American Funds The Income Fund of America (AMECX) N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

Certified Shareholder Report of

Registered Management Investment Companies

Investment Company Act File Number: 811-01880

The Income Fund of America, Inc.

(Exact name of registrant as specified in charter)

P.O. Box 7650, One Market, Steuart Tower

San Francisco, California 94120

(Address of principal executive offices)

Registrant's telephone number, including area code: (415) 421-9360

Date of fiscal year end: July 31

Date of reporting period: January 31, 2007

Patrick F. Quan

Capital Research and Management Company

P.O. Box 7650, One Market, Steuart Tower

San Francisco, California 94120

(Name and address of agent for service)

Copies to:

Michael Glazer

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street

Los Angeles, California 90071

(Counsel for the registrant)

ITEM 1 - Reports to Stockholders

[Logo - American Funds^®]

The right choice for the long term^®

The Income Fund of America

Semi-annual report for the six months ended January 31, 2007

[Cover photo of stepping stones in lily pond.]

Income Fund of America^® seeks current income while secondarily striving for capital growth through investments in stocks and fixed-income securities.

This fund is one of the 30 American Funds. The organization ranks among the nation’s three largest mutual fund families. For 75 years, Capital Research and Management Company,^SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.

Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended December 31, 2006 (the most recent calendar quarter):

Class A shares	1 year	5 years	10 years
Reflecting 5.75% maximum sales charge	13.40%	9.66%	9.47%

The total annual fund operating expense ratio was 0.56% for Class A shares as of the most recent fiscal year-end. This figure does not reflect a fee waiver that currently is in effect and which causes the actual expense ratio to be lower.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect actual expenses, with the waiver applied. Fund results would have been lower without the waiver. Please see the Financial Highlights table on pages 26 to 29 for details.

Results for other share classes can be found on page 35. Please see the inside back cover for important information about other share classes.

The return of principal for the bond holdings in The Income Fund of America is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. High-yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing outside the United States is subject to additional risks, such as currency fluctuations and political instability, which are detailed in the fund’s prospectus.

[Photograph of lotus flower]

Fellow shareholders:

For the six-month period ended January 31, 2007, global stock prices rose as developed and developing countries alike succeeded in striking a balance between economic growth and moderate inflation. U.S. bond prices, in contrast, did little during the period; the market vacillated between hopes that the Federal Reserve would begin to ease short-term interest rates and concerns that another interest-rate increase could be within the realm of possibility in the year ahead. High-yield bonds had stronger returns than investment-grade bonds, as they benefited from rising corporate profits, low default rates and strong demand on the part of investors.

Against this backdrop, The Income Fund of America generated solid results for the first half of its fiscal year, delivering both high current income and a healthy measure of capital appreciation. The fund’s total rate of return for the six months ended January 31 was 11.5%. That was well ahead of its peer group, the Lipper Income Funds Average, and only slightly behind the 13.7% total return of the broader stock market, as measured by Standard & Poor’s 500 Composite Index. (The index is unmanaged and has no expenses.)

In keeping with its primary objective, the fund continued to provide above-average dividend yields. As of January 31, 2007, The Income Fund of America yielded 4.5%, more than twice the 1.7% yield of the S&P 500. It was also comfortably higher than the 3.1% yield of the Lipper Income Funds Average.

Stepping up the dividend

We take a prudent approach to setting the fund’s dividend, increasing it when we believe it can be sustained by long-term economic and market trends. In recent years, we have seen a rise in both short-term yields and stock dividends. The fund’s dividend has likewise risen. Following an increase this past June, the December 2006 dividend was again increased, to 19.5 cents a share, a level we expect to maintain for the foreseeable future. In December, the fund also paid a special dividend of 15 cents a share, in addition to a 46.4-cents-a share capital gain distribution. The special dividend reflects, in part, the growing number of companies, particularly those based outside the U.S., that pay such dividends as a means of distributing excess capital resulting from short-term trends or one-time events such as the sale of assets.

Stocks continue to climb

With inflationary pressures kept in check by a softening housing market and a sharp drop in oil prices, the Fed decided to end its long string of hikes in the federal funds rate at its August 2006 meeting. Investors responded enthusiastically to the so-called Goldilocks economy — not too hot, not too cold — by pushing up stock prices through much of the six-month period.

Among industries that are well-represented in the fund, real estate investment trusts (REITs) were especially strong; these securities, which pass virtually all of their income on to shareholders, have been the focus of intense interest from private equity firms. The fund’s holdings in telecommunication services benefited in large part from the completion of the BellSouth and AT&T merger.

The fund also benefited from its equity holdings of non-U.S. companies, which currently account for about 18% of net assets. In Europe, which is experiencing an economic resurgence, stocks delivered both higher dividend yields and greater share price appreciation than their U.S. counterparts. At the same time, the euro and sterling appreciated against the dollar, improving returns for U.S.-based investors.

Among weaker sectors during the six months, the decline in crude oil prices weighed on energy stocks, even as companies reported record profits. Bank stocks were generally lackluster, amid concerns about the inversion of the yield curve (when short-term securities yield more than longer dated securities) and a potential deterioration in mortgage business.

Bonds seesaw

The Fed’s decision to suspend its tightening stance boosted bond prices over the summer. The rally began to flag in early winter, however, as an unexpected surge in U.S. economic growth raised fresh concerns about inflation. Higher yielding bonds, which are more dependent on the underlying health of individual companies, largely shrugged off these worries. About 9.7% of the portfolio is held in bonds rated BB and below. Overall, fixed-income securities represent 21.6% of net assets.

As of January 31, 2007, cash and short-term investments increased to 9.1% of net assets, versus 6.8% six months earlier. (A complete portfolio breakdown appears on page 6.)

Planning for the future

Our comprehensive research efforts allow us to find value in companies that are both underappreciated by the market and likely to contribute to the fund’s income goals. For example, we continued to add selectively to our pharmaceutical holdings. The sector is compellingly valued — concerns about patent expirations and litigation have put pressure on share prices — while dividends and dividend growth have helped provide a cushion.

Keeping our focus

During recent periods of uncertainty, stock investors have recognized the importance of income as a component of total return. Many holdings in The Income Fund of America have benefited from the increase in investor demand for higher yielding investments. As the upper chart on the opposite page shows, the fund outpaced the S&P 500 by a considerable margin over one- and five-year time frames. We would note, however, that the magnitude of this disparity is exceptional when compared with the fund’s longer term results. Our primary focus has always been on providing above-average income through all market conditions. It is this focus that over the years has helped us build a long-term track record of consistent results with considerably less return volatility than the broader stock market.

Cordially,

/s/ Hilda L. Applbaum

Hilda L. Applbaum

Vice Chairman and 

Principal Executive Officer

/s/ David C. Barclay

David C. Barclay
President

March 8, 2007

The fund’s 30-day yield for Class A shares as of February 28, 2007, calculated in accordance with the Securities and Exchange Commission formula, was 3.72% (3.69% without the fee waiver). The fund’s distribution rate for Class A shares as of that date was 4.03%. Both reflect the 5.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.

For current information about the fund, visit americanfunds.com.

The Income Fund of America at a glance

Figures shown are past results for Class A shares and are not predictive of results in future

periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value.

If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.

Results at a glance (with dividends reinvested or interest compounded)

					For periods ended January 31, 2007
	Cumulative total returns				Average annual total returns
	6 months		1 year		5 years		10 years		Lifetime1
The Income Fund of America	+11.5	%	+18.4	%	+11.2	%	+10.0	%	+12.8	%
Standard & Poor’s 500 Composite Index	+13.7		+14.5		+6.8		+7.9		+12.1
Lipper Income Funds Average2	+7.3		+8.5		+6.8		+6.5		+12.3
Lehman Brothers Aggregate Bond Index	+3.6		+4.3		+4.9		+6.2		+8.43
Consumer Price Index (inflation)4	-.5		+2.1		+2.7		+2.4		+4.6

¹Since December 1, 1973, when Capital Research and Management Company became the fund’s

investment adviser.

²Source: Lipper. Figures do not reflect the effect of sales charges.

³From December 1, 1973, through December 31, 1975, the Lehman Brothers Government/Credit Bond Index was used because the Aggregate index did not yet exist.

⁴Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.

A history of high current income

[Begin line chart]

For the five years ended January 31, 2007

Year-end	The Income Fund of America		Lipper Income Funds Average		S&P 500
January 31, 2002		5.01		3.93		1.40
July 31, 2002		5.49		3.74		1.75
January 31, 2003		5.45		3.49		1.88
July 31, 2003		4.69		3.11		1.66
January 31, 2004		4.05		2.64		1.54
July 31, 2004		3.98		2.60		1.69
January 31, 2005		3.57		2.44		1.64
July 31, 2005		3.44		2.37		1.70
January 31, 2006		3.75		2.67		1.75
July 31, 2006		3.84		2.78		1.83
January 31, 2007		4.52		3.10		1.77

[End line chart]

All numbers calculated by Lipper. The 12-month dividend rate is calculated by taking the total of the trailing 12 months’ dividends and dividing the month-end net asset value adjusted for capital gains.

The portfolio at a glance

The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.

January 31, 2007

unaudited

[begin pie chart]

Investment portfolio	Percent of net assets
U.S. common stocks	47.7	%
Non-U.S. common stocks	17.6
U.S. & non-U.S. convertible securities & preferred stocks	4.0
U. S. Treasury & agency bonds & notes	2.5
Other fixed-income securities	19.1
Short-term securities & other assets less liabilities	9.1

[End pie chart]

Five largest sectors in common stock holdings	Percent of net assets
Financials	17.3	%
Utilities	7.4
Telecommunication services	6.9
Consumer staples	6.6
Health care	5.6

Ten largest common stock holdings	Percent of net assets
AT&T	3.2	%
Chevron	2.1
Citigroup	2.0
General Electric	1.7
Bristol-Myers Squibb	1.4
Royal Dutch Shell	1.3
Verizon Communications	1.2
Merck	1.2
Washington Mutual	1.2
Altria Group	1.0

July 31, 2006

unaudited

[begin pie chart]

Investment portfolio	Percent of net assets
U.S. common stocks	49.5	%
Non-U.S. common stocks	17.2
U.S. & non-U.S. convertible securities & preferred stocks	4.6
U. S. Treasury & agency bonds & notes	1.9
Other fixed-income securities	20.0
Short-term securities & other assets less liabilities	6.8

[end pie chart]

Five largest sectors in common stock holdings	Percent of net assets
Financials	17.9	%
Utilities	8.0
Telecommunication services	7.8
Consumer staples	7.6
Energy	5.6

Ten largest common stock holdings	Percent of net assets
AT&T	2.2	%
Chevron	2.1
BellSouth	1.9
Royal Dutch Shell	1.8
Citigroup	1.7
General Electric	1.6
Bristol-Myers Squibb	1.5
Altria Group	1.3
Merck	1.1
Washington Mutual	1.1

Summary investment portfolio, January 31, 2007

unaudited

					Market		Percent
					value		of net
Common stocks - 65.34%		Shares			(000	)	assets
Financials - 17.28%
Citigroup Inc.		28,715,000		$	1,583,058		1.97
Washington Mutual, Inc.		21,300,000			949,767		1.18
Wells Fargo & Co.		22,063,600			792,525		.99
Société Générale (1)		4,386,500			773,195		.96
Bank of America Corp.		13,936,550			732,784		.91
Fifth Third Bancorp		13,000,000			518,700		.65
J.P. Morgan Chase & Co.		9,625,000			490,201		.61
Equity Residential, shares of beneficial interest		8,337,700			469,246		.59
Lloyds TSB Group PLC (1)		40,349,900			462,065		.58
Hang Lung Properties Ltd. (1)		156,970,000			428,145		.53
HSBC Holdings PLC (United Kingdom) (1)		12,794,652			232,154
HSBC Holdings PLC (Hong Kong) (1)		9,593,396			175,399		.51
iStar Financial, Inc.		8,110,000			406,717		.51
SunTrust Banks, Inc.		4,545,000			377,690		.47
Fannie Mae		1,906,200			107,757		.13
Other securities					5,367,388		6.69
					13,866,791		17.28
Utilities - 7.43%
National Grid PLC (1)		39,049,462			589,252		.73
E.ON AG (1)		3,850,000			522,766		.65
Entergy Corp.		5,022,600			466,348		.58
Duke Energy Corp.		23,080,000			454,445		.57
Public Service Enterprise Group Inc.		5,807,000			389,243		.48
Other securities					3,543,247		4.42
					5,965,301		7.43
Telecommunication services - 6.87%
AT&T Inc.		68,449,871			2,575,769		3.21
Verizon Communications Inc.		25,720,000			990,734		1.23
Koninklijke KPN NV (1)		47,015,000			677,370		.84
Other securities					1,271,694		1.59
					5,515,567		6.87
Consumer staples - 6.57%
Altria Group, Inc.		9,530,000			832,827		1.04
Coca-Cola Co.		16,450,000			787,626		.98
H.J. Heinz Co.		14,535,000			684,889		.85
General Mills, Inc.		8,186,800			468,612		.59
Reynolds American Inc.		6,257,000			403,576		.50
Kimberly-Clark Corp.		5,700,000			395,580		.49
Other securities					1,696,246		2.12
					5,269,356		6.57
Health care - 5.60%
Bristol-Myers Squibb Co.		40,101,500			1,154,522		1.44
Merck & Co., Inc.		21,700,000			971,075		1.21
Eli Lilly and Co.		14,485,000			783,928		.98
Pfizer Inc		26,200,000			687,488		.86
Other securities					894,484		1.11
					4,491,497		5.60
Industrials - 5.02%
General Electric Co.		37,170,000			1,339,978		1.67
Emerson Electric Co.		9,370,000			421,369		.53
Waste Management, Inc.		10,715,000			406,956		.51
R.R. Donnelley & Sons Co.		10,400,000			385,840		.48
Other securities					1,471,554		1.83
					4,025,697		5.02
Energy - 4.49%
Chevron Corp.		23,630,900			1,722,220		2.14
Royal Dutch Shell PLC, Class A (ADR)		8,696,000			593,502
Royal Dutch Shell PLC, Class B (ADR)		2,855,147			193,322
Royal Dutch Shell PLC, Class B (1)		5,136,078			172,565
Royal Dutch Shell PLC, Class A (1)		1,340,000			45,216		1.25
Other securities					880,133		1.10
					3,606,958		4.49
Materials - 4.42%
Weyerhaeuser Co.		9,625,000			721,875		.90
E.I. du Pont de Nemours and Co.		11,885,000			589,021		.74
International Paper Co.		13,723,820			462,493		.58
Dow Chemical Co.		10,700,000			444,478		.55
Other securities					1,324,973		1.65
					3,542,840		4.42
Consumer discretionary - 2.70%
Esprit Holdings Ltd. (1)		40,949,000			418,397		.52
General Motors Corp.		11,975,000			393,259		.49
Other securities					1,357,259		1.69
					2,168,915		2.70
Information technology - 0.60%
Other securities					483,548		.60
Miscellaneous - 4.36%
Other common stocks in initial period of acquisition					3,497,843		4.36
Total common stocks (cost: $38,669,709,000)					52,434,313		65.34
					Market		Percent
					value		of net
Preferred stocks - 1.10%		Shares			(000	)	assets
Financials - 1.10%
Fannie Mae, Series O, 7.00% (2) (3)		2,190,000			117,439		.15
Société Générale 7.85% (2) (3)		11,950,000			12,015		.01
Other securities					750,625		.94
					880,079		1.10
Telecommunication services - 0.00%
Other securities					0		.00
Total preferred stocks (cost: $853,059,000)					880,079		1.10
					Market		Percent
					value		of net
Warrants - 0.00%					(000	)	assets
Telecommunication services - 0.00%
Other securities					20		.00
Total warrants (cost: $816,000)					20		.00
					Market		Percent
					value		of net
Convertible securities - 2.91%		Shares			(000	)	assets
Other - 2.63%
Fannie Mae 5.375% convertible preferred		1,530			152,617		.19
Other securities					1,958,859		2.44
					2,111,476		2.63
Miscellaneous - 0.28%
Other convertible securities in initial period of acquisition					225,501		.28
Total convertible securities (cost: $1,984,968,000)					2,336,977		2.91
		Principal			Market		Percent
		amount			value		of net
Bonds & notes - 21.59%		(000	)		(000	)	assets
Consumer discretionary - 3.65%
Other securities					2,929,830		3.65
Financials - 3.43%
Washington Mutual Preferred Funding I Ltd. 6.534% (undated) (2) (3)	$	74,300			73,308
Washington Mutual Preferred Funding II Ltd. 6.665% (undated) (2) (3)		17,100			17,380
Providian Financial Corp., Series A, 9.525% 2027 (2)		10,000			10,500
Dime Capital Trust I, Dime Bancorp, Inc., Series A, 9.33% 2027		9,425			9,938
Washington Mutual, Inc. 4.00%-5.665% 2009-2012 (3)		32,000			31,617		.18
MBNA Global Capital Funding, Series B, 6.171% 2027 (3)		35,000			34,960
MBNA Corp. 5.625% 2007		10,000			10,012
Bank of America Corp. 4.25% 2010		10,000			9,654		.07
JPMorgan Chase Capital XX, Series T, 6.55% 2066		16,250			16,658
JPMorgan Chase Capital XXI, Series U, 6.31% 2037 (3)		12,500			12,461
J.P. Morgan & Co. Inc. 6.70% 2007		5,000			5,049
JPMorgan Chase Capital XVIII, Series R, 6.95% 2036		3,100			3,334
J.P. Morgan Chase & Co. 4.75%-4.891% 2015		17,500			16,970		.07
SocGen Real Estate Co. LLC, Series A, 7.64% (undated) (2) (3)		51,475			52,153		.06
Citigroup Inc. 5.125% 2011		12,500			12,437		.01
Other securities					2,436,476		3.04
					2,752,907		3.43
Mortgage-backed obligations (4) - 3.30%
Fannie Mae 3.74%-11.904% 2010-2042 (3)		421,636			415,903		.52
Other securities					2,232,992		2.78
					2,648,895		3.30
Telecommunication services - 2.49%
AT&T Corp. 7.30% 2011 (3)		14,789			16,000
AT&T Inc. 6.80% 2036		11,235			11,980
BellSouth Corp. 6.55% 2034		10,000			10,231
AT&T Wireless Services, Inc. 7.50%-8.125% 2007-2012		69,185			73,552
SBC Communications Inc. 4.125%-6.25% 2009-2016		71,465			69,906		.23
Verizon New York Inc., Series A, 6.875% 2012		6,500			6,765
Verizon Global Funding Corp. 4.90%-7.75% 2015-2030		11,735			12,916		.02
Other securities					1,799,140		2.24
					2,000,490		2.49
U.S. government & government agency bonds & notes - 1.56%
U.S. Treasury 3.25%-8.875% 2007-2036		857,525			878,670		1.10
Fannie Mae 5.25%-6.25% 2007-2029		165,500			171,363		.21
Other securities					199,600		.25
					1,249,633		1.56
Industrials - 1.55%
General Electric Co. 5.00% 2013		5,000			4,925
General Electric Capital Corp. 5.375%-6.00% 2007-2012		16,000			16,251		.03
Other securities					1,223,869		1.52
					1,245,045		1.55
Energy - 1.06%
Other securities					846,544		1.06
Other - 4.55%
Other securities					3,648,963		4.55
Total bonds & notes (cost: $16,950,964,000)					17,322,307		21.59
		Principal			Market		Percent
		amount			value		of net
Short-term securities - 9.21%		(000	)		(000	)	assets
Freddie Mac 5.105%-5.15% due 2/13-4/16/2007		574,754			571,131		.71
Federal Home Loan Bank 5.13%-5.155% due 2/7-5/2/2007		492,290			488,621		.61
Fannie Mae 5.09%-5.14% due 3/21-5/9/2007		469,200			464,293		.58
Bank of America Corp. 5.23%-5.26% due 2/2-4/4/2007		373,000			371,534
Ranger Funding Co. LLC 5.26%-5.27% due 2/8-3/1/2007 (2)		81,100			80,759		.56
Park Avenue Receivables Co., LLC 5.21%-5.25% due 2/21-3/6/2007 (2)		187,686			186,914
J.P. Morgan Chase & Co. 5.235%-5.24% due 2/7-3/28/2007		146,300			145,821
Jupiter Securitization Co., LLC 5.23%-5.24% due 2/5-3/12/2007 (2)		107,800			107,428		.55
CAFCO, LLC 5.23%-5.28% due 2/1-4/9/2007 (2)		331,300			330,138
Ciesco LLC 5.23% due 4/24/2007 (2)		25,000			24,700
Citigroup Funding Inc. 5.26% due 2/12/2007		50,000			49,912		.50
Clipper Receivables Co., LLC 5.24%-5.27% due 2/5-3/14/2007 (2)		352,900			351,730
State Street Corp. 5.22% due 3/21/2007		50,000			49,660		.50
Variable Funding Capital Corp. 5.23%-5.25% due 2/6-3/19/2007 (2)		397,500			395,797		.49
Edison Asset Securitization LLC 5.23%-5.26% due 2/22-3/15/2007 (2)		210,500			209,581
General Electric Capital Corp. 5.23% due 4/19-4/20/2007		100,000			98,874
General Electric Capital Services, Inc. 5.24% due 2/12/2007		40,000			39,931		.44
U.S. Treasury Bills 4.925%-5.00% due 2/8-5/3/2007		350,000			347,044		.43
Atlantic Industries 5.20%-5.23% due 2/28-3/5/2007 (2)		109,500			109,001
Coca-Cola Co. 5.18% due 2/16/2007 (2)		50,000			49,888		.20
Pfizer Investment Capital PLC 5.20%-5.22% due 2/9-2/21/2007 (2)		149,200			148,887		.19
AT&T Inc. 5.24% due 4/10/2007 (2)		50,000			49,503		.06
Eli Lilly and Co. 5.19% due 3/22-3/29/2007 (2)		49,300			48,925		.06
Other securities					2,669,025		3.33
Total short-term securities (cost: $7,389,212,000)					7,389,097		9.21
Total investment securities (cost: $65,848,728,000)					80,362,793		100.15
Other assets less liabilities					(116,617	)	(.15	)
Net assets				$	80,246,176		100.00	%
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the

fund's holdings in that company represent 5% or more of the outstanding voting shares of that company.

Some of the fund's affiliated holdings listed below are also among the fund's largest holdings and are shown

in the preceding summary investment portfolio. Affiliated companies not among the fund's largest holdings are

included in the market value of "Other securities" under their respective industry sectors.

Further details on these holdings and related transactions during the six months ended January 31, 2007, appear below.

Company		Beginning shares or principal amount		Purchases		Sales		Ending shares or principal amount		Interest and Dividend Income (000	)		Market value of affiliates at 1/31/07 (000	)
iStar Financial, Inc.		7,240,000		870,000		-		8,110,000	$	11,916		$	406,717
iStar Financial, Inc. 5.375% 2010	$	10,925,000	$	-	$	-	$	10,925,000		297			10,825
iStar Financial, Inc., Series F, 7.80% cumulative redeemable preferred		400,000		-		-		400,000		390			10,300
iStar Financial, Inc., Series B, 5.125% 2011	$	10,000,000	$	-	$	-	$	10,000,000		273			9,807
iStar Financial, Inc. 7.00% 2008	$	6,525,000	$	-	$	-	$	6,525,000		173			6,616
iStar Financial, Inc. 5.80% 2011	$	5,000,000	$	-	$	-	$	5,000,000		145			5,018
iStar Financial, Inc., Series B, 4.875% 2009	$	5,000,000	$	-	$	-	$	5,000,000		141			4,938
iStar Financial, Inc. 6.05% 2015	$	4,285,000	$	-	$	-	$	4,285,000		130			4,291
iStar Financial, Inc. 6.00% 2010	$	3,750,000	$	-	$	-	$	3,750,000		114			3,799
iStar Financial, Inc. 8.75% 2008	$	1,028,000	$	-	$	1,028,000	$	-		10			-
MeadWestvaco Corp.		10,565,696		1,000,000		1,000,000		10,565,696		7,060			318,450
Macquarie Korea Infrastructure Fund (1)		-		20,441,070		-		20,441,070		7,987			147,648
Packaging Corp. of America		6,736,800		56,000		-		6,792,800		3,383			155,148
Packaging Corp. of America 4.375% 2008	$	2,500,000	$	-	$	-	$	2,500,000		56			2,454
Arthur J. Gallagher & Co.		5,403,700		-		-		5,403,700		3,242			154,924
Goodman Fielder Ltd. (1)		67,000,000		-		-		67,000,000		2,621			123,908
Worthington Industries, Inc.		3,414,900		2,358,100		-		5,773,000		1,562			110,726
Sunstone Hotel Investors, Inc.		3,593,400		145,000		-		3,738,400		2,274			105,759
Tupperware Brands Corp.		3,865,000		-		-		3,865,000		1,701			90,170
Beverly Hills Bancorp Inc.		1,848,400		-		552,500		1,295,900		324			10,173
Clarent Hospital Corp. (1) (5)		484,684		-		-		484,684		-			121
ConAgra Foods, Inc. (6)		26,327,600		-		14,180,400		12,147,200		4,394			-
Montpelier Re Holdings Ltd. (6)		4,465,000		-		4,465,000		-		152			-
Premier Farnell PLC (6)		21,050,000		-		21,050,000		-		-			-
									$	48,345		$	1,681,792

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $12,284,651,000.

(2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $7,752,567,000, which represented 9.66% of the net assets of the fund.

(3) Coupon rate may change periodically.

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

(5) Security did not produce income during the last 12 months.

(6) Unaffiliated issuer at 1/31/2007.

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities					unaudited
at January 31, 2007	(dollars and shares in thousands, except per-share amounts)
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $64,360,772)		$	78,681,001
Affiliated issuers (cost: $1,487,956)			1,681,792	$	80,362,793
Cash denominated in non-U.S. currencies (cost: $3,417)					3,418
Cash					23,705
Receivables for:
Sales of investments			120,903
Sales of fund's shares			198,911
Dividends and interest			410,342		730,156
					81,120,072
Liabilities:
Payables for:
Purchases of investments			488,218
Repurchases of fund's shares			53,905
Dividends on fund's shares			273,296
Investment advisory services			13,203
Services provided by affiliates			42,415
Deferred directors' compensation			2,524
Other			335		873,896
Net assets at January 31, 2007				$	80,246,176
Net assets consist of:
Capital paid in on shares of capital stock				$	64,625,266
Undistributed net investment income					166,878
Undistributed net realized gain					939,991
Net unrealized appreciation					14,514,041
Net assets at January 31, 2007				$	80,246,176

Total authorized capital stock - 5,500,000 shares, $.001 par value (3,912,844 total shares outstanding)
		Net assets	Shares outstanding		Net asset value per share (*	)
Class A	$	61,701,536	3,004,970	$	20.53
Class B		4,960,049	242,943		20.42
Class C		8,099,814	397,318		20.39
Class F		2,613,013	127,426		20.51
Class 529-A		569,759	27,775		20.51
Class 529-B		108,490	5,301		20.46
Class 529-C		248,480	12,135		20.48
Class 529-E		28,352	1,384		20.48
Class 529-F		15,105	736		20.51
Class R-1		58,836	2,874		20.47
Class R-2		471,814	23,117		20.41
Class R-3		798,309	38,960		20.49
Class R-4		344,911	16,813		20.51
Class R-5		227,708	11,092		20.53
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $21.78 and $21.76, respectively.
See Notes to Financial Statements

Statement of operations					unaudited
for the six months ended January 31, 2007		(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $15,791; also includes $47,006 from affiliates)	$	876,671
Interest (includes $1,339 from affiliates)		760,737		$	1,637,408
Fees and expenses(*):
Investment advisory services		88,083
Distribution services		139,442
Transfer agent services		19,458
Administrative services		8,095
Reports to shareholders		1,772
Registration statement and prospectus		905
Postage, stationery and supplies		1,923
Directors' compensation		443
Auditing and legal		54
Custodian		1,440
State and local taxes		1
Other		132
Total fees and expenses before reimbursements/waivers		261,748
Less reimbursements/waivers of fees and expenses:
Investment advisory services		8,808
Administrative services		81
Total fees and expenses after reimbursements/waivers					252,859
Net investment income					1,384,549
Net realized gain and unrealized appreciation
on investments and non-U.S. currency:
Net realized gain (loss) on:
Investments (including $129,217 net loss from affiliates)		961,456
Non-U.S. currency transactions		(1,713	)		959,743
Net unrealized appreciation (depreciation) on:
Investments		5,698,594
Non-U.S. currency translations		(218	)		5,698,376
Net realized gain and unrealized appreciation
on investments and non-U.S. currency					6,658,119
Net increase in net assets resulting from operations				$	8,042,668
(*) 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)
	Six months ended January 31, 2007*				Year ended July 31, 2006
Operations:
Net investment income	$	1,384,549		$	2,667,261
Net realized gain on investments and non-U.S. currency transactions		959,743			1,718,266
Net unrealized appreciation on investments and non-U.S. currency translations		5,698,376			1,592,617
Net increase in net assets resulting from operations		8,042,668			5,978,144
Dividends and distributions paid or accrued to shareholders:
Dividends from net investment income and non-U.S. currency gain		(1,892,426	)		(2,496,685	)
Distributions from net realized gain on investments		(1,728,244	)		(1,211,543	)
Total dividends and distributions paid or accrued to shareholders		(3,620,670	)		(3,708,228	)
Capital share transactions		7,366,123			6,036,571
Total increase in net assets		11,788,121			8,306,487
Net assets:
Beginning of period		68,458,055			60,151,568
End of period including undistributed
net investment income: $166,878 and $674,755, respectively)	$	80,246,176		$	68,458,055
*Unaudited.
See Notes to Financial Statements

Notes to financial statements     

unaudited

1.    Organization and significant accounting policies

Organization - The Income Fund of America, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks current income while secondarily striving for capital growth through investments in stocks and fixed-income securities.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Class A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Class B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Class B and 529-B convert to Class 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 after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Class F and 529-F	None	None	None
Class R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation - Equity securities 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, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region.

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, 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.

Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations - Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. Realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders - Dividends paid to shareholders are declared daily from net investment income and are paid to shareholders quarterly. Distributions paid to shareholders are recorded on the ex-dividend date.

Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.

Mortgage dollar rolls - The fund may enter into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a financing transaction; therefore, any gain or loss is considered unrealized until the roll reaches completion. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Income is generated as consideration for entering into these transactions and is included in interest income on the accompanying financial statements.

Loan transactions - The fund may enter into loan transactions in which the fund acquires a loan either through an agent, by assignment from another holder, or as a participation interest in another holder's portion of a loan. The loan is often administered by a financial institution that acts as agent for the holders of the loan, and the fund may be required to receive approval from the agent and/or borrower prior to the sale of the investment. The loan's interest rate and maturity date may change based on the terms of the loan, including potential early payments of principal. Risks may arise due to the delayed settlement date of the loan transaction and the ability of the agent and/or the borrower to meet the obligations of the loan.

2.    Non-U.S. investments

Investment risk - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.

Taxation - Dividend and interest income is recorded net of non-U.S. taxes paid.

3. Federal income taxation and distributions

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.

The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of July 31, 2006, the fund had tax basis undistributed ordinary income of $924,041,000 and undistributed long-term capital gain of $1,727,884,000.

As of January 31, 2007, the tax basis unrealized appreciation (depreciation) and cost of investments were as follows:

(dollars in thousands)
Gross unrealized appreciation on investment securities	$	14,676,832
Gross unrealized depreciation on investment securities		(212,713	)
Net unrealized appreciation on investment securities		14,464,119
Cost of investment securities		65,898,674

The tax character of distributions paid or accrued to shareholders was as follows (dollars in thousands):

		Six months ended January 31, 2007						Year ended July 31, 2006
		Ordinary income		Long-term capital gains		Total distributions paid or accrued		Ordinary income		Long-term capital gains		Total distributions paid or accrued
Share class
Class A	$	1,501,261	$	1,330,294	$	2,831,555	$	2,018,662	$	945,614	$	2,964,276
Class B		105,334		108,711		214,045		140,500		81,514		222,014
Class C		164,651		174,424		339,075		201,163		117,973		319,136
Class F		60,117		55,200		115,317		70,225		33,305		103,530
Class 529-A		13,097		11,935		25,032		15,421		7,171		22,592
Class 529-B		2,174		2,332		4,506		2,598		1,542		4,140
Class 529-C		4,879		5,270		10,149		5,562		3,248		8,810
Class 529-E		629		605		1,234		740		373		1,113
Class 529-F		329		297		626		313		134		447
Class R-1		995		1,091		2,086		864		485		1,349
Class R-2		9,405		10,098		19,503		10,343		5,960		16,303
Class R-3		16,597		16,294		32,891		17,725		8,906		26,631
Class R-4		7,690		7,141		14,831		7,679		3,433		11,112
Class R-5		5,268		4,552		9,820		4,890		1,885		6,775
Total	$	1,892,426	$	1,728,244	$	3,620,670	$	2,496,685	$	1,211,543	$	3,708,228

4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ^SM ("AFS"), the fund’s transfer agent, and American Funds Distributors ^SM, Inc. ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.250% on the first $500 million of daily net assets and decreasing to 0.125% on such assets in excess of $71 billion. The agreement also provides for monthly fees, accrued daily, of 2.25% of the fund’s monthly gross income. CRMC is currently waiving 10% of investment advisory services fees. During the six months ended January 31, 2007, total investment advisory services fees waived by CRMC were $8,808,000. As a result, the fee shown on the accompanying financial statements of $88,083,000, which was equivalent to an annualized rate of 0.236%, was reduced to $79,275,000, or 0.212% of average daily net assets.

Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of January 31, 2007, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.

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

Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the six months ended January 31, 2007, the total administrative services fees paid by CRMC were $81,000 for Class R-2. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the six months ended January 31, 2007, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
			CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$69,631	$17,767	Not applicable	Not applicable	Not applicable
Class B	23,685	1,691	Not applicable	Not applicable	Not applicable
Class C	37,131	Included in administrative services	$3,778	$527	Not applicable
Class F	2,895		906	147	Not applicable
Class 529-A	516		167	26	$254
Class 529-B	502		33	16	51
Class 529-C	1,121		74	27	112
Class 529-E	65		8	1	13
Class 529-F	-		4	1	6
Class R-1	223		24	10	Not applicable
Class R-2	1,602		311	652	Not applicable
Class R-3	1,699		462	172	Not applicable
Class R-4	372		208	8	Not applicable
Class R-5	Not applicable		94	3	Not applicable
Total	$139,442	$19,458	$6,069	$1,590	$436

Deferred directors’ compensation - Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $443,000, shown on the accompanying financial statements, includes $199,000 in current fees (either paid in cash or deferred) and a net increase of $244,000 in the value of the deferred amounts.

Affiliated officers and directors - Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.

5. Capital share transactions

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

Share class		Sales(*)			Reinvestments of dividends and distributions			Repurchases(*)					Net increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount	Shares
Six months ended January 31, 2007
Class A	$	5,253,834	261,142	$	2,582,408	128,282	$	(2,749,704	)	(136,678	)	$	5,086,538	252,746
Class B		281,864	14,092		192,311	9,601		(237,059	)	(11,863	)		237,116	11,830
Class C		1,063,194	53,217		302,307	15,110		(375,540	)	(18,807	)		989,961	49,520
Class F		601,363	29,955		92,750	4,610		(172,356	)	(8,553	)		521,757	26,012
Class 529-A		82,922	4,112		24,769	1,231		(19,281	)	(960	)		88,410	4,383
Class 529-B		9,043	449		4,498	224		(2,747	)	(136	)		10,794	537
Class 529-C		38,118	1,894		10,098	503		(13,724	)	(684	)		34,492	1,713
Class 529-E		3,659	181		1,226	61		(1,447	)	(72	)		3,438	170
Class 529-F		4,669	231		610	30		(694	)	(34	)		4,585	227
Class R-1		22,875	1,135		2,016	100		(5,311	)	(263	)		19,580	972
Class R-2		93,734	4,681		19,332	966		(45,125	)	(2,253	)		67,941	3,394
Class R-3		221,281	10,985		32,358	1,610		(73,643	)	(3,660	)		179,996	8,935
Class R-4		89,322	4,428		14,569	724		(30,821	)	(1,528	)		73,070	3,624
Class R-5		54,267	2,693		8,531	424		(14,353	)	(710	)		48,445	2,407
Total net increase
(decrease)	$	7,820,145	389,195	$	3,287,783	163,476	$	(3,741,805	)	(186,201	)	$	7,366,123	366,470
Year ended July 31, 2006
Class A	$	7,526,901	404,213	$	2,634,343	142,882	$	(5,936,400	)	(318,528	)	$	4,224,844	228,567
Class B		417,059	22,507		194,060	10,594		(449,190	)	(24,223	)		161,929	8,878
Class C		1,279,488	69,133		275,082	15,037		(854,118	)	(46,137	)		700,452	38,033
Class F		579,266	31,091		80,258	4,359		(369,396	)	(19,859	)		290,128	15,591
Class 529-A		115,828	6,225		21,870	1,187		(29,602	)	(1,587	)		108,096	5,825
Class 529-B		15,280	823		4,043	220		(4,608	)	(248	)		14,715	795
Class 529-C		51,850	2,790		8,560	465		(19,447	)	(1,044	)		40,963	2,211
Class 529-E		6,516	351		1,079	59		(2,291	)	(123	)		5,304	287
Class 529-F		4,653	250		424	23		(938	)	(50	)		4,139	223
Class R-1		21,603	1,163		1,257	69		(6,100	)	(329	)		16,760	903
Class R-2		164,063	8,842		15,707	857		(83,808	)	(4,514	)		95,962	5,185
Class R-3		275,744	14,822		25,650	1,394		(135,565	)	(7,291	)		165,829	8,925
Class R-4		163,310	8,773		10,477	568		(48,034	)	(2,576	)		125,753	6,765
Class R-5		96,681	5,189		5,091	276		(20,075	)	(1,077	)		81,697	4,388
Total net increase
(decrease)	$	10,718,242	576,172	$	3,277,901	177,990	$	(7,959,572	)	(427,586	)	$	6,036,571	326,576
(*) Includes exchanges between share classes of the fund.

6. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $12,618,782,000 and $10,159,127,000, respectively, during the six months ended January 31, 2007.

Financial highlights(1)

					Income (loss) from investment operations(2)									Dividends and distributions
				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	)		Distributions (from capital gains	)		Total dividends and distributions			Net asset value, end of period	Total return(3	)		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
Class A:
Six months ended 1/31/2007	(5	)	$	19.33	$	.39	$	1.80		$	2.19		$	(.53	)	$	(.46	)	$	(.99	)	$	20.53	11.46	%	$	61,702				.56	%	(6	)	.53	%	(6	)	3.85	%	(6	)
Year ended 7/31/2006				18.70		.81		.94			1.75			(.76	)		(.36	)		(1.12	)		19.33	9.77			53,188				.56				.53				4.35
Year ended 7/31/2005				17.10		.77		1.61			2.38			(.65	)		(.13	)		(.78	)		18.70	14.12			47,196				.55				.54				4.26
Year ended 7/31/2004				15.44		.70		1.70			2.40			(.74	)		-			(.74	)		17.10	15.76			36,075				.57				.57				4.15
Year ended 7/31/2003				14.49		.72		.98			1.70			(.73	)		(.02	)		(.75	)		15.44	12.18			25,891				.61				.61				4.98
Year ended 7/31/2002				16.44		.74		(1.73	)		(.99	)		(.80	)		(.16	)		(.96	)		14.49	(6.35	)		19,585				.61				.61				4.66
Class B:
Six months ended 1/31/2007	(5	)		19.22		.31		1.80			2.11			(.45	)		(.46	)		(.91	)		20.42	11.11			4,960				1.33		(6	)	1.30		(6	)	3.09		(6	)
Year ended 7/31/2006				18.61		.66		.93			1.59			(.62	)		(.36	)		(.98	)		19.22	8.87			4,442				1.33				1.31				3.58
Year ended 7/31/2005				17.01		.63		1.61			2.24			(.51	)		(.13	)		(.64	)		18.61	13.32			4,135				1.34				1.32				3.48
Year ended 7/31/2004				15.36		.56		1.69			2.25			(.60	)		-			(.60	)		17.01	14.84			3,231				1.35				1.35				3.37
Year ended 7/31/2003				14.42		.61		.97			1.58			(.62	)		(.02	)		(.64	)		15.36	11.37			2,015				1.39				1.39				4.17
Year ended 7/31/2002				16.39		.61		(1.73	)		(1.12	)		(.69	)		(.16	)		(.85	)		14.42	(7.14	)		800				1.37				1.37				3.88
Class C:
Six months ended 1/31/2007	(5	)		19.19		.30		1.80			2.10			(.44	)		(.46	)		(.90	)		20.39	11.10			8,100				1.37		(6	)	1.35		(6	)	3.02		(6	)
Year ended 7/31/2006				18.58		.65		.93			1.58			(.61	)		(.36	)		(.97	)		19.19	8.83			6,675				1.38				1.36				3.52
Year ended 7/31/2005				16.99		.61		1.60			2.21			(.49	)		(.13	)		(.62	)		18.58	13.17			5,756				1.43				1.41				3.38
Year ended 7/31/2004				15.34		.55		1.69			2.24			(.59	)		-			(.59	)		16.99	14.75			3,833				1.44				1.44				3.26
Year ended 7/31/2003				14.41		.59		.97			1.56			(.61	)		(.02	)		(.63	)		15.34	11.23			1,850				1.48				1.48				4.07
Year ended 7/31/2002				16.37		.59		(1.71	)		(1.12	)		(.68	)		(.16	)		(.84	)		14.41	(7.17	)		614				1.48				1.48				3.77
Class F:
Six months ended 1/31/2007	(5	)		19.30		.38		1.81			2.19			(.52	)		(.46	)		(.98	)		20.51	11.51			2,613				.59		(6	)	.57		(6	)	3.78		(6	)
Year ended 7/31/2006				18.68		.80		.93			1.73			(.75	)		(.36	)		(1.11	)		19.30	9.68			1,957				.60				.57				4.30
Year ended 7/31/2005				17.08		.75		1.61			2.36			(.63	)		(.13	)		(.76	)		18.68	14.01			1,603				.67				.65				4.14
Year ended 7/31/2004				15.42		.67		1.71			2.38			(.72	)		-			(.72	)		17.08	15.65			1,000				.69				.69				4.02
Year ended 7/31/2003				14.47		.71		.97			1.68			(.71	)		(.02	)		(.73	)		15.42	12.11			471				.72				.72				4.83
Year ended 7/31/2002				16.44		.71		(1.73	)		(1.02	)		(.79	)		(.16	)		(.95	)		14.47	(6.56	)		156				.73				.73				4.52
Class 529-A:
Six months ended 1/31/2007	(5	)		19.31		.38		1.80			2.18			(.52	)		(.46	)		(.98	)		20.51	11.43			570				.63		(6	)	.61		(6	)	3.77		(6	)
Year ended 7/31/2006				18.68		.80		.94			1.74			(.75	)		(.36	)		(1.11	)		19.31	9.70			452				.63				.61				4.27
Year ended 7/31/2005				17.08		.75		1.61			2.36			(.63	)		(.13	)		(.76	)		18.68	13.98			328				.70				.68				4.13
Year ended 7/31/2004				15.42		.68		1.70			2.38			(.72	)		-			(.72	)		17.08	15.61			195				.67				.67				4.06
Year ended 7/31/2003				14.48		.71		.97			1.68			(.72	)		(.02	)		(.74	)		15.42	12.10			93				.68				.68				4.87
Period from 2/15/2002 to 7/31/2002				15.76		.31		(1.20	)		(.89	)		(.39	)		-			(.39	)		14.48	(5.83	)		24				.37				.37				2.02
Class 529-B:
Six months ended 1/31/2007	(5	)		19.26		.30		1.80			2.10			(.44	)		(.46	)		(.90	)		20.46	11.01			108				1.45		(6	)	1.43		(6	)	2.95		(6	)
Year ended 7/31/2006				18.65		.64		.92			1.56			(.59	)		(.36	)		(.95	)		19.26	8.71			92				1.47				1.44				3.44
Year ended 7/31/2005				17.05		.59		1.61			2.20			(.47	)		(.13	)		(.60	)		18.65	13.05			74				1.55				1.53				3.28
Year ended 7/31/2004				15.36		.53		1.70			2.23			(.54	)		-			(.54	)		17.05	14.67			51				1.57				1.57				3.16
Year ended 7/31/2003				14.46		.58		.97			1.55			(.63	)		(.02	)		(.65	)		15.36	11.10			28				1.60				1.60				3.95
Period from 2/19/2002 to 7/31/2002				15.63		.25		(1.06	)		(.81	)		(.36	)		-			(.36	)		14.46	(5.40	)		7				.71				.71				1.62
Class 529-C:
Six months ended 1/31/2007	(5	)		19.27		.30		1.81			2.11			(.44	)		(.46	)		(.90	)		20.48	11.06			248				1.44		(6	)	1.42		(6	)	2.96		(6	)
Year ended 7/31/2006				18.65		.64		.93			1.57			(.59	)		(.36	)		(.95	)		19.27	8.77			201				1.46				1.43				3.45
Year ended 7/31/2005				17.06		.59		1.60			2.19			(.47	)		(.13	)		(.60	)		18.65	13.00			153				1.54				1.52				3.29
Year ended 7/31/2004				15.39		.53		1.71			2.24			(.57	)		-			(.57	)		17.06	14.69			95				1.56				1.56				3.17
Year ended 7/31/2003				14.46		.58		.97			1.55			(.60	)		(.02	)		(.62	)		15.39	11.10			44				1.59				1.59				3.96
Period from 2/19/2002 to 7/31/2002				15.63		.25		(1.06	)		(.81	)		(.36	)		-			(.36	)		14.46	(5.40	)		12				.70				.70				1.63
Class 529-E:
Six months ended 1/31/2007	(5	)		19.28		.35		1.80			2.15			(.49	)		(.46	)		(.95	)		20.48	11.29			28				.93		(6	)	.91		(6	)	3.47		(6	)
Year ended 7/31/2006				18.66		.74		.93			1.67			(.69	)		(.36	)		(1.05	)		19.28	9.32			23				.94				.92				3.96
Year ended 7/31/2005				17.06		.69		1.61			2.30			(.57	)		(.13	)		(.70	)		18.66	13.63			17				1.02				1.01				3.80
Year ended 7/31/2004				15.40		.62		1.70			2.32			(.66	)		-			(.66	)		17.06	15.24			10				1.04				1.04				3.69
Year ended 7/31/2003				14.47		.66		.96			1.62			(.67	)		(.02	)		(.69	)		15.40	11.66			5				1.06				1.06				4.48
Period from 2/25/2002 to 7/31/2002				15.81		.27		(1.23	)		(.96	)		(.38	)		-			(.38	)		14.47	(6.24	)		1				.45				.45				1.79
Class 529-F:
Six months ended 1/31/2007	(5	)		19.30		.40		1.81			2.21			(.54	)		(.46	)		(1.00	)		20.51	11.60			15				.43		(6	)	.41		(6	)	3.94		(6	)
Year ended 7/31/2006				18.68		.83		.93			1.76			(.78	)		(.36	)		(1.14	)		19.30	9.85			10				.44				.42				4.46
Year ended 7/31/2005				17.08		.75		1.60			2.35			(.62	)		(.13	)		(.75	)		18.68	13.96			5				.70				.68				4.14
Year ended 7/31/2004				15.42		.67		1.69			2.36			(.70	)		-			(.70	)		17.08	15.53			3				.79				.79				3.95
Period from 9/17/2002 to 7/31/2003				14.11		.60		1.24			1.84			(.51	)		(.02	)		(.53	)		15.42	13.38			1				.81		(6	)	.81		(6	)	4.68		(6	)
Class R-1:
Six months ended 1/31/2007	(5	)	$	19.27	$	.30	$	1.80		$	2.10		$	(.44	)	$	(.46	)	$	(.90	)	$	20.47	11.03	%	$	59				1.40	%	(6	)	1.38	%	(6	)	2.97	%	(6	)
Year ended 7/31/2006				18.65		.64		.94			1.58			(.60	)		(.36	)		(.96	)		19.27	8.79			37				1.45				1.41				3.46
Year ended 7/31/2005				17.05		.61		1.61			2.22			(.49	)		(.13	)		(.62	)		18.65	13.15			19				1.50				1.45				3.36
Year ended 7/31/2004				15.39		.55		1.70			2.25			(.59	)		-			(.59	)		17.05	14.75			8				1.55				1.48				3.27
Year ended 7/31/2003				14.47		.60		.96			1.56			(.62	)		(.02	)		(.64	)		15.39	11.19			2				1.92				1.50				4.02
Period from 6/17/2002 to 7/31/2002				15.65		.06		(1.24	)		(1.18	)		-			-			-			14.47	(7.54	)		-		(7	)	.32				.18				.42
Class R-2:
Six months ended 1/31/2007	(5	)		19.22		.30		1.79			2.09			(.44	)		(.46	)		(.90	)		20.41	11.00			472				1.45		(6	)	1.39		(6	)	2.99		(6	)
Year ended 7/31/2006				18.60		.64		.94			1.58			(.60	)		(.36	)		(.96	)		19.22	8.83			379				1.52				1.40				3.48
Year ended 7/31/2005				17.01		.61		1.60			2.21			(.49	)		(.13	)		(.62	)		18.60	13.16			271				1.58				1.42				3.39
Year ended 7/31/2004				15.36		.55		1.69			2.24			(.59	)		-			(.59	)		17.01	14.75			139				1.75				1.44				3.30
Year ended 7/31/2003				14.48		.59		.95			1.54			(.64	)		(.02	)		(.66	)		15.36	11.12			52				1.81				1.46				4.02
Period from 5/31/2002 to 7/31/2002				16.26		.09		(1.69	)		(1.60	)		(.18	)		-			(.18	)		14.48	(9.95	)		1				.29				.24				.66
Class R-3:
Six months ended 1/31/2007	(5	)		19.29		.35		1.80			2.15			(.49	)		(.46	)		(.95	)		20.49	11.27			798				.94		(6	)	.91		(6	)	3.45		(6	)
Year ended 7/31/2006				18.67		.73		.93			1.66			(.68	)		(.36	)		(1.04	)		19.29	9.29			579				.96				.94				3.94
Year ended 7/31/2005				17.07		.70		1.60			2.30			(.57	)		(.13	)		(.70	)		18.67	13.68			394				.97				.96				3.85
Year ended 7/31/2004				15.41		.62		1.70			2.32			(.66	)		-			(.66	)		17.07	15.25			176				1.02				1.02				3.70
Year ended 7/31/2003		��		14.48		.65		.98			1.63			(.68	)		(.02	)		(.70	)		15.41	11.68			56				1.12				1.08				4.42
Period from 6/4/2002 to 7/31/2002				16.09		.09		(1.51	)		(1.42	)		(.19	)		-			(.19	)		14.48	(8.90	)		1				.19				.17				.61
Class R-4:
Six months ended 1/31/2007	(5	)		19.31		.38		1.80			2.18			(.52	)		(.46	)		(.98	)		20.51	11.42			345				.65		(6	)	.62		(6	)	3.74		(6	)
Year ended 7/31/2006				18.69		.79		.93			1.72			(.74	)		(.36	)		(1.10	)		19.31	9.60			255				.66				.64				4.22
Year ended 7/31/2005				17.09		.76		1.60			2.36			(.63	)		(.13	)		(.76	)		18.69	14.00			120				.67				.65				4.17
Year ended 7/31/2004				15.43		.68		1.70			2.38			(.72	)		-			(.72	)		17.09	15.64			30				.69				.69				4.05
Year ended 7/31/2003				14.49		.70		.98			1.68			(.72	)		(.02	)		(.74	)		15.43	12.07			12				.72				.72				4.81
Period from 6/27/2002 to 7/31/2002				15.25		.08		(.84	)		(.76	)		-			-			-			14.49	(4.98	)		-		(7	)	5.11				.03				.52
Class R-5:
Six months ended 1/31/2007	(5	)		19.32		.41		1.81			2.22			(.55	)		(.46	)		(1.01	)		20.53	11.63			228				.35		(6	)	.33		(6	)	4.04		(6	)
Year ended 7/31/2006				18.70		.85		.93			1.78			(.80	)		(.36	)		(1.16	)		19.32	9.92			168				.36				.34				4.56
Year ended 7/31/2005				17.10		.80		1.61			2.41			(.68	)		(.13	)		(.81	)		18.70	14.33			81				.37				.35				4.45
Year ended 7/31/2004				15.44		.73		1.71			2.44			(.78	)		-			(.78	)		17.10	16.01			57				.37				.37				4.35
Year ended 7/31/2003				14.49		.75		.98			1.73			(.76	)		(.02	)		(.78	)		15.44	12.43			39				.40				.40				5.17
Period from 5/15/2002 to 7/31/2002				16.31		.15		(1.77	)		(1.62	)		(.20	)		-			(.20	)		14.49	(9.99	)		22				.09				.09				.97

	Six months ended			Year ended July 31
		January 31, 2007(5	)	2006		2005		2004		2003		2002
Portfolio turnover rate for all classes of shares		15	%	35	%	24	%	27	%	28	%	36	%

(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 all sales charges, including contingent deferred sales charges.

(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC.

During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan

share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services.

(5) Unaudited.

(6) Annualized.

(7) Amount less than $1 million.

See Notes to Financial Statements

Expense example

unaudited

As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (August 1, 2006, through January 31, 2007).

Actual expenses:

The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.

Hypothetical example for comparison purposes:

The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.

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

		Beginning account value 8/1/2006		Ending account value 1/31/2007		Expenses paid during period*	Annualized expense ratio
Class A -- actual return	$	1,000.00	$	1,114.62	$	2.82	.53	%
Class A -- assumed 5% return		1,000.00		1,022.53		2.70	.53
Class B -- actual return		1,000.00		1,111.06		6.92	1.30
Class B -- assumed 5% return		1,000.00		1,018.65		6.61	1.30
Class C -- actual return		1,000.00		1,110.97		7.18	1.35
Class C -- assumed 5% return		1,000.00		1,018.40		6.87	1.35
Class F -- actual return		1,000.00		1,115.09		3.04	.57
Class F -- assumed 5% return		1,000.00		1,022.33		2.91	.57
Class 529-A -- actual return		1,000.00		1,114.31		3.25	.61
Class 529-A -- assumed 5% return		1,000.00		1,022.13		3.11	.61
Class 529-B -- actual return		1,000.00		1,110.09		7.61	1.43
Class 529-B -- assumed 5% return		1,000.00		1,018.00		7.27	1.43
Class 529-C -- actual return		1,000.00		1,110.63		7.55	1.42
Class 529-C -- assumed 5% return		1,000.00		1,018.05		7.22	1.42
Class 529-E -- actual return		1,000.00		1,112.85		4.85	.91
Class 529-E -- assumed 5% return		1,000.00		1,020.62		4.63	.91
Class 529-F -- actual return		1,000.00		1,115.98		2.19	.41
Class 529-F -- assumed 5% return		1,000.00		1,023.14		2.09	.41
Class R-1 -- actual return		1,000.00		1,110.32		7.34	1.38
Class R-1 -- assumed 5% return		1,000.00		1,018.25		7.02	1.38
Class R-2 -- actual return		1,000.00		1,110.05		7.39	1.39
Class R-2 -- assumed 5% return		1,000.00		1,018.20		7.07	1.39
Class R-3 -- actual return		1,000.00		1,112.73		4.85	.91
Class R-3 -- assumed 5% return		1,000.00		1,020.62		4.63	.91
Class R-4 -- actual return		1,000.00		1,114.22		3.30	.62
Class R-4 -- assumed 5% return		1,000.00		1,022.08		3.16	.62
Class R-5 -- actual return		1,000.00		1,116.30		1.76	.33
Class R-5 -- assumed 5% return		1,000.00		1,023.54		1.68	.33
* Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (184), and divided by 365 (to reflect the one-half year period).

Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through December 31, 2007. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The information, material facts and conclusions that formed the basis for the committee’s recommendation and the board’s subsequent approval are described below.

1. Information reviewed

Materials reviewed— During the course of each year, board members review a wide variety of materials relating to the services provided by CRMC, including reports on the fund’s investment results, portfolio composition, portfolio trading practices, shareholder services, and other information relating to the nature, extent and quality of services provided by CRMC to the fund. In addition, the committee requests and reviews supplementary information that includes extensive materials regarding the fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding CRMC, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the fund.

Review process— The committee received assistance and advice regarding legal and industry standards from independent counsel to the board. The committee discussed the approval of the agreement with CRMC representatives and in a private session with counsel at which no representatives of CRMC were present. In deciding to recommend approval of the agreement, the committee did not identify any single issue or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the board and the committee.

2. Nature, extent and quality of services

CRMC, its personnel and its resources— The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ability of its organizational structure to address growth in assets under management. The board and the committee also considered that CRMC made available to its investment professionals a variety of resources and systems relating to investment management, compliance, trading, investment results and portfolio accounting. They considered CRMC’s commitment to investing in information technology supporting investment management and compliance. They further considered CRMC’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems. The board and the committee also considered the benefits to fund shareholders from investing in a fund that is part of a larger family of funds offering a variety of investment objectives.

Other services— The board and the committee considered CRMC’s policies, procedures and systems designed to comply with applicable laws and regulations and its commitment to compliance; its efforts to keep the board members informed; and its attention to matters that may involve potential conflicts of interest with the fund. The board and the committee also considered the nature, extent, quality and cost of administrative, distribution and shareholder services provided by CRMC to the fund under the agreement and other agreements, including the information technology, legal, and fund accounting and treasury functions.

3. Investment results

The board and the committee considered the investment results of the fund in light of its objective of providing current income and, secondarily, growth of capital. They reviewed the fund’s absolute investment results, and compared the fund’s total returns with the total returns of the Lipper Income Funds Index (the Lipper category that includes the fund), the Lehman Brothers Aggregate Bond Index, and the averages of the funds included in the Lipper Income Funds Index as of June 30, 2006. The board and the committee noted that although the fund’s total returns were below these comparative measures (except the Lehman Brothers Aggregate Bond Index) for 2005, they exceeded all the comparative measures for the first six months of 2006 and the five- and 10-year periods ended June 30, 2006. The board and the committee also considered the volatility of the fund’s results as well as the investment risks assumed by the fund relative to comparable market indexes and funds.

4. Advisory fees and total expenses

The board and the committee reviewed the advisory fees and total expenses of the fund (each as a percentage of average net assets) and compared such amounts with the median fee and expense levels of all other funds in the Lipper Income Funds Index (excluding funds of funds). The board and the committee observed that the fund’s advisory fees and total expenses had been below the median of all the other funds included in the index for the entire 10-year period ended on July 31, 2005. The board and the committee also noted the 10% advisory fee waiver that CRMC put into effect on April 1, 2005.

The board and the committee also reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with similar investment mandates. They noted that, although the fees paid by those clients generally were lower than those paid by American Funds, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, as well as the resulting level of profits to CRMC, comparing those to the reported results of several large, publicly held investment management companies. The committee also received information during previous periods regarding the structure and manner in which CRMC’s investment professionals were compensated and CRMC’s view of the relationship of such compensation to the attraction and retention of quality personnel. The board and the committee considered CRMC’s willingness to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements. They further considered that breakpoint discounts in the fund’s advisory fee structure reduce the level of fees charged by CRMC to the fund as fund assets increase. They also considered the impact of CRMC’s current 10% advisory fee waiver.

6. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to the investment adviser’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers.

7. Conclusions

Based on their review, including their consideration of each of the factors referred to above, the board and the committee concluded that the agreement is fair and reasonable to the fund and its shareholders, that the fund’s shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund, that each of the factors discussed above supported approval of the agreement, and that approval of the agreement was in the best interests of the fund and its shareholders.

Other share class results

 unaudited

Class B, Class C, Class F and Class 529

Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns for periods ended December 31, 2006
(the most recent calendar quarter):
	1 year		5 years		Life of class
Class B shares— first sold 3/15/00
Reflecting applicable contingent deferred sales
charge (CDSC), maximum of 5%, payable only
if shares are sold within six years of purchase	+14.39	%	+9.84	%	+10.13	%
Not reflecting CDSC	+19.39	%	+10.12	%	+10.13	%
Class C shares— first sold 3/15/01
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase	+18.36	%	+10.03	%	+9.27	%
Not reflecting CDSC	+19.36	%	+10.03	%	+9.27	%
Class F shares*— first sold 3/15/01
Not reflecting annual asset-based fee charged
by sponsoring firm	+20.21	%	+10.85	%	+10.10	%
Class 529-A shares†— first sold 2/15/02
Reflecting 5.75% maximum sales charge	+13.33	%	—		+9.89	%
Not reflecting maximum sales charge	+20.22	%	—		+11.23	%
Class 529-B shares†— first sold 2/19/02
Reflecting applicable CDSC, maximum of 5%,
payable only if shares are sold within six years
of purchase	+14.24	%	—		+10.23	%
Not reflecting CDSC	+19.24	%	—		+10.51	%
Class 529-C shares†— first sold 2/19/02
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase	+18.24	%	—		+10.52	%
Not reflecting CDSC	+19.24	%	—		+10.52	%
Class 529-E shares*†— first sold 2/25/02	+19.90	%	—		+10.87	%
Class 529-F shares*†— first sold 9/17/02
Not reflecting annual asset-based fee charged
by sponsoring firm	+20.45	%	—		+14.81	%

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 26 to 29 for details.

*These shares are sold without any initial or contingent deferred sales charge.

^†Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.

Office of the fund

One Market

Steuart Tower, Suite 1800

Mailing address: P.O. Box 7650

San Francisco, CA 94120-7650

Investment adviser

Capital Research and

Management Company

333 South Hope Street

Los Angeles, CA 90071-1406

135 South State College Boulevard

Brea, CA 92821-5823

Transfer agent for shareholder accounts

American Funds Service Company

(Please write to the address

nearest you.)

P.O. Box 25065

Santa Ana, CA 92799-5065

P.O. Box 659522

San Antonio, TX 78265-9522

P.O. Box 6007

Indianapolis, IN 46206-6007

P.O. Box 2280

Norfolk, VA 23501-2280

Custodian of assets

JPMorgan Chase Bank

270 Park Avenue

New York, NY 10017-2070

Counsel

Paul, Hastings, Janofsky & Walker LLP

515 South Flower Street

Los Angeles, CA 90071-2228

Independent registered public

accounting firm

Deloitte & Touche LLP

695 Town Center Drive

Suite 1200

Costa Mesa, CA 92626-7188

Principal underwriter

American Funds Distributors, Inc.

333 South Hope Street

Los Angeles, CA 90071-1406

There are several ways to invest in The Income Fund of America. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annualized expenses for Class B shares were 0.77 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (“CDSC”) of up to 5% that declines over time. Class C shares were subject to annualized expenses 0.82 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annualized expenses (by 0.04 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

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

A complete January 31, 2007, portfolio of The Income Fund of America’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

The Income Fund of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.

This report is for the information of shareholders of The Income Fund of America, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after March 31, 2007, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

[logo - American Funds^®]

The right choice for the long term^®

What makes American Funds different?

For 75 years, we have followed a consistent philosophy that we firmly believe is in our investors’ best interests. The range of opportunities offered by our family of just 30 carefully conceived, broadly diversified funds has attracted over 40 million shareholder accounts.

Our unique combination of strengths includes these five factors:

•A long-term, value-oriented approach

We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.

•An extensive global research effort

Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.

•The multiple portfolio counselor system

Our unique method of portfolio management, developed nearly 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.

•Experienced investment professionals

American Funds portfolio counselors have an average of 24 years of investment experience, providing a wealth of knowledge and experience that few organizations have.

•A commitment to low operating expenses

The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.

American Funds span a range of investment objectives

•Growth funds

AMCAP Fund^®

EuroPacific Growth Fund^®

The Growth Fund of America^®

The New Economy Fund^®

New Perspective Fund^®

New World Fund^SM

SMALLCAP World Fund^®

•Growth-and-income funds

American Mutual Fund^®

Capital World Growth and Income Fund^SM

Fundamental Investors^SM

The Investment Company of America^®

Washington Mutual Investors Fund^SM

•Equity-income funds

Capital Income Builder^®

>The Income Fund of America^®

•Balanced fund

American Balanced Fund^®

•Bond funds

American High-Income Trust^SM

The Bond Fund of America^SM

Capital World Bond Fund^®

Intermediate Bond Fund of America^®

Short-Term Bond Fund of America^SM

U.S. Government Securities Fund^SM

•Tax-exempt bond funds

American High-Income Municipal Bond Fund^®

Limited Term Tax-Exempt Bond Fund of America^SM

The Tax-Exempt Bond Fund of America^®

State-specific tax-exempt funds

The Tax-Exempt Fund of California^®

The Tax-Exempt Fund of Maryland^®

The Tax-Exempt Fund of Virginia^®

•Money market funds

The Cash Management Trust of America^®

The Tax-Exempt Money Fund of America^SM

The U.S. Treasury Money Fund of America^SM

•American Funds Target Date Retirement Series^SM

The Capital Group Companies

American FundsCapital Research and ManagementCapital InternationalCapital GuardianCapital Bank and Trust

Lit. No. MFGESR-906-0307P

Litho in USA BAG/CVB/8088-S7481

Printed on recycled paper

ITEM 2 - Code of Ethics

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

ITEM 3 - Audit Committee Financial Expert

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

ITEM 4 - Principal Accountant Fees and Services

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

ITEM 5 - Audit Committee of Listed Registrants

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

ITEM 6 - Schedule of Investments

[logo - American Funds ®]

The Income Fund of America^®

Investment portfolio

January 31, 2007

unaudited

Common stocks — 65.34%	Shares			Market value (000)
FINANCIALS — 17.28%
Citigroup Inc.		28,715,000		$	1,583,058
Washington Mutual, Inc.		21,300,000			949,767
Wells Fargo & Co.		22,063,600			792,525
Société Générale1		4,386,500			773,195
Bank of America Corp.		13,936,550			732,784
Fifth Third Bancorp		13,000,000			518,700
J.P. Morgan Chase & Co.		9,625,000			490,201
Equity Residential, shares of beneficial interest		8,337,700			469,246
Lloyds TSB Group PLC1		40,349,900			462,065
Hang Lung Properties Ltd.1		156,970,000			428,145
HSBC Holdings PLC (United Kingdom)1		12,794,652			232,154
HSBC Holdings PLC (Hong Kong)1		9,593,396			175,399
iStar Financial, Inc.2		8,110,000			406,717
SunTrust Banks, Inc.		4,545,000			377,690
Equity Office Properties Trust		6,775,000			376,351
Boston Properties, Inc.		2,795,000			352,422
U.S. Bancorp		9,600,000			341,760
ING Groep NV1		7,441,076			324,866
PNC Financial Services Group, Inc.		3,800,000			280,326
Kimco Realty Corp.		4,842,000			240,163
CapitalSource Inc.		8,628,441			239,784
Wachovia Corp.		4,200,000			237,300
Hospitality Properties Trust		4,100,000			200,080
BNP Paribas1		1,771,000			198,564
St. George Bank Ltd.1		6,846,552			176,556
American Capital Strategies, Ltd.		3,575,000			173,924
Arthur J. Gallagher & Co.2		5,403,700			154,924
Banco Itaú Holding Financeira SA, preferred nominative		4,110,000			151,971
Developers Diversified Realty Corp.		2,255,000			151,356
Fidelity National Financial, Inc.		5,929,000			140,754
HRPT Properties Trust		9,850,000			128,247
DnB NOR ASA1		7,500,000			112,902
Allied Capital Corp.		3,848,020			111,054
National City Corp.		2,924,300			110,685
Fannie Mae		1,906,200			107,757
Sunstone Hotel Investors, Inc.2		3,738,400			105,759
Crescent Real Estate Equities Co.		5,045,000			101,203
Health Care Property Investors, Inc.		2,442,300			100,745
Banco Santander Central Hispano, SA1		5,030,828			95,612
Compass Bancshares, Inc.		1,550,000			94,395
Archstone-Smith Trust		1,400,000			88,494
Cathay Financial Holding Co., Ltd.1		38,729,373			86,204
Regions Financial Corp.		2,350,000			85,211
XL Capital Ltd., Class A		1,175,000			81,075
Unibanco-União de Bancos Brasileiros SA, units (GDR)		697,000			66,097
Camden Property Trust		789,300			61,881
Hysan Development Co. Ltd.1		21,815,601			59,365
Itaúsa — Investimentos Itaú SA, preferred nominative		9,061,035			50,149
Unibail Holding1		195,000			49,294
First Midwest Bancorp, Inc.		700,074			26,281
Beverly Hills Bancorp Inc.2		1,295,900			10,173
Weingarten Realty Investors		29,500			1,461
					13,866,791
UTILITIES — 7.43%
National Grid PLC1		39,049,462			589,252
E.ON AG1		3,850,000			522,766
Entergy Corp.		5,022,600			466,348
Duke Energy Corp.		23,080,000			454,445
Public Service Enterprise Group Inc.		5,807,000			389,243
Dominion Resources, Inc.		4,158,498			344,989
Progress Energy, Inc.		7,010,700			333,289
Exelon Corp.		5,050,000			302,950
Equitable Resources, Inc.		5,470,000			236,578
DTE Energy Co.		5,000,000			231,850
Southern Co.		5,920,000			216,258
Ameren Corp.		3,900,000			207,129
NiSource Inc.		8,632,800			205,461
Consolidated Edison, Inc.		3,880,000			187,326
American Electric Power Co., Inc.		4,250,000			185,003
RWE AG1		1,750,000			182,760
Hongkong Electric Holdings Ltd.1		33,080,000			163,493
FirstEnergy Corp.		2,240,000			132,899
Xcel Energy Inc.		5,225,000			121,899
Edison International		2,500,000			112,450
KeySpan Corp.		2,160,000			88,128
FPL Group, Inc.		1,500,000			84,975
PPL Corp.		2,000,000			71,200
MDU Resources Group, Inc.		2,655,000			68,632
Northeast Utilities		2,386,200			65,978
					5,965,301
TELECOMMUNICATION SERVICES — 6.87%
AT&T Inc.		68,449,871			2,575,769
Verizon Communications Inc.		25,720,000			990,734
Koninklijke KPN NV1		47,015,000			677,370
Chunghwa Telecom Co., Ltd. (ADR)		12,868,988			266,517
Chunghwa Telecom Co., Ltd.1		43,659,060			83,870
Telecom Italia SpA, nonvoting1		117,280,000			293,933
Vodafone Group PLC1		87,500,000			255,059
France Télécom SA1		7,000,000			194,100
SK Telecom Co., Ltd. (ADR)		4,175,000			99,156
Telefónica, SA1		1,900,000			41,581
Dobson Communications Corp., Class A3		2,290,483			22,195
Sprint Nextel Corp., Series 1		760,501			13,560
American Tower Corp., Class A3		42,271			1,684
XO Holdings, Inc.3		9,158			39
					5,515,567
CONSUMER STAPLES — 6.57%
Altria Group, Inc.		9,530,000			832,827
Coca-Cola Co.		16,450,000			787,626
H.J. Heinz Co.		14,535,000			684,889
General Mills, Inc.		8,186,800			468,612
Reynolds American Inc.		6,257,000			403,576
Kimberly-Clark Corp.		5,700,000			395,580
Diageo PLC1		17,650,000			343,436
ConAgra Foods, Inc.		12,147,200			312,305
Unilever NV (New York registered)		6,751,750			180,204
Unilever NV1		2,355,000			62,571
UST Inc.		2,750,000			157,960
Scottish & Newcastle PLC1		14,192,000			151,498
Goodman Fielder Ltd.1,2		67,000,000			123,908
Tesco PLC1		15,040,000			123,606
SABMiller PLC1		4,311,000			97,743
Sara Lee Corp.		4,500,000			77,175
Woolworths Ltd.1		3,565,632			65,840
					5,269,356
HEALTH CARE — 5.60%
Bristol-Myers Squibb Co.		40,101,500			1,154,522
Merck & Co., Inc.		21,700,000			971,075
Eli Lilly and Co.		14,485,000			783,928
Pfizer Inc		26,200,000			687,488
Brookdale Senior Living Inc.		5,035,000			241,680
GlaxoSmithKline PLC1		8,615,000			231,955
Abbott Laboratories		3,500,000			185,500
Baxter International Inc.		1,972,048			97,932
Wyeth		1,431,500			70,730
AstraZeneca PLC (United Kingdom)1		1,195,000			66,566
Clarent Hospital Corp.1,2,3		484,684			121
					4,491,497
INDUSTRIALS — 5.02%
General Electric Co.		37,170,000			1,339,978
Emerson Electric Co.		9,370,000			421,369
Waste Management, Inc.		10,715,000			406,956
R.R. Donnelley & Sons Co.		10,400,000			385,840
Deutsche Post AG1		10,521,400			323,052
Cooper Industries, Ltd., Class A		1,900,000			173,641
Bidvest Group Ltd.1		8,665,000			162,142
Avery Dennison Corp.		2,348,182			160,522
Hubbell Inc., Class B		3,213,100			154,871
Macquarie Korea Infrastructure Fund1,2		20,441,070			147,648
PACCAR Inc		1,805,700			120,747
Sandvik AB1		7,500,000			120,197
Brambles Ltd.1,3		9,053,000			97,659
Singapore Technologies Engineering Ltd.1		4,823,000			10,489
Delta Air Lines, Inc.3		542,911			586
					4,025,697
ENERGY — 4.49%
Chevron Corp.		23,630,900			1,722,220
Royal Dutch Shell PLC, Class A (ADR)		8,696,000			593,502
Royal Dutch Shell PLC, Class B (ADR)		2,855,147			193,322
Royal Dutch Shell PLC, Class B1		5,136,078			172,565
Royal Dutch Shell PLC, Class A1		1,340,000			45,216
Marathon Oil Corp.		3,895,000			351,874
TOTAL SA1		1,390,000			93,673
TOTAL SA (ADR)		1,290,000			87,785
Occidental Petroleum Corp.		3,600,000			166,896
Exxon Mobil Corp.		1,385,000			102,628
ENI SpA1		2,400,000			77,277
					3,606,958
MATERIALS — 4.42%
Weyerhaeuser Co.		9,625,000			721,875
E.I. du Pont de Nemours and Co.		11,885,000			589,021
International Paper Co.		13,723,820			462,493
Dow Chemical Co.		10,700,000			444,478
MeadWestvaco Corp.2		10,565,696			318,450
PPG Industries, Inc.		2,545,000			168,708
Packaging Corp. of America2		6,792,800			155,148
RPM International, Inc.		5,385,000			125,093
Worthington Industries, Inc.2		5,773,000			110,726
UPM-Kymmene Corp.1		4,100,000			105,444
Alcoa Inc.		3,200,000			103,360
Eastman Chemical Co.		1,500,000			87,840
Lyondell Chemical Co.		2,220,000			70,196
Akzo Nobel NV1		1,000,000			62,755
Freeport-McMoRan Copper & Gold Inc., Class B		300,000			17,253
					3,542,840
CONSUMER DISCRETIONARY — 2.70%
Esprit Holdings Ltd.1		40,949,000			418,397
General Motors Corp.		11,975,000			393,259
CBS Corp., Class B		6,000,000			187,020
ServiceMaster Co.		13,973,750			182,357
Leggett & Platt, Inc.		6,500,000			157,560
DSG International PLC1		45,000,000			148,946
KangwonLand Inc.1		4,672,395			99,592
Kingfisher PLC1		20,678,565			97,363
Regal Entertainment Group, Class A		4,022,000			90,495
Tupperware Brands Corp.2		3,865,000			90,170
Kesa Electricals PLC1		13,338,258			89,271
Harrah’s Entertainment, Inc.		805,300			68,032
Snap-on Inc.		967,800			46,658
Marks and Spencer Group PLC1		3,195,000			42,363
Macquarie Media Group1		8,725,000			31,092
Publishing & Broadcasting Ltd.1		1,723,149			26,340
TI Automotive Ltd., Class A1,3		7,000,000			—
					2,168,915
INFORMATION TECHNOLOGY — 0.60%
Microsoft Corp.		9,200,000			283,912
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		17,710,081			193,217
Micron Technology, Inc.3,4		339,328			4,394
ZiLOG, Inc.3		455,000			2,025
					483,548
MISCELLANEOUS — 4.36%
Other common stocks in initial period of acquisition					3,497,843
Total common stocks (cost: $38,669,709,000)					52,434,313
Preferred stocks — 1.10%
FINANCIALS — 1.10%
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred4,5		124,434,000			130,470
Fannie Mae, Series O, 7.00%4,5		2,190,000			117,439
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred4,5		71,950,000			75,929
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred4,5		31,300,000			32,625
MUFG Capital Finance 1 Ltd. 6.346% noncumulative preferred5		74,580,000			75,094
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred4,5		19,000,000			20,065
Vornado Realty Trust, Series I, 6.625% preferred		3,380,000			83,824
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative preferred4,5		60,950,000			61,845
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred4,5		25,000,000			28,022
HSBC Capital Funding LP, Series 2, 10.176% noncumulative step-up perpetual preferred4,5		10,000,000			14,629
Banco Santander Central Hispano, SA 6.50%3,4		1,340,000			33,793
Banco Santander Central Hispano, SA 6.80%3,4		184,000			4,710
Chuo Mitsui Trust and Banking Co., Ltd. 5.506%4,5		36,590,000			34,980
Public Storage, Inc., Series F, 6.45% preferred		1,000,000			24,730
Public Storage, Inc., Series V, 7.50% cumulative preferred depositary shares		400,000			10,168
BNP Paribas 5.186% noncumulative4,5		9,375,000			8,972
BNP Paribas Capital Trust 9.003% noncumulative trust preferred4,5		8,000,000			8,898
BNP U.S. Funding LLC, Series A, 7.738% noncumulative preferred4,5		4,200,000			4,267
Wachovia Capital Trust III 5.80%5		20,000,000			20,156
Duke Realty Corp., Series B, 7.99% preferred cumulative step-up premium rate		300,000			14,841
National Bank of Canada, Series A, 8.35% exchangeable preferred depositary shares		520,000			13,749
Société Générale 7.85%4,5		11,950,000			12,015
Simon Property Group, Inc., Series G, 7.89% preferred cumulative step-up premium rate		200,000			10,331
iStar Financial, Inc., Series F, 7.80% cumulative redeemable preferred2		400,000			10,300
Resona Preferred Global Securities (Cayman) Ltd. 7.191%4,5		9,825,000			10,291
DBS Capital Funding Corp., Series A, 7.657% noncumulative guaranteed preference shares4,5		6,500,000			6,987
New Plan Excel Realty Trust, Inc., Series D, 7.80% preferred cumulative step-up premium rate		112,500			5,899
Nationwide Health Properties, Inc., Series A, 7.677% preferred cumulative step-up premium rate		50,000			5,050
					880,079
TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc. 14.00% preferred 20091,3,6		12			0
Total preferred stocks (cost: $853,059,000)					880,079
Warrants — 0.00%		Shares			Market value (000	)
TELECOMMUNICATION SERVICES — 0.00%
XO Holdings, Inc., Series A, warrants, expire 20103		18,316			12
XO Holdings, Inc., Series B, warrants, expire 20103		13,738			5
XO Holdings, Inc., Series C, warrants, expire 20103		13,738			3
Allegiance Telecom, Inc., warrants, expire 20081,3,4		20,000			0
GT Group Telecom Inc., warrants, expire 20101,3,4		15,000			0
Total warrants (cost: $816,000)					20
Convertible securities — 2.91%		Shares or principal amount
FINANCIALS — 0.68%
Metropolitan Life Insurance Co., Class B, 6.375% convertible preferred 2008		6,400,000 units			201,088
Fannie Mae 5.375% convertible preferred		1,530			152,617
XL Capital Ltd. 6.50% ACES convertible preferred 2007		1,340,000 units			30,472
XL Capital Ltd. 7.00% convertible preferred 2009		2,810,000 units			71,683
Genworth Financial, Inc. 6.00% convertible preferred 2007		2,400,000 units			89,496
					545,356
HEALTH CARE — 0.41%
Schering-Plough Corp. 6.00% convertible preferred 2007		2,499,900			147,244
Medtronic, Inc. 1.625% convertible notes 2013	$	45,500,000			48,685
Medtronic, Inc. 1.50% convertible notes 2011	$	69,900,000			74,531
Sepracor Inc. 5.00% convertible debentures 2007	$	46,000,000			46,000
Incyte Corp. 3.50% convertible notes 20114	$	15,000,000			13,369
					329,829
INFORMATION TECHNOLOGY — 0.34%
Nortel Networks Corp. 4.25% convertible notes 20084	$	40,000,000			39,050
Nortel Networks Corp. 4.25% convertible notes 2008	$	80,000,000			78,100
SCI Systems, Inc. 3.00% convertible debentures 2007	$	57,500,000			57,500
International Rectifier Corp. 4.25% convertible notes 2007	$	52,000,000			51,935
Liberty Media Holding Corp. 3.50% exchangeable debentures 2031	$	52,000,000			44,231
Fairchild Semiconductor Corp. 5.00% convertible notes 2008	$	2,500,000			2,491
					273,307
INDUSTRIALS — 0.32%
UAL Corp. 4.50% convertible notes 20214	$	72,600,000			104,086
Allied Waste Industries, Inc., Series D, 6.25% convertible preferred 2008		240,000			81,888
Tyco International Group SA, Series B, 3.125% convertible debentures 20234	$	50,000,000			74,250
					260,224
TELECOMMUNICATION SERVICES — 0.27%
Qwest Communications International Inc. 3.50% convertible debenture 2025	$	100,000,000			153,125
American Tower Corp. 5.00% convertible debentures 2010	$	38,100,000			38,290
Liberty Media Holding Corp. 4.00% exchangeable debentures 2029	$	36,000,000			24,795
					216,210
CONSUMER DISCRETIONARY — 0.20%
Ford Motor Co. 4.25% convertible notes 2036	$	50,000,000			57,000
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		474,600			17,498
Amazon.com, Inc. 4.75% convertible debentures 2009	$	59,137,000			58,250
Liberty Media Holding Corp. 3.25% exchangeable debentures 2031	$	35,000,000			29,575
					162,323
UTILITIES — 0.20%
PG&E Corp. 9.50% convertible notes 2010		28,000,000			94,395
NRG Energy, Inc. 5.75% convertible preferred 2009		200,000			56,394
AES Trust VII 6.00% convertible preferred 2008		125,000			6,113
					156,902
ENERGY — 0.13%
El Paso Corp. 4.99% convertible preferred4		75,000			100,500
MATERIALS — 0.08%
Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred		50,000			66,825
MISCELLANEOUS — 0.28%
Other convertible securities in initial period of acquisition					225,501
Total convertible securities (cost: $1,984,968,000)					2,336,977
Bonds & notes — 21.59%		Principal amount (000	)
CONSUMER DISCRETIONARY — 3.65%
Delphi Automotive Systems Corp. 6.50% 20097	$	54,466			60,457
Delphi Corp. 6.50% 20137		72,580			79,203
Delphi Automotive Systems Corp. 6.55% 20067		17,105			18,987
Delphi Automotive Systems Corp. 7.125% 20297		104,355			115,834
Delphi Corp. 8.25% 20337		30,031			37,088
General Motors Nova Scotia Finance Co. 6.85% 2008		1,675			1,675
General Motors Corp. 7.20% 2011		138,470			135,354
General Motors Corp. 7.125% 2013		68,665			66,777
General Motors Corp. 7.70% 2016		40,145			38,941
General Motors Corp. 8.80% 2021		19,875			19,279
General Motors Corp. 9.40% 2021		5,775			5,775
General Motors Corp. 8.25% 2023		7,000			6,667
General Motors Corp. 8.375% 2033		10,000			9,462
CCH II, LLC and CCH II Capital Corp. 10.25% 2010		9,000			9,394
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 13.50% 20118		4,375			4,375
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20124		58,648			61,214
Charter Communications Operating, LLC, Term Loan Facilities B, 8.005% 20135,9		28,500			28,856
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013		18,350			18,992
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20144		20,000			20,900
CCH I, LLC and CCH I Capital Corp. 11.00% 2015		20,000			20,750
Comcast Cable Communications, Inc. 6.20% 2008		49,000			49,735
Lenfest Communications, Inc. 7.625% 2008		2,000			2,043
Comcast Corp. 5.66% 20095		1,250			1,254
Comcast Cable Communications, Inc. 6.875% 2009		8,000			8,265
Comcast Cable Communications, Inc. 7.125% 2013		8,100			8,749
Comcast Corp. 5.85% 2015		19,200			19,291
Comcast Corp. 5.90% 2016		8,475			8,522
Comcast Corp. 6.50% 2017		10,500			11,009
Comcast Corp. 5.65% 2035		2,650			2,420
Dex Media West LLC, Dex Media West Finance Co., Series B, 8.50% 2010		5,000			5,231
R.H. Donnelley Inc. 10.875% 20124		1,000			1,092
Dex Media, Inc., Series B, 0%/9.00% 20138		9,000			8,212
R.H. Donnelley Corp., Series A-2, 6.875% 2013		25,975			25,001
R.H. Donnelley Corp., Series A-1, 6.875% 2013		20,650			19,876
R.H. Donnelley Corp., Series A-3, 8.875% 2016		25,375			26,707
MGM MIRAGE 6.00% 2009		35,100			35,144
Mandalay Resort Group 6.50% 2009		7,122			7,220
MGM MIRAGE 8.50% 2010		22,830			24,599
MGM MIRAGE 6.75% 2012		9,150			9,127
MGM MIRAGE 6.75% 2013		9,200			9,073
DaimlerChrysler North America Holding Corp. 4.05% 2008		2,560			2,508
DaimlerChrysler North America Holding Corp. 4.75% 2008		7,440			7,378
DaimlerChrysler North America Holding Corp. 5.79% 20095		15,000			15,037
DaimlerChrysler North America Holding Corp. 7.20% 2009		11,000			11,410
DaimlerChrysler North America Holding Corp. 8.00% 2010		15,000			16,044
DaimlerChrysler North America Holding Corp. 7.75% 2011		26,500			28,325
Time Warner Inc. 8.18% 2007		20,000			20,278
Time Warner Inc. 5.606% 20095		10,000			10,017
Time Warner Inc. 5.50% 2011		1,000			999
AOL Time Warner Inc. 6.875% 2012		6,950			7,355
Time Warner Companies, Inc. 9.125% 2013		5,000			5,815
Time Warner Inc. 5.875% 2016		8,700			8,697
Time Warner Companies, Inc. 7.25% 2017		8,000			8,761
AOL Time Warner Inc. 7.625% 2031		10,750			12,085
Time Warner Inc. 6.50% 2036		750			749
NTL Cable PLC 8.75% 2014		16,319			17,013
NTL Cable PLC 9.125% 2016		50,500			53,656
Clear Channel Communications, Inc. 4.625% 2008		14,000			13,866
Chancellor Media Corp. of Los Angeles 8.00% 2008		23,750			24,611
Clear Channel Communications, Inc. 7.65% 2010		15,000			15,870
Clear Channel Communications, Inc. 5.75% 2013		3,580			3,332
Clear Channel Communications, Inc. 5.50% 2014		9,170			8,121
Liberty Media Corp. 7.75% 2009		10,950			11,431
Liberty Media Corp. 7.875% 2009		37,983			39,819
Liberty Media Corp. 8.25% 2030		13,870			13,777
J.C. Penney Co., Inc. 8.00% 2010		35,705			38,092
J.C. Penney Co., Inc. 9.00% 2012		10,506			11,980
J.C. Penney Co., Inc. 7.625% 2097		13,500			13,899
K. Hovnanian Enterprises, Inc. 10.50% 2007		6,000			6,202
K. Hovnanian Enterprises, Inc. 8.00% 2012		3,000			3,101
K. Hovnanian Enterprises, Inc. 8.875% 2012		10,515			10,804
K. Hovnanian Enterprises, Inc. 7.75% 2013		12,215			12,215
K. Hovnanian Enterprises, Inc. 6.375% 2014		2,000			1,910
K. Hovnanian Enterprises, Inc. 6.25% 2016		7,000			6,580
K. Hovnanian Enterprises, Inc. 7.50% 2016		4,090			4,110
K. Hovnanian Enterprises, Inc. 8.625% 2017		15,405			16,329
Michaels Stores, Inc., Term Loan B, 8.125% 20135,9		12,062			12,198
Michaels Stores, Inc. 10.00% 20144		43,000			46,117
Neiman Marcus Group, Inc. 9.00% 20156		52,810			58,091
Cox Communications, Inc. 5.91% 20075		8,250			8,284
Cox Communications, Inc. 7.875% 2009		12,500			13,189
Cox Communications, Inc. 4.625% 2010		8,250			8,069
Cox Communications, Inc. 7.75% 2010		10,000			10,755
Cox Communications, Inc. 5.45% 2014		13,500			13,216
CanWest Media Inc., Series B, 8.00% 2012		41,773			43,548
Royal Caribbean Cruises Ltd. 7.00% 2007		3,000			3,045
Royal Caribbean Cruises Ltd. 8.75% 2011		26,850			29,422
Royal Caribbean Cruises Ltd. 7.25% 2016		10,000			10,305
Technical Olympic USA, Inc. 9.00% 2010		9,990			9,840
Technical Olympic USA, Inc. 9.00% 2010		7,325			7,215
Technical Olympic USA, Inc. 7.50% 2011		14,000			11,900
Technical Olympic USA, Inc. 8.25% 20114		3,000			2,910
Technical Olympic USA, Inc. 10.375% 2012		4,500			4,162
Technical Olympic USA, Inc. 7.50% 2015		5,550			4,454
Linens ‘n Things, Inc. 10.985% 20145		40,500			39,488
Idearc Inc. 8.00% 20164		37,000			37,786
Harrah’s Operating Co., Inc. 7.125% 2007		4,150			4,165
Harrah’s Operating Co., Inc. 5.50% 2010		26,375			25,946
Harrah’s Operating Co., Inc. 5.625% 2015		8,800			7,650
Mohegan Tribal Gaming Authority 6.375% 2009		19,780			19,904
Mohegan Tribal Gaming Authority 8.00% 2012		2,100			2,192
Mohegan Tribal Gaming Authority 6.125% 2013		4,175			4,149
Mohegan Tribal Gaming Authority 7.125% 2014		4,950			5,086
Mohegan Tribal Gaming Authority 6.875% 2015		5,000			5,031
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014		36,535			36,352
News America Holdings Inc. 8.00% 2016		6,000			6,892
News America Holdings Inc. 8.25% 2018		5,000			5,854
News America Inc. 6.40% 2035		5,500			5,496
News America Inc. 6.75% 2038		15,000			15,940
Standard Pacific Corp. 6.50% 2008		6,675			6,708
Standard Pacific Corp. 5.125% 2009		17,750			17,351
Standard Pacific Corp. 6.875% 2011		6,500			6,435
Standard Pacific Corp. 6.25% 2014		3,500			3,255
CSC Holdings, Inc. 7.25% 2008		8,000			8,150
CSC Holdings, Inc., Series B, 8.125% 2009		21,400			22,283
Cablevision Systems Corp., Series B, 8.00% 2012		2,050			2,078
Vidéotron Ltée 6.875% 2014		21,069			21,122
Vidéotron Ltée 6.375% 2015		10,435			10,174
Radio One, Inc., Series B, 8.875% 2011		16,750			17,462
Radio One, Inc. 6.375% 2013		13,850			13,192
Viacom Inc. 5.75% 2011		3,000			3,006
Viacom Inc. 6.25% 2016		15,750			15,716
Viacom Inc. 6.875% 2036		11,500			11,491
Tenneco Automotive Inc., Series B, 10.25% 2013		10,325			11,345
Tenneco Automotive Inc. 8.625% 2014		17,675			18,426
Boyd Gaming Corp. 7.75% 2012		28,400			29,359
KB Home 6.375% 2011		4,000			3,975
KB Home 6.25% 2015		24,800			23,425
Federated Retail Holdings, Inc. 5.90% 2016		23,685			23,639
American Media Operations, Inc., Series B, 10.25% 2009		16,005			15,405
American Media Operations, Inc. 8.875% 2011		8,930			8,171
Toys “R” Us, Inc. 7.625% 2011		11,325			10,759
Toys “R” Us-Delaware, Inc., Term Loan B, 9.625% 20125,9		12,000			12,420
Cinemark USA, Inc., Term Loan B, 7.32% 20135,9		3,791			3,828
Cinemark USA, Inc. 9.00% 2013		17,700			18,895
Kabel Deutschland GmbH 10.625% 2014		19,675			22,061
Adelphia Communications Corp. 10.25% 20067		13,975			14,185
Adelphia Communications Corp. 10.25% 20117		6,100			6,466
Warner Music Group 7.375% 2014		20,000			19,800
Bon-Ton Department Stores, Inc. 10.25% 2014		18,850			19,604
Telenet Group Holding NV 0%/11.50% 20144,8		20,027			18,225
D.R. Horton, Inc. 8.00% 2009		16,650			17,384
D.R. Horton, Inc. 7.875% 2011		550			594
Hilton Hotels Corp. 7.625% 2008		2,450			2,506
Hilton Hotels Corp. 7.20% 2009		4,850			5,005
Hilton Hotels Corp. 8.25% 2011		9,618			10,273
Quebecor Media Inc. 7.75% 2016		16,675			17,009
Young Broadcasting Inc. 10.00% 2011		16,890			16,721
Visteon Corp. 7.00% 2014		18,000			15,930
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013		14,536			15,281
William Lyon Homes, Inc. 7.625% 2012		17,000			15,173
Toll Brothers, Inc. 4.95% 2014		5,000			4,597
Toll Brothers, Inc. 5.15% 2015		10,500			9,694
Beazer Homes USA, Inc. 8.125% 2016		13,000			13,585
MDC Holdings, Inc. 7.00% 2012		5,000			5,168
MDC Holdings, Inc. 5.50% 2013		8,250			7,894
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007		12,350			12,403
Goodyear Tire & Rubber Co. 9.14% 20094,5		7,125			7,214
Goodyear Tire & Rubber Co. 8.625% 20114		4,850			5,129
Hyatt Equities, LLC 6.875% 20074		12,000			12,040
Ryland Group, Inc. 5.375% 2012		12,350			11,873
Seneca Gaming Corp. 7.25% 2012		8,000			8,060
Seneca Gaming Corp. 7.25% 2012		3,275			3,300
LBI Media, Inc. 10.125% 2012		10,395			11,084
YUM! Brands, Inc. 7.70% 2012		10,000			10,848
Hanesbrands Inc. 8.735% 20144,5		10,295			10,630
AMC Entertainment Inc., Series B, 8.625% 2012		9,755			10,304
British Sky Broadcasting Group PLC 6.875% 2009		10,000			10,262
Meritage Corp. 7.00% 2014		1,250			1,206
Meritage Homes Corp. 6.25% 2015		9,250			8,649
Staples, Inc. 7.375% 2012		9,000			9,741
NVR, Inc. 5.00% 2010		10,000			9,730
Seminole Tribe of Florida 6.535% 20204		10,000			9,682
TRW Automotive Acquisition Corp. 9.375% 2013		8,988			9,662
Burlington Coat Factory Warehouse Corp. 11.125% 20144		9,625			9,577
EchoStar DBS Corp. 5.75% 2008		9,300			9,265
Cooper-Standard Automotive Inc. 7.00% 2012		10,000			9,200
WCI Communities, Inc. 9.125% 2012		8,000			7,860
Regal Cinemas Corp., Series B, 9.375% 20121		7,250			7,659
Univision Communications Inc. 7.85% 2011		7,000			7,166
Fisher Communications, Inc. 8.625% 2014		6,105			6,548
Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013		6,700			6,382
Aztar Corp. 7.875% 2014		5,500			6,012
Warnaco, Inc. 8.875% 2013		5,625			6,005
Education Management LLC and Education Management Finance Corp. 10.25% 2016		5,500			5,940
Pulte Homes, Inc. 7.875% 2011		5,000			5,406
Gamestop Corp. 8.00% 2012		5,000			5,313
Centex Corp. 6.50% 2016		5,000			5,116
Viacom Inc. 5.625% 2007		5,000			5,002
Carnival Corp. 3.75% 2007		5,000			4,937
Ford Motor Co. 6.50% 2018		5,000			4,000
Gaylord Entertainment Co. 6.75% 2014		4,000			3,905
Entercom Radio, LLC 7.625% 2014		3,135			3,159
Walt Disney Co., Series B, 5.375% 2007		3,000			3,002
Sealy Mattress Co. 8.25% 2014		2,825			2,980
XM Satellite Radio Inc. and XM Satellite Radio Holdings Inc. 9.75% 2014		2,850			2,879
Gray Communications Systems, Inc. 9.25% 2011		2,000			2,098
					2,929,830
FINANCIALS — 3.43%
General Motors Acceptance Corp. 6.125% 2007	$	45,020		$	45,020
General Motors Acceptance Corp. 6.125% 2007		12,500			12,505
General Motors Acceptance Corp. 6.225% 20075		25,000			25,009
General Motors Acceptance Corp. 6.125% 2008		50,000			49,932
Residential Capital Corp. 6.675% 20085		20,000			20,254
Residential Capital Corp. 6.46% 20095		18,395			18,558
Residential Capital Corp. 7.19% 20094,5		22,000			22,089
Residential Capital Corp. 6.375% 2010		39,900			40,264
Residential Capital Corp. 6.00% 2011		15,000			14,933
General Motors Acceptance Corp. 6.875% 2011		92,370			93,835
General Motors Acceptance Corp. 7.25% 2011		59,895			61,667
General Motors Acceptance Corp. 6.875% 2012		11,145			11,340
General Motors Acceptance Corp. 7.00% 2012		66,305			67,715
Residential Capital Corp. 6.50% 2013		5,000			5,053
General Motors Acceptance Corp. 6.75% 2014		32,000			32,517
General Motors Acceptance Corp. 7.569% 20145		37,000			38,967
Ford Motor Credit Co. 7.20% 2007		5,000			5,000
Ford Motor Credit Co. 5.80% 2009		4,000			3,927
Ford Motor Credit Co. 7.875% 2010		7,000			7,108
Ford Motor Credit Co. 9.75% 20104		94,300			100,666
Ford Motor Credit Co. 7.25% 2011		4,450			4,347
Ford Motor Credit Co. 9.875% 2011		7,500			8,038
Ford Motor Credit Co. 8.11% 20125		48,405			48,663
Ford Motor Credit Co. 8.00% 2016		3,250			3,196
Washington Mutual, Inc. 4.00% 2009		9,000			8,768
Washington Mutual, Inc. 5.00% 2012		7,000			6,796
Washington Mutual, Inc. 5.665% 20125		16,000			16,053
Dime Capital Trust I, Dime Bancorp, Inc., Series A, 9.33% 2027		9,425			9,938
Providian Financial Corp., Series A, 9.525% 20274		10,000			10,500
Washington Mutual Preferred Funding I Ltd. 6.534% (undated)4,5		74,300			73,308
Washington Mutual Preferred Funding II Ltd. 6.665% (undated)4,5		17,100			17,380
ASIF Global Financing XVIII 3.85% 20074		8,500			8,394
International Lease Finance Corp. 4.75% 2009		10,000			9,866
International Lease Finance Corp. 5.125% 2010		15,000			14,863
International Lease Finance Corp. 5.00% 2012		5,000			4,881
International Lease Finance Corp., Series R, 5.40% 2012		10,000			9,974
American General Finance Corp., Series I, 5.40% 2015		17,250			17,021
ILFC E-Capital Trust I 5.90% 20654,5		19,000			19,153
ILFC E-Capital Trust II 6.25% 20654,5		18,790			19,161
Rouse Co. 3.625% 2009		32,561			31,140
Rouse Co. 7.20% 2012		38,789			40,224
Rouse Co. 6.75% 20134		12,150			12,310
Sumitomo Mitsui Banking Corp. 5.625% (undated)4,5		44,400			43,287
Sumitomo Mitsui Banking Corp. 6.078% (undated)4,5		32,500			32,316
Capital One Financial Corp. 8.75% 2007		3,500			3,500
Capital One Bank 4.875% 2008		20,000			19,865
Capital One Financial Corp. 7.125% 2008		8,848			9,049
Capital One Financial Corp. 6.25% 2013		30,000			31,184
Capital One Capital I 6.921% 20274,5		10,500			10,568
Simon Property Group, LP 4.875% 2010		11,375			11,210
Simon Property Group, LP 5.375% 2011		32,700			32,612
Simon Property Group, LP 5.00% 2012		8,000			7,838
Simon Property Group, LP 6.35% 2012		5,000			5,200
Simon Property Group, LP 5.25% 2016		5,000			4,849
Simon Property Group, LP 5.875% 2017		5,000			5,079
MBNA Corp. 5.625% 2007		10,000			10,012
Bank of America Corp. 4.25% 2010		10,000			9,654
MBNA Global Capital Funding, Series B, 6.171% 20275		35,000			34,960
J.P. Morgan & Co. Inc. 6.70% 2007		5,000			5,049
J.P. Morgan Chase & Co. 4.75% 2015		7,500			7,144
J.P. Morgan Chase & Co. 4.891% 20155		10,000			9,826
JPMorgan Chase Capital XVIII, Series R, 6.95% 2036		3,100			3,334
JPMorgan Chase Capital XXI, Series U, 6.31% 20375		12,500			12,461
JPMorgan Chase Capital XX, Series T, 6.55% 2066		16,250			16,658
Household Finance Corp. 4.125% 2009		15,000			14,578
HSBC Finance Corp. 4.625% 2010		19,000			18,596
Household Finance Corp. 6.375% 2011		6,000			6,250
Household Finance Corp. 6.375% 2012		5,000			5,239
HSBC Bank USA 4.625% 20144		2,900			2,750
HSBC Finance Corp. 5.00% 2015		2,720			2,633
Midland Bank 5.688% Eurodollar note (undated)5		5,000			4,350
SocGen Real Estate Co. LLC, Series A, 7.64% (undated)4,5		51,475			52,153
TuranAlem Finance BV 8.00% 2014		2,390			2,396
TuranAlem Finance BV 8.50% 20154		10,000			10,225
TuranAlem Finance BV 8.50% 2015		2,610			2,669
TuranAlem Finance BV 8.25% 20374		33,255			34,058
Host Marriott, LP, Series M, 7.00% 2012		28,085			28,506
Host Marriott, LP, Series K, 7.125% 2013		10,000			10,200
Host Hotels & Resorts LP 6.875% 20144		10,500			10,592
UniCredito Italiano SpA 5.584% 20174,5		32,650			32,670
HVB Funding Trust I 8.741% 20314		3,225			4,080
HVB Funding Trust III 9.00% 20314		8,832			11,462
iStar Financial, Inc. 7.00% 20082		6,525			6,616
iStar Financial, Inc., Series B, 4.875% 20092		5,000			4,938
iStar Financial, Inc. 5.375% 20102		10,925			10,825
iStar Financial, Inc. 6.00% 20102		3,750			3,799
iStar Financial, Inc., Series B, 5.125% 20112		10,000			9,807
iStar Financial, Inc. 5.80% 20112		5,000			5,018
iStar Financial, Inc. 6.05% 20152		4,285			4,291
UnumProvident Corp. 7.625% 2011		5,000			5,322
UnumProvident Finance Co. PLC 6.85% 20154		33,500			34,840
EOP Operating LP 7.75% 2007		5,000			5,091
EOP Operating LP 8.10% 2010		6,500			7,080
EOP Operating LP 7.00% 2011		15,000			16,033
EOP Operating LP 6.75% 2012		4,750			5,062
EOP Operating LP 7.875% 20311		5,000			6,304
E*TRADE Financial Corp. 8.00% 2011		3,250			3,409
E*TRADE Financial Corp. 7.375% 2013		8,750			9,122
E*TRADE Financial Corp. 7.875% 2015		24,475			26,311
PNC Funding Corp., Series I, 6.517% (undated)4,5		35,400			36,368
CNA Financial Corp. 6.45% 2008		2,406			2,423
CNA Financial Corp. 6.60% 2008		9,630			9,807
CNA Financial Corp. 5.85% 2014		8,975			8,970
CNA Financial Corp. 7.25% 2023		14,000			15,055
Glen Meadow Pass Through Trust 6.505% 20674		38,500			38,500
Prudential Financial, Inc., Series D, 5.10% 2011		4,000			3,951
Prudential Holdings, LLC, Series C, 8.695% 20234,9		22,250			27,655
Prudential Financial, Inc., Series D, 5.70% 2036		3,500			3,371
Mangrove Bay Pass Through Trust 6.102% 20334,5		28,000			27,193
Twin Reefs Asset Trust (XLFA), Series B, 6.32% (undated)4,5		7,200			7,225
Santander Issuances, SA Unipersonal 5.725% 20164,5		17,200			17,232
Santander Issuances, SA Unipersonal 5.805% 20164,5		13,100			13,165
Abbey National PLC 6.70% (undated)5		3,635			3,684
Liberty Mutual Group Inc. 6.50% 20354		23,150			22,494
Liberty Mutual Group Inc. 7.50% 20364		8,100			8,834
Standard Chartered Bank 5.563% Eurodollar note (undated)5		15,000			12,413
Standard Chartered PLC 6.409% (undated)4,5		19,100			18,823
HBOS PLC 5.375% (undated)4,5		30,260			29,801
Lazard Group LLC 7.125% 2015		26,765			27,967
Hospitality Properties Trust 7.00% 2008		1,210			1,227
Hospitality Properties Trust 6.75% 2013		23,315			24,286
Hospitality Properties Trust 6.30% 2016		1,500			1,526
CIT Group Inc. 3.65% 2007		7,110			7,017
CIT Group Inc. 6.875% 2009		15,000			15,568
CIT Group Inc. 7.75% 2012		4,000			4,403
Skandinaviska Enskilda Banken AB 5.471% (undated)4,5		14,700			14,289
Skandinaviska Enskilda Banken 7.50% (undated)4,5		10,405			10,880
American Express Co. 6.80% 20665		23,250			24,834
Development Bank of Singapore Ltd. 7.875% 20104		10,000			10,726
Development Bank of Singapore Ltd. 7.125% 20114		5,000			5,331
DBS Bank Ltd. 5.97% 20214,5		7,250			7,461
Resona Bank, Ltd. 5.85% (undated)4,5		21,675			21,106
Nationwide Life Insurance Co. 5.35% 20074		5,000			5,000
North Front Pass Through Trust 5.81% 20244,5		10,000			9,790
Nationwide Mutual Insurance Co. 7.875% 20334		5,000			5,926
Downey Financial Corp. 6.50% 2014		20,000			19,961
Lincoln National Corp. 7.00% 20665		18,725			19,837
Mizuho Capital Investment (USD) 1 Ltd. and Mizuho Capital Investment (EUR) 1 Ltd. 6.686%
noncumulative preferred (undated)4,5		18,850			18,897
Kimco Realty Corp. 6.00% 2012		3,250			3,329
Kimco Realty Corp., Series C, 5.783% 2016		15,000			15,105
Westfield Group 5.40% 20124		5,000			4,986
Westfield Capital Corp. Ltd., WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 20144		12,500			12,091
Allstate Financial Global Funding LLC 5.25% 20074		16,750			16,750
Developers Diversified Realty Corp. 4.625% 2010		10,140			9,857
Developers Diversified Realty Corp. 5.50% 2015		5,000			4,900
Independence Community Bank Corp. 4.90% 2010		5,000			4,871
Independence Community Bank 3.75% 20145		10,000			9,626
Genworth Financial, Inc. 6.15% 20665		14,165			14,134
Royal Bank of Scotland Group PLC 5.00% 2014		500			483
Royal Bank of Scotland Group PLC 5.512% noncumulative trust preferred (undated)5		10,000			9,830
National Westminster Bank PLC 7.75% (undated)5		3,024			3,060
Realogy Corp. 6.15% 20114		5,000			5,086
Realogy Corp. 6.50% 20164		7,500			7,631
Financial Security Assurance Holdings Ltd. 6.40% 20664,5		12,500			12,565
Citigroup Inc. 5.125% 2011		12,500			12,437
Banco Mercantil del Norte 6.135% 20164		2,000			2,011
Banco Mercantil del Norte 6.862% 20214		10,250			10,399
United Dominion Realty Trust, Inc., Series E, 4.50% 2008		10,000			9,813
United Dominion Realty Trust, Inc. 5.00% 2012		2,500			2,426
New York Life Global Funding 4.625% 20104		12,500			12,237
Plum Creek Timberlands, LP 5.875% 2015		12,300			12,084
ORIX Corp. 5.48% 2011		12,000			11,935
Kazkommerts International BV 8.50% 20134		1,500			1,599
Kazkommerts International BV 7.875% 20144		10,000			10,281
BOI Capital Funding (No. 2) LP 5.571% (undated)4,5		11,395			11,152
ZFS Finance (USA) Trust I 6.15% 20654,5		4,000			4,061
ZFS Finance (USA) Trust II 6.45% 20654,5		6,500			6,595
Federal Realty Investment Trust 6.125% 2007		10,000			10,032
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		10,000			9,862
United Overseas Bank Ltd. 5.375% 20194,5		10,000			9,817
Popular North America, Inc., Series E, 3.875% 2008		10,000			9,750
Duke Realty LP 4.625% 2013		10,000			9,497
Zions Bancorporation 5.50% 2015		4,000			3,914
Zions Bancorporation 6.00% 2015		5,000			5,060
Bank of Nova Scotia 5.125% 20855		10,000			8,495
Canadian Imperial Bank of Commerce 5.625% Eurodollar note 20855		10,000			8,350
Monumental Global Funding III 5.56% 20144,5		8,000			8,000
Assurant, Inc. 5.625% 2014		7,500			7,443
Goldman Sachs Group, Inc., Series B, 5.455% 20095		3,000			3,004
Goldman Sachs Group, Inc. 5.625% 2017		4,000			3,956
LaBranche & Co Inc. 9.50% 2009		5,000			5,275
BCI U.S. Funding Trust I 8.01% noncumulative preferred (undated)4,5		5,000			5,154
SLM Corp., Series A, 5.40% 2011		5,000			4,986
Lehman Brothers Holdings Inc., Series I, 5.475% 20095		2,000			2,002
Lehman Brothers Holdings Inc. 5.25% 2012		3,000			2,984
ProLogis 5.625% 2015		5,000			4,967
Brandywine Operating Partnership, LP 5.75% 2012		4,190			4,212
Den Danske Bank A/S 7.40% 20104,5		3,850			3,878
Merrill Lynch & Co., Inc., Series C, 5.45% 20095		1,000			1,001
Merrill Lynch & Co., Inc. 6.11% 2037		2,000			1,982
ACE Capital Trust II 9.70% 2030		1,250			1,693
					2,752,907
MORTGAGE-BACKED OBLIGATIONS9— 3.30%
Fannie Mae, Series 2000-T5, Class B, 7.30% 2010		36,750			39,064
Fannie Mae 9.00% 2010		196			201
Fannie Mae 4.89% 2012		10,000			9,775
Fannie Mae 4.00% 2015		7,075			6,732
Fannie Mae 7.00% 2016		247			253
Fannie Mae 5.00% 2018		17,387			17,041
Fannie Mae 5.50% 2018		15,319			15,295
Fannie Mae 10.00% 2018		340			376
Fannie Mae 6.00% 2021		1,954			1,978
Fannie Mae 9.50% 2022		309			337
Fannie Mae 7.50% 2023		58			60
Fannie Mae 7.50% 2023		13			13
Fannie Mae 10.00% 2025		202			223
Fannie Mae, Series 2001-4, Class GA, 10.264% 20255		1,140			1,259
Fannie Mae, Series 2001-4, Class NA, 11.904% 20255		103			114
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		935			966
Fannie Mae 7.00% 2031		852			882
Fannie Mae 7.00% 2031		440			456
Fannie Mae 7.50% 2031		396			410
Fannie Mae, Series 2001-20, Class E, 9.609% 20315		998			1,082
Fannie Mae 3.74% 20335		4,618			4,561
Fannie Mae 4.476% 20355		2,639			2,589
Fannie Mae 4.50% 2035		32,554			30,321
Fannie Mae 4.569% 20355		7,269			7,164
Fannie Mae 5.00% 2035		49,662			47,714
Fannie Mae 5.00% 2035		26,033			25,012
Fannie Mae 5.00% 2035		6,976			6,705
Fannie Mae 5.50% 2035		54,622			53,826
Fannie Mae 5.50% 2035		17,760			17,490
Fannie Mae 5.50% 2035		8,424			8,301
Fannie Mae 6.50% 2035		6,350			6,488
Fannie Mae 5.50% 2036		36,429			35,853
Fannie Mae 5.50% 2036		22,605			22,247
Fannie Mae 5.50% 2036		8,622			8,486
Fannie Mae 5.50% 2036		4,122			4,057
Fannie Mae 6.00% 2036		23,429			23,513
Fannie Mae, Series 2006-43, Class PX, 6.00% 2036		9,733			9,845
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		1,791			1,830
Fannie Mae, Series 2001-T10, Class A-1, 7.00% 2041		1,249			1,280
Fannie Mae, Series 2002-W1, Class 2A, 7.50% 2042		2,035			2,104
Freddie Mac 8.50% 2008		3			3
Freddie Mac, Series SF02, Class GC, 2.64% 2009		3,839			3,777
Freddie Mac 8.50% 2009		41			42
Freddie Mac 8.50% 2010		86			89
Freddie Mac 5.00% 2018		10,837			10,611
Freddie Mac 5.50% 2018		5,398			5,385
Freddie Mac 11.00% 2018		269			296
Freddie Mac, Series 178, Class Z, 9.25% 2021		103			109
Freddie Mac, Series 2289, Class NB, 11.512% 20225		235			261
Freddie Mac 4.647% 20355		11,585			11,393
Freddie Mac 4.788% 20355		8,216			8,104
Freddie Mac 5.00% 2035		18,418			17,712
Freddie Mac 5.00% 2035		14,102			13,565
Freddie Mac 5.50% 2035		9,057			8,918
Freddie Mac 5.50% 2035		8,969			8,831
Freddie Mac, Series 3061, Class PN, 5.50% 2035		6,712			6,721
Freddie Mac, Series 3257, Class PA, 5.50% 2036		25,247			24,983
Freddie Mac 6.00% 2036		33,483			33,620
Freddie Mac 6.00% 2036		27,215			27,326
Freddie Mac 6.00% 2036		4,414			4,432
Freddie Mac 5.50% 2037		65,000			63,967
Freddie Mac 6.00% 2037		80,000			80,310
Countrywide Alternative Loan Trust, Series 2006-J3, Class 2-A-1, 4.75% 2020		7,857			7,699
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035		127,623			126,292
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		24,053			23,969
Countrywide Alternative Loan Trust, Series 2005-40CB, Class A-1, 5.50% 2035		16,716			16,350
Countrywide Alternative Loan Trust, Series 2005-64CB, Class 1-A-7, 5.50% 2035		8,731			8,638
Countrywide Alternative Loan Trust, Series 2005-54CB, Class 1-A-7, 5.50% 2035		8,636			8,616
Countrywide Alternative Loan Trust, Series 2005-23CB, Class A-15, 5.50% 2035		7,960			7,857
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 5.883% 20355		7,319			7,326
Countrywide Alternative Loan Trust, Series 2005-50CB, Class 3-A-1, 6.00% 2035		16,858			16,806
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		10,601			10,571
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		5,371			5,400
Countrywide Alternative Loan Trust, Series 2006-6CB, Class 1-A-1, 5.50% 2036		9,163			9,097
Countrywide Alternative Loan Trust, Series 2006-24CB, Class A-1, 6.00% 2036		17,968			17,921
Countrywide Alternative Loan Trust, Series 2006-16CB, Class A-2, 6.00% 2036		6,223			6,208
Countrywide Alternative Loan Trust, Series 2007-2CB, Class 1-A-9, 5.75% 2037		17,700			17,700
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S8, Class A-2, 5.00% 2018		80,402			78,165
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S10, Class A-2, 5.00% 2018		49,009			47,646
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-S6, Class II-A-1, 5.00% 2018		15,850			15,409
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 20335		4,101			4,059
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR5, Class A-7, 4.208% 20335		2,873			2,855
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.337% 20335		1,422			1,403
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR1, Class A-6, 4.475% 20335		766			758
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR1, Class A, 4.229% 20345		3,973			3,901
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 4.561% 20345		5,268			5,176
WaMu Mortgage Pass-Through Certificates Trust, Series 2006-AR2, Class 2-A1, 5.845% 20375		12,251			12,152
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 5.58% 20455		17,416			17,474
CS First Boston Mortgage Securities Corp., Series 2004-6, Class II-A-1, 4.75% 2019		35,544			34,221
CS First Boston Mortgage Securities Corp., Series 2005-7, Class III-A-1, 5.00% 2020		5,828			5,666
CS First Boston Mortgage Securities Corp., Series 2003-AR26, Class VI-A-1, 4.127% 20335		31,147			30,900
CS First Boston Mortgage Securities Corp., Series 2004-5, Class IV-A-1, 6.00% 2034		4,156			4,142
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3, 6.238% 2034		3,884			3,896
CS First Boston Mortgage Securities Corp., Series 2005-6, Class VI-A-1, 6.00% 2035		7,636			7,639
CS First Boston Mortgage Securities Corp., Series 2005-5, Class IV-A-1, 6.25% 2035		6,402			6,444
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		10,100			10,386
CS First Boston Mortgage Securities Corp., Series 2006-2R, Class A-PO, principal only, 0% 20364		21,252			14,804
CS First Boston Mortgage Securities Corp., Series 2006-3, Class 1-A-4A, 5.896% 2036		5,000			4,976
CS First Boston Mortgage Securities Corp., Series 2004-C5, Class A-2, 4.183% 2037		10,000			9,674
CS First Boston Mortgage Securities Corp., Series 2005-C3, Class A-AB, 4.614% 2037		10,000			9,586
CS First Boston Mortgage Securities Corp., Series 2002-CKN2, Class A-3, 6.133% 2037		6,910			7,128
CS First Boston Mortgage Securities Corp., Series 2005-C5, Class A-2, 5.10% 2038		8,000			7,910
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-2FX, 5.207% 2040		2,400			2,382
CS First Boston Mortgage Securities Corp., Series 2005-C6, Class A-3, 5.23% 2040		10,000			9,838
CHL Mortgage Pass-Through Trust, Series 2003-35, Class 1-A-1, 4.75% 2018		7,558			7,277
CHL Mortgage Pass-Through Trust, Series 2003-27, Class A-1, 3.69% 20335		2,474			2,446
CHL Mortgage Pass-Through Trust, Series 2003-56, Class 6-A-1, 4.822% 20335		15,734			15,590
CHL Mortgage Pass-Through Trust, Series 2003-58, Class 2-A-2, 4.517% 20345		30,664			30,507
CHL Mortgage Pass-Through Trust, Series 2004-22, Class A-2, 4.629% 20345		4,827			4,750
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class 4-A-1, 5.672% 20355		23,539			23,375
Banc of America Mortgage Securities, Inc., Series 2004-7, Class 7-A-1, 5.00% 2019		36,026			34,990
Banc of America Mortgage Securities, Inc., Series 2003-G, Class 2-A-1, 4.088% 20335		2,990			2,951
Banc of America Mortgage Securities, Inc., Series 2003-D, Class 2-A-1, 4.183% 20335		1,692			1,669
Banc of America Mortgage Securities, Inc., Series 2003-J, Class 2-A-2, 4.396% 20335		33,927			33,558
SBA CMBS Trust, Series 2005-1, Class A, 5.369% 20354		10,000			9,980
SBA CMBS Trust, Series 2005-1, Class B, 5.565% 20354		7,000			7,013
SBA CMBS Trust, Series 2006-1A, Class A, 5.314% 20364		12,000			11,939
SBA CMBS Trust, Series 2006-1A, Class D, 5.852% 20364		5,000			4,979
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20364		18,000			17,918
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20364		17,000			16,865
Residential Accredit Loans, Inc., Series 2003-QS16, Class A-1, 5.00% 2018		15,856			15,419
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019		12,588			12,238
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		8,637			8,627
Residential Accredit Loans, Inc., Series 2005-QS13, Class I-A-5, 5.50% 2035		14,023			13,804
Residential Accredit Loans, Inc., Series 2005-QS9, Class A-6, 5.50% 2035		100			96
Residential Accredit Loans, Inc., Series 2006-QS10, Class I-A, 6.00% 2035		16,031			16,031
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 20354		10,000			9,757
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 20354		37,750			37,402
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20364		14,300			14,201
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20364		1,250			1,241
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC12, Class A-2, 4.739% 2037		2,000			1,958
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CIBC11, Class A-2, 5.016% 2037		14,040			13,876
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-C1, Class A-3, 4.719% 2038		7,000			6,697
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2004-C3, Class A-2, 4.223% 2042		11,687			11,305
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP1, Class A-2, 4.625% 2046		20,000			19,581
Tower Ventures, LLC, Series 2006-1, Class A1-FX, 5.361% 20364		12,000			11,942
Tower Ventures, LLC, Series 2006-1, Class C, 5.707% 20364		8,000			8,004
Tower Ventures, LLC, Series 2006-1, Class D, 6.052% 20364		29,000			29,073
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1, Class A-2, 7.56% 2031		10,744			11,137
Merrill Lynch Mortgage Investors, Inc., Series 2003-A6, Class II-A, 4.187% 20335		32,700			32,168
Merrill Lynch Mortgage Investors, Inc., Series 2004-A1, Class II-A-1, 4.577% 20345		4,186			4,144
Wachovia Bank Commercial Mortgage Trust, Series 2002-C1, Class A-2, 5.681% 2034		4,290			4,292
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16, Class A-PB, 4.692% 2041		15,000			14,496
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-2, 4.782% 2042		11,000			10,806
Wachovia Bank Commercial Mortgage Trust, Series 2005-C17, Class A-4, 5.083% 2042		5,000			4,866
Wachovia Bank Commercial Mortgage Trust, Series 2006-C23, Class A-PB, 5.446% 2045		12,500			12,473
Wells Fargo Mortgage-backed Securities Trust, Series 2003-6, Class I-A-1, 5.00% 2018		8,021			7,806
Wells Fargo Mortgage-backed Securities Trust, Series 2003-3, Class II-A-1, 5.25% 2033		8,278			8,133
Wells Fargo Mortgage-backed Securities Trust, Series 2006-AR15, Class A-1, 5.697% 2036		30,459			30,318
IndyMac INDX Mortgage Loan Trust, Series 2006-AR5, Class 2-A-1, 5.874% 20365		45,274			44,962
Bear Stearns ARM Trust, Series 2003-8, Class II-A-1, 4.782% 20345		20,324			20,123
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 4.97% 20345		2,364			2,325
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 20355		20,000			19,429
GE Commercial Mortgage Corp., Series 2004-C1, Class A-2, 3.915% 2038		5,550			5,335
GE Commercial Mortgage Corp., Series 2006-C1, Class A-4, 5.34% 20445		13,000			12,908
GE Commercial Mortgage Corp., Series 2005-C4, Class A-M, 5.333% 2045		1,650			1,634
GE Commercial Mortgage Corp., Series 2005-C4, Class A-3A, 5.333% 2045		17,000			16,986
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A-1, 6.02% 20355		9,266			9,268
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-5, Class 4-A-1, 5.96% 20365		22,963			22,969
Structured Adjustable Rate Mortgage Loan Trust, Series 2006-4, Class 5-A-1, 5.961% 20365		3,571			3,569
Structured Asset Securities Corp., Series 2003-29, Class 1-A-1, 4.75% 2018		9,658			9,299
Structured Asset Securities Corp., Series 2004-15, Class 2-A-1, 4.75% 2019		23,006			22,150
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.52% 20274,5		316			317
Structured Asset Securities Corp., Series 1998-RF1, Class A, 8.728% 20274,5		260			260
Banc of America Commercial Mortgage Inc., Series 2001-1, Class A-2, 6.503% 2036		9,498			9,814
Banc of America Commercial Mortgage Inc., Series 2005-5, Class A-3B, 5.229% 20455		17,730			17,609
Wells Fargo Mortgage Backed Securities Trust, Series 2004-7, Class II-A-1, 4.50% 2019		25,489			24,301
Morgan Stanley Mortgage Loan Trust, Series 2004-3, Class 4-A, 5.686% 20345		10,090			9,831
Morgan Stanley Mortgage Loan Trust, Series 2005-10, Class 5-A-1, 6.00% 2035		13,126			13,144
Morgan Stanley Mortgage Loan Trust, Series 2006-3AR, Class 3-A-1, 6.055% 20365		1,261			1,266
Residential Asset Securitization Trust, Series 2004-A6, Class A-1, 5.00% 2019		24,791			24,110
J.P. Morgan Mortgage Trust, Series 2004-S1, Class 1-A-7, 5.00% 2019		10,860			10,525
J.P. Morgan Mortgage Trust, Series 2005-A1, Class 4-A-1, 4.776% 20355		13,653			13,127
L.A. Arena Funding, LLC, Series 1, Class A, 7.656% 20264		20,677			22,472
GS Mortgage Securities Corp. II, Series 1998-C1, Class D, 7.197% 20305		20,000			20,516
J.P. Morgan Alternative Loan Trust, Series 2006-S1, Class 3-A-5, 5.73% 2036		19,462			19,210
Residential Funding Mortgage Securities I, Inc., Series 2004-S9, Class II-A-1, 4.75% 2019		19,134			18,396
Morgan Stanley Capital I Trust, Series 2005-HQ7, Class A-2, 5.203% 20425		17,875			17,713
Chase Mortgage Finance Trust, Series 2003-S2, Class A-1, 5.00% 2018		18,204			17,697
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-C1, Class X, interest only, 1.136% 20314,5		74,582			1,873
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		7,969			7,769
Bear Stearns Commercial Mortgage Securities Inc., Series 2001-TOP2, Class A-2, 6.48% 2035		7,665			7,951
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA11, Class I-A-5, 5.75% 2036		1,677			1,665
First Horizon Alternative Mortgage Securities Trust, Series 2006-FA3, Class A-6, 6.00% 2036		14,266			14,384
Commercial Mortgage Trust, Series 2003-LNB1, Class A-2, 4.084% 2038		6,925			6,437
Commercial Mortgage Trust, Series 2004-LNB2, Class A-2, 3.60% 2039		7,203			6,968
Bear Stearns ALT-A Trust, Series 2006-2, Class II-4-A-1, 5.943% 20365		13,001			13,012
Washington Mutual Securities Corp., Series 2005-AR1, Class A-1-A, 5.58% 20355		12,784			12,802
GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class A-2, 6.465% 2034		12,250			12,671
GSR Mortgage Loan Trust, Series 2007-AR1, Class 5-A-1, 5.569% 20375		12,500			12,331
Lehman Mortgage Trust, Series 2005-2, Class 3-A3, 5.50% 2035		12,144			12,124
Chase Commercial Mortgage Securities Corp., Series 1998-1, Class A-2, 6.56% 2030		5,446			5,486
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		6,180			6,503
Host Marriott Pool Trust, Series 1999-HMTA, Class D, 7.97% 20154		10,990			11,602
Bear Stearns Asset-backed Securities I Trust, Series 2005-AC8, Class A-4, 5.50% 2035		7,419			7,354
Bear Stearns Asset-backed Securities I Trust, Series 2006-AC-2, Class II-1A-1, 6.00% 2036		4,118			4,110
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		1,693			1,707
GE Capital Commerical Mortgage Corp., Series 2002-3, Class A-1, 4.229% 2037		8,452			8,248
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A-4-1, 5.243% 2037		10,000			9,909
American General Mortgage Loan Trust, Series 2006-1, Class A-5, 5.75% 20354		10,000			9,891
GMAC Mortgage Loan Trust, Series 2006-AR1, Class 2-A-1, 5.647% 20365		9,301			9,247
Citigroup Mortgage Loan Trust, Inc., Series 2003-UST1, Class A-3, 5.00% 2018		7,726			7,558
CSAB Mortgage-backed Trust, Series 2006-2, Class A-6-A, 5.72% 20365		6,923			6,822
Residential Asset Mortgage Products Trust, Series 2003-RZ4, Class A-7, 4.79% 20335		6,905			6,773
HarborView Mortgage Loan Trust, Series 2005-15, Class 2-A1A2, 6.12% 20455		5,759			5,814
Government National Mortgage Assn. 9.50% 2009		249			256
Government National Mortgage Assn. 9.00% 2016		48			53
Government National Mortgage Assn. 8.50% 2017		35			37
Government National Mortgage Assn. 8.50% 2017		8			9
Government National Mortgage Assn. 8.50% 2017		4			4
Government National Mortgage Assn. 10.00% 2020		1,026			1,153
Government National Mortgage Assn. 8.50% 2021		233			251
Government National Mortgage Assn. 8.50% 2021		58			62
Government National Mortgage Assn. 8.50% 2021		7			7
Government National Mortgage Assn. 9.50% 2021		104			116
Government National Mortgage Assn. 10.00% 2021		1,486			1,669
Government National Mortgage Assn. 10.00% 2025		1,398			1,562
Metropolitan Asset Funding, Inc., Series 1998-A, Class B-1, 7.728% 20144		4,669			4,605
Salomon Brothers Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.46% 2008		543			546
Salomon Brothers Commercial Mortgage Trust, Series 2000-C3, Class A-1, 6.341% 20334		2,772			2,781
Financial Asset Securitization, Inc., Series 1997-NAM1, Class B-1, 7.75% 2027		413			412
					2,648,895
TELECOMMUNICATION SERVICES — 2.49%
Nextel Partners, Inc. 8.125% 2011		19,250			20,048
Nextel Communications, Inc., Series E, 6.875% 2013		66,850			67,852
Nextel Communications, Inc., Series D, 7.375% 2015		224,120			229,908
Dobson Cellular Systems, Inc., Series B, 8.375% 2011		29,600			31,413
Dobson Cellular Systems, Inc. 8.375% 2011		6,000			6,368
American Cellular Corp., Series B, 10.00% 2011		77,900			82,964
Dobson Communications Corp. 9.61% 20125		21,000			21,630
Dobson Cellular Systems, Inc. 9.875% 2012		3,850			4,211
Dobson Communications Corp. 8.875% 2013		78,365			81,304
U S WEST Capital Funding, Inc. 6.375% 2008		7,100			7,153
Qwest Capital Funding, Inc. 7.90% 2010		29,635			31,043
Qwest Capital Funding, Inc. 7.25% 2011		34,645			35,684
Qwest Communications International Inc. 7.25% 2011		30,025			30,963
Qwest Corp. 8.875% 2012		12,400			13,826
Qwest Capital Funding, Inc. 7.625% 2021		7,225			7,279
U S WEST Capital Funding, Inc. 6.875% 2028		21,175			19,799
Qwest Capital Funding, Inc. 7.75% 2031		39,335			39,335
AT&T Wireless Services, Inc. 7.50% 2007		34,250			34,400
SBC Communications Inc. 4.125% 2009		17,465			16,956
SBC Communications Inc. 6.25% 2011		5,500			5,671
AT&T Corp. 7.30% 20115		14,789			16,000
AT&T Wireless Services, Inc. 8.125% 2012		34,935			39,152
SBC Communications Inc. 5.10% 2014		38,500			37,297
SBC Communications Inc. 5.625% 2016		10,000			9,982
BellSouth Corp. 6.55% 2034		10,000			10,231
AT&T Inc. 6.80% 2036		11,235			11,980
Triton PCS, Inc. 8.75% 20111		26,700			27,635
Triton PCS, Inc. 9.375% 20111		39,845			41,240
Triton PCS, Inc. 8.50% 2013		94,050			96,401
American Tower Corp. 7.25% 2011		52,175			54,197
American Tower Corp. 7.125% 2012		60,225			62,559
American Tower Corp. 7.50% 2012		43,300			44,978
Intelsat (Bermuda), Ltd. 10.252% 20125		20,575			20,781
Intelsat, Ltd. 6.50% 2013		20,850			18,609
Intelsat (Bermuda), Ltd. 8.25% 2013		39,135			40,700
Intelsat (Bermuda), Ltd. 0%/9.25% 20158		1,150			937
Intelsat (Bermuda), Ltd. 8.625% 2015		6,560			7,011
Intelsat PanAmSat Opco 9.00% 20164		10,000			10,938
Intelsat (Bermuda), Ltd. 9.25% 20164		28,500			31,421
Intelsat (Bermuda), Ltd. 11.25% 20164		6,800			7,718
Centennial Cellular Corp. 10.75% 2008		3,326			3,351
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013		16,000	��		17,340
Centennial Communications Corp. 11.11% 20135		44,800			47,600
Centennial Communications Corp., Centennial Cellular Operating Co. LLC and
Centennial Puerto Rico Operations Corp. 8.125% 20145		60,275			62,309
Windstream Corp. 8.125% 2013		6,000			6,488
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015		10,000			10,800
Windstream Corp. 8.625% 2016		63,950			70,105
Hawaiian Telcom Communications, Inc. 9.75% 2013		16,945			17,538
Hawaiian Telcom Communications, Inc. 10.889% 20135		15,920			16,437
Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015		7,075			7,729
Deutsche Telekom International Finance BV 8.00% 20105		7,150			7,707
Deutsche Telekom International Finance BV 5.75% 2016		25,000			24,669
Deutsche Telekom International Finance BV 8.25% 20305		7,000			8,578
France Télécom 7.75% 20115		32,950			35,791
Cricket Communications, Inc. 9.375% 20144		33,225			35,052
Rogers Wireless Inc. 7.25% 2012		11,825			12,505
Rogers Wireless Inc. 7.50% 2015		16,750			18,090
Telecom Italia Capital SA, Series A, 4.00% 2008		3,000			2,924
Telecom Italia Capital SA, Series B, 5.25% 2013		10,300			9,808
Telecom Italia Capital SA 5.25% 2015		10,100			9,388
Telecom Italia Capital SA 7.20% 2036		7,000			7,173
Cincinnati Bell Inc. 7.25% 2013		26,275			27,457
Rural Cellular Corp. 9.75% 2010		9,000			9,293
Rural Cellular Corp. 8.25% 2012		4,000			4,190
Rural Cellular Corp. 11.121% 20125		11,590			12,169
Verizon New York Inc., Series A, 6.875% 2012		6,500			6,765
Verizon Global Funding Corp. 4.90% 2015		3,560			3,380
Verizon Global Funding Corp. 7.75% 2030		8,175			9,536
TELUS Corp. 7.50% 2007		19,000			19,105
Singapore Telecommunications Ltd. 6.375% 20114		12,000			12,506
Singapore Telecommunications Ltd. 6.375% 2011		4,825			5,029
Telefónica Emisiones, SAU 6.421% 2016		5,000			5,182
Telefónica Emisiones, SAU 7.045% 2036		9,500			10,253
Koninklijke KPN NV 8.00% 2010		8,400			9,030
Koninklijke KPN NV 8.375% 2030		2,000			2,257
Level 3 Financing, Inc. 9.25% 20144		10,000			10,275
Embarq Corp. 6.738% 2013		10,000			10,265
British Telecommunications PLC 8.375% 20105		2,000			2,230
British Telecommunications PLC 9.125% 20305		4,600			6,322
MetroPCS Communications, Inc., Term Loan B, 7.86% 20135,9		8,000			8,060
NTELOS Inc., Term Loan B, 7.57% 20115,9		5,955			5,996
Nordic Telephone Co. Holding ApS 8.875% 20164		4,000			4,320
PCCW-HKT Capital No. 3 Ltd. 5.25% 20154		4,300			4,060
Millicom International Cellular SA 10.00% 2013		3,500			3,854
					2,000,490
U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 1.56%
U.S. Treasury 3.25% 2007		35,000			34,661
U.S. Treasury 3.875% 2007		50,000			49,707
U.S. Treasury 4.375% 2008		45,000			44,701
U.S. Treasury 6.50% 2010		18,000			18,828
U.S. Treasury 4.50% 2011		102,250			100,836
U.S. Treasury 3.625% 2013		10,000			9,372
U.S. Treasury 4.25% 2013		380,375			368,606
U.S. Treasury 8.875% 2017		40,000			53,025
U.S. Treasury 7.875% 2021		15,000			19,310
U.S. Treasury 6.875% 2025		66,750			81,529
U.S. Treasury 6.50% 2026		14,950			17,707
U.S. Treasury 5.25% 2029		55,000			56,830
U.S. Treasury 4.50% 2036		25,200			23,558
Fannie Mae 5.25% 2007		41,500			41,485
Fannie Mae 5.25% 2012		74,000			74,000
Fannie Mae 6.25% 2029		50,000			55,878
Federal Home Loan Bank 3.70% 2007		10,000			9,915
Federal Home Loan Bank 5.625% 2016		105,000			107,150
Freddie Mac 4.125% 2010		40,375			39,177
Freddie Mac 5.25% 2011		10,000			10,068
Federal Agricultural Mortgage Corp. 4.25% 2008		20,000			19,736
Federal Agricultural Mortgage Corp. 4.875% 20114		1,000			993
Federal Agricultural Mortgage Corp. 5.50% 20114		3,000			3,020
United States Agency for International Development, Republic of Egypt 4.45% 2015		10,000			9,541
					1,249,633
INDUSTRIALS — 1.55%
Continental Airlines, Inc. 8.75% 2011		29,250			29,469
Continental Airlines, Inc., Series 2000-2, Class A-2, 7.487% 20129		11,700			12,292
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 20179		6,315			6,445
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20189		2,101			2,091
Continental Airlines, Inc., Series 1998-1, Class A, 6.648% 20199		23,729			24,633
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20199		5,493			5,771
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20199		895			931
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20209		17,114			17,724
Continental Airlines, Inc., Series 1999-1, Class B, 6.795% 20209		957			958
Continental Airlines, Inc., Series 2003-ERJ3, Class A, 7.875% 20209		18,069			18,803
Continental Airlines, Inc., Series 1999-2, Class A-1, 7.256% 20219		792			856
Continental Airlines, Inc., Series 1999-2, Class B, 7.566% 20219		5,626			5,742
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20229		15,697			16,335
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20229		2,908			3,179
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20229		7,425			8,293
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20229		6,215			6,498
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20109		11,424			11,488
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20117,9		5,302			5,942
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20129		66,300			67,667
UAL Corp., Term Loan B, 9.12% 20125,9		44,149			44,149
UAL Corp., Term Loan B, 9.125% 20125,9		6,335			6,335
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20149		8,492			8,540
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20159		5,387			5,464
United Air Lines, Inc., Series 1996-A2, 7.87% 20197,9		4,163			2,334
Delta Air Lines, Inc. 8.00% 20074,7		24,410			14,951
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 20129		8,050			8,256
Delta Air Lines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.417% 20149		46,035			46,639
Delta Air Lines, Inc., Series 1992-A2, 9.20% 20147,9		4,996			5,112
Delta Air Lines, Inc. 10.375% 20227		3,000			1,838
Delta Air Lines, Inc., Series 2002-1, Class G-1, MBIA insured, 6.718% 20249		21,516			21,798
Northwest Airlines, Inc. 9.875% 20077		8,400			8,064
Northwest Airlines, Inc. 7.875% 20087		4,000			3,710
Northwest Airlines, Inc. 10.00% 20097		10,000			9,475
Northwest Airlines, Inc., Term Loan B, 8.864% 20135,9		7,780			7,877
Northwest Airlines, Inc., Term Loan A, 7.114% 20185,9		64,500			64,500
Northwest Airlines, Inc., Series 2001-1, Class A-1, 7.041% 20239		3,514			3,543
American Airlines, Inc., Series 2003-1, Class G, AMBAC insured, 3.857% 20129		1,777			1,726
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20129		17,745			17,845
American Airlines, Inc., Series 2001-2, Class A-1, 6.978% 20129		3,058			3,136
American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012		4,595			4,885
AMR Corp. 9.00% 2012		11,000			11,660
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20139		17,838			19,410
AMR Corp. 9.00% 2016		2,000			2,085
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20199		17,310			17,148
AMR Corp. 10.00% 2021		3,000			3,113
American Airlines, Inc., Series 2001-1, Class A-1, 6.977% 20229		8,633			8,531
Allied Waste North America, Inc. 8.50% 2008		8,300			8,694
Allied Waste North America, Inc., Series B, 6.50% 2010		16,000			16,100
Allied Waste North America, Inc., Series B, 5.75% 2011		18,800			18,330
Allied Waste North America, Inc. 7.875% 2013		2,500			2,588
Allied Waste North America, Inc., Series B, 6.125% 2014		11,375			10,892
Allied Waste North America, Inc., Series B, 7.375% 2014		4,500			4,511
Allied Waste North America, Inc. 7.25% 2015		8,500			8,553
Nielsen Finance LLC, Term Loan B, 8.125% 20135,9		5,936			5,996
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 20144		29,275			32,056
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20164,8		18,100			12,783
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 20114,9		32,786			33,767
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class G, MBIA insured, 6.664% 20134,9		11,938			12,444
NTK Holdings Inc. 0%/10.75% 20148		12,500			9,250
THL Buildco, Inc. 8.50% 2014		27,325			27,257
Hutchison Whampoa International Ltd. 7.00% 20114		5,000			5,272
Hutchison Whampoa International Ltd. 6.50% 20134		25,000			26,061
American Standard Inc. 7.375% 2008		9,928			10,066
American Standard Inc. 8.25% 2009		2,124			2,236
American Standard Inc. 7.625% 2010		16,501			17,348
USG Corp. 6.30% 20164		28,500			28,548
ARAMARK Corp., Term Loan B, 7.485% 20145,9		9,350			9,444
ARAMARK Corp. 8.50% 20154		11,700			12,036
ARAMARK Corp. 8.86% 20154,5		1,425			1,461
Tyco International Group SA 6.125% 2008		8,000			8,092
Tyco International Group SA 7.00% 2028		4,345			5,124
Tyco International Group SA 6.875% 2029		8,310			9,633
Waste Management, Inc. 6.50% 2008		5,000			5,081
Waste Management, Inc. 5.00% 2014		7,000			6,695
WMX Technologies, Inc. 7.10% 2026		10,125			10,849
Ashtead Group PLC 8.625% 20154		7,500			7,838
Ashtead Capital, Inc. 9.00% 20164		13,175			14,163
General Electric Capital Corp., Series A, 5.375% 2007		8,000			8,001
General Electric Capital Corp., Series A, 6.00% 2012		8,000			8,250
General Electric Co. 5.00% 2013		5,000			4,925
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013		19,505			20,578
Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012		11,100			11,738
H-Lines Finance Holding Corp. 0%/11.00% 20138		8,448			7,878
Argo-Tech Corp. 9.25% 2011		17,000			18,488
Goodman Global Holdings, Inc., Series B, 7.875% 2012		17,000			17,170
Accuride Corp. 8.50% 2015		17,200			16,856
Jacuzzi Brands, Inc. 9.625% 2010		14,991			16,003
Case New Holland Inc. 6.00% 2009		15,000			15,075
John Deere Capital Corp., Series D, 4.375% 2008		9,000			8,893
John Deere Capital Corp. 4.875% 2009		4,000			3,962
John Deere Capital Corp. 5.40% 2011		2,000			1,998
Southwest Airlines Co. 5.25% 2014		15,000			14,407
ACIH, Inc. 0%/11.50% 20124,8		6,125			4,869
Atrium Companies, Inc., Term Loan B, 8.10% 20125,9		7,672			7,681
DRS Technologies, Inc. 6.625% 2016		10,000			9,950
BNSF Funding Trust I 6.613% 20555		10,000			9,744
Bombardier Inc. 6.30% 20144		9,450			8,989
Caterpillar Financial Services Corp., Series F, 3.10% 2007		5,000			4,968
Caterpillar Financial Services Corp. 2.70% 2008		3,000			2,891
Caterpillar Financial Services Corp., Series F, 5.43% 20085		400			401
RBS Global, Inc. and Rexnord Corp. 9.50% 20144		4,250			4,420
RBS Global, Inc. and Rexnord Corp. 8.875% 20164		2,125			2,125
RSC Equipment Rental, Second Lien Term Loan B, 8.85% 20135,9		6,100			6,214
TransDigm Group Inc. 7.75% 20144		5,500			5,555
Hertz Corp. 10.50% 2016		4,500			5,085
Esco Corp. 8.625% 20134		4,000			4,140
Terex Corp. 7.375% 2014		3,500			3,588
H&E Equipment Services, Inc. 8.375% 2016		3,025			3,214
Standard Aero Holdings, Inc. 8.25% 2014		2,500			2,550
Alion Science and Technology 10.25% 20154		1,740			1,762
Mobile Storage Group, Inc. 9.75% 20144		1,650			1,745
Williams Scotsman, Inc. 8.50% 2015		500			523
					1,245,045
ENERGY — 1.06%
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20094,9		30,811			30,095
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 20099		593			579
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20144,9		13,329			14,814
Ras Laffan Liquefied Natural Gas Co. Ltd. 8.294% 20149		4,325			4,807
Ras Laffan Liquefied Natural Gas II 5.298% 20204,9		49,350			46,823
Ras Laffan Liquefied Natural Gas III 5.838% 20274,9		54,650			51,835
Williams Companies, Inc. and Credit Linked Certificate Trust 6.75% 20094		8,000			8,160
Williams Companies, Inc. 6.375% 20104		4,700			4,747
Williams Companies, Inc. 7.36% 20104,5		8,000			8,240
Northwest Pipeline Corp. 8.125% 2010		5,000			5,213
Transcontinental Gas Pipe Line Corp., Series B, 7.00% 2011		10,000			10,450
Williams Companies, Inc. 7.125% 2011		38,750			40,397
Williams Companies, Inc. 8.125% 2012		14,810			16,013
Williams Partners LP 7.25% 20174		12,325			12,726
Williams Companies, Inc. 7.875% 2021		10,000			10,800
Williams Companies, Inc. 8.75% 2032		14,000			15,995
El Paso Corp. 7.625% 2007		5,000			5,050
El Paso Corp. 6.375% 2009		800			807
El Paso Corp. 7.75% 2010		2,500			2,631
El Paso Corp. 7.00% 2011		7,800			8,034
El Paso Energy Corp. 7.375% 2012		525			547
El Paso Corp. 7.875% 2012		2,000			2,125
Tennessee Gas Pipeline Co. 7.00% 2028		71,500			74,491
Newfield Exploration Co., Series B, 7.45% 2007		6,000			6,083
Newfield Exploration Co. 7.625% 2011		1,500			1,575
Newfield Exploration Co. 6.625% 2014		32,075			31,674
Newfield Exploration Co. 6.625% 2016		44,400			43,734
Pogo Producing Co. 7.875% 2013		31,250			31,641
Pogo Producing Co. 6.625% 2015		2,400			2,268
Pogo Producing Co. 6.875% 2017		33,650			31,883
Premcor Refining Group Inc. 9.25% 2010		9,775			10,258
Premcor Refining Group Inc. 6.125% 2011		14,500			14,670
Premcor Refining Group Inc. 6.75% 2011		11,150			11,532
Premcor Refining Group Inc. 9.50% 2013		12,275			13,214
Energy Transfer Partners, LP 5.65% 2012		13,665			13,649
Energy Transfer Partners, LP 5.95% 2015		23,965			24,093
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20144,9		28,500			28,434
Tengizchevroil Finance Co. S.àr.l., Series A, 6.124% 20149		9,000			8,979
Drummond Co., Inc. 7.375% 20164		37,705			36,291
Devon Financing Corp., ULC 6.875% 2011		29,500			31,112
Qatar Petroleum 5.579% 20114		20,000			19,996
Sunoco, Inc. 4.875% 2014		10,060			9,373
Sonoco, Inc. 5.75% 2017		10,000			9,729
Enterprise Products Operating LP, Series B, 5.00% 2015		7,000			6,602
Enterprise Products Operating LP 8.375% 20665		7,500			8,207
OPTI Canada Inc. 8.25% 20144		10,450			10,973
XTO Energy Inc. 5.65% 2016		10,000			9,842
Massey Energy Co. 6.875% 2013		7,500			6,975
Pemex Project Funding Master Trust 7.875% 2009		1,600			1,663
Pemex Project Funding Master Trust 7.375% 2014		3,500			3,798
Pemex Project Funding Master Trust 8.625% 2022		500			613
Kinder Morgan Energy Partners LP 5.125% 2014		6,325			6,058
Sabine Pass LNG, L.P. 7.25% 20134		6,000			5,902
Overseas Shipholding Group, Inc. 8.25% 2013		3,895			4,109
Petrobas International Finance Co. 6.125% 2016		5,000			5,040
Peabody Energy Corp., Series B, 6.875% 2013		4,300			4,343
PETRONAS Capital Ltd. 7.00% 20124		4,000			4,288
International Coal Group, Inc. 10.25% 2014		4,000			3,960
Delek & Avner-Yam Tethys Ltd. 5.326% 20134,9		3,908			3,818
OXYMAR 7.50% 20164,9		3,085			3,216
TNK-BP Finance SA 7.50% 20164		1,500			1,570
					846,544
UTILITIES — 0.90%
AES Corp. 9.50% 2009		49,815			53,053
AES Corp. 9.375% 2010		18,252			19,803
AES Corp. 8.75% 20134		62,100			66,525
AES Panama SA 6.35% 20164		6,000			5,845
AES Red Oak, LLC, Series A, 8.54% 20199		32,641			35,497
AES Red Oak, LLC, Series B, 9.20% 20299		7,000			7,875
Mission Energy Holding Co. 13.50% 2008		22,230			24,481
Edison Mission Energy 7.73% 2009		6,720			6,955
Edison Mission Energy 7.50% 2013		20,700			21,580
Edison Mission Energy 7.75% 2016		29,325			31,158
Midwest Generation, LLC, Series B, 8.56% 20169		11,625			12,794
Homer City Funding LLC 8.734% 20269		9,775			11,278
Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034		24,675			26,772
Southern California Edison Co., First and Refunding Mortgage Bonds, Series 2006-E, 5.55% 2037		6,500			6,164
NRG Energy, Inc. 7.25% 2014		24,525			24,648
NRG Energy, Inc. 7.375% 2016		76,625			76,912
Nevada Power Co., General and Refunding Mortgage Bonds, Series A, 8.25% 2011		6,000			6,587
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012		4,250			4,395
Nevada Power Co., General and Refunding Mortgage Notes, Series G, 9.00% 2013		19,595			21,256
Sierra Pacific Resources 8.625% 2014		2,725			2,952
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015		5,675			5,675
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016		13,700			13,754
Sierra Pacific Resources 6.75% 2017		3,000			3,021
Israel Electric Corp. Ltd. 7.95% 20114		5,000			5,387
Israel Electric Corp. Ltd. 7.70% 20184		22,500			25,140
Israel Electric Corp. Ltd. 8.10% 20964		9,155			9,992
PSEG Energy Holdings Inc. 8.625% 2008		3,593			3,687
PSEG Power LLC 7.75% 2011		13,806			14,958
PSEG Power LLC 5.00% 2014		10,000			9,593
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007		8,000			8,000
Dominion Resources, Inc., Series 2002-D, 5.125% 2009		8,500			8,437
Virginia Electric and Power Co., Series 2003-A, 4.75% 2013		6,000			5,767
Cilcorp Inc. 8.70% 2009		9,000			9,655
Union Electric Co. 5.40% 2016		8,000			7,801
Cilcorp Inc. 9.375% 2029		3,000			3,393
Abu Dhabi National Energy Co. PJSC (TAQA) 5.875% 20164		11,000			11,004
Abu Dhabi National Energy Co. PJSC (TAQA) 6.50% 20364		6,000			6,111
MidAmerican Energy Co. 4.65% 2014		3,200			3,022
MidAmerican Energy Holdings Co. 6.125% 2036		11,650			11,752
Appalachian Power Co., Series G, 3.60% 2008		6,770			6,615
Appalachian Power Co., Series M, 5.55% 2011		3,000			2,998
Ohio Power Co., Series K, 6.00% 2016		5,000			5,125
Exelon Corp. 6.75% 2011		1,000			1,044
Exelon Generation Co., LLC 6.95% 2011		1,300			1,368
Commonwealth Edison Co., First Mortgage Bonds, Series 104, 5.95% 2016		5,000			5,058
Commonwealth Edison Co., First Mortgage Bonds, Series 103, 5.90% 2036		3,850			3,730
Alabama Power Co., Series X, 3.125% 2008		3,750			3,651
Alabama Power Co., Series R, 4.70% 2010		1,250			1,220
Alabama Power Co., Series Q, 5.50% 2017		5,000			4,992
Mirant Americas Generation, Inc. 8.30% 2011		9,000			9,225
Constellation Energy Group, Inc. 6.125% 2009		8,000			8,142
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc. 5.25% 2015		6,000			5,867
NiSource Finance Corp. 7.875% 2010		5,000			5,389
Duke Energy Corp., First and Refunding Mortgage Bonds, 5.30% 2015		5,000			4,949
Scottish Power PLC 5.375% 2015		5,000			4,912
Pacific Gas and Electric Co., First Mortgage Bonds, 6.05% 2034		4,000			4,016
Enersis SA 7.375% 2014		3,000			3,224
Centerpoint Energy, Inc., Series B, 6.85% 2015		3,000			3,155
Tri-State Generation and Transmission Assn. Inc., Pass Through Trust, Series 2003-A, 6.04% 20184,9		2,965			2,963
FPL Energy National Wind Portfolio, LLC 6.125% 20194,9		2,006			1,935
					722,257
INFORMATION TECHNOLOGY — 0.88%
Electronic Data Systems Corp. 7.125% 2009		15,515			16,116
Electronic Data Systems Corp., Series B, 6.50% 20135		137,150			137,328
Electronic Data Systems Corp. 7.45% 2029		10,555			11,399
Celestica Inc. 7.875% 2011		63,905			62,787
Celestica Inc. 7.625% 2013		36,945			35,329
Sanmina-SCI Corp., Term Loan B, 7.875% 20085,9		13,000			13,081
Sanmina-SCI Corp. 6.75% 2013		11,000			10,010
Sanmina-SCI Corp. 8.125% 2016		67,650			64,775
NXP BV and NXP Funding LLC 8.11% 20134,5		14,000			14,333
NXP BV and NXP Funding LLC 7.875% 20144		13,750			14,266
NXP BV and NXP Funding LLC 9.50% 20154		44,000			45,705
Jabil Circuit, Inc. 5.875% 2010		54,140			53,725
Western Union Co. 5.523% 20084,5		22,000			22,019
Western Union Co. 5.40% 20114		5,000			4,918
Western Union Co. 5.93% 20164		24,000			23,763
Flextronics International Ltd. 6.50% 2013		45,000			43,875
SunGard Data Systems Inc. 9.125% 2013		21,050			22,260
SunGard Data Systems Inc. 10.25% 2015		12,500			13,500
Xerox Corp. 7.125% 2010		21,000			21,892
Freescale Semiconductor, Inc., Term Loan B, 7.37% 20135,9		15,000			15,112
Firestone Acquisition Corp. 8.875% 20144		2,000			2,000
Hughes Communications, Inc. 9.50% 2014		15,750			16,734
Sensata Technologies BV 8.25% 20144,5		11,000			10,862
Cisco Systems, Inc. 5.25% 2011		9,500			9,501
Serena Software, Inc. 10.375% 2016		8,630			9,256
Nortel Networks Ltd. 9.61% 20114,5		6,500			6,939
Hyundai Semiconductor America, Inc. 8.625% 20074		4,860			4,884
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 8.61% 20115		4,150			3,569
					709,938
MATERIALS — 0.86%
Abitibi-Consolidated Co. of Canada 5.25% 2008		25,650			25,361
Abitibi-Consolidated Finance LP 7.875% 2009		6,136			6,335
Abitibi-Consolidated Inc. 8.55% 2010		12,693			13,026
Abitibi-Consolidated Inc. 7.75% 2011		6,025			5,889
Abitibi-Consolidated Co. of Canada 8.86% 20115		5,225			5,264
Abitibi-Consolidated Co. of Canada 6.00% 2013		13,710			12,031
Abitibi-Consolidated Co. of Canada 8.375% 2015		17,585			17,189
Owens-Illinois, Inc. 8.10% 2007		750			756
Owens-Illinois, Inc. 7.35% 2008		9,800			9,898
Owens-Brockway Glass Container Inc. 8.875% 2009		18,436			18,943
Owens-Illinois, Inc. 7.50% 2010		750			765
Owens-Brockway Glass Container Inc. 7.75% 2011		13,500			13,973
Owens-Brockway Glass Container Inc. 8.75% 2012		6,000			6,375
Owens-Brockway Glass Container Inc. 8.25% 2013		14,000			14,665
Domtar Inc. 5.375% 2013		12,350			11,269
Domtar Inc. 7.125% 2015		42,750			42,429
Norske Skogindustrier ASA 7.625% 20114		35,291			37,236
Norske Skogindustrier ASA 6.125% 20154		9,000			8,606
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014		41,710			40,876
Jefferson Smurfit Corp. (U.S.) 8.25% 2012		3,700			3,728
Stone Container Corp. 8.375% 2012		16,558			16,724
Jefferson Smurfit Corp. (U.S.) 7.50% 2013		15,825			15,350
Graphic Packaging International, Inc. 8.50% 2011		20,750			21,632
Graphic Packaging International, Inc. 9.50% 2013		12,225			13,020
Georgia Gulf Corp. 9.50% 20144		25,600			25,472
Georgia Gulf Corp. 10.75% 20164		6,800			6,664
Stora Enso Oyj 6.404% 20164		14,500			14,827
Stora Enso Oyj 7.25% 20364		13,000			13,567
JSG Funding PLC 9.625% 2012		8,200			8,754
JSG Funding PLC 7.75% 2015		19,300			19,541
Momentive Performance Materials Inc. 9.75% 20144		19,000			19,570
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B, 0%/10.50% 20148		13,800			12,075
BCP Caylux Holdings Luxembourg SCA 9.625% 2014		5,150			5,717
C10 Capital (SPV) Ltd. 6.722% (undated)4,5		16,395			16,243
NewPage Corp., Series A, 11.621% 20125		10,000			11,000
NewPage Corp., Series A, 12.00% 2013		3,300			3,613
Equistar Chemicals, LP 10.125% 2008		12,825			13,659
Equistar Chemicals, LP and Equistar Funding Corp. 8.75% 2009		625			658
United States Steel Corp. 9.75% 2010		13,205			14,030
Nalco Co. 7.75% 2011		7,810			8,005
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 20148		7,200			6,012
Rhodia 10.25% 2010		11,668			13,360
Weyerhaeuser Co. 5.95% 2008		5,331			5,369
Weyerhaeuser Co. 7.375% 2032		7,000			7,459
FMG Finance Pty Ltd. 10.625% 20164		11,500			12,736
Georgia-Pacific Corp., First Lien Term Loan B, 7.353% 20125,9		11,368			11,481
Ainsworth Lumber Co. Ltd. 7.25% 2012		4,150			3,299
Ainsworth Lumber Co. Ltd. 6.75% 2014		10,000			7,550
Ainsworth Lumber Co. Ltd. 6.75% 2014		650			497
Allegheny Technologies, Inc. 8.375% 2011		10,500			11,209
Building Materials Corp. of America, Series B, 8.00% 2007		3,500			3,564
Building Materials Corp. of America 8.00% 2008		3,000			3,138
Building Materials Corp. of America 7.75% 2014		3,000			2,850
AEP Industries Inc. 7.875% 2013		7,300			7,482
UPM-Kymmene Corp. 5.625% 20144		7,500			7,317
AMH Holdings, Inc. 0%/11.25% 20148		6,240			4,602
Chemtura Corp. 6.875% 2016		4,180			4,075
Ispat Inland ULC 9.75% 2014		3,207			3,582
Rockwood Specialties Group, Inc. 10.625% 2011		1,500			1,603
Rockwood Specialties Group, Inc. 7.50% 2014		1,175			1,193
Covalence Specialty Materials Corp. 10.25% 20164		2,950			2,729
Packaging Corp. of America 4.375% 20082		2,500			2,454
Plastipak Holdings, Inc. 8.50% 20154		2,275			2,389
Airgas, Inc. 6.25% 2014		1,750			1,706
International Paper Co. 5.85% 2012		1,667			1,686
Mosaic Co. 7.375% 20144		725			738
Mosaic Co. 7.625% 20164		875			899
Corporación Nacional del Cobre de Chile 6.375% 20124		1,500			1,563
Arbermarle Corp. 5.10% 2015		870			821
Neenah Paper, Inc. 7.375% 2014		107			104
					688,202
HEALTH CARE — 0.71%
HCA Inc., Term Loan B, 8.114% 20135,9		164,100			165,536
HCA Inc. 9.125% 20144		11,490			12,251
HCA Inc. 9.25% 20164		22,620			24,090
HCA Inc. 9.625% 20164,6		13,520			14,551
HealthSouth Corp. 11.354% 20144,5		27,425			30,270
HealthSouth Corp. 10.75% 20164		50,950			56,236
Tenet Healthcare Corp. 6.375% 2011		17,300			16,089
Tenet Healthcare Corp. 9.875% 2014		20,215			20,594
Tenet Healthcare Corp. 9.25% 2015		14,175			14,210
Warner Chilcott Corp. 8.75% 2015		47,460			49,240
AMR HoldCo, Inc. and EmCare HoldCo, Inc. 10.00% 2015		29,470			32,343
Cardinal Health, Inc. 4.00% 2015		25,000			22,043
Cardinal Health, Inc. 5.80% 20164		10,000			9,922
Team Finance LLC and Health Finance Corp. 11.25% 2013		26,600			27,731
Elan Corp., PLC 8.875% 20134		12,100			12,040
Elan Corp., PLC 9.496% 20134,5		4,000			3,990
Concentra Operating Corp. 9.50% 2010		7,475			7,905
Concentra Operating Corp. 9.125% 2012		7,255			7,672
Humana Inc. 6.45% 2016		14,250			14,614
Amgen Inc. 4.00% 2009		9,125			8,835
Angiotech Pharmaceuticals, Inc. 9.12% 20134,5		6,000			6,180
Aetna Inc. 7.875% 2011		4,500			4,894
Accellent Inc. 10.50% 2013		3,105			3,245
Select Medical Corp. 7.625% 2015		2,425			2,183
					566,664
ASSET-BACKED OBLIGATIONS9— 0.58%
Drive Auto Receivables Trust, Series 2005-1, Class A-4, MBIA insured, 4.01% 2012		10,000			9,840
Drive Auto Receivables Trust, Series 2005-2, Class A-3, MBIA insured, 4.26% 20124		8,900			8,773
Drive Auto Receivables Trust, Series 2005-3, Class A-4, FSA insured, 5.09% 20134		20,000			19,931
Drive Auto Receivables Trust, Series 2006-2, Class A-3, MBIA insured, 5.33% 20144		20,000			20,047
CWABS, Inc., Series 2006-23, Class 2-A-2, 5.43% 20295		20,000			19,997
CWABS, Inc., Series 2004-12, Class 2-AV-2, 5.60% 20335		405			405
CWABS, Inc., Series 2005-11, Class AF-2, 4.657% 2036		11,330			11,210
CWABS, Inc., Series 2006-24, Class 2-A-3, 5.47% 20375		4,000			3,995
ARG Funding Corp., Series 2005-1, Class A-1, MBIA insured, 4.02% 20094		10,000			9,861
ARG Funding Corp., Series 2005-2, Class A-4, AMBAC insured, 4.84% 20114		20,000			19,749
Green Tree Financial Corp., Series 1995-3, Class B-2, 8.10% 20257		12,867			4,322
Green Tree Financial Corp., Series 1995-2, Class B-2, 8.80% 20267		9,283			5,197
Green Tree Financial Corp., Series 1996-2, Class B-2, 7.90% 20277		8,186			1
Green Tree Financial Corp., Series 1997-6, Class B-2, 7.75% 20297		6,530			1
Conseco Finance Home Loan Trust, Series 1999-G, Class B-2, 10.96% 2029		17,523			16,998
Green Tree Financial Corp., Series 1998-4, Class B-2, 8.11% 20307		3,999			40
Morgan Stanley ABS Capital I Inc. Trust, Series 2007-HE1, Class A-2B, 5.33% 20365		25,235			25,235
Triad Automobile Receivables Trust, Series 2006-C, Class A-3, AMBAC insured, 5.26% 2011		11,000			10,966
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012		10,000			9,807
Prestige Auto Receivables Trust, Series 2005-1A, Class A-2, FSA insured, 4.37% 20124		10,000			9,895
Prestige Auto Receivables Trust, Series 2006-1A, Class A-2, FSA insured, 5.25% 20134		10,000			9,991
Advanta Business Card Master Trust, Series 2005-A2, Class A-2, 5.45% 20135		18,000			17,989
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-3, 4.14% 2012		10,000			9,736
PG&E Energy Recovery Funding LLC, Series 2005-2, Class A-3, 5.12% 2014		8,040			7,987
CPS Auto Receivables Trust, Series 2006-A, Class 1-A-4, FSA insured, 5.33% 20124		7,500			7,511
CPS Auto Receivables Trust, Series 2006-C, Class A-4, XLCA insured, 5.14% 20134		10,000			9,969
Drivetime Auto Owner Trust, Series 2005-C, Class A-3, MBIA insured, 5.006% 20114		6,709			6,683
Drivetime Auto Owner Trust, Series 2006-A, Class A-3, XLCA insured, 5.501% 20114		10,000			10,028
UPFC Auto Receivables Trust, Series 2004-A, Class A-3, AMBAC insured, 3.27% 2010		2,496			2,464
UPFC Auto Receivables Trust, Series 2005-B, Class A-3, XLCA insured, 4.98% 2011		10,000			9,958
J.P. Morgan Mortgage Acquisition Corp., Series 2005-FRE1, Class A-F-4, 5.488% 2035		11,978			11,796
Long Beach Acceptance Auto Receivables Trust, Series 2006-B, Class A-4, FSA insured, 5.18% 2013		11,500			11,451
BMW Vehicle Owner Trust, Series 2006-A, Class A-4, 5.07% 2011		11,044			11,001
Capital One Multi-asset Execution Trust, Series 2006-10, Class A, 5.15% 2014		10,425			10,404
Home Equity Asset Trust, Series 2004-7, Class M-1, 5.94% 20355		10,000			10,110
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FX, 10.421% 20074		5,000			5,023
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FL, 10.485% 20074,5		5,000			5,022
Providian Master Note Trust, Series 2005-A1A, Class A, 5.38% 20124,5		10,000			10,008
CWHEQ Home Equity Loan Trust, Series 2006-S2, Class A-5, FGIC insured, 5.753% 2027		10,000			9,978
Residential Funding Mortgage Securities II, Inc., Series 2006-HSA2, Class A-I-5, FGIC insured, 5.63% 2036		10,000			9,887
First USA Credit Card Master Trust, Series 1997-4, Class C, 6.32% 20104,5		6,500			6,510
First USA Credit Card Master Trust, Series 1998-6, Class C, 6.16% 20114		2,000			2,021
AEP Texas Central Transitioning Funding II LLC, Senior Secured Transition Bonds, Series A, Class A-3, 5.09% 2015		8,265			8,146
Argent Securities Trust, Series 2006-M2, Class A-2D, 5.56% 20365		8,000			8,023
Vanderbilt Mortgage and Finance, Inc., Series 1999-B, Class I-A-6, 6.925% 2024		7,706			7,887
Ameriquest Mortgage Securities Inc., Series 2003-12, Class M-1, 6.07% 20345		7,000			7,061
Bear Stearns Asset-backed Securities I Trust, Series 2005-CL1, Class A-1, 5.82% 20345		6,710			6,732
Residential Asset Securities Corp. Trust, Series 2001-KS3, Class A-I-6, 5.96% 2031		6,530			6,534
Residential Asset Securities Corp. Trust, Series 2003-KS6, Class A-2, 5.62% 20335		191			191
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2005-2, Class A-6, AMBAC insured, 5.08% 20114		6,375			6,307
MBNA Master Credit Card Trust II, Series 2000-H, Class B, 5.92% 20135		5,000			5,083
AmeriCredit Automobile Receivables Trust, Series 2003-C-F, Class A-4, FSA insured, 3.48% 2010		4,755			4,737
Centex Home Equity Loan Trust, Series 2005-A, Class AF-3, 4.14% 2028		3,604			3,583
PECO Energy Transition Trust, Series 1999-A, Class A-7, 6.13% 2009		1,250			1,259
Nebhelp Trust, Student Loan Interest Margin Securities, Series 1, Class A, MBIA insured, 6.68% 20164		807			807
Specialty Underwriting and Residential Finance Trust, Series 2004-BC4, Class A-2B, 5.63% 20355		782			782
Fremont Home Loan Trust, Series 2005-E, Class 2-A-1, 5.41% 20365		111			111
					469,040
CONSUMER STAPLES — 0.42%
Tyson Foods, Inc. 6.85% 20165		70,600			72,027
SUPERVALU INC., Term Loan B, 7.10% 20125,9		20,596			20,802
SUPERVALU INC. 7.50% 2012		5,090			5,340
Albertson’s, Inc. 7.25% 2013		21,355			22,002
Albertson’s, Inc. 8.00% 2031		12,650			13,019
Stater Bros. Holdings Inc. 8.86% 20105		6,525			6,639
Stater Bros. Holdings Inc. 8.125% 2012		28,100			28,662
Spectrum Brands, Inc. 7.375% 2015		27,850			24,438
Dole Food Co., Inc. 8.625% 20095		7,400			7,437
Dole Food Co., Inc. 7.25% 2010		4,975			4,832
Dole Food Co., Inc. 8.875% 2011		12,075			12,075
Jean Coutu Group (PJC) Inc. 7.625% 2012		2,500			2,637
Jean Coutu Group (PJC) Inc. 8.50% 2014		16,740			17,493
Rite Aid Corp. 9.50% 2011		4,500			4,736
Rite Aid Corp. 7.50% 2015		2,500			2,503
Rite Aid Corp. 7.70% 2027		9,000			7,650
Rite Aid Corp. 6.875% 2028		1,000			795
CVS Corp. 5.298% 20274,9		4,526			4,264
CVS Corp. 6.036% 20284,9		9,983			9,848
Vitamin Shoppe 12.874% 20125		11,650			12,291
Ahold Finance U.S.A., Inc. 6.25% 2009		12,015			12,195
Playtex Products, Inc. 8.00% 2011		10,000			10,512
Cadbury Schweppes US Finance LLC 5.125% 20134		10,000			9,637
Duane Reade Inc. 9.86% 20105		6,000			6,233
Kellogg Co. 7.45% 2031		5,000			5,900
Wal-Mart Stores, Inc. 5.25% 2035		5,000			4,570
Winn-Dixie Pass Through Trust, Series 1999-1, Class A-1, 7.803% 20174,7,9		4,924			4,186
Smithfield Foods, Inc. 7.625% 2008		1,975			2,010
Smithfield Foods, Inc., Series A, 8.00% 2009		875			914
Smithfield Foods, Inc., Series B, 7.75% 2013		925			946
					336,593
NON-U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 0.16%
Russian Federation 8.25% 2010		19,639			20,484
Russian Federation 8.25% 20104		7,778			8,112
Russian Federation 5.00%/7.50% 20308,9		24,770			27,557
United Mexican States Government Eurobonds, Global 8.375% 2011		3,000			3,303
United Mexican States Government Eurobonds, Global 7.50% 2012		5,470			5,938
United Mexican States Government Global 6.375% 2013		14,765			15,274
United Mexican States Government Global 11.375% 2016		9,118			12,925
United Mexican States Government Global 6.75% 2034		7,740			8,224
State of Qatar 9.75% 2030		4,000			5,940
El Salvador (Republic of) 7.75% 2023		3,000			3,417
El Salvador (Republic of) 7.75% 20234		1,250			1,424
El Salvador (Republic of) 7.65% 20354		750			841
Banque Centrale de Tunisie 7.375% 2012		3,500			3,766
Bulgaria (Republic of) 8.25% 2015		3,000			3,520
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014		2,500			3,175
Corporación Andina de Fomento 5.75% 2017		2,000			1,993
					125,893
MUNICIPALS — 0.04%
State of California, Golden State Tobacco Securitization Corp., Tobacco Settlement Asset-backed Bonds, Series 2003-A-1, 6.25% 2033		19,750			22,039
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds, Series 2002-A, Class A, 6.72% 2025		4,207			4,177
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds, Series 2001-A, Class A, 6.36% 2025		4,168			4,160
					30,376
Total bonds & notes (cost: $16,950,964,000)					17,322,307
Short-term securities — 9.21%
Freddie Mac 5.105%-5.15% due 2/13-4/16/2007		574,754			571,131
Federal Home Loan Bank 5.13%-5.155% due 2/7-5/2/2007		492,290			488,621
Fannie Mae 5.09%-5.14% due 3/21-5/9/2007		469,200			464,293
Ranger Funding Co. LLC 5.26%-5.27% due 2/8-3/1/20074		81,100			80,759
Bank of America Corp. 5.23%-5.26% due 2/2-4/4/2007		373,000			371,534
Park Avenue Receivables Co., LLC 5.21%-5.25% due 2/21-3/6/20074		187,686			186,914
J.P. Morgan Chase & Co. 5.235%-5.24% due 2/7-3/28/2007		146,300			145,821
Jupiter Securitization Co., LLC 5.23%-5.24% due 2/5-3/12/20074		107,800			107,428
CAFCO, LLC 5.23%-5.28% due 2/1-4/9/20074		331,300			330,138
Ciesco LLC 5.23% due 4/24/20074		25,000			24,700
Citigroup Funding Inc. 5.26% due 2/12/2007		50,000			49,912
Clipper Receivables Co., LLC 5.24%-5.27% due 2/5-3/14/20074		352,900			351,730
State Street Corp. 5.22% due 3/21/2007		50,000			49,660
Variable Funding Capital Corp. 5.23%-5.25% due 2/6-3/19/20074		397,500			395,797
Edison Asset Securitization LLC 5.23%-5.26% due 2/22-3/15/20074		210,500			209,581
General Electric Capital Corp. 5.23% due 4/19-4/20/2007		100,000			98,874
General Electric Capital Services, Inc. 5.24% due 2/12/2007		40,000			39,931
U.S. Treasury Bills 4.925%-5.00% due 2/8-5/3/2007		350,000			347,044
Abbott Laboratories 5.20% due 3/19/20074,10		100,000			99,328
Abbott Laboratories 5.18%-5.23% due 2/6-3/21/20074		228,900			228,180
CIT Group, Inc. 5.21%-5.25% due 2/13-5/25/20074		302,000			300,124
Procter & Gamble International Funding S.C.A. 5.23%-5.25% due 2/2-3/16/20074		214,640			214,150
Johnson & Johnson 5.18% due 3/23/20074,10		60,000			59,575
Johnson & Johnson 5.17%-5.18% due 4/12-5/25/20074		144,100			142,288
Federal Farm Credit Banks 5.05%-5.11% due 2/14-5/14/2007		200,000			198,442
International Lease Finance Corp. 5.21%-5.23% due 2/15-3/27/2007		97,300			96,768
American General Finance Corp. 5.21% due 2/1/2007		50,000			49,993
AIG Funding, Inc. 5.22% due 3/22/2007		30,000			29,782
Atlantic Industries 5.20%-5.23% due 2/28-3/5/20074		109,500			109,001
Coca-Cola Co. 5.18% due 2/16/20074		50,000			49,888
Union Bank of California, N.A. 5.28%-5.30% due 3/19-4/16/2007		155,200			155,188
Wal-Mart Stores Inc. 5.17%-5.19% due 4/3-5/8/20074		155,100			153,389
Pfizer Investment Capital PLC 5.20%-5.22% due 2/9-2/21/20074		149,200			148,887
HSBC Finance Corp. 5.21%-5.24% due 2/28-3/23/2007		112,500			111,889
Private Export Funding Corp. 5.20% due 3/20/20074,10		45,000			44,689
Private Export Funding Corp. 5.21%-5.23% due 2/13-4/11/20074		49,000			48,703
IBM Corp. 5.18% due 3/27/20074		50,000			49,604
IBM Capital Inc. 5.19% due 3/7/20074		40,062			39,867
Tennessee Valley Authority 5.11%-5.14% due 2/15-3/15/2007		82,200			81,800
NetJets Inc. 5.19% due 4/3/20074		50,000			49,557
NetJets Inc. 5.19% due 3/16/20074,10		25,000			24,850
International Bank for Reconstruction and Development 5.14% due 3/7-3/26/2007		73,500			73,064
FCAR Owner Trust I 5.25%-5.26% due 2/9-3/21/2007		73,000			72,710
Kimberly-Clark Worldwide Inc. 5.20% due 2/5-2/12/20074		68,000			67,907
AT&T Inc. 5.24% due 4/10/20074		50,000			49,503
Eli Lilly and Co. 5.19% due 3/22-3/29/20074		49,300			48,925
Three Pillars Funding, LLC 5.26% due 3/26/20074		43,571			43,233
American Express Credit Corp. 5.21% due 3/28/2007		40,000			39,689
Scripps (E.W.) Co. 5.22% due 2/1/20074		25,000			24,996
Triple-A One Funding Corp. 5.25% due 2/9/20074		25,000			24,967
USAA Capital Corp. 5.21% due 2/15/2007		25,000			24,948
Illinois Tool Works Inc. 5.21% due 2/28/2007		25,000			24,899
Hershey Co. 5.20% due 3/9/20074		25,000			24,866
Harvard University 5.18% due 3/14/2007		25,000			24,850
Anheuser-Busch Cos. Inc. 5.18% due 3/12/20074		24,300			24,160
Medtronic Inc. 5.18% due 4/18/20074		20,800			20,570
Total short-term securities (cost: $7,389,212,000)					7,389,097
Total investment securities (cost: $65,848,728,000)					80,362,793
Other assets less liabilities					(116,617	)
Net assets				$	80,246,176

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

¹Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in “Miscellaneous,” was $12,284,651,000.

²Represents an affiliated company as defined under the Investment Company Act of 1940.

³Security did not produce income during the last 12 months.

⁴Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $7,752,567,000, which represented 9.66% of the net assets of the fund.

⁵Coupon rate may change periodically.

⁶Payment in kind; the issuer has the option of paying additional securities in lieu of cash.

⁷Scheduled interest and/or principal payment was not received.

⁸Step bond; coupon rate will increase at a later date.

⁹Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.

¹⁰This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

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 a financial adviser and should be read carefully before investing.

MFGEFP-906-0307-S6906

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

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

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

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

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

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

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

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the Board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating committee.

ITEM 11 - Controls and Procedures

(a)	The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
(b)	There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12 - Exhibits

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

SIGNATURES

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

THE INCOME FUND OF AMERICA, INC.

By /s/ Hilda L. Applbaum

Hilda L. Applbaum, Vice Chairman and

Principal Executive Officer

Date: April 10, 2007

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

By /s/ Hilda L. Applbaum

Hilda L. Applbaum, Vice Chairman and

Principal Executive Officer

Date: April 10, 2007

By /s/ Jennifer M. Buchheim

Jennifer M. Buchheim, Treasurer and

Principal Financial Officer

Date: April 10, 2007