N-CSRS 1 gvt_ncsrs.htm N-CSRS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

Certified Shareholder Report of

Registered Management Investment Companies

 

Investment Company Act File Number: 811-04318

 

The American Funds Income Series

(Exact Name of Registrant as Specified in Charter)

 

333 South Hope Street

Los Angeles, California 90071

(Address of Principal Executive Offices)

 

Registrant's telephone number, including area code: (949) 975-5000

 

Date of fiscal year end: August 31

 

Date of reporting period: February 28, 2021

 

Brian C. Janssen

The American Funds Income Series

6455 Irvine Center Drive

Irvine, California 92618

(Name and Address of Agent for Service)

 
 

 

ITEM 1 – Reports to Stockholders

 

U.S. Government
Securities Fund
®  
 
Semi-annual report
for the six months ended
February 28, 2021

 

Seeking stability in
uncertain markets

 

 

U.S. Government Securities Fund seeks to provide a high level of current income consistent with prudent investment risk and preservation of capital.

 

This fund is one of more than 40 offered by Capital Group, home of American Funds, one of the nation’s largest mutual fund families. For nearly 90 years, Capital Group has invested with a long-term focus based on thorough research and attention to risk.

 

Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 3.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com.

 

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended March 31, 2021 (the most recent calendar quarter-end):

 

Class A shares   1 year   5 years   10 years
             
Reflecting 3.75% maximum sales charge   –5.01%   1.55%   2.31%

 

For other share class results, visit capitalgroup.com and americanfundsretirement.com.

 

The total annual fund operating expense ratio was 0.66% for Class A shares as of the prospectus dated October 30, 2020.

 

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect fee waivers, without which results would have been lower. Visit capitalgroup.com for more information.

 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Refer to the fund prospectus and the Risk Factors section of this report for more information on these and other risks associated with investing in the fund.

 

Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government.

 

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

 

Fellow investors:

 

Results for U.S. Government Securities Fund for the periods ended February 28, 2021, are shown in the table below, as well as results of the fund’s benchmark and peer group.

 

For additional information about the fund, its investment results, holdings and portfolio managers, visit capitalgroup.com/individual/investments/fund/ GVTFX. You can also access information about Capital Group’s American Funds and read our insights about the markets, retirement, saving for college, investing fundamentals and more at capitalgroup.com.

 

Contents

 

1 Results at a glance
   
2 Investment portfolio
   
15 Financial statements
   
18 Notes to financial statements
   
29 Financial highlights

 

Results at a glance

 

For periods ended February 28, 2021, with dividends reinvested

 

    Total returns   Average annual total returns
    1 year   5 years   10 years   Lifetime
(since 10/17/85)
                 
U.S. Government Securities Fund (Class A shares)     3.40 %     2.71 %     2.82 %     5.42 %
Bloomberg Barclays U.S. Government/Mortgage-Backed Securities Index*     0.63       2.62       2.96       6.18  
Lipper General U.S. Government Funds Average     0.51       2.27       2.69       5.53  
                                 
* Bloomberg Barclays U.S. Government/Mortgage-Backed Securities Index is a market value-weighted index that covers fixed-rate, publicly placed, dollar denominated obligations issued by the U.S. Treasury, U.S. government agencies, quasi-federal corporations, corporate or foreign debt guaranteed by the U.S. government, and the mortgage-backed pass-through securities of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. This index is unmanaged, and its results include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes. Investors cannot invest directly in an index. Source: Bloomberg Index Services Ltd.
Lipper averages reflect the current composition of all eligible mutual funds (all share classes) within a given category. Lipper categories are dynamic and averages may have few funds, especially over longer periods. Source: Refinitiv Lipper. To see the number of funds included in the Lipper category for each fund’s lifetime, please see the Quarterly Statistical Update, available on our website.
   

 

The fund’s 30-day yield for Class A shares as of March 31, 2021, calculated in accordance with the U.S. Securities and Exchange Commission (SEC) formula, was 0.31%. The fund’s 12-month distribution rate for Class A shares as of that date was 0.68%. Both reflect the 3.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.

 

U. S. Government Securities Fund 1
 

Investment portfolio February 28, 2021
unaudited
   
Portfolio by type of security Percent of net assets

 

 

Portfolio quality summary*   Percent of
net assets
 
U.S. Treasury and agency     54.94 %
AAA/Aaa     21.63  
AA/Aa     .18  
Short-term securities & other assets less liabilities     23.25  
         
* 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.
These securities are guaranteed by the full faith and credit of the U.S. government.
   
Bonds, notes & other debt instruments 76.75%   Principal amount
(000)
    Value
(000)
 
U.S. Treasury bonds & notes 51.82%            
U.S. Treasury 45.27%                
U.S. Treasury (3-month U.S. Treasury Bill Yield + 0.30%) 0.33% 20211   $ 200,000     $ 200,416  
U.S. Treasury 1.50% 2021     93,000       93,992  
U.S. Treasury 0.125% 2022     96,631       96,645  
U.S. Treasury 0.125% 2022     65,000       65,027  
U.S. Treasury 0.125% 2022     48,415       48,427  
U.S. Treasury 0.125% 2022     30,116       30,122  
U.S. Treasury 1.375% 2022     10,000       10,118  
U.S. Treasury 1.50% 2022     135,000       137,744  
U.S. Treasury 1.50% 2022     25,000       25,533  
U.S. Treasury 1.75% 2022     48,600       49,606  
U.S. Treasury 1.875% 2022     34,000       34,943  
U.S. Treasury 2.00% 2022     67,750       69,866  
U.S. Treasury 0.50% 2023     30,000       30,218  
U.S. Treasury 1.50% 2023     20,000       20,512  
U.S. Treasury 1.625% 2023     13,000       13,412  
U.S. Treasury 2.625% 2023     131,950       138,497  
U.S. Treasury 2.625% 2023     30,888       32,663  
U.S. Treasury 2.75% 2023     64,293       68,014  
U.S. Treasury 2.75% 2023     35,200       37,385  
U.S. Treasury 2.875% 2023     90,800       97,377  
U.S. Treasury 2.875% 2023     16,500       17,666  
U.S. Treasury 1.50% 20242     288,000       299,321  
U.S. Treasury 1.50% 2024     123,000       127,818  
U.S. Treasury 1.50% 2024     36,500       37,941  
U.S. Treasury 1.75% 2024     204,000       214,024  
U.S. Treasury 1.75% 2024     53,722       56,205  
U.S. Treasury 2.00% 2024     158,000       166,392  
U.S. Treasury 2.00% 2024     45,000       47,463  
U.S. Treasury 2.00% 2024     17,400       18,337  
U.S. Treasury 2.25% 2024     57,250       61,102  
U.S. Treasury 0.25% 2025     266,000       261,992  
U.S. Treasury 0.25% 2025     171,000       168,200  
U.S. Treasury 0.25% 2025     128,150       125,795  
U.S. Treasury 0.25% 2025     37,000       36,356  
U.S. Treasury 0.25% 2025     900       887  
U.S. Treasury 0.375% 2025     753,000       741,776  
                 
2 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 0.375% 2025   $ 227,000     $ 223,881  
U.S. Treasury 2.125% 2025     6,500       6,931  
U.S. Treasury 2.25% 2025     11,000       11,817  
U.S. Treasury 2.625% 2025     20,000       21,855  
U.S. Treasury 2.75% 2025     38,000       41,408  
U.S. Treasury 2.875% 20252     82,200       90,416  
U.S. Treasury 2.875% 2025     55,500       60,924  
U.S. Treasury 2.875% 2025     20,000       21,936  
U.S. Treasury 0.375% 2026     926,600       911,819  
U.S. Treasury 0.50% 2026     3,000       2,966  
U.S. Treasury 1.375% 2026     35,000       36,037  
U.S. Treasury 1.625% 2026     25,775       26,859  
U.S. Treasury 1.75% 2026     63,900       67,047  
U.S. Treasury 1.875% 2026     25,500       26,956  
U.S. Treasury 1.875% 2026     10,000       10,572  
U.S. Treasury 2.125% 2026     35,750       38,253  
U.S. Treasury 2.25% 2026     5,200       5,595  
U.S. Treasury 2.375% 2026     50,000       54,134  
U.S. Treasury 2.625% 2026     73,800       80,702  
U.S. Treasury 0.375% 2027     89,750       86,207  
U.S. Treasury 0.375% 2027     70,750       67,734  
U.S. Treasury 0.50% 2027     47,750       46,032  
U.S. Treasury 0.50% 2027     44,000       42,525  
U.S. Treasury 0.50% 2027     14,000       13,576  
U.S. Treasury 0.625% 2027     348,337       337,748  
U.S. Treasury 2.375% 2027     10,000       10,858  
U.S. Treasury 0.75% 2028     24,974       24,396  
U.S. Treasury 2.875% 2028     10,000       11,233  
U.S. Treasury 0.625% 2030     43,000       40,319  
U.S. Treasury 0.625% 2030     30,950       28,918  
U.S. Treasury 0.875% 2030     526,465       502,340  
U.S. Treasury 6.25% 2030     5,250       7,535  
U.S. Treasury 1.125% 2031     1,300       1,268  
U.S. Treasury 5.00% 2037     1,000       1,463  
U.S. Treasury 1.125% 2040     176,350       150,881  
U.S. Treasury 1.125% 2040     143,300       123,289  
U.S. Treasury 1.375% 2040     10,914       9,761  
U.S. Treasury 4.625% 2040     5,600       8,065  
U.S. Treasury 1.875% 2041     60,963       59,548  
U.S. Treasury 3.125% 2041     10,000       11,960  
U.S. Treasury 4.375% 2041     7,000       9,867  
U.S. Treasury 2.75% 2042     27,000       30,261  
U.S. Treasury 2.75% 2042     6,000       6,773  
U.S. Treasury 2.875% 2043     10,880       12,522  
U.S. Treasury 3.375% 2044     18,500       23,024  
U.S. Treasury 2.875% 2045     5,000       5,762  
U.S. Treasury 3.00% 2045     3,500       4,124  
U.S. Treasury 3.00% 2045     3,350       3,942  
U.S. Treasury 2.50% 2046     50,000       53,899  
U.S. Treasury, principal only, 0% 2047     1,000       561  
U.S. Treasury 2.75% 2047     7,250       8,212  
U.S. Treasury 2.75% 2047     3,000       3,397  
U.S. Treasury 3.00% 2047     54,200       64,166  
U.S. Treasury 3.00% 2048     6,000       7,135  
U.S. Treasury 3.00% 2048     3,000       3,561  
U.S. Treasury 3.125% 2048     6,500       7,893  
U.S. Treasury 3.375% 2048     6,572       8,358  
U.S. Treasury 2.25% 2049     26,050       26,848  
U.S. Treasury 2.375% 2049     88,250       93,408  
U.S. Treasury 2.875% 20492     94,000       109,723  
U.S. Treasury 3.00% 20492     56,947       67,906  
U.S. Treasury 1.25% 20502     487,450       393,960  
U.S. Treasury 1.375% 2050     777,675       649,843  
U.S. Treasury 1.625% 20502     1,070,706       953,641  
U.S. Treasury 2.00% 2050     241,408       235,517  
U.S. Treasury 1.875% 2051     35,294       33,412  
              9,825,271  
   
U. S. Government Securities Fund 3
 
Bonds, notes & other debt instruments (continued)   Principal amount
(000)
    Value
(000)
 
U.S. Treasury bonds & notes (continued)            
U.S. Treasury inflation-protected securities 6.55%                
U.S. Treasury Inflation-Protected Security 0.125% 20213   $ 489,046     $ 492,477  
U.S. Treasury Inflation-Protected Security 0.125% 20223     79,750       81,628  
U.S. Treasury Inflation-Protected Security 0.625% 20233     33,975       36,119  
U.S. Treasury Inflation-Protected Security 0.125% 20303     152,485       167,310  
U.S. Treasury Inflation-Protected Security 0.125% 20303     45,861       50,172  
U.S. Treasury Inflation-Protected Security 0.125% 20313     202,508       221,138  
U.S. Treasury Inflation-Protected Security 2.125% 20413     3,271       4,838  
U.S. Treasury Inflation-Protected Security 0.75% 20422,3     98,604       117,238  
U.S. Treasury Inflation-Protected Security 0.875% 20473     15,214       18,839  
U.S. Treasury Inflation-Protected Security 1.00% 20492,3     51,134       65,860  
U.S. Treasury Inflation-Protected Security 0.25% 20503     2,214       2,390  
U.S. Treasury Inflation-Protected Security 0.125% 20513     158,334       164,413  
              1,422,422  
                 
Total U.S. Treasury bonds & notes             11,247,693  
                 
Mortgage-backed obligations 21.81%                
Federal agency mortgage-backed obligations 21.81%                
Fannie Mae Pool #AH2358 4.00% 20264     903       963  
Fannie Mae Pool #AI4191 4.00% 20264     502       536  
Fannie Mae Pool #256740 4.50% 20274     12       12  
Fannie Mae Pool #257055 6.50% 20274     293       333  
Fannie Mae Pool #256993 6.50% 20274     128       144  
Fannie Mae Pool #AZ4646 3.50% 20304     174       187  
Fannie Mae Pool #AZ0554 3.50% 20304     149       161  
Fannie Mae Pool #AY1948 3.50% 20304     124       134  
Fannie Mae Pool #AS7323 2.50% 20314     1,731       1,835  
Fannie Mae Pool #735571 8.00% 20314     160       175  
Fannie Mae Pool #FM1162 2.50% 20324     1,640       1,734  
Fannie Mae Pool #BM1036 2.50% 20324     194       205  
Fannie Mae Pool #AS8610 3.00% 20324     206       217  
Fannie Mae Pool #BJ7193 3.00% 20334     755       813  
Fannie Mae Pool #CA1442 3.00% 20334     692       746  
Fannie Mae Pool #BJ4573 3.00% 20334     499       530  
Fannie Mae Pool #BJ5302 3.00% 20334     417       440  
Fannie Mae Pool #695412 5.00% 20334     4       5  
Fannie Mae Pool #BO6247 2.50% 20344     6,872       7,228  
Fannie Mae Pool #FM1490 3.50% 20344     4,341       4,677  
Fannie Mae Pool #BN1085 4.00% 20344     15       15  
Fannie Mae Pool #BN3172 4.00% 20344     11       12  
Fannie Mae Pool #AD3566 5.00% 20354     54       60  
Fannie Mae Pool #MA2787 4.00% 20364     12,188       13,395  
Fannie Mae Pool #MA2588 4.00% 20364     7,289       8,010  
Fannie Mae Pool #MA2717 4.00% 20364     5,754       6,337  
Fannie Mae Pool #MA2746 4.00% 20364     5,288       5,812  
Fannie Mae Pool #AS6870 4.00% 20364     3,389       3,724  
Fannie Mae Pool #MA2819 4.00% 20364     679       744  
Fannie Mae Pool #MA2856 4.00% 20364     19       21  
Fannie Mae Pool #MA3099 4.00% 20374     6,138       6,709  
Fannie Mae Pool #256860 6.50% 20374     65       77  
Fannie Mae Pool #256810 6.50% 20374     53       61  
Fannie Mae Pool #888372 6.50% 20374     25       29  
Fannie Mae Pool #888698 7.00% 20374     128       148  
Fannie Mae Pool #256828 7.00% 20374     15       17  
Fannie Mae Pool #923171 7.50% 20374     3       3  
Fannie Mae Pool #889101 1.63% 20381,4     48       50  
Fannie Mae Pool #964279 2.633% 20381,4     47       48  
Fannie Mae Pool #964708 2.765% 20381,4     6       6  
Fannie Mae Pool #970343 6.00% 20384     36       37  
Fannie Mae Pool #889388 7.00% 20384     172       203  
Fannie Mae Pool #AC0794 5.00% 20394     258       301  
Fannie Mae Pool #931768 5.00% 20394     44       51  
Fannie Mae Pool #AE7629 2.273% 20401,4     21       22  
Fannie Mae Pool #AL9335 2.441% 20401,4     1,913       2,023  
Fannie Mae Pool #932606 5.00% 20404     135       157  
Fannie Mae Pool #AE0844 2.189% 20411,4     160       169  
Fannie Mae Pool #AE0789 2.29% 20411,4     146       154  
Fannie Mae Pool #AL9531 2.565% 20411,4     1,473       1,557  
                 
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 #AL9327 2.777% 20411,4   $ 1,752     $ 1,848  
Fannie Mae Pool #AL0073 2.90% 20411,4     107       112  
Fannie Mae Pool #AL9326 2.961% 20411,4     2,402       2,533  
Fannie Mae Pool #AJ1873 4.00% 20414     292       330  
Fannie Mae Pool #AH0351 4.50% 20414     654       737  
Fannie Mae Pool #AI1862 5.00% 20414     1,083       1,261  
Fannie Mae Pool #AI3510 5.00% 20414     642       747  
Fannie Mae Pool #AJ0704 5.00% 20414     596       693  
Fannie Mae Pool #AJ5391 5.00% 20414     341       394  
Fannie Mae Pool #AE1248 5.00% 20414     306       352  
Fannie Mae Pool #AE1274 5.00% 20414     242       281  
Fannie Mae Pool #AE1277 5.00% 20414     141       162  
Fannie Mae Pool #AE1283 5.00% 20414     82       94  
Fannie Mae Pool #AP7819 2.24% 20421,4     137       143  
Fannie Mae Pool #AL2000 2.503% 20421,4     196       204  
Fannie Mae Pool #AL9532 2.539% 20421,4     1,744       1,821  
Fannie Mae Pool #AL2184 2.616% 20421,4     307       321  
Fannie Mae Pool #AL1941 2.768% 20421,4     196       204  
Fannie Mae Pool #AL9533 2.839% 20421,4     796       833  
Fannie Mae Pool #AL9530 2.941% 20421,4     1,148       1,204  
Fannie Mae Pool #AJ9327 3.50% 20424     41       44  
Fannie Mae Pool #AE1290 5.00% 20424     170       195  
Fannie Mae Pool #AT5898 3.00% 20434     13,708       14,590  
Fannie Mae Pool #AL3829 3.50% 20434     1,815       1,987  
Fannie Mae Pool #AT7161 3.50% 20434     550       601  
Fannie Mae Pool #AR1512 3.50% 20434     398       436  
Fannie Mae Pool #AT0412 3.50% 20434     203       222  
Fannie Mae Pool #AT3954 3.50% 20434     142       155  
Fannie Mae Pool #AT0300 3.50% 20434     110       119  
Fannie Mae Pool #BM6240 2.38% 20441,4     7,597       7,968  
Fannie Mae Pool #AX8521 3.50% 20444     203       223  
Fannie Mae Pool #AY1829 3.50% 20444     143       154  
Fannie Mae Pool #AW8240 3.50% 20444     39       42  
Fannie Mae Pool #BE5017 3.50% 20454     954       1,036  
Fannie Mae Pool #BE5009 3.50% 20454     774       835  
Fannie Mae Pool #AY3880 4.00% 20454     143       155  
Fannie Mae Pool #MA2833 3.00% 20464     11,876       12,619  
Fannie Mae Pool #BC3465 4.00% 20464     14       16  
Fannie Mae Pool #AS8804 3.50% 20474     21,344       23,077  
Fannie Mae Pool #CA0770 3.50% 20474     19,423       20,742  
Fannie Mae Pool #MA3120 3.50% 20474     10,831       11,543  
Fannie Mae Pool #BE8740 3.50% 20474     922       1,003  
Fannie Mae Pool #BD2440 3.50% 20474     749       801  
Fannie Mae Pool #BE8742 3.50% 20474     288       315  
Fannie Mae Pool #BH2848 3.50% 20474     126       136  
Fannie Mae Pool #BH2846 3.50% 20474     114       124  
Fannie Mae Pool #BH2847 3.50% 20474     67       73  
Fannie Mae Pool #BH2597 4.00% 20474     12,881       13,920  
Fannie Mae Pool #BJ5015 4.00% 20474     2,784       3,066  
Fannie Mae Pool #BH3122 4.00% 20474     77       83  
Fannie Mae Pool #BM4488 3.383% 20481,4     20,117       20,918  
Fannie Mae Pool #BJ4901 3.50% 20484     645       704  
Fannie Mae Pool #BJ8118 3.50% 20484     201       214  
Fannie Mae Pool #FM2669 4.00% 20484     6,459       6,930  
Fannie Mae Pool #CA2850 4.00% 20484     3,392       3,814  
Fannie Mae Pool #BK6840 4.00% 20484     1,863       2,044  
Fannie Mae Pool #BK5232 4.00% 20484     1,423       1,576  
Fannie Mae Pool #BK9743 4.00% 20484     530       587  
Fannie Mae Pool #BK4740 4.00% 20484     205       220  
Fannie Mae Pool #BJ4342 4.00% 20484     145       157  
Fannie Mae Pool #BJ6169 4.00% 20484     121       130  
Fannie Mae Pool #BK7665 4.50% 20484     8,348       9,332  
Fannie Mae Pool #BK0951 4.50% 20484     6,130       6,852  
Fannie Mae Pool #BN1172 4.50% 20484     386       421  
Fannie Mae Pool #BK9761 4.50% 20484     368       407  
Fannie Mae Pool #BJ8318 4.50% 20484     331       360  
Fannie Mae Pool #BK6577 4.50% 20484     7       8  
                 
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 #BO2264 3.00% 20494   $ 53,083     $ 57,468  
Fannie Mae Pool #FM1505 3.00% 20494     18,781       20,158  
Fannie Mae Pool #BO5177 3.00% 20494     8,160       8,777  
Fannie Mae Pool #BO2890 3.00% 20494     5,770       6,167  
Fannie Mae Pool #BN6708 3.50% 20494     34,228       36,717  
Fannie Mae Pool #BO3252 3.50% 20494     10,099       11,016  
Fannie Mae Pool #CA4151 3.50% 20494     8,907       9,753  
Fannie Mae Pool #FM1062 3.50% 20494     7,945       8,714  
Fannie Mae Pool #FM1443 3.50% 20494     6,480       7,078  
Fannie Mae Pool #FM1220 3.50% 20494     5,593       6,036  
Fannie Mae Pool #FM2656 3.50% 20494     4,633       4,974  
Fannie Mae Pool #BJ8411 3.50% 20494     1,885       2,046  
Fannie Mae Pool #BJ8402 3.547% 20491,4     3,856       4,018  
Fannie Mae Pool #BN3931 4.50% 20494     401       437  
Fannie Mae Pool #CA5229 3.00% 20504     66,640       71,524  
Fannie Mae Pool #CA5509 3.00% 20504     61,954       66,420  
Fannie Mae Pool #CA5536 3.00% 20504     35,886       38,564  
Fannie Mae Pool #CA5539 3.00% 20504     31,713       33,799  
Fannie Mae Pool #FM2179 3.00% 20504     27,644       29,525  
Fannie Mae Pool #FM2822 3.00% 20504     19,202       20,466  
Fannie Mae Pool #CA5338 3.00% 20504     9,197       9,853  
Fannie Mae Pool #FM2777 3.00% 20504     7,556       8,053  
Fannie Mae Pool #FM2664 3.50% 20504     35,944       39,605  
Fannie Mae Pool #FM2839 3.50% 20504     22,034       23,865  
Fannie Mae Pool #FM2389 3.50% 20504     4,000       4,319  
Fannie Mae Pool #FM3834 4.50% 20504     7,025       7,625  
Fannie Mae Pool #MA4256 2.50% 20514     291       302  
Fannie Mae Pool #MA4282 2.50% 20514     277       288  
Fannie Mae, Series 2001-4, Class NA, 9.009% 20251,4     2       2  
Fannie Mae, Series 2001-25, Class ZA, 6.50% 20314     163       184  
Fannie Mae, Series 2006-65, Class PF, (1-month USD-LIBOR + 0.28%) 0.398% 20361,4     422       422  
Fannie Mae, Series 1999-T2, Class A1, 7.50% 20391,4     136       148  
Fannie Mae, Series 2001-T10, Class A1, 7.00% 20414     48       56  
Fannie Mae, Series 2018-M5, Class A2, Multi Family, 3.56% 20211,4     554       558  
Fannie Mae, Series 2012-M13, Class A2, Multi Family, 2.377% 20224     612       625  
Fannie Mae, Series 2015-M4, Class AV2, Multi Family, 2.509% 20221,4     1,243       1,258  
Fannie Mae, Series 2012-M2, Class A2, Multi Family, 2.717% 20224     2,183       2,214  
Fannie Mae, Series 2012-M3, Class 1A2, Multi Family, 3.044% 20224     2,062       2,099  
Fannie Mae, Series 2016-M2, Class AV2, Multi Family, 2.152% 20234     1,871       1,913  
Fannie Mae, Series 2016-M3, Class ASQ2, Multi Family, 2.263% 20234     248       249  
Fannie Mae, Series 2013-M12, Class APT, Multi Family, 2.413% 20231,4     1,519       1,564  
Fannie Mae, Series 2014-M1, Class A2, Multi Family, 3.134% 20231,4     2,539       2,669  
Fannie Mae, Series 2017-M3, Class AV2, Multi Family, 2.522% 20241,4     1,322       1,381  
Fannie Mae, Series 2017-M10, Class AV2, Multi Family, 2.553% 20241,4     1,704       1,801  
Fannie Mae, Series 2017-M15, Class AV2, Multi Family, 2.623% 20241,4     1,473       1,563  
Fannie Mae, Series 2014-M3, Class A2, Multi Family, 3.488% 20241,4     5,061       5,435  
Fannie Mae, Series 2015-M12, Class A1, Multi Family, 2.331% 20254     160       162  
Fannie Mae, Series 2015-M8, Class A1, Multi Family, 2.344% 20254     464       474  
Fannie Mae, Series 2015-M15, Class A1, Multi Family, 2.623% 20254     1,391       1,455  
Fannie Mae, Series 2016-M9, Class A1, Multi Family, 2.003% 20264     270       278  
Fannie Mae, Series 2016-M7, Class A1, Multi Family, 2.037% 20264     419       430  
Fannie Mae, Series 2016-M5, Class A1, Multi Family, 2.073% 20264     1,522       1,574  
Fannie Mae, Series 2016-M11, Class A1, Multi Family, 2.08% 20264     2,236       2,315  
Fannie Mae, Series 2016-M12, Class A1, Multi Family, 2.132% 20264     1,085       1,129  
Fannie Mae, Series 2016-M6, Class A1, Multi Family, 2.137% 20264     1,084       1,128  
Fannie Mae, Series 2016-M4, Class A1, Multi Family, 2.187% 20264     1,035       1,080  
Fannie Mae, Series 2017-M1, Class A1, Multi Family, 2.417% 20261,4     543       553  
Fannie Mae, Series 2016-M1, Class A1, Multi Family, 2.428% 20264     61       61  
Fannie Mae, Series 2017-M3, Class A1, Multi Family, 2.477% 20261,4     808       832  
Fannie Mae, Series 2016-M13, Class A1, Multi Family, 2.483% 20261,4     45       45  
Fannie Mae, Series 2017-M4, Class A1, Multi Family, 2.584% 20261,4     764       792  
Fannie Mae, Series 2017-M7, Class A1, Multi Family, 2.595% 20264     1,573       1,655  
Fannie Mae, Series 2017-M8, Class A1, Multi Family, 2.654% 20274     1,426       1,488  
Fannie Mae, Series 2017-M13, Class A1, Multi Family, 2.746% 20274     143       148  
Fannie Mae, Series 2017-M12, Class A1, Multi Family, 2.747% 20274     35       36  
Fannie Mae, Series 2017-M15, Class ATS1, Multi Family, 2.987% 20274,5     1,420       1,506  
Fannie Mae, Series 2006-83, Class AO, principal only, 0% 20364     590       550  
                 
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)                
Fannie Mae, Series 2006-56, Class OG, principal only, 0% 20364   $ 395     $ 374  
Freddie Mac Pool #G80295 10.00% 20254     1       1  
Freddie Mac Pool #QS0124 1.50% 20304     859       874  
Freddie Mac Pool #ZT1332 3.00% 20304     4,368       4,641  
Freddie Mac Pool #ZK8180 2.50% 20314     2,019       2,134  
Freddie Mac Pool #G16634 3.00% 20314     9,237       9,915  
Freddie Mac Pool #G18655 3.00% 20324     7,357       7,811  
Freddie Mac Pool #V61960 3.00% 20334     3,595       3,840  
Freddie Mac Pool #QN1197 2.50% 20344     4,604       4,844  
Freddie Mac Pool #1H1354 2.442% 20361,4     135       144  
Freddie Mac Pool #C91909 4.00% 20364     130       143  
Freddie Mac Pool #840222 2.406% 20401,4     539       571  
Freddie Mac Pool #G06459 5.00% 20414     2,036       2,371  
Freddie Mac Pool #841039 2.895% 20431,4     7,308       7,609  
Freddie Mac Pool #G61082 3.00% 20434     7,783       8,445  
Freddie Mac Pool #Q18236 3.50% 20434     816       891  
Freddie Mac Pool #Q19133 3.50% 20434     513       560  
Freddie Mac Pool #Q17696 3.50% 20434     469       513  
Freddie Mac Pool #Q15874 4.00% 20434     68       73  
Freddie Mac Pool #Q28558 3.50% 20444     2,156       2,355  
Freddie Mac Pool #760014 3.076% 20451,4     1,471       1,532  
Freddie Mac Pool #760012 3.122% 20451,4     1,708       1,781  
Freddie Mac Pool #760013 3.176% 20451,4     992       1,036  
Freddie Mac Pool #Z40130 3.00% 20464     3,138       3,407  
Freddie Mac Pool #G60744 3.50% 20464     3,340       3,620  
Freddie Mac Pool #760015 2.774% 20471,4     3,308       3,417  
Freddie Mac Pool #Q52069 3.50% 20474     1,365       1,486  
Freddie Mac Pool #Q51622 3.50% 20474     1,021       1,118  
Freddie Mac Pool #Q47615 3.50% 20474     923       1,015  
Freddie Mac Pool #G08800 3.50% 20484     4,201       4,477  
Freddie Mac Pool #G08804 3.50% 20484     3,672       3,902  
Freddie Mac Pool #ZT0538 3.50% 20484     3,014       3,245  
Freddie Mac Pool #Q54709 3.50% 20484     1,028       1,118  
Freddie Mac Pool #Q55056 3.50% 20484     1,036       1,115  
Freddie Mac Pool #Q54701 3.50% 20484     958       1,041  
Freddie Mac Pool #Q54782 3.50% 20484     820       891  
Freddie Mac Pool #Q54781 3.50% 20484     787       859  
Freddie Mac Pool #Q54700 3.50% 20484     714       779  
Freddie Mac Pool #Q56590 3.50% 20484     448       483  
Freddie Mac Pool #Q56589 3.50% 20484     439       479  
Freddie Mac Pool #Q54698 3.50% 20484     376       415  
Freddie Mac Pool #Q55060 3.50% 20484     363       393  
Freddie Mac Pool #Q54699 3.50% 20484     344       377  
Freddie Mac Pool #Q56591 3.50% 20484     339       364  
Freddie Mac Pool #Q54831 3.50% 20484     244       268  
Freddie Mac Pool #G67711 4.00% 20484     33,006       36,381  
Freddie Mac Pool #SI2002 4.00% 20484     3,546       3,819  
Freddie Mac Pool #Q56599 4.00% 20484     2,192       2,429  
Freddie Mac Pool #Q56175 4.00% 20484     1,518       1,681  
Freddie Mac Pool #Q55971 4.00% 20484     1,341       1,481  
Freddie Mac Pool #Q55970 4.00% 20484     680       758  
Freddie Mac Pool #Q56576 4.00% 20484     499       539  
Freddie Mac Pool #Q56064 4.00% 20484     189       203  
Freddie Mac Pool #Q58411 4.50% 20484     2,843       3,143  
Freddie Mac Pool #Q58436 4.50% 20484     1,281       1,435  
Freddie Mac Pool #Q58378 4.50% 20484     1,029       1,132  
Freddie Mac Pool #Q57242 4.50% 20484     827       917  
Freddie Mac Pool #RA1339 3.00% 20494     7,797       8,311  
Freddie Mac Pool #QA4673 3.00% 20494     3,478       3,725  
Freddie Mac Pool #ZA6700 3.50% 20494     25,405       27,354  
Freddie Mac Pool #QA5131 3.50% 20494     20,577       22,047  
Freddie Mac Pool #SD7502 3.50% 20494     15,419       16,669  
Freddie Mac Pool #QA1442 3.50% 20494     7,500       8,091  
Freddie Mac Pool #RA1580 3.50% 20494     6,127       6,767  
Freddie Mac Pool #RA1463 3.50% 20494     6,107       6,694  
Freddie Mac Pool #QA0284 3.50% 20494     3,771       4,119  
Freddie Mac Pool #QA2748 3.50% 20494     846       925  
                 
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 Pool #ZN5963 4.50% 20494   $ 22     $ 24  
Freddie Mac Pool #RA2596 2.50% 20504     1,973       2,062  
Freddie Mac Pool #RA2319 3.00% 20504     16,008       16,908  
Freddie Mac Pool #SD0187 3.00% 20504     9,767       10,523  
Freddie Mac Pool #SD7512 3.00% 20504     2,929       3,131  
Freddie Mac Pool #SD7513 3.50% 20504     124,660       136,675  
Freddie Mac Pool #SD7514 3.50% 20504     93,130       99,847  
Freddie Mac Pool #RA2003 4.50% 20504     15,215       16,887  
Freddie Mac Pool #SD8053 4.50% 20504     1,880       2,048  
Freddie Mac Pool #SD8135 2.50% 20514     541       562  
Freddie Mac, Series 1567, Class A, (1-month USD-LIBOR + 0.40%) 0.512% 20231,4     7       7  
Freddie Mac, Series 3156, Class PF, (1-month USD-LIBOR + 0.25%) 0.362% 20361,4     828       828  
Freddie Mac, Series K031, Class A1, Multi Family, 2.778% 20224     783       798  
Freddie Mac, Series KS01, Class A2, Multi Family, 2.522% 20234     3,571       3,663  
Freddie Mac, Series K033, Class A2, Multi Family, 3.06% 20231,4     21,150       22,401  
Freddie Mac, Series K031, Class A2, Multi Family, 3.30% 20234     17,787       18,867  
Freddie Mac, Series K029, Class A2, Multi Family, 3.32% 20234     1,400       1,470  
Freddie Mac, Series K035, Class A2, Multi Family, 3.458% 20231,4     21,000       22,461  
Freddie Mac, Series K058, Class A2, Multi Family, 2.653% 20264     3,507       3,814  
Freddie Mac, Series K065, Class A2, Multi Family, 3.243% 20274     4,860       5,464  
Freddie Mac, Series K074, Class A2, Multi Family, 3.60% 20284     2,000       2,303  
Freddie Mac, Series 3156, Class PO, principal only, 0% 20364     697       645  
Freddie Mac, Series 3213, Class OG, principal only, 0% 20364     378       359  
Freddie Mac, Series 3146, Class PO, principal only, 0% 20364     265       241  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-2, Class HA, 3.00% 20561,4     29,444       31,211  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-2, Class MA, 3.00% 20564     28,719       30,493  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-1, Class HA, 3.00% 20561,4     25,737       27,284  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-3, Class MT, 3.00% 20564     13,474       14,242  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-3, Class HT, 3.25% 20564     2,598       2,785  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-1, Class HT, 3.00% 20574     13,828       14,739  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-4, Class HT, 3.25% 20571,4     21,848       23,426  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-2, Class MT, 3.50% 20574     20,240       22,218  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-4, Class MT, 3.50% 20574     13,086       14,246  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-3, Class MA, 3.50% 20574     7,313       7,864  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-2, Class MA, 3.50% 20574     5,590       6,002  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-4, Class MT, 3.50% 20574     2,438       2,678  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-2, Class MA, 3.50% 20584     34,918       37,695  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-2, Class MT, 3.50% 20584     13,974       15,336  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-1, Class MT, 3.50% 20584     12,503       13,687  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-3, Class MT, 3.50% 20584     6,692       7,347  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-1, Class MA, 3.50% 20584     6,370       6,864  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-3, Class MA, 3.50% 20584     947       1,022  
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-4, Class MA, 3.00% 20594     35,333       37,527  
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2018-2, Class A1, 3.50% 20284     112,081       118,671  
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2018-1, Class A1, 3.50% 20284     21,929       23,094  
                 
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)                
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2019-2, Class A1C, 2.75% 20294   $ 65,544     $ 69,051  
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2019-3, Class A1C, 2.75% 20294     49,456       52,374  
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2019-1, Class A1, 3.50% 20294     13,116       13,926  
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2020-1, Class A1D, 2.00% 20304     24,375       25,093  
Freddie Mac Seasoned Loan Structured Transaction Trust, Series 2020-1, Class A2D, 2.00% 20304     4,281       4,296  
Government National Mortgage Assn. 2.00% 20514,6     456,134       461,230  
Government National Mortgage Assn. 2.00% 20514,6     82,658       83,730  
Government National Mortgage Assn. 2.50% 20514,6     60,505       62,693  
Government National Mortgage Assn. 2.50% 20514,6     54,451       56,314  
Government National Mortgage Assn. 3.00% 20514,6     50,130       52,239  
Government National Mortgage Assn. 3.00% 20514,6     25,856       26,917  
Government National Mortgage Assn. 3.50% 20514,6     160,044       169,557  
Government National Mortgage Assn. 3.50% 20514,6     90,141       95,552  
Government National Mortgage Assn. Pool #754335 6.50% 20294     197       218  
Government National Mortgage Assn. Pool #754334 6.50% 20324     323       363  
Government National Mortgage Assn. Pool #AH5901 3.75% 20344     1,038       1,135  
Government National Mortgage Assn. Pool #754319 6.50% 20374     208       240  
Government National Mortgage Assn. Pool #700778 5.50% 20384     75       87  
Government National Mortgage Assn. Pool #004182 5.50% 20384     27       29  
Government National Mortgage Assn. Pool #782365 6.00% 20384     214       257  
Government National Mortgage Assn. Pool #754287 6.50% 20384     123       133  
Government National Mortgage Assn. Pool #AA4873 6.50% 20384     96       100  
Government National Mortgage Assn. Pool #738836 6.50% 20384     70       72  
Government National Mortgage Assn. Pool #AA4839 6.50% 20384     43       44  
Government National Mortgage Assn. Pool #741910 4.00% 20394     286       309  
Government National Mortgage Assn. Pool #004367 4.00% 20394     30       33  
Government National Mortgage Assn. Pool #698406 5.00% 20394     435       505  
Government National Mortgage Assn. Pool #783690 6.00% 20394     1,051       1,213  
Government National Mortgage Assn. Pool #754314 6.50% 20394     520       613  
Government National Mortgage Assn. Pool #004636 4.50% 20404     701       789  
Government National Mortgage Assn. Pool #736089 5.00% 20404     140       158  
Government National Mortgage Assn. Pool #736084 5.00% 20404     112       127  
Government National Mortgage Assn. Pool #783689 5.50% 20404     1,722       2,001  
Government National Mortgage Assn. Pool #754636 3.50% 20414     558       592  
Government National Mortgage Assn. Pool #005157 4.00% 20414     98       102  
Government National Mortgage Assn. Pool #783687 4.50% 20414     6,447       7,098  
Government National Mortgage Assn. Pool #783688 5.00% 20414     3,327       3,759  
Government National Mortgage Assn. Pool #005040 5.00% 20414     50       55  
Government National Mortgage Assn. Pool #005187 5.50% 20414     208       226  
Government National Mortgage Assn. Pool #005073 5.50% 20414     69       74  
Government National Mortgage Assn. Pool #005112 6.50% 20414     588       675  
Government National Mortgage Assn. Pool #754308 3.50% 20424     261       276  
Government National Mortgage Assn. Pool #754591 4.00% 20424     1,305       1,424  
Government National Mortgage Assn. Pool #754637 4.00% 20424     1,076       1,164  
Government National Mortgage Assn. Pool #AA2589 3.50% 20434     2,221       2,384  
Government National Mortgage Assn. Pool #MA5398 4.00% 20484     1,210       1,305  
Government National Mortgage Assn. Pool #MA5528 4.00% 20484     1,150       1,243  
Government National Mortgage Assn. Pool #MA5466 4.00% 20484     1,003       1,084  
Government National Mortgage Assn. Pool #MA5264 4.00% 20484     466       501  
Government National Mortgage Assn. Pool #MA5332 5.00% 20484     35       38  
Government National Mortgage Assn. Pool #MA5764 4.50% 20494     33,456       36,192  
Government National Mortgage Assn. Pool #MA5877 4.50% 20494     15,604       16,879  
Government National Mortgage Assn. Pool #MA6092 4.50% 20494     7,074       7,651  
Government National Mortgage Assn. Pool #MA6042 5.00% 20494     74       81  
Government National Mortgage Assn. Pool #MA7052 2.50% 20504     125,986       130,979  
Government National Mortgage Assn. Pool #MA7193 2.50% 20514     14,352       14,923  
Government National Mortgage Assn. Pool #686718 6.40% 20584     261       266  
Government National Mortgage Assn. Pool #892950 1.338% 20601,4     844       861  
Government National Mortgage Assn. Pool #710077 4.70% 20614     22       24  
Government National Mortgage Assn. Pool #756695 4.70% 20614     5       6  
Government National Mortgage Assn. Pool #710074 4.72% 20614     2       3  
Government National Mortgage Assn. Pool #751409 4.755% 20614     3       3  
                 
U. S. Government Securities Fund 9
 
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 #765151 4.785% 20614   $ 13     $ 14  
Government National Mortgage Assn. Pool #756715 4.39% 20624     27       28  
Government National Mortgage Assn. Pool #767610 4.609% 20624     1       1  
Government National Mortgage Assn. Pool #759735 4.774% 20624     1       1  
Government National Mortgage Assn. Pool #795471 5.119% 20624     1       1  
Government National Mortgage Assn. Pool #894475 2.39% 20631,4     2,311       2,411  
Government National Mortgage Assn. Pool #767641 4.262% 20634     1       1  
Government National Mortgage Assn. Pool #795533 4.824% 20634     2       2  
Government National Mortgage Assn. Pool #AG8149 0.754% 20641,4     284       287  
Government National Mortgage Assn. Pool #AG8156 1.248% 20641,4     321       326  
Government National Mortgage Assn. Pool #894482 2.382% 20641,4     3,114       3,245  
Government National Mortgage Assn. Pool #AG8194 4.446% 20644     32       34  
Government National Mortgage Assn. Pool #AG8150 4.792% 20644     5       5  
Government National Mortgage Assn. Pool #AG8068 4.824% 20644     9       9  
Government National Mortgage Assn. Pool #AG8155 5.158% 20644     7       8  
Government National Mortgage Assn. Pool #AG8189 5.175% 20644     12       14  
Government National Mortgage Assn. Pool #AG8171 5.223% 20644     1       1  
Government National Mortgage Assn. Pool #AA7554 6.64% 20644     137       144  
Government National Mortgage Assn. Pool #AL7438 4.542% 20654     5       5  
Government National Mortgage Assn., Series 2003-46, Class NB, 5.00% 20334     277       298  
Government National Mortgage Assn., Series 2010-H23, Class PT, 5.50% 20601,4     296       304  
Government National Mortgage Assn., Series 2011-H02, Class BI, interest only, 0.118% 20611,4     941       9  
Government National Mortgage Assn., Series 2012-H23, Class FI, interest only, 0.556% 20621,4     166       2  
Government National Mortgage Assn., Series 2012-H12, Class FT, (1-year CMT Weekly Rate + 0.70%) 0.81% 20621,4     1,205       1,202  
Government National Mortgage Assn., Series 2012-H20, Class PT, 0.948% 20621,4     1,830       1,828  
Uniform Mortgage-Backed Security 1.50% 20364,6     328,760       331,960  
Uniform Mortgage-Backed Security 1.50% 20364,6     4,957       4,992  
Uniform Mortgage-Backed Security 2.00% 20364,6     585,084       605,430  
Uniform Mortgage-Backed Security 2.00% 20364,6     154,665       159,409  
Uniform Mortgage-Backed Security 2.00% 20514,6     71,030       71,406  
Uniform Mortgage-Backed Security 2.00% 20514,6     4,433       4,469  
Uniform Mortgage-Backed Security 2.50% 20514,6     14,873       15,350  
Uniform Mortgage-Backed Security 2.50% 20514,6     1,030       1,065  
Uniform Mortgage-Backed Security 3.00% 20514,6     114,370       119,704  
Uniform Mortgage-Backed Security 3.50% 20514,6     19,067       20,218  
Uniform Mortgage-Backed Security 4.00% 20514,6     32,398       34,813  
Uniform Mortgage-Backed Security 4.50% 20514,6     13,618       14,815  
Vendee Mortgage Trust, Series 2011-2, Class V, 3.75% 20284     3,367       3,385  
Vendee Mortgage Trust, Series 2008-1, Class GD, 5.25% 20324     2,502       2,586  
Vendee Mortgage Trust, Series 2010-1, Class DA, 4.25% 20354     180       181  
                 
Total mortgage-backed obligations             4,732,649  
                 
Federal agency bonds & notes 3.12%                
Export-Import Bank of the United States-Guaranteed, VCK Lease SA 2.591% 2026     1,659       1,750  
Export-Import Bank of the United States-Guaranteed, Ethiopian Leasing 2012 LLC 2.646% 2026     922       967  
Fannie Mae 2.75% 2021     26,500       26,720  
Fannie Mae 0.625% 20252     320,800       321,282  
Fannie Mae 0.75% 2027     21,700       21,217  
Fannie Mae 0.875% 2030     63,500       60,241  
Fannie Mae 7.125% 2030     5,000       7,362  
Federal Home Loan Bank 3.375% 2023     14,160       15,277  
Federal Home Loan Bank 3.25% 2028     56,500       64,833  
Federal Home Loan Bank 5.50% 2036     1,000       1,495  
Freddie Mac 0.45% 2023     25,000       25,135  
Private Export Funding Corp. 3.55% 2024     14,300       15,603  
Small Business Administration, Series 2001-20K, 5.34% 2021     33       33  
Small Business Administration, Series 2001-20J, 5.76% 2021     8       8  
Small Business Administration, Series 2001-20F, 6.44% 2021     16       16  
Small Business Administration, Series 2003-20B, 4.84% 2023     264       272  
Tennessee Valley Authority 0.75% 2025     13,200       13,292  
Tennessee Valley Authority 2.875% 2027     5,000       5,558  
Tennessee Valley Authority 4.65% 2035     4,480       5,967  
   
10 U. S. Government Securities Fund
 
Bonds, notes & other debt instruments (continued)   Principal amount
 (000)
    Value
 (000)
 
Federal agency bonds & notes (continued)            
Tennessee Valley Authority 5.88% 2036   $ 3,625     $ 5,338  
Tennessee Valley Authority, Series 2008, Class A, 4.875% 2048     3,300       4,735  
TVA Southaven 3.846% 2033     1,861       2,000  
U.S. Agency for International Development, Iraq (State of) 2.149% 2022     16,630       16,918  
U.S. Agency for International Development, Israel (State of), Class 1A, 5.50% 2023     5,000       5,661  
U.S. Agency for International Development, Jordan (Kingdom of) 2.578% 2022     7,500       7,739  
U.S. Agency for International Development, Jordan (Kingdom of) 3.00% 2025     3,125       3,382  
U.S. Agency for International Development, Tunisia (Kingdom of) 1.416% 2021     8,500       8,562  
U.S. Agency for International Development, Ukraine 1.471% 2021     13,970       14,099  
U.S. Department of Housing and Urban Development, Series 2015-A-7, 2.35% 2021     1,250       1,262  
U.S. Department of Housing and Urban Development, Series 2015-A-8, 2.45% 2022     2,000       2,065  
U.S. Department of Housing and Urban Development, Series 2015-A-9, 2.80% 2023     500       531  
U.S. Department of Housing and Urban Development, Series 2015-A-10, 2.85% 2024     750       813  
U.S. Department of Housing and Urban Development, Series 2015-A-11, 2.95% 2025     875       948  
U.S. Department of Housing and Urban Development, Series 2015-A-12, 3.10% 2026     875       951  
U.S. Department of Housing and Urban Development, Series 2015-A-13, 3.15% 2027     3,850       4,184  
U.S. Department of Housing and Urban Development, Series 2015-A-14, 3.25% 2028     1,250       1,361  
U.S. Department of Housing and Urban Development, Series 2015-A-15, 3.35% 2029     850       928  
U.S. Department of Housing and Urban Development, Series 2015-A-16, 3.50% 2030     825       890  
U.S. Department of Housing and Urban Development, Series 2015-A-17, 3.55% 2031     825       892  
U.S. Department of Housing and Urban Development, Series 2015-A-18, 3.60% 2032     800       866  
U.S. Department of Housing and Urban Development, Series 2015-A-19, 3.65% 2033     675       732  
U.S. Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp. 3.49% 2029     1,989       2,250  
U.S. Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp. 3.82% 2032     1,483       1,711  
U.S. Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp. 3.938% 2032     1,169       1,334  
              677,180  
                 
Total bonds, notes & other debt instruments (cost: $16,867,016,000)             16,657,522  
                         
Short-term securities 30.07%   Weighted
average yield
at acquisition
             
U.S. Treasury bills 18.50%                  
U.S. Treasury 3/4/2021     0.088 %     50,000       50,000  
U.S. Treasury 3/9/2021     0.089       100,000       100,000  
U.S. Treasury 3/11/2021     0.089       156,800       156,799  
U.S. Treasury 3/16/2021     0.077       248,700       248,697  
U.S. Treasury 3/18/2021     0.081       150,000       149,998  
U.S. Treasury 3/25/2021     0.086       380,900       380,892  
U.S. Treasury 3/30/2021     0.058       100,000       99,998  
U.S. Treasury 4/6/2021     0.088       144,500       144,502  
U.S. Treasury 4/8/2021     0.092       56,000       55,998  
U.S. Treasury 4/13/2021     0.071       175,000       175,001  
U.S. Treasury 4/20/2021     0.078       149,200       149,200  
U.S. Treasury 4/22/2021     0.072       184,700       184,692  
U.S. Treasury 4/27/2021     0.080       124,100       124,098  
U.S. Treasury 5/4/2021     0.084       50,000       50,000  
U.S. Treasury 5/6/2021     0.087       25,000       24,998  
U.S. Treasury 5/11/2021     0.081       115,000       114,997  
U.S. Treasury 5/13/2021     0.050       257,500       257,479  
U.S. Treasury 5/18/2021     0.061       300,000       299,991  
U.S. Treasury 5/20/2021     0.054       93,750       93,743  
U.S. Treasury 5/25/2021     0.043       280,000       279,987  
U.S. Treasury 6/1/2021     0.043       125,000       124,992  
U.S. Treasury 6/10/2021     0.030       50,000       49,994  
U.S. Treasury 6/17/2021     0.073       200,000       199,973  
U.S. Treasury 7/13/2021     0.048       200,000       199,971  
U.S. Treasury 7/22/2021     0.086       100,000       99,982  
U.S. Treasury 8/5/2021     0.059       200,000       199,956  
                      4,015,938  
   
U. S. Government Securities Fund 11
 
Short-term securities (continued)   Weighted
 average yield
 at acquisition
    Principal amount
 (000)
    Value
 (000)
 
Federal agency bills & notes 11.36%                        
Discount bills and notes 10.67%                        
Federal Farm Credit Bank 5/12/2021     0.080 %   $ 43,600     $ 43,593  
Federal Farm Credit Bank 8/25/2021     0.088       20,000       19,991  
Federal Farm Credit Bank 12/8/2021     0.060       50,000       49,959  
Federal Home Loan Bank 3/8/2021     0.068       150,000       150,000  
Federal Home Loan Bank 3/10/2021     0.078       224,400       224,400  
Federal Home Loan Bank 3/12/2021     0.075       75,000       75,000  
Federal Home Loan Bank 3/17/2021     0.080       50,000       50,000  
Federal Home Loan Bank 3/26/2021     0.090       100,000       99,997  
Federal Home Loan Bank 3/29/2021     0.027       50,000       49,998  
Federal Home Loan Bank 4/1/2021     0.080       95,000       94,996  
Federal Home Loan Bank 4/9/2021     0.063       95,000       94,995  
Federal Home Loan Bank 4/12/2021     0.080       50,000       49,997  
Federal Home Loan Bank 4/14/2021     0.038       50,000       49,997  
Federal Home Loan Bank 4/16/2021     0.069       194,000       193,987  
Federal Home Loan Bank 4/21/2021     0.031       59,500       59,495  
Federal Home Loan Bank 4/26/2021     0.039       85,000       84,992  
Federal Home Loan Bank 4/28/2021     0.040       50,000       49,995  
Federal Home Loan Bank 4/29/2021     0.040       200,000       199,981  
Federal Home Loan Bank 5/5/2021     0.040       20,000       19,998  
Federal Home Loan Bank 5/7/2021     0.040       88,000       87,991  
Federal Home Loan Bank 5/10/2021     0.030       74,800       74,791  
Federal Home Loan Bank 5/11/2021     0.064       50,000       49,994  
Federal Home Loan Bank 5/12/2021     0.040       50,000       49,994  
Federal Home Loan Bank 5/19/2021     0.039       155,000       154,980  
Federal Home Loan Bank 5/21/2021     0.034       30,000       29,996  
Federal Home Loan Bank 7/14/2021     0.089       42,000       41,990  
Federal Home Loan Bank 8/6/2021     0.050       25,000       24,993  
Federal Home Loan Bank 8/13/2021     0.054       75,000       74,977  
Federal Home Loan Bank 8/18/2021     0.058       28,000       27,991  
Tennessee Valley Authority 3/10/2021     0.035       35,800       35,800  
                      2,314,868  
                         
    Coupon rate                  
Interest bearing bills & notes 0.69%                        
Federal Home Loan Bank (USD-SOFR + 0.01%) 5/3/20211     0.040       50,000       50,004  
Federal Home Loan Bank (USD-SOFR + 0.015%) 5/19/20211     0.045       100,000       100,011  
                      150,015  
                         
Total federal agency bills & notes (cost: $2,464,897,000)                     2,464,883  
                         
    Weighted
average yield
at acquisition
                 
Commercial paper 0.21%                      
Crédit Agricole Corporate and Investment Bank, New York Branch 3/1/2021     0.050       18,100       18,100  
Manhattan Asset Funding Company LLC 3/15/20215     0.090       28,000       27,998  
                      46,098  
                         
Total short-term securities (cost: $6,526,692,000)                     6,526,919  
Total investment securities 106.82% (cost: $23,393,708,000)                     23,184,441  
Other assets less liabilities (6.82%)                     (1,480,361 )
                         
Net assets 100.00%                   $ 21,704,080  
   
12 U. S. Government Securities Fund
 
Futures contracts                  
                   
Contracts   Type   Number of
contracts
  Expiration   Notional
amount7
 (000)
    Value at
2/28/20218
(000)
  Unrealized
(depreciation)
appreciation
at 2/28/2021
(000)
 
90 Day Euro Dollar Futures   Short   11,538   March 2021   $ (2,884,500 )   $ (2,879,308 )   $ (857 )
90 Day Euro Dollar Futures   Long   2,682   December 2022     670,500       667,516       129  
2 Year U.S. Treasury Note Futures   Long   1,061   July 2021     212,200       234,232       (173 )
5 Year U.S. Treasury Note Futures   Long   7,390   July 2021     739,000       916,129       (425 )
10 Year U.S. Treasury Note Futures   Short   6,807   June 2021     (680,700 )     (903,416 )     10,497  
10 Year Ultra U.S. Treasury Note Futures   Short   14,351   June 2021     (1,435,100 )     (2,114,530 )     20,098  
20 Year U.S. Treasury Bond Futures   Long   4,856   June 2021     485,600       773,166       (7,045 )
30 Year Ultra U.S. Treasury Bond Futures   Long   1,307   June 2021     130,700       247,105       137  
                                $ 22,361  

 

Swap contracts

 

Interest rate swaps

 

Receive     Pay     Expiration
date
  Notional
(000)
    Value at
2/28/2021
(000)
    Upfront
premium
received
(000)
    Unrealized
appreciation
(depreciation)
at 2/28/2021
(000)
 
2.5775%     U.S. EFFR     7/16/2022   $ 694,646     $ 17,587     $     $ 17,587  
1.2525%     U.S. EFFR     2/14/2023     586,311       13,192             13,192  
3-month USD-LIBOR     1.495%     11/10/2023     115,000       (3,548 )           (3,548 )
U.S. EFFR     2.4325%     12/21/2023     94,000       (5,845 )           (5,845 )
0.2815%     U.S. EFFR     3/1/2024     88,500       (3 )           (3 )
0.2405%     U.S. EFFR     3/1/2024     467,500       (599 )           (599 )
U.S. EFFR     0.11%     5/18/2024     1,096,100       6,661             6,661  
U.S. EFFR     0.1275%     6/25/2025     315,600       5,747             5,747  
U.S. EFFR     0.126%     6/25/2025     148,100       2,707             2,707  
U.S. EFFR     0.106%     6/30/2025     239,354       4,625             4,625  
U.S. EFFR     0.105%     6/30/2025     167,600       3,246             3,246  
U.S. EFFR     0.0975%     6/30/2025     90,919       1,790             1,790  
3-month USD-LIBOR     1.867%     7/11/2025     199,200       (5,240 )           (5,240 )
2.91%     3-month USD-LIBOR     2/1/2028     60,800       3,935             3,935  
2.908%     3-month USD-LIBOR     2/1/2028     60,700       3,923             3,923  
2.925%     3-month USD-LIBOR     2/1/2028     48,600       3,181             3,181  
2.92%     3-month USD-LIBOR     2/2/2028     45,900       2,991             2,991  
U.S. EFFR     2.32625%     4/18/2029     60,500       (5,734 )           (5,734 )
U.S. EFFR     0.5385%     3/26/2030     233,200       14,265             14,265  
0.913%     3-month USD-LIBOR     6/9/2030     235,000       (11,423 )           (11,423 )
U.S. EFFR     0.666%     11/19/2030     111,300       6,516             6,516  
3-month USD-LIBOR     2.986%     2/1/2038     29,200       (1,608 )           (1,608 )
3-month USD-LIBOR     2.9625%     2/1/2038     36,300       (1,927 )           (1,927 )
3-month USD-LIBOR     2.963%     2/1/2038     36,300       (1,929 )           (1,929 )
0.833%     3-month USD-LIBOR     4/3/2040     21,600       (3,705 )           (3,705 )
3-month USD-LIBOR     0.81%     7/28/2045     242,600       54,229       (144 )     54,373  
0.8235%     3-month USD-LIBOR     4/24/2050     22,500       (5,723 )           (5,723 )
3-month USD-LIBOR     0.811%     7/27/2050     411,000       106,396             106,396  
                                $ (144 )   $ 203,851  
                                             
U. S. Government Securities Fund 13
 
1 Coupon rate may change periodically. Reference rate and spread are as of the most recent information available. For short-term securities, the date of the next scheduled coupon rate change is considered to be the maturity date.
2 All or a portion of this security was pledged as collateral. The total value of pledged collateral was $142,743,000, which represented .66% of the net assets of the fund.
3 Index-linked bond whose principal amount moves with a government price index.
4 Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
5 Acquired in a transaction exempt from registration under Rule 144A or Section 4(2) of the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $29,504,000, which represented .14% of the net assets of the fund.
6 Purchased on a TBA basis.
7 Notional amount is calculated based on the number of contracts and notional contract size.
8 Value is calculated based on the notional amount and current market price.

 

Key to abbreviations and symbol

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

 

See notes to financial statements.

 

14 U. S. Government Securities Fund
 

Financial statements

 

Statement of assets and liabilities   unaudited
at February 28, 2021   (dollars in thousands)

 

Assets:            
Investment securities in unaffiliated issuers, at value (cost: $23,393,708)           $ 23,184,441  
Cash             478,367  
Receivables for:                
Sales of investments   $ 3,589,232          
Sales of fund’s shares     13,961          
Interest     40,410          
Variation margin on futures contracts     9,488          
Variation margin on swap contracts     2,330       3,655,421  
              27,318,229  
Liabilities:                
Payables for:                
Purchases of investments     5,545,703          
Repurchases of fund’s shares     36,790          
Dividends on fund’s shares     122          
Investment advisory services     2,778          
Services provided by related parties     2,163          
Trustees’ deferred compensation     275          
Variation margin on futures contracts     10,365          
Variation margin on swap contracts     15,916          
Other     37       5,614,149  
Net assets at February 28, 2021           $ 21,704,080  
                 
Net assets consist of:                
Capital paid in on shares of beneficial interest           $ 21,664,453  
Total distributable earnings             39,627  
Net assets at February 28, 2021           $ 21,704,080  

 

(dollars and shares in thousands, except per-share amounts)

 

Shares of beneficial interest issued and outstanding (no stated par value) —

unlimited shares authorized (1,535,471 total shares outstanding)

 

    Net assets     Shares
outstanding
    Net asset
value per share
 
Class A   $ 4,356,971       308,203     $ 14.14  
Class C     209,540       14,885       14.08  
Class T     10       1       14.13  
Class F-1     157,017       11,108       14.14  
Class F-2     873,530       61,790       14.14  
Class F-3     818,626       57,903       14.14  
Class 529-A     236,617       16,738       14.14  
Class 529-C     16,863       1,200       14.06  
Class 529-E     13,908       984       14.13  
Class 529-T     12       1       14.13  
Class 529-F-1     10       1       14.14  
Class 529-F-2     27,507       1,945       14.14  
Class 529-F-3     10       1       14.14  
Class R-1     12,339       876       14.09  
Class R-2     116,326       8,263       14.08  
Class R-2E     14,094       997       14.13  
Class R-3     148,665       10,520       14.13  
Class R-4     169,943       12,020       14.14  
Class R-5E     16,106       1,139       14.13  
Class R-5     68,683       4,857       14.14  
Class R-6     14,447,303       1,022,039       14.14  

 

See notes to financial statements.

 

U. S. Government Securities Fund 15
 

Financial statements (continued)

 

Statement of operations unaudited
for the six months ended February 28, 2021 (dollars in thousands)

 

Investment income:            
Income:            
Interest           $ 82,189  
Fees and expenses*:                
Investment advisory services   $ 17,045          
Distribution services     9,666          
Transfer agent services     3,790          
Administrative services     3,061          
Reports to shareholders     181          
Registration statement and prospectus     663          
Trustees’ compensation     80          
Auditing and legal     13          
Custodian     24          
Other     98          
Total fees and expenses before waiver/reimbursement     34,621          
Less waiver/reimbursement of fees and expenses:                
Investment advisory services waiver     8          
Transfer agent services reimbursement            
Total fees and expenses after waiver/reimbursement             34,613  
Net investment income             47,576  
                 
Net realized gain and unrealized depreciation:                
Net realized gain on:                
Investments in unaffiliated issuers     60,622          
Futures contracts     56,888          
Swap contracts     1,249       118,759  
Net unrealized (depreciation) appreciation on:                
Investments in unaffiliated issuers     (624,748 )        
Futures contracts     28,434          
Swap contracts     136,896       (459,418 )
Net realized gain and unrealized depreciation             (340,659 )
                 
Net decrease in net assets resulting from operations           $ (293,083 )

 

* Additional information related to class-specific fees and expenses is included in the notes to financial statements.
Amount less than one thousand.

 

See notes to financial statements.

 

16 U. S. Government Securities Fund
 

Financial statements (continued)

 

Statements of changes in net assets  
  (dollars in thousands)

 

    Six months ended
February 28, 2021*
    Year ended
August 31, 2020
 
Operations:                
Net investment income   $ 47,576     $ 202,688  
Net realized gain     118,759       1,029,091  
Net unrealized (depreciation) appreciation     (459,418 )     260,557  
Net (decrease) increase in net assets resulting from operations     (293,083 )     1,492,336  
                 
Distributions paid or accrued to shareholders     (881,560 )     (442,504 )
                 
Net capital share transactions     3,678,584       3,232,909  
                 
Total increase in net assets     2,503,941       4,282,741  
                 
Net assets:                
Beginning of period     19,200,139       14,917,398  
End of period   $ 21,704,080     $ 19,200,139  

 

* Unaudited.

 

See notes to financial statements.

 

U. S. Government Securities Fund 17
 
Notes to financial statements unaudited

 

1. Organization

 

The American Funds Income Series (the “trust”) is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company and has initially issued one series of shares, U.S. Government Securities Fund (the “fund”). The fund seeks 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% for certain redemptions within 18 months of purchase without an initial sales charge)   None
Classes C and 529-C   None   1% 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.

 

Cash — Cash may include amounts held in an interest bearing deposit facility.

 

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. 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.

 

18 U. S. Government Securities Fund
 

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.

 

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.

 

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, including an annual control self-evaluation program facilitated by the investment adviser’s compliance 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 February 28, 2021 (dollars in thousands):

 

    Investment securities  
    Level 1     Level 2     Level 3     Total  
Assets:                                
Bonds, notes & other debt instruments:                                
U.S. Treasury bonds & notes   $     $ 11,247,693     $     $ 11,247,693  
Mortgage-backed obligations           4,732,649             4,732,649  
Federal agency bonds & notes           677,180             677,180  
Short-term securities           6,526,919             6,526,919  
Total   $     $ 23,184,441     $     $ 23,184,441  
                                 
    Other investments*  
    Level 1     Level 2     Level 3     Total  
Assets:                                
Unrealized appreciation on futures contracts   $ 30,861     $     $     $ 30,861  
Unrealized appreciation on interest rate swaps           251,135             251,135  
Liabilities:                                
Unrealized depreciation on futures contracts     (8,500 )                 (8,500 )
Unrealized depreciation on interest rate swaps           (47,284 )           (47,284 )
Total   $ 22,361     $ 203,851     $     $ 226,212  
   
* Futures contracts and interest rate swaps are not included in the 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; 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 related to the issuer, 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 changing interest rates and by changes in the effective maturities and credit ratings of these securities.

 

A bond’s effective maturity is the market’s trading assessment of its maturity. A portfolio’s dollar-weighted average effective maturity is the weighted average of all effective maturities in the portfolio, where more weight is given to larger holdings. Rising interest rates will generally cause the prices of bonds and other debt securities to fall. 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. 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 seeking to assess 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 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.

 

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.

 

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.

 

U. S. Government Securities Fund 21
 

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 expose the fund to losses in excess of 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.

 

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. In addition, the fund segregates liquid assets equivalent to the fund’s outstanding obligations under the contract in excess of the initial margin and variation margin, if any. 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 $10,081,753,000.

 

Interest rate swaps — The fund has entered into interest rate swap contracts, which are agreements to exchange one stream of future interest payments for another based on a specified notional amount. Typically, interest rate swaps exchange a fixed interest rate for a payment that floats relative to a benchmark or vice versa. The fund’s investment adviser uses 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. Risks may arise as a result of the fund’s investment adviser incorrectly anticipating changes in interest rates, increased volatility, reduced liquidity and the potential inability of counterparties to meet the terms of their agreements.

 

22 U. S. Government Securities Fund
 

Upon entering into an interest rate 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 interest rate 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, the fund’s investment adviser records daily interest accruals related to the exchange of future payments as a receivable and payable in the fund’s statement of assets and liabilities. The fund also pays or receives a variation margin based on the increase or decrease in the value of the interest rate swaps, including accrued interest, and records variation margin on interest rate swaps 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 interest rate swap is closed or expires. Net realized gains or losses, as well as any net unrealized appreciation or depreciation, from interest rate swaps are recorded in the fund’s statement of operations. The average month-end notional amount of interest rate swaps while held was $10,095,435,000.

 

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 six months ended, February 28, 2021 (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*   $ 30,861     Unrealized depreciation*   $ 8,500  
Swap   Interest   Unrealized appreciation*     251,135     Unrealized depreciation*     47,284  
            $ 281,996         $ 55,784  
                 
        Net realized gain     Net unrealized appreciation  
Contracts   Risk type   Location on statement of operations   Value     Location on statement of
operations
  Value  
Futures   Interest   Net realized gain on futures contracts   $ 56,888     Net unrealized appreciation on futures contracts   $ 28,434  
Swap   Interest   Net realized gain on swap contracts     1,249     Net unrealized appreciation on swap contracts     136,896  
            $ 58,137         $ 165,330  
   
* Includes cumulative appreciation/depreciation on futures contracts and 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 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 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 mutual funds 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 period ended February 28, 2021, 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.

 

U. S. Government Securities Fund 23
 

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; cost of investments sold; paydowns on fixed-income securities 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.

 

The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of August 31, 2020, the components of distributable earnings on a tax basis were as follows (dollars in thousands):

 

Undistributed ordinary income   $ 506,835  
Undistributed long-term capital gains     297,990  

 

As of February 28, 2021, the tax basis unrealized appreciation (depreciation) and cost of investments were as follows (dollars in thousands):

 

Gross unrealized appreciation on investments   $ 538,886  
Gross unrealized depreciation on investments     (531,852 )
Net unrealized appreciation on investments     7,034  
Cost of investments     23,403,763  

 

Distributions paid or accrued were characterized for tax purposes as follows (dollars in thousands):

 

    Six months ended February 28, 2021     Year ended August 31, 2020  
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   $   118,789     $ 63,818     $ 182,607     $ 60,720     $ 14,901     $ 75,621  
Class C     5,253       3,101       8,354       2,429       918       3,347  
Class T     *     *     *     *     *     *
Class F-1     8,740       4,722       13,462       5,999       1,513       7,512  
Class F-2     25,692       13,131       38,823       16,348       3,443       19,791  
Class F-3     18,472       9,161       27,633       10,700       1,993       12,693  
Class 529-A     6,464       3,454       9,918       3,465       851       4,316  
Class 529-C     433       255       688       368       144       512  
Class 529-E     361       201       562       186       52       238  
Class 529-T     *     *     *     *     *     *
Class 529-F-1     46       *     46       488       103       591  
Class 529-F-2     743       405       1,148                          
Class 529-F-3     *     *     *                        
Class R-1     216       128       344       106       41       147  
Class R-2     2,930       1,734       4,664       1,345       510       1,855  
Class R-2E     351       202       553       122       38       160  
Class R-3     3,919       2,206       6,125       2,030       581       2,611  
Class R-4     4,739       2,518       7,257       2,934       713       3,647  
Class R-5E     517       268       785       176       27       203  
Class R-5     1,902       958       2,860       1,421       330       1,751  
Class R-6     383,238       192,493       575,731       251,748       55,761       307,509  
Total   $ 582,805     $ 298,755     $ 881,560     $ 360,585     $ 81,919     $ 442,504  
                                                 
* Amount less than one thousand.
Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020.
   
24 U. S. Government Securities Fund
 

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 0.130% on such assets in excess of $15 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. During the six months ended February 28, 2021, CRMC voluntarily reduced the investment advisory services fee to a proposed annualized rate of 0.120% on such assets in excess of $21 billion. For the six months ended February 28, 2021, total investment advisory services fees waived by CRMC were $8,000. CRMC does not intend to recoup this waiver. As a result, the fee shown on the statement of operations of $17,045,000 was reduced to $17,037,000, both of which were equivalent to an annualized rate of 0.167% of average daily net assets.

 

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 February 28, 2021, 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. For the six months ended February 28, 2021, CRMC reimbursed transfer agent services fees of less than $1,000 for Class 529-F-3 shares. CRMC does not intend to recoup this reimbursement.

 

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.

 

U. S. Government Securities Fund 25
 

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 fee is 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. The quarterly fee is 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. The fee for any given calendar quarter is 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. The fee is included in other expenses in the fund’s statement of operations. Virginia529 is not considered a related party to the fund.

 

For the six months ended February 28, 2021, class-specific expenses under the agreements were as follows (dollars in thousands):

 

    Distribution     Transfer agent     Administrative     529 plan  
Share class   services     services     services     services  
Class A     $6,653       $2,305       $665     Not applicable  
Class C     1,074       109       33     Not applicable  
Class T           *     *   Not applicable  
Class F-1     369       224       44     Not applicable  
Class F-2     Not applicable       487       134     Not applicable  
Class F-3     Not applicable       14       101     Not applicable  
Class 529-A     281       116       37     $74  
Class 529-C     86       9       3     5  
Class 529-E     35       3       2     4  
Class 529-T           *     *   *
Class 529-F-1           4       1     3  
Class 529-F-2     Not applicable       10       3     6  
Class 529-F-3     Not applicable       *     *   *
Class R-1     48       5       1     Not applicable  
Class R-2     461       215       18     Not applicable  
Class R-2E     42       15       2     Not applicable  
Class R-3     394       134       24     Not applicable  
Class R-4     223       93       27     Not applicable  
Class R-5E     Not applicable       14       3     Not applicable  
Class R-5     Not applicable       19       10     Not applicable  
Class R-6     Not applicable       14       1,953     Not applicable  
Total class-specific expenses     $9,666       $3,790       $3,061     $92  
                               
* Amount less than one thousand.
Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020.
   

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 $80,000 in the fund’s statement of operations reflects $41,000 in current fees (either paid in cash or deferred) and a net increase of $39,000 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.

 

Security transactions with related funds — The fund may purchase securities from, or sell 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 six months ended February 28, 2021, 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 six months ended February 28, 2021.

 

26 U. S. Government Securities Fund
 

8. Capital share transactions

 

Capital share transactions in the fund were as follows (dollars and shares in thousands):

 

    Sales1     Reinvestments of
distributions
    Repurchases1     Net increase
(decrease)
 
Share class   Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares  
                             
Six months ended February 28, 2021                            
                             
Class A   $ 869,912       59,050     $ 180,970       12,560     $ (755,175 )     (51,726 )   $ 295,707       19,884  
Class C     51,474       3,508       8,298       578       (51,263 )     (3,517 )     8,509       569  
Class T                                                
Class F-1     64,781       4,384       13,219       917       (220,240 )     (15,296 )     (142,240 )     (9,995 )
Class F-2     355,990       24,145       37,567       2,606       (313,227 )     (21,428 )     80,330       5,323  
Class F-3     410,263       28,230       26,791       1,858       (209,257 )     (14,253 )     227,797       15,835  
Class 529-A     34,469       2,349       9,906       688       (39,806 )     (2,721 )     4,569       316  
Class 529-C     2,994       204       688       48       (4,197 )     (287 )     (515 )     (35 )
Class 529-E     2,039       139       562       39       (2,022 )     (138 )     579       40  
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     31,674       2,131       1,147       79       (3,858 )     (265 )     28,963       1,945  
Class 529-F-33     10       1       2     2                 10       1  
Class R-1     5,022       350       343       24       (1,650 )     (114 )     3,715       260  
Class R-2     23,671       1,616       4,656       325       (33,529 )     (2,292 )     (5,202 )     (351 )
Class R-2E     7,704       519       554       38       (5,021 )     (340 )     3,237       217  
Class R-3     45,630       3,105       6,117       425       (53,080 )     (3,623 )     (1,333 )     (93 )
Class R-4     41,732       2,837       7,252       503       (48,446 )     (3,309 )     538       31  
Class R-5E     10,215       694       777       54       (9,726 )     (673 )     1,266       75  
Class R-5     20,003       1,357       2,860       198       (17,988 )     (1,218 )     4,875       337  
Class R-6     3,119,154       212,611       575,690       39,936       (499,333 )     (33,909 )     3,195,511       218,638  
Total net increase (decrease)   $ 5,098,953       347,378     $ 877,418       60,878     $ (2,297,787 )     (157,121 )   $ 3,678,584       251,135  
                                                                 
Year ended August 31, 2020                          
                                                                 
Class A   $ 2,137,681       146,790     $ 74,587       5,267     $ (946,034 )     (65,001 )   $ 1,266,234       87,056  
Class C     129,059       8,889       3,317       237       (117,387 )     (8,048 )     14,989       1,078  
Class T                                                
Class F-1     117,320       8,091       7,440       527       (122,228 )     (8,348 )     2,532       270  
Class F-2     846,420       58,012       19,135       1,348       (705,425 )     (48,033 )     160,130       11,327  
Class F-3     570,971       38,970       12,100       849       (352,471 )     (23,930 )     230,600       15,889  
Class 529-A     119,334       8,194       4,305       304       (49,973 )     (3,448 )     73,666       5,050  
Class 529-C     14,054       974       511       36       (27,111 )     (1,849 )     (12,546 )     (839 )
Class 529-E     6,432       445       237       17       (2,704 )     (187 )     3,965       275  
Class 529-T                 2     2                 2     2
Class 529-F-1     12,631       873       586       41       (7,860 )     (550 )     5,357       364  
Class R-1     3,125       215       146       10       (3,867 )     (272 )     (596 )     (47 )
Class R-2     77,240       5,337       1,842       132       (59,487 )     (4,120 )     19,595       1,349  
Class R-2E     8,730       605       160       11       (4,053 )     (278 )     4,837       338  
Class R-3     99,536       6,844       2,595       184       (67,637 )     (4,661 )     34,494       2,367  
Class R-4     95,377       6,552       3,639       257       (74,799 )     (5,186 )     24,217       1,623  
Class R-5E     16,829       1,158       201       14       (6,011 )     (412 )     11,019       760  
Class R-5     44,162       3,033       1,757       124       (44,266 )     (3,082 )     1,653       75  
Class R-6     4,757,469       327,243       307,337       21,699       (3,672,043 )     (249,905 )     1,392,763       99,037  
Total net increase (decrease)   $ 9,056,370       622,225     $ 439,895       31,057     $ (6,263,356 )     (427,310 )   $ 3,232,909       225,972  
   
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.

 

9. Investment transactions

 

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $64,184,857,000 and $70,487,791,000, respectively, during the six months ended February 28, 2021.

 

U. S. Government Securities Fund 27
 

10. Ownership concentration

 

At February 28, 2021, two shareholders held more than 10% of the fund’s outstanding shares. The two shareholders were American Funds 2030 Target Date Retirement Fund and American Funds 2035 Target Date Retirement Fund, with aggregate ownership of the fund’s outstanding shares of 11% and 10%, respectively. CRMC is the investment adviser to the two target date retirement funds.

 

28 U. S. Government Securities Fund
 

Financial highlights

 

          (Loss) income from
investment operations1
    Dividends and distributions                                      
Period ended   Net asset
value,
beginning
of period
    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 period
    Total return2,3     Net assets,
end of period
(in millions)
    Ratio of
expenses to
average net
assets before
reimburse-
ments
    Ratio of
expenses to
average net
assets after
reimburse-
ments3
    Ratio of
net income
(loss)
to average
net assets3
 
Class A:                                                                                                        
2/28/20214,5    $ 14.95     $ .01     $ (.22 )   $ (.21 )   $ (.04 )   $ (.56 )   $ (.60 )   $ 14.14       (1.52 )%6    $ 4,357       .61 %7      .61 %7      .19 %7 
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  
8/31/2017     14.10       .15       (.04 )     .11       (.15 )     (.17 )     (.32 )     13.89       .86       2,778       .63       .63       1.08  
8/31/2016     14.09       .14       .26       .40       (.18 )     (.21 )     (.39 )     14.10       2.88       3,029       .63       .63       .97  
Class C:                                                                                                        
2/28/20214,5      14.90       (.04 )     (.22 )     (.26 )     8      (.56 )     (.56 )     14.08       (1.90 )6      210       1.30 7      1.30 7      (.49 )7 
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  
8/31/2017     14.07       .04       (.03 )     .01       (.05 )     (.17 )     (.22 )     13.86       .11       257       1.42       1.42       .29  
8/31/2016     14.07       .03       .25       .28       (.07 )     (.21 )     (.28 )     14.07       2.06       305       1.42       1.42       .20  
Class T:                                                                                                        
2/28/20214,5      14.95       .03       (.23 )     (.20 )     (.06 )     (.56 )     (.62 )     14.13       (1.39 )6,9      10      .34 7,9      .34 7,9      .47 7,9 
8/31/2020     14.09       .18       1.06       1.24       (.23 )     (.15 )     (.38 )     14.95       8.99 9      10      .37 9      .37 9      1.21 9 
8/31/2019     13.37       .27       .74       1.01       (.29 )           (.29 )     14.09       7.64 9      10      .42 9      .42 9      2.01 9 
8/31/2018     13.89       .24       (.52 )     (.28 )     (.24 )           (.24 )     13.37       (1.99 )9      10      .42 9      .42 9      1.81 9 
8/31/20174,11      13.71       .08       .18       .26       (.08 )           (.08 )     13.89       1.90 6,9      10      .16 6,9      .16 6,9      .59 6,9 
Class F-1:                                                                                                        
2/28/20214,5      14.95       .01       (.22 )     (.21 )     (.04 )     (.56 )     (.60 )     14.14       (1.52 )6      157       .61 7      .61 7      .19 7 
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  
8/31/2017     14.10       .15       (.04 )     .11       (.15 )     (.17 )     (.32 )     13.89       .84       211       .66       .66       1.05  
8/31/2016     14.09       .14       .26       .40       (.18 )     (.21 )     (.39 )     14.10       2.88       246       .65       .65       1.01  
Class F-2:                                                                                                        
2/28/20214,5      14.95       .04       (.23 )     (.19 )     (.06 )     (.56 )     (.62 )     14.14       (1.38 )6      873       .32 7      .32 7      .49 7 
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  
8/31/2017     14.10       .18       (.03 )     .15       (.19 )     (.17 )     (.36 )     13.89       1.11       257       .39       .39       1.33  
8/31/2016     14.09       .18       .25       .43       (.21 )     (.21 )     (.42 )     14.10       3.15       266       .38       .38       1.30  
Class F-3:                                                                                                        
2/28/20214,5      14.95       .04       (.22 )     (.18 )     (.07 )     (.56 )     (.63 )     14.14       (1.33 )6      819       .21 7      .21 7      .60 7 
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  
8/31/20174,12      13.66       .13       .23       .36       (.13 )           (.13 )     13.89       2.66 6      114       .28 7      .28 7      1.64 7 
Class 529-A:                                                                                                        
2/28/20214,5      14.95       .02       (.23 )     (.21 )     (.04 )     (.56 )     (.60 )     14.14       (1.51 )6      237       .59 7      .59 7      .21 7 
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  
8/31/2017     14.10       .14       (.04 )     .10       (.14 )     (.17 )     (.31 )     13.89       .81       135       .69       .69       1.03  
8/31/2016     14.09       .13       .26       .39       (.17 )     (.21 )     (.38 )     14.10       2.81       142       .71       .71       .89  

 

See end of table for footnotes.

 

U. S. Government Securities Fund 29
 

Financial highlights (continued)

 

          (Loss) income from
investment operations1
    Dividends and distributions                                      
Period ended   Net asset
value,
beginning
of period
    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 period
    Total return2,3     Net assets,
end of period
(in millions)
    Ratio of
expenses to
average net
assets before
reimburse-
ments
    Ratio of
expenses to
average net
assets after
reimburse-
ments3
    Ratio of
net income
(loss)
to average
net assets3
 
Class 529-C:                                                                                                        
2/28/20214,5    $ 14.89     $ (.04 )   $ (.22 )   $ (.26 )   $ (.01 )   $ (.56 )   $ (.57 )   $ 14.06       (1.90 )%6    $ 17       1.32 %7      1.32 %7      (.52 )%7 
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  
8/31/2017     14.06       .04       (.04 )     8      (.05 )     (.17 )     (.22 )     13.84       .02       49       1.46       1.46       .25  
8/31/2016     14.06       .02       .26       .28       (.07 )     (.21 )     (.28 )     14.06       2.02       55       1.47       1.47       .13  
Class 529-E:                                                                                                        
2/28/20214,5      14.95       8      (.24 )     (.24 )     (.02 )     (.56 )     (.58 )     14.13       (1.62 )6      14       .81 7      .81 7      (.01 )7 
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  
8/31/2017     14.10       .11       (.04 )     .07       (.11 )     (.17 )     (.28 )     13.89       .58       9       .92       .92       .79  
8/31/2016     14.09       .09       .26       .35       (.13 )     (.21 )     (.34 )     14.10       2.57       9       .94       .94       .67  
Class 529-T:                                                                                                        
2/28/20214,5      14.95       .03       (.23 )     (.20 )     (.06 )     (.56 )     (.62 )     14.13       (1.48 )6,9      10      .39 7,9      .39 7,9      .41 7,9 
8/31/2020     14.09       .17       1.06       1.23       (.22 )     (.15 )     (.37 )     14.95       8.93 9      10      .43 9      .43 9      1.15 9 
8/31/2019     13.37       .26       .74       1.00       (.28 )           (.28 )     14.09       7.57 9      10      .48 9      .48 9      1.95 9 
8/31/2018     13.89       .23       (.52 )     (.29 )     (.23 )           (.23 )     13.37       (2.06 )9      10      .49 9      .49 9      1.74 9 
8/31/20174,11      13.71       .08       .18       .26       (.08 )           (.08 )     13.89       1.87 6,9      10      .19 6,9      .19 6,9      .56 6,9 
Class 529-F-1:                                                                                                        
2/28/20214,5      14.95       .04       (.23 )     (.19 )     (.06 )     (.56 )     (.62 )     14.14       (1.41 )6,9      10      .35 7,9      .35 7,9      .52 7,9 
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  
8/31/2017     14.10       .17       (.03 )     .14       (.18 )     (.17 )     (.35 )     13.89       1.03       13       .47       .47       1.25  
8/31/2016     14.09       .16       .26       .42       (.20 )     (.21 )     (.41 )     14.10       3.04       13       .49       .49       1.13  
Class 529-F-2:                                                                                                        
2/28/20214,5,13      14.89       .02       (.18 )     (.16 )     (.03 )     (.56 )     (.59 )     14.14       (1.16 )6      27       .12 6      .12 6      .13 6 
Class 529-F-3:                                                                                                        
2/28/20214,5,13      14.89       .02       (.17 )     (.15 )     (.04 )     (.56 )     (.60 )     14.14       (1.13 )6      10      .15 6      .09 6      .16 6 
Class R-1:                                                                                                        
2/28/20214,5      14.91       (.04 )     (.22 )     (.26 )     8      (.56 )     (.56 )     14.09       (1.84 )6      12       1.29 7      1.29 7      (.48 )7 
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  
8/31/2017     14.08       .04       (.04 )     8      (.05 )     (.17 )     (.22 )     13.86       .06       9       1.41       1.41       .29  
8/31/2016     14.07       .03       .27       .30       (.08 )     (.21 )     (.29 )     14.08       2.15       11       1.39       1.39       .20  

 

See end of table for footnotes.

 

30 U. S. Government Securities Fund
 

Financial highlights (continued)

 

          (Loss) income from
investment operations1 
    Dividends and distributions                                      
Period ended   Net asset
value,
beginning
of period
    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 period
    Total return2,3     Net assets,
end of period
(in millions)
    Ratio of
expenses to
average net
assets before
reimburse-
ments
    Ratio of
expenses to
average net
assets after
reimburse-
ments3 
    Ratio of
net income
(loss)
to average
net assets3
 
Class R-2:                                                                                                        
2/28/20214,5    $ 14.91     $ (.04 )   $ (.23 )   $ (.27 )   $ 8    $ (.56 )   $ (.56 )   $ 14.08       (1.91 )%6    $ 116       1.31 %7      1.31 %7      (.50 )%7 
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  
8/31/2017     14.07       .04       (.03 )     .01       (.05 )     (.17 )     (.22 )     13.86       .15       116       1.40       1.40       .31  
8/31/2016     14.07       .03       .26       .29       (.08 )     (.21 )     (.29 )     14.07       2.10       133       1.37       1.37       .22  
Class R-2E:                                                                                                        
2/28/20214,5      14.95       (.02 )     (.23 )     (.25 )     (.01 )     (.56 )     (.57 )     14.13       (1.70 )6      14       1.02 7      1.02 7      (.21 )7 
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  
8/31/2017     14.10       .08       (.03 )     .05       (.09 )     (.17 )     (.26 )     13.89       .42       3       1.10       1.10       .61  
8/31/2016     14.09       .11       .25       .36       (.14 )     (.21 )     (.35 )     14.10       2.63       2       1.07       1.07       .76  
Class R-3:                                                                                                        
2/28/20214,5      14.95       (.01 )     (.23 )     (.24 )     (.02 )     (.56 )     (.58 )     14.13       (1.64 )6      149       .88 7      .88 7      (.07 )7 
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  
8/31/2017     14.10       .11       (.04 )     .07       (.11 )     (.17 )     (.28 )     13.89       .55       145       .95       .95       .76  
8/31/2016     14.09       .09       .26       .35       (.13 )     (.21 )     (.34 )     14.10       2.57       155       .95       .95       .66  
Class R-4:                                                                                                        
2/28/20214,5      14.95       .02       (.23 )     (.21 )     (.04 )     (.56 )     (.60 )     14.14       (1.50 )6      170       .56 7      .56 7      .24 7 
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  
8/31/2017     14.10       .15       (.04 )     .11       (.15 )     (.17 )     (.32 )     13.89       .88       253       .62       .62       1.09  
8/31/2016     14.09       .15       .25       .40       (.18 )     (.21 )     (.39 )     14.10       2.90       275       .62       .62       1.09  
Class R-5E:                                                                                                        
2/28/20214,5      14.95       .03       (.23 )     (.20 )     (.06 )     (.56 )     (.62 )     14.13       (1.40 )6      16       .37 7      .37 7      .44 7 
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  
8/31/2017     14.10       .19       (.04 )     .15       (.19 )     (.17 )     (.36 )     13.89       1.14       10      .53       .36       1.36  
8/31/20164,14      14.08       .13       .25       .38       (.15 )     (.21 )     (.36 )     14.10       2.74 6      10      .49 7      .49 7      1.21 7 
Class R-5:                                                                                                        
2/28/20214,5      14.95       .04       (.23 )     (.19 )     (.06 )     (.56 )     (.62 )     14.14       (1.42 )6      69       .26 7      .26 7      .54 7 
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  
8/31/2017     14.10       .19       (.03 )     .16       (.20 )     (.17 )     (.37 )     13.89       1.18       63       .33       .33       1.40  
8/31/2016     14.09       .17       .27       .44       (.22 )     (.21 )     (.43 )     14.10       3.20       60       .32       .32       1.21  
Class R-6:                                                                                                        
2/28/20214,5      14.95       .04       (.22 )     (.18 )     (.07 )     (.56 )     (.63 )     14.14       (1.32 )6      14,447       .21 7      .21 7      .60 7 
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  
8/31/2017     14.10       .20       (.04 )     .16       (.20 )     (.17 )     (.37 )     13.89       1.23       5,726       .27       .27       1.48  
8/31/2016     14.09       .19       .26       .45       (.23 )     (.21 )     (.44 )     14.10       3.26       3,857       .27       .27       1.35  

 

    Six months ended   Year ended August 31,
Portfolio turnover rate for all share classes15   February 28, 20214,5,6     2020       2019       2018       2017       2016  
Excluding mortgage dollar roll transactions     46 %     133 %     113 %     95 %     187 %     296 %
Including mortgage dollar roll transactions     432 %     720 %     350 %     383 %     577 %     693 %

 

U. S. Government Securities Fund 31
 

Financial highlights (continued)

 

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 some of the periods shown, CRMC reimbursed a portion of transfer agent services fees for certain share classes.
4 Based on operations for a period that is less than a full year.
5 Unaudited.
6 Not annualized.
7 Annualized.
8 Amount less than $.01.
9 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.
10 Amount less than $1 million.
11 Class T and 529-T shares began investment operations on April 7, 2017.
12 Class F-3 shares began investment operations on January 27, 2017.
13 Class 529-F-2 and 529-F-3 shares began investment operations on October 30, 2020.
14 Class R-5E shares began investment operations on November 20, 2015.
15 Refer to Note 5 for more information on mortgage dollar rolls.

 

See notes to financial statements.

 

32 U. S. Government Securities Fund
 
Expense example unaudited

 

As a fund shareholder, you incur two types of costs: (1) transaction costs, such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads), and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period (September 1, 2020, through February 28, 2021).

 

Actual expenses:

The first line of each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled “Expenses paid during period” to estimate the expenses you paid on your account during this period.

 

Hypothetical example for comparison purposes:

The second line of each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

 

Notes:

Retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2, F-3, 529-F-1, 529-F-2 and 529-F-3 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would be lower by the amount of these fees.

 

Note that the expenses shown in the table on the following page are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

U. S. Government Securities Fund 33
 
Expense example (continued)   Beginning
account value
9/1/2020
    Ending
account value
2/28/2021
    Expenses paid
during period*
    Annualized
expense ratio
 
Class A – actual return   $ 1,000.00     $ 984.78     $ 3.00       .61 %
Class A – assumed 5% return     1,000.00       1,021.77       3.06       .61  
Class C – actual return     1,000.00       981.00       6.39       1.30  
Class C – assumed 5% return     1,000.00       1,018.35       6.51       1.30  
Class T – actual return     1,000.00       986.10       1.67       .34  
Class T – assumed 5% return     1,000.00       1,023.11       1.71       .34  
Class F-1 – actual return     1,000.00       984.83       3.00       .61  
Class F-1 – assumed 5% return     1,000.00       1,021.77       3.06       .61  
Class F-2 – actual return     1,000.00       986.20       1.58       .32  
Class F-2 – assumed 5% return     1,000.00       1,023.21       1.61       .32  
Class F-3 – actual return     1,000.00       986.74       1.03       .21  
Class F-3 – assumed 5% return     1,000.00       1,023.75       1.05       .21  
Class 529-A – actual return     1,000.00       984.89       2.90       .59  
Class 529-A – assumed 5% return     1,000.00       1,021.87       2.96       .59  
Class 529-C – actual return     1,000.00       981.03       6.48       1.32  
Class 529-C – assumed 5% return     1,000.00       1,018.25       6.61       1.32  
Class 529-E – actual return     1,000.00       983.80       3.98       .81  
Class 529-E – assumed 5% return     1,000.00       1,020.78       4.06       .81  
Class 529-T – actual return     1,000.00       985.18       1.92       .39  
Class 529-T – assumed 5% return     1,000.00       1,022.86       1.96       .39  
Class 529-F-1 – actual return     1,000.00       985.95       1.72       .35  
Class 529-F-1 – assumed 5% return     1,000.00       1,023.06       1.76       .35  
Class 529-F-2 – actual return     1,000.00       986.02       1.21       .37  
Class 529-F-2 – assumed 5% return     1,000.00       1,022.96       1.86       .37  
Class 529-F-3 – actual return     1,000.00       986.50       .91       .28  
Class 529-F-3 – assumed 5% return     1,000.00       1,023.41       1.40       .28  
Class R-1 – actual return     1,000.00       981.59       6.34       1.29  
Class R-1 – assumed 5% return     1,000.00       1,018.40       6.46       1.29  
Class R-2 – actual return     1,000.00       980.93       6.43       1.31  
Class R-2 – assumed 5% return     1,000.00       1,018.30       6.56       1.31  
Class R-2E – actual return     1,000.00       983.01       5.02       1.02  
Class R-2E – assumed 5% return     1,000.00       1,019.74       5.11       1.02  
Class R-3 – actual return     1,000.00       983.58       4.33       .88  
Class R-3 – assumed 5% return     1,000.00       1,020.43       4.41       .88  
Class R-4 – actual return     1,000.00       985.03       2.76       .56  
Class R-4 – assumed 5% return     1,000.00       1,022.02       2.81       .56  
Class R-5E – actual return     1,000.00       985.98       1.82       .37  
Class R-5E – assumed 5% return     1,000.00       1,022.96       1.86       .37  
Class R-5 – actual return     1,000.00       985.81       1.28       .26  
Class R-5 – assumed 5% return     1,000.00       1,023.51       1.30       .26  
Class R-6 – actual return     1,000.00       986.75       1.03       .21  
Class R-6 – assumed 5% return     1,000.00       1,023.75       1.05       .21  

 

* The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the one-half year period).
The period for the “annualized expense ratio” and “actual return” line is based on the number of days since the share class began investment operations on October 30, 2020. The “assumed 5% return” line is based on 181 days.

 

34 U. S. Government Securities Fund
 

Liquidity Risk Management Program

 

The fund has adopted a liquidity risk management program (the “program”). The fund’s board has designated Capital Research and Management Company (“CRMC”) as the administrator of the program. Personnel of CRMC or its affiliates conduct the day-to-day operation of the program pursuant to policies and procedures administered by the Capital Group Liquidity Risk Management Committee.

 

Under the program, CRMC manages the fund’s liquidity risk, which is the risk that the fund could not meet shareholder redemption requests without significant dilution of remaining shareholders’ interests in the fund. This risk is managed by monitoring the degree of liquidity of the fund’s investments, limiting the amount of the fund’s illiquid investments, and utilizing various risk management tools and facilities available to the fund for meeting shareholder redemptions, among other means. CRMC’s process of determining the degree of liquidity of the fund’s investments is supported by one or more third-party liquidity assessment vendors.

 

The fund’s board reviewed a report prepared by CRMC regarding the operation and effectiveness of the program for the period October 1, 2019, through September 30, 2020. No significant liquidity events impacting the fund were noted in the report. In addition, CRMC provided its assessment that the program had been effective in managing the fund’s liquidity risk.

 

U. S. Government Securities Fund 35
 

Office of the fund

333 South Hope Street

Los Angeles, CA 90071-1406

 

Investment adviser

Capital Research and Management Company

333 South Hope Street

Los Angeles, CA 90071-1406

 

Transfer agent for shareholder accounts

American Funds Service Company

(Write to the address near you.)

 

P.O. Box 6007

Indianapolis, IN 46206-6007

 

P.O. Box 2280

Norfolk, VA 23501-2280

 

Counsel

Morgan, Lewis & Bockius LLP

One Federal Street

Boston, MA 02110-1726

 

Custodian of assets

JPMorgan Chase Bank

270 Park Avenue

New York, NY 10017-2070

 

Independent registered public accounting firm

Deloitte & Touche LLP

695 Town Center Drive

Suite 1000

Costa Mesa, CA 92626-7188

 

Principal underwriter

American Funds Distributors, Inc.

333 South Hope Street

Los Angeles, CA 90071-1406

 

36 U. S. Government Securities Fund
 

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at (800) 421-4225 or visit the Capital Group website at capitalgroup.com.

 

“American Funds Proxy Voting Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on our website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on our website.

 

U.S. Government Securities Fund files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form NPORT-P. The list of portfolio holdings is available free of charge on the SEC website and on our website.

 

This report is for the information of shareholders of U.S. Government Securities Fund, but it also may be used as sales literature when preceded or accompanied by the current prospectus or summary prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after June 30, 2021, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

 

Bloomberg® is a trademark of Bloomberg Finance L.P. (collectively with its affiliates, “Bloomberg”). Barclays® is a trademark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Neither Bloomberg nor Barclays approves or endorses this material, guarantees the accuracy or completeness of any information herein and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

 

American Funds Distributors, Inc., member FINRA.

 

The Capital Advantage®

 

Since 1931, Capital Group, home of American Funds, has helped investors pursue long-term investment success. Our consistent approach — in combination with The Capital SystemSM — has resulted in superior outcomes.

 

  Aligned with investor success
  We base our decisions on a long-term perspective, which we believe aligns our goals with the interests of our clients. Our portfolio managers average 27 years of investment industry experience, including 21 years at our company, reflecting a career commitment to our long-term approach.1
   
  The Capital System
  The Capital System combines individual accountability with teamwork. Funds using The Capital System are divided into portions that are managed independently by investment professionals with diverse backgrounds, ages and investment approaches. An extensive global research effort is the backbone of our system.
   
  American Funds’ superior outcomes
  Equity funds have beaten their Lipper peer indexes in 91% of 10-year periods and 98% of 20-year periods.2 Fixed income funds have helped investors achieve diversification through attention to correlation between bonds and equities.3 Fund management fees have been among the lowest in the industry.4

 

  1 Investment industry experience as of December 31, 2020.
  2 Based on Class F-2 share results for rolling periods through December 31, 2020. Periods covered are the shorter of the fund’s lifetime or since the comparable Lipper index inception date (except Capital Income Builder and SMALLCAP World Fund, for which the Lipper average was used). Expenses differ for each share class, so results will vary.
  3

Based on Class F-2 share results as of December 31, 2020. Thirteen of the 17 fixed income American Funds that have been in existence for the three-year period showed a three-year correlation below 0.3. Standard & Poor’s 500 Index was used as an equity market proxy. Correlation based on monthly total returns. Correlation is a statistical measure of how two securities move in relation to each other. A correlation ranges from –1 to 1.

A positive correlation close to 1 implies that as one security moves, either up or down, the other security will move in “lockstep,” in the same direction. A negative correlation close to –1 indicates that the securities have moved in the opposite direction.

  4 On average, our management fees were in the lowest quintile 66% of the time, based on the 20-year period ended December 31, 2020, versus comparable Lipper categories, excluding funds of funds.

 

Class F-2 shares were first offered on August 1, 2008. Class F-2 share results prior to the date of first sale are hypothetical based on the results of the original share class of the fund without a sales charge, adjusted for typical estimated expenses. Results for certain funds with an inception date after August 1, 2008, also include hypothetical returns because those funds’ Class F-2 shares sold after the funds’ date of first offering. Please see capitalgroup.com for more information on specific expense adjustments and the actual dates of first sale.

 

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

 

 

 

ITEM 2 – Code of Ethics

 

Not applicable for filing of semi-annual reports to shareholders.

 

ITEM 3 – Audit Committee Financial Expert

 

Not applicable for filing of semi-annual reports to shareholders.

 

ITEM 4 – Principal Accountant Fees and Services

 

Not applicable for filing of semi-annual reports to shareholders.

 

ITEM 5 – Audit Committee of Listed Registrants

 

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

 

ITEM 6 – Schedule of Investments

 

Not applicable, insofar as the schedule is included as part of the report to shareholders filed under Item 1 of this Form.

 

ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

 

ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies

 

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

 

ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

 

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

 

ITEM 10 – Submission of Matters to a Vote of Security Holders

 

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. 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. While the committee normally is able to identify from its own 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 suggestions must be sent in writing to the nominating and governance committee of the Registrant, c/o the Registrant’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 nominating and governance committee.

 

ITEM 11 – Controls and Procedures

 

(a) The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
   
(b)

There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s semi-annual period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

 

ITEM 12 – Exhibits

 

(a)(1) Not applicable for filing of semi-annual reports to shareholders.
   
(a)(2) The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.

 

 
 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  THE AMERICAN FUNDS INCOME SERIES
   
  By __/s/ Kristine M. Nishiyama___________________
 

Kristine M. Nishiyama,

Principal Executive Officer

   
  Date: April 30, 2021

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

 

 

By __/s/ Kristine M. Nishiyama________________

Kristine M. Nishiyama,

Principal Executive Officer

 
Date: April 30, 2021

 

 

 

By ___/s/ Brian C. Janssen    __________

Brian C. Janssen, Treasurer and

Principal Financial Officer

 
Date: April 30, 2021