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: 811-05364
American High-Income Trust
(Exact name of registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code: (213) 486-9200
Date of fiscal year end: September 30
Date of reporting period: September 30, 2007
Kimberly S. Verdick
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(Name and address of agent for service)
Copies to:
Michael Glazer
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street, 25th Floor
Los Angeles, California 90071
(Counsel for the registrant)
ITEM 1 – Reports to Stockholders
[logo - American Funds®]
The right choice for the long term®
American
High-Income Trust
A changing financial landscape:
The impact of leveraged buyouts on
the high-yield bond market
[photo of glass buildings from street-level looking skyward - clouds in the sky]
Annual report for the year ended September 30, 2007
American High-Income TrustSM seeks a high level of current income and, secondarily, capital appreciation through a diversified, carefully supervised portfolio consisting primarily of lower rated, higher risk corporate bonds.
This fund is one of the 30 American Funds. American Funds 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.
Contents | |
Letter to shareholders | 1 |
The value of a long-term perspective | 3 |
Feature article | |
A changing financial landscape: The impact of | |
leveraged buyouts on the high-yield bond market | 4 |
Summary investment portfolio | 10 |
Financial statements | 15 |
Board of trustees and other officers | 32 |
What makes American Funds different? | back cover |
Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 3.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. 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.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2007: | ||||||||||||
Class A shares | 1 year | 5 years | 10 years | |||||||||
Reflecting 3.75% maximum sales charge | 3.94 | % | 12.45 | % | 6.14 | % |
The total annual fund operating expense ratio for Class A shares as of the most recent fiscal year-end was 0.69%. This figure does not reflect a fee waiver currently in effect; therefore, the actual expense ratio is lower.
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver 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 24 and 25 for details.
The fund’s 30-day yield for Class A shares as of October 31, 2007, calculated in accordance with the Securities and Exchange Commission formula, was 7.65% (7.62% without the fee waiver). The fund’s distribution rate for Class A shares as of that date was 7.17%. Both reflect the 3.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund’s past dividends paid to shareholders. Accordingly, the fund’s SEC yield and distribution rate may differ.
Results for other share classes can be found on page 31.
The return of principal in bond funds is not guaranteed. Bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund. High-yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing outside the United States may be subject to additional risks, such as currency fluctuations, political instability, differing securities regulations and periods of illiquidity, which are detailed in the fund’s prospectus.
[photo of the branch of a tree near a glass building]
Fellow shareholders:
American High-Income Trust ended its 2007 fiscal year with strong results, although tightening credit, costlier financing and diminishing demand began to put pressure on returns in the latter part of the fiscal period.
For the 12 months ended September 30, 2007, shareholders who reinvested monthly dividends totaling about 92 cents a share earned a total return of 8.0%, including an income return of 7.7%. Those results compare with a 7.7% gain for the Lipper High Current Yield Bond Funds Index, a benchmark of similar funds, and an 8.3% return for the Credit Suisse High Yield Index, which attempts to mirror the high-yield debt markets. The latter index is unmanaged and includes no expenses.
High-yield bonds enjoyed significantly higher returns during the period than investment-grade bonds. The Citigroup Broad Investment-Grade (BIG) Bond Index, an unmanaged index that measures high-quality bond markets including Treasuries, posted a 5.2% total return, not including expenses.
Shareholders in the fund who elected to take their dividends in cash saw the value of their holdings increase 0.4% while earning an income return of 7.4%.
Putting the year in perspective
For the past five years, high-yield bonds have enjoyed a favorable market and economic climate, characterized by low interest rates, strong corporate fundamentals and historically low default rates. This environment helped American High-Income Trust to post an average annual total return of 13.3% since September 2002.
That trend continued into the first nine months of the fiscal year, as ample liquidity, low market volatility, an increase in leveraged buyouts (LBOs) and strong investor demand for higher yielding assets helped drive returns for high-yield bonds even higher. For the nine months ending June 30, 2007, American High-Income Trust posted an 8.3% gain.
But in July, debt markets weakened as troubles in the U.S. subprime mortgage market spread to the credit markets, sparking a global liquidity crisis. In addition, increasingly aggressive LBOs resulted in a supply of debt that was difficult to sell. These pressures negatively impacted results for the last three months of the period, with the fund posting a slight 0.3% loss.
In September, there was some relief for investors when the Federal Reserve reduced short-term rates by a greater than expected 50 basis points, helping to ease the liquidity crisis.
[Begin Sidebar]
Results at a glance | ||||||||||||||||
For periods ended September 30, 2007, with all distributions reinvested | ||||||||||||||||
Total returns | Average annual total returns | |||||||||||||||
1 year | 5 years | 10 years | Lifetime | |||||||||||||
(since | ||||||||||||||||
2/19/88) | ||||||||||||||||
American High-Income Trust (Class A shares) | 8.0 | % | 13.3 | % | 6.5 | % | 9.1 | % | ||||||||
Credit Suisse High Yield Index* | 8.3 | 12.5 | 6.4 | 9.0 | ||||||||||||
Citigroup Broad Investment-Grade (BIG) Bond Index* | 5.2 | 4.2 | 6.0 | 7.3 | ||||||||||||
Lipper High Current Yield Bond Funds Index† | 7.7 | 11.7 | 4.2 | 7.3 | ||||||||||||
*The market indexes are unmanaged and do not reflect the effect of sales charges, commissions or expenses. | ||||||||||||||||
† The Lipper index does not reflect the effect of sales charges. |
Since its inception through September 30, 2007, American High-Income Trust ranked 3rd in total return among the 37 high current yield funds in existence throughout the period, according to Lipper. For the 10 years ended September 30, 2007, the fund ranked 12th of 146; for the five years ended September 30, 2007, it ranked 39th of 319; and for the 12 months ended September 30, 2007, it ranked 88th of 444. Lipper rankings do not reflect the effect of sales charges.
[End Sidebar]
[Begin Sidebar]
After several years of above-average gains, the high-yield market was susceptible to a correction. We believe the recent market correction has been healthy for high-yield bonds, bringing spreads to levels that more accurately reflect market and credit risks.
[close up photo of the side of a glass building]
[End Sidebar]
Despite the market pressures, credit fundamentals in the high-yield market have remained strong as companies continue to generate cash flow and enjoy healthy operating environments. As such, we are using the current volatility as an opportunity to find attractive values in the market and will continue to adjust the portfolio as market conditions evolve.
The impact of leveraged buyouts
In recent years, the rise in LBO activity has transformed the credit markets and had a huge impact on high-yield bond markets. LBOs allow companies to make large acquisitions using mostly debt with a small amount of capital. Because that debt is issued mainly as high-yield bonds, the growth in LBO volume has helped to drive growth in the high-yield marketplace.
Although tighter credit and more expensive financing have reduced demand for buyouts in the latter part of the fiscal period, we expect them to remain a significant part of the market going forward. For more insights on how LBOs are changing the financial landscape for high-yield bonds, see the feature article that begins on page 4.
Preparing for a slowdown
After several years of above-average gains, the high-yield market was susceptible to a correction. We believe the recent market correction has been healthy for high-yield bonds, bringing spreads to levels that more accurately reflect market and credit risks.
Still, there are some issues as we enter the next period. In the short term, the high-yield market will have to absorb a significant amount of new issuance, which will add to the volatility experienced in recent months. A bigger issue is the possibility of an economic slowdown, or even recession. If the economy slows beyond housing and related sectors, it could have a greater impact on more companies, particularly those with high leverage ratios. That could impact their ability to meet their debt obligations, which would result in a higher number of defaults.
While we are mindful of these market and economic risks, we are also seeing a return to more prudent financing and better values throughout the marketplace. We are preparing for a possible slowdown by understanding the companies we own and what kind of leverage they can support. To this end, we continue to favor companies with strong or improving balance sheets, as well as areas of the market that are attractively valued and likely to benefit from sustained modest expansion of the economy.
It is this commitment to building a diversified, research-driven investment portfolio that has helped the fund produce solid returns for shareholders over the long term. During the past 10 years ended September 30, 2007, American High-Income Trust has posted an average annual total return of 6.5%. That compares with a 4.2% return for the Lipper High Current Yield Bond Funds Index, a 6.4% return for the Credit Suisse High Yield Index and a 6.0% return for investment-grade bonds as measured by the Citigroup BIG Bond Index.
As always, we appreciate your continued support and long-term investment perspective.
Sincerely,
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Vice Chairman
/s/ David C. Barclay
David C. Barclay
President
President
November 12, 2007
For current information about the fund, visit americanfunds.com.
The value of a long-term perspective
Here’s how a $10,000 investment in American High-Income Trust grew between February 19, 1988, when the fund began operations, and September 30, 2007, the end of its latest fiscal year. As you can see, that $10,000 grew to $53,103 with all distributions reinvested.
Fund results shown reflect deduction of the maximum sales charge of 3.75% on the $10,000 investment.1 Thus, the net amount invested was $9,625.2
[begin mountain chart]
Year ended | American High-Income Trust | Lipper High Current Yield Bond Funds Index4 | Citigroup Broad Investment-Grade (BIG) Bond Index3. | Credit Suisse High Yield Index3 | Consumer Price Index (inflation)5 | |||||||||||||||
Sept. 30th | ||||||||||||||||||||
2/19/88 | $ | 9,625 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | ||||||||||
1988 | 10,182 | 10,475 | 10,222 | 10,447 | 10,328 | |||||||||||||||
1989 | 11,189 | 10,935 | 11,367 | 11,026 | 10,776 | |||||||||||||||
1990 | 10,735 | 9,570 | 12,237 | 10,047 | 11,440 | |||||||||||||||
1991 | 13,873 | 12,290 | 14,198 | 13,757 | 11,828 | |||||||||||||||
1992 | 16,376 | 15,132 | 15,999 | 16,573 | 12,181 | |||||||||||||||
1993 | 18,764 | 17,473 | 17,627 | 19,172 | 12,509 | |||||||||||||||
1994 | 19,066 | 17,899 | 17,063 | 19,831 | 12,879 | |||||||||||||||
1995 | 21,604 | 20,178 | 19,461 | 22,619 | 13,207 | |||||||||||||||
1996 | 24,570 | 22,644 | 20,423 | 25,054 | 13,603 | |||||||||||||||
1997 | 28,176 | 26,120 | 22,406 | 28,994 | 13,897 | |||||||||||||||
1998 | 27,491 | 25,688 | 24,975 | 28,842 | 14,103 | |||||||||||||||
1999 | 29,721 | 27,037 | 24,908 | 29,980 | 14,474 | |||||||||||||||
2000 | 31,295 | 27,021 | 26,632 | 30,555 | 14,974 | |||||||||||||||
2001 | 30,218 | 23,569 | 30,110 | 29,050 | 15,371 | |||||||||||||||
2002 | 28,442 | 22,814 | 32,632 | 29,877 | 15,603 | |||||||||||||||
2003 | 38,197 | 28,862 | 34,423 | 38,257 | 15,966 | |||||||||||||||
2004 | 42,235 | 32,215 | 35,738 | 43,352 | 16,371 | |||||||||||||||
2005 | 45,421 | 34,422 | 36,783 | 46,089 | 17,138 | |||||||||||||||
2006 | 49,174 | 36,744 | 38,147 | 49,667 | 17,491 | |||||||||||||||
2007 | 53,103 | 39,586 | 40,148 | 53,807 | 17,973 |
[end mountain chart]
1As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $100,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. |
2The maximum initial sales charge was 4.75% prior to January 10, 2000. |
3The market indexes are unmanaged and include reinvested distributions, but do not reflect the effect of sales charges, commissions or expenses. |
4Calculated by Lipper. The index does not reflect the effect of sales charges. |
5Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics. |
6For the period February 19 through September 30, 1988. |
Past results are not predictive of results in future periods. The results shown are before taxes on fund distributions and sale of fund shares.
Average annual total returns based on a $1,000 investment (for periods ended September 30, 2007)* | ||||||||||||
1 year | 5 years | 10 years | ||||||||||
Class A shares | 3.94 | % | 12.45 | % | 6.14 | % | ||||||
*Assumes reinvestment of all distributions and payment of the maximum 3.75% sales charge. |
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver 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 24 and 25 for details.
[photo of buildings as reflected from a glass building]
A changing financial landscape:
The impact of leveraged buyouts on the high-yield bond market
In September, shareholders of TXU Corp., the largest power company in Texas, approved the company’s plan to be acquired by a consortium of private equity firms for $44 billion, making it the biggest leveraged buyout in U.S. history and one of the first in the utility industry.
The news came on what could be the tail end of a global boom in LBOs that has swept capital markets and changed the financial landscape for high-yield bonds. From 2002 to 2006, the total number of LBO transactions per year more than doubled, rising from 1,029 to 2,454 deals. At the same time, the size of the average deal grew six times, from roughly $186 million in 2002 to more than $1.1 billion through the first half of 2007, according to Standard & Poor’s.
“The rise in LBO activity in recent years has had a huge impact on high-yield bonds,” says David Barclay, president of American High-Income Trust. “It’s opened many new opportunities for investors, while also increasing the level of risk in the marketplace.”
A leveraged buyout is the acquisition of a public or private company where the takeover is financed primarily with borrowed money, with a small equity investment — much like the use of a mortgage to buy a house. Typically, LBOs are financed with roughly 70 to 90 percent debt and 10 to 30 percent equity. Unlike a house purchase, however, interest and principal obligations are paid with the cash flows of the refinanced company and sometimes from the sale of some of its assets.
Because the high debt-to-equity ratio requires LBOs to finance the purchase with high-yield bonds rather than investment-grade bonds, the dramatic increase in LBO volume over the past four years has helped to bolster growth in the high-yield market.
Although the number and size of deals are beginning to slow amidst rising financing costs, tighter credit and concerns about the market’s ability to absorb large amounts of new issuance, LBOs are still expected to remain a key ingredient in the high-yield market going forward. In the following pages, we will look at some of the factors behind the recent growth, the potential risks and rewards for high-yield debt investors, and the increasing importance of fundamental research to navigate the challenges posed by these buyouts.
[Begin Sidebar]
The boom in LBOs has created both opportunity and risk in the high-yield marketplace.
[photo of a glass building from street-level looking up]
[End Sidebar]
Factors fueling the buyout boom
The rise in LBO activity has been part of a broader trend in recent years of companies willing to take on more debt. That willingness can be attributed to a combination of factors, including low interest rates, the availability of more types of debt financings and a huge demand for yield throughout the world. “What has really helped in the last four years is that financing costs have been at all-time lows,” says Marc Linden, a portfolio counselor in the fund.
Buyouts are also being driven by pools of institutional money seeking a high rate of return, which has created a flow of money going into private equity funds. Since LBOs are financed primarily with debt, private equity investors have used them to apply leverage to assets in a rising market, which allowed them to significantly increase their overall returns.
Another factor has been a growing reliance on the U.S. bank loan market for LBO financing. “Ten years ago, LBOs such as TXU Corp. would not have been possible because there simply wasn’t enough liquidity at the secured bank level to write multibillion-dollar loans, and banks couldn’t take on that much risk,” says Linden. “Today, an increasing number of banks are selling their secured loan debt to institutional investors. Instead of banks being the only primary lenders of secured loans, now certain mutual funds and other institutions can also loan money. That has helped to expand the borrowing base and diversify risk, which has made larger LBOs possible.”
Also fueling the LBO trend has been the willingness of boards of directors to take public companies private. Passage of the Sarbanes-Oxley Act of 2002, which established new standards and oversight for public companies in response to a number of high-profile corporate and accounting scandals, made being a public company more expensive, particularly for smaller companies. “The additional paperwork and headaches that have resulted from Sarbanes-Oxley have created another incentive for managements and boards of directors to get out of the public domain,” says David Daigle, another portfolio counselor in the fund. “As a result, there has been a great transfer from public to private companies over the past few years.”
A wider range of investment opportunities
The boom in LBOs has created both opportunity and risk in the high-yield marketplace. American High-Income Trust’s long-term perspective and focus on fundamental research is helping to capitalize on the newly created opportunities while limiting the potential risks that LBOs pose.
[Begin Sidebar]
[photo of a glass building from street-level looking up]
“Having long-term context in a particular industry helps an analyst to identify companies that have been beaten up unjustifiably and avoid situations where we are not getting paid enough for the risk.”
David Daigle
Portfolio counselor
[End Sidebar]
“We research LBOs and their impact on the market the same way we do any other issue,” says Barclay. “Our same philosophy applies: We understand that markets and the economy have cycles. Our research has helped us invest in companies that have been able to meet their debt obligations over various business and market cycles.”
Overall, say the investment professionals in American High-Income Trust, the LBO trend has been positive for the fund because it has increased the range of investment opportunities for high-yield investors. Historically, companies that became LBO targets usually had specific characteristics, such as a stable cash flow, low debt, fairly low cyclicality and a depressed equity valuation. As a result, some industries never made it onto the radar screen of buyout firms.
“Traditionally, LBOs were done in small companies or in industries that either were not well-known or had small market caps, which we don’t follow much,” says Daigle. “Today, the quality of companies and variety of industries in the high-yield universe have increased substantially.”
Contributing to this greater industry diversification has been the increasing number of blue-chip companies that have entered the high-yield markets. In the past several years, the availability of debt financing and equity capital has led to the buyouts of industry leaders such as HCA Healthcare, an operator of hospitals and outpatient centers in the U.S. and England; Univision, the Spanish-language television network; Harrah’s Entertainment, the casino operator; and Alltel, owner and operator of one of the largest wireless networks in the U.S. For the portfolio counselors in American High-Income Trust, being able to add blue-chip companies to the portfolio has been a positive development. “If you can buy an industry leader, it may represent less risk,” says Daigle.
Reflecting this growth in the number and types of high-yield investments, the percent of the fund’s portfolio that is LBO-related has increased substantially in recent years. “We have an investment in almost every industry,” says Tara Torrens, a fixed-income analyst with the fund. But, she emphasizes, it’s the result of bottom-up research rather than an attempt to follow macroeconomic trends. “Just as we choose our other holdings on an issuer by issuer basis, we evaluate LBOs on a deal by deal basis,” she says.
This increase in volume and the financing needed for these bigger deals has benefited American High-Income Trust in another way. “We have been able to work with private equity sponsors and underwriters to become more involved in structuring deals to make them more advantageous to us,” says Torrens. “Now, we have more control over the investment options themselves.”
Managing risk through research
As has been widely reported, the profusion of LBOs also has a downside. While they have created more investment choices, they have also introduced more risk in the marketplace.
“The good news is that the quality of companies and industries represented in the high-yield universe is as good as I’ve ever seen,” says Daigle. “On the other hand, balance sheets are weak because they are highly leveraged and complex. If the economy goes into a recession, many companies may not be able to meet their debt obligations.”
This would likely lead to an increase in defaults. Defaults have been historically low in recent years, but could return to more normal or even elevated levels if the economy sours. In fact, Moody’s Investors Service is already predicting that default rates for high-yield bonds may triple over the next year, citing the global credit crunch. While that would be a drag on the broader market, it also creates investment opportunities. “When we see an industry where defaults have increased and there’s greater market turmoil, there are often opportunities to buy deeply discounted bonds of good companies,” says Torrens.
Helping the fund to spot these opportunities are the extensive research capabilities of Capital Research and Management Company, adviser to the fund. “Our research coverage of industries is broad,” says Daigle. “We have analysts who have been covering particular industries for years. That really benefits us when the market weakens. Having long-term context in a particular industry helps an analyst to identify companies that have been beaten up unjustifiably and avoid situations where we are not getting paid enough for the risk.”
[Begin Sidebar]
“We understand that markets and the economy have cycles. Our research has helped us invest in companies that have been able to meet their debt obligations over various business and market cycles.”
David Barclay
President of American High-Income Trust
The buyout boom
Since 2000, leveraged buyouts have grown in volume and size. The following chart illustrates the worldwide growth both in the number of LBO transactions and the value of the average deal.
Average value and total number of LBO transactions worldwide
[begin line/bar chart]
Average deal value ($ millions) | Total number of transactions | |||||||
2000 | 189.3 | 754 | ||||||
2001 | 120.6 | 925 | ||||||
2002 | 186.2 | 1029 | ||||||
2003 | 197.1 | 1278 | ||||||
2004 | 278.5 | 1620 | ||||||
2005 | 389.0 | 1490 | ||||||
2006 | 671.4 | 2454 | ||||||
2007* | 1142.4 |
*Through June 30, 2007
Source: Capital IQ
© Standard & Poor’s 2007
[end line/bar chart]
[End Sidebar]
[Begin Sidebar]
The history of leveraged buyouts
Exactly when the first leveraged buyout occurred is up for debate. They are often traced back to the 1960s, before there were high-yield bond markets. At the time, such acquisitions were called “bootstrap” transactions, which refers to the ability of the acquired company to help pay for itself with its own cash flows.
Harvard Business School credits Kohlberg Kravis Roberts & Co. (KKR) with completing the first LBO in history when it acquired Orkin Exterminating Company in 1964. Other sources cite the 1955 purchase of Waterman Steamship Corp. by McLean Industries as the first. In that transaction, McLean borrowed $42 million and raised an additional $7 million through issues of preferred stock. After the deal was complete, about $20 million in loan debt was paid with Waterman’s cash and assets.
It wasn’t until the late 1980s, however, that the LBO market rose to prominence and the high-yield markets began to develop as a way to finance these transactions. Many buyouts were motivated by opportunities to profit from inefficient and undervalued corporate assets. LBOs became characterized by hostile takeovers and takeover defenses such as management buyouts, where the management of an LBO targeted company would buy back company shares in an attempt to gain control of the company. Perhaps the most famous takeover battle was the 1988 buyout of RJR Nabisco, when private equity firm KKR battled a management team led by F. Ross Johnson. KKR ultimately won, purchasing the company for $25 billion. At the time, it was the most expensive corporate acquisition in history.
By the end of the decade, the boom turned bust as a number of high-profile buyouts led to the eventual bankruptcy of the acquired companies. Because many of these companies were overleveraged, their operating cash flows were not able to meet the high interest payments during the economic slowdown of the early 1990s. Bankruptcies and defaults rose sharply, and the number of LBOs declined as a result.
In the years since, the LBO market has experienced some dramatic changes. “One of the big differences is that the market has matured,” says Tara Torrens, a fixed-income analyst in American High-Income Trust. “In the 1980s, the high-yield markets were just developing and there was a limited buyer base. Today, there are a significant number of investors, a tremendous amount of capital and more financing options, all of which have helped to increase liquidity, diversify risk and lower financing costs.”
By 2006, these trends helped to propel LBOs to historical highs in terms of size, leverage and pricing multiples. Strong returns attracted even more investors and encouraged even bigger deals. But in recent months, costlier financing, tighter credit and diminishing demand among investors are setting the scene for a more volatile market. While only time will tell how the current cycle will play out, one thing is certain: LBOs have had a huge impact on contemporary credit markets, and will remain a major part of the high-yield bond market going forward.
[photo of keys on a calculator - a pair of eyeglasses nearby]
[End Sidebar]
Understanding capital structures
A key to managing risk is to understand how bonds in the portfolio are structured. “One result of the LBO trend is that capital structures are much more complex,” says Daigle. “We have a research team capable of analyzing complex balance sheets, including multiple structures, issuers and bonds within an issuer, each of which may have different covenants and relationships.” A covenant is a provision in a debt agreement that requires one party to either perform or refrain from certain acts; usually, it is a restriction designed to protect the lender’s interest.
In addition to market risk, there are risks to current bondholders of the companies that are bought out by private equity investors. That’s because financing is often obtained by issuing additional debt that’s senior to that held by existing bondholders. When that happens, existing bondholders are pushed down in the capital structure, which means they are less protected in the case of a default. Consequently, spreads tend to widen significantly, which can negatively impact prices in the short term. “We understand from the covenant the risk of being pushed down in the capital structure,” says Torrens. “We look at factors that make companies LBO targets and try to avoid those types of investments if we aren’t being compensated appropriately for the risk.”
There is no rule of thumb as to which kinds of issuers or capital structure are considered. “We evaluate the risk-reward ratio,” Daigle emphasizes. “We look at pricing, structure, covenants — and then determine how much we’re getting paid to take those risks. Our goal is to find the right companies with balance sheets we believe will generate attractive investment returns.”
LBOs enter a new cycle
In recent months, LBO growth has slowed as financing has become costlier and investor appetite has waned. In addition, the high-yield market is trying to absorb a significant amount of supply, which is expected to add to the volatility that the market has experienced in recent months. “The popularity of LBOs has always been cyclical and a downturn is inevitable,” says Daigle. “We are preparing for the slowdown and the end of the boom cycle by understanding the companies we own and what kind of leverage they can support.”
Despite the current concerns in the market, Torrens believes a correction will be positive for the fund. “We are seeing lower prices, more prudent refinancing and promising investment opportunities,” she says. “From our perspective, it’s a good environment because we are focused on credit quality and finding value.”
Adds Barclay, “We expect the current slowdown to mark the end of what has been a cycle of very aggressive LBOs and very aggressive financing. As we enter a new phase, we expect leverage ratios to be lower, which we believe will be healthy for the market overall. It marks a shift in LBOs, but certainly not the end of them.”
[Begin Pull Quote]
[close-up photo of the glass panels on a building]
“We are seeing lower prices, more prudent refinancing and promising investment opportunities. From our perspective, it’s a good environment because we are focused on credit quality and finding value.”
Tara Torrens
Fixed-income analyst
[End Pull Quote]
Summary investment portfolio,September 30, 2007
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.
[begin pie chart]
U.S. corporate bonds & notes | 63.1 | % | ||
Non-U.S. corporate bonds & notes | 12.6 | |||
Corporate loans | 7.5 | |||
Non-U.S. government & government agency bonds & notes | 4.7 | |||
Common stocks & warrants | 3.6 | |||
Convertible securities | 0.7 | |||
Preferred securities | 1.3 | |||
Other | 1.6 | |||
Short-term securities & other assets less liabilities | 4.9 |
[end pie chart]
Principal amount (000) | Market value (000) | Percent of net assets | ||
Bonds, notes & other debt instruments - 89.57% | ||||
Corporate bonds, notes & loans - 83.18% | ||||
Consumer discretionary - 25.35% | ||||
Charter Communications Operating LLC, Term Loan Facilities B: | ||||
Delayed Draw, 7.13% 2014 (1) (2) (3) | $79,400 | $76,919 | ||
7.36% 2014 (1) (2) (3) | 54,550 | 52,845 | ||
Charter Communications Operating LLC and Charter Communications Operating Capital Corp.: | ||||
8.00% 2012 (4) | 61,665 | 61,665 | ||
8.375% 2014 (4) | 37,800 | 38,178 | ||
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 | 50,065 | 50,566 | ||
CCH I, LLC and CCH I Capital Corp. 11.00% 2015 | 41,075 | 41,794 | ||
CCH II, LLC and CCH II Capital Corp. 10.25% 2010 | 14,105 | 14,493 | ||
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 11.75%-13.50% 2011-2012 | 14,375 | 14,089 | 2.64 | % |
Univision Communications Inc.: | ||||
9.75% 2015 (4) (5) | 76,050 | 74,529 | ||
First Lien Term Loan B, 7.61% 2014 (1) (2) (3) | 49,975 | 47,414 | ||
7.85% 2011 | 12,535 | 12,598 | ||
Term Loan, 7.629% 2009 (1) (2) (3) | 11,595 | 11,518 | 1.10 | |
General Motors Corp.: | ||||
7.20% 2011 | 83,370 | 79,827 | ||
7.25% 2013 | €3,000 | 4,032 | ||
6.375%-8.80% 2008-2033 | $66,765 | 60,992 | 1.09 | |
Michaels Stores, Inc. 10.00% 2014 | 76,550 | 78,846 | .59 | |
Ford Motor Co.: | ||||
Term Loan, 8.70% 2013 (1) (2) (3) | 38,927 | 37,856 | ||
6.50%-9.50%% 2011-2031 | 33,998 | 27,913 | ||
Ford Capital BV 9.50% 2010 | 4,000 | 4,000 | .52 | |
CanWest Media Inc., Series B, 8.00% 2012 | 59,248 | 58,359 | .44 | |
Young Broadcasting Inc. 10.00% 2011 | 52,810 | 48,981 | .37 | |
Bon-Ton Department Stores, Inc. 10.25% 2014 | 52,040 | 48,918 | .37 | |
Grupo Posadas, SA de CV 8.75% 2011 (4) | 46,225 | 47,496 | .36 | |
Other securities | 2,374,104 | 17.87 | ||
3,367,932 | 25.35 | |||
Telecommunication services - 10.29% | ||||
Windstream Corp.: | ||||
8.125% 2013 | 103,600 | 109,557 | ||
8.625% 2016 | 12,300 | 13,176 | ||
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015 | 37,160 | 38,989 | 1.22 | |
Dobson Communications Corp. 8.875%-9.61% 2012-2013 (1) | 60,975 | 64,301 | ||
Dobson Cellular Systems, Inc. 8.375%-9.875% 2011-2012 | 45,415 | 48,806 | ||
American Cellular Corp.: | ||||
Term Loan, 7.36% 2014 (1) (2) (3) | 21,197 | 21,157 | ||
10.00% 2011 | 6,350 | 6,667 | 1.06 | |
Triton PCS, Inc. 8.50% 2013 (6) | 113,840 | 119,674 | .90 | |
American Tower Corp. 7.125% 2012 | 64,360 | 66,130 | .50 | |
MetroPCS Wireless, Inc. 9.25% 2014 (4) | 55,025 | 56,401 | .42 | |
Rural Cellular Corp. 8.621% 2013 (1) (4) | 48,875 | 50,341 | .38 | |
Nextel Communications, Inc., Series D, 7.375% 2015 | 47,808 | 48,628 | .37 | |
Other securities | 723,327 | 5.44 | ||
1,367,154 | 10.29 | |||
Industrials - 10.16% | ||||
DAE Aviation Holdings, Inc.: | ||||
Term Loan B, 9.00% 2014 (1) (2) | 57,125 | 57,125 | ||
11.25% 2015 (4) | 66,070 | 69,373 | .95 | |
Nielsen Finance LLC and Nielsen Finance Co.: | ||||
10.00% 2014 | 59,500 | 63,219 | ||
0%/12.50% 2016 (7) | 81,050 | 57,140 | .91 | |
Hawker Beechcraft 8.875% 2015 (4) (5) | 58,480 | 59,065 | .44 | |
Accuride Corp. 8.50% 2015 | 53,595 | 51,719 | .39 | |
Other securities | 992,319 | 7.47 | ||
1,349,960 | 10.16 | |||
Financials - 6.65% | ||||
Ford Motor Credit Co.: | ||||
8.11% 2012 (1) | 71,750 | 67,858 | ||
5.625%-9.875% 2008-2016 (1) | 70,270 | 69,414 | 1.03 | |
Realogy Corp.: | ||||
10.50% 2014 (4) | 98,930 | 84,585 | ||
Term Loan, 5.32%-8.36% 2013 (1) (2) (3) | 32,312 | 30,427 | ||
11.00%-12.375% 2014-2015 (4) (5) | 25,225 | 20,098 | 1.02 | |
Other securities | 610,478 | 4.60 | ||
882,860 | 6.65 | |||
Health care - 6.61% | ||||
HealthSouth Corp.: | ||||
10.75% 2016 | 86,990 | 91,992 | ||
11.409% 2014 (1) | 57,805 | 60,551 | 1.15 | |
Tenet Healthcare Corp.: | ||||
9.875% 2014 | 86,260 | 79,359 | ||
6.375%-9.25% 2011-2031 | 73,950 | 65,197 | 1.09 | |
VWR International, Inc. 10.25% 2015 (1) (4) (5) | 117,360 | 113,839 | .86 | |
HCA Inc., Term Loan B, 7.448% 2013 (1) (2) (3) | 98,257 | 96,460 | .72 | |
PTS Acquisition Corp. 9.50% 2015 (4) (5) | 60,430 | 57,409 | .43 | |
Elan Finance PLC and Elan Finance Corp. 8.875% 2013 | 54,850 | 54,164 | .41 | |
Warner Chilcott Corp. 8.75% 2015 | 46,274 | 48,125 | .36 | |
Other securities | 210,720 | 1.59 | ||
877,816 | 6.61 | |||
Materials - 6.43% | ||||
Georgia Gulf Corp. 9.50% 2014 | 67,115 | 61,746 | .47 | |
Other securities | 791,899 | 5.96 | ||
853,645 | 6.43 | |||
Information technology - 5.25% | ||||
NXP BV and NXP Funding LLC: | ||||
9.50% 2015 | 129,445 | 121,031 | ||
7.875%-8.11% 2013-2014 (1) | 42,425 | 40,754 | 1.22 | |
First Data Corp., Term Loan B2, 8.00% 2014 (1) (2) (3) | 78,500 | 75,990 | .57 | |
Sanmina-SCI Corp. 8.125% 2016 | 83,775 | 72,884 | .55 | |
Hughes Communications, Inc. 9.50% 2014 | 53,375 | 54,042 | .41 | |
Other securities | 332,484 | 2.50 | ||
697,185 | 5.25 | |||
Energy - 5.21% | ||||
Williams Companies, Inc.: | ||||
8.75% 2032 | 71,030 | 82,128 | ||
6.375%-8.125% 2010-2021 (1) (4) | 57,750 | 59,893 | ||
Williams Partners L.P. and Williams Partners Finance Corp. 7.25%-7.50% 2011-2017 | 39,375 | 40,690 | ||
Transcontinental Gas Pipe Line Corp. 6.40%-7.25% 2016-2026 | 16,310 | 16,959 | ||
Northwest Pipeline Corp. 7.00% 2016 | 7,030 | 7,338 | 1.56 | |
Enterprise Products Operating LP: | ||||
8.375% 2066 (1) | 45,240 | 46,568 | ||
7.034% 2068 (1) | 61,555 | 56,486 | .77 | |
Kinder Morgan Inc., Term Loan B, 6.63% 2013 (1) (2) (3) | 56,387 | 55,428 | .42 | |
Drummond Co., Inc. 7.375% 2016 (4) | 49,705 | 46,474 | .35 | |
Other securities | 280,749 | 2.11 | ||
692,713 | 5.21 | |||
Consumer staples - 3.67% | ||||
Stater Bros. Holdings Inc. 8.125% 2012 | 48,555 | 49,708 | .37 | |
Other securities | 438,072 | 3.30 | ||
487,780 | 3.67 | |||
Utilities - 3.56% | ||||
Edison Mission Energy: | ||||
7.50% 2013 | 44,900 | 46,247 | ||
7.00%-7.75% 2016-2027 (4) | 129,325 | 128,842 | ||
Midwest Generation, LLC 8.56% 2016 (2) | 39,629 | 42,403 | ||
Homer City Funding LLC 8.734% 2026 (2) | 9,251 | 10,361 | 1.72 | |
Other securities | 244,734 | 1.84 | ||
472,587 | 3.56 | |||
Total corporate bonds, notes & loans | 11,049,632 | 83.18 | ||
Non-U.S. government & government agency bonds & notes - 4.77% | ||||
Brazil (Federal Republic of): | ||||
10.00% 2014-2017 (8) | BRL73,000 | 36,835 | ||
Global 10.25% 2028 (8) | 15,000 | 8,607 | ||
Global 7.125%-10.50% 2014-2040 (2) | $ 24,805 | 30,944 | ||
Brazilian Treasury Bill 6.00% 2010-2045 (8) (9) | BRL118,699 | 62,966 | 1.05 | |
Other securities | 494,716 | 3.72 | ||
634,068 | 4.77 | |||
Other - 1.62% | ||||
U.S. Treasury 6.00% 2026 | $58,500 | 66,279 | .50 | |
Other securities | 149,322 | 1.12 | ||
215,601 | 1.62 | |||
Total bonds, notes & other debt instruments (cost: $11,988,873,000) | 11,899,301 | 89.57 | ||
Market value (000) | Percent of net assets | |||
Convertible securities - 0.69% | ||||
Other - 0.69% | ||||
Other securities | 92,151 | .69 | ||
Total convertible securities (cost: $74,644,000) | 92,151 | .69 | ||
Market value (000) | Percent of net assets | |||
Preferred securities - 1.27% | ||||
Other - 1.27% | ||||
Other securities | 168,359 | 1.27 | ||
Total preferred securities (cost: $165,377,000) | 168,359 | 1.27 | ||
Market value (000) | Percent of net assets | |||
Common stocks - 3.60% | Shares | |||
Telecommunication services - 2.35% | ||||
SunCom Wireless Holdings, Inc., Class A (6) (10) | 7,554,434 | 194,904 | 1.47% | |
Dobson Communications Corp., Class A (10) | 3,435,685 | 43,942 | .33 | |
Other securities | 73,205 | .55 | ||
312,051 | 2.35 | |||
Other - 0.81% | ||||
Other securities | 107,234 | .81 | ||
Miscellaneous - 0.44% | ||||
Other common stocks in initial period of acquisition | 58,521 | .44 | ||
Total common stocks (cost: $369,636,000) | 477,806 | 3.60 | ||
Market value (000) | Percent of net assets | |||
Warrants - 0.00% | ||||
Telecommunication services - 0.00% | ||||
Other securities | 38 | .00 | ||
Total warrants (cost: $1,100,000) | 38 | .00 | ||
Principal amount (000) | Market value (000) | Percent of net assets | ||
Short-term securities - 4.35% | ||||
Procter & Gamble Co. 4.75%-5.21% due 10/31-12/14/2007 (4) (11) | $91,100 | 90,431 | ||
Procter & Gamble International Funding S.C.A. 4.77%-5.23% due 10/16-12/10/2007 (4) (11) | 75,000 | 74,430 | 1.24 | |
Federal Farm Credit Banks 4.70%-5.13% due 10/9-11/1/2007 (11) | 89,500 | 89,271 | .67 | |
Wal-Mart Stores Inc. 4.72%-5.28% due 10/9-12/11/2007 (4) (11) | 59,300 | 58,995 | .45 | |
Federal Home Loan Bank 4.75%-5.125% due 10/5-12/7/2007 (11) | 55,100 | 54,827 | .41 | |
Other securities | 210,304 | 1.58 | ||
Total short-term securities (cost: $578,337,000) | 578,258 | 4.35 | ||
Total investment securities (cost: $13,177,967,000) | 13,215,913 | 99.48 | ||
Other assets less liabilities | 69,123 | .52 | ||
Net assets | $13,285,036 | 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, including securities purchased in transactions exempt from registration under the Securities Act of 1933 which may be subject to legal or contractual restrictions on resale. The total value of all such restricted securities was $50,960,000, which represented .38% of the net assets of the fund. |
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. The fund's affiliated holdings listed below are either shown in the preceding summary investment portfolio or included in the market value of "Other securities" under their respective industry sectors. Further details on these holdings and related transactions during the year ended September 30, 2007, appear below. |
Beginning shares or principal amount | Additions | Reductions | Ending shares or principal amount | Dividend and interest income (000) | Market value of affiliates at 9/30/07 (000) | |||||||||||||||||||
SunCom Wireless Holdings, Inc., Class A (10) | - | $ | 90,653,206 | $ | 83,098,772 | 7,554,434 | $ | - | $ | 194,904 | ||||||||||||||
Triton PCS, Inc. 8.50% 2013 | $ | 113,840,000 | - | - | $ | 113,840,000 | 10,298 | 119,674 | ||||||||||||||||
Triton PCS, Inc. 8.75% 2011 | $ | 46,050,000 | - | 46,050,000 | $ | - | 3,395 | - | ||||||||||||||||
Triton PCS, Inc. 9.375% 2011 | $ | 60,855,000 | - | 60,855,000 | $ | - | 4,643 | - | ||||||||||||||||
ZiLOG, Inc. (10) | 1,140,500 | - | - | 1,140,500 | - | 4,151 | ||||||||||||||||||
ZiLOG, Inc. - MOD III Inc., units (10) | 1,868 | - | 1,868 | - | - | - | ||||||||||||||||||
Clarent Hospital Corp. (7) (8) (10) | 576,849 | - | - | 576,849 | - | 58 | ||||||||||||||||||
$ | 18,336 | $ | 318,787 |
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) Coupon rate may change periodically. |
(2) Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
(3) Loan participations and assignments; the total value of all such loans, including those in "Other securities" in the summary investment portfolio, was $996,322,000, which represented 7.50% of the net assets of the fund. |
(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be |
resold in the United States in a transaction exempt from registration, normally to qualified institutional buyers. |
The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, |
was $2,865,989,000, which represented 21.57% of the net assets of the fund. |
(5) Payment in kind; the issuer has the option of paying additional securities in lieu of cash. |
(6) Represents an affiliated company as defined under the Investment Company Act of 1940. |
(7) Step bond; coupon rate will increase at a later date. |
(8) Valued under fair value procedures adopted by authority of the board of trustees. |
The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $640,572,000. |
(9) Index-linked bond whose principal amount moves with a government retail price index. |
(10) Security did not produce income during the last 12 months. |
(11) This security, or a portion of this security, has been segregated to cover funding requirements |
on investment transactions settling in the future. |
The industry classifications shown in the summary investment portfolio were obtained from sources |
believed to be reliable and are not covered by the Report of Independent Registered Public Accounting Firm. |
See Notes to Financial Statements |
Financial statements
Statement of assets and liabilities | ||||||||
at September 30, 2007 | (dollars and shares in thousands, except per-share amounts) | |||||||
Assets: | ||||||||
Investment securities at market: | ||||||||
Unaffiliated issuers (cost: $12,919,832) | $ | 12,897,126 | ||||||
Affiliated issuers (cost: $258,135) | 318,787 | $ | 13,215,913 | |||||
Cash | 671 | |||||||
Receivables for: | ||||||||
Sales of investments | 53,011 | |||||||
Sales of fund's shares | 35,060 | |||||||
Dividends and interest | 259,011 | 347,082 | ||||||
13,563,666 | ||||||||
Liabilities: | ||||||||
Payables for: | ||||||||
Purchases of investments | 226,046 | |||||||
Repurchases of fund's shares | 24,590 | |||||||
Dividends on fund's shares | 17,405 | |||||||
Open forward currency contracts | 1,560 | |||||||
Investment advisory services | 3,121 | |||||||
Services provided by affiliates | 5,582 | |||||||
Trustees' deferred compensation | 135 | |||||||
Other | 191 | 278,630 | ||||||
Net assets at September 30, 2007 | $ | 13,285,036 | ||||||
Net assets consist of: | ||||||||
Capital paid in on shares of beneficial interest | $ | 13,210,973 | ||||||
Undistributed net investment income | 37,476 | |||||||
Accumulated net realized loss | (158 | ) | ||||||
Net unrealized appreciation | 36,745 | |||||||
Net assets at September 30, 2007 | $ | 13,285,036 |
Shares of beneficial interest issued and outstanding (no stated par value) - unlimited shares authorized (1,075,506 total shares outstanding) | ||||||||||||
Net assets | Shares outstanding | Net asset value per share* | ||||||||||
Class A | $ | 9,516,467 | 770,417 | $ | 12.35 | |||||||
Class B | 755,759 | 61,183 | 12.35 | |||||||||
Class C | 1,045,438 | 84,635 | 12.35 | |||||||||
Class F | 1,165,809 | 94,379 | 12.35 | |||||||||
Class 529-A | 124,147 | 10,050 | 12.35 | |||||||||
Class 529-B | 20,775 | 1,682 | 12.35 | |||||||||
Class 529-C | 52,473 | 4,248 | 12.35 | |||||||||
Class 529-E | 7,024 | 569 | 12.35 | |||||||||
Class 529-F | 5,609 | 454 | 12.35 | |||||||||
Class R-1 | 13,076 | 1,059 | 12.35 | |||||||||
Class R-2 | 137,903 | 11,164 | 12.35 | |||||||||
Class R-3 | 185,852 | 15,046 | 12.35 | |||||||||
Class R-4 | 117,627 | 9,523 | 12.35 | |||||||||
Class R-5 | 137,077 | 11,097 | 12.35 | |||||||||
(*) 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 $12.83 each. | ||||||||||||
See Notes to Financial Statements |
Statement of operations | ||||||||
for the year ended September 30, 2007 | (dollars in thousands) | |||||||
Investment income: | ||||||||
Income: | ||||||||
Interest (net of non-U.S. taxes of $438; also includes | ||||||||
$18,336 from affiliates) | $ | 1,007,393 | ||||||
Dividends | 19,054 | $ | 1,026,447 | |||||
Fees and expenses(*): | ||||||||
Investment advisory services | 40,887 | |||||||
Distribution services | 47,033 | |||||||
Transfer agent services | 9,535 | |||||||
Administrative services | 4,457 | |||||||
Reports to shareholders | 458 | |||||||
Registration statement and prospectus | 763 | |||||||
Postage, stationery and supplies | 1,001 | |||||||
Trustees' compensation | 105 | |||||||
Auditing and legal | 122 | |||||||
Custodian | 428 | |||||||
State and local taxes | 116 | |||||||
Other | 82 | |||||||
Total fees and expenses before reimbursements/waivers | 104,987 | |||||||
Less reimbursements/waivers of fees and expenses: | ||||||||
Investment advisory services | 4,089 | |||||||
Administrative services | 241 | |||||||
Total fees and expenses after reimbursements/waivers | 100,657 | |||||||
Net investment income | 925,790 | |||||||
Net realized gain and unrealized | ||||||||
depreciation on investments and non-U.S. currency: | ||||||||
Net realized gain (loss) on: | ||||||||
Investments (including $40,960 net gain from affiliates) | 161,149 | |||||||
Non-U.S. currency transactions | (7,116 | ) | 154,033 | |||||
Net unrealized depreciation on: | ||||||||
Investments | (172,444 | ) | ||||||
Non-U.S. currency translations | (1,525 | ) | (173,969 | ) | ||||
Net realized gain and unrealized depreciation on investments and non-U.S. currency | (19,936 | ) | ||||||
Net increase in net assets resulting from operations | $ | 905,854 | ||||||
(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements. | ||||||||
See Notes to Financial Statements | ||||||||
Statements of changes in net assets | (dollars in thousands) | |||||||
Year ended September 30 | ||||||||
2007 | 2006 | |||||||
Operations: | ||||||||
Net investment income | $ | 925,790 | $ | 773,220 | ||||
Net realized gain on investments and non-U.S. currency transactions | 154,033 | 94,929 | ||||||
Net unrealized depreciation on investments and non-U.S. currency translations | (173,969 | ) | (43,452 | ) | ||||
Net increase in net assets resulting from operations | 905,854 | 824,697 | ||||||
Dividends paid or accrued to shareholders from net investment income and non-U.S. currency gain | (914,620 | ) | (791,733 | ) | ||||
Net capital share transactions | 1,967,445 | 1,230,972 | ||||||
Total increase in net assets | 1,958,679 | 1,263,936 | ||||||
Net assets: | ||||||||
Beginning of year | 11,326,357 | 10,062,421 | ||||||
End of year (including undistributed net investment income: $37,476 and $28,765, respectively) | $ | 13,285,036 | $ | 11,326,357 | ||||
See Notes to Financial Statements |
Notes to financial statements
1. | Organization and significant accounting policies |
Organization– American High-Income Trust (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks a high level of current income and, secondarily, capital appreciation through a diversified, carefully supervised portfolio consisting primarily of lower rated, higher risk corporate bonds.
The fund offers 14 share classes consisting of four retail share classes, five 529 college savings plan share classes and five retirement plan share classes. The 529 college 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 3.75% | 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. Forward currency contracts are valued at the mean of representative quoted bid and asked prices.
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 trustees. 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 monthly. 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. On 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.
Forward currency contracts– The fund may enter into forward currency contracts, which represent agreements to exchange non-U.S. currencies on specific future dates at predetermined rates. The fund enters into these contracts to manage its exposure to changes in non-U.S. exchange rates arising from investments denominated in non-U.S. currencies. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates. Due to these risks, the fund could incur losses up to the entire contract amount, which may exceed the net unrealized value shown on the accompanying financial statements. On a daily basis, the fund values forward currency contracts based on the applicable exchange rates and records unrealized gains or losses. The fund records realized gains or losses at the time the forward contract is closed or offset by another contract with the same broker for the same settlement date and currency.
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 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. Realized and unrealized gains on securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on realized and unrealized gains to provide for potential non-U.S. taxes payable on these securities. As of September 30, 2007, the liability for non-U.S. taxes based on realized gains was $77,000. As of September 30, 2007, there were no non-U.S. taxes provided on unrealized gains.
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.
The fund adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on June 29, 2007. The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net asset value of the fund.
As of and during the period ended September 30, 2007, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.
The fund is not subject to examination by U.S. federal tax authorities for tax years before 2003, by state tax authorities for tax years before 2002 and by non-U.S. tax authorities for tax years before 2004.
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; unrealized appreciation of certain investments in non-U.S. securities; net capital losses; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.
During the year ended September 30, 2007, the fund reclassified $2,389,000 from undistributed net investment income to accumulated net realized loss; and $70,000 from undistributed net investment income to capital paid in on shares of beneficial interest to align financial reporting with tax reporting.
As of September 30, 2007, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:
(dollars in thousands) | ||||
Undistributed ordinary income | $ | 66,708 | ||
Post-October non-U.S. currency loss deferrals (realized during the period November 1, 2006, through September 30, 2007)* | (2,667 | ) | ||
Undistributed long-term capital gain† | 6,949 | |||
Gross unrealized appreciation on investment securities | 499,683 | |||
Gross unrealized depreciation on investment securities | (470,355 | ) | ||
Net unrealized appreciation on investment securities | 29,328 | |||
Cost of investment securities | 13,186,585 | |||
* These deferrals are considered incurred in the subsequent year. | ||||
† Reflects the utilization of capital loss carryforwards of $146,129,000. |
Ordinary income distributions paid or accrued to shareholders from net investment income and non-U.S. currency gains were as follows (dollars in thousands):
Year ended September 30 | ||||||||
Share class | 2007 | 2006 | ||||||
Class A | $ | 673,938 | $ | 593,936 | ||||
Class B | 51,158 | 52,530 | ||||||
Class C | 64,794 | 56,047 | ||||||
Class F | 75,998 | 54,509 | ||||||
Class 529-A | 8,047 | 5,972 | ||||||
Class 529-B | 1,272 | 1,102 | ||||||
Class 529-C | 3,073 | 2,402 | ||||||
Class 529-E | 432 | 338 | ||||||
Class 529-F | 355 | 260 | ||||||
Class R-1 | 680 | 474 | ||||||
Class R-2 | 8,052 | 6,088 | ||||||
Class R-3 | 11,472 | 7,856 | ||||||
Class R-4 | 7,040 | 4,334 | ||||||
Class R-5 | 8,309 | 5,885 | ||||||
Total | $ | 914,620 | $ | 791,733 |
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 were based on a declining series of annual rates beginning with 0.30% on the first $60 million of daily net assets and decreasing to 0.14% on such assets in excess of $10 billion. The board of trustees approved an amended agreement effective November 1, 2007, decreasing the annual rate on net assets in excess of $15 billion from a rate of 0.14% to a rate of 0.135%. The agreement also provides for monthly fees, accrued daily, based on a declining series of rates beginning with 3.00% on the first $8,333,333 of the fund's monthly gross income and decreasing to 1.50% on such income in excess of $50 million. CRMC is currently waiving 10% of investment advisory services fees. During the year ended September 30, 2007, total investment advisory services fees waived by CRMC were $4,089,000. As a result, the fee shown on the accompanying financial statements of $40,887,000, which was equivalent to an annualized rate of 0.319%, was reduced to $36,798,000, or 0.287% 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 trustees approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.30% to 1.00% as noted on the following page. In some cases, the board of trustees has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes 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 trustees 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 0.30% is not exceeded. As of September 30, 2007, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.
Share class | Currently approved limits | Plan limits |
Class A | 0.30% | 0.30% |
Class 529-A | 0.30 | 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 year ended September 30, 2007, the total administrative services fees paid by CRMC were $2,000 and $239,000 for Class R-1 and R-2, respectively. 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 529 college savings 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 year ended September 30, 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 | $23,491 | $8,765 | Not applicable | Not applicable | Not applicable |
Class B | 7,823 | 770 | Not applicable | Not applicable | Not applicable |
Class C | 10,021 | Included in administrative services | $1,225 | $184 | Not applicable |
Class F | 2,630 | 998 | 227 | Not applicable | |
Class 529-A | 240 | 92 | 16 | $112 | |
Class 529-B | 198 | 16 | 6 | 20 | |
Class 529-C | 480 | 40 | 13 | 48 | |
Class 529-E | 31 | 5 | 1 | 6 | |
Class 529-F | - | 4 | 1 | 5 | |
Class R-1 | 106 | 13 | 12 | Not applicable | |
Class R-2 | 935 | 178 | 572 | Not applicable | |
Class R-3 | 833 | 222 | 164 | Not applicable | |
Class R-4 | 245 | 138 | 22 | Not applicable | |
Class R-5 | Not applicable | 109 | 8 | Not applicable | |
Total | $47,033 | $9,535 | $3,040 | $1,226 | $191 |
Trustees’ deferred compensation– Since the adoption of the deferred compensation plan in 1993, trustees who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Trustees’ compensation of $105,000, shown on the accompanying financial statements, includes $76,000 in current fees (either paid in cash or deferred) and a net increase of $29,000 in the value of the deferred amounts.
Affiliated officers and trustees – Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or trustees 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 | Repurchases(*) | Net increase (decrease) | ||||||||||||||||||||||||||||
Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | |||||||||||||||||||||||||
Year ended September 30, 2007 | ||||||||||||||||||||||||||||||||
Class A | $ | 2,599,636 | 206,346 | $ | 536,365 | 42,801 | $ | (1,902,067 | ) | (152,186 | ) | $ | 1,233,934 | 96,961 | ||||||||||||||||||
Class B | 100,652 | 7,985 | 35,448 | 2,827 | (142,227 | ) | (11,372 | ) | (6,127 | ) | (560 | ) | ||||||||||||||||||||
Class C | 335,555 | 26,621 | 45,464 | 3,628 | (204,959 | ) | (16,409 | ) | 176,060 | 13,840 | ||||||||||||||||||||||
Class F | 567,759 | 45,127 | 55,726 | 4,448 | (299,941 | ) | (23,998 | ) | 323,544 | 25,577 | ||||||||||||||||||||||
Class 529-A | 38,433 | 3,050 | 8,058 | 643 | (14,230 | ) | (1,139 | ) | 32,261 | 2,554 | ||||||||||||||||||||||
Class 529-B | 3,620 | 287 | 1,275 | 102 | (1,775 | ) | (142 | ) | 3,120 | 247 | ||||||||||||||||||||||
Class 529-C | 17,218 | 1,366 | 3,076 | 245 | (7,875 | ) | (630 | ) | 12,419 | 981 | ||||||||||||||||||||||
Class 529-E | 2,154 | 172 | 432 | 35 | (851 | ) | (68 | ) | 1,735 | 139 | ||||||||||||||||||||||
Class 529-F | 2,248 | 179 | 354 | 28 | (1,015 | ) | (81 | ) | 1,587 | 126 | ||||||||||||||||||||||
Class R-1 | 6,443 | 513 | 673 | 54 | (2,333 | ) | (185 | ) | 4,783 | 382 | ||||||||||||||||||||||
Class R-2 | 64,051 | 5,089 | 8,017 | 640 | (39,894 | ) | (3,180 | ) | 32,174 | 2,549 | ||||||||||||||||||||||
Class R-3 | 97,675 | 7,775 | 11,452 | 914 | (56,548 | ) | (4,518 | ) | 52,579 | 4,171 | ||||||||||||||||||||||
Class R-4 | 72,689 | 5,787 | 7,051 | 563 | (34,470 | ) | (2,750 | ) | 45,270 | 3,600 | ||||||||||||||||||||||
Class R-5 | 79,624 | 6,325 | 7,422 | 593 | (32,940 | ) | (2,638 | ) | 54,106 | 4,280 | ||||||||||||||||||||||
Total net increase | ||||||||||||||||||||||||||||||||
(decrease) | $ | 3,987,757 | 316,622 | $ | 720,813 | 57,521 | $ | (2,741,125 | ) | (219,296 | ) | $ | 1,967,445 | 154,847 | ||||||||||||||||||
Year ended September 30, 2006 | ||||||||||||||||||||||||||||||||
Class A | $ | 1,836,967 | 150,540 | $ | 464,940 | 38,136 | $ | (1,488,356 | ) | (122,025 | ) | $ | 813,551 | 66,651 | ||||||||||||||||||
Class B | 83,910 | 6,876 | 35,821 | 2,939 | (132,928 | ) | (10,896 | ) | (13,197 | ) | (1,081 | ) | ||||||||||||||||||||
Class C | 215,416 | 17,646 | 39,011 | 3,200 | (189,470 | ) | (15,533 | ) | 64,957 | 5,313 | ||||||||||||||||||||||
Class F | 422,946 | 34,663 | 39,769 | 3,262 | (255,884 | ) | (20,984 | ) | 206,831 | 16,941 | ||||||||||||||||||||||
Class 529-A | 27,498 | 2,253 | 5,944 | 488 | (8,085 | ) | (663 | ) | 25,357 | 2,078 | ||||||||||||||||||||||
Class 529-B | 2,686 | 220 | 1,099 | 90 | (1,455 | ) | (119 | ) | 2,330 | 191 | ||||||||||||||||||||||
Class 529-C | 11,808 | 968 | 2,389 | 196 | (6,128 | ) | (502 | ) | 8,069 | 662 | ||||||||||||||||||||||
Class 529-E | 1,527 | 125 | 337 | 28 | (682 | ) | (56 | ) | 1,182 | 97 | ||||||||||||||||||||||
Class 529-F | 1,418 | 116 | 258 | 21 | (450 | ) | (37 | ) | 1,226 | 100 | ||||||||||||||||||||||
Class R-1 | 4,022 | 330 | 468 | 38 | (2,189 | ) | (180 | ) | 2,301 | 188 | ||||||||||||||||||||||
Class R-2 | 48,334 | 3,959 | 6,045 | 496 | (23,306 | ) | (1,910 | ) | 31,073 | 2,545 | ||||||||||||||||||||||
Class R-3 | 69,151 | 5,670 | 7,805 | 640 | (40,631 | ) | (3,334 | ) | 36,325 | 2,976 | ||||||||||||||||||||||
Class R-4 | 45,516 | 3,729 | 4,297 | 352 | (19,679 | ) | (1,615 | ) | 30,134 | 2,466 | ||||||||||||||||||||||
Class R-5 | 35,308 | 2,894 | 4,732 | 388 | (19,207 | ) | (1,576 | ) | 20,833 | 1,706 | ||||||||||||||||||||||
Total net increase | ||||||||||||||||||||||||||||||||
(decrease) | $ | 2,806,507 | 229,989 | $ | 612,915 | 50,274 | $ | (2,188,450 | ) | (179,430 | ) | $ | 1,230,972 | 100,833 | ||||||||||||||||||
(*) Includes exchanges between share classes of the fund. |
6. | Forward currency contracts |
As of September 30, 2007, the fund had open forward currency contracts to sell non-U.S. currencies as follows (amounts in thousands):
Contract amount | U.S. valuation at September 30, 2007 | |||
Non-U.S. currency contracts | Non-U.S. | U.S. | Amount | Unrealized depreciation |
Sales: | ||||
Euros | ||||
expiring 10/12 to 12/14/2007 | €39,061 | $54,225 | $55,785 | $(1,560) |
7. | Investment transactions |
The fund made purchases and sales of investment securities, excluding short-term securities, of $6,973,751,000 and $4,957,390,000, respectively, during the year ended September 30, 2007.
Financial highlights
Income from investment operations (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of year | Net investment income | Net gains on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Net assets, value, end of year | Total return (2) (3) | Net assets, end of year (in millions) | Ratio of expenses to average net assets before reimbursements/ waivers | Ratio of expenses to average net assets after reimbursements/ waivers | (3 | ) | Ratio of net income to average net assets | (3 | ) | ||||||||||||||||||||||||||||||||||||||
Class A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | $ | 12.30 | $ | .93 | $ | .04 | $ | .97 | $ | (.92 | ) | $ | 12.35 | 7.99 | % | $ | 9,516 | .69 | % | .66 | % | 7.35 | % | |||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .92 | .05 | .97 | (.94 | ) | 12.30 | 8.26 | 8,285 | .69 | .65 | 7.52 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .89 | .01 | .90 | (.89 | ) | 12.27 | 7.54 | 7,448 | .68 | .65 | 7.17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .87 | .35 | 1.22 | (.84 | ) | 12.26 | 10.57 | 6,920 | .67 | .67 | 7.19 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .93 | 2.25 | 3.18 | (.92 | ) | 11.88 | 34.30 | 6,235 | .75 | .75 | 8.49 | ||||||||||||||||||||||||||||||||||||||||
Class B: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .83 | .04 | .87 | (.82 | ) | 12.35 | 7.19 | 756 | 1.44 | 1.41 | 6.62 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .83 | .05 | .88 | (.85 | ) | 12.30 | 7.44 | 760 | 1.46 | 1.42 | 6.76 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .80 | .01 | .81 | (.80 | ) | 12.27 | 6.72 | 771 | 1.45 | 1.43 | 6.39 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .78 | .35 | 1.13 | (.75 | ) | 12.26 | 9.71 | 794 | 1.46 | 1.46 | 6.40 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .84 | 2.25 | 3.09 | (.83 | ) | 11.88 | 33.28 | 736 | 1.51 | 1.51 | 7.63 | ||||||||||||||||||||||||||||||||||||||||
Class C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .83 | .04 | .87 | (.82 | ) | 12.35 | 7.14 | 1,045 | 1.48 | 1.45 | 6.55 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .82 | .05 | .87 | (.84 | ) | 12.30 | 7.39 | 871 | 1.50 | 1.46 | 6.71 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .79 | .01 | .80 | (.79 | ) | 12.27 | 6.65 | 804 | 1.51 | 1.49 | 6.32 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .77 | .35 | 1.12 | (.74 | ) | 12.26 | 9.62 | 812 | 1.54 | 1.54 | 6.31 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .83 | 2.25 | 3.08 | (.82 | ) | 11.88 | 33.17 | 772 | 1.60 | 1.60 | 7.49 | ||||||||||||||||||||||||||||||||||||||||
Class F: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .92 | .04 | .96 | (.91 | ) | 12.35 | 7.98 | 1,166 | .70 | .67 | 7.32 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .92 | .05 | .97 | (.94 | ) | 12.30 | 8.23 | 846 | .71 | .68 | 7.47 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .88 | .01 | .89 | (.88 | ) | 12.27 | 7.45 | 637 | .76 | .74 | 7.07 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .86 | .35 | 1.21 | (.83 | ) | 12.26 | 10.44 | 578 | .79 | .78 | 7.05 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .92 | 2.25 | 3.17 | (.91 | ) | 11.88 | 34.17 | 470 | .84 | .84 | 8.26 | ||||||||||||||||||||||||||||||||||||||||
Class 529-A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .92 | .04 | .96 | (.91 | ) | 12.35 | 7.92 | 124 | .76 | .72 | 7.30 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .91 | .05 | .96 | (.93 | ) | 12.30 | 8.21 | 92 | .74 | .70 | 7.47 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .88 | .01 | .89 | (.88 | ) | 12.27 | 7.44 | 66 | .77 | .75 | 7.09 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .86 | .35 | 1.21 | (.83 | ) | 12.26 | 10.48 | 48 | .76 | .76 | 7.12 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .92 | 2.25 | 3.17 | (.91 | ) | 11.88 | 34.17 | 28 | .77 | .77 | 8.36 | ||||||||||||||||||||||||||||||||||||||||
Class 529-B: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .82 | .04 | .86 | (.81 | ) | 12.35 | 7.06 | 21 | 1.56 | 1.53 | 6.50 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .81 | .05 | .86 | (.83 | ) | 12.30 | 7.30 | 18 | 1.58 | 1.55 | 6.63 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .77 | .01 | .78 | (.77 | ) | 12.27 | 6.52 | 15 | 1.64 | 1.61 | 6.22 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .75 | .35 | 1.10 | (.72 | ) | 12.26 | 9.47 | 12 | 1.67 | 1.67 | 6.20 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .82 | 2.25 | 3.07 | (.81 | ) | 11.88 | 33.01 | 7 | 1.73 | 1.73 | 7.36 | ||||||||||||||||||||||||||||||||||||||||
Class 529-C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .82 | .04 | .86 | (.81 | ) | 12.35 | 7.07 | 52 | 1.55 | 1.52 | 6.50 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .81 | .05 | .86 | (.83 | ) | 12.30 | 7.31 | 40 | 1.57 | 1.54 | 6.64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .77 | .01 | .78 | (.77 | ) | 12.27 | 6.53 | 32 | 1.63 | 1.60 | 6.23 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .75 | .35 | 1.10 | (.72 | ) | 12.26 | 9.49 | 25 | 1.66 | 1.66 | 6.21 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .82 | 2.25 | 3.07 | (.81 | ) | 11.88 | 33.03 | 16 | 1.71 | 1.71 | 7.43 | ||||||||||||||||||||||||||||||||||||||||
Class 529-E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .88 | .04 | .92 | (.87 | ) | 12.35 | 7.62 | 7 | 1.04 | 1.01 | 7.01 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .88 | .05 | .93 | (.90 | ) | 12.30 | 7.88 | 5 | 1.05 | 1.01 | 7.17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .84 | .01 | .85 | (.84 | ) | 12.27 | 7.09 | 4 | 1.10 | 1.07 | 6.77 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .82 | .35 | 1.17 | (.79 | ) | 12.26 | 10.06 | 3 | 1.13 | 1.13 | 6.75 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .88 | 2.25 | 3.13 | (.87 | ) | 11.88 | 33.73 | 2 | 1.18 | 1.18 | 7.94 | ||||||||||||||||||||||||||||||||||||||||
Class 529-F: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | $ | 12.30 | $ | .94 | $ | .04 | $ | .98 | $ | (.93 | ) | $ | 12.35 | 8.15 | % | $ | 6 | .54 | % | .51 | % | 7.51 | % | |||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .94 | .05 | .99 | (.96 | ) | 12.30 | 8.41 | 4 | .55 | .52 | 7.66 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .88 | .01 | .89 | (.88 | ) | 12.27 | 7.45 | 3 | .75 | .72 | 7.13 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .85 | .35 | 1.20 | (.82 | ) | 12.26 | 10.34 | 2 | .88 | .88 | 6.99 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .91 | 2.25 | 3.16 | (.90 | ) | 11.88 | 34.06 | 1 | .92 | .92 | 7.96 | ||||||||||||||||||||||||||||||||||||||||
Class R-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .82 | .04 | .86 | (.81 | ) | 12.35 | 7.08 | 13 | 1.57 | 1.52 | 6.50 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .82 | .05 | .87 | (.84 | ) | 12.30 | 7.35 | 8 | 1.59 | 1.50 | 6.68 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .78 | .01 | .79 | (.78 | ) | 12.27 | 6.61 | 6 | 1.61 | 1.52 | 6.35 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .76 | .35 | 1.11 | (.73 | ) | 12.26 | 9.59 | 3 | 1.68 | 1.56 | 6.32 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .83 | 2.25 | 3.08 | (.82 | ) | 11.88 | 33.16 | 1 | 2.01 | 1.60 | 7.20 | ||||||||||||||||||||||||||||||||||||||||
Class R-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .82 | .04 | .86 | (.81 | ) | 12.35 | 7.13 | 138 | 1.69 | 1.47 | 6.56 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .82 | .05 | .87 | (.84 | ) | 12.30 | 7.37 | 106 | 1.90 | 1.48 | 6.70 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .79 | .01 | .80 | (.79 | ) | 12.27 | 6.64 | 74 | 1.94 | 1.49 | 6.36 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .77 | .35 | 1.12 | (.74 | ) | 12.26 | 9.63 | 44 | 2.10 | 1.53 | 6.36 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .84 | 2.25 | 3.09 | (.83 | ) | 11.88 | 33.21 | 15 | 2.31 | 1.57 | 7.34 | ||||||||||||||||||||||||||||||||||||||||
Class R-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .88 | .04 | .92 | (.87 | ) | 12.35 | 7.58 | 186 | 1.07 | 1.04 | 6.98 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .87 | .05 | .92 | (.89 | ) | 12.30 | 7.84 | 134 | 1.08 | 1.05 | 7.13 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .84 | .01 | .85 | (.84 | ) | 12.27 | 7.06 | 97 | 1.13 | 1.10 | 6.74 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .82 | .35 | 1.17 | (.79 | ) | 12.26 | 10.05 | 58 | 1.15 | 1.14 | 6.76 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .88 | 2.25 | 3.13 | (.87 | ) | 11.88 | 33.71 | 14 | 1.28 | 1.18 | 7.74 | ||||||||||||||||||||||||||||||||||||||||
Class R-4: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .92 | .04 | .96 | (.91 | ) | 12.35 | 7.93 | 118 | .75 | .72 | 7.30 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .91 | .05 | .96 | (.93 | ) | 12.30 | 8.19 | 73 | .75 | .72 | 7.46 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .88 | .01 | .89 | (.88 | ) | 12.27 | 7.46 | 42 | .75 | .72 | 7.14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .86 | .35 | 1.21 | (.83 | ) | 12.26 | 10.45 | 24 | .79 | .78 | 7.11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .92 | 2.25 | 3.17 | (.91 | ) | 11.88 | 34.17 | 9 | .86 | .83 | 8.13 | ||||||||||||||||||||||||||||||||||||||||
Class R-5: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2007 | 12.30 | .96 | .04 | 1.00 | (.95 | ) | 12.35 | 8.26 | 137 | .44 | .41 | 7.61 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2006 | 12.27 | .95 | .05 | 1.00 | (.97 | ) | 12.30 | 8.51 | 84 | .46 | .42 | 7.75 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2005 | 12.26 | .92 | .01 | .93 | (.92 | ) | 12.27 | 7.78 | 63 | .46 | .43 | 7.37 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2004 | 11.88 | .90 | .35 | 1.25 | (.87 | ) | 12.26 | 10.80 | 74 | .47 | .47 | 7.39 | ||||||||||||||||||||||||||||||||||||||||
Year ended 9/30/2003 | 9.62 | .95 | 2.25 | 3.20 | (.94 | ) | 11.88 | 34.61 | 75 | .52 | .52 | 8.77 |
Year ended September 30 | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Portfolio turnover rate for all classes of shares | 42 | % | 41 | % | 39 | % | 39 | % | 41 | % |
(1) Based on average shares outstanding. |
(2) Total returns exclude all sales charges, including contingent deferred sales charges. |
(3) This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the years shown, CRMC reduced fees for investment advisory services. In addition, during some of the years shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes. |
See Notes to Financial Statements |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of American High-Income Trust:
We have audited the accompanying statement of assets and liabilities, including the summary investment portfolio, of American High-Income Trust (the “Fund”), as of September 30, 2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American High-Income Trust as of September 30, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, California
November 7, 2007
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 (April 1, 2007, through September 30, 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.
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.
Notes:
There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and 529 college savings plan 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 4/1/2007 | Ending account value 9/30/2007 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
Class A -- actual return | $ | 1,000.00 | $ | 1,006.91 | $ | 3.27 | .65 | % | ||||||||
Class A -- assumed 5% return | 1,000.00 | 1,021.81 | 3.29 | .65 | ||||||||||||
Class B -- actual return | 1,000.00 | 1,003.14 | 7.03 | 1.40 | ||||||||||||
Class B -- assumed 5% return | 1,000.00 | 1,018.05 | 7.08 | 1.40 | ||||||||||||
Class C -- actual return | 1,000.00 | 1,002.88 | 7.28 | 1.45 | ||||||||||||
Class C -- assumed 5% return | 1,000.00 | 1,017.80 | 7.33 | 1.45 | ||||||||||||
Class F -- actual return | 1,000.00 | 1,006.83 | 3.37 | .67 | ||||||||||||
Class F -- assumed 5% return | 1,000.00 | 1,021.71 | 3.40 | .67 | ||||||||||||
Class 529-A -- actual return | 1,000.00 | 1,006.60 | 3.57 | .71 | ||||||||||||
Class 529-A -- assumed 5% return | 1,000.00 | 1,021.51 | 3.60 | .71 | ||||||||||||
Class 529-B -- actual return | 1,000.00 | 1,002.51 | 7.63 | 1.52 | ||||||||||||
Class 529-B -- assumed 5% return | 1,000.00 | 1,017.45 | 7.69 | 1.52 | ||||||||||||
Class 529-C -- actual return | 1,000.00 | 1,002.56 | 7.63 | 1.52 | ||||||||||||
Class 529-C -- assumed 5% return | 1,000.00 | 1,017.45 | 7.69 | 1.52 | ||||||||||||
Class 529-E -- actual return | 1,000.00 | 1,005.13 | 5.08 | 1.01 | ||||||||||||
Class 529-E -- assumed 5% return | 1,000.00 | 1,020.00 | 5.11 | 1.01 | ||||||||||||
Class 529-F -- actual return | 1,000.00 | 1,007.65 | 2.57 | .51 | ||||||||||||
Class 529-F -- assumed 5% return | 1,000.00 | 1,022.51 | 2.59 | .51 | ||||||||||||
Class R-1 -- actual return | 1,000.00 | 1,002.50 | 7.68 | 1.53 | ||||||||||||
Class R-1 -- assumed 5% return | 1,000.00 | 1,017.40 | 7.74 | 1.53 | ||||||||||||
Class R-2 -- actual return | 1,000.00 | 1,002.83 | 7.33 | 1.46 | ||||||||||||
Class R-2 -- assumed 5% return | 1,000.00 | 1,017.75 | 7.38 | 1.46 | ||||||||||||
Class R-3 -- actual return | 1,000.00 | 1,004.92 | 5.28 | 1.05 | ||||||||||||
Class R-3 -- assumed 5% return | 1,000.00 | 1,019.80 | 5.32 | 1.05 | ||||||||||||
Class R-4 -- actual return | 1,000.00 | 1,006.59 | 3.62 | .72 | ||||||||||||
Class R-4 -- assumed 5% return | 1,000.00 | 1,021.46 | 3.65 | .72 | ||||||||||||
Class R-5 -- actual return | 1,000.00 | 1,008.17 | 2.06 | .41 | ||||||||||||
Class R-5 -- assumed 5% return | 1,000.00 | 1,023.01 | 2.08 | .41 |
*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period (183), and divided by 365 (to reflect the one-half year period).
Tax information
unaudited
We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended September 30, 2007:
Qualified dividend income | $ | 14,830,000 | ||
Corporate dividends received deduction | 4,561,000 | |||
U.S. government income that may be exempt from state taxation | 5,850,000 |
Individual shareholders should refer to their Form 1099 or other tax information, which will be mailed in January 2008, to determine the calendar year amounts to be included on their 2007 tax returns. Shareholders should consult their tax advisers.
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 October 31, 2008. The agreement was amended to add an additional advisory fee breakpoint if and when the fund’s net assets exceed $15 billion. 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 board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.
In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.
1. Nature, extent and quality of services
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 ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.
2. Investment results
The board and the committee considered the investment results of the fund in light of its primary objective of providing a high level of current income and its secondary objective of capital appreciation. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s short- and long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.
3. Advisory fees and total expenses
The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase and the 10% advisory fee waiver in effect since April 2005. In addition, they reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with investment mandates similar to those of the fund. They noted that, although the fees paid by those clients generally were lower than those paid by the fund, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.
4. 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 CRMC’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. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information previously received regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure and the impact of CRMC’s current 10% advisory fee waiver, reflecting benefits that may accrue from growth in assets. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.
Other share class results
unaudited
Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com
Class B, Class C, Class F and Class 529 | ||||||||||||
Average annual total returns for periods ended September 30, 2007: | 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 | 2.19 | % | 12.19 | % | 6.50 | % | ||||||
Not reflecting CDSC | 7.19 | % | 12.44 | % | 6.50 | % | ||||||
Class C shares— first sold 3/15/01 | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only | ||||||||||||
if shares are sold within one year of purchase | 6.14 | % | 12.37 | % | 7.31 | % | ||||||
Not reflecting CDSC | 7.14 | % | 12.37 | % | 7.31 | % | ||||||
Class F shares*— first sold 3/15/01 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | 7.98 | % | 13.22 | % | 8.10 | % | ||||||
Class 529-A shares†— first sold 2/19/02 | ||||||||||||
Reflecting 3.75% maximum sales charge | 3.87 | % | 12.36 | % | 8.85 | % | ||||||
Not reflecting maximum sales charge | 7.92 | % | 13.21 | % | 9.59 | % | ||||||
Class 529-B shares†— first sold 2/25/02 | ||||||||||||
Reflecting applicable CDSC, maximum of 5%, | ||||||||||||
payable only if shares are sold | ||||||||||||
within six years of purchase | 2.06 | % | 11.99 | % | 8.79 | % | ||||||
Not reflecting CDSC | 7.06 | % | 12.25 | % | 8.91 | % | ||||||
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 | 6.07 | % | 12.26 | % | 8.68 | % | ||||||
Not reflecting CDSC | 7.07 | % | 12.26 | % | 8.68 | % | ||||||
Class 529-E shares*†— first sold 3/15/02 | 7.62 | % | 12.85 | % | 8.91 | % | ||||||
Class 529-F shares*†— first sold 9/16/02 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | 8.15 | % | 13.26 | % | 12.65 | % | ||||||
*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. |
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver 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 24 and 25 for details.
For information regarding the differences among the various share classes, please refer to the fund’s prospectus.
Board of trustees and other officers
“Independent” trustees | |||
Year first | |||
elected | |||
a trustee | |||
Name and age | of the fund1 | Principal occupation(s) during past five years | |
Ambassador | 1999 | Corporate director and author; former U.S. | |
Richard G. Capen, Jr., 73 | Ambassador to Spain; former Vice Chairman, Knight-Ridder, Inc. (communications company); former Chairman and Publisher, The Miami Herald | ||
H. Frederick Christie, 74 | 1987 | Private investor; former President and CEO, The Mission Group (non-utility holding company, subsidiary of Southern California Edison Company) | |
James G. Ellis, 60 | 2006 | Vice Provost, Globalization, University of Southern California; Dean and Professor, Marshall School of Business, University of Southern California | |
Martin Fenton, 72 | 1989 | Chairman of the Board, Senior Resource Group LLC | |
Chairman of the Board | (development and management of senior living | ||
(Independent and | communities) | ||
Non-Executive) | |||
Leonard R. Fuller, 61 | 1994 | President and CEO, Fuller Consulting (financial management consulting firm) | |
R. Clark Hooper, 61 | 2005 | Private investor; former President, Dumbarton Group LLC (securities industry consulting); former Executive Vice President — Policy and Oversight, NASD | |
Richard G. Newman, 73 | 1991 | Chairman of the Board, AECOM Technology Corporation (engineering, consulting and professional technical services) | |
Frank M. Sanchez, 64 | 1999 | Principal, The Sanchez Family Corporation dba McDonald’s Restaurants (McDonald’s licensee) | |
Steadman Upham, Ph.D., 58 | 2007 | President and Professor of Anthropology, The University of Tulsa; former President and Professor of Archaeology, Claremont Graduate University | |
“Independent” trustees | |||
Number of | |||
portfolios | |||
in fund | |||
complex2 | |||
overseen by | |||
Name and age | trustee | Other directorships3 held by trustee | |
Ambassador | 15 | Carnival Corporation | |
Richard G. Capen, Jr., 73 | |||
H. Frederick Christie, 74 | 21 | AECOM Technology Corporation; Ducommun Incorporated; IHOP Corporation; Southwest Water Company | |
James G. Ellis, 60 | 12 | Genius Products; Professional Business Bank | |
Martin Fenton, 72 | 18 | None | |
Chairman of the Board | |||
(Independent and | |||
Non-Executive) | |||
Leonard R. Fuller, 61 | 16 | None | |
R. Clark Hooper, 61 | 18 | JPMorgan Value Opportunities Fund; The Swiss Helvetia Fund Inc. | |
Richard G. Newman, 73 | 14 | Sempra Energy; Southwest Water Company | |
Frank M. Sanchez, 64 | 13 | None | |
Steadman Upham, Ph.D., 58 | 14 | None | |
Diane C. Creel resigned from the board in September 2007. The trustees thank Ms. Creel for her service and dedication to the fund. |
“Interested” trustees4 | ||
Year first | ||
elected a | ||
trustee or | Principal occupation(s) during past five years and | |
Name, age and | officer of | positions held with affiliated entities or the principal |
position with fund | the fund¹ | underwriter of the fund |
Abner D. Goldstine, 77 | 1987 | Senior Vice President — Fixed Income, Capital |
Vice Chairman of the Board | Research and Management Company; Director, Capital Research and Management Company | |
Paul G. Haaga, Jr., 58 | 1987 | Vice Chairman of the Board, Capital Research and |
Vice Chairman of the Board | Management Company; Senior Vice President — Fixed Income, Capital Research and Management Company; Director, The Capital Group Companies, Inc.5 | |
David C. Barclay, 51 | 1995 | Senior Vice President — Fixed Income, Capital |
President | Research and Management Company; Director, The Capital Group Companies, Inc.5 | |
“Interested” trustees4 | ||
Number of | ||
portfolios in | ||
fund complex2 | ||
Name, age and | overseen | |
position with fund | by trustee | Other directorships3 held by trustee |
Abner D. Goldstine, 77 | 13 | None |
Vice Chairman of the Board | ||
Paul G. Haaga, Jr., 58 | 14 | None |
Vice Chairman of the Board | ||
David C. Barclay, 51 | 1 | None |
President |
The statement of additional information includes additional information about fund trustees and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all trustees and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.
1Trustees and officers of the fund serve until their resignation, removal or retirement. |
2Capital Research and Management Company manages the American Funds, consisting of 30 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 15 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series,® Inc., which is composed of nine funds and is available to investors in tax-deferred retirement plans and IRAs; and Endowments, which is composed of two portfolios and is available to certain nonprofit organizations. |
3This includes all directorships (other than those in the American Funds) that are held by each trustee as a director of a public company or a registered investment company. |
4“Interested persons” within the meaning of the 1940 Act, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter). |
5Company affiliated with Capital Research and Management Company. |
Other officers | ||
Year first | ||
elected an | Principal occupation(s) during past five years and | |
Name, age and | officer of | positions held with affiliated entities or the principal |
position with fund | the fund¹ | underwriter of the fund |
Susan M. Tolson, 45 | 1997 | Senior Vice President — Fixed Income, Capital |
Senior Vice President | Research and Management Company | |
Jennifer L. Hinman, 49 | 2001 | Senior Vice President — Fixed Income, Capital |
Vice President | Research Company5; Director, Capital Research Company5; Director, Capital International Research, Inc.5 | |
Kristine M. Nishiyama, 37 | 2003 | Vice President and Senior Counsel — Fund |
Vice President | Business Management Group, Capital Research and Management Company; Vice President and Counsel, Capital Bank and Trust Company5 | |
Kimberly S. Verdick, 43 | 1994 | Vice President — Fund Business Management |
Secretary | Group, Capital Research and Management Company | |
Ari M. Vinocor, 33 | 2007 | Vice President — Fund Business Management |
Treasurer | Group, Capital Research and Management Company | |
Courtney R. Taylor, 32 | 2006 | Assistant Vice President — Fund Business |
Assistant Secretary | Management Group, Capital Research and Management Company | |
Sharon G. Moseley, 39 | 2003 | Vice President — Fund Business Management |
Assistant Treasurer | Group, Capital Research and Management Company | |
Please see page 32 for footnotes. |
Offices of the fund and of the
investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
6455 Irvine Center Drive
Irvine, CA 92618
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
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
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 professional 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 September 30, 2007, portfolio of American High-Income Trust’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
American High-Income Trust 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 American High-Income Trust, 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 December 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 to benefit our investors. Our 30 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have 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 |
Emphasis on long-term growth through stocks |
AMCAP Fund® |
EuroPacific Growth Fund® |
The Growth Fund of America® |
The New Economy Fund® |
New Perspective Fund® |
New World FundSM |
SMALLCAP World Fund® |
•Growth-and-income funds |
Emphasis on long-term growth and dividends through stocks |
American Mutual Fund® |
Capital World Growth and Income FundSM |
Fundamental InvestorsSM |
The Investment Company of America® |
Washington Mutual Investors FundSM |
•Equity-income funds |
Emphasis on above-average income and growth through stocks and/or bonds |
Capital Income Builder® |
The Income Fund of America®
•Balanced fund |
Emphasis on long-term growth and current income through stocks and bonds |
American Balanced Fund® |
•Bond funds |
Emphasis on current income through bonds |
> | American High-Income TrustSM |
The Bond Fund of AmericaSM |
Capital World Bond Fund® |
Intermediate Bond Fund of America® |
Short-Term Bond Fund of AmericaSM
U.S. Government Securities FundSM |
•Tax-exempt bond funds |
Emphasis on tax-free current income through municipal bonds |
American High-Income Municipal Bond Fund® |
Limited Term Tax-Exempt Bond Fund of AmericaSM |
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 AmericaSM |
The U.S. Treasury Money Fund of AmericaSM |
•American Funds Target Date Retirement Series® |
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGEAR-921-1107P
Litho in USA RCG/CG/8049-S10027
Printed on recycled paper
ITEM 2 – Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.
ITEM 3 – Audit Committee Financial Expert
The Registrant’s board has determined that H. Frederick Christie, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such. Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 – Principal Accountant Fees and Services
Registrant: | ||||
a) Audit Fees: | ||||
2006 | $84,000 | |||
2007 | $94,000 | |||
b) Audit-Related Fees: | ||||
2006 | $1,000 | |||
2007 | $6,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2006 | $6,000 | |||
2007 | $6,000 | |||
The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns. | ||||
d) All Other Fees: | ||||
2006 | None | |||
2007 | None | |||
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | ||||
a) Not Applicable | ||||
b) Audit-Related Fees: | ||||
2006 | $642,000 | |||
2007 | $956,000 | |||
The audit–related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2006 | $9,000 | |||
2007 | $2,000 | |||
The tax fees consist of consulting services relating to the registrant’s investments. | ||||
d) All Other Fees: | ||||
2006 | $9,000 | |||
2007 | None | |||
The other fees consist of consulting services related to the Registrant’s compliance program. |
The Registrant’s audit committee will pre-approve all audit and permissible non-audit services that the committee considers compatible with maintaining the independent registered public accounting firm’s independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.
Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $954,000 for fiscal year 2006 and $1,238,000 for fiscal year 2007. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.
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®]
American High-Income TrustSM
Investment portfolio
September 30, 2007
Bonds, notes & other debt instruments — 89.57% | Principal amount (000) | Market value (000) | ||||||
CORPORATE BONDS, NOTES & LOANS — 83.18% | ||||||||
CONSUMER DISCRETIONARY — 25.35% | ||||||||
CCH II, LLC and CCH II Capital Corp. 10.25% 2010 | $ | 14,105 | $ | 14,493 | ||||
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 11.75% 2011 | 6,000 | 5,782 | ||||||
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 13.50% 2011 | 5,525 | 5,560 | ||||||
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20121 | 61,665 | 61,665 | ||||||
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 12.125% 2012 | 2,850 | 2,747 | ||||||
CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 | 50,065 | 50,566 | ||||||
Charter Communications Operating, LLC, Term Loan Facilities B, Delayed Draw, 7.13% 20142,3,4 | 79,400 | 76,919 | ||||||
Charter Communications Operating, LLC, Term Loan Facilities B, 7.36% 20142,3,4 | 54,550 | 52,845 | ||||||
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20141 | 37,800 | 38,178 | ||||||
CCH I, LLC and CCH I Capital Corp. 11.00% 2015 | 41,075 | 41,794 | ||||||
Univision Communications, Inc., Second Lien Term Loan, 7.629% 20092,3,4 | 11,595 | 11,518 | ||||||
Univision Communications Inc. 7.85% 2011 | 12,535 | 12,598 | ||||||
Univision Communications, Inc., First Lien Term Loan B, 7.61% 20142,3,4 | 49,975 | 47,414 | ||||||
Univision Communications Inc. 9.75% 20151,5 | 76,050 | 74,529 | ||||||
General Motors Corp. 6.375% 2008 | 695 | 690 | ||||||
General Motors Corp. 7.20% 2011 | 83,370 | 79,827 | ||||||
General Motors Corp. 7.125% 2013 | 16,575 | 15,249 | ||||||
General Motors Corp. 7.25% 2013 | € | 3,000 | 4,032 | |||||
General Motors Corp. 7.70% 2016 | $ | 10,870 | 9,783 | |||||
General Motors Corp. 8.80% 2021 | 29,975 | 27,652 | ||||||
General Motors Corp. 8.25% 2023 | 3,650 | 3,212 | ||||||
General Motors Corp. 8.375% 2033 | 5,000 | 4,406 | ||||||
Michaels Stores, Inc., Term Loan B, 7.625% 20132,3,4 | 20,202 | 19,628 | ||||||
Michaels Stores, Inc. 10.00% 2014 | 76,550 | 78,846 | ||||||
Michaels Stores, Inc. 0%/13.00% 20166 | 17,700 | 10,708 | ||||||
Michaels Stores, Inc. 11.375% 2016 | 9,250 | 9,504 | ||||||
K. Hovnanian Enterprises, Inc. 10.50% 2007 | 5,000 | 5,000 | ||||||
K. Hovnanian Enterprises, Inc. 6.00% 2010 | 5,275 | 4,141 | ||||||
K. Hovnanian Enterprises, Inc. 8.875% 2012 | 20,915 | 15,791 | ||||||
K. Hovnanian Enterprises, Inc. 7.75% 2013 | 16,225 | 11,682 | ||||||
K. Hovnanian Enterprises, Inc. 6.375% 2014 | 11,150 | 8,697 | ||||||
K. Hovnanian Enterprises, Inc. 6.50% 2014 | 2,655 | 2,078 | ||||||
K. Hovnanian Enterprises, Inc. 6.25% 2015 | 7,530 | 5,760 | ||||||
K. Hovnanian Enterprises, Inc. 6.25% 2016 | 9,010 | 6,983 | ||||||
K. Hovnanian Enterprises, Inc. 7.50% 2016 | 12,285 | 9,828 | ||||||
K. Hovnanian Enterprises, Inc. 8.625% 2017 | 29,990 | 24,892 | ||||||
TL Acquisitions, Inc., Term Loan B, 7.95% 20142,3,4 | 41,700 | 40,592 | ||||||
Thomson Learning 0%/13.25% 20151,6 | 14,895 | 12,139 | ||||||
Thomson Learning 10.50% 20151 | 42,365 | 42,047 | ||||||
Claire’s Stores, Inc., Term Loan, 7.948% 20132,3,4 | 39,541 | 37,079 | ||||||
Claire’s Stores, Inc. 9.25% 20151 | 37,125 | 32,299 | ||||||
Claire’s Stores, Inc. 10.50% 20171 | 8,925 | 6,917 | ||||||
Delphi Automotive Systems Corp. 6.50% 20097 | 34,600 | 31,659 | ||||||
Delphi Corp. 6.50% 20137 | 17,190 | 15,492 | ||||||
Delphi Automotive Systems Corp. 6.55% 20067 | 12,730 | 11,712 | ||||||
Delphi Automotive Systems Corp. 7.125% 20297 | 14,300 | 13,227 | ||||||
Delphi Trust I 8.25% 20337 | 4,470 | 2,838 | ||||||
Dex Media East LLC, Dex Media East Finance Co., Series B, 9.875% 2009 | 5,000 | 5,137 | ||||||
R.H. Donnelley Corp. 10.875% 20121 | 3,000 | 3,202 | ||||||
Dex Media, Inc., Series B, 0%/9.00% 20136 | 9,000 | 8,505 | ||||||
R.H. Donnelley Corp., Series A-1, 6.875% 2013 | 10,150 | 9,642 | ||||||
R.H. Donnelley Corp., Series A-2, 6.875% 2013 | 9,000 | 8,550 | ||||||
Dex Media, Inc., Series B, 8.00% 2013 | 3,075 | 3,113 | ||||||
R.H. Donnelley Corp., Series A-3, 8.875% 2016 | 20,475 | 20,961 | ||||||
R.H. Donnelley Corp. 8.875% 20171 | 14,750 | 15,045 | ||||||
Ford Capital BV 9.50% 2010 | 4,000 | 4,000 | ||||||
Ford Motor Co. 9.50% 2011 | 1,000 | 992 | ||||||
Ford Motor Co., Term Loan B, 8.70% 20132,3,4 | 38,927 | 37,856 | ||||||
Ford Motor Co. 6.50% 2018 | 22,668 | 18,361 | ||||||
Ford Motor Co. 8.875% 2022 | 5,330 | 4,610 | ||||||
Ford Motor Co. 7.45% 2031 | 5,000 | 3,950 | ||||||
Tenneco Automotive Inc., Series B, 10.25% 2013 | 16,725 | 18,021 | ||||||
Tenneco Automotive Inc. 8.625% 2014 | 45,225 | 45,790 | ||||||
CanWest Media Inc., Series B, 8.00% 2012 | 59,248 | 58,359 | ||||||
CanWest MediaWorks Inc. 9.25% 20151 | 3,700 | 3,755 | ||||||
American Media Operations, Inc., Series B, 10.25% 2009 | 51,295 | 45,781 | ||||||
American Media Operations, Inc. 8.875% 2011 | 17,615 | 15,501 | ||||||
NTL Cable PLC 8.75% 2014 | 43,875 | 45,191 | ||||||
NTL Cable PLC 8.75% 2014 | $ | 4,500 | 6,522 | |||||
NTL Cable PLC 9.75% 2014 | £ | 3,000 | 6,148 | |||||
Mohegan Tribal Gaming Authority 6.375% 2009 | $ | 36,500 | 36,500 | |||||
Mohegan Tribal Gaming Authority 8.00% 2012 | 7,775 | 7,969 | ||||||
Mohegan Tribal Gaming Authority 6.125% 2013 | 1,225 | 1,173 | ||||||
Mohegan Tribal Gaming Authority 7.125% 2014 | 6,400 | 6,448 | ||||||
Mohegan Tribal Gaming Authority 6.875% 2015 | 3,775 | 3,733 | ||||||
Toys “R” Us, Inc. 7.625% 2011 | 41,665 | 38,332 | ||||||
Toys “R” Us-Delaware, Inc., Term Loan B, 9.76% 20122,3,4 | 17,600 | 17,446 | ||||||
Mirage Resorts, Inc. 6.75% 2008 | 4,800 | 4,824 | ||||||
MGM MIRAGE 6.00% 2009 | 18,500 | 18,454 | ||||||
MGM MIRAGE 8.50% 2010 | 3,100 | 3,255 | ||||||
Mandalay Resort Group 6.375% 2011 | 1,500 | 1,507 | ||||||
MGM MIRAGE 6.75% 2012 | 1,700 | 1,681 | ||||||
MGM MIRAGE 6.75% 2013 | 16,855 | 16,560 | ||||||
MGM MIRAGE 6.625% 2015 | 4,400 | 4,196 | ||||||
MGM MIRAGE 7.50% 2016 | 4,000 | 3,995 | ||||||
William Lyon Homes, Inc. 7.625% 2012 | 18,050 | 12,364 | ||||||
William Lyon Homes, Inc. 10.75% 2013 | 20,395 | 15,194 | ||||||
William Lyon Homes, Inc. 7.50% 2014 | 37,860 | 25,177 | ||||||
Technical Olympic USA, Inc. 9.00% 2010 | 29,511 | 18,223 | ||||||
Technical Olympic USA, Inc. 9.00% 2010 | 10,885 | 6,803 | ||||||
Technical Olympic USA, Inc. 9.25% 20111 | 34,325 | 20,423 | ||||||
Technical Olympic USA, Inc. 10.375% 2012 | 19,965 | 5,540 | ||||||
Technical Olympic USA, Inc. 7.50% 2015 | 6,075 | 1,306 | ||||||
Young Broadcasting Inc. 10.00% 2011 | 52,810 | 48,981 | ||||||
Young Broadcasting Inc. 8.75% 2014 | 2,325 | 1,976 | ||||||
Education Management LLC and Education Management Finance Corp. 8.75% 2014 | 4,125 | 4,249 | ||||||
Education Management LLC and Education Management Finance Corp. 10.25% 2016 | 43,270 | 45,001 | ||||||
Bon-Ton Department Stores, Inc. 10.25% 2014 | 52,040 | 48,918 | ||||||
Grupo Posadas, SA de CV 8.75% 20111 | 46,225 | 47,496 | ||||||
Grupo Posadas, SA de CV 8.75% 2011 | 750 | 771 | ||||||
Burlington Coat Factory Warehouse Corp. 11.125% 2014 | 48,275 | 45,378 | ||||||
AMC Entertainment Inc., Series B, 8.625% 2012 | 24,450 | 25,245 | ||||||
AMC Entertainment Inc. 8.00% 2014 | 8,175 | 7,828 | ||||||
AMC Entertainment Inc., Series B, 11.00% 2016 | 10,000 | 10,700 | ||||||
Idearc Inc. 8.00% 2016 | 43,500 | 43,609 | ||||||
Beazer Homes USA, Inc. 8.625% 2011 | 9,600 | 7,632 | ||||||
Beazer Homes USA, Inc. 8.375% 2012 | 1,650 | 1,303 | ||||||
Beazer Homes USA, Inc. 6.50% 2013 | 7,515 | 5,599 | ||||||
Beazer Homes USA, Inc. 6.875% 2015 | 10,695 | 7,968 | ||||||
Beazer Homes USA, Inc. 8.125% 2016 | 26,600 | 20,881 | ||||||
Boyd Gaming Corp. 7.75% 2012 | 22,425 | 23,154 | ||||||
Boyd Gaming Corp. 6.75% 2014 | 15,000 | 14,775 | ||||||
Boyd Gaming Corp. 7.125% 2016 | 5,500 | 5,349 | ||||||
Pinnacle Entertainment, Inc. 7.50% 20151 | 43,600 | 41,474 | ||||||
Dollarama Group LP and Dollarama Corp. 8.875% 2012 | 41,125 | 41,331 | ||||||
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014 | 40,835 | 40,222 | ||||||
Quebecor Media Inc. 7.75% 2016 | 24,220 | 23,221 | ||||||
Quebecor Media Inc. 7.75% 20161 | 14,725 | 14,118 | ||||||
Kabel Deutschland GmbH 10.625% 2014 | 34,275 | 36,846 | ||||||
Standard Pacific Corp. 5.125% 2009 | 8,625 | 7,331 | ||||||
Standard Pacific Corp. 6.50% 2010 | 9,700 | 7,517 | ||||||
Standard Pacific Corp. 6.875% 2011 | 2,905 | 2,222 | ||||||
Standard Pacific Corp. 9.25% 2012 | 1,000 | 675 | ||||||
Standard Pacific Corp. 7.75% 2013 | 3,920 | 3,038 | ||||||
Standard Pacific Corp. 6.25% 2014 | 13,020 | 9,309 | ||||||
Standard Pacific Corp. 7.00% 2015 | 9,295 | 6,646 | ||||||
Edcon Pty Ltd. 7.98% 20142 | € | 22,425 | 29,822 | |||||
Edcon Pty Ltd. 10.23% 20152 | 4,000 | 5,248 | ||||||
Neiman Marcus Group, Inc. 9.00% 20155 | $ | 32,655 | 34,941 | |||||
Hanesbrands Inc., Series B, 8.784% 20142 | 33,545 | 33,545 | ||||||
CSC Holdings, Inc., Series B, 8.125% 2009 | 17,325 | 17,671 | ||||||
Cablevision Systems Corp., Series B, 8.00% 2012 | 14,865 | 14,493 | ||||||
Gaylord Entertainment Co. 8.00% 2013 | 18,425 | 18,770 | ||||||
Gaylord Entertainment Co. 6.75% 2014 | 12,850 | 12,400 | ||||||
Cinemark USA, Inc., Term Loan B, 7.25% 20132,3,4 | 5,656 | 5,518 | ||||||
Cinemark, Inc. 0%/9.75% 20146 | 26,025 | 24,724 | ||||||
Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013 | 37,980 | 29,909 | ||||||
KB Home 5.875% 2015 | 12,460 | 10,653 | ||||||
KB Home 6.25% 2015 | 22,265 | 19,120 | ||||||
Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012 | 28,180 | 29,519 | ||||||
Seneca Gaming Corp., Series B, 7.25% 2012 | 19,825 | 20,073 | ||||||
Seneca Gaming Corp. 7.25% 2012 | 8,440 | 8,545 | ||||||
Telenet Communications NV 9.00% 20133 | € | 7,171 | 11,147 | |||||
Telenet Group Holding NV 0%/11.50% 20141,6 | $ | 17,541 | 17,453 | |||||
iesy Repository GmbH 10.125% 2015 | € | 4,750 | 7,163 | |||||
iesy Repository GmbH 10.375% 20151 | $ | 20,475 | 20,987 | |||||
Radio One, Inc., Series B, 8.875% 2011 | 11,100 | 11,017 | ||||||
Radio One, Inc. 6.375% 2013 | 18,325 | 16,309 | ||||||
Sealy Mattress Co. 8.25% 2014 | 26,820 | 27,155 | ||||||
Chrysler Financial, First Lien Term Loan, 9.36% 20122,3,4 | 10,745 | 10,744 | ||||||
Chrysler Financial, Second Lien Term Loan, 11.86% 20132,3,4 | 15,800 | 15,593 | ||||||
Goodyear Tire & Rubber Co. 9.13% 20092 | 17,500 | 17,719 | ||||||
Goodyear Tire & Rubber Co. 8.625% 2011 | 8,010 | 8,410 | ||||||
Sally Holdings LLC and Sally Capital Inc. 9.25% 2014 | 24,800 | 25,172 | ||||||
Vidéotron Ltée 6.875% 2014 | 15,540 | 15,346 | ||||||
Vidéotron Ltée 6.375% 2015 | 9,535 | 9,011 | ||||||
Local T.V. Finance LLC 9.25% 20151,5 | 25,560 | 24,154 | ||||||
LBI Media, Inc. 8.50% 20171 | 23,985 | 23,985 | ||||||
Dillard’s, Inc. 6.625% 2008 | 5,050 | 4,981 | ||||||
Dillard Department Stores, Inc. 9.125% 2011 | 8,230 | 8,469 | ||||||
Dillard Department Stores, Inc. 7.85% 2012 | 1,900 | 1,864 | ||||||
Dillard’s, Inc. 7.13% 20188 | 4,000 | 3,658 | ||||||
Dillard’s, Inc. 7.00% 2028 | 3,000 | 2,509 | ||||||
Liberty Media Corp. 7.75% 2009 | 4,750 | 4,870 | ||||||
Liberty Media Corp. 5.70% 2013 | 3,675 | 3,452 | ||||||
Liberty Media Corp. 8.25% 2030 | 12,675 | 12,485 | ||||||
DaimlerChrysler North America Holding Corp. 6.133% 20092 | 20,000 | 19,926 | ||||||
J.C. Penney Co., Inc. 8.00% 2010 | 14,995 | 15,965 | ||||||
J.C. Penney Co., Inc. 9.00% 2012 | 2,980 | 3,390 | ||||||
Allison Transmission Holdings, Inc., Term Loan B, 8.57% 20142,3,4 | 19,400 | 18,769 | ||||||
Visteon Corp. 8.25% 2010 | 20,000 | 17,700 | ||||||
WCI Communities, Inc. 9.125% 2012 | 21,350 | 17,667 | ||||||
Warner Music Group 7.375% 2014 | 19,610 | 17,159 | ||||||
Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014 | 17,450 | 17,014 | ||||||
Royal Caribbean Cruises Ltd. 7.00% 2007 | 10,293 | 10,293 | ||||||
Royal Caribbean Cruises Ltd. 8.00% 2010 | 3,200 | 3,348 | ||||||
Royal Caribbean Cruises Ltd. 6.875% 2013 | 1,750 | 1,738 | ||||||
Warnaco, Inc. 8.875% 2013 | 13,900 | 14,630 | ||||||
MDC Holdings, Inc. 7.00% 2012 | 10,000 | 10,301 | ||||||
MDC Holdings, Inc. 5.50% 2013 | 4,000 | 3,764 | ||||||
Regal Cinemas Corp., Series B, 9.375% 20128 | 13,300 | 13,915 | ||||||
WDAC Intermediate Corp. 8.375% 20141 | 10,500 | 10,500 | ||||||
WDAC Intermediate Corp. 8.50% 2014 | € | 1,750 | 2,452 | |||||
Meritage Corp. 7.00% 2014 | $ | 3,250 | 2,616 | |||||
Meritage Homes Corp. 6.25% 2015 | 12,980 | 10,189 | ||||||
Entercom Radio, LLC 7.625% 2014 | 12,720 | 12,593 | ||||||
Gamestop Corp. 8.00% 2012 | 11,800 | 12,331 | ||||||
D.R. Horton, Inc. 8.00% 2009 | 10,770 | 10,698 | ||||||
D.R. Horton, Inc. 7.875% 2011 | 1,530 | 1,501 | ||||||
Hilton Hotels Corp. 7.625% 2008 | 4,700 | 4,776 | ||||||
Hilton Hotels Corp. 7.20% 2009 | 5,885 | 6,241 | ||||||
Cooper-Standard Automotive Inc. 7.00% 2012 | 11,500 | 10,580 | ||||||
Seminole Tribe of Florida 7.804% 20201,3,8 | 10,050 | 10,241 | ||||||
Riddell Bell Holdings Inc. 8.375% 20128 | 10,175 | 9,768 | ||||||
XM Satellite Radio Inc. and XM Satellite Radio Holdings Inc. 9.75% 2014 | 8,805 | 8,871 | ||||||
Mediacom Broadband LLC and Mediacom Broadband Corp. 8.50% 2015 | 8,375 | 8,438 | ||||||
Buffets, Inc. 12.50% 2014 | 9,150 | 6,451 | ||||||
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013 | 6,031 | 6,295 | ||||||
Toll Corp. 8.25% 2011 | 5,500 | 5,362 | ||||||
Viacom Inc. 5.75% 2011 | 4,500 | 4,547 | ||||||
News America Inc. 6.75% 2038 | 2,990 | 3,141 | ||||||
Carmike Cinemas, Inc., Term Loan B, 8.98% 20122,3,4 | 2,199 | 2,198 | ||||||
TRW Automotive Inc. 7.00% 20141 | 1,950 | 1,901 | ||||||
KAC Acquisition Corp. 8.00% 20261,5,8 | 203 | 203 | ||||||
3,367,932 | ||||||||
TELECOMMUNICATION SERVICES — 10.29% | ||||||||
Windstream Corp. 8.125% 2013 | 103,600 | 109,557 | ||||||
Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015 | 37,160 | 38,989 | ||||||
Windstream Corp. 8.625% 2016 | 12,300 | 13,176 | ||||||
Dobson Cellular Systems, Inc., Series B, 8.375% 2011 | 25,040 | 26,699 | ||||||
American Cellular Corp., Series B, 10.00% 2011 | 6,350 | 6,667 | ||||||
Dobson Communications Corp. 9.61% 20122 | 19,850 | 20,297 | ||||||
Dobson Cellular Systems, Inc. 9.875% 2012 | 20,375 | 22,107 | ||||||
Dobson Communications Corp. 8.875% 2013 | 41,125 | 44,004 | ||||||
American Cellular Corp., Term Loan B, 7.36% 20142,3,4 | 21,197 | 21,157 | ||||||
Triton PCS, Inc. 8.50% 20139 | 113,840 | 119,674 | ||||||
Centennial Communications Corp. 10.00% 2013 | 2,175 | 2,311 | ||||||
Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013 | 34,505 | 36,748 | ||||||
Centennial Communications Corp. 11.11% 20132 | 39,750 | 41,141 | ||||||
Centennial Communications Corp., Centennial Cellular Operating Co. LLC | ||||||||
and Centennial Puerto Rico Operations Corp. 8.125% 20142 | 24,175 | 24,719 | ||||||
Qwest Capital Funding, Inc. 7.00% 2009 | 5,000 | 5,050 | ||||||
Qwest Capital Funding, Inc. 7.90% 2010 | 18,285 | 18,788 | ||||||
Qwest Communications International Inc. 7.25% 2011 | 43,725 | 44,436 | ||||||
Qwest Capital Funding, Inc. 7.25% 2011 | 25,575 | 25,831 | ||||||
Qwest Corp. 8.875% 2012 | 3,600 | 3,946 | ||||||
Qwest Capital Funding, Inc. 7.625% 2021 | 1,325 | 1,245 | ||||||
U S WEST Capital Funding, Inc. 6.875% 2028 | 3,300 | 2,846 | ||||||
Intelsat, Ltd. 6.50% 2013 | 4,475 | 3,423 | ||||||
Intelsat (Bermuda), Ltd. 8.25% 2013 | 28,730 | 29,305 | ||||||
Intelsat (Bermuda), Ltd. 0%/9.25% 20156 | 8,200 | 6,785 | ||||||
Intelsat (Bermuda), Ltd. 8.625% 2015 | 13,350 | 13,684 | ||||||
Intelsat Corp. 9.00% 2016 | 13,075 | 13,533 | ||||||
Intelsat (Bermuda), Ltd. 9.25% 2016 | 27,200 | 28,356 | ||||||
Intelsat (Bermuda), Ltd. 11.25% 2016 | 5,550 | 5,973 | ||||||
Rural Cellular Corp. 8.25% 2012 | 11,850 | 12,354 | ||||||
Rural Cellular Corp. 11.106% 20122 | 33,900 | 34,747 | ||||||
Rural Cellular Corp. 8.621% 20131,2 | 48,875 | 50,341 | ||||||
American Tower Corp. 7.125% 2012 | 64,360 | 66,130 | ||||||
American Tower Corp. 7.50% 2012 | 14,100 | 14,558 | ||||||
American Tower Corp. 7.00% 20171 | 6,500 | 6,573 | ||||||
MetroPCS Wireless, Inc., Term Loan B, 7.625% 20132,3,4 | 15,892 | 15,706 | ||||||
MetroPCS Wireless, Inc. 9.25% 20141 | 55,025 | 56,401 | ||||||
Hawaiian Telcom Communications, Inc. 9.75% 2013 | 23,340 | 23,982 | ||||||
Hawaiian Telcom Communications, Inc. 10.86% 20132 | 19,715 | 20,060 | ||||||
Hawaiian Telcom Communications, Inc., Term Loan C, 7.45% 20142,3,4 | 15,711 | 15,274 | ||||||
Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015 | 8,725 | 9,467 | ||||||
Cricket Communications, Inc. 9.375% 2014 | 43,905 | 44,783 | ||||||
Cricket Communications, Inc. 9.375% 20141 | 16,875 | 17,212 | ||||||
Nextel Communications, Inc., Series E, 6.875% 2013 | 7,000 | 7,034 | ||||||
Nextel Communications, Inc., Series D, 7.375% 2015 | 47,808 | 48,628 | ||||||
Cincinnati Bell Inc. 7.25% 2013 | 38,425 | 38,905 | ||||||
Orascom Telecom 7.875% 20141 | 32,780 | 31,182 | ||||||
Digicel Group Ltd. 8.875% 20151 | 29,100 | 27,427 | ||||||
Level 3 Financing, Inc. 9.25% 2014 | 21,150 | 20,938 | ||||||
NTELOS Inc., Term Loan B, 7.38% 20112,3,4 | 20,966 | 20,782 | ||||||
Rogers Wireless Inc. 7.25% 2012 | 6,375 | 6,757 | ||||||
Rogers Wireless Inc. 7.50% 2015 | 12,025 | 12,906 | ||||||
Millicom International Cellular SA 10.00% 2013 | 10,050 | 10,728 | ||||||
Trilogy International Partners LLC, Term Loan B, 8.698% 20122,3,4 | 10,000 | 9,600 | ||||||
Nordic Telephone Co. Holding ApS 8.875% 20161 | 7,900 | 8,374 | ||||||
América Móvil, SA de CV 8.46% 2036 | MXP65,000 | 5,858 | ||||||
1,367,154 | ||||||||
INDUSTRIALS — 10.16% | ||||||||
Nielsen Finance LLC, Term Loan B, 7.61% 20132,3,4 | $ | 9,825 | 9,550 | |||||
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014 | 59,500 | 63,219 | ||||||
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20166 | 81,050 | 57,140 | ||||||
DAE Aviation Holdings, Inc., Term Loan B, 9.00% 20142,3,4 | 57,125 | 57,125 | ||||||
DAE Aviation Holdings, Inc. 11.25% 20151 | 66,070 | 69,373 | ||||||
Calair LLC and Calair Capital Corp. 8.125% 2008 | 6,115 | 6,146 | ||||||
Continental Airlines, Inc. 8.75% 2011 | 18,950 | 18,287 | ||||||
Continental Airlines, Inc., Series 2000-2, Class A-2, 7.487% 20123 | 5,000 | 5,129 | ||||||
Continental Airlines, Inc., Series 2000-2, Class C, 8.312% 20123 | 3,556 | 3,480 | ||||||
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 20173 | 6,394 | 6,186 | ||||||
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20183 | 13,512 | 13,072 | ||||||
Continental Airlines, Inc., Series 1997-4B, Class B, 6.90% 20183 | 12,500 | 11,882 | ||||||
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20193 | 5,613 | 5,746 | ||||||
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20193 | 5,585 | 5,580 | ||||||
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20203 | 9,475 | 9,547 | ||||||
Continental Airlines, Inc., Series 2003-ERJ3, Class A, 7.875% 20203 | 15,001 | 14,739 | ||||||
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20223 | 3,445 | 3,452 | ||||||
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20223 | 2,922 | 3,061 | ||||||
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20223 | 389 | 417 | ||||||
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20223 | 11,374 | 11,345 | ||||||
AMR Corp., Series B, 10.45% 2011 | 1,850 | 1,880 | ||||||
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20123 | 17,375 | 16,963 | ||||||
American Airlines, Inc., Series 2001-2, Class B, 8.608% 20123 | 8,690 | 8,811 | ||||||
AMR Corp. 9.00% 2012 | 16,155 | 16,478 | ||||||
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20133 | 5,729 | 6,050 | ||||||
AMR Corp. 9.00% 2016 | 1,475 | 1,453 | ||||||
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20193 | 22,502 | 21,192 | ||||||
AMR Corp. 9.88% 20208 | 1,275 | 1,211 | ||||||
AMR Corp. 9.80% 20218 | 2,555 | 2,466 | ||||||
AMR Corp. 10.00% 20218 | 9,000 | 8,730 | ||||||
DRS Technologies, Inc. 6.875% 2013 | 43,330 | 43,547 | ||||||
DRS Technologies, Inc. 6.625% 2016 | 8,900 | 8,833 | ||||||
DRS Technologies, Inc. 7.625% 2018 | 19,575 | 20,064 | ||||||
NTK Holdings Inc. 0%/10.75% 20146 | 53,460 | 33,145 | ||||||
THL Buildco, Inc. 8.50% 2014 | 41,945 | 36,597 | ||||||
Hawker Beechcraft 8.50% 20151 | 4,975 | 5,099 | ||||||
Hawker Beechcraft 8.875% 20151,5 | 58,480 | 59,065 | ||||||
Hawker Beechcraft 9.75% 20171 | 5,255 | 5,386 | ||||||
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20113,7 | 17,433 | 20,484 | ||||||
United Air Lines, Inc., Series 2000-2, Class A-2, 7.186% 20123 | 7,680 | 7,747 | ||||||
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20143,8 | 4,616 | 4,616 | ||||||
United Air Lines, Inc., Term Loan B, 7.125% 20142,3,4 | 14,010 | 13,353 | ||||||
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20153 | 3,869 | 3,879 | ||||||
United Air Lines, Inc., 1991 Equipment Trust Certificates, Series A, 10.11% 20063,7,8 | 1,136 | 0 | ||||||
United Air Lines, Inc., Series 2007-1, Class B, 7.336% 20213 | 9,910 | 9,464 | ||||||
Allied Waste North America, Inc., Series B, 6.50% 2010 | 9,500 | 9,619 | ||||||
Allied Waste North America, Inc., Series B, 5.75% 2011 | 9,650 | 9,529 | ||||||
Allied Waste North America, Inc., Series B, 6.375% 2011 | 5,000 | 5,037 | ||||||
Allied Waste North America, Inc., Series B, 6.125% 2014 | 11,000 | 10,739 | ||||||
Allied Waste North America, Inc., Series B, 7.375% 2014 | 15,705 | 15,862 | ||||||
Allied Waste North America, Inc. 6.875% 2017 | 2,800 | 2,828 | ||||||
Accuride Corp. 8.50% 2015 | 53,595 | 51,719 | ||||||
Ashtead Group PLC 8.625% 20151 | 20,775 | 20,308 | ||||||
Ashtead Capital, Inc. 9.00% 20161 | 31,100 | 30,828 | ||||||
ACIH, Inc. 0%/11.50% 20121,6 | 37,235 | 28,857 | ||||||
Atrium Companies, Inc., Term Loan B, 8.61% 20122,3,4 | 22,376 | 20,922 | ||||||
ARAMARK Corp., Term Loan B, 7.36% 20142,3,4 | 23,549 | 23,140 | ||||||
ARAMARK Corp., Term Loan B, Letter of Credit, 7.36% 20142,3,4 | 1,683 | 1,654 | ||||||
ARAMARK Corp. 8.50% 2015 | 20,745 | 21,264 | ||||||
ARAMARK Corp. 8.856% 20152 | 3,225 | 3,273 | ||||||
Goodman Global Holdings, Inc., Series B, 7.875% 2012 | 38,015 | 37,540 | ||||||
Delta Air Lines, Inc., Series 2000-1, Class A-1, 7.379% 20113 | 1,679 | 1,697 | ||||||
Delta Air Lines, Inc., Series 2000-1, Class A-2, 7.57% 20123 | 17,018 | 17,470 | ||||||
Delta Air Lines, Inc., Series 2000-1, Class B, 7.92% 20123 | 3,500 | 3,478 | ||||||
Delta Air Lines, Inc., Second Lien Term Loan B, 8.61% 20142,3,4 | 12,000 | 11,670 | ||||||
DynCorp International and DIV Capital Corp., Series A, 9.50% 2013 | 30,820 | 32,053 | ||||||
Northwest Airlines, Inc., Term Loan B, 8.698% 20132,3,4 | 16,537 | 15,751 | ||||||
Northwest Airlines, Inc., Term Loan A, 8.698% 20182,3,4 | 12,082 | 11,750 | ||||||
TransDigm Inc. 7.75% 2014 | 24,785 | 25,157 | ||||||
Williams Scotsman, Inc. 8.50% 2015 | 22,375 | 24,724 | ||||||
TFM, SA de CV 9.375% 2012 | 21,000 | 22,102 | ||||||
RBS Global, Inc. and Rexnord LLC 9.50% 2014 | 11,000 | 11,440 | ||||||
RBS Global, Inc. and Rexnord LLC 8.875% 2016 | 8,475 | 8,560 | ||||||
RSC Holdings III, LLC, Second Lien Term Loan B, 8.86% 20132,3,4 | 16,541 | 16,100 | ||||||
Quebecor World Inc. 8.75% 20161 | 17,615 | 16,074 | ||||||
Kansas City Southern Railway Co. 9.50% 2008 | 3,150 | 3,233 | ||||||
Kansas City Southern Railway Co. 7.50% 2009 | 11,567 | 11,755 | ||||||
Hertz Corp. 8.875% 2014 | 3,175 | 3,286 | ||||||
Hertz Corp. 10.50% 2016 | 8,600 | 9,331 | ||||||
H&E Equipment Services, Inc. 8.375% 2016 | 11,500 | 11,270 | ||||||
United Rentals (North America), Inc., Series B, 6.50% 2012 | 10,675 | 10,862 | ||||||
Mobile Storage Group, Inc. 9.75% 20141 | 10,000 | 10,050 | ||||||
CEVA Group PLC 10.00% 20141 | 9,675 | 9,723 | ||||||
Alion Science and Technology Corp. 10.25% 2015 | 10,350 | 9,444 | ||||||
Esterline Technologies Corp. 6.625% 2017 | 8,250 | 8,209 | ||||||
Terex Corp. 7.375% 2014 | 8,000 | 8,160 | ||||||
Esco Corp. 8.625% 20131 | 5,600 | 5,544 | ||||||
Esco Corp. 9.569% 20131,2 | 950 | 921 | ||||||
Park-Ohio Industries, Inc. 8.375% 2014 | 6,225 | 6,038 | ||||||
1,349,960 | ||||||||
FINANCIALS — 6.65% | ||||||||
Ford Motor Credit Co. 5.625% 2008 | 3,570 | 3,489 | ||||||
Ford Motor Credit Co. 7.375% 2009 | 2,725 | 2,673 | ||||||
Ford Motor Credit Co. 8.625% 2010 | 1,000 | 992 | ||||||
Ford Motor Credit Co. 9.75% 20102 | 31,000 | 31,646 | ||||||
Ford Motor Credit Co. 7.25% 2011 | 5,750 | 5,393 | ||||||
Ford Motor Credit Co. 7.375% 2011 | 10,025 | 9,613 | ||||||
Ford Motor Credit Co. 9.875% 2011 | 5,000 | 5,068 | ||||||
Ford Motor Credit Co. 7.80% 2012 | 3,000 | 2,857 | ||||||
Ford Motor Credit Co. 8.11% 20122 | 71,750 | 67,858 | ||||||
Ford Motor Credit Co. 8.00% 2016 | 8,200 | 7,683 | ||||||
Realogy Corp., Term Loan B, Letter of Credit, 5.32% 20132,3,4 | 5,417 | 5,101 | ||||||
Realogy Corp., Term Loan B, 8.36% 20132,3,4 | 26,895 | 25,326 | ||||||
Realogy Corp. 10.50% 20141 | 98,930 | 84,585 | ||||||
Realogy Corp. 11.00% 20141,5 | 14,400 | 11,898 | ||||||
Realogy Corp. 12.375% 20151 | 10,825 | 8,200 | ||||||
General Motors Acceptance Corp. 6.36% 20082 | 2,450 | 2,414 | ||||||
Residential Capital Corp. 7.46% 20092 | 2,000 | 1,702 | ||||||
Residential Capital Corp. 9.19% 20091,2 | 16,650 | 11,676 | ||||||
Residential Capital Corp. 7.375% 20102 | 10,000 | 8,305 | ||||||
General Motors Acceptance Corp. 7.25% 2011 | 11,710 | 11,360 | ||||||
General Motors Acceptance Corp. 6.625% 2012 | 3,000 | 2,802 | ||||||
General Motors Acceptance Corp. 6.875% 2012 | 12,635 | 11,863 | ||||||
General Motors Acceptance Corp. 7.00% 2012 | 8,150 | 7,744 | ||||||
Residential Capital, LLC 7.50% 20122 | 10,850 | 8,797 | ||||||
General Motors Acceptance Corp. 6.75% 2014 | 15,930 | 14,458 | ||||||
General Motors Acceptance Corp. 7.821% 20142 | 15,000 | 13,847 | ||||||
General Motors Acceptance Corp. 8.00% 2031 | 9,565 | 9,409 | ||||||
E*TRADE Financial Corp. 8.00% 2011 | 29,825 | 29,825 | ||||||
E*TRADE Financial Corp. 7.375% 2013 | 8,600 | 8,084 | ||||||
E*TRADE Financial Corp. 7.875% 2015 | 36,920 | 34,336 | ||||||
Host Marriott, LP, Series M, 7.00% 2012 | 25,100 | 25,414 | ||||||
Host Marriott, LP, Series K, 7.125% 2013 | 19,375 | 19,617 | ||||||
Host Hotels & Resorts, LP, Series S, 6.875% 2014 | 4,325 | 4,336 | ||||||
Host Marriott, LP, Series O, 6.375% 2015 | 1,025 | 1,007 | ||||||
Washington Mutual Preferred Funding I Ltd., Series A-1, 6.534% (undated)1,2 | 39,800 | 36,548 | ||||||
Washington Mutual Preferred Funding III Ltd. 6.895% (undated)1,2 | 11,400 | 10,701 | ||||||
Rouse Co. 3.625% 2009 | 12,415 | 11,946 | ||||||
Rouse Co. 7.20% 2012 | 11,395 | 11,490 | ||||||
Rouse Co. 6.75% 20131 | 15,800 | 15,578 | ||||||
TuranAlem Finance BV 7.875% 2010 | 10,000 | 9,525 | ||||||
TuranAlem Finance BV 7.75% 20131 | 8,500 | 7,586 | ||||||
TuranAlem Finance BV 8.50% 20158 | 4,000 | 3,720 | ||||||
TuranAlem Finance BV 8.50% 20151,8 | 2,280 | 2,120 | ||||||
TuranAlem Finance BV 8.25% 20371 | 17,970 | 15,724 | ||||||
Kazkommerts International BV 8.50% 20131 | 3,500 | 3,328 | ||||||
Kazkommerts International BV 8.50% 2013 | 1,500 | 1,426 | ||||||
Kazkommerts International BV 7.875% 20141 | 10,000 | 9,123 | ||||||
Kazkommerts International BV 8.00% 20151 | 6,000 | 5,345 | ||||||
Kazkommerts International BV 8.00% 2015 | 3,000 | 2,673 | ||||||
Kazkommerts International BV, Series 4, 7.50% 2016 | 7,500 | 6,292 | ||||||
Lazard Group LLC 7.125% 2015 | 8,620 | 8,719 | ||||||
Lazard Group LLC 6.85% 2017 | 15,450 | 15,228 | ||||||
Countrywide Home Loans, Inc., Series L, 3.25% 2008 | 11,717 | 11,294 | ||||||
Countrywide Home Loans, Inc., Series M, 4.125% 2009 | 3,600 | 3,310 | ||||||
Countrywide Financial Corp., Series A, 4.50% 2010 | 2,941 | 2,652 | ||||||
Countrywide Home Loans, Inc., Series L, 4.00% 2011 | 2,820 | 2,527 | ||||||
Countrywide Financial Corp., Series B, 5.80% 2012 | 1,000 | 938 | ||||||
Countrywide Financial Corp. 6.25% 2016 | 1,875 | 1,700 | ||||||
HSBK (Europe) B.V. 7.75% 2013 | 7,660 | 7,642 | ||||||
HSBK (Europe) B.V. 7.75% 20131 | 1,200 | 1,197 | ||||||
HSBK (Europe) B.V. 7.25% 20171 | 13,765 | 12,251 | ||||||
MBNA Corp. 5.625% 2007 | 10,000 | 10,010 | ||||||
MBNA Capital A, Series A, 8.278% 2026 | 7,500 | 7,807 | ||||||
SLM Corp., Series A, 5.375% 2013 | 9,000 | 8,157 | ||||||
SLM Corp., Series A, 5.66% 20142 | 7,000 | 6,117 | ||||||
Liberty Mutual Group Inc., Series A, 7.80% 20871 | 14,000 | 13,663 | ||||||
FelCor Lodging LP 8.50% 20112 | 11,505 | 12,195 | ||||||
Capmark Financial Group, Inc. 6.03% 20101,2 | 9,000 | 8,398 | ||||||
Capmark Financial Group, Inc. 5.875% 20121 | 4,000 | 3,646 | ||||||
Catlin Insurance Ltd. 7.249% (undated)1,2 | 12,500 | 11,810 | ||||||
Northern Rock PLC 5.60% (undated)1,8 | 900 | 608 | ||||||
Northern Rock PLC 6.594% (undated)1,8 | 16,400 | 11,070 | ||||||
Advanta Capital Trust I, Series B, 8.99% 2026 | 12,000 | 10,860 | ||||||
ILFC E-Capital Trust II 6.25% 20651,2 | 8,000 | 7,723 | ||||||
Glen Meadow Pass Through Trust 6.505% 20671,2,8 | 7,500 | 7,278 | ||||||
iStar Financial, Inc. 7.00% 2008 | 2,375 | 2,373 | ||||||
iStar Financial, Inc., Series B, 4.875% 2009 | 2,000 | 1,957 | ||||||
iStar Financial, Inc. 6.00% 2010 | 2,250 | 2,189 | ||||||
LaBranche & Co Inc. 11.00% 2012 | 6,000 | 6,045 | ||||||
Morgan Stanley 10.09% 20178 | BRL10,800 | 5,781 | ||||||
Banco Mercantil del Norte, SA 6.135% 20161 | $ | 3,500 | 3,501 | |||||
Banco Mercantil del Norte, SA 6.862% 20211 | 2,000 | 2,006 | ||||||
Chevy Chase Bank, FSB 6.875% 2013 | 5,500 | 5,376 | ||||||
XL Capital Ltd., Series E, 6.50% (undated)2 | 5,000 | 4,678 | ||||||
Ambac Financial Group, Inc. 6.15% 20872 | 4,010 | 3,471 | ||||||
CIT Group Inc. 5.40% 2016 | 2,750 | 2,488 | ||||||
UnumProvident Corp. 5.859% 2009 | 2,000 | 2,028 | ||||||
Standard Chartered PLC 6.409% (undated)1,2 | 1,800 | 1,664 | ||||||
882,860 | ||||||||
HEALTH CARE — 6.61% | ||||||||
HealthSouth Corp. 11.409% 20142 | $ | 57,805 | $ | 60,551 | ||||
HealthSouth Corp. 10.75% 2016 | 86,990 | 91,992 | ||||||
Tenet Healthcare Corp. 6.375% 2011 | 16,930 | 14,898 | ||||||
Tenet Healthcare Corp. 7.375% 2013 | 7,990 | 6,811 | ||||||
Tenet Healthcare Corp. 9.875% 2014 | 86,260 | 79,359 | ||||||
Tenet Healthcare Corp. 9.25% 2015 | 48,830 | 43,337 | ||||||
Tenet Healthcare Corp. 6.875% 2031 | 200 | 151 | ||||||
HCA Inc., Term Loan B, 7.448% 20132,3,4 | 98,257 | 96,460 | ||||||
HCA Inc. 9.125% 20141 | 4,345 | 4,595 | ||||||
HCA Inc. 9.25% 20161 | 7,700 | 8,201 | ||||||
HCA Inc. 9.625% 20161,5 | 11,550 | 12,359 | ||||||
VWR International, Inc. 10.25% 20151,2,5 | 117,360 | 113,839 | ||||||
Elan Finance PLC and Elan Finance Corp. 8.875% 2013 | 54,850 | 54,164 | ||||||
Elan Finance PLC and Elan Finance Corp. 9.705% 20132 | 9,525 | 9,406 | ||||||
PTS Acquisition Corp. 9.50% 20151,5 | 60,430 | 57,409 | ||||||
Warner Chilcott Corp. 8.75% 2015 | 46,274 | 48,125 | ||||||
Surgical Care Affiliates, Inc. 8.875% 20151,5 | 22,325 | 21,320 | ||||||
United Surgical Partners International, Inc. 8.875% 2017 | 5,025 | 5,100 | ||||||
Surgical Care Affiliates, Inc. 10.00% 20171 | 15,800 | 15,247 | ||||||
Viant Holdings Inc. 10.125% 20171 | 35,135 | 32,851 | ||||||
Team Finance LLC and Health Finance Corp. 11.25% 2013 | 30,640 | 32,632 | ||||||
Boston Scientific Corp. 7.00% 2035 | 28,450 | 24,823 | ||||||
Community Health Systems Inc. 8.875% 20151 | 15,550 | 16,055 | ||||||
Accellent Inc. 10.50% 2013 | 11,520 | 10,714 | ||||||
AMR HoldCo, Inc. and EmCare HoldCo, Inc. 10.00% 2015 | 9,795 | 10,432 | ||||||
Universal Hospital Services, Inc. 8.50% 20151,5 | 3,970 | 3,950 | ||||||
Universal Hospital Services, Inc. 8.759% 20151,2 | 3,035 | 3,035 | ||||||
877,816 | ||||||||
MATERIALS — 6.43% | ||||||||
Jefferson Smurfit Corp. (U.S.) 8.25% 2012 | 33,010 | 33,258 | ||||||
Stone Container Corp. 8.375% 2012 | 12,840 | 12,904 | ||||||
Jefferson Smurfit Corp. (U.S.) 7.50% 2013 | 24,405 | 23,734 | ||||||
Smurfit-Stone Container Enterprises, Inc. 8.00% 2017 | 20,735 | 20,476 | ||||||
Georgia Gulf Corp. 9.50% 2014 | 67,115 | 61,746 | ||||||
Georgia Gulf Corp. 10.75% 2016 | 6,920 | 6,055 | ||||||
Abitibi-Consolidated Co. of Canada 5.25% 2008 | 6,250 | 6,000 | ||||||
Abitibi-Consolidated Finance LP 7.875% 2009 | 7,415 | 6,636 | ||||||
Abitibi-Consolidated Inc. 8.55% 2010 | 16,275 | 13,508 | ||||||
Abitibi-Consolidated Inc. 7.75% 2011 | 8,025 | 6,219 | ||||||
Abitibi-Consolidated Co. of Canada 9.194% 20112 | 6,975 | 5,475 | ||||||
Abitibi-Consolidated Co. of Canada 6.00% 2013 | 3,000 | 2,115 | ||||||
Abitibi-Consolidated Co. of Canada 8.375% 2015 | 29,125 | 21,334 | ||||||
Freeport-McMoRan Copper & Gold Inc. 8.25% 2015 | 24,170 | 26,164 | ||||||
Freeport-McMoRan Copper & Gold Inc. 8.564% 20152 | 6,000 | 6,248 | ||||||
Freeport-McMoRan Copper & Gold Inc. 8.375% 2017 | 20,790 | 22,765 | ||||||
Nalco Co. 7.75% 2011 | 36,890 | 37,812 | ||||||
Nalco Co. 8.875% 2013 | 3,500 | 3,693 | ||||||
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 20146 | 8,700 | 7,613 | ||||||
Algoma Steel Inc., Term Loan B, 8.09% 20142,3,4 | 9,000 | 8,753 | ||||||
Algoma Steel Inc. 9.875% 20151 | 42,000 | 37,590 | ||||||
Building Materials Corp. of America 7.75% 2014 | 45,035 | 40,982 | ||||||
Associated Materials Inc. 9.75% 2012 | 8,865 | 9,042 | ||||||
AMH Holdings, Inc. 0%/11.25% 20146 | 47,925 | 30,432 | ||||||
Boise Cascade, LLC and Boise Cascade Finance Corp. 8.235% 20122 | 4,000 | 4,000 | ||||||
Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014 | 34,605 | 33,394 | ||||||
Georgia-Pacific Corp. 8.125% 2011 | 14,320 | 14,606 | ||||||
Georgia-Pacific Corp. 9.50% 2011 | 2,705 | 2,867 | ||||||
Georgia-Pacific Corp., First Lien Term Loan B, 7.474% 20122,3,4 | 19,712 | 19,385 | ||||||
Owens-Illinois, Inc. 7.35% 2008 | 1,400 | 1,412 | ||||||
Owens-Brockway Glass Container Inc. 8.875% 2009 | 8,988 | 9,168 | ||||||
Owens-Illinois, Inc. 7.50% 2010 | 2,000 | 2,025 | ||||||
Owens-Brockway Glass Container Inc. 8.75% 2012 | 15,050 | 15,746 | ||||||
Owens-Brockway Glass Container Inc. 8.25% 2013 | 4,150 | 4,316 | ||||||
Owens-Brockway Glass Container Inc. 6.75% 2014 | € | 375 | 527 | |||||
Domtar Inc. 5.375% 2013 | $ | 5,075 | 4,669 | |||||
Domtar Corp., Term Loan B, 7.185% 20142,3,4 | 4,031 | 3,953 | ||||||
Domtar Inc. 7.125% 2015 | 17,445 | 16,834 | ||||||
Domtar Inc. 9.50% 2016 | 6,350 | 6,715 | ||||||
AEP Industries Inc. 7.875% 2013 | 29,155 | 28,353 | ||||||
Graphic Packaging International, Inc. 8.50% 2011 | 19,950 | 20,399 | ||||||
Graphic Packaging International, Inc. 9.50% 2013 | 2,425 | 2,504 | ||||||
Metals USA Holdings Corp. 11.36% 20121,2,5,8 | 21,075 | 19,811 | ||||||
Metals USA, Inc. 11.125% 2015 | 1,500 | 1,605 | ||||||
Plastipak Holdings, Inc. 8.50% 20151 | 20,340 | 21,154 | ||||||
Ainsworth Lumber Co. Ltd. 7.25% 2012 | 5,350 | 3,692 | ||||||
Ainsworth Lumber Co. Ltd. 6.75% 2014 | 19,005 | 12,353 | ||||||
Ainsworth Lumber Co. Ltd. 6.75% 2014 | 5,550 | 3,580 | ||||||
FMG Finance Pty Ltd. 10.625% 20161 | 15,450 | 18,270 | ||||||
Rockwood Specialties Group, Inc. 7.50% 2014 | 5,765 | 5,779 | ||||||
Rockwood Specialties Group, Inc. 7.625% 2014 | € | 7,200 | 10,268 | |||||
Neenah Paper, Inc. 7.375% 2014 | $ | 14,325 | 13,895 | |||||
Equistar Chemicals, LP 10.125% 2008 | 7,349 | 7,625 | ||||||
Equistar Chemicals, LP and Equistar Funding Corp. 8.75% 2009 | 2,000 | 2,078 | ||||||
Lyondell Chemical Co. 10.50% 2013 | 1,755 | 1,895 | ||||||
Berry Plastics Holding Corp. 10.25% 20168 | 11,525 | 11,352 | ||||||
Momentive Performance Materials Inc. 9.75% 20141 | 11,100 | 11,045 | ||||||
NewPage Corp., Series A, 12.00% 2013 | 9,700 | 10,452 | ||||||
Graham Packaging Co., LP and GPC Capital Corp. 9.875% 2014 | 9,000 | 8,955 | ||||||
Vale Overseas Ltd. 6.25% 2017 | 3,700 | 3,760 | ||||||
Vale Overseas Ltd. 6.875% 2036 | 4,000 | 4,141 | ||||||
C10 Capital (SPV) Ltd. 6.722% (undated)1,2 | 7,700 | 7,409 | ||||||
Allegheny Technologies, Inc. 8.375% 2011 | 5,000 | 5,300 | ||||||
Smurfit Capital Funding PLC 7.50% 2025 | 4,250 | 4,101 | ||||||
Huntsman LLC 11.50% 2012 | 500 | 546 | ||||||
Huntsman International LLC 7.50% 2015 | € | 2,250 | 3,369 | |||||
Exopack Holding Corp. 11.25% 2014 | $ | 3,650 | 3,833 | |||||
Ispat Inland ULC 9.75% 2014 | 3,233 | 3,523 | ||||||
Norampac Inc. 6.75% 2013 | 3,500 | 3,360 | ||||||
Airgas, Inc. 6.25% 2014 | 3,500 | 3,343 | ||||||
MacDermid 9.50% 20171 | 3,150 | 3,056 | ||||||
Novelis Inc. 7.25% 20152 | 2,750 | 2,668 | ||||||
853,645 | ||||||||
INFORMATION TECHNOLOGY — 5.25% | ||||||||
NXP BV and NXP Funding LLC 8.11% 20132 | 7,100 | 6,621 | ||||||
NXP BV and NXP Funding LLC 7.875% 2014 | 35,325 | 34,133 | ||||||
NXP BV and NXP Funding LLC 9.50% 2015 | 129,445 | 121,031 | ||||||
Sanmina-SCI Corp. 8.444% 20101,2 | 2,250 | 2,239 | ||||||
Sanmina-SCI Corp. 6.75% 2013 | 5,300 | 4,585 | ||||||
Sanmina-SCI Corp. 8.444% 20141,2 | 19,250 | 18,480 | ||||||
Sanmina-SCI Corp. 8.125% 2016 | 83,775 | 72,884 | ||||||
First Data Corp., Term Loan B2, 8.00% 20142,3,4 | 78,500 | 75,990 | ||||||
Celestica Inc. 7.875% 2011 | 36,905 | 35,706 | ||||||
Celestica Inc. 7.625% 2013 | 28,510 | 26,657 | ||||||
Hughes Communications, Inc. 9.50% 2014 | 53,375 | 54,042 | ||||||
SunGard Data Systems Inc. 3.75% 2009 | 2,125 | 2,056 | ||||||
SunGard Data Systems Inc. 9.125% 2013 | 39,889 | 41,684 | ||||||
SunGard Data Systems Inc. 4.875% 2014 | 4,500 | 3,949 | ||||||
Sensata Technologies BV, Term Loan B, 7.11% 20132,3,4 | 11,091 | 10,727 | ||||||
Sensata Technologies BV 8.00% 20142 | 32,755 | 32,100 | ||||||
HowStuffWorks, Inc. 12.00% 2012, units5,8,10 | 38,701 | 38,701 | ||||||
Freescale Semiconductor, Inc., Term Loan B, 7.33% 20132,3,4 | 8,486 | 8,141 | ||||||
Freescale Semiconductor, Inc. 8.875% 2014 | 11,975 | 11,616 | ||||||
Freescale Semiconductor, Inc. 10.125% 2016 | 8,000 | 7,480 | ||||||
Serena Software, Inc. 10.375% 2016 | 23,825 | 24,659 | ||||||
Electronic Data Systems Corp., Series B, 6.50% 20132 | 13,750 | 13,889 | ||||||
Electronic Data Systems Corp. 7.45% 2029 | 2,200 | 2,232 | ||||||
Nortel Networks Ltd. 9.61% 20111,2 | 10,600 | 10,653 | ||||||
Nortel Networks Ltd. 10.75% 20161 | �� | 1,325 | 1,391 | |||||
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 8.00% 2014 | 13,010 | 9,042 | ||||||
Xerox Corp. 7.125% 2010 | 3,650 | 3,793 | ||||||
Xerox Corp. 7.625% 2013 | 5,000 | 5,196 | ||||||
Iron Mountain Inc. 7.75% 2015 | 8,410 | 8,431 | ||||||
Solectron Global Finance, LTD 8.00% 2016 | 4,400 | 4,785 | ||||||
Jabil Circuit, Inc. 5.875% 2010 | 4,250 | 4,292 | ||||||
Exodus Communications, Inc. 11.625% 20107,8 | 3,774 | 0 | ||||||
697,185 | ||||||||
ENERGY — 5.21% | ||||||||
Williams Companies, Inc. 6.375% 20101 | 6,000 | 6,060 | ||||||
Williams Companies, Inc. 7.36% 20101,2 | 31,050 | 31,438 | ||||||
Williams Companies, Inc. 7.125% 2011 | 1,900 | 1,978 | ||||||
Williams Partners L.P. and Williams Partners Finance Corp. 7.50% 2011 | 16,525 | 17,269 | ||||||
Williams Companies, Inc. 8.125% 2012 | 12,150 | 13,152 | ||||||
Transcontinental Gas Pipe Line Corp. 6.40% 2016 | 7,275 | 7,348 | ||||||
Northwest Pipeline Corp. 7.00% 2016 | 7,030 | 7,338 | ||||||
Williams Partners L.P. and Williams Partners Finance Corp. 7.25% 2017 | 22,850 | 23,421 | ||||||
Williams Companies, Inc. 7.875% 2021 | 6,650 | 7,265 | ||||||
Transcontinental Gas Pipe Line Corp. 7.25% 2026 | 9,035 | 9,611 | ||||||
Williams Companies, Inc. 8.75% 2032 | 71,030 | 82,128 | ||||||
Enterprise Products Operating LP 8.375% 20662 | 45,240 | 46,568 | ||||||
Enterprise Products Operating LP 7.034% 20682 | 61,555 | 56,486 | ||||||
Kinder Morgan Inc., Term Loan B, 6.63% 20132,3,4 | 56,387 | 55,428 | ||||||
K N Energy, Inc. 7.25% 2028 | 17,500 | 16,379 | ||||||
Pogo Producing Co. 7.875% 2013 | 21,525 | 22,386 | ||||||
Pogo Producing Co. 6.625% 2015 | 600 | 605 | ||||||
Pogo Producing Co. 6.875% 2017 | 26,475 | 26,740 | ||||||
Drummond Co., Inc. 7.375% 20161 | 49,705 | 46,474 | ||||||
Forest Oil Corp. 7.25% 20191 | 40,125 | 40,326 | ||||||
Newfield Exploration Co., Series B, 7.45% 2007 | 1,750 | 1,750 | ||||||
Newfield Exploration Co. 6.625% 2014 | 10,175 | 10,048 | ||||||
Newfield Exploration Co. 6.625% 2016 | 20,075 | 19,724 | ||||||
Petroplus Finance Ltd. 6.75% 20141 | 14,750 | 14,234 | ||||||
Petroplus Finance Ltd. 7.00% 20171 | 12,575 | 12,009 | ||||||
Gaz Capital SA 6.51% 20221 | 10,000 | 9,924 | ||||||
Gaz Capital SA 7.288% 20371 | 11,800 | 12,608 | ||||||
Teekay Shipping Corp. 8.875% 2011 | 17,615 | 18,584 | ||||||
Encore Acquisition Co. 6.00% 2015 | 16,100 | 14,611 | ||||||
Peabody Energy Corp., Series B, 6.875% 2013 | 7,000 | 7,105 | ||||||
Peabody Energy Corp. 5.875% 2016 | 4,000 | 3,940 | ||||||
Massey Energy Co. 6.625% 2010 | 3,000 | 2,948 | ||||||
Massey Energy Co. 6.875% 2013 | 7,925 | 7,430 | ||||||
Premcor Refining Group Inc. 9.50% 2013 | 9,600 | 10,138 | ||||||
Whiting Petroleum Corp. 7.25% 2013 | 8,850 | 8,673 | ||||||
Enbridge Energy Partners, LP 8.05% 20672 | 7,220 | 7,352 | ||||||
Sabine Pass LNG, LP 7.25% 2013 | 6,000 | 5,940 | ||||||
Tennessee Gas Pipeline Co. 7.00% 2028 | 4,000 | 4,092 | ||||||
Pemex Project Funding Master Trust 7.875% 2009 | 1,400 | 1,453 | ||||||
Pemex Project Funding Master Trust 8.625% 2022 | 1,170 | 1,449 | ||||||
Petrozuata Finance, Inc., Series B, 8.22% 20171,3 | 300 | 301 | ||||||
692,713 | ||||||||
CONSUMER STAPLES — 3.67% | ||||||||
Dole Food Co., Inc. 8.625% 2009 | 21,600 | 21,762 | ||||||
Dole Food Co., Inc. 7.25% 2010 | 21,625 | 20,544 | ||||||
Dole Food Co., Inc. 8.875% 2011 | 27,815 | 27,259 | ||||||
SUPERVALU INC., Term Loan B, 7.32% 20122,3,4 | 17,127 | 16,998 | ||||||
SUPERVALU INC. 7.50% 2012 | 5,335 | 5,552 | ||||||
Albertson’s, Inc. 7.25% 2013 | 11,015 | 11,140 | ||||||
SUPERVALU INC. 7.50% 2014 | 1,000 | 1,023 | ||||||
Albertson’s, Inc. 8.00% 2031 | 32,750 | 33,406 | ||||||
Stater Bros. Holdings Inc. 8.125% 2012 | 48,555 | 49,708 | ||||||
Stater Bros. Holdings Inc. 7.75% 2015 | 18,425 | 18,333 | ||||||
Rite Aid Corp. 6.125% 20081 | 7,950 | 7,871 | ||||||
Rite Aid Corp. 8.125% 2010 | 1,000 | 1,008 | ||||||
Rite Aid Corp. 7.50% 2015 | 7,000 | 6,650 | ||||||
Rite Aid Corp. 8.625% 2015 | 4,500 | 4,095 | ||||||
Rite Aid Corp. 7.50% 2017 | 13,000 | 12,301 | ||||||
Rite Aid Corp. 7.70% 2027 | 8,500 | 6,588 | ||||||
Rite Aid Corp. 6.875% 2028 | 12,977 | 9,408 | ||||||
Yankee Candle Co., Inc., Series B, 8.50% 2015 | 27,145 | 26,466 | ||||||
Yankee Candle Co., Inc., Series B, 9.75% 2017 | 20,310 | 19,295 | ||||||
Smithfield Foods, Inc. 7.625% 2008 | 1,125 | 1,131 | ||||||
Smithfield Foods, Inc., Series B, 8.00% 2009 | 3,000 | 3,113 | ||||||
Smithfield Foods, Inc., Series B, 7.00% 2011 | 1,250 | 1,272 | ||||||
Smithfield Foods, Inc., Series B, 7.75% 2013 | 2,800 | 2,870 | ||||||
Smithfield Foods, Inc. 7.75% 2017 | 24,725 | 25,467 | ||||||
Duane Reade Inc. 9.75% 2011 | 32,910 | 31,676 | ||||||
Constellation Brands, Inc. 7.25% 20171 | 24,500 | 24,623 | ||||||
Elizabeth Arden, Inc. 7.75% 2014 | 24,012 | 23,772 | ||||||
Vitamin Shoppe Industries Inc. 13.058% 20122 | 19,535 | 20,121 | ||||||
Spectrum Brands, Inc., Term Loan B, Letter of Credit, 5.515% 20132,3,4 | 595 | 587 | ||||||
Spectrum Brands, Inc., Term Loan B, 9.36% 20132,3,4 | 11,975 | 11,820 | ||||||
Spectrum Brands, Inc. 7.375% 2015 | 7,075 | 5,483 | ||||||
Del Monte Corp., Series B, 8.625% 2012 | 10,550 | 10,761 | ||||||
Playtex Products, Inc. 8.00% 2011 | 5,000 | 5,263 | ||||||
Playtex Products, Inc. 9.375% 2011 | 1,900 | 1,964 | ||||||
Cervecería Nacional Dominicana, C. por A. 8.00% 20141 | 5,961 | 6,065 | ||||||
JBS SA 10.50% 2016 | 5,000 | 5,300 | ||||||
Koninklijke Ahold NV 5.875% 2008 | € | 2,367 | 3,384 | |||||
American Achievement Group Holding Corp. 14.75% 20125 | $ | 2,076 | 2,044 | |||||
Tyson Foods, Inc. 6.85% 20162 | 1,600 | 1,657 | ||||||
487,780 | ||||||||
UTILITIES — 3.56% | ||||||||
Edison Mission Energy 7.50% 2013 | 44,900 | 46,247 | ||||||
Edison Mission Energy 7.75% 2016 | 25,025 | 26,026 | ||||||
Midwest Generation, LLC, Series B, 8.56% 20163 | 39,629 | 42,403 | ||||||
Edison Mission Energy 7.00% 20171 | 35,775 | 35,417 | ||||||
Edison Mission Energy 7.20% 20191 | 46,450 | 45,986 | ||||||
Homer City Funding LLC 8.734% 20263 | 9,251 | 10,361 | ||||||
Edison Mission Energy 7.625% 20271 | 22,075 | 21,413 | ||||||
AES Corp. 9.50% 2009 | 5,387 | 5,629 | ||||||
AES Corp. 9.375% 2010 | 13,594 | 14,410 | ||||||
AES Corp. 8.875% 2011 | 8,475 | 8,888 | ||||||
AES Corp. 8.75% 20131 | 32,485 | 34,150 | ||||||
AES Gener SA 7.50% 2014 | 15,350 | 16,090 | ||||||
AES Corp. 9.00% 20151 | 7,000 | 7,385 | ||||||
AES Red Oak, LLC, Series A, 8.54% 20193 | 4,335 | 4,639 | ||||||
AES Red Oak, LLC, Series B, 9.20% 20293 | 5,000 | 5,500 | ||||||
NRG Energy, Inc. 7.25% 2014 | 22,925 | 23,040 | ||||||
NRG Energy, Inc. 7.375% 2016 | 29,700 | 29,849 | ||||||
Nevada Power Co., General and Refunding Mortgage Bonds, Series A, 8.25% 2011 | 4,700 | 5,131 | ||||||
Sierra Pacific Power Co., General and Refunding Mortgage Notes, Series H, 6.25% 2012 | 3,000 | 3,072 | ||||||
Nevada Power Co., General and Refunding Mortgage Notes, Series I, 6.50% 2012 | 2,650 | 2,740 | ||||||
Sierra Pacific Resources 8.625% 2014 | 12,000 | 12,762 | ||||||
Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015 | 2,475 | 2,429 | ||||||
Nevada Power Co., General and Refunding Mortgage Notes, Series M, 5.95% 2016 | 1,600 | 1,572 | ||||||
Sierra Pacific Resources 6.75% 2017 | 2,000 | 1,978 | ||||||
Intergen Power 9.00% 20171 | 17,800 | 18,779 | ||||||
ISA Capital do Brasil SA 7.875% 20121 | 3,275 | 3,332 | ||||||
ISA Capital do Brasil SA 8.80% 20171 | 11,800 | 12,390 | ||||||
FPL Energy National Wind Portfolio, LLC 6.125% 20191,3 | 4,069 | 4,099 | ||||||
FPL Energy American Wind, LLC 6.639% 20231,3 | 6,500 | 6,750 | ||||||
Enersis SA 7.375% 2014 | 6,800 | 7,226 | ||||||
PSEG Energy Holdings Inc. 8.625% 2008 | 6,532 | 6,599 | ||||||
Mirant Americas Generation, Inc. 8.30% 2011 | 5,500 | 5,583 | ||||||
Electricidad de Caracas Finance BV 10.25% 20141 | 700 | 712 | ||||||
472,587 | ||||||||
Total corporate bonds, notes & loans | 11,049,632 | |||||||
NON-U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 4.77% | ||||||||
Brazilian Treasury Bill 6.00% 20108,11 | BRL82,530 | 43,993 | ||||||
Brazil (Federal Republic of) 10.00% 20148 | 10,000 | 5,127 | ||||||
Brazil (Federal Republic of) Global 10.50% 2014 | $ | 3,000 | 3,803 | |||||
Brazil (Federal Republic of) 10.00% 20178 | BRL63,000 | 31,708 | ||||||
Brazil (Federal Republic of) Global 8.00% 20183 | $ | 6,820 | 7,628 | |||||
Brazil (Federal Republic of) Global 10.25% 20288 | BRL15,000 | 8,607 | ||||||
Brazil (Federal Republic of) Global 7.125% 2037 | $ | 2,500 | 2,799 | |||||
Brazil (Federal Republic of) Global 11.00% 2040 | 12,485 | 16,714 | ||||||
Brazilian Treasury Bill 6.00% 20458,11 | BRL36,169 | 18,973 | ||||||
Turkey (Republic of) Treasury Bill 0% 20088 | TRY53,360 | 38,885 | ||||||
Turkey (Republic of) 15.00% 20108 | 16,262 | 13,109 | ||||||
Turkey (Republic of) 14.00% 20118 | 30,550 | 23,985 | ||||||
Turkey (Republic of) 16.00% 20128 | 16,000 | 13,424 | ||||||
Argentina (Republic of) 3.368% 20122,3,8 | $ | 20,420 | 11,529 | |||||
Argentina (Republic of) 5.83% 20333,5,8,11 | ARS108,074 | 27,329 | ||||||
Argentina (Republic of) GDP-Linked 2035 | 261,027 | 8,094 | ||||||
Argentina (Republic of) GDP-Linked 2035 | $ | 52,000 | 6,786 | |||||
Argentina (Republic of) 0.63% 20383,8,11 | ARS138,692 | 13,720 | ||||||
Egypt (Arab Republic of) Treasury Bill 0% 20078 | EGP124,750 | 22,146 | ||||||
Egypt (Arab Republic of) Treasury Bill 0% 20078 | 16,750 | 2,981 | ||||||
Egypt (Arab Republic of) Treasury Bill 0% 20088 | 41,500 | 7,277 | ||||||
Egypt (Arab Republic of) Treasury Bill 0% 20088 | 18,025 | 3,157 | ||||||
Egypt (Arab Republic of) Treasury Bill 0% 20088 | 11,900 | 2,095 | ||||||
Egypt (Arab Republic of) 9.10% 20108 | 3,130 | 570 | ||||||
Egypt (Arab Republic of) 11.50% 20118 | 9,380 | 1,845 | ||||||
Egypt (Arab Republic of) 9.10% 20128 | 18,225 | 3,324 | ||||||
Egypt (Arab Republic of) 11.625% 20148 | 49,265 | 10,153 | ||||||
Russian Federation 12.75% 2028 | 8,000 | 14,280 | ||||||
Russian Federation 7.50% 20303 | 32,203 | 36,068 | ||||||
Indonesia (Republic of) 12.50% 2013 | IDR77,730,000 | 9,732 | ||||||
Indonesia (Republic of) 6.875% 20171 | $ | 1,000 | 1,044 | |||||
Indonesia (Republic of) 11.50% 2019 | IDR25,000,000 | 3,118 | ||||||
Indonesia (Republic of) 11.00% 2020 | 69,275,000 | 8,321 | ||||||
Indonesia (Republic of) 12.80% 2021 | 45,440,000 | 6,133 | ||||||
Indonesia (Republic of) 12.90% 2022 | 54,492,000 | 7,439 | ||||||
Indonesia (Republic of) 11.00% 2025 | 40,562,000 | 4,879 | ||||||
Indonesia (Republic of) 10.25% 2027 | 725,000 | 82 | ||||||
Indonesia (Republic of) 6.625% 20371 | $ | 2,500 | 2,397 | |||||
Columbia (Republic of) Global 11.75% 20108 | COP3,295,000 | 1,709 | ||||||
Colombia (Republic of) Global 10.00% 2012 | $ | 1,500 | 1,751 | |||||
Colombia (Republic of) Global 10.75% 2013 | 8,550 | 10,474 | ||||||
Colombia (Republic of) Global 12.00% 20158 | COP23,200,000 | 12,948 | ||||||
Colombia (Republic of) Global 11.75% 2020 | $ | 1,936 | 2,846 | |||||
Columbia (Republic of) Global 9.85% 20278 | COP10,930,000 | 5,519 | ||||||
Colombia (Republic of) Global 10.375% 2033 | $ | 823 | 1,212 | |||||
Columbia (Republic of) Global 7.375% 2037 | 4,139 | 4,563 | ||||||
Panama (Republic of) Global 7.125% 2026 | 585 | 635 | ||||||
Panama (Republic of) Global 8.875% 2027 | 6,500 | 8,320 | ||||||
Panama (Republic of) Global 6.70% 20363 | 28,009 | 28,919 | ||||||
United Mexican States Government, Series M10, 10.50% 2011 | MXN12,320 | 1,311 | ||||||
United Mexican States Government Global 6.375% 2013 | $ | 6,970 | 7,346 | |||||
United Mexican States Government, Series M20, 10.00% 2024 | MXN120,000 | 13,128 | ||||||
United Mexican States Government Global 6.75% 2034 | $ | 6,105 | 6,654 | |||||
Dominican Republic 9.50% 20113 | 5,064 | 5,388 | ||||||
Dominican Republic 9.50% 20111,3 | 2,749 | 2,925 | ||||||
Dominican Republic 9.04% 20181,3 | 5,481 | 6,194 | ||||||
Dominican Republic 9.04% 2018 | 4,902 | 5,539 | ||||||
Venezuela (Republic of) 10.75% 2013 | 6,000 | 6,645 | ||||||
Venezuela (Republic of) Global 8.50% 2014 | 1,250 | 1,256 | ||||||
Venezuela (Republic of) 7.65% 2025 | 5,195 | 4,663 | ||||||
Venezuela (Republic of) Global 9.25% 2027 | 2,685 | 2,786 | ||||||
Peru (Republic of) 9.875% 2015 | 8,500 | 10,672 | ||||||
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 20141 | 4,000 | 5,010 | ||||||
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014 | 4,000 | 5,010 | ||||||
El Salvador (Republic of) 7.75% 20231 | 2,775 | 3,187 | ||||||
El Salvador (Republic of) 7.65% 20351 | 4,250 | 4,781 | ||||||
Uruguay (Republic of) 4.25% 20273,8,11 | UYU126,435 | 5,940 | ||||||
State of Qatar 9.75% 2030 | $ | 3,500 | 5,171 | |||||
Jamaican Government 9.00% 2015 | 280 | 301 | ||||||
Jamaican Government 8.00% 20393 | 2,910 | 2,895 | ||||||
Corporación Andina de Fomento 5.75% 2017 | 3,000 | 2,948 | ||||||
Thai Government 4.125% 2009 | THB73,490 | 2,168 | ||||||
634,068 | ||||||||
MORTGAGE-BACKED OBLIGATIONS3— 1.07% | ||||||||
American Tower Trust I, Series 2007-1A, Class E, 6.249% 20371,8 | $ | 10,725 | 10,265 | |||||
American Tower Trust I, Series 2007-1A, Class F, 6.639% 20371,8 | 38,760 | 36,465 | ||||||
Crown Castle Towers LLC, Series 2006-1, Class F, 6.650% 20361,8 | 30,490 | 29,993 | ||||||
Crown Castle Towers LLC, Series 2006-1, Class G, 6.795% 20361,8 | 12,250 | 12,009 | ||||||
SBA CMBS Trust, Series 2006-1A, Class F, 6.709% 20361,8 | 1,450 | 1,399 | ||||||
SBA CMBS Trust, Series 2006-1A, Class G, 6.904% 20361,8 | 5,950 | 5,682 | ||||||
SBA CMBS Trust, Series 2006-1A, Class H, 7.389% 20361,8 | 11,615 | 11,063 | ||||||
SBA CMBS Trust, Series 2006-1A, Class J, 7.825% 20361,8 | 12,950 | 12,069 | ||||||
Tower Ventures, LLC, Series 2006-1, Class E, 6.495% 20361,8 | 4,000 | 3,954 | ||||||
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 20361,8 | 20,405 | 20,054 | ||||||
142,953 | ||||||||
U.S. GOVERNMENT BONDS & NOTES — 0.50% | ||||||||
U.S. Treasury 6.00% 2026 | 58,500 | 66,279 | ||||||
MUNICIPALS — 0.05% | ||||||||
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027 | 6,155 | 6,369 | ||||||
Total bonds, notes & other debt instruments (cost: $11,988,873,000) | 11,899,301 | |||||||
Shares or | ||||||||
Convertible securities — 0.69% | principal amount | |||||||
CONSUMER DISCRETIONARY — 0.23% | ||||||||
Amazon.com, Inc. 6.875% PEACS convertible notes 2010 | € | 20,645,000 | 29,957 | |||||
INFORMATION TECHNOLOGY — 0.20% | ||||||||
Fairchild Semiconductor Corp. 5.00% convertible notes 2008 | $ | 17,850,000 | 17,671 | |||||
Advanced Micro Devices, Inc. 6.00% convertible notes 2015 | $ | 10,000,000 | 9,038 | |||||
26,709 | ||||||||
UTILITIES — 0.16% | ||||||||
AES Trust VII 6.00% convertible preferred 2008 | 439,925 | 21,721 | ||||||
FINANCIALS — 0.10% | ||||||||
Countrywide Financial Corp., Series A, 1.86% convertible debentures 20371,2 | $ | 15,000,000 | 13,764 | |||||
Total convertible securities (cost: $74,644,000) | 92,151 | |||||||
Preferred securities — 1.27% | Shares | |||||||
FINANCIALS — 1.27% | ||||||||
IndyMac Bancorp, Inc., Series A, 8.50% noncumulative1 | 2,406,000 | 43,910 | ||||||
Fuji JGB Investment LLC, Series A, 9.87% noncumulative1,2 | 22,648,000 | 23,248 | ||||||
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative1,2 | 16,105,000 | 16,408 | ||||||
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities1 | 1,125,000 | 32,449 | ||||||
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative1,2 | 26,075,000 | 23,223 | ||||||
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative1,2 | 11,723,000 | 12,142 | ||||||
Fannie Mae, Series O, 7.00%1,2 | 150,000 | 7,856 | ||||||
SB Treasury Co. LLC, Series A, 9.40% noncumulative1,2 | 2,897,000 | 2,964 | ||||||
Sumitomo Mitsui Banking Corp. 6.078%1,2 | 3,000,000 | 2,789 | ||||||
Chevy Chase Preferred Capital Corp., Series A, 10.375% exchangeable | 55,994 | 2,901 | ||||||
167,890 | ||||||||
CONSUMER STAPLES — 0.00% | ||||||||
Great Atlantic & Pacific Tea Co., Inc. 9.375% QUIBS 2039 | 18,500 | 469 | ||||||
Total preferred securities (cost: $165,377,000) | 168,359 | |||||||
Market value | ||||||||
Common stocks — 3.60% | Shares | (000 | ) | |||||
TELECOMMUNICATION SERVICES — 2.35% | ||||||||
SunCom Wireless Holdings, Inc., Class A9,12 | 7,554,434 | $ | 194,904 | |||||
Dobson Communications Corp., Class A12 | 3,435,685 | 43,942 | ||||||
AT&T Inc. | 765,000 | 32,367 | ||||||
American Tower Corp., Class A12 | 538,967 | 23,467 | ||||||
Sprint Nextel Corp., Series 1 | 777,508 | 14,773 | ||||||
Embarq Corp. | 38,875 | 2,162 | ||||||
Cincinnati Bell Inc.12 | 70,740 | 350 | ||||||
XO Holdings, Inc.12 | 25,291 | 86 | ||||||
312,051 | ||||||||
UTILITIES — 0.32% | ||||||||
Drax Group PLC | 3,436,672 | 42,852 | ||||||
INFORMATION TECHNOLOGY — 0.19% | ||||||||
Micron Technology, Inc.1,12 | 678,656 | 7,533 | ||||||
Micron Technology, Inc.12 | 424,160 | 4,708 | ||||||
Fairchild Semiconductor International, Inc.12 | 500,000 | 9,340 | ||||||
ZiLOG, Inc.9,12 | 1,140,500 | 4,151 | ||||||
25,732 | ||||||||
HEALTH CARE — 0.14% | ||||||||
UnitedHealth Group Inc. | 375,000 | 18,161 | ||||||
Clarent Hospital Corp.8,9,12 | 576,849 | 58 | ||||||
18,219 | ||||||||
INDUSTRIALS — 0.10% | ||||||||
DigitalGlobe Inc.8,10,12 | 3,064,647 | 12,259 | ||||||
UAL Corp.12 | 22,816 | 1,062 | ||||||
13,321 | ||||||||
CONSUMER STAPLES — 0.03% | ||||||||
Winn-Dixie Stores, Inc.12 | 194,677 | 3,644 | ||||||
CONSUMER DISCRETIONARY — 0.03% | ||||||||
Viacom Inc., Class B12 | 31,612 | 1,232 | ||||||
CBS Corp., Class B | 31,612 | 996 | ||||||
Emmis Communications Corp., Class A12 | 201,000 | 993 | ||||||
Radio One, Inc., Class D, nonvoting12 | 44,000 | 164 | ||||||
Radio One, Inc., Class A12 | 22,000 | 81 | ||||||
3,466 | ||||||||
MISCELLANEOUS — 0.44% | ||||||||
Other common stocks in initial period of acquisition | 58,521 | |||||||
Total common stocks (cost: $369,636,000) | 477,806 | |||||||
Warrants — 0.00% | ||||||||
TELECOMMUNICATION SERVICES — 0.00% | ||||||||
XO Holdings, Inc., Series A, warrants, expire 201012 | 50,587 | 22 | ||||||
XO Holdings, Inc., Series B, warrants, expire 201012 | 37,939 | 10 | ||||||
XO Holdings, Inc., Series C, warrants, expire 201012 | 37,939 | 6 | ||||||
KMC Telecom Holdings, Inc., warrants, expire 20081,8,12 | 22,500 | 0 | ||||||
GT Group Telecom Inc., warrants, expire 20101,8,12 | 11,000 | 0 | ||||||
Allegiance Telecom, Inc., warrants, expire 20081,8,12 | 5,000 | 0 | ||||||
Total warrants (cost: $1,100,000) | 38 | |||||||
Principal amount | Market value | |||||||
Short-term securities — 4.35% | (000 | ) | (000 | ) | ||||
Procter & Gamble Co. 4.75%–5.21% due 10/31–12/14/20071,13 | $ | 91,100 | $ | 90,431 | ||||
Procter & Gamble International Funding S.C.A. 4.77%–5.23% due 10/16–12/10/20071,13 | 75,000 | 74,430 | ||||||
Federal Farm Credit Banks 4.70%–5.13% due 10/9–11/1/200713 | 89,500 | 89,271 | ||||||
Wal-Mart Stores Inc. 4.72%–5.28% due 10/9–12/11/20071,13 | 59,300 | 58,995 | ||||||
Federal Home Loan Bank 4.75%–5.125% due 10/5–12/7/200713 | 55,100 | 54,827 | ||||||
Anheuser-Busch Cos. Inc. 4.72% due 11/27/20071,13 | 41,000 | 40,666 | ||||||
Three Pillars Funding, LLC 5.30% due 10/1/20071 | 40,200 | 40,182 | ||||||
CAFCO, LLC 5.10%–5.27% due 10/5–11/5/20071,13 | 36,900 | 36,836 | ||||||
Bank of America Corp. 5.245% due 10/4/2007 | 29,000 | 28,984 | ||||||
International Lease Finance Corp. 5.28% due 10/15/2007 | 25,000 | 24,945 | ||||||
Hewlett-Packard Co. 4.81% due 10/26/20071 | 14,400 | 14,350 | ||||||
E.I. duPont de Nemours and Co. 5.21% due 10/10/20071 | 13,600 | 13,580 | ||||||
Estée Lauder Companies Inc. 5.00% due 10/26/20071 | 10,800 | 10,761 | ||||||
Total short-term securities (cost: $578,337,000) | 578,258 | |||||||
Total investment securities (cost: $13,177,967,000) | 13,215,913 | |||||||
Other assets less liabilities | 69,123 | |||||||
Net assets | $ | 13,285,036 |
“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
1 | Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in a transaction exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $2,865,989,000, which represented 21.57% of the net assets of the fund. |
2 | Coupon rate may change periodically. |
3 | Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
4 | Loan participations and assignments; the total value of all such loans was $996,322,000, which represented 7.50% of the net assets of the fund. |
5 | Payment in kind; the issuer has the option of paying additional securities in lieu of cash. |
6 | Step bond; coupon rate will increase at a later date. |
7 | Scheduled interest and/or principal payment was not received. |
8 | Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities, including those in “Miscellaneous,” was $640,572,000. |
9 | Represents an affiliated company as defined under the Investment Company Act of 1940. |
10 | Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear below: |
Acquisition dates | Cost (000) | Market value (000) | Percent of net assets | ||||||||||
HowStuffWorks, Inc. 12.00% 2012, units | 2/27/2007–8/1/2007 | $ | 38,812 | $ | 38,701 | .29 | % | ||||||
DigitalGlobe Inc. | 4/14/1999–7/31/2003 | 2,500 | 12,259 | .09 | |||||||||
Total restricted securities | $ | 41,312 | $ | 50,960 | .38 | % |
11 | Index-linked bond whose principal amount moves with a government retail price index. |
12 | Security did not produce income during the last 12 months. |
13 | This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. |
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 professional and should be read carefully before investing.
MFGEFP-921-1107O-S10909
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO
To the Shareholders and Board of Trustees of
American High-Income Trust:
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of American High-Income Trust, (the “Fund”) as of September 30, 2007, and for the year then ended and have issued our report thereon dated November 7, 2007, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Fund’s investment portfolio (the “Schedule”) as of September 30, 2007, appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Fund’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Costa Mesa, California
November 7, 2007
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 – Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of trustees. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating and governance committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating and governance committee.
ITEM 11 – Controls and Procedures
(a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
(b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s 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) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
(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.
AMERICAN HIGH-INCOME TRUST | |
By /s/ David C. Barclay | |
David C. Barclay, President and Principal Executive Officer | |
Date: December 7, 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/ David C. Barclay |
David C. Barclay, President and Principal Executive Officer |
Date: December 7, 2007 |
By /s/ Ari M. Vinocor |
Ari M. Vinocor, Treasurer and Principal Financial Officer |
Date: December 7, 2007 |