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, 2006
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
Los Angeles, California 90071
(Counsel for the registrant)
ITEM 1 - Reports to Stockholders
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The right choice for the long term®
American High-Income Trust
Simplifying a complex investment:
How bond funds can add value and limit risk
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Annual report for the year ended September 30, 2006
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. The organization ranks among the nation’s three largest mutual fund families. For 75 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.
| Contents | |
| Letter to shareholders | 1 |
| Results at a glance | 1 |
| The value of a long-term perspective | 3 |
| Simplifying a complex investment: How bond funds | |
| can add value and limit risk | 4 |
| Summary investment portfolio | 9 |
| Financial statements | 14 |
| Board of trustees and officers | 31 |
| What makes American Funds different? | back cover |
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 3.75%) had been deducted, the results would have been lower.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2006:
Class A shares | 1 year | 5 years | 10 years | |||||||
Reflecting 3.75% maximum sales charge | +4.18 | % | +9.39 | % | +6.78 | % | ||||
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 23 and 24 for details.
The fund’s 30-day yield for Class A shares as of October 31, 2006, calculated in accordance with the Securities and Exchange Commission formula, was 6.97%, which reflects a fee waiver (6.94% without the fee waiver). The fund’s distribution rate for Class A shares as of that date was 7.00%. 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 30. Please see the inside back cover for important information about other share classes.
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 is 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.
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Fellow shareholders:
Strong corporate fundamentals, a healthy economy and historically low default rates provided a favorable climate for high-yield bonds, helping American High-Income Trust post a solid gain for the fiscal year.
For the 12 months ended September 30, 2006, shareholders who reinvested monthly dividends totaling 94.1 cents a share earned a total return of 8.3%, including an income return of 7.9%. Those results surpassed both the 6.7% gain for the Lipper High Current Yield Bond Funds Index, a benchmark of similar funds, and the 7.8% 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 3.7% total return, not including expenses.
Shareholders in the fund who elected to take their dividends in cash saw the value of their holdings increase 0.2% while earning an income return of 7.7%.
Corporate profitability drives results
The high-yield bond market benefited from a combination of factors during the period, including rising corporate profits, solid economic growth, low default rates and brisk demand by investors for higher yielding issues.
The robust economy, however, sparked concerns of inflation, which led the Federal Reserve to continue to tighten credit. Over the past 12 months, the Fed raised its target for the federal funds rate six times, from 3.75% to 5.25%. Higher quality bonds were hit harder by the increased interest rates. Fortunately for holders of high-yield issues, strong corporate profits helped to boost prices, which offset the effect of rising interest rates.
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Results at a glance
Average annual total returns for periods ended
September 30, 2006, with all distributions reinvested.
The market indexes are unmanaged.
Returns | 1 year | 5 years | 10 years | |||||||
| American High-Income Trust | +8.3 | % | +10.2 | % | +7.2 | % | ||||
| Credit Suisse High | ||||||||||
| Yield Index | +7.8 | +11.3 | +7.1 | |||||||
| Citigroup Broad Investment- | ||||||||||
| Grade (BIG) Bond Index | +3.7 | +4.8 | +6.4 | |||||||
| Lipper High Current Yield | ||||||||||
| Bond Funds Index | +6.7 | +9.3 | +5.0 | |||||||
For the 10 years ended September 30, 2006, American High-Income Trust ranked 10th in total return among the 120 high current yield funds in existence throughout the period, according to Lipper. For the five years ended September 30, 2006, it ranked 82nd of 321, and for the 12 months ended September 30, 2006, the fund ranked 53rd of 458. Lipper rankings do not reflect the effect of sales charges.
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Strong corporate profits, however, also encouraged companies to take on more debt to finance acquisitions, make larger dividend payments and increase business spending. Going forward, that means we must select companies that can effectively manage their businesses with a high level of debt throughout various business cycles.
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The high-yield bond market benefited from a combination of factors during the period, including rising corporate profits, solid economic growth, low default rates and brisk demand by investors for higher yielding issues.
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Sectors that impacted the fund
Fund results for the period were helped by good returns in the struggling but improving automobile and airline industries. Both industries still face serious operational and financial difficulties, but investors have responded positively to the initial progress made by management to improve their operations. General Motors and Ford are not likely to return to investment-grade anytime soon, but they have enacted cost savings and other measures that have improved their security prices. In the airline industry, our holdings in aircraft-backed securities of major airlines also contributed positively to results, due to greater demand for travel and an increase in fares.
Hurting portfolio results were the bonds of homebuilders, which suffered significant declines in profitability and underlying demand due to the slowdown in the U.S. housing market. Although we expect the cycle to get worse, we believe that homebuilders are better positioned to withstand a downturn than they were in previous market cycles. As a result, we believe there are some attractive investment opportunities and have been increasing our holdings in this area.
Maintaining a long-term perspective
Although the market environment continues to be favorable for high-yield bonds, we are cautiously optimistic as we enter the next period. Slower economic growth, inflationary concerns, higher debt levels and tighter global monetary conditions are some of the potential challenges that lie ahead. It’s also become harder to find good values, as many high-yield issuers have already improved their credit quality and experienced a boost in their bond prices.
For all these reasons, fundamental research will be crucial in selecting companies that will be able to support their debt obligations through various business and market cycles going forward. Our continued emphasis on building a diversified, research-driven investment portfolio has allowed the fund to produce solid results for shareholders who share our long-term outlook. Over the past 10-year period ended September 30, 2006, American High-Income Trust has produced an average annual total return of 7.2%, compared with a 5.0% return for the Lipper High Current Yield Bond Funds Index and a 7.1% return for the Credit Suisse High Yield Index.
To learn how an actively managed bond fund can add value to your investment portfolio, please read the feature article beginning on page 4.
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 10, 2006
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, 2006, the end of its latest fiscal year. As you can see, that $10,000 grew to $49,174 with all distributions reinvested.
Fund figures 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
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1 As 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.
Year ended Sept. 30th | 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 | |||||||||||
| 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 | |||||||||||
1 As 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.
2 The maximum initial sales charge was 4.75% prior to January 10, 2000.
3 The market indexes are unmanaged and include reinvested distributions, but do not reflect sales charges, commissions or expenses.
4 Calculated by Lipper. The index does not reflect sales charges.
5 Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.
6 For 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, 2006)*
| 1 year | 5 years | 10 years | ||||||||
Class A shares | +4.18 | % | +9.39 | % | +6.78 | % | ||||
*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 23 and 24 for details.
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Simplifying a complex investment:
How bond funds can add value and limit risk
It’s a debate that has raged for decades: Is it better to invest in individual bonds or bond funds? When it comes to an investment in the high-yield market, the answer for most investors is a bond fund.
“The complex nature of the high-yield securities market makes it difficult for individual investors to go it alone,” says David Barclay, president of American High-Income Trust. “The market is geared to the institutional investor. It lacks transparency, requires a lot of money to build a diversified portfolio and is difficult to navigate.”
For individual investors seeking a high level of current income as well as capital appreciation, a high-yield bond fund can provide a simple way to invest in a diversified, carefully supervised portfolio of lower rated, higher risk corporate bonds. In the following pages, we will discuss five key advantages a bond fund has over individual bonds.
Professional management
Perhaps the biggest advantage of owning a bond fund is professional portfolio management. Investing in high-yield bonds can be even more complicated than investing in stocks. Buyers must understand the relationships among bond prices, interest rates and varying maturity dates. They must also be able to evaluate such factors as covenants and call features (which may allow the issuer to redeem the bonds before the maturity date), and how that can affect their potential return. On top of that, they must understand special financing and credit features of different bonds from different issuers. “The average investor simply does not have the time, resources or expertise required to adequately do this kind of exhaustive research,” says David.
Professional management can give investors a tremendous advantage. In American High-Income Trust, managers and analysts are researching the market full time, constantly monitoring the financial fitness of each bond issuer in the portfolio while evaluating shifts in risk and changing opportunities in the marketplace. Fund managers also have access to a greater volume of in-depth information about companies, industries, the market environment, individual issues and bond structure than an individual investor does, as well as the ability to review credits from several perspectives.
“Our comprehensive research process allows us to look at the broader market and assess value across a range of opportunities,” says Susan Tolson, a portfolio counselor in the fund. “We have teams of people looking at durations, currencies, what the Federal Reserve is doing, and trends in the broader economic environment both in the U.S. and globally.”
The fund also has access to equity research at Capital, which gives the portfolio counselors another perspective on the bond markets. “The equity analysts are a great resource for us,” says Susan, citing the 2000 to 2002 market downturn as an example. “During that time, there was a merging of external shocks — including the Internet bubble, a credit crunch and corporate governance issues — that repriced the bonds of high-yield and investment-grade companies. Investment-grade bonds were trading at yields usually associated with high-yield bonds. Thanks to the collaboration between our equity and fixed-income research analysts, we were able to spot relative value in the market and react to it quickly.”
This kind of cross-research and collaboration allows the fund managers to find the right balance of risk and return in the portfolio — a key factor to achieving success in the high-yield bond market.
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professional management
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“Our comprehensive research process allows us to look at the broader market and assess value across a range of opportunities,” says Susan Tolson.
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Diversification
“In any bond portfolio where there is risk of loss, diversification is important,” says David, who believes many investors underestimate the potential downside of investing in bonds. “If you invest in high yield, you will have bonds that will default,” he says. “If an individual owns just a few bonds and one defaults or declines in price significantly, it will have a disproportionate impact on their overall portfolio.”
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better prices
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“Because institutional investors typically trade in lots of $1 million or more, they get maximum efficiency of trading, better prices and lower transaction costs,” says David Barclay.
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Diversification acts as a shock absorber, helping the portfolio withstand adverse changes in market conditions and problems that can develop with individual issuers, such as nonpayments, credit downgrades and call features. It can also expose the investor to bonds that may disproportionately benefit from market changes. A well-diversified portfolio includes a broad sampling of bond maturities, types of issuers and credit quality. Whether hedging the negative or emphasizing the positive, diversification can help stabilize a portfolio over time — a particularly important consideration for investors who plan to live on the income generated by their portfolios.
Yet, diversification can be difficult if not impossible for the average individual investor to achieve. “High-yield bonds typically trade in large lots, usually of $1 million or more, which makes it difficult for individuals to buy enough bonds to build a diversified portfolio,” says Susan. That compares with a minimum initial investment of $250 to own American High-Income Trust, which holds hundreds of debt issues. Shareholders, in effect, own a proportionate share of each of these holdings, which encompass companies in industries ranging from telecommunication services and information technology to health care and consumer staples.
The fund’s investment guidelines also limit how much exposure it may have to any given company, sector or asset class. In most cases, the largest single holdings do not exceed 2% of the portfolio. “These guidelines result in an investment mix that provides diversification and leads to more consistent results,” says David.
Better prices
A high-yield bond fund can obtain better bond prices than individual investors for two main reasons: better execution and more access to information.
Because there is very little publicly available information about transaction prices in the high-yield market, it is difficult for the individual investor to get the best price or even be treated fairly. “The brokerage community is geared to institutional investors,” says David. “Because institutional investors typically trade in lots of $1 million or more, they get maximum efficiency of trading, better prices and lower transaction costs. The individual investor trading in odd lots incurs significantly more in trading costs.”
Unlike stocks, which trade on electronic exchanges at prices that are posted almost instantaneously in an extremely visible and efficient market, high-yield bonds are traded “over the counter” where brokers and dealers negotiate directly with one another over computer networks and by telephone. Price quotes can vary significantly from dealer to dealer, and often depend on the amount of the sale or purchase. As a result, high-yield bonds are more difficult than stocks to trade efficiently. “The large volume we trade daily with our counterparts at Wall Street firms and the investment we have made in trading support systems allow us to garner favorable executions in the market,” says Susan.
A fund also has the resources to evaluate the various factors that determine the value of a bond and its yield. For example, one issuer may be offering several bonds with various maturities, yields and seniority levels within the capital structure. The traders on the fund’s trading desk add to the evaluation of which company’s bonds to buy by helping to determine the best issue or issues of an individual issuer. They are constantly assessing the flows of supply and demand in the market, which makes them more knowledgeable about market prices and better able to evaluate the best time to buy or sell a particular security.
Greater liquidity and marketability
Because of high trading costs and a lack of transparency in the high-yield market, individual investors have less flexibility to adjust their bond holdings to take advantage of changing market conditions.
“Because we can trade efficiently, we may buy and sell to take advantage of relative value,” says David. “That gives the fund the ability to change its risk profile based on microeconomic and macroeconomic conditions.”
American High-Income Trust has significant resources dedicated to trading, which gives portfolio counselors the ability to understand what’s going on in real time and react to it in real time in an efficient way. “Liquidity does vary in this market,” says David. “We have access both as a buyer and seller to the market. As an active participant, we have a good understanding of liquidity within the market and of different issues, and can pick better times to transact.”
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A unique management system
American High-Income Trust is managed in a unique fashion — as are all American Funds — using a method we call the multiple portfolio counselor system. In this system, each of the fund’s portfolio counselors is entrusted with a segment of the portfolio to manage as he or she believes will best meet the objective of the fund. This allows them to focus on the sectors of the market they know best and deem the best value. What makes the system special is that it enables counselors to consult with each other, yet follow their own highest convictions. Because the fund is not dependent on any single individual, transition of fund management from one generation to the next becomes almost seamless.
American High-Income Trust has five counselors, each of whom has more than 12 years of experience. A sixth segment of the fund, as shown in the pie chart, is managed directly by the fund’s research analysts, each contributing to the portfolio in his or her own area of expertise. Those contributions, in turn, signal to counselors the degree of an analyst’s conviction.
This type of portfolio management provides for diverse viewpoints and leads to more consistent results by smoothing out the peaks and valleys of the market. “Not every individual style works in every market environment,” says Susan Tolson, a portfolio counselor in the fund. “This system balances out the different styles and provides for greater stability.”
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David C. Barclay
David C. Barclay
25 years of investment experience
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Abner D. Goldstine
55 years of investment experience
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Susan M. Tolson
18 years of investment experience
[photo of David Daigle]
David Daigle
12 years of investment experience
[photo of Marc Linden]
Marc Linden
12 years of investment experience
Years of experience as of December 2006.
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greater liquidity and marketability
Individuals do not have access to the array of information that an institution has to make the best decisions. As a result, individuals have less ability to adjust their bond holdings to take advantage of changing market conditions.
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In addition, the fund’s counselors frequently are able to purchase bonds that are undervalued or overlooked by the market. Most of these bonds are simply unavailable to individual investors. “Many issuers that don’t trade very often will go to larger institutional investors, who can transact quickly and more efficiently,” says Susan. “Often, an institutional investor will have opportunities to participate in the primary or secondary market that individual investors never see.”
Automatic reinvestment
Finally, a bond fund can simplify the administrative aspects of your investment. Unlike individual bonds, which pay interest twice a year, American High-Income Trust pays income in the form of monthly dividends. The more frequent payouts are a convenience both for those looking to create a regular income stream to meet living expenses as well as for those who want to automatically reinvest their dividends in additional shares of the fund.
Over time, reinvested dividends help boost future income by increasing the number of shares owned. The benefits of automatic reinvestment are illustrated in the mountain chart on page 3, which shows the growth of an initial investment with dividends reinvested over the life of the fund.
Fund shareholders can also make subsequent investments in the fund at any time and for any dollar amount.
Individual bonds, on the other hand, do not offer the option of automatic reinvestment. Oftentimes, interest payments are set aside in a lower yielding money market fund until enough cash accrues to buy another bond.
“Automatically reinvesting your dividends can help you compound your earnings over time without paying a sales charge,” says David. “That’s difficult to do with individual bonds.”
Furthermore, bond funds offer the convenience of not having to hold the actual bond certificates and keeping records of all interest income and capital gains received.
For all these reasons, an actively managed bond fund accomplishes what many individuals seek when investing in high-yield bonds: the ability to add value, minimize risk and simplify what can otherwise be a complex investment.
Summary investment portfolio, September 30, 2006
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.
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| U.S. corporate bonds & notes | 71.9 | |||
| Non-U.S. corporate bonds & notes | 11.4 | |||
| U.S. government bonds & notes | 0.3 | |||
| Non-U.S. government & government agency bonds & notes | 4.3 | |||
| Common stocks & warrants | 1.9 | |||
| Convertible securities | 1.4 | |||
| Preferred securities | 1.9 | |||
| Other | 0.5 | |||
| Short-term securities & other assets less liabilities | 6.4 |
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Principal | Market | Percent | ||||||||
amount | value | of net | ||||||||
Bonds & notes - 88.48% | (000 | ) | (000 | ) | assets | |||||
Corporate bonds & notes - 83.37% | ||||||||||
| Consumer discretionary - 23.02% | ||||||||||
| Charter Communications Operating, LLC, Term Loan B, 8.125% 2013 (1) (2) | $ | 51,500 | $ | 51,822 | ||||||
| Charter Communications Operating, LLC and Charter Communications Operating Capital Corp.: | ||||||||||
| 8.00% 2012 (3) | 45,950 | 46,524 | ||||||||
| 8.375% 2014 (3) | 24,800 | 25,327 | ||||||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 | 44,665 | 45,167 | ||||||||
| CCH II, LLC and CCH II Capital Corp. 10.25% 2010 | 14,105 | 14,458 | ||||||||
| Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 0%-13.50% 2011-2012 (4) | 14,375 | 11,307 | ||||||||
| CCH I, LLC and CCH I Capital Corp. 11.00% 2015 | 4,750 | 4,346 | 1.76 | % | ||||||
| General Motors Corp.: | ||||||||||
| 7.20% 2011 | 96,220 | 89,124 | ||||||||
| 7.25% 2013 | € 3,000 | 3,535 | ||||||||
| 7.125%-9.40% 2013-2033 | $ | 75,815 | 66,721 | 1.41 | ||||||
| Linens 'n Things, Inc. 11.132% 2014 (1) (3) | 66,350 | 64,360 | .57 | |||||||
| CanWest Media Inc., Series B, 8.00% 2012 | 62,808 | 62,337 | .55 | |||||||
| Cinemark USA, Inc. 9.00% 2013 | 58,743 | 61,240 | .54 | |||||||
| Young Broadcasting Inc. 10.00% 2011 | 52,810 | 49,575 | .44 | |||||||
| Grupo Posadas, SA de CV 8.75% 2011 (3) | 46,225 | 48,536 | .43 | |||||||
| Mohegan Tribal Gaming Authority 6.375% 2009 | 45,540 | 45,426 | .40 | |||||||
| Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014 | 45,910 | 44,762 | .39 | |||||||
| Bon-Ton Department Stores, Inc. 10.25% 2014 | 45,200 | 44,183 | .39 | |||||||
| Tenneco Automotive Inc. 8.625% 2014 | 43,250 | 42,926 | .38 | |||||||
| Neiman Marcus Group, Inc. 9.00% 2015 (5) | 38,355 | 40,944 | .36 | |||||||
| Other securities | 1,744,517 | 15.40 | ||||||||
2,607,137 | 23.02 | |||||||||
Telecommunication services - 12.13% | ||||||||||
| Triton PCS, Inc.: | ||||||||||
| 9.375% 2011 | 60,855 | 45,793 | ||||||||
| 8.50% 2013 | 113,840 | 106,156 | ||||||||
| 8.75% 2011 | 46,050 | 34,653 | 1.65 | |||||||
| Windstream Corp.: | ||||||||||
| 8.625% 2016 (3) | 90,575 | 97,368 | ||||||||
| 8.125% 2013 (3) | 25,300 | 26,976 | ||||||||
| Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015 | 44,450 | 47,562 | 1.52 | |||||||
| American Cellular Corp., Series B, 10.00% 2011 | 52,725 | 55,493 | ||||||||
| Dobson Communications Corp. 8.875%-9.757% 2012-2013 (1) | 57,100 | 57,456 | ||||||||
| Dobson Cellular Systems, Inc. 8.375%-9.875% 2011-2012 (3) | 53,215 | 56,231 | 1.49 | |||||||
| Intelsat (Bermuda), Ltd. 8.25%-11.25% 2012-2016 (1) (3) | 111,180 | 114,626 | ||||||||
| Intelsat PanAmSat Opco 9.00% 2016 (3) | 13,075 | 13,533 | ||||||||
| Intelsat, Ltd. 6.50%-7.625% 2012-2013 | 12,500 | 10,303 | 1.22 | |||||||
| Qwest Capital Funding, Inc. 7.00%-7.90% 2009-2031 | 72,820 | 73,558 | ||||||||
| Qwest Communications International Inc. 7.25%-7.50% 2011-2014 | 45,575 | 45,818 | ||||||||
| U S WEST Capital Funding, Inc. 6.50%-6.875% 2018-2028 | 15,064 | 13,578 | ||||||||
| Qwest Corp. 8.875% 2012 | 3,600 | 3,946 | 1.21 | |||||||
| Nextel Communications, Inc.: | ||||||||||
| Series D, 7.375% 2015 | 85,378 | 88,177 | ||||||||
| Series E, 6.875% 2013 | 14,500 | 14,776 | ||||||||
| Alamosa (Delaware), Inc. 8.50% 2012 | 1,925 | 2,060 | .93 | |||||||
| American Tower Corp.: | ||||||||||
| 7.125% 2012 | 64,360 | 66,291 | ||||||||
| 7.25%-7.50% 2011-2012 | 27,225 | 28,132 | .83 | |||||||
| Centennial Communications Corp. 11.258% 2013 (1) | 39,750 | 41,241 | .37 | |||||||
| Other securities | 329,767 | 2.91 | ||||||||
1,373,494 | 12.13 | |||||||||
Industrials - 11.05% | ||||||||||
| Continental Airlines, Inc. 6.545%- 8.388% 2012-2022 (2) | 121,748 | 121,134 | 1.07 | |||||||
| UAL Corp., Term Loan B, 9.08% 2012 (1) (2) | 67,045 | 67,548 | .60 | |||||||
| Nielsen Finance LLC and Nielsen Finance Co. 10.00% 2014 (3) | 43,750 | 45,445 | .40 | |||||||
| Goodman Global Holdings, Inc., Series B, 7.875% 2012 | 44,980 | 43,068 | .38 | |||||||
| Accuride Corp. 8.50% 2015 | 46,015 | 43,024 | .38 | |||||||
| DynCorp International and DIV Capital Corp., Series A, 9.50% 2013 | 41,290 | 42,942 | .38 | |||||||
| Other securities | 888,644 | 7.84 | ||||||||
1,251,805 | 11.05 | |||||||||
Materials - 9.19% | ||||||||||
| JSG Holdings PLC 11.50% 2015 (5) | € 41,591 | 53,912 | .48 | |||||||
| Georgia-Pacific Corp., Second Lien Term Loan C, 8.39% 2013 (1) (2) | $ | 49,475 | 50,032 | .44 | ||||||
| Georgia Gulf Corp. 9.50% 2014 (3) | 40,800 | 40,647 | .36 | |||||||
| Other securities | 895,872 | 7.91 | ||||||||
1,040,463 | 9.19 | |||||||||
Energy - 5.92% | ||||||||||
| Williams Companies, Inc.: | ||||||||||
| 8.75% 2032 | 39,370 | 43,307 | ||||||||
| 6.375%-8.125% 2010-2021 (1) (3) | 43,050 | 45,143 | ||||||||
| Transcontinental Gas Pipe Line Corp. 6.40%-7.25% 2011-2026 (3) | 16,810 | 17,128 | ||||||||
| Northwest Pipeline Corp. 7.00% 2016 (3) | 5,000 | 5,138 | ||||||||
| Williams Companies, Inc. and Credit Linked Certificate Trust 6.75% 2009 (3) | 2,000 | 2,020 | ||||||||
| Williams Partners LP 7.50% 2011 (3) | 16,525 | 16,649 | 1.14 | |||||||
| Drummond Co., Inc. 7.375% 2016 (3) | 46,205 | 43,664 | .39 | |||||||
| Other securities | 496,907 | 4.39 | ||||||||
669,956 | 5.92 | |||||||||
Financials - 5.07% | ||||||||||
| General Motors Acceptance Corp.: | ||||||||||
| 7.25% 2011 | 45,460 | 45,762 | ||||||||
| 6.125%-7.60% 2007-2014 (1) | 123,745 | 123,119 | 1.49 | |||||||
| Ford Motor Credit Co. 9.75% 2010 (3) | 44,000 | 45,466 | .40 | |||||||
| Other securities | 359,904 | 3.18 | ||||||||
574,251 | 5.07 | |||||||||
Utilities - 4.86% | ||||||||||
| Edison Mission Energy: | ||||||||||
| 7.50% 2013 (3) | 45,375 | 46,056 | ||||||||
| 7.73%-7.75% 2009-2016 (3) | 54,975 | 56,466 | ||||||||
| Mission Energy Holding Co. 13.50% 2008 | 38,350 | 43,000 | ||||||||
| Midwest Generation, LLC, Series B, 8.56% 2016 (2) | 25,378 | 26,980 | ||||||||
| Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 | 16,500 | 17,696 | ||||||||
| Homer City Funding LLC 8.734% 2026 (2) | 9,342 | 10,393 | 1.77 | |||||||
| AES Corp.: | ||||||||||
| 8.75% 2013 (3) | 43,985 | 47,394 | ||||||||
| 8.875%-9.50% 2009-2015 (3) | 63,301 | 68,234 | ||||||||
| AES Gener SA 7.50% 2014 | 18,350 | 19,089 | ||||||||
| AES Red Oak, LLC 8.54%-9.20% 2019-2029 (2) | 9,486 | 10,350 | 1.28 | |||||||
| Other securities | 205,142 | 1.81 | ||||||||
550,800 | 4.86 | |||||||||
Consumer staples - 4.44% | ||||||||||
| Other securities | 503,281 | 4.44 | ||||||||
Information technology - 3.97% | ||||||||||
| Sanmina-SCI Corp. 8.125% 2016 | 77,725 | 76,559 | .68 | |||||||
| Hughes Network Systems, LLC and HNS Finance Corp. 9.50% 2014 (3) | 58,375 | 60,418 | .53 | |||||||
| Electronic Data Systems Corp., Series B, 6.50% 2013 (1) | 41,040 | 41,689 | .37 | |||||||
| Celestica Inc. 7.875% 2011 | 41,170 | 41,582 | .37 | |||||||
| Other securities | 229,417 | 2.02 | ||||||||
449,665 | 3.97 | |||||||||
Health care - 3.72% | ||||||||||
| Warner Chilcott Corp. 8.75% 2015 | 71,014 | 73,855 | .65 | |||||||
| Other securities | 347,894 | 3.07 | ||||||||
421,749 | 3.72 | |||||||||
Non-U.S. government & government agency bonds & notes - 4.28% | ||||||||||
| Other securities | 484,387 | 4.28 | ||||||||
Other - 0.83% | ||||||||||
| Other securities | 94,363 | .83 | ||||||||
Total bonds & notes (cost: $9,912,202,000) | 10,021,351 | 88.48 | ||||||||
Shares or | Market | Percent | ||||||||
principal | value | of net | ||||||||
Convertible securities - 1.41% | amount | (000 | ) | assets | ||||||
Other - 1.41% | ||||||||||
| American Tower Corp. 5.00% convertible debentures 2010 | $ | 25,925,000 | 25,925 | .23 | ||||||
| AES Trust VII 6.00% convertible preferred 2008 | 439,925 | 21,446 | .19 | |||||||
| Other securities | 111,827 | .99 | ||||||||
Total convertible securities (cost: $139,429,000) | 159,198 | 1.41 | ||||||||
Market | Percent | |||||||||
value | of net | |||||||||
Preferred securities - 1.86% | Shares | (000 | ) | assets | ||||||
Financials - 1.83% | ||||||||||
| Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred (1) (3) | 52,248,000 | 55,982 | .49 | |||||||
| Other securities | 151,533 | 1.34 | ||||||||
207,515 | 1.83 | |||||||||
Other - 0.03% | ||||||||||
| Other securities | 3,626 | .03 | ||||||||
Total preferred securities (cost: $183,407,000) | 211,141 | 1.86 | ||||||||
Market | Percent | |||||||||
value | of net | |||||||||
Common stocks - 1.85% | Shares | (000 | ) | assets | ||||||
Other - 1.85% | ||||||||||
| Drax Group PLC (6) | 3,969,950 | 61,924 | .55 | |||||||
| Dobson Communications Corp., Class A (6) | 3,435,685 | 24,118 | .21 | |||||||
| American Tower Corp., Class A (6) | 538,967 | 19,672 | .18 | |||||||
| Sprint Nextel Corp., Series 1 | 777,508 | 13,334 | .12 | |||||||
| Other securities | 90,224 | .79 | ||||||||
209,272 | 1.85 | |||||||||
Miscellaneous - 0.00% | ||||||||||
| Other common stocks in initial period of acquisition | 237 | .00 | ||||||||
Total common stocks (cost: $154,796,000) | 209,509 | 1.85 | ||||||||
Market | Percent | |||||||||
value | of net | |||||||||
Warrants - 0.00% | (000 | ) | assets | |||||||
Other - 0.00% | ||||||||||
| Other securities | 83 | .00 | ||||||||
| Total warrants (cost: $1,100,000) | 83 | .00 | ||||||||
Principal | Market | Percent | ||||||||
amount | value | of net | ||||||||
Short-term securities - 5.07% | (000 | ) | (000 | ) | assets | |||||
| Clipper Receivables Co., LLC 5.26%-5.28% due 10/19-12/1/2006 (3) (7) | $ | 69,705 | 69,265 | .61 | ||||||
| Fannie Mae 5.21% due 10/2/2006 | 61,200 | 61,182 | .54 | |||||||
| Hershey Co. 5.19% due 10/31-11/8/2006 (3) (7) | 55,000 | 54,725 | .48 | |||||||
| Wal-Mart Stores Inc. 5.20%-5.21% due 11/28-12/19/2006 (3) (7) | 53,500 | 52,969 | .47 | |||||||
| Federal Home Loan Bank 5.15% due 11/29/2006 (7) | 53,000 | 52,549 | .46 | |||||||
| Variable Funding Capital Corp. 5.25% due 10/12-10/18/2006 (3) | 46,400 | 46,295 | .41 | |||||||
| Other securities | 237,299 | 2.10 | ||||||||
Total short-term securities (cost: $574,242,000) | 574,284 | 5.07 | ||||||||
Total investment securities (cost: $10,965,176,000) | 11,175,566 | 98.67 | ||||||||
Other assets less liabilities | 150,791 | 1.33 | ||||||||
Net assets | $ | 11,326,357 | 100.00 | % | ||||||
| "Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. | ||||||||||
| "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. | ||||||||||
Investments in affiliates
A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. The market value of the fund's holdings in affiliated companies is included in "Other securities" under their respective industry sectors in the preceding summary investment portfolio. Further details on these holdings and related transactions during the year ended September 30, 2006, appear below.
| Company | Beginning | Ending | Dividend income | Market value of affiliates | |||||||||||||||
| shares | Purchases | Sales | shares | (000 | ) | (000 | ) | ||||||||||||
| ZiLOG, Inc. (6) | 1,140,500 | - | - | 1,140,500 | $ | - | $ | 4,163 | |||||||||||
| ZiLOG, Inc. - MOD III Inc., units (6) (8) | 1,868 | - | - | 1,868 | - | 278 | |||||||||||||
| Clarent Hospital Corp. (6) (8) | 576,849 | - | - | 576,849 | - | 144 | |||||||||||||
| $ | - | $ | 4,585 |
| 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) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $2,269,467,000, which represented 20.04% of the net assets of the fund. | ||||||||||
| (4) Step bond; coupon rate will increase at a later date. | ||||||||||
| (5) Payment in kind; the issuer has the option of paying additional securities in lieu of cash. | ||||||||||
| (6) Security did not produce income during the last 12 months. | ||||||||||
| (7) This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future. | ||||||||||
| (8) Valued under fair value procedures adopted by authority of the board of trustees. | ||||||||||
| See Notes to Financial Statements | ||||||||||
Financial statements
Statement of assets and liabilities | |||||||
| at September 30, 2006 | (dollars and shares in thousands, except per-share amounts) | ||||||
Assets: | |||||||
| Investment securities at market: | |||||||
| Unaffiliated issuers (cost: $10,943,263) | $ | 11,170,981 | |||||
| Affiliated issuers (cost: $21,913) | 4,585 | $ | 11,175,566 | ||||
| Cash | 48,907 | ||||||
| Receivables for: | |||||||
| Sales of investments | 33,518 | ||||||
| Sales of fund's shares | 37,895 | ||||||
| Open forward currency contracts | 333 | ||||||
| Dividends and interest | 206,674 | 278,420 | |||||
| 11,502,893 | |||||||
Liabilities: | |||||||
| Payables for: | |||||||
| Purchases of investments | 144,768 | ||||||
| Repurchases of fund's shares | 19,597 | ||||||
| Dividends on fund's shares | 4,667 | ||||||
| Open forward currency contracts | 2 | ||||||
| Closed forward currency contracts | 40 | ||||||
| Investment advisory services | 2,742 | ||||||
| Services provided by affiliates | 4,083 | ||||||
| Deferred trustees' compensation | 141 | ||||||
| Other fees and expenses | 496 | 176,536 | |||||
Net assets at September 30, 2006 | $ | 11,326,357 | |||||
Net assets consist of: | |||||||
| Capital paid in on shares of beneficial interest | $ | 11,243,458 | |||||
| Undistributed net investment income | 28,765 | ||||||
| Accumulated net realized loss | (156,580 | ) | |||||
| Net unrealized appreciation | 210,714 | ||||||
Net assets at September 30, 2006 | $ | 11,326,357 | |||||
Shares of beneficial interest issued and outstanding - unlimited shares authorized (920,659 total shares outstanding) | ||||||||||
| Net assets | Shares outstanding | Net asset value per share* | ||||||||
| Class A | $ | 8,285,158 | 673,456 | $ | 12.30 | |||||
| Class B | 759,588 | 61,743 | 12.30 | |||||||
| Class C | 870,949 | 70,795 | 12.30 | |||||||
| Class F | 846,439 | 68,802 | 12.30 | |||||||
| Class 529-A | 92,214 | 7,496 | 12.30 | |||||||
| Class 529-B | 17,649 | 1,435 | 12.30 | |||||||
| Class 529-C | 40,186 | 3,267 | 12.30 | |||||||
| Class 529-E | 5,294 | 430 | 12.30 | |||||||
| Class 529-F | 4,038 | 328 | 12.30 | |||||||
| Class R-1 | 8,334 | 677 | 12.30 | |||||||
| Class R-2 | 105,991 | 8,615 | 12.30 | |||||||
| Class R-3 | 133,792 | 10,875 | 12.30 | |||||||
| Class R-4 | 72,863 | 5,923 | 12.30 | |||||||
| Class R-5 | 83,862 | 6,817 | 12.30 | |||||||
| (*) 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 $12.78 each. | ||||||||||
| See Notes to Financial Statements | ||||||||||
Statement of operations | |||||||
| for the year ended September 30, 2006 | (dollars in thousands) | ||||||
Investment income: | |||||||
| Income: | |||||||
| Interest (net of non-U.S. taxes of $828) | $ | 845,000 | |||||
| Dividends | 10,756 | $ | 855,756 | ||||
| Fees and expenses(*): | |||||||
| Investment advisory services | 35,055 | ||||||
| Distribution services | 37,973 | ||||||
| Transfer agent services | 7,740 | ||||||
| Administrative services | 3,370 | ||||||
| Reports to shareholders | 460 | ||||||
| Registration statement and prospectus | 364 | ||||||
| Postage, stationery and supplies | 785 | ||||||
| Trustees' compensation | 72 | ||||||
| Auditing and legal | 100 | ||||||
| Custodian | 278 | ||||||
| State and local taxes | 110 | ||||||
| Other | 83 | ||||||
| Total fees and expenses before reimbursements/waivers | 86,390 | ||||||
| Less reimbursements/waivers of fees and expenses: | |||||||
| Investment advisory services | 3,506 | ||||||
| Administrative services | 348 | ||||||
| Total fees and expenses after reimbursements/waivers | 82,536 | ||||||
| Net investment income | 773,220 | ||||||
Net realized gain and unrealized depreciation on investments and non-U.S. currency: | |||||||
| Net realized gain (loss) on: | |||||||
| Investments | 95,056 | ||||||
| Non-U.S. currency transactions | (127 | ) | 94,929 | ||||
| Net unrealized depreciation on: | |||||||
| Investments | (42,064 | ) | |||||
| Non-U.S. currency translations | (1,388 | ) | (43,452 | ) | |||
| Net realized gain and unrealized depreciation | |||||||
| on investments and non-U.S. currency | 51,477 | ||||||
Net increase in net assets resulting from operations | $ | 824,697 | |||||
| (*) 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 | |||||||
| 2006 | 2005 | ||||||
Operations: | |||||||
| Net investment income | $ | 773,220 | $ | 690,756 | |||
| Net realized gain on investments and non-U.S. currency transactions | 94,929 | 237,223 | |||||
| Net unrealized depreciation on investments and non-U.S. currency translations | (43,452 | ) | (232,508 | ) | |||
| Net increase in net assets resulting from operations | 824,697 | 695,471 | |||||
Dividends paid or accrued to shareholders from | |||||||
net investment income and non-U.S. currency gain | (791,733 | ) | (694,615 | ) | |||
Capital share transactions | 1,230,972 | 664,719 | |||||
Total increase in net assets | 1,263,936 | 665,575 | |||||
Net assets: | |||||||
| Beginning of year | 10,062,421 | 9,396,846 | |||||
| End of year (including | |||||||
| undistributed net investment income: $28,765 and $49,132, respectively) | $ | 11,326,357 | $ | 10,062,421 | |||
| 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 CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:
| Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature |
| Class A and 529-A | Up to 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 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. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.
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 the borrower to meet the obligations of the loan.
| 2. | Non-U.S. investments |
Investment risk - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.
Taxation - Dividend and interest income is recorded net of non-U.S. taxes paid. 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. For the year ended September 30, 2006, non-U.S. taxes paid on realized and unrealized gains were $221,000. As of September 30, 2006, 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.
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; paydowns on fixed-income securities; net capital losses; non-U.S. taxes on capital gains; 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, 2006, the fund reclassified $1,841,000 from undistributed net investment income to accumulated net realized loss and $13,000 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, 2006, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investments were as follows:
| (dollars in thousands) | ||||
| Undistributed ordinary income | $ | 42,174 | ||
| Post-October non-U.S. currency loss deferrals (realized during the period November 1, 2005, through September 31, 2006)* | (318 | ) | ||
| Capital loss carryforward expiring in 2011† | (146,129 | ) | ||
| Gross unrealized appreciation on investment securities | 436,308 | |||
| Gross unrealized depreciation on investment securities | (242,294 | ) | ||
| Net unrealized appreciation on investment securities | 194,014 | |||
| Cost of investment securities | 10,981,552 | |||
| *These deferrals are considered incurred in the subsequent year. | ||||
| †Reflects the utilization of capital loss carryforwards of $99,258,000. The capital loss carryforwards will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while capital loss carryforwards remain. | ||||
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 | 2006 | 2005 | |||||
| Class A | $ | 593,936 | $ | 523,835 | |||
| Class B | 52,530 | 51,233 | |||||
| Class C | 56,047 | 52,182 | |||||
| Class F | 54,509 | 42,973 | |||||
| Class 529-A | 5,972 | 4,127 | |||||
| Class 529-B | 1,102 | 879 | |||||
| Class 529-C | 2,402 | 1,818 | |||||
| Class 529-E | 338 | 240 | |||||
| Class 529-F | 260 | 176 | |||||
| Class R-1 | 474 | 301 | |||||
| Class R-2 | 6,088 | 3,992 | |||||
| Class R-3 | 7,856 | 5,166 | |||||
| Class R-4 | 4,334 | 2,449 | |||||
| Class R-5 | 5,885 | 5,244 | |||||
| Total | $ | 791,733 | $ | 694,615 | |||
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, Inc.SM ("AFD"), the principal underwriter of the fund’s shares.
Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.30% on the first $60 million of daily net assets and decreasing to 0.14% on such assets in excess of $10 billion. 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 $50,000,000. CRMC is currently waiving 10% of investment advisory services fees. During the year ended September 30, 2006, total investment advisory services fees waived by CRMC were $3,506,000. As a result, the fee shown on the accompanying financial statements of $35,055,000, which was equivalent to an annualized rate of 0.335%, was reduced to $31,549,000, or 0.301% 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 below. 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, 2006, 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, 2006, the total administrative services fees paid by CRMC were $4,000 and $344,000 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 CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.
Expenses under the agreements described on the previous page for the year ended September 30, 2006, 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 | $18,394 | $6,990 | Not applicable | Not applicable | Not applicable |
| Class B | 7,560 | 750 | Not applicable | Not applicable | Not applicable |
| Class C | 8,131 | Included in administrative services | $945 | $200 | Not applicable |
| Class F | 1,785 | 610 | 191 | Not applicable | |
| Class 529-A | 147 | 58 | 14 | $78 | |
| Class 529-B | 162 | 12 | 9 | 16 | |
| Class 529-C | 353 | 26 | 16 | 36 | |
| Class 529-E | 23 | 4 | 1 | 5 | |
| Class 529-F | - | 3 | 1 | 3 | |
| Class R-1 | 69 | 9 | 7 | Not applicable | |
| Class R-2 | 667 | 131 | 582 | Not applicable | |
| Class R-3 | 540 | 147 | 100 | Not applicable | |
| Class R-4 | 142 | 77 | 10 | Not applicable | |
| Class R-5 | Not applicable | 74 | 5 | Not applicable | |
| Total | $37,973 | $7,740 | $2,096 | $1,136 | $138 |
Deferred trustees’ 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 $72,000, shown on the accompanying financial statements, includes $54,000 in current fees (either paid in cash or deferred) and a net increase of $18,000 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, 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 | |||||||||||
| Year ended September 30, 2005 | |||||||||||||||||||||||||
| Class A | $ | 1,717,183 | 138,578 | $ | 406,479 | 32,844 | $ | (1,596,907 | ) | (129,264 | ) | $ | 526,755 | 42,158 | |||||||||||
| Class B | 98,256 | 7,936 | 34,967 | 2,824 | (157,417 | ) | (12,748 | ) | (24,194 | ) | (1,988 | ) | |||||||||||||
| Class C | 192,388 | 15,519 | 36,227 | 2,926 | (236,808 | ) | (19,190 | ) | (8,193 | ) | (745 | ) | |||||||||||||
| Class F | 313,820 | 25,362 | 31,571 | 2,550 | (286,463 | ) | (23,196 | ) | 58,928 | 4,716 | |||||||||||||||
| Class 529-A | 21,884 | 1,765 | 4,106 | 332 | (6,883 | ) | (557 | ) | 19,107 | 1,540 | |||||||||||||||
| Class 529-B | 2,891 | 233 | 876 | 71 | (802 | ) | (64 | ) | 2,965 | 240 | |||||||||||||||
| Class 529-C | 9,408 | 759 | 1,809 | 146 | (4,153 | ) | (336 | ) | 7,064 | 569 | |||||||||||||||
| Class 529-E | 1,309 | 106 | 239 | 19 | (317 | ) | (26 | ) | 1,231 | 99 | |||||||||||||||
| Class 529-F | 944 | 76 | 174 | 14 | (378 | ) | (30 | ) | 740 | 60 | |||||||||||||||
| Class R-1 | 3,243 | 261 | 298 | 24 | (868 | ) | (70 | ) | 2,673 | 215 | |||||||||||||||
| Class R-2 | 45,263 | 3,652 | 3,965 | 321 | (18,208 | ) | (1,476 | ) | 31,020 | 2,497 | |||||||||||||||
| Class R-3 | 81,319 | 6,577 | 5,107 | 413 | (47,837 | ) | (3,844 | ) | 38,589 | 3,146 | |||||||||||||||
| Class R-4 | 35,411 | 2,847 | 2,410 | 195 | (18,452 | ) | (1,500 | ) | 19,369 | 1,542 | |||||||||||||||
| Class R-5 | 20,105 | 1,623 | 3,958 | 320 | (35,398 | ) | (2,867 | ) | (11,335 | ) | (924 | ) | |||||||||||||
| Total net increase | |||||||||||||||||||||||||
| (decrease) | $ | 2,543,424 | 205,294 | $ | 532,186 | 42,999 | $ | (2,410,891 | ) | (195,168 | ) | $ | 664,719 | 53,125 | |||||||||||
| (*) Includes exchanges between share classes of the fund. | |||||||||||||||||||||||||
6. Forward currency contracts
As of September 30, 2006, the fund had outstanding forward currency contracts to sell non-U.S. currencies as follows (amounts in thousands):
| Contract amount | U.S. valuations at September 30, 2006 | ||||||||||||
Non-U.S. currency contracts | Non-U.S. | U.S. | Amount | Unrealized appreciation | |||||||||
| Sales: | |||||||||||||
| Euros expiring 10/12 to 12/29/2006 | €58,071 | $ | 74,271 | $ | 73,940 | $ | 331 | ||||||
7. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities, of $4,949,881,000 and $4,030,332,000, respectively, during the year ended September 30, 2006.
Financial highlights(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from investment operations(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | Net investment income | Net gains (losses) on securities (both realized and unrealized | ) | Total from investment operations | Dividends (from net investment income | ) | Net asset value, end of period | Total return(3 | ) | Net assets, end of period (in millions | ) | Ratio of expenses to average net assets before reimbursements/ waivers | Ratio of expenses to average net assets after reimbursements/ waivers | (4 | ) | Ratio of net income to average net assets | |||||||||||||||||||||||||||||||||
Class A: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Year ended 9/30/2002 | 11.27 | 1.08 | (1.65 | ) | (.57 | ) | (1.08 | ) | 9.62 | (5.88 | ) | 3,327 | .88 | .88 | 9.99 | ||||||||||||||||||||||||||||||||||
Class B: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Year ended 9/30/2002 | 11.27 | 1.00 | (1.65 | ) | (.65 | ) | (1.00 | ) | 9.62 | (6.57 | ) | 294 | 1.59 | 1.59 | 9.28 | ||||||||||||||||||||||||||||||||||
Class C: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Year ended 9/30/2002 | 11.27 | .99 | (1.65 | ) | (.66 | ) | (.99 | ) | 9.62 | (6.65 | ) | 262 | 1.67 | 1.67 | 9.21 | ||||||||||||||||||||||||||||||||||
Class F: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Year ended 9/30/2002 | 11.27 | 1.07 | (1.65 | ) | (.58 | ) | (1.07 | ) | 9.62 | (5.95 | ) | 156 | .93 | .93 | 9.95 | ||||||||||||||||||||||||||||||||||
Class 529-A: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 2/19/2002 to 9/30/2002 | 11.37 | .65 | (1.76 | ) | (1.11 | ) | (.64 | ) | 9.62 | (10.11 | ) | 7 | 1.07 | (5 | ) | 1.07 | (5 | ) | 10.40 | (5 | ) | ||||||||||||||||||||||||||||
Class 529-B: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 2/25/2002 to 9/30/2002 | 11.23 | .59 | (1.63 | ) | (1.04 | ) | (.57 | ) | 9.62 | (9.54 | ) | 2 | 1.82 | (5 | ) | 1.82 | (5 | ) | 9.67 | (5 | ) | ||||||||||||||||||||||||||||
Class 529-C: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 2/19/2002 to 9/30/2002 | 11.37 | .60 | (1.76 | ) | (1.16 | ) | (.59 | ) | 9.62 | (10.52 | ) | 4 | 1.80 | (5 | ) | 1.80 | (5 | ) | 9.65 | (5 | ) | ||||||||||||||||||||||||||||
Class 529-E: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 3/15/2002 to 9/30/2002 | 11.57 | .57 | (1.96 | ) | (1.39 | ) | (.56 | ) | 9.62 | (12.29 | ) | - | (6 | ) | 1.27 | (5 | ) | 1.27 | (5 | ) | 10.45 | (5 | ) | ||||||||||||||||||||||||||
| Please see page 24 for footnotes. | |||||||||||||||||||||||||||||||||||||||||||||||||
Class 529-F: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 9/16/2002 to 9/30/2002 | 9.88 | .08 | (.30 | ) | (.22 | ) | (.04 | ) | 9.62 | (2.23 | ) | - | (6 | ) | .05 | .05 | .77 | ||||||||||||||||||||||||||||||||
Class R-1: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 7/11/2002 to 9/30/2002 | 10.00 | .23 | (.40 | ) | (.17 | ) | (.21 | ) | 9.62 | (1.70 | ) | - | (6 | ) | 2.07 | .38 | 2.32 | ||||||||||||||||||||||||||||||||
Class R-2: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 6/18/2002 to 9/30/2002 | 10.76 | .31 | (1.18 | ) | (.87 | ) | (.27 | ) | 9.62 | (8.05 | ) | - | (6 | ) | .85 | .48 | 3.17 | ||||||||||||||||||||||||||||||||
Class R-3: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 6/21/2002 to 9/30/2002 | 10.60 | .31 | (1.01 | ) | (.70 | ) | (.28 | ) | 9.62 | (6.63 | ) | 1 | .51 | .36 | 3.21 | ||||||||||||||||||||||||||||||||||
Class R-4: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 7/19/2002 to 9/30/2002 | 9.97 | .22 | (.38 | ) | (.16 | ) | (.19 | ) | 9.62 | (1.58 | ) | - | (6 | ) | 9.55 | .14 | 2.25 | ||||||||||||||||||||||||||||||||
Class R-5: | |||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||||
| Period from 5/15/2002 to 9/30/2002 | 11.30 | .42 | (1.70 | ) | (1.28 | ) | (.40 | ) | 9.62 | (11.41 | ) | 42 | .23 | .23 | 4.25 | ||||||||||||||||||||||||||||||||||
| Year ended September 30 | ||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||
| Portfolio turnover rate for all classes of shares | 41 | % | 39 | % | 39 | % | 41 | % | 34 | % | ||||||
| (1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year. |
| (2) Based on average shares outstanding. |
| (3) Total returns exclude all sales charges, including contingent deferred sales charges. |
| (4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, |
| CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan |
| share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services. |
| (5) Annualized. |
| (6) Amount less than $1 million. |
| 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 of American High-Income Trust (the “Fund”), including the summary investment portfolio, as of September 30, 2006, 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, 2006, 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, 2006, 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 8, 2006
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, 2006, through September 30, 2006).
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value 4/1/2006 | Ending account value 9/30/2006 | Expenses paid during period* | Annualized expense ratio | ||||||||||
| Class A -- actual return | $ | 1,000.00 | $ | 1,038.32 | $ | 3.27 | .64 | % | |||||
| Class A -- assumed 5% return | 1,000.00 | 1,021.86 | 3.24 | .64 | |||||||||
| Class B -- actual return | 1,000.00 | 1,034.32 | 7.24 | 1.42 | |||||||||
| Class B -- assumed 5% return | 1,000.00 | 1,017.95 | 7.18 | 1.42 | |||||||||
| Class C -- actual return | 1,000.00 | 1,034.09 | 7.39 | 1.45 | |||||||||
| Class C -- assumed 5% return | 1,000.00 | 1,017.80 | 7.33 | 1.45 | |||||||||
| Class F -- actual return | 1,000.00 | 1,038.17 | 3.42 | .67 | |||||||||
| Class F -- assumed 5% return | 1,000.00 | 1,021.71 | 3.40 | .67 | |||||||||
| Class 529-A -- actual return | 1,000.00 | 1,038.10 | 3.47 | .68 | |||||||||
| Class 529-A -- assumed 5% return | 1,000.00 | 1,021.66 | 3.45 | .68 | |||||||||
| Class 529-B -- actual return | 1,000.00 | 1,033.66 | 7.85 | 1.54 | |||||||||
| Class 529-B -- assumed 5% return | 1,000.00 | 1,017.35 | 7.79 | 1.54 | |||||||||
| Class 529-C -- actual return | 1,000.00 | 1,033.69 | 7.85 | 1.54 | |||||||||
| Class 529-C -- assumed 5% return | 1,000.00 | 1,017.35 | 7.79 | 1.54 | |||||||||
| Class 529-E -- actual return | 1,000.00 | 1,036.42 | 5.16 | 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 | 1,039.02 | 2.61 | .51 | |||||||||
| Class 529-F -- assumed 5% return | 1,000.00 | 1,022.51 | 2.59 | .51 | |||||||||
| Class R-1 -- actual return | 1,000.00 | 1,033.88 | 7.65 | 1.50 | |||||||||
| Class R-1 -- assumed 5% return | 1,000.00 | 1,017.55 | 7.59 | 1.50 | |||||||||
| Class R-2 -- actual return | 1,000.00 | 1,034.00 | 7.55 | 1.48 | |||||||||
| Class R-2 -- assumed 5% return | 1,000.00 | 1,017.65 | 7.49 | 1.48 | |||||||||
| Class R-3 -- actual return | 1,000.00 | 1,036.46 | 5.16 | 1.01 | |||||||||
| Class R-3 -- assumed 5% return | 1,000.00 | 1,020.00 | 5.11 | 1.01 | |||||||||
| Class R-4 -- actual return | 1,000.00 | 1,037.95 | 3.63 | .71 | |||||||||
| Class R-4 -- assumed 5% return | 1,000.00 | 1,021.51 | 3.60 | .71 | |||||||||
| Class R-5 -- actual return | 1,000.00 | 1,039.48 | 2.15 | .42 | |||||||||
| Class R-5 -- assumed 5% return | 1,000.00 | 1,022.96 | 2.13 | .42 | |||||||||
* Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (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, 2006:
| Qualified dividend income | $ | 3,130,000 | ||
| Corporate dividends received deduction | 3,108,000 | |||
| U.S. government income that may be exempt from state taxation | 4,306,000 |
Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed in January 2007, to determine the calendar year amounts to be included on their 2006 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, 2007. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The information, material facts and conclusions that formed the basis for the committee’s recommendation and the board’s subsequent approval are described below.
1. Information reviewed
Materials reviewed— During the course of each year, board members review a wide variety of materials relating to the services provided by CRMC, including reports on the fund’s investment results, portfolio composition, portfolio trading practices, shareholder services, and other information relating to the nature, extent and quality of services provided by CRMC to the fund. In addition, the committee requests and reviews supplementary information that includes extensive materials regarding the fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding CRMC, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the fund.
Review process— The committee received assistance and advice regarding legal and industry standards from independent counsel to the board. The committee discussed the approval of the agreement with CRMC representatives and in a private session with counsel at which no representatives of CRMC were present. In deciding to recommend approval of the agreement, the committee did not identify any single issue or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the board and the committee.
2. Nature, extent and quality of services
CRMC, its personnel and its resources— The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ability of its organizational structure to address the recent growth in assets under management. The board and the committee also considered that CRMC made available to its investment professionals a variety of resources and systems relating to investment management, compliance, trading, investment results and portfolio accounting. They considered CRMC’s commitment to investing in information technology supporting investment management and compliance. They further considered CRMC’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems. The board and the committee also considered the benefits to fund shareholders from investing in a fund that is part of a larger family of funds offering a variety of investment objectives.
Other services— The board and the committee considered CRMC’s policies, procedures and systems designed to comply with applicable laws and regulations and its commitment to compliance; its efforts to keep the board members informed; and its attention to matters that may involve potential conflicts of interest with the fund. The board and the committee also considered the nature, extent, quality and cost of administrative, distribution and shareholder services provided by CRMC to the fund under the agreement and other agreements, including the information technology, legal, and fund accounting and treasury functions.
3. Investment results
The board and 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. Among other things, they compared the fund’s total returns with the average returns of all funds included in the Lipper High Current Yield Bond Funds category (the Lipper category that includes the fund) and the Lipper High Current Yield Bond Funds Index (composed of the 30 largest funds in the category each year). The board and the committee noted that for the six months ended June 2006, and the three-, five- and 10-year periods ended June 30, 2006, the fund’s investment results exceeded both measurements.
4. Advisory fees and total expenses
The board and the committee reviewed the advisory fees and total expenses of the fund (each as a percentage of average net assets) and compared such amounts with the median fee and expense levels of all other funds in the Lipper High Current Yield Bond Funds category and the Lipper High Current Yield Bond Funds Index as of September 30, 2005. The board and the committee observed that the fund’s advisory fees and total expenses were well below the median fees and expenses for all such other funds as of the end of each of the fund’s last 10 fiscal years. The board and the committee also noted the 10% advisory fee waiver that CRMC put into effect on April 1, 2005.
The board and the committee also reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with similar investment mandates. They noted that, although the fees paid by those clients generally were lower than those paid by American Funds, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, as well as the resulting level of profits to CRMC, comparing those to the reported results of several large, publicly held investment management companies. The committee also received information during previous periods regarding the structure and manner in which CRMC’s investment professionals were compensated and CRMC’s view of the relationship of such compensation to the attraction and retention of quality personnel. The board and the committee considered CRMC’s willingness to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements. They further considered that breakpoint discounts in the fund’s advisory fee structure reduce the level of fees charged by CRMC to the fund as fund assets increase. They also considered the impact of CRMC’s current 10% advisory fee waiver.
6. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to the investment adviser’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers.
7. Conclusions
Based on their review, including their consideration of each of the factors referred to above, the board and the committee concluded that the agreement is fair and reasonable to the fund and its shareholders, that the fund’s shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund, that each of the factors discussed above supported approval of the agreement, and that approval of the agreement was in the best interests of the fund and its shareholders.
Other share class results
unaudited
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.
Class B, Class C, Class F and Class 529 | ||||||||||
Average annual total returns for periods ended September 30, 2006: | ||||||||||
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 | +2.44 | % | +9.11 | % | +6.40 | % | ||||
| Not reflecting CDSC | +7.44 | % | +9.39 | % | +6.40 | % | ||||
Class C shares— first sold 3/15/01 | ||||||||||
| Reflecting CDSC, maximum of 1%, payable only | ||||||||||
| if shares are sold within one year of purchase | +6.39 | % | +9.31 | % | +7.34 | % | ||||
| Not reflecting CDSC | +7.39 | % | +9.31 | % | +7.34 | % | ||||
Class F shares*— first sold 3/15/01 | ||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||
| sponsoring firm | +8.23 | % | +10.14 | % | +8.12 | % | ||||
Class 529-A shares†— first sold 2/19/02 | ||||||||||
| Reflecting 3.75% maximum sales charge | +4.13 | % | — | +9.05 | % | |||||
| Not reflecting maximum sales charge | +8.21 | % | — | +9.95 | % | |||||
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 | +2.30 | % | — | +8.99 | % | |||||
| Not reflecting CDSC | +7.30 | % | — | +9.31 | % | |||||
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 | +6.31 | % | — | +9.03 | % | |||||
| Not reflecting CDSC | +7.31 | % | — | +9.03 | % | |||||
Class 529-E shares*†— first sold 3/15/02 | +7.88 | % | — | +9.19 | % | |||||
Class 529-F shares*†— first sold 9/16/02 | ||||||||||
| Not reflecting annual asset-based fee charged by | ||||||||||
| sponsoring firm | +8.41 | % | — | +13.79 | % | |||||
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 23 and 24 for details.
*These shares are sold without any initial or contingent deferred sales charge.
† Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.
Board of trustees
“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., 72 | Ambassador to Spain; former Vice Chairman, Knight-Ridder, Inc. (communications company); former Chairman and Publisher, The Miami Herald | |
| H. Frederick Christie, 73 | 1987 | Private investor; former President and CEO, The Mission Group (non-utility holding company, subsidiary of Southern California Edison Company) |
| Diane C. Creel, 58 | 1994 | Chairman of the Board, President and CEO, Ecovation, Inc. (organic waste management); former President and CEO, The Earth Technology Corporation (international consulting engineering) |
| Martin Fenton, 71 | 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, 60 | 1994 | President and CEO, Fuller Consulting (financial management consulting firm) |
| R. Clark Hooper, 60 | 2005 | President, Dumbarton Group LLC (consulting); former Executive Vice President — Policy and Oversight, NASD |
| Richard G. Newman, 72 | 1991 | Chairman of the Board, AECOM Technology Corporation (engineering, consulting and professional technical services) |
| Frank M. Sanchez, 63 | 1999 | Principal, The Sanchez Family Corporation dba McDonald’s Restaurants (McDonald’s licensee) |
“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., 72 | ||
| H. Frederick Christie, 73 | 20 | Ducommun Incorporated; IHOP Corporation; Southwest Water Company |
| Diane C. Creel, 58 | 13 | Allegheny Technologies; BF Goodrich; Foster Wheeler Ltd. |
| Martin Fenton, 71 | 17 | None |
| Chairman of the Board | ||
| (Independent and | ||
| Non-Executive) | ||
| Leonard R. Fuller, 60 | 15 | None |
| R. Clark Hooper, 60 | 18 | JPMorgan Value Opportunities Fund |
| Richard G. Newman, 72 | 14 | Sempra Energy; Southwest Water Company |
| Frank M. Sanchez, 63 | 13 | None |
“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, 76 | 1987 | Senior Vice President and Director, Capital |
| Vice Chairman of the Board | Research and Management Company | |
| Paul G. Haaga, Jr., 57 | 1987 | Vice Chairman of the Board, Capital Research and |
| Vice Chairman of the Board | Management Company; Director, The Capital Group Companies, Inc.5 | |
| David C. Barclay, 50 | 1995 | Senior Vice President, Capital Research and |
| President | Management Company; Director, The Capital Group Companies, Inc.5 | |
“Interested” trustees4 | ||
Number of | ||
portfolios | ||
in fund | ||
complex2 | ||
Name, age and | overseen by | |
position with fund | trustee | Other directorships3 held by trustee |
| Abner D. Goldstine, 76 | 13 | None |
| Vice Chairman of the Board | ||
| Paul G. Haaga, Jr., 57 | 16 | None |
| Vice Chairman of the Board | ||
| David C. Barclay, 50 | 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: Fund Secretary.
1 Trustees and officers of the fund serve until their resignation, removal or retirement.
2 Capital Research and Management Company manages the American Funds, consisting of 30 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which serves as the underlying investment vehicle for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain nonprofit organizations.
3 This 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).
5 Company affiliated with Capital Research and Management Company.
Other officers | ||
Year first | ||
elected | Principal occupation(s) during past five years | |
Name, age and | an officer | and positions held with affiliated entities or the |
position with fund | of the fund1 | principal underwriter of the fund |
| Susan M. Tolson, 44 | 1997 | Senior Vice President, Capital Research Company2 |
| Senior Vice President | ||
| Jennifer L. Hinman, 48 | 2001 | Vice President and Director, Capital Research |
| Vice President | Company;2 Director, Capital International Research, Inc.2 | |
| Kristine M. Nishiyama, 36 | 2003 | Vice President and Counsel — Fund Business |
| Vice President | Management Group, Capital Research and Management Company; Vice President and Counsel, Capital Bank and Trust Company2 | |
| Kimberly S. Verdick, 42 | 1994 | Vice President — Fund Business Management |
| Secretary | Group, Capital Research and Management Company | |
| Susi M. Silverman, 36 | 2001 | Vice President — Fund Business Management |
| Treasurer | Group, Capital Research and Management Company | |
| Sharon G. Moseley, 38 | 2003 | Vice President — Fund Business Management |
| Assistant Treasurer | Group, Capital Research and Management Company |
1 Trustees and officers of the fund serve until their resignation, removal or retirement.
2 Company affiliated with Capital Research and Management Company.
Offices of the fund and of the
investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
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
There are several ways to invest in American High-Income Trust. Class A shares are subject to a 3.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $100,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annual expenses for Class B shares were 0.77 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge (“CDSC”) of up to 5% that declines over time. Class C shares were subject to annual expenses 0.81 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annual expenses (by 0.03 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class.
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.
A complete September 30, 2006, 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 may also 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, 2006, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
[logo - American Funds®]
The right choice for the long term®
What makes American Funds different?
For 75 years, we have followed a consistent philosophy that we firmly believe is in our investors’ best interests. The range of opportunities offered by our family of just 30 carefully conceived, broadly diversified funds has attracted over 35 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.
• An extensive global research effort
American Funds investment professionals search the world to 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 23 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.
30 mutual funds, consistent philosophy, consistent results
• 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
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGEAR-921-1106P
Litho in USA RCG/GP/8049-S7520
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: | ||||
| 2005 | $76,000 | |||
| 2006 | $84,000 | |||
| b) Audit-Related Fees: | ||||
| 2005 | $2,000 | |||
| 2006 | $1,000 | |||
| 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: | ||||
| 2005 | $6,000 | |||
| 2006 | $6,000 | |||
| The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns. | ||||
| d) All Other Fees: | ||||
| 2005 | None | |||
| 2006 | 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: | ||||
| 2005 | $338,000 | |||
| 2006 | $553,000 | |||
| 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: | ||||
| 2005 | None | |||
| 2006 | $9,000 | |||
| The tax fees consist of consulting services relating to the registrant’s investments. | ||||
| d) All Other Fees: | ||||
| 2005 | $27,000 | |||
| 2006 | $9,000 | |||
| 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 auditors’ 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 $1,037,000 for fiscal year 2005 and $865,000 for fiscal year 2006. 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, 2006
Bonds & notes — 88.48% | Principal amount (000) | Market value (000) | |||||
CORPORATE BONDS & NOTES — 83.37% | |||||||
| CONSUMER DISCRETIONARY — 23.02% | |||||||
| CCH II, LLC and CCH II Capital Corp. 10.25% 2010 | $ | 14,105 | $ | 14,458 | |||
| Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 11.75% 2011 | 6,000 | 4,830 | |||||
| Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 13.50% 2011 | 5,525 | 4,503 | |||||
Charter Communications Holdings, LLC and Charter Communications Holdings Capital Corp. 0%/12.125% 20121 | 2,850 | 1,974 | |||||
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.00% 20122 | 45,950 | 46,524 | |||||
Charter Communications Operating, LLC, Term Loan B, 8.125% 20133,4 | 51,500 | 51,822 | |||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 8.75% 2013 | 44,665 | 45,167 | |||||
Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. 8.375% 20142 | 24,800 | 25,327 | |||||
| CCH I, LLC and CCH I Capital Corp. 11.00% 2015 | 4,750 | 4,346 | |||||
| General Motors Corp. 7.20% 2011 | 96,220 | 89,124 | |||||
| General Motors Corp. 7.125% 2013 | 29,300 | 25,894 | |||||
| General Motors Corp. 7.25% 2013 | €3,000 | 3,535 | |||||
| General Motors Corp. 7.70% 2016 | $ | 32,215 | 28,228 | ||||
| General Motors Corp. 8.80% 2021 | 4,300 | 3,827 | |||||
| General Motors Corp. 9.40% 2021 | 1,350 | 1,242 | |||||
| General Motors Corp. 8.25% 2023 | 3,650 | 3,180 | |||||
| General Motors Corp. 8.375% 2033 | 5,000 | 4,350 | |||||
| Cinemark USA, Inc. 9.00% 2013 | 58,743 | 61,240 | |||||
Cinemark, Inc. 0%/9.75% 20141 | 21,025 | 16,873 | |||||
| Mirage Resorts, Inc. 6.75% 2007 | 5,700 | 5,757 | |||||
| Mandalay Resort Group, Series B, 10.25% 2007 | 5,000 | 5,187 | |||||
| Mirage Resorts, Inc. 6.75% 2008 | 4,800 | 4,854 | |||||
| MGM MIRAGE 6.00% 2009 | 21,677 | 21,514 | |||||
| Mandalay Resort Group 6.50% 2009 | 2,000 | 2,013 | |||||
| MGM MIRAGE 8.50% 2010 | 6,100 | 6,519 | |||||
| Mandalay Resort Group 6.375% 2011 | 1,500 | 1,474 | |||||
| MGM MIRAGE 6.75% 2012 | 1,700 | 1,685 | |||||
| MGM MIRAGE 6.75% 2013 | 14,930 | 14,743 | |||||
| MGM MIRAGE 6.625% 2015 | 6,950 | 6,707 | |||||
Delphi Automotive Systems Corp. 6.50% 20095 | 34,600 | 30,967 | |||||
Delphi Corp. 6.50% 20135 | 17,190 | 14,697 | |||||
Delphi Automotive Systems Corp. 6.55% 20065 | 12,730 | 11,457 | |||||
Delphi Automotive Systems Corp. 7.125% 20295 | 14,300 | 12,155 | |||||
| K. Hovnanian Enterprises, Inc. 10.50% 2007 | 10,855 | 11,343 | |||||
| K. Hovnanian Enterprises, Inc. 6.00% 2010 | 5,275 | 4,939 | |||||
| K. Hovnanian Enterprises, Inc. 8.875% 2012 | 13,475 | 13,273 | |||||
| K. Hovnanian Enterprises, Inc. 7.75% 2013 | 6,900 | 6,348 | |||||
| K. Hovnanian Enterprises, Inc. 6.375% 2014 | 8,450 | 7,605 | |||||
| K. Hovnanian Enterprises, Inc. 6.25% 2016 | 6,000 | 5,310 | |||||
| K. Hovnanian Enterprises, Inc. 7.50% 2016 | 7,820 | 7,341 | |||||
| K. Hovnanian Enterprises, Inc. 8.625% 2017 | 11,000 | 10,973 | |||||
| Technical Olympic USA, Inc. 9.00% 2010 | 28,511 | 27,264 | |||||
| Technical Olympic USA, Inc. 9.00% 2010 | 4,280 | 4,093 | |||||
| Technical Olympic USA, Inc. 7.50% 2011 | 17,225 | 13,952 | |||||
| Technical Olympic USA, Inc. 10.375% 2012 | 23,730 | 20,645 | |||||
Linens ‘n Things, Inc. 11.132% 20142,3 | 66,350 | 64,360 | |||||
| CanWest Media Inc., Series B, 8.00% 2012 | 62,808 | 62,337 | |||||
| Mohegan Tribal Gaming Authority 6.375% 2009 | 45,540 | 45,426 | |||||
| Mohegan Tribal Gaming Authority 8.00% 2012 | 7,775 | 8,086 | |||||
| Mohegan Tribal Gaming Authority 7.125% 2014 | 7,825 | 7,825 | |||||
| Tenneco Automotive Inc., Series B, 10.25% 2013 | 16,725 | 18,230 | |||||
| Tenneco Automotive Inc. 8.625% 2014 | 43,250 | 42,926 | |||||
| NTL Cable PLC 8.75% 2014 | 36,525 | 38,077 | |||||
| NTL Cable PLC 8.75% 2014 | €4,500 | 5,980 | |||||
| NTL Cable PLC 9.75% 2014 | £3,000 | 5,797 | |||||
| NTL Cable PLC 9.125% 2016 | $ | 8,400 | 8,715 | ||||
| Dex Media East LLC, Dex Media East Finance Co., Series B, 9.875% 2009 | 5,000 | 5,294 | |||||
R.H. Donnelley Inc. 10.875% 20122 | 3,000 | 3,315 | |||||
Dex Media, Inc., Series B, 0%/9.00% 20131 | 9,000 | 7,628 | |||||
| R.H. Donnelley Corp., Series A-1, 6.875% 2013 | 10,650 | 9,771 | |||||
| R.H. Donnelley Corp., Series A-2, 6.875% 2013 | 9,000 | 8,258 | |||||
| Dex Media, Inc., Series B, 8.00% 2013 | 3,075 | 3,067 | |||||
| R.H. Donnelley Corp., Series A-3, 8.875% 2016 | 20,475 | 20,629 | |||||
| AMC Entertainment Inc. 9.50% 2011 | 8,282 | 8,313 | |||||
| AMC Entertainment Inc., Series B, 8.625% 2012 | 18,825 | 19,531 | |||||
| AMC Entertainment Inc. 9.875% 2012 | 18,150 | 18,740 | |||||
| AMC Entertainment Inc. 8.00% 2014 | 8,175 | 7,725 | |||||
| Young Broadcasting Inc. 10.00% 2011 | 52,810 | 49,575 | |||||
| Young Broadcasting Inc. 8.75% 2014 | 2,325 | 1,988 | |||||
Grupo Posadas, SA de CV 8.75% 20112 | 46,225 | 48,536 | |||||
| Grupo Posadas, SA de CV 8.75% 2011 | 750 | 788 | |||||
| William Lyon Homes, Inc. 7.625% 2012 | 13,925 | 11,314 | |||||
| William Lyon Homes, Inc. 10.75% 2013 | 20,395 | 18,865 | |||||
| William Lyon Homes, Inc. 7.50% 2014 | 23,085 | 18,583 | |||||
| American Media Operations, Inc., Series B, 10.25% 2009 | 34,445 | 32,206 | |||||
| American Media Operations, Inc. 8.875% 2011 | 17,615 | 15,545 | |||||
| Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. 6.625% 2014 | 45,910 | 44,762 | |||||
| Bon-Ton Department Stores, Inc. 10.25% 2014 | 45,200 | 44,183 | |||||
| Boyd Gaming Corp. 7.75% 2012 | 26,700 | 27,534 | |||||
| Boyd Gaming Corp. 8.75% 2012 | 4,500 | 4,748 | |||||
| Boyd Gaming Corp. 6.75% 2014 | 11,000 | 10,807 | |||||
Neiman Marcus Group, Inc. 9.00% 20156 | 38,355 | 40,944 | |||||
Burlington Coat Factory Warehouse Corp. 11.125% 20142 | 41,900 | 40,643 | |||||
| Dollarama Group LP and Dollarama Corp. 8.875% 2012 | 39,125 | 40,103 | |||||
| Toys “R” Us, Inc. 7.625% 2011 | 18,685 | 15,882 | |||||
Toys “R” Us-Delaware, Inc., Term Loan B, 9.643% 20123,4 | 21,600 | 22,059 | |||||
Kabel Deutschland GmbH 10.625% 20142 | 34,275 | 36,931 | |||||
| Royal Caribbean Cruises Ltd. 7.00% 2007 | 10,293 | 10,447 | |||||
| Royal Caribbean Cruises Ltd. 8.00% 2010 | 9,900 | 10,541 | |||||
| Royal Caribbean Cruises Ltd. 8.75% 2011 | 5,750 | 6,292 | |||||
| Royal Caribbean Cruises Ltd. 6.875% 2013 | 3,150 | 3,155 | |||||
| Royal Caribbean Cruises Ltd. 7.00% 2013 | 6,390 | 6,492 | |||||
| Gaylord Entertainment Co. 8.00% 2013 | 20,509 | 20,970 | |||||
| Gaylord Entertainment Co. 6.75% 2014 | 13,600 | 13,073 | |||||
| Dillard’s, Inc. 6.69% 2007 | 1,950 | 1,965 | |||||
| Dillard Department Stores, Inc. 7.15% 2007 | 2,100 | 2,116 | |||||
| Dillard’s, Inc. 6.30% 2008 | 1,382 | 1,389 | |||||
| Dillard’s, Inc. 6.625% 2008 | 10,165 | 10,229 | |||||
| Dillard Department Stores, Inc. 9.125% 2011 | 8,230 | 8,960 | |||||
| Dillard Department Stores, Inc. 7.85% 2012 | 1,900 | 1,971 | |||||
| Dillard’s, Inc. 7.13% 2018 | 3,000 | 2,955 | |||||
| Dillard’s, Inc. 7.00% 2028 | 3,000 | 2,756 | |||||
| Circus and Eldorado Joint Venture and Silver Legacy Resort Casino 10.125% 2012 | 28,180 | 29,765 | |||||
| Liberty Media Corp. 7.75% 2009 | 4,750 | 4,973 | |||||
| Liberty Media Corp. 5.70% 2013 | 16,175 | 15,344 | |||||
| Liberty Media Corp. 8.25% 2030 | 8,550 | 8,577 | |||||
| Seneca Gaming Corp. 7.25% 2012 | 24,275 | 24,396 | |||||
| Seneca Gaming Corp. 7.25% 2012 | 3,440 | 3,457 | |||||
| WCI Communities, Inc. 9.125% 2012 | 12,847 | 11,562 | |||||
| WCI Communities, Inc. 7.875% 2013 | 9,735 | 8,275 | |||||
| WCI Communities, Inc. 6.625% 2015 | 9,925 | 7,965 | |||||
Telenet Communications NV 9.00% 20134 | €8,490 | 12,009 | |||||
Telenet Group Holding NV 0%/11.50% 20141,2 | $ | 17,541 | 15,436 | ||||
| Iesy Repository GmbH 10.125% 2015 | €4,750 | 5,845 | |||||
Iesy Repository GmbH 10.375% 20152 | $ | 22,850 | 21,136 | ||||
| Sealy Mattress Co. 8.25% 2014 | 25,595 | 26,235 | |||||
| Lenfest Communications, Inc. 7.625% 2008 | 6,750 | 6,940 | |||||
Comcast Corp. 5.80% 20093 | 7,500 | 7,518 | |||||
| Comcast Corp. 10.625% 2012 | 2,245 | 2,735 | |||||
| Comcast Corp. 5.90% 2016 | 8,475 | 8,494 | |||||
| J.C. Penney Co., Inc. 8.00% 2010 | 14,995 | 16,141 | |||||
| J.C. Penney Co., Inc. 9.00% 2012 | 2,980 | 3,457 | |||||
| J.C. Penney Co., Inc. 7.625% 2097 | 5,500 | 5,670 | |||||
| Warnaco, Inc. 8.875% 2013 | 24,175 | 25,142 | |||||
| Vidéotron Ltée 6.875% 2014 | 15,540 | 15,385 | |||||
| Vidéotron Ltée 6.375% 2015 | 9,535 | 9,082 | |||||
| Quebecor Media Inc. 7.75% 2016 | 23,700 | 23,848 | |||||
Education Management LLC and Education Management Finance Corp. 10.25% 20162 | 22,260 | 22,872 | |||||
| Visteon Corp. 8.25% 2010 | 23,100 | 22,638 | |||||
| Gray Communications Systems, Inc. 9.25% 2011 | 20,800 | 21,866 | |||||
| Emmis Operating Co. 6.875% 2012 | 21,750 | 21,832 | |||||
| AOL Time Warner Inc. 6.15% 2007 | 20,000 | 20,081 | |||||
DaimlerChrysler North America Holding Corp. 5.82% 20093 | 20,000 | 20,023 | |||||
XM Satellite Radio Holdings Inc. 9.75% 20142 | 20,055 | 19,353 | |||||
| Buffets, Inc. 11.25% 2010 | 17,900 | 19,019 | |||||
| Aztar Corp. 7.875% 2014 | 17,325 | 18,754 | |||||
| Atlantic Broadband Finance, LLC and Atlantic Broadband Finance, Inc. 9.375% 2014 | 17,450 | 17,145 | |||||
| Morris Publishing Group, LLC and Morris Publishing Finance Co., Series B, 7.00% 2013 | 18,025 | 17,124 | |||||
| CSC Holdings, Inc., Series B, 8.125% 2009 | 1,750 | 1,820 | |||||
| Cablevision Systems Corp., Series B, 8.00% 2012 | 14,865 | 15,125 | |||||
| Radio One, Inc., Series B, 8.875% 2011 | 11,100 | 11,391 | |||||
| Radio One, Inc. 6.375% 2013 | 6,050 | 5,536 | |||||
| Reader’s Digest Assn., Inc. 6.50% 2011 | 16,640 | 15,891 | |||||
| PETCO Animal Supplies, Inc. 10.75% 2011 | 14,685 | 15,566 | |||||
Adelphia Communications Corp. 10.25% 20065 | 9,955 | 6,147 | |||||
Adelphia Communications Corp. 10.25% 20115 | 6,850 | 4,470 | |||||
Century Communications Corp. 0% 20035 | 4,565 | 4,542 | |||||
| LBI Media, Inc. 10.125% 2012 | 14,030 | 14,837 | |||||
Regal Cinemas Corp., Series B, 9.375% 20127 | 13,300 | 14,028 | |||||
| MDC Holdings, Inc. 7.00% 2012 | 10,000 | 10,168 | |||||
| MDC Holdings, Inc. 5.50% 2013 | 4,000 | 3,734 | |||||
| KB Home 6.25% 2015 | 14,750 | 13,639 | |||||
| Standard Pacific Corp. 5.125% 2009 | 8,625 | 8,151 | |||||
| Standard Pacific Corp. 6.50% 2010 | 2,000 | 1,890 | |||||
| Standard Pacific Corp. 9.25% 2012 | 1,000 | 970 | |||||
| Standard Pacific Corp. 6.25% 2014 | 3,000 | 2,625 | |||||
| D.R. Horton, Inc. 8.00% 2009 | 10,770 | 11,276 | |||||
| D.R. Horton, Inc. 7.875% 2011 | 1,530 | 1,636 | |||||
WDAC Subsidiary Corp. 8.375% 20142 | 10,500 | 10,605 | |||||
| WDAC Subsidiary Corp. 8.50% 2014 | €1,750 | 2,231 | |||||
| Gamestop Corp. 8.00% 2012 | $ | 11,800 | 12,213 | ||||
| Fisher Communications, Inc. 8.625% 2014 | 10,565 | 11,014 | |||||
| Hilton Hotels Corp. 7.625% 2008 | 4,700 | 4,829 | |||||
| Hilton Hotels Corp. 7.20% 2009 | 5,885 | 6,113 | |||||
| Riddell Bell Holdings Inc. 8.375% 2012 | 10,175 | 10,022 | |||||
| DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. 8.375% 2013 | 9,307 | 9,691 | |||||
Carmike Cinemas, Inc., Term Loan B, 8.64% 20123,4 | 9,225 | 9,317 | |||||
| Entercom Radio, LLC 7.625% 2014 | 7,775 | 7,629 | |||||
| Stoneridge, Inc. 11.50% 2012 | 7,842 | 7,626 | |||||
| Warner Music Group 7.375% 2014 | 7,760 | 7,605 | |||||
| Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007 | 3,875 | 3,919 | |||||
| Starwood Hotels & Resorts Worldwide, Inc. 7.875% 2012 | 2,600 | 2,743 | |||||
| Toll Corp. 8.25% 2011 | 5,500 | 5,651 | |||||
| TRW Automotive Acquisition Corp. 9.375% 2013 | 4,697 | 5,026 | |||||
Viacom Inc. 5.75% 20112 | 4,500 | 4,495 | |||||
| Cooper-Standard Automotive Inc. 8.375% 2014 | 6,000 | 4,440 | |||||
| Payless ShoeSource, Inc. 8.25% 2013 | 4,025 | 4,116 | |||||
| Beazer Homes USA, Inc. 8.375% 2012 | 1,650 | 1,650 | |||||
| Beazer Homes USA, Inc. 6.875% 2015 | 2,225 | 2,025 | |||||
RBS-Zero Editora Jornalística SA 11.00% 20102 | 3,410 | 3,666 | |||||
Mediacom Broadband Corp. 8.50% 20152 | 3,525 | 3,521 | |||||
| News America Inc. 6.75% 2038 | 2,990 | 3,108 | |||||
Dura Operating Corp., Second Lien Term Loan, 9.109% 20113,4 | 2,000 | 1,750 | |||||
Key Plastics Holdings, Inc., Series B, 10.25% 20075,7 | 9,650 | — | |||||
2,607,137 | |||||||
TELECOMMUNICATION SERVICES — 12.13% | |||||||
| Triton PCS, Inc. 8.75% 2011 | 46,050 | 34,653 | |||||
| Triton PCS, Inc. 9.375% 2011 | 60,855 | 45,793 | |||||
| Triton PCS, Inc. 8.50% 2013 | 113,840 | 106,156 | |||||
Windstream Corp. 8.125% 20132 | 25,300 | 26,976 | |||||
| Valor Telecommunications Enterprises, LLC and Valor Telecommunications Enterprises Finance Corp. 7.75% 2015 | 44,450 | 47,562 | |||||
Windstream Corp. 8.625% 20162 | 90,575 | 97,368 | |||||
Dobson Cellular Systems, Inc. 8.375% 20112 | 32,840 | 34,277 | |||||
| American Cellular Corp., Series B, 10.00% 2011 | 52,725 | 55,493 | |||||
Dobson Communications Corp. 9.757% 20123 | 19,850 | 20,346 | |||||
| Dobson Cellular Systems, Inc. 9.875% 2012 | 20,375 | 21,954 | |||||
| Dobson Communications Corp. 8.875% 2013 | 37,250 | 37,110 | |||||
| Intelsat, Ltd. 7.625% 2012 | 3,500 | 3,080 | |||||
Intelsat (Bermuda), Ltd. 10.484% 20123 | 28,150 | 28,678 | |||||
| Intelsat, Ltd. 6.50% 2013 | 9,000 | 7,223 | |||||
| Intelsat (Bermuda), Ltd. 8.25% 2013 | 36,930 | 37,576 | |||||
| Intelsat (Bermuda), Ltd. 8.625% 2015 | 13,350 | 13,717 | |||||
Intelsat PanAmSat Opco 9.00% 20162 | 13,075 | 13,533 | |||||
Intelsat (Bermuda), Ltd. 9.25% 20162 | 27,200 | 28,730 | |||||
Intelsat (Bermuda), Ltd. 11.25% 20162 | 5,550 | 5,925 | |||||
| Qwest Capital Funding, Inc. 7.00% 2009 | 20,500 | 20,705 | |||||
| Qwest Capital Funding, Inc. 7.90% 2010 | 16,835 | 17,382 | |||||
| Qwest Communications International Inc. 7.25% 2011 | 39,575 | 39,773 | |||||
| Qwest Capital Funding, Inc. 7.25% 2011 | 29,830 | 29,979 | |||||
| Qwest Corp. 8.875% 2012 | 3,600 | 3,946 | |||||
| Qwest Communications International Inc., Series B, 7.50% 2014 | 6,000 | 6,045 | |||||
| U S WEST Capital Funding, Inc. 6.50% 2018 | 2,000 | 1,820 | |||||
| Qwest Capital Funding, Inc. 7.625% 2021 | 2,000 | 1,947 | |||||
| U S WEST Capital Funding, Inc. 6.875% 2028 | 13,064 | 11,758 | |||||
| Qwest Capital Funding, Inc. 7.75% 2031 | 3,655 | 3,545 | |||||
| Alamosa (Delaware), Inc. 8.50% 2012 | 1,925 | 2,060 | |||||
| Nextel Communications, Inc., Series E, 6.875% 2013 | 14,500 | 14,776 | |||||
| Nextel Communications, Inc., Series D, 7.375% 2015 | 85,378 | 88,177 | |||||
| Centennial Communications Corp. and Centennial Cellular Operating Co. LLC 10.125% 2013 | 34,505 | 36,834 | |||||
Centennial Communications Corp. 11.258% 20133 | 39,750 | 41,241 | |||||
| Centennial Communications Corp. and Centennial Cellular Operating Co. LLC and | |||||||
Centennial Puerto Rico Operations Corp. 8.125% 20143 | 24,175 | 23,933 | |||||
| American Tower Corp. 7.25% 2011 | 8,925 | 9,237 | |||||
| American Tower Corp. 7.125% 2012 | 64,360 | 66,291 | |||||
| American Tower Corp. 7.50% 2012 | 18,300 | 18,895 | |||||
| Hawaiian Telcom Communications, Inc. 9.75% 2013 | 23,340 | 24,099 | |||||
Hawaiian Telcom Communications, Inc. 10.789% 20133 | 19,715 | 20,257 | |||||
| Hawaiian Telcom Communications, Inc., Series B, 12.50% 2015 | 8,725 | 9,205 | |||||
| Rural Cellular Corp. 8.25% 2012 | 11,850 | 12,265 | |||||
Rural Cellular Corp. 11.239% 20123 | 28,900 | 29,948 | |||||
MetroPCS, Inc., Second Lien Loan, 12.938% 20073,4 | 26,850 | 28,058 | |||||
MetroPCS, Inc., First Lien Loan, 10.188% 20113,4 | 11,575 | 11,778 | |||||
| Cincinnati Bell Inc. 7.25% 2013 | 38,425 | 39,482 | |||||
| Rogers Wireless Inc. 7.25% 2012 | 11,725 | 12,326 | |||||
| Rogers Wireless Inc. 7.50% 2015 | 17,950 | 19,251 | |||||
| Rogers Cantel Inc. 9.75% 2016 | 1,625 | 2,047 | |||||
NTELOS Inc., Term Loan B, 7.58% 20113,4 | 21,392 | 21,418 | |||||
| Millicom International Cellular SA 10.00% 2013 | 16,550 | 17,853 | |||||
Nordic Telephone Co. Holding ApS 8.875% 20162 | 7,900 | 8,344 | |||||
| Level 3 Financing, Inc. 12.25% 2013 | 5,600 | 6,272 | |||||
AT&T Corp. 7.30% 20113 | 4,341 | 4,710 | |||||
| iPCS, Inc. 11.50% 2012 | 1,500 | 1,687 | |||||
1,373,494 | |||||||
INDUSTRIALS — 11.05% | |||||||
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.487% 20124 | 5,000 | 5,228 | |||||
Continental Airlines, Inc., Series 2000-2, Class C, 8.312% 20124 | 3,883 | 3,824 | |||||
Continental Airlines, Inc., Series 2001-1, Class B, 7.373% 20174 | 6,914 | 6,849 | |||||
Continental Airlines, Inc., Series 1998-1, Class B, 6.748% 20184 | 15,320 | 14,947 | |||||
Continental Airlines, Inc., Series 1997-4B, Class B, 6.90% 20184 | 14,562 | 13,973 | |||||
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 20194 | 5,924 | 6,102 | |||||
Continental Airlines, Inc., Series 2000-2, Class B, 8.307% 20194 | 5,597 | 5,597 | |||||
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 20204 | 9,817 | 9,993 | |||||
Continental Airlines, Inc., Series 2003-ERJ1, Class A, 7.875% 20204 | 31,092 | 30,723 | |||||
Continental Airlines, Inc., Series 2001-1, Class A-1, 6.703% 20224 | 3,734 | 3,737 | |||||
Continental Airlines, Inc., Series 2000-2, Class A-1, 7.707% 20224 | 3,060 | 3,272 | |||||
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 20224 | 5,059 | 5,391 | |||||
Continental Airlines, Inc., Series 2000-1, Class B, 8.388% 20224 | 11,786 | 11,498 | |||||
United Air Lines, Inc., Series 2001-1, Class A-2, 6.201% 20104 | 2,383 | 2,384 | |||||
United Air Lines, Inc., Series 2000-2, Class B, 7.811% 20114 | 17,433 | 18,664 | |||||
UAL Corp., Term Loan B, 9.08% 20123,4 | 67,045 | 67,548 | |||||
United Air Lines, Inc., Series 2001-1, Class A-1, 6.071% 20144 | 8,093 | 8,089 | |||||
United Air Lines, Inc., Series 2001-1, Class A-3, 6.602% 20154 | 7,988 | 8,013 | |||||
United Air Lines, Inc., 1991 Equipment Trust Certificates, Series A, 10.11% 20064,5 | 1,213 | 667 | |||||
| AMR Corp., Series B, 10.45% 2011 | 1,850 | 1,776 | |||||
American Airlines, Inc., Series 2001-1, Class A-2, 6.817% 20124 | 17,375 | 17,104 | |||||
| American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012 | 5,190 | 5,381 | |||||
| AMR Corp. 9.00% 2012 | 16,155 | 16,317 | |||||
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 20134 | 19,994 | 21,506 | |||||
| AMR Corp. 9.00% 2016 | 1,475 | 1,460 | |||||
American Airlines, Inc., Series 2001-1, Class B, 7.377% 20194 | 25,120 | 23,158 | |||||
| AMR Corp. 9.88% 2020 | 1,275 | 1,221 | |||||
| AMR Corp. 9.80% 2021 | 2,555 | 2,472 | |||||
| AMR Corp. 10.00% 2021 | 9,000 | 8,730 | |||||
| Allied Waste North America, Inc. 8.50% 2008 | 16,500 | 17,366 | |||||
| Allied Waste North America, Inc., Series B, 6.50% 2010 | 14,500 | 14,355 | |||||
| Allied Waste North America, Inc., Series B, 5.75% 2011 | 24,380 | 23,496 | |||||
| Allied Waste North America, Inc., Series B, 6.375% 2011 | 5,000 | 4,900 | |||||
| Allied Waste North America, Inc., Series B, 6.125% 2014 | 10,000 | 9,375 | |||||
| Allied Waste North America, Inc., Series B, 7.375% 2014 | 22,830 | 22,602 | |||||
NTK Holdings Inc. 0%/10.75% 20141 | 52,460 | 36,460 | |||||
| THL Buildco, Inc. 8.50% 2014 | 41,445 | 39,373 | |||||
Nielsen Finance LLC, Term Loan B, 8.195% 20133,4 | 12,500 | 12,500 | |||||
Nielsen Finance LLC and Nielsen Finance Co. 10.00% 20142 | 43,750 | 45,445 | |||||
Nielsen Finance LLC and Nielsen Finance Co. 0%/12.50% 20161,2 | 29,400 | 17,383 | |||||
| DRS Technologies, Inc. 6.875% 2013 | 36,855 | 36,579 | |||||
| DRS Technologies, Inc. 6.625% 2016 | 8,900 | 8,789 | |||||
| DRS Technologies, Inc. 7.625% 2018 | 22,050 | 22,491 | |||||
| Goodman Global Holdings, Inc., Series B, 7.875% 2012 | 44,980 | 43,068 | |||||
Goodman Global Holdings, Inc., Series B, 8.329% 20123 | 10,270 | 10,437 | |||||
| Accuride Corp. 8.50% 2015 | 46,015 | 43,024 | |||||
| DynCorp International and DIV Capital Corp., Series A, 9.50% 2013 | 41,290 | 42,942 | |||||
| Horizon Lines, LLC and Horizon Lines Holding Corp. 9.00% 2012 | 28,948 | 29,961 | |||||
H-Lines Finance Holding Corp. 0%/11.00% 20131 | 12,540 | 11,098 | |||||
Ashtead Group PLC 8.625% 20152 | 19,525 | 19,916 | |||||
Ashtead Capital, Inc. 9.00% 20162 | 15,150 | 15,832 | |||||
| Standard Aero Holdings, Inc. 8.25% 2014 | 30,445 | 29,532 | |||||
RBS Global, Inc. and Rexnord Corp. 9.50% 20142 | 20,625 | 21,038 | |||||
RBS Global, Inc. and Rexnord Corp. 11.75% 20162 | 7,750 | 8,021 | |||||
| TFM, SA de CV 10.25% 2007 | 2,295 | 2,358 | |||||
| TFM, SA de CV 9.375% 2012 | 22,500 | 23,963 | |||||
| TFM, SA de CV 12.50% 2012 | 2,310 | 2,553 | |||||
| K&F Industries, Inc. 7.75% 2014 | 27,635 | 27,842 | |||||
| Argo-Tech Corp. 9.25% 2011 | 25,955 | 27,123 | |||||
Northwest Airlines, Inc. 8.70% 20075 | 5,000 | 2,788 | |||||
Northwest Airlines, Inc. 9.875% 20075 | 9,500 | 5,332 | |||||
Northwest Airlines, Inc. 7.875% 20085 | 15,900 | 8,825 | |||||
Northwest Airlines, Inc. 10.00% 20095 | 7,300 | 3,960 | |||||
Northwest Airlines, Inc. 8.875% 20065 | 8,315 | 4,552 | |||||
| United Rentals (North America), Inc., Series B, 6.50% 2012 | 16,675 | 16,175 | |||||
| United Rentals (North America), Inc. 7.75% 2013 | 8,625 | 8,539 | |||||
ACIH, Inc. 0%/11.50% 20121,2 | 36,685 | 24,579 | |||||
Quebecor World Inc. 8.75% 20162 | 22,340 | 21,614 | |||||
| Jacuzzi Brands, Inc. 9.625% 2010 | 18,900 | 20,128 | |||||
| Williams Scotsman, Inc. 8.50% 2015 | 15,775 | 16,209 | |||||
| Terex Corp. 9.25% 2011 | 5,200 | 5,505 | |||||
| Terex Corp. 7.375% 2014 | 9,075 | 9,166 | |||||
CCMG Acquisition Corp. 8.875% 20142 | 3,175 | 3,342 | |||||
CCMG Acquisition Corp. 10.50% 20162 | 8,600 | 9,503 | |||||
Delta Air Lines, Inc. 8.00% 20072,5 | 15,525 | 4,386 | |||||
Delta Air Lines, Inc. 7.90% 20095 | 5,000 | 1,450 | |||||
Delta Air Lines, Inc. 10.125% 20105 | 1,650 | 474 | |||||
Delta Air Lines, Inc., Series 2001-1, Class A-1, 6.619% 20114 | 2,166 | 2,165 | |||||
| Delta Air Lines, Inc., Series 2000-1, Class B, 7.92% 2012 | 2,500 | 2,414 | |||||
Delta Air Lines, Inc. 9.75% 20215 | 2,200 | 632 | |||||
Delta Air Lines, Inc. 10.375% 20225 | 3,000 | 862 | |||||
| Kansas City Southern Railway Co. 9.50% 2008 | 3,150 | 3,292 | |||||
| Kansas City Southern Railway Co. 7.50% 2009 | 8,817 | 8,861 | |||||
| American Standard Inc. 8.25% 2009 | 5,190 | 5,529 | |||||
| American Standard Inc. 7.625% 2010 | 4,300 | 4,541 | |||||
TransDigm Inc. 7.75% 20142 | 9,785 | 9,907 | |||||
Gol Finance 8.75% (undated)2 | 9,900 | 9,652 | |||||
H&E Equipment Services, Inc. 8.375% 20162 | 8,650 | 8,909 | |||||
Mobile Storage Group, Inc. 9.75% 20142 | 7,200 | 7,416 | |||||
Bombardier Inc. 6.75% 20122 | 6,600 | 6,319 | |||||
| UCAR Finance Inc. 10.25% 2012 | 5,551 | 5,856 | |||||
| Cummins Inc. 9.50% 2010 | 5,550 | 5,840 | |||||
| Park-Ohio Industries, Inc. 8.375% 2014 | 6,225 | 5,696 | |||||
| AGCO Corp. 6.875% 2014 | €1,500 | 1,941 | |||||
1,251,805 | |||||||
MATERIALS — 9.19% | |||||||
| JSG Funding PLC 9.625% 2012 | $ | 7,267 | 7,703 | ||||
| JSG Funding PLC 7.75% 2015 | €12,250 | 15,074 | |||||
| JSG Funding PLC 7.75% 2015 | $ | 7,000 | 6,650 | ||||
JSG Holdings PLC 11.50% 20156 | €41,591 | 53,912 | |||||
| Smurfit Capital Funding PLC 7.50% 2025 | $ | 4,250 | 3,995 | ||||
Georgia-Pacific Corp., First Lien Term Loan B, 7.39% 20123,4 | 32,016 | 32,076 | |||||
Georgia-Pacific Corp., Second Lien Term Loan C, 8.39% 20133,4 | 49,475 | 50,032 | |||||
| Lyondell Chemical Co. 9.50% 2008 | 5,885 | 6,084 | |||||
| Equistar Chemicals, LP 10.125% 2008 | 15,650 | 16,648 | |||||
| Equistar Chemicals, LP and Equistar Funding Corp. 8.75% 2009 | 10,265 | 10,676 | |||||
| Equistar Chemicals, LP and Equistar Funding Corp. 10.625% 2011 | 23,025 | 24,809 | |||||
| Lyondell Chemical Co. 8.25% 2016 | 10,150 | 10,353 | |||||
| Stone Container Corp. 9.75% 2011 | 5,220 | 5,403 | |||||
| Jefferson Smurfit Corp. (U.S.) 8.25% 2012 | 33,010 | 31,772 | |||||
| Stone Container Corp. 8.375% 2012 | 8,515 | 8,217 | |||||
| Jefferson Smurfit Corp. (U.S.) 7.50% 2013 | 24,030 | 22,288 | |||||
| Abitibi-Consolidated Co. of Canada 5.25% 2008 | 6,250 | 6,031 | |||||
| Abitibi-Consolidated Finance LP 7.875% 2009 | 7,415 | 7,378 | |||||
| Abitibi-Consolidated Inc. 8.55% 2010 | 5,775 | 5,761 | |||||
Abitibi-Consolidated Co. of Canada 8.89% 20113 | 20,500 | 20,193 | |||||
| Abitibi-Consolidated Co. of Canada 6.00% 2013 | 1,000 | 817 | |||||
| Abitibi-Consolidated Co. of Canada 8.375% 2015 | 29,000 | 26,535 | |||||
| Associated Materials Inc. 9.75% 2012 | 22,960 | 23,017 | |||||
AMH Holdings, Inc. 0%/11.25% 20141 | 66,375 | 36,838 | |||||
| Owens-Illinois, Inc. 8.10% 2007 | 250 | 254 | |||||
| Owens-Illinois, Inc. 7.35% 2008 | 2,440 | 2,470 | |||||
| Owens-Brockway Glass Container Inc. 8.875% 2009 | 8,988 | 9,280 | |||||
| Owens-Illinois, Inc. 7.50% 2010 | 2,000 | 2,010 | |||||
| Owens-Brockway Glass Container Inc. 7.75% 2011 | 15,985 | 16,505 | |||||
| Owens-Brockway Glass Container Inc. 8.75% 2012 | 22,225 | 23,558 | |||||
| Owens-Brockway Glass Container Inc. 8.25% 2013 | 4,150 | 4,274 | |||||
| Owens-Brockway Glass Container Inc. 6.75% 2014 | €375 | 464 | |||||
| Building Materials Corp. of America, Series B, 8.00% 2007 | $ | 6,925 | 6,908 | ||||
| Building Materials Corp. of America 8.00% 2008 | 15,370 | 15,312 | |||||
| Building Materials Corp. of America 7.75% 2014 | 39,235 | 35,017 | |||||
Georgia Gulf Corp. 9.50% 20142 | 40,800 | 40,647 | |||||
Georgia Gulf Corp. 10.75% 20162 | 15,975 | 15,735 | |||||
| Graphic Packaging International, Inc. 8.50% 2011 | 32,565 | 33,461 | |||||
| Graphic Packaging International, Inc. 9.50% 2013 | 16,925 | 17,390 | |||||
Boise Cascade, LLC and Boise Cascade Finance Corp. 8.382% 20123 | 4,300 | 4,343 | |||||
| Boise Cascade, LLC and Boise Cascade Finance Corp. 7.125% 2014 | 42,130 | 39,497 | |||||
| Nalco Co. 7.75% 2011 | 21,150 | 21,679 | |||||
| Nalco Co. 8.875% 2013 | 12,100 | 12,675 | |||||
Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. 0%/9.00% 20141 | 6,300 | 4,977 | |||||
| AEP Industries Inc. 7.875% 2013 | 24,150 | 24,271 | |||||
| United States Steel Corp. 10.75% 2008 | 1,000 | 1,086 | |||||
| United States Steel Corp. 9.75% 2010 | 20,923 | 22,440 | |||||
| Rhodia 10.25% 2010 | 9,507 | 10,695 | |||||
| Rhodia 8.875% 2011 | 392 | 407 | |||||
| Rhodia SA 9.25% 2011 | €8,590 | 11,728 | |||||
FMG Finance Pty Ltd. 10.625% 20162 | $ | 22,950 | 22,147 | ||||
| Earle M. Jorgensen Co. 9.75% 2012 | 17,840 | 19,111 | |||||
| Domtar Inc. 7.125% 2015 | 13,135 | 12,281 | |||||
| Domtar Inc. 9.50% 2016 | 6,350 | 6,652 | |||||
Plastipak Holdings, Inc. 8.50% 20152 | 17,990 | 18,260 | |||||
Crystal US Holdings 3 LLC and Crystal US Sub 3 Corp., Series B, 0%/10.50% 20141 | 12,722 | 10,384 | |||||
| BCP Caylux Holdings Luxembourg SCA 9.625% 2014 | 7,075 | 7,712 | |||||
| Ainsworth Lumber Co. Ltd. 7.25% 2012 | 5,350 | 3,986 | |||||
| Ainsworth Lumber Co. Ltd. 6.75% 2014 | 13,730 | 9,680 | |||||
| Ainsworth Lumber Co. Ltd. 6.75% 2014 | 5,550 | 3,913 | |||||
| Chemtura Corp. 6.875% 2016 | 16,825 | 16,678 | |||||
| Rockwood Specialties Group, Inc. 10.625% 2011 | 511 | 549 | |||||
| Rockwood Specialties Group, Inc. 7.50% 2014 | 3,700 | 3,663 | |||||
| Rockwood Specialties Group, Inc. 7.625% 2014 | €7,200 | 9,499 | |||||
| Neenah Paper, Inc. 7.375% 2014 | $ | 14,325 | 13,501 | ||||
Covalence Specialty Materials Corp. 10.25% 20162 | 11,525 | 11,237 | |||||
| Steel Dynamics, Inc. 9.50% 2009 | 9,800 | 10,155 | |||||
| Graham Packaging Co., LP and GPC Capital Corp. 9.875% 2014 | 9,000 | 8,887 | |||||
| Gerdau Ameristeel Corp. and GUSAP Partners 10.375% 2011 | 7,075 | 7,659 | |||||
| Freeport-McMoRan Copper & Gold Inc. 6.875% 2014 | 6,640 | 6,590 | |||||
| Allegheny Technologies, Inc. 8.375% 2011 | 5,000 | 5,287 | |||||
Exopack Holding Corp. 11.25% 20142 | 4,050 | 4,172 | |||||
| Ispat Inland ULC 9.75% 2014 | 3,233 | 3,646 | |||||
| Huntsman LLC 11.50% 2012 | 500 | 571 | |||||
| Huntsman International LLC 7.50% 2015 | €2,250 | 3,072 | |||||
| Norampac Inc. 6.75% 2013 | $ | 3,500 | 3,325 | ||||
| Airgas, Inc. 6.25% 2014 | 3,500 | 3,281 | |||||
Novelis Inc. 7.25% 20152 | 2,750 | 2,626 | |||||
| AK Steel Corp. 7.75% 2012 | 2,650 | 2,594 | |||||
1,040,463 | |||||||
ENERGY — 5.92% | |||||||
Williams Companies, Inc. and Credit Linked Certificate Trust 6.75% 20092 | 2,000 | 2,020 | |||||
Williams Companies, Inc. 6.375% 20102 | 6,000 | 6,000 | |||||
Williams Companies, Inc. 7.508% 20102,3 | 8,000 | 8,180 | |||||
| Transcontinental Gas Pipe Line Corp., Series B, 7.00% 2011 | 2,125 | 2,189 | |||||
| Williams Companies, Inc. 7.125% 2011 | 1,900 | 1,957 | |||||
Williams Partners LP 7.50% 20112 | 16,525 | 16,649 | |||||
| Williams Companies, Inc. 8.125% 2012 | 22,150 | 23,756 | |||||
Transcontinental Gas Pipe Line Corp. 6.40% 20162 | 3,150 | 3,130 | |||||
Northwest Pipeline Corp. 7.00% 20162 | 5,000 | 5,138 | |||||
| Williams Companies, Inc. 7.875% 2021 | 5,000 | 5,250 | |||||
| Transcontinental Gas Pipe Line Corp. 7.25% 2026 | 11,535 | 11,809 | |||||
| Williams Companies, Inc. 8.75% 2032 | 39,370 | 43,307 | |||||
| El Paso Corp. 7.625% 2007 | 2,000 | 2,035 | |||||
| El Paso Corp. 6.375% 2009 | 5,995 | 6,010 | |||||
| El Paso Corp. 7.75% 2010 | 16,975 | 17,654 | |||||
| Sonat Inc. 7.625% 2011 | 23,325 | 24,025 | |||||
El Paso Credit Linked Trust 7.75% 20112 | 8,800 | 9,086 | |||||
| El Paso Energy Corp. 7.375% 2012 | 9,670 | 9,875 | |||||
| El Paso Corp. 7.875% 2012 | 1,625 | 1,694 | |||||
| El Paso Corp. 9.625% 2012 | 8,500 | 9,456 | |||||
| El Paso Natural Gas Co. 7.50% 2026 | 575 | 604 | |||||
| Tennessee Gas Pipeline Co. 7.00% 2028 | 4,000 | 4,004 | |||||
| Southern Natural Gas Co. 7.35% 2031 | 3,525 | 3,670 | |||||
| Southern Natural Gas Co. 8.00% 2032 | 1,950 | 2,166 | |||||
Pogo Producing Co. 7.875% 20132 | 31,450 | 32,197 | |||||
| Pogo Producing Co. 6.625% 2015 | 1,725 | 1,656 | |||||
| Pogo Producing Co. 6.875% 2017 | 41,700 | 39,980 | |||||
| Premcor Refining Group Inc. 9.25% 2010 | 12,675 | 13,409 | |||||
| Premcor Refining Group Inc. 6.75% 2011 | 8,475 | 8,857 | |||||
| Premcor Refining Group Inc. 9.50% 2013 | 10,425 | 11,363 | |||||
| Premcor Refining Group Inc. 6.75% 2014 | 5,000 | 5,142 | |||||
| Premcor Refining Group Inc. 7.50% 2015 | 29,775 | 31,142 | |||||
| Newfield Exploration Co., Series B, 7.45% 2007 | 1,750 | 1,778 | |||||
| Newfield Exploration Co. 7.625% 2011 | 3,500 | 3,627 | |||||
| Newfield Exploration Co. 6.625% 2014 | 14,575 | 14,338 | |||||
| Newfield Exploration Co. 6.625% 2016 | 36,075 | 35,263 | |||||
Drummond Co., Inc. 7.375% 20162 | 46,205 | 43,664 | |||||
| Teekay Shipping Corp. 8.875% 2011 | 30,092 | 31,898 | |||||
| Ultrapetrol Ltd., First Preferred Ship Mortgage Notes, 9.00% 2014 | 27,955 | 25,858 | |||||
| Encore Acquisition Co. 6.00% 2015 | 23,800 | 21,896 | |||||
International Coal Group, Inc. 10.25% 20142 | 21,750 | 20,771 | |||||
| American Commercial Lines LLC and ACL Finance Corp. 9.50% 2015 | 18,367 | 20,112 | |||||
Enterprise Products Operating LP 8.375% 20663 | 16,000 | 16,870 | |||||
| Overseas Shipholding Group, Inc. 8.25% 2013 | 6,010 | 6,250 | |||||
| Overseas Shipholding Group, Inc. 8.75% 2013 | 4,555 | 4,897 | |||||
| Peabody Energy Corp., Series B, 6.875% 2013 | 7,000 | 6,930 | |||||
| Peabody Energy Corp. 5.875% 2016 | 4,000 | 3,690 | |||||
| Massey Energy Co. 6.625% 2010 | 3,000 | 2,940 | |||||
| Massey Energy Co. 6.875% 2013 | 7,925 | 7,212 | |||||
Targa Resources, Inc. and Targa Resources Finance Corp. 8.50% 20132 | 10,060 | 10,085 | |||||
| OMI Corp. 7.625% 2013 | 9,500 | 9,643 | |||||
| Whiting Petroleum Corp. 7.25% 2013 | 8,850 | 8,717 | |||||
| Compton Petroleum Finance Corp. 7.625% 2013 | 7,150 | 6,936 | |||||
| Pemex Project Funding Master Trust 7.875% 2009 | 1,400 | 1,469 | |||||
| Pemex Project Funding Master Trust 8.625% 2022 | 1,170 | 1,408 | |||||
Petrozuata Finance, Inc., Series B, 8.22% 20172,4 | 300 | 294 | |||||
669,956 | |||||||
FINANCIALS — 5.07% | |||||||
| General Motors Acceptance Corp. 6.125% 2007 | 17,500 | 17,478 | |||||
| General Motors Acceptance Corp. 6.125% 2007 | 5,000 | 4,994 | |||||
| General Motors Acceptance Corp. 6.15% 2007 | 14,035 | 14,021 | |||||
General Motors Acceptance Corp. 6.243% 20073 | 3,000 | 2,990 | |||||
| General Motors Acceptance Corp. 6.875% 2011 | 4,450 | 4,431 | |||||
| General Motors Acceptance Corp. 7.25% 2011 | 45,460 | 45,762 | |||||
| General Motors Acceptance Corp. 6.875% 2012 | 14,225 | 14,097 | |||||
| General Motors Acceptance Corp. 7.00% 2012 | 31,535 | 31,466 | |||||
| General Motors Acceptance Corp. 6.75% 2014 | 19,000 | 18,577 | |||||
General Motors Acceptance Corp. 7.60% 20143 | 15,000 | 15,065 | |||||
| Ford Motor Credit Co. 7.20% 2007 | 30,825 | 30,812 | |||||
| Ford Motor Credit Co. 7.875% 2010 | 5,000 | 4,873 | |||||
Ford Motor Credit Co. 9.75% 20102 | 44,000 | 45,466 | |||||
| Ford Motor Credit Co. 7.25% 2011 | 750 | 708 | |||||
| Ford Motor Credit Co. 9.875% 2011 | 5,000 | 5,179 | |||||
| E*TRADE Financial Corp. 8.00% 2011 | 4,000 | 4,160 | |||||
| E*TRADE Financial Corp. 7.375% 2013 | 2,250 | 2,312 | |||||
| E*TRADE Financial Corp. 7.875% 2015 | 36,420 | 38,514 | |||||
| Host Marriott, LP, Series G, 9.25% 2007 | 1,725 | 1,788 | |||||
| Host Marriott, LP, Series I, 9.50% 2007 | 2,050 | 2,078 | |||||
| Host Marriott, LP, Series M, 7.00% 2012 | 23,900 | 24,288 | |||||
| Host Marriott, LP, Series K, 7.125% 2013 | 14,375 | 14,627 | |||||
| Host Marriott, LP, Series O, 6.375% 2015 | 1,025 | 999 | |||||
Providian Financial Corp., Series A, 9.525% 20272 | 15,000 | 15,852 | |||||
Washington Mutual Preferred Funding I Ltd. 6.534% (undated)2,3 | 25,000 | 24,647 | |||||
| Rouse Co. 3.625% 2009 | 12,415 | 11,783 | |||||
| Rouse Co. 7.20% 2012 | 12,370 | 12,713 | |||||
| Rouse Co. 5.375% 2013 | 3,715 | 3,453 | |||||
Rouse Co. 6.75% 20132 | 5,925 | 5,951 | |||||
Kazkommerts International BV 8.50% 20132 | 3,500 | 3,701 | |||||
| Kazkommerts International BV 8.50% 2013 | 1,500 | 1,586 | |||||
Kazkommerts International BV 7.875% 20142 | 10,000 | 10,200 | |||||
Kazkommerts International BV 8.00% 20152 | 6,000 | 6,090 | |||||
| TuranAlem Finance BV 7.875% 2010 | 10,000 | 10,212 | |||||
TuranAlem Finance BV 7.75% 20132 | 8,500 | 8,474 | |||||
TuranAlem Finance BV 8.50% 20152 | 2,280 | 2,324 | |||||
| MBNA Corp. 5.625% 2007 | 10,000 | 10,036 | |||||
| MBNA Capital A, Series A, 8.278% 2026 | 7,500 | 7,835 | |||||
| Lazard Group LLC 7.125% 2015 | 14,785 | 15,430 | |||||
FelCor Lodging LP 8.50% 20113 | 11,505 | 12,238 | |||||
| Advanta Capital Trust I, Series B, 8.99% 2026 | 12,000 | 12,210 | |||||
ILFC E-Capital Trust II 6.25% 20652,3 | 8,000 | 8,011 | |||||
| Mizuho Capital Investment (USD) 1 Ltd. and Mizuho Capital Investment (EUR) 1 Ltd. 6.686% | |||||||
noncumulative preferred (undated)2,3 | 7,150 | 7,224 | |||||
| iStar Financial, Inc. 7.00% 2008 | 2,375 | 2,434 | |||||
| iStar Financial, Inc., Series B, 4.875% 2009 | 2,000 | 1,975 | |||||
| iStar Financial, Inc. 6.00% 2010 | 2,250 | 2,290 | |||||
| LaBranche & Co Inc. 11.00% 2012 | 6,000 | 6,450 | |||||
UnumProvident Finance Co. PLC 6.85% 20152 | 6,250 | 6,425 | |||||
| Chevy Chase Bank, FSB 6.875% 2013 | 5,500 | 5,528 | |||||
| Sovereign Capital Trust I 9.00% 2027 | 5,000 | 5,264 | |||||
| BankUnited Capital Trust, BankUnited Financial Corp. 10.25% 2026 | 4,500 | 4,748 | |||||
| Crescent Real Estate LP 7.50% 2007 | 3,500 | 3,544 | |||||
Korea First Bank 7.267% 20342,3 | 870 | 938 | |||||
574,251 | |||||||
UTILITIES — 4.86% | |||||||
| Mission Energy Holding Co. 13.50% 2008 | 38,350 | 43,000 | |||||
| Edison Mission Energy 7.73% 2009 | 35,250 | 36,396 | |||||
Edison Mission Energy 7.50% 20132 | 45,375 | 46,056 | |||||
Edison Mission Energy 7.75% 20162 | 19,725 | 20,070 | |||||
Midwest Generation, LLC, Series B, 8.56% 20164 | 25,378 | 26,980 | |||||
Homer City Funding LLC 8.734% 20264 | 9,342 | 10,393 | |||||
| Midwest Generation, LLC and Midwest Finance Corp. 8.75% 2034 | 16,500 | 17,696 | |||||
| AES Corp. 9.50% 2009 | 26,032 | 27,919 | |||||
| AES Corp. 9.375% 2010 | 13,644 | 14,804 | |||||
| AES Corp. 8.875% 2011 | 8,475 | 9,111 | |||||
AES Corp. 8.75% 20132 | 43,985 | 47,394 | |||||
| AES Gener SA 7.50% 2014 | 18,350 | 19,089 | |||||
AES Corp. 9.00% 20152 | 15,150 | 16,400 | |||||
AES Red Oak, LLC, Series A, 8.54% 20194 | 4,486 | 4,800 | |||||
AES Red Oak, LLC, Series B, 9.20% 20294 | 5,000 | 5,550 | |||||
| NRG Energy, Inc. 7.25% 2014 | 31,750 | 31,591 | |||||
| NRG Energy, Inc. 7.375% 2016 | 29,700 | 29,589 | |||||
| Nevada Power Co., General and Refunding Mortgage Bonds, Series A, 8.25% 2011 | 4,700 | 5,198 | |||||
| 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 | 2,745 | |||||
| Nevada Power Co., General and Refunding Mortgage Notes, Series G, 9.00% 2013 | 19,217 | 21,064 | |||||
| Sierra Pacific Resources 8.625% 2014 | 12,000 | 13,017 | |||||
| Nevada Power Co., General and Refunding Mortgage Notes, Series L, 5.875% 2015 | 2,475 | 2,476 | |||||
Nevada Power Co., Series M, 5.95% 20162 | 1,600 | 1,606 | |||||
| Sierra Pacific Resources 6.75% 2017 | 2,000 | 2,011 | |||||
| Mirant Americas Generation, Inc. 8.30% 2011 | 5,500 | 5,534 | |||||
| Mirant Americas Generation, Inc. 9.125% 2031 | 20,000 | 20,450 | |||||
| Enersis SA 7.375% 2014 | 16,800 | 17,887 | |||||
| PSEG Energy Holdings Inc. 8.625% 2008 | 15,999 | 16,679 | |||||
Calpine Generating Co., LLC and CalGen Finance Corp. 11.08% 20103,4 | 12,000 | 12,690 | |||||
FPL Energy National Wind Portfolio, LLC 6.125% 20192,4 | 4,423 | 4,311 | |||||
FPL Energy American Wind, LLC 6.639% 20232,4 | 7,104 | 7,349 | |||||
Electricidad de Caracas Finance BV 10.25% 20142 | 7,480 | 7,873 | |||||
550,800 | |||||||
CONSUMER STAPLES — 4.44% | |||||||
SUPERVALU INC., Term Loan B, 7.188% 20123,4 | 17,300 | 17,322 | |||||
| SUPERVALU INC. 7.50% 2012 | 11,500 | 11,718 | |||||
| Albertson’s, Inc. 7.45% 2029 | 16,695 | 15,547 | |||||
| Albertson’s, Inc. 8.00% 2031 | 16,055 | 15,688 | |||||
Stater Bros. Holdings Inc. 8.89% 20103 | 8,450 | 8,577 | |||||
| Stater Bros. Holdings Inc. 8.125% 2012 | 37,005 | 37,375 | |||||
| Jean Coutu Group (PJC) Inc. 7.625% 2012 | 1,425 | 1,505 | |||||
| Jean Coutu Group (PJC) Inc. 8.50% 2014 | 40,750 | 39,426 | |||||
Rite Aid Corp. 6.125% 20082 | 7,950 | 7,821 | |||||
| Rite Aid Corp. 8.125% 2010 | 1,000 | 1,007 | |||||
| Rite Aid Corp. 9.50% 2011 | 9,500 | 9,868 | |||||
| Rite Aid Corp. 7.50% 2015 | 7,000 | 6,667 | |||||
| Rite Aid Corp. 7.70% 2027 | 8,000 | 6,370 | |||||
| Rite Aid Corp. 6.875% 2028 | 12,477 | 9,061 | |||||
| Dole Food Co., Inc. 7.25% 2010 | 12,325 | 11,493 | |||||
| Dole Food Co., Inc. 8.875% 2011 | 29,390 | 28,288 | |||||
| Delhaize America, Inc. 8.125% 2011 | 23,645 | 25,496 | |||||
| Delhaize America, Inc. 9.00% 2031 | 9,500 | 11,176 | |||||
| Pathmark Stores, Inc. 8.75% 2012 | 29,810 | 28,990 | |||||
| Petro Stopping Centers, LP and Petro Financial Corp. 9.00% 2012 | 26,840 | 27,310 | |||||
| Rayovac Corp. 8.50% 2013 | 3,885 | 3,380 | |||||
| Spectrum Brands, Inc. 7.375% 2015 | 28,710 | 23,112 | |||||
| Playtex Products, Inc. 8.00% 2011 | 5,000 | 5,213 | |||||
| Playtex Products, Inc. 9.375% 2011 | 16,160 | 16,968 | |||||
Vitamin Shoppe Industries, Inc. 12.905% 20122,3 | 20,610 | 21,280 | |||||
| Elizabeth Arden, Inc. 7.75% 2014 | 20,372 | 20,066 | |||||
| Gold Kist Inc. 10.25% 2014 | 14,729 | 17,012 | |||||
| Koninklijke Ahold NV 5.875% 2008 | €2,367 | 3,086 | |||||
| Ahold Finance U.S.A., Inc. 6.25% 2009 | $ | 6,960 | 7,064 | ||||
Ahold Lease Pass Through Trust, Series 2001-A-2, 8.62% 20254 | 4,420 | 4,555 | |||||
Winn-Dixie Stores, Inc. 8.875% 20085 | 18,675 | 12,419 | |||||
Winn-Dixie Pass Through Trust, Series 1999-1, Class A-1, 7.803% 20172,4,5 | 1,971 | 1,652 | |||||
Tyson Foods, Inc. 6.85% 20163 | 12,885 | 13,290 | |||||
| Del Monte Corp., Series B, 8.625% 2012 | 10,550 | 11,117 | |||||
Roundy’s Supermarkets, Inc., Term Loan B, 8.365% 20113,4 | 8,955 | 9,033 | |||||
Duane Reade Inc. 9.89% 20103 | 6,000 | 6,105 | |||||
| Smithfield Foods, Inc. 7.625% 2008 | 1,125 | 1,148 | |||||
| Smithfield Foods, Inc., Series A, 8.00% 2009 | 3,000 | 3,150 | |||||
| Smithfield Foods, Inc., Series B, 7.75% 2013 | 925 | 957 | |||||
AAC Group Holding Corp. 12.75% 20122,6 | 1,875 | 1,969 | |||||
503,281 | |||||||
INFORMATION TECHNOLOGY — 3.97% | |||||||
| Sanmina-SCI Corp. 6.75% 2013 | 2,000 | 1,895 | |||||
| Sanmina-SCI Corp. 8.125% 2016 | 77,725 | 76,559 | |||||
| Celestica Inc. 7.875% 2011 | 41,170 | 41,582 | |||||
| Celestica Inc. 7.625% 2013 | 28,420 | 28,349 | |||||
Hughes Network Systems, LLC and HNS Finance Corp. 9.50% 20142 | 58,375 | 60,418 | |||||
| Electronic Data Systems Corp. 7.125% 2009 | 4,800 | 5,024 | |||||
Electronic Data Systems Corp., Series B, 6.50% 20133 | 41,040 | 41,689 | |||||
| Electronic Data Systems Corp. 7.45% 2029 | 2,200 | 2,421 | |||||
Nortel Networks Ltd. 9.73% 20112,3 | 10,600 | 10,997 | |||||
Nortel Networks Ltd. 10.125% 20132 | 27,425 | 29,071 | |||||
Nortel Networks Ltd. 10.75% 20162 | 7,325 | 7,874 | |||||
| SunGard Data Systems Inc. 3.75% 2009 | 2,550 | 2,397 | |||||
| SunGard Data Systems Inc. 9.125% 2013 | 25,145 | 26,151 | |||||
| SunGard Data Systems Inc. 4.875% 2014 | 4,500 | 3,915 | |||||
| SunGard Data Systems Inc. 10.25% 2015 | 6,000 | 6,210 | |||||
| Xerox Corp. 9.75% 2009 | 2,000 | 2,175 | |||||
| Xerox Corp. 7.125% 2010 | 19,650 | 20,534 | |||||
| Xerox Corp. 7.625% 2013 | 5,000 | 5,275 | |||||
Sensata Technologies BV 8.00% 20142 | 26,130 | 25,542 | |||||
| Serena Software, Inc. 10.375% 2016 | 19,117 | 20,121 | |||||
| Jabil Circuit, Inc. 5.875% 2010 | 9,250 | 9,341 | |||||
| Iron Mountain Inc. 7.75% 2015 | 8,410 | 8,452 | |||||
| Freescale Semiconductor, Inc. 6.875% 2011 | 5,000 | 5,288 | |||||
| Solectron Global Finance, LTD 8.00% 2016 | 4,400 | 4,378 | |||||
Hyundai Semiconductor America, Inc. 8.625% 20072 | 2,600 | 2,626 | |||||
MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co. 8.64% 20113 | 1,625 | 1,381 | |||||
Exodus Communications, Inc. 11.625% 20105,7 | 3,774 | — | |||||
449,665 | |||||||
HEALTH CARE — 3.72% | |||||||
| Tenet Healthcare Corp. 6.375% 2011 | 30,260 | 26,742 | |||||
| Tenet Healthcare Corp. 7.375% 2013 | 11,140 | 10,096 | |||||
| Tenet Healthcare Corp. 9.875% 2014 | 18,100 | 18,123 | |||||
| Tenet Healthcare Corp. 9.25% 2015 | 35,475 | 34,322 | |||||
| Warner Chilcott Corp. 8.75% 2015 | 71,014 | 73,855 | |||||
HealthSouth Corp. 11.418% 20142,3 | 36,200 | 37,105 | |||||
HealthSouth Corp. 10.75% 20162 | 32,000 | 32,840 | |||||
| Concentra Operating Corp. 9.50% 2010 | 26,400 | 27,588 | |||||
| Concentra Operating Corp. 9.125% 2012 | 24,990 | 26,114 | |||||
| Select Medical Corp. 7.625% 2015 | 27,350 | 23,179 | |||||
Select Medical Holdings Corp. 11.175% 20153 | 10,000 | 8,850 | |||||
| Team Finance LLC and Health Finance Corp. 11.25% 2013 | 27,190 | 28,006 | |||||
| Accellent Inc. 10.50% 2013 | 24,325 | 25,420 | |||||
| Columbia/HCA Healthcare Corp. 7.00% 2007 | 7,755 | 7,833 | |||||
| Columbia/HCA Healthcare Corp. 7.25% 2008 | 1,000 | 1,012 | |||||
| HCA — The Healthcare Co. 7.875% 2011 | 1,250 | 1,202 | |||||
| HCA Inc. 6.30% 2012 | 2,975 | 2,525 | |||||
| HCA Inc. 6.95% 2012 | 2,000 | 1,757 | |||||
| AMR HoldCo, Inc. and EmCare HoldCo, Inc. 10.00% 2015 | 13,005 | 13,915 | |||||
| MedCath Holdings Corp. 9.875% 2012 | 11,575 | 12,385 | |||||
| Triad Hospitals, Inc. 7.00% 2012 | 8,925 | 8,880 | |||||
421,749 | |||||||
NON-U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 4.28% | |||||||
Argentina (Republic of) 4.193% 20123,4 | 36,580 | 25,335 | |||||
Argentina (Republic of) 7.255% 20334,6,8 | ARS109,942 | 32,833 | |||||
| Argentina (Republic of) GDP-Linked 2035 | 347,027 | 10,289 | |||||
| Argentina (Republic of) 0% 2035 | $ | 70,000 | 6,860 | ||||
Argentina (Republic of) 0.797% 20384,8 | ARS131,471 | 16,647 | |||||
Brazilian Treasury Bill 6.00% 20108 | R$26,761 | 11,155 | |||||
| Brazil (Federal Republic of) Global 10.25% 2013 | $ | 7,125 | 8,717 | ||||
| Brazil (Federal Republic of) Global 10.50% 2014 | 3,000 | 3,777 | |||||
Brazil (Federal Republic of) Global 8.00% 20184 | 6,820 | 7,509 | |||||
| Brazil (Federal Republic of) Global 8.875% 2024 | 1,895 | 2,283 | |||||
| Brazil (Federal Republic of) Global 7.125% 2037 | 2,500 | 2,559 | |||||
| Brazil (Federal Republic of) Global 11.00% 2040 | 26,485 | 34,530 | |||||
Russian Federation 8.25% 20102,4 | 4,444 | 4,678 | |||||
| Russian Federation 12.75% 2028 | 8,000 | 14,370 | |||||
Russian Federation 5.00%/7.50% 20301,4 | 32,365 | 36,148 | |||||
| Turkey (Republic of) Treasury Bill 0% 2006 | TRY17,000 | 10,939 | |||||
| Turkey (Republic of) 20.00% 2007 | 23,983 | 15,767 | |||||
| Turkey (Republic of) Treasury Bill 0% 2007 | 11,943 | 6,959 | |||||
| Turkey (Republic of) Treasury Bill 0% 2007 | 12,000 | 6,857 | |||||
| Turkey (Republic of) 15.00% 2010 | 16,262 | 9,345 | |||||
| Panama (Republic of) Global 7.125% 2026 | $ | 585 | 616 | ||||
| Panama (Republic of) Global 8.875% 2027 | 6,500 | 8,076 | |||||
Panama (Republic of) Global 6.70% 20364 | 28,009 | 27,869 | |||||
| United Mexican States Government, Series M10, 10.50% 2011 | MXP12,320 | 1,315 | |||||
| United Mexican States Government Global 6.375% 2013 | $ | 3,540 | 3,731 | ||||
| United Mexican States Government, Series MI10, 8.00% 2013 | MXP52,500 | 4,721 | |||||
| United Mexican States Government Global 11.375% 2016 | $ | 2,501 | 3,595 | ||||
| United Mexican States Government, Series M20, 8.00% 2023 | MXP55,000 | 4,790 | |||||
| United Mexican States Government, Series M20, 10.00% 2024 | 70,000 | 7,267 | |||||
| United Mexican States Government Global 8.30% 2031 | $ | 3,020 | 3,773 | ||||
| United Mexican States Government Global 7.50% 2033 | 2,285 | 2,641 | |||||
| Peru (Republic of) 9.125% 2012 | 4,909 | 5,658 | |||||
| Peru (Republic of) 9.875% 2015 | 13,500 | 16,774 | |||||
| Peru (Republic of) 8.375% 2016 | 2,500 | 2,894 | |||||
Peru (Republic of) Past Due Interest Eurobond 5.00% 20173,4 | 331 | 327 | |||||
| Peru (Republic of) 7.35% 2025 | 500 | 535 | |||||
Dominican Republic 9.50% 20114,6 | 5,626 | 6,077 | |||||
Dominican Republic 9.50% 20112,4,6 | 3,436 | 3,711 | |||||
Dominican Republic 9.04% 20182,4 | 9,001 | 10,081 | |||||
Dominican Republic 9.04% 20184 | 4,902 | 5,490 | |||||
Dominican Republic 6.188% 20243 | 500 | 492 | |||||
| Colombia (Republic of) Global 10.00% 2012 | 1,500 | 1,756 | |||||
| Colombia (Republic of) Global 10.75% 2013 | 8,550 | 10,482 | |||||
| Colombia (Republic of) Global 12.00% 2015 | COP3,940,000 | 1,878 | |||||
| Colombia (Republic of) Global 11.75% 2020 | $ | 1,936 | 2,720 | ||||
| Colombia (Republic of) Global 10.375% 2033 | 823 | 1,123 | |||||
| Columbia (Republic of) Global 7.375% 2037 | 4,139 | 4,201 | |||||
| Indonesia (Republic of) 12.25% 2007 | IDR28,500,000 | 3,141 | |||||
| Indonesia (Republic of) 12.50% 2013 | 77,730,000 | 9,101 | |||||
Indonesia (Republic of) 6.875% 20172 | $ | 1,000 | 1,027 | ||||
| Indonesia (Republic of) 11.00% 2020 | IDR30,770,000 | 3,263 | |||||
| Indonesia (Republic of) 12.90% 2022 | 45,000,000 | 5,435 | |||||
| Venezuela (Republic of) 10.75% 2013 | $ | 6,000 | 7,350 | ||||
| Venezuela (Republic of) Global 8.50% 2014 | 1,250 | 1,387 | |||||
| Venezuela (Republic of) 9.25% 2027 | 3,935 | 4,828 | |||||
| Venezuela (Republic of) 9.375% 2034 | 3,000 | 3,715 | |||||
Aries Vermögensverwaltungs GmbH, Series C, 9.60% 20142 | 4,000 | 5,180 | |||||
| Aries Vermögensverwaltungs GmbH, Series C, 9.60% 2014 | 4,000 | 5,180 | |||||
| Egypt (Arab Republic of) Treasury Bill 0% 2007 | EGP38,450 | 6,533 | |||||
| Egypt (Arab Republic of) Treasury Bill 0% 2007 | 11,550 | 1,959 | |||||
El Salvador (Republic of) 7.75% 20232 | $ | 2,775 | 3,112 | ||||
El Salvador (Republic of) 7.65% 20352 | 4,250 | 4,579 | |||||
| State of Qatar 9.75% 2030 | 3,500 | 5,189 | |||||
| Thai Government 4.125% 2009 | THB73,490 | 1,909 | |||||
| Philippines (Republic of) 7.75% 2031 | $ | 1,000 | 1,049 | ||||
| Jamaican Government 9.00% 2015 | 280 | 300 | |||||
484,387 | |||||||
U.S. TREASURY BONDS & NOTES — 0.26% | |||||||
| U.S. Treasury 3.25% 2007 | 5,000 | 4,928 | |||||
| U.S. Treasury 6.625% 2007 | 25,000 | 25,246 | |||||
30,174 | |||||||
MORTGAGE-BACKED OBLIGATIONS4— 0.22% | |||||||
Tower Ventures, LLC, Series 2006-1, Class E, 6.495% 20362 | 4,000 | 3,997 | |||||
Tower Ventures, LLC, Series 2006-1, Class F, 7.036% 20362 | 20,380 | 20,822 | |||||
24,819 | |||||||
MUNICIPALS — 0.20% | |||||||
| State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027 | 16,720 | 17,932 | |||||
| State of Louisiana, Tobacco Settlement Authority, Asset-backed Bonds, Series 2001-B, 5.50% 2030 | 4,500 | 4,667 | |||||
22,599 | |||||||
ASSET-BACKED OBLIGATIONS4— 0.15% | |||||||
Consumer Credit Reference Index Securities Program Trust, Series 2002-2A, Class FX, 10.421% 20072 | 16,500 | 16,771 | |||||
Total bonds & notes (cost: $9,912,202,000) | 10,021,351 | ||||||
Convertible securities — 1.41% | Shares or principal amount | Market value (000 | ) | ||||
INFORMATION TECHNOLOGY — 0.42% | |||||||
| Fairchild Semiconductor Corp. 5.00% convertible notes 2008 | $ | 17,850,000 | $ | 17,761 | |||
| Conexant Systems, Inc. 4.00% convertible notes 2007 | $ | 14,700,000 | 14,590 | ||||
| SCI Systems, Inc. 3.00% convertible debentures 2007 | $ | 12,000,000 | 11,820 | ||||
| LSI Logic Corp. 4.00% convertible notes 2006 | $ | 3,000,000 | 3,000 | ||||
47,171 | |||||||
CONSUMER DISCRETIONARY — 0.38% | |||||||
| Amazon.com, Inc. 6.875% PEACS convertible notes 2010 | €20,645,000 | 26,649 | |||||
| Amazon.com, Inc. 4.75% convertible debentures 2009 | $ | 8,825,000 | 8,615 | ||||
| Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032 | 160,600 | 5,395 | |||||
Gray Communications Systems, Inc., Series C, 8.00% convertible preferred 20122,6,7 | 300 | 2,565 | |||||
43,224 | |||||||
TELECOMMUNICATION SERVICES — 0.23% | |||||||
| American Tower Corp. 5.00% convertible debentures 2010 | $ | 25,925,000 | 25,925 | ||||
UTILITIES — 0.19% | |||||||
| AES Trust VII 6.00% convertible preferred 2008 | 439,925 | 21,446 | |||||
FINANCIALS — 0.19% | |||||||
| Equity Office Properties Trust, Series B, 5.25% convertible preferred 2008 | 200,000 | 11,568 | |||||
| Crescent Real Estate Equities Co., Series A, 6.75% convertible preferred | 450,000 | 9,864 | |||||
21,432 | |||||||
Total convertible securities (cost: $139,429,000) | 159,198 | ||||||
Preferred securities — 1.86% | Shares | ||||||
FINANCIALS — 1.83% | |||||||
Fuji JGB Investment LLC, Series A, 9.87% noncumulative preferred2,3 | 52,248,000 | 55,982 | |||||
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative preferred2,3 | 21,180,000 | 22,320 | |||||
Swire Pacific Capital Ltd. 8.84% cumulative guaranteed perpetual capital securities2 | 1,125,000 | 32,836 | |||||
Swire Pacific Offshore Financing Ltd. 9.33% cumulative guaranteed perpetual preferred capital securities2 | 546,648 | 14,111 | |||||
Tokai Preferred Capital Co. LLC, Series A, 9.98% noncumulative preferred2,3 | 28,963,000 | 31,060 | |||||
Shinsei Finance II (Cayman) Ltd. 7.16% noncumulative preferred2,3 | 26,075,000 | 26,091 | |||||
SB Treasury Co. LLC, Series A, 9.40% noncumulative preferred2,3 | 13,297,000 | 14,136 | |||||
Fannie Mae, Series O, 7.085% preferred2,3 | 150,000 | 7,978 | |||||
| Chevy Chase Preferred Capital Corp., Series A, 10.375% exchangeable preferred | 55,994 | 3,001 | |||||
207,515 | |||||||
CONSUMER DISCRETIONARY — 0.03% | |||||||
Delphi Corp., Series A, 8.25% cumulative trust preferred 20339 | 178,800 | 2,861 | |||||
Adelphia Communications Corp., Series B, 13.00% preferred 20099 | 36,196 | 18 | |||||
2,879 | |||||||
CONSUMER STAPLES — 0.00% | |||||||
| Great Atlantic & Pacific Tea Co., Inc. 9.375% QUIBS preferred 2039 | 18,500 | 469 | |||||
INFORMATION TECHNOLOGY — 0.00% | |||||||
ZiLOG, Inc. — MOD III Inc., units7,9,10 | 1,868 | 278 | |||||
Preferred securities | Shares | Market value (000 | ) | ||||
TELECOMMUNICATION SERVICES — 0.00% | |||||||
XO Holdings, Inc. 14.00% preferred 20096,7,9 | 40 | $ | — | ||||
Total preferred securities (cost: $183,407,000) | 211,141 | ||||||
Common stocks — 1.85% | |||||||
TELECOMMUNICATION SERVICES — 0.70% | |||||||
Dobson Communications Corp., Class A9 | 3,435,685 | 24,118 | |||||
American Tower Corp., Class A9 | 538,967 | 19,672 | |||||
| AT&T Inc. | 600,000 | 19,536 | |||||
| Sprint Nextel Corp., Series 1 | 777,508 | 13,334 | |||||
| Embarq Corp. | 38,875 | 1,880 | |||||
Cincinnati Bell Inc.9 | 70,740 | 341 | |||||
XO Holdings, Inc.9 | 25,291 | 124 | |||||
79,005 | |||||||
UTILITIES — 0.55% | |||||||
Drax Group PLC9 | 3,969,950 | 61,924 | |||||
INFORMATION TECHNOLOGY — 0.29% | |||||||
Micron Technology, Inc.2,9 | 678,656 | 11,809 | |||||
Micron Technology, Inc.9 | 424,160 | 7,380 | |||||
Fairchild Semiconductor International, Inc.9 | 500,000 | 9,350 | |||||
ZiLOG, Inc.9,10 | 1,140,500 | 4,163 | |||||
32,702 | |||||||
HEALTH CARE — 0.16% | |||||||
| UnitedHealth Group Inc. | 375,000 | 18,450 | |||||
Clarent Hospital Corp.7,9,10 | 576,849 | 144 | |||||
18,594 | |||||||
CONSUMER DISCRETIONARY — 0.06% | |||||||
Emmis Communications Corp., Class A9 | 201,000 | 2,462 | |||||
| Clear Channel Communications, Inc. | 51,012 | 1,472 | |||||
Viacom Inc., Class B9 | 31,612 | 1,175 | |||||
| CBS Corp., Class B | 31,612 | 891 | |||||
Radio One, Inc., Class D, nonvoting9 | 44,000 | 275 | |||||
Radio One, Inc., Class A9 | 22,000 | 137 | |||||
6,412 | |||||||
FINANCIALS — 0.05% | |||||||
| Equity Office Properties Trust | 150,000 | 5,964 | |||||
INDUSTRIALS — 0.04% | |||||||
DigitalGlobe Inc.2,7,9 | 3,064,647 | 3,065 | |||||
Delta Air Lines, Inc.2,9 | 766,165 | 1,050 | |||||
UAL Corp.9 | 20,934 | 556 | |||||
4,671 | |||||||
MISCELLANEOUS — 0.00% | |||||||
| Other common stocks in initial period of acquisition | 237 | ||||||
Total common stocks (cost: $154,796,000) | 209,509 | ||||||
Warrants — 0.00% | Shares | Market value (000 | ) | ||||
TELECOMMUNICATION SERVICES — 0.00% | |||||||
XO Holdings, Inc., Series A, warrants, expire 20109 | 50,587 | $ | 46 | ||||
XO Holdings, Inc., Series B, warrants, expire 20109 | 37,939 | 23 | |||||
XO Holdings, Inc., Series C, warrants, expire 20109 | 37,939 | 14 | |||||
KMC Telecom Holdings, Inc., warrants, expire 20082,7,9 | 22,500 | — | |||||
GT Group Telecom Inc., warrants, expire 20102,7,9 | 11,000 | — | |||||
Allegiance Telecom, Inc., warrants, expire 20082,7,9 | 5,000 | — | |||||
Total warrants (cost: $1,100,000) | 83 | ||||||
Short-term securities — 5.07% | Principal amount (000 | ) | |||||
Clipper Receivables Co., LLC 5.28% due 11/8/20062,11 | $ | 30,800 | 30,632 | ||||
Clipper Receivables Co., LLC 5.26% due 10/19-12/1/20062 | 38,905 | 38,633 | |||||
| Fannie Mae 5.21% due 10/2/2006 | 61,200 | 61,182 | |||||
Hershey Co. 5.19% due 10/31/20062 | 30,000 | 29,866 | |||||
Hershey Co. 5.19% due 11/8/20062,11 | 25,000 | 24,859 | |||||
Wal-Mart Stores Inc. 5.20%-5.21% due 12/19/20062 | 27,500 | 27,188 | |||||
Wal-Mart Stores Inc. 5.20% due 11/28/20062,11 | 26,000 | 25,781 | |||||
Federal Home Loan Bank 5.15% due 11/29/200611 | 53,000 | 52,549 | |||||
Variable Funding Capital Corp. 5.25% due 10/12-10/18/20062 | 46,400 | 46,295 | |||||
| Bank of America Corp. 5.255% due 12/12/2006 | 40,000 | 39,585 | |||||
| Caterpillar Financial Services Corp. 5.20% due 10/10/2006 | 35,000 | 34,949 | |||||
Three Pillars Funding, LLC 5.26% due 10/5/20062 | 34,789 | 34,764 | |||||
Gannett Co. 5.21% due 10/26-11/6/20062 | 32,900 | 32,751 | |||||
Triple-A One Funding Corp. 5.25% due 10/11/20062 | 25,030 | 24,990 | |||||
| General Electric Capital Services, Inc. 5.24% due 10/4/2006 | 24,100 | 24,086 | |||||
Estée Lauder Companies Inc. 5.20% due 10/5/20062 | 15,000 | 14,989 | |||||
| International Lease Finance Corp. 5.23% due 10/24/2006 | 12,200 | 12,157 | |||||
Colgate-Palmolive Co. 5.19% due 10/27/20062 | 9,600 | 9,563 | |||||
AT&T Inc. 5.25% due 10/25/20062 | 9,500 | 9,465 | |||||
Total short-term securities (cost: $574,242,000) | 574,284 | ||||||
Total investment securities (cost: $10,965,176,000) | 11,175,566 | ||||||
Other assets less liabilities | 150,791 | ||||||
Net assets | $ | 11,326,357 | |||||
“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
1Step bond; coupon rate will increase at a later date.
2Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $2,269,467,000, which represented 20.04% of the net assets of the fund.
3Coupon rate may change periodically.
4Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
5Scheduled interest and/or principal payment was not received.
6Payment in kind; the issuer has the option of paying additional securities in lieu of cash.
7Valued under fair value procedures adopted by authority of the board of trustees.
8Index-linked bond whose principal amount moves with a government retail price index.
9Security did not produce income during the last 12 months.
10Represents an affiliated company as defined under the Investment Company Act of 1940.
11This 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 adviser and should be read carefully before investing.
MFGEFP-921-1106-S6836
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO
To the Board of Trustees and Shareholders 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, 2006, and for the year then ended and have issued our report thereon dated November 8, 2006, 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, 2006, 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
November 8, 2006
Costa Mesa, California
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 8, 2006 |
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 8, 2006 |
By /s/ Susi M. Silverman |
Susi M. Silverman, Treasurer and Principal Financial Officer |
| Date: December 8, 2006 |