fund’s investment adviser has also established a Fixed-Income Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors. This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security valuation are also subject to additional internal reviews facilitated by the investment adviser’s global risk management group.
Classifications — The fund’s investment adviser classifies the fund’s assets and liabilities into three levels based on the inputs used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. Level 3 values are based on significant unobservable inputs that reflect the investment adviser’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following tables present the fund’s valuation levels as of August 31, 2022 (dollars in thousands):
| Investment securities | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Bonds, notes & other debt instruments: | ||||||||||||||||
| Mortgage-backed obligations | $ | — | $ | 9,158,507 | $ | — | $ | 9,158,507 | ||||||||
| U.S. Treasury bonds & notes | — | 8,671,552 | — | 8,671,552 | ||||||||||||
| Federal agency bonds & notes | — | 538,975 | — | 538,975 | ||||||||||||
| Short-term securities | 3,670,895 | 4,334,718 | — | 8,005,613 | ||||||||||||
| Total | $ | 3,670,895 | $ | 22,703,752 | $ | — | $ | 26,374,647 | ||||||||
| Other investments* | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Unrealized appreciation on futures contracts | $ | 126,728 | $ | — | $ | — | $ | 126,728 | ||||||||
| Unrealized appreciation on centrally cleared interest rate swaps | — | 233,652 | — | 233,652 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Unrealized depreciation on futures contracts | (197,978 | ) | — | — | (197,978 | ) | ||||||||||
| Unrealized depreciation on centrally cleared interest rate swaps | — | (81,469 | ) | — | (81,469 | ) | ||||||||||
| Total | $ | (71,250 | ) | $ | 152,183 | $ | — | $ | 80,933 | |||||||
| * | Futures contracts and interest rate swaps are not included in the fund’s investment portfolio. |
4. Risk factors
Investing in the fund may involve certain risks including, but not limited to, those described below.
Market conditions — The prices of, and the income generated by, the securities held by the fund may decline — sometimes rapidly or unpredictably — due to various factors, including events or conditions affecting the general economy or particular industries or companies; overall market changes; local, regional or global political, social or economic instability; governmental, governmental agency or central bank responses to economic conditions; and currency exchange rate, interest rate and commodity price fluctuations.
Economies and financial markets throughout the world are highly interconnected. Economic, financial or political events, trading and tariff arrangements, wars, terrorism, cybersecurity events, natural disasters, public health emergencies (such as the spread of infectious disease) and other circumstances in one country or region, including actions taken by governmental or quasi-governmental authorities in response to any of the foregoing, could have impacts on global economies or markets. As a result, whether or not the fund invests in securities of issuers located in or with significant exposure to the countries affected, the value and liquidity of the fund’s investments may be negatively affected by developments in other countries and regions.
| 20 | U.S. Government Securities Fund |
Issuer risks — The prices of, and the income generated by, securities held by the fund may decline in response to various factors directly related to the issuers of such securities, including reduced demand for an issuer’s goods or services, poor management performance, major litigation, investigations or other controversies related to the issuer, changes in financial condition or credit rating, changes in government regulations affecting the issuer or its competitive environment and strategic initiatives such as mergers, acquisitions or dispositions and the market response to any such initiatives.
Investing in debt instruments — The prices of, and the income generated by, bonds and other debt securities held by the fund may be affected by factors such as the interest rates, maturities and credit quality of these securities.
Rising interest rates will generally cause the prices of bonds and other debt securities to fall. Also, when interest rates rise, repayments of debt securities may occur more slowly than anticipated, causing the market prices of such securities to decline. A general rise in interest rates may cause investors to sell debt securities on a large scale, which could also adversely affect the price and liquidity of debt securities and could also result in increased redemptions from the fund. Falling interest rates may cause an issuer to redeem, call or refinance a debt security before its stated maturity, which may result in the fund failing to recoup the full amount of its initial investment and having to reinvest the proceeds in lower yielding securities. Longer maturity debt securities generally have greater sensitivity to changes in interest rates and may be subject to greater price fluctuations than shorter maturity debt securities.
Bonds and other debt securities are also subject to credit risk, which is the possibility that the credit strength of an issuer or guarantor will weaken or be perceived to be weaker, and/or an issuer of a debt security will fail to make timely payments of principal or interest and the security will go into default. Changes in actual or perceived creditworthiness may occur quickly. A downgrade or default affecting any of the fund’s securities could cause the value of the fund’s shares to decrease. Credit risk is gauged, in part, by the credit ratings of the debt securities in which the fund invests. However, ratings are only the opinions of the rating agencies issuing them and are not guarantees as to credit quality or an evaluation of market risk. The fund’s investment adviser relies on its own credit analysts to research issuers and issues in assessing credit and default risks.
Investing in securities backed by the U.S. government — Securities backed by the U.S. Treasury or the full faith and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates and the credit rating of the U.S. government. Securities issued by U.S. government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor guaranteed by the U.S. government. U.S. government securities are subject to market risk, interest rate risk and credit risk.
Investing in mortgage-related and other asset-backed securities — Mortgage-related securities, such as mortgage-backed securities, and other asset-backed securities, include debt obligations that represent interests in pools of mortgages or other income-bearing assets, such as consumer loans or receivables. While such securities are subject to the risks associated with investments in debt instruments generally (for example, credit, extension and interest rate risks), they are also subject to other and different risks. Mortgage-backed and other asset-backed securities are subject to changes in the payment patterns of borrowers of the underlying debt, potentially increasing the volatility of the securities and the fund’s net asset value. When interest rates fall, borrowers are more likely to refinance or prepay their debt before its stated maturity. This may result in the fund having to reinvest the proceeds in lower yielding securities, effectively reducing the fund’s income. Conversely, if interest rates rise and borrowers repay their debt more slowly than expected, the time in which the mortgage-backed and other asset-backed securities are paid off could be extended, reducing the fund’s cash available for reinvestment in higher yielding securities. Mortgage-backed securities are also subject to the risk that underlying borrowers will be unable to meet their obligations and the value of property that secures the mortgages may decline in value and be insufficient, upon foreclosure, to repay the associated loans. Investments in asset-backed securities are subject to similar risks.
Investing in future delivery contracts — The fund may enter into contracts, such as to-be-announced contracts and mortgage dollar rolls, that involve the fund selling mortgage-related securities and simultaneously contracting to repurchase similar securities for delivery at a future date at a predetermined price. This can increase the fund’s market exposure, and the market price of the securities that the fund contracts to repurchase could drop below their purchase price. While the fund can preserve and generate capital through the use of such contracts by, for example, realizing the difference between the sale price and the future purchase price, the income generated by the fund may be reduced by engaging in such transactions. In addition, these transactions increase the turnover rate of the fund.
| U.S. Government Securities Fund | 21 |
Investing in inflation-linked bonds — The values of inflation-linked bonds generally fluctuate in response to changes in real interest rates — i.e., rates of interest after factoring in inflation. A rise in real interest rates may cause the prices of inflation-linked securities to fall, while a decline in real interest rates may cause the prices to increase. Inflation-linked bonds may experience greater losses than other debt securities with similar durations when real interest rates rise faster than nominal interest rates. There can be no assurance that the value of an inflation-linked security will be directly correlated to changes in interest rates; for example, if interest rates rise for reasons other than inflation, the increase may not be reflected in the security’s inflation measure.
Investing in inflation-linked bonds may also reduce the fund’s distributable income during periods of deflation. If prices for goods and services decline throughout the economy, the principal and income on inflation-linked securities may decline and result in losses to the fund.
Investing in derivatives — The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional securities, such as stocks and bonds. Changes in the value of a derivative may not correlate perfectly with, and may be more sensitive to market events than, the underlying asset, rate or index, and a derivative instrument may cause the fund to lose significantly more than its initial investment. Derivatives may be difficult to value, difficult for the fund to buy or sell at an opportune time or price and difficult, or even impossible, to terminate or otherwise offset. The fund’s use of derivatives may result in losses to the fund, and investing in derivatives may reduce the fund’s returns and increase the fund’s price volatility. The fund’s counterparty to a derivative transaction (including, if applicable, the fund’s clearing broker, the derivatives exchange or the clearinghouse) may be unable or unwilling to honor its financial obligations in respect of the transaction. In certain cases, the fund may be hindered or delayed in exercising remedies against or closing out derivative instruments with a counterparty, which may result in additional losses. Derivatives are subject to additional risks, including operational risk (such as documentation issues, settlement issues and systems failures) and legal risk (such as insufficient documentation, insufficient capacity or authority of a counterparty, and issues with the legality or enforceability of a contract).
Management — The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses, including models, tools and data, employed by the investment adviser in this process may be flawed or incorrect and may not produce the desired results. This could cause the fund to lose value or its investment results to lag relevant benchmarks or other funds with similar objectives.
5. Certain investment techniques
Index-linked bonds — The fund has invested in index-linked bonds, which are fixed-income securities whose principal value is periodically adjusted to a government price index. Over the life of an index-linked bond, interest is paid on the adjusted principal value. Increases or decreases in the principal value of index-linked bonds are recorded as interest income in the fund’s statement of operations.
Mortgage dollar rolls — The fund has entered into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Mortgage dollar rolls are accounted for as purchase and sale transactions. Portfolio turnover rates excluding and including mortgage dollar rolls are presented at the end of the fund’s financial highlights table.
Futures contracts — The fund has entered into futures contracts, which provide for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument for a specified price, date, time and place designated at the time the contract is made. Futures contracts are used to strategically manage the fund’s interest rate sensitivity by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio.
Upon entering into futures contracts, and to maintain the fund’s open positions in futures contracts, the fund is required to deposit with a futures broker, known as a futures commission merchant (“FCM”), in a segregated account in the name of the FCM an amount of cash, U.S. government securities or other liquid securities, known as initial margin. The margin required for a particular futures contract is set by the exchange on which the contract is traded to serve as collateral, and may be significantly modified from time to time by the exchange during the term of the contract.
On a daily basis, the fund pays or receives variation margin based on the increase or decrease in the value of the futures contracts and records variation margin on futures contracts in the statement of assets and liabilities. Futures contracts may involve a risk of loss in excess of the variation margin shown on the fund’s statement of assets and liabilities. The fund records realized gains or losses at the time the futures contract is closed or expires. Net realized gains or losses and net unrealized appreciation or depreciation from futures contracts are recorded in the fund’s statement of operations. The average month-end notional amount of futures contracts while held was $27,145,579,000.
| 22 | U.S. Government Securities Fund |
Swap contracts — The fund has entered into swap agreements, which are two-party contracts entered into primarily by institutional investors for a specified time period. In a typical swap transaction, two parties agree to exchange the returns earned or realized from one or more underlying assets or rates of return. Swap agreements can be traded on a swap execution facility (SEF) and cleared through a central clearinghouse (cleared), traded over-the-counter (OTC) and cleared, or traded bilaterally and not cleared. Because clearing interposes a central clearinghouse as the ultimate counterparty to each participant’s swap, and margin is required to be exchanged under the rules of the clearinghouse, central clearing is intended to decrease (but not eliminate) counterparty risk relative to uncleared bilateral swaps. To the extent the fund enters into bilaterally negotiated swap transactions, the fund will enter into swap agreements only with counterparties that meet certain credit standards and subject to agreed collateralized procedures. The term of a swap can be days, months or years and certain swaps may be less liquid than others.
Upon entering into a centrally cleared swap contract, the fund is required to deposit cash, U.S. government securities or other liquid securities, which is known as initial margin. Generally, the initial margin required for a particular swap is set and held as collateral by the clearinghouse on which the contract is cleared. The amount of initial margin required may be significantly modified from time to time by the clearinghouse during the term of the contract.
On a daily basis, interest accruals related to the exchange of future payments are recorded as a receivable and payable in the fund’s statement of assets and liabilities for centrally cleared swaps and as unrealized appreciation or depreciation in the fund’s statement of assets and liabilities for bilateral swaps. For centrally cleared swaps, the fund also pays or receives a variation margin based on the increase or decrease in the value of the swaps, including accrued interest as applicable, and records variation margin in the statement of assets and liabilities. The fund records realized gains and losses on both the net accrued interest and any gain or loss recognized at the time the swap is closed or expires. Net realized gains or losses, as well as any net unrealized appreciation or depreciation, from swaps are recorded in the fund’s statement of operations.
Swap agreements can take different forms. The fund has entered into the following types of swap agreements:
Interest rate swaps — The fund has entered into interest rate swaps, which seek to manage the interest rate sensitivity of the fund by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio. An interest rate swap is an agreement between two parties to exchange or swap payments based on changes in an interest rate or rates. Typically, one interest rate is fixed and the other is variable based on a designated short-term interest rate such as the Secured Overnight Financing Rate (SOFR), prime rate or other benchmark. In other types of interest rate swaps, known as basis swaps, the parties agree to swap variable interest rates based on different designated short-term interest rates. Interest rate swaps generally do not involve the delivery of securities or other principal amounts. Rather, cash payments are exchanged by the parties based on the application of the designated interest rates to a notional amount, which is the predetermined dollar principal of the trade upon which payment obligations are computed. Accordingly, the fund’s current obligation or right under the swap agreement is generally equal to the net amount to be paid or received under the swap agreement based on the relative value of the position held by each party. The average month-end notional amount of interest rate swaps while held was $13,018,498,000.
The following tables identify the location and fair value amounts on the fund’s statement of assets and liabilities and the effect on the fund’s statement of operations resulting from the fund’s use of futures contracts and interest rate swaps as of, or for the year ended, August 31, 2022 (dollars in thousands):
| Assets | Liabilities | |||||||||||||
| Contracts | Risk type | Location on
statement of assets and liabilities |
Value | Location on
statement of assets and liabilities |
Value | |||||||||
| Futures | Interest | Unrealized appreciation* | $ | 126,728 | Unrealized depreciation* | $ | 197,978 | |||||||
| Swap (centrally cleared) | Interest | Unrealized appreciation* | 233,652 | Unrealized depreciation* | 81,469 | |||||||||
| $ | 360,380 | $ | 279,447 | |||||||||||
Refer to the end of the tables for footnote.
| U.S. Government Securities Fund | 23 |
| Net realized (loss) gain | Net unrealized depreciation | |||||||||||||
| Contracts | Risk type | Location on statement of operations | Value | Location on statement of operations | Value | |||||||||
| Futures | Interest | Net realized loss on futures contracts | $ | (209,583 | ) | Net unrealized depreciation on futures contracts | $ | (46,926 | ) | |||||
| Swap | Interest | Net realized gain on swap contracts | 188,592 | Net unrealized depreciation on swap contracts | (307 | ) | ||||||||
| $ | (20,991 | ) | $ | (47,233 | ) | |||||||||
| * | Includes cumulative appreciation/depreciation on futures contracts and centrally cleared interest rate swaps as reported in the applicable tables following the fund’s investment portfolio. Only current day’s variation margin is reported within the fund’s statement of assets and liabilities. |
Collateral — The fund receives or pledges highly liquid assets, such as cash or U.S. government securities, as collateral due to its use of futures contracts, interest rate swaps and future delivery contracts. For futures contracts and centrally cleared interest rate swaps, the fund pledges collateral for initial and variation margin by contract. For future delivery contracts, the fund either receives or pledges collateral based on the net gain or loss on unsettled contracts by certain counterparties. The purpose of the collateral is to cover potential losses that could occur in the event that either party cannot meet its contractual obligation. Non-cash collateral pledged by the fund, if any, is disclosed in the fund’s investment portfolio, and cash collateral pledged by the fund, if any, is held in a segregated account with the fund’s custodian, which is reflected as pledged cash collateral in the fund’s statement of assets and liabilities.
6. Taxation and distributions
Federal income taxation — The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.
As of and during the year ended August 31, 2022, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any significant interest or penalties.
The fund’s tax returns are generally not subject to examination by federal, state and, if applicable, non-U.S. tax authorities after the expiration of each jurisdiction’s statute of limitations, which is typically three years after the date of filing but can be extended in certain jurisdictions.
Distributions — Distributions determined on a tax basis may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to different treatment for items such as short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; deferred expenses; cost of investments sold; paydowns on fixed-income securities; net capital losses; amortization of premiums and discounts and income on certain investments. 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 for financial reporting purposes.
During the year ended August 31, 2022, the fund reclassified $14,000 from total accumulated loss to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.
As of August 31, 2022, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investments were as follows (dollars in thousands):
| Undistributed ordinary income | $ | 8,692 | ||
| Capital loss carryforward1 | (1,251,987 | ) | ||
| Gross unrealized appreciation on investments | 432,943 | |||
| Gross unrealized depreciation on investments | (1,374,695 | ) | ||
| Net unrealized depreciation on investments | (941,752 | ) | ||
| Cost of investments | 27,397,476 |
| 1 | The capital loss carryforward will be used to offset any capital gains realized by the fund in future years. The fund will not make distributions from capital gains while a capital loss carryforward remains. |
| 24 | U.S. Government Securities Fund |
Distributions paid or accrued were characterized for tax purposes as follows (dollars in thousands):
| Year ended August 31, 2022 | Year ended August 31, 2021 | |||||||||||||||||||||||
| Share class | Ordinary income |
Long-term capital gains |
Total distributions paid or accrued |
Ordinary income |
Long-term capital gains |
Total distributions paid or accrued |
||||||||||||||||||
| Class A | $ | 81,758 | $ | — | $ | 81,758 | $ | 143,334 | $ | 63,818 | $ | 207,152 | ||||||||||||
| Class C | 2,406 | — | 2,406 | 5,814 | 3,101 | 8,915 | ||||||||||||||||||
| Class T | — | 2 | — | — | 2 | — | 2 | — | 2 | — | 2 | |||||||||||||
| Class F-1 | 3,030 | — | 3,030 | 9,591 | 4,722 | 14,313 | ||||||||||||||||||
| Class F-2 | 20,799 | — | 20,799 | 31,931 | 13,131 | 45,062 | ||||||||||||||||||
| Class F-3 | 21,726 | — | 21,726 | 24,445 | 9,161 | 33,606 | ||||||||||||||||||
| Class 529-A | 4,364 | — | 4,364 | 7,820 | 3,454 | 11,274 | ||||||||||||||||||
| Class 529-C | 187 | — | 187 | 480 | 255 | 735 | ||||||||||||||||||
| Class 529-E | 210 | — | 210 | 423 | 201 | 624 | ||||||||||||||||||
| Class 529-T | — | 2 | — | — | 2 | — | 2 | — | 2 | — | 2 | |||||||||||||
| Class 529-F-1 | — | 2 | — | — | 2 | 46 | — | 2 | 46 | |||||||||||||||
| Class 529-F-23 | 627 | — | 627 | 941 | 405 | 1,346 | ||||||||||||||||||
| Class 529-F-33 | — | 2 | — | — | 2 | — | 2 | — | 2 | — | 2 | |||||||||||||
| Class R-1 | 130 | — | 130 | 252 | 128 | 380 | ||||||||||||||||||
| Class R-2 | 1,599 | — | 1,599 | 3,269 | 1,734 | 5,003 | ||||||||||||||||||
| Class R-2E | 200 | — | 200 | 400 | 202 | 602 | ||||||||||||||||||
| Class R-3 | 2,465 | — | 2,465 | 4,562 | 2,206 | 6,768 | ||||||||||||||||||
| Class R-4 | 2,656 | — | 2,656 | 5,641 | 2,518 | 8,159 | ||||||||||||||||||
| Class R-5E | 982 | — | 982 | 730 | 268 | 998 | ||||||||||||||||||
| Class R-5 | 1,357 | — | 1,357 | 2,389 | 958 | 3,347 | ||||||||||||||||||
| Class R-6 | 410,822 | — | 410,822 | 506,447 | 192,493 | 698,940 | ||||||||||||||||||
| Total | $ | 555,318 | $ | — | $ | 555,318 | $ | 748,515 | $ | 298,755 | $ | 1,047,270 | ||||||||||||
| 2 | Amount less than one thousand. |
| 3 | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
7. Fees and transactions with related parties
CRMC, the fund’s investment adviser, is the parent company of American Funds Distributors®, Inc. (“AFD”), the principal underwriter of the fund’s shares, and American Funds Service Company® (“AFS”), the fund’s transfer agent. CRMC, AFD and AFS are considered related parties to the fund.
Investment advisory services — The fund has an investment advisory and service agreement with CRMC that provides for monthly fees accrued daily. These fees are based on a series of decreasing annual rates beginning with 0.300% on the first $60 million of daily net assets and decreasing to 0.120% on such assets in excess of $21 billion. The agreement also provides for monthly fees, accrued daily, based on a series of decreasing rates beginning with 3.00% on the first $3,333,333 of the fund’s monthly gross income and decreasing to 2.00% on such income in excess of $8,333,333. For the year ended August 31, 2022, the investment advisory services fees were $45,016,000, which were equivalent to an annualized rate of 0.203% of average daily net assets.
| U.S. Government Securities Fund | 25 |
Class-specific fees and expenses — Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are further described below:
Distribution services — The fund has plans of distribution for all share classes, except Class F-2, F-3, 529-F-2, 529-F-3, R-5E, R-5 and R-6 shares. Under the plans, the board of trustees approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.30% to 1.00% as noted in this section. In some cases, the board of trustees has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes with a plan may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.
| Share class | Currently approved limits | Plan limits | ||||||
| Class A | 0.30 | % | 0.30 | % | ||||
| Class 529-A | 0.30 | 0.50 | ||||||
| Classes C, 529-C and R-1 | 1.00 | 1.00 | ||||||
| Class R-2 | 0.75 | 1.00 | ||||||
| Class R-2E | 0.60 | 0.85 | ||||||
| Classes 529-E and R-3 | 0.50 | 0.75 | ||||||
| Classes T, F-1, 529-T, 529-F-1 and R-4 | 0.25 | 0.50 | ||||||
For Class A and 529-A shares, distribution-related expenses include the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These share classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limits are not exceeded. As of August 31, 2022, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A shares.
Transfer agent services — The fund has a shareholder services agreement with AFS under which the fund compensates AFS for providing transfer agent services to each of the fund’s share classes. These services include recordkeeping, shareholder communications and transaction processing. In addition, the fund reimburses AFS for amounts paid to third parties for performing transfer agent services on behalf of fund shareholders.
Administrative services — The fund has an administrative services agreement with CRMC under which the fund compensates CRMC for providing administrative services to all share classes. Administrative services are provided by CRMC and its affiliates to help assist third parties providing non-distribution services to fund shareholders. These services include providing in-depth information on the fund and market developments that impact fund investments. Administrative services also include, but are not limited to, coordinating, monitoring and overseeing third parties that provide services to fund shareholders. The agreement provides the fund the ability to charge an administrative services fee at the annual rate of 0.05% of the average daily net assets attributable to each share class of the fund. Currently the fund pays CRMC an administrative services fee at the annual rate of 0.03% of the average daily net assets attributable to each share class of the fund for CRMC’s provision of administrative services.
529 plan services — Each 529 share class is subject to service fees to compensate the Virginia College Savings Plan (“Virginia529”) for its oversight and administration of the CollegeAmerica 529 college savings plan. The fees are based on the combined net assets invested in Class 529 and ABLE shares of the American Funds. Class ABLE shares are offered on other American Funds by Virginia529 through ABLEAmerica®, a tax-advantaged savings program for individuals with disabilities. Virginia529 is not considered a related party to the fund.
Prior to January 1, 2022, the quarterly fees were based on a series of decreasing annual rates beginning with 0.09% on the first $20 billion of the combined net assets invested in the American Funds and decreasing to 0.03% on such assets in excess of $100 billion. Effective January 1, 2022, the quarterly fees were amended to a series of decreasing annual rates beginning with 0.09% on the first $20 billion of the combined net assets invested in the American Funds and decreasing to 0.03% on such assets in excess of $75 billion. The fees for any given calendar quarter are accrued and calculated on the basis of the average net assets of Class 529 and ABLE shares of the American Funds for the last month of the prior calendar quarter. For the year ended August 31, 2022, the 529 plan services fees were $142,000, which were equivalent to 0.058% of the average daily net assets of each 529 share class.
| 26 | U.S. Government Securities Fund |
For the year ended August 31, 2022, class-specific expenses under the agreements were as follows (dollars in thousands):
| Share class | Distribution services |
Transfer
agent services |
Administrative services |
529
plan services |
|||||
| Class A | $9,376 | $4,311 | $1,110 | Not applicable | |||||
| Class C | 1,511 | 171 | 45 | Not applicable | |||||
| Class T | — | — | * | — | * | Not applicable | |||
| Class F-1 | 342 | 217 | 41 | Not applicable | |||||
| Class F-2 | Not applicable | 903 | 251 | Not applicable | |||||
| Class F-3 | Not applicable | 2 | 236 | Not applicable | |||||
| Class 529-A | 453 | 214 | 60 | $115 | |||||
| Class 529-C | 122 | 13 | 4 | 7 | |||||
| Class 529-E | 53 | 6 | 3 | 6 | |||||
| Class 529-T | — | — | * | — | * | — | * | ||
| Class 529-F-1 | — | — | * | — | * | — | * | ||
| Class 529-F-2 | Not applicable | 17 | 7 | 14 | |||||
| Class 529-F-3 | Not applicable | — | — | * | — | * | |||
| Class R-1 | 80 | 6 | 2 | Not applicable | |||||
| Class R-2 | 728 | 322 | 29 | Not applicable | |||||
| Class R-2E | 67 | 23 | 3 | Not applicable | |||||
| Class R-3 | 629 | 191 | 38 | Not applicable | |||||
| Class R-4 | 295 | 119 | 35 | Not applicable | |||||
| Class R-5E | Not applicable | 61 | 12 | Not applicable | |||||
| Class R-5 | Not applicable | 30 | 17 | Not applicable | |||||
| Class R-6 | Not applicable | 44 | 4,769 | Not applicable | |||||
| Total class-specific expenses | $13,656 | $6,650 | $6,662 | $142 |
| * | Amount less than one thousand. |
Trustees’ deferred compensation — Trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $39,000 in the fund’s statement of operations reflects $72,000 in current fees (either paid in cash or deferred) and a net decrease of $33,000 in the value of the deferred amounts.
Affiliated officers and trustees — Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFD and AFS. No affiliated officers or trustees received any compensation directly from the fund.
Investment in CCF — The fund holds shares of CCF, an institutional prime money market fund managed by CRMC. CCF invests in high-quality, short-term money market instruments. CCF is used as the primary investment vehicle for the fund’s short-term instruments. CCF shares are only available for purchase by CRMC, its affiliates, and other funds managed by CRMC or its affiliates, and are not available to the public. CRMC does not receive an investment advisory services fee from CCF.
Security transactions with related funds — The fund may purchase investment securities from, or sell investment securities to, other funds managed by CRMC (or funds managed by certain affiliates of CRMC) under procedures adopted by the fund’s board of trustees. The funds involved in such transactions are considered related by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers. When such transactions occur, each transaction is executed at the current market price of the security and no brokerage commissions or fees are paid in accordance with Rule 17a-7 of the 1940 Act. During the year ended August 31, 2022, the fund did not engage in any such purchase or sale transactions with any related funds.
Interfund lending — Pursuant to an exemptive order issued by the SEC, the fund, along with other CRMC-managed funds (or funds managed by certain affiliates of CRMC), may participate in an interfund lending program. The program provides an alternate credit facility that permits the funds to lend or borrow cash for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. The fund did not lend or borrow cash through the interfund lending program at any time during the year ended August 31, 2022.
| U.S. Government Securities Fund | 27 |
8. Indemnifications
The fund’s organizational documents provide board members and officers with indemnification against certain liabilities or expenses in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown since it is dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote. Insurance policies are also available to the fund’s board members and officers.
9. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
| Sales1 | Reinvestments of distributions |
Repurchases1 | Net (decrease) increase |
|||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Year ended August 31, 2022 | ||||||||||||||||||||||||||||||||
| Class A | $ | 584,257 | 42,757 | $ | 80,352 | 6,027 | $ | (998,736 | ) | (73,408 | ) | $ | (334,127 | ) | (24,624 | ) | ||||||||||||||||
| Class C | 27,042 | 2,010 | 2,368 | 180 | (59,782 | ) | (4,423 | ) | (30,372 | ) | (2,233 | ) | ||||||||||||||||||||
| Class T | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Class F-1 | 45,708 | 3,379 | 2,953 | 222 | (44,128 | ) | (3,254 | ) | 4,533 | 347 | ||||||||||||||||||||||
| Class F-2 | 518,012 | 38,446 | 19,984 | 1,496 | (556,974 | ) | (41,541 | ) | (18,978 | ) | (1,599 | ) | ||||||||||||||||||||
| Class F-3 | 508,284 | 37,563 | 21,138 | 1,588 | (282,671 | ) | (20,948 | ) | 246,751 | 18,203 | ||||||||||||||||||||||
| Class 529-A | 36,478 | 2,678 | 4,335 | 325 | (59,846 | ) | (4,402 | ) | (19,033 | ) | (1,399 | ) | ||||||||||||||||||||
| Class 529-C | 3,141 | 232 | 185 | 14 | (6,845 | ) | (506 | ) | (3,519 | ) | (260 | ) | ||||||||||||||||||||
| Class 529-E | 1,383 | 100 | 207 | 15 | (3,600 | ) | (264 | ) | (2,010 | ) | (149 | ) | ||||||||||||||||||||
| Class 529-T | — | — | — | 2 | — | 2 | — | — | — | 2 | — | 2 | ||||||||||||||||||||
| Class 529-F-1 | — | — | — | 2 | — | 2 | — | — | — | 2 | — | 2 | ||||||||||||||||||||
| Class 529-F-2 | 7,069 | 520 | 624 | 47 | (8,271 | ) | (606 | ) | (578 | ) | (39 | ) | ||||||||||||||||||||
| Class 529-F-3 | — | — | — | 2 | — | 2 | — | — | — | 2 | — | 2 | ||||||||||||||||||||
| Class R-1 | 1,269 | 94 | 129 | 10 | (3,847 | ) | (278 | ) | (2,449 | ) | (174 | ) | ||||||||||||||||||||
| Class R-2 | 23,100 | 1,705 | 1,585 | 120 | (32,279 | ) | (2,381 | ) | (7,594 | ) | (556 | ) | ||||||||||||||||||||
| Class R-2E | 4,030 | 292 | 200 | 15 | (5,856 | ) | (430 | ) | (1,626 | ) | (123 | ) | ||||||||||||||||||||
| Class R-3 | 48,851 | 3,568 | 2,442 | 183 | (60,573 | ) | (4,429 | ) | (9,280 | ) | (678 | ) | ||||||||||||||||||||
| Class R-4 | 47,995 | 3,522 | 2,607 | 195 | (61,795 | ) | (4,543 | ) | (11,193 | ) | (826 | ) | ||||||||||||||||||||
| Class R-5E | 14,123 | 1,037 | 979 | 74 | (12,179 | ) | (896 | ) | 2,923 | 215 | ||||||||||||||||||||||
| Class R-5 | 15,755 | 1,148 | 1,313 | 97 | (29,106 | ) | (2,144 | ) | (12,038 | ) | (899 | ) | ||||||||||||||||||||
| Class R-6 | 1,675,111 | 121,539 | 410,589 | 30,711 | (3,442,159 | ) | (263,154 | ) | (1,356,459 | ) | (110,904 | ) | ||||||||||||||||||||
| Total net increase (decrease) | $ | 3,561,608 | 260,590 | $ | 551,990 | 41,319 | $ | (5,668,647 | ) | (427,607 | ) | $ | (1,555,049 | ) | (125,698 | ) | ||||||||||||||||
Refer to the end of the tables for footnotes.
| 28 | U.S. Government Securities Fund |
| Sales1 | Reinvestments of distributions |
Repurchases1 | Net (decrease) increase |
|||||||||||||||||||||||||||||
| Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
| Year ended August 31, 2021 | ||||||||||||||||||||||||||||||||
| Class A | $ | 1,190,903 | 81,807 | $ | 205,077 | 14,264 | $ | (1,439,157 | ) | (100,305 | ) | $ | (43,177 | ) | (4,234 | ) | ||||||||||||||||
| Class C | 66,892 | 4,608 | 8,849 | 618 | (101,994 | ) | (7,137 | ) | (26,253 | ) | (1,911 | ) | ||||||||||||||||||||
| Class T | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Class F-1 | 86,312 | 5,912 | 14,036 | 975 | (257,972 | ) | (17,977 | ) | (157,624 | ) | (11,090 | ) | ||||||||||||||||||||
| Class F-2 | 549,616 | 37,862 | 43,567 | 3,030 | (525,182 | ) | (36,471 | ) | 68,001 | 4,421 | ||||||||||||||||||||||
| Class F-3 | 520,229 | 36,039 | 32,585 | 2,268 | (429,033 | ) | (29,855 | ) | 123,781 | 8,452 | ||||||||||||||||||||||
| Class 529-A | 52,334 | 3,614 | 11,250 | 783 | (80,544 | ) | (5,605 | ) | (16,960 | ) | (1,208 | ) | ||||||||||||||||||||
| Class 529-C | 4,786 | 332 | 735 | 51 | (8,501 | ) | (594 | ) | (2,980 | ) | (211 | ) | ||||||||||||||||||||
| Class 529-E | 3,030 | 209 | 623 | 44 | (4,940 | ) | (345 | ) | (1,287 | ) | (92 | ) | ||||||||||||||||||||
| Class 529-T | — | — | — | 2 | — | 2 | — | — | — | 2 | — | 2 | ||||||||||||||||||||
| Class 529-F-1 | 2,216 | 148 | 21 | 2 | (29,969 | ) | (2,012 | ) | (27,732 | ) | (1,862 | ) | ||||||||||||||||||||
| Class 529-F-23 | 35,706 | 2,416 | 1,343 | 93 | (8,851 | ) | (617 | ) | 28,198 | 1,892 | ||||||||||||||||||||||
| Class 529-F-33 | 10 | 1 | — | 2 | — | 2 | — | — | 10 | 1 | ||||||||||||||||||||||
| Class R-1 | 6,154 | 430 | 380 | 26 | (4,765 | ) | (335 | ) | 1,769 | 121 | ||||||||||||||||||||||
| Class R-2 | 34,658 | 2,399 | 4,993 | 348 | (55,130 | ) | (3,833 | ) | (15,479 | ) | (1,086 | ) | ||||||||||||||||||||
| Class R-2E | 9,959 | 679 | 602 | 42 | (9,402 | ) | (652 | ) | 1,159 | 69 | ||||||||||||||||||||||
| Class R-3 | 66,698 | 4,600 | 6,753 | 470 | (87,503 | ) | (6,069 | ) | (14,052 | ) | (999 | ) | ||||||||||||||||||||
| Class R-4 | 60,849 | 4,193 | 8,122 | 565 | (110,296 | ) | (7,693 | ) | (41,325 | ) | (2,935 | ) | ||||||||||||||||||||
| Class R-5E | 38,493 | 2,698 | 989 | 69 | (14,123 | ) | (984 | ) | 25,359 | 1,783 | ||||||||||||||||||||||
| Class R-5 | 30,952 | 2,133 | 3,324 | 231 | (34,436 | ) | (2,387 | ) | (160 | ) | (23 | ) | ||||||||||||||||||||
| Class R-6 | 4,970,883 | 344,121 | 698,825 | 48,645 | (854,664 | ) | (59,127 | ) | 4,815,044 | 333,639 | ||||||||||||||||||||||
| Total net increase (decrease) | $ | 7,730,680 | 534,201 | $ | 1,042,074 | 72,524 | $ | (4,056,462 | ) | (281,998 | ) | $ | 4,716,292 | 324,727 | ||||||||||||||||||
| 1 | Includes exchanges between share classes of the fund. |
| 2 | Amount less than one thousand. |
| 3 | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
10. Investment transactions
The fund engaged in purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $83,907,650,000 and $77,936,681,000, respectively, during the year ended August 31, 2022.
| U.S. Government Securities Fund | 29 |
Financial highlights
| (Loss) income from investment operations1 |
Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Year ended | Net asset value, beginning of year |
Net investment income (loss) |
Net (losses) gains on securities (both realized and unrealized) |
Total from investment operations |
Dividends (from net investment income) |
Distributions (from capital gains) |
Total dividends and distributions |
Net asset value, end of year |
Total return2,3 | Net assets, end of year (in millions) |
Ratio of expenses to average net assets before reimburse- ments4 |
Ratio of expenses to average net assets after reimburse- ments3,4 |
Ratio of net income (loss) to average net assets3 |
|||||||||||||||||||||||||||||||||||||||
| Class A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | $ | 14.21 | $ | .28 | $ | (1.40 | ) | $ | (1.12 | ) | $ | (.31 | ) | $ | — | $ | (.31 | ) | $ | 12.78 | (7.98 | )% | $ | 3,317 | .61 | % | .61 | % | 2.08 | % | ||||||||||||||||||||||
| 8/31/2021 | 14.95 | .09 | (.15 | ) | (.06 | ) | (.12 | ) | (.56 | ) | (.68 | ) | 14.21 | (.37 | ) | 4,038 | .61 | .61 | .61 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .13 | 1.06 | 1.19 | (.19 | ) | (.15 | ) | (.34 | ) | 14.95 | 8.61 | 4,311 | .65 | .65 | .87 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.38 | .24 | .74 | .98 | (.26 | ) | — | (.26 | ) | 14.10 | 7.38 | 2,837 | .66 | .66 | 1.77 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .21 | (.51 | ) | (.30 | ) | (.21 | ) | — | (.21 | ) | 13.38 | (2.15 | ) | 2,544 | .64 | .64 | 1.58 | ||||||||||||||||||||||||||||||||||
| Class C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.14 | .18 | (1.40 | ) | (1.22 | ) | (.22 | ) | — | (.22 | ) | 12.70 | (8.65 | ) | 129 | 1.35 | 1.35 | 1.30 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.90 | (.02 | ) | (.13 | ) | (.15 | ) | (.05 | ) | (.56 | ) | (.61 | ) | 14.14 | (1.11 | ) | 176 | 1.31 | 1.31 | (.11 | ) | |||||||||||||||||||||||||||||||
| 8/31/2020 | 14.06 | .03 | 1.06 | 1.09 | (.10 | ) | (.15 | ) | (.25 | ) | 14.90 | 7.95 | 213 | 1.34 | 1.34 | .20 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.34 | .14 | .74 | .88 | (.16 | ) | — | (.16 | ) | 14.06 | 6.53 | 186 | 1.41 | 1.41 | 1.01 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.86 | .11 | (.52 | ) | (.41 | ) | (.11 | ) | — | (.11 | ) | 13.34 | (2.91 | ) | 201 | 1.42 | 1.42 | .80 | ||||||||||||||||||||||||||||||||||
| Class T: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .32 | (1.41 | ) | (1.09 | ) | (.34 | ) | — | (.34 | ) | 12.78 | (7.74 | )5 | — | 6 | .36 | 5 | .36 | 5 | 2.37 | 5 | ||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .13 | (.15 | ) | (.02 | ) | (.16 | ) | (.56 | ) | (.72 | ) | 14.21 | (.11 | )5 | — | 6 | .35 | 5 | .35 | 5 | .89 | 5 | |||||||||||||||||||||||||||||
| 8/31/2020 | 14.09 | .18 | 1.06 | 1.24 | (.23 | ) | (.15 | ) | (.38 | ) | 14.95 | 8.99 | 5 | — | 6 | .37 | 5 | .37 | 5 | 1.21 | 5 | |||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .27 | .74 | 1.01 | (.29 | ) | — | (.29 | ) | 14.09 | 7.64 | 5 | — | 6 | .42 | 5 | .42 | 5 | 2.01 | 5 | ||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .24 | (.52 | ) | (.28 | ) | (.24 | ) | — | (.24 | ) | 13.37 | (1.99 | )5 | — | 6 | .42 | 5 | .42 | 5 | 1.81 | 5 | ||||||||||||||||||||||||||||||
| Class F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .28 | (1.41 | ) | (1.13 | ) | (.30 | ) | — | (.30 | ) | 12.78 | (8.01 | ) | 132 | .65 | .65 | 2.08 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .07 | (.13 | ) | (.06 | ) | (.12 | ) | (.56 | ) | (.68 | ) | 14.21 | (.38 | ) | 142 | .62 | .62 | .46 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .14 | 1.06 | 1.20 | (.20 | ) | (.15 | ) | (.35 | ) | 14.95 | 8.65 | 315 | .61 | .61 | .96 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .24 | .75 | .99 | (.26 | ) | — | (.26 | ) | 14.10 | 7.39 | 294 | .65 | .65 | 1.78 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .21 | (.52 | ) | (.31 | ) | (.21 | ) | — | (.21 | ) | 13.37 | (2.17 | ) | 279 | .66 | .66 | 1.59 | ||||||||||||||||||||||||||||||||||
| Class F-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .32 | (1.41 | ) | (1.09 | ) | (.34 | ) | — | (.34 | ) | 12.78 | (7.73 | ) | 758 | .35 | .35 | 2.36 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .13 | (.14 | ) | (.01 | ) | (.17 | ) | (.56 | ) | (.73 | ) | 14.21 | (.09 | ) | 866 | .32 | .32 | .91 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .17 | 1.07 | 1.24 | (.24 | ) | (.15 | ) | (.39 | ) | 14.95 | 8.95 | 844 | .34 | .34 | 1.20 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.38 | .28 | .73 | 1.01 | (.29 | ) | — | (.29 | ) | 14.10 | 7.68 | 636 | .38 | .38 | 2.06 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .25 | (.51 | ) | (.26 | ) | (.25 | ) | — | (.25 | ) | 13.38 | (1.90 | ) | 386 | .39 | .39 | 1.87 | ||||||||||||||||||||||||||||||||||
| Class F-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.22 | .36 | (1.43 | ) | (1.07 | ) | (.36 | ) | — | (.36 | ) | 12.79 | (7.56 | ) | 879 | .24 | .24 | 2.64 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .15 | (.14 | ) | .01 | (.18 | ) | (.56 | ) | (.74 | ) | 14.22 | .02 | 718 | .21 | .21 | 1.05 | |||||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .18 | 1.07 | 1.25 | (.25 | ) | (.15 | ) | (.40 | ) | 14.95 | 9.06 | 629 | .23 | .23 | 1.26 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.38 | .30 | .73 | 1.03 | (.31 | ) | — | (.31 | ) | 14.10 | 7.79 | 369 | .27 | .27 | 2.17 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .27 | (.52 | ) | (.25 | ) | (.26 | ) | — | (.26 | ) | 13.38 | (1.79 | ) | 197 | .28 | .28 | 1.98 | ||||||||||||||||||||||||||||||||||
| Class 529-A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .28 | (1.41 | ) | (1.13 | ) | (.30 | ) | — | (.30 | ) | 12.78 | (8.00 | ) | 177 | .63 | .63 | 2.06 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .09 | (.14 | ) | (.05 | ) | (.13 | ) | (.56 | ) | (.69 | ) | 14.21 | (.36 | ) | 216 | .60 | .60 | .62 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .13 | 1.06 | 1.19 | (.19 | ) | (.15 | ) | (.34 | ) | 14.95 | 8.63 | 246 | .63 | .63 | .89 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .24 | .74 | .98 | (.25 | ) | — | (.25 | ) | 14.10 | 7.33 | 160 | .70 | .70 | 1.73 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .21 | (.53 | ) | (.32 | ) | (.20 | ) | — | (.20 | ) | 13.37 | (2.21 | ) | 135 | .70 | .70 | 1.53 | ||||||||||||||||||||||||||||||||||
Refer to the end of the table for footnotes.
| 30 | U.S. Government Securities Fund |
Financial highlights (continued)
| (Loss) income from investment operations1 |
Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Year ended | Net asset value, beginning of year |
Net investment income (loss) |
Net (losses) gains on securities (both realized and unrealized) |
Total from investment operations |
Dividends (from net investment income) |
Distributions (from capital gains) |
Total dividends and distributions |
Net asset value, end of year |
Total return2,3 | Net assets, end of year (in millions) |
Ratio of expenses to average net assets before reimburse- ments4 |
Ratio of expenses to average net assets after reimburse- ments3,4 |
Ratio of net income (loss) to average net assets3 |
|||||||||||||||||||||||||||||||||||||||
| Class 529-C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | $ | 14.12 | $ | .17 | $ | (1.39 | ) | $ | (1.22 | ) | $ | (.22 | ) | $ | — | $ | (.22 | ) | $ | 12.68 | (8.70 | )% | $ | 10 | 1.40 | % | 1.40 | % | 1.22 | % | ||||||||||||||||||||||
| 8/31/2021 | 14.89 | (.02 | ) | (.14 | ) | (.16 | ) | (.05 | ) | (.56 | ) | (.61 | ) | 14.12 | (1.10 | ) | 14 | 1.34 | 1.34 | (.14 | ) | |||||||||||||||||||||||||||||||
| 8/31/2020 | 14.05 | .03 | 1.06 | 1.09 | (.10 | ) | (.15 | ) | (.25 | ) | 14.89 | 7.87 | 18 | 1.37 | 1.37 | .23 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.33 | .13 | .74 | .87 | (.15 | ) | — | (.15 | ) | 14.05 | 6.59 | 29 | 1.42 | 1.42 | 1.00 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.84 | .10 | (.51 | ) | (.41 | ) | (.10 | ) | — | (.10 | ) | 13.33 | (2.94 | ) | 32 | 1.45 | 1.45 | .76 | ||||||||||||||||||||||||||||||||||
| Class 529-E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .25 | (1.40 | ) | (1.15 | ) | (.28 | ) | — | (.28 | ) | 12.78 | (8.18 | ) | 9 | .85 | .85 | 1.81 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .06 | (.15 | ) | (.09 | ) | (.09 | ) | (.56 | ) | (.65 | ) | 14.21 | (.58 | ) | 12 | .82 | .82 | .39 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .10 | 1.06 | 1.16 | (.16 | ) | (.15 | ) | (.31 | ) | 14.95 | 8.40 | 14 | .85 | .85 | .68 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .21 | .74 | .95 | (.22 | ) | — | (.22 | ) | 14.10 | 7.11 | 10 | .91 | .91 | 1.52 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .18 | (.53 | ) | (.35 | ) | (.17 | ) | — | (.17 | ) | 13.37 | (2.42 | ) | 8 | .92 | .92 | 1.30 | ||||||||||||||||||||||||||||||||||
| Class 529-T: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .32 | (1.42 | ) | (1.10 | ) | (.33 | ) | — | (.33 | ) | 12.78 | (7.79 | )5 | — | 6 | .40 | 5 | .40 | 5 | 2.33 | 5 | ||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .12 | (.15 | ) | (.03 | ) | (.15 | ) | (.56 | ) | (.71 | ) | 14.21 | (.16 | )5 | — | 6 | .40 | 5 | .40 | 5 | .84 | 5 | |||||||||||||||||||||||||||||
| 8/31/2020 | 14.09 | .17 | 1.06 | 1.23 | (.22 | ) | (.15 | ) | (.37 | ) | 14.95 | 8.93 | 5 | — | 6 | .43 | 5 | .43 | 5 | 1.15 | 5 | |||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .26 | .74 | 1.00 | (.28 | ) | — | (.28 | ) | 14.09 | 7.57 | 5 | — | 6 | .48 | 5 | .48 | 5 | 1.95 | 5 | ||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .23 | (.52 | ) | (.29 | ) | (.23 | ) | — | (.23 | ) | 13.37 | (2.06 | )5 | — | 6 | .49 | 5 | .49 | 5 | 1.74 | 5 | ||||||||||||||||||||||||||||||
| Class 529-F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .31 | (1.41 | ) | (1.10 | ) | (.33 | ) | — | (.33 | ) | 12.78 | (7.83 | )5 | — | 6 | .46 | 5 | .46 | 5 | 2.28 | 5 | ||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .08 | (.11 | ) | (.03 | ) | (.15 | ) | (.56 | ) | (.71 | ) | 14.21 | (.17 | )5 | — | 6 | .35 | 5 | .35 | 5 | .52 | 5 | |||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .16 | 1.07 | 1.23 | (.23 | ) | (.15 | ) | (.38 | ) | 14.95 | 8.87 | 28 | .40 | .40 | 1.14 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .27 | .74 | 1.01 | (.28 | ) | — | (.28 | ) | 14.10 | 7.58 | 21 | .46 | .46 | 1.97 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .24 | (.53 | ) | (.29 | ) | (.23 | ) | — | (.23 | ) | 13.37 | (1.98 | ) | 15 | .47 | .47 | 1.77 | ||||||||||||||||||||||||||||||||||
| Class 529-F-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.22 | .32 | (1.41 | ) | (1.09 | ) | (.34 | ) | — | (.34 | ) | 12.79 | (7.74 | ) | 24 | .36 | .36 | 2.38 | ||||||||||||||||||||||||||||||||||
| 8/31/20217,8 | 14.89 | .11 | (.09 | ) | .02 | (.13 | ) | (.56 | ) | (.69 | ) | 14.22 | .18 | 9 | 27 | .38 | 10 | .38 | 10 | .94 | 10 | |||||||||||||||||||||||||||||||
| Class 529-F-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.22 | .33 | (1.41 | ) | (1.08 | ) | (.35 | ) | — | (.35 | ) | 12.79 | (7.68 | ) | — | 6 | .30 | .30 | 2.44 | |||||||||||||||||||||||||||||||||
| 8/31/20217,8 | 14.89 | .12 | (.08 | ) | .04 | (.15 | ) | (.56 | ) | (.71 | ) | 14.22 | .25 | 9 | — | 6 | .36 | 10 | .29 | 10 | 1.04 | 10 | ||||||||||||||||||||||||||||||
| Class R-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.15 | .19 | (1.40 | ) | (1.21 | ) | (.23 | ) | — | (.23 | ) | 12.71 | (8.62 | ) | 7 | 1.31 | 1.31 | 1.37 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.91 | — | 11 | (.15 | ) | (.15 | ) | (.05 | ) | (.56 | ) | (.61 | ) | 14.15 | (1.02 | ) | 10 | 1.28 | 1.28 | (.01 | ) | |||||||||||||||||||||||||||||||
| 8/31/2020 | 14.07 | .04 | 1.05 | 1.09 | (.10 | ) | (.15 | ) | (.25 | ) | 14.91 | 7.87 | 9 | 1.34 | 1.34 | .26 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.35 | .14 | .74 | .88 | (.16 | ) | — | (.16 | ) | 14.07 | 6.63 | 10 | 1.38 | 1.38 | 1.05 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.86 | .11 | (.51 | ) | (.40 | ) | (.11 | ) | — | (.11 | ) | 13.35 | (2.89 | ) | 8 | 1.40 | 1.40 | .82 | ||||||||||||||||||||||||||||||||||
Refer to the end of the table for footnotes.
| U.S. Government Securities Fund | 31 |
Financial highlights (continued)
| (Loss) income from investment operations1 |
Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Year ended | Net asset value, beginning of year |
Net investment income (loss) |
Net (losses) gains on securities (both realized and unrealized) |
Total from investment operations |
Dividends (from net investment income) |
Distributions (from capital gains) |
Total dividends and distributions |
Net asset value, end of year |
Total return2,3 | Net assets, end of year (in millions) |
Ratio of expenses to average net assets before reimburse- ments4 |
Ratio of expenses to average net assets after reimburse- ments3,4 |
Ratio of net income (loss) to average net assets3 |
|||||||||||||||||||||||||||||||||||||||
| Class R-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | $ | 14.15 | $ | .19 | $ | (1.40 | ) | $ | (1.21 | ) | $ | (.23 | ) | $ | — | $ | (.23 | ) | $ | 12.71 | (8.62 | )% | $ | 89 | 1.32 | % | 1.32 | % | 1.37 | % | ||||||||||||||||||||||
| 8/31/2021 | 14.91 | (.01 | ) | (.14 | ) | (.15 | ) | (.05 | ) | (.56 | ) | (.61 | ) | 14.15 | (1.04 | ) | 107 | 1.30 | 1.30 | (.09 | ) | |||||||||||||||||||||||||||||||
| 8/31/2020 | 14.06 | .03 | 1.07 | 1.10 | (.10 | ) | (.15 | ) | (.25 | ) | 14.91 | 7.97 | 128 | 1.32 | 1.32 | .23 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.34 | .14 | .74 | .88 | (.16 | ) | — | (.16 | ) | 14.06 | 6.57 | 102 | 1.36 | 1.36 | 1.06 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.86 | .11 | (.52 | ) | (.41 | ) | (.11 | ) | — | (.11 | ) | 13.34 | (2.87 | ) | 99 | 1.37 | 1.37 | .85 | ||||||||||||||||||||||||||||||||||
| Class R-2E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .22 | (1.41 | ) | (1.19 | ) | (.25 | ) | — | (.25 | ) | 12.77 | (8.40 | ) | 9 | 1.05 | 1.05 | 1.60 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .03 | (.14 | ) | (.11 | ) | (.07 | ) | (.56 | ) | (.63 | ) | 14.21 | (.75 | ) | 12 | 1.02 | 1.02 | .19 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .05 | 1.09 | 1.14 | (.14 | ) | (.15 | ) | (.29 | ) | 14.95 | 8.19 | 12 | 1.04 | 1.04 | .45 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .18 | .75 | .93 | (.20 | ) | — | (.20 | ) | 14.10 | 6.92 | 6 | 1.09 | 1.09 | 1.36 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .15 | (.52 | ) | (.37 | ) | (.15 | ) | — | (.15 | ) | 13.37 | (2.61 | ) | 3 | 1.12 | 1.12 | 1.11 | ||||||||||||||||||||||||||||||||||
| Class R-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .25 | (1.41 | ) | (1.16 | ) | (.27 | ) | — | (.27 | ) | 12.78 | (8.21 | ) | 114 | .89 | .89 | 1.80 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .05 | (.14 | ) | (.09 | ) | (.09 | ) | (.56 | ) | (.65 | ) | 14.21 | (.62 | ) | 137 | .87 | .87 | .34 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.09 | .09 | 1.08 | 1.17 | (.16 | ) | (.15 | ) | (.31 | ) | 14.95 | 8.41 | 159 | .91 | .91 | .63 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .20 | .74 | .94 | (.22 | ) | — | (.22 | ) | 14.09 | 7.00 | 116 | .95 | .95 | 1.47 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .17 | (.52 | ) | (.35 | ) | (.17 | ) | — | (.17 | ) | 13.37 | (2.46 | ) | 119 | .96 | .96 | 1.26 | ||||||||||||||||||||||||||||||||||
| Class R-4: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.22 | .29 | (1.41 | ) | (1.12 | ) | (.31 | ) | — | (.31 | ) | 12.79 | (7.95 | ) | 105 | .59 | .59 | 2.11 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .09 | (.13 | ) | (.04 | ) | (.13 | ) | (.56 | ) | (.69 | ) | 14.22 | (.25 | ) | 129 | .56 | .56 | .62 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .14 | 1.06 | 1.20 | (.20 | ) | (.15 | ) | (.35 | ) | 14.95 | 8.69 | 179 | .58 | .58 | .98 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.38 | .24 | .74 | .98 | (.26 | ) | — | (.26 | ) | 14.10 | 7.41 | 146 | .62 | .62 | 1.80 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .21 | (.51 | ) | (.30 | ) | (.21 | ) | — | (.21 | ) | 13.38 | (2.13 | ) | 154 | .63 | .63 | 1.58 | ||||||||||||||||||||||||||||||||||
| Class R-5E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .32 | (1.41 | ) | (1.09 | ) | (.34 | ) | — | (.34 | ) | 12.78 | (7.77 | ) | 39 | .39 | .39 | 2.35 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .15 | (.17 | ) | (.02 | ) | (.16 | ) | (.56 | ) | (.72 | ) | 14.21 | (.12 | ) | 40 | .36 | .36 | 1.08 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.09 | .15 | 1.09 | 1.24 | (.23 | ) | (.15 | ) | (.38 | ) | 14.95 | 8.98 | 16 | .37 | .37 | 1.00 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .28 | .73 | 1.01 | (.29 | ) | — | (.29 | ) | 14.09 | 7.56 | 4 | .42 | .42 | 2.02 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .26 | (.54 | ) | (.28 | ) | (.24 | ) | — | (.24 | ) | 13.37 | (1.91 | ) | 2 | .41 | .41 | 1.98 | ||||||||||||||||||||||||||||||||||
| Class R-5: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.22 | .32 | (1.40 | ) | (1.08 | ) | (.35 | ) | — | (.35 | ) | 12.79 | (7.68 | ) | 46 | .29 | .29 | 2.32 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .14 | (.14 | ) | — | 11 | (.17 | ) | (.56 | ) | (.73 | ) | 14.22 | (.03 | ) | 64 | .27 | .27 | .96 | |||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .19 | 1.05 | 1.24 | (.24 | ) | (.15 | ) | (.39 | ) | 14.95 | 9.08 | 68 | .28 | .28 | 1.31 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.38 | .29 | .73 | 1.02 | (.30 | ) | — | (.30 | ) | 14.10 | 7.74 | 63 | .32 | .32 | 2.11 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .26 | (.52 | ) | (.26 | ) | (.25 | ) | — | (.25 | ) | 13.38 | (1.84 | ) | 63 | .33 | .33 | 1.90 | ||||||||||||||||||||||||||||||||||
| Class R-6: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/31/2022 | 14.21 | .33 | (1.40 | ) | (1.07 | ) | (.36 | ) | — | (.36 | ) | 12.78 | (7.64 | ) | 13,117 | .24 | .24 | 2.46 | ||||||||||||||||||||||||||||||||||
| 8/31/2021 | 14.95 | .15 | (.15 | ) | — | 11 | (.18 | ) | (.56 | ) | (.74 | ) | 14.21 | .03 | 16,161 | .21 | .21 | 1.07 | ||||||||||||||||||||||||||||||||||
| 8/31/2020 | 14.10 | .20 | 1.05 | 1.25 | (.25 | ) | (.15 | ) | (.40 | ) | 14.95 | 9.07 | 12,011 | .23 | .23 | 1.36 | ||||||||||||||||||||||||||||||||||||
| 8/31/2019 | 13.37 | .29 | .75 | 1.04 | (.31 | ) | — | (.31 | ) | 14.10 | 7.80 | 9,928 | .27 | .27 | 2.17 | |||||||||||||||||||||||||||||||||||||
| 8/31/2018 | 13.89 | .27 | (.53 | ) | (.26 | ) | (.26 | ) | — | (.26 | ) | 13.37 | (1.78 | ) | 7,867 | .27 | .27 | 1.98 | ||||||||||||||||||||||||||||||||||
Refer to the end of the table for footnotes.
| 32 | U.S. Government Securities Fund |
Financial highlights (continued)
| Year ended August 31, | ||||||||||||||||||||
| Portfolio turnover rate for all share classes12,13 | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||
| Excluding mortgage dollar roll transactions | 73 | % | 96 | % | 133 | % | 113 | % | 95 | % | ||||||||||
| Including mortgage dollar roll transactions | 488 | % | 631 | % | 720 | % | 350 | % | 383 | % | ||||||||||
| 1 | Based on average shares outstanding. |
| 2 | Total returns exclude any applicable sales charges, including contingent deferred sales charges. |
| 3 | This column reflects the impact, if any, of certain reimbursements from CRMC. During one of the years shown, CRMC reimbursed a portion of transfer agent services fees for Class 529-F-3. |
| 4 | Ratios do not include expenses of any Central Funds. The fund indirectly bears its proportionate share of the expenses of any Central Funds. |
| 5 | All or a significant portion of assets in this class consisted of seed capital invested by CRMC and/or its affiliates. Fees for distribution services are not charged or accrued on these seed capital assets. If such fees were paid by the fund on seed capital assets, fund expenses would have been higher and net income and total return would have been lower. |
| 6 | Amount less than $1 million. |
| 7 | Based on operations for a period that is less than a full year. |
| 8 | Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020. |
| 9 | Not annualized. |
| 10 | Annualized. |
| 11 | Amount less than $.01. |
| 12 | Refer to Note 5 for more information on mortgage dollar rolls. |
| 13 | Rates do not include the fund’s portfolio activity with respect to any Central Funds. |
Refer to the notes to financial statements.
| U.S. Government Securities Fund | 33 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of U.S. Government Securities Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of U.S. Government Securities Fund, the fund constituting the American Funds Income Series (the “Fund”), as of August 31, 2022, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2022, and 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 financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Costa Mesa, California
October 10, 2022
We have served as the auditor of one or more American Funds investment companies since 1956.
| 34 | U.S. Government Securities Fund |