gvt497.htm

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Prospectus Supplement

For the following funds with prospectuses and retirement plan prospectuses dated

November 1, 2009

Intermediate Bond Fund of America®

U.S. Government Securities FundSM

January 4, 2010

1. Applicable to Intermediate Bond Fund of America only.

a. The table under the heading “Portfolio counselors” in the “Management” section of the prospectus and retirement plan prospectus is amended

in its entirety to read as follows:

Portfolio counselor/ Fund title (if applicable)	Portfolio counselor experience in this fund	Primary title with investment adviser (or one of its divisions)
John H. Smet President and Trustee	18 years	Senior Vice President – Fixed Income, Capital Research and Management Company
David A. Hoag Vice President	7 years	Senior Vice President – Fixed Income, Capital Research and Management Company
Mark A. Brett	Less than 1 year	Vice President – Fixed Income, Capital Research Company

b.	The table under the heading “Multiple portfolio counselor system” in the “Management and organization” section of the prospectus and retirement plan prospectus is amended in its entirety to read as follows:

Portfolio counselor	Investment experience	Experience in this fund	Role in management of the fund
John H. Smet	Investment professional for 27 years in total; 26 years with Capital Research and Management Company or affiliate	18 years	Serves as an intermediate-term fixed-income portfolio counselor
David A. Hoag	Investment professional for 21 years in total; 18 years with Capital Research and Management Company or affiliate	7 years	Serves as an intermediate-term fixed-income portfolio counselor
Mark A. Brett	Investment professional for 31 years in total; 16 years with Capital Research and Management Company or affiliate	Less than 1 year	Serves as an intermediate-term fixed-income portfolio counselor

2. Applicable to U.S. Government Securities Fund only.

a. The table under the heading “Portfolio counselors” in the “Management” section of the prospectus and retirement plan prospectus is amended

in its entirety to read as follows:

Portfolio counselor/ Fund title (if applicable)	Portfolio counselor experience in this fund	Primary title with investment adviser (or one of its divisions)
John H. Smet President and Trustee	23 years	Senior Vice President – Fixed Income, Capital Research and Management Company
Thomas H. Hogh Vice President	13 years	Senior Vice President – Fixed Income, Capital Research Company
Fergus N. MacDonald	Less than 1 year	Vice President – Fixed Income, Capital Research Company
Wesley K.-S. Phoa	Less than 1 year	Vice President – Fixed Income, Capital Research Company

b.	The table under the heading “Multiple portfolio counselor system” in the “Management and organization” section of the prospectus and retirement plan prospectus is amended in its entirety to read as follows:

Portfolio counselor	Investment experience	Experience in this fund	Role in management of the fund
John H. Smet	Investment professional for 27 years in total; 26 years with Capital Research and Management Company or affiliate	23 years	Serves as a fixed-income portfolio counselor
Thomas H. Hogh	Investment professional for 23 years in total; 19 years with Capital Research and Management Company or affiliate	13 years	Serves as a fixed-income portfolio counselor
Fergus N. MacDonald	Investment professional for 17 years in total; 6 years with Capital Research and Management Company or affiliate	Less than 1 year	Serves as a fixed-income portfolio counselor
Wesley K.-S. Phoa	Investment professional for 16 years in total; 11 years with Capital Research and Management Company or affiliate	Less than 1 year	Serves as a fixed-income portfolio counselor

Keep this supplement with your prospectus and/or retirement plan prospectus

MFGEBS-031-1209P Printed in USA CGD/AFD/10060-S24151

THE FUND PROVIDES SPANISH TRANSLATION IN CONNECTION WITH THE PUBLIC OFFERING AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.

/s/ KIMBERLY S. VERDICK

KIMBERLY S. VERDICK

SECRETARY

[logo - American Funds®]

Prospectus Supplement

For the following funds with prospectuses and retirement plan prospectuses dated

November 1, 2009

Intermediate Bond Fund of America®

U.S. Government Securities FundSM

January 4, 2010

1. Applicable to Intermediate Bond Fund of America only.

a. The table under the heading “Portfolio counselors” in the “Management” section of the prospectus and retirement plan prospectus is amended

in its entirety to read as follows:

Portfolio counselor/ Fund title (if applicable)	Portfolio counselor experience in this fund	Primary title with investment adviser (or one of its divisions)
John H. Smet President and Trustee	18 years	Senior Vice President – Fixed Income, Capital Research and Management Company
David A. Hoag Vice President	7 years	Senior Vice President – Fixed Income, Capital Research and Management Company
Mark A. Brett	Less than 1 year	Vice President – Fixed Income, Capital Research Company

b.	The table under the heading “Multiple portfolio counselor system” in the “Management and organization” section of the prospectus and retirement plan prospectus is amended in its entirety to read as follows:

Portfolio counselor	Investment experience	Experience in this fund	Role in management of the fund
John H. Smet	Investment professional for 27 years in total; 26 years with Capital Research and Management Company or affiliate	18 years	Serves as an intermediate-term fixed-income portfolio counselor
David A. Hoag	Investment professional for 21 years in total; 18 years with Capital Research and Management Company or affiliate	7 years	Serves as an intermediate-term fixed-income portfolio counselor
Mark A. Brett	Investment professional for 31 years in total; 16 years with Capital Research and Management Company or affiliate	Less than 1 year	Serves as an intermediate-term fixed-income portfolio counselor

2. Applicable to U.S. Government Securities Fund only.

a. The table under the heading “Portfolio counselors” in the “Management” section of the prospectus and retirement plan prospectus is amended

in its entirety to read as follows:

Portfolio counselor/ Fund title (if applicable)	Portfolio counselor experience in this fund	Primary title with investment adviser (or one of its divisions)
John H. Smet President and Trustee	23 years	Senior Vice President – Fixed Income, Capital Research and Management Company
Thomas H. Hogh Vice President	13 years	Senior Vice President – Fixed Income, Capital Research Company
Fergus N. MacDonald	Less than 1 year	Vice President – Fixed Income, Capital Research Company
Wesley K.-S. Phoa	Less than 1 year	Vice President – Fixed Income, Capital Research Company

b.	The table under the heading “Multiple portfolio counselor system” in the “Management and organization” section of the prospectus and retirement plan prospectus is amended in its entirety to read as follows:

Portfolio counselor	Investment experience	Experience in this fund	Role in management of the fund
John H. Smet	Investment professional for 27 years in total; 26 years with Capital Research and Management Company or affiliate	23 years	Serves as a fixed-income portfolio counselor
Thomas H. Hogh	Investment professional for 23 years in total; 19 years with Capital Research and Management Company or affiliate	13 years	Serves as a fixed-income portfolio counselor
Fergus N. MacDonald	Investment professional for 17 years in total; 6 years with Capital Research and Management Company or affiliate	Less than 1 year	Serves as a fixed-income portfolio counselor
Wesley K.-S. Phoa	Investment professional for 16 years in total; 11 years with Capital Research and Management Company or affiliate	Less than 1 year	Serves as a fixed-income portfolio counselor

Keep this supplement with your prospectus and/or retirement plan prospectus

MFGEBS-031-1209P Printed in USA CGD/AFD/10060-S24151

...

<PAGE>

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

Part B
Statement of Additional Information

November 1, 2009

(as supplemented January 4, 2010)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of U.S. Government Securities
Fund (the "fund" or "GVT") dated November 1, 2009. You may obtain a prospectus
from your financial adviser or by writing to the fund at the following address:

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

Certain privileges and/or services described below may not be available to all
shareholders (including shareholders who purchase shares at net asset value
through eligible retirement plans) depending on the shareholder's investment
dealer or retirement plan recordkeeper. Please see your financial adviser,
investment dealer, plan recordkeeper or employer for more information.

Class A AMUSX Class 529-A CGTAX Class R-1 RGVAX
Class B UGSBX Class 529-B CGTBX Class R-2 RGVBX
Class C UGSCX Class 529-C CGTCX Class R-3 RGVCX
Class F-1 UGSFX Class 529-E CGTEX Class R-4 RGVEX
Class F-2 GVTFX Class 529-F-1 CGTFX Class R-5 RGVFX
Class R-6 RGVGX

TABLE OF CONTENTS

Item Page no.
- ---- --------

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 2
Fund policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 10
Execution of portfolio transactions . . . . . . . . . . . . . . . . 34
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 37
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 40
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 44
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 51
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Shareholder account services and privileges . . . . . . . . . . . . 58
General information . . . . . . . . . . . . . . . . . . . . . . . . 61
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Investment portfolio
Financial statements

U.S. Government Securities Fund -- Page 1
<PAGE>

CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

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

.. The fund will invest at least 80% of its assets in securities guaranteed or
sponsored by the U.S. government.

.. The fund may invest up to 20% of its assets in non-government securities
rated AAA or Aaa by a nationally recognized statistical ratings
organization or unrated securities determined to be of equivalent quality
by the fund's investment adviser.

* * * * * *

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment objective, strategies and risks."

OBLIGATIONS BACKED BY THE "FULL FAITH AND CREDIT" OF THE U.S. GOVERNMENT -- U.S.
government obligations include the following types of securities:

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

FEDERAL AGENCY SECURITIES -- The securities of certain U.S. government
agencies and government-sponsored entities are guaranteed as to the timely
payment of principal and interest by the full faith and credit of the U.S.
government. Such agencies and entities include The Federal Financing Bank
(FFB), the Government National Mortgage Association (Ginnie Mae), the
Veterans Administration (VA), the Federal Housing Administration (FHA), the
Export-Import Bank (Exim Bank), the Overseas Private Investment Corporation
(OPIC), the Commodity Credit Corporation (CCC) and the Small Business
Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

U.S. Government Securities Fund -- Page 2
<PAGE>

On September 7, 2008, Freddie Mac and Fannie Mae were placed into
conservatorship by their new regulator, the Federal Housing Finance Agency.
Simultaneously, the U.S. Treasury made a commitment of indefinite duration to
maintain the positive net worth of both firms.

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

DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values and their values accrete over
time to face value at maturity. The market prices of debt securities fluctuate
depending on such factors as interest rates, credit quality and maturity. In
general, market prices of debt securities decline when interest rates rise and
increase when interest rates fall.

Certain additional risk factors relating to debt securities are discussed below:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or
substantial period of rising interest rates, issuers that are highly
leveraged may experience increased financial stress that could adversely
affect their ability to meet projected business goals, to obtain additional
financing and to service their principal and interest payment obligations.
Periods of economic change and uncertainty also can be expected to result
in increased volatility of market prices and yields of certain debt
securities. For example, prices of these securities can be affected by
financial contracts held by the issuer or third parties (such as
derivatives) relating to the security or other assets or indices.

PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest
rate market, the fund would have to replace the security with a lower
yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or
principal or is the subject of bankruptcy proceedings, the fund may incur
losses or expenses in seeking recovery of amounts owed to it.

LIQUIDITY AND VALUATION -- There may be little trading in the secondary
market for particular debt securities, which may affect adversely the
fund's ability to value accurately or dispose of such debt securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and/or liquidity of debt
securities.

Credit ratings for debt securities provided by rating agencies reflect an
evaluation of the safety of principal and interest payments, not market value
risk. The rating of an issuer is a rating agency's view of past and future
potential developments related to the issuer and may not necessarily reflect
actual outcomes. There can be a lag between the time of developments relating to
an issuer and the time a rating is assigned and updated.

Bond rating agencies may assign modifiers (such as +/-) to ratings categories to
signify the relative position of a credit within the rating category. Investment
policies that are based on ratings categories should be read to include any
security within that category, without giving

U.S. Government Securities Fund -- Page 3
<PAGE>

consideration to the modifier except where otherwise provided. See the Appendix
for more information about credit ratings.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by pools of mortgages. Principal and interest payments made on the
underlying asset pools backing these obligations are typically passed through to
investors, net of any fees paid to any insurer or any guarantor of the
securities. Pass-through securities may have either fixed or adjustable coupons.
These securities include:

MORTGAGE-BACKED SECURITIES -- These securities may be issued by U.S.
government agencies and government-sponsored entities, such as Ginnie Mae,
Fannie Mae and Freddie Mac. The payment of interest and principal on
mortgage-backed obligations issued by U.S. government agencies may be
guaranteed by the full faith and credit of the U.S. government (in the case
of Ginnie Mae), or may be guaranteed by the issuer (in the case of Fannie
Mae and Freddie Mac). However, these guarantees do not apply to the market
prices and yields of these securities, which vary with changes in interest
rates.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -- CMOs are also backed by a
pool of mortgages or mortgage loans, which are divided into two or more
separate bond issues. CMOs issued by U.S. government agencies are backed by
agency mortgages. Payments of principal and interest are passed through to
each bond issue at varying schedules resulting in bonds with different
coupons, effective maturities and sensitivities to interest rates. Some
CMOs may be structured in a way that when interest rates change, the impact
of changing prepayment rates on the effective maturities of certain issues
of these securities is magnified. CMOs may be less liquid or may exhibit
greater price volatility than other types of mortgage or asset-backed
securities.

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

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

U.S. Government Securities Fund -- Page 4
<PAGE>

INFLATION-INDEXED BONDS -- The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities and corporations. The fund
has no current intention of investing in inflation-index bonds issued by
corporations.

The principal amount of an inflation-indexed bond is adjusted in response to
changes in the level of the consumer price index. Repayment of the original bond
principal upon maturity (as adjusted for inflation) is guaranteed in the case of
U.S. Treasury inflation-indexed bonds, and therefore the principal amount of
such bonds cannot be reduced below par even during a period of deflation.
However, the current market value of these bonds is not guaranteed and will
fluctuate, reflecting the rise and fall of yields. In certain jurisdictions
outside the United States the repayment of the original bond principal upon the
maturity of an inflation-indexed bond is not guaranteed, allowing for the amount
of the bond repaid at maturity to be less than par.

The interest rate for inflation-indexed bonds is fixed at issuance as a
percentage of this adjustable principal. Accordingly, the actual interest income
may both rise and fall as the principal amount of the bonds adjusts in response
to movements of the consumer price index. For example, typically interest income
would rise during a period of inflation and fall during a period of deflation.

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

FORWARD COMMITMENT, WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The fund
may enter into commitments to purchase or sell securities at a future date. When
the fund agrees to purchase such securities, it assumes the risk of any decline
in value of the security from the date of the agreement. If the other party to
such a transaction fails to deliver or pay for the securities, the fund could
miss a favorable price or yield opportunity, or could experience a loss.

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

U.S. Government Securities Fund -- Page 5
<PAGE>

transaction. Additionally, prior to receiving delivery of securities as part of
a transaction, the fund may sell such securities.

The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement involves the sale of a security by
a fund and its agreement to repurchase the security at a specified time and
price. A "roll" transaction involves the sale of mortgage-backed or other
securities together with a commitment to purchase similar, but not identical,
securities at a later date. The fund assumes the risk of price and yield
fluctuations during the time of the commitment. The fund will segregate liquid
assets that will be marked to market daily in an amount sufficient to meet its
payment obligations under "roll" transactions and reverse repurchase agreements
with broker-dealers (no collateral is required for reverse repurchase agreements
with banks).

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities may only be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or in a registered public offering. Where registration is required, the holder
of a registered security may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. Difficulty in selling such securities may
result in a loss to the fund or cause it to incur additional administrative
costs.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the fund's board of trustees, taking into account
factors such as the frequency and volume of trading, the commitment of dealers
to make markets and the availability of qualified investors, all of which can
change from time to time. The fund may incur certain additional costs in
disposing of illiquid securities.

CASH AND CASH EQUIVALENTS -- The fund may hold cash or invest in cash
equivalents. Cash equivalents include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less. Investments in these securities are subject to the fund's ratings
guidelines.

VARIABLE AND FLOATING RATE OBLIGATIONS -- The interest rates payable on certain
securities in which the fund may invest may not be fixed but may fluctuate based
upon changes in market rates or credit ratings. Variable and floating rate
obligations bear coupon rates that are adjusted at designated intervals, based
on the then current market rates of interest or credit ratings. The rate
adjustment features tend to limit the extent to which the market value of the
obligations will fluctuate.

U.S. Government Securities Fund -- Page 6
<PAGE>

ADJUSTMENT OF MATURITIES -- The investment adviser seeks to anticipate movements
in interest rates and may adjust the maturity distribution of the portfolio
accordingly, keeping in mind the fund's objectives.

LOANS OF PORTFOLIO SECURITIES -- The fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors whose
financial condition is monitored by the investment adviser. The borrower must
maintain with the fund's custodian collateral consisting of cash, cash
equivalents or U.S. government securities equal to at least 100% of the value of
the borrowed securities, plus any accrued interest. The investment adviser will
monitor the adequacy of the collateral on a daily basis. The fund may at any
time call a loan of its portfolio securities and obtain the return of the loaned
securities. The fund will receive any interest paid on the loaned securities and
a fee or a portion of the interest earned on the collateral. The fund will limit
its loans of portfolio securities to an aggregate of 33-1/3% of the value of its
total assets, measured at the time any such loan is made.

The fund does not currently intend to engage in this investment practice over
the next 12 months.

* * * * * *

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

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. Transaction costs are
usually reflected in the spread between the bid and asked price.

The fund's portfolio turnover rates for the fiscal years ended August 31, 2009
and 2008 were 166% and 92%, respectively. The portfolio turnover rate would
equal 100% if each security in a fund's portfolio were replaced once per year.
See "Financial highlights" in the prospectus for the fund's annual portfolio
turnover rate for each of the last five fiscal years.

FUND POLICIES

All percentage limitations in the following fund policies are considered at the
time securities are purchased and are based on the fund's net assets unless
otherwise indicated. None of the following policies involving a maximum
percentage of assets will be considered violated unless the excess occurs
immediately after, and is caused by, an acquisition by the fund.

FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies,
which may not be changed without approval by holders of a majority of its
outstanding shares. Such majority is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), as the vote of the lesser of (a) 67% or more
of the voting securities present at a shareholder meeting, if the holders of
more than 50% of the outstanding voting securities are present in person or by
proxy, or (b) more than 50% of the outstanding voting securities.

These restrictions provided that the fund may not:

U.S. Government Securities Fund -- Page 7
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

U.S. Government Securities Fund -- Page 8
<PAGE>

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

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

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

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

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

CHANGES TO FUNDAMENTAL POLICIES - At a meeting of the fund's shareholders on
November 24, 2009, shareholders approved changes to the fundamental policies
listed above. The fund plans to implement the new fundamental policies in 2010
or early 2011; however, the fund reserves the right to delay the implementation.
The new policies are set forth in a joint proxy statement available on the SEC's
website at sec.gov.

NONFUNDAMENTAL POLICIES -- The fund has adopted the following nonfundamental
investment policies, which may be changed by action of the board of trustees
without shareholder approval:

1. The fund may not issue senior securities, except as permitted by the 1940
Act.

2. The fund may not acquire securities of open-end investment companies or
unit investment trusts registered under the 1940 Act in reliance on Sections
12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.

U.S. Government Securities Fund -- Page 9
<PAGE>

MANAGEMENT OF THE FUND

"INDEPENDENT" TRUSTEES/1/

NAME, AGE AND NUMBER OF
POSITION WITH FUND PORTFOLIOS/3/
(YEAR FIRST ELECTED AS A PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
TRUSTEE/2/) DURING PAST FIVE YEARS BY TRUSTEE BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------

Lee A. Ault III, 73 Private investor and 37 Anworth Mortgage Asset
Trustee (2010) corporate director; former Corporation; Office Depot,
Chairman of the Board, Inc.
In-Q-Tel, Inc. (technology
venture company funded
principally by the Central
Intelligence Agency); former
Chairman of the Board,
President and CEO,
Telecredit, Inc. (payment
services)
- ------------------------------------------------------------------------------------------------------------
William H. Baribault, 64 Chairman and CEO, Oakwood 37 None
Trustee (2010) Enterprises (private
investment and consulting);
former Chairman of the Board,
President and CEO,
Professional Business Bank
(financial services for small
businesses); former President
and CEO, Henry Company
(building products)
- ------------------------------------------------------------------------------------------------------------
Ambassador Richard G. Corporate director and 12 Carnival Corporation
Capen, Jr., 75 author; former U.S.
Trustee (1999) Ambassador to Spain; former
Vice Chairman, Knight-Ridder,
Inc. (communications
company); former Chairman and
Publisher, The Miami Herald
- ------------------------------------------------------------------------------------------------------------
James G. Ellis, 62 Dean and Professor of 40 Quiksilver, Inc.
Trustee (2006) Marketing, Marshall School of
Business, University of
Southern California
- ------------------------------------------------------------------------------------------------------------
Martin Fenton, 74 Chairman of the Board, Senior 40 None
Chairman of the Board Resource Group LLC
(Independent and Non- (development and management
Executive) (1989) of senior living communities)
- ------------------------------------------------------------------------------------------------------------
Leonard R. Fuller, 63 President and CEO, Fuller 40 None
Trustee (1994) Consulting (financial
management consulting firm)
- ------------------------------------------------------------------------------------------------------------
W. Scott Hedrick, 64 Founding General Partner, 37 Hot Topic, Inc.;
Trustee (2010) InterWest Partners (venture Office Depot, Inc.
capital firm focused on
information technology and
life sciences); Visiting
lecturer, Stanford Graduate
School of Business
- ------------------------------------------------------------------------------------------------------------
R. Clark Hooper, 63 Private investor; former 43 JPMorgan Value Opportunities
Trustee (2005) President, Dumbarton Group Fund, Inc.;
LLC (securities industry The Swiss Helvetia Fund, Inc.
consulting); former Executive
Vice President - Policy and
Oversight, NASD
- ------------------------------------------------------------------------------------------------------------
Merit E. Janow, 51 Professor, Columbia 40 The NASDAQ Stock Market LLC;
Trustee (2010) University, School of Trimble Navigation Limited
International and Public
Affairs; former Member, World
Trade Organization Appellate
Body
- ------------------------------------------------------------------------------------------------------------
Laurel B. Mitchell, Ph.D., Director, Accounting Program, 37 None
54 University of Redlands
Trustee (2010)
- ------------------------------------------------------------------------------------------------------------
Richard G. Newman,/5/ 75 Chairman of the Board, AECOM 13 Sempra Energy;
Trustee (1991) Technology Corporation SouthWest Water Company
(engineering, consulting and
professional technical
services)
- ------------------------------------------------------------------------------------------------------------
Frank M. Sanchez, 66 Principal, The Sanchez Family 37 None
Trustee (1999) Corporation dba McDonald's
Restaurants (McDonald's
licensee)
- ------------------------------------------------------------------------------------------------------------
Margaret Spellings, 52 President and CEO, Margaret 37 None
Trustee (2010) Spellings & Company; former
United States Secretary of
Education, United States
Department of Education -
Federal Government Agency;
former Assistant to the
President for Domestic
Policy, The White House -
Federal Government, Executive
Branch - Domestic Policy
- ------------------------------------------------------------------------------------------------------------
Steadman Upham, Ph.D., 60 President and Professor of 40 None
Trustee (2007) Anthropology, The University
of Tulsa; former President
and Professor of Archaeology,
Claremont Graduate University
- ------------------------------------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 10
<PAGE>

[This intentionally left blank for this filing]

U.S. Government Securities Fund -- Page 11
<PAGE>

"INTERESTED" TRUSTEES/6,7/

PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS
NAME, AGE AND AND POSITIONS HELD WITH NUMBER OF
POSITION WITH FUND AFFILIATED ENTITIES OR THE PORTFOLIOS/3/
(YEAR FIRST ELECTED AS A PRINCIPAL UNDERWRITER OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
TRUSTEE/OFFICER/2/) OF THE FUND BY TRUSTEE BY TRUSTEE
- -------------------------------------------------------------------------------------------------------

Paul G. Haaga, Jr., 61 Vice Chairman of the 12 None
Vice Chairman of the Board Board, Capital Research
(1985) and Management Company;
Senior Vice President -
Fixed Income, Capital
Research and Management
Company
- -------------------------------------------------------------------------------------------------------
John H. Smet, 53 Senior Vice President - 2 None
President and Trustee Fixed Income, Capital
(1993) Research and Management
Company; Director, The
Capital Group Companies,
Inc.*
- -------------------------------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 12
<PAGE>

OTHER OFFICERS/7/

NAME, AGE AND
POSITION WITH FUND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
(YEAR FIRST ELECTED AS AND POSITIONS HELD WITH AFFILIATED ENTITIES
AN OFFICER/2/) OR THE PRINCIPAL UNDERWRITER OF THE FUND
- -------------------------------------------------------------------------------

Thomas H. Hogh, 46 Senior Vice President - Fixed Income, Capital Research
Senior Vice President Company*
(2004)
- -------------------------------------------------------------------------------
Kristine M. Vice President and Senior Counsel - Fund Business
Nishiyama, 39 Management Group, Capital Research and Management
Vice President (2003) Company; Vice President and Counsel, Capital Bank and
Trust Company*
- -------------------------------------------------------------------------------
Kimberly S. Verdick, Vice President - Fund Business Management Group,
45 Capital Research and Management Company
Secretary (1994)
- -------------------------------------------------------------------------------
Ari M. Vinocor, 35 Vice President - Fund Business Management Group,
Treasurer (2007) Capital Research and Management Company
- -------------------------------------------------------------------------------
Courtney R. Taylor, Assistant Vice President - Fund Business Management
34 Group, Capital Research and Management Company
Assistant Secretary
(2006)
- -------------------------------------------------------------------------------
M. Susan Gupton, 36 Vice President - Fund Business Management Group,
Assistant Treasurer Capital Research and Management Company
(2008)
- -------------------------------------------------------------------------------

* Company affiliated with Capital Research and Management Company.

1 The term "independent" trustee refers to a trustee who is not an "interested
person" of the fund within the meaning of the 1940 Act.
2 Trustees and officers of the fund serve until their resignation, removal or
retirement.
3 Funds managed by Capital Research and Management Company, including the
American Funds; American Funds Insurance Series,(R) which is composed of 16
funds and serves as the underlying investment vehicle for certain variable
insurance contracts; American Funds Target Date Retirement Series,(R)/ /Inc.,
which is composed of nine funds and is available through tax-deferred
retirement plans and IRAs; and Endowments, which is composed of two portfolios
and is available to certain nonprofit organizations.
4 This includes all directorships (other than those in the American Funds or
other funds managed by Capital Research and Management Company) that are held
by each trustee as a director of a public company or a registered investment
company.
5 The investment adviser and its affiliates use a subsidiary of AECOM, Inc. to
perform architectural and space management services. The investment adviser's
business relationship with the subsidiary preceded its acquisition by AECOM in
1994. The total fees relating to this engagement for the last two years
represent less than 0.1% of AECOM, Inc.'s 2008 gross revenues.

6 "Interested persons" of the fund within the meaning of the 1940 Act, on the
basis of their affiliation with the fund's investment adviser, Capital Research
and Management Company, or affiliated entities (including the fund's principal
underwriter).
7 All of the officers listed are officers and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company
serves as investment adviser.

THE ADDRESS FOR ALL TRUSTEES AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: SECRETARY.

U.S. Government Securities Fund -- Page 13
<PAGE>

FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2008:

AGGREGATE
DOLLAR
RANGE/1/ OF
INDEPENDENT
AGGREGATE TRUSTEES
DOLLAR RANGE/1/ DOLLAR DEFERRED
OF SHARES RANGE/1/OF COMPENSATION/2/
OWNED IN INDEPENDENT ALLOCATED TO
ALL FUNDS TRUSTEES ALL FUNDS
IN THE DEFERRED WITHIN
DOLLAR RANGE/1/ AMERICAN FUNDS COMPENSATION/2/ AMERICAN FUNDS
OF FUND FAMILY OVERSEEN ALLOCATED FAMILY OVERSEEN
NAME SHARES OWNED BY TRUSTEE TO FUND BY TRUSTEE
- --------------------------------------------------------------------------------------------

"INDEPENDENT" TRUSTEES
- --------------------------------------------------------------------------------------------
Lee A. Ault III/3/ None Over $100,000 N/A N/A
- --------------------------------------------------------------------------------------------
William H. None None N/A N/A
Baribault/3/
- --------------------------------------------------------------------------------------------
Richard G. Capen, None Over $100,000 N/A Over $100,000
Jr.
- --------------------------------------------------------------------------------------------
James G. Ellis None Over $100,000 N/A N/A
- --------------------------------------------------------------------------------------------
Martin Fenton $10,001 - Over $100,000 N/A Over $100,000
$50,000
- --------------------------------------------------------------------------------------------
Leonard R. Fuller None $50,001 - N/A Over $100,000
$100,000
- --------------------------------------------------------------------------------------------
W. Scott Hedrick/3/ None None N/A N/A
- --------------------------------------------------------------------------------------------
R. Clark Hooper None Over $100,000 N/A $50,001 -
$100,000
- --------------------------------------------------------------------------------------------
Merit E. Janow/3/ None Over $100,000 N/A N/A
- --------------------------------------------------------------------------------------------
Laurel B. Mitchell, None None N/A N/A
Ph.D./3/
- --------------------------------------------------------------------------------------------
Richard G. Newman Over $100,000 Over $100,000 N/A N/A
- --------------------------------------------------------------------------------------------
Frank M. Sanchez $1 - $10,000 $10,001 - N/A N/A
$50,000
- --------------------------------------------------------------------------------------------
Margaret None None N/A N/A
Spellings/3/
- --------------------------------------------------------------------------------------------
Steadman Upham None Over $100,000 N/A Over $100,000
- --------------------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 14
<PAGE>

FUND SHARES OWNED BY TRUSTEES AS OF NOVEMBER 30, 2009:

AGGREGATE
DOLLAR RANGE/1/
OF SHARES
OWNED IN
ALL FUNDS
IN THE
DOLLAR RANGE/1/ AMERICAN FUNDS
OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY TRUSTEE
- -------------------------------------------------------------------------------

"INDEPENDENT" TRUSTEES
- -------------------------------------------------------------------------------
Lee A. Ault III/3/ None Over $100,000
- -------------------------------------------------------------------------------
William H. Baribault/3/ None None
- -------------------------------------------------------------------------------
Richard G. Capen, Jr. None Over $100,000
- -------------------------------------------------------------------------------
James G. Ellis None Over $100,000
- -------------------------------------------------------------------------------
Martin Fenton $10,001 - $50,000 Over $100,000
- -------------------------------------------------------------------------------
Leonard R. Fuller None $50,001 - $100,000
- -------------------------------------------------------------------------------
W. Scott Hedrick/3/ None None
- -------------------------------------------------------------------------------
R. Clark Hooper None Over $100,000
- -------------------------------------------------------------------------------
Merit E. Janow/3/ None Over $100,000
- -------------------------------------------------------------------------------
Laurel B. Mitchell, $1 - $10,000 $10,001 - $50,000
Ph.D./3/
- -------------------------------------------------------------------------------
Richard G. Newman Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
Frank M. Sanchez $1 - $10,000 $10,001 - $50,000
- -------------------------------------------------------------------------------
Margaret Spellings/3/ None None
- -------------------------------------------------------------------------------
Steadman Upham None Over $100,000
- -------------------------------------------------------------------------------

FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2008:

"INTERESTED" TRUSTEES
- -----------------------------------------------------------------------------
Paul G. Haaga, $10,001 - $50,000 Over $100,000
Jr.
- -----------------------------------------------------------------------------
John H. Smet Over $100,000 Over $100,000
- -----------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 15
<PAGE>

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" trustees include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.
2 Eligible trustees may defer their compensation under a nonqualified deferred
compensation plan. Deferred amounts accumulate at an earnings rate determined
by the total return of one or more American Funds as designated by the trustee.

3 Lee A. Ault III, William H. Baribault, W. Scott Hedrick, Merit E. Janow,
Laurel B. Mitchell and Margaret Spellings were elected to the board effective
January 1, 2010. A separate table has been provided with fund shares owned by
independent trustees as of November 30, 2009.

TRUSTEE COMPENSATION -- No compensation is paid by the fund to any officer or
trustee who is a director, officer or employee of the investment adviser or its
affiliates. The boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The fund typically pays each independent trustee an annual
fee, which ranges from $580 to $4,058, based primarily on the total number of
board clusters on which that independent trustee serves.

In addition, the fund generally pays independent trustees attendance and other
fees for meetings of the board and its committees. Board and committee chairs
receive additional fees for their services.

Independent trustees also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The fund and the other funds served
by each independent trustee each pay an equal portion of these attendance fees.

No pension or retirement benefits are accrued as part of fund expenses.
Independent trustees may elect, on a voluntary basis, to defer all or a portion
of their fees through a deferred compensation plan in effect for the fund. The
fund also reimburses certain expenses of the independent trustees.

U.S. Government Securities Fund -- Page 16
<PAGE>

TRUSTEE COMPENSATION EARNED DURING THE FISCAL YEAR ENDED AUGUST 31, 2009

TOTAL COMPENSATION (INCLUDING
AGGREGATE COMPENSATION VOLUNTARILY DEFERRED COMPENSATION/1/)
(INCLUDING VOLUNTARILY FROM ALL FUNDS MANAGED BY
DEFERRED COMPENSATION/1/) CAPITAL RESEARCH AND MANAGEMENT
NAME FROM THE FUND COMPANY OR ITS AFFILIATES/2/
- ------------------------------------------------------------------------------------------

Lee A. Ault III/3/ $ None $158,616
- ------------------------------------------------------------------------------------------
William H. Baribault/3/ None 84,956
- ------------------------------------------------------------------------------------------
Richard G. Capen, Jr. 6,184 248,564
- ------------------------------------------------------------------------------------------
James G. Ellis 7,881 221,988
- ------------------------------------------------------------------------------------------
Martin Fenton/4/ 8,493 440,100
- ------------------------------------------------------------------------------------------
Leonard R. Fuller/4/ 5,855 366,239
- ------------------------------------------------------------------------------------------
W. Scott Hedrick/3/ None 143,943
- ------------------------------------------------------------------------------------------
R. Clark Hooper 5,904 397,938
- ------------------------------------------------------------------------------------------
Merit E. Janow/3/ None 221,633
- ------------------------------------------------------------------------------------------
Laurel B. Mitchell/3/ None 80,664
- ------------------------------------------------------------------------------------------
Richard G. Newman 8,261 316,510
- ------------------------------------------------------------------------------------------
Frank M. Sanchez 10,276 157,683
- ------------------------------------------------------------------------------------------
Margaret Spellings/3/ None 30,250
- ------------------------------------------------------------------------------------------
Steadman Upham/4/ 6,077 227,487
- ------------------------------------------------------------------------------------------

1 Amounts may be deferred by eligible trustees under a nonqualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more American Funds
as designated by the trustees. Compensation shown in this table for the fiscal
year ended August 31, 2009 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
2 Funds managed by Capital Research and Management Company, including the
American Funds; American Funds Insurance Series,(R) which is composed of 16
funds and serves as the underlying investment vehicle for certain variable
insurance contracts; American Funds Target Date Retirement Series,(R)/ /Inc.,
which is composed of nine funds and is available through tax-deferred
retirement plans and IRAs; and Endowments, which is composed of two portfolios
and is available to certain nonprofit organizations.

3 Lee A. Ault III, William H. Baribault, W. Scott Hedrick, Merit E. Janow,
Laurel B. Mitchell and Margaret Spellings were elected to the board effective
January 1, 2010.
4 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2009
fiscal year for participating trustees is as follows: Martin Fenton ($51,754),
Leonard R. Fuller, ($35,494) and Steadman Upham ($10,909). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the trustees.

As of December 1, 2009, the officers and trustees of the fund and their
families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.

FUND ORGANIZATION AND THE BOARD OF TRUSTEES -- The fund, an open-end,
diversified management investment company, was organized as a Massachusetts
business trust on

U.S. Government Securities Fund -- Page 17
<PAGE>

May 8, 1985. At a meeting of the fund's shareholders on November 24, 2009,
shareholders approved the reorganization of the fund to a Delaware statutory
trust. The reorganization is expected to be completed in 2010 or early 2011;
however, the fund reserves the right to delay the implementation. A summary
comparison of the governing documents and state laws affecting the Delaware
statutory trust and the current form of organization of the fund can be found in
a joint proxy statement available on the SEC's website at sec.gov. Although the
board of trustees has delegated day-to-day oversight to the investment adviser,
all fund operations are supervised by the fund's board, which meets periodically
and performs duties required by applicable state and federal laws.

Massachusetts common law provides that a trustee of a Massachusetts business
trust owes a fiduciary duty to the trust and must carry out his or her
responsibilities as a trustee in accordance with that fiduciary duty. Generally,
a trustee will satisfy his or her duties if he or she acts in good faith and
uses ordinary prudence.

Independent board members are paid certain fees for services rendered to the
fund as described above. They may elect to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund.

The fund has several different classes of shares. Shares of each class represent
an interest in the same investment portfolio. Each class has pro rata rights as
to voting, redemption, dividends and liquidation, except that each class bears
different distribution expenses and may bear different transfer agent fees and
other expenses properly attributable to the particular class as approved by the
board of trustees and set forth in the fund's rule 18f-3 Plan. Each class'
shareholders have exclusive voting rights with respect to the respective class'
rule 12b-1 plans adopted in connection with the distribution of shares and on
other matters in which the interests of one class are different from interests
in another class. Shares of all classes of the fund vote together on matters
that affect all classes in substantially the same manner. Each class votes as a
class on matters that affect that class alone. Note that 529 college savings
plan account owners invested in Class 529 shares are not shareholders of the
fund and, accordingly, do not have the rights of a shareholder, such as the
right to vote proxies relating to fund shares. As the legal owner of the fund's
Class 529 shares, the Virginia College Savings Plan/SM/ will vote any proxies
relating to such fund shares.

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

The fund's declaration of trust and by-laws as well as separate indemnification
agreements that the fund has entered into with independent trustees provide in
effect that, subject to certain conditions, the fund will indemnify its officers
and trustees against liabilities or expenses actually and reasonably incurred by
them relating to their service to the fund. However, trustees are not protected
from liability by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
office.

REMOVAL OF TRUSTEES BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority

U.S. Government Securities Fund -- Page 18
<PAGE>

of the votes entitled to be cast, remove any trustee from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired terms
of removed trustees. The fund has agreed, at the request of the staff of the
Securities and Exchange Commission, to apply the provisions of section 16(c) of
the 1940 Act with respect to the removal of trustees, as though the fund were a
common-law trust. Accordingly, the trustees of the fund will promptly call a
meeting of shareholders for the purpose of voting upon the removal of any
trustees when requested in writing to do so by the record holders of at least
10% of the outstanding shares.

COMMITTEES OF THE BOARD OF TRUSTEES -- The fund has an audit committee comprised
of Richard G. Capen, Jr.; Laurel B. Mitchell; Frank M. Sanchez and Steadman
Upham, none of whom is an "interested person" of the fund within the meaning of
the 1940 Act. The committee provides oversight regarding the fund's accounting
and financial reporting policies and practices, its internal controls and the
internal controls of the fund's principal service providers. The committee acts
as a liaison between the fund's independent registered public accounting firm
and the full board of trustees. Four audit committee meetings were held during
the 2009 fiscal year.

The fund has a contracts committee comprised of Lee A. Ault III; William H.
Baribault; Richard G. Capen, Jr.; James G. Ellis; Martin Fenton; Leonard R.
Fuller; W. Scott Hedrick; R. Clark Hooper; Merit E. Janow; Laurel B. Mitchell;
Richard G. Newman; Frank M. Sanchez; Margaret Spellings; and Steadman Upham,
none of whom is an "interested person" of the fund within the meaning of the
1940 Act. The committee's principal function is to request, review and consider
the information deemed necessary to evaluate the terms of certain agreements
between the fund and its investment adviser or the investment adviser's
affiliates, such as the Investment Advisory and Service Agreement, Principal
Underwriting Agreement, Administrative Services Agreement and Plans of
Distribution adopted pursuant to rule 12b-1 under the 1940 Act, that the fund
may enter into, renew or continue, and to make its recommendations to the full
board of trustees on these matters. One contracts committee meeting was held
during the 2009 fiscal year.

The fund has a nominating and governance committee comprised of Lee A. Ault III;
William H. Baribault; James G. Ellis; R. Clark Hooper; Merit E. Janow; and
Laurel B. Mitchell, none of whom is an "interested person" of the fund within
the meaning of the 1940 Act. The committee periodically reviews such issues as
the board's composition, responsibilities, committees, compensation and other
relevant issues, and recommends any appropriate changes to the full board of
trustees. The committee also evaluates, selects and nominates independent
trustee candidates to the full board of trustees. While the committee normally
is able to identify from its own and other resources an ample number of
qualified candidates, it will consider shareholder suggestions of persons to be
considered as nominees to fill future vacancies on the board. Such suggestions
must be sent in writing to the nominating and governance committee of the fund,
addressed to the fund's secretary, and must be accompanied by complete
biographical and occupational data on the prospective nominee, along with a
written consent of the prospective nominee for consideration of his or her name
by the committee. Four nominating and governance committee meetings were held
during the 2009 fiscal year.

PROXY VOTING PROCEDURES AND PRINCIPLES -- The fund's investment adviser, in
consultation with the fund's board, has adopted Proxy Voting Procedures and
Principles (the "Principles") with respect to voting proxies of securities held
by the fund, other American Funds, Endowments and American Funds Insurance
Series. The complete text of these principles is available on the American Funds
website at americanfunds.com. Proxies are voted by a committee of the

U.S. Government Securities Fund -- Page 19
<PAGE>

appropriate equity investment division of the investment adviser under authority
delegated by the funds' boards. Therefore, if more than one fund invests in the
same company, they may vote differently on the same proposal. In addition, the
funds' boards monitor the proxy voting process and provide guidance with respect
to the Principles.

All U.S. proxies are voted. Proxies for companies outside the U.S. also are
voted, provided there is sufficient time and information available. After a
proxy statement is received, the investment adviser prepares a summary of the
proposals contained in the proxy statement. A discussion of any potential
conflicts of interest also is included in the summary. For proxies of securities
managed by a particular investment division of the investment adviser, the
initial voting recommendation is made by one or more of the division's
investment analysts familiar with the company and industry. A second
recommendation is made by a proxy coordinator (an investment analyst with
experience in corporate governance and proxy voting matters) within the
appropriate investment division, based on knowledge of these Principles and
familiarity with proxy-related issues. The proxy summary and voting
recommendations are made available to the appropriate proxy voting committee for
a final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy voting committee members
are alerted to the potential conflict. The proxy voting committee may then elect
to vote the proxy or seek a third-party recommendation or vote of an ad hoc
group of committee members.

The Principles, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Principles provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website and (c) on the SEC's website at sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Principles is available upon request, free
of charge, by calling American Funds Service Company or visiting the American
Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director generally is supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions also may be
supported.

GOVERNANCE PROVISIONS -- Typically, proposals to declassify a board (elect
all directors annually) are supported based on the belief that this
increases the directors' sense of accountability to shareholders. Proposals
for cumulative voting generally are supported in

U.S. Government Securities Fund -- Page 20
<PAGE>

order to promote management and board accountability and an opportunity for
leadership change. Proposals designed to make director elections more
meaningful, either by requiring a majority vote or by requiring any
director receiving more withhold votes than affirmative votes to tender his
or her resignation, generally are supported.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill generally
are supported. (There may be certain circumstances, however, when a proxy
voting committee of a fund or an investment division of the investment
adviser believes that a company needs to maintain anti-takeover
protection.) Proposals to eliminate the right of shareholders to act by
written consent or to take away a shareholder's right to call a special
meeting typically are not supported.

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items generally are voted in favor of
management's recommendations unless circumstances indicate otherwise.

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on December 1, 2009. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

NAME AND ADDRESS OWNERSHIP OWNERSHIP PERCENTAGE
- --------------------------------------------------------------------------------

Edward D. Jones & Co. Record Class A 15.14%
Omnibus Account Class B 8.85
Maryland Heights, MO
- --------------------------------------------------------------------------------
First Clearing, LLC Record Class A 6.26
Custody Account Class B 6.27
St. Louis, MO Class C 6.19
Class F-1 7.50
- --------------------------------------------------------------------------------
Merrill Lynch Record Class B 9.32
Omnibus Account Class C 19.70
Jacksonville, FL Class F-2 28.11
Class R-3 5.17
Class R-5 5.16
- --------------------------------------------------------------------------------
LPL Financial Record Class F-1 5.90
Omnibus Account
San Diego, CA
- --------------------------------------------------------------------------------
Capital Guardian Trust Company Record Class F-2 6.25
Personal Investment Management Account Beneficial
Irvine, CA
- --------------------------------------------------------------------------------
Trader Joe's Company Record Class R-4 31.40
Retirement Plan Beneficial
Englewood, CO
- --------------------------------------------------------------------------------
John Hancock Life Insurance Co. USA Record Class R-5 32.30
Omnibus Account
Boston, MA
- --------------------------------------------------------------------------------
The Capital Group Companies Record Class R-5 13.30
Retirement Plans Beneficial
Los Angeles, CA
- --------------------------------------------------------------------------------
Edward D. Jones & Co. Record Class R-5 5.95
Retirement Plan Beneficial
Norwood, MA
- --------------------------------------------------------------------------------
NFS, LLC FEBO Record Class R-5 5.58
First American Trust Beneficial
Santa Ana, CA
- --------------------------------------------------------------------------------
American Funds 2020 Target Date Record Class R-6 22.02
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------
American Funds 2025 Target Date Record Class R-6 19.50
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------
American Funds 2015 Target Date Record Class R-6 19.10
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------
American Funds 2010 Target Date Record Class R-6 13.45
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------
American Funds 2030 Target Date Record Class R-6 9.41
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------
American Funds 2035 Target Date Record Class R-6 6.17
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------
American Funds 2040 Target Date Record Class R-6 5.07
Retirement Fund
Norfolk, VA
- --------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 21
<PAGE>

UNLESS OTHERWISE NOTED, REFERENCES IN THIS STATEMENT OF ADDITIONAL INFORMATION
TO CLASS F SHARES, CLASS R SHARES OR CLASS 529 SHARES REFER TO BOTH F SHARE
CLASSES, ALL R SHARE CLASSES OR ALL 529 SHARE CLASSES, RESPECTIVELY.

U.S. Government Securities Fund -- Page 22
<PAGE>

INVESTMENT ADVISER -- Capital Research and Management Company, the fund's
investment adviser, founded in 1931, maintains research facilities in the United
States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London,
Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 6455 Irvine Center Drive, Irvine,
CA 92618. It is a wholly owned subsidiary of The Capital Group Companies, Inc.,
a holding company for several investment management subsidiaries. Capital
Research and Management Company manages equity assets through two investment
divisions, Capital World Investors and Capital Research Global Investors, and
manages fixed-income assets through its Fixed Income division. Capital World
Investors and Capital Research Global Investors make investment decisions on an
independent basis.

Rather than remain as investment divisions, Capital World Investors and Capital
Research Global Investors may be incorporated into wholly owned subsidiaries of
Capital Research and Management Company. In that event, Capital Research and
Management Company would continue to be the investment adviser, and day-to-day
investment management of equity assets would continue to be carried out through
one or both of these subsidiaries. Although not currently contemplated, Capital
Research and Management Company could incorporate its Fixed Income division in
the future and engage it to provide day-to-day investment management of
fixed-income assets. Capital Research and Management Company and each of the
funds it advises have applied to the U.S. Securities and Exchange Commission for
an exemptive order that would give Capital Research and Management Company the
authority to use, upon approval of the fund's board, its management subsidiaries
and affiliates to provide day-to-day investment management services to the fund,
including making changes to the management subsidiaries and affiliates providing
such services. The fund's shareholders approved this arrangement at a meeting of
the fund's shareholders on November 24, 2009. There is no assurance that Capital
Research and Management Company will incorporate its investment divisions or
exercise any authority, if granted, under an exemptive order.

The investment adviser has adopted policies and procedures that address issues
that may arise as a result of an investment professional's management of the
fund and other funds and accounts. Potential issues could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, investment professional compensation and
voting relating to portfolio securities. The investment adviser believes that
its policies and procedures are reasonably designed to address these issues.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage.

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing plans will vary depending on
the individual's portfolio results, contributions to the organization and other
factors.

To encourage a long-term focus, bonuses based on investment results are
calculated by comparing pretax total investment returns to relevant benchmarks
over the most recent year, a four-year rolling average and an eight-year rolling
average with greater weight placed on the

U.S. Government Securities Fund -- Page 23
<PAGE>

four-year and eight-year rolling averages. For portfolio counselors, benchmarks
may include measures of the marketplaces in which the fund invests and measures
of the results of comparable mutual funds. For investment analysts, benchmarks
may include relevant market measures and appropriate industry or sector indexes
reflecting their areas of expertise. Capital Research and Management Company
makes periodic subjective assessments of analysts' contributions to the
investment process and this is an element of their overall compensation. The
investment results of each of the fund's portfolio counselors are measured
against the following benchmark: Citigroup Treasury/Government
Sponsored/Mortgage Index and Lipper General U.S. Government Funds Average.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage portions of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF AUGUST 31, 2009:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) FOR WHICH
FOR WHICH FOR WHICH PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR IS A MANAGER
OF FUND IS A MANAGER IS A MANAGER (ASSETS OF
PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS)/2/ IN BILLIONS)/3/ IN BILLIONS)/4/
- --------------------------------------------------------------------------------------------

John H. Smet $100,001 - 7 $249.8 None None
$500,000
- --------------------------------------------------------------------------------------------
Thomas H. Hogh None/5/ 3 $107.8 1 $0.15 3 $0.26
- --------------------------------------------------------------------------------------------
Fergus N. None/6/ None None None
MacDonald
- --------------------------------------------------------------------------------------------
Wesley K.-S. Phoa $10,001 - None None None
$50,000/6/
- --------------------------------------------------------------------------------------------

1 Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
2 Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not the
total assets managed by the individual, which is a substantially lower amount.
No fund has an advisory fee that is based on the performance of the fund.
3 Represents funds advised or sub-advised by Capital Research and Management
Company or its affiliates and sold outside the United States and/or
fixed-income assets in institutional accounts managed by investment adviser
subsidiaries of Capital Group International, Inc., an affiliate of Capital
Research and Management Company. Assets noted are the total net assets of the
funds or accounts and are not the total assets managed by the individual, which
is a substantially lower amount. No fund or account has an advisory fee that is
based on the performance of the fund or account.
4 Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.
5 Portfolio counselor resides outside the United States. As such, tax
considerations may adversely influence his or her ability to own shares of the
fund.

6 Assumed portfolio counselor responsibilities in the fund on January 4, 2010.

U.S. Government Securities Fund -- Page 24
<PAGE>

INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until May 31, 2010, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (a) the board of trustees, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (b) the vote of a majority of trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the investment adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act). In addition, the Agreement provides that the investment adviser may
delegate all, or a portion of, its investment management responsibilities to one
or more subsidiary advisers that is approved by the fund's board, pursuant to an
agreement between the investment adviser and such subsidiary. Any such
subsidiary adviser will be paid solely by the investment adviser out of its
fees.

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

The management fee is based upon the daily net assets of the fund and monthly
gross investment income. Gross investment income is determined in accordance
with generally accepted accounting principles and does not include gains or
losses from sales of capital assets.

The management fee is based on the following annualized rates and daily net
asset levels:

Net asset level

RATE IN EXCESS OF UP TO
- ------------------------------------------------------------------------------

0.30% $ 0 $ 60,000,000
- ------------------------------------------------------------------------------
0.21 60,000,000 1,000,000,000
- ------------------------------------------------------------------------------
0.18 1,000,000,000 3,000,000,000
- ------------------------------------------------------------------------------
0.15 3,000,000,000
- ------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 25
<PAGE>

The Agreement also provides for fees based on monthly gross investment income at
the following annualized rates:

Monthly gross investment income

RATE IN EXCESS OF UP TO
- -----------------------------------------------------------------------------------

3.00% $ 0 $3,333,333
- -----------------------------------------------------------------------------------
2.25 3,333,333 8,333,333
- -----------------------------------------------------------------------------------
2.00 8,333,333
- -----------------------------------------------------------------------------------

For the fiscal years ended August 31, 2009, 2008 and 2007, the investment
adviser was entitled to receive from the fund management fees of $18,125,000,
$9,781,000 and $7,659,000, respectively. After giving effect to the management
fee waivers/expense reimbursements described below, the fund paid the investment
adviser management fees of $17,597,000 (a reduction of $528,000), $8,803,000 (a
reduction of $978,000) and $6,893,000 (a reduction of $766,000) for the fiscal
years ended August 31, 2009, 2008 and 2007, respectively.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. From April 1, 2005 through December 31, 2008,
this waiver increased to 10% of the management fees that the investment adviser
was otherwise entitled to receive. The waiver was discontinued effective January
1, 2009.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until May 31,
2010, unless sooner terminated, and may be renewed from year to year thereafter,
provided that any such renewal has been specifically approved at least annually
by the vote of a majority of trustees who are not parties to the Administrative
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The fund may terminate the Administrative Agreement at any time by vote of a
majority of independent trustees. The investment adviser has the right to
terminate the Administrative Agreement upon 60 days' written notice to the fund.
The Administrative Agreement automatically terminates in the event of its
assignment (as defined in the 1940 Act).

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and Class R and 529 shares. The investment adviser may contract
with third parties, including American Funds Service Company,/(R)/ the fund's
Transfer Agent, to provide some of these services. Services include, but are not
limited to, shareholder account maintenance, transaction processing, tax
information reporting and shareholder and fund communications. In addition, the
investment adviser monitors, coordinates, oversees and assists with the
activities performed by third parties providing such services. For Class R-2
shares, the investment adviser has agreed to pay a portion of the fees payable
under the Administrative Agreement that would otherwise have been paid by the
fund. For the year ended August 31, 2009, the total fees paid by the investment
adviser were $78,000.

U.S. Government Securities Fund -- Page 26
<PAGE>

The investment adviser receives an administrative services fee at the annual
rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding
Class R-5 and R-6 shares) and 529 shares for administrative services provided to
these share classes. Administrative services fees are paid monthly and accrued
daily. The investment adviser uses a portion of this fee to compensate third
parties for administrative services provided to the fund. Of the remainder, the
investment adviser does not retain more than 0.05% of the average daily net
assets for each applicable share class. For Class R-5 and R-6 shares, the
administrative services fee is calculated at the annual rate of up to 0.10% and
0.05%, respectively, of the average daily net assets of such class. The
administrative services fee includes compensation for transfer agent and
shareholder services provided to the fund's Class C, F, R and 529 shares. In
addition to making administrative service fee payments to unaffiliated third
parties, the investment adviser also makes payments from the administrative
services fee to American Funds Service Company according to a fee schedule,
based principally on the number of accounts serviced, contained in a Shareholder
Services Agreement between the fund and American Funds Service Company. A
portion of the fees paid to American Funds Service Company for transfer agent
services is also paid directly from the relevant share class.

During the 2009 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
- ------------------------------------------------------------------------------

CLASS C $968,000
- ------------------------------------------------------------------------------
CLASS F-1 294,000
- ------------------------------------------------------------------------------
CLASS F-2 29,000
- ------------------------------------------------------------------------------
CLASS 529-A 140,000
- ------------------------------------------------------------------------------
CLASS 529-B 30,000
- ------------------------------------------------------------------------------
CLASS 529-C 77,000
- ------------------------------------------------------------------------------
CLASS 529-E 8,000
- ------------------------------------------------------------------------------
CLASS 529-F-1 8,000
- ------------------------------------------------------------------------------
CLASS R-1 24,000
- ------------------------------------------------------------------------------
CLASS R-2 840,000
- ------------------------------------------------------------------------------
CLASS R-3 401,000
- ------------------------------------------------------------------------------
CLASS R-4 197,000
- ------------------------------------------------------------------------------
CLASS R-5 244,000
- ------------------------------------------------------------------------------
CLASS R-6 57,000
- ------------------------------------------------------------------------------

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds
Distributors,/(R)/ Inc. (the "Principal Underwriter") is the principal
underwriter of the fund's shares. The Principal Underwriter is located at 333
South Hope Street, Los Angeles, CA 90071; 6455 Irvine Center Drive, Irvine, CA
92618; 3500 Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.

U.S. Government Securities Fund -- Page 27
<PAGE>

The Principal Underwriter receives revenues relating to sales of the fund's
shares, as follows:

. For Class A and 529-A shares, the Principal Underwriter receives
commission revenue consisting of the balance of the Class A and 529-A
sales charge remaining after the allowances by the Principal
Underwriter to investment dealers.

. For Class B and 529-B shares sold prior to April 21, 2009, the
Principal Underwriter sold its rights to the 0.75%
distribution-related portion of the 12b-1 fees paid by the fund, as
well as any contingent deferred sales charges, to a third party. The
Principal Underwriter compensated investment dealers for sales of
Class B and 529-B shares out of the proceeds of this sale and kept any
amounts remaining after this compensation was paid.

. For Class C and 529-C shares, the Principal Underwriter receives any
contingent deferred sales charges that apply during the first year
after purchase.

In addition, the fund reimburses the Principal Underwriter for advancing
immediate service fees to qualified dealers and advisers upon the sale of Class
C and 529-C shares. The fund also reimbursed the Principal Underwriter for
advancing immediate service fees to qualified dealers on sales of Class B and
529-B shares prior to April 21, 2009. The fund also reimburses the Principal
Underwriter for service fees (and, in the case of Class 529-E shares,
commissions) paid on a quarterly basis to qualified dealers and advisers in
connection with investments in Class F-1, 529-F-1, 529-E, R-1, R-2, R-3 and R-4
shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR

REVENUE COMPENSATION

FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
- -----------------------------------------------------------------------------------------------------

CLASS A 2009 $4,326,000 $16,437,000
2008 1,717,000 6,572,000
2007 767,000 2,997,000
- -----------------------------------------------------------------------------------------------------
CLASS B 2009 136,000 1,528,000
2008 67,000 574,000
2007 40,000 886,000
- -----------------------------------------------------------------------------------------------------
CLASS C 2009 0 2,577,000
2008 0 751,000
2007 0 292,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-A 2009 184,000 678,000
2008 65,000 250,000
2007 39,000 148,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-B 2009 8,000 62,000
2008 4,000 34,000
2007 4,000 28,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-C 2009 0 259,000
2008 0 106,000
2007 0 55,000
- -----------------------------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 28
<PAGE>

Plans of distribution -- The fund has adopted plans of distribution (the
"Plans") pursuant to rule 12b-1 under the 1940 Act. The Plans permit the fund to
expend amounts to finance any activity primarily intended to result in the sale
of fund shares, provided the fund's board of trustees has approved the category
of expenses for which payment is being made.

Each Plan is specific to a particular share class of the fund. As the fund has
not adopted a Plan for Class F-2, Class R-5 or Class R-6, no 12b-1 fees are paid
from Class F-2, Class R-5 or Class R-6 share assets and the following disclosure
is not applicable to these share classes.

Payments under the Plans may be made for service-related and/or
distribution-related expenses. Service-related expenses include paying service
fees to qualified dealers. Distribution-related expenses include commissions
paid to qualified dealers. The amounts actually paid under the Plans for the
past fiscal year, expressed as a percentage of the fund's average daily net
assets attributable to the applicable share class, are disclosed in the
prospectus under "Fees and expenses of the fund." Further information regarding
the amounts available under each Plan is in the "Plans of Distribution" section
of the prospectus.

Following is a brief description of the Plans:

CLASS A AND 529-A -- For Class A and 529-A shares, up to 0.25% of the
fund's average daily net assets attributable to such shares is reimbursed
to the Principal Underwriter for paying service-related expenses, and the
balance available under the applicable Plan may be paid to the Principal
Underwriter for distribution-related expenses. The fund may annually expend
up to 0.30% for Class A shares and up to 0.50% for Class 529-A shares under
the applicable Plan.

Distribution-related expenses for Class A and 529-A shares include dealer
commissions and wholesaler compensation paid on sales of shares of $1
million or more purchased without a sales charge. Commissions on these "no
load" purchases (which are described in further detail under the "Sales
Charges" section of this statement of additional information) in excess of
the Class A and 529-A Plan limitations and not reimbursed to the Principal
Underwriter during the most recent fiscal quarter are recoverable for five
quarters, provided that the reimbursement of such commissions does not
cause the fund

U.S. Government Securities Fund -- Page 29
<PAGE>

to exceed the annual expense limit. After five quarters, these commissions
are not recoverable.

CLASS B AND 529-B -- The Plans for Class B and 529-B shares provide for
payments to the Principal Underwriter of up to 0.25% of the fund's average
daily net assets attributable to such shares for paying service-related
expenses and 0.75% for distribution-related expenses, which include the
financing of commissions paid to qualified dealers.

OTHER SHARE CLASSES (CLASS C, 529-C, F-1, 529-F-1, 529-E, R-1, R-2, R-3 AND
R-4) -- The Plans for each of the other share classes that have adopted
Plans provide for payments to the Principal Underwriter for paying
service-related and distribution-related expenses of up to the following
amounts of the fund's average daily net assets attributable to such shares:

TOTAL
SERVICE DISTRIBUTION ALLOWABLE
RELATED RELATED UNDER
SHARE CLASS PAYMENTS/1/ PAYMENTS/1/ THE PLANS/2/
- ----------------------------------------------------------------------------------

Class C 0.25% 0.75% 1.00%
- ----------------------------------------------------------------------------------
Class 529-C 0.25 0.75 1.00
- ----------------------------------------------------------------------------------
Class F-1 0.25 -- 0.50
- ----------------------------------------------------------------------------------
Class 529-F-1 0.25 -- 0.50
- ----------------------------------------------------------------------------------
Class 529-E 0.25 0.25 0.75
- ----------------------------------------------------------------------------------
Class R-1 0.25 0.75 1.00
- ----------------------------------------------------------------------------------
Class R-2 0.25 0.50 1.00
- ----------------------------------------------------------------------------------
Class R-3 0.25 0.25 0.75
- ----------------------------------------------------------------------------------
Class R-4 0.25 -- 0.50
- ----------------------------------------------------------------------------------

1 Amounts in these columns represent the amounts approved by the board of
trustees under the applicable Plan.
2 The fund may annually expend the amounts set forth in this column under
the current Plans with the approval of the board of trustees.

During the 2009 fiscal year, 12b-1 expenses accrued and paid, and if applicable,
unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
- ------------------------------------------------------------------------------

CLASS A $12,049,000 $2,075,000
- ------------------------------------------------------------------------------
CLASS B 3,676,000 423,000
- ------------------------------------------------------------------------------
CLASS C 6,542,000 1,235,000
- ------------------------------------------------------------------------------
CLASS F-1 586,000 120,000
- ------------------------------------------------------------------------------
CLASS 529-A 257,000 65,000
- ------------------------------------------------------------------------------
CLASS 529-B 237,000 32,000
- ------------------------------------------------------------------------------
CLASS 529-C 664,000 153,000
- ------------------------------------------------------------------------------
CLASS 529-E 38,000 11,000
- ------------------------------------------------------------------------------
CLASS 529-F-1 -- --
- ------------------------------------------------------------------------------
CLASS R-1 142,000 34,000
- ------------------------------------------------------------------------------
CLASS R-2 1,369,000 346,000
- ------------------------------------------------------------------------------
CLASS R-3 810,000 195,000
- ------------------------------------------------------------------------------
CLASS R-4 318,000 94,000
- ------------------------------------------------------------------------------

U.S. Government Securities Fund -- Page 30
<PAGE>

Approval of the Plans -- As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full board of trustees and separately by a majority of the independent trustees
of the fund who have no direct or indirect financial interest in the operation
of the Plans or the Principal Underwriting Agreement. In addition, the selection
and nomination of independent trustees of the fund are committed to the
discretion of the independent trustees during the existence of the Plans.

Potential benefits of the Plans to the fund include quality shareholder
services, savings to the fund in transfer agency costs, and benefits to the
investment process from growth or stability of assets. The Plans may not be
amended to materially increase the amount spent for distribution without
shareholder approval. Plan expenses are reviewed quarterly by the board of
trustees and the Plans must be renewed annually by the board of trustees.

FEE TO VIRGINIA COLLEGE SAVINGS PLAN -- With respect to Class 529 shares, as
compensation for its oversight and administration, Virginia College Savings Plan
receives a quarterly fee accrued daily and calculated at the annual rate of
0.10% on the first $30 billion of the net assets invested in Class 529 shares of
the American Funds, 0.09% on net assets between $30 billion and $60 billion,
0.08% on net assets between $60 billion and $90 billion, 0.07% on net assets
between $90 billion and $120 billion, and 0.06% on net assets between $120
billion and $150 billion. The fee for any given calendar quarter is accrued and
calculated on the basis of average net assets of Class 529 shares of the
American Funds for the last month of the prior calendar quarter.

OTHER COMPENSATION TO DEALERS -- As of July 2009, the top dealers (or their
affiliates) that American Funds Distributors anticipates will receive additional
compensation (as described in the prospectus) include:

AIG Advisors Group
Advantage Capital Corporation
American General Securities Incorporated
FSC Securities Corporation
Royal Alliance Associates, Inc.
SagePoint Financial, Inc.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc

U.S. Government Securities Fund -- Page 31
<PAGE>

Cambridge Investment Research, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Edward Jones
Genworth Financial Securities Corporation
Hefren-Tillotson, Inc.
HTK / Janney Montgomery Group
Hornor, Townsend & Kent, Inc.
Janney Montgomery Scott LLC
ING Advisors Network Inc.
Bancnorth Investment Group, Inc.
Financial Network Investment Corporation
Guaranty Brokerage Services, Inc.
ING Financial Partners, Inc.
Multi-Financial Securities Corporation
Primevest Financial Services, Inc.
Intersecurities / Transamerica
InterSecurities, Inc.
Transamerica Financial Advisors, Inc.
J. J. B. Hilliard, W. L. Lyons, LLC
JJB Hilliard/PNC Bank
PNC Bank, National Association
PNC Investments LLC
Lincoln Financial Advisors Corporation
Lincoln Financial Securities Corporation
LPL Group
Associated Securities Corp.
LPL Financial Corporation
Mutual Service Corporation
Uvest Investment Services
Waterstone Financial Group, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Metlife Enterprises
Metlife Securities Inc.
New England Securities
Tower Square Securities, Inc.
Walnut Street Securities, Inc.
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley Smith Barney LLC
National Planning Holdings Inc.
Invest Financial Corporation
Investment Centers of America, Inc.
National Planning Corporation
SII Investments, Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC
Park Avenue Securities LLC
PFS Investments Inc.

U.S. Government Securities Fund -- Page 32
<PAGE>

Raymond James Group
Raymond James & Associates, Inc.
Raymond James Financial Services Inc.
RBC Capital Markets Corporation
Robert W. Baird & Co. Incorporated
Securian / C.R.I.
CRI Securities, LLC
Securian Financial Services, Inc.
U.S. Bancorp Investments, Inc.
UBS Financial Services Inc.
Wells Fargo Network
A. G. Edwards, A Division Of Wells Fargo Advisors, LLC
First Clearing LLC
H.D. Vest Investment Securities, Inc.
Wells Fargo Advisors Financial Network, LLC
Wells Fargo Advisors Investment Services Group
Wells Fargo Advisors Latin American Channel
Wells Fargo Advisors Private Client Group
Wells Fargo Investments, LLC

U.S. Government Securities Fund -- Page 33
<PAGE>

EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the fund's
portfolio transactions. Purchases and sales of equity securities on a securities
exchange or an over-the-counter market are effected through broker-dealers who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions relating
to securities traded on U.S. exchanges and may not be subject to negotiation.
Equity securities may also be purchased from underwriters at prices that include
underwriting fees. Purchases and sales of fixed-income securities are generally
made with an issuer or a primary market-maker acting as principal with no stated
brokerage commission. The price paid to an underwriter for fixed-income
securities includes underwriting fees. Prices for fixed-income securities in
secondary trades usually include undisclosed compensation to the market-maker
reflecting the spread between the bid and ask prices for the securities.

In selecting broker-dealers, the investment adviser strives to obtain "best
execution" (the most favorable total price reasonably attainable under the
circumstances) for the fund's portfolio transactions, taking into account a
variety of factors. These factors include the size and type of transaction, the
nature and character of the markets for the security to be purchased or sold,
the cost, quality and reliability of the executions and the broker-dealer's
ability to offer liquidity and anonymity. The investment adviser considers these
factors, which involve qualitative judgments, when selecting broker-dealers and
execution venues for fund portfolio transactions. The investment adviser views
best execution as a process that should be evaluated over time as part of an
overall relationship with particular broker-dealer firms rather than on a
trade-by-trade basis. The fund does not consider the investment adviser as
having an obligation to obtain the lowest commission rate available for a
portfolio transaction to the exclusion of price, service and qualitative
considerations.

The investment adviser may execute portfolio transactions with broker-dealers
who provide certain brokerage and/or investment research services to it, but
only when in the investment adviser's judgment the broker-dealer is capable of
providing best execution for that transaction. The receipt of these services
permits the investment adviser to supplement its own research and analysis and
makes available the views of, and information from, individuals and the research
staffs of other firms. Such views and information may be provided in the form of
written reports, telephone contacts and meetings with securities analysts. These
services may include, among other things, reports and other communications with
respect to individual companies, industries, countries and regions, economic,
political and legal developments, as well as scheduling meetings with corporate
executives and seminars and conferences related to relevant subject matters. The
investment adviser considers these services to be supplemental to its own
internal research efforts and therefore the receipt of investment research from
broker-dealers does not tend to reduce the expenses involved in the investment
adviser's research efforts. If broker-dealers were to discontinue providing such
services it is unlikely the investment adviser would attempt to replicate them
on its own, in part because they would then no longer provide an independent,
supplemental viewpoint. Nonetheless, if it were to attempt to do so, the
investment adviser would incur substantial additional costs. Research services
that the investment adviser receives from broker-dealers may be used by the
investment adviser in servicing the fund and other funds and accounts that it
advises; however, not all such services will necessarily benefit the fund.

The investment adviser may pay commissions in excess of what other
broker-dealers might have charged - including on an execution-only basis - for
certain portfolio transactions in recognition of brokerage and/or investment
research services provided by a broker-dealer. In this regard, the investment
adviser has adopted a brokerage allocation procedure consistent with the

U.S. Government Securities Fund -- Page 34
<PAGE>

requirements of Section 28(e) of the U.S. Securities Exchange Act of 1934.
Section 28(e) permits an investment adviser to cause an account to pay a higher
commission to a broker-dealer that provides certain brokerage and/or investment
research services to the investment adviser, if the investment adviser makes a
good faith determination that such commissions are reasonable in relation to the
value of the services provided by such broker-dealer to the investment adviser
in terms of that particular transaction or the investment adviser's overall
responsibility to the fund and other accounts that it advises. Certain brokerage
and/or investment research services may not necessarily benefit all accounts
paying commissions to each such broker-dealer; therefore, the investment adviser
assesses the reasonableness of commissions in light of the total brokerage and
investment research services provided by each particular broker-dealer.

In accordance with its internal brokerage allocation procedure, each equity
investment division of the investment adviser periodically assesses the
brokerage and investment research services provided by each broker-dealer from
which it receives such services. Using its judgment, each equity investment
division of the investment adviser then creates lists with suggested levels of
commissions for particular broker-dealers and provides those lists to its
trading desks. Neither the investment adviser nor the fund incurs any obligation
to any broker-dealer to pay for research by generating trading commissions. The
actual level of business received by any broker-dealer may be less than the
suggested level of commissions and can, and often does, exceed the suggested
level in the normal course of business. As part of its ongoing relationships
with broker-dealers, the investment adviser routinely meets with firms,
typically at the firm's request, to discuss the level and quality of the
brokerage and research services provided, as well as the perceived value and
cost of such services. In valuing the brokerage and investment research services
the investment adviser receives from broker-dealers in connection with its good
faith determination of reasonableness, the investment adviser does not attribute
a dollar value to such services, but rather takes various factors into
consideration, including the quantity, quality and usefulness of the services to
the investment adviser.

The investment adviser seeks, on an ongoing basis, to determine what the
reasonable levels of commission rates are in the marketplace. The investment
adviser takes various considerations into account when evaluating such
reasonableness, including, (a) rates quoted by broker-dealers, (b) the size of a
particular transaction in terms of the number of shares and dollar amount, (c)
the complexity of a particular transaction, (d) the nature and character of the
markets on which a particular trade takes place, (e) the ability of a
broker-dealer to provide anonymity while executing trades, (f) the ability of a
broker-dealer to execute large trades while minimizing market impact, (g) the
extent to which a broker-dealer has put its own capital at risk, (h) the level
and type of business done with a particular broker-dealer over a period of time,
(i) historical commission rates, and (j) commission rates that other
institutional investors are paying.

When executing portfolio transactions in the same equity security for the funds
and accounts, or portions of funds and accounts, over which the investment
adviser, through its equity investment divisions, has investment discretion,
each of the investment divisions will normally aggregate its respective
purchases or sales and execute them as part of the same transaction or series of
transactions. When executing portfolio transactions in the same fixed-income
security for the fund and the other funds or accounts over which it or one of
its affiliated companies has investment discretion, the investment adviser will
normally aggregate such purchases or sales and execute them as part of the same
transaction or series of transactions. The objective of aggregating purchases
and sales of a security is to allocate executions in an equitable manner among
the funds and other accounts that have concurrently authorized a transaction in
such security.

U.S. Government Securities Fund -- Page 35
<PAGE>

The investment adviser may place orders for the fund's portfolio transactions
with broker-dealers who have sold shares of the funds managed by the investment
adviser or its affiliated companies; however, it does not consider whether a
broker-dealer has sold shares of the funds managed by the investment adviser or
its affiliated companies when placing any such orders for the fund's portfolio
transactions.

No brokerage commissions were paid by the fund on portfolio transactions for the
fiscal years ended August 31, 2009, 2008 and 2007.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year.

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Citigroup Global Markets Inc. and Morgan Stanley. As of
the fund's most recent fiscal year-end, the fund held debt securities of
Citigroup, Inc. in the amount of $9,092,000 and Morgan Stanley in the amount of
$10,154,000.

U.S. Government Securities Fund -- Page 36
<PAGE>

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's board
of trustees and compliance will be periodically assessed by the board in
connection with reporting from the fund's Chief Compliance Officer.

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. Such portfolio holdings information may then be disclosed to
any person pursuant to an ongoing arrangement to disclose portfolio holdings
information to such person no earlier than one day after the day on which the
information is posted on the American Funds website. The fund's custodian,
outside counsel and auditor, each of which requires portfolio holdings
information for legitimate business and fund oversight purposes, may receive the
information earlier.

Affiliated persons of the fund, including officers of the fund and employees of
the investment adviser and its affiliates, who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements not to trade in securities based on confidential and proprietary
investment information, to maintain the confidentiality of such information, and
to preclear securities trades and report securities transactions activity, as
applicable. For more information on these restrictions and limitations, please
see the "Code of Ethics" section in this statement of additional information and
the Code of Ethics. Third party service providers of the fund, as described in
this statement of additional information, receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons will be bound by agreements (including confidentiality agreements)
or fiduciary obligations that restrict and limit their use of the information to
legitimate business uses only. Neither the fund nor its investment adviser or
any affiliate thereof receives compensation or other consideration in connection
with the disclosure of information about portfolio securities.

Subject to board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the appropriate investment-related committees of the fund's investment
adviser. In exercising their authority, the committees determine whether
disclosure of information about the fund's portfolio securities is appropriate
and in the best interest of fund shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the investment
adviser's code of ethics specifically requires, among other things, the
safeguarding of information about fund holdings and contains prohibitions
designed to prevent the personal use of confidential, proprietary investment
information in a way that would conflict with fund transactions. In addition,
the investment adviser believes that its current policy of not selling portfolio
holdings information and not disclosing such information to unaffiliated third
parties until such holdings have been made public on the American Funds website
(other than to certain fund service providers for legitimate business and fund
oversight purposes) helps reduce potential conflicts of interest between fund
shareholders and the investment adviser and its affiliates.

U.S. Government Securities Fund -- Page 37
<PAGE>

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value price is effective
for orders received prior to the time of determination of the net asset value
and, in the case of orders placed with dealers or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment dealer should be indicated. The dealer is responsible for
promptly transmitting purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, the Transfer
Agent or the fund after the time of the determination of the net asset value
will be entered at the next calculated offering price. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.

Prices that appear in the newspaper do not always indicate prices at which you
will be purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price, while purchases and redemptions are
made at the next calculated price. The price you pay for shares, the offering
price, is based on the net asset value per share, which is calculated once daily
as of approximately 4 p.m. New York time, which is the normal close of trading
on the New York Stock Exchange, each day the Exchange is open. If, for example,
the Exchange closes at 1 p.m., the fund's share price would still be determined
as of 4 p.m. New York time. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day; Martin Luther King, Jr.
Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving; and Christmas Day. Each share class of the fund has a separately
calculated net asset value (and share price).

All portfolio securities of funds managed by Capital Research and Management
Company (other than American Funds Money Market Fund) are valued, and the net
asset values per share for each share class are determined, as indicated below.
The fund follows standard industry practice by typically reflecting changes in
its holdings of portfolio securities on the first business day following a
portfolio trade.

Equity securities, including depositary receipts, are valued at the official
closing price of, or the last reported sale price on, the exchange or market on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Prices for each security are taken from the principal exchange or market
in which the security trades. Fixed-income securities are valued at prices
obtained from one or more independent pricing vendors, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued in good faith at the mean
quoted bid and asked prices that are reasonably and timely available (or bid
prices, if asked prices are not available) or at prices for securities of
comparable maturity, quality and type. The pricing vendors base bond prices on,
among other things, valuation matrices which may incorporate dealer-supplied
valuations, proprietary pricing models and an evaluation of the yield curve as
of approximately 3 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to calculation of the fund's net asset
value.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity

U.S. Government Securities Fund -- Page 38
<PAGE>

or fixed-income securities, depending on which method is deemed most appropriate
by the investment adviser.

Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity, or if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.

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

Securities and assets for which market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's board. Subject to board oversight, the
fund's board has delegated the obligation to make fair valuation determinations
to a valuation committee established by the fund's investment adviser. The board
receives regular reports describing fair-valued securities and the valuation
methods used.

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to consider certain relevant principles and factors when
making all fair value determinations. As a general principle, securities lacking
readily available market quotations, or that have quotations that are considered
unreliable by the investment adviser, are valued in good faith by the valuation
committee based upon what the fund might reasonably expect to receive upon their
current sale. 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. The valuation
committee considers relevant indications of value that are reasonably and timely
available to it in determining the fair value to be assigned to a particular
security, such as the type and cost of the security, contractual or legal
restrictions on resale of the security, relevant financial or business
developments of the issuer, actively traded similar or related securities,
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.

Each class of shares represents interests in the same portfolio of investments
and is identical in all respects to each other class, except for differences
relating to distribution, service and other charges and expenses, certain voting
rights, differences relating to eligible investors, the designation of each
class of shares, conversion features and exchange privileges. Expenses
attributable to the fund, but not to a particular class of shares, are borne by
each class pro rata based on relative aggregate net assets of the classes.
Expenses directly attributable to a class of shares are borne by that class of
shares. Liabilities, including accruals of taxes and other expense items
attributable to particular share classes, are deducted from total assets
attributable to such share classes.

Net assets so obtained for each share class are divided by the total number of
shares outstanding of that share class, and the result, rounded to the nearest
cent, is the net asset value per share for that share class.

U.S. Government Securities Fund -- Page 39
<PAGE>

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. The fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances the fund may determine
that it is in the interest of shareholders to distribute less than that amount.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
the business of investing in such securities or currencies, and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation, generally limited in respect of
any one issuer, to an amount not greater than 5% of the market value of the
fund's assets and 10% of the outstanding voting securities of such issuer) and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. government securities or the securities of
other regulated investment companies), two or more issuers which the fund
controls and which are determined to be engaged in the same or similar trades or
businesses or the securities of certain publicly traded partnerships.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
generally means the sum of (a) 98% of ordinary income (generally net investment
income) for the calendar year, (b) 98% of capital gain (both long-term and
short-term) for the one-year period ending on October 31 (as though the one-year
period ending on October 31 were the regulated investment company's taxable
year) and (c) the sum of any untaxed, undistributed net investment income and
net capital gains of the regulated investment company for prior periods. The
term "distributed amount" generally means the sum of (a) amounts actually
distributed by the fund from its current year's ordinary income and capital gain
net income and (b) any amount on which the fund pays income tax during the
periods described above. Although the fund intends to distribute its net
investment income and net capital gains so as to avoid excise tax liability, the
fund may determine that it is in the interest of shareholders to distribute a
lesser amount. The fund may pass through the income earned on certain U.S.
government bonds free of various states' income taxes. However, a few states
require the fund to hold more than 50% of its assets in these types of
government bonds at the end of every fiscal quarter in order to qualify for the
tax exemption. The fund does not currently intend to actively meet the 50%
threshold in order to qualify for the tax exemption in those few states.

U.S. Government Securities Fund -- Page 40
<PAGE>

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.

Distributions of investment company taxable income and net realized capital
gains to shareholders will be taxable whether received in shares or in cash,
unless such shareholders are exempt from taxation. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of that share on the reinvestment date. Dividends and capital gain
distributions by the fund to a tax-deferred retirement plan account are not
taxable currently. When a dividend or a capital gain is distributed by the fund,
the net asset value per share is reduced by the amount of the payment.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income. Investment
company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and
certain foreign currency gains, if any, less expenses and certain foreign
currency losses.

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

The price of a bond purchased after its original issuance may reflect
market discount which, depending on the particular circumstances, may
affect the tax character and amount of income required to be recognized by
a fund holding the bond. In determining whether a bond is purchased with
market discount, certain de minimis rules apply.

CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to distribute its net
capital gain each year. The fund's net capital gain is the entire excess of
net realized long-term capital gains over net realized short-term capital
losses. Net capital gains for a fiscal year are computed by taking into
account any capital loss carryforward of the fund.

If any net long-term capital gains in excess of net short-term capital
losses are retained by the fund for reinvestment, requiring federal income
taxes to be paid thereon by the fund, the fund intends to elect to treat
such capital gains as having been distributed to shareholders. As a result,
each shareholder will report such capital gains as long-term capital gains
taxable to individual shareholders at a maximum 15% capital gains rate,
will be able to claim a pro rata share of federal income taxes paid by the
fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the

U.S. Government Securities Fund -- Page 41
<PAGE>

adjusted tax basis on fund shares by the difference between a pro rata
share of the retained gains and such shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
All or a portion of a fund's dividend distribution may be a "qualified
dividend." If the fund meets the applicable holding period requirement, it
will distribute dividends derived from qualified corporation dividends to
shareholders as qualified dividends. Interest income from bonds and money
market instruments and nonqualified foreign dividends will be distributed
to shareholders as nonqualified fund dividends. The fund will report on
Form 1099-DIV the amount of each shareholder's dividend that may be treated
as a qualified dividend. If a shareholder other than a corporation meets
the requisite holding period requirement, qualified dividends are taxable
at a maximum rate of 15%.

CAPITAL GAINS -- Distributions of net capital gain that the fund properly
designates as "capital gain dividends" generally will be taxable as
long-term capital gain, regardless of the length of time the shares of the
fund have been held by a shareholder. For non-corporate shareholders, a
capital gain distribution by the fund is subject to a maximum tax rate of
15%. Any loss realized upon the redemption of shares held at the time of
redemption for six months or less from the date of their purchase will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gains (including any undistributed
amounts treated as distributed capital gains, as described above) during
such six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Investors should consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

U.S. Government Securities Fund -- Page 42
<PAGE>

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

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

Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.

U.S. Government Securities Fund -- Page 43
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F-1 SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR
529-F-1 SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE APPLICABLE
PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY
RELATING TO THESE ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE
RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR
INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES.

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- For initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent transaction confirmation and mailing the form, along
with a check made payable to the fund, using the envelope provided with
your confirmation.

The amount of time it takes for us to receive regular U.S. postal mail may
vary and there is no assurance that we will receive such mail on the day
you expect. Mailing addresses for regular U.S. postal mail can be found in
the prospectus. To send investments or correspondence to us via overnight
mail or courier service, use either of the following addresses:

American Funds
8332 Woodfield Crossing Blvd.
Indianapolis, IN 46240-2482

American Funds
5300 Robin Hood Rd.
Norfolk, VA 23513-2407

BY TELEPHONE -- Using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this statement of additional
information for more information regarding this service.

BY INTERNET -- Using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this statement of additional
information for more information regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

U.S. Government Securities Fund -- Page 44
<PAGE>

Your bank should include the following information when wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

OTHER PURCHASE INFORMATION -- The Principal Underwriter will not knowingly sell
shares of the fund directly or indirectly to any person or entity, where, after
the sale, such person or entity would own beneficially directly or indirectly
more than 4.5% of the outstanding shares of the fund without the consent of a
majority of the fund's board.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. The American Funds state tax-exempt funds are qualified
for sale only in certain jurisdictions, and tax-exempt funds in general should
not serve as retirement plan investments. In addition, the fund and the
Principal Underwriter reserve the right to reject any purchase order.

Class R-5 and R-6 shares may be made available to certain charitable foundations
organized and maintained by The Capital Group Companies, Inc. or its affiliates.

Class R-5 and R-6 shares may also be made available to the Virginia College
Savings Plan for use in the Virginia Education Savings Trust and the Virginia
Prepaid Education Program.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases.

In the case of American Funds non-tax-exempt funds, the initial purchase minimum
of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

U.S. Government Securities Fund -- Page 45
<PAGE>

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

Certain accounts held on the fund's books, known as omnibus accounts, contain
multiple underlying accounts that are invested in shares of the fund. These
underlying accounts are maintained by entities such as financial intermediaries
and are subject to the applicable initial purchase minimums as described in the
prospectus and this statement of additional information. However, in the case
where the entity maintaining these accounts aggregates the accounts' purchase
orders for fund shares, such accounts are not required to meet the fund's
minimum amount for subsequent purchases.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of American Funds Money
Market Fund may be made to Class C shares of other American Funds for dollar
cost averaging purposes. Exchanges are not permitted from Class A shares of
American Funds Money Market Fund to Class C shares of Intermediate Bond Fund of
America, Limited Term Tax-Exempt Bond Fund of America or Short-Term Bond Fund of
America. Exchange purchases are subject to the minimum investment requirements
of the fund purchased and no sales charge generally applies. However, exchanges
of shares from American Funds Money Market Fund are subject to applicable sales
charges, unless the American Funds Money Market Fund shares were acquired by an
exchange from a fund having a sales charge, or by reinvestment or
cross-reinvestment of dividends or capital gain distributions. Exchanges of
Class F shares generally may only be made through fee-based programs of
investment firms that have special agreements with the fund's distributor and
certain registered investment advisers.

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" in this statement of additional
information. THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" in this
statement of additional information).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for

U.S. Government Securities Fund -- Page 46
<PAGE>

example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

If you wish to "move" your investment between share classes (within the
same fund or between different funds), we generally will process your
request as an exchange of the shares you currently hold for shares in the
new class or fund. Below is more information about how sales charges are
handled for various scenarios.

EXCHANGING CLASS B SHARES FOR CLASS A SHARES -- If you exchange Class B
shares for Class A shares during the contingent deferred sales charge
period you are responsible for paying any applicable deferred sales charges
attributable to those Class B shares, but you will not be required to pay a
Class A sales charge. If, however, you exchange your Class B shares for
Class A shares after the contingent deferred sales charge period, you are
responsible for paying any applicable Class A sales charges.

EXCHANGING CLASS C SHARES FOR CLASS A SHARES -- If you exchange Class C
shares for Class A shares, you are still responsible for paying any Class C
contingent deferred sales charges and applicable Class A sales charges.

EXCHANGING CLASS C SHARES FOR CLASS F SHARES -- If you are part of a
qualified fee-based program and you wish to exchange your Class C shares
for Class F shares to be held in the program, you are still responsible for
paying any applicable Class C contingent deferred sales charges.

EXCHANGING CLASS F SHARES FOR CLASS A SHARES -- You can exchange Class F
shares held in a qualified fee-based program for Class A shares without
paying an initial Class A sales charge if all of the following requirements
are met: (a) you are leaving or have left the fee-based program, (b) you
have held the Class F shares in the program for at least one year, and (c)
you notify American Funds Service Company of your request. If you have
already redeemed your Class F shares, the foregoing requirements apply and
you must purchase Class A shares within 90 days after redeeming your Class
F shares to receive the Class A shares without paying an initial Class A
sales charge.

EXCHANGING CLASS A SHARES FOR CLASS F SHARES -- If you are part of a
qualified fee-based program and you wish to exchange your Class A shares
for Class F shares to be held in the program, any Class A sales charges
(including contingent deferred sales charges) that you paid or are payable
will not be credited back to your account.

U.S. Government Securities Fund -- Page 47
<PAGE>

EXCHANGING CLASS A SHARES FOR CLASS R SHARES -- Provided it is eligible to
invest in Class R shares, a retirement plan currently invested in Class A
shares may exchange its shares for Class R shares. Any Class A sales
charges that the retirement plan previously paid will not be credited back
to the plan's account.

EXCHANGING CLASS F-1 SHARES FOR CLASS F-2 SHARES -- If you are part of a
qualified fee-based program that offers Class F-2 shares, you may exchange
your Class F-1 shares for Class F-2 shares to be held in the program.

MOVING BETWEEN OTHER SHARE CLASSES -- If you desire to move your investment
between share classes and the particular scenario is not described in this
statement of additional information, please contact American Funds Service
Company at 800/421-0180 for more information.

NON-REPORTABLE TRANSACTIONS -- Automatic conversions described in the
prospectus will be non-reportable for tax purposes. In addition, except in
the case of a movement between a 529 share class and a non-529 share class,
an exchange of shares from one share class of a fund to another share class
of the same fund will be treated as a non-reportable exchange for tax
purposes, provided that the exchange request is received in writing by
American Funds Service Company and processed as a single transaction.

U.S. Government Securities Fund -- Page 48
<PAGE>

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

A 403(b) plan may not invest in Class A or C shares unless such plan was
invested in Class A or C shares before January 1, 2009.

Participant accounts of a 403(b) plan that were treated as an
individual-type plan for sales charge purposes before January 1, 2009, may
continue to be treated as accounts of an individual-type plan for sales
charge purposes. Participant accounts of a 403(b) plan that were treated as
an employer-sponsored plan for sales charge purposes before January 1,
2009, may continue to be treated as accounts of an employer-sponsored plan
for sales charge purposes. Participant accounts of a 403(b) plan that is
established on or after January 1, 2009 are treated as accounts of an
employer-sponsored plan for sales charge purposes.

PURCHASES BY SEP PLANS AND SIMPLE IRA PLANS

Participant accounts in a Simplified Employee Pension (SEP) plan or a
Savings Incentive Match Plan for Employees of Small Employers IRA (SIMPLE
IRA) plan will be aggregated together for Class A sales charge purposes if
the SEP plan or SIMPLE IRA plan was established after November 15, 2004 by
an employer adopting a prototype plan produced by American Funds
Distributors, Inc. In the case where the employer adopts any other plan
(including, but not limited to, an IRS model agreement), each participant's
account in the plan will be aggregated with the participant's own personal
investments that qualify under the aggregation policy. A SEP plan or SIMPLE
IRA plan with a certain method of aggregating participant accounts as of
November 15, 2004 may continue with that method so long as the employer has
not modified the plan document since that date.

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds stock, stock/bond and bond funds may be sold at net asset
value to:

(1) current or retired directors, trustees, officers and advisory board
members of, and certain lawyers who provide services to, the funds
managed by Capital Research and Management Company, current or retired
employees of Washington Management Corporation, current or retired
employees and partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members of the above persons, and
trusts or plans primarily for such persons;

(2) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the

U.S. Government Securities Fund -- Page 49
<PAGE>

spouses, children or parents of the Eligible Persons are listed in the
account registration with the parents-in-law) of dealers who have
sales agreements with the Principal Underwriter (or who clear
transactions through such dealers), plans for the dealers, and plans
that include as participants only the Eligible Persons, their spouses,
parents and/or children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or full-time employees (collectively,
"Eligible Persons") (and their (a) spouses or equivalents if
recognized under local law, (b) parents and children, including
parents and children in step and adoptive relationships, sons-in-law
and daughters-in-law and (c) parents-in-law, if the Eligible Persons
or the spouses, children or parents of the Eligible Persons are listed
in the account registration with the parents-in-law) of RIA firms that
are authorized to sell shares of the funds, plans for the RIA firms,
and plans that include as participants only the Eligible Persons,
their spouses, parents and/or children;

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

(5) insurance company separate accounts;

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

(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation;

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

(9) wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts
whose underlying investments are managed by any affiliate of The
Capital Group Companies, Inc.; and

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

TRANSFERS TO COLLEGEAMERICA -- A transfer from the Virginia Prepaid
Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a
CollegeAmerica account will be made with no sales charge. No commission
will be paid to the dealer on such a transfer.

MOVING BETWEEN ACCOUNTS -- Investments in certain account types may be moved to
other account types without incurring additional Class A sales charges. These
transactions include, for example:

U.S. Government Securities Fund -- Page 50
<PAGE>

. redemption proceeds from a non-retirement account (for example, a
joint tenant account) used to purchase fund shares in an IRA or other
individual-type retirement account;

. required minimum distributions from an IRA or other individual-type
retirement account used to purchase fund shares in a non-retirement
account; and

. death distributions paid to a beneficiary's account that are used by
the beneficiary to purchase fund shares in a different account.

LOAN REPAYMENTS -- Repayments on loans taken from a retirement plan or an
individual-type retirement account are not subject to sales charges if American
Funds Service Company is notified of the repayment.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to initial sales charges. These purchases consist of purchases of $1
million or more, purchases by employer-sponsored defined contribution-type
retirement plans investing $1 million or more or with 100 or more eligible
employees, and purchases made at net asset value by certain retirement plans,
endowments and foundations with assets of $50 million or more. Commissions on
such investments (other than IRA rollover assets that roll over at no sales
charge under the fund's IRA rollover policy as described in the prospectus) are
paid to dealers at the following rates: 1.00% on amounts of less than $4
million, 0.50% on amounts of at least $4 million but less than $10 million and
0.25% on amounts of at least $10 million. Commissions are based on cumulative
investments over the life of the account with no adjustment for redemptions,
transfers, or market declines. For example, if a shareholder has accumulated
investments in excess of $4 million (but less than $10 million) and subsequently
redeems all or a portion of the account(s), purchases following the redemption
will generate a dealer commission of 0.50%.

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
the American Funds (excluding American Funds Money Market Fund) over a
13-month period and receive the same sales charge (expressed as a
percentage of your purchases) as if all shares had been purchased at once,
unless the Statement is upgraded as described below.

The Statement period starts on the date on which your first purchase made
toward satisfying the Statement is processed. The market value of your
existing holdings eligible to be aggregated (see below) as of the day
immediately before the start of the Statement period may be credited toward
satisfying the Statement.

U.S. Government Securities Fund -- Page 51
<PAGE>

You may revise the commitment you have made in your Statement upward at any
time during the Statement period. If your prior commitment has not been met
by the time of the revision, the Statement period during which purchases
must be made will remain unchanged. Purchases made from the date of the
revision will receive the reduced sales charge, if any, resulting from the
revised Statement. If your prior commitment has been met by the time of the
revision, your original Statement will be considered met and a new
Statement will be established.

The Statement will be considered completed if the shareholder dies within
the 13-month Statement period. Commissions to dealers will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement may be held in escrow in the
shareholder's account out of the initial purchase (or subsequent purchases,
if necessary) by the Transfer Agent. All dividends and any capital gain
distributions on shares held in escrow will be credited to the
shareholder's account in shares (or paid in cash, if requested). If the
intended investment is not completed within the specified Statement period,
the purchaser may be required to remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge
which would have been paid if the total of such purchases had been made at
a single time. Any dealers assigned to the shareholder's account at the
time a purchase was made during the Statement period will receive a
corresponding commission adjustment if appropriate. If the difference is
not paid by the close of the Statement period, the appropriate number of
shares held in escrow will be redeemed to pay such difference. If the
proceeds from this redemption are inadequate, the purchaser may be liable
to the Principal Underwriter for the balance still outstanding.

Certain payroll deduction retirement plans purchasing Class A shares under
a Statement on or before November 12, 2006, may continue to purchase Class
A shares at the sales charge determined by that particular Statement until
the plans' values reach the amounts specified in their Statements. Upon
reaching such amounts, the Statements for these plans will be deemed
completed and will terminate. In addition, effective May 1, 2009, the
Statements for these plans will expire if they have not been met by the
next anniversary of the establishment of such Statement. After such
termination, these plans are eligible for additional sales charge
reductions by meeting the criteria under the fund's rights of accumulation
policy.

In addition, if you currently have individual holdings in American Legacy
variable annuity contracts or variable life insurance policies that were
established on or before March 31, 2007, you may continue to apply
purchases under such contracts and policies to a Statement.

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

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

U.S. Government Securities Fund -- Page 52
<PAGE>

. individual-type employee benefit plans, such as an IRA,
single-participant Keogh-type plan, or a participant account of a
403(b) plan that is treated as an individual-type plan for sales
charge purposes (see "Purchases by certain 403(b) plans" under "Sales
charges" in this statement of additional information);

. SEP plans and SIMPLE IRA plans established after November 15, 2004 by
an employer adopting any plan document other than a prototype plan
produced by American Funds Distributors, Inc.;

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);

. trust accounts established by you or your immediate family (for trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

. endowments or foundations established and controlled by you or your
immediate family;

. 529 accounts, which will be aggregated at the account owner level
(Class 529-E accounts may only be aggregated with an eligible employer
plan).

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

. for a single trust estate or fiduciary account, including employee
benefit plans other than the individual-type employee benefit plans
described above;

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

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

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations;

. for participant accounts of a 403(b) plan that is treated as an
employer-sponsored plan for sales charge purposes (see "Purchases by
certain 403(b) plans" under "Sales charges" in this statement of
additional information), or made for participant accounts of two or
more such plans, in each case of a single employer or affiliated
employers as defined in the 1940 Act; or

. for a SEP or SIMPLE IRA plan established after November 15, 2004 by an
employer adopting a prototype plan produced by American Funds
Distributors, Inc.

U.S. Government Securities Fund -- Page 53
<PAGE>

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

CONCURRENT PURCHASES -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as holdings in Endowments and applicable holdings
in the American Funds Target Date Retirement Series. Shares of money market
funds purchased through an exchange, reinvestment or cross-reinvestment
from a fund having a sales charge also qualify. However, direct purchases
of American Funds Money Market Fund are excluded. If you currently have
individual holdings in American Legacy variable annuity contracts or
variable life insurance policies that were established on or before March
31, 2007, you may continue to combine purchases made under such contracts
and policies to reduce your Class A sales charge.

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments and applicable holdings in the American Funds Target Date
Retirement Series, to determine your sales charge on investments in
accounts eligible to be aggregated. Direct purchases of American Funds
Money Market Fund are excluded. Subject to your investment dealer's or
recordkeeper's capabilities, your accumulated holdings will be calculated
as the higher of (a) the current value of your existing holdings (the
"market value") as of the day prior to your American Funds investment or
(b) the amount you invested (including reinvested dividends and capital
gains, but excluding capital appreciation) less any withdrawals (the "cost
value"). Depending on the entity on whose books your account is held, the
value of your holdings in that account may not be eligible for calculation
at cost value. For example, accounts held in nominee or street name may not
be eligible for calculation at cost value and instead may be calculated at
market value for purposes of rights of accumulation.

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

When determining your American Funds Class A sales charge, if your
investment is not in an employer-sponsored retirement plan, you may also
continue to take into account the market value (as of the day prior to your
American Funds investment) of your individual holdings in various American
Legacy variable annuity contracts and variable life insurance policies that
were established on or before March 31, 2007. An employer-sponsored
retirement plan may also continue to take into account the market value of
its investments in American Legacy Retirement Investment Plans that were
established on or before March 31, 2007.

U.S. Government Securities Fund -- Page 54
<PAGE>

You may not purchase Class C or 529-C shares if such combined holdings
cause you to be eligible to purchase Class A or 529-A shares at the $1
million or more sales charge discount rate (i.e. at net asset value).

If you make a gift of American Funds Class A shares, upon your request, you
may purchase the shares at the sales charge discount allowed under rights
of accumulation of all of your American Funds and applicable American
Legacy accounts.

RIGHT OF REINVESTMENT -- As described in the prospectus, certain
transactions may be eligible for investment without a sales charge pursuant
to the fund's right of reinvestment policy. Recent legislation suspended
required minimum distributions from individual retirement accounts and
employer-sponsored retirement plan accounts for the 2009 tax year. Given
this suspension, proceeds from an automatic withdrawal plan to satisfy a
required minimum distribution may be invested without a sales charge for
the 2009 tax year, or any subsequent period, to the extent such legislation
is extended. This policy is subject to any restrictions regarding the
investment of proceeds from a required minimum distribution that may be
established by the transfer agent.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or post-purchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions made after the Transfer Agent is
notified of the death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

. Redemptions through an automatic withdrawal plan ("AWP") (see
"Automatic withdrawals" under "Shareholder account services and
privileges" in this statement of additional information). For each AWP
payment, assets that are not subject to a CDSC, such as appreciation
on shares and shares acquired through reinvestment of dividends and/or
capital gain distributions, will be redeemed first and will count
toward the 12% limit. If there is an insufficient amount of assets not
subject to a CDSC to cover a particular AWP payment, shares subject to
the lowest CDSC will be redeemed next until the 12% limit is reached.
Any dividends and/or capital gain distributions taken in cash by a
shareholder who receives payments through an AWP will also count
toward the 12% limit. In the case of an AWP, the 12% limit is
calculated at the time an automatic redemption is first made, and is
recalculated at the time each additional automatic redemption is made.
Shareholders who establish an AWP should be aware that the amount of a
payment not subject to a CDSC may vary over time depending on
fluctuations in

U.S. Government Securities Fund -- Page 55
<PAGE>

the value of their accounts. This privilege may be revised or
terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds Money Market Fund are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or elimination of the fund by
the Virginia College Savings Plan as an option for additional investment within
CollegeAmerica.

U.S. Government Securities Fund -- Page 56
<PAGE>

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders. To contact American Funds Service Company via overnight mail or
courier service, see "Purchase and exchange of shares."

A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the Financial
Industry Regulatory Authority, bank, savings association or credit union that is
an eligible guarantor institution. The Transfer Agent reserves the right to
require a signature guarantee on any redemptions.

Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, equals the dollar amount requested.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 10
business days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may request that redemption proceeds of $1,000 or more from American Funds
Money Market Fund be wired to your bank by writing American Funds Service
Company. A signature guarantee is required on all requests to wire funds.

U.S. Government Securities Fund -- Page 57
<PAGE>

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges described in the
prospectus and this statement of additional information may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

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

AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
unless you indicate otherwise on the account application. You also may elect to
have dividends and/or capital gain distributions paid in cash by informing the
fund, the Transfer Agent or your investment dealer. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

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

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

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

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

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

U.S. Government Securities Fund -- Page 58
<PAGE>

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- Depending on the type of account, for all share classes
except R shares, you may automatically withdraw shares from any of the American
Funds. You can make automatic withdrawals of $50 or more. You can designate the
day of each period for withdrawals and request that checks be sent to you or
someone else. Withdrawals may also be electronically deposited to your bank
account. The Transfer Agent will withdraw your money from the fund you specify
on or around the date you specify. If the date you specified falls on a weekend
or holiday, the redemption will take place on the previous business day.
However, if the previous business day falls in the preceding month, the
redemption will take place on the following business day after the weekend or
holiday. You should consult with your adviser or intermediary to determine if
your account is eligible for automatic withdrawals.

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

Redemption proceeds from an automatic withdrawal plan are not eligible for
reinvestment without a sales charge.

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

AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its

U.S. Government Securities Fund -- Page 59
<PAGE>

affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, costs or liabilities (including attorney fees) that may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these services. However, you may
elect to opt out of these services by writing the Transfer Agent (you may also
reinstate them at any time by writing the Transfer Agent). If the Transfer Agent
does not employ reasonable procedures to confirm that the instructions received
from any person with appropriate account information are genuine, it and/or the
fund may be liable for losses due to unauthorized or fraudulent instructions. In
the event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions or a natural disaster, redemption and
exchange requests may be made in writing only.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds Money Market Fund upon meeting
the fund's initial purchase minimum of $1,000. This can be done by using an
account application. If you request check writing privileges, you will be
provided with checks that you may use to draw against your account. These checks
may be made payable to anyone you designate and must be signed by the authorized
number of registered shareholders exactly as indicated on your account
application.

REDEMPTION OF SHARES -- The fund's declaration of trust permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder of record owns
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the board of trustees of the fund may from time to time
adopt.

While payment of redemptions normally will be in cash, the fund's declaration of
trust permits payment of the redemption price wholly or partly with portfolio
securities or other fund assets under conditions and circumstances determined by
the fund's board of trustees. For example, redemptions could be made in this
manner if the board determined that making payments wholly in cash over a
particular period would be unfair and/or harmful to other fund shareholders.

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

U.S. Government Securities Fund -- Page 60
<PAGE>

GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds securities of issuers outside the U.S., the
Custodian may hold these securities pursuant to subcustodial arrangements in
banks outside the U.S. or branches of U.S. banks outside the U.S.

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, processes
purchases and redemptions of the fund's shares, acts as dividend and capital
gain distribution disbursing agent, and performs other related shareholder
service functions. The principal office of American Funds Service Company is
located at 6455 Irvine Center Drive, Irvine, CA 92618. American Funds Service
Company was paid a fee of $5,491,000 for Class A shares and $375,000 for Class
B shares for the 2009 fiscal year. American Funds Service Company is also
compensated for certain transfer agency services provided to all share classes
from the administrative services fees paid to Capital Research and Management
Company and from the relevant share class, as described under "Administrative
services agreement."

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 695 Town
Center Drive, Costa Mesa, California 92626, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
report appearing herein. Such financial statements have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing. The selection of the fund's independent registered
public accounting firm is reviewed and determined annually by the board of
trustees.

INDEPENDENT LEGAL COUNSEL -- Bingham McCutchen LLP, 355 South Grand Avenue,
Suite 4400, Los Angeles, CA 90071, serves as independent legal counsel
("counsel") for the fund and for independent trustees in their capacities as
such. A determination with respect to the independence of the fund's counsel
will be made at least annually by the independent trustees of the fund, as
prescribed by the 1940 Act and related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on August 31. Shareholders are provided updated summary prospectuses
annually and at least semi-annually with reports showing the fund's investment
portfolio or summary investment portfolio, financial statements and other
information. Shareholders may request a copy of the fund's current prospectus at
no cost by calling 800/421-0180 or by sending an e-mail request to
prospectus@americanfunds.com. The fund's annual financial statements are audited
by the

U.S. Government Securities Fund -- Page 61
<PAGE>

fund's independent registered public accounting firm, Deloitte & Touche LLP. In
addition, shareholders may also receive proxy statements for the fund. In an
effort to reduce the volume of mail shareholders receive from the fund when a
household owns more than one account, the Transfer Agent has taken steps to
eliminate duplicate mailings of summary prospectuses, shareholder reports and
proxy statements. To receive additional copies of a summary prospectus, report
or proxy statement, shareholders should contact the Transfer Agent.

Shareholders may also elect to receive updated summary prospectuses, annual
reports and semi-annual reports electronically by signing up for electronic
delivery on our website, americanfunds.com. Upon electing the electronic
delivery of updated summary prospectuses and other reports, a shareholder will
no longer automatically receive such documents in paper form by mail. A
shareholder who elects electronic delivery is able to cancel this service at any
time and return to receiving updated summary prospectuses and other reports in
paper form by mail.

Summary prospectuses, prospectuses, annual reports and semi-annual reports that
are mailed to shareholders by the American Funds organization are printed with
ink containing soy and/or vegetable oil on paper containing recycled fibers.

SHAREHOLDER AND TRUSTEE RESPONSIBILITY -- Under the laws of Massachusetts, where
the fund was organized, there is no express provision relating to the limitation
of liability of the beneficial owners of a Massachusetts business trust.
However, under the laws of Massachusetts and California, where the fund's
principal office is located, shareholders of a Massachusetts business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the fund. However, the risk of a shareholder incurring any
financial loss on account of shareholder liability is limited to circumstances
in which a fund itself would be unable to meet its obligations. The Declaration
of Trust contains an express disclaimer of shareholder liability for acts,
omissions, obligations or affairs of the fund and provides that notice of the
disclaimer may be given in each agreement, obligation, or instrument which is
entered into or executed by the fund or trustees. The Declaration of Trust
provides for indemnification out of fund property of any shareholder held
personally liable for the obligations of the fund and also provides for the fund
to reimburse such shareholder for all legal and other expenses reasonably
incurred in connection with any such claim or liability.

Massachusetts law does not include an express provision limiting the liability
of the trustees of a Massachusetts business trust. Under the Declaration of
Trust, the trustees, officers, employees or agents of the fund are not liable
for actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.

U.S. Government Securities Fund -- Page 62
<PAGE>

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD (now the Financial Industry
Regulatory Authority, or FINRA) filed an administrative complaint against the
Principal Underwriter. The complaint alleges violations of certain NASD rules by
the Principal Underwriter with respect to the selection of broker-dealer firms
that buy and sell securities for mutual fund investment portfolios. The
complaint seeks sanctions, restitution and disgorgement. On August 30, 2006, a
FINRA Hearing Panel ruled against the Principal Underwriter and imposed a $5
million fine. On April 30, 2008, FINRA's National Adjudicatory Council affirmed
the decision by FINRA's Hearing Panel. The Principal Underwriter has appealed
this decision to the Securities and Exchange Commission.

The investment adviser and Principal Underwriter believe that the likelihood
that this matter could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. In addition, class action lawsuits have been
filed in the U.S. District Court, Central District of California, relating to
this and other matters. The investment adviser believes that these suits are
without merit and will defend itself vigorously.

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- AUGUST 31, 2009

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $14.11
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $14.66

OTHER INFORMATION -- The fund reserves the right to modify the privileges
described in this statement of additional information at any time.

The financial statements, including the investment portfolio and the report of
the fund's independent registered public accounting firm contained in the annual
report, are included in this statement of additional information. The following
information on fund numbers is not included in the annual report:

U.S. Government Securities Fund -- Page 63
<PAGE>

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
-------------------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F-1 CLASS F-2
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . 002 202 302 402 602
American Balanced Fund/(R)/ 011 211 311 411 611
American Mutual Fund/(R)/ . 003 203 303 403 603
Capital Income Builder/(R)/ 012 212 312 412 612
Capital World Growth and
Income Fund/SM/ . . . . . . 033 233 333 433 633
EuroPacific Growth Fund/(R)/ 016 216 316 416 616
Fundamental Investors/SM/ . 010 210 310 410 610
The Growth Fund of
America/(R)/. . . . . . . . 005 205 305 405 605
The Income Fund of
America/(R)/. . . . . . . . 006 206 306 406 606
International Growth and
Income Fund/SM/ . . . . . . 034 234 334 434 634
The Investment Company of
America/(R)/. . . . . . . . 004 204 304 404 604
The New Economy Fund/(R)/ . 014 214 314 414 614
New Perspective Fund/(R)/ . 007 207 307 407 607
New World Fund/(R)/ . . . . 036 236 336 436 636
SMALLCAP World Fund/(R)/ . 035 235 335 435 635
Washington Mutual Investors
Fund/SM/ . . . . . . . . . 001 201 301 401 601
BOND FUNDS
American Funds Short-Term
Tax-Exempt Bond Fund/SM/ . 039 N/A N/A 439 639
American High-Income
Municipal Bond Fund/(R)/ . 040 240 340 440 640
American High-Income
Trust/SM/ . . . . . . . . . 021 221 321 421 621
The Bond Fund of America/SM/ 008 208 308 408 608
Capital World Bond Fund/(R)/ 031 231 331 431 631
Intermediate Bond Fund of
America/SM/ . . . . . . . . 023 223 323 423 623
Limited Term Tax-Exempt Bond
Fund of America/SM/ . . . . 043 243 343 443 643
Short-Term Bond Fund of
America/SM/ . . . . . . . . 048 248 348 448 648
The Tax-Exempt Bond Fund of
America/(R)/. . . . . . . . 019 219 319 419 619
The Tax-Exempt Fund of
California/(R)/*. . . . . . 020 220 320 420 620
The Tax-Exempt Fund of
Maryland/(R)/*. . . . . . . 024 224 324 424 624
The Tax-Exempt Fund of
Virginia/(R)/*. . . . . . . 025 225 325 425 625
U.S. Government Securities
Fund/SM/. . . . . . . . . . 022 222 322 422 622
MONEY MARKET FUNDS
American Funds Money Market
Fund/SM/ . . . . . . . . . 059 259 359 459 659
___________
*Qualified for sale only in certain jurisdictions.

U.S. Government Securities Fund -- Page 64
<PAGE>

FUND NUMBERS
----------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F-1
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
International Growth and Income
Fund . . . . . . . . . . . . . 1034 1234 1334 1534 1434
The Investment Company of
America. . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors
Fund . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America. . . . . . . . . . . . 1023 1223 1323 1523 1423
Short-Term Bond Fund of America 1048 1248 1348 1548 1448
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
American Funds Money Market
Fund . . . . . . . . . . . . . 1059 1259 1359 1559 1459

U.S. Government Securities Fund -- Page 65
<PAGE>

FUND NUMBERS
------------------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5 R-6
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . 2102 2202 2302 2402 2502 2602
American Balanced Fund . . . . . . 2111 2211 2311 2411 2511 2611
American Mutual Fund . . . . . . . 2103 2203 2303 2403 2503 2603
Capital Income Builder . . . . . . 2112 2212 2312 2412 2512 2612
Capital World Growth and Income
Fund . . . . . . . . . . . . . . . 2133 2233 2333 2433 2533 2633
EuroPacific Growth Fund . . . . . 2116 2216 2316 2416 2516 2616
Fundamental Investors . . . . . . 2110 2210 2310 2410 2510 2610
The Growth Fund of America . . . . 2105 2205 2305 2405 2505 2605
The Income Fund of America . . . . 2106 2206 2306 2406 2506 2606
International Growth and Income
Fund . . . . . . . . . . . . . . . 2134 2234 2334 2434 2534 2634
The Investment Company of America 2104 2204 2304 2404 2504 2604
The New Economy Fund . . . . . . . 2114 2214 2314 2414 2514 2614
New Perspective Fund . . . . . . . 2107 2207 2307 2407 2507 2607
New World Fund . . . . . . . . . . 2136 2236 2336 2436 2536 2636
SMALLCAP World Fund . . . . . . . 2135 2235 2335 2435 2535 2635
Washington Mutual Investors Fund . 2101 2201 2301 2401 2501 2601
BOND FUNDS
American High-Income Trust . . . . 2121 2221 2321 2421 2521 2621
The Bond Fund of America . . . . . 2108 2208 2308 2408 2508 2608
Capital World Bond Fund . . . . . 2131 2231 2331 2431 2531 2631
Intermediate Bond Fund of America 2123 2223 2323 2423 2523 2623
Short-Term Bond Fund of America. . 2148 2248 2348 2448 2548 2648
U.S. Government Securities Fund . 2122 2222 2322 2422 2522 2622
MONEY MARKET FUNDS
American Funds Money Market Fund . 2159 2259 2359 2459 2559 2659
___________
*Qualified for sale only in certain
jurisdictions.

U.S. Government Securities Fund -- Page 66
<PAGE>

FUND NUMBERS
---------------------------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS
FUND CLASS A R-1 R-2 R-3 R-4 R-5 R-6
- -------------------------------------------------------------------------------

AMERICAN FUNDS TARGET DATE RETIREMENT SERIES/(R)/
American Funds 2050 Target
Date Retirement Fund/(R)/ 069 2169 2269 2369 2469 2569 2669
American Funds 2045 Target
Date Retirement Fund/(R)/ 068 2168 2268 2368 2468 2568 2668
American Funds 2040 Target
Date Retirement Fund/(R)/ 067 2167 2267 2367 2467 2567 2667
American Funds 2035 Target
Date Retirement Fund/(R)/ 066 2166 2266 2366 2466 2566 2666
American Funds 2030 Target
Date Retirement Fund/(R)/ 065 2165 2265 2365 2465 2565 2665
American Funds 2025 Target
Date Retirement Fund/(R)/ 064 2164 2264 2364 2464 2564 2664
American Funds 2020 Target
Date Retirement Fund/(R)/ 063 2163 2263 2363 2463 2563 2663
American Funds 2015 Target
Date Retirement Fund/(R)/ 062 2162 2262 2362 2462 2562 2662
American Funds 2010 Target
Date Retirement Fund/(R)/ 061 2161 2261 2361 2461 2561 2661

U.S. Government Securities Fund -- Page 67
<PAGE>

APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

U.S. Government Securities Fund -- Page 68
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

U.S. Government Securities Fund -- Page 69
<PAGE>

C
A C rating is assigned to obligations that are currently highly vulnerable to
nonpayment, obligations that have payment arrearages allowed by the terms of the
documents, or obligations of an issuer that is the subject of a bankruptcy
petition or similar action which have not experienced a payment default. Among
others, the C rating may be assigned to subordinated debt, preferred stock or
other obligations on which cash payments have been suspended in accordance with
the instrument's terms.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

FITCH
LONG-TERM CREDIT RATINGS

AAA
Highest credit quality. 'AAA' ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA
Very high credit quality. 'AA' ratings denote expectations of very low credit
risk. They indicate very strong capacity for payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.

A
High credit quality. 'A' ratings denote expectations of low credit risk. The
capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB
Good credit quality. 'BBB' ratings indicate that there is currently expectations
of low credit risk. The capacity for payment of financial commitments is
considered adequate but adverse changes in circumstances and economic conditions
are more likely to impair this capacity. This is the lowest investment grade
category.

BB
Speculative. 'BB' ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.

U.S. Government Securities Fund -- Page 70
<PAGE>

B
Highly speculative.

. For issuers and performing obligations, 'B' ratings indicate that
significant credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met; however,
capacity for continued payment is contingent upon a sustained,
favorable business and economic environment.

. For individual obligations, may indicate distressed or defaulted
obligations with potential for extremely high recoveries. Such
obligations would possess a Recovery Rating of 'R1' (outstanding).

CCC

. For issuers and performing obligations, default is a real possibility.
Capacity for meeting financial commitments is solely reliant upon
sustained, favorable business or economic conditions.

. For individual obligations, may indicate distressed or defaulted
obligations with potential for average to superior levels of recovery.
Differences in credit quality may be denoted by plus/minus
distinctions. Such obligations typically would possess a Recovery
Rating of 'R2' (superior), or 'R3' (good) or 'R4' (average).

. For issuers and performing obligations, default of some kind appears
probable.

. For individual obligations, may indicate distressed or defaulted
obligations with a Recovery Rating of 'R4' (average) or 'R5' (below
average).

. For issuers and performing obligations, default is imminent.

. For individual obligations, may indicate distressed or defaulted
obligations with potential for below-average to poor recoveries. Such
obligations would possess a Recovery Rating of 'R6' (poor).

RD
Indicates an entity that has failed to make due payments (within the applicable
grace period) on some but not all material financial obligations, but continues
to honor other classes of obligations.

D
Indicates an entity or sovereign that has defaulted on all of its financial
obligations. Default generally is defined as the following:

The modifiers "+" or "-" may be appended to a rating to denote relative
status within major rating categories. Such suffixes are not added to the
'AAA' Long-term rating category, to categories below 'CCC', or to
Short-term ratings other than 'F1'. (The +/- modifiers are only used to
denote issues within the CCC category, whereas issuers are only rated CCC
without the use of modifiers.

U.S. Government Securities Fund -- Page 71
<PAGE>

DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.

P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.

P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to
repay short-term obligations.

STANDARD & POOR'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

A-1
A short-term obligation rated A-1 is rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.

A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

A-3
A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

U.S. Government Securities Fund -- Page 72

...

[logo – American Funds®]

U.S. Government Securities FundSM

Investment portfolio

August 31, 2009

Bonds & notes — 99.09%	Principal amount (000)		Value (000)

U.S. TREASURY BONDS & NOTES — 47.20%
U.S. Treasury 1.25% 2010	$	10,000	$	10,090
U.S. Treasury 2.00% 2010		26,650		26,882
U.S. Treasury 2.00% 2010		25,000		25,415
U.S. Treasury 5.75% 2010		14,435		15,165
U.S. Treasury 6.50% 2010		10,000		10,283
U.S. Treasury 0.875% 2011		20,000		20,069
U.S. Treasury 1.125% 2011		20,000		19,978
U.S. Treasury 1.125% 2011		7,500		7,534
U.S. Treasury 2.375% 20111,2		27,486		28,167
U.S. Treasury 4.50% 2011		15,625		16,517
U.S. Treasury 4.625% 2011		20,500		22,117
U.S. Treasury 4.875% 2011		51,750		55,381
U.S. Treasury 1.50% 2012		100,840		101,049
U.S. Treasury 1.75% 2012		61,000		61,484
U.S. Treasury 3.00% 20121,2		38,378		40,401
U.S. Treasury 4.25% 2012		29,825		32,305
U.S. Treasury 4.875% 2012		8,825		9,609
U.S. Treasury 1.875% 20131,2		17,611		17,952
U.S. Treasury 3.125% 2013		81,500		85,139
U.S. Treasury 3.125% 2013		23,000		24,018
U.S. Treasury 3.375% 2013		15,000		15,838
U.S. Treasury 3.50% 2013		28,890		30,646
U.S. Treasury 3.625% 2013		20,000		21,298
U.S. Treasury 3.875% 2013		33,720		36,201
U.S. Treasury 1.75% 2014		53,250		52,339
U.S. Treasury 1.875% 2014		8,425		8,310
U.S. Treasury 2.25% 2014		310,200		309,474
U.S. Treasury 2.00% 20141,2		41,254		42,109
U.S. Treasury 2.00% 20141,2		17,160		17,535
U.S. Treasury 2.625% 2014		250,000		253,290
U.S. Treasury 2.625% 2014		62,000		62,738
U.S. Treasury 4.00% 2014		56,750		61,210
U.S. Treasury 4.25% 2014		31,225		33,973
U.S. Treasury 4.25% 2014		20,000		21,772
U.S. Treasury 1.875% 20151,2		43,679		44,323
U.S. Treasury 4.25% 2015		10,000		10,844
U.S. Treasury 9.875% 2015		7,000		9,828
U.S. Treasury 11.25% 2015		30,000		43,275
U.S. Treasury 3.25% 2016		304,385		309,094
U.S. Treasury 3.25% 2016		125,660		127,913
U.S. Treasury 3.25% 2016		46,400		47,190
U.S. Treasury 2.375% 20171,2		34,056		35,604
U.S. Treasury 4.625% 2017		34,500		37,951
U.S. Treasury 8.875% 2017		62,925		87,512
U.S. Treasury 3.50% 2018		10,650		10,789
U.S. Treasury 3.875% 2018		50,250		52,254
U.S. Treasury 4.00% 2018		10,000		10,474
U.S. Treasury 2.75% 2019		139,350		131,937
U.S. Treasury 3.125% 2019		343,000		334,895
U.S. Treasury 3.625% 2019		159,000		161,994
U.S. Treasury 8.125% 2019		25,000		34,543
U.S. Treasury 8.50% 2020		36,750		52,202
U.S. Treasury 7.875% 2021		6,500		8,940
U.S. Treasury 8.00% 2021		6,450		9,020
U.S. Treasury 6.25% 2023		21,090		26,122
U.S. Treasury 7.125% 2023		28,000		37,113
U.S. Treasury 7.50% 2024		6,625		9,226
U.S. Treasury 2.375% 20251,2		6,177		6,339
U.S. Treasury 6.125% 2027		4,675		5,869
U.S. Treasury 3.875% 20291,2		5,542		6,971
U.S. Treasury 6.25% 2030		18,000		23,251
U.S. Treasury 3.375% 20321,2		1,106		1,334
U.S. Treasury 4.50% 2036		55,400		58,335
U.S. Treasury 4.375% 2038		9,550		9,856
U.S. Treasury 4.50% 2038		57,250		60,327
U.S. Treasury 3.50% 2039		35,935		31,774
U.S. Treasury Principal Strip 0% 2019		18,000		12,672
				3,446,059


MORTGAGE-BACKED OBLIGATIONS — 43.22%
Federal agency mortgage-backed obligations3 — 41.75%
Fannie Mae 7.00% 2009		—		—
Fannie Mae 7.00% 2010		2		2
Fannie Mae 7.00% 2011		7		7
Fannie Mae 9.50% 2011		5		5
Fannie Mae 7.00% 2017		101		108
Fannie Mae 10.50% 2018		1,105		1,287
Fannie Mae 4.50% 2019		5,466		5,724
Fannie Mae 12.00% 2019		333		377
Fannie Mae 4.50% 2020		16,606		17,426
Fannie Mae 4.50% 2020		15,223		15,930
Fannie Mae 4.50% 2020		5,299		5,561
Fannie Mae 5.50% 2021		10,132		10,698
Fannie Mae 6.00% 2021		5,654		6,045
Fannie Mae 6.00% 2021		328		351
Fannie Mae 6.00% 2021		314		336
Fannie Mae 6.00% 2021		279		298
Fannie Mae 6.00% 2022		9,136		9,756
Fannie Mae 9.50% 2022		32		36
Fannie Mae 5.50% 2023		26,679		28,226
Fannie Mae 5.50% 2023		6,201		6,536
Fannie Mae 5.50% 2023		2,071		2,183
Fannie Mae 6.00% 2023		13,560		14,481
Fannie Mae 6.00% 2023		5,871		6,270
Fannie Mae 4.00% 2024		60,817		61,533
Fannie Mae 4.00% 2024		43,693		44,178
Fannie Mae 4.00% 2024		38,527		38,954
Fannie Mae 4.00% 2024		33,604		33,977
Fannie Mae 4.00% 2024		24,564		24,853
Fannie Mae 4.00% 2024		19,264		19,491
Fannie Mae 4.50% 2024		78,790		81,157
Fannie Mae 4.50% 2024		63,970		65,789
Fannie Mae 4.50% 2024		33,444		34,448
Fannie Mae 4.50% 2024		31,251		32,195
Fannie Mae 4.50% 2024		22,333		23,008
Fannie Mae 4.50% 2024		21,047		21,679
Fannie Mae 4.50% 2024		20,995		21,629
Fannie Mae 4.50% 2024		9,881		10,180
Fannie Mae 4.50% 2024		5,782		5,957
Fannie Mae 4.50% 2024		3,630		3,740
Fannie Mae 4.50% 2024		3,508		3,614
Fannie Mae 4.50% 2024		3,119		3,213
Fannie Mae 4.50% 2024		3,092		3,185
Fannie Mae 6.00% 2024		2,935		3,108
Fannie Mae 10.976% 20254		2,558		2,978
Fannie Mae 6.00% 2026		163		172
Fannie Mae 9.50% 2026		251		294
Fannie Mae 6.00% 2027		13,971		14,792
Fannie Mae 6.50% 2027		12,484		13,390
Fannie Mae 6.50% 2027		6,657		7,140
Fannie Mae 6.50% 2027		5,884		6,311
Fannie Mae 8.50% 2027		13		15
Fannie Mae 5.00% 2028		8,273		8,577
Fannie Mae 6.00% 2028		10,577		11,166
Fannie Mae 6.00% 2028		5,697		6,015
Fannie Mae 6.00% 2028		2,408		2,543
Fannie Mae 4.00% 2029		19,674		19,528
Fannie Mae 7.50% 2029		257		283
Fannie Mae 7.50% 2030		42		46
Fannie Mae 7.50% 2030		14		15
Fannie Mae 7.50% 2031		175		192
Fannie Mae 7.50% 2031		70		76
Fannie Mae 7.50% 2031		67		74
Fannie Mae 7.50% 2031		37		41
Fannie Mae 8.00% 2031		2,291		2,537
Fannie Mae 4.931% 20334		1,356		1,390
Fannie Mae 5.50% 2033		11,008		11,537
Fannie Mae 6.50% 2034		24,238		26,111
Fannie Mae 4.466% 20354		3,150		3,273
Fannie Mae 4.50% 2035		26,345		26,621
Fannie Mae 4.50% 20354		1,430		1,481
Fannie Mae 4.576% 20354		2,349		2,428
Fannie Mae 5.00% 2035		8,563		8,827
Fannie Mae 5.50% 2035		7,660		8,018
Fannie Mae 5.50% 2035		3,922		4,107
Fannie Mae 6.50% 2035		37,784		40,774
Fannie Mae 5.00% 2036		16,760		17,269
Fannie Mae 5.00% 2036		8,134		8,385
Fannie Mae 5.409% 20364		5,352		5,645
Fannie Mae 5.50% 2036		239		250
Fannie Mae 5.506% 20364		6,733		7,111
Fannie Mae 6.00% 2036		276		292
Fannie Mae 6.50% 2036		25,185		27,202
Fannie Mae 5.00% 2037		16,494		16,974
Fannie Mae 5.339% 20374		8,294		8,719
Fannie Mae 5.50% 2037		43,601		45,599
Fannie Mae 5.50% 2037		3,600		3,755
Fannie Mae 5.611% 20374		2,968		3,141
Fannie Mae 5.835% 20374		4,185		4,441
Fannie Mae 6.00% 2037		7,877		8,315
Fannie Mae 6.00% 2037		1,990		2,093
Fannie Mae 6.00% 2037		1,267		1,342
Fannie Mae 6.024% 20374		2,509		2,656
Fannie Mae 6.14% 20374		1,531		1,622
Fannie Mae 6.327% 20374		10,779		11,446
Fannie Mae 6.50% 2037		26,489		28,386
Fannie Mae 6.50% 2037		12,792		13,660
Fannie Mae 6.50% 2037		11,763		12,562
Fannie Mae 6.50% 2037		9,490		10,134
Fannie Mae 6.50% 2037		8,859		9,496
Fannie Mae 6.50% 2037		7,907		8,444
Fannie Mae 6.50% 2037		4,952		5,288
Fannie Mae 6.50% 2037		4,828		5,173
Fannie Mae 7.00% 2037		11,175		12,129
Fannie Mae 7.00% 2037		10,818		11,742
Fannie Mae 7.00% 2037		7,497		8,138
Fannie Mae 7.00% 2037		6,301		6,840
Fannie Mae 7.00% 2037		2,887		3,150
Fannie Mae 7.00% 2037		2,586		2,807
Fannie Mae 7.00% 2037		1,782		1,921
Fannie Mae 7.00% 2037		1,457		1,581
Fannie Mae 7.00% 2037		1,166		1,265
Fannie Mae 7.50% 2037		979		1,061
Fannie Mae 4.445% 20384		4,557		4,740
Fannie Mae 4.542% 20384		1,751		1,823
Fannie Mae 5.00% 2038		46,723		48,032
Fannie Mae 5.46% 20384		10,974		11,576
Fannie Mae 5.47% 20384		2,700		2,848
Fannie Mae 5.50% 2038		50,468		52,670
Fannie Mae 5.50% 2038		20,606		21,505
Fannie Mae 5.50% 2038		10,501		10,981
Fannie Mae 5.552% 20384		585		613
Fannie Mae 5.644% 20384		23,957		25,179
Fannie Mae 6.00% 2038		15,828		16,709
Fannie Mae 6.00% 2038		6,166		6,491
Fannie Mae 6.50% 2038		23,599		25,290
Fannie Mae 6.50% 2038		15,160		16,246
Fannie Mae 6.50% 2038		9,627		10,328
Fannie Mae 6.50% 2038		9,552		10,248
Fannie Mae 7.00% 2038		12,467		13,532
Fannie Mae 3.58% 20394		7,548		7,601
Fannie Mae 3.652% 20394		4,000		4,079
Fannie Mae 3.655% 20394		10,097		10,275
Fannie Mae 3.758% 20394		4,992		5,104
Fannie Mae 3.801% 20394		2,500		2,558
Fannie Mae 3.861% 20394		8,518		8,734
Fannie Mae 3.908% 20394		4,984		5,104
Fannie Mae 3.913% 20394		1,700		1,744
Fannie Mae 4.00% 20392,4		3,350		3,434
Fannie Mae 5.121% 20394		6,327		6,643
Fannie Mae 5.50% 2039		42,800		44,559
Fannie Mae 6.00% 2039		42,200		44,409
Fannie Mae 6.50% 2039		16,405		17,580
Fannie Mae 6.443% 20474		10,911		11,587
Fannie Mae 6.488% 20474		5,058		5,371
Fannie Mae, Series 35, Class 2, 12.00% 2018		15		16
Fannie Mae, Series 2003-48, Class TJ, 4.50% 2022		4,023		4,154
Fannie Mae, Series 1992-119, Class Z, 8.00% 2022		168		183
Fannie Mae, Series 2001-4, Class NA, 11.837% 20254		1,787		2,019
Fannie Mae, Series 2002-W7, Class A-5, 7.50% 2029		2,417		2,692
Fannie Mae, Series 2001-25, Class ZA, 6.50% 2031		1,106		1,184
Fannie Mae, Series 2001-20, Class E, 9.626% 20314		65		74
Fannie Mae, Series 2001-20, Class C, 11.994% 20314		220		254
Fannie Mae, Series 2005-29, Class AK, 4.50% 2035		9,238		9,539
Fannie Mae, Series 2005-68, Class PG, 5.50% 2035		16,049		17,035
Fannie Mae, Series 2006-56, Class OG, principal only, 0% 2036		5,423		4,531
Fannie Mae, Series 2006-83, Class AO, principal only, 0% 2036		4,397		3,585
Fannie Mae, Series 2006-65, Class PF, 0.546% 20364		5,994		5,913
Fannie Mae, Series 2006-49, Class PA, 6.00% 2036		991		1,058
Fannie Mae, Series 2007-33, Class HE, 5.50% 2037		6,397		6,725
Fannie Mae, Series 2007-40, Class PT, 5.50% 2037		4,121		4,381
Fannie Mae, Series 2007-24, Class P, 6.00% 2037		28,691		30,583
Fannie Mae, Series 1999-T2, Class A-1, 7.50% 20394		827		921
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2041		597		665
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		612		671
Freddie Mac 6.00% 2014		106		113
Freddie Mac 6.00% 2017		416		446
Freddie Mac 8.50% 2018		—		—
Freddie Mac 4.50% 2019		6,813		7,130
Freddie Mac 4.50% 2019		1,426		1,492
Freddie Mac 4.50% 2023		27,992		28,820
Freddie Mac 5.50% 2023		65,385		68,861
Freddie Mac 6.00% 2023		9,604		10,256
Freddie Mac 4.50% 2024		71,443		73,557
Freddie Mac 4.50% 2024		29,128		29,990
Freddie Mac 4.50% 2024		10,535		10,847
Freddie Mac 4.50% 2024		4,863		5,007
Freddie Mac 5.00% 2024		23,250		24,272
Freddie Mac 10.00% 2025		989		1,139
Freddie Mac 6.00% 2026		8,600		9,120
Freddie Mac 6.00% 2027		16,703		17,712
Freddie Mac 4.628% 20354		7,502		7,819
Freddie Mac 5.00% 2035		13,230		13,641
Freddie Mac 5.00% 2036		26,033		26,841
Freddie Mac 5.597% 20364		10,775		11,318
Freddie Mac 5.877% 20364		33,270		35,219
Freddie Mac 6.00% 2036		19,576		20,770
Freddie Mac 6.00% 2036		10,137		10,716
Freddie Mac 4.754% 20374		2,785		2,902
Freddie Mac 5.452% 20374		3,791		3,977
Freddie Mac 5.698% 20374		3,677		3,867
Freddie Mac 5.79% 20374		4,000		4,220
Freddie Mac 5.976% 20374		2,374		2,507
Freddie Mac 6.00% 2037		7,243		7,657
Freddie Mac 6.00% 2037		5,395		5,702
Freddie Mac 6.00% 2037		4,790		5,090
Freddie Mac 6.00% 2037		2,868		3,034
Freddie Mac 6.06% 20374		2,061		2,182
Freddie Mac 6.24% 20374		2,319		2,450
Freddie Mac 6.259% 20374		4,060		4,302
Freddie Mac 6.316% 20374		3,150		3,334
Freddie Mac 6.50% 2037		15,641		16,718
Freddie Mac 6.50% 2037		3,243		3,451
Freddie Mac 6.50% 2037		1,487		1,583
Freddie Mac 4.814% 20384		4,427		4,597
Freddie Mac 4.963% 20384		1,215		1,270
Freddie Mac 5.00% 2038		26,944		27,705
Freddie Mac 5.00% 2038		8,140		8,370
Freddie Mac 5.145% 20384		21,440		22,461
Freddie Mac 5.187% 20384		4,032		4,212
Freddie Mac 5.50% 2038		30,573		32,005
Freddie Mac 5.50% 2038		30,535		31,903
Freddie Mac 5.50% 2038		21,204		22,154
Freddie Mac 5.50% 2038		18,214		19,070
Freddie Mac 5.524% 20384		4,180		4,399
Freddie Mac 6.00% 2038		33,749		35,735
Freddie Mac 6.00% 2038		27,208		28,753
Freddie Mac 6.00% 2038		9,405		9,962
Freddie Mac 6.50% 2038		26,910		28,736
Freddie Mac 6.50% 2038		20,611		22,011
Freddie Mac 6.50% 2038		17,821		19,031
Freddie Mac 6.50% 2038		16,467		17,585
Freddie Mac 6.50% 2038		7,901		8,437
Freddie Mac 6.50% 2038		7,825		8,357
Freddie Mac 5.00% 2039		5,589		5,747
Freddie Mac 5.00% 2039		3,171		3,260
Freddie Mac, Series K003, Class A2, 3.607% 20142		6,125		6,250
Freddie Mac, Series 2356, Class GD, 6.00% 2016		3,594		3,825
Freddie Mac, Series 2289, Class NA, 11.926% 20204		896		1,017
Freddie Mac, Series 178, Class Z, 9.25% 2021		48		52
Freddie Mac, Series 2289, Class NB, 11.341% 20224		223		257
Freddie Mac, Series 1567, Class A, 0.713% 20234		50		48
Freddie Mac, Series 2626, Class NG, 3.50% 2023		1,221		1,232
Freddie Mac, Series 1617, Class PM, 6.50% 2023		1,426		1,558
Freddie Mac, Series 2153, Class GG, 6.00% 2029		2,721		2,899
Freddie Mac, Series T-041, Class 3-A, 7.50% 2032		513		571
Freddie Mac, Series 3061, Class PN, 5.50% 2035		3,708		3,929
Freddie Mac, Series 3156, Class PO, principal only, 0% 2036		8,220		7,258
Freddie Mac, Series 3171, Class MO, principal only, 0% 2036		4,244		3,502
Freddie Mac, Series 3146, Class PO, principal only, 0% 2036		3,897		3,381
Freddie Mac, Series 3213, Class OG, principal only, 0% 2036		2,496		2,027
Freddie Mac, Series 3156, Class PF, 0.523% 20364		9,761		9,620
Freddie Mac, Series 3257, Class PA, 5.50% 2036		4,635		4,915
Freddie Mac, Series 3233, Class PA, 6.00% 2036		6,014		6,412
Freddie Mac, Series 3272, Class PA, 6.00% 2037		7,820		8,330
Government National Mortgage Assn. 9.50% 2009		—		—
Government National Mortgage Assn. 6.00% 2013		230		246
Government National Mortgage Assn. 6.00% 2014		148		158
Government National Mortgage Assn. 6.50% 2014		90		96
Government National Mortgage Assn. 6.50% 2014		90		95
Government National Mortgage Assn. 6.50% 2014		78		83
Government National Mortgage Assn. 6.50% 2014		76		81
Government National Mortgage Assn. 6.50% 2014		56		59
Government National Mortgage Assn. 6.50% 2014		54		58
Government National Mortgage Assn. 6.50% 2014		43		46
Government National Mortgage Assn. 6.50% 2014		38		40
Government National Mortgage Assn. 6.50% 2014		34		37
Government National Mortgage Assn. 6.50% 2014		19		20
Government National Mortgage Assn. 6.50% 2014		10		10
Government National Mortgage Assn. 6.50% 2014		7		7
Government National Mortgage Assn. 5.50% 2016		446		478
Government National Mortgage Assn. 5.50% 2016		329		354
Government National Mortgage Assn. 5.50% 2016		272		293
Government National Mortgage Assn. 5.50% 2016		240		257
Government National Mortgage Assn. 5.50% 2016		210		226
Government National Mortgage Assn. 5.50% 2016		208		223
Government National Mortgage Assn. 5.50% 2016		197		212
Government National Mortgage Assn. 5.50% 2016		192		206
Government National Mortgage Assn. 5.50% 2016		142		153
Government National Mortgage Assn. 5.50% 2016		128		137
Government National Mortgage Assn. 5.50% 2016		89		95
Government National Mortgage Assn. 5.50% 2016		88		95
Government National Mortgage Assn. 5.50% 2016		78		84
Government National Mortgage Assn. 5.50% 2016		62		67
Government National Mortgage Assn. 5.50% 2016		58		62
Government National Mortgage Assn. 6.00% 2016		564		609
Government National Mortgage Assn. 6.50% 2016		298		319
Government National Mortgage Assn. 6.50% 2016		210		225
Government National Mortgage Assn. 9.00% 2016		41		46
Government National Mortgage Assn. 5.50% 2017		1,942		2,087
Government National Mortgage Assn. 10.00% 2019		703		808
Government National Mortgage Assn. 8.50% 2021		42		47
Government National Mortgage Assn. 10.00% 2021		237		274
Government National Mortgage Assn. 8.50% 2022		16		18
Government National Mortgage Assn. 6.00% 2035		20		21
Government National Mortgage Assn. 5.00% 2038		50,088		51,655
Government National Mortgage Assn. 5.50% 2038		39,176		41,031
Government National Mortgage Assn. 5.50% 2038		8,657		9,065
Government National Mortgage Assn. 5.50% 2038		8,065		8,447
Government National Mortgage Assn. 6.00% 2038		28,511		30,149
Government National Mortgage Assn. 6.00% 2038		26,725		28,261
Government National Mortgage Assn. 6.00% 2038		22,782		24,091
Government National Mortgage Assn. 6.00% 2038		7,813		8,261
Government National Mortgage Assn. 6.00% 2038		7,085		7,491
Government National Mortgage Assn. 6.50% 2038		35,395		37,655
Government National Mortgage Assn. 5.00% 2039		14,980		15,455
Government National Mortgage Assn. 5.922% 20582		17,350		18,044
Government National Mortgage Assn. 6.172% 20582		771		801
Government National Mortgage Assn. 6.22% 20582		9,168		9,655
Government National Mortgage Assn., Series 2004-19, 5.00% 2031		13,911		14,532
Government National Mortgage Assn., Series 2003-116, Class JD, 5.00% 2032		10,000		10,377
Government National Mortgage Assn., Series 2003-46, 5.00% 2033		10,000		10,512
Government National Mortgage Assn., Series 2003, Class A, 5.612% 20582		16,165		16,836
Government National Mortgage Assn., Series 2003, 6.116% 20582		4,073		4,236
				3,047,984


MORTGAGE-BACKED OBLIGATIONS — Commercial mortgage-backed securities3 — 1.47%
Fannie Mae, Series 2003-T1, Class B, 4.491% 2012		27,750		28,931
Fannie Mae, Series 2003-M2, Class D, 4.68% 20334		11,000		10,803
Wachovia Bank Commercial Mortgage Trust, Series 2004-C12, Class M-AD, 5.439% 20414,5		7,293		7,855
Wachovia Bank Commercial Mortgage Trust, Series 2005-C18, Class A-PB, 4.807% 2042		5,500		5,455
Wachovia Bank Commercial Mortgage Trust, Series 2005-C20, Class A-7, 5.118% 20424		2,000		1,924
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		3,000		2,925
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-3, 4.184% 2037		1,784		1,785
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-CIBC10, Class A-4, 4.529% 2037		2,000		2,006
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP2, Class A-4, 4.738% 2042		2,000		1,891
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP3, Class A-4A, 4.936% 20424		5,000		4,797
American Tower Trust I, Series 2007-1A, Class A-FX, 5.42% 20375		10,750		10,114
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-2, 4.183% 2037		2,550		2,553
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-4, 4.686% 2037		2,250		2,123
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-AB, 5.10% 20384		5,000		5,041
GE Commercial Mortgage Corp., Series 2006-C1, Class A-AB, 5.515% 20444		3,000		2,989
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.515% 20444		2,000		1,921
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		1,127		1,177
Banc of America Commercial Mortgage Inc., Series 2006-2, Class A-3, 5.901% 20454		3,000		2,913
Merrill Lynch Mortgage Trust, Series 2005-LC1, Class A-3, 5.289% 20444		3,000		2,967
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 20374		3,000		2,904
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-2, 6.592% 2033		1,755		1,803
GMAC Commercial Mortgage Securities, Inc., Series 2005-C1, Class A-M, 4.754% 2043		2,000		1,511
COBALT CMBS Commerical Mortgage Trust, Series 2006-C1, Class A-2, 5.174% 2048		1,000		996
				107,384

Collateralized mortgage-backed obligations (privately originated)3 — 0.00%
Paine Webber CMO, Series O, Class 5, 9.50% 2019		152		164


Total mortgage-backed obligations				3,155,532


FEDERAL AGENCY BONDS & NOTES — 7.87%
Federal Home Loan Bank 2.50% 2009		5,000		5,003
Federal Home Loan Bank 3.375% 2010		10,000		10,308
Federal Home Loan Bank 7.625% 2010		8,000		8,403
Federal Home Loan Bank 1.75% 2012		108,605		108,521
Federal Home Loan Bank 3.625% 2013		10,000		10,484
Federal Home Loan Bank 5.375% 2016		27,750		30,978
Federal Home Loan Bank 5.375% 2016		8,755		9,704
Federal Home Loan Bank 4.75% 2018		10,050		10,639
Fannie Mae 1.75% 2011		29,450		29,828
Fannie Mae 3.625% 2011		10,000		10,485
Fannie Mae 6.00% 2011		15,000		16,262
Fannie Mae 6.125% 2012		10,000		11,149
Fannie Mae 3.00% 2014		7,250		7,332
Fannie Mae 5.375% 2017		13,000		14,546
Freddie Mac 2.875% 2010		17,000		17,461
Freddie Mac 2.50% 2014		13,000		12,949
Freddie Mac 3.00% 2014		22,750		22,995
Freddie Mac 5.50% 2016		10,000		11,271
Federal Agricultural Mortgage Corp. 4.875% 20115		6,750		7,140
Federal Agricultural Mortgage Corp. 5.125% 2011		3,500		3,738
Federal Agricultural Mortgage Corp. 5.50% 20115		20,010		21,438
Federal Agricultural Mortgage Corp. 5.125% 20175		10,225		10,944
United States Government Agency-Guaranteed (FDIC insured), Bank of America Corp. 2.375% 2012		33,000		33,566
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.20% 2012		10,000		10,117
United States Government Agency-Guaranteed (FDIC insured), General Electric Capital Corp., Series G, 2.25% 2012		17,500		17,765
United States Agency for International Development, Republic of Egypt 4.45% 2015		19,000		19,933
United States Agency for International Development, State of Israel, Class 1-A, 5.50% 2023		5,000		5,381
Small Business Administration, Series SBIC-PS 2006-10A, Participating Securities, 5.408% 2016		8,022		8,476
Small Business Administration, Series 2001-20K, 5.34% 20213		1,956		2,066
Small Business Administration, Series 2001-20J, 5.76% 20213		1,009		1,075
Small Business Administration, Series 2001-20F, 6.44% 20213		2,960		3,196
Small Business Administration, Series 2003-20B, 4.84% 20233		6,714		7,015
United States Government Agency-Guaranteed (FDIC insured), JPMorgan Chase & Co. 2.20% 2012		15,000		15,216
United States Government Agency-Guaranteed (FDIC insured), PNC Funding Corp. 2.30% 2012		13,586		13,784
United States Government Agency-Guaranteed (FDIC insured), Morgan Stanley 2.25% 2012		10,000		10,154
United States Government Agency-Guaranteed (FDIC insured), State Street Corp. 2.15% 2012		10,000		10,100
United States Government Agency-Guaranteed (FDIC insured), Citigroup Inc. 2.125% 2012		9,000		9,092
United States Government Agency-Guaranteed (FDIC insured), John Deere Capital Corp. 2.875% 2012		6,414		6,609
United States Government-Guaranteed Certificates of Participation, Overseas Private Investment Corp.,
Series 2000-044-A, 3.74% 20153		4,012		4,202
Tennessee Valley Authority, Series 2008, Class A, 4.875% 2048		2,255		2,130
United States Government-Guaranteed, Perforadora Centrale SA de CV (Title XI) 4.92% 20183		1,901		2,041
United States Government-Guaranteed Ship Financing Obligations, Rowan Companies, Inc. (Title XI) 5.88% 20123		954		998
				574,494

ASSET-BACKED OBLIGATIONS3 — 0.80%
Hyundai Auto Receivables Trust, Series 2006-B, Class A-4, 5.15% 2013		10,000		10,371
John Deere Owner Trust, Series 2008, Class A-4, 4.89% 2015		8,000		8,007
AEP Texas Central Transitioning Funding II LLC, Secured Transition Bonds, Series A, Class A-3, 5.09% 2017		5,450		5,863
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-2, 5.03% 2014		4,276		4,482
PSE&G Transition Funding II LLC, Series 2005-1, Class A-2, 4.34% 2014		4,062		4,211
Reliant Energy Transition Bond Company LLC, Series 2001-1, Class A-4, 5.63% 2015		200		216
CenterPoint Energy Transition Bond Company III, LLC, Series 2008, Class A-1, 4.192% 2020		2,670		2,784
CenterPoint Energy Transition Bond Company III, LLC, Series 2008, Class A-2, 5.234% 2023		625		663
CPL Transition Funding LLC, Series 2002-1, Class A-4, 5.96% 2015		3,000		3,276
FPL Recovery Funding LLC, Series 2007-A, Class A-2, 5.044% 2015		3,000		3,220
Ford Credit Auto Owner Trust, Series 2008-A, Class A-4, 4.37% 2012		3,000		3,114
Nissan Auto Lease Trust, Series 2008-A, Class A-3a, 5.14% 2011		3,000		3,105
Nissan Auto Receivables Owner Trust, Series 2008-A, Class A-4, 4.28% 2014		3,000		3,101
World Omni Auto Receivables Trust, Series 2008-A, Class A-4, 4.74% 2013		2,000		2,092
Oncor Electric Delivery Transition Bond Co. LLC, Series 2003-1, Class A-3, 4.95% 2015		1,895		2,008
PE Environmental Funding LLC, Series 2007-A, Class A-1, 4.982% 2016		1,584		1,569
Susquehanna Auto Lease Trust, Series 2007-1, Class A-3, 5.25% 20105		671		673
				58,755

Total bonds & notes (cost: $7,014,269,000)				7,234,840




Short-term securities — 1.84%

Federal Home Loan Bank 0.08%–0.22% due 9/1–9/11/2009		100,700		100,697
U.S. Treasury Bills 0.20% due 11/12/2009		20,700		20,695
Freddie Mac 0.225% due 9/14/2009		12,800		12,799


Total short-term securities (cost: $134,187,000)				134,191


Total investment securities (cost: $7,148,456,000)			$	7,369,031
Other assets less liabilities				(67,626	)

Net assets			$	7,301,405

1Index-linked bond whose principal amount moves with a government retail price index.

2Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $299,991,000, which represented 4.11% of the net assets of the fund.

3Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

4Coupon rate may change periodically.

5Purchased in a transaction exempt from registration under 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 $58,164,000, which represented .80% of the net assets of the fund.

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

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus, which can be obtained from your financial professional and should be read carefully before investing.

MFGEFP-922-1009O-S21456

Statement of assets and liabilities
at August 31, 2009		(dollars in thousands)

Assets:
Investment securities, at value (cost: $7,148,456)		$7,369,031
Cash		202
Receivables for:
Sales of investments	$76,772
Sales of fund's shares	24,380
Interest	34,613	135,765
		7,504,998
Liabilities:
Payables for:
Purchases of investments	168,326
Repurchases of fund's shares	24,329
Dividends on fund's shares	3,001
Investment advisory services	1,546
Services provided by affiliates	5,680
Trustees' deferred compensation	145
Other	566	203,593
Net assets at August 31, 2009		$7,301,405

Net assets consist of:
Capital paid in on shares of beneficial interest		$7,081,275
Distributions in excess of net investment income		(319)
Distributions in excess of net realized gain		(126)
Net unrealized appreciation		220,575
Net assets at August 31, 2009		$7,301,405

(dollars and shares in thousands, except per-share amounts)
Shares of beneficial interest issued and outstanding (no stated par value) - unlimited shares authorized (517,631 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share*
Class A	$	4,745,077		336,401	$	14.11
Class B		356,303		25,260		14.11
Class C		685,685		48,611		14.11
Class F-1		185,496		13,151		14.11
Class F-2		56,806		4,027		14.11
Class 529-A		145,156		10,291		14.11
Class 529-B		25,553		1,811		14.11
Class 529-C		78,352		5,555		14.11
Class 529-E		8,813		625		14.11
Class 529-F-1		8,812		625		14.11
Class R-1		14,121		1,001		14.11
Class R-2		203,873		14,453		14.11
Class R-3		173,828		12,323		14.11
Class R-4		158,558		11,241		14.11
Class R-5		51,267		3,635		14.11
Class R-6		403,705		28,621		14.11

(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Classes A and 529-A, for which the maximum offering prices per share were $14.66 each.

See Notes to Financial Statements

Statement of operations
for the year ended August 31, 2009	(dollars in thousands)

Investment income:
Income:
Interest				$	268,889

Fees and expenses*:
Investment advisory services	$	18,125
Distribution services		26,688
Transfer agent services		5,866
Administrative services		3,550
Reports to shareholders		362
Registration statement and prospectus		1,602
Trustees' compensation		46
Auditing and legal		107
Custodian		38
State and local taxes		40
Other		403
Total fees and expenses before reimbursements/waivers		56,827
Less reimbursements/waivers of fees and expenses:
Investment advisory services		528
Administrative services		78
Total fees and expenses after reimbursements/waivers					56,221
Net investment income					212,668

Netrealized gain andunrealized appreciation on investments:
Net realized gain on investments					40,528
Net unrealized appreciation on investments					226,988
Net realized gain and unrealized appreciation on investments					267,516
Net increase in net assets resulting from operations				$	480,184

(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

See Notes to Financial Statements



Statements of changes in net assets		(dollars in thousands)

	Year ended August 31
	2009			2008
Operations:
Net investment income	$	212,668		$	126,323
Net realized gain on investments		40,528			24,821
Net unrealized appreciation on investments		226,988			715
Net increase in net assets resulting from operations		480,184			151,859

Dividends paid or accrued to shareholders from net investment income		(220,836	)		(127,252	)

Net capital share transactions		3,081,256			1,366,130

Total increase in net assets		3,340,604			1,390,737

Net assets:
Beginning of year		3,960,801			2,570,064
End of year (including distributions in excess of
net investment income: $(319) and $(170), respectively)	$	7,301,405		$	3,960,801


See Notes to Financial Statements

(dollars in thousands)
Undistributed ordinary income	$	18,716
Post-October capital loss deferrals (realized during the period November 1, 2008, through August 31, 2009)*		(10,425	)
Gross unrealized appreciation on investment securities		217,849
Gross unrealized depreciation on investment securities		(2,864	)
Net unrealized appreciation on investment securities		214,985
Cost of investment securities		7,154,046
*These deferrals are considered incurred in the subsequent year.

	Year ended August 31
Share class	2009		2008
Class A	$	156,462	$	87,199
Class B		8,902		5,959
Class C		15,415		5,823
Class F-1		7,423		5,126
Class F-2*		728		2
Class 529-A		3,915		2,227
Class 529-B		552		469
Class 529-C		1,532		1,053
Class 529-E		218		152
Class 529-F-1		267		176
Class R-1		334		205
Class R-2		4,333		3,865
Class R-3		4,529		3,946
Class R-4		3,979		3,385
Class R-5		8,415		7,665
Class R-6†		3,832		-
Total	$	220,836	$	127,252


*Class F-2 was offered beginning August 1, 2008.
†Class R-6 was offered beginning May 1, 2009.

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes A and 529-A	Up to 3.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Classes B and 529-B*	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to Classes A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F-1 after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F-1, F-2 and 529-F-1	None	None	None
Classes R-1, R-2, R-3, R-4, R-5 and R-6	None	None	None

Share class	Currently approved limits	Plan limits
Class A	0.30%	0.30%
Class 529-A	0.30	0.50
Classes B and 529-B	1.00	1.00
Classes C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Classes 529-E and R-3	0.50	0.75
Classes F-1, 529-F-1 and R-4	0.25	0.50

Investment securities:	Level 1		Level 2		Level 3		Total
Bonds & notes:
U.S. Treasury bonds & notes	$	-	$	3,446,059	$	-	$	3,446,059
Mortgage-backed obligations		-		3,105,960		49,572		3,155,532
Federal agency bonds & notes		-		574,494		-		574,494
Asset-backed obligations		-		58,755		-		58,755
Short-term securities		-		134,191		-		134,191
Total	$	-	$	7,319,459	$	49,572	$	7,369,031

The following table reconciles the valuation of the fund's Level 3 investment securities and related transactions for the year ended August 31, 2009 (dollars in thousands):

	Beginning						Net transfers		Ending
	value		Net		Net unrealized		into		value
	at 9/1/2008		purchases		appreciation(*)		Level 3		at 8/31/2009
Investment securities	$	-	$	22,676	$	620	$	26,276	$	49,572

Net unrealized appreciation during the period on Level 3 investment securities held at August 31, 2009 (dollars in thousands)(*):									$	620

(*)Net unrealized appreciation is included in the related amounts on investments in the statement of operations.

Share class	Sales(1)				Reinvestments of dividends				Repurchases(1)						Net increase (decrease)
	Amount		Shares		Amount		Shares		Amount			Shares			Amount			Shares
Year ended August 31, 2009
Class A	$	5,297,274		383,500	$	144,606		10,378	$	(3,475,366	)		(249,425	)	$	1,966,514			144,453
Class B		327,707		23,746		8,159		586		(195,600	)		(14,039	)		140,266			10,293
Class C		835,237		60,392		13,936		999		(428,802	)		(30,752	)		420,371			30,639
Class F-1		292,639		21,225		6,137		441		(264,696	)		(18,993	)		34,080			2,673
Class F-2		80,015		5,766		587		42		(25,738	)		(1,838	)		54,864			3,970
Class 529-A		109,813		7,922		3,869		278		(40,830	)		(2,924	)		72,852			5,276
Class 529-B		14,116		1,017		547		39		(5,991	)		(429	)		8,672			627
Class 529-C		58,672		4,223		1,516		109		(23,710	)		(1,698	)		36,478			2,634
Class 529-E		6,582		474		216		16		(2,944	)		(211	)		3,854			279
Class 529-F-1		6,051		438		262		19		(2,764	)		(198	)		3,549			259
Class R-1		15,892		1,146		325		23		(11,254	)		(804	)		4,963			365
Class R-2		154,432		11,107		4,270		307		(97,606	)		(7,016	)		61,096			4,398
Class R-3		142,827		10,272		4,483		322		(97,415	)		(6,994	)		49,895			3,600
Class R-4		122,042		8,748		3,957		284		(63,003	)		(4,511	)		62,996			4,521
Class R-5		185,632		13,344		8,203		590		(435,023	)		(31,039	)		(241,188	)		(17,105	)
Class R-6(2)		399,827		28,466		3,752		268		(1,585	)		(113	)		401,994			28,621
Total net increase
(decrease)	$	8,048,758		581,786	$	204,825		14,701	$	(5,172,327	)		(370,984	)	$	3,081,256			225,503

Year ended August 31, 2008
Class A	$	1,499,821		109,722	$	79,245		5,830	$	(751,724	)		(55,277	)	$	827,342			60,275
Class B		89,751		6,554		5,436		400		(51,555	)		(3,792	)		43,632			3,162
Class C		188,535		13,792		5,285		389		(75,769	)		(5,576	)		118,051			8,605
Class F-1		114,287		8,367		3,926		289		(76,162	)		(5,606	)		42,051			3,050
Class F-2(3)		775		57		1		-		-			-			776			57
Class 529-A		30,432		2,231		2,215		163		(9,664	)		(711	)		22,983			1,683
Class 529-B		3,974		291		467		34		(1,888	)		(139	)		2,553			186
Class 529-C		18,428		1,353		1,048		77		(7,576	)		(558	)		11,900			872
Class 529-E		1,591		116		151		11		(616	)		(45	)		1,126			82
Class 529-F-1		1,982		145		175		13		(476	)		(35	)		1,681			123
Class R-1		6,897		506		199		15		(3,311	)		(242	)		3,785			279
Class R-2		74,308		5,440		3,826		281		(45,644	)		(3,356	)		32,490			2,365
Class R-3		79,304		5,818		3,918		288		(53,806	)		(3,954	)		29,416			2,152
Class R-4		42,799		3,126		3,379		248		(30,448	)		(2,238	)		15,730			1,136
Class R-5		231,550		16,999		7,555		556		(26,491	)		(1,944	)		212,614			15,611
Total net increase
(decrease)	$	2,384,434		174,517	$	116,826		8,594	$	(1,135,130	)		(83,473	)	$	1,366,130			99,638


(1)Includes exchanges between share classes of the fund.
(2)Class R-6 was offered beginning May 1, 2009.
(3)Class F-2 was offered beginning August 1, 2008.

			Income from investment operations(2)
	Net asset value, beginning of period		Net investment income		Net gains (losses) on securities (both realized and unrealized)			Total from investment operations		Dividends (from net investment income)			Net asset value, end of period		Total return(3) (4)			Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers			Ratio of expenses to average net assets after reimbursements/ waivers(4)			Ratio of net income to average net assets(4)
Class A:
Year ended 8/31/2009	$	13.56	$	.42	$	.57		$	.99	$	(.44	)	$	14.11		7.43	%	$	4,745		.64	%		.63	%		3.05	%
Year ended 8/31/2008		13.35		.54		.22			.76		(.55	)		13.56		5.73			2,602		.77			.74			3.95
Year ended 8/31/2007		13.32		.59		.03			.62		(.59	)		13.35		4.72			1,758		.79			.76			4.38
Year ended 8/31/2006		13.72		.52		(.39	)		.13		(.53	)		13.32		1.04			1,685		.77			.74			3.89
Year ended 8/31/2005		13.74		.44		-	(5)		.44		(.46	)		13.72		3.23			1,801		.76			.74			3.17
Class B:
Year ended 8/31/2009		13.56		.32		.57			.89		(.34	)		14.11		6.64			356		1.39			1.38			2.31
Year ended 8/31/2008		13.35		.44		.22			.66		(.45	)		13.56		4.99			203		1.46			1.44			3.27
Year ended 8/31/2007		13.32		.49		.03			.52		(.49	)		13.35		3.99			158		1.51			1.47			3.66
Year ended 8/31/2006		13.72		.43		(.39	)		.04		(.44	)		13.32		.32			169		1.49			1.46			3.17
Year ended 8/31/2005		13.74		.34		-	(5)		.34		(.36	)		13.72		2.51			196		1.48			1.46			2.45
Class C:
Year ended 8/31/2009		13.56		.31		.57			.88		(.33	)		14.11		6.59			686		1.43			1.42			2.24
Year ended 8/31/2008		13.35		.43		.22			.65		(.44	)		13.56		4.95			244		1.50			1.47			3.19
Year ended 8/31/2007		13.32		.49		.03			.52		(.49	)		13.35		3.94			125		1.55			1.52			3.62
Year ended 8/31/2006		13.72		.42		(.39	)		.03		(.43	)		13.32		.27			109		1.55			1.52			3.11
Year ended 8/31/2005		13.74		.33		-	(5)		.33		(.35	)		13.72		2.45			120		1.53			1.51			2.40
Class F-1:
Year ended 8/31/2009		13.56		.42		.57			.99		(.44	)		14.11		7.42			185		.65			.65			3.05
Year ended 8/31/2008		13.35		.54		.22			.76		(.55	)		13.56		5.79			142		.70			.67			4.01
Year ended 8/31/2007		13.32		.60		.03			.63		(.60	)		13.35		4.80			99		.72			.69			4.44
Year ended 8/31/2006		13.72		.53		(.39	)		.14		(.54	)		13.32		1.10			76		.71			.68			3.98
Year ended 8/31/2005		13.74		.44		-	(5)		.44		(.46	)		13.72		3.24			54		.75			.73			3.18
Class F-2:
Year ended 8/31/2009		13.56		.46		.57			1.03		(.48	)		14.11		7.67			57		.41			.41			3.24
Period from 8/7/2008 to 8/31/2008		13.48		.03		.08			.11		(.03	)		13.56		.85			1		.03			.03			.25
Class 529-A:
Year ended 8/31/2009		13.56		.42		.57			.99		(.44	)		14.11		7.37			145		.70			.69			2.99
Year ended 8/31/2008		13.35		.53		.22			.75		(.54	)		13.56		5.70			68		.79			.76			3.93
Year ended 8/31/2007		13.32		.58		.03			.61		(.58	)		13.35		4.66			44		.84			.81			4.33
Year ended 8/31/2006		13.72		.52		(.39	)		.13		(.53	)		13.32		1.00			39		.81			.78			3.86
Year ended 8/31/2005		13.74		.43		-	(5)		.43		(.45	)		13.72		3.18			38		.81			.79			3.13
Class 529-B:
Year ended 8/31/2009		13.56		.30		.57			.87		(.32	)		14.11		6.51			25		1.51			1.50			2.19
Year ended 8/31/2008		13.35		.42		.22			.64		(.43	)		13.56		4.85			16		1.60			1.57			3.14
Year ended 8/31/2007		13.32		.48		.03			.51		(.48	)		13.35		3.85			13		1.64			1.60			3.53
Year ended 8/31/2006		13.72		.41		(.39	)		.02		(.42	)		13.32		.19			13		1.63			1.60			3.03
Year ended 8/31/2005		13.74		.32		-	(5)		.32		(.34	)		13.72		2.34			14		1.65			1.63			2.29
Class 529-C:
Year ended 8/31/2009		13.56		.31		.57			.88		(.33	)		14.11		6.52			78		1.50			1.49			2.19
Year ended 8/31/2008		13.35		.42		.22			.64		(.43	)		13.56		4.87			40		1.58			1.55			3.14
Year ended 8/31/2007		13.32		.48		.03			.51		(.48	)		13.35		3.86			27		1.63			1.60			3.54
Year ended 8/31/2006		13.72		.41		(.39	)		.02		(.42	)		13.32		.20			24		1.62			1.59			3.06
Year ended 8/31/2005		13.74		.32		-	(5)		.32		(.34	)		13.72		2.35			23		1.64			1.61			2.30
Class 529-E:
Year ended 8/31/2009		13.56		.38		.57			.95		(.40	)		14.11		7.07			9		.99			.98			2.71
Year ended 8/31/2008		13.35		.49		.22			.71		(.50	)		13.56		5.40			5		1.07			1.04			3.66
Year ended 8/31/2007		13.32		.54		.03			.57		(.54	)		13.35		4.38			4		1.12			1.09			4.05
Year ended 8/31/2006		13.72		.48		(.39	)		.09		(.49	)		13.32		.73			3		1.09			1.06			3.60
Year ended 8/31/2005		13.74		.39		-	(5)		.39		(.41	)		13.72		2.88			3		1.11			1.09			2.83

Class 529-F-1:
Year ended 8/31/2009	$	13.56	$	.45	$	.57		$	1.02	$	(.47	)	$	14.11		7.59	%	$	9		.50	%		.49	%		3.21	%
Year ended 8/31/2008		13.35		.56		.22			.78		(.57	)		13.56		5.93			5		.57			.54			4.15
Year ended 8/31/2007		13.32		.61		.03			.64		(.61	)		13.35		4.90			3		.62			.59			4.56
Year ended 8/31/2006		13.72		.54		(.39	)		.15		(.55	)		13.32		1.20			2		.60			.57			4.09
Year ended 8/31/2005		13.74		.43		-	(5)		.43		(.45	)		13.72		3.20			2		.78			.75			3.18
Class R-1:
Year ended 8/31/2009		13.56		.31		.57			.88		(.33	)		14.11		6.57			14		1.45			1.45			2.24
Year ended 8/31/2008		13.35		.43		.22			.65		(.44	)		13.56		4.89			9		1.56			1.53			3.16
Year ended 8/31/2007		13.32		.48		.03			.51		(.48	)		13.35		3.89			5		1.65			1.57			3.57
Year ended 8/31/2006		13.72		.42		(.39	)		.03		(.43	)		13.32		.30			4		1.63			1.49			3.17
Year ended 8/31/2005		13.74		.33		-	(5)		.33		(.35	)		13.72		2.46			3		1.66			1.50			2.43
Class R-2:
Year ended 8/31/2009		13.56		.31		.57			.88		(.33	)		14.11		6.58			204		1.49			1.44			2.26
Year ended 8/31/2008		13.35		.44		.22			.66		(.45	)		13.56		4.97			136		1.61			1.46			3.24
Year ended 8/31/2007		13.32		.49		.03			.52		(.49	)		13.35		3.98			103		1.73			1.48			3.66
Year ended 8/31/2006		13.72		.43		(.39	)		.04		(.44	)		13.32		.32			94		1.93			1.47			3.18
Year ended 8/31/2005		13.74		.34		-	(5)		.34		(.36	)		13.72		2.50			85		1.94			1.47			2.46
Class R-3:
Year ended 8/31/2009		13.56		.37		.57			.94		(.39	)		14.11		7.02			174		1.03			1.02			2.68
Year ended 8/31/2008		13.35		.49		.22			.71		(.50	)		13.56		5.40			118		1.07			1.04			3.67
Year ended 8/31/2007		13.32		.54		.03			.57		(.54	)		13.35		4.39			88		1.11			1.08			4.05
Year ended 8/31/2006		13.72		.48		(.39	)		.09		(.49	)		13.32		.69			107		1.20			1.09			3.56
Year ended 8/31/2005		13.74		.39		-	(5)		.39		(.41	)		13.72		2.88			91		1.20			1.08			2.84
Class R-4:
Year ended 8/31/2009		13.56		.42		.57			.99		(.44	)		14.11		7.39			159		.69			.68			3.02
Year ended 8/31/2008		13.35		.54		.22			.76		(.55	)		13.56		5.77			91		.72			.69			4.02
Year ended 8/31/2007		13.32		.59		.03			.62		(.59	)		13.35		4.79			75		.72			.69			4.50
Year ended 8/31/2006		13.72		.53		(.39	)		.14		(.54	)		13.32		1.06			21		.75			.72			3.96
Year ended 8/31/2005		13.74		.44		-	(5)		.44		(.46	)		13.72		3.25			13		.74			.72			3.21
Class R-5:
Year ended 8/31/2009		13.56		.46		.57			1.03		(.48	)		14.11		7.71			51		.38			.37			3.37
Year ended 8/31/2008		13.35		.58		.22			.80		(.59	)		13.56		6.10			281		.41			.38			4.26
Year ended 8/31/2007		13.32		.63		.03			.66		(.63	)		13.35		5.07			68		.45			.41			4.79
Year ended 8/31/2006		13.72		.56		(.39	)		.17		(.57	)		13.32		1.36			10		.45			.42			4.24
Year ended 8/31/2005		13.74		.48		-	(5)		.48		(.50	)		13.72		3.56			8		.43			.41			3.50
Class R-6:
Period from 5/1/2009 to 8/31/2009		14.07		.15		.05			.20		(.16	)		14.11		1.41			404		.11			.11			1.10

(1)Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.
(2)Based on average shares outstanding.
(3)Total returns exclude any applicable sales charges, including contingent deferred sales charges.
(4)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes.
(5)Amount less than $.01.

See Notes to Financial Statements